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CONFORMED
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required) for the fiscal year ended JUNE 30, 1995 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) for the transition period from
__________ to __________
Commission file number 0-17399
NU-WEST INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
a Delaware corporation 82-0415557
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8400 East Prentice Avenue, Suite 1320
Englewood, Colorado 80111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 721-1396
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange
Title of Each Class on Which Registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($.01 par value) NASDAQ Stock Market
Class A Preferred Stock ($100 par value) NASDAQ Stock Market
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
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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]
Based on the NASDAQ Stock Market closing sales price as of July 31, 1995, the
aggregate market value of the Common Stock held by non-affiliates of the
registrant was approximately $42.5 million.
As of July 31, 1995, there were approximately 8,086,363 shares of the
registrant's Common Stock outstanding.
Documents Incorporated by Reference
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None
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TABLE OF CONTENTS TO FORM 10-K
PAGE
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PART I
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ITEM 1. BUSINESS........................................................ 1
Introduction and Overview....................................... 1
The Fertilizer Market........................................... 3
Principal Products.............................................. 4
Sales and Marketing............................................. 6
Competition..................................................... 7
Existing Mining Operations...................................... 7
Manufacturing Process and Raw Materials......................... 10
Environmental Matters........................................... 11
NuTec Mineral and Chemical Company.............................. 12
Employees....................................................... 13
ITEM 2. PROPERTIES...................................................... 14
ITEM 3. LEGAL PROCEEDINGS............................................... 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS......................................................... 16
PART II
ITEM 5. TRADING MARKET FOR COMMON STOCK AND DIVIDEND
POLICY.......................................................... 17
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA............................ 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.............................. 20
General......................................................... 20
Results of Operation............................................ 21
Acquisitions and Dispositions................................... 23
Liquidity and Capital Resources................................. 24
Changing Prices and Inflation................................... 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................... 30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
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ACCOUNTING AND FINANCIAL DISCLOSURE............................. 31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT...................................................... 32
ITEM 11. EXECUTIVE COMPENSATION.......................................... 34
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.................................................. 43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................. 46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K............................................. 47
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PART I
ITEM 1. BUSINESS
INTRODUCTION AND OVERVIEW
Nu-West Industries, Inc. (the "Company") is engaged in the production and sale
of concentrated, phosphate-based fertilizer products for markets primarily in
western North America. All references to a "fiscal" year are to the twelve month
period ended June 30 of that year.
On August 10, 1995 the Company and Agrium Inc. announced that they have entered
into a definitive merger agreement (the "Merger Agreement") which provides for
the acquisition of the Company by Agrium. Under the terms of the Merger
Agreement, a subsidiary of Agrium is making a tender offer to purchase all of
the outstanding common stock of the Company at $10.50 per share in cash. The
tender will expire on September 14, 1995 unless extended. As soon as practical
following the tender offer, the Agrium subsidiary will merge into the Company,
and each remaining share of the Company's common stock will be converted into
the right to receive $10.50 per share in cash. See Item 7 "Liquidity and
Capital Resources - Other" for further information.
The Company owns fertilizer manufacturing facilities located near Soda Springs,
Idaho (the "Conda Plant") and through fiscal 1994 conducted phosphate ore mining
and milling operations through a general partnership (the "Conda Partnership").
The Company was formed in July 1987 for the purpose of acquiring the Conda Plant
and a 50% interest in the Conda Partnership from bankruptcy proceedings relating
to Beker Industries Corp. ("Beker"). As part of that purchase transaction, the
Company succeeded to substantial tax net operating loss carryforwards available
to Beker. The Company acquired the other 50% interest in the Conda Partnership
in July 1992.
The Company's production and marketing strategy emphasizes the liquid fertilizer
product Super Phosphoric Acid ("SPA"). The Company services a diverse base of
agricultural customers geographically dispersed across the western portion of
North America, and is perceived as a high quality manufacturer of liquid
fertilizer products while maintaining a price competitive position. The Company
believes it has an approximate 40% share of the SPA market and an approximate
30% share of the total phosphate fertilizer market in its market area. Total
fertilizer customers number in excess of 200, although sales to only one
exceeded 10% of total product sales for fiscal 1995. The Company benefits from
its close proximity to certain raw materials used in its production processes,
including phosphate ore, sulfur, and sulfuric acid.
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The Company has emerged from a period marked by liquidity problems and a
significant increase in long-term debt as the result of a failed expansion
strategy into the export market by previous management in 1988, the bankruptcy
of a subsidiary of the Company in 1990, and product prices throughout the
phosphate ferilizer industry which reached historic low levels in 1993. During
this period, the Company refocused its efforts around the Conda Plant, which has
historically been a profitable operation. The combination of product cost
reductions and a strong industry-wide fertilizer price recovery beginning in
1994 has led to substantial gains in profitability and cash flow for the
Company.
In fiscal 1994, the Company refinanced its long-term debt as part of a
Recapitalization Plan approved by a vote of its shareholders in October 1993.
The Recapitalization included the refinancing of a significant portion of the
Company's outstanding debt to longer maturities, the conversion of certain
existing debt from a senior secured to a junior unsecured position with no
current payment of interest, and the issuance of warrants to acquire
approximately 58% of the Company's common stock on a fully diluted basis. The
Recapitalization was completed on November 2, 1993.
The Recapitalization allowed the Company to make significant improvements to its
operating cost structure. Until November 1993, the Company operated its own
phosphate ore mining operation through the Conda Partnership, which has the
rights to approximately 60-70 million tons of proven ore reserves, sufficient
for nearly 40 years of operations at present ore consumption rates. In fiscal
1994, the Company entered into a seven year purchase agreement with Rhone-
Poulenc Basic Chemicals Company, a division of Rhone-Poulenc, Inc. ("RP") to
purchase phosphate ore from a 20-year deposit owned by RP near the Conda Plant
(the "RP Agreement").
The RP Agreement provides the Company with higher grade ore at a substantially
lower cost than the Company could obtain from its own reserves. These savings
are due primarily to less costly mining operations resulting from the geologic
formation of the RP reserves, and production efficiencies at the Conda Plant
which result from the higher concentration of phosphate ("P\\2\\0\\5\\") in the
RP ore relative to the Company's own reserves. The Company will retain its
existing reserves for development in future years. In June 1995, the RP
Agreement was extended for an additional five years through 2005.
In July 1994, the Company entered into an agreement with Kennecott Utah Copper
Corporation ("Kennecott") for the purchase of sulfuric acid beginning in fiscal
1996 (the "Kennecott Agreement"). This purchase contract will replace the
production from a sulfuric acid facility at the Conda Plant which is being
phased-out. See Item 7, "Liquidity and Capital Resources" for further
information.
A one-for-six reverse stock split was proposed by the Company and approved by
its shareholders in November 1994. The stock split became effective at the
close of business on December 9, 1994 and the number of authorized shares of
common stock was reduced to 16,666,667.
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In March 1995, the Company disclosed that it had retained PaineWebber
Incorporated to assist it in exploring alternatives for enhancing long-term
shareholder value. Alternatives to be considered included, but were not limited
to, strategic relationships with other fertilizer producers and customers, the
sale or merger of the Company, or the continuation of the Company's current
business plan of internal growth. The result was the Merger Agreement.
On August 3, 1995, the Company completed the refinancing of substantially all
of its long-term debt, including all of the senior secured, senior unsecured and
junior unsecured debt incurred during the 1993 Recapitalization. The new credit
facility results in a lower blended interest rate and estimated savings in
fiscal 1996 of approximately $2.6 million in interest expense based on current
interest rates and loan balances. See Item 7, "Liquidity and Capital Resources"
for further information.
The Company's manufacturing and certain administrative offices are located near
Soda Springs, Idaho. The Company's marketing and executive offices are located
at 8400 East Prentice Avenue, Suite 1320, Englewood, Colorado, 80111. The
telephone number is (303)721-1396.
THE FERTILIZER MARKET
Phosphate fertilizer production capacity of U.S. producers is estimated to be
approximately 12 million tons per year of P\\2\\O\\5\\ equivalent, with the
majority of the domestic production capacity located in the Gulf Coast states
and in North Carolina. Approximately 925,000 tons per year of P\\2\\O\\5\\
equivalent are produced at three facilities in the western United States. The
Conda Plant has a phosphoric acid production capacity of approximately 300,000
tons per year of P\\2\\O\\5\\ equivalent. Currently, it is estimated that 55-60%
of U.S. production, on a P\\2\\O\\5\\ equivalent basis, is exported. Other than
sales to customers in Canada and Mexico, which accounted for approximately 14%
of the Company's fiscal 1995 gross sales revenues, the Company did not export
any of its fertilizer products.
The western North American phosphate fertilizer market is highly dependent on
the agricultural economy, particularly the size of annual crop plantings,
weather conditions, USDA and other government farm programs, and disposable farm
income levels. Export demand for U.S. phosphate products also plays a major
role in the supply available for and the product price in the domestic
fertilizer market. Various unfavorable combinations of these factors during
recent years resulted in price volatility and generally lower prices. Closer
proximity to sources of certain raw materials, the ability to diversify product
mix and the emphasis by the Company on the production and sale of liquid
fertilizer products have, among other factors, moderated the effect of the
cyclicality of the domestic fertilizer business on the Conda Plant's operations.
Average prices received by the Company for products in its market area tend to
follow the relative movement of prices received in the U.S. Gulf Coast region.
However, freight differentials and other geographical factors result in
generally higher costs and average product prices in the western U.S.
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Prices for phosphate fertilizer products dropped to twenty-year low levels
industry-wide during fiscal years 1992 and 1993. India and China, which
historically accounted for well over half of U.S. phosphate export activity,
determine to a large extent the level of export demand. Currency instability in
China and political uncertainty regarding fertilizer subsidies in India resulted
in a substantial reduction in demand for phosphate products from the U.S.
during fiscal years 1992 and 1993. Adding further to the world-wide imbalance
in supply and demand was significantly reduced consumption of fertilizer by the
former Soviet Union and Eastern European countries as a result of difficulties
related to conversion of those economies to free market systems. Industry
consolidation during this period significantly reduced the number of U.S.
producers, and some curtailment in production output has followed. Beginning in
the fall of 1993 a price recovery resulted from the combination of this reduced
production output and improved export demand, largely from China. However, the
volatility of the market has historically frustrated attempts to predict with
accuracy future pricing trends.
Extremely wet weather patterns in the western and central U.S. during the peak
fertilizer consumption period of March and April 1995 resulted in lower than
anticipated application rates and relatively high inventories at the conclusion
of the spring season. Prices remained relatively stable, however, during the
spring season and did not decline significantly until the normal off-season
summer months. Price declines were more pronounced with liquid phosphate
products than with dry granular products due to limited industry-wide storage
capacity and shorter shelf life; dry granular fertilizer is more easily stored
for longer durations. Sales volumes of liquids have also declined in early
fiscal 1996 due to carryover inventories from the spring season.
PRINCIPAL PRODUCTS
Phosphate fertilizers provide phosphorus, one of the three primary plant
nutrients required by plant life. The other two primary nutrients are nitrogen
and potassium. Phosphate fertilizer products which are made with ammonia also
provide nitrogen. The principal applications of phosphate fertilizers are in
the production of corn, wheat, soybeans, barley, cotton, and other small grain
crops, fruits and vegetables. Phosphate rock, sulfur and anhydrous ammonia are
the primary raw materials for the production of ammonium phosphate fertilizers.
Phosphate rock is combined with sulfuric acid to produce phosphoric acid which
is then either (i) combined with anhydrous ammonia to produce various dry
granular fertilizers that are differentiated by their NPK content (% nitrogen-%
phosphorus-% potassium), including DAP (18-46-0), MAP (11-52-0) and 16-20-0, or
(ii) concentrated to produce liquid fertilizer products containing no nitrogen
and 52% to 72% P\\2\\O\\5\\. Generally, a product with a higher P\\2\\O\\5\\
content sells for a higher price per unit. The Conda Plant produces multiple
products and alters its product mix to meet the changing requirements of its
customers. The following is a brief description of the products manufactured at
the Conda Plant.
Super Phosphoric Acid
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The manufacture of liquid SPA accounts for approximately 50% of the Company's
total production volume and sales, and a substantially higher percentage of its
gross profits. SPA is produced by concentrating phosphoric acid to a level of
68-72% P\\2\\O\\5\\. Because of its unique chelating and suspending properties,
which allow impurities to remain dissolved, SPA has few substitutes as a liquid
fertilizer, and is the highest margin product currently manufactured by the
Company. The use of liquid fertilizer as a percentage of total phosphate
fertilizers applied in the domestic U.S. market has grown steadily over the past
few years, due to its agronomic, economic and ecologic advantages. SPA is not an
end use fertilizer but is upgraded, mixed or blended with other liquid
nutrients, pesticides and/or herbicides before it is applied. As a liquid, it
allows for easy and precise application to crops, which makes more nutrient
available for use by the plant, and can be injected below the soil in minimum-
till or no-till programs to prevent leaching into waterways.
The customers for SPA are diverse and consist of large wholesalers such as
cooperatives and grain companies, and many smaller independent distributors.
The principal factors in the SPA customer purchase decision are price,
dependability of supply and quality. Phosphate solution products are primarily
used for corn, wheat, alfalfa and soybeans; however, the properties and ease of
application allow for use on other row crops such as lettuce, strawberries and
cotton.
The Conda Plant has a current production capacity for SPA of approximately
175,000 P\\2\\0\\5\\ tons annually. This represents approximately 55% to 60% of
the Conda Plant's phosphoric acid capacity. The remaining capacity is used to
produce dry granular fertilizer products.
Merchant Grade Acid
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Merchant Grade Acid ("MGA"), is produced by concentrating phosphoric acid to a
level of 52% P\\2\\O\\5\\. Like SPA, MGA contains no nitrogen and is generally
diluted and mixed with other nutrients before application. The characteristics
of MGA are similar to those of SPA, but because of certain processing and
storage requirements the capacity to produce MGA is currently limited to
approximately 14,000 P\\2\\0\\5\\ tons per year.
Dry Granular Products
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Dry granular products manufactured at the Conda Plant are commodities and
consequently are very price sensitive in the market place. The customers for
these dry products are more diverse than for liquid products, and they range
from large cooperatives to small retail stores. The uses for dry granular
fertilizer are varied, and they can be applied to many different crops including
corn, wheat, vegetables, rice and grasses.
The major dry granular fertilizer products manufactured by the Company are:
. Diammonium Phosphate ("DAP" or 18-46-0); DAP is the most common
granular phosphate fertilizer product manufactured by domestic producers, and as
much as 70% of total U.S. production of DAP is exported.
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. Mono-ammonium Phosphate ("MAP" or 11-52-0)
. Ammonium Phosphate (16-20-0)
SALES AND MARKETING
The Company's customers include retailers, distributors, producers and others
who purchase in bulk for use or resale, before or after blending with other
fertilizer materials. The Company also enters into a limited number of exchange
agreements with other domestic producers whereby the parties trade equivalent
quantities of products for delivery by each other to or for the account of the
other. The Company's products are distributed by rail and, to a lesser extent,
by truck.
The Company's sales and inventory levels follow the seasonal trends of the
fertilizer business. Periods of heavy crop planting in the spring and fall
seasons result in relatively higher sales and receivables, while early summer
and winter generally reflect a build-up of product inventory. The Company's
emphasis on liquid fertilizers somewhat mitigates the seasonality of sales with
relatively constant demand as dealers refill storage tanks on a year-round
basis. Limited storage life and capacity for these liquids results in a greater
need to sell and ship product throughout the year than for dry granular
fertilizers, which can be stockpiled and moved between producers, dealers and
end-users more readily as needed. Receivables are typically on fifteen to
thirty-day terms in the western U.S. market, although variations can occur based
on competitive conditions. The Company's credit policies are generally in line
with those of its competitors. The Company has had no substantial bad trade
debts.
Due largely to the seasonal nature of the fertilizer business, working capital
requirements vary significantly through the year. The Company's needs are
generally greatest in late summer and fall due to the seasonality described
above as well as the timing of the annual maintenance campaign at the Conda
Plant and the ore mining schedule. Production is halted for approximately two
weeks each summer for an annual refurbishment or "turnaround" of plant
facilities at a time when fertilizer sales demand is low. Mining activity is at
a peak during the summer months with the largest build-up of ore inventory
occurring in the fall season as delivery of ore to the Conda Plant is concluded
prior to the onset of winter weather.
Sales to Cenex/Land O'Lakes, Inc. constituted 17% and 16% of product sales
during the fiscal years 1995 and 1994, respectively. No other customer accounts
for more than 10% of the Company's aggregate revenues. The Company does not
believe that the loss of any individual customer would have a material adverse
impact on its consolidated operating results or financial condition. The
Company's sales force consists of five field salesmen, three officers in charge
of sales and a sales support staff of two based in Denver.
During fiscal years 1995, 1994, and 1993 approximately $14.0, $13.1, and $12.1
million of sales, respectively, were export sales to Canadian and to a lesser
extent Mexican customers. Sales
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to Mexico have declined due largely to Mexico's internal economic difficulties
and are not considered a material portion of the Company's sales.
COMPETITION
The phosphate fertilizer business is intensely competitive. Certain of the
Company's principal competitors have greater available resources than the
Company and are less dependent on phosphate-based fertilizer sales. Certain of
these competitors may be at an advantage to the extent that they own, control or
have access to sources of supply for raw materials at a lower cost than is
available to the Company.
The relative cost of transportation of raw materials and finished product to
manufacturing facilities and markets is also an important competitive factor.
The Company's principal marketing area includes the United States west of the
Mississippi River, the southern portions of the Canadian provinces of Alberta,
Saskatchewan and British Columbia, and the northwestern Mexican states of Sonora
and Sinaloa. As a result, the operations of the Conda Plant are, to some
extent, insulated from competitors located outside western North America because
of the cost of transporting finished products from Gulf Coast manufacturing
facilities to the principal markets served by the Company. The lack of an
inland waterway to provide barge transportation into the Company's market area
from Gulf Coast and other eastern phosphate manufacturing facilities requires
more expensive rail and truck freight over relatively long distances and often
mountainous terrain.
The Company's most direct competitors are the J.R. Simplot Company ("Simplot")
operations located in Pocatello, Idaho, and SF Industries, a joint venture
between Simplot and Farmland Industries, which owns a production facility
located near Rock Springs, Wyoming. It is estimated that the total phosphate
fertilizer demand within the western U.S. significantly exceeds the production
capacity of the three western producers which is estimated at 925,000 tons per
year of P\\2\\0\\5\\ equivalent. The Company has, and it believes that its
direct competitors also have, been operating at maximum effective production
capacity for the past five years, and will likely continue to do so.
MINING OPERATIONS
The Company began to receive phosphate ore under the RP Agreement in March 1994.
The phosphate ore mined by RP contains higher quality ore with substantially
lower overburden removal requirements than found in other known reserves in
southeastern Idaho, including those owned by the Company. The Company realized
significant annual production cost savings in fiscal 1995 by purchasing
phosphate ore under the RP Agreement versus the estimated cost of mining its own
reserves, and expects similar or greater benefits in future years.
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The RP Agreement was contingent on the Company's ability to obtain and make
available to RP approximately $13.3 million of mobile mining equipment. In
November 1993, the Company entered into a five-year lease financing arrangement
with Caterpillar Financial Services Corp. ("Caterpillar") providing for the
necessary mining equipment. The equipment is subleased by the Company to RP on
payment terms equivalent to those between the Company and Caterpillar. RP may
cancel the sublease if the Company fails to take ore or make timely payment for
ore received under the RP Agreement.
The terms of the RP Agreement provide that the Company will not be required to
take a minimum annual tonnage of ore and may mine its own ore reserves, but will
be responsible for idle leased equipment costs resulting from a reduction in the
Company's purchase requirements below 1.6 million tons per year. The Company
may not purchase more than 1.6 million tons per year without the consent of RP
and must give six months' notice of reductions in its ore purchase requirements.
The Company has constructed a new haul road and ore loading system at the RP
mine site. Construction is also nearly completed of an equipment maintenance
shop at that location at a total cost of approximately $2.2 million.
Payment for delivery of ore will be based on the actual cost of mining by RP
plus 50% of the net savings recognized by RP and the Company as a result of the
RP Agreement. RP is prohibited from selling its ore reserves without assumption
of the RP Agreement by any purchaser. Part of the mining cost paid by the
Company will be the cost of reclamation of mined acreage based on cost estimates
as the ore is mined, with subsequent adjustments for actual expenditures as
required. RP will be responsible for all reclamation work and has indemnified
the Company against environmental exposure at the mine.
In June 1995, RP notified the Company of its intent to mothball its elemental
phosphate processing facilities in Montana and cease taking ore from the mine
for its own account. An amendment to the RP Agreement executed in July 1995
allows RP to resume taking ore with ninety days notice although no such action
is anticipated in the foreseeable future. The Company's ore requirements have
exceeded 80% of the total output of the mine since March 1994 and no material
cost or operational disadvantage is expected as a result of the cessation of
deliveries to RP. RP also provided notice of termination to a contractor
engaged in ore hauling services at the mine. Existing equipment will allow RP
to haul ore for the Company without the use of a contractor and should result in
increased savings.
The Company purchased phosphate rock from the Conda Partnership from the time
the Company acquired the Conda Plant and a 50% interest in the Conda Partnership
in July 1987 until November 1993, when mining ceased at the Conda Partnership
mine. On July 14, 1992, the Company purchased 100% of the common stock of
Western Cooperative Fertilizers (U.S.) Inc. ("WCF(US)"), a previously
unaffiliated entity which owned the other 50% interest in the Conda Partnership.
The transaction effectively gave the Company complete ownership of the Conda
Partnership, and thereby control of significant phosphate ore reserves in
southeastern Idaho and the processing facilities adjacent to the Conda Plant.
The name of WCF(US) has been changed to Nu-West Mining, Inc. ("Nu-West Mining").
Effective July 1, 1994, all assets of the Conda
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Partnership were transferred to either Nu-West Mining or the Company, and the
Conda Partnership has been dissolved.
The Company currently has an estimated 60-70 million tons of proven reserves,
which are located on lands leased primarily from federal and state governments
under long-term leases. Some of the leases are subject to renegotiation of
certain terms at varying times over the next 16 years, including terms
concerning the amount of royalty fees, penalties for failure to conduct
sufficient mining operation and reclamation requirements. None of these leases
require the commencement of mining operations during their term, and the Company
anticipates renewals without material modifications.
With the exception of the Company's first mining season in 1987, which was
shortened because of the late season startup of the Conda Plant, the Conda
Partnership mined and delivered approximately 1.5 to 1.9 million tons per year
through 1992. Approximately 1.2 million tons were mined during the 1993 mining
season and an additional 400,000 tons were purchased from RP. The Company
purchased 1.9 million tons from RP in 1994 and anticipates the purchase of a
similar tonnage in the 1995 mining season. The Company does not foresee any
mining operation of its own leased reserves during the remaining term of the RP
Agreement.
The mining operations must meet certain reclamation requirements mandated by the
Bureau of Land Management and the U.S. Forest Service. These requirements
include controlling overburden disposal, backfill and reseeding. In July 1992,
the Company received the 1991 Idaho Outstanding Achievement for Excellence in
Reclamation for its Mountain Fuel mine from the State of Idaho and cooperating
federal agencies. This award is given annually to the Idaho mining operation
which, in the opinion of the state and federal agencies which have oversight in
mine operation and reclamation activities, exceeds guidelines for mine site
reclamation. The Company has complied with agency requirements for cash bonding
to complete future reclamation of previously mined properties.
Mining operations at the existing reserves of the Conda Partnership had been
carried out by a third party general contractor (the "General Contractor") since
inception of the Conda Partnership. The contract required the Conda Partnership
to mine a minimum amount of phosphate ore each year, or pay the General
Contractor a negotiated price adjustment. In addition, the Company and the
Conda Partnership were required to use the General Contractor for all mining
activity on its leases through 1997.
On November 30, 1993, the Company and the Conda Partnership executed an Ore
Requirement Reduction Settlement Agreement with the General Contractor providing
for an extension of the mining contract through December 31, 2007 and the
payment of $1,000,000 to the General Contractor. In return, the annual minimum
ore requirement under the mining agreement was reduced to a minimal amount. On
August 9, 1994, the Company executed a Work Reduction and Buy-Out Settlement
Agreement to eliminate the minimum ore requirement, reduce the term to 2005,
eliminate a requirement to use the General Contractor for ore handling functions
at the Conda Plant and for certain other modifications to the contract. The
Company has made a
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payment to the General Contractor of $100,000 for the further modification of
the contract and expects to save $1.0-1.5 million annually as a result of these
changes.
The Company currently has a completed mine plan, approved by government
agencies, to mine an estimated six million tons of phosphate ore from its North
Maybe Extension lease. This reserve would be the next lease to be developed.
Approximately $2-3 million in capital expenditures and approximately six months
time would be required to construct roads, power lines and loading facilities.
The normal progression to this property has been postponed as a result of the RP
Agreement.
The Company has complied in the past with federal lease terms, which include
minimum royalty payments and other conditions and believes it will continue to
do so in the future. After the stipulated renewal dates, the United States
Department of Interior has the right to reasonably readjust the lease terms and
conditions. Based on past experience, the Company presently believes that it
will be successful in renewing its leases.
MANUFACTURING PROCESS AND RAW MATERIALS
The Company benefits from its close proximity to sources of phosphate rock,
sulfuric acid, and sulfur, the principal raw materials used in its manufacturing
process. Phosphoric acid is produced through the acidulation of ground
phosphate rock with sulfuric acid, water and recycled phosphoric acid in
reaction tanks. The sulfuric acid reacts with the phosphate slurry to produce
liquid phosphoric acid and solid gypsum crystals composed of calcium sulfate,
which are physically separated. The phosphoric acid is concentrated in steam
evaporators, and used as feedstock in the fertilizer production process, and the
gypsum crystals are impounded. The phosphoric acid is then either (i) combined
with anhydrous ammonia to produce various dry granular fertilizers, or (ii)
further concentrated to produce liquid fertilizer products containing no
ammonia.
The sulfuric acid used in the process is either manufactured by the Company from
elemental sulfur or is purchased from third party sources. Approximately 20% of
the sulfuric acid utilized at the Conda Plant is currently purchased from
Kennecott. All of the Company's requirements for sulfur are purchased from
unaffiliated third parties who extract the sulfur as a by-product of natural gas
production in western Wyoming.
The Company purchases sulfur primarily under short term contracts with terms of
one year and generally based on the market price of sulfur at the beginning of
each calendar quarter. The market price for sulfur has increased by 68% in
fiscal 1995 over the previous fiscal year in conjunction with the recovery in
phosphate fertilizer prices. Supply and demand currently appear to be
relatively balanced and the Company presently expects only moderate sulfur price
increases in fiscal 1996.
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<PAGE>
The Company's requirements for ammonia are purchased from unaffiliated third
parties, are contracted for a year at a time, and are subject to periodic market
price adjustments. Prices increased in fiscal 1995 as a result of greater
demand for nitrogen fertilizers and reduced production of ammonia but have
stabilized recently due to lower demand during the spring planting season
resulting from wet weather conditions.
On July 28, 1994, the Company entered into the Kennecott Agreement for the
purchase of 300,000 tons of sulfuric acid per year to replace the output of the
older of the two sulfuric acid facilities currently operating at the Conda
Plant. Shut down of the older sulfuric acid plant will significantly reduce
sulfur dioxide ("SO\\2\\") emissions as proposed to the U.S. Environmental
Protection Agency ("EPA") as part of a settlement of the air quality enforcement
action described under "Environmental Matters." Shipments of sulfuric acid are
to begin no later than November 1995, and prices under the Kennecott Agreement
will be adjusted quarterly based on the equivalent cost of sulfur and the
Company's selling price for one of its dry fertilizer products. The Company will
continue to produce approximately 50% of its sulfuric acid requirement after
shut down of the sulfuric plant.
The Company's key raw materials are available from numerous sources and the
Company has experienced no difficulty in the past in obtaining them. The
Company expects to be able to continue to acquire adequate supplies of raw
materials, as needed.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local environmental laws and
regulations. Significant costs could be incurred on account of these
environmental laws and regulations in the future. Most of the Company's
environmental expenditures and potential costs are, or would be, in response to
provisions of various federal environmental laws, particularly the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act and the
Comprehensive Environmental Response, Compensation and Liability Act (aka
"Superfund"), and the land use, air, surface and ground water, and hazardous
waste regulations of the State of Idaho.
The phosphoric acid process water and calcium sulfate or "phosphogypsum" handled
at the Company's Conda Plant are currently exempt from regulation as a
"hazardous waste" under Subtitle C of the Resource Conservation and Recovery Act
("RCRA"). The EPA, with input from an advisory committee, is currently
evaluating potential improved processing, handling and storage measures for
phosphogypsum under provisions of the Toxic Substances Control Act and the RCRA.
The exact requirements of those potential future rules cannot be predicted with
certainty at this time but will likely affect the Company's handling of these
materials.
These materials are also regulated under Section 112 of the federal Clean Air
Act, which contains closure requirements for gypsum stacks that are no longer
used for water management and otherwise become deactivated. The Company does
not currently plan to deactivate any of its gypsum stacks under these
provisions.
-11-
<PAGE>
The Company has been subject to normal periodic review under Superfund, and an
Expanded Site Inspection was recently completed by an EPA contractor. This
inspection included an initial site visit in August 1993, followed by well water
sampling and testing in March 1994. Based on the contractor's report, the EPA
notified the Company in October 1994 that no further action under the Federal
Superfund Program is currently recommended at the Conda Plant.
In March 1994, the EPA issued a Notice of Violation pertaining to numerous
SO\\2\\ emissions during the period from October 1989 to May 1993. The Company
has negotiated a settlement with the EPA, which is now pending final federal
court approval, that provides for the payment of a $150,000 fine and reduced
SO\\2\\ emissions limitations until November 1995, at which time the Company
will shut down the older of its two sulfuric acid plants. The Company has
entered into the Kennecott Agreement to replace the production of this plant.
The Company has recently received a Notice of Violation from the EPA for alleged
violations under the Safe Drinking Water Act ("SDWA") relating to testing and
reporting on the quality of water used for human consumption from a public water
supply system at the Conda Plant. The Company has initiated testing of water
that potentially could be used for human consumption and believes, based on
discussions with agency officials, that no or only minimal civil penalties will
be assessed in connection with this matter. However, the Company has committed
to make improvements to its water supply system to comply with SDWA requirements
at a cost of approximately $100,000.
NUTEC MINERAL & CHEMICAL COMPANY
In January 1991, a wholly-owned subsidiary of the Company, Nu-West Minerals,
Inc. ("Nu-West Minerals"), formed a joint venture, NuTec Mineral & Chemical
Company ("NuTec"), with Mineral Technology Corporation ("MinTec") of Custer,
South Dakota, for the development and production of high purity synthetic silica
and other chemical and natural quartz products. MinTec had obtained a license
from an international chemical company of the worldwide patented rights to a
process which extracts high-purity synthetic silica in a gaseous form from the
production of phosphoric acid. The process also includes techniques for the
refinement and further purification of the extracted "wet cake" into dry
synthetic silica products.
MinTec contributed its existing natural quartz mining and processing operations
located in and around Custer, South Dakota (net of liabilities conditionally
assumed by NuTec) and the license for the process to NuTec in exchange for a 20%
general partnership interest. Nu-West Minerals contributed $2 million in cash,
a contract for the use of the phosphoric acid production process at the Conda
Plant, and a lease from the Company for the use of land and facilities in
exchange for an 80% General Partnership interest. In addition, the Company
provides operations support to NuTec at its actual cost.
In January 1992, NuTec obtained a $3 million senior secured term loan from GE
Capital. The loan was collateralized by the assets of NuTec, including the
license. The lender also received
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<PAGE>
a variable profit sharing interest in the partnership for a period of ten years
beginning with the quarter that commercial production commences. This loan was
repaid, the joint venture was converted to a limited partnership, and a note was
issued by NuTec to the Company for $3.4 million on November 2, 1993 in
connection with the Recapitalization.
Effective January 1, 1994, NuTec distributed to MinTec certain assets and
liabilities associated with the natural quartz business of NuTec originally
contributed by MinTec. In return, MinTec reduced its ownership interest in
NuTec to 5%, thereby increasing the Company's indirect ownership of NuTec to
95%. The 5% ownership interest in NuTec retained by MinTec was also converted
from a general partnership interest to a limited partnership interest as part of
the transaction. NuTec retained the license rights and related assets for the
production of synthetic silica and certain other products.
NuTec's production facilities have been constructed at the Conda Plant for the
processing of synthetic silica. These facilities have been operated
sufficiently to test production capacities and to produce sample quantities of
high-purity synthetic silica which have been introduced into the marketplace for
analysis by prospective customers. While initial market response has been
encouraging, continuous operation and process refinement will be required to
meet various end-user requirements for product particle size and density.
Potential end uses for which NuTec's products may serve as feedstock include
high-purity glass applications, implements and crucibles used in the production
of silicon crystals, low alpha fillers used for silicon chip encapsulation,
fibre optic wave guides, high temperature lighting and other technical
applications.
No attempt at commercial operations will be undertaken, however, unless and
until NuTec is successful in marketing its products and in obtaining sufficient
additional working capital to sustain operations. Uncertainty remains at this
time as to the success of the production scale processes, availability of
working capital, and the ultimate acceptance and marketing of NuTec's products.
Development of the synthetic silica business has been constrained by lack of
capital, including a restriction in its previous credit facility to the
investment of not more than $300,000 in NuTec during fiscal 1995 and a
limitation to investment of no more than $150,000 per year under its new credit
agreement. NuTec has worked within its capital limitation to continue testing
of various processes to increase particle size and density of its dry silica.
Test samples of wet cake silica, using currently available product
specifications, have been shipped to prospective customers in recent months for
product testing. There can be no assurance, however, that an economical means
of increasing particle size and density will be found or that wet cake sales
will be sufficient to justify continued operations. NuTec management believes
that it will recover its investment over time based on its projections of
production cost and potential sales to certain interested parties. Any such
sales are contingent on further testing and process refinement by such parties
and the timing or certainty of any transactions cannot yet be determined.
EMPLOYEES
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<PAGE>
As of June 30, 1995, the Company had 298 employees, approximately 95% of whom
were engaged in production activities. The Company believes that its relations
with its employees are good. The Company maintains employee benefit plans
providing for retirement savings, disability income, life insurance and medical,
dental and hospitalization coverage. None of the employees of the Company is
represented by a labor union.
In June 1994, the Company and its employees at the Conda Plant received
recognition for an exceptional safety program from the Occupational Safety and
Health Administration ("OSHA"). Following an extensive on-site OSHA review late
in 1993, the Conda Plant was awarded Merit status for a three-year period as
part of the agency's Voluntary Protection Program. An award received by fewer
than 0.1% of eligible industrial facilities nationwide, the Conda Plant and its
employees were recognized for voluntary compliance with OSHA regulations and
programs and are exempted from routine compliance inspections during the three-
year period of the Merit designation.
In June 1995, following an even more extensive on-site review by OSHA, the
Company was awarded STAR status, the highest achievement under the Voluntary
Protection Program. The Company's commitment to safety continues to be a top
priority as recognized by this prestigious award.
ITEM 2. PROPERTIES
CONDA PLANT
The Conda Plant is located near Soda Springs, Idaho, on approximately 630 acres
owned by the Company. The Conda Plant has the ability to produce multiple
phosphate fertilizer products simultaneously and to alter product mix to meet
changing requirements of its customers. The Conda Plant has a phosphoric acid
production capacity of approximately 300,000 P\\2\\O\\5\\ tons per year.
Approximately 50% of this phosphoric acid is currently concentrated to produce
SPA for direct sale. A granulation plant in the complex converts varying
quantities of the phosphoric acid to dry granular fertilizers. See "Business -
Principal Products" in Item 1. A small amount of phosphoric acid is also sold
directly as MGA. Two sulfuric acid plants, a 900 ton/day unit and a 1,200
ton/day unit, supply 80-90% of the sulfuric acid requirements for the complex.
The Company has an active preventive maintenance program at the Conda Plant to
assure the continuing operation of the plant and equipment. In addition,
production is halted for approximately two weeks each summer for an annual
refurbishment or "turnaround" of plant facilities at a time when fertilizer
sales demand is low.
NUTEC PLANT
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<PAGE>
NuTec has constructed equipment at the Conda Plant for the purpose of producing
high purity synthetic silica. Further process and product development will be
necessary to meet market requirements and to achieve commercial production
capacity. See "NuTec Mineral & chemical Company" in Item 1.
MINING PROPERTIES
The Company's mining properties and reserves in Idaho are described under the
heading "Existing Mining Operations" in Item 1.
OTHER
The Company acquired the Conda Plant and a 50% interest in the Conda Partnership
in 1987 from the bankruptcy estates of Beker and one of its subsidiaries which
filed for reorganization in 1985. The Company co-sponsored a bankruptcy
reorganization plan for Beker and its subsidiary that was confirmed by the U.S.
Bankruptcy Court on October 6, 1988. As a result of the acquisition of these
Beker assets, the Company believes that it has obtained substantial tax benefits
that will be available to it in future years. (See Note 5 to the Company's
Consolidated Financial Statements.)
ITEM 3. LEGAL PROCEEDINGS
NU-SOUTH BANKRUPTCY
In November 1992, the Company executed an agreement with the Trustee of the
bankruptcy estate of Nu-South Industries, Inc. ("Nu-South"), a wholly owned
subsidiary of the Company, and Mississippi Chemical Company ("MCC") for the
settlement of, and the mutual release from, all claims against the Company
relating to the Nu-South bankruptcy (the "Settlement Agreement"). The Trustee
had filed a complaint against the Company in January 1992 for the recovery of
unspecified amounts relating to alleged preferential transfers by Nu-South, and
was considering possible additional claims against the Company, including claims
which would assert that the Company should be held liable for the debts of Nu-
South. As part of the settlement, the Trustee obtained such releases or
dismissal with prejudice so as to protect the Company from indemnity claims by
defendants in certain third party guaranty preference cases. The Settlement
Agreement was approved by the Bankruptcy Court on December 7, 1992 and all
required payments were made as scheduled. The Nu-South bankruptcy estate was
terminated on April 1, 1994, and the Company expects no further liabilities or
financial exposure relating to Nu-South.
SHAREHOLDER LITIGATION
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<PAGE>
On August 10, 1995, the Company and Agrium issued a press release which
disclosed the contemplated tender offer by Agrium and the proposed merger
between Agrium and the Company. In the succeeding seven days, four class action
lawsuits were filed by various Company shareholders in the Court of Chancery of
the State of Delaware, New Castle County, Delaware, alleging that the Company
and its board of directors had breached their fiduciary duties to the
shareholders of the Company by agreeing to and supporting the tender offer and
merger. One of the lawsuits also named Agrium as a defendant and alleged that
Agrium had aided and abetted the alleged breach of fiduciary duty. Among other
claims, the lawsuits allege that the Company's Board of Directors had breached
its fiduciary duties to the shareholders by failing to take certain actions to
maximize the value of the Company's shares. The four lawsuits are captioned as
follows:
Elyse Azus v. Craig D. Harlen, Mark R. Sanders, Wesley W. Lang, Peter
B. Pfister, Nu-West Industries, Inc. and Agrium, Inc., Civil Action
No. 14484 (filed August 17, 1995)
Steven Grumet v. Craig D. Harlen, Mark R. Sanders, Wesley W. Lang,
Peter B. Pfister and Nu-West Industries, Inc., Civil Action No. 14477
(filed August 14, 1995)
Daniel Pitluck v. Craig D. Harlen, Mark R. Sanders, Wesley W. Lang,
Peter B. Pfister and Nu-West Industries, Inc., Civil Action No. 14469
(filed August 11, 1995)
Mark Bruckner v. Craig D. Harlen, Mark R. Sanders, Wesley W. Lang,
Peter B. Pfister and Nu-West Industries, Inc., Civil Action No. 14468
(filed August 10, 1995)
Each of the lawsuits seek a variety of injunctive and equitable relief as well
as unspecified money damages and an award of attorneys' fees and costs. The
Company intends to vigorously defend each of the lawsuits. Because the lawsuits
have only recently been filed and evidence has not yet been fully developed,
the Company is unable to comment with regard to the probable outcome of the
litigation.
OTHER
The Company is a party to certain legal actions or potential actions which it
considers routine litigation incidental to its business. The final resolution
of each such action cannot be predicted at this time although any potential
liabilities are estimated to be immaterial to the ongoing business of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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<PAGE>
Not applicable.
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<PAGE>
PART II
ITEM 5. TRADING MARKET FOR COMMON STOCK AND DIVIDEND POLICY
The Company's common stock trades on The Nasdaq Stock Market under the symbol:
FERT. As of June 30, 1995, there were approximately 443 holders of record of the
Company's common stock.
The following table sets forth the range of high and low closing sales prices as
reported on the Nasdaq Stock Market for the periods indicated adjusted for the
one-for-six reverse stock split which was effective December 9, 1994.
<TABLE>
<CAPTION>
Prices
--------------------------
High Low
---- ---
<S> <C> <C>
Fiscal 1993:
First Quarter... 6 3/4 3
Second Quarter.. 7 1/2 3 3/4
Third Quarter... 4 1/2 2 7/16
Fourth Quarter.. 3 3/16 1 1/2
Fiscal 1994:
First Quarter... 4 1/2 1 7/8
Second Quarter.. 9 3/8 1 1/2
Third Quarter... 17 1/4 9 15/16
Fourth Quarter.. 13 1/2 8 5/8
Fiscal 1995:
First Quarter... 12 3/8 9
Second Quarter.. 10 7/8 5 3/8
Third Quarter... 14 7/8 8 1/8
Fourth Quarter.. 14 1/2 9 1/8
</TABLE>
The Company has paid no dividends on its common stock. Holders of the Company's
common stock are entitled to receive dividends, when and as declared by the
Board of Directors, only after the holders of the Company's Class A Preferred
Stock and Class B Preferred Stock have received their respective preferential
dividend amounts, to the extent such dividends have accrued under the terms of
the Company's Restated Certificate of Incorporation. The payment of future
dividends and the amounts thereof will depend on the Company's earnings,
financial condition, capital requirements and such other factors as the
Company's Board of Directors may consider relevant.
The Company does not anticipate the payment of dividends to the holders of
either the Class A Preferred Stock, the Class B Preferred Stock or the common
stock in the foreseeable future. Payment of Class A and Class B Preferred Stock
dividends is prohibited by the terms of the Company's senior secured loan
agreement. Dividends of $3,190,000 per year have
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<PAGE>
accumulated with respect to the Class A Preferred Stock for each of the fiscal
years 1990, 1991, 1992, 1993, 1994 and 1995. For a description of the dividends
payable to the holders of the Class A Preferred Stock and the Class B Preferred
Stock, and the restrictions thereon, see Note 6 to the Company's Consolidated
Financial Statements.
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<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial information of the Company with
respect to the years ended June 30, 1991, 1992, 1993, 1994 and 1995 is derived
from the financial statements of the Company and related notes. This
information should be read in conjunction with the consolidated financial
statements and related notes elsewhere in this Form 10K and "Manage ment's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------------
Operations Data: 1991 1992 1993 1994 1995
---------------- --------- --------- --------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net Sales $92,178 $98,099 $ 87,288 $94,104 $103,327
Cost of Sales 82,339 88,225 79,538 77,984 79,302
------- ------- -------- ------- --------
Gross Margin 9,839 9,874 7,750 16,120 24,025
Selling, General and
Administrative Expenses 4,165 4,483 4,045 4,604 4,592
Provision for Litigation 1,300 400 150 - -
Partnership Investment
Valuation Adjustment 700 - - - -
------- ------- -------- ------- --------
Income from Operations 3,674 4,991 3,555 11,516 19,433
Interest Expense 9,222 9,380 8,673 8,737 9,555
Other (Income) Expense, Net (173) (126) (121) 187 177
------- ------- -------- ------- --------
Income (Loss) Before
Income Taxes and Minority
Interest (5,375) (4,263) (4,997) 2,592 9,701
Minority Interest 24 51 367 56 -
Provision for (Benefit From)
Income Taxes - - - - -
------- ------- -------- ------- --------
Net Income (Loss) Before
Extraordinary Item (5,351) (4,212) (4,630) 2,648 9,701
Extraordinary Loss from
Early Extinguishment of Debt - - - 1,660 -
------- ------- -------- ------- --------
Net Income (Loss) (5,351) (4,212) (4,630) 988 9,701
Preferred Stock Dividends (3,190) (3,190) (3,190) (3,194) (3,194)
-------
Net Income (Loss) Applicable
to Common Stockholders $(8,541) $(7,402) $ (7,820) $(2,206) $ 6,507
======= ======= ======== ======= ========
Net Income (Loss) per
Common Share $(.57) $(.49) $(.52) $(.06) $.72
======= ======= ======== ======= ========
As of June 30,
---------------------------------------------------
Financial Position: 1991 1992 1993 1994 1995
------------------- ------- ------- -------- ------- --------
Working Capital $16,287 $ 6,329 $(23,905) $16,731 $ 24,833
Total Assets 87,882 76,840 69,908 84,185 91,629
Long Term Debt 59,000 54,174 52,532 65,851 63,711
Stockholders' Equity 14,681 10,582 5,940 7,307 17,008
</TABLE>
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company is engaged in the production and sale of concentrated phosphate
fertilizer products. Its production facilities are located near Soda Springs,
Idaho (the "Conda Plant"), and its primary marketing area is western North
America. It operates on a fiscal year ended June 30.
In March 1995, the Company disclosed that it had retained PaineWebber
Incorporated to assist it in exploring alternatives for enhancing long-term
shareholder value. Alternatives to be considered included, but were not limited
to, strategic relationships with other fertilizer producers and customers, the
sale or merger of the Company, or the continuation of the Company's current
business plan of internal growth. On August 10, 1995 the Company and Agrium
announced that they had entered into a definitive Merger Agreement which
provides for the acquisition of the Company by Agrium. Under the terms of the
Merger Agreement, a subsidiary of Agrium is making a tender offer to purchase
all of the outstanding common stock of the Company at $10.50 per share in cash.
The tender will expire on September 14, 1995, unless extended. As soon as
practical following the tender offer, the Agrium subsidiary will merge into the
Company, and each remaining share of the Company's common stock will be
converted into the right to receive $10.50 per share in cash. See "Liquidity
and Capital Resources - Other" for further information.
The fertilizer industry is a commodity-oriented business, and has historically
experienced wide-ranging volatility in prices due to supply and demand
imbalances both domestically and overseas. Government farm policies, weather and
disposable farm income, in addition to international politics and economics with
their effect on export demand, are among the factors contributing to price
volatility.
Largely a result of reduced export demand, prices for phosphate fertilizer
products dropped to record low levels industry-wide during the Company's fiscal
year 1993. Beginning in the Fall of 1993, a steady recovery of product prices
began due to reduced production by certain U.S. Gulf Coast manufacturers and
improved export demand, primarily from China. The average prices received for
the Company's dry granular products were 14 - 19% higher during the year ended
June 30, 1995 compared to the prior year, and prices for its liquid products
increased approximately 8%. The combination of product price gains, increased
production, and ore cost reductions, which offset other raw material cost
increases, has enabled the Company to post improved operating earnings and net
income for fiscal 1995.
The Company's business is very seasonal in nature with emphasis on the crop
planting seasons of spring and fall. The spring of 1995 resulted in lower
domestic application of fertilizer than had been anticipated due to extremely
wet weather conditions in California, the Pacific Northwest and the Midwest.
Crop planting was delayed and farmers were unable to apply fertilizer in optimal
quantities. Total planted acreage of corn, the heaviest user of fertilizer, was
reduced due to time
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<PAGE>
constraints and substitution of soybean or other crops. Consequently, some
producer inventories were higher than normal at June 30, 1995. Subsequent to
June 30, 1995, the Company shipped a significant quantity of MAP and 16-20-0 as
export sales, lowering its inventory levels by selling outside its normal market
area.
The outlook for the price of phosphate fertilizer remains relatively good due
to product demand both internationally and domestically. Worldwide grain
inventories are low, as are certain grain stocks in the U.S. The possibility
exists for increased domestic crop planting and relatively high grain prices in
the year ahead with an attendant increase in fertilizer application. It has
historically been difficult to forecast the effects of international politics
and economics on fertilizer export tonnage or the uncertainty of weather
patterns and farm income in the U.S.
RESULTS OF OPERATIONS
The results of operations as reported in the Consolidated Statements of
Operation for the years ended June 30, 1995, 1994, and 1993 represent the
operation of the Company's Conda Plant and its wholly-owned subsidiaries, Nu-
West Minerals, Inc. ("Nu-West Minerals") and Nu-West Mining, Inc. ("Nu-West
Mining").
1995 VS. 1994
-------------
Consolidated net income for the year ended June 30, 1995 was $9.7 million, or
$.72 per share, as compared to a net income before extraordinary loss of $2.6
million, or a loss of $.09 per share, for the prior year. After an
extraordinary loss of $1.6 million from the write-off of loan fees and
discounts, the total consolidated net income for the year ended June 30, 1994
was $1.0 million, or a loss of $.38 per share. Included in the consolidated
results are losses from NuTec Mineral and Chemical Company ("NuTec"), net of
minority interest and including amortization of goodwill, of $882,000 and $1.3
million for the years ended June 30, 1995 and 1994, respectively.
Net sales were $103.3 million for the current year compared to $94.1 million for
the prior year, or a 10% increase. Improved product prices caused the increase
in sales revenue. Sales prices of liquid fertilizer products increased
approximately 8% while the average prices for dry granular products improved 17%
for fiscal 1995 as compared to the previous year. Sales of dry granular
products on a P\\2\\O\\5\\ ton basis decreased 4% during the year ended June 30,
1995 as compared to the prior year while sales of liquid fertilizer products
were approximately the same as the prior year. Inventories of dry granular
products increased substantially over the prior year due to lower than
anticipated spring season sales of both dry and liquid products, a result of
prolonged adverse weather conditions. Sales of liquid products accounted for
54% of net product sales in the current period and 55% in the prior year
period, and contributed a substantial portion of gross margins in both periods.
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<PAGE>
The gross operating margin of $24.0 million for fiscal 1995 compares to a gross
margin of $16.1 million for the prior year. This improvement is a result of the
higher product prices discussed above and the effects of higher production
output and reduced ore cost, which largely offset increases in other raw
material costs. The per ton production costs of the Company's products were 1 -
2% higher in fiscal 1995 than in fiscal 1994. Although the cost of phosphate
ore for the current year decreased by 13% as compared to the prior year, the
cost of sulfur, purchased sulfuric acid and ammonia increased 68%, 52% and 9%,
respectively. Ore cost, however, accounts for the greatest portion of production
cost on a weighted basis. Production volume increased 3% for fiscal 1995 as
compared to the prior year. The components of cost of sales are raw materials,
labor, manufacturing overhead and on-site administration, as well as
depreciation and amortization.
Selling, general and administrative expenses ("SGA") were slightly less in the
current year than in the prior year and decreased as a percentage of sales from
4.9% to 4.4% as a result of the increase in sales revenue. Interest expense
increased $818,000 largely as a result of the change to variable rate debt
instruments as part of the Recapitalization in November 1993 and the increase in
the prime lending rate during the current fiscal year. See Note 4 to the
Company's Consolidated Financial Statements for the year ended June 30, 1995 for
further information.
1994 VS. 1993
-------------
Net income before preferred stock dividends and before the extraordinary loss
from the write-off of loan fees and discounts in connection with the
Recapitalization, for the year ended June 30, 1994 was $2.6 million, or a
loss of $.09 per share, as compared to a loss of $4.6 million, or $3.12 per
share, for the prior year. Consolidated net income, including the extraordinary
loss of $1.6 million, for the year ended June 30,1994 was $1.0 million, or a
loss of $.38 per common share. Included in the consolidated earnings are losses
of $1.3 million and $1.5 million for the years ended June 30, 1994 and 1993,
respectively, representing the Company's allocable share of the loss net of
minority interest for NuTec.
Net sales were $94.1 million for the year ended June 30, 1994 as compared to
$87.3 million for the prior year. This increase in sales revenue is due to
increased sales volumes and prices. Total sales volume on a P\\2\\O\\5\\ basis
increased by approximately 3%. This increase in sales volume was possible due
to a corresponding increase in tons produced. Sales prices increased during the
year ended June 30, 1994 by 3-5% for granular products compared to fiscal 1993,
while prices for liquid fertilizer products increased by approximately 6%.
Sales of liquid fertilizer products accounted for 55% of net product sales in
fiscal 1994 and 57% in fiscal 1993, and contributed a substantial portion of
gross margin in both fiscal years.
The gross operating margin of $16.1 million for the year ended June 30, 1994
compares to a gross margin of $7.8 million for the comparable prior year period.
The difference is due to the increased sales revenues discussed above and to a
decrease in production costs. The reduction in production costs was due to a
48% decrease in the cost of sulfur and a 38% decrease in the cost of purchased
sulfuric acid, partially offset by a 3% increase in the cost of ammonia.
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<PAGE>
Depreciation and amortization expense for fiscal 1994 totalled $5.5 million as
compared to $5.8 million in fiscal 1993. This decrease is due to lower Conda
Partnership depreciation expense. Since the Company discontinued the mining of
its reserves in November 1993, depreciation and depletion associated with mine
assets and reserves were discontinued. The mine assets had been depreciated to
salvage value at that date. Although the Company incurred significant loan fees
in connection with its Recapitalization, these fees are being amortized over the
life of the associated loans which are longer than those of the loans which were
repaid with the proceeds of the refinancing, resulting in a lower annual
amortization of discounts and loan fees.
Selling, general and administrative expenses increased by $559,000 during fiscal
1994 as compared to the previous year, and as a percentage of sales was 4.9%
for fiscal 1994 compared to 4.6% for fiscal 1993. This increase in SGA is
primarily due to legal fees and an increase in compensation which had been
deferred until completion of the Company's Recapitalization.
Interest expense increased slightly, due to the increase in the prime lending
rate during the fourth quarter of fiscal 1994 and to the increased outstanding
debt following the Recapitalization. See Note 4 to the Company's Consolidated
Financial Statements.
ACQUISITIONS AND DISPOSITIONS
Nu-South Industries: In February 1990, Nu-South Industries, Inc. ("Nu-South"),
a wholly-owned subsidiary of the Company, filed a voluntary petition for
liquidation under the provisions of Chapter 7 of the Bankruptcy Code. Severe
liquidity problems and large operating losses caused by a period of extremely
low fertilizer prices extending through the 1989 Fall season fertilizer market
coupled with high capital requirements for refurbishment of the Pascagoula Plant
owned by Nu-South limited its ability to operate without external cash
infusions. Restrictions under the Company's term loan agreement with GE Capital
limited total cash advances which could be made by the Company to Nu-South and
prevented the Company from continued funding of production operations. In
December 1990, the Trustee of the Nu-South bankruptcy estate executed and
delivered deeds in lieu of foreclosure and related instruments covering the
Pascagoula Plant to Mississippi Chemical Company ("MCC"), Nu-South's principal
secured creditor, thereby transferring to MCC all of the production facilities,
equipment and real property owned by Nu-South.
In December 1992, the Company executed an agreement with the Trustee and MCC for
the settlement of, and the mutual release from, all claims against the Company
relating to the Nu-South bankruptcy (the "Settlement Agreement"). The
Settlement Agreement required a series of payments totalling $550,000 in
exchange for a general and irrevocable release by the Trustee and MCC of all
claims against the Company, its current and former officers and directors, and
its affiliates. The Settlement Agreement was approved by the Bankruptcy Court
on December 7, 1992 and all required payments were made by the Company as
scheduled. The Nu-South bankruptcy estate was closed on April 1, 1994 and the
Company expects no further liability relating to Nu-South.
-24-
<PAGE>
Nu-West Mining: In July 1992, the Company purchased 100% of the capital stock
of WCF(US), which owned a 50% interest in the Conda Partnership. The Company
owned the other 50% interest. The consideration for the stock purchase included
cash of $150,000 and a senior secured promissory note in the amount of $4.95
million, which was repaid as part of the Recapitalization. The Company has
also provided an unlimited indemnification against certain tax and other
liabilities related to WCF(US) and the transaction.
The transaction effectively gave the Company complete ownership of the Conda
Partnership, and thereby control of significant phosphate ore reserves in
southeastern Idaho and the processing facilities adjacent to the Conda Plant.
The name of WCF(US) has been changed to Nu-West Mining. Effective July 1, 1994,
all assets of the Conda Partnership were transferred to either Nu-West Mining or
the Company, and the Conda Partnership has been dissolved.
LIQUIDITY AND CAPITAL RESOURCES
Recapitalization Plan: As a result of the sustained depressed market conditions
in fiscal years 1992 and 1993 and the Company's substantial debt repayment
requirements, the Company defaulted on principal and interest payments on its
senior indebtedness due on July 1, 1993 and October 1, 1993. At a Special
Meeting of Stockholders held on October 20, 1993, the Company received approval
for a Recapitalization Plan, which was completed on November 2, 1993. For a
detailed discussion of the various components of the Recapitalization, see Note
4 of the Company's Consolidated Financial Statements. The Recapitalization
included the refinancing of substantially all of the Company's long-term debt.
This included (i) a six-year $20 million revolving loan at Prime interest rate
plus 2% with Banque Indosuez, New York Branch, as agent, (ii) a six-year $30
million senior secured term loan at the same rate of interest, (iii) an eight-
year $10 million 12.5% senior subordinated unsecured term loan, and (iv) $13.6
million of 18% nine-year junior subordinated unsecured deferred interest notes.
All of the Company's assets were pledged to secure the working capital revolver
and the senior secured term loan. The Recapitalization strengthened the
Company's liquidity position and allowed it to implement various production
cost savings projects which would not otherwise have been available to it.
However, the Recapitalization required substantial dilution of common stock
holdings due to issuance of warrants to various lenders. In August 1995, the
Company refinanced the debt acquired under the Recapitalization at substantially
lower interest rates. See "Liquidity and Capital Resources - Financing
Activities."
Operating Activities: Cash provided by operations for fiscal 1995 was $10.7
million as compared to a use of cash for operations of $4.2 million for the
prior year. The Company's liquidity and profitability have improved during the
past eighteen months as a result of higher phosphate fertilizer prices and the
realization of phosphate ore cost reductions. Prices averaged 17% and 8%
higher for dry and liquid products, respectively, for the fiscal year ended June
30, 1995 compared to the prior year. Sulfur prices compared over the same
periods were approximately 68% higher, a result primarily of increased demand by
the phosphate fertilizer industry. Ammonia prices increased 9% during fiscal
1995 due to high demand for and reduced
-25-
<PAGE>
supply of nitrogen fertilizers and are expected to remain at relatively high
levels in future months, although the extremely wet 1995 spring season weather
resulted in a moderation of that trend. The Company expects further moderate
increases in its cost of sulfur and ammonia in the near term. The Company
expects continued savings from the purchase of ore under the RP Agreement to
largely offset these raw material cost increases. The combined effect of higher
product prices and cost reduction efforts has been improved product margins and
higher earnings.
Domestic fertilizer usage was down in the spring of 1995 due to wet weather
conditions, although world-wide demand for fertilizer has moderated the effect
on prices. The current outlook for product prices industry-wide remains
positive based on the need for phosphates in both the United States and in
foreign markets such as China, India and South America. Increased buying in the
international market has been a key factor in the balancing of supply and demand
that has led to reduced inventories and product price recovery. It is
difficult, however, to forecast the future effect or duration of the near term
buying patterns of China and India. The Company's product prices continue to be
related to those received by producers of phosphate fertilizers in the Gulf
Coast region, and the uncertainties associated with the export market serviced
by those producers. Factors such as weather conditions, the timing and quantity
of export demand, and other unforeseeable market forces on a world-wide basis
have frustrated previous attempts to predict with accuracy a sustained recovery.
The Company finances its working capital needs through its revolving line of
credit. Working capital increased by $8.2 million due primarily to a $7.7
million increase in inventories. Higher inventories are due to increased
finished good inventory resulting from increased production rates and the
delayed Spring planting season as discussed above. Ore inventories are somewhat
higher at June 30, 1995 than at June 30, 1994 due to unusually low levels in
the prior year resulting from the transition to ore purchased under the RP
contract.
The Company's revolving credit facility at June 30, 1995 bore interest at prime
plus 2% (11% at June 30). Cash balances were $140,000 and unused borrowing
capacity totalled approximately $9.9 million. Outstanding borrowings were $6.5
million at June 30, 1995. The Company had working capital of approximately
$24.8 million and a current ratio of 2.65:1 at June 30, 1995. Based on current
projections, the Company expects results of operations to generate sufficient
borrowing capacity under its revolving line of credit to continue to meet its
working capital needs.
Investing Activities: Capital expenditures were $6.4 million for the twelve
months ended June 30, 1995. Of this amount $1.5 million relates to the RP
Agreement and $2.0 million relates to construction of certain assets required by
the sulfuric acid purchase contract with Kennecott described below.
Future capital expenditure requirements of the Company include an additional
$0.8 million required by the RP Agreement, approximately $2 million required by
the Kennecott Agreement and $3.5 million for the construction of a new double
lined cooling pond to be completed during the summer and fall of 1995. In
addition the Company believes that approximately $2 million per
-26-
<PAGE>
year of estimated capital expenditures, along with an approximate $4-5 million
per year of annual maintenance turnaround expenditures (included in cost of
sales), will be sufficient to maintain production capacity of the Conda Plant
for the foreseeable future.
On July 28, 1994, the Company entered into the five-year Kennecott Agreement
for the purchase of 300,000 tons of sulfuric acid per year to replace the output
of the older of the two sulfuric acid facilities currently operating at the
Conda Plant. Shut down of the older sulfuric acid plant will significantly
reduce sulfur dioxide emissions as proposed to the EPA as part of a settlement
of an air quality enforcement action. Shipments of sulfuric acid are to begin
no later than November 1995 and prices under the contract will be adjusted
quarterly based on the equivalent cost of sulfur and the Company's selling price
for one of its fertilizer products.
The Company also entered into a $4 million loan agreement with Kennecott. The
proceeds of the $4 million loan are being used to construct tankage and rail
spurs to receive and unload the sulfuric acid and a boiler to replace the steam
now supplied by the older sulfuric acid plant. The five-year senior subordinated
loan is secured by the constructed assets described and bears interest at prime
plus 2%. Interest will be paid quarterly and principal will be repaid as
sulfuric acid is purchased over the five-year term of the loan. Borrowings
under this facility were $1.9 million at June 30, 1995. The Company will
continue to produce approximately 50% of its sulfuric acid requirement after the
shutdown. See Note 13 to the Company's June 30, 1995 Consolidated Financial
Statements for further information.
The capital expenditure requirements for the RP Agreement, the new cooling pond
and those required to maintain capacity will be funded from the results of
operations. The construction of the assets required by the Kennecott Agreement
will be financed by the five-year, $4 million loan from Kennecott described
above.
On August 9, 1994, the Company executed a Work Reduction and Buy-Out Settlement
Agreement with the third party general contractor (the "General Contractor")
that prior to the RP Agreement mined Conda Partnership ore reserves to eliminate
a minimal annual mining requirement and the use of the General Contractor for
ore handling functions at the Conda Plant, and to make certain other
modifications to the mining contract. The Company paid the General Contractor a
payment of $100,000 for the further modification of the contract, and expects to
save $1.0-1.5 million annually as a result of these changes. Under an operating
lease, the Company has acquired equipment valued at $1.3 million to conduct the
ore handling operations previously performed by the General Contractor.
The Company has pursued product diversification through its indirect interest in
NuTec. Capital investment by the Company in NuTec is currently limited to no
more than $150,000 per year. NuTec has worked within its capital limitation to
continue testing of various processes to increase particle size and density of
its dry silica. Test samples of wet cake silica, using currently available
product specifications, have been shipped to prospective customers in recent
months for product testing. There can be no assurance, however, that an
economical means of increasing particle size and density will be found or that
wet cake sales will be sufficient to justify continuous
-27-
<PAGE>
operation. NuTec believes that it will recover its investment over time based on
its projections of production cost and potential sales to certain interested
parties. Any such sales are contingent on further testing and process refinement
by such parties and the timing or certainty of any transactions cannot yet be
determined. NuTec believes it will be able to obtain sufficient capital when
required, however, production scale operation on a continuous basis will require
additional capital beyond that currently available under the Company's loan
agreements.
Financing Activities: On August 3, 1995, the Company refinanced substantially
all of its long-term debt with a $75 million senior secured loan agreement with
Harris Trust and Savings Bank ("Harris"), as agent, consisting of (i) a five-
year $15 million revolving credit facility, $5 million of which is available
only during the Company's period of peak working capital requirement from July
through February, (ii) a $5 million letter of credit facility which expires
December 31, 1998, (iii) a five-year $25 million term loan with equal quarterly
amortization, and (iv) a six-year $30 million term loan with quarterly
amortization in varying amounts. The loans bear interest based, at the
Company's option, on either (i) LIBOR or (ii) the prime commercial rate
announced from time to time by Harris, plus a variable margin determined by
the Company's fixed charge ratio. Based on the initial margin at closing, the
$25 million loan and revolving credit facility bear interest at LIBOR plus
2.25% and the $30 million loan bears interest at LIBOR plus 3.0%. Using current
loan balances and interest rates, the Company estimates interest savings for
fiscal 1996 of approximately $2.6 million and a reduction in blended interest
rates from 13.3% to 8.5%.
The Company made $5.2 million in regularly scheduled principal payments on its
previous senior secured term loan during fiscal 1995.
Agrium Tender Offer: In March 1995, the Company disclosed that it had
retained PaineWebber Incorporated to assist it in exploring alternatives for
enhancing long-term shareholder value. The alternatives to be considered
included, but were not limited to, strategic relationships with other
significant fertilizer producers and customers, the sale or merger of the
Company, the formation of a joint venture with one or more parties, or the
continuation of the Company's current business plan to concentrate on internal
growth. Agrium and the Company announced on August 10, 1995 that they had
entered into a definitive Merger Agreement which provides for the acquisition of
the Company by Agrium.
Under the terms of the Merger Agreement, a subsidiary of Agrium is making a
tender offer to purchase all of the outstanding common stock of the Company at
$10.50 per share in cash. The tender offer commenced on August 16, 1995 and
will expire September 14, 1995, unless extended. As soon as practical following
the tender offer, the Agrium subsidiary will merge into the Company, and each
remaining share of the Company's common stock will be converted into the right
to receive $10.50 per share in cash. Total consideration to be paid to the
common stockholders of the Company will be approximately $98.5 million.
The completion of the tender offer is conditioned upon, among other things, the
tender of at least 60% of the shares of common stock of the Company on a fully-
diluted basis and applicable
-28-
<PAGE>
regulatory review. The Board of Directors of the Company has unanimously
approved the Merger Agreement. The Board of Directors of the Company may
withdraw its recommendation for and support of the transaction if required to do
so in furtherance of its fiduciary responsibilities; however, if the Merger
Agreement is terminated or not completed because of such withdrawal, Agrium will
be entitled to a payment from the Company of $4 million. PaineWebber
Incorporated has acted as financial advisor to the Company and has rendered a
fairness opinion in connection with the transaction. The Board of Directors of
Agrium has also unanimously approved the merger agreement.
Certain shareholders of the Company, who own in the aggregate approximately 57%
of the outstanding and 49% of the fully-diluted common shares, have agreed with
Agrium to tender those shares in the tender offer, subject to certain revocation
rights.
The Company's current debt structure, as recently refinanced, is expected to
remain in place as of the date of the contemplated merger. The Class A and
Class B Preferred Stock of the Company will also remain outstanding at the
effective date of the merger. Due to the change of ownership which will result
if the tender is successful, the Company's usage of its tax net operating losses
will be limited based on the market value of the Company's stock.
CHANGING PRICES AND INFLATION
The fertilizer industry is subject to volatile price fluctuations due to supply
and demand imbalances caused by factors such as crop prices, disposable farm
income, adverse weather conditions, and political and economic factors affecting
both domestic and foreign purchasers of fertilizer. Following a sustained
downturn in fiscal 1993 that resulted in prices at twenty year low levels, the
recovery in fiscal years 1994 and 1995 has resulted in granular fertilizer
prices 17% higher in fiscal 1995 than 1994.
Although the Company does not generally ship product overseas, over half of the
U.S. phosphate fertilizer production is exported, principally to India and
China. Changes in export demand and other factors have a direct effect on
prices realized by the Company in its market area and add to the volatility and
uncertainty of product prices.
The Company does not consider the impact of inflation on its business activities
to have been significant to date.
-29-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Nu-West Industries, Inc. and Subsidiaries
-----------------------------------------
Index to Financial Statements and Supporting Schedules
------------------------------------------------------
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Report of Independent Public Accountants.................................. F-1
Consolidated Balance Sheets -- June 30, 1995 and 1994..................... F-2
Consolidated Statements of Operation for the years
ended June 30, 1995, 1994 and 1993....................................... F-3
Consolidated Statements of Stockholders' Equity for
the years ended June 30, 1995, 1994 and 1993............................. F-4
Consolidated Statements of Cash Flows for the years
ended June 30, 1995, 1994 and 1993....................................... F-5
Notes to Consolidated Financial Statements................................ F-6
Schedule for the years ended June
30, 1995, 1994 and 1993:
II - Valuation and Qualifying Accounts.................................... S-1
</TABLE>
-30-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Nu-West Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Nu-West
Industries, Inc. (a Delaware corporation), and subsidiaries as of June 30, 1995
and 1994, and the related consolidated statements of operation, stockholders'
equity, and cash flows for the years ended June 30, 1995, 1994 and 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits 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 financial position of Nu-West Industries, Inc. and
subsidiaries as of June 30, 1995 and 1994, and the results of their operations
and their cash flows for the years ended June 30, 1995, 1994 and 1993, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed on S-1
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial statements.
This information has been subjected to the auditing procedures applied in our
audits of the basic financial statements and, in our opinion, is fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
/s/ ARTHUR ANDERSEN LLP
Boise, Idaho
July 28, 1995
(Except with respect to the
merger agreement and related
shareholder litigation, as
described in Note 15, as to
which the date is August 23, 1995)
F-1
<PAGE>
NU-WEST INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30,
(In thousands, except shares and par values)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 140 $ 1,137
Receivables, net of allowance for doubtful accounts
of $264,000 and $311,000, respectively 11,207 9,543
Inventories 26,814 18,888
Deferred turnaround costs 840 1,397
Prepaid expenses and other current assets 904 990
--------- ---------
Total current assets 39,905 31,955
PROPERTY, PLANT AND EQUIPMENT, less
accumulated depreciation, depletion and amortization 37,978 38,793
DEFERRED FINANCING FEES 9,038 9,717
DEFERRED COSTS AND OTHER ASSETS 4,708 3,720
--------- ---------
Total assets $ 91,629 $ 84,185
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 5,019 $ 5,262
Accounts payable 2,812 1,456
Accrued liabilities 7,241 8,506
--------- ---------
Total current liabilities 15,072 15,224
LONG-TERM DEBT 58,692 60,589
OTHER LIABILITIES 230 141
DEFERRED INCOME TAXES 627 924
--------- ---------
Total liabilities 74,621 76,878
STOCKHOLDERS' EQUITY
Preferred stock Class A, $100 par value, 290,000
shares authorized and outstanding 29,000 29,000
Preferred stock Class B, $100 par value, 20,000
shares authorized, 344 and 362 shares
outstanding, respectively 34 36
Common stock, $.01 par value, 16,666,667 shares authorized
of which 2,000,000 shares are non-voting, 8,086,363 shares
outstanding, of which 633,106 shares are non-voting 81 81
Additional paid-in capital 46,972 46,970
Accumulated deficit (59,079) (68,780)
--------- ---------
Total stockholders' equity 17,008 7,307
--------- ---------
Total liabilities and stockholders' equity $ 91,629 $ 84,185
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-2
<PAGE>
NU-WEST INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
For the Years Ended June 30,
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net sales $103,327 $94,104 $87,288
Cost of sales 79,302 77,984 79,538
-------- ------- -------
Gross margin 24,025 16,120 7,750
Selling, general and admin-
istrative expenses 4,592 4,604 4,045
Provision for litigation - - 150
-------- ------- -------
Income from
operation 19,433 11,516 3,555
Interest expense 9,555 8,737 8,673
Other (income) expense, net 177 187 (121)
-------- ------- -------
Income (loss) before income taxes and
minority interest 9,701 2,592 (4,997)
Minority interest - 56 367
Income taxes - - -
-------- ------- -------
Net income (loss) before extra-
ordinary item 9,701 2,648 (4,630)
Extraordinary loss from early
extinguishment of debt - (1,660) -
-------- ------- -------
Net income (loss) 9,701 988 (4,630)
Preferred dividends (3,194) (3,194) (3,190)
-------- ------- -------
Net income (loss) applicable to
common shareholders $ 6,507 $(2,206) $(7,820)
======== ======= =======
Net income (loss) before extra-
ordinary item per common share $ .72 $ (.09) $ (3.12)
Extraordinary item - (.29) -
-------- ------- -------
Net income (loss) per common share $ .72 $ (.38) $ (3.12)
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE>
NU-WEST INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended June 30, 1995, 1994, and 1993
(In thousands, except share amounts)
<TABLE>
<CAPTION>
ADDITIONAL WARRANTS TO
PREFERRED STOCK PREFERRED STOCK PAID IN PURCHASE ACCUMULATED
CLASS A CLASS B COMMON STOCK CAPITAL COMMON STOCK DEFICIT
--------------- ---------------- ------------ ---------- ------------ -----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance June 30,
1992 290,000 $29,000 20,000 $ 2,000 14,964,567 $ 150 $40,095 4,475 $(65,138)
Net (loss) - - - - - - - - (4,630)
Stock issued to
employees - - - - 78,300 - 85 - -
Adjustment to warrants
issued in prior
periods, net - - - - - - - (97) -
------- ------- ------ ------- ---------- ----- ------- ----- --------
Balance June 30,
1993 290,000 29,000 20,000 2,000 15,042,867 150 40,180 4,378 (69,768)
Net income - - - - - - - - 988
Stock issued under
employee stock grant
plan - - - - 107,200 2 38 - -
Preferred stock
surrendered - - (19,638) (1,964) - - 1,964 - -
Stock options
granted at less than
market value - - - - - - 70 - -
Warrants exercised - - - - 33,367,610 333 4,314 (4,378) -
------- ------- ------- ------- ----------- ----- ------ ----- --------
Balance June 30,
1994 290,000 29,000 362 36 48,517,677 485 46,566 - (68,780)
Net income - - - - - - - - 9,701
Preferred stock
surrendered - - (18) (2) - - 2 - -
Reverse stock
split - - - - (40,431,314) (404) 404 - -
------- ------- ------- ------- ----------- ----- ------ ----- --------
Balance June 30,
1995 290,000 $29,000 344 $ 34 8,086,363 $ 81 $46,972 - $(59,079)
======= ======= ======= ======= =========== ===== ======= ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
NU-WEST INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended June 30,
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING
ACTIVITIES
Net income (loss) $ 9,701 $ 988 $ (4,630)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation, depletion and amortization 5,783 5,537 5,848
Amortization of discounts and loan fees 1,531 1,680 2,083
Interest paid in kind 2,870 1,658 -
Deferred income taxes (297) (140) -
Other (83) 49 69
Write-off of loan fees and discounts - 1,560 -
Loan fees deferred (195) (6,833) (681)
Changes in operating assets and liabilities:
Receivables (1,294) (3,058) 1,211
Inventories (7,744) (5,830) 2,221
Deferred turnaround costs 556 (722) 590
Deferred mining costs (4) 862 1,098
Prepaid expenses and other current assets (237) 187 (5)
Accounts payable 1,358 468 (1,282)
Accrued liabilities (1,311) (708) (379)
Other liabilities 89 141 4
Minority interest - (56) (367)
-------- -------- ---------
Net cash provided by (used for)
operating activities 10,723 (4,217) 5,780
CASH FLOWS USED FOR INVESTING ACTIVITIES
Capital expenditures (6,426) (3,288) (673)
Net proceeds from Nu-West Mining acquisition - - 350
Purchase of bonding deposit investment securities (365) (5) (565)
Proceeds from maturity of bonding deposit investments 525 329 442
Proceeds from collection of long-term note receivable 161 - -
Other 8 - 2
-------- -------- ---------
Net cash used for investing activities (6,097) (2,964) (444)
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Proceeds from revolving lines of credit 12,800 52,399 105,730
Payments on revolving lines of credit (15,000) (50,839) (104,512)
Proceeds from long-term debt 1,877 43,250 -
Principal payments on long-term debt (5,300) (36,658) (8,048)
Proceeds from exercise of warrants - 74 -
-------- -------- ---------
Net cash provided by (used
for) financing activities (5,623) 8,226 (6,830)
-------- -------- ---------
NET INCREASE (DECREASE) IN CASH (997) 1,045 (1,494)
CASH AT BEGINNING OF PERIOD 1,137 92 1,586
-------- -------- ---------
CASH AT END OF PERIOD $ 140 $ 1,137 $ 92
======== ======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during fiscal year for:
Interest $ 5,231 $ 6,492 $ 6,676
Income taxes $ 297 $ 507 $ -
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
NU-WEST INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying financial statements include the accounts of Nu-West
Industries, Inc. (the "Company") and its wholly owned subsidiaries, Nu-West
Minerals, Inc. ("Nu-West Minerals") and Nu-West Mining, Inc. ("Nu-West Mining").
All significant intercompany transactions have been eliminated.
Inventories
Inventories are stated at the lower of first-in, first-out cost or market value
and include the cost of materials, direct labor and manufacturing overhead.
Inventories consisted of the following at June 30 (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Finished goods $ 8,811 $ 3,705
Work in progress 3,948 2,885
Raw materials 10,364 8,894
Supplies 3,691 3,404
------- -------
$26,814 $18,888
======= =======
</TABLE>
Supplies consist of replacement parts, chemicals and coal. Supplies are charged
to production as they are consumed and are expensed, as Cost of sales, as the
associated finished goods are sold.
Deferred Turnaround Costs
Production facilities are periodically shut down (typically once annually), at
which time repair and maintenance procedures are performed. Related costs
("turnaround costs") are deferred and amortized ratably throughout the fiscal
year which is benefitted by these costs.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Significant improvements and
betterments are capitalized, while repairs and maintenance, other than
turnaround costs, are charged to operations as incurred.
Lease obligations for which the Company assumes substantially all property
rights and risks of ownership are capitalized. All other leases are treated as
operating leases. Payments on operating leases totaled $3.0 million in fiscal
1995 and $2.3 million in fiscal 1994. See Note 13 for annual minimum lease
payments on certain material operating leases.
F-6
<PAGE>
The major components of property, plant and equipment are as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Mineral reserves $ 2,465 $ 2,465
Land and Land improvements 7,863 7,812
Buildings 3,460 3,230
Operating equipment 50,804 48,612
Plant and Construction in progress 6,657 4,868
-------- --------
71,249 66,987
Accumulated depreciation (33,271) (28,194)
-------- --------
$ 37,978 $ 38,793
======== ========
</TABLE>
Depreciation of plant and equipment and amortization of land improvements and
assets under capital leases are calculated using the straight-line method over
10 - 20 years for land improvements, 10 - 20 years for buildings and 3 - 15
years for plant and operating equipment. Depletion of mineral reserves is
provided based on the estimated recoverable reserves on the units of production
method.
Deferred Financing Fees
The Company incurred loan fees of $195,000 in fiscal 1995, $10,362,000 in
fiscal 1994 (including $3,529,000 of noncash items) and $681,000 in fiscal 1993,
which were deferred and are being amortized over the lives of the associated
loans. In fiscal 1995, deferred financing fees increased by $657,000 due to an
adjustment in the estimated value of the Cash Settlement Option. (See Note 4.)
Amortization of loan fees was $1,531,000 in each of fiscal 1995 and 1994, and
$1,513,000 in fiscal 1993. Unamortized loan fees were $9,038,000 at June 30,
1995 and $9,717,000 at June 30, 1994. Loan fees totalling $1,193,000 were
written off in fiscal 1994 in connection with the Company's Recapitalization
Plan (See Note 4).
Deferred Costs and Other Assets
Deferred costs and other assets consisted of the following at June 30 (in
thousands):
<TABLE>
<CAPTION>
1995 1994
------ -------
<S> <C> <C>
Goodwill $ 858 $1,102
Rhone-Poulenc mine site development 728 508
Rhone-Poulenc note receivable 1,398 -
Bonding deposits 367 527
Ore requirement reduction agreement 796 870
Exploratory drilling 539 646
Other 22 67
------ ------
$4,708 $3,720
====== ======
</TABLE>
Goodwill is recorded at cost and amortized on a straight line basis over a
period of five years.
Mine site development costs relate to costs incurred at the Rhone-Poulenc mine
and are being amortized on a units of production basis over the life of the RP
Agreement (See Note 13).
Bonding deposits represent bank certificates of deposit and United States
Treasury securities pledged to various state and federal government agencies to
guarantee compliance with royalty and mine rehabilitation requirements pursuant
to existing agreements with such agencies.
Exploratory drilling costs are associated with mineral properties on which
mining permits have been granted, or are in the process of being granted, by the
state and federal agencies with jurisdiction over them. Exploratory drilling
represents costs incurred to define the existence and layout of ore reserves in
a given mineral property. If the Company determines the ore cannot be
economically mined, or a state or federal agency declines to grant a
F-7
<PAGE>
mining permit on a specific property, any associated costs, including
exploratory drilling, are expensed. These mineral properties will be required
in the event Rhone-Poulenc is unable to fully perform under the terms of the RP
Agreement (See Note 13).
See Note 2 "Synthetic Silica Business" and Note 13 "Mining Contracts" and
"Rhone-Poulenc Agreement" for a description of additional components of Deferred
costs and Other assets.
Product Sales
Upon shipment, the Company records product sales net of related freight,
commissions, cash discounts, price adjustments and heel credits.
Major Customers and Export Sales
Sales to one domestic customer represented 17% of product sales during fiscal
1995, 16% during fiscal 1994 and 14% during fiscal 1993. Other than sales to
customers in Canada and Mexico, which accounted for approximately 14% of the
Company's product sales for all periods presented, the Company has not exported
any of its fertilizer products.
Income Taxes
Effective July 1, 1993, the Company adopted Statement of Financial Accounting
Standard 109, "Accounting for Income Taxes" ("SFAS 109"), and therefore
continues to follow the liability method of accounting for income taxes as it
had since 1988 under SFAS 96. Adoption of these requirements based on a one
time adjustment had no effect on the Company's income for the year ended June
30, 1994. Financial Statements for prior periods have not been restated.
Deferred income tax liabilities are recorded based on the difference between the
tax basis of assets and liabilities and their carrying amounts for financial
reporting purposes.
Net Income or Loss Per Common Share
Net income or loss per common share is computed by dividing income applicable to
common shareholders by the weighted average number of shares outstanding during
the period (9,018,000 in fiscal 1995, 5,759,000 in fiscal 1994, and 2,507,000 in
fiscal 1993). The effect of the Company's common stock equivalents (warrants
and options) was anti-dilutive at June 30, 1994 and 1993.
(2) SYNTHETIC SILICA BUSINESS
Effective January 1, 1991, Nu-West Minerals formed a general partnership, NuTec
Mineral and Chemical Company ("NuTec"), with Mineral Technology Corporation
("MinTec") of Custer, South Dakota, for the development and production of high
purity silica and other chemical and natural quartz products. Initially, Nu-
West Minerals owned an 80% interest in NuTec, and MinTec held a 20% interest.
Effective January 1, 1994, NuTec distributed to MinTec certain assets and
liabilities associated with the natural quartz business of NuTec which had
originally been contributed by MinTec. In return, MinTec reduced its ownership
interest in NuTec to 5%, thereby increasing the Company's indirect ownership of
NuTec to 95% through its subsidiary, Nu-West Minerals. The 5% ownership
interest retained by MinTec was also converted from a general partnership
interest to a limited partnership interest as part of the transaction. NuTec
retained the license rights to patented technology and related assets for the
production of synthetic silica and certain other products. In connection with
the transaction, the Company recorded $1,225,000 of goodwill which is being
amortized on a straight line basis over five years. The unamortized balance of
$858,000 at June 30, 1995 and $1,102,000 at June 30, 1994 is included in
Deferred costs and Other assets on the Consolidated Balance Sheet.
Potential end uses for which NuTec's products may serve as feedstock include
high-purity glass applications, implements and crucibles used in the production
of silicon crystals, low alpha fillers used for silicon chip
F-8
<PAGE>
encapsulation, fibre optic wave guides, high temperature lighting and other
technical applications. Since its formation, development of the synthetic
silica business has been constrained by a lack of capital, including a
restriction under its current credit agreement to invest no more than $300,000
during fiscal 1995. The new Harris credit agreement (See Note 4) further limits
the investment in NuTec to no more than $150,000 per year. Accordingly, NuTec
has operated its facilities principally to test production capacities and to
produce sample quantities of high purity synthetic silica for prospective
customers. While initial prospective customer response has been encouraging,
continuous operation and process refinement will be necessary to meet various
end-user requirements. Management's plans are to not undertake commercial
operations until NuTec is successful in marketing its products and in obtaining
sufficient capital to sustain operations. While uncertainty exists, management
believes it will be able to obtain sufficient capital and, based on its
projection of potential sales and production costs, the Company's investment in
NuTec is recoverable over time.
Summarized financial information for NuTec is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Net sales to unaffiliated customers $ 8 $ 152 $ 277
Net loss 882 1,373 1,836
Net loss allocable to Nu-West 882 1,317 1,469
Identifiable assets 6,048 6,339 7,038
Depreciation and amortization 245 180 232
Capital expenditures - 29 264
</TABLE>
(3) ACQUISITION OF THE CONDA PARTNERSHIP
AND WESTERN COOPERATIVE FERTILIZERS (US)
Until July 14, 1992, the Company had a 50% interest in the Conda Partnership.
The Conda Partnership was a general partnership which held significant phosphate
ore reserves in southeastern Idaho, operated processing facilities adjacent to
the Company's Conda, Idaho manufacturing operation ("the Conda Plant") and until
fiscal 1994 supplied the Company with substantially all its phosphate ore
requirements. (See Note 13 "Rhone-Poulenc Agreement".)
On July 14, 1992, the Company purchased 100% of the capital stock of Western
Cooperative Fertilizers(U.S.) Inc. ("WCF(US)"), a wholly owned subsidiary of
Western Cooperative Fertilizers Limited ("WCFL"). WCF(US) owned the other 50%
interest in the Conda Partnership. Following the closing, the name of WCF(US)
was changed to Nu-West Mining. This acquisition was accounted for as a purchase
and, accordingly, the accounts of the Conda Partnership have been consolidated
with those of the Company and Nu-West Mining since the beginning of fiscal 1993.
In connection with the transaction, the Company has provided an unlimited
indemnification to WCFL against tax and certain other liabilities related to
WCF(US) and the transaction.
Immediately following the closing of the stock purchase, WCF(US) prepaid all of
its outstanding debt, consisting of certain long-term notes, by payment to the
note holders of outstanding principal, interest and prepayment penalties
totalling approximately $20.7 million. Funds to satisfy the notes were supplied
by the payment of approximately $21.2 million from WCFL in return for the
cancellation of sales contracts which would require WCFL to take future delivery
of phosphate rock from WCF(US) through 1996.
The Company dissolved the Conda Partnership effective July 1, 1994, and its
assets and liabilities were distributed to the Company and Nu-West Mining.
F-9
<PAGE>
(4) LONG-TERM DEBT
Long-term debt at June 30 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Senior secured term loan, due September 1999 $23,250 $28,500
Revolving credit loan, due September 1999 6,521 8,721
Junior secured term loan, due November 2000 1,880 -
12.5% senior subordinated unsecured term loan, due October 2001 10,000 10,000
18% subordinated notes, due October 2002 13,600 13,600
18% subordinated PIK interest notes, due October 2002 4,529 1,659
Cash settlement option 3,736 3,179
Non-interest bearing promissory notes, due October 2002 156 156
Capitalized lease obligations 39 16
Conda Partnership obligation - 20
------- -------
$63,711 $65,851
Less - Current portion (5,019) (5,262)
------- -------
$58,692 $60,589
======= =======
</TABLE>
On October 20, 1993, the Company held a Special Meeting of Stockholders at which
stockholders approved the Company's Recapitalization Plan (as described below),
an increase in the authorized number of common shares from 35 million to 100
million, and the creation of a non-voting class of common stock.
The Recapitalization Plan involved the refinancing of substantially all of the
Company's existing long-term debt and the issuance of additional equity
securities. On November 2, 1993, the Company entered into loan agreements with
Banque Indosuez, New York Branch, as agent, providing for (i) a six-year $30
million senior secured term loan, (ii) an eight-year $10 million senior
subordinated unsecured term loan, and (iii) a six-year $20 million revolving
credit facility, a portion of which is used for letters of credit. The senior
secured term loan bears a floating interest rate of 2.0% over the higher of (i)
the Federal Funds Rate plus 1/2% or (ii) the prime rate of Banque Indosuez.
Principal and interest are payable quarterly and principal repayment began on
June 30, 1994. Additional principal payments are required to be made from the
proceeds of asset sales, sales of equity or debt securities and from excess cash
flow (as defined in the Credit Agreement). The senior subordinated term loan
bears interest at a fixed rate of 12.5% with principal due at maturity on
October 15, 2001. Warrants to purchase 799,087 shares (or 9% on a fully diluted
basis) of the Company's common stock at an exercise price of $.06 per share were
issued in connection with the bank financing. At June 30, 1995, 479,452 non-
voting common shares had been issued in connection with the exercise of
warrants. The Company also agreed to pay to an affiliate of Banque Indosuez an
amount equal to 12.6% of the appreciation in trading value of Class A Preferred
Stock above $40 per share (the "Cash Settlement Option"). The estimated amount
of such payment of $3,736,000 at June 30, 1995 and $3,179,000 at June 30, 1994
was recorded as long-term debt and deferred loan fees which will be amortized
over the term of the agreement. These items are non-cash and are not reflected
in the Company's Consolidated Statement of Cash Flows. The Cash Settlement
Option is payable upon exercise of the option by the holder after November 2,
1996 (unless accelerated as a result of the occurrence of certain events) and
before November 1, 2003. The revolving credit facility bears interest at prime
plus 2% (11% at June 30, 1995) and advances are limited to a maximum of 85% of
eligible accounts receivable, 35% of eligible phosphate ore inventories and 70%
of eligible raw materials and finished goods inventories. At June 30, 1995, the
Company had $9.9 million of available capacity under the revolving line of
credit after a reduction for $3.5 million of outstanding letters of credit. See
Note 13 "Rhone-Poulenc Agreement". Subsequent to the refinancing Banque
Indosuez obtained other participating investors in the financing.
The Company also executed a purchase agreement with a former member of the board
of directors, a member of the WPG Debtholder Group ( as defined below) and an
affiliate of Banque Indosuez for the purchase of $3.5 million of junior
subordinated notes ("Subordinated Notes"). The Subordinated Notes are payable
at maturity on October 20, 2002 and bear interest at a rate of 18%, payable
semi-annually in cash or in Subordinated PIK Notes, at the option of the
Company. The senior secured term loan and the senior subordinated unsecured term
loan each
F-10
<PAGE>
prohibit the payment of interest on the Subordinated Notes in cash. Also,
warrants for the purchase of 1,118,722 shares, or 12.6% on a fully-diluted
basis, of common stock at an exercise price of $.06 per share were issued to
these purchasers in connection with the financing. At June 30, 1995, warrants to
purchase 760,731 common shares had been exercised. Proceeds of the Subordinated
Notes were used for transaction costs of the Recapitalization Plan and for
certain capital expenditures, including capital projects necessary to meet the
requirements of the RP Agreement (See Note 13).
Because of the Company's financial condition at the time, its small balance in
stockholders' equity and the liquidation preference of the Preferred Stock over
the common stockholders, warrants issued in conjunction with the
Recapitalization were assigned no value.
The holders of $10.1 million of secured senior subordinated debt issued in July
1989 and November 1990 (the "WPG Debtholder Group") exchanged that debt for
$10.1 million of Subordinated Notes. This non-cash exchange is not reflected in
the Company's Consolidated Statement of Cash Flows. The Company issued warrants
for the purchase of 3,231,864 shares, or 36.4% on a fully-diluted basis, of
common stock at an exercise price of $0.06 per share in connection with the
exchange. These warrants were exercised by the WPG Debtholder Group on November
2, 1993. The exercise price was paid by reducing the balance of the $350,000
notes discussed below to $156,000. In addition, the holders of the Subordinated
Notes contributed to the capital of the Company, for no consideration, 19,638
shares of Class B Preferred Stock held by them. Subsequent to the refinancing,
substantially all of the Subordinated Notes have been transferred to other
investors.
Certain warrants to purchase common stock issued to the WPG Debtholder Group in
connection with the July 1989 and November 1990 financings were adjusted because
of the Recapitalization, giving effect to the anti-dilution provisions of the
warrants, and these warrants as adjusted were exercised on November 2, 1993.
The exercise price of the warrants was paid to the Company by surrender of
warrants, resulting in a net issuance of 1,089,221 shares of common stock. As
consideration for the agreement by the WPG Debtholder Group to exercise the
warrants issued in the 1989 and 1990 financings prior to their expiration date,
the Company issued non-interest bearing promissory notes to the WPG Debtholder
Group in the aggregate principal amount of $350,000 payable on October 21, 2002.
These notes, which were reduced to $156,000 as discussed above, will begin to
bear interest from October 20, 1998 to maturity at prime.
The Company was required to write-off deferred financing costs and unamortized
discounts totalling $1,560,000 related to the debt retired in connection with
the Recapitalization Plan. The Company also incurred a prepayment penalty of
$100,000 in connection with this debt retirement. The total write-off of
$1,660,000 is presented as an extraordinary loss in the fiscal 1994 statement of
operation. Other than the $100,000 prepayment penalty, this charge had no cash
effect.
See Note 13 "Kennecott Agreement" for further information regarding the Junior
Secured Term Loan due November 2000.
The scheduled annual minimum maturities for long-term debt, including
capitalized lease obligations, are as follows (in thousands):
Fiscal Year Amount
----------- -------
1996 $ 5,019
1997 9,374
1998 6,133
1999 6,380
2000 8,397/*/
2001 and thereafter 28,408
-------
$63,711
=======
/*/Includes $6,521,000 which was the balance of the Company's revolving line of
credit at June 30, 1995.
F-11
<PAGE>
On August 3, 1995, the Company refinanced substantially all of its long-term
debt described earlier. The Company entered into a $75 million senior secured
loan agreement with Harris Trust and Savings Bank ("Harris") as agent providing
for (i) a five-year $15 million revolving credit facility, $5 million of which
is available only during the period July through February of each year, (ii) a
$5 million letter of credit facility which expires December 31, 1998, (iii) a
five-year $25 million term loan with equal quarterly amortization, and (iv) a
six-year $30 million term loan with quarterly amortization in varying amounts.
The loans bear interest based, at the Company's option, on either (i) LIBOR or
(ii) the prime commercial rate announced from time to time by Harris, plus a
variable margin determined by the Company's fixed charge ratio. Based on the
initial margin at closing, the $25 million loan and revolving credit facility
bear interest at LIBOR plus 2.25% and the $30 million loan bears interest at
LIBOR plus 3.0%. The loan agreements require the Corporation to maintain
certain financial ratios and other covenants, and the notes are secured by
substantially all of the assets of the Company.
If the Recapitalization had occurred on July 1, 1994, net sales for the year
ended June 30, 1995 would not have changed and unaudited pro forma net income
and net income per common share before extraordinary items would have been
approximately $13.7 million and $1.17, respectively. After an extraordinary loss
for early extinguishment of debt of approximately $10.7 million, net income
would have been approximately $3 million and a net loss per common share of $.02
after preferred dividend requirements. The extraordinary loss which was
recorded at August 3, 1995 due to write off of loan fees and prepayment
penalties was $9.8 million, or $1.09 per common share of which $8.8 million had
no cash effect.
The pro forma scheduled annual minimum maturities for long-term debt assuming
the refinancing completed in August 1995 had been completed at June 30,1995,
including capitalized lease obligations, are as follows (in thousands):
Fiscal Year Amount
----------- ------
1996 $ 6,019
1997 10,374
1998 9,383
1999 10,380
2000 17,897/*/
2001 and thereafter 13,124
-------
$67,177
=======
/*/Includes $6,521,000 which was the balance of the Company's revolving line of
credit at June 30, 1995.
The foregoing unaudited proforma information does not purport to be indicative
of the financial position or results of operations which actually would have
occurred had the refinancing been completed on the dates indicated.
(5) INCOME TAXES
Due to the Company's net operating loss carryforwards, it is subject only to
alternative minimum taxes. During 1995 and 1994, the Company provided
alternative minimum taxes of $194,000 and $20,000, respectively, which were
offset by the reversal of excess tax liabilities provided in prior years.
Benefits relating to the net operating losses for fiscal 1993 were not recorded
as the Company could not carry them back for refunds and future realization was
not assured.
The Conda Plant and the interest in the Conda Partnership were purchased from
the bankruptcy estate of Beker Industries Corp. ("Beker") on July 24, 1987. In
this transaction, the Company succeeded to Beker's tax basis in the assets
purchased as well as Beker's net operating loss and investment tax credit
carryforwards. Deferred income taxes were provided at the acquisition date for
the difference in the tax basis of the acquired assets from the book basis.
These deferred taxes are required for alternative minimum taxes that will not be
reduced by the Company's operating loss and investment tax credit carryforwards.
The components of the net deferred tax liability on the Company's Balance Sheet
were determined in accordance with SFAS 109 and were as follows at June 30, (in
thousands):
F-12
<PAGE>
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
DEFERRED TAX LIABILITIES
Book basis in excess of tax basis of acquired assets $ 4,980 $ 5,515
Other 19 328
-------- --------
Total Deferred Tax Liabilities 4,999 5,843
DEFERRED TAX ASSETS
Operating loss carryover 84,276 86,962
Tax credit carryover 2,012 2,583
AMT credit carryover 805 397
Other 238 83
-------- --------
Total Deferred Tax Assets 87,331 90,025
Less Valuation Allowance (82,959) (85,106)
-------- --------
4,372 4,919
-------- --------
$ 627 $ 924
======== ========
</TABLE>
The fiscal 1995 and 1994 Consolidated Statement of Cash Flows includes alternate
minimum taxes paid on taxable income arising from the purchase of WCF(US) (see
Note 3) which were accrued as part of the purchase price, as well as estimated
alternative minimum taxes paid on fiscal 1995 and 1994 taxable income from
operations.
At June 30, 1995, net operating loss carryforwards of approximately $232 million
were available to offset future taxable income and investment tax credit
carryforwards of approximately $2 million were available to offset future tax
liabilities. These carryforwards expire in 1998 through 2007. The Company also
has $805,000 of alternative minimum tax credits which can be carried forward
indefinitely.
(6) PREFERRED STOCK
At June 30, 1995, 290,000 shares of Class A Preferred Stock and 344 shares of
Class B Preferred Stock were outstanding. Each share of Class A Preferred Stock
is entitled to an $11 per share annual cash dividend payable on December 1
following the Company's fiscal year end. Dividends are cumulative, and unpaid
dividends were $19,140,000 at June 30, 1995 and $15,950,000 at June 30, 1994.
Although not accrued as a liability, Class A Preferred Stock dividends are taken
into effect in the calculation of earnings per share. The Class A Preferred
Stock is redeemable by the Company at $100 per share plus any unpaid cumulative
dividends. Redeemed Class A Preferred Stock may not be reissued by the Company.
In connection with the Company's fiscal 1994 refinancing (see Note 4) certain
holders of the Class B Preferred Stock surrendered 19,638 shares for no
consideration. An additional 18 shares were surrendered in fiscal 1995. Each
remaining share of Class B Preferred Stock is entitled to an $11 per share
annual cash dividend beginning in fiscal year 1994, and payable on December 1
following the Company's fiscal year end. Dividends are cumulative, and unpaid
dividends were $8,000 at June 30, 1995. Payment of dividends is dependent upon
certain cash flow requirements in excess of current and cumulative dividend
payments on Class A Preferred Stock. Such dividends are cumulative for any
amounts not paid. Although not accrued as a liability Class B Preferred Stock
dividends are taken into effect in the calculation of earnings per share. The
Class B Preferred Stock is redeemable by the Company at $100 per share plus any
unpaid cumulative dividends. Redeemed Class B Preferred Stock may not be
reissued by the Company.
Payment of Class A and Class B Preferred Stock dividends is prohibited by the
covenants of certain of the Company's loan agreements, including the new senior
secured loan agreement with Harris. (See Note 4.)
In the event of liquidation, the Class A and Class B Preferred Stock are
entitled to a liquidation preference of $100 per share plus any accumulated
dividends prior to any distribution to common stockholders. The Class A and
Class B Preferred Stock do not have voting rights on matters presented to the
Company's shareholders.
F-13
<PAGE>
(7) COMMON STOCK
On November 15, 1994, the stockholders of the Company authorized a reverse stock
split of one share of newly issued Common Stock for each six shares of existing
Common Stock. On that same date, the Board of Directors approved a one-for-six
reverse stock split to be effective at the close of business on December 9,
1994. Accordingly, the Restated Certificate of Incorporation was amended to
reduce the number of authorized shares of common stock to 16,666,667. Every six
shares of common stock outstanding on the effective date were reclassified into
one share of common stock. All per share amounts in this report reflect the
effect of this one-for-six reverse stock split.
By a vote of the common shareholders in October 1993, the authorized shares of
common stock was increased from 35,000,000 to 100,000,000, and a class of
12,000,000 shares of non-voting common stock was authorized (see Note 4). After
adjustment for the reverse stock split, 633,105 shares of non-voting common
stock were outstanding at June 30, 1995.
At June 30, 1995, a total of 1,291,000 shares of common stock are reserved for
the exercise of employee stock options (501,833 shares) and warrants for the
purchase of common stock (789,167 shares). The exercise price for warrants to
purchase 111,541 shares is 75% of market price on the date of exercise. The
exercise price for the remaining warrants is $.06 per share.
(8) RELATED PARTY TRANSACTIONS
The Company paid consulting fees and expenses of $259,000 in fiscal 1995 and
$255,000 in each of fiscal 1994 and 1993 to an affiliate of Weiss, Peck and
Greer. Certain principals of Weiss, Peck and Greer are directors of the Company
and certain of their affiliates are major shareholders of the Company.
(9) STOCK OPTION PLANS
Employee Stock Option Plans
In May 1988, the Company adopted the Employee Stock Option Plan (the "Option
Plan"), which provides for the issuance of incentive stock options ("ISOs") and
nonstatutory options ("NSOs") as well as stock appreciation rights ("SARs") to
qualified officers and employees of the Company. Options to acquire up to
300,000 shares of common stock of the Company may be granted under the Option
Plan. On November 15, 1994, the stockholders of the Company approved the Nu-
West Industries, Inc. 1994 Employee Stock Incentive Plan. An additional
300,000 shares of common stock of the Company may be granted under this option
plan.
ISOs may be granted at exercise prices that are not less than the fair market
value of the common stock at the date of grant. NSOs may be granted at exercise
prices at or below the fair market value of the common stock at the date of
grant. Options granted under the Option Plan become exercisable as determined
at the date of grant and expire no later than 10 years after the date of grant
if not previously exercised. If an Option Plan participant owns more than 10%
of the Company's outstanding common stock, the exercise price of any ISOs
granted must be at least 110% of fair market value of the common stock at the
date of grant.
Directors Stock Option Plan
On November 15, 1994, the stockholders of the Company approved the Nu-West
Industries, Inc. Nonemployee Director Stock Option Plan (the "Directors' Plan").
Options to acquire up to 50,000 shares of the common stock of the Company may be
granted under the Directors' Plan. Only directors who are not employees of the
Company and who are not affiliated with any entity or group of entities which
own more than 20% of the fully-diluted Common Stock of the Company are eligible
to participate in the Directors' Plan.
F-14
<PAGE>
Stock options shall be granted automatically under the Directors' Plan as
follows: (i) upon initial election or appointment to the Board, a non-employee
director shall be granted a stock option to purchase 4,167 shares of Common
Stock; and, (ii) each non-employee director shall be granted a stock option to
purchase 833 shares of Common Stock for each full fiscal year of the Company
during which he or she served as a non-employee director, effective on the
succeeding July 1. Each non-employee director shall be eligible to receive stock
options exercisable for a maximum of 16,667 shares of Common Stock. The
exercise price of all stock options granted under the Option Plan shall be 100%
of the fair market value of the Common Stock as of the date of grant. Stock
options will be fully vested on the date of grant and will expire not more than
ten years from the date of grant.
Summary of Option Plan Transactions
A summary of option transactions for fiscal years 1995, 1994, and 1993 is as
follows (in thousands except exercise price):
<TABLE>
<CAPTION>
Employee Directors
Option Option Exercise
Plans Plan Price
-------- --------- -----------
<S> <C> <C> <C>
Options outstanding June 30, 1992 78 - 5.04
Options granted 43 - 3.96
---- ----
Options outstanding June 30, 1993 121 5.04 & 3.96
Options canceled due to surrender (121) - 5.04 & 3.96
Options granted 237 - 2.70
---- ----
Options outstanding June 30, 1994 237 - 2.70
Options granted 261 4 6.38 & 8.50
---- ----
Options outstanding June 30, 1995 498 4
==== ====
</TABLE>
The options issued in fiscal 1994 are not exercisable until December 1, 1996.
Of the options issued in fiscal 1995, forty percent are exercisable on January
1, 1997 and twenty percent become exercisable on each of January 1, 1998, 1999,
and 2000. As of June 30, 1995, 39,167 shares were available for grant under the
Employee Option Plan, and 45,833 shares were available for grant under the
Directors Plan.
Compensation expense of $70,000 was recognized in fiscal 1994 for options to
acquire 237,000 shares of common stock which were granted at an exercise price
of $2.70 per share, which was 90% of the fair market value of the common stock
at the date of grant. The options granted in fiscal 1995 are noncompensatory,
since the exercise price was the closing price of the common stock on the date
of grant.
(10) EMPLOYEE STOCK GRANT PLAN
In May 1991, the Company adopted the Employee Stock Grant Plan which provided
for the issuance of up to 167 shares of the Company's common stock to each
eligible employee, other than senior management, as defined by the plan.
Accordingly, 17,867 shares in fiscal 1994 and 13,050 shares in fiscal 1993 were
issued to eligible employees. Compensation expense of $40,000 in fiscal 1994
and $86,000 in fiscal 1993 has been recognized in the Financial Statements which
was a non-cash expense and is not reflected in the Consolidated Statement of
Cash Flows. No stock was issued to employees in fiscal year 1995.
(11) RETIREMENT AND BENEFIT PLANS
Effective January 1, 1988, the Company adopted a profit sharing plan qualified
under Section 401(k) of the Internal Revenue Code. All employees are eligible
to participate in the plan immediately upon employment with the
F-15
<PAGE>
Company. The Company matches a certain percentage of the employees'
contributions. Company contributions were $526,000 in fiscal 1995, $305,000 in
fiscal 1994, and $286,000 in fiscal 1993.
The Company incurred approximately $15,000 in 1995 and $20,000 in both 1994 and
1993 in cash payments for postretirement benefits. The Company has agreed to
provide a Medicare supplement and $5,000 of life insurance to its employees upon
retirement. Effective July 1, 1993, the Company adopted Financial Accounting
Standards Board Statement 106, "Employers Accounting for Postretirement Benefits
Other Than Pensions", which requires that the cost of these benefits be accrued
as a form of deferred compensation earned during the period that employees
render service, rather than the previously permitted practice of accounting for
such costs as incurred. The Company has elected to amortize the unrecognized
accumulated postretirement benefit obligation ("transition obligation") of
$963,000 at July 1, 1993 to expense over a twenty year period. This obligation
was determined by application of the terms of the Medicare supplement and life
insurance plans, together with relevant actuarial assumptions and historical
health-care cost trend rates of 7%. The assumed health-care cost trend rate for
fiscal 1995 was 4%. The effect of a 1% annual increase in the assumed cost
trend rates would increase the accumulated postretirement benefit obligation by
approximately $52,000 and the annual service cost by approximately $19,000. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7%. The plans are unfunded.
The following table sets forth the plans' combined status reconciled with the
amount included in the Consolidated Balance Sheets at June 30, (in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Retirees $ 200 $ 299
Other active plan participants 442 775
Unrecognized transition obligation (865) (913)
Unrecognized gain 473 -
----- -----
Total accumulated postretirement obligation accrued at June 30 $ 250 $ 161
===== =====
Net periodic postretirement benefit cost for the years ended June 30,
included the following components:
1995 1994
----- -----
Service cost-benefits attributed
to service during the period $ 55 $113
Amortization of unrecognized gain (14) -
Amortization of transition obligation 48 48
---- ----
Net periodic postretirement benefit cost $ 89 $161
==== ====
</TABLE>
The adoption of the new accounting method will have no effect on the Company's
cash outlays for retiree benefits.
(12) LITIGATION
In fiscal 1993, the Company executed an agreement with the Trustee of the Estate
of Nu-South Industries, Inc. ("Nu-South") and Mississippi Chemical Corporation
("MCC"), a major creditor of Nu-South, for the settlement of, and the mutual
release from all claims against the Company relating to the Nu-South bankruptcy
(the "Settlement Agreement"). Nu-South was a wholly owned subsidiary of the
Company that filed a voluntary petition for liquidation under the provisions of
Chapter 7 of the Bankruptcy Code on February 1, 1990. The Trustee had filed a
complaint against the Company in January 1992 for the recovery of unspecified
amounts relating to alleged preferential transfers by Nu-South and was
considering possible additional claims against the Company, including claims
which would assert that the Company should be held liable for the debts of Nu-
South. In addition, the Trustee had filed certain preference claims against
other parties which involved payments by Nu-South of debts allegedly guaranteed
by the Company.
The Settlement Agreement required a payment of $400,000 in cash on December 1,
1992, plus deferred payments totalling an additional $150,000 through May 1993,
in exchange for a general and irrevocable release by the Trustee
F-16
<PAGE>
and MCC of all claims against the Company, its current and former officers and
directors, and its affiliates. The Trustee has obtained such releases or
dismissals with prejudice as would protect the Company from indemnity claims by
defendants in the guaranty preference cases. The Settlement Agreement was
approved by the Bankruptcy Court on December 7, 1992. A provision for $400,000
was recorded during fiscal 1992 and an additional $150,000 was recorded in
fiscal 1993 to provide for payment of this settlement. The Nu-South bankruptcy
estate was closed on April 1, 1994.
The Company is not a party to or involved in any other legal action except for
routine litigation incidental to its business.
(13) COMMITMENTS AND CONTINGENT LIABILITIES
Mining Contract
Mining operations at the existing reserves of the Conda Partnership have been
carried out by a third party general contractor (the "General Contractor") since
1972. The agreement between the Conda Partnership and the General Contractor
required the Conda Partnership to mine a minimum amount of phosphate ore each
year, or pay the General Contractor a price adjustment determined at the
conclusion of the mining season, which typically runs through November. The
agreement also required the Conda Partnership to use the General Contractor as
the miner on its reserves through 1997.
The Company entered into an Ore Requirement Reduction Settlement Agreement
effective November 30, 1993 with the General Contractor which reduced the amount
of ore required to be mined by the Conda Partnership each year to a minimal
amount and extends the term of the mining agreement to December 31, 2007. The
Company paid $500,000 in January 1994 and $500,000 plus accrued interest in
March 1994 to the General Contractor in connection with this agreement.
On August 9, 1994 the Company entered into a Work Reduction and Buy-Out
Settlement Agreement with the General Contractor. This amendment to the mining
contract eliminates the remaining minimum annual mining requirement and the
required use of the General Contractor for ore handling functions at the Conda
Plant, as well as certain other modifications. The Company paid the General
Contractor $100,000 for the modification of the contract and expects to save
$1.0 to $1.5 million annually as a result of these changes. The payments
associated with both of these agreements are included in Deferred Costs and
Other Assets on the Consolidated Balance Sheet and are being expensed on a units
of production basis over the life of the RP Agreement (as defined below). The
unamortized balance of these payments was $796,000 at June 30, 1995 and $870,000
at June 30, 1994.
The Company entered into a $1.2 million, five year operating lease with
Caterpillar Financial Services Corporation for Equipment to conduct the ore
handling operations previously performed by the general contractor. The annual
minimum lease payments for this equipment are $266,000 for fiscal 1996, $249,000
for fiscal 1997 through 1999 and $58,000 for fiscal 2000.
Rhone-Poulenc Agreement
The Company entered into a seven-year agreement with Rhone-Poulenc Basic
Chemical Company, a division of Rhone-Poulenc, Inc. ("RP") for supply of
phosphate ore (the "RP Agreement"). The phosphate ore mined by RP contains
higher quality ore with substantially lower overburden removal requirements than
found in other known reserves in southeastern Idaho, including those owned by
Nu-West Mining. The Company has realized significant annual production cost
savings by purchasing phosphate ore under the RP Agreement versus the estimated
cost of mining its own reserves. The RP Agreement was contingent on the
Company's ability to obtain and make available to RP approximately $13.3 million
of mobile mining equipment. On November 2, 1993, the Company entered into a
lease financing arrangement with Caterpillar Financial Services Corp.
("Caterpillar") providing for the necessary mining equipment. The Company has
posted a $3.2 million letter of credit with Caterpillar to secure its
obligations under the lease.
F-17
<PAGE>
The Caterpillar lease has a 60 month term and provides for the optional purchase
of the equipment based on fair market value at the end of the lease. The
annual minimum lease payments under this lease are $2.4 million for fiscal
1996, 1997 and 1998, and $608,000 for fiscal 1999. The equipment is subleased
by the Company to RP on payment terms equivalent to those between the Company
and Caterpillar. RP may cancel the sublease, however, if the Company fails to
take shipments or make timely payment for ore received under the RP Agreement.
The terms of the RP Agreement provide that the Company will not be required to
take a minimum annual tonnage of ore and may mine its own phosphate ore
reserves, but will be responsible for idle leased equipment costs resulting from
a reduction in the Company's purchase requirements from RP below 1.6 million
tons per year. The Company may not elect to purchase more than 1.6 million tons
of ore per year without the consent of RP and must give six months' notice of
reductions in its ore purchase requirements. The Company has constructed a new
haul road and ore loading system at the RP mine site at a combined total cost of
approximately $1.8 million and has transferred these assets to RP in exchange
for a 69 month non-interest bearing note receivable. RP makes equal monthly
payments on the note. The unpaid balance at June 30, 1995 was $1.7 million of
which $1.4 million is included in Deferred costs and Other assets and the
balance is included in Accounts receivable. Through June 30, 1995, the Company
had spent $1.4 million on the construction of a maintenance shop, and additional
expenditures of $780,000 will be required in fiscal 1996 for the completion of
this project. This asset will also be transferred to RP in exchange for a non-
interest bearing note receivable. Payment for delivery of ore is based on the
actual cost of mining by RP plus 50% of the net savings recognized by RP and the
Company as a result of the RP Agreement. RP is prohibited from selling its ore
reserves without assumption of the RP Agreement by any purchaser. Part of the
mining cost paid by the Company will be the cost of reclamation of mined acreage
based on cost estimates as the ore is mined, with subsequent adjustments as
required. RP will be responsible for all reclamation work and has indemnified
the Company against environmental exposure at the mine.
In June 1995, the RP Agreement was extended for an additional five year term
through 2005. RP also notified the Company of its intent to cease taking ore
from the mine for its own account. RP may resume taking ore with ninety days
notice, although no such action is anticipated in the foreseeable future. The
Company's ore requirements have exceeded 80% of the total output of the RP mine
during fiscal 1995, and no material cost or operational disadvantage is expected
as a result of the cessation of deliveries to RP.
Since the Company discontinued the mining of its reserves in November 1993,
depreciation and depletion associated with mine assets and reserves were
discontinued. The mine assets had been depreciated to salvage value at that
date.
Kennecott Agreement
On July 28, 1994, the Company entered into a five-year sulfuric acid purchase
contract with Kennecott Utah Copper Corporation ("Kennecott") for the purchase
of 300,000 tons of sulfuric acid per year to replace the output of the older of
the two sulfuric acid facilities currently operating at the Conda Plant. Shut
down of the older sulfuric acid plant will significantly reduce sulfur dioxide
emissions as part of a settlement of the air quality enforcement action
described below. Shipments of sulfuric acid are to begin no later than November
1995 and prices under the contract will be adjusted quarterly based on the
equivalent cost of sulfur and the Company's selling price for one of its
fertilizer products. The Company also entered into a $4 million loan agreement
with Kennecott. The proceeds of the $4 million loan are being used to
construct tankage and rail spurs to receive and unload the sulfuric acid and a
boiler to replace the steam now supplied by the older acid plant. At June 30,
1995, $2.0 million had been spent toward the construction of those assets, and
advances on the loan were $1.9 million. The five-year senior subordinated loan
is secured by the constructed assets described and bears interest at prime plus
2%. Interest will be paid quarterly, and principal will be repaid as sulfuric
acid is purchased over the five year term of the loan.
Environmental Matters
The Company is subject to federal, state and local environmental laws and
regulations. Significant costs could be incurred on account of these
environmental laws and regulations in the future. Most of the Company's
environmental expenditures and potential costs are or would be in response to
provisions of various federal environmental laws,
F-18
<PAGE>
particularly the Clean Air Act, the Clean Water Act, the Resource Conservation
and Recovery Act and the Comprehensive Environmental Response, Compensation and
Liability Act (aka "Superfund"), and the land use, air, surface and ground
water, and hazardous waste regulations of the State of Idaho.
The phosphoric acid process water and calcium sulfate or "phosphogypsum" handled
at the Company's Conda Plant are currently exempt from regulation as a
"hazardous waste" under Subtitle C of the Resource Conservation and Recovery Act
("RCRA"). The EPA, with input from an advisory committee, is currently
evaluating potential improved processing, handling and storage measures for
phosphogypsum under provisions of the Toxic Substances Control Act and RCRA.
The exact requirements of those potential future rules cannot be predicted with
certainty at this time but will likely control the Company's handling of these
materials.
These materials are also regulated under Section 112 of the federal Clean Air
Act, which contains closure requirements for gypsum stacks that are no longer
used for water management and otherwise become deactivated. The Company does not
currently plan to deactivate any of its gypsum stacks under these provisions.
The Company has been subject to normal periodic review under Superfund, and an
Expanded Site Inspection was recently completed by an EPA contractor. This
inspection included an initial site visit in August 1993, followed by well water
sampling and testing in March 1994. Based on the contractor's report, the EPA
notified the Company in October 1994 that no further action under the Federal
Superfund Program is currently recommended at the Conda Plant.
In March 1994, the EPA issued a Notice of Violation pertaining to numerous
excess SO\\2\\ emissions during the period from October 1989 to May 1993. The
Company has negotiated a settlement with the EPA, which is now pending final
federal court approval, that provides for the payment of a $150,000 fine and
reduced SO\\2\\ emissions limitations until November 1995, at which time the
Company will shut down the older of its two sulfuric acid plants. The Company
has entered into a five-year contract with Kennecott to replace the production
of this plant. (See Note 13 "Kennecott Agreement" for further information.)
The Company has recently received a Notice of Violation from the EPA for alleged
violations under the Safe Drinking Water Act ("SDWA") relating to testing and
reporting on the quality of water used for human consumption from a public water
supply system at the Conda Plant. The Company has initiated testing of water
that potentially could be used for human consumption and believes, based on
discussions with agency officials, that no or only minimal civil penalties will
be assessed in connection with this matter. However, the Company has committed
to make improvements to its water supply system to comply with SDWA requirements
at a cost of approximately $100,000.
(14) ACCRUED LIABILITIES
Accrued liabilities consisted of the following at June 30 (in thousands):
F-19
<PAGE>
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Accrued raw materials and
operating supplies $2,634 $2,518
Accrued capital expenditures - 750
Salaries, wages and
employee benefits 2,154 2,265
Interest 294 324
Shipping costs 698 881
Legal fees and provision for litigation 29 47
Accrued rehabilitation 758 957
Other 674 764
------ ------
$7,241 $8,506
====== ======
</TABLE>
Pursuant to the terms of mineral leases with state and federal agencies, the
Company is required to rehabilitate acreage disturbed during mining of leases.
The estimated cost of rehabilitation is calculated in consultation with the
appropriate state or federal agency, and is accrued to Cost of sales using the
units of production method as the related ore is mined. The rehabilitation
liability is secured by Bonding deposits (see Note 1) and existing surety bonds.
(15) SUBSEQUENT EVENT
In March 1995, the Company disclosed that it had retained PaineWebber
Incorporated to assist it in exploring alternatives for enhancing long-term
shareholder value. The alternatives to be considered included but were not
limited to strategic relationships with other significant fertilizer producers
and customers, the sale or merger of the Company, the formation of a joint
venture with one or more parties, or the continuation of the Company's current
business plan to concentrate on internal growth. Agrium, Inc. and the Company
announced on August 10, 1995 that they had entered into a definitive Merger
Agreement which provides for the acquisition of the Company by Agrium.
Under the terms of the Merger Agreement, a subsidiary of Agrium is making a
tender offer to purchase all of the outstanding common stock of the Company at
$10.50 in cash. The tender offer commenced on August 16, 1995 and will expire
on September 14, 1995 unless extended. As soon as practical following the
tender offer, the Agrium subsidiary will merge into the Company, and each
remaining share of the Company's common stock will be converted into the right
to receive $10.50 per share in cash. Total consideration to be paid to the
common stockholders of the Company will be approximately $98.5 million.
The completion of the tender offer is conditioned upon, among other things, the
tender of at least 60% of the shares of common stock of the Company on a fully-
diluted basis and applicable regulatory review. The Board of Directors of the
Company has unanimously approved the Merger Agreement. The Board of Directors
of the Company may withdraw its recommendation for and support of the
transaction if required to do so in furtherance of its fiduciary
responsibilities; however, if the transaction with Agrium is terminated or not
completed because of such withdrawal, Agrium will be entitled to a payment from
the Company of $4 million. PaineWebber Incorporated has acted as financial
advisor to the Company and has rendered a fairness opinion in connection with
the transaction. The Board of Directors of Agrium has also unanimously approved
the merger agreement.
Certain shareholders of the Company, who own in the aggregate approximately 57%
of the outstanding and 49% of the fully-diluted common shares, have agreed with
Agrium to tender those shares in the tender offer, subject to certain revocation
rights.
The Company's current debt structure, as recently refinanced, is expected to
remain in place as of the date of the contemplated merger. The Class A and
Class B Preferred Stock of the Company will also remain outstanding at the
effective date of the merger. Due to the change of ownership which will result
if the tender is successful, the Company's usage of its net operating losses
will be limited based on the market value of the Company's stock.
F-20
<PAGE>
In the succeeding seven days following the announcement of the Merger Agreement,
four class action lawsuits were filed by various shareholders of the Company in
the Court of Chancery of the State of Delaware, New Castle County, Delaware,
alleging that the Company and its board of directors had breached their
fiduciary duties to the shareholders of the Company by agreeing to and
supporting the tender offer and merger. One of the lawsuits also named Agrium
as a defendant and alleged that Agrium had aided and abetted the alleged breach
of fiduciary duty. Among other claims, the lawsuits allege that the Company's
Board of Directors had breached its fiduciary duties to the shareholders by
failing to take certain actions to maximize the value of the Company's shares.
Each of the lawsuits seek a variety of injunctive and equitable relief as well
as unspecified money damages and an award of attorneys' fees and costs. The
Company intends to vigorously defend each of the lawsuits. Because the lawsuits
have only recently been filed and evidence has not yet been fully developed, the
Company is unable to comment with regard to the probable outcome of the
litigation.
F-21
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended June, 30 1995, 1994, and 1993
(In thousands)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
----------------------------------------- ----------------------
Balance at Charged to Allowance for Bad Service Accounts Balance at
Beginning of Costs and Uncollectible Debts Charges Receivable End of
Description Period Expenses Service Charges Collected Waived Written Off Period
---------------------- ------------ ---------- --------------- --------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts:
June 30, 1993 $361 8 141 3 38 42 $433
June 30, 1994 $433 - 154 - 57 219 $311
June 30, 1995 $311 - 109 - 133 23 $264
</TABLE>
S-1
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-31-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's Restated Certificate of Incorporation provides for a Board of
Directors composed of not less than six nor more than nine persons. The Board
is divided into three classes, with each class consisting, as nearly as
possible, of one-third of the number of directors constituting the Board. Each
class of directors serves three year staggered terms, which expire at the Annual
Meetings during the fiscal years specified below. The size of the Board is
presently five, with one vacancy in Class III Directors.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---------------- --- ------------------------------------------------------------
<S> <C> <C>
Craig D. Harlen 46 Chairman of the Board of Directors; President and Chief
Executive Officer
H. Alan Dahlbach 50 Executive Vice President
Mark R. Sanders 45 Director, Senior Vice President, and Chief Financial Officer
Steven W. Gampp 43 Vice President, Secretary and Treasurer
Larry C. Dearing 52 Vice President - Regional Sales
John D. Yokley 54 Vice President - National Sales
Don G. LaRue 43 Vice President - Operations
Helen K. Smith 44 Controller and Assistant Secretary
Cecil D. Andrus 63 Director
Peter B. Pfister 35 Director
Wesley W. Lang 38 Director
</TABLE>
Craig D. Harlen. Mr. Harlen has been a director of the Company since 1987
and has served as Chairman of the Board since 1994. He was Senior Vice
President and General Manager of the Company's manufacturing operations at the
Conda Plant until he was appointed President and Chief Executive Officer in June
1989. Prior to joining the Company, Mr. Harlen held various positions with
Beker since 1975, including General Manager of its western phosphate operations
for more than five years. Mr. Harlen's term as a director will expire in 1995.
H. Alan Dahlbach. Mr. Dahlbach joined the Company in September 1988, and is
responsible for overseeing all of the Company's sales and marketing activities.
From 1972 to 1986, Mr. Dahlbach held various positions with Gardinier, Inc., a
major phosphate fertilizer mining and manufacturing firm based in Tampa,
Florida. From March 1986 to September 1988, he was self-employed and engaged in
a variety of private business ventures.
Mark R. Sanders. Mr. Sanders became a director of the Company in June 1991.
Mr. Sanders, who joined the Company in 1987 as Controller for the Conda Plant,
was elected Senior Vice President and Chief Financial Officer in June 1989.
From April 1981 through June 1987, he served as Plant Controller for Beker's
western phosphate operations. Mr. Sanders' term as a director will expire in
1996.
Steven W. Gampp. Mr. Gampp joined the Company in February 1989 as Corporate
Treasurer and was appointed Vice President, Secretary and Treasurer in June
1989. From 1983 until 1989, Mr. Gampp held various financial executive
positions with Quinoco Petroleum, Inc., an oil and gas syndication, exploration
and production company based in Denver, Colorado.
-32-
<PAGE>
Larry C. Dearing. Mr. Dearing joined the Company in July 1987, and is
responsible for the regional sales activities of the Company. From 1978 to June
1986, Mr. Dearing held various positions at Beker, including Senior Vice
President - Marketing. From November 1986 to June 1987, he was the Chief
Executive Officer of an employee benefits consulting firm.
John D. Yokley. Mr. Yokley joined the Company in August 1989, and is
responsible for national account sales and raw materials procurement. From 1981
to September 1988, Mr. Yokley was Executive Vice President of Chemex, Inc., a
commodities trading firm. From September 1988 to August 1989, he directed the
marketing operations of Chemtran, a fertilizer joint venture with the Pillsbury
Company.
Don G. LaRue. Mr. LaRue joined the Company in July 1987 as Production Manager
for the Conda Plant and, in July 1989, was appointed the General Manager of
those operations. In February 1994, Mr. LaRue was appointed Vice President -
Operations for the Company. From August 1986 through June 1987, he was
Production Manager for Beker's western phosphate operations.
Helen K. Smith. Mrs. Smith joined the Company in August 1987 as General
Accounting Manager, was appointed the Corporate Controller in July 1989, and
assumed her current position in November 1991. Prior to her employment with the
Company, Mrs. Smith was a Senior Accountant with Peat Marwick & Main.
Cecil D. Andrus. Mr. Andrus became a director of the Company in January 1995.
Mr. Andrus was elected governor of Idaho four times -- in 1970, 1974, 1986 and
1990. He served as Secretary of the Interior in the Carter Administration from
1977-1981. Mr. Andrus' term as a director will expire in 1997.
Wesley W. Lang. Mr. Lang became a director of the Company in May 1988. Mr.
Lang is a partner in Weiss, Peck & Greer, L.L.C., an investment management firm
("WPG"), which he joined in 1985, and he is also a director of Durakon
Industries, Inc. Mr. Lang's term as a director will expire in 1996.
Peter B. Pfister. Mr. Pfister became a director of the Company in February
1994. Mr. Pfister is a partner in WPG, which he joined in 1987. Prior to his
association with WPG, he was with Manufacturers Hanover Trust Company where he
specialized in acquisition financing. Mr. Pfister's term as a director will
expire in 1997.
No family relationships among members of the Board of Directors and officers
exist.
-33-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The table below sets forth information concerning compensation paid to the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers for services rendered to the Company and its
subsidiaries during the fiscal years ended June 30, 1995, 1994 and 1993. All of
the persons named below continue to serve as officers of the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
FISCAL SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)/(1)/ ($)/(1)/ /(2)/ (#)/(3)/ ($)/(4)/
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CRAIG D. HARLEN 1995 $250,000 $150,000 41,666 $12,732
President and Chief 1994 250,000 235,000 39,080 8,533
Executive Officer 1993 200,000 50,000 25,000 7,893
----------------------------------------------------------------------------------------------------
H. ALAN DAHLBACH 1995 $193,000 $ 95,000 16,666 $10,083
Executive Vice President 1994 193,000 185,000 29,366 6,346
1993 178,500 40,000 20,000 6,299
----------------------------------------------------------------------------------------------------
MARK R. SANDERS 1995 $160,000 $ 80,000 16,666 $ 8,908
Senior Vice President and 1994 160,000 180,000 29,366 5,552
Chief Financial Officer 1993 145,002 40,000 20,000 5,286
----------------------------------------------------------------------------------------------------
JOHN D. YOKLEY 1995 $154,000 $ 75,000 13,333 $ 8,955
Vice President - 1994 154,000 55,000 16,641 5,353
National Sales 1993 142,942 30,000 11,000 4,947
----------------------------------------------------------------------------------------------------
STEVEN W. GAMPP 1995 $143,000 $ 60,000 16,666 $ 8,361
Vice President, Secretary 1994 143,000 165,000 29,366 5,353
and Treasurer 1993 132,000 40,000 20,000 4,947
----------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts shown include cash compensation earned by the named executive
officer during the fiscal year listed, including amounts deferred at the
election of those officers. Bonuses are paid in the fiscal year following
the year in which they are earned.
(2) Amounts shown include payment in April 1994 of cash bonuses deferred from
1991 in the following amounts: Mr. Harlen - $135,000; Mr. Dahlbach -
$105,000; Mr. Sanders - $105,000; Mr. Gampp -$105,000.
(3) All of the Company's executive officers voluntarily surrendered their
outstanding stock options granted in 1992 and 1993 for no consideration on
November 2, 1993 in connection with the Recapitalization (See Note 4 to the
June 30, 1995 Consolidated Financial Statements). No Stock Appreciation
Rights ("SARs") were granted by the company in fiscal 1995, and there are
no outstanding SARs held by any employee or director of the Company. The
number shown for each year represents the number of shares of Common
-34-
<PAGE>
Stock for which options were granted to the named executive officer in that
year, and reflect the 1:6 reverse stock spilt of the Company's common stock
effective December 9, 1994.
(4) Amounts shown are the matching contributions made by the Company to its
Employee Retirement Savings Plan, a qualified Section 401(k) profit sharing
plan, and the amount of premiums for term life insurance paid by the
Company for the named executive officers as follows:
<TABLE>
<CAPTION>
401(k) Life
Contributions Insurance
-------------- ---------
<S> <C> <C>
Craig D. Harlen $10,512 $2,220
H. Alan Dahlbach 8,369 1,714
Mark R. Sanders 7,487 1,421
John D. Yokley 7,587 1,368
Steven W. Gampp 7,091 1,270
</TABLE>
EMPLOYMENT AND COMPENSATION AGREEMENTS
On December 1, 1994, the Company entered into an employment agreement
with Craig D. Harlen to serve as the Company's President and Chief Executive
Officer. The agreement provides for an annual base salary of $250,000 (which
was increased to $257,500 effective July 1, 1995) and automatically renews for
successive twelve month periods. The agreement provides for severance
compensation equal to one year's base salary in the event of a termination
without cause, and severance compensation in the event of a termination by
reason of a change of control equal to three times the sum of (i) base salary at
the time of the change of control, plus (ii) the average of the performance
bonus paid for the prior two fiscal years of the Company. In no event, however,
shall such severance compensation exceed the amount that the Company may deduct
for federal income tax purposes by virtue of Section 280G of the Internal
Revenue Code of 1986, as amended, or any successor provision.
On December 1, 1994, the Company entered into employment agreements
with H. Alan Dahlbach, Mark R. Sanders, Steven W. Gampp, Larry C. Dearing and
John D. Yokley. Each of these employment agreements provide for an annual base
salary, and for severance compensation in the event of termination without cause
or by reason of a change of control calculated in the same manner as described
above with respect to Mr. Harlen's agreement. Effective July 1, 1995, the
agreements provide for annual base salaries in the aggregate amount of $816,790
per year. The amounts applicable to each of the employees under his employment
agreement have been included in the Summary Compensation Table, where
applicable.
Each of the above described agreements provides for certain payments
in the event of death or disability. Also, each such agreement contains non-
competition and confidentiality provisions. For purposes of the above
agreements, a change of control occurs (i) if a person other than the Company
or Weiss, Peck and Greer ("WPG") or its affiliates acquires 40% or more of the
outstanding shares of Common Stock, (ii) if any merger, share exchange,
issuance of capital stock, tender offer or similar transaction results in the
existing stockholders owning fewer than 50% of the outstanding shares of Common
Stock after the transaction, (iii) upon a sale, lease or exchange of
substantially all of the Company's assets other than a sale/leaseback or similar
financing transaction, or (iv) upon the adoption of a plan for the liquidation
or dissolution of the
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<PAGE>
Company. A termination by reason of a change of control of the Company includes
constructive termination, as defined in the agreements, including, for example,
resignation following a substantial change in duties, a reduction in salary or
benefits or the failure of the executive and the Company or its successor to
negotiate a mutually agreeable amendment to the current employment agreement or
a new employment agreement within 90 days after the change in control of the
Company. The transactions contemplated by the Merger Agreement will result in a
change of control of the Company, as defined by the above agreements.
COMPENSATION TO DIRECTORS
The Company has agreed to pay Cecil D. Andrus an annual retainer of
$35,000 for his services as a non-employee director of the Company during his
current two-year term, which term ends in fiscal 1997. Pursuant to the Merger
Agreement, Governor Andrus has agreed to resign as a director of the Company
effective as of the Effective Date. The Company will honor its agreement with
Mr. Andrus by the payment of the unpaid balance of his retainer for the full two
year term on or prior to the Effective Date. No other director receives
compensation for services as a director, but all directors are reimbursed for
travel and other expenses directly related to their activities as directors.
The Company also has a Company Non-Employee Director Stock Option Plan, of which
Governor Andrus is the sole participant.
COMPENSATION PURSUANT TO PLANS
Stock Incentive Plans
---------------------
In 1988, the Company adopted an Employee Stock Option Plan (the "1988
Plan") to provide long-term incentives and rewards to the Company's officers and
employees. Under the 1988 Plan, options to acquire up to 300,000 shares of
Common Stock were authorized (as adjusted for the 1:6 reverse stock split in
December 1994). In 1994, the Company adopted the 1994 Employee Stock Incentive
Plan (the "1994 Plan") to provide long-term incentives and rewards to the
Company's officers and employees. Under the 1994 Plan, options to acquire up to
300,000 shares of Common Stock were authorized (as adjusted for the 1:6 reverse
stock split in December 1994). Both the 1988 Plan and the 1994 Plan are
administered by the Compensation Committee of the Board of Directors.
Under the 1988 Plan and the 1994 Plan, the Company may grant both
incentive stock options intended to qualify under Section 422 of the Internal
Revenue Code of 1986, as amended ("ISOs"), and nonqualified stock options
("NSOs"). ISOs may be granted at exercise prices that are not less than the
fair market value of the Common Stock at the date of grant, except that the
exercise price of ISOs granted to any person who owns more than 10% of the
outstanding Common Stock must be at least 110% of the fair market value on the
date of grant. NSOs can be granted at exercise prices at or below the fair
market value of the Common Stock on the date of grant.
The exercise price of an ISO or NSO may be paid with cash, shares of
Common Stock or recourse promissory notes at the option of the Compensation
Committee. The 1988 Plan and the 1994 Plan also provide for the grant of SARs.
An SAR permits the participant to surrender a specified portion of his options
in exchange for a payment representing the unrealized appreciation of those
options. No SARs have been granted under either of the plans. Each of the
plans also provides for supplemental bonuses granted at the discretion of the
Compensation Committee designed to offset all or part of the tax liability
incurred by participants who exercise ISOs or NSOs. The supplemental bonus may
not exceed the participant's tax liability arising from the exercise.
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<PAGE>
The 1988 Plan was adopted in May 1988. At June 30, 1995, NSOs had
been granted under the 1988 Plan for an aggregate of 236,887 shares of Common
Stock to 42 officers and employees, and NSOs had been exercised to purchase
63,111 shares of Common Stock in prior fiscal years.
The following table contains information relating to ISO grants made
in fiscal 1995 under the 1994 Plan to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
% of Total Realizable Value at Assumed
Options Granted Exercise Annual Rates of Stock Price
Options To Employees in Price Expiration Appreciation for Option Term
Name Granted (#) Fiscal Year/(1)/ ($/sh)/(2)/ Date 5%/(3)/ 10%/(4)/
----------------- ----------- ---------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Craig D. Harlen 41,666 16.0% $6.375 11/22/04 $166,872 $432,535
H. Alan Dahlbach 16,666 6.9% $6.375 11/22/04 66,747 169,410
Mark R. Sanders 16,666 6.9% $6.375 11/22/04 66,747 169,410
John D. Yokley 13,333 5.1% $6.375 11/22/04 53,399 135,530
Steven Gampp 16,666 6.9% $6.375 11/22/04 66,747 169,410
</TABLE>
(1) In fiscal 1995, the Company granted incentive stock options exercisable for
an aggregate of 260,834 shares of Common Stock to 49 employees.
(2) The exercise price is 100% of the closing price of the Company's Common
Stock on the NASDAQ/National Market on November 22, 1994 (adjusted for the
1:6 reverse stock split in December 1994). All options shown in this table
were granted on November 22, 1994. The options vest 40% on January 1,
1997, and 20% on each of January 1, 1998, 1999 and 2000.
(3) Assumes a price of $10.38 at the end of ten years.
(4) Assumes a price of $16.54 at the end of ten years.
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<PAGE>
The following table shows the potential realizable value of stock options
held by each of the named executive officers as of June 30, 1995:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of
Shares Underlying Unexercised Unexercised -
Acquired on Value Options at In the Money
Name Exercise (#) Realized ($) FY End (#)/(1)/ Options/(1)/
------------ ------------ ------------ ------------------------- -------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
<S> <C> <C> <C> <C>
Craig D. Harlen 0 0 0/80,746 0/$446,417
H. Alan Dahlbach 0 0 0/46,032 0/280,540
Mark R. Sanders 0 0 0/46,032 0/280,540
John D. Yokley 0 0 0/29,974 0/173,558
Steven W. Gampp 0 0 0/46,032 0/280,540
</TABLE>
(1) None of the options outstanding at June 30, 1995 are not exercisable
before December 1, 1996. The value shown is based on the closing price of
$10.125 per share for the Common Stock on June 30, 1995.
Directors' Stock Option Plan
----------------------------
In November 1994, the Company adopted the Non-employee Director Stock
Option Plan (the "Director Plan"), covering an aggregate of 50,000 shares of
Common Stock (adjusted for the reverse stock split in December 1994). Qualified
non-employee directors are eligible to receive grants of NSOs to purchase 4,167
shares of Common Stock on the date when service as a director commences, and to
receive NSOs for an additional 167 shares of Common Stock for each full fiscal
year of service as a director. All options to non-employee directors are fully
exercisable six months after the date of grant. During the twelve months ended
June 30, 1995, Mr. Andrus was granted an option to purchase 4,167 shares of
Common Stock at an exercise price of $8.50. Such option expires on January 3,
2005. All options granted under the Director Plan are fully vested.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
At its meeting in November 1992, the Company's Board of Directors
established a Compensation Committee to be responsible for establishing,
implementing and monitoring the Company's policies and plans for executive
development, succession planning and compensation. The Committee is composed of
Messrs. Lang, Pfister and Andrus.
The Company's policy is (i) to attract high caliber managerial and
technical talent to meet the Company's human resources needs, (ii) to assess and
develop such talent to succeed to key positions throughout the Company and its
operating subsidiaries, (iii) to provide compensation opportunities that are
competitive with those provided by comparable fertilizer companies, and (iv) to
motivate and reward its executives individually based on the contribution of
each toward the meeting of Company objectives, which include annual and long-
term business performance objectives and creation of stockholder value.
-38-
<PAGE>
In accordance with its responsibilities, at the beginning of each fiscal
year the Compensation Committee reviews a summary of objectives for the Company
and for the executive officers which are derived from the Company's strategic
and financial planning activities. Based on this review and a review of the
compensation offered by the Company's competitors, the Compensation Committee
determines for the Chief Executive Officer and, upon the recommendation of the
Chief Executive Officer, the other executive officers of the Company,
compensation levels for base salary, annual incentive awards and long-term
incentive compensation. At the end of the fiscal year, results achieved are
assessed by the Compensation Committee relative to the previously approved
objectives taking into consideration prevailing economic and business
conditions.
For fiscal 1995, the compensation of the Company's Chief Executive Officer
and the next four highest paid executive officers of the Company is consistent
with the Company's policies and plans which provide for three major elements of
compensation:
1. Base salaries have ranges which are established to reflect the
competitive marketplace at the appropriate job level. Placement within base
salary ranges reflects the individual performance of each executive officer,
time in position and the overall financial condition of the Company. Base
salaries are generally reviewed each year for adjustment by the Compensation
Committee. As of July 1, 1993, the salaries of all of the executive officers,
as well as all of the salaried and hourly employees of the Company, were frozen
at their 1992 levels on the recommendation of the Chief Executive Officer to
reflect the Company's financial difficulties pending completion of the
Recapitalization. After consummation of the Recapitalization, the salaries of
all salaried and hourly employees, including the executive officers, were
adjusted retroactively to July 1, 1993. No adjustments were made to salaries of
executive officers until July 1, 1995.
2. Annual incentive awards are contingent on the Compensation Committee's
year-end assessment of the performance of the Company and the individual
executive officer in relation to goals and objectives set for such executive
officers at the beginning of the year. Awards are generally made in cash during
the following fiscal year.
3. Equity participation has been provided in the form of stock options
which strengthen the coincidence of interest of executive officers, as well as
other salaried employees, and the Company's stockholders in the Company's growth
in real value over the long term. Stock options awarded under the 1988 Plan are
exercisable for 10 years. If employment terminates, other than for cause, there
are certain limited periods during which the stock options may be exercised.
Stock option grants may be made to all Company's officers and other key
employees at option prices equal to or less than the fair market value of the
Company's Common Stock at the date of grant. Stock options are granted to
Company's officers on a discretionary basis. Such grants reflect the relative
value of the individual's position as well as his or her current performance,
continuing contributions and the prospective impact of the officer on the
Company's future success and creation of stockholder value.
Compensation of the Chief Executive Officer
-------------------------------------------
The Chief Executive Officer of the Company participates in the Company's
compensation programs discussed above on substantially the same basis as other
participants. The base salary of the Chief Executive Officer, which had been
maintained at the same level since fiscal 1990, was adjusted on February 24,
1994 retroactive to the beginning of the fiscal year and was further adjusted on
July 1, 1995 to $257,500.
The Compensation Committee will continue to review, monitor and evaluate
the Company's program for executive compensation to assure that it is effective
in support of the Company's strategy, is competitive in the marketplace to
attract, retain and motivate the talent needed to succeed, and appropriately
pays for performance on behalf of all Company stockholders.
-39-
<PAGE>
Members of the Compensation Committee
Wesley W. Lang Peter B. Pfister Cecil D. Andrus
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return on its Common Stock over the prior five
years with the cumulative total return on the published NASDAQ Stock Market -
U.S. Index and the cumulative total return of certain peer companies with
investment weighted on the basis of market capitalization. THE FOLLOWING GRAPH
IS PRESENTED PURSUANT TO THE RULES OF THE SECURITIES AND EXCHANGE COMMISSION
("SEC"). THE COMPANY BELIEVES THAT WHILE TOTAL SHAREHOLDER RETURN IS A VERY
IMPORTANT CRITERION OF CORPORATE PERFORMANCE, IT IS SUBJECT TO THE VAGARIES OF
THE MARKET. IN ADDITION TO STOCK PRICE PERFORMANCE, THE COMPANY'S EXECUTIVE
COMPENSATION PROGRAM IS BASED ON FINANCIAL AND STRATEGIC RESULTS, AS WELL AS
OTHER FACTORS SET FORTH AND DISCUSSED IN THE REPORT BY THE COMPENSATION
COMMITTEE.
The Peer group in the performance graph consisted of Agricultural Minerals Co.
LP, Arcadian Partners LP, Freeport McMoran Resource Partners, IMC Global Inc.,
Terra Industries, Inc., Vigoro Corp., and First Mississippi Corp.
-40-
<PAGE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG NU-WEST INDUSTRIES, INC., THE NASDAQ STOCK MARKET-US INDEX
AND A PEER GROUP
DOLLARS
<TABLE>
<CAPTION>
Measurement Period NU-WEST NASDAQ STOCK
(Fiscal Year Covered) INDUSTRIES,INC. PEER GROUP MARKET-US
------------------- --------------- ---------- ------------
<S> <C> <C> <C>
Measurement Pt -
06/30/90 $100 $100 $100
FYE 06/30/91 $ 50 $113 $106
FYE 06/30/92 $ 80 $124 $127
FYE 06/30/93 $ 27 $102 $160
FYE 06/30/94 $132 $129 $162
FYE 06/30/95 $123 $184 $215
</TABLE>
/*/ $100 INVESTED ON 06/30/90 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
-41-
<PAGE>
Compliance with Section 16(A)
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers to file with the Securities and Exchange
Commission and the National Association of Securities Dealers initial reports of
ownership and reports of changes in ownership of the Company's securities.
Copies of all such Section 16(a) reports are required to be furnished to the
Company. These filing requirements also apply to holders of more than ten
percent of the Company's common stock.
To the Company's knowledge, based solely on a review of the copies of
Section 16(a) reports furnished to it and representations that no other reports
were required, during the fiscal year 1995 all such reports have been timely
filed.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of June 30, 1995 (except as otherwise noted),
information regarding the beneficial ownership of (i) the Company's voting and
non-voting securities by each person known by the Company to own beneficially
more than five percent of any class of the Company's voting securities and (ii)
the Company's equity securities owned by each director and by the Company's
Chief Executive Officer and the four most highly compensated executive officers
other than the Chief Executive Officer. Except as otherwise indicated, the
Company believes that the beneficial owners of its capital stock listed below
have sole investment and voting power as to such shares.
<TABLE>
<CAPTION>
Class A Class B
Common Stock Preferred Stock Preferred Stock
Beneficial Ownership(1) Beneficial Ownership(1) Beneficial Ownership(1)
----------------------- ----------------------- -----------------------
Name and Address Number Percent Number Percent Number Percent
--------------------------- --------- ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
PRINCIPAL STOCKHOLDERS:
Weiss, Peck & Greer, L.L.C. 4,614,281(2) 57.1% 0 0 0(2) 0%
and Affiliated Persons
One New York Plaza
New York, New York 10004
Glenbrook Partners 563,000 7.0% 4,000 1.4% 0
P. O. Box 12219
Zephyr Cove, Nevada 89448
Indosuez CM II, Inc. 633,105(3) 7.8% 0 0
Les Lieberman 456,063(4) 5.3% 0 0
c/o Banque Indosuez
1211 Avenue of the Americas
New York, New York 10036
DIRECTORS:
Craig D. Harlen 87,031(5) 1.1% 0 0
Mark R. Sanders 46,199(5) * 0 0
Cecil D. Andrus 4,500(5) * 0 0
c/o Nu-West Industries, Inc.
3010 Conda Road
Soda Springs, Idaho 83276
Wesley W. Lang 1,166(6) * 0 0
Peter B. Pfister 389(6) * 0 0
One New York Plaza
New York, New York 10004
</TABLE>
-43-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
NAMED EXECUTIVE OFFICERS:
H. Alan Dahlbach 46,199(7) * 0 0
John D. Yokley 32,132(7) * 0 0
Steven W. Gampp 46,032(7) * 0 0
c/o Nu-West Industries, Inc.
8400 East Prentice Avenue
Suite 1320
Englewood, Colorado 80111
Executive Officers 359,546(8) 4.3% 0 0
and Directors as
a Group (11 Persons)
</TABLE>
* Less than one percent.
(1) A person is deemed to be a "beneficial owner" of a security if that
person has or shares "voting power," which includes the power to vote or
direct the voting of such security, or "investment power," which includes
the power to dispose of, or to direct the disposition of, such security. A
person is also deemed to be the beneficial owner of a security over which
he has the right to acquire either voting power or investment power within
60 days, either through the exercise of a warrant or option or the
conversion of a convertible security. More than one person may be deemed to
be a beneficial owner of the same securities, and a person may be deemed to
be a beneficial owner of securities which he may not vote.
(2) Includes 2,488,005 shares of Common Stock held by WPG Corporate
Development Associates II, L.P. Liquidating Trust, U/T/A dated December 31,
1993 ("CDA II"), 880,563 shares of Common Stock held by Weiss, Peck & Greer
Venture Associates, L.P. Liquidating Trust U/T/A dated December 30, 1994
("WPGVA"), 1,027,714 shares of Common Stock held by WPG Corporate
Development Associates III, L.P. ("CDA III"), and 217,999 shares of Common
Stock held by WPG Corporate Development Associates III (Overseas) Ltd.
("Overseas, Ltd.") See additional discussion under the heading "Certain
Relationships and Related Transactions." Does not include shares held by
Messrs. Lang and Pfister -- see note 6 below.
(3) Consists of 633,105 Non-Voting shares issued upon the exercise of warrants
issued by the Company on November 2, 1993 in connection with the
Recapitalization Plan.
(4) Consists of 456,063 shares issuable upon exercise of warrants issued by
the Company on November 2, 1993 in connection with the Recapitalization to
Indosuez CM II, Inc. and subsequently transferred to Mr. Lieberman.
(5) Includes shares issuable under options granted by the Company in the
following amounts: Mr. Harlen - 80,746; Mr. Sanders - 46,032; Governor
Andrus - 4,167.
(6) Messrs. Lang and Pfister are principals of WPG and Mr. Lang is a managing
partner of WPG CDA III, L.P. WPG is the sole trustee of CDA II and WPGVA;
WPG CDA III, L.P. is the general partner of CDA III. Another principal of
WPG is a director of Overseas, Ltd. Messrs. Lang and Pfister each disclaim
beneficial ownership of the shares held by CDA II, WPGVA, CDA III and
Overseas, Ltd., except to the extent of his own beneficial ownership
interest (direct or indirect) therein. Accordingly, the shares set forth as
beneficially owned by Messrs. Lang and Pfister exclude 2,488,005 shares of
Common Stock held by CDA II, 880,563 shares of Common Stock held by WPGVA,
1,027,714 shares of Common Stock held by CDA III, and 217,999 shares of
Common Stock held by Overseas, Ltd.--see Note 2 above.
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<PAGE>
(7) Includes shares issuable under options granted by the Company in the
following amounts: Mr. Dahlbach - 46,032; Mr. Yokley - 29,974; Mr. Gampp -
46,032.
(8) Includes 342,214 shares issuable under options granted by the Company.
As of June 30, 1995, 8,086,363 shares of Common Stock (7,453,174 shares of
Voting Common Stock and 633,106 shares of Non-Voting Common Stock), 290,000
shares of non-voting Class A Preferred Stock and 344 shares of non-voting Class
B Preferred Stock were issued and outstanding.
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<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and WPG-CDA, an affiliate of WPG, have entered into an agreement
under which WPG-CDA provides management and financial consulting services to the
Company for an annual fee of $250,000, plus expenses. The Company paid WPG-CDA
$259,000 in fees and related expenses during fiscal 1995 for such services.
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<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
FILED IN THIS REPORT.
1. Index to Financial Statements and Supplementary Data. See
page 30.
2. Index to Financial Statement Schedules. See page 30.
3. Index to Exhibits required by Form 10-K.
Exhibit Index to Form 10-K for
Fiscal Year Ended June 30, 1995
-------------------------------
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C> <C>
3(a) Restated Certificate of Incorporation, Incorporated herein by reference.
as amended. See Footnote Numbers 1, 6 & 8 below.
3(b) Bylaws, as amended. Incorporated herein by reference. See
Footnote Number 2 below.
10(a) Non-employee Director Stock Option Plan Incorporated herein by reference.
See Footnote Number 9 below.
10(b) Amended and Restated Employee Stock Incorporated herein by reference.
Option Plan, as amended. See Footnote Number 2 below.
10(c) 1994 Employee Stock Incentive Plan Incorporated herein by reference.
See Footnote Number 9 below.
10(d) Warrant to Purchase 250,000 Shares Incorporated herein by reference.
of Common Stock of the Company See Footnote Number 3 below.
in name of General Electric
Capital Corporation.
10(e) Registration Rights Agreement Incorporated herein by reference.
between the Company and General See Footnote Number 3 below.
Electric Capital Corporation, dated
as of September 18, 1989.
10(f) Employment Agreement dated as of
December 1, 1994 between the Company
and H. Alan Dahlbach.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10(g) Employment Agreement dated as of
December 1, 1994 between the Company
and Craig Harlen.
10(h) Employment Agreement dated as of
December 1, 1994 between the Company
and Mark R. Sanders.
10(i) Employment Agreement dated as of
December 1, 1994 between the Company
and Steven W. Gampp.
10(j) License Agreement dated September 28, Incorporated herein by reference.
1990 between IMCERA Group, Inc. and See Footnote Number 4 below.
Mineral Technology Corporation.
10(k) Indemnity and Tax Reporting Agreement Incorporated herein by reference.
dated as of July 15, 1992 by and among See Footnote Number 5 below.
Western Co-operative Fertilizers Limited,
Western Co-operative Fertilizers(U.S.),
Inc., and Nu-West Industries, Inc.
10(l) Ore Purchase Agreement between Rhone- Incorporated herein by reference.
Poulenc Basic Chemicals Co., a division See Footnote Number 6 below.
of Rhone-Poulenc, Inc. and Nu-West
Industries, Inc., dated June 15, 1993.
a. Collateral Assignment of Ore Purchase Agreement
b. Access Agreement
c. Amendment dated June 1, 1995
10(m) Lease Financing Agreement dated Incorporated herein by reference.
November 2, 1993 between Caterpillar See Footnote Number 6 below.
Financial Services Corporation and the
Company.
a. Sublease between Nu-West and Rhone-Poulenc
b. Collateral Assignment of Lease Financing Agreement
10(n) Ore Requirement Reduction Settlement Incorporated herein by reference.
Agreement between Conda Partnership, See Footnote Number 6 below.
a partnership composed of Nu-West
Industries, Inc. and Nu-West Mining, Inc.,
and WCG Holdings, Inc., dated effective
November 30, 1993.
10(o) Subordination Agreement dated as of Incorporated herein by reference.
October 15, 1993 between the Company See Footnote Number 6 below.
and Weiss, Peck & Greer.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10(p) Amended and Restated Limited Partner- Incorporated herein by reference.
ship Agreement for NuTec Mineral & See Footnote Number 6 below.
Chemical Company, dated November 1,
1993.
a. Senior Secured Promissory Note from NuTec to Nu-West Industries
b. Assignment and Pledge Agreement between the Company and the Collateral
Agent
10(q) Warrant issued to Indosuez CM II, Inc. Incorporated herein by reference.
See Footnote Number 6 below.
10(r) Registration Rights Agreement between the Incorporated herein by reference.
Company and Indosuez CM II, Inc. See Footnote Number 6 below.
10(s) Cash Settlement Option Agreement Incorporated herein by reference.
between the Company and Indosuez See Footnote Number 6 below.
CM II, Inc.
10(t) Acid Sales Contract between Nu-West Incorporated herein by reference.
Industries, Inc. and Kennecott Utah See Footnote 7 below.
Copper Corporation, dated July 28, 1994.
10(u) $4,000,000 Loan Agreement between Incorporated herein by reference.
Nu-West Industries, Inc. and Kennecott See Footnote 7 below.
Utah Copper Corporation, dated July 28,
1994.
10(v) Intercreditor Agreement among the Harris
Trust and Savings Bank and the Lending
Institution listed therein and Kennecott
Copper Corporation, dated August 3, 1995.
10(w) Work Reduction and Buy-Out Settlement Incorporated herein by reference.
Agreement among Conda Partnership whose See Footnote 7 below.
partners are Nu-West Industries, Inc. and
Nu-West Mining, and WCG Holdings, Inc.
10(x) Agreement and Plan of Merger, dated Incorporated herein by reference.
August 9, 1995 among Nu-West Industries, See Footnote 9 below.
Inc. and Agrium Inc., Agrium Acquisition
Corporation and Agrium U.S. Inc.
10(y) $75,000,000 Credit Agreement among Nu-West
Industries, Inc. and Harris Trust and Savings
Bank and the Lending Institutions listed
therein, dated as of August 3, 1995.
a. Form of Mortgage and Security Agreement
b. Form of Security Agreement
11 Statement regarding computation of per share
earnings.
</TABLE>
-49-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
22 Subsidiaries of Registrant.
27 Financial Data Schedule.
</TABLE>
--------------------------
(1) Incorporated herein by reference from the Exhibits to the Company's
Registration Statement on Form S-1 as filed on November 9, 1988,
Registration No. 33-25448.
(2) Incorporated herein by reference from the Exhibits to Amendment No. 1 to
the Company's Registration Statement on Form S-1 as filed on November 18,
1988, Registration No. 33-25448.
(3) Incorporated herein by reference from the Exhibits to the Company's Form
10-K, as filed on October 10, 1989.
(4) Incorporated herein by reference from the Exhibits to the Company's Form
10-K, as filed on September 10, 1991.
(5) Incorporated herein by reference from the Exhibits to the Company's
Report on Form 8-K, as filed on July 28, 1992.
(6) Incorporated herein by reference from the Exhibits to the Company's
Report on Form 10-Q, as filed on November 12, 1993.
(7) Incorporated herein by reference from the Exhibits to the Company's
Report on Form 10-K, as filed on September 15, 1994.
(8) Incorporated herein by reference from the Exhibits to the Company's
Report on Form 10-Q, as filed on January 31, 1995.
(9) Incorporated herein by reference from the Exhibits to the Company's Proxy
Statement as filed on October 11, 1994.
(10) Incorporated herein by reference from the Exhibits to the Company's
Schedule 14D-9, as filed on August 16, 1995.
-50-
<PAGE>
(B) Reports on Form 8-K.
None
-51-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
NU-WEST INDUSTRIES, INC.
Date: August 24, 1995 By: /s/ Craig D. Harlen
-------------------------------------
Craig D. Harlen, President and Chief Executive Officer
Know all men by these presents that each person whose signature
appears below does hereby constitute and appoint Wesley W. Lang, Mark R.
Sanders, Steven W. Gampp, and each of them, with full power to act without the
other, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign all amendments to this report, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission granting unto said attorney-in-fact
and agent, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or his substitute or substitutes, lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ---------------------- --------------------------
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER
/s/ Craig D. Harlen Chairman of the Board, August 24, 1995
-------------------------------------------- President, Chief Executive
Craig D. Harlen Officer and Director
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
/s/ Mark R. Sanders Senior Vice President, August 24, 1995
-------------------------------------------- Chief Financial Officer and
Mark R. Sanders Director
DIRECTORS
/s/ Peter B. Pfister Director August 24, 1995
--------------------------------------------
Peter B. Pfister
/s/ Wesley W. Lang Director August 24, 1995
--------------------------------------------
Wesley W. Lang
</TABLE>
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<PAGE>
EXHIBIT 10(f)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 1st day of December,
1994, between Nu-West Industries, Inc., a Delaware corporation (the "Company"),
and H. Alan Dahlbach (the "Officer"). This Agreement amends, restates and
supersedes in its entirety that certain Employment Agreement between Company and
Officer dated February 1, 1989.
RECITAL
-------
Officer has accepted the appointment by the Company's Board of Directors
(the "Board") as the Company's Executive Vice President, and the Company and the
Officer desire to set forth herein the terms and conditions of his employment.
AGREEMENT
---------
The parties hereto agree as follows:
1. Agreement to Serve.
1.1 Title. The Company shall employ Officer and Officer shall serve
in the employ of the Company as its Executive Vice President, and in such other
executive offices as the Board and the Officer shall determine during the term
of Officer's employment hereunder.
1.2 Duties. The Officer shall assume and discharge the
responsibilities of Executive Vice President (as set forth in the Bylaws of the
Company), as well as such other responsibilities as may be assigned to him by
the President and Chief Executive Officer ("President") or the Board, upon the
terms and conditions contained herein. The Officer shall perform his
responsibilities to the best of his abilities and shall devote his full-time
working hours and attention to the good faith best efforts performance of his
responsibilities. The Officer will engage in no other business or activity for
compensation during the term of this Agreement except with the prior written
consent of the Company, or otherwise engage in activities which would interfere
significantly with his faithful performance of his duties hereunder. The Officer
also agrees to serve, if elected, at no compensation in addition to that
provided for in this Agreement, in the position of officer or director of any
subsidiary of the Company; provided, however, that such position shall be of no
less status relative to such subsidiary as the position that the Officer holds
with the Company. The Officer shall always be subject to the directions of the
President in the performance of his responsibilities, and nothing herein shall
affect the power of the President to limit, alter, restrict, or remove the
authority of the Officer. Officer's principal place of business with respect to
his services to Company shall be at its offices located in Englewood, Colorado
or such other location acceptable to Officer.
2. Terms of Employment.
<PAGE>
2.1 Basic Term. The term of the Officer's employment under this
Agreement shall be for twelve months commencing December 1, 1994, unless
terminated earlier pursuant to this Section 2. This Agreement will be
automatically renewed for successive twelve-month periods unless Officer or the
Company provides notice to the other on or before the 90th day prior to the
anniversary date of this Agreement of the intention not to renew this Agreement;
and the same terms and conditions contained herein (including compensation
determined under Section 3) shall remain in effect during such continuance of
employment. If the Company provides such notice of non-renewal to the Officer,
the resulting termination of this Agreement shall be considered a termination
without cause under Section 2.3.
2.2 Termination for Cause. The Company shall have the right to
terminate the Officer for cause and said termination shall be effected by
written notification to Officer. Grounds for termination for cause shall
include, without limitation, (i) the Officer's breach of any terms of this
Agreement; (ii) the Officer's willful dishonesty towards, fraud upon, crime
against, deliberate injury or bad faith action with respect to, or deliberate or
attempted injury to Company; or (iii) Officer's conviction of any felony crime
(whether in connection with the Company's affairs or otherwise).
2.3 Termination Without Cause. The Company shall have the right,
upon 30 days written notification to the Officer to terminate the Officer's
employment without cause. Any termination not covered by Sections 2.2, 2.4, 2.5,
2.6 or 2.7 shall be deemed a termination without cause. Upon any termination
without cause, Officer shall promptly be paid all accrued salary, bonus
compensation to the extent earned, vested deferred compensation (other than
pension plan or profit sharing plan benefits, which will be paid in accordance
with the applicable plan), any benefits then due under any plans of Company in
which Officer is a participant, accrued vacation pay and any appropriate
business expenses incurred by Officer in connection with his duties hereunder,
all to date of termination ("Accrued Compensation"), and all severance
compensation provided for in Section 4.1.
2.4 Disability. If, during the term of this Agreement, Officer
shall fail to render the services provided for by this Agreement because of
illness, physical or mental disability or other incapacity, for a period of six
consecutive months or for shorter periods aggregating six months during any
twelve-month period, then the Company may, at any time after the last day of the
six consecutive months of disability or the last day on which the shorter
periods of disability equal an aggregate of six months, terminate Officer's
employment for disability by written notice to the Officer. Upon termination for
disability, Officer shall promptly be paid all Accrued Compensation to the date
of termination, and disability benefits as provided in Section 4.2. Except as
provided in this Section 2.4, upon termination of employment by disability the
Company shall have no further obligation to the Officer under this Agreement.
2.5 Death. In the event of Officer's death during the term of this
Agreement, Officer's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs. Company shall pay promptly
to his estate all Accrued Compensation to the date of termination, and death
benefits as provided in Section 4.3. Except as provided in this Section
-2-
<PAGE>
2.5, upon termination of employment by death the Company shall have no further
obligation to the Officer under this Agreement.
2.6 Voluntary Termination. In the event Officer voluntarily
terminates his employment hereunder and Sections 2.2, 2.3 or 2.7 are not
applicable, Company shall promptly pay all Accrued Compensation to the date of
termination, but shall not be required to pay any other compensation or
reimbursement of any kind, including, without limitation, severance
compensation.
2.7 Termination Upon a Change in Control.
(a) In the event of a termination upon a change in control,
Officer shall promptly be paid all Accrued Compensation. "Termination Upon a
Change in Control" shall mean a termination by Officer for Good Reason (as
defined below) of Officer's employment with Company within 12 months following a
"Change in Control" as defined in Section 2.8. For purposes of this Agreement
"Good Reason" shall include, but not be limited to, any of the following
(without the Officer's express written consent):
(i) the assignment to Officer by Company of duties inconsistent
with, or a substantial alteration in the nature or status of,
Officer's responsibilities immediately prior to a Change in Control
other than any such alteration primarily attributable to the fact that
Company's securities are no longer publicly traded;
(ii) a reduction by Company in the Officer's Base Salary or other
benefits as in effect on the date of a Change in Control;
(iii) the requirement of Officer to be based at any office or
other location maintained by the Company more than 25 miles from the
Company's current office located in Englewood, Colorado, or Officer's
relocation to any place other than the said office of Company, except
for reasonably required travel by Officer on Company's business;
(iv) any material breach by Company of any provision of this
Agreement, if such material breach has not been cured within thirty
(30) days following written notice by Officer to Company of such
breach setting forth with specificity the nature of the breach;
(v) any failure by Company to obtain the assumption of this
Agreement by any successor or assign of Company, or
(vi) the failure of the Company to negotiate, or cause its
successor to negotiate, with Officer in good faith with a view to the
execution of a mutually satisfactory amendment to this Agreement, or
for a new agreement superseding the terms hereof, within 90 days after
the date of the Change in Control. If such amendment or agreement has
not been executed and delivered by the Company and
-3-
<PAGE>
the Officer by the end of such period, Officer may, within 30 days
after the end of such period, terminate his employment for Good Reason
by written notice to the Company.
(b) Notwithstanding anything else in this Agreement, solely in
the event of a Termination Upon a Change in Control pursuant to Section 2.7, the
aggregate of the amount of severance compensation paid to Officer under this
Agreement or otherwise, but exclusive of any payments to Officer by virtue of
Officer's exercise of any options or rights provided to Officer under any stock
option plan maintained by the Company upon a Change in Control, shall not
include any amount that the Company is prohibited from deducting for federal
income tax purposes by virtue of Section 280G of the Internal Revenue Code or
any successor provision.
2.8 Change in Control. A Change in Control of the Company shall be
deemed to have occurred if: (i) any person (as such term is used in Sections
13(d) and 14(d)(2) of the Securities and Exchange Act of 1934 (the "Exchange
Act")), other than the Company or Weiss, Peck & Greer, is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 40% or more of the shares of capital stock of the Company having
the right to vote for the election of directors (calculated as provided in Rule
13d-3(d) under the Exchange Act in the case of rights to acquire capital stock),
whether by means of a tender offer or exchange offer, open-market purchase,
consolidation, merger or otherwise; (ii) any merger, share exchange, issuance of
capital stock, tender offer or other transaction or series of related
transactions shall result in the Company's stockholders (determined as of the
record date fixed for the purpose of determining stockholders entitled to vote
on the transaction or the first of the series of related transactions, or if no
such record is taken, immediately prior to the consummation of the transaction
or the first of the series of related transactions) holding fewer than 50% of
the outstanding shares of capital stock having the right to vote for the
election of directors of the Company or, if other than the Company, the
surviving or resulting corporation, as the case may be; (iii) the Company sells,
leases or exchanges or otherwise transfers (in one transaction or a series of
related transactions) all or substantially all of the assets of the Company
(other than a sale/leaseback or a similar financing transaction involving the
Company's assets); or, (iv) any plan or proposal for the liquidation or
dissolution of the Company is adopted.
For purposes of this Section, Weiss, Peck & Greer shall mean Weiss, Peck &
Greer, a general partnership, or any person directly or indirectly controlling,
controlled by or under common control with Weiss, Peck & Greer, or any
investment fund of which Weiss, Peck & Greer or a partner thereof is the advisor
or a general partner or any investment fund of which Weiss, Peck & Greer or a
partner thereof is a general partner of the advisor to such fund or a general
partner of a general partner of such fund (including, without limitation,
WPG Venture Associates, L.P., WPG Corporate Development Associates, II, L.P.,
WPG Corporate Development Associates III, L.P., and WPG Corporate Development
Associates (Overseas), Ltd.).
3. Compensation.
-4-
<PAGE>
3.1 Base Salary. The Company agrees to pay the Officer for his
services hereunder a salary at the rate of $193,000.00 per annum ("Base
Salary"), payable in equal semi-monthly installments. The Base Salary for each
fiscal year (or portion thereafter) of the Company shall be as determined by the
Board, but shall in no event be less than the Base Salary payable to Officer in
the previous fiscal year.
3.2 Benefits. The Officer shall be entitled to participate in any
of the Company's benefit and deferred compensation plans as are from time to
time available to the officers of the Company, including profit sharing,
medical, dental, health and annual physical examination plans, life and
disability insurance plans and supplemental retirement programs; provided,
however, that Officer's benefits may be modified or the Officer may be denied
participation in any such plan because of a condition or restriction imposed by
law or regulation or third-party insurer or other provider relating to
participation of officers).
4. Severance and Other Payments.
4.1 Severance Compensation.
(a) In the event Officer's employment is terminated under Section
2.3 or 2.7, the parties acknowledge that Officer will sustain actual damages,
the amount of which is indefinite, uncertain and difficult of exact
ascertainment because of the uncertainties of successfully relocating and/or of
seeking a comparable position. In order to avoid dispute as to the amount of
such damages and the mutual expense and inconvenience such dispute would entail,
Company and Officer have agreed to hereby stipulate and agree that Company shall
pay to Officer a severance compensation determined pursuant to this Section 4.1.
It is hereby agreed that in the event of such termination by Company, Officer
shall receive such amounts as herein provided, not as a penalty, but as
Officer's agreed severance compensation and sole damages for the termination of
this Agreement, in lieu of Officer's proof of his actual damages on that
account. All severance compensation shall be without prejudice to Officer's
right to receive all Accrued Compensation (as defined in Section 2.3) earned and
unpaid up to the time of termination.
(b) In the event of a termination pursuant to Section 2.3, the
Company shall pay severance compensation in an amount equal to Officer's Base
Salary (at the rate payable at the time of such termination) in equal semi-
monthly installments over the following twelve months until paid in full.
(c) Except as provided in paragraphs (d) and (e) of this Section
4.1, in the event of a termination pursuant to Section 2.7, the Company shall
pay severance compensation in an amount equal to the lesser of (a) three times
the sum of (x) Officer's Base Salary (at the rate payable at the time of such
termination), plus (y) the average of the bonuses paid to the Officer for the
two most recent fiscal years of the Company preceding the date of termination,
or (b) the amount determined pursuant to Section 2.7(b). Such total amount shall
be payable in equal semi-monthly installments over the following thirty-six
months until paid in full.
-5-
<PAGE>
(d) In the event of a termination pursuant to Section 2.7(vi)
after December 31, 1996 but prior to January 1, 1998, the Company shall pay
severance compensation in an amount equal to the lesser of (a) two times the sum
of (x) Officer's Base Salary (at the rate payable at the time of such
termination), plus (y) the average of the bonuses paid to the Officer for the
two most recent fiscal years of the Company preceding the date of termination,
or (b) the amount determined pursuant to Section 2.7(b). Such total amount shall
be payable in equal semi-monthly installments over the following twenty-four
months until paid in full.
(e) In the event of a termination pursuant to Section 2.7(vi)
after December 31, 1997, the Company shall pay severance compensation in an
amount equal to the lesser of (a) the sum of (x) Officer's Base Salary (at the
rate payable at the time of such termination), plus (y) the average of the
bonuses paid to the Officer for the two most recent fiscal years of the Company
preceding the date of termination, or (b) the amount determined pursuant to
Section 2.7(b). Such total amount shall be payable in equal semi-monthly
installments over the following twelve months until paid in full.
(f) Following a termination under Section 2.7, Officer may in
Officer's sole discretion, by delivery of a notice to Company within thirty (30)
days following such termination, elect to receive from Company a lump sum
severance payment equal to the present value of the flow of cash payments that
would otherwise be paid to Officer pursuant to Section 4.1(a)(ii) by bank
cashier's check or other payment method acceptable to Officer. Such present
value shall be determined as of the date of delivery of the notice of election
of Officer and shall be based on a discount rate equal to the interest rate of
90-day U.S. Treasury Bills, as reported in the Wall Street Journal (or similar
publication) on the date of delivery of the election notice. If Officer elects
to receive a lump sum severance payment, Company shall make such payment to
Officer within sixty (60) days following the date on which Officer notifies
Company of Officer's election. The Company shall continue to make payments
pursuant to Section 4.1(a)(ii) from the date of the notice of election by
Officer through the date of payment of the lump-sum amount under this paragraph.
(g) No deduction shall be made by Company under this Section 4.1
for any compensation earned by Officer from any other employment or for any
other monies otherwise received by Officer subsequent to termination of
employment hereunder.
4.2 Disability Benefits. In the event of termination of Officer's
employment by reason of disability pursuant to Section 2.4, Company shall
continue to pay the Officer's Base Salary then in effect for a period of 18
months, and shall continue during such period the Officer's participation in
medical and other benefits programs then maintained for the Company's officers
(or shall provide reasonably equivalent benefits). The Officer will use his
reasonable best efforts to cooperate with any physician engaged by the Company
to determine whether or not a disability exists, and for the determination of
appropriate and necessary rehabilitation procedures and programs. Any payments
provided for in this Section 4.2 shall be offset (but not below zero) by any
salary continuation payments received by the Officer under any plan, program or
arrangements in which the Officer participated pursuant to Section 3.2.
-6-
<PAGE>
4.3 Death Benefits. In the event of the Officer's death, Company
shall pay to Officer's estate or designated beneficiary an amount equal to
Officer's Base Salary (at the rate payable at the time of Officer's death) in
equal semi-monthly installments over the following twelve months until paid in
full.
5. Protection for Company.
5.1 Confidentiality. The Officer shall not, during his employment
by the Company or at any time thereafter, directly or indirectly use, divulge,
furnish or make accessible to anyone other than the Company, its directors or
officers (otherwise than in the regular course of the business of the Company),
any knowledge or information regarding any confidential or secret ideas,
activities, projects, plans, techniques, methods, reports, customer names or
lists, financial or sales information or other material relating to the business
or activities of the Company. The Officer, upon leaving the employ of the
Company, shall not take with him or retain any books, records, data, reports,
letters, memoranda, notes or other writings or documents whatsoever, or copies
thereof, which reflect or deal with any secret, proprietary or confidential
information or material relating to the business or activities of the Company.
5.2 Non-Interference.
(a) During his employment hereunder and for a period of one year
following termination of Officer's employment under this Agreement for any
reason other than under Section 2.7, Officer shall not directly or indirectly,
unless Company gives its prior written consent (which consent shall not be
unreasonably withheld):
(i) be employed by any Competitor (as herein defined) to hold
any executive office or to perform any function for which during the
two years immediately preceding termination of Officer's employment
Officer had direct or supervisory responsibility;
(ii) consult with, act as agent for, or otherwise assist any
Competitor to compete or prepare to compete with Company in any of
Company's then businesses;
(iii) solicit any customer of Company with which he dealt on
behalf of Company during the last two years of employment to purchase
any product or service which is supplied by Company; or
(iv) solicit or employ any person employed by Company at that
time or within one year prior to termination of Officer's employment
by Company.
(b) For purposes of this Agreement, a "Competitor" means any
person or entity which at relevant times engages or is making plans to engage,
in whole or in part,
-7-
<PAGE>
in the manufacture and/or sale of any products useful for any purpose also
served by products which Company then markets or is then preparing to market.
(c) Company promises that it will not unreasonably withhold
consent to activity otherwise prohibited by Section 5.2 (a), if Officer provides
Company with such written assurances as Company reasonably requests from the
Competitor and Officer that Company's trade secret rights will not be violated
by Officer in the course of the activities described in Section 5.2(a). Section
5.2(a)(iii) shall not be deemed to apply to customers with which Officer had
dealings before he became employed by Company.
(d) Officer acknowledges that Company competes on a national
basis and that placing geographical limits on the restrictive covenants would
substantially impair protection of Company's legitimate interests in protecting
its trade secrets.
5.3 Remedies. Officer acknowledges that Company would be greatly
injured by, and have no adequate remedy at law for, breach of Article 5 duties.
Officer therefore consents that if such breach occurs or is threatened, whether
before or after termination of his employment by Company, Company may, as
appropriate and in addition to all other then available remedies, enjoin him
(together with all persons acting in concert with him) from such breach or
threatened breach. If Company prevails in such litigation, Company shall also be
entitled to collect from Officer the court costs, attorneys' and experts' fees
and other expenses of enforcing such Agreement rights.
6. Miscellaneous.
6.1 Severability. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, so that it is enforceable to the maximum extent
possible, and all other provisions of the Agreement shall be deemed valid and
enforceable to the extent possible.
6.2 Withholdings. All compensation and benefits to Officer
hereunder shall be reduced by all federal, state, local and other withholdings
and similar taxes and payments required by applicable law.
6.3 Arbitration. Except as provided in Section 5.3, the parties
hereby submit all controversies, claims and matters of difference in any way
related to this Agreement or the performance or breach of the whole or any part
hereof to arbitration in Denver, Colorado, according to the rules and practices
of the American Arbitration Association from time to time in force. If such
rules and practices shall conflict with the Colorado Rules of Civil Procedure or
any other provisions of Colorado law then in force, such Colorado rules and
provisions shall govern. Arbitration of any such controversy, claim or matter of
difference shall be a condition precedent to any legal action thereon. This
submission and agreement to arbitration shall be specifically
-8-
<PAGE>
enforceable.
Awards shall be final and binding on all parties to the extent and in
the manner provided by Colorado law. All awards may be filed by any party with
the Clerk of the District Court in the City and County of Denver, Colorado, and
an appropriate judgment entered thereon and execution issued therefor. At the
election of any party, said award may also be filed, and judgment entered
thereon and execution issued therefor, with the clerk of one or more other
courts, state or federal, having jurisdiction over the party against whom such
an award is rendered or its property.
6.4 Entire Agreement; Modifications. This Agreement represents
the entire agreement between the parties and may be amended, modified,
superseded, or canceled, and any of the terms hereof may be waived, only by a
written instrument executed by each party hereto or, in the case of a waiver, by
the party waiving compliance. The failure of any party at any time or times to
require performance of any provisions hereof shall not affect the right at a
latter time to enforce the same. No waiver by any party of the breach of any
provision contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such breach or of any other term of this Agreement.
6.5 Applicable Law. This Agreement shall be construed under and
governed by the laws of the State of Colorado.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
NU-WEST INDUSTRIES, INC.
By:_____________________________________
President and Chief Executive Officer
OFFICER:
----------------------------------------
H. Alan Dahlbach
-10-
<PAGE>
EXHIBIT 10(g)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 1st day of December,
1994, between Nu-West Industries, Inc., a Delaware corporation (the "Company"),
and Craig D. Harlen (the "Officer"). This Agreement amends, restates and
supersedes in its entirety that certain Employment Agreement between Company and
Officer dated September 1, 1989.
RECITAL
-------
Officer has accepted the appointment by the Company's Board of Directors
(the "Board") as the Company's President & Chief Executive Officer, and the
Company and the Officer desire to set forth herein the terms and conditions of
his employment.
AGREEMENT
---------
The parties hereto agree as follows:
1. Agreement to Serve.
1.1 Title. The Company shall employ Officer and Officer shall serve in
the employ of the Company as its President & Chief Executive Officer and in such
other executive offices as the Board and the Officer shall determine during the
term of Officer's employment hereunder.
1.2 Duties. The Officer shall assume and discharge the responsibilities
of President & Chief Executive Officer (as set forth in the Bylaws of the
Company), as well as such other responsibilities as may be assigned to him by
the Board, upon the terms and conditions contained herein. The Officer shall
perform his responsibilities to the best of his abilities and shall devote his
full-time working hours and attention to the good faith best efforts performance
of his responsibilities. The Officer will engage in no other business or
activity for compensation during the term of this Agreement except with the
prior written consent of the Company, or otherwise engage in activities which
would interfere significantly with his faithful performance of his duties
hereunder. The Officer also agrees to serve, if elected, at no compensation in
addition to that provided for in this Agreement, in the position of officer or
director of any subsidiary of the Company; provided, however, that such
position shall be of no less status relative to such subsidiary as the position
that the Officer holds with the Company. The Officer shall always be subject to
the directions of the Board in the performance of his responsibilities, and
nothing herein shall affect the power of the Board to limit, alter, restrict, or
remove the authority of the Officer. Officer's principal place of business with
respect to his services to Company shall be at its offices located in Soda
Springs, Idaho or such other location acceptable to Officer.
<PAGE>
2. Terms of Employment.
2.1 Basic Term. The term of the Officer's employment under this Agreement
shall be for twelve months commencing December 1, 1994, unless terminated
earlier pursuant to this Section 2. This Agreement will be automatically
renewed for successive twelve-month periods unless Officer or the Company
provides notice to the other on or before the 90th day prior to the anniversary
date of this Agreement of the intention not to renew this Agreement; and the
same terms and conditions contained herein (including compensation determined
under Section 3) shall remain in effect during such continuance of employment.
If the Company provides such notice of non-renewal to the Officer, the resulting
termination of this Agreement shall be considered a termination without cause
under Section 2.3.
2.2 Termination for Cause. The Company shall have the right to terminate
the Officer for cause and said termination shall be effected by written
notification to Officer. Grounds for termination for cause shall include,
without limitation, (i) the Officer's breach of any terms of this Agreement;
(ii) the Officer's willful dishonesty towards, fraud upon, crime against,
deliberate injury or bad faith action with respect to, or deliberate or
attempted injury to Company; or (iii) Officer's conviction of any felony crime
(whether in connection with the Company's affairs or otherwise).
2.3 Termination Without Cause. The Company shall have the right, upon 30
days written notification to the Officer to terminate the Officer's employment
without cause. Any termination not covered by Sections 2.2, 2.4, 2.5, 2.6 or
2.7 shall be deemed a termination without cause. Upon any termination without
cause, Officer shall promptly be paid all accrued salary, bonus compensation to
the extent earned, vested deferred compensation (other than pension plan or
profit sharing plan benefits, which will be paid in accordance with the
applicable plan), any benefits then due under any plans of Company in which
Officer is a participant, accrued vacation pay and any appropriate business
expenses incurred by Officer in connection with his duties hereunder, all to
date of termination ("Accrued Compensation"), and all severance compensation
provided for in Section 4.1.
2.4 Disability. If, during the term of this Agreement, Officer shall fail
to render the services provided for by this Agreement because of illness,
physical or mental disability or other incapacity, for a period of six
consecutive months or for shorter periods aggregating six months during any
twelve-month period, then the Company may, at any time after the last day of the
six consecutive months of disability or the last day on which the shorter
periods of disability equal an aggregate of six months, terminate Officer's
employment for disability by written notice to the Officer. Upon termination
for disability, Officer shall promptly be paid all Accrued Compensation to the
date of termination, and disability benefits as provided in Section 4.2. Except
as provided in this Section 2.4, upon termination of employment by disability
the Company shall have no further obligation to the Officer under this
Agreement.
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<PAGE>
2.5 Death. In the event of Officer's death during the term of this
Agreement, Officer's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs. Company shall pay promptly
to his estate all Accrued Compensation to the date of termination, and death
benefits as provided in Section 4.3. Except as provided in this Section 2.5,
upon termination of employment by death the Company shall have no further
obligation to the Officer under this Agreement.
2.6 Voluntary Termination. In the event Officer voluntarily terminates
his employment hereunder and Sections 2.2, 2.3 or 2.7 are not applicable,
Company shall promptly pay all Accrued Compensation to the date of termination,
but shall not be required to pay any other compensation or reimbursement of any
kind, including, without limitation, severance compensation.
2.7 Termination Upon a Change in Control.
(a) In the event of a termination upon a change in control, Officer shall
promptly be paid all Accrued Compensation. "Termination Upon a Change in
Control" shall mean a termination by Officer for Good Reason (as defined below)
of Officer's employment with Company within 12 months following a "Change in
Control" as defined in Section 2.8. For purposes of this Agreement "Good
Reason" shall include, but not be limited to, any of the following (without the
Officer's express written consent):
(i) the assignment to Officer by Company of duties inconsistent with,
or asubstantial alteration in the nature or status of, Officer's
responsibilities immediately prior to a Change in Control other than any
such alteration primarily attributable to the fact that Company's securities
are no longer publicly traded;
(ii) a reduction by Company in the Officer's Base Salary or other
benefits as in effect on the date of a Change in Control;
(iii) the requirement of Officer to be based at any office or other
location maintained by the Company more than 25 miles from the Company's
current office located in Soda Springs, Idaho, or Officer's relocation to
any place other than the said office of Company, except for reasonably
required travel by Officer on Company's business;
(iv) any material breach by Company of any provision of this Agreement,
if such material breach has not been cured within thirty (30) days following
written notice by Officer to Company of such breach setting forth with
specificity the nature of the breach;
(v) any failure by Company to obtain the assumption of this Agreement
by any successor or assign of Company; or
(vi) the failure of the Company to negotiate, or cause its successor to
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negotiate, with Officer in good faith with a view to the execution of a
mutually satisfactory amendment to this Agreement, or for a new agreement
superseding the terms hereof, within 90 days after the date of the Change in
Control. If such amendment or agreement has not been executed and delivered
by the Company and the Officer by the end of such period, Officer may,
within 30 days after the end of such period, terminate his employment for
Good Reason by written notice to the Company.
(b) Notwithstanding anything else in this Agreement, solely in the event
of a Termination Upon a Change in Control pursuant to Section 2.7, the aggregate
of the amount of severance compensation paid to Officer under this Agreement or
otherwise, but exclusive of any payments to Officer by virtue of Officer's
exercise of any options or rights provided to Officer under any stock option
plan maintained by the Company upon a Change in Control, shall not include any
amount that the Company is prohibited from deducting for federal income tax
purposes by virtue of Section 280G of the Internal Revenue Code or any successor
provision.
2.8 Change in Control. A Change in Control of the Company shall be deemed
to have occurred if: (i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities and Exchange Act of 1934 (the "Exchange Act")), other
than the Company or Weiss, Peck & Greer, is or becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 40% or
more of the shares of capital stock of the Company having the right to vote for
the election of directors (calculated as provided in Rule 13d-3(d) under the
Exchange Act in the case of rights to acquire capital stock), whether by means
of a tender offer or exchange offer, open-market purchase, consolidation, merger
or otherwise; (ii) any merger, share exchange, issuance of capital stock, tender
offer or other transaction or series of related transactions shall result in the
Company's stockholders (determined as of the record date fixed for the purpose
of determining stockholders entitled to vote on the transaction or the first of
the series of related transactions, or if no such record is taken, immediately
prior to the consummation of the transaction or the first of the series of
related transactions) holding fewer than 50% of the outstanding shares of
capital stock having the right to vote for the election of directors of the
Company or, if other than the Company, the surviving or resulting corporation,
as the case may be; (iii) the Company sells, leases or exchanges or otherwise
transfers (in one transaction or a series of related transactions) all or
substantially all of the assets of the Company (other than a sale/leaseback or a
similar financing transaction involving the Company's assets); or, (iv) any plan
or proposal for the liquidation or dissolution of the Company is adopted.
For purposes of this Section, Weiss, Peck & Greer shall mean Weiss, Peck &
Greer, a general partnership, or any person directly or indirectly controlling,
controlled by or under common control with Weiss, Peck & Greer, or any
investment fund of which Weiss, Peck & Greer or a partner thereof is the advisor
or a general partner or any investment fund of which Weiss, Peck & Greer or a
partner thereof is a general partner of the advisor to such fund or a general
partner of a general partner of such fund (including, without limitation, WPG
Venture Associates, L.P., WPG Corporate Development Associates, II, L.P., WPG
Corporate Development Associates III, L.P., and WPG Corporate Development
Associates (Overseas), Ltd.).
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3. Compensation.
3.1 Base Salary. The Company agrees to pay the Officer for his services
hereunder a salary at the rate of $250,000.00 per annum ("Base Salary"), payable
in equal semi-monthly installments. The Base Salary for each fiscal year (or
portion thereafter) of the Company shall be as determined by the Board, but
shall in no event be less than the Base Salary payable to Officer in the
previous fiscal year.
3.2 Benefits. The Officer shall be entitled to participate in any of the
Company's benefit and deferred compensation plans as are from time to time
available to the officers of the Company, including profit sharing, medical,
dental, health and annual physical examination plans, life and disability
insurance plans and supplemental retirement programs; provided, however, that
Officer's benefits may be modified or the Officer may be denied participation in
any such plan because of a condition or restriction imposed by law or regulation
or third-party insurer or other provider relating to participation of officers).
4. Severance and Other Payments.
4.1 Severance Compensation.
(a) In the event Officer's employment is terminated under Section 2.3 or
2.7, the parties acknowledge that Officer will sustain actual damages, the
amount of which is indefinite, uncertain and difficult of exact ascertainment
because of the uncertainties of successfully relocating and/or of seeking a
comparable position. In order to avoid dispute as to the amount of such damages
and the mutual expense and inconvenience such dispute would entail, Company and
Officer have agreed to hereby stipulate and agree that Company shall pay to
Officer a severance compensation determined pursuant to this Section 4.1. It is
hereby agreed that in the event of such termination by Company, Officer shall
receive such amounts as herein provided, not as a penalty, but as Officer's
agreed severance compensation and sole damages for the termination of this
Agreement, in lieu of Officer's proof of his actual damages on that account.
All severance compensation shall be without prejudice to Officer's right to
receive all Accrued Compensation (as defined in Section 2.3) earned and unpaid
up to the time of termination.
(b) In the event of a termination pursuant to Section 2.3, the Company
shall pay severance compensation in an amount equal to Officer's Base Salary (at
the rate payable at the time of such termination) in equal semi-monthly
installments over the following twelve months until paid in full.
(c) Except as provided in paragraphs (d) and (e) of this Section 4.1, in
the event of a termination pursuant to Section 2.7, the Company shall pay
severance compensation in an amount equal to the lesser of (a) three times the
sum of (x) Officer's Base Salary (at the rate payable at the time of such
termination), plus (y) the average of the bonuses paid to the Officer for the
two most recent fiscal years of the Company preceding the date of termination,
or (b) the amount
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determined pursuant to Section 2.7(b). Such total amount shall be payable in
equal semi-monthly installments over the following thirty-six months until paid
in full.
(d) In the event of a termination pursuant to Section 2.7(vi) after
December 31, 1996 but prior to January 1, 1998, the Company shall pay severance
compensation in an amount equal to the lesser of (a) two times the sum of (x)
Officer's Base Salary (at the rate payable at the time of such termination),
plus (y) the average of the bonuses paid to the Officer for the two most recent
fiscal years of the Company preceding the date of termination, or (b) the amount
determined pursuant to Section 2.7(b). Such total amount shall be payable in
equal semi-monthly installments over the following twenty-four months until paid
in full.
(e) In the event of a termination pursuant to Section 2.7(vi) after
December 31, 1997, the Company shall pay severance compensation in an amount
equal to the lesser of (a) the sum of (x) Officer's Base Salary (at the rate
payable at the time of such termination), plus (y) the average of the bonuses
paid to the Officer for the two most recent fiscal years of the Company
preceding the date of termination, or (b) the amount determined pursuant to
Section 2.7(b). Such total amount shall be payable in equal semi-monthly
installments over the following twelve months until paid in full.
(f) Following a termination under Section 2.7, Officer may in Officer's
sole discretion, by delivery of a notice to Company within thirty (30) days
following such termination, elect to receive from Company a lump sum severance
payment equal to the present value of the flow of cash payments that would
otherwise be paid to Officer pursuant to Section 4.1(a)(ii) by bank cashier's
check or other payment method acceptable to Officer. Such present value shall
be determined as of the date of delivery of the notice of election of Officer
and shall be based on a discount rate equal to the interest rate of 90-day U.S.
Treasury Bills, as reported in the Wall Street Journal (or similar publication)
on the date of delivery of the election notice. If Officer elects to receive a
lump sum severance payment, Company shall make such payment to Officer within
sixty (60) days following the date on which Officer notifies Company of
Officer's election. The Company shall continue to make payments pursuant to
Section 4.1(a)(ii) from the date of the notice of election by Officer through
the date of payment of the lump-sum amount under this paragraph.
(g) No deduction shall be made by Company under this Section 4.1 for any
compensation earned by Officer from any other employment or for any other monies
otherwise received by Officer subsequent to termination of employment hereunder.
4.2 Disability Benefits. In the event of termination of Officer's
employment by reason of disability pursuant to Section 2.4, Company shall
continue to pay the Officer's Base Salary then in effect for a period of 18
months, and shall continue during such period the Officer's participation in
medical and other benefits programs then maintained for the Company's officers
(or shall provide reasonably equivalent benefits). The Officer will use his
reasonable best efforts to cooperate with any physician engaged by the Company
to determine whether or not a disability exists, and for the determination of
appropriate and necessary rehabilitation procedures and programs. Any payments
provided for in this Section 4.2 shall be offset (but not below zero) by any
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salary continuation payments received by the Officer under any plan, program or
arrangements in which the Officer participated pursuant to Section 3.2.
4.3 Death Benefits. In the event of the Officer's death, Company shall
pay to Officer's estate or designated beneficiary an amount equal to Officer's
Base Salary (at the rate payable at the time of Officer's death) in equal semi-
monthly installments over the following twelve months until paid in full.
5. Protection for Company.
5.1 Confidentiality. The Officer shall not, during his employment by the
Company or at any time thereafter, directly or indirectly use, divulge, furnish
or make accessible to anyone other than the Company, its directors or officers
(otherwise than in the regular course of the business of the Company), any
knowledge or information regarding any confidential or secret ideas, activities,
projects, plans, techniques, methods, reports, customer names or lists,
financial or sales information or other material relating to the business or
activities of the Company. The Officer, upon leaving the employ of the Company,
shall not take with him or retain any books, records, data, reports, letters,
memoranda, notes or other writings or documents whatsoever, or copies thereof,
which reflect or deal with any secret, proprietary or confidential information
or material relating to the business or activities of the Company.
5.2 Non-Interference.
(a) During his employment hereunder and for a period of one year
following termination of Officer's employment under this Agreement for any
reason other than under Section 2.7, Officer shall not directly or indirectly,
unless Company gives its prior written consent (which consent shall not be
unreasonably withheld):
(i) be employed by any Competitor (as herein defined) to hold any
executive office or to perform any function for which during the two years
immediately preceding termination of Officer's employment Officer had direct
or supervisory responsibility;
(ii) consult with, act as agent for, or otherwise assist any Competitor
to compete or prepare to compete with Company in any of Company's then
businesses;
(iii) solicit any customer of Company with which he dealt on behalf of
Company during the last two years of employment to purchase any product or
service which is supplied by Company; or
(iv) solicit or employ any person employed by Company at that time or
within one year prior to termination of Officer's employment by Company.
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(b) For purposes of this Agreement, a "Competitor" means any person or
entity which at relevant times engages or is making plans to engage, in whole or
in part, in the manufacture and/or sale of any products useful for any purpose
also served by products which Company then markets or is then preparing to
market.
(c) Company promises that it will not unreasonably withhold consent to
activity otherwise prohibited by Section 5.2 (a), if Officer provides Company
with such written assurances as Company reasonably requests from the Competitor
and Officer that Company's trade secret rights will not be violated by Officer
in the course of the activities described in Section 5.2(a). Section
5.2(a)(iii) shall not be deemed to apply to customers with which Officer had
dealings before he became employed by Company.
(d) Officer acknowledges that Company competes on a national basis and
that placing geographical limits on the restrictive covenants would
substantially impair protection of Company's legitimate interests in protecting
its trade secrets.
5.3 Remedies. Officer acknowledges that Company would be greatly injured
by, and have no adequate remedy at law for, breach of Article 5 duties. Officer
therefore consents that if such breach occurs or is threatened, whether before
or after termination of his employment by Company, Company may, as appropriate
and in addition to all other then available remedies, enjoin him (together with
all persons acting in concert with him) from such breach or threatened breach.
If Company prevails in such litigation, Company shall also be entitled to
collect from Officer the court costs, attorneys' and experts' fees and other
expenses of enforcing such Agreement rights.
6. Miscellaneous.
6.1 Severability. Should a court or other body of competent jurisdiction
determine that any provision of this Agreement is excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted rather than
voided, if possible, so that it is enforceable to the maximum extent possible,
and all other provisions of the Agreement shall be deemed valid and enforceable
to the extent possible.
6.2 Withholdings. All compensation and benefits to Officer hereunder
shall be reduced by all federal, state, local and other withholdings and similar
taxes and payments required by applicable law.
6.3 Arbitration. Except as provided in Section 5.3, the parties hereby
submit all controversies, claims and matters of difference in any way related to
this Agreement or the performance or breach of the whole or any part hereof to
arbitration in Denver, Colorado, according to the rules and practices of the
American Arbitration Association from time to time in force. If such rules and
practices shall conflict with the Colorado Rules of Civil Procedure or any other
provisions of Colorado law then in force, such Colorado rules and provisions
shall govern. Arbitration of any such controversy, claim or matter of
difference shall be a condition precedent to any legal action
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thereon. This submission and agreement to arbitration shall be specifically
enforceable.
Awards shall be final and binding on all parties to the extent and in the
manner provided by Colorado law. All awards may be filed by any party with the
Clerk of the District Court in the City and County of Denver, Colorado, and an
appropriate judgment entered thereon and execution issued therefor. At the
election of any party, said award may also be filed, and judgment entered
thereon and execution issued therefor, with the clerk of one or more other
courts, state or federal, having jurisdiction over the party against whom such
an award is rendered or its property.
6.4 Entire Agreement; Modifications. This Agreement represents the
entire agreement between the parties and may be amended, modified, superseded,
or canceled, and any of the terms hereof may be waived, only by a written
instrument executed by each party hereto or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provisions hereof shall not affect the right at a
latter time to enforce the same. No waiver by any party of the breach of any
provision contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such breach or of any other term of this Agreement.
6.5 Applicable Law. This Agreement shall be construed under and governed
by the laws of the State of Colorado.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
NU-WEST INDUSTRIES, INC.
By:________________________________________
Sr. Vice President and Chief Financial
Officer
OFFICER:
-------------------------------------------
Craig D. Harlen
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EXHIBIT 10(h)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 1st day of December,
1994, between Nu-West Industries, Inc., a Delaware corporation (the "Company"),
and Mark R. Sanders (the "Officer"). This Agreement amends, restates and
supersedes in its entirety that certain Employment Agreement between Company and
Officer dated September 1, 1989.
RECITAL
-------
Officer has accepted the appointment by the Company's Board of Directors
(the "Board") as the Company's Senior Vice President & Chief Financial Officer,
and the Company and the Officer desire to set forth herein the terms and
conditions of his employment.
AGREEMENT
---------
The parties hereto agree as follows:
1. Agreement to Serve.
1.1 Title. The Company shall employ Officer and Officer shall
serve in the employ of the Company as its Senior Vice President & Chief
Financial Officer and in such other executive offices as the Board and the
Officer shall determine during the term of Officer's employment hereunder.
1.2 Duties. The Officer shall assume and discharge the
responsibilities of Senior Vice President & Chief Financial Officer (as set
forth in the Bylaws of the Company), as well as such other responsibilities as
may be assigned to him by the President and Chief Executive Officer
("President") or the Board, upon the terms and conditions contained herein. The
Officer shall perform his responsibilities to the best of his abilities and
shall devote his full-time working hours and attention to the good faith best
efforts performance of his responsibilities. The Officer will engage in no other
business or activity for compensation during the term of this Agreement except
with the prior written consent of the Company, or otherwise engage in activities
which would interfere significantly with his faithful performance of his duties
hereunder. The Officer also agrees to serve, if elected, at no compensation in
addition to that provided for in this Agreement, in the position of officer or
director of any subsidiary of the Company; provided, however, that such position
shall be of no less status relative to such subsidiary as the position that the
Officer holds with the Company. The Officer shall always be subject to the
directions of the President in the performance of his responsibilities, and
nothing herein shall affect the power of the President to limit, alter,
restrict, or remove the authority of the Officer. Officer's principal place of
business with respect to his services to Company shall be at its offices located
in Soda Springs, Idaho or such other location acceptable to Officer.
2. Terms of Employment.
<PAGE>
2.1 Basic Term. The term of the Officer's employment under this
Agreement shall be for twelve months commencing December 1, 1994, unless
terminated earlier pursuant to this Section 2. This Agreement will be
automatically renewed for successive twelve-month periods unless Officer or the
Company provides notice to the other on or before the 90th day prior to the
anniversary date of this Agreement of the intention not to renew this Agreement;
and the same terms and conditions contained herein (including compensation
determined under Section 3) shall remain in effect during such continuance of
employment. If the Company provides such notice of non-renewal to the Officer,
the resulting termination of this Agreement shall be considered a termination
without cause under Section 2.3.
2.2 Termination for Cause. The Company shall have the right to
terminate the Officer for cause and said termination shall be effected by
written notification to Officer. Grounds for termination for cause shall
include, without limitation, (i) the Officer's breach of any terms of this
Agreement; (ii) the Officer's willful dishonesty towards, fraud upon, crime
against, deliberate injury or bad faith action with respect to, or deliberate or
attempted injury to Company; or (iii) Officer's conviction of any felony crime
(whether in connection with the Company's affairs or otherwise).
2.3 Termination Without Cause. The Company shall have the right,
upon 30 days written notification to the Officer to terminate the Officer's
employment without cause. Any termination not covered by Sections 2.2, 2.4, 2.5,
2.6 or 2.7 shall be deemed a termination without cause. Upon any termination
without cause, Officer shall promptly be paid all accrued salary, bonus
compensation to the extent earned, vested deferred compensation (other than
pension plan or profit sharing plan benefits, which will be paid in accordance
with the applicable plan), any benefits then due under any plans of Company in
which Officer is a participant, accrued vacation pay and any appropriate
business expenses incurred by Officer in connection with his duties hereunder,
all to date of termination ("Accrued Compensation"), and all severance
compensation provided for in Section 4.1.
2.4 Disability. If, during the term of this Agreement, Officer
shall fail to render the services provided for by this Agreement because of
illness, physical or mental disability or other incapacity, for a period of six
consecutive months or for shorter periods aggregating six months during any
twelve-month period, then the Company may, at any time after the last day of the
six consecutive months of disability or the last day on which the shorter
periods of disability equal an aggregate of six months, terminate Officer's
employment for disability by written notice to the Officer. Upon termination for
disability, Officer shall promptly be paid all Accrued Compensation to the date
of termination, and disability benefits as provided in Section 4.2. Except as
provided in this Section 2.4, upon termination of employment by disability the
Company shall have no further obligation to the Officer under this Agreement.
2.5 Death. In the event of Officer's death during the term of this
Agreement, Officer's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs. Company shall pay promptly
to his estate all Accrued Compensation to the date of termination, and death
benefits as provided in Section 4.3. Except as provided in this Section 2.5,
upon termination of employment by death the Company shall have no further
obligation to the
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Officer under this Agreement.
2.6 Voluntary Termination. In the event Officer voluntarily
terminates his employment hereunder and Sections 2.2, 2.3 or 2.7 are not
applicable, Company shall promptly pay all Accrued Compensation to the date of
termination, but shall not be required to pay any other compensation or
reimbursement of any kind, including, without limitation, severance
compensation.
2.7 Termination Upon a Change in Control.
(a) In the event of a termination upon a change in control,
Officer shall promptly be paid all Accrued Compensation. "Termination Upon a
Change in Control" shall mean a termination by Officer for Good Reason (as
defined below) of Officer's employment with Company within 12 months following a
"Change in Control" as defined in Section 2.8. For purposes of this Agreement
"Good Reason" shall include, but not be limited to, any of the following
(without the Officer's express written consent):
(i) the assignment to Officer by Company of duties
inconsistent with, or a substantial alteration in the nature or status
of, Officer's responsibilities immediately prior to a Change in
Control other than any such alteration primarily attributable to the
fact that Company's securities are no longer publicly traded;
(ii) a reduction by Company in the Officer's Base Salary or
other benefits as in effect on the date of a Change in Control;
(iii) the requirement of Officer to be based at any office or
other location maintained by the Company more than 25 miles from the
Company's current office located in Soda Springs, Idaho, or Officer's
relocation to any place other than the said office of Company, except
for reasonably required travel by Officer on Company's business;
(iv) any material breach by Company of any provision of this
Agreement, if such material breach has not been cured within thirty
(30) days following written notice by Officer to Company of such
breach setting forth with specificity the nature of the breach;
(v) any failure by Company to obtain the assumption of this
Agreement by any successor or assign of Company; or
(vi) the failure of the Company to negotiate, or cause its
successor to negotiate, with Officer in good faith with a view to the
execution of a mutually satisfactory amendment to this Agreement, or
for a new agreement superseding the terms hereof, within 90 days after
the date of the Change in Control. If such amendment or agreement has
not been executed and delivered by the Company and the Officer by the
end of such period, Officer may, within 30 days after the end of
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such period, terminate his employment for Good Reason by written
notice to the Company.
(b) Notwithstanding anything else in this Agreement, solely in
the event of a Termination Upon a Change in Control pursuant to Section 2.7, the
aggregate of the amount of severance compensation paid to Officer under this
Agreement or otherwise, but exclusive of any payments to Officer by virtue of
Officer's exercise of any options or rights provided to Officer under any stock
option plan maintained by the Company upon a Change in Control, shall not
include any amount that the Company is prohibited from deducting for federal
income tax purposes by virtue of Section 280G of the Internal Revenue Code or
any successor provision.
2.8 Change in Control. A Change in Control of the Company shall be
deemed to have occurred if: (i) any person (as such term is used in Sections
13(d) and 14(d)(2) of the Securities and Exchange Act of 1934 (the "Exchange
Act")), other than the Company or Weiss, Peck & Greer, is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 40% or more of the shares of capital stock of the Company having
the right to vote for the election of directors (calculated as provided in Rule
13d-3(d) under the Exchange Act in the case of rights to acquire capital stock),
whether by means of a tender offer or exchange offer, open-market purchase,
consolidation, merger or otherwise; (ii) any merger, share exchange, issuance of
capital stock, tender offer or other transaction or series of related
transactions shall result in the Company's stockholders (determined as of the
record date fixed for the purpose of determining stockholders entitled to vote
on the transaction or the first of the series of related transactions, or if no
such record is taken, immediately prior to the consummation of the transaction
or the first of the series of related transactions) holding fewer than 50% of
the outstanding shares of capital stock having the right to vote for the
election of directors of the Company or, if other than the Company, the
surviving or resulting corporation, as the case may be; (iii) the Company sells,
leases or exchanges or otherwise transfers (in one transaction or a series of
related transactions) all or substantially all of the assets of the Company
(other than a sale/leaseback or a similar financing transaction involving the
Company's assets); or, (iv) any plan or proposal for the liquidation or
dissolution of the Company is adopted.
For purposes of this Section, Weiss, Peck & Greer shall mean Weiss, Peck &
Greer, a general partnership, or any person directly or indirectly controlling,
controlled by or under common control with Weiss, Peck & Greer, or any
investment fund of which Weiss, Peck & Greer or a partner thereof is the advisor
or a general partner or any investment fund of which Weiss, Peck & Greer or a
partner thereof is a general partner of the advisor to such fund or a general
partner of a general partner of such fund (including, without limitation,
WPG Venture Associates, L.P., WPG Corporate Development Associates, II, L.P.,
WPG Corporate Development Associates III, L.P., and WPG Corporate Development
Associates (Overseas), Ltd.).
3. Compensation.
3.1 Base Salary. The Company agrees to pay the Officer for his
services
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hereunder a salary at the rate of $160,000.00 per annum ("Base Salary"), payable
in equal semi-monthly installments. The Base Salary for each fiscal year (or
portion thereafter) of the Company shall be as determined by the Board, but
shall in no event be less than the Base Salary payable to Officer in the
previous fiscal year.
3.2 Benefits. The Officer shall be entitled to participate in any
of the Company's benefit and deferred compensation plans as are from time to
time available to the officers of the Company, including profit sharing,
medical, dental, health and annual physical examination plans, life and
disability insurance plans and supplemental retirement programs; provided,
however, that Officer's benefits may be modified or the Officer may be denied
participation in any such plan because of a condition or restriction imposed by
law or regulation or third-party insurer or other provider relating to
participation of officers).
4. Severance and Other Payments.
4.1 Severance Compensation.
(a) In the event Officer's employment is terminated under Section
2.3 or 2.7, the parties acknowledge that Officer will sustain actual damages,
the amount of which is indefinite, uncertain and difficult of exact
ascertainment because of the uncertainties of successfully relocating and/or of
seeking a comparable position. In order to avoid dispute as to the amount of
such damages and the mutual expense and inconvenience such dispute would entail,
Company and Officer have agreed to hereby stipulate and agree that Company shall
pay to Officer a severance compensation determined pursuant to this Section 4.1.
It is hereby agreed that in the event of such termination by Company, Officer
shall receive such amounts as herein provided, not as a penalty, but as
Officer's agreed severance compensation and sole damages for the termination of
this Agreement, in lieu of Officer's proof of his actual damages on that
account. All severance compensation shall be without prejudice to Officer's
right to receive all Accrued Compensation (as defined in Section 2.3) earned and
unpaid up to the time of termination.
(b) In the event of a termination pursuant to Section 2.3, the
Company shall pay severance compensation in an amount equal to Officer's Base
Salary (at the rate payable at the time of such termination) in equal semi-
monthly installments over the following twelve months until paid in full.
(c) Except as provided in paragraphs (d) and (e) of this Section
4.1, in the event of a termination pursuant to Section 2.7, the Company shall
pay severance compensation in an amount equal to the lesser of (a) three times
the sum of (x) Officer's Base Salary (at the rate payable at the time of such
termination), plus (y) the average of the bonuses paid to the Officer for the
two most recent fiscal years of the Company preceding the date of termination,
or (b) the amount determined pursuant to Section 2.7(b). Such total amount shall
be payable in equal semi-monthly installments over the following thirty-six
months until paid in full.
(d) In the event of a termination pursuant to Section 2.7(vi)
after
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December 31, 1996 but prior to January 1, 1998, the Company shall pay severance
compensation in an amount equal to the lesser of (a) two times the sum of (x)
Officer's Base Salary (at the rate payable at the time of such termination),
plus (y) the average of the bonuses paid to the Officer for the two most recent
fiscal years of the Company preceding the date of termination, or (b) the amount
determined pursuant to Section 2.7(b). Such total amount shall be payable in
equal semi-monthly installments over the following twenty-four months until paid
in full.
(e) In the event of a termination pursuant to Section 2.7(vi)
after December 31, 1997, the Company shall pay severance compensation in an
amount equal to the lesser of (a) the sum of (x) Officer's Base Salary (at the
rate payable at the time of such termination), plus (y) the average of the
bonuses paid to the Officer for the two most recent fiscal years of the Company
preceding the date of termination, or (b) the amount determined pursuant to
Section 2.7(b). Such total amount shall be payable in equal semi-monthly
installments over the following twelve months until paid in full.
(f) Following a termination under Section 2.7, Officer may in
Officer's sole discretion, by delivery of a notice to Company within thirty (30)
days following such termination, elect to receive from Company a lump sum
severance payment equal to the present value of the flow of cash payments that
would otherwise be paid to Officer pursuant to Section 4.1(a)(ii) by bank
cashier's check or other payment method acceptable to Officer. Such present
value shall be determined as of the date of delivery of the notice of election
of Officer and shall be based on a discount rate equal to the interest rate of
90-day U.S. Treasury Bills, as reported in the Wall Street Journal (or similar
publication) on the date of delivery of the election notice. If Officer elects
to receive a lump sum severance payment, Company shall make such payment to
Officer within sixty (60) days following the date on which Officer notifies
Company of Officer's election. The Company shall continue to make payments
pursuant to Section 4.1(a)(ii) from the date of the notice of election by
Officer through the date of payment of the lump-sum amount under this paragraph.
(g) No deduction shall be made by Company under this Section 4.1
for any compensation earned by Officer from any other employment or for any
other monies otherwise received by Officer subsequent to termination of
employment hereunder.
4.2 Disability Benefits. In the event of termination of Officer's
employment by reason of disability pursuant to Section 2.4, Company shall
continue to pay the Officer's Base Salary then in effect for a period of 18
months, and shall continue during such period the Officer's participation in
medical and other benefits programs then maintained for the Company's officers
(or shall provide reasonably equivalent benefits). The Officer will use his
reasonable best efforts to cooperate with any physician engaged by the Company
to determine whether or not a disability exists, and for the determination of
appropriate and necessary rehabilitation procedures and programs. Any payments
provided for in this Section 4.2 shall be offset (but not below zero) by any
salary continuation payments received by the Officer under any plan, program or
arrangements in which the Officer participated pursuant to Section 3.2.
4.3 Death Benefits. In the event of the Officer's death, Company
shall pay to
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Officer's estate or designated beneficiary an amount equal to Officer's Base
Salary (at the rate payable at the time of Officer's death) in equal semi-
monthly installments over the following twelve months until paid in full.
5. Protection for Company.
5.1 Confidentiality. The Officer shall not, during his employment
by the Company or at any time thereafter, directly or indirectly use, divulge,
furnish or make accessible to anyone other than the Company, its directors or
officers (otherwise than in the regular course of the business of the Company),
any knowledge or information regarding any confidential or secret ideas,
activities, projects, plans, techniques, methods, reports, customer names or
lists, financial or sales information or other material relating to the business
or activities of the Company. The Officer, upon leaving the employ of the
Company, shall not take with him or retain any books, records, data, reports,
letters, memoranda, notes or other writings or documents whatsoever, or copies
thereof, which reflect or deal with any secret, proprietary or confidential
information or material relating to the business or activities of the Company.
5.2 Non-Interference.
(a) During his employment hereunder and for a period of one year
following termination of Officer's employment under this Agreement for any
reason other than under Section 2.7, Officer shall not directly or indirectly,
unless Company gives its prior written consent (which consent shall not be
unreasonably withheld):
(i) be employed by any Competitor (as herein defined) to hold
any executive office or to perform any function for which during the
two years immediately preceding termination of Officer's employment
Officer had direct or supervisory responsibility;
(ii) consult with, act as agent for, or otherwise assist any
Competitor to compete or prepare to compete with Company in any of
Company's then businesses;
(iii) solicit any customer of Company with which he dealt on
behalf of Company during the last two years of employment to purchase
any product or service which is supplied by Company; or
(iv) solicit or employ any person employed by Company at that
time or within one year prior to termination of Officer's employment
by Company.
(b) For purposes of this Agreement, a "Competitor" means any
person or entity which at relevant times engages or is making plans to engage,
in whole or in part, in the manufacture and/or sale of any products useful for
any purpose also served by products which
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Company then markets or is then preparing to market.
(c) Company promises that it will not unreasonably withhold
consent to activity otherwise prohibited by Section 5.2 (a), if Officer provides
Company with such written assurances as Company reasonably requests from the
Competitor and Officer that Company's trade secret rights will not be violated
by Officer in the course of the activities described in Section 5.2(a). Section
5.2(a)(iii) shall not be deemed to apply to customers with which Officer had
dealings before he became employed by Company.
(d) Officer acknowledges that Company competes on a national
basis and that placing geographical limits on the restrictive covenants would
substantially impair protection of Company's legitimate interests in protecting
its trade secrets.
5.3 Remedies. Officer acknowledges that Company would be greatly
injured by, and have no adequate remedy at law for, breach of Article 5 duties.
Officer therefore consents that if such breach occurs or is threatened, whether
before or after termination of his employment by Company, Company may, as
appropriate and in addition to all other then available remedies, enjoin him
(together with all persons acting in concert with him) from such breach or
threatened breach. If Company prevails in such litigation, Company shall also be
entitled to collect from Officer the court costs, attorneys' and experts' fees
and other expenses of enforcing such Agreement rights.
6. Miscellaneous.
6.1 Severability. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, so that it is enforceable to the maximum extent
possible, and all other provisions of the Agreement shall be deemed valid and
enforceable to the extent possible.
6.2 Withholdings. All compensation and benefits to Officer
hereunder shall be reduced by all federal, state, local and other withholdings
and similar taxes and payments required by applicable law.
6.3 Arbitration. Except as provided in Section 5.3, the parties hereby
submit all controversies, claims and matters of difference in any way related to
this Agreement or the performance or breach of the whole or any part hereof to
arbitration in Denver, Colorado, according to the rules and practices of the
American Arbitration Association from time to time in force. If such rules and
practices shall conflict with the Colorado Rules of Civil Procedure or any other
provisions of Colorado law then in force, such Colorado rules and provisions
shall govern. Arbitration of any such controversy, claim or matter of difference
shall be a condition precedent to any legal action thereon. This submission and
agreement to arbitration shall be specifically enforceable.
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Awards shall be final and binding on all parties to the extent and in
the manner provided by Colorado law. All awards may be filed by any party with
the Clerk of the District Court in the City and County of Denver, Colorado, and
an appropriate judgment entered thereon and execution issued therefor. At the
election of any party, said award may also be filed, and judgment entered
thereon and execution issued therefor, with the clerk of one or more other
courts, state or federal, having jurisdiction over the party against whom such
an award is rendered or its property.
6.4 Entire Agreement; Modifications. This Agreement represents
the entire agreement between the parties and may be amended, modified,
superseded, or canceled, and any of the terms hereof may be waived, only by a
written instrument executed by each party hereto or, in the case of a waiver, by
the party waiving compliance. The failure of any party at any time or times to
require performance of any provisions hereof shall not affect the right at a
latter time to enforce the same. No waiver by any party of the breach of any
provision contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such breach or of any other term of this Agreement.
6.5 Applicable Law. This Agreement shall be construed under and
governed by the laws of the State of Colorado.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
NU-WEST INDUSTRIES, INC.
By:_____________________________________
President and Chief Executive Officer
OFFICER:
----------------------------------------
Mark R. Sanders
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EXHIBIT 10(i)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 1st day of December,
1994, between Nu-West Industries, Inc., a Delaware corporation (the "Company"),
and Steven W. Gampp (the "Officer"). This Agreement amends, restates and
supersedes in its entirety that certain Employment Agreement between Company and
Officer dated September 1, 1989.
RECITAL
-------
Officer has accepted the appointment by the Company's Board of Directors
(the "Board") as the Company's Vice President, Secretary & Treasurer, and the
Company and the Officer desire to set forth herein the terms and conditions of
his employment.
AGREEMENT
---------
The parties hereto agree as follows:
1. Agreement to Serve.
1.1 Title. The Company shall employ Officer and Officer shall serve in
the employ of the Company as its Vice President, Secretary & Treasurer, and in
such other executive offices as the Board and the Officer shall determine during
the term of Officer's employment hereunder.
1.2 Duties. The Officer shall assume and discharge the
responsibilities of Vice President, Secretary & Treasurer (as set forth in the
Bylaws of the Company), as well as such other responsibilities as may be
assigned to him by the President and Chief Executive Officer ("President") or
the Board, upon the terms and conditions contained herein. The Officer shall
perform his responsibilities to the best of his abilities and shall devote his
full-time working hours and attention to the good faith best efforts performance
of his responsibilities. The Officer will engage in no other business or
activity for compensation during the term of this Agreement except with the
prior written consent of the Company, or otherwise engage in activities which
would interfere significantly with his faithful performance of his duties
hereunder. The Officer also agrees to serve, if elected, at no compensation in
addition to that provided for in this Agreement, in the position of officer or
director of any subsidiary of the Company; provided, however, that such position
shall be of no less status relative to such subsidiary as the position that the
Officer holds with the Company. The Officer shall always be subject to the
directions of the President in the performance of his responsibilities, and
nothing herein shall affect the power of the President to limit, alter,
restrict, or remove the authority of the Officer. Officer's principal place of
business with respect to his services to Company shall be at its offices located
in Englewood, Colorado or such other location acceptable to Officer.
2. Terms of Employment.
<PAGE>
2.1 Basic Term. The term of the Officer's employment under this
Agreement shall be for twelve months commencing December 1, 1994, unless
terminated earlier pursuant to this Section 2. This Agreement will be
automatically renewed for successive twelve-month periods unless Officer or the
Company provides notice to the other on or before the 90th day prior to the
anniversary date of this Agreement of the intention not to renew this Agreement;
and the same terms and conditions contained herein (including compensation
determined under Section 3) shall remain in effect during such continuance of
employment. If the Company provides such notice of non-renewal to the Officer,
the resulting termination of this Agreement shall be considered a termination
without cause under Section 2.3.
2.2 Termination for Cause. The Company shall have the right to
terminate the Officer for cause and said termination shall be effected by
written notification to Officer. Grounds for termination for cause shall
include, without limitation, (i) the Officer's breach of any terms of this
Agreement; (ii) the Officer's willful dishonesty towards, fraud upon, crime
against, deliberate injury or bad faith action with respect to, or deliberate or
attempted injury to Company; or (iii) Officer's conviction of any felony crime
(whether in connection with the Company's affairs or otherwise).
2.3 Termination Without Cause. The Company shall have the right, upon
30 days written notification to the Officer to terminate the Officer's
employment without cause. Any termination not covered by Sections 2.2, 2.4, 2.5,
2.6 or 2.7 shall be deemed a termination without cause. Upon any termination
without cause, Officer shall promptly be paid all accrued salary, bonus
compensation to the extent earned, vested deferred compensation (other than
pension plan or profit sharing plan benefits, which will be paid in accordance
with the applicable plan), any benefits then due under any plans of Company in
which Officer is a participant, accrued vacation pay and any appropriate
business expenses incurred by Officer in connection with his duties hereunder,
all to date of termination ("Accrued Compensation"), and all severance
compensation provided for in Section 4.1.
2.4 Disability. If, during the term of this Agreement, Officer shall
fail to render the services provided for by this Agreement because of illness,
physical or mental disability or other incapacity, for a period of six
consecutive months or for shorter periods aggregating six months during any
twelve-month period, then the Company may, at any time after the last day of the
six consecutive months of disability or the last day on which the shorter
periods of disability equal an aggregate of six months, terminate Officer's
employment for disability by written notice to the Officer. Upon termination for
disability, Officer shall promptly be paid all Accrued Compensation to the date
of termination, and disability benefits as provided in Section 4.2. Except as
provided in this Section 2.4, upon termination of employment by disability the
Company shall have no further obligation to the Officer under this Agreement.
2.5 Death. In the event of Officer's death during the term of this
Agreement, Officer's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs. Company shall pay promptly
to his estate all Accrued Compensation to the date of termination, and death
benefits as provided in Section 4.3. Except as provided in this Section 2.5,
upon termination of employment by death the Company shall have no further
obligation to the
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Officer under this Agreement.
2.6 Voluntary Termination. In the event Officer voluntarily terminates
his employment hereunder and Sections 2.2, 2.3 or 2.7 are not applicable,
Company shall promptly pay all Accrued Compensation to the date of termination,
but shall not be required to pay any other compensation or reimbursement of any
kind, including, without limitation, severance compensation.
2.7 Termination Upon a Change in Control.
(a) In the event of a termination upon a change in control,
Officer shall promptly be paid all Accrued Compensation. "Termination Upon a
Change in Control" shall mean a termination by Officer for Good Reason (as
defined below) of Officer's employment with Company within 12 months following a
"Change in Control" as defined in Section 2.8. For purposes of this Agreement
"Good Reason" shall include, but not be limited to, any of the following
(without the Officer's express written consent):
(i) the assignment to Officer by Company of duties
inconsistent with, or a substantial alteration in the nature or status
of, Officer's responsibilities immediately prior to a Change in
Control other than any such alteration primarily attributable to the
fact that Company's securities are no longer publicly traded;
(ii) a reduction by Company in the Officer's Base Salary or
other benefits as in effect on the date of a Change in Control;
(iii) the requirement of Officer to be based at any office
or other location maintained by the Company more than 25 miles from
the Company's current office located in Englewood, Colorado, or
Officer's relocation to any place other than the said office of
Company, except for reasonably required travel by Officer on Company's
business;
(iv) any material breach by Company of any provision of this
Agreement, if such material breach has not been cured within thirty
(30) days following written notice by Officer to Company of such
breach setting forth with specificity the nature of the breach;
(v) any failure by Company to obtain the assumption of this
Agreement by any successor or assign of Company; or
(vi) the failure of the Company to negotiate, or cause its
successor to negotiate, with Officer in good faith with a view to the
execution of a mutually satisfactory amendment to this Agreement, or
for a new agreement superseding the terms hereof, within 90 days after
the date of the Change in Control. If such amendment or agreement has
not been executed and delivered by the Company and the Officer by the
end of such period, Officer may, within 30 days after the end of
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such period, terminate his employment for Good Reason by written
notice to the Company.
(b) Notwithstanding anything else in this Agreement, solely in
the event of a Termination Upon a Change in Control pursuant to Section 2.7, the
aggregate of the amount of severance compensation paid to Officer under this
Agreement or otherwise, but exclusive of any payments to Officer by virtue of
Officer's exercise of any options or rights provided to Officer under any stock
option plan maintained by the Company upon a Change in Control, shall not
include any amount that the Company is prohibited from deducting for federal
income tax purposes by virtue of Section 280G of the Internal Revenue Code or
any successor provision.
2.8 Change in Control. A Change in Control of the Company shall be
deemed to have occurred if: (i) any person (as such term is used in Sections
13(d) and 14(d)(2) of the Securities and Exchange Act of 1934 (the "Exchange
Act")), other than the Company or Weiss, Peck & Greer, is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 40% or more of the shares of capital stock of the Company having
the right to vote for the election of directors (calculated as provided in Rule
13d-3(d) under the Exchange Act in the case of rights to acquire capital stock),
whether by means of a tender offer or exchange offer, open-market purchase,
consolidation, merger or otherwise; (ii) any merger, share exchange, issuance of
capital stock, tender offer or other transaction or series of related
transactions shall result in the Company's stockholders (determined as of the
record date fixed for the purpose of determining stockholders entitled to vote
on the transaction or the first of the series of related transactions, or if no
such record is taken, immediately prior to the consummation of the transaction
or the first of the series of related transactions) holding fewer than 50% of
the outstanding shares of capital stock having the right to vote for the
election of directors of the Company or, if other than the Company, the
surviving or resulting corporation, as the case may be; (iii) the Company sells,
leases or exchanges or otherwise transfers (in one transaction or a series of
related transactions) all or substantially all of the assets of the Company
(other than a sale/leaseback or a similar financing transaction involving the
Company's assets); or, (iv) any plan or proposal for the liquidation or
dissolution of the Company is adopted.
For purposes of this Section, Weiss, Peck & Greer shall mean Weiss, Peck &
Greer, a general partnership, or any person directly or indirectly controlling,
controlled by or under common control with Weiss, Peck & Greer, or any
investment fund of which Weiss, Peck & Greer or a partner thereof is the advisor
or a general partner or any investment fund of which Weiss, Peck & Greer or a
partner thereof is a general partner of the advisor to such fund or a general
partner of a general partner of such fund (including, without limitation,
WPG Venture Associates, L.P., WPG Corporate Development Associates, II, L.P.,
WPG Corporate Development Associates III, L.P., and WPG Corporate Development
Associates (Overseas), Ltd.).
3. Compensation.
3.1 Base Salary. The Company agrees to pay the Officer for his
services
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hereunder a salary at the rate of $143,000.00 per annum ("Base Salary"), payable
in equal semi-monthly installments. The Base Salary for each fiscal year (or
portion thereafter) of the Company shall be as determined by the Board, but
shall in no event be less than the Base Salary payable to Officer in the
previous fiscal year.
3.2 Benefits. The Officer shall be entitled to participate in any of
the Company's benefit and deferred compensation plans as are from time to time
available to the officers of the Company, including profit sharing, medical,
dental, health and annual physical examination plans, life and disability
insurance plans and supplemental retirement programs; provided, however, that
Officer's benefits may be modified or the Officer may be denied participation in
any such plan because of a condition or restriction imposed by law or regulation
or third-party insurer or other provider relating to participation of officers).
4. Severance and Other Payments.
4.1 Severance Compensation.
(a) In the event Officer's employment is terminated under Section
2.3 or 2.7, the parties acknowledge that Officer will sustain actual damages,
the amount of which is indefinite, uncertain and difficult of exact
ascertainment because of the uncertainties of successfully relocating and/or of
seeking a comparable position. In order to avoid dispute as to the amount of
such damages and the mutual expense and inconvenience such dispute would entail,
Company and Officer have agreed to hereby stipulate and agree that Company shall
pay to Officer a severance compensation determined pursuant to this Section 4.1.
It is hereby agreed that in the event of such termination by Company, Officer
shall receive such amounts as herein provided, not as a penalty, but as
Officer's agreed severance compensation and sole damages for the termination of
this Agreement, in lieu of Officer's proof of his actual damages on that
account. All severance compensation shall be without prejudice to Officer's
right to receive all Accrued Compensation (as defined in Section 2.3) earned and
unpaid up to the time of termination.
(b) In the event of a termination pursuant to Section 2.3, the
Company shall pay severance compensation in an amount equal to Officer's Base
Salary (at the rate payable at the time of such termination) in equal semi-
monthly installments over the following twelve months until paid in full.
(c) Except as provided in paragraphs (d) and (e) of this Section
4.1, in the event of a termination pursuant to Section 2.7, the Company shall
pay severance compensation in an amount equal to the lesser of (a) three times
the sum of (x) Officer's Base Salary (at the rate payable at the time of such
termination), plus (y) the average of the bonuses paid to the Officer for the
two most recent fiscal years of the Company preceding the date of termination,
or (b) the amount determined pursuant to Section 2.7(b). Such total amount shall
be payable in equal semi-monthly installments over the following thirty-six
months until paid in full.
(d) In the event of a termination pursuant to Section 2.7(vi)
after
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December 31, 1996 but prior to January 1, 1998, the Company shall pay severance
compensation in an amount equal to the lesser of (a) two times the sum of (x)
Officer's Base Salary (at the rate payable at the time of such termination),
plus (y) the average of the bonuses paid to the Officer for the two most recent
fiscal years of the Company preceding the date of termination, or (b) the amount
determined pursuant to Section 2.7(b). Such total amount shall be payable in
equal semi-monthly installments over the following twenty-four months until paid
in full.
(e) In the event of a termination pursuant to Section 2.7(vi)
after December 31, 1997, the Company shall pay severance compensation in an
amount equal to the lesser of (a) the sum of (x) Officer's Base Salary (at the
rate payable at the time of such termination), plus (y) the average of the
bonuses paid to the Officer for the two most recent fiscal years of the Company
preceding the date of termination, or (b) the amount determined pursuant to
Section 2.7(b). Such total amount shall be payable in equal semi-monthly
installments over the following twelve months until paid in full.
(f) Following a termination under Section 2.7, Officer may in
Officer's sole discretion, by delivery of a notice to Company within thirty (30)
days following such termination, elect to receive from Company a lump sum
severance payment equal to the present value of the flow of cash payments that
would otherwise be paid to Officer pursuant to Section 4.1(a)(ii) by bank
cashier's check or other payment method acceptable to Officer. Such present
value shall be determined as of the date of delivery of the notice of election
of Officer and shall be based on a discount rate equal to the interest rate of
90-day U.S. Treasury Bills, as reported in the Wall Street Journal (or similar
publication) on the date of delivery of the election notice. If Officer elects
to receive a lump sum severance payment, Company shall make such payment to
Officer within sixty (60) days following the date on which Officer notifies
Company of Officer's election. The Company shall continue to make payments
pursuant to Section 4.1(a)(ii) from the date of the notice of election by
Officer through the date of payment of the lump-sum amount under this paragraph.
(g) No deduction shall be made by Company under this Section 4.1
for any compensation earned by Officer from any other employment or for any
other monies otherwise received by Officer subsequent to termination of
employment hereunder.
4.2 Disability Benefits. In the event of termination of Officer's
employment by reason of disability pursuant to Section 2.4, Company shall
continue to pay the Officer's Base Salary then in effect for a period of 18
months, and shall continue during such period the Officer's participation in
medical and other benefits programs then maintained for the Company's officers
(or shall provide reasonably equivalent benefits). The Officer will use his
reasonable best efforts to cooperate with any physician engaged by the Company
to determine whether or not a disability exists, and for the determination of
appropriate and necessary rehabilitation procedures and programs. Any payments
provided for in this Section 4.2 shall be offset (but not below zero) by any
salary continuation payments received by the Officer under any plan, program or
arrangements in which the Officer participated pursuant to Section 3.2.
4.3 Death Benefits. In the event of the Officer's death, Company shall
pay to Officer's estate or designated beneficiary an amount equal to Officer's
Base Salary (at the rate payable at the time of Officer's death) in equal semi-
monthly installments over the following twelve
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months until paid in full.
5. Protection for Company.
5.1 Confidentiality. The Officer shall not, during his employment by
the Company or at any time thereafter, directly or indirectly use, divulge,
furnish or make accessible to anyone other than the Company, its directors or
officers (otherwise than in the regular course of the business of the Company),
any knowledge or information regarding any confidential or secret ideas,
activities, projects, plans, techniques, methods, reports, customer names or
lists, financial or sales information or other material relating to the business
or activities of the Company. The Officer, upon leaving the employ of the
Company, shall not take with him or retain any books, records, data, reports,
letters, memoranda, notes or other writings or documents whatsoever, or copies
thereof, which reflect or deal with any secret, proprietary or confidential
information or material relating to the business or activities of the Company.
5.2 Non-Interference.
(a) During his employment hereunder and for a period of one year
following termination of Officer's employment under this Agreement for any
reason other than under Section 2.7, Officer shall not directly or indirectly,
unless Company gives its prior written consent (which consent shall not be
unreasonably withheld):
(i) be employed by any Competitor (as herein defined) to
hold any executive office or to perform any function for which during
the two years immediately preceding termination of Officer's
employment Officer had direct or supervisory responsibility;
(ii) consult with, act as agent for, or otherwise assist any
Competitor to compete or prepare to compete with Company in any of
Company's then businesses;
(iii) solicit any customer of Company with which he dealt on
behalf of Company during the last two years of employment to purchase
any product or service which is supplied by Company; or
(iv) solicit or employ any person employed by Company at
that time or within one year prior to termination of Officer's
employment by Company.
(b) For purposes of this Agreement, a "Competitor" means any
person or entity which at relevant times engages or is making plans to engage,
in whole or in part, in the manufacture and/or sale of any products useful for
any purpose also served by products which Company then markets or is then
preparing to market.
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(c) Company promises that it will not unreasonably withhold
consent to activity otherwise prohibited by Section 5.2 (a), if Officer provides
Company with such written assurances as Company reasonably requests from the
Competitor and Officer that Company's trade secret rights will not be violated
by Officer in the course of the activities described in Section 5.2(a). Section
5.2(a)(iii) shall not be deemed to apply to customers with which Officer had
dealings before he became employed by Company.
(d) Officer acknowledges that Company competes on a national
basis and that placing geographical limits on the restrictive covenants would
substantially impair protection of Company's legitimate interests in protecting
its trade secrets.
5.3 Remedies. Officer acknowledges that Company would be greatly
injured by, and have no adequate remedy at law for, breach of Article 5 duties.
Officer therefore consents that if such breach occurs or is threatened, whether
before or after termination of his employment by Company, Company may, as
appropriate and in addition to all other then available remedies, enjoin him
(together with all persons acting in concert with him) from such breach or
threatened breach. If Company prevails in such litigation, Company shall also be
entitled to collect from Officer the court costs, attorneys' and experts' fees
and other expenses of enforcing such Agreement rights.
6. Miscellaneous.
6.1 Severability. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, so that it is enforceable to the maximum extent
possible, and all other provisions of the Agreement shall be deemed valid and
enforceable to the extent possible.
6.2 Withholdings. All compensation and benefits to Officer hereunder
shall be reduced by all federal, state, local and other withholdings and similar
taxes and payments required by applicable law.
6.3 Arbitration. Except as provided in Section 5.3, the parties hereby
submit all controversies, claims and matters of difference in any way related to
this Agreement or the performance or breach of the whole or any part hereof to
arbitration in Denver, Colorado, according to the rules and practices of the
American Arbitration Association from time to time in force. If such rules and
practices shall conflict with the Colorado Rules of Civil Procedure or any other
provisions of Colorado law then in force, such Colorado rules and provisions
shall govern. Arbitration of any such controversy, claim or matter of difference
shall be a condition precedent to any legal action thereon. This submission and
agreement to arbitration shall be specifically enforceable.
Awards shall be final and binding on all parties to the extent and in
the manner provided by Colorado law. All awards may be filed by any party with
the Clerk of the District Court in the City and County of Denver, Colorado, and
an appropriate judgment entered thereon and
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execution issued therefor. At the election of any party, said award may also be
filed, and judgment entered thereon and execution issued therefor, with the
clerk of one or more other courts, state or federal, having jurisdiction over
the party against whom such an award is rendered or its property.
6.4 Entire Agreement; Modifications. This Agreement represents the
entire agreement between the parties and may be amended, modified, superseded,
or canceled, and any of the terms hereof may be waived, only by a written
instrument executed by each party hereto or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provisions hereof shall not affect the right at a
latter time to enforce the same. No waiver by any party of the breach of any
provision contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such breach or of any other term of this Agreement.
6.5 Applicable Law. This Agreement shall be construed under and
governed by the laws of the State of Colorado.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NU-WEST INDUSTRIES, INC.
By:__________________________________________
President and Chief Executive Officer
OFFICER:
----------------------------------------------
Steven W. Gampp
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EXHIBIT 10(l) c.
AMENDMENT TO ORE PURCHASE AGREEMENT
THIS AMENDMENT TO ORE PURCHASE AGREEMENT (the "Amendment") is made and
entered into and effective as of the 1st day of June, 1995 by and between RHONE-
POULENC, INC., North American Chemicals Sector, a New York corporation ("RP"),
and NU-WEST INDUSTRIES, INC., a Delaware corporation ("Nu-West").
RECITALS
A. RP and Nu-West entered into an Ore Purchase Agreement dated as of
June 15, 1993, which Ore Purchase Agreement has been amended by various letter
agreements since the date thereof, referred to collectively as the "Agreement.")
B. RP and Nu-West desire hereby to extend the term of the Agreement,
to provide for the acquisition and use of certain additional mining equipment,
and to amend the Agreement in certain other respects, as more particularly
provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the following mutual covenants,
and for other good and valuable consideration, the Parties agree as follows:
1. Defined Terms. Unless otherwise defined in this Amendment,
capitalized terms used herein which are defined in the Agreement shall have the
same meanings as the meanings given to such terms in the Agreement.
2. Amendments to the Agreement.
a. The definition of "Nu-West Mining Equipment" contained in
Section 1.1 of the Agreement is deleted and the following is substituted
therefor:
"'Nu-West Mining Equipment' means the mining equipment to be
leased by Nu-West and subleased to RP during each of the Mining
Years provided for in this Agreement, which equipment consists of
the equipment identified in Attachments 7 and 7A hereto, and such
additional equipment as may have been substituted therefor or
added thereto, with the timing and nature of such substitution or
addition to be determined by RP in consultation with Nu-West,
acting reasonably and in good faith. If Nu-West disagrees with
RP's determination, the decision regarding such additional
equipment shall be made based on economic considerations and in
accordance with the evaluation and recommendation of the Winters
Company, or if the Winters Company is not available, of a similar
firm
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acceptable to RP and Nu-West, which decision shall be final. The
cost of such evaluation and recommendation shall be included in
the Mining Cost. Any such additional equipment will be described
in an addendum to be attached and become a part of the Nu-West
Mining Equipment Sublease."
b. The definition of "Nu-West Development Savings" in Section 1.1
of the Ore Purchase Agreement is hereby amended to delete "number of" in the
sixth line thereof, and "first seven" is substituted therefor and in the
twentieth line the phrase ", not to exceed seven (7) full Mining Years," is
inserted after "full Mining Years."
c. The definition of "RP Mining Equipment" contained in Section
1.1 of the Agreement is deleted and the following is substituted therefor:
"'RP Mining Equipment' means certain mining equipment owned or
leased by RP (other than the Nu-West Mining Equipment) and
currently in operation at the Mine, as such equipment is
identified in Attachment 6 hereto, and such additional equipment
as may have been substituted therefor or added thereto, with the
timing and nature of such substitution or addition to be
determined by RP in consultation with Nu-West, acting reasonably
and in good faith. If Nu-West disagrees with RP's determination,
the decision regarding such additional equipment shall be made
based on economic considerations and in accordance with the
evaluation and recommendation of the Winters Company, or if the
Winters Company is not available, of a similar firm acceptable to
RP and Nu-West, which decision shall be final. The cost of such
evaluation and recommendation shall be included in the Mining
Cost.
d. Section 2.1 of the Agreement, pertaining to the Initial Term
thereof, is amended by deleting clause (a) therefrom and substituting the
following language therefor:
"(a) will continue in effect for each of the Mining Years 1994
through 2005,"
e. Section 2.2 of the Agreement, pertaining to Term Extension, is
modified by changing the reference to "1998" therein to "2003" and changing the
reference to "1999" therein to "2004."
f. Section 3 of the Agreement is modified by changing the
reference to "2000" therein to "2005."
g. The first paragraph of Section 7.1.3 of the Agreement,
pertaining to liability for Equipment Costs, is deleted in its entirety and the
following is substituted therefor:
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"(a) Subject to the provisions of the last paragraph of this
Section 7.1.3, in the event that in any Mining Year RP elects to
take less than 600,000 tons of Ore for its account (including an
election to take no Ore), RP will alone bear all or a portion of
the costs associated with the RP Mining Equipment, as provided
herein, and such costs will not be included in the Mining Cost. If
Nu-West elects to purchase less than 1,600,000 tons of Ore
(including purchasing no Ore), Nu-West will alone bear all or a
portion of the costs associated with the Nu-West Mining Equipment
as provided herein, and such costs will not be included in the
Mining Cost."
h. The second paragraph of Section 7.1.3 of the Agreement is
modified by adding "(b)" at the beginning thereof and the third paragraph of
Section 7.1.3 is modified by adding "(c)" at the beginning thereof.
i. The following paragraph is added to the end of Section 7.1.3:
"(d) Notwithstanding the foregoing paragraphs (a) and (b), if
RP elects to cease mining Ore for its account for an indefinite
period of time, and if RP gives Nu-West notice thereof as provided
herein prior to the date on which it intends to cease mining Ore
for its account ("RP Advance Notice"), the following provisions
shall apply with respect to continued utilization of the RP Mining
Equipment, the acquisition of new or replacement Equipment, if
applicable, and the inclusion of the costs thereof in the Mining
Cost:
(A) the RP Mining Equipment will continue to be employed
by RP in mining Ore for the account of Nu-West, in
transporting such Ore to the Plant, and in performing
maintenance and repair projects in connection therewith and
such other projects agreed to by RP and Nu-West pursuant to
Section 7.1.8, to the extent that RP determines, in
consultation with Nu-West, acting reasonably and in good
faith, that such RP Mining Equipment is required for such
operations together with the Nu-West Mining Equipment. If Nu-
West disagrees with RP's determination, the decision shall be
made based on economic considerations and in accordance with
the evaluation and recommendation of the Winters Company, or
if the Winters Company is not available, a similar firm
acceptable to RP and Nu-West, which decision shall be final.
The cost of such evaluation and recommendation shall be
included in the Mining Cost;
(B) the cost of any such RP Mining Equipment which is so
employed in such operations will be included in the Mining
Cost;
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(C) any such RP Mining Equipment which is so employed in
such operations will not be replaced by RP, but will be
replaced by Nu-West as specified by RP as to type, make and
models, but not as to number of items of such equipment to be
replaced. The number of items of Equipment to be replaced
shall be determined by RP in consultation with Nu-West, acting
reasonably and in good faith. If Nu-West disagrees with RP's
determination, the decision shall be made based on economic
considerations and in accordance with the evaluation and
recommendation of the Winters Company, or if the Winters
Company is not available, a similar firm acceptable to RP and
Nu-West, which decision shall be final. The cost of such
evaluation and recommendation shall be included in the Mining
Cost. Any such replacements will constitute Nu-West Mining
Equipment upon acquisition by Nu-West, will be subleased to RP
pursuant to the Nu-West Mining Equipment Sublease, and the
cost thereof will be included in the Mining Cost, as provided
in Section 7.1.4 and the Nu-West Mining Equipment Sublease;
(D) the cost of any RP Mining Equipment which is not so
employed in such operations will not be included in the Mining
Cost and will remain the sole liability of RP, as provided in
subparagraph (b) above in this Section 7.1.3;
(E) if RP desires to resume mining Ore for its account, it
shall give Nu-West not less than ninety (90) days' prior
notice thereof, in which event, effective on the date RP
resumes mining Ore for its account, the provisions relating to
the RP Mining Equipment set forth in subparagraphs (A) through
(D) above shall thereafter no longer apply and RP shall
thereafter be responsible for obtaining replacements for the
RP Mining Equipment, and for obtaining all additional
equipment, necessary for mining Ore for RP's account until
such time that RP once again elects to cease mining Ore for
its account. Any RP or Nu-West Mining Equipment acquired
and/or leased pursuant to subparagraphs (A) through (D) above
shall, in any event, continue to be owned or leased by the
party who originally acquired or leased the same."
j. Section 7.1.4 of the Agreement pertaining to Mining Equipment
is amended by deleting the first three sentences therefrom and substituting the
following language therefor:
"RP now has the RP Mining Equipment identified in Attachment
6. Nu-West will use its best efforts to have entered into a firm
lease for the Nu-West Mining Equipment identified in Attachment 7
by not later than
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September 1, 1993 (on terms acceptable to both Parties) and to
have such Nu-West Mining Equipment delivered to the Mine as soon
as practicable thereafter, but in all events by not later than
October 15, 1993. If all of such Nu-West Mining Equipment is not
delivered to the Mine by October 15, 1993, Nu-West recognizes
that, depending on the type of the late equipment and the duration
of the delay, it may not be possible to produce the full volume of
Ore requested by Nu-West during the 1994 Mining Year, or it may
not be possible to produce such full volume of Ore for Nu-West
without overtime mining operations or other incremental costs.
k. Section 7.1.4 of the Agreement is further amended by adding
the following sentence at the end of the first paragraph thereof:
"Nu-West will use its best efforts to acquire the Nu-West
Mining Equipment identified in Attachment 7A by September 10, 1995
(on terms acceptable to both Parties) and to have such Nu-West
Mining Equipment delivered to the Mine as soon as practicable
thereafter."
l. Section 7.1.4 of the Agreement is further amended by adding the
following thereto as the last paragraph thereof:
"Any loss suffered by Nu-West upon disposition of the Nu-West
Mining Equipment identified in Attachment 7A hereto shall be
included in the Mining Cost for the applicable Mining Year. For
purposes hereof, 'loss' is defined as (i) delivery and
cancellation charges imposed by reason of cancellation of the
Equipment order, any additional rent payable on lease termination
as excess usage, or other similar charges, or (ii) any gain or
loss realized by Nu-West upon purchase of the Equipment at lease
termination and resale thereof in an arm's-length transaction."
m. The following is added to Attachment 2 to the Ore Purchase
Agreement at the end of Paragraph 2.9 thereof:
"RP and Nu-West agree that all attorneys' fees and other legal
costs to handle, investigate and settle litigation or claims, and
amounts paid in settlement of or as a result of such litigation or
claims (herein called the "Circle A Termination Costs"), to a
maximum amount of $2,000,000, arising out of the termination of
the Ore Haulage Agreement dated November 1, 1993, between RP and
Circle A Construction, Inc. shall be a deduction from Mining Cost
Savings for the Mining Year in which such Circle A Termination
Costs are incurred by RP, to the extent Mining Cost Savings are
available in such year, and will be a deduction from Mining Cost
Savings in a subsequent year or years, to the extent Mining Cost
Savings are not available for the Mining Year in which such Circle
A Termination Costs are incurred by RP.
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3. General.
a. This Amendment is an amendment to the Agreement, and the
Agreement, as hereby amended, is ratified, approved and confirmed by RP and Nu-
West in each and every respect. All references to the Agreement in any other
document, instrument or agreement or writing shall hereafter be deemed to refer
to the Agreement as amended hereby.
b. Captions used in this Amendment are for convenience of
reference only and shall not affect the construction of this Amendment.
c. This Amendment is binding upon and shall inure to the benefit
of RP and Nu-West and their respective permitted successors and assigns.
d. This Amendment shall be governed by Idaho law, as more
particularly provided in Section 14.7 of the Agreement.
e. This Amendment may be executed in counterparts, each of which
shall constitute an original copy hereof.
IN WITNESS WHEREOF, the Parties have executed this Amendment to be
effective as of the date first above written.
RHONE-POULENC, INC.
By:___________________________
Name:______________________
Title:_____________________
NU-WEST INDUSTRIES, INC.
By:___________________________
Name:______________________
Title:_____________________
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Attachment 7A
-------------
ADDITIONAL NU-WEST MINING EQUIPMENT
-----------------------------------
Two Caterpillar #177 Trucks.
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EXHIBIT 10(v)
Intercredit Agreement
Harris Trust and Savings Bank
Chicago, Illinois
FBS Ag Credit, Inc.
Denver, Colorado
First Union National Bank of North Carolina
Charlotte, North Carolina
St. Paul Bank for Cooperatives
St. Paul, Minnesota
Caisse Nationale de Credit Agricole
Chicago, Illinois
Ladies and Gentlemen:
The undersigned, Nu-West Industries, Inc., a Delaware corporation (the
"Company") and Kennecott Utah Copper Corporation, a Delaware corporation
("Kennecott") are parties to a Loan Agreement dated as of July 28, 1993
(together with all amendments, extensions, renewals, waivers and refinancings
thereof, the "Kennecott Loan Agreement" and, together with all security
agreements, deeds of trust, mortgages, assignments, instruments and documents
executed in connection therewith, the "Kennecott Loan Documents"), pursuant to
which Kennecott has made a loan in the original principal amount of $4,000,000
to the Company (the "Kennecott Loan"). Concurrently with the execution and
delivery of the Kennecott Loan Documents, the Company, Kennecott and the other
parties identified therein executed and delivered an Intercreditor Agreement
dated as of July 28, 1993 (the "Original Intercreditor Agreement") pursuant to
which, among other things, Kennecott subordinated the payment of the Kennecott
Indebtedness (as defined in the Original Intercreditor Agreement) and all
collateral security therefor to the payment of the Senior Bank Indebtedness (as
such term is defined in the Original Intercreditor Agreement) and all collateral
security therefor, respectively.
Concurrently herewith, the Company, you (you and your respective successors
and assigns are referred to individually as a "Bank" and collectively as the
"Banks") and Harris Trust and Savings Bank, as agent (the "Agent") for the
Banks, are entering into a Secured Credit Agreement of even date herewith (such
Secured Credit Agreement, as amended, supplemented,
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extended, modified and restated from time to time, any and all refinancings
thereof and any and all agreements entered into in replacement or substitution
thereof, being referred to as the "Credit Agreement") pursuant to which the
Banks will extend credit and make other financial accommodations to the Company
and its subsidiaries, a portion of the proceeds of which will be used to repay
in full the Senior Bank Indebtedness, the Senior Subordinated Indebtedness and
the Junior Subordinated Indebtedness (as each such term is defined in the
Original Intercreditor Agreement or in the Subordination and Forebearance
Agreement referred to in the Original Intercreditor Agreement). As a condition
precedent to entering into the Credit Agreement, the Agent and the Banks require
that Kennecott confirm that the Kennecott Indebtedness and all collateral
security therefor is subordinate to the Senior Bank Indebtedness (as defined
herein) and all collateral security therefor, in accordance with and pursuant to
the terms and conditions contained in this Agreement. Accordingly, to induce
the Agent and the Banks to enter into the Credit Agreement with the Company and
extend credit and make other financial accommodations to the Company as set
forth therein, Kennecott and the Company hereby confirm and agree with the Agent
and the Banks as follows:
Section 2. Definitions. The following terms shall have the meanings
set forth below:
Section 2.1. Kennecott Indebtedness. The term "Kennecott
Indebtedness" shall mean all present and future obligations and liabilities of
the Company to Kennecott and its successors, assigns and transferees now or
hereafter arising under or in connection with the Kennecott Loan Agreement and
the Kennecott Loan Documents, including without limitation interest that would
accrue but for the filing of a bankruptcy or similar petition initiating any
bankruptcy or similar proceeding, at the rate specified in the instrument
governing such obligations, whether or not such interest is an enforceable debt
or an allowable claim in any bankruptcy or similar proceeding with respect to
the Company, and any and all penalties, fees, expense reimbursements, indemnity
and contribution obligations and all other monetary obligations under the
Kennecott Loan Agreement and the Kennecott Loan Documents.
Section 2.2. Holder of Kennecott Indebtedness. The term "Holder of
Kennecott Indebtedness" shall mean (i) Kennecott and (ii) each person otherwise
becoming a holder or assignee of any Kennecott Indebtedness or otherwise having
an interest in any Kennecott Indebtedness.
Section 2.3. Kennecott Collateral. The term "Kennecott Collateral"
shall have the
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meaning given to the term "Collateral" in the Kennecott Loan Documents as such
Kennecott Loan Documents exist at the date hereof.
Section 2.4. Kennecott Collateral Proceeds. The term "Kennecott
Collateral Proceeds" shall mean the proceeds from any foreclosure, sale,
liquidation or other disposition of, or realization upon, the Kennecott
Collateral under the Kennecott Loan Documents (or any of them, as applicable).
Section 2.5. Credit Agreement Documents. The term "Credit Agreement
Documents" shall mean the Credit Agreement together with all security
agreements, mortgages, assignments, instruments and documents executed in
connection therewith, pursuant to which the Banks have agreed to make loans and
to provide for the issuance of letters of credit to or on the application of the
Company (the "Loans," which term shall include the obligations of the Company to
reimburse the Banks under any letters of credit provided under the Credit
Agreement whether or not there has been a draw under any such letter of credit
outstanding).
Section 2.6. Additional Senior Loan Documents. The term "Additional
Senior Loan Documents" shall mean any and all agreements hereinafter entered
into (hereinafter, together with all amendments, extensions, renewals, waivers
and refinancings thereof, the "Additional Senior Loan Agreements," and together
with all security documents executed in connection therewith, the "Additional
Senior Loan Documents") by which any other lenders party to such Additional
Senior Loan Agreements together with one or more Banks ("Other Senior Lenders"),
singly or jointly, make additional loans to, provide for the issuance of letters
of credit for, or extend other financial accommodation for the benefit of the
Company, not in excess of aggregate loans, letters of credit and other financial
accommodations of $75,000,000 at any time (hereinafter referred to as the
"Additional Loans," which term shall include the obligations of the Company to
reimburse the other Senior Lenders under any letters of credit provided under
the Additional Senior Loan Agreements whether or not there has been a draw under
any such letter of credit outstanding). The term "Senior Lenders" shall
hereinafter refer to each of the Banks and each of the Other Senior Lenders.
Section 2.7. Senior Bank Indebtedness. The term "Senior Bank
Indebtedness," shall mean all present and future obligations and liabilities of
the Company to the Senior Lenders and their successors, assigns and transferees
now or hereafter arising under or in connection with the Credit Agreement, the
Additional Senior Loan Agreements, the Credit Agreement Documents and
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the Additional Senior Loan Documents, including without limitation (i) the
Loans, the Additional Loans, all principal, premiums and interest thereon
(including all obligations to reimburse the banks with respect to letters of
credit) including interest that would accrue but for the filing of a bankruptcy
or similar petition initiating any bankruptcy or similar proceeding, at the rate
specified in the instrument governing such obligations, whether or not such
interest is an enforceable debt or an allowable claim in any bankruptcy or
similar proceeding with respect to the Company and (ii) any and all penalties,
fees, expense reimbursements, indemnity and contribution obligations and all
other monetary obligations under the Credit Agreement, the Credit Agreement
Documents, the Additional Senior Loan Agreements and the Additional Senior Loan
Documents.
Section 2.8. Holder of Senior Bank Indebtedness. The term "Holder of
Senior Bank Indebtedness" shall mean: (i) each Senior Lender and (ii) each
person otherwise becoming a holder or assignee of any Senior Bank Indebtedness
or otherwise having an interest in any Senior Bank Indebtedness.
Section 3. Covenants in Favor of Senior Bank Indebtedness by the
Company and Holders of Kennecott Indebtedness. The Company and each Holder of
Kennecott Indebtedness hereby covenants that, until the Senior Bank Indebtedness
shall have been paid in full and any commitment of the Banks to extend credit to
or for the account of the Company shall have terminated or expired, each will
comply with such of the following provisions as are applicable to it:
Section 3.1. Transfers. No Holder of Kennecott Indebtedness will
sell or otherwise dispose of any Kennecott Indebtedness except to another Holder
of Kennecott Indebtedness which shall have become a party to this Agreement by
executing a counterpart to this Agreement.
Section 3.2. Payments and Distributions. (a) The payment of any
Kennecott Indebtedness, whether pursuant to the terms of the Kennecott Loan
Agreement, the Kennecott Loan Documents or upon acceleration or otherwise, is
and shall be expressly subordinated and junior in right of payment to the prior
payment in full in cash of all Senior Bank Indebtedness to the extent and in the
manner provided herein, and the Kennecott Indebtedness is hereby subordinated as
a claim against the Company or any of its assets, whether such claim be (i) in
the ordinary course of business or (ii) in the event of any distribution of the
assets of the Company upon any voluntary or involuntary dissolution, winding-up,
total or partial liquidation
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or reorganization, or bankruptcy, insolvency, receivership or other statutory
common law proceeding or arrangement, including without limitation any
proceedings under Title 11 of the United States Code, involving the Company or
the readjustment of the Company's liabilities or any assignment for the benefit
of creditors or any marshalling of the assets or liabilities of the Company
(collectively called "reorganization"), to the prior payment in full in cash of
the Senior Bank Indebtedness.
(b) The Company will not make, and no Holder of Kennecott Indebtedness
will ask, demand, sue for, by way of any action, suit or proceeding, or any
defense or counterclaim asserted in any action, suit or proceeding, accept or
receive from the Company, directly or indirectly, any payment of, on or in
respect of any Kennecott Indebtedness, whether in cash, securities or other
property or by way of conversion, exchange or set-off or otherwise, until all
the Senior Bank Indebtedness has been paid in full in cash and the Credit
Agreement and any Additional Senior Loan Agreements shall have been terminated
in accordance with their respective terms, if there exists a default in payment
of Senior Bank Indebtedness, unless such payment default shall have been cured
or waived.
(c) In addition, during the continuance of any event of default other
than the payment of any Senior Bank Indebtedness, upon receipt by the Company
from the Agent or the Required Banks (as defined in the Credit Agreement and any
Additional Senior Loan Agreements) of written notice of such default, no payment
may be made by the Company upon or in respect of the Kennecott Loan for a
payment blockage period ("Payment Blockage Period") commencing on the date of
receipt of such notice and ending 179 days thereafter (unless such event of
default shall have been cured or waived or such Payment Blockage Period shall
have terminated by written notice to the Company from the Agent or the Required
Banks). Notwithstanding anything to the contrary herein, in no event shall any
one Payment Blockage Period extend beyond 179 days. Notwithstanding anything to
the contrary herein, the Agent and Required Banks may not commence or allow to
continue Payment Blockage Periods aggregating more than 179 days with respect to
the Kennecott Loan during any period of 360 consecutive days.
(d) In the event of any reorganization relative to the Company or its
property, then all Senior Bank Indebtedness shall first be paid in full in cash
before any payment is made on account of any Kennecott Indebtedness or Kennecott
Collateral, and in any such proceedings any payment or distribution of any kind
or character, whether in cash, property or securities, which
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may be payable or deliverable in respect of any Kennecott Indebtedness or
Kennecott Collateral, shall be paid or delivered directly to the Banks for
application in satisfaction of the Senior Bank Indebtedness unless and until all
such Senior Bank Indebtedness shall have been paid in full in cash, and each
Holder of Kennecott Indebtedness authorizes each Holder of Senior Bank
Indebtedness to assert any claim in such proceedings on the Kennecott
Indebtedness to such extent, and to accept and receipt for any payment or
distribution to such extent and to apply such payment or distribution to the
satisfaction of the Senior Bank Indebtedness and to do any and all things and to
execute all instruments necessary to effectuate the foregoing.
(e) If, notwithstanding the foregoing, any payment or distribution of the
assets of the Company of any kind or character, other than distributions
permitted by paragraph (c) of this Section 3.2, shall be received, including
receipt by set-off, recoupment or otherwise, by any Holder of Kennecott
Indebtedness before all Senior Bank Indebtedness is paid in full in cash, such
payment or distribution and the amount of any such set-off or recoupment shall
be held by such Holder of Kennecott Indebtedness in trust for the benefit of
Holders of Senior Bank Indebtedness and shall be paid over to Holders of Senior
Bank Indebtedness until all such Senior Bank Indebtedness shall have been paid
in full in cash, after giving effect to any concurrent payment or distribution
to Holders of such Senior Bank Indebtedness.
(f) The Company shall not give, and no Holder of Kennecott Indebtedness
shall demand, accept or receive, any security, direct or indirect, for any
Kennecott Indebtedness, other than the Kennecott Collateral pursuant to the
Kennecott Loan Documents.
(g) Each Holder of Kennecott Indebtedness shall furnish to the Agent and
each Senior Lender promptly upon receipt by it a copy of any notice, demand or
pleading relating to the Kennecott Indebtedness received by such holder
reasonably expected to affect adversely the Senior Bank Indebtedness. Until all
Senior Bank Indebtedness has been paid in full no holder of Kennecott
Indebtedness shall accelerate the maturity of or institute proceedings against
the Company to enforce any claims, rights, demands, causes of action,
liabilities, and suits, of any kind whatsoever, whether known or unknown, that
have been, could have been, or in the future might be asserted by Holders of
Kennecott Indebtedness based upon, arising out of, or in any way relating to,
any Kennecott Indebtedness unless such Holder of Kennecott Indebtedness shall
have first given no less than 5 days' prior written notice to the Banks of its
intention to accelerate and exercise any other remedies.
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(h) For the purposes of this Agreement, no Senior Bank Indebtedness shall
be deemed to have been paid in full unless the holders thereof shall have
received and have been permitted to retain cash equal to the full amount thereof
then outstanding. This Agreement shall continue to apply in full to all Senior
Bank Indebtedness, notwithstanding that the claims arising from Senior Bank
Indebtedness (or any portion thereof) are subordinated to any other claims
against the Company, and notwithstanding that the Senior Bank Indebtedness, or
any lien, mortgage, pledge, assignment or other security interest in property
securing the Senior Bank Indebtedness or any portion thereof, is voided under
any fraudulent transfer, fraudulent conveyance or bankruptcy law.
(i) Each Holder of Kennecott Indebtedness agrees that it will not at any
time insist upon, plead, or in any manner whatsoever, seek the entry of any
order or judgment, or take the benefit or advantage of, any substantive
consolidation, piercing of the corporate veil or any other order or judgment
that causes an effective combination of the assets and liabilities of the
Company, any Subsidiary and any other individual, corporation, partnership or
joint venture in any case or proceeding under Title 11 of the United States Code
or other similar proceeding.
Section 3.3. Subordination of Kennecott Lien. (a) Any security interest
in or lien or encumbrance on the assets and rights of the Company granted to
Kennecott pursuant to the Kennecott Loan Documents or otherwise is hereby
subordinated and expressly made junior to any and all security interests, liens
and encumbrances granted by the Company to the Senior Lenders, and the rights of
the Senior Lenders shall be senior and superior to the rights of Holders of
Kennecott Indebtedness irrespective of the time of perfection or the perfection
or nonperfection of such security interests, liens and encumbrances of either
the Senior Lenders or Kennecott.
(b) Holders of Kennecott Indebtedness may not foreclose, sell, liquidate
or otherwise dispose of or realize upon, or initiate any proceedings or other
action to foreclose, sell, liquidate, dispose of or realize upon, the Kennecott
Collateral unless and until all Senior Bank Indebtedness shall have been paid in
full in cash and any commitment of the Banks to extend credit to or for the
account of the Company shall have been terminated or expired.
Section 3.4. Subrogation. Subject to the payment in full in cash of all
Senior Bank Indebtedness, Holders of Kennecott Indebtedness shall be subrogated
to the rights of Holders of Senior Bank Indebtedness to receive payments or
distributions of assets of the Company made on the Senior Bank Indebtedness
until the Kennecott Indebtedness shall be paid in full; and, for
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the purposes of such subrogation, no payments or distributions to Holders of
Senior Bank Indebtedness of any cash, property or securities to which Holders of
Kennecott Indebtedness would be entitled except for the provisions of this
Agreement, and no payments over pursuant to the provisions of this Agreement to
Holders of Senior Bank Indebtedness by Holders of Kennecott Indebtedness shall,
as between the Company and its creditors other than the holders of Senior Bank
Indebtedness, be deemed to be a payment by the Company to or on account of
Senior Bank Indebtedness, it being understood that the provisions of this
Section 3 are and are intended solely for the purpose of defining the relative
rights of Holders of Kennecott Indebtedness, on the one hand, and Holders of
Senior Bank Indebtedness, on the other hand.
Section 3.5. Further Assurances. The Company and Holders of
Kennecott Indebtedness, for themselves and their successors and assigns as
Holders of Kennecott Indebtedness, covenant to execute and deliver to the
holders of record of the Senior Bank Indebtedness such further instruments and
to take such further action as the Agent or the Required Banks may at any time
or times reasonably request in order to carry out the provisions and intent of
this Agreement.
Section 3.6. Tolling and Waiver of Statutes of Limitations. The
Company hereby agrees that, during any period that any Holder of Kennecott
Indebtedness shall be subject to any preclusion of or limitation on raising,
pursuing, maintaining, perfecting or enforcing any claim against the Company or
any of its assets under the provisions of this Agreement, any statute of
limitations that otherwise would apply to such claim shall be tolled. The
Company further agrees that it will not raise, and hereby waives, any defense to
any such claim based on the running of any statute of limitations with respect
to any such claim during the pendency of any such preclusion or limitation.
Section 4. Legends. The Company and Holders of Kennecott
Indebtedness, for itself and its successors and assigns as Holders of Kennecott
Indebtedness, covenant to cause each instrument representing or evidencing any
of the Kennecott Indebtedness to have affixed upon it the following legend:
"This instrument is subject to an Intercreditor Agreement dated as
of ____________, 1995 between the [MAKER] and [PAYEE] for the benefit
of the financial institution or institutions that are from time to
time party to the Secured Credit Agreement, dated as
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of _________________, 1995 among the maker, Harris Trust and Savings
Bank, as agent, and the financial institutions listed therein, and the
lender or lenders under certain Additional Senior Loan Agreements that
may from time to time be entered into by the [MAKER]. The
Intercreditor Agreement, among other things, subordinates the
[MAKER'S] obligations hereunder to the prior payment of certain
obligations of the maker to the Holders of Senior Indebtedness, as
defined therein."
Section 5. Successors. The provisions of this Agreement shall inure
to the benefit of Holders of Senior Bank Indebtedness, and Holders of Kennecott
Indebtedness and their respective successors and assigns and transferees and
shall be binding upon the Company and Holders of Kennecott Indebtedness and
their respective successors and assigns.
Section 6. Notices. Any notice or other communication in connection
with this Agreement shall be deemed to be delivered if in writing (including a
telex or telecopy) addressed as provided below and if either (a) actually
delivered at said address or (b) in the case of a letter, five business days
shall have elapsed after the same is sent by U.S. mail postage prepaid and
registered or certified:
If to the Company at the address specified on the signature page
hereof or at such other address as it shall have specified by notice.
If to the Agent or a Bank, to it at its address specified in the
Credit Agreement, or at such other address as such Bank shall have
specified by notice.
If to any Holder of Senior Indebtedness, to it at the address as
it shall from time to time specified by notice.
If to Holders of Kennecott Indebtedness, to them at Kennecott Utah
Copper Corporation, 8362 West 10200 South, Post Office Box 525, Bingham
Canyon, Utah 84006-0525, Attention: Controller; Fax No. (801) 569-1741.
Section 7. Governing Law; service of Process. This Agreement shall
be governed by, and construed in accordance with, the internal laws of the State
of Illinois, without regard to any laws or rules relating to conflicts of laws.
Holders of Kennecott Indebtedness, by their execution hereof hereby irrevocably
accept for themselves and in connection with their properties, generally and
unconditionally,
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the non-exclusive jurisdiction of any state or federal court of competent
jurisdiction in the State of Illinois in any action, suit or proceeding of any
kind against them which arises out of or by reason of this Agreement, in
addition to any other court in which such action, suit or proceeding may be
brought, irrevocably agree to be bound by any judgment rendered by any such
court in any such action, suit or proceeding in which they shall have been
served with process in the manner hereinafter provided, and to the extent that
they may lawfully do so, waive and agree not to assert, by way of motion, as a
defense or otherwise, in such action, suit or proceeding any claims that they
are not personally subject to the jurisdiction of such court, that their
property is exempt or immune from attachment or execution, that the action, suit
or proceeding is brought in an inconvenient forum or that the venue thereof is
improper, and agree that process may be served upon them in any such action,
suit or proceeding in the manner provided by the laws of the State of Illinois.
Without limitation of the foregoing, Holders of Kennecott Indebtedness hereby
designate and appoint CT Corporation System, Illinois, and such other persons as
may hereafter be selected by them and that shall irrevocably agree in a writing,
of which a copy shall be delivered by notice to each Lender, to serve as their
Agent to receive on their behalf service of all process in any such action, suit
or proceeding in any such court, such service being hereby acknowledged by
Holders of Kennecott Indebtedness to be effective and binding service in every
respect. A copy of such process so served shall be mailed by registered or
certified mail to the Holders of Kennecott Indebtedness at their addresses
specified pursuant hereto. If any agent appointed by Holders of Kennecott
Indebtedness refuses to accept service, the Holders of Kennecott Indebtedness
hereby agree that the dispatch or service to them by registered or certified
mail, return receipt requested, shall constitute sufficient notice of any such
action, suit or proceeding, and valid service therein as to themselves, whether
or not they shall accept such service.
Section 8. Amendments and Waivers. Changes in or additions to this
Agreement may be made, or compliance with any term, covenant, agreement,
condition or provision set forth herein may be omitted or waived (either
generally or in a particular instance and either retroactively or
prospectively), only if the Company and the party seeking such amendment or
waiver shall have obtained the consent thereof in writing from (a) the Holders
of Kennecott Indebtedness; and (b) the Required Banks; provided, however, that
the Company and the party
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seeking such amendment or waiver shall deliver copies of such consent in writing
to any Bank, or Holder of Kennecott Indebtedness (if applicable) or its assign
or any assign of a Bank who did not execute the same. Any consent may be given
subject to the satisfaction of conditions stated therein.
Section 9. Miscellaneous.
Section 9.1. Continuing Agreement. This Agreement shall be a
continuing agreement and shall be irrevocable and shall remain in full force and
effect until the Senior Bank Indebtedness shall have been indefeasibly satisfied
or paid in full in accordance with the terms thereof and any commitment of the
Banks to extend credit to or for the account of the Company shall have been
terminated or expired, and no action which any Holder of Senior Bank
Indebtedness or the Company may take or refrain from taking with respect to
Senior Bank Indebtedness, including any amendments thereof, shall affect the
provisions of this Agreement or the obligations of the Company, any Holder of
Senior Subordinated Indebtedness or any Holder of Kennecott Indebtedness. No
right of any Holder of Senior Bank Indebtedness shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act in good faith by such Holder of Senior Bank
Indebtedness, or by any non-compliance by the Company with the terms, provisions
and covenants of this Agreement, regardless of any knowledge thereof which such
Holder of Senior Bank Indebtedness may have or otherwise be charged with.
Section 9.2. Rights of Enforcement. The provisions of this Agreement
may be enforced directly by any Holder of Senior Bank Indebtedness against any
Holders of Kennecott Indebtedness. Each Holder of Kennecott Indebtedness, by
executing this Agreement, acknowledges and agrees that Holders of Senior Bank
Indebtedness have relied and will continue to rely upon the subordination
provided for herein and waives notice and proof of such reliance.
Section 9.3. Equitable Remedies. Each Holder of Senior Bank
Indebtedness is hereby authorized to demand specific performance of this
Agreement at any time when the Company or any Holder of Kennecott Indebtedness
shall have failed to comply with any provision hereof applicable to it, and the
Company and each Holder of Kennecott Indebtedness hereby irrevocably waive any
defense based on the adequacy of a remedy at law which might be asserted as a
bar to the remedy of specific performance hereof in any action brought therefor
by a Holder of Senior Bank Indebtedness.
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Section 9.4. Amendment of Terms of Senior Bank Indebtedness. The
Company and each Holder of Kennecott Indebtedness hereby grant each Holder of
Senior Bank Indebtedness full power, in its uncontrolled discretion, without
notice to any Holder of Kennecott Indebtedness and without in any way affecting
the subordination of the subordinated obligations provided in this Agreement:
(i) to consent to any amendment or change of any terms of the agreements
governing such Senior Bank Indebtedness and any related agreement, each as
amended from time to time except to the extent any amendment or change adversely
affects the rights of the Kennecott Indebtedness held by such holder; (ii) to
grant any extensions or renewals thereof and any other indulgence with respect
thereto, and to effect any release, compromise or settlement with respect
thereof; and (iii) to accept, substitute, exchange or release or otherwise
dispose of any item of collateral at any time securing the Senior Bank
Indebtedness, whether or not the collateral, if any, received upon the exercise
of such power shall be of a character or value the same as or different from the
character or value of the item of collateral released.
Section 9.5. Original Intercreditor Agreement Superseded. This
Agreement replaces and supersedes the Original Intercreditor Agreement in its
entirety.
Section 9.6. Counterparts. This Agreement may be executed in any
number of counterparts, and by each party hereto on a separate counterpart, all
of which together shall constitute one instrument. The headings in this
Agreement are for convenience of reference only and shall not alter or otherwise
affect the meaning hereof.
Dated as of _______________, 1995 Very truly yours,
Nu-West Industries, Inc.
By
Name:
Title:
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3010 Conda Road
Soda Springs, Idaho 83276
Fax No.: (208) 547-2550
Kennecott Utah Copper Corporation
By________________________________
Name:___________________________
Title:____________________________
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EXHIBIT 10(y)
================================================================================
SECURED CREDIT AGREEMENT
NU-WEST INDUSTRIES, INC.,
AS BORROWER
AND
NU-WEST MINERALS, INC.
NU-WEST MINING, INC.,
AS GUARANTORS
AND
HARRIS TRUST AND SAVINGS BANK,
INDIVIDUALLY AND AS AGENT
AND
HARRIS TRUST AND SAVINGS BANK
FBS AG CREDIT, INC.
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
ST. PAUL BANK FOR COOPERATIVES
CAISSE NATIONALE DE CREDIT AGRICOLE
DATED AS OF AUGUST 3, 1995
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION DESCRIPTION PAGE
<S> <C> <C>
SECTION 1. THE CREDITS.................................................... 1
Section 1.1. The Revolving Credit......................................... 1
Section 1.2. The Term Credit One.......................................... 3
Section 1.3. The Term Credit Two.......................................... 4
Section 1.4. Manner of Borrowing.......................................... 4
Section 1.5. The Letter of Credit Facility................................ 5
Section 1.6. Reimbursement Obligation..................................... 6
Section 1.7. Participation in L/C's....................................... 6
SECTION 2. INTEREST....................................................... 7
Section 2.1. Options...................................................... 7
Section 2.2. Domestic Rate Portion........................................ 7
Section 2.3. LIBOR Portions............................................... 7
Section 2.4. Computation.................................................. 8
Section 2.5. Minimum Amounts.............................................. 8
Section 2.6. Manner of Rate Selection..................................... 8
Section 2.7. Change of Law................................................ 8
Section 2.8. Unavailability of Deposits or Inability to Ascertain the
Adjusted LIBOR............................................... 9
Section 2.9. Taxes and Increased Costs.................................... 9
Section 2.10. Funding Indemnity............................................10
Section 2.11. Lending Branch...............................................11
Section 2.12. Discretion of Banks as to Manner of Funding..................11
SECTION 3. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS AND
NOTATIONS......................................................11
Section 3.1. Commitment Fee...............................................11
Section 3.2. Closing Fees.................................................11
Section 3.3. Letter of Credit Fees........................................11
Section 3.4. Agent's Fees.................................................11
Section 3.5. Voluntary Prepayments........................................12
Section 3.6. Mandatory Prepayments. (a) Borrowing Base Deficiency........12
(b) Fixed Asset Proceeds.........................................12
(c) Equity Offering..............................................13
Section 3.7. Terminations.................................................13
Section 3.8. Place and Application........................................13
Section 3.9. Notations and Requests.......................................15
Section 3.10. Capital Adequacy.............................................15
Section 4. The Collateral.................................................16
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 5. REPRESENTATIONS AND WARRANTIES.................................16
Section 5.1. Organization and Qualification...............................16
Section 5.2. Subsidiaries.................................................17
Section 5.3. Financial Reports............................................17
Section 5.4. Litigation; Tax Returns; Approvals...........................17
Section 5.5. Regulation U.................................................18
Section 5.6. No Default...................................................18
Section 5.7. ERISA........................................................18
Section 5.8. Security Interests and Debt..................................18
Section 5.9. Accurate Information.........................................18
Section 5.10 Enforceability...............................................18
Section 5.11. No Default Under Other Agreements............................18
Section 5.12. Status Under Certain Laws....................................19
Section 5.13. Compliance with Laws.........................................19
Section 5.14. Tangible Net Worth on June 30, 1995..........................19
SECTION 6. CONDITIONS PRECEDENT...........................................19
Section 6.1. All Advances.................................................19
Section 6.2. Initial Advance..............................................20
SECTION 7. COMPANY COVENANTS..............................................23
Section 7.1. Maintenance..................................................23
Section 7.2. Taxes........................................................23
Section 7.3. Maintenance of Insurance.....................................23
Section 7.4. Financial Reports............................................23
Section 7.5. Inspection and Reviews.......................................25
Section 7.6. Funded Debt Ratio............................................25
Section 7.7. Fixed Charge Coverage Ratio..................................25
Section 7.8. Interest Coverage Ratio......................................26
Section 7.9. Tangible Net Worth...........................................26
Section 7.10. Funded Debt to Total Capitalization..........................26
Section 7.11. Capital Expenditures.........................................26
Section 7.12. Turnaround Expenses..........................................27
Section 7.13. Consolidation and Merger.....................................27
Section 7.14. Transactions with Affiliates.................................27
Section 7.15. Dividends and Certain Other Restricted Payments..............27
Section 7.16. Liens........................................................27
Section 7.17. Borrowings and Guaranties....................................28
Section 7.18. Investments, Loans and Advances..............................29
Section 7.19. Sale of Property.............................................29
Section 7.20. Notice of Suit, Adverse Change in Business or Default........30
Section 7.21. ERISA........................................................30
Section 7.22. Use of Loan Proceeds.........................................30
</TABLE>
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<TABLE>
<S> <C> <C>
Section 7.23. Conduct of Business and Maintenance of Existence.............30
Section 7.24. Compliance with Laws, etc....................................31
Section 7.25. New Subsidiaries.............................................31
Section 7.26. Environmental Covenant.......................................31
Section 7.27. Hedging Arrangements.........................................31
Section 7.28. Concentration Accounts.......................................31
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.................................32
Section 8.1. Events of Default............................................32
Section 8.2. Remedies for Non-Bankruptcy Defaults.........................34
Section 8.3. Remedies for Bankruptcy Defaults.............................34
Section 8.4. L/C's........................................................34
SECTION 9. DEFINITIONS....................................................35
Section 9.1. Certain Terms Defined........................................35
Section 9.2. Accounting Terms.............................................48
SECTION 10. THE AGENT......................................................48
Section 10.1. Appointment and Authorization................................48
Section 10.2. Rights as a Bank.............................................49
Section 10.3. Standard of Care.............................................49
Section 10.4. Costs and Expenses...........................................50
Section 10.5. Indemnity....................................................50
SECTION 11. THE GUARANTEES.................................................50
Section 11.1. The Guarantees...............................................50
Section 11.2. Guarantee Unconditional......................................51
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances................................................52
Section 11.4. Subrogation..................................................52
Section 11.5. Waivers......................................................52
Section 11.6. Stay of Acceleration.........................................52
SECTION 12. MISCELLANEOUS..................................................52
Section 12.1. Holidays.....................................................52
Section 12.2. No Waiver, Cumulative Remedies...............................53
Section 12.3. Waivers, Modifications and Amendments........................53
Section 12.4. Costs and Expenses...........................................53
Section 12.5. Stamp Taxes..................................................54
Section 12.6. Survival of Representations..................................54
Section 12.7. Construction.................................................54
Section 12.8. Accounting Principles........................................54
Section 12.9. Addresses for Notices........................................54
</TABLE>
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<TABLE>
<S> <C> <C>
Section 12.10. Headings.....................................................55
Section 12.11. Severability of Provisions...................................55
Section 12.12. Counterparts.................................................55
Section 12.13. Binding Nature, Governing Law, Etc...........................55
Section 12.14. Assignment Agreements........................................55
Section 12.15. Participations...............................................56
Section 12.16. Certain Junior Subordinated Debt.............................56
Signature Page......................................................................58
</TABLE>
Exhibit A Revolving Credit Note
Exhibit B Term Credit One Note
Exhibit C Term Credit Two Note
Exhibit D Borrowing Base Certificate
Exhibit E Compliance Certificate
Schedule 5.2. Subsidiaries
Schedule 5.13 Compliance with Laws
Schedule 7.17 Existing Capital Leases
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NU-WEST INDUSTRIES, INC.
CREDIT AGREEMENT
To:
Harris Trust and Savings Bank
Chicago, Illinois
FBS Ag Credit, Inc.
Denver, Colorado
First Union National Bank of North Carolina
Charlotte, North Carolina
St. Paul Bank for Cooperatives
St. Paul, Minnesota
Caisse Nationale de Credit Agricole
Chicago, Illinois
Gentlemen:
The undersigned, Nu-West Industries, Inc., a Delaware corporation (the
"Company"), applies to the Banks (as hereinafter defined) for their several
commitments, subject to all of the terms and conditions hereof and on the basis
of the representations and warranties hereinafter set forth, to make a revolving
credit (the "Revolving Credit"), a letter of credit facility (the "Letter of
Credit Facility") and, a term credit ("Term Credit One") and to the Banks for a
term credit ("Term Credit Two" and, together with Term Credit One, collectively,
the "Term Credits") available to the Company, all as more fully hereinafter set
forth.
.C.SECTION 1. THE CREDITS;.
.c2.Section 1.1. The Revolving Credit. (a) Subject to all of the terms
and conditions hereof, the Banks agree, severally and not jointly, to extend a
Revolving Credit to the Company which may be utilized by the Company in the form
of loans (individually a "Revolving Credit Loan" and collectively the "Revolving
Credit Loans"). The aggregate principal amount of all Revolving Credit Loans at
any time outstanding shall not exceed the lesser of (i) the sum of the Banks'
Revolving Credit Commitments (as hereinafter defined) in effect from time to
time during the term of this Agreement (as hereinafter defined) and (ii) the
Borrowing Base as then
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determined and computed. The Revolving Credit shall be available to the Company,
and may be availed of by the Company from time to time, be repaid (subject to
the restrictions on prepayment set forth herein) and used again, during the
period from the date hereof to and including June 30, 2000 (the "Termination
Date"). Each Revolving Credit Loan obtained pursuant to Section 1.6 and 1.7
hereof, shall be in a minimum principal amount of $250,000 or any greater amount
which is a whole multiple of $100,000.
(b) The Revolving Credit shall consist of a base revolving credit (the
"Base Credit") in an aggregate principal amount at any one time outstanding of
up to $10,000,000, which shall be available at all times during the term of this
Agreement and an excess revolving credit (the "Excess Credit") in an aggregate
principal amount at any one time outstanding of up to $5,000,000, which shall be
available only during the period from July 1 through the last day of the
following February of each year during the term hereof.
The respective maximum aggregate principal amounts of the Base Credit at
any one time outstanding and the percentage of the Base Credit available at any
time which each Bank by its acceptance hereof severally agrees to make available
to the Company and each Bank's percentage thereof (its "Commitment Percentage")
are as follows (collectively, the "Base Revolving Credit Commitments" and
individually, a "Base Revolving Credit Commitment"):
<TABLE>
<S> <C> <C>
Harris Trust and Savings Bank $3,333,333.34 33.33333340%
FBS Ag Credit, Inc. $2,000,000.00 20%
First Union National Bank of North $2,000,000.00 20%
Carolina
St. Paul Bank for Cooperatives $1,333,333.33 13.33333330%
Caisse Nationale de Credit Agricole $1,333,333.33 13.33333330%
</TABLE>
-8-
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<TABLE>
<S> <C> <C>
Total $10,000,000 100%
</TABLE>
The respective maximum aggregate principal amounts of the Excess Credit at any
one time outstanding and the percentage of the Excess Credit available at any
time which each Bank by its acceptance hereof severally agrees to make available
to the Company are as follows (collectively, the "Excess Revolving Credit
Commitments" and individually, an "Excess Revolving Credit Commitment"):
<TABLE>
<S> <C> <C>
Harris Trust and Savings Bank $1,666,666.66 33.33333320%
FBS Ag Credit, Inc. $1,000,000.00 20%
First Union National Bank of $1,000,000.00
North Carolina 20%
St. Paul Bank for Cooperatives $666,666.67 13.33333340%
Caisse Nationale de Credit Agricole $666,666.67 13.33333340%
Total $5,000,000 100%
</TABLE>
Each Bank's Base Revolving Credit Commitment and Excess Revolving Credit
Commitment during any period are hereinafter referred to collectively as the
"Revolving Credit Commitment" for such Bank during such period and the Base
Revolving Credit Commitments and Excess Revolving Credit Commitments for all
Banks during any period are hereinafter collectively
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referred to as the "Revolving Credit Commitments" during such period.
(c) Revolving Credit Loans made by each Bank hereunder shall be evidenced
by a single Revolving Credit Note of the Company substantially in the form (with
appropriate insertions) of Exhibit A hereto (individually, a "Revolving Note"
and together, the "Revolving Notes") payable to the order of such Bank in the
principal amount of such Bank's Revolving Credit Commitment, but the aggregate
principal amount of indebtedness evidenced by such Revolving Note at any time
shall be, and the same is to be determined by, the aggregate principal amount of
all Revolving Credit Loans made by such Bank to the Company pursuant hereto on
or prior to the date of determination less the aggregate amount of principal
repayments on such Revolving Credit Loans received by or on behalf of such Bank
on or prior to such date of determination. Each Revolving Note shall be dated as
of the execution date of this Agreement, shall be delivered concurrently
herewith, and shall be expressed to mature on the Termination Date and to bear
interest as provided in Section 2 hereof.
.c2.Section 1.2. The Term Credit One;. Subject to all of the terms and
conditions hereof, each Bank agrees to make a loan to the Company under the Term
Credit One in the amount set forth below opposite its name (collectively, the
"Term Credit One Commitments" and individually a "Term Credit One Commitment"):
<TABLE>
<S> <C> <C>
Harris Trust and Savings Bank $8,333,333.34 33.333333336%
FBS Ag Credit, Inc. $5,000,000.00 20%
First Union National Bank of $5,000,000.00 20%
North Carolina
St. Paul Bank for Cooperatives $3,333,333.33 13.33333332%
Caisse Nationale de Credit Agricole $3,333,333.33 13.33333332%
</TABLE>
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<TABLE>
<S> <C> <C>
Total $25,000,000 100%
</TABLE>
The loans from all Banks under the Term Credit One (the "Term Credit One Loans")
shall be made concurrently and such loans shall be made, if at all, on or before
July 31, 1995, at which time the commitments of the Banks to make the Term
Credit One Loans shall expire. The Term Credit One Loan made by each Bank shall
be evidenced by a Term Credit One Note of the Company (individually a "Term
Credit One Note" and collectively the "Term Credit One Notes") payable to the
order of such Bank in the amount of its Term Credit One Commitment, each Term
Credit One Note to be in the form (with appropriate insertions) attached hereto
as Exhibit B hereto. Each Term Credit One Note shall be expressed to bear
interest as provided in Section 2 hereof and to mature in twenty (20)
consecutive quarterly installments of principal, commencing on September 30,
1995 and continuing on the last day of each December, March, June and September
occurring thereafter to and including June 30, 2000, the final maturity date
thereof, with each installment on all Term Credit One Notes to aggregate
$1,250,000 and with the amount of each installment due on the Term Credit One
Note held by each Bank to be a pro rata part (based on the relationship which
its Term Credit One Commitment bears to the total Term Credit One Commitments)
of each such aggregate amount.
.c2.Section 1.3. The Term Credit Two;. Subject to all of the terms and
conditions hereof, each Bank agrees to make a loan to the Company under the Term
Credit Two in the amount set forth below opposite (collectively, the "Term
Credit Two Commitments" and individually a "Term Credit Two Commitment"):
<TABLE>
<S> <C> <C>
Harris Trust and Savings Bank $10,000,000.00 33.33333333%
FBS Ag Credit, Inc. $6,000,000.00 20%
</TABLE>
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<TABLE>
<S> <C> <C>
First Union National Bank of $6,000,000.00 20%
North Carolina
St. Paul Bank for Cooperatives $4,000,000.00 13.33333333%
Caisse Nationale de Credit Agricole $4,000,000.00 13.33333333%
Total $30,000,000 100%
</TABLE>
The loans from all Banks under the Term Credit Two (the "Term Credit Two Loans")
shall be made concurrently and such loans shall be made, if at all, on or before
July 31, 1995, at which time the commitments of the Banks to make the Term
Credit Two Loans shall expire. The Term Credit Two Loan made by each Bank shall
be evidenced by a Term Credit Two Note of the Company (individually a "Term
Credit Two Note" and collectively the "Term Credit Two Notes") payable to the
order of such Bank in the amount of its Term Credit Two Commitment, each Term
Credit Two Note to be in the form (with appropriate insertions) attached hereto
as Exhibit C hereto. Each Term Credit Two Note shall be expressed to bear
interest as provided in Section 2 hereof and to mature in twenty-four (24)
consecutive quarterly installments of principal, commencing on September 30,
1995 and continuing on the last day of each December, March, June and September
occurring thereafter to and including June 30, 2001, the final maturity date
thereof, in the following aggregate principal amounts; $250,000 on September 30,
1995, December 31, 1995, March 31, 1996, June 30, 1996, September 30, 1996,
December 31, 1996, March 31, 1997, and June 30, 1997; $1,000,000 on September
30, 1997, December 31, 1997, March 31, 1998 and June 30, 1998; $1,250,000 on
September 30, 1998, December 31, 1998, March 31, 1999 and, June 30, 1999;
$1,500,000 on September 30, 1999, December 31, 1999, March 31, 2000 and June 30,
2000; and $3,250,000 on September 30, 2000, December 31, 2000, March 31, 2001
and June 30, 2001. The amount of each installment due on the Term Credit Two
Note held by each Bank shall be a pro rata part (based on the relationship which
its Term Credit Two Commitment bears to the total Term Credit Two Commitments)
of each such
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aggregate amount.
.c2.Section 1.4. Manner of Borrowing;. The Company shall give written
or telephonic notice to the Agent (which notice shall be irrevocable once given
and, if given by telephone, shall be promptly confirmed in writing) by no later
than 11:00 a.m. (Chicago time) one (1) Business Day prior to the date the
Company requests that any Loan be made to it under any of the Commitments, and
the Agent shall promptly notify each Bank that has a Commitment of that type of
the Agent's receipt of each such notice. Each such notice shall specify the date
of the Loan requested (which must be a Business Day) and the amount and type of
such Loan. Each Loan shall initially constitute part of the applicable Domestic
Rate Portion except to the extent the Company has otherwise timely elected as
provided in Section 2 hereof. The Company agrees that the Agent may rely upon
any written or telephonic notice given by any person purporting to be a person
authorized to act on behalf of the Company hereunder, without the necessity of
independent investigation and, in the event any telephonic notice conflicts with
the written confirmation, such telephonic notice shall govern if the Agent and
the relevant Banks have acted in reliance thereon. Not later than 1:00 p.m.
(Chicago time) on the date specified for any Loan to be made by a Bank
hereunder, such Bank shall make the proceeds of its pro rata share of such Loan
available to the Agent in Chicago, Illinois in immediately available funds.
Subject to the provisions of Section 6 hereof, the proceeds of each Loan shall
be made available to the Company at the principal office of the Agent in
Chicago, Illinois, in immediately available funds, upon receipt by the Agent
from each Bank of its pro rata share of such Loan. Unless the Agent shall have
been notified by a Bank prior to the date a Loan is to be made by it hereunder
that such Bank does not intend to make its pro rata share of such Loan available
to the Agent, the Agent may assume that such Bank has made such share available
to the Agent on such date and the Agent may in reliance upon such assumption
make available to the Company a corresponding amount. If such corresponding
amount is not in fact made available to the Agent by such Bank and the Agent has
made such amount available to the Company, the Agent shall be entitled to
receive such amount from such Bank forthwith upon the Agent's demand, together
with interest thereon in respect of each day during the period commencing on the
date such amount was made available to the Company and ending on but excluding
the date the Agent recovers such amount at a rate per annum equal to the
effective rate charged to the Agent for overnight federal funds transactions
with member banks of the federal reserve system for each day as determined by
the Agent (or in the case of a day which is not a Business Day, then for
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the preceding day). If such amount is not received from such Bank by the Agent
immediately upon demand, the Company will, on demand, repay to the Agent the
proceeds of the Loan attributable to such Bank with interest thereon at a rate
per annum equal to the interest rate applicable to the relevant Loan, together
with any amount payable under Section 2.10 hereof with respect to such payment.
Nothing in this Section 1.4 shall be deemed to permit any Bank to breach its
obligations to make Loans hereunder or to limit the Company's claims against any
Bank for such breach.
.c2.Section 1.5. The Letter of Credit Facility;. (a) Subject to all the
terms and conditions hereof, Harris shall issue letters of credit (each an "L/C"
and collectively, the "L/C's") for the account of the Company in an aggregate
original stated amount of up to $5,000,000 (the "L/C Commitment") at any time
prior to December 31, 1998 (the "L/C Facility Expiration Date"), and the Banks
hereby agree to participate therein as more fully described in Section 1.7
hereof. Each L/C shall be issued pursuant to an Application for letter of credit
in Harris' customary form (an "Application"), shall conform to the general
requirements of Harris for the issuance of letters of credit as to form and
substance, shall be in U.S. Dollars and shall be a letter of credit which Harris
may lawfully issue. Each L/C shall have an expiry date not more than one year
from the date of issuance thereof (but in no event later than the L/C Facility
Expiration Date).
(b) This Agreement supersedes any terms of the Applications which are
irreconcilably inconsistent with the terms hereof. Anything contained in the
Applications to the contrary notwithstanding, (i) the Company shall pay fees in
connection with each L/C as set forth in Section 3.3 hereof, (ii) prior to the
occurrence of an Event of Default, unless required by Section 8.4 hereof, Harris
will not call for any collateral security for the obligations of the Company
under the Applications and (iii) prior to the occurrence of an Event of Default
or the L/C Facility Expiration Date, unless required by Section 8.4 hereof,
Harris will not call for the funding by the Company of an L/C issued for its
account prior to being presented with a draft drawn thereunder (or, in the event
the draft is a time draft, prior to its due date).
.c2.Section 1.6. Reimbursement Obligation;. The Company is obligated,
and hereby unconditionally agrees, to pay in immediately available funds to the
Agent for the account of Harris the face amount of each draft drawn and
presented under an L/C issued by Harris hereunder (the obligation of the Company
under this Section 1.6 with respect to any L/C is a "Reimbursement Obligation").
If at any time the Company fails to pay any Reimbursement
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Obligation when due, the Company shall be deemed to have automatically requested
a Revolving Credit Loan from the Banks hereunder, as of the maturity date of
such Reimbursement Obligation, the proceeds of which shall be used to repay such
Reimbursement Obligation. Such Loan shall only be made if all conditions
precedent to making a Revolving Credit Loan have been satisfied and shall be
subject to availability under the Revolving Credit. If such Loan is not made by
the Banks for any reason, the unpaid amount of such Reimbursement Obligation
shall be due and payable to Harris upon demand and shall bear interest at the
default rate of interest specified in Section 2.2 hereof.
.c2.Section 1.7. Participation in L/C's;. Each of the Banks will
acquire a risk participation in each L/C upon the issuance thereof. In the event
any Reimbursement Obligation is not immediately paid by the Company pursuant to
Section 1.6 hereof, each Bank will pay to Harris funds in an amount equal to
such Bank's ratable share of the unpaid amount of such Reimbursement Obligation
(based upon its Commitment Percentage). At the election of the Banks, such
funding by the Banks of the unpaid Reimbursement Obligations shall be treated as
additional Revolving Credit Loans to the Company hereunder rather than a
purchase of participations by the Banks in the related L/C's held by Harris. The
obligation of the Banks to Harris under this Section 1.7 shall be absolute and
unconditional and shall not be affected or impaired by any Event of Default or
Potential Default which may then be continuing hereunder. The Agent shall notify
each Bank by telephone of its Commitment Percentage of such unpaid Reimbursement
Obligation. If such notice has been given to each Bank by 12:00 Noon (Chicago
time) each Bank agrees to pay the Agent in immediately available and freely
transferable funds on the same Business Day. Funds shall be so made available at
the account designated by the Agent in such notice to the Banks. Upon the
election by the Banks to treat such funding as an additional Revolving Credit
Loan hereunder and payment by each Bank such Revolving Credit Loans shall bear
interest in accordance with Section 2.2 hereof. Harris shall share with each
Bank on a pro rata basis relative to each Bank's Commitment Percentage a portion
of any L/C fee payable by the Company pursuant to Section 3.3 hereof. Any such
fee shall be promptly remitted to the Banks when and as received by Harris from
the Company.
.C.SECTION 2. INTEREST.
.c2.Section 2.1. Options;. Subject to all of the terms and conditions
of this Section 2, portions of the principal indebtedness evidenced by the Notes
(all of the indebtedness evidenced
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by a particular class of Notes bearing interest at the same rate for the same
period of time being hereinafter referred to as a "Portion") may, at the option
of the Company, bear interest with reference to the Domestic Rate (the "Domestic
Rate Portions") or with reference to the Adjusted LIBOR ("LIBOR Portions"), and
Portions may be converted from time to time from one basis to the other. All of
the indebtedness evidenced by a particular class of Notes which is not part of a
LIBOR Portion shall constitute a single Domestic Rate Portion. All of the
indebtedness evidenced by a particular class of Notes which bears interest with
reference to a particular Adjusted LIBOR for a particular Interest Period shall
constitute a single LIBOR Portion. The Company promises to pay interest on each
Portion at the rates and times specified in this Section 2.
.c2.Section 2.2. Domestic Rate Portion;. Each Domestic Rate Portion
shall bear interest (which the Company promises to pay at the times herein
provided) at the rate per annum determined by adding the Applicable Domestic
Rate Margin to the Domestic Rate as in effect from time to time, provided that
if a Domestic Rate Portion or any part thereof is not paid when due (whether by
lapse of time, acceleration or otherwise), such Portion shall bear interest
(which the Company promises to pay at the times hereinafter provided), whether
before or after judgment, for the period from the date such Portion became due
and until payment in full thereof, at the rate per annum determined by adding 2%
to the interest rate which would otherwise be applicable thereto from time to
time. Interest on the Domestic Rate Portions shall be payable quarter-annually
in arrears on the last day of each March, June, September and December in each
year (commencing September 30, 1995) and at maturity of the applicable Notes,
and interest after maturity (whether by lapse of time, acceleration or
otherwise) shall be due and payable upon demand. Any change in the interest rate
on the Domestic Rate Portions resulting from a change in the Domestic Rate shall
be effective on the date of the relevant change in the Domestic Rate.
.c2.Section 2.3. LIBOR Portions;. Each LIBOR Portion shall bear
interest (which the Company promises to pay at the times herein provided) for
each Interest Period selected therefor at a rate per annum determined by adding
the Applicable LIBOR Margin to the Adjusted LIBOR for such Interest Period,
provided that if any LIBOR Portion is not paid when due (whether by lapse of
time, acceleration or otherwise) such Portion shall bear interest (which the
Company promises to pay at the times hereinafter provided) whether before or
after judgment, for the period from the date such Portion became due and until
payment in full thereof, through the end of the Interest Period then applicable
thereto at the rate per annum determined by adding 2% to
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the interest rate otherwise applicable thereto, and effective at the end of such
Interest Period such LIBOR Portion shall automatically be converted into and
added to the applicable Domestic Rate Portion and shall thereafter bear interest
at the interest rate applicable to the applicable Domestic Rate Portion after
default. Interest on each LIBOR Portion shall be due and payable on the last day
of each Interest Period applicable thereto and, if an Interest Period is longer
than three months, then on the date occurring every three months after the date
such Interest Period began and at the end of such Interest Period, and interest
after maturity (whether by lapse of time, acceleration or otherwise) shall be
due and payable upon demand. The Company shall notify the Agent on or before
11:00 a.m. (Chicago time) on the third Business Day preceding the end of an
Interest Period applicable to a LIBOR Portion whether such LIBOR Portion is to
continue as a LIBOR Portion, in which event the Company shall notify the Agent
of the new Interest Period selected therefor, and in the event the Company shall
fail to so notify the Agent, such LIBOR Portion shall automatically be converted
into and added to the applicable Domestic Rate Portion as of and on the last day
of such Interest Period. The Agent shall promptly notify each Bank of each
notice received from the Company pursuant to the foregoing provisions. Anything
contained herein to the contrary notwithstanding, the obligation of the Banks to
create, continue or effect by conversion any LIBOR Portion shall be conditioned
upon the fact that at the time no Potential Default or Event of Default shall
have occurred and be continuing.
.c2.Section 2.4. Computation;. All interest on the Domestic Rate
Portions and all fees, charges and other amounts due hereunder shall be computed
on the basis of a year of 365/366 days for the actual number of days elapsed,
and interest on all LIBOR Portions shall be computed on the basis of a year of
360 days for the actual number of days elapsed.
.c2.Section 2.5. Minimum Amounts;. Each LIBOR Portion shall be in a
minimum amount of $1,000,000 or such greater amount which is an integral
multiple of $100,000.
.c2.Section 2.6. Manner of Rate Selection;. The Company shall notify
the Agent by 11:00 a.m. (Chicago time) at least three Business Days prior to the
date upon which it requests that any LIBOR Portion be created or that any part
of a Domestic Rate Portion be converted into a LIBOR Portion (such notice to
specify in each instance the amount thereof and the Interest Period selected
therefor) and the Agent shall promptly advise each Bank of each such notice. If
any request is made to convert a LIBOR Portion into a Domestic Rate Portion,
such conversion shall only be made so as to become effective as of the last day
of the Interest Period applicable
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thereto. All requests for the creation, continuance or conversion of Portions
under this Agreement shall be irrevocable. Such requests may be written or oral
and the Agent is hereby authorized to honor telephonic requests for creations,
continuances and conversions received by it from any person purporting to be a
person authorized to act on behalf of the Company hereunder, without the
necessity of independent investigation, the Company hereby indemnifying the
Agent and the Banks from any liability or loss ensuing from so acting.
.c2.Section 2.7. Change of Law;. Notwithstanding any other provisions
of this Agreement or any Note, if at any time a Bank shall determine in good
faith that any change in applicable laws, treaties or regulations or in the
interpretation thereof makes it unlawful for such Bank to create or continue to
maintain any LIBOR Portion, it shall promptly so notify the Agent (which shall
in turn promptly notify the Company and the other Banks) and the obligation of
such Bank to create, continue or maintain any such LIBOR Portion under this
Agreement shall terminate until it is no longer unlawful for such Bank to
create, continue or maintain such LIBOR Portions. The Company, on demand, shall,
if the continued maintenance of any such LIBOR Portion is unlawful, thereupon
prepay the outstanding principal amount of such LIBOR Portions, together with
all interest accrued thereon and all other amounts payable to the affected Bank
with respect thereto under this Agreement, provided, however, that the Company
may instead elect to convert the principal amount of the affected Portion into
the applicable Domestic Rate Portion, subject to the terms and conditions of
this Agreement. If a Bank affected by a change in law or regulation can avoid
the effect of such change by changing its lending or funding branch it shall do
so, provided that the same can be accomplished without disadvantage to it.
.c2.Section 2.8. Unavailability of Deposits or Inability to Ascertain
the Adjusted LIBOR;. Notwithstanding any other provision of this Agreement or
any Note, if prior to the commencement of any Interest Period, the Required
Banks shall determine that United States dollar deposits in the amount of any
LIBOR Portion scheduled to be outstanding during such Interest Period are not
readily available to such Banks in the offshore interbank market or, by reason
of circumstances affecting the offshore interbank market, adequate and
reasonable means do not exist for ascertaining Adjusted LIBOR, then such Banks
shall promptly give notice thereof to the Agent (which shall promptly notify the
Company and each other Banks) and the obligations of the Banks to create,
continue or effect by conversion any LIBOR Portion in such amount and for such
Interest Period shall terminate until United States dollar deposits in such
amount and for the Interest Period selected by the Company shall again be
readily available in
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the offshore interbank market or adequate and reasonable means exist for
ascertaining Adjusted LIBOR, as the case may be.
.c2.Section 2.9. Taxes and Increased Costs;. With respect to any LIBOR
Portion, if any Bank shall determine in good faith that any change after the
date hereof in any applicable law, treaty, regulation or guideline (including,
without limitation, Regulation D of the Board of Governors of the Federal
Reserve System) or any new law, treaty, regulation or guideline, or any
interpretation of any of the foregoing by any governmental authority charged
with the administration thereof or any central bank or other fiscal, monetary or
other authority having jurisdiction over such Bank or its lending branch or the
LIBOR Portions contemplated by this Agreement (whether or not having the force
of law) shall:
(a) impose, increase, or deem applicable any reserve, special
deposit or similar requirement against assets held by, or deposits in or
for the account of, or loans by, or any other acquisition of funds or
disbursements by, such Bank which is not in any instance already
accounted for in computing the Adjusted LIBOR;
(b) subject such Bank, any LIBOR Portion or a Note to the extent
it evidences such Portions, to any tax (including, without limitation,
any United States interest equalization tax or similar tax however named
applicable to the acquisition or holding of debt obligations and any
interest or penalties with respect thereto), duty, charge, stamp tax,
fee, deduction or withholding in respect of this Agreement, any LIBOR
Portion or a Note to the extent it evidences such a Portion, except such
taxes as may be measured by the overall net income or gross receipts of
such Bank or its lending branches and imposed by the jurisdiction, or any
political subdivision or taxing authority thereof, in which such Bank's
principal executive office or its lending branch is located;
(c) change the basis of taxation of payments of principal or
interest due from the Company to such Bank hereunder or under a Note to
the extent it evidences any LIBOR Portion (other than by a change in
taxation of the overall net income or gross receipts of such Bank); or
(d) impose on such Bank any penalty with respect to the foregoing
or any other condition regarding this Agreement, its disbursement, any
LIBOR Portion or a Note to the extent it evidences any LIBOR Portion;
and such Bank shall determine that the result of any of the foregoing is to
increase the cost
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(whether by incurring a cost or adding to a cost) to such Bank of creating or
maintaining any LIBOR Portion hereunder or to reduce the amount of principal or
interest received or receivable by such Bank (without benefit of, or credit for,
any prorations, exemption, credits or other offsets available under any such
laws, treaties, regulations, guidelines or interpretations thereof), then the
Company shall pay on demand to the Agent for the account of such Bank from time
to time as specified by such Bank such additional amounts as such Bank shall
reasonably determine are sufficient to compensate and indemnify it for such
increased cost or reduced amount. If a Bank makes such a claim for compensation,
it shall provide to the Company (with a copy to the Agent) a written explanation
of the circumstances giving rise to such claim and a certificate setting forth
the computation of the increased cost or reduced amount as a result of any event
mentioned herein in reasonable detail and such certificate shall be deemed prima
facie correct. If a Bank can avoid the effect of any such change by changing its
lending or funding branch, it shall do so provided that the same can be
accomplished without disadvantage to it.
.c2.Section 2.10. Funding Indemnity;. In the event any Bank shall incur
any loss, cost or expense (including, without limitation, any loss (including
loss of profit), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired or contracted to be acquired by
such Bank to fund or maintain its part of any LIBOR Portion or the relending or
reinvesting of such deposits or other funds or amounts paid or prepaid to such
Bank), as a result of:
(i) any payment of a LIBOR Portion on a date other than the last
day of the then applicable Interest Period for any reason, whether before
or after default, and whether or not such payment is required by any
provisions of the Agreement; or
(ii) any failure by the Company to create, borrow, continue or
effect by conversion a LIBOR Portion on the date specified in a notice
given pursuant to this Agreement;
then upon the demand of such Bank, the Company shall pay to the Agent for the
account of such Bank such amount as will reimburse such Bank for such loss, cost
or expense. If a Bank requests such a reimbursement it shall provide the Company
(with a copy to the Agent) with a certificate setting forth the computation of
the loss, cost or expense giving rise to the request for reimbursement in
reasonable detail and such certificate shall be deemed prima facie correct.
.c2.Section 2.11. Lending Branch;. Each Bank may, at its option, elect
to make, fund or
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maintain its Loans hereunder at the branches or offices specified on the
signature pages hereof or on any Assignment Agreement executed and delivered
pursuant to Section 12.14 hereof or at such other of its branches or offices as
such Bank may from time to time elect.
.c2.Section 2.12. Discretion of Banks as to Manner of Funding;.
Notwithstanding any provision of this Agreement to the contrary, each Bank shall
be entitled to fund and maintain its funding of all or any part of its Notes in
any manner it sees fit, it being understood, however, that for the purposes of
this Agreement all determinations hereunder (including determinations under
Sections 2.8, 2.9 and 2.10 hereof) shall be made as if each such Bank had
actually funded and maintained each LIBOR Portion during each Interest Period
applicable thereto through the purchase of deposits in the offshore interbank
market in the amount of its share of such LIBOR Portion, having a maturity
corresponding to such Interest Period and bearing an interest rate equal to
LIBOR for such Interest Period.
.C.SECTION 3. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS AND NOTATIONS;.
.c2.Section 3.1. Commitment Fee;. For the period from and including the
date hereof to and including the Termination Date, the Company shall pay to the
Agent for the ratable account of the Banks a commitment fee at the rate of 1/2
of 1% per annum on the average daily unused amount of the Revolving Credit
Commitments hereunder, such fee to be payable on September 30, 1995 and on the
last day of each September, December, March and June thereafter to and
including, and on, the Termination Date.
.c2.Section 3.2. Closing Fees;. On the date hereof, the Company shall
pay to the Agent for the ratable account of the Banks, a closing fee in an
amount equal to 1/2 of 1% of their Revolving Credit Commitments and Term Credit
One Commitments and 7/8 of 1% of their Term Credit Two Commitments.
.c2.Section 3.3. Letter of Credit Fees;. On the date of issuance or
extension, or increase in the amount, of any L/C pursuant to Section 1.5 hereof,
the Company shall pay to Harris for its own use and benefit an issuance fee
equal to 1/8 of 1% (0.125%) of the face amount of (or of the increase in the
face amount of) such L/C. Quarterly in arrears, on the last day of each calendar
quarter (commencing on the first of such dates after the date hereof), the
Company shall pay to the Agent, for the ratable benefit of the Banks in
accordance with the Commitment Percentages, a letter of credit fee at a rate per
annum equal to the Applicable Margin for LIBOR Portions under the Revolving
Credit in effect during each day of such quarter applied to the daily
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average face amount of L/C's outstanding during such quarter. In addition, the
Company shall pay to Harris for its own use and benefit Harris's standard
drawing, negotiation, amendment and other administrative fees for each L/C. Such
standard fees referred to in the immediately preceding sentence may be
established by Harris from time to time.
.c2.Section 3.4. Agent's Fees;. The Company shall pay to and for the
sole account of the Agent such fees as may be agreed upon in writing from time
to time by the Agent and the Company. Such fees shall be in addition to any fees
and charges the Agent may be entitled to receive under Section 10 hereunder or
under the other Loan Documents.
.c2.Section 3.5. Voluntary Prepayments.; (a) The Company shall have the
privilege of prepaying without premium or penalty and in whole or in part (but
if in part, then in an amount not less than $250,000) the Domestic Rate Portion
of any Note at any time upon notice from the Company to the Agent prior to 10:00
a.m. (Chicago time) on the date fixed for prepayment, each such prepayment to be
made by the payment of the principal amount to be prepaid and accrued interest
thereon to the date of prepayment.
(b) The Company may prepay any LIBOR Portion of any Note in whole or in
part (but if in part, then in an amount not less than $1,000,000 or such greater
amount which is an integral multiple of $100,000) upon three (3) Business Days'
prior notice from the Company to the Agent (which notice shall be irrevocable
once given, must be received by the Agent no later than 10:00 a.m. (Chicago
time) on the third Business Day preceding the date of such prepayment, and shall
specify the principal amount to be repaid). Any such prepayment shall be
effected by payment of (i) the principal amount to be prepaid, (ii) accrued
interest thereon to the date of prepayment, and (iii) any amounts due to the
Banks pursuant to Section 2.10 hereof.
.c2.Section 3.6. Mandatory Prepayments. (a) Borrowing Base Deficiency.;
The Company covenants and agrees that if at any time the unpaid principal
balance of the Revolving Notes shall at any time and for any reason exceed the
lesser of the Revolving Credit Commitments or the Borrowing Base as then
determined and computed, the Company shall immediately and without notice or
demand pay over the amount of the excess to the Agent for the account of the
Banks as and for a mandatory prepayment on the Revolving Notes.
.c2.(b) Fixed Asset Proceeds.; Any and all proceeds derived from the
sale or disposition (whether voluntary or involuntary), or on account of damage
or destruction, of the real estate, furniture, fixtures, equipment or other
fixed assets of the Company shall be paid over to the
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Agent as and for a mandatory prepayment on the Term Notes; provided, however,
that if at the time of receipt no amount is outstanding under the Term Notes or
the amount received is in excess of the amount necessary to prepay the Term
Notes in full, then such payment or excess (as appropriate) shall be applied to
the Revolving Notes (or held by the Agent as collateral security for the
Company's obligations under the Applications if the Revolving Credit Loans have
been prepaid in full but L/C's are outstanding) and the Revolving Credit
Commitments shall be ratably reduced by a like amount; provided, however, that
(i) the foregoing provisions shall be inapplicable to proceeds received by the
Agent under the Security Documents if and so long as, pursuant to the terms of
the Security Documents, the same are to be held by the Agent and disbursed for
the restoration, repair or replacement of the property in respect of which such
proceeds were received, (ii) no prepayment shall be required with respect to the
first $250,000 of net proceeds (i.e., gross proceeds net of out-of-pocket
expenses incurred in effecting the sale or other disposition) received during
each fiscal year of the Company on a cumulative basis from the sale or other
disposition of equipment, furniture and fixtures of the Company which are worn
out, obsolete or, in the good faith judgment of the Company, no longer desirable
to the efficient conduct of its business as then conducted, (iii) no prepayment
shall be required with respect to proceeds received from the sale, damage or
destruction of any of the equipment or other assets subject to Liens permitted
by Section 7.16(d) hereof if and to the extent such proceeds are applied to
reduce the indebtedness secured by such Liens, and (iv) so long as no Potential
Default or Event of Default has occurred or is continuing the Company may retain
the proceeds derived from the sale, damage or destruction of fixtures, furniture
and equipment if and to the extent that it establishes to the reasonable
satisfaction of the Agent that the equipment sold, damaged, or destroyed has
been replaced (or repaired in the case of damaged property) with fixtures,
furniture or equipment of at least equal actual out-of-pocket replacement cost
to that replaced (before any such damage or destruction) which is subject to a
first lien in favor of the Agent for the benefit of the Banks. Nothing herein
contained shall in any manner impair or otherwise affect the prohibitions
against the sale or other disposition of Collateral contained herein and in the
Security Documents.
.c2.(c) Equity Offering; Within five (5) days of receipt by the Company
of proceeds from any Equity Offering, the Term Notes shall be prepaid in an
amount equal to the lesser of (i) 100% of the gross proceeds of such issuance
(net of underwriting discounts and commissions and other costs directly incurred
and payable as a result thereof) or (ii) the aggregate amount of
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the Term Notes then outstanding. Upon such prepayment, the Term Credit
Commitments shall be ratably reduced by a like amount.
(d) Excess Cash Flow. On the last day of March, June, September and
December of each year (commencing September 30, 1996) (each such date a "payment
date"), the Company shall pay over to the Agent as and for a mandatory
prepayment on the Term Notes an amount equal to 25% of 75% of Excess Cash Flow
for the fiscal year of the Company most recently completed; provided, however,
that upon the Company's prepayment of $20,000,000 of the principal amount
outstanding under the Term Notes pursuant to this Section 3.6(d), such
percentage shall be reduced from 75% to 50%.
.c2.Section 3.7. Terminations;. The Company shall have the privilege at
any time and from time to time upon three Business Days' prior notice to the
Agent (which shall promptly notify the Banks) received on or before 10:00 a.m.
(Chicago time) to ratably terminate the Revolving Credit Commitments in whole or
in part (but if in part then in a minimum amount of $1,000,000 or an integral
multiple thereof). The Company shall, on the date the Revolving Credit
Commitments are terminated in whole or in part, prepay the Revolving Notes by
the amount, if any, necessary to reduce their aggregate outstanding principal
balance to the amount to which the Revolving Credit Commitments have been
reduced. No termination of the Revolving Credit Commitments pursuant to this
Section 3.7 may be reinstated.
.c2.Section 3.8. Place and Application;. All payments of principal,
interest, fees and amounts due with respect to L/C's shall be made to the Agent
at its office at 111 West Monroe Street, Chicago, Illinois (or at such other
place as the Agent may specify) in immediately available and freely transferable
funds at the place of payment. All such payments shall be made without setoff or
counterclaim and without reduction for, and free from, any and all present or
future taxes, levies, imposts, duties, fees, charges, deductions, withholdings,
restrictions or conditions of any nature imposed by any government or political
subdivision or taxing authority thereof. Payments received by the Agent after
12:00 noon (Chicago time) shall be deemed received as of the opening of business
on the next Business Day. Except as otherwise provided in this Agreement, all
payments shall be received by the Agent for the ratable account of the Banks,
and shall be promptly distributed by the Agent ratably to the Banks except that
payments which pursuant to the terms hereof are for the use and benefit of the
Agent shall be retained by it for its own account and payments received to
reimburse a Bank for a cost peculiar to that Bank
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shall be remitted to it. Payments under Sections 2.9, 2.10 and 3.10 hereof may
be made by the Company directly to the Banks or to the Agent, which shall
promptly remit same to the Banks entitled thereto. Unless the Company otherwise
directs, payments applicable to the principal of the Notes shall be deemed first
applied to the applicable Domestic Rate Portion until payment in full thereof,
with any balance applied to the applicable LIBOR Portions in the order in which
their Interest Periods expire. All prepayments (whether voluntary or required)
applicable to the Term Credits shall be applied to the several installment
maturities due on the Term Notes in the inverse order of their respective
maturities. All payments (whether voluntary or required) shall be accompanied by
any amount due the Banks under Section 2.10 hereof, but no acceptance of such a
payment without requiring payment of amounts due under Section 2.10 shall
preclude a later demand by the Banks for any amount due them under Section 2.10
in respect of such payment.
Anything contained herein to the contrary notwithstanding, all payments
and collections received in respect of the indebtedness evidenced by the Notes
and all proceeds of the Collateral received, in each instance, by the Agent or
any of the Banks after the occurrence of an Event of Default shall be remitted
to the Agent and distributed as follows:
(a) first, to the payment of any outstanding costs and expenses
incurred by the Agent or any security trustee in monitoring, verifying,
protecting, preserving or enforcing the Liens on the Collateral or in
protecting, preserving or enforcing rights under this Agreement or any of
the other Loan Documents, and in any event including all costs and
expenses of a character which the Company has agreed to pay under Section
12.4 hereof (such funds to be retained by the Agent for its own account
unless it has previously been reimbursed for such costs and expenses by
the Banks, in which event such amounts shall be remitted to the Banks to
reimburse them for payments theretofor made to the Agent);
(b) second, to the payment of any outstanding interest or other
fees or amounts due under this Agreement or any of the other Loan
Documents other than for principal, ratably as among the Banks in accord
with the amount of such interest and other fees or amounts owing each;
(c) third, to the payment of the principal of the Notes and the
Reimbursement Obligations and to the Hedging Liability ratably as among
the Notes, the Reimbursement Obligations and the Hedging Liability;
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(d) fourth, to the Agent, to be held as collateral security for
any undrawn L/C's until the Agent is holding an amount of cash equal to
the then outstanding amount of L/C's
(e) fifth, to the Banks ratably in accord with the amounts of any
other indebtedness, obligations or liabilities of the Company owing to
each of them and secured by the Security Documents unless and until all
such indebtedness, obligations and liabilities have been fully paid and
satisfied; and
(f) sixth, to the Company or whoever may be lawfully entitled
thereto.
.c2.Section 3.9. Notations and Requests;. All Loans made against the
Notes, the status of all amounts evidenced by the Notes as constituting part of
the Domestic Rate Portion or a LIBOR Portion and the rates of interest and
Interest Periods applicable to such Portions shall be recorded by each Bank on
its books or, at its option in any instance, endorsed on the reverse side of the
Notes and the unpaid principal balances and status, rates and Interest Periods
so recorded or endorsed by such Bank shall be prima facie evidence in any court
or other proceeding brought to enforce such Notes of the principal amount
remaining unpaid thereon, the status of the Loans evidenced thereby and the
interest rates and Interest Periods applicable thereto. Prior to any negotiation
of any Note, the Bank holding such Note shall endorse thereon the status of all
amounts evidenced thereby as constituting part of the Domestic Rate Portion or a
LIBOR Portion and the rates of interest and Interest Periods applicable thereto.
.c2.Section 3.10. Capital Adequacy;. If, after the date hereof, any
Bank or the Agent shall have determined in good faith that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein (including, without limitation, any revision in the Final Risk-Based
Capital Guidelines of the Board of Governors of the Federal Reserve System (12
CFR Part 208, Appendix A; 12 CFR Part 225, Appendix A) or of the Office of the
Comptroller of the Currency (12 CFR Part 3, Appendix A), or in any other
applicable capital rules heretofore adopted and issued by any governmental
authority), or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
lending office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Bank's capital, or on the capital of
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any corporation controlling such Bank, in each case as a consequence of its
obligations hereunder to a level below that which such Bank would have achieved
but for such adoption, change or compliance (taking into consideration such
Bank's policies with respect to capital adequacy) by an amount reasonably deemed
by such Bank to be material, then from time to time, within fifteen (15) days
after demand by such Bank (with a copy to the Agent), the Company shall pay to
(the Agent for the account of) such Bank such additional amount or amounts as
will compensate such Bank for such reduction.
.c.Section 4. The Collateral;.
The Notes and the other obligations of the Company hereunder and under
the other Loan Documents and the Hedging Liability, shall be secured by valid
and perfected first Liens on the inventory, accounts receivable, general
intangibles (including patents, trademarks, licenses, copyrights and
applications therefor), key-man life insurance policies maintained on Mr. Craig
Harlen, the Master Finance Lease (as amended from time to time, the "Lease")
dated as of November 2, 1993 between Caterpillar Financial Services Corporation,
as lessor ("Caterpillar") and the Company, as lessee, the Mining Equipment
Sublease Agreement dated as of November 1, 1993 (the "Sublease") between the
Company, as lessor, and Rhone-Poulenc Basic Chemicals Co., a division of Rhone-
Poulenc, Inc. ("Rhone"), as lessee, and the Ore Purchase Agreement (as amended
from time to time, the "Rhone-Poulenc Agreement") dated as of June 15, 1993,
between the Company and Rhone, that certain Senior Secured Promissory Note dated
November 2, 1993 (such promissory note and any and all notes issued in renewal
or extension thereof or substitution or replacement therefor, being hereinafter
referred to collectively as the "Pledged Note") of NuTec Mineral & Chemical
Company, a Colorado limited partnership ("NuTec") payable to the order of the
Company, and any sums due or to become due in respect of the Pledged Note, all
rights in and to any and all loan agreements, mortgages, deeds of trust,
assignments of leases and/or rents, security agreements, financing statements,
guaranties, title and hazard insurance policies and any other instruments and
documents of any kind or character now or at any time hereafter securing or
relating to the Pledged Note, fixtures, furniture, equipment, mineral rights,
mining rights and real property of the Company and its Subsidiaries, Nu-West
Minerals, Inc.'s partnership interest in NuTec, and on all capital stock owned
by the Company and its Subsidiaries in each instance whether now owned or
existing or hereafter acquired or arising (collectively the "Collateral") and
the Company agrees that it will from time to time at the request of the Agent or
the Required Banks execute and deliver such documents and do such acts and
things, and will
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cause the Subsidiaries to do such acts and things, as the Agent or the Required
Banks may reasonably request in order to provide for or perfect such Liens.
.c.Section 5. Representations and Warranties;.
The Company represents and warrants to the Agent and the Banks as to
itself and, where the following representations and warranties apply to
Subsidiaries, as to each of its Subsidiaries, and each Guarantor represents and
warrants as to itself, as follows:
.c2.Section 5.1. Organization and Qualification;. The Company is a
corporation duly organized and existing and in good standing under the laws of
the State of Delaware, has full and adequate corporate power to carry on its
business as now conducted, is duly licensed or qualified in all jurisdictions
wherein the nature of its activities requires such licensing or qualification
except where failure to be so licensed or qualified would not reasonably be
expected to have a Material Adverse Effect, has full right and authority to
enter into this Agreement and the other Loan Documents, to make the borrowings
herein provided for, to issue the Notes in evidence thereof, to encumber its
assets as collateral security for such borrowings and to perform each and all of
the matters and things herein and therein provided for; and this Agreement does
not, nor does the performance or observance by the Company of any of the matters
or things provided for herein or in the other Loan Documents, contravene (a) any
provision of law or any charter or by-law provision or (b) any covenant,
indenture or agreement of or affecting the Company or its Properties, except as
to (b) any contravention that would not reasonably be expected to have a
Material Adverse Effect.
.c2.Section 5.2. Subsidiaries;. Each Subsidiary is duly organized and
existing under the laws of the jurisdiction of its incorporation, has full and
adequate corporate power to carry on its business as now conducted and is duly
licensed or qualified in all jurisdictions wherein the nature of its business
requires such licensing or qualification and the failure to be so licensed or
qualified would have a Material Adverse Effect. The only Subsidiaries of the
Company are listed on Schedule 5.2 hereto. Each Guarantor has full right, power
and authority to execute and deliver the Loan Documents executed by it and to
perform each and all of the matters and things therein provided for; and the
Loan Documents executed by it do not, nor does the performance or observance by
any Guarantor of any of the matters or things therein provided for, contravene
(a) any provision of law or any provision of any charter, articles of
incorporation or bylaws of any Guarantor or (b) any covenant, indenture or
agreement of or effecting the Company or any
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Guarantor or any of the Company's or such Guarantor's Property, except as to (b)
any contravention that would not reasonably be expected to have a Material
Adverse Effect.
.c2.Section 5.3. Financial Reports;. The Company has heretofore
delivered to the Banks a copy of the audited financial statements as of June 30,
1994 of the Company and its Subsidiaries and unaudited financial statements
(including a balance sheet, statement of income and retained earnings, statement
of cash flows, footnotes and comparison to the comparable prior year period) of
the Company as of, and for the interim period ending March 31, 1995. Such
audited financial statements have been prepared in accordance with generally
accepted accounting principles on a basis consistent, except as otherwise noted
therein, with that of the previous fiscal year or period and fairly reflect the
financial position of the Company and its Subsidiaries as of the dates thereof,
and the results of their operations for the periods covered thereby. The Company
and its Subsidiaries have no material contingent liabilities other than as
indicated on said financial statements and since said date of March 31, 1995
there has been no material adverse change in the condition, financial or
otherwise, of the Company or any Subsidiary that has not been disclosed in
writing to the Banks.
.c2.`Section 5.4. Litigation; Tax Returns; Approvals';. There is no
litigation or governmental proceeding pending, nor to the knowledge of the
Company threatened, against the Company or any Subsidiary which, if adversely
determined, is likely to result in any material adverse change in the Properties
or the business and operations of the Company and its Subsidiaries taken as a
whole. All income tax returns for the Company required to be filed have been
filed on a timely basis, all amounts required to be paid as shown by said
returns have been paid. There are no pending or, to the best of the Company's
knowledge, threatened objections to or controversies in respect of the income
tax returns of the Company for any fiscal year. No authorization, consent,
license, exemption or filing (other than the filing of financing statements and
the other Security Documents) or registration with any court or governmental
department, agency or instrumentality, is or will be necessary to the valid
execution, delivery or performance by the Company of the Loan Documents.
.c2.Section 5.5. Regulation U;. Neither the Company nor any Subsidiary
is engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System) and no part of the proceeds of any Loan
made or any L/C issued hereunder will be used to purchase or
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carry any margin stock or to extend credit to others for such a purpose.
.c2.Section 5.6. No Default;. As of the date of this Agreement, the
Company is in full compliance with all of the terms and conditions of this
Agreement, and no Potential Default or Event of Default is existing under this
Agreement.
.c2.Section 5.7. ERISA;. The Company and its Subsidiaries are in
compliance in all material respects with ERISA to the extent applicable to them
and have received no notice to the contrary from the PBGC or any other
governmental entity or agency.
.c2.Section 5.8. Security Interests and Debt;. There are no Liens on
any of the Property of the Company or any Subsidiary except such as are
permitted by Section 7.16 of this Agreement, and the Company and its
Subsidiaries have no Debt except such as is permitted by Section 7.17 of this
Agreement.
.c2.Section 5.9. Accurate Information;. No information, exhibit or
report furnished by the Company to the Banks in connection with the negotiation
of the Loan Documents contain any material misstatement of fact or omits to
state a material fact or any fact necessary to make the statements contained
therein not materially misleading in light of the circumstances in which made.
The financial projections furnished by the Company to the Banks contain to the
Company's knowledge and belief, reasonable projections as of the date hereof of
future results of operations and financial position of the Company and its
Subsidiaries.
.c2.Section 5.10 Enforceability;. This Agreement and the other Loan
Documents are legal, valid and binding agreements of the Company and the
Guarantors, as the case may be, enforceable against them in accordance with
their terms, except as may be limited by (a) bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws or
judicial decisions for the relief of debtors or the limitation of creditors'
rights generally; and (b) general equitable principles.
.c2.Section 5.11. No Default Under Other Agreements;. Neither the
Company nor any Subsidiary is in default with respect to any note, indenture,
loan agreement, mortgage, lease, deed, or other agreement to which it is a party
or by which it or its Property is bound, which default might materially and
adversely affect the Collateral, the repayment of the indebtedness, obligations
and liabilities under the Loan Documents, any Bank's or the Agent's rights under
the Loan Documents or the Property, business, operations or condition (financial
or otherwise) of the Company or any Subsidiary.
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.c2.Section 5.12. Status Under Certain Laws;. Neither the Company nor
any of its Subsidiaries is an "investment company" or a person directly or
indirectly controlled by or acting on behalf of 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 a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
.c2.Section 5.13. Compliance with Laws;. The Company and its
Subsidiaries each are in compliance with the requirements of all federal, state
and local laws, rules and regulations applicable to or pertaining to their
Properties or business operations (including, without limitation, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities Act
of 1990, and Environmental Laws), except as disclosed on Schedule 5.13 and
except for such non-compliance which would not reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any Subsidiary has received
notice to the effect that its operations are not in compliance with any of the
requirements of applicable federal, state or local Environmental Laws or are the
subject of any governmental investigation evaluating whether any remedial action
is needed to respond to a release of any toxic or hazardous waste or substance
into the environment, except as disclosed on Schedule 5.13 and except for such
non-compliance or remedial action which would not reasonably be expected to have
a Material Adverse Effect.
.c2.Section 5.14. Tangible Net Worth on June 30, 1995;. The Company's
Tangible Net Worth on June 30, 1995 was not less than $7,000,000.
.c.Section 6. Conditions Precedent;.
.c2.Section 6.1. All Advances;. The obligation of the Banks to make any
Loan or of the Agent to issue any L/C hereunder shall be subject to the
conditions precedent that as of the time of the making of each Loan or the
issuance of each L/C:
(a) each of the representations and warranties set forth herein or
in the Security Documents shall be and remain true and correct as of said
time except that the representations and warranties made in Section 5.3
hereof shall be deemed to refer to the most recent financial statements
delivered to the Banks pursuant to Section 7.4 hereof;
(b) no materially adverse change in the financial condition of the
Company shall have occurred; and
(c) the Company shall be in compliance in all material respects
with all of the
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terms and conditions hereof and of the Security Documents and no
Potential Default or Event of Default shall have occurred and be
continuing.
Any request made by the Company to the Agent for a Loan or L/C hereunder
shall be deemed to constitute a representation and warranty that the foregoing
statements are true and correct.
.c2.Section 6.2. Initial Advance;. At or prior to the making of the
initial extension of credit hereunder, the following conditions precedent shall
also have been satisfied:
(a) the Agent shall have received the following for the account of
the Banks (each to be properly executed and completed) and the same shall
have been approved as to form and substance by the Banks:
(i) the Notes,
(ii) copies (executed or certified as may be appropriate)
for each Bank of all legal documents or proceedings taken in
connection with the execution and delivery of this Agreement, the
Notes and the Security Documents to the extent the Agent or its
counsel may reasonably request;
(iii) the Security Documents and any financing statements
requested by the Agent in connection therewith;
(iv) a mortgagee's policy or policies of title insurance (or
a binding commitment or commitments therefor) in the amount of
$75,000,000, with a waiver of coinsurance insuring the Liens of
those Security Documents creating Liens on real property to be
valid first Liens subject to no defects or objections which are
unacceptable to the Agent, together with such direct access
reinsurance agreements and endorsements (including without
limitation a revolving credit endorsement and doing business,
usury and zoning endorsements) as the Agent may require;
(v) current ALTA surveys of, and current Phase I
environmental inspection reports and current appraisals by firms
acceptable to the Agent for so much of the Collateral as consists
of real property;
(vi) evidence of the maintenance of insurance by the Company
as required hereby and by the Security Documents;
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(vii) the Intercreditor Agreement;
(viii) copies, certified as true and complete by the Secretary
or Assistant Secretary of the Company, of all instruments and
documents evidencing or setting forth terms and conditions
applicable to the Kennecott Debt;
(ix) certificates evidencing all of the issued and
outstanding capital stock of the Subsidiaries, any warrants for
the issuance of capital stock of the Subsidiaries and duly
executed stock powers therefor;
(x) blocked account letters from any bank into which the
proceeds of Collateral will be deposited;
(xi) an access agreement acceptable in form and substance to
the Banks from Rhone and every landlord of leased premises on
which Inventory is maintained;
(xii) the Pledged Note endorsed in blank;
(xiii) a pay-off letter from the Existing Lenders and the
holders of all of the Subordinated Indebtedness;
(xiv) copies, certified as true and complete by the Secretary
or Assistant Secretary of the Company, of the Lease, the Sublease,
the Rhone-Poulenc Agreement and the NuTec partnership agreement,
together with all amendments and supplements to any of the
foregoing; and
(xv) copies of the SEC Reports;
(b) The Agent shall have received such current appraisals, reports
and certifications as it may require in order to satisfy itself as to the
value of the Collateral, the financial condition of the Company and the
lack of material environmental or other contingent liabilities of the
Company.
(c) The Agent shall have received for its own account such fees as
the Company has agreed to pay to the Agent and the Agent shall have
received for the account of the Banks the closing fee payable pursuant to
Section 3.2 hereof.
(d) All legal matters incident to the transactions contemplated
hereby shall be acceptable to the Agent and its counsel and the Agent
shall have received for the account of the Banks the favorable written
opinion of Messrs. Davis, Graham and Stubbs, or other
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acceptable counsel to the Company and its Subsidiaries in form and
substance reasonably satisfactory to the Agent and its counsel with
respect to:
(i) the existence of the Company and its Subsidiaries, the
Company's qualification to do business in Colorado and Idaho,
Mining's qualification to do business in Idaho and Mineral's
qualification to do business in Colorado and [Idaho];
(ii) the corporate power and authority of the Company and
the Subsidiaries to enter into this Agreement, the Notes and the
other Loan Documents and to perform and observe all of the matters
and things herein and therein provided for;
(iii) the fact that the execution and delivery of this
Agreement and the other Loan Documents will not, nor will the
observance or performance of any of the matters or things herein
or therein provided for, contravene any provision of law or of the
charter or bylaws of the Company or any Subsidiary or of any
agreement attached as an Exhibit to any SEC Report filed by the
Company with the Securities and Exchange Commission and binding
upon the Company or any Subsidiary or affecting a substantial
portion of their Properties taken as a whole;
(iv) the due authorization for and the validity and
enforceability (except to the extent affected by bankruptcy,
insolvency or other laws relating to or affecting the enforcement
of creditors' rights and remedies generally or general principles
of equity) of this Agreement, the Notes and the other Loan
Documents;
(v) the fact no governmental authorization or consent or
approval of any other person, firm or corporation or of the
stockholders of the Company or any Subsidiary is, to the knowledge
of counsel, required with respect to the lawful execution,
delivery and performance of this Agreement and the Notes and the
Security Documents;
(vi) the lack, to the knowledge of counsel after due
inquiry, of any material pending or threatened litigation or
administrative proceeding which, if adversely determined, would
reasonably be expected to have a Material Adverse Effect;
(vii) the fact that the indebtedness, obligations and
liabilities of the
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Company and its Subsidiaries to the Agent and the Banks under the
Loan Documents constitute "Senior Indebtedness" as defined in the
Intercreditor Agreement; and
(viii) such other matters as the Banks or their counsel may
reasonably require;
(e) The Agent shall have received the favorable written opinion of
counsel licensed to practice law in Idaho with respect to so much of the
Collateral as consists of real estate located in that State as to such
matters as the Agent may request.
(f) The liens and security interests granted to the Agent shall
have been perfected in a manner satisfactory to the Agent and its
counsel.
(g) The Agent shall have received such other agreements,
instruments, documents, certificates and opinions as it may reasonably
request.
.c.Section 7. Company Covenants;.
The Company agrees that, so long as any credit is available to or in use
by the Company hereunder, except to the extent compliance in any case or cases
is waived in writing by the Required Banks:
.c2.Section 7.1. Maintenance;. The Company will, and will cause each
Subsidiary to, maintain, preserve and keep its plant, Properties and equipment
in good repair, working order and condition and will from time to time make all
needful and proper repairs, renewals, replacements, additions and betterments
thereto so that at all times the efficiency thereof shall be preserved and
maintained in all material respects, normal wear and tear excepted.
.c2.Section 7.2. Taxes;. The Company will, and will cause each
Subsidiary to, duly pay and discharge all taxes, rates, assessments, fees and
governmental charges upon or against the Company or its Subsidiaries or against
their respective Properties in each case before the same become delinquent and
before penalties accrue thereon unless and to the extent that the same are being
contested in good faith and by appropriate proceedings diligently conducted and
for which adequate reserves in form and amount reasonably satisfactory to the
Required Banks have been established, provided that the Company shall pay or
cause to be paid all such taxes, rates, assessments, fees and governmental
charges forthwith upon the commencement of proceedings to foreclose any Lien
which is attached as security therefor, unless such foreclosure is stayed by
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the filing of an appropriate bond in a manner satisfactory to the Required
Banks.
.c2.Section 7.3. Maintenance of Insurance;. The Company will, and will
cause each Subsidiary to, maintain insurance coverage by good and responsible
insurance underwriters in such forms and amounts and against such risks and
hazards as are customary for companies engaged in similar businesses and owning
and operating similar Properties, all in amounts and under policies containing
loss payable clauses to the Agent as its interest may appear (and, if the
Required Banks request, naming the Agent as additional insured therein) and
providing for advance notice to the Agent of cancellation thereof, issued by
sound and reputable insurers and all premiums thereon shall be paid by the
Company and certificates summarizing the same delivered to the Agent. In any
event, the Company will maintain insurance on the Collateral as required by the
Security Documents, business interruption insurance equivalent to that
maintained on the date hereof and until March 8, 1997, key-man life insurance on
Mr. Craig Harlen in an amount not less than $2,000,000.
.c2.Section 7.4. Financial Reports;. The Company will, and will cause
each Subsidiary to, maintain a standard and modern system of accounting in
accordance with sound accounting practice and will furnish to the Banks and
their duly authorized representatives such information respecting the business
and financial condition of the Company and its Subsidiaries as may be requested
and, without any request, will furnish to the Banks:
(a) as soon as available, and in any event within 30 days after
the close of each monthly fiscal period of the Company a copy of the
monthly financial statement of the Company and its Subsidiaries
containing a copy of the consolidated and consolidating balance sheet,
statement of income and retained earnings and statement of cash flows for
such period of the Company and its Subsidiaries, together with all such
information for the year to date, all in reasonable detail, prepared by
the Company and certified on behalf of the Company by the Company's chief
financial officer;
(b) as soon as available, and in any event within 50 days after
the close of each quarterly fiscal period of the Company a copy of the
consolidated and consolidating balance sheet, statement of income and
retained earnings, statement of cash flows for such period of the Company
and its Subsidiaries, together with all such information for the year to
date, all in reasonable detail, prepared by the Company and certified on
behalf of the Company by the Company's chief financial officer;
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(c) as soon as available, and in any event within 95 days after
the close of each fiscal year, a copy of the audit report for such year
and accompanying financial statements, including a consolidated balance
sheet, a statement of income and retained earnings, and a statement of
cash flows, together with all footnotes thereto, for the Company and its
Subsidiaries, in each case, showing in comparative form the figures for
the previous fiscal year of the Company, all in reasonable detail,
accompanied by an unqualified opinion of Arthur Andersen LLP or other
independent public accountants of nationally recognized standing selected
by the Company and satisfactory to the Required Banks, such opinion to
indicate that such statements are made in accordance with generally
accepted accounting principles;
(d) each of the financial statements furnished to the Banks
pursuant to paragraph (b) and (c) above shall be accompanied by a
Compliance Certificate in the form of Exhibit E hereto signed on behalf
of the Company by its chief financial officer and certifying that as of
the last day of the preceding monthly or yearly fiscal period, as the
case may be, the signer thereof has re-examined the terms and provisions
of this Agreement and the Security Documents and that to the best of his
knowledge and belief, no Potential Default or Event of Default has
occurred or, if any such Potential Default or Event of Default has
occurred, setting forth the description of such Potential Default or
Event of Default and specifying the action, if any, taken by the Company
to remedy the same;
(e) as soon as available, and in any event within 10 days after
the close of each calendar month, a Borrowing Base Certificate setting
forth a computation of the Borrowing Base as of the close of business on
the last day of such month, prepared by the Company and, certified to by
the Company's chief financial officer;
(f) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the
Company shall have filed with the Securities and Exchange Commission or
any governmental agency substituted therefor, or any national securities
exchange, including copies of the Company's form 10-K annual report,
including financial statements audited by Arthur Andersen & Co. L.L.P. or
other independent public accountants of nationally recognized standing
selected by the Company and reasonably satisfactory to the Bank, its form
10-Q quarterly report to the Securities
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<PAGE>
and Exchange Commission and any Form 8-K filed by the Company with the
Securities and Exchange Commission; and
(g) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed.
.c2.Section 7.5. Inspection and Reviews;. The Company shall, and shall
cause each Subsidiary to, permit the Agent and the Banks, by their
representatives and agents, to inspect any of the properties, corporate books
and financial records of the Company and its Subsidiaries, to review and make
copies of the books of accounts and other financial records of the Company and
its Subsidiaries, and to discuss the affairs, finances and accounts of the
Company and its Subsidiaries with, and to be advised as to the same by, its
officers at such reasonable times and intervals as the Agent or the Banks may
designate. In addition to any other compensation or reimbursement to which the
Agent and the Banks may be entitled under the Loan Documents, the Company shall
pay to the Agent from time to time upon demand the amount necessary to
compensate it for all fees, charges and expenses incurred by the Agent or its
designee in connection with the audits of Collateral, or inspections or review
of the books, records and accounts of the Company or any Subsidiary conducted by
the Agent or its designee or any of the Banks.
.c2.Section 7.6. Funded Debt Ratio;. The Company will maintain a Funded
Debt Ratio of not more than 2.75 to 1 on the date of this Agreement and 3.1 to 1
on September 30, 1995 and December 31, 1995 and thereafter the Company will, as
of the last day of each fiscal quarter of the Company ending during each of the
periods specified below, maintain a Funded Debt Ratio of not more than:
Funded Debt Ratio
From and To and shall not be
including including greater than:
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<PAGE>
<TABLE>
<S> <C> <C>
January 1, 1996 June 30, 1996 2.75 to 1.0
July 1, 1996 June 30, 1997 2.50 to 1
July 1, 1997 June 30, 1998 2.00 to 1
July 1, 1998 June 30, 1999 1.50 to 1
July 1, 1999 all times thereafter 1.0 to 1.0
</TABLE>
.c2.Section 7.7. Fixed Charge Coverage Ratio;. The Company will
maintain a Fixed Charge Coverage Ratio of not less than 1.15 to 1 on the date of
this Agreement, 1.10 to 1 on September 30, 1995, 1.00 to 1 at December 31, 1995,
1.10 to 1 at March 31, 1996 and 1.50 to 1 at June 30, 1996, and thereafter the
Company will, as of the last day of each fiscal quarter of the Company ending
during each of the periods specified below, maintain a Fixed Charge Coverage
Ratio at not less than:
<TABLE>
<CAPTION>
Fixed Charge Coverage
From and To and Ratio shall not be
including including less than:
<S> <C> <C>
July 1, 1996 June 30, 1997 2.0 to 1.0
July 1, 1997 June 30, 1998 2.25 to 1.0
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
July 1, 1998 all times thereafter 2.5 to 1.0
</TABLE>
.c2.Section 7.8. Interest Coverage Ratio;. The Company will, as of the
last day of each fiscal quarter of the Company ending during each of the periods
specified below, maintain the ratio of EBITDA for the four fiscal quarters of
the Company then ended to Interest Expense for the same four fiscal quarters
then ended (the "Interest Coverage Ratio") of not less than 2.50 to 1.0 on the
date of this Agreement and on September 30, 1995, and not less than 3.0 to 1.0
at all times thereafter.
.c2.Section 7.9. Tangible Net Worth;. The Company will at all times
maintain Tangible Net Worth at not less than (i) $6,400,000 during the fiscal
quarter of the Company ending September 30, 1995, and (ii) during each fiscal
quarter thereafter, an amount equal to the sum of the minimum amount required to
be maintained during the immediately preceding fiscal quarter and 70% of Net
Income (but not less than zero) for the immediately preceding fiscal quarter of
the Company.
.c2.Section 7.10. Funded Debt to Total Capitalization;. The Company
will maintain a ratio of its Funded Debt to its Total Capitalization of not more
than 0.80 to 1 on the date of this Agreement, 0.89 to 1 on September 30, 1995,
0.88 to 1 on December 31, 1995, 0.80 to 1 on March 31, 1996 and June 30, 1996
and thereafter the Company will, as of the last day of each fiscal quarter of
the Company ending during each of the periods specified below, maintain a ratio
of its Funded Debt to its Total Capitalization of not more than:
<TABLE>
<CAPTION>
From and To and Ratio shall not
including including be Greater than:
<S> <C> <C>
July 1, 1996 June 30, 1997 0.70 to 1.0
July 1, 1997 June 30, 1998 0.50 to 1.0
</TABLE>
-40-
<PAGE>
<TABLE>
<S> <C> <C>
July 1, 1998 all times thereafter 0.45 to 1.0
</TABLE>
.c2.Section 7.11. Capital Expenditures;. The Company will not, and will
not permit any Subsidiary to, make or commit to make Capital Expenditures during
any fiscal year in excess of (a) the Maximum Permitted Amount (for the Company
and the Subsidiaries in the aggregate) for such fiscal year, (b) $800,000
incurred to complete the maintenance facility that forms a part of the Rhone-
Poulenc mine site, and (c) up to $2,000,000 in connection with expenditures
financed with the proceeds of the Kennecott Debt. For purposes of this Section
7.11, the term "Maximum Permitted Amount" shall mean $6,900,000 during the
fiscal year ending June 30, 1996, $3,000,000 during the fiscal year ending June
30, 1997 and $4,000,000 during each fiscal year thereafter; provided, however,
that the Maximum Permitted Amount for any calendar year shall be increased by
the amount, if any, by which the Maximum Permitted Amount for the immediately
preceding calendar year, computed without giving effect to any increase therein
by reason of this proviso, exceeds the amount actually expended for Capital
Expenditures during such preceding year.
.c2.Section 7.12. Turnaround Expenses;. The Company will not, and will
not permit any Subsidiary to, incur for any [CALENDAR/FISCAL]fiscal year annual
customary turnaround expenses in excess of $4,500,000 in the aggregate.
.c2.Section 7.13. Consolidation and Merger;. The Company will not, and
will not permit any Subsidiary to, consolidate with or merge into any Person, or
permit any other Person to merge into it, or acquire (in a transaction analogous
in purpose or effect to a consolidation or merger) all or substantially all the
Property of the other Person, or acquire substantially as an entirety the
business of any other Person, except that any wholly-owned Subsidiary may merge
into the Company or merge into or with any other wholly-owned Subsidiary.
.c2.Section 7.14. Transactions with Affiliates;. The Company will not,
and will not permit any Subsidiary to, enter into any transaction, including
without limitation, the purchase, sale, lease or exchange of any Property, or
the rendering of any service (including the rendering of any services by
employees of the Company or any Subsidiary), with any Affiliate (other than a
Guarantor) of the Company or such Subsidiary except (a) in the ordinary course
of and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms not materially less
favorable to the Company than would be obtained in a
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<PAGE>
comparable arm's-length transaction with a Person not an Affiliate of the
Company or such Subsidiary, and (b) the transactions contemplated by the
Consulting Agreement dated November, 1987 between the Company and Weiss, Peck &
Greer CDA, L.P.
.c2.Section 7.15. Dividends and Certain Other Restricted Payments;. The
Company will not (a) declare or pay any dividends or make any distribution on
any class of its capital stock (other than dividends payable solely in its
capital stock) or (b) directly or indirectly purchase, redeem or otherwise
acquire or retire any of its capital stock (except out of the proceeds of, or in
exchange for, a substantially concurrent issue and sale of capital stock) or (c)
make any other distributions with respect to its capital stock; provided,
however, that the foregoing shall not operate to prevent SAR Repurchase
Transactions so long as no Potential Default or Event of Default shall exist
before or after giving effect thereto.
.c2.Section 7.16. Liens;. The Company will not, and will not permit any
Subsidiary to, pledge, mortgage or otherwise encumber or subject to or permit to
exist upon or be subjected to any Lien of any kind (including any conditional
sale or other title retention agreement and any lease in the nature thereof), on
any of its Properties of any kind or character other than:
(a) Liens, pledges or deposits for workmen's compensation,
unemployment insurance, old age benefits or social security obligations,
taxes, assessments, statutory obligations or other similar charges, good
faith deposits made in connection with tenders, contracts or leases to
which the Company or a Subsidiary is a party or other deposits required
to be made in the ordinary course of business, and statutory mechanics,
materialmen, carriers, bankers, brokers, warehousemen and other similar
statutory liens and bonds, provided in each case the obligation secured
is not overdue or, if overdue, is being contested in good faith by
appropriate proceedings and adequate reserves have been provided therefor
in accordance with generally accepted accounting principles and that the
obligation is not for borrowed money, customer advances or trade
payables;
(b) the pledge of Property for the purpose of securing an appeal
or stay or discharge in the course of any legal proceedings, provided
that the aggregate amount of liabilities of the Company and its
Subsidiaries so secured by a pledge of Property permitted under this
subsection, including interest and penalties thereon, if any, shall not
be in excess of $100,000 at any one time outstanding;
(c) the Liens granted in favor of the Agent for the benefit of the
Banks by the
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<PAGE>
Security Documents;
(d) the interest of Caterpillar under the Lease in the Property
subject thereto and the interest of Rhone under the Sublease in the
Property subject thereto;
(e) Liens securing the Kennecott Debt on the date of this
Agreement;
(f) the rights of Rhone under the Rhone-Poulenc Agreement;
(g) Liens disclosed in the Company's audited financial statements
for the fiscal year ended June 30, 1994, except (i) any such securing the
Existing Lenders, and (ii) any such securing the Subordinated
Indebtedness; and
(h) Liens securing only Debt permitted by Section 7.17(g),
provided the aggregate principal amount of such Debt does not exceed
$1,000,000.
.c2.Section 7.17. Borrowings and Guaranties;. The Company will not, and
will not permit any Subsidiary to, issue, incur, assume, create or have
outstanding any Debt or customer advances, nor be or remain liable, whether as
endorser, surety, guarantor or otherwise, for or in respect of any liability or
Debt of any other Person, other than:
(a) Debt of the Company arising under or pursuant to this
Agreement or the other Loan Documents;
(b) the liability of the Company and its Subsidiaries arising out
of the endorsement for deposit or collection of commercial paper received
in the ordinary course of business;
(c) trade payables of the Company and its Subsidiaries arising in
the ordinary course of business;
(d) the Kennecott Debt;
(e) the obligations of the Guarantors under Section 11 of this
Agreement;
(f) the Capitalized Lease Obligations existing as of the date
hereof and described on Schedule 7.17 hereto;
(g) Debt incurred to finance the acquisition of Property, but only
to the extent of the fair market value thereof, provided that the
aggregate principal amount of such Debt does not exceed $1,000,000;
(h) other Debt not otherwise permitted hereby in an aggregate
principal amount
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<PAGE>
not to exceed $500,000;
(i) the Hedging Liability;
(j) Debt evidenced by the Pledged Note;
(k) Debt of the Guarantors to the Company; and
(l) Capitalized Lease Obligations incurred to replace equipment
that is subject to the Rhone-Poulenc Agreement.
.c2.Section 7.18. Investments, Loans and Advances;. The Company will
not, and will not permit any Subsidiary to, make or retain any investment
(whether through the purchase of stock, obligations or otherwise) in or make any
loan or advance to, any other Person, other than:
(a) investments in certificates of deposit having a maturity of
one year or less issued by any the Banks;
(b) marketable obligations of the United States;
(c) investments shown on the Company's audited financial
statements for the fiscal year ended June 30, 1994;
(d) loans and advances to the Guarantors in an aggregate amount
not to exceed $500,000 at any time; and
(e) investments, loans and advances in and to NuTec in an
aggregate amount not to exceed $150,000 in any fiscal year.
.c2.Section 7.19. Sale of Property;. The Company will not, and will not
permit any Subsidiary to, sell, lease, assign, transfer or otherwise dispose of
(whether in one transaction or in a series of transactions) all or a material
part of its Property to any other Person; provided, however, that this Section
7.19 shall not prohibit:
(a) sales of Inventory by the Company and its Subsidiaries in the
ordinary course of business; and
(b) sales or leases by the Company and its Subsidiaries of its
surplus, obsolete or worn-out machinery and equipment.
For purposes of this Section 7.19, "material part" shall mean 5% or more of the
lesser of the book value or fair market value of the Property of the Company and
its Subsidiaries on a consolidated basis.
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<PAGE>
.c2.Section 7.20. Notice of Suit, Adverse Change in Business or
Default;. The Company shall, as soon as possible, and in any event within
fifteen (15) days after the Company learns of the following, give written notice
to the Banks of (a) any proceeding(s) that, if determined adversely to the
Company or any Subsidiary could have a material adverse effect on the
Properties, business or operations of the Company or such Subsidiary being
instituted or threatened to be instituted by or against the Company or such
Subsidiary in any federal, state, local or foreign court or before any
commission or other regulatory body (federal, state, local or foreign); (b) any
material adverse change in the business, Property or financial condition of the
Company and its Subsidiaries taken as a whole; and (c) the occurrence of a
Potential Default or Event of Default.
.c2.Section 7.21. ERISA;. The Company will, and will cause each
Subsidiary to, promptly pay and discharge all obligations and liabilities
arising under ERISA of a character which if unpaid or unperformed might result
in the imposition of a Lien against any of its Property and will promptly notify
the Agent of (i) the occurrence of any reportable event (as defined in ERISA)
which might result in the termination by the PBGC of any Plan covering any
officers or employees of the Company or any Subsidiary any benefits of which
are, or are required to be, guaranteed by PBGC, (ii) receipt of any notice from
PBGC of its intention to seek termination of any Plan or appointment of a
trustee therefor, and (iii) its intention to terminate or withdraw from any
Plan. The Company will not, and will not permit any Subsidiary to, terminate any
Plan or withdraw therefrom unless it shall be in compliance with all of the
terms and conditions of this Agreement after giving effect to any liability to
PBGC resulting from such termination or withdrawal.
.c2.Section 7.22. Use of Loan Proceeds;. The Company will use the
proceeds of all Loans made or created hereunder solely to pay all amounts owing
under the Existing Agreement and the Subordinated Indebtedness and to finance
its seasonal working capital requirements.
.c2.Section 7.23. Conduct of Business and Maintenance of Existence;.
The Company will, and will cause each Subsidiary to, continue to engage in
business of the same general type as now conducted by it, and the Company will,
and will cause each Subsidiary to, preserve, renew and keep in full force and
effect its corporate existence and its rights, privileges and franchises
necessary or desirable in the normal conduct of business.
.c2.Section 7.24. Compliance with Laws, etc.; The Company will, and
will cause each of
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<PAGE>
its Subsidiaries to, comply in all material respects with all applicable laws,
rules, regulations and orders, such compliance to include (without limitation)
(a) the maintenance and preservation of its corporate existence and
qualification as a foreign corporation, (b) compliance with all rules and
regulations promulgated pursuant to the Occupational Safety and Health Act of
1970, as amended, and (c) compliance with all applicable Environmental Laws, in
each case where the failure to so comply would be reasonably expected to have a
Material Adverse Effect.
.c2.Section 7.25. New Subsidiaries;. The Company will not, directly or
indirectly, create or acquire any Subsidiary.
.c2.Section 7.26. Environmental Covenant;. The Company will:
(a) use and operate all of its facilities and Properties in
compliance with all Environmental Laws where the failure to do so would
be reasonably expected to have a Material Adverse Effect; keep all
necessary permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect and remain in
material compliance therewith; and handle all hazardous materials in
compliance with all applicable Environmental Laws except, in all cases,
where such non-compliance would not reasonably be expected to have a
Material Adverse Effect;
(b) immediately notify the Agent, and provide copies upon receipt,
of all written claims, complaints, notices or inquiries relating to the
condition of its facilities and Properties or compliance with
Environmental Laws, and shall use its best efforts to promptly cure and
have dismissed, to the reasonable satisfaction of the Required Banks, any
actions and proceedings relating to compliance with Environmental Laws
except where any noncompliance with Environmental Laws would not
reasonably be expected to have a Material Adverse Effect; and
(c) provide such information and certifications which the Agent
may reasonably request from time to time to evidence compliance with this
Section 7.26.
.c2.Section 7.27. Hedging Arrangements;. On or before December 31,
1995, the Company will hedge its interest rate risk on an amount equal to 50% of
the outstanding principal amount of the Term Credits through the use of one or
more Hedging Arrangements, with all of the foregoing to effectively limit the
amount of interest that the Company must pay on notional amounts of not less
than such portion of the Term Credit to not more than such rates, for a period
of three years from the date the Company enters into such hedging arrangements
on such terms
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<PAGE>
as are reasonably acceptable to the Agent. If the Company enters into any
Hedging Arrangements with any Bank, the Company's obligations to such Bank in
connection with such Hedging Arrangements do not constitute usage of the
Commitments of such Bank.
.c2.Section 7.28. Concentration Accounts;. On or before December 31,
1995, the Company will make such arrangements as shall be necessary or
appropriate to assure that all proceeds of accounts receivable of the Company
are deposited (in the same form as received) in an account or accounts
maintained with or under the control of First Interstate Bank of Denver, N.A. or
any other bank or banks acceptable to the Agent and which bank or banks have
executed a blocked account agreement in form and substance satisfactory to the
Agent (such accounts to constitute special restricted accounts). The Company
acknowledges that the Agent shall have (and is hereby granted) a Lien on such
account or accounts and all funds contained therein to secure the Notes and the
other indebtedness, obligations and liabilities of the Company under the Loan
Documents. The Banks agree with the Company that if and so long as no Potential
Default or Event of Default has occurred or is continuing hereunder, amounts on
deposit in such special restricted accounts will (subject to the rules and
regulations as from time to time in effect applicable to demand deposit
accounts) be made available to the Company for use in the conduct of its
business. Upon the occurrence of an Event of Default, the Agent may apply the
funds on deposit in such account to the Notes and other indebtedness,
obligations and liabilities of the Company under the Loan Documents and in
respect of the Hedging Liability.
.c1.Section 8. Events of Default and Remedies.
.c2.Section 8.1. Events of Default;. Any one or more of the following
shall constitute an Event of Default hereunder:
(a) (i) default in the payment when due of any principal of any
Note or Reimbursement Obligation, whether at the stated maturity thereof
or as required by Section 1.6 or 3.6 hereof or at any other time provided
in this Agreement, or (ii) default in the payment when due of any
interest on any Note or Reimbursement Obligation or of any fee or other
amount payable by the Company pursuant to this Agreement or any other
Loan Document and the continuation thereof for two (2) Business Days;
(b) default in the observance or performance of any covenant set
forth in Sections 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12,
7.13, 7.14, 7.15, 7.16,
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<PAGE>
7.17, 7.18, 7.19, 7.20, 7.22, 7.25, 7.27 and 7.28, inclusive, hereof, or
of any provision of any Loan Document requiring the maintenance of
insurance on the Collateral subject thereto or dealing with the use or
remittance of proceeds of such Collateral;
(c) default in the observance or performance of any other
covenant, condition, agreement or provision hereof or any of the other
Loan Documents and such default shall continue for thirty (30) days after
written notice thereof to the Company by any Bank;
(d) default shall occur under any evidence of indebtedness in an
aggregate principal amount in excess of $2,000,000 issued or assumed or
guaranteed by the Company or any Subsidiary, or under any mortgage,
agreement or other similar instrument under which the same may be issued
or secured and such default shall continue for a period of time
sufficient to permit the acceleration of maturity of any indebtedness
evidenced thereby or outstanding or secured thereunder;
(e) any representation or warranty made by the Company or any
Guarantor herein or in any other Loan Document or in any statement or
certificate furnished by it pursuant hereto or thereto, proves untrue in
any material respect as of the date made or deemed made pursuant to the
terms hereof;
(f) any judgment or judgments, writ or writs, or warrant or
warrants of attachment, or any similar process or processes in an
aggregate amount in excess of $1,000,000 shall be entered or filed
against the Company or any Subsidiary or against any of their respective
Property or assets and remain unbonded, unstayed and undischarged for a
period of thirty (30) days from the date of its entry;
(g) the Company makes any payment or other distribution on account
of the principal of or interest on the Kennecott Debt which payment or
distribution is prohibited under the terms of any instruments
subordinating such Indebtedness to the prior payment of the Notes or any
of the Company's other obligations hereunder;
(h) any party obligated on any guaranty of the Company's
indebtedness,
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obligations and liabilities to the Banks under the Loan Documents or any
part thereof shall purport to breach, disavow, revoke, repudiate or
terminate such guaranty, or any event specified in Sections 8.1(j) or (k)
shall occur with regard to any such party; or
(i) one or more conditions exist or events have occurred which may
result in a material adverse change in the operations, Properties or
financial condition of the Company and its Subsidiaries taken as a whole;
(j) the Company or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the Bankruptcy Code of
1978, as amended, (the "Bankruptcy Code"), (ii) admit in writing its
inability to pay, or not pay, its debts generally as they become due or
suspend payment of its obligations, (iii) make an assignment for the
benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in,
the appointment of a receiver, custodian, trustee, conservator,
liquidator or similar official for it or any substantial part of its
property, (v) file a petition seeking relief or institute any proceeding
seeking to have entered against it an order for relief under the
Bankruptcy Code, to adjudicate it insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, marshalling of
assets, adjustment or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors
or fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, or (vi) fail to
contest in good faith any appointment or proceeding described in Section
8.1(k) hereof; or
(k) a custodian, receiver, trustee, conservator, liquidator or
similar official shall be appointed for the Company, any Subsidiary or
any substantial part of its respective Property, or a proceeding
described in Section 8.1(j)(v) shall be instituted against the Company or
any Subsidiary and such appointment continues undischarged or any such
proceeding continues undismissed or unstayed for a period of sixty (60)
days.
.c2.Section 8.2. Remedies for Non-Bankruptcy Defaults;. When any Event
of Default described in subsections 8.1(a) to 8.1(i), both inclusive, has
occurred and is continuing, the Agent shall, upon request of the Required Banks,
by notice to the Company, take any or all of the
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following actions:
(a) terminate the obligation of the Banks to extend any further
credit hereunder on the date (which may be the date thereof) stated in
such notice;
(b) declare the principal of and the accrued interest on the Notes
and Reimbursement Obligations to be forthwith due and payable and
thereupon the Notes and Reimbursement Obligations, including both
principal and interest, and all fees, charges and commissions payable
hereunder and under the other Loan Documents, shall be and become
immediately due and payable without further demand, presentment, protest
or notice of any kind; and
(c) enforce any and all rights and remedies available under the
Loan Documents.
.c2.Section 8.3. Remedies for Bankruptcy Defaults;. When any Event of
Default described in subsection 8.1(j) or 8.1(k) has occurred and is continuing,
then the then unpaid balance of the Notes and Reimbursement Obligations,
including both principal and interest, and all fees, charges and commissions
payable hereunder and under the other Loan Documents, shall immediately become
due and payable without presentment, demand, protest or notice of any kind, the
obligation of the Banks to extend further credit pursuant to any of the terms
hereof shall immediately terminate and the Agent may exercise all remedies
available to it under the Loan Documents.
.c2.Section 8.4. L/C's;. Promptly following the acceleration of the
maturity of the Notes pursuant to Section 8.2 or 8.3 hereof, the Company shall
immediately pay to the Agent for the benefit of the Banks the full aggregate
amount of all outstanding L/C's. The Agent shall hold all such funds as
additional collateral security for the obligations of the Company to the Banks
under this Agreement. The amount paid under any L/C's for which the Company has
not reimbursed the Banks shall bear interest from the date of such payment at
the default rate of interest specified in Section 2.2. hereof.
.c.Section 9. Definitions;.
.c2.Section 9.1. Certain Terms Defined;. The following terms when used
herein shall have the following meanings; such terms to be equally applicable to
both the singular and plural of the terms defined (capitalized terms defined
elsewhere in this Agreement to have the meanings so ascribed to them in all
provisions of this Agreement).
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<PAGE>
"Account Debtor" shall mean the Person who is obligated on a Receivable.
"Adjusted LIBOR" means a rate per annum determined by the Agent pursuant
to the following formula:
Adjusted LIBOR = LIBOR
-------------------------
100% - Reserve Percentage
"Affiliate" shall mean any person, firm or corporation which, directly or
indirectly controls, or is controlled by, or is under common control with, the
Company. As used in this Section the term "controls" (including the terms
"controlled by" and "under common control with") shall have the meaning given
below.
"Agent" means Harris Trust and Savings Bank and any successor thereto
appointed pursuant to Section 10.1 hereof.
"Agreement" shall mean this Secured Credit Agreement as supplemented,
modified, restated and amended from time to time.
"Applicable Margin" with respect to LIBOR Portions and Domestic Rate
Portions, shall each mean the rate specified for such obligation below in Rows
A, B, C, D and E for the range of Funded Debt Ratio specified for each Row:
<TABLE>
<CAPTION>
Applicable Margin Applicable
Applicable for Domestic Rate Margin
Applicable
Margin Portions under the for Domestic
Margin
for LIBOR Portions Revolving Credit Rate Portions
for LIBOR Portions
If Funded Debt under the Revolving and Term Loan One under the
under the Term
Ratio is: Credit and Term is: Term Loan
Loan Two is:
Loan One is: Two is:
<S> <C> <C> <C> <C>
A more than 3.50 3.25% 4.0% 2.25% 3.0%
-
B more than 3.0 less than 3.5 2.75% 3.5% 1.75% 2.5%
-
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
C more than 2.5 less than 3.0 2.25% 3.0% 1.25% 2.0%
-
D more than 2.0 less than 2.5 1.75% 2.5% .75% 1.5%
-
E less than 2.0 1.25% 2.0% .25% 1.0%
</TABLE>
Not later than ten (10) Business Days after receipt by the Banks of the
Compliance Certificate called for by Section 7.4(d) hereof for the applicable
fiscal quarter, the Agent shall determine the Funded Debt Ratio for the
applicable period and shall promptly notify the Company of such determination
and of any change in the Applicable Margins resulting therefrom. Any such change
in the Applicable Margins shall be effective as of the date the Agent so
notifies the Company with respect to all Loans outstanding on such date, and
such new Applicable Margins shall continue in effect until the effective date of
the next quarterly redetermination in accordance with this Section. Each
determination of the Funded Debt Ratio and Applicable Margins by the Agent in
accordance with this Section shall be conclusive and binding on the Company
absent manifest error. From the date hereof until the Applicable Margins are
first adjusted pursuant hereto, the Applicable Margins shall be those set forth
in Row C above.
"Application" is defined in Section 1.5 hereof.
"Bank" means Harris Trust and Savings Bank, the other signatories hereto
(other than the Company) and all other lenders becoming party thereto pursuant
to Section 12.14 hereof.
"Bankruptcy Code" is defined in Section 8.1(j) hereof.
"Business Day" shall mean a day on which banks are open for business in
Nassau, Bahamas, and Chicago, Illinois, other than a Saturday or Sunday, and,
with respect to LIBOR Portions, a day on which banks are also dealing in United
States Dollar deposits in London, England and Nassau, Bahamas.
"Borrowing Base", as determined on the basis of the information contained
in the most recent Borrowing Base Certificate, shall mean an amount equal to:
(a) 85% of the amount of Eligible Receivables, plus
(b) 70% of the value of Eligible Inventory except Eligible
Inventory consisting
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of phosphate rock, plus
(c) 35% of the value of Eligible Inventory consisting of phosphate
rock, minus
(d) an amount equal to the undrawn amount of all L/Cs issued and
outstanding hereunder.
"Borrowing Base Certificate" shall mean a certificate in the form of
Exhibit D hereto which is required to be delivered to the Banks in accordance
with Section 7.4(d) hereof.
"Capital Expenditures" shall mean, for any period, capital expenditures
of the Company and its Subsidiaries during such period as defined and classified
in accordance with generally accepted accounting principles consistently
applied.
"Capital Lease" shall mean any lease of Property which, in accordance
with generally accepted accounting principles, is required to be capitalized on
the balance sheet of the lessee.
"Capitalized Lease Obligation" shall mean the amount of the liability
shown on the balance sheet of any Person in respect of a Capital Lease
determined in accordance with generally accepted accounting principles.
"Caterpillar" shall have the meaning specified in Section 4 hereof.
"Collateral" shall mean all properties, rights, interests and privileges
from time to time subject to the Liens granted in favor of the Agent for the
benefit of the Banks pursuant to the Security Documents.
"Commitment Percentage" shall have the meaning set forth in Section
1.1(b) hereof.
"Commitments" shall mean, collectively, the Revolving Credit Commitments,
the Term Credit Commitments and the L/C Commitment.
"Company" shall have the meaning specified in the first paragraph of this
Agreement.
"Control" or "Controlled By" or "Under Common Control" shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of voting securities, by
contract or otherwise); provided that, in any event any Person which
beneficially owns, directly or indirectly, 10% or more (in number of votes) of
the securities having ordinary voting power for the election of directors of a
corporation shall be conclusively presumed to control such corporation, and
provided further that any Consolidated Subsidiary shall be conclusively presumed
to be controlled by the Company.
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"Current Maturities of Funded Debt" shall mean, as at any date of
determination, all payments of principal due under the terms of any Funded Debt
within twelve calendar months after that date.
"Debt" of any Person shall mean as of any time the same is to be
determined, the aggregate of (i) all indebtedness, obligations and liabilities
for borrowed money, (ii) all guaranties, endorsements (other than any liability
arising out of the endorsement of items for deposit or collection in the
ordinary course of business) and other contingent obligations in respect of, or
any obligations to purchase or otherwise acquire, indebtedness of others, (iii)
all reimbursement and other obligations with respect to letters of credit and
banker's acceptances, (iv) the aggregate amount of all Capitalized Lease
Obligations, (v) all indebtedness, obligations and liabilities representing the
deferred purchase price of property and (vi) all indebtedness and liabilities
secured by any Lien on any Property or assets of such person, whether or not the
same would be classified as a liability on a balance sheet, but excluding all
general contingency reserves and reserves for deferred income taxes and
investment credit, and with respect to Debt of the Company, all computed and
determined on a consolidated basis for the Company and its Subsidiaries after
the elimination of intercompany items in accordance with generally accepted
accounting principles consistent with those used in the preparation of the audit
report referred to in Section 5.3 hereof.
"Debt-to-Capital Ratio" shall mean, as of any time the same is to be
determined, the ratio of (i) Funded Debt of the Company and its Subsidiaries to
(ii) Total Capitalization.
"Domestic Rate" means, for any day, the greater of (i) the rate of
interest announced by the Agent from time to time as its prime commercial rate,
as in effect on such day; and (ii) the sum of (x) the rate determined by the
Agent to be the average (rounded upwards, if necessary, to the next higher 1/100
of 1%) of the rates per annum quoted to the Agent at approximately 10:00 a.m.
(Chicago time) (or as soon thereafter as is practicable) on such day (or, if
such day is not a Business Day, on the immediately preceding Business Day) by
two or more Federal funds brokers selected by the Agent for the sale to the
Agent at face value of Federal funds in an amount equal or comparable to the
principal amount owed to the Agent for which such rate is being determined, plus
(y) 1/2 of 1% (0.5%).
"Domestic Rate Portions" is defined in Section 2.1 hereof.
"EBITDA" means, with reference to any period, Net Income for such period
plus all
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amounts deducted in arriving at such Net Income amount in respect of (i)
Interest Expense for such period, plus (ii) federal, state and local income
taxes for such period, plus (iii) all amounts properly charged for depreciation
of fixed assets and amortization of intangible assets during such period on the
books of the Company and its Subsidiaries.
"Eligible Receivables" shall mean the aggregate face amount of the
Receivables of the Company that conform to the warranties and standards for
eligibility contained herein and in the Security Documents, less the aggregate
amount of all returns, discounts, claims, credits, charges and allowances of any
nature (whether issued, owing, granted or outstanding), and less the aggregate
amount of all reserves, limits and deductions set forth below or as otherwise
provided in this Agreement. No Receivable shall be deemed to be an Eligible
Receivable if:
(i) it arises out of a sale made by Company to a Subsidiary or
an Affiliate of Company or to a Person controlled by an Affiliate of
Company;
(ii) the Receivable is otherwise not based on an actual and
bona fide sale and delivery of goods, financial instruments, documents,
permits or other items, or rendition of services, including funds
transfer services, by the Company to its customers in the ordinary course
of business;
(iii) it is due or unpaid more than ninety (90) days after the
original invoice date;
(iv) the total unpaid Receivables of the Account Debtor exceed
ten percent (10%), except with respect to the Persons identified in a
letter from Company to Agent, which may be updated from time to time
subject to approval of the Agent, as to which the percentages specified
in such letter shall be applicable, of the net amount of all Eligible
Receivables Receivable, to the extent of such excess;
(v) any covenant, representation or warranty contained in this
Agreement or the Security Documents with respect to such Receivable has
been materially breached;
(vi) the Account Debtor is also Company's creditor or supplier
to the extent of the amount owed by the Company to the Account Debtor
(unless and except to the extent such amount owed is collateralized by a
letter of credit acceptable to the Agent and such letter of credit has
been assigned and delivered to the Agent), or has disputed liability with
respect to such Receivable, or has made any claim with respect to such
Receivable or any other Receivable due from such Account Debtor to
Company, or the Receivable
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otherwise is subject to any right of setoff by the Account Debtor, unless
Agent has received a non-offset letter in form and substance satisfactory
to Agent, to the extent of any offset, dispute or claim;
(vii) the Account Debtor has commenced a voluntary case under
the Bankruptcy Code, or made an assignment for the benefit of creditors,
or a decree or order for relief has been entered by a court having
jurisdiction in the premises in respect of the Account Debtor in an
involuntary case under the Bankruptcy Code, or any other petition or
other application for relief under the Bankruptcy Code has been filed by
or against the Account Debtor, or if the Account Debtor has filed a
certificate of dissolution under applicable state law or shall be
liquidated, dissolved or wound-up, or shall authorize or commence any
action or proceeding for dissolution, winding-up or liquidation, or if
the Account Debtor has failed, suspended business, declared itself to be
or has become insolvent, or consented to or suffered a receiver, trustee,
liquidator or custodian to be appointed for it or for all or a
significant portion of its assets or affairs, unless the payment of
Receivables from such Account Debtor is insured in a manner satisfactory
to the Agent, or if the Receivable from such Account Debtor arises
subsequent to a decree or order for relief with respect to such Account
Debtor under the Bankruptcy Code, the Agent shall have determined in its
sole discretion that the timely payment and collection of such Receivable
will not be impaired;
(viii) it arises from a sale to an Account Debtor outside the
United States or Canada provided that Receivables that arise from a sale
to an Account Debtor in Mexico may be included if and to the extent such
Receivable is collateralized by cash or by a letter of credit issued by a
U.S. bank, which can be drawn upon regardless of the creditworthiness of
the account party or of any underlying letter of credit and otherwise
acceptable to the Agent;
(ix) it arises from a sale to the Account Debtor on a bill-
and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment
or any other repurchase or return basis;
(x) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless Company duly
assigns its rights to payment of such Receivable to the Agent pursuant
to, and has otherwise complied with, the Assignment of Claims Act of
1940, as amended (31 U.S.C. (S) 3727 et seq.), or the
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Account Debtor is a department, agency or instrumentality of any state or
municipality unless Company has complied with any applicable state
statute relating to the assignment of claims against such entity;
(xi) the Agent does not have a valid and duly perfected first
priority security interest in such Receivable or the Receivable is
subject to a Lien (other than a Lien permitted by Section 7.15 hereof) in
favor of any Person other than the Agent under the Security Documents;
(xii) the goods giving rise to such Receivable have not been
delivered to and accepted by the Account Debtor or the services giving
rise to such Receivable have not been performed by the Company and
accepted by the Account Debtor or the Receivable otherwise does not
represent a final sale;
(xiii) the total unpaid Receivables of the Account Debtor
exceed a credit limit determined by Agent and previously disclosed to the
Company in writing, in its sole discretion, to the extent such Receivable
exceeds such limit;
(xiv) the Receivable is evidenced by chattel paper or an
instrument of any kind, or has been reduced to judgment;
(xv) Company has made any agreement with the Account Debtor
for any deduction therefrom, to the extent of such deduction, except for
discounts or allowances which are made in the ordinary course of business
for prompt payment and which discounts or allowances are reflected in the
calculation of the face value of each invoice related to such Receivable;
(xvi) Company has made an agreement with the Account Debtor to
extend the time of payment thereof;
(xvii) the Receivable arises from a retail sale of goods to a
Person who is purchasing such goods primarily for personal, family or
household purposes;
(xviii) the Receivable does not comply with all applicable legal
requirements, including, where applicable, the Federal Consumer Credit
Protection Act, the Federal Truth in Lending Act and Regulation Z of the
Board of Governors of the Federal Reserve System, in each case as
amended;
(xix) the Receivable (or the item being sold in connection
therewith) is not the
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exclusive property of the Company;
(xx) the Receivable is payable in a currency other than U.S.
Dollars;
(xxi) the Account Debtor on such Receivable is located in a
jurisdiction which requires creditors to be licensed or hold a permit in
order to perform the services or sell the items giving rise to such
Receivable or to receive payments on such Receivable, and Company is not
so licensed or does not hold such permit;
(xxii) the Receivable is required pursuant to the Company's
credit guidelines to be secured by a letter of credit or payment bond and
such letter of credit or payment bond is not in form and substance
satisfactory, or has not been assigned and delivered to the Agent on
terms acceptable, to the Agent or the Agent shall not have received such
documentation (including opinions) as it shall require in connection
therewith;
(xxiii) the Receivable does not conform in all respects to the
representations and warranties contained herein and in the Security
Documents; or
(xxiv) the Receivable is not fully transferable or assignable.
"Eligible Inventory" shall mean such Inventory of Company (other than
packaging materials and supplies) the value of which is calculated on the basis
of the lower of cost or market with the cost calculated under the first-in
first-out method of accounting. Without limiting the generality of the
foregoing, no Inventory shall be Eligible Inventory unless, it (i) is sulfur,
sulfuric acid and ammonia raw materials, phosphate rock or finished goods, (ii)
is in good, new and saleable condition, (iii) is not obsolete, slow-moving or
unmerchantable, (iv) meets all standards imposed by any governmental agency or
authority, (v) conforms in all respects to the warranties and representations
set forth herein and in the Security Documents, (vi) is at all times subject to
Agent's valid and duly perfected, first priority security interest and no other
Lien (except a Lien permitted by Section 7.16 hereof), (vii) has been fully paid
for, (viii) in the case of inventory subject to the Rhone-Poulenc Agreement, is
located in the Nu-West Stockpile (as defined in the Rhone-Poulenc Agreement) in
accordance with the terms of such Agreement and title has passed to Company in
accordance with the Rhone-Poulenc Agreement, (ix) is not in transit, (x) is
owned solely by Company, (xi) is located in the United States of America and
(xii) if stored in a leased facility, Company is current (without giving effect
to any grace periods) in all obligations owed to such landlord and the landlord
has waived any statutory or other Lien.
"Environmental Laws" shall mean all federal, state and local
environmental, health and
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safety statutes and regulations, including without limitation all statutes and
regulations establishing quality criteria and standards for air, water, land and
toxic or hazardous wastes and substances.
"Equity Offering" shall mean a public offering or private placement of
the common capital stock of the Company.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Event of Default" shall mean any event or condition identified as such
in Section 8.1 hereof.
"Excess Cash Flow" shall mean for any period, the amount (if any) by
which (x) EBITDA exceeds (y) the sum of (i) Current Maturities of Funded Debt,
(ii) Interest Expense, (iii) Capital Expenditures and (iv) cash payments for
taxes on or measured by income.
"Existing Agreement" shall mean the Credit Agreement dated as of October
15, 1993, among the Company, Banque Indosuez, New York Branch, individually and
as agent, and the other lenders party thereto (the "Existing Lenders").
"Fixed Charge Coverage Ratio" shall mean, as of any time the same is to
be determined the ratio of (x) EBITDA for the four most recently completed
fiscal quarters minus Capital Expenditures (other than Capital Expenditures
funded with the proceeds of the Kennecott Debt) during the same such period
minus the aggregate amount of all federal, state and local income taxes paid by
the Company and its Subsidiaries during the same such period to (y) the sum of
(i) Interest Expense during the same such period plus (ii) Current Maturities of
Funded Debt.
"Funded Debt," shall mean, as of any time the same is to be determined,
all indebtedness for borrowed money of the Company and its Subsidiaries on a
consolidated basis, in each case maturing by its terms more than one year after,
or which is renewable or extendible at the option of such Person for a period
ending one year or more after, the date of determination, and shall include
indebtedness for borrowed money of such maturity created, assumed or guaranteed
by such Person either directly or indirectly, including obligations of such
maturity secured by liens upon Property of such Person and upon which such
entity customarily pays the interest, all current maturities of all such
indebtedness of such maturity and all rental payments under capitalized leases
of such maturity.
"Funded Debt Ratio" shall mean, as of any time the same is to be
determined, the ratio
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of Funded Debt to EBITDA.
"Guarantors" shall mean Nu-West Minerals, Inc., a Delaware corporation,
and Nu-West Mining, Inc., a Delaware corporation.
"Hedging Arrangements" shall mean any interest rate swaps, interest rate
caps, interest rate collars or other interest rate hedging arrangements as the
Company may from time to time enter into pursuant to Section 7.26 hereof.
"Hedging Liability" shall mean the liability of the Company to the Banks
or any of them in respect of the Hedging Arrangements.
"Intercreditor Agreement" shall mean the Intercreditor Agreement dated as
of August 3, 1995, from the Company and Kennecott, and their successors and
assigns, to the Agent and the Banks.
"Interest Coverage Ratio" is defined in Section 7.8 hereof.
"Interest Expense" means, with reference to any period, the sum of all
interest charges (including imputed interest charges with respect to Capitalized
Lease Obligations and all amortization of debt discount and expense) of the
Company and its Subsidiaries for such period determined in accordance with
generally accepted accounting principles.
"Interest Period" means, with respect to any LIBOR Portion, the period
commencing on, as the case may be, the creation, continuation or conversion date
with respect to such LIBOR Portion and ending one (1), two (2), three (3) or six
(6) months thereafter as selected by the Company in its notice as provided
herein, provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the next
succeeding Business Day, unless in the case of an Interest Period for a
LIBOR Portion the result of such extension would be to carry such
Interest Period into another calendar month in which event such Interest
Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity
date of the relevant Notes;
(iii) the interest rate to be applicable to each Portion for
each Interest Period shall apply from and including the first day of such
Interest Period to but excluding the
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last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto the Company will be unable to make a principal payment scheduled
to be made during such Interest Period without paying part of a Fixed
Rate Portion on a date other than the last day of the Interest Period
applicable thereto.
For purposes of determining an Interest Period, a month means a period starting
on one day in a calendar month and ending on a numerically corresponding day in
the next calendar month, provided, however, if an Interest Period begins on the
last day of a month or if there is no numerically corresponding day in the month
in which an Interest Period is to end, then such Interest Period shall end on
the last Business Day of such month.
"Inventory" shall mean all raw materials, work in process, finished
goods, and goods held for sale or lease or furnished or to be furnished under
contracts of service in which the Company or any Subsidiary now has or hereafter
acquires any right.
"Junior Subordinated Notes" shall mean the Company's 18% Subordinated
Notes due November 1, 2003.
"Kennecott" shall mean Kennecott Utah Copper Corporation, a Delaware
corporation.
"Kennecott Debt" shall mean the Company's indebtedness, obligations and
liabilities to Kennecott under the Loan Agreement dated as of July 28, 1994, as
heretofore amended.
"L/C" shall have the meaning set forth in Section 1.5 hereof.
"Lease" shall have the meaning specified in Section 4 hereof.
"Letter of Credit Facility" is defined in the first paragraph of this
Agreement.
"LIBOR" means, for each Interest Period, (a) the LIBOR Index Rate for
such Interest Period, if such rate is available, and (b) if the LIBOR Index Rate
cannot be determined, the arithmetic average of the rates of interest per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) at which deposits
in U.S. Dollars in immediately available funds are offered to the Agent at 11:00
a.m. (London, England time) two Business Days before the beginning of such
Interest Period by three (3) or more major banks in the interbank eurodollar
market selected by the Agent for a period equal to such Interest Period and in
an amount equal or comparable to the applicable LIBOR Portion scheduled to be
outstanding from the Agent during such Interest Period. Each determination of
LIBOR made by the Agent shall be conclusive and binding on
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the Company and the Banks absent manifest error.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one hundred-thousandth of a
percentage point) for deposits in U.S. Dollars for a period equal to such
Interest Period which appears on the Telerate Page 3750 as of 11:00 a.m.
(London, England time) on the date two Business Days before the commencement of
such Interest Period.
"LIBOR Portion" is defined in Section 2.1 hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, Capital Lease or other title
retention arrangement.
"Loans" shall mean and include Revolving Credit Loans, the Term Credit
One Loans and the Term Credit Two Loans; and "Loan" shall mean any of the Loans.
"Loan Documents" shall mean this Agreement and any and all exhibits
hereto, the Notes, the Applications and the Security Documents.
"Material Adverse Effect" shall mean a material adverse effect on the
operations, financial condition or Properties of the Company and its
Subsidiaries, taken as a whole.
"Net Income" means, with reference to any period, the net income (or net
loss) of the Company and its Subsidiaries for such period as computed on a
consolidated basis in accordance with generally accepted accounting principles,
and, without limiting the foregoing, after deduction from gross income of all
expenses and reserves, including reserves for all taxes on or measured by
income.
"Notes" shall mean the Revolving Notes, Term Credit One Notes and Term
Credit Two Notes; and "Note" shall mean any of the Notes.
"NuTec" shall have the meaning specified in Section 4 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean and include any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government (whether national,
federal, state, county, city, municipal, or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
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"Plan" shall mean any employee benefit plan covering any officers or
employees of the Company or any Subsidiary, any benefits of which are, or are
required to be, guaranteed by the PBGC.
"Potential Default" shall mean any event or condition which, with the
lapse of time, or giving of notice, or both, would constitute an Event of
Default.
"Pledged Note" shall have the meaning specified in Section 4 hereof.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed or tangible or intangible.
"Receivables" shall mean all accounts, contract rights, instruments,
documents, chattel paper and general intangibles in which the Company or any
Subsidiary now has or hereafter acquires any right.
"Reimbursement Obligation" is defined in Section 1.6 hereof.
"Required Banks" shall mean any Bank or Banks which in the aggregate hold
at least 66-2/3% of the aggregate unpaid principal balance of the Loans and
Reimbursement Obligations or, if no Loans or Reimbursement Obligations are
outstanding hereunder, any Bank or Banks in the aggregate having at least 66-
2/3% of the Revolving Credit Commitments.
"Reserve Percentage" means, for the purpose of computing Adjusted LIBOR,
the maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental or other special reserves) imposed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D on Eurocurrency liabilities (as such term is defined in Regulation
D) for the applicable Interest Period as of the first day of such Interest
Period, but subject to any amendments to such reserve requirement by such Board
or its successor, and taking into account any transitional adjustments thereto
becoming effective during such Interest Period. For purposes of this definition,
LIBOR Portions shall be deemed to be Eurocurrency liabilities as defined in
Regulation D without benefit of or credit for prorations, exemptions or offsets
under Regulation D.
"Revolving Credit" is defined in the first paragraph of this Agreement.
"Revolving Credit Commitment" and "Revolving Credit Commitments" shall
have the meanings specified in Section 1.1(b) hereof.
"Revolving Credit Loan" and "Revolving Credit Loans" shall have the
meanings specified
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in Section 1.1(a) hereof.
"Revolving Note" or "Revolving Notes" shall have the meanings specified
in Section 1.1(d) hereof.
"Rhone" shall have the meaning specified in Section 4 hereof.
"Rhone-Poulenc Agreement" shall have the meaning specified in Section 4
hereof.
"SAR Repurchase Transactions" shall mean the payment by the Company of
amounts required to be paid by it pursuant to the Cash Settlement Option
Agreement dated as of October 15, 1993 between the Company and Indosuez CM II,
Inc.
"SEC Report" shall mean (a) the annual report on Form 10-K of the Company
for the fiscal year ended June 30, 1994, (b) the quarterly reports on Form 10-Q
of the Company for the fiscal quarters ended September 30, 1994, December 31,
1994 and March 31, 1995, and (c) the proxy statement dated October 11, 1994 of
the Company prepared in connection with the notice of annual meeting of the
stockholders of the Company held on November 15, 1994.
"Security Documents" shall mean all mortgages, deeds of trust, security
agreements, assignments of leases and rents, pledge agreements, collateral
assignments, financing statements and other instruments and documents executed
and delivered by the Company or any Subsidiary to the Agent for the benefit of
the Banks to secure any indebtedness, obligations and liabilities of the Company
as any Subsidiary to the Agent and the Banks.
"Senior Subordinated Debt" shall mean the Company's indebtedness,
obligations and liabilities in an aggregate principal amount of $10,000,000
under the Senior Subordinated Term Loan Agreement dated as of October 15, 1993
among the Company and each of the lending institutions named therein.
"Subordinated Indebtedness" shall mean (a) the Company's indebtedness
evidenced by the subordinated warrant notes issued pursuant to the Agreement
Regarding Exercise of Warrants dated November 2, 1993 among the Company and each
of the warrant holders named therein, (b) the Senior Subordinated Debt and (c)
the Company's indebtedness evidenced by the Junior Subordinated Notes.
"Subsidiary" shall mean collectively any corporation or other entity at
least a majority of the outstanding voting equity interests (other than
directors' qualifying shares) of which is at the time owned directly or
indirectly by the Company or by one of more Subsidiaries or by the
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Company and one or more Subsidiaries. The term "Consolidated Subsidiary" shall
mean any Subsidiary whose accounts are consolidated with those of the Company in
accordance with generally accepted accounting principles.
"Tangible Net Worth" means, as of any time the same is to be determined,
the total shareholders' equity (including capital stock, additional paid-in-
capital and retained earnings after deducting treasury stock, but excluding
minority interests in Subsidiaries) which would appear on the balance sheet of
the Company and its Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles consistently applied,
less the sum of (i) all notes receivable from officers and employees of the
Company and its Subsidiaries, (ii) the aggregate book value of all assets which
would be classified as intangible assets under generally accepted accounting
principles consistently applied, including, without limitation, goodwill,
patents, trademarks, trade names, copyrights, franchises and deferred charges
(including, without limitation, unamortized debt discount and expense,
organization costs and deferred research and development expense) and similar
assets and (iii) the write-up of assets above cost.
"Telerate Page 3750" shall mean the display designated as "Page 3750" on
the Telerate Service (or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for U.S. Dollar deposits).
"Term Credit Commitments" shall mean the commitments of the Banks to make
loans under the Term Credit One and Term Credit Two in the amounts of the Term
Credit One Commitments and Term Credit Two Commitments, respectively, or
opposite their signatures on Assignment Agreements delivered pursuant to Section
12.14 hereof under the headings "Term Credit One Commitment" and "Term Credit
Two Commitment", respectively, as such amounts may be reduced pursuant hereto.
"Term Credit One Commitment" and "Term Credit One Commitments" shall have
the meanings specified in Section 1.2 hereof.
"Term Credit Two Commitment" and "Term Credit Two Commitments" shall have
the meanings specified in Section 1.3 hereof.
"Termination Date" shall have the meaning set forth in Section 1.1(a)
hereof.
"Term Notes" shall mean the Term Credit One Notes and the Term Credit Two
Notes.
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"Total Capitalization" shall mean, as of any time the same is to be
determined, the sum of (i) Tangible Net Worth plus (ii) Total Consolidated
Indebtedness.
"Total Consolidated Indebtedness" means, as of any time the same is to be
determined, the aggregate of all indebtedness, obligations, liabilities,
reserves and any other items which would be listed as a liability on a balance
sheet of the Company and its Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles consistently applied,
but excluding all trade payables, accrued expenses, accrued dividends and
accrued income taxes.
.c2.Section 9.2. Accounting Terms;. Any accounting term or the character
or amount of any asset or liability or item of income or expense required to be
determined under this Agreement, shall be determined or made in accordance with
generally accepted accounting principles at the time in effect, to the extent
applicable, except where such principles are inconsistent with the requirements
of this Agreement.
.c.Section 10. The Agent;.
.c2.Section 10.1. Appointment and Authorization;. Each Bank hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers hereunder and under the Security Documents as are
designated to the Agent by the terms hereof and thereof together with such
powers as are reasonably incidental thereto. The Agent may waive receipt of a
Lien on any after acquired fixed assets or intangibles of the Company and on
negotiable instruments and documents. The Agent may resign at any time by
sending twenty (20) days prior written notice to the Company and the Banks and
may be removed by the Required Banks upon twenty (20) days prior written notice
to the Company and the Banks. In the event of any such resignation or removal
the Required Banks may appoint a new agent after consultation with the Company
and due consideration of its views, which shall succeed to all the rights,
powers and duties of the Agent hereunder and under the Security Documents. Any
resigning or removed Agent shall be entitled to the benefit of all the
protective provisions hereof with respect to its acts as an agent hereunder, but
no successor Agent shall in any event be liable or responsible for any actions
of its predecessor. If the Agent resigns or is removed and no successor is
appointed, the rights and obligations of such Agent shall be automatically
assumed by the Required Banks and (i) the Company shall be directed to make all
payments due each Bank hereunder directly to such Bank and (ii) the Agent's
rights in the Security Documents shall
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be assigned without representation, recourse or warranty to the Banks as their
interests may appear.
.c2.Section 10.2. Rights as a Bank;. The Agent has and reserves all of
the rights, powers and duties hereunder and under its Notes and the other Loan
Documents as any Bank may have and may exercise the same as though it were not
the Agent and the terms "Bank" or "Banks" as used herein and in all of such
documents shall, unless the context otherwise expressly indicates, include the
Agent in its individual capacity as a Bank.
.c2.Section 10.3. Standard of Care;. The Banks acknowledge that they have
received and approved copies of the Loan Documents, and such other information
and documents concerning the transactions contemplated and financed hereby as
they have requested to receive and/or review. The Agent makes no
representations or warranties of any kind or character to the Banks with respect
to the validity, enforceability, genuineness, perfection, value, worth or
collectibility hereof or of the other Loan Documents or of the Liens provided
for thereby or of any other documents called for hereby or thereby or of the
Collateral. The Agent need not verify the worth or existence of the Collateral
and may rely exclusively on reports of the Company in computing the Borrowing
Base. Neither the Agent nor any director, officer employee, agent or
representative thereof (including any security trustee therefor) shall in any
event be liable for any clerical errors or errors in judgment, inadvertence or
oversight, or for action taken or omitted to be taken by it or them hereunder or
under the other Loan Documents or in connection herewith or therewith except for
its or their own gross negligence or willful misconduct. The Agent shall incur
no liability under or in respect of this Agreement or the other Loan Documents
by acting upon any notice, certificate, warranty, instruction or statement (oral
or written) of anyone (including anyone in good faith believed by it to be
authorized to act on behalf of the Company), unless it has actual knowledge of
the untruthfulness of same. The Agent may execute any of its duties hereunder
by or through employees, agents, and attorneys-in-fact and shall not be
answerable to the Banks for the default or misconduct of any such agents or
attorneys-in-fact selected with reasonable care. The Agent shall be entitled to
advice of counsel concerning all matters pertaining to the agencies hereby
created and its duties hereunder, and shall incur no liability to anyone and be
fully protected in acting upon the advice of such counsel. The Agent shall be
entitled to assume that no Potential Default or Event of Default exists unless
notified to the contrary by a Bank. The Agent shall in all events be fully
protected in acting or failing to act in accord with the instructions of the
Required Banks. Upon the occurrence of an Event of
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Default hereunder, the Agent shall take such action with respect to the
enforcement of its liens on the Collateral and the preservation and protection
thereof as it shall be directed to take by the Required Banks but unless and
until the Required Banks have given such direction the Agent shall take or
refrain from taking such actions as it deems appropriate and in the best of
interest of all Banks. The Agent shall in all cases be fully justified in
failing or refusing to act hereunder unless it shall be indemnified to its
reasonable satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent may treat the owner of any Note as the holder thereof until
written notice of transfer shall have been filed with it signed by such owner in
form satisfactory to the Agent. Each Bank acknowledges that it has independently
and without reliance on the Agent or any other Bank and based upon such
information, investigations and inquiries as it deems appropriate made its own
credit analysis and decision to extend credit to the Company. It shall be the
responsibility of each Bank to keep itself informed as to the creditworthiness
of the Company and the Agent shall have no liability to any Bank with respect
thereto.
.c2.Section 10.4. Costs and Expenses;. Each Bank agrees to reimburse the
Agent for all out-of-pocket costs and expenses suffered or incurred by the Agent
or any security trustee in performing its duties hereunder and under the other
Loan Documents or in the exercise of any right or power imposed or conferred
upon the Agent hereby or thereby, to the extent that the Agent is not promptly
reimbursed for same by the Company or out of the Collateral, all such costs and
expenses to be borne by the Banks ratably in accordance with the amounts of
their respective Commitments. If any Bank fails to reimburse the Agent for its
share of any such costs and expenses, such costs and expenses shall be paid pro
rata by the remaining Banks, but without in any manner releasing the defaulting
Bank from its liability hereunder.
.c2.Section 10.5. Indemnity;. The Banks shall ratably indemnify and hold
the Agent, and its directors, officers, employees, agents or representatives
(including as such any security trustee therefor) harmless from and against any
liabilities, losses, costs or expenses suffered or incurred by them hereunder or
under the Applications or the other Loan Documents or in connection with the
transactions contemplated hereby or thereby, regardless of when asserted or
arising, except to the extent they are promptly reimbursed for the same by the
Company or out of the Collateral and except to the extent that any event giving
rise to a claim was caused by the gross negligence or willful misconduct of the
party seeking to be indemnified. If any Bank defaults in its obligations under
this Section 10.5, its share of the obligations shall be paid pro rata by the
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remaining Banks, but without in any manner releasing the defaulting Bank from
its liability hereunder.
.c1.Section 11. The Guarantees;.
.c2.Section 11.1. The Guarantees;. To induce the Banks to provide the
credits described herein and in consideration of benefits expected to accrue to
each Guarantor by reason of the Commitments and for other good and valuable
consideration, receipt of which is hereby acknowledged, each Guarantor hereby
unconditionally and irrevocably guarantees jointly and severally to the Agent,
the Banks and each other holder of any of the Company's obligations under the
Loan Documents, the due and punctual payment of all present and future
indebtedness, obligations and liabilities of the Company evidenced by or arising
out of the Loan Documents, including, but not limited to, the due and punctual
payment of principal of and interest on the Notes and Reimbursement Obligations
and the due and punctual payment of all other obligations now or hereafter owed
by the Company under the Loan Documents as and when the same shall become due
and payable, whether at stated maturity, by acceleration or otherwise, according
to the terms hereof and thereof. In case of failure by the Company punctually
to pay any indebtedness guaranteed hereby, each Guarantor hereby unconditionally
agrees jointly and severally to make such payment or to cause such payment to be
made punctually as and when the same shall become due and payable, whether at
stated maturity, by acceleration or otherwise, and as if such payment were made
by the Company.
.c2.Section 11.2. Guarantee Unconditional;. The obligations of each
Guarantor as a guarantor under this Section 11 shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Company or of any other
Guarantor under this Agreement or any other Loan Document or by operation
of law or otherwise;
(b) any modification or amendment of or supplement to this
Agreement or any other Loan Document;
(c) any change in the corporate existence, structure or
ownership of, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting, the Company, any other Guarantor, or any of
their respective assets, or any resulting release or discharge of any
obligation of the Company or of any other Guarantor contained in any
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Loan Document;
(d) the existence of any claim, set-off or other rights which
the Guarantor may have at any time against the Agent, any Bank or any
other Person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or
demand or any exercise of, or failure to exercise, any rights or remedies
against the Company, any other Guarantor or any Collateral;
(f) any application of any sums by whomsoever paid or howsoever
realized to any obligation of the Company, regardless of what obligations
of the Company remain unpaid,
(g) any invalidity or unenforceability relating to or against
the Company or any other Guarantor for any reason of this Agreement or
of any other Loan Document or any provision of applicable law or
regulation purporting to prohibit the payment by the Company of the
principal of or interest on any Note, any Reimbursement Obligations or
any other amount payable by it under the Loan Documents; or
(h) any other act or omission to act or delay of any kind by the
Agent, any Bank or any other Person or any other circumstance whatsoever
that might, but for the provisions of this paragraph, constitute a legal
or equitable discharge of the obligations of the Guarantor under this
Section 11.
.c2.'Section 11.3. Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances';. Each Guarantor's obligations under this Section 11
shall remain in full force and effect until the Commitments are terminated and
the principal of and interest on the Notes and all other amounts payable by the
Company under this Agreement and all other Loan Documents shall have been paid
in full. If at any time any payment of the principal of or interest on any Note
or any other amount payable by the Company under the Loan Documents is rescinded
or must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Company or of a Guarantor, or otherwise, each Guarantor's
obligations under this Section 11 with respect to such payment shall be
reinstated at such time as though such payment had become due but had not been
made at such time.
.c2.Section 11.4. Subrogation;. No Guarantor will exercise any rights
which it may acquire by way of subrogation by any payment made hereunder, or
otherwise, until the Notes and all
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other amounts payable by the Company under the Loan Documents shall have been
paid in full and after the termination of the Commitments. If any amount shall
be paid to a Guarantor on account of such subrogation rights at any time prior
to the later of (a) the payment in full of the Notes and all other amounts
payable by such Guarantor hereunder and (y) the termination of all the
Commitments, such amount shall be held in trust for the benefit of the Agent and
the Banks and shall forthwith be paid to the Agent and the Banks or be credited
and applied upon the Company's obligations under the Loan Documents, whether
matured or unmatured, in accordance with the terms of this Agreement.
Notwithstanding any other provision hereof, the right to recovery against each
Guarantor under this Section 11 shall not exceed $1.00 less than the amount
which would render such Guarantor's obligations under this Section 11 void or
voidable under applicable law, including without limitation fraudulent
conveyance law.
.c2.Section 11.5. Waivers;. Each Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by the Agent, any
Bank or any other Person against the Company, another Guarantor or any other
Person.
.c2.Section 11.6. Stay of Acceleration;. If acceleration of the time for
payment of any amount payable by the Company under this Agreement or any other
Loan Document is stayed upon the insolvency, bankruptcy or reorganization of the
Company, all such amounts otherwise subject to acceleration under the terms of
this Agreement or the other Loan Documents shall nonetheless be payable jointly
and severally by the Guarantors hereunder forthwith on demand by the Agent or
any Bank.
.c.Section 12. Miscellaneous;.
.c2.Section 12.1. Holidays;. If any principal of any of the Notes shall
fall due on a Saturday, Sunday or on another day which is a legal holiday for
lenders in the State of Illinois, interest at the rates such Notes bear for the
period prior to maturity shall continue to accrue on such principal from the
stated due date thereof to and including the next succeeding Business Day on
which the same is payable.
.c2.Section 12.2. No Waiver, Cumulative Remedies;. No delay or failure on
the part of any Bank in the exercise of any power or right shall operate as a
waiver thereof, nor as an acquiescence in any Potential Default or Event of
Default nor preclude any other or further exercise thereof, or the exercise of
any other power or right, and the rights and remedies
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hereunder of the Banks are cumulative to, and not exclusive of, any rights or
remedies which any of them would otherwise have.
.c2.Section 12.3. Waivers, Modifications and Amendments;. Any provision
hereof or of the Notes or Security Documents, may be amended, modified, waived
or released and any Potential Default or Event of Default and its consequences
may be rescinded and annulled upon the written consent of the Required Banks
provided, however, that without the consent of each Bank no such amendment,
modification or waiver shall (a) increase the amount or extend the terms of such
Bank's Commitment or reduce the interest rate applicable to or extend the
maturity of its Notes or reduce the amount of the principal thereof or modify
any provision of the Notes or this Agreement with respect to the payment or
prepayment of the Notes or change the amount or postpone the date of payment of
any scheduled or required payment of principal of the Notes or reduce the amount
of the fees to which it is entitled hereunder, (b) give to any Note any
preference or priority over any other Notes, (c) amend the definition of the
term "Required Banks", (d) alter, modify or amend the provisions of this Section
12.3, or (e) change the advance rates under the Borrowing Base or the definition
of the terms "Borrowing Base", "Eligible Inventory" or "Eligible Receivables",
and without the consent of all Banks no such amendment, modification, release or
waiver shall release all or any substantial (in value) part of the collateral
security afforded by the Security Documents, except that the Agent may release
its Lien on Collateral without the consent of any Bank if made in connection
with a sale or other disposition thereof. No amendment, modification or waiver
of the Agent's protective provisions shall be effective without the prior
written consent of the Agent.
.c2.Section 12.4. Costs and Expenses;. The Company agrees to pay on
demand all reasonable out-of-pocket costs and expenses of the Agent in
connection with the negotiation, preparation, execution, delivery, recording
and/or filing and/or release of this Agreement, the other Loan Documents and the
other instruments and documents to be delivered hereunder or thereunder or in
connection with the transactions contemplated hereby or thereby or in connection
with any consents hereunder or thereunder or waivers or amendments hereto or
thereto, including the fees and out-of-pocket expenses of counsel for the Agent
with respect to all of the foregoing, and all recording, filing, title insurance
or other fees, costs and taxes incident to perfecting a Lien upon the collateral
security for the Notes, and all reasonable costs and expenses (including
reasonable attorneys' fees), incurred by the Agent, any security trustee, the
Banks or any other holders of a Note in connection with a default or the
enforcement of this Agreement, the other
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Loan Documents and the other instruments and documents to be delivered hereunder
or thereunder and all costs, fees and taxes of the types enumerated above
incurred in supplementing (and recording or filing supplements to) the Security
Documents in connection with assignments contemplated by Section 12.14 hereof
(collectively, "Security Assignment Costs") if counsel to the Agent believes
such supplements to be appropriate or desirable (but the Company shall be
obligated to pay such costs, expenses and taxes incurred in supplementing the
Security Documents in connection with such assignments for only one concurrent
series of assignments); provided that the Company's obligations hereunder with
respect to the Agent's counsel's fees and expenses incurred in connection with
the negotiation, preparation, execution and delivery of the Loan Documents shall
be limited to $60,000. The Company shall pay the Agent from time to time
customary fees and charges for field audits of the Collateral, provided that the
Company shall not be required to pay for more than two such field audits per
annum unless a Potential Default or Event of Default has occurred and is
continuing. The Company agrees to indemnify and save the Banks, the Agent and
any security trustee harmless from any and all liabilities, losses, costs and
expenses incurred by the Banks or the Agent in connection with any action, suit
or proceeding brought against the Agent, security trustee or any Bank by any
person which arises out of the transactions contemplated or financed hereby or
by the Notes, Applications or Security Documents or out of any action or
inaction by the Agent, any security trustee or any Bank hereunder or thereunder,
except for such thereof as is caused by the gross negligence or willful
misconduct of the party indemnified. The provisions of this Section 12.4 and the
protective provisions of Section 2 hereof shall survive payment of the Notes and
the termination of the Banks' Commitments hereunder.
.c2.Section 12.5. Stamp Taxes;. Although the Company is of the opinion
that no documentary or similar taxes are payable in respect to this Agreement or
the other Loan Documents, the Company agrees that it will pay such taxes,
including interest and penalties, in the event any such taxes are assessed,
irrespective of when such assessment is made and whether or not any credit to it
is then in use or available.
.c2.Section 12.6. Survival of Representations;. All representations and
warranties made herein or in the Loan Documents or in certificates given
pursuant hereto shall survive the execution and delivery of this Agreement, and
the other Loan Documents, and shall continue in full force and effect with
respect to the date as of which they were made as long as any credit is in use
or available hereunder.
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.c2.Section 12.7. Construction;. The parties hereto acknowledge and agree
that this Agreement shall not be construed more favorably in favor of one than
the other based upon which party drafted the same, it being acknowledged that
all parties hereto contributed substantially to the negotiation and preparation
of this Agreement.
.c2.Section 12.8. Accounting Principles;. All computations of compliance
with the terms hereof shall be made on the basis of generally accepted
principles of accounting applied in a manner consistent with those used in the
preparation of the audit report of the Company referred to in the first sentence
of Section 5.3 hereof.
.c2.Section 12.9. Addresses for Notices;. All communications provided for
herein shall be in writing and shall be deemed to have been given or made when
served personally or three days after being deposited in the United States mail
addressed, if to the Company or any Guarantor, at 3010 Conda Road, Soda Springs,
Idaho 83276, Attention: Mark R. Sanders, with a copy to 8400 East Prentice
Avenue, Suite 1320, Englewood, Colorado 80111 Attention: Steven W. Gampp, if to
the Agent at 111 West Monroe Street, Chicago, Illinois 60690 Attention:
Agribusiness Division, if to the Banks at their addresses as shown on the
signature pages hereof or on any Assignment Agreement or at such other address
as shall be designated by any party hereto in a written notice given to each
party pursuant to this Section 12.9.
.c2.Section 12.10. Headings;. Article and Section headings used in this
Agreement are for convenience of reference only and are not a part of this
Agreement for any other purpose.
.c2.Section 12.11. Severability of Provisions;. Any provision of this
Agreement which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. All rights,
remedies and powers provided in this Agreement and the Notes may be exercised
only to the extent that the exercise thereof does not violate any applicable
mandatory provisions of law, and all the provisions of this Agreement and the
Notes are intended to be subject to all applicable mandatory provisions of law
which may be controlling and to be limited to the extent necessary so that they
will not render this Agreement or the Notes invalid or unenforceable.
.c2.Section 12.12. Counterparts;. This Agreement may be executed in any
number of counterparts, and by different parties hereto on separate
counterparts, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
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.c2.Section 12.13. Binding Nature, Governing Law, Etc;. This Agreement
shall be binding upon the Company and its successors and assigns, and shall
inure to the benefit of the Banks and the benefit of their successors and
assigns, including any subsequent holder of an interest in the Notes. This
Agreement and the Notes and the rights and duties of the parties hereto shall be
construed and determined in accordance with, and shall be governed by the
internal laws of the State of Illinois without regard to principles of conflicts
of law. This Agreement, together with the Notes and the other Loan Documents
constitutes the entire understanding of the parties with respect to the subject
matter hereof and any prior agreements, whether written or oral, with respect
thereto are superseded hereby except for prior understandings related to fees
payable to the Agent. The Company may not assign its rights hereunder without
the written consent of the Banks.
.c2.Section 12.14. Assignment Agreements;. Any Bank may, from time to
time upon at least five (5) Business Days' notice to the Agent, assign to other
financial institutions all or part of its rights and obligations under this
Agreement (including without limitation the indebtedness evidenced by the Notes
then owned by such assigning Bank, together with an equivalent proportion of its
obligation to participate in L/C's hereunder) pursuant to an assignment
agreement in form and substance satisfactory to the Agent (an "Assignment
Agreement"); provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of the assigning Bank's rights and
obligations under this Agreement and the assignment shall cover the same
percentage of such Bank's Commitments, Loans, Notes and interests in L/C's; (ii)
unless the Agent otherwise consents, the assigning Bank shall assign all of its
Commitments, Loans, Notes and interests in the L/C's or the aggregate amount
thereof being assigned pursuant to each such assignment (determined as of the
effective date of the relevant Assignment Agreement) shall in no event be less
than $5,000,000 and shall be an integral multiple of $500,000; (iii) unless the
Company otherwise consents, each Bank shall maintain for its own account at
least 50% of its original Commitments; (iv) the Agent and the Company must each
consent, which consent shall not be unreasonably withheld and shall be evidenced
by execution of a counterpart of the relevant Assignment Agreement in the space
provided thereon for such acceptance, to each such assignment to a party which
was not an original signatory of this Agreement (it being understood and agreed
the Company may condition its acceptance of an assignment on payment by the
assigning or assignee Bank of the Security Assignment Costs referred to in
Section 12.5 hereof) and (v) the assigning Bank (other than the
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Banks party hereto as of the date hereof) must pay to the Agent a processing and
recordation fee of $2,500 and any reasonable out-of-pocket attorney's fees
incurred by the Agent in connection with such Assignment Agreement. Upon the
execution of each Assignment Agreement by the assigning Bank thereunder, the
assignee Bank thereunder, the Company and the Agent and payment to such
assigning Bank by such assignee Bank of the purchase price for the portion of
the indebtedness of the Borrowers being acquired by it, (i) such assignee Bank
shall thereupon become a "Bank" for all purposes of this Agreement with
Commitments in the amount set forth in such Assignment Agreement and with all
the rights, powers and obligations afforded a Bank hereunder, (ii) such
assigning Bank shall have no further liability for funding the portion of its
Commitment assumed by such other Bank and (iii) the address for notices to such
assignee Bank shall be as specified in the Assignment Agreement executed by it.
Concurrently with the execution and delivery of such Assignment Agreement, the
Company shall execute and deliver Notes to the assignee Bank in the amount of
its respective Commitments and new Notes to the assigning Bank in the amount of
its Commitments after giving effect to the reduction occasioned by such
assignment, all such Notes to constitute "Notes" for all purposes of the Loan
Documents. Upon completion of the foregoing, the assigning Bank shall surrender
to the Company its old Notes.
.c2.Section 12.15. Participations;. Any Bank may grant participations
in all or any part of any loan and/or any Note. No such participant shall have
any rights under this Agreement (the participant's rights against a Bank in
respect of such participation to be those set forth in the agreement executed by
such Bank in favor of the participant relating thereto) and all amounts payable
by the Company hereunder shall be determined as if such Bank had not sold such
participation. Except with respect to interest rate, principal amount of the
loan, scheduled dates for payment of principal or interest (except as
contemplated by this Agreement), fees or commissions, and the terms of Sections
2.7, 2.8, 2.9 and 2.10, no Bank shall in any such participation agreement
restrict its ability to make any modification, amendment or waiver to this
Agreement without the consent of the participant.
.c2.Section 12.16. Certain Junior Subordinated Debt;. The Company
hereby irrevocably authorizes and directs the Agent, in the name and on behalf
of the Company, to obtain Revolving Credit Loans hereunder in an aggregate
principal amount sufficient to fully pay and satisfy the Company's indebtedness
evidenced by the Company's 18% Subordinated Note due 2002 in the principal
amount of $3,000,000 currently held by Canpartners Investments III, L.P.
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("Canpartners"), together with accrued and unpaid interest thereon through the
payment date. The Agent shall have the authority to obtain such Loans hereunder
notwithstanding the fact that any Event of Default or Potential Default may have
occurred and be continuing hereunder or that the conditions precedent set forth
herein shall not have been met, provided, however, that in any such case the
Agent shall first obtain the approval of all of the Banks. In making such
Revolving Credit Loans hereunder, the Agent and the Banks shall be fully
protected in relying upon any statement or information provided to them by
Canpartners as to the amount of the Company's indebtedness due and owing to it,
without the necessity of any independent investigation. Until such time as the
Company's indebtedness to Canpartners, shall be fully paid and satisfied, the
credit available to the Company under the Revolving Credit shall be reduced by
the outstanding principal amount of said indebtedness together with an amount
determined by the Agent in good faith to be the aggregate amount of accrued and
unpaid interest thereon through any date of calculation.
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Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall be a contract between us for the purposes hereinabove set forth.
Dated as of August 3, 1995.
.c4.Signature Page;
Nu-West Industries, Inc.
B
y
It
s
Nu-West Minerals, Inc.
B
y
It
s
Nu-West Mining, Inc.
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B
y
It
s
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Accepted and Agreed to at Chicago, Illinois as of the day and year last
above written.
Each of the Banks hereby agrees with each other Bank that if it should
receive or obtain any payment (whether by voluntary payment, by realization upon
collateral, by the exercise of rights of setoff or banker's lien, by
counterclaim or cross action, or by the enforcement of any rights under this
Agreement, the Notes or the other Loan Documents or otherwise) in respect of the
obligations of the Company under this Agreement, the Notes and the other Loan
Documents in a greater amount than such Bank would have received had such
payment been made to the Agent and been distributed among the Banks as
contemplated by Section 3.8 hereof then in that event the Bank receiving such
disproportionate payment shall purchase for cash without recourse from the other
Banks an interest in the obligations of the Company to such Banks rising under
the Credit Agreement and Notes in such amount as shall result in a distribution
of such payment as contemplated by Section 3.8 hereof. In the event any payment
made to a Bank and shared with the other Banks pursuant to the provisions hereof
is ever recovered from such Bank, the Banks receiving a portion of such payment
hereunder shall restore the same to the payor Bank, but without interest.
Harris Trust and Savings Bank
B
y
Its Vice President
111 W. Monroe Street
Chicago, Illinois 60690
Attention: Agribusiness Division
FBS Ag Credit, Inc.
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B
y
It
s
Address: Suite 350
950 Seventeenth Street
Denver, Colorado 80202
Attention: Scott Trauth
First Union National Bank of North
Carolina
B
y
It
s
Address: 301 South College Street
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Charlotte, North Carolina 28288-0737
Attention: Bragg Comer
St. Paul Bank for Cooperatives
B
y
It
s
Address: 375 Jackson Street
St. Paul, Minnesota 55101-1849
Attention: Mr. Marvin L. Lindo
Caisse Nationale de Credit Agricole
B
y
It
s
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<PAGE>
Address: 55 East Monroe Street
Chicago, Illinois 60603
Attention: Mr. Brad Peterson
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<PAGE>
EXHIBIT A
NU-WEST INDUSTRIES, INC.
REVOLVING CREDIT NOTE
Chicago, Illinois
$________________
August 3, 1995
On June 30, 2000, for value received, the undersigned, Nu-West
Industries, Inc., a Delaware corporation (the "Company"), promises to pay to the
order of _____________________________ (the "Bank"), at the principal office of
Harris Trust and Savings Bank in Chicago, Illinois, the principal sum of (i)
_____________________ Dollars ($________________), or (ii) such lesser amount as
may at the time of the maturity hereof, whether by acceleration or otherwise, be
the aggregate unpaid principal amount of all loans owing from the Company to the
Bank under the Revolving Credit provided for in the Credit Agreement hereinafter
mentioned.
This Note evidences indebtedness loans constituting part of a "Domestic
Rate Portion" and "LIBOR Portions" as such terms are defined in that certain
Secured Credit Agreement dated as of August 3, 1995 by and between the Company,
Harris Trust and Savings Bank individually and as Agent and certain lenders
which may from time to time become parties thereto (the "Credit Agreement") made
and to be made to the Company by the Bank under the Revolving Credit provided
for under the Credit Agreement and the Company hereby promises to pay interest
at the office specified above on each loan evidenced hereby at the rates and
times specified therefor in the Credit Agreement.
Each loan made under the Revolving Credit provided for in the Credit
Agreement by the Bank to the Company against this Note, any repayment of
principal hereon, the status of each such loan from time to time as part of the
Domestic Rate Portion or a LIBOR Portion and the interest rates and interest
periods applicable thereto shall be endorsed by the holder hereof on the reverse
side of this Note or recorded on the books and records of the holder hereof
(provided that such entries shall be endorsed on the reverse side hereof prior
to any negotiation hereof) and the Company agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the entries
so endorsed on the reverse side hereof or recorded on the books and records of
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<PAGE>
the Bank shall be prima facie evidence of the unpaid balance of this Note and
the status of each loan from time to time as part of a Domestic Rate Portion or
a LIBOR Portion and the interest rates and interest periods applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured, inter alia, by certain Security Documents, and
this Note and the holder hereof are entitled to all of the benefits and security
provided for thereby or referred to therein, equally and ratably with all other
indebtedness thereby secured, to which reference is hereby made for a statement
thereof. This Note may be declared to be, or be and become, due prior to its
expressed maturity, voluntary prepayments may be made hereon, and certain
prepayments are required to be made hereon, all in the events, on the terms and
with the effects provided in the Credit Agreement.
This Note shall be construed in accordance with, and governed by, the
internal laws of the State of Illinois without regard to principles of conflict
of law.
The Company hereby waives presentment for payment and demand.
Nu-West Industries, Inc.
By Its
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<PAGE>
EXHIBIT B
NU-WEST INDUSTRIES, INC.
TERM CREDIT ONE NOTE
Chicago, Illinois
$______________
August 3, 1995
For Value Received, the undersigned, Nu-West Industries, Inc., a Delaware
corporation (the "Company"), promises to pay to the order of
________________________ (the "Bank"), at the principal office of Harris Trust
and Savings Bank in Chicago, Illinois, the principal sum of
________________________ Dollars ($___________), in twenty (20) consecutive
quarterly installments, commencing on September 30, 1995 and continuing on the
last day of each December, March, June and September occurring thereafter to and
including June 30, 2000, with each such installment to be in the amount of
$____________.
This Note evidences indebtedness constituting part of a "Domestic Rate
Portion" and "LIBOR Portions" as such terms are defined in that certain Secured
Credit Agreement dated as of August 3, 1995 by and between the Company, Harris
Trust and Savings Bank individually and as Agent and certain lenders which are
or may from time to time become parties thereto (the "Credit Agreement") made
and to be made to the Company by the Bank under the Credit Agreement and the
Company hereby promises to pay interest at the office specified above on each
loan evidenced hereby at the rates and times specified therefor in the Credit
Agreement.
Any prepayment of principal hereon, the status of the indebtedness
evidenced hereby from time to time as part of the Domestic Rate Portion or a
LIBOR Portion and the interest rates and interest periods applicable thereto
shall be endorsed by the holder hereof on the reverse side of this Note or
recorded on the books and records of the holder hereof (provided that such
entries shall be endorsed on the reverse side hereof prior to any negotiation
hereof) and the Company agrees that in any action or proceeding instituted to
collect or enforce collection of this Note, the entries so endorsed on the
reverse side hereof or recorded on the books and records of the Bank shall be
prima facie evidence of the unpaid balance of this Note and the status of each
loan from time to time as part of a Domestic Rate Portion or a LIBOR Portion and
the interest rates and interest periods applicable thereto.
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<PAGE>
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured, inter alia, by certain Security Documents, and
this Note and the holder are entitled to all of the benefits and security
provided for thereby or referred to therein, equally and ratably with all other
indebtedness thereby secured, to which reference is hereby made for a statement
thereof. This Note may be declared to be, or be and become, due prior to its
expressed maturity, voluntary prepayments may under certain circumstances be
made hereon, and certain prepayments are required to be made hereon, all in the
events, on the terms and with the effects provided in the Credit Agreement.
This Note shall be construed in accordance with, and governed by, the
internal laws of the State of Illinois without regard to principles of conflict
of law.
The Company hereby waives presentment for payment and demand.
Nu-West Industries, Inc.
By Its
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<PAGE>
EXHIBIT C
NU-WEST INDUSTRIES, INC.
TERM CREDIT TWO NOTE
Chicago, Illinois
$__________________
August 3, 1995
For Value Received, the undersigned, Nu-West Industries, Inc., a Delaware
corporation (the "Company"), promises to pay to the order of
________________________ (the "Bank"), at the principal office of Harris Trust
and Savings Bank in Chicago, Illinois, the principal sum of
________________________ Dollars ($_____________), in twenty-four (24)
consecutive quarterly installments, commencing on September 30, 1995 and
continuing on the last day of each December, March, June and September occurring
thereafter to and including June 30, 2001, as follows: $________ on September
30, 1995, December 31, 1995, March 31, 1996, June 30, 1996, September 30, 1996,
December 31, 1996, March 31, 1997 and June 30, 1997; $________ on September 30,
1997, December 31, 1997, March 31, 1998 and June 30, 1998; $________ on
September 30, 1998, December 31, 1998, March 31, 1999 and June 30, 1999;
$__________ on September 30, 1999, December 31, 1999, March 31, 2000 and June
30, 2000; and $________ on September 30, 2000, December 31, 2000, March 31, 2001
and June 30, 2001.
This Note evidences indebtedness constituting part of a "Domestic Rate
Portion" and "LIBOR Portions" as such terms are defined in that certain Secured
Credit Agreement dated as of August 3, 1995 by and between the Company, Harris
Trust and Savings Bank individually and as Agent and certain lenders which are
or may from time to time become parties thereto (the "Credit Agreement") made
and to be made to the Company by the Bank under the Credit Agreement and the
Company hereby promises to pay interest at the office specified above on each
loan evidenced hereby at the rates and times specified therefor in the Credit
Agreement.
Any prepayment of principal hereon, the status of the indebtedness
evidenced hereby from time to time as part of the Domestic Rate Portion or a
LIBOR Portion and the interest rates and
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<PAGE>
interest periods applicable thereto shall be endorsed by the holder hereof on
the reverse side of this Note or recorded on the books and records of the holder
hereof (provided that such entries shall be endorsed on the reverse side hereof
prior to any negotiation hereof) and the Company agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the entries
so endorsed on the reverse side hereof or recorded on the books and records of
the Bank shall be prima facie evidence of the unpaid balance of this Note and
the status of each loan from time to time as part of a Domestic Rate Portion or
a LIBOR Portion and the interest rates and interest periods applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured, inter alia, by certain Security Documents, and
this Note and the holder are entitled to all of the benefits and security
provided for thereby or referred to therein, equally and ratably with all other
indebtedness thereby secured, to which reference is hereby made for a statement
thereof. This Note may be declared to be, or be and become, due prior to its
expressed maturity, voluntary prepayments may under certain circumstances be
made hereon, and certain prepayments are required to be made hereon, all in the
events, on the terms and with the effects provided in the Credit Agreement.
This Note shall be construed in accordance with, and governed by, the
internal laws of the State of Illinois without regard to principles of conflict
of law.
The Company hereby waives presentment for payment and demand.
Nu-West Industries, Inc.
By Its
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<PAGE>
EXHIBIT D
NU-WEST INDUSTRIES, INC.
BORROWING BASE CERTIFICATE
as of _____________________
($000's omitted)
This Borrowing Base Certificate is furnished to Harris Trust and Savings
Bank, as agent (the "Agent"), pursuant to that certain Secured Credit Agreement
dated as of August 3, 1995, by and among Nu-West Industries, Inc. (the
"Company"), Harris Trust and Savings Bank and the other Bank parties thereto
(the "Agreement"). Unless otherwise defined herein, the terms used in this
Borrowing Base Certificate have the meanings ascribed thereto in the Agreement.
The Undersigned Hereby Certifies That:
1. I am the duly elected ____________________________ of the
Company.
2. I have reviewed the terms of the Agreement and I have made,
or have caused to be made under my supervision, the attached computation
of the Borrowing Base as defined in the Agreement.
3. No change of name, corporate identity or address of the chief
executive office of the Company has occurred.
4. I have reviewed the terms of the Agreement and, pursuant to
such review, I have no knowledge of the existence of any condition or
event which would constitute a Potential Default or Event of Default,
except as set forth below (detailing the nature of the condition or
event, the period during which it has existed and the action which the
Company has taken, is taking or proposes to take with respect to each
such condition or event):
__________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
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<PAGE>
5. The information above and any attached exhibits do not contain
any untrue statement of material fact or omit a material fact, either
individually or in aggregate, that would make the information or any
attached exhibits misleading.
_________________________________
By Its
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<PAGE>
NU-WEST INDUSTRIES, INC.
BORROWING BASE COMPUTATION
AS OF ______________, 199___
1. Receivables $____________
2. Less: Ineligibles $____________
3. Eligible Receivables
(1-2) $____________
4. 85% of Eligible Receivables $____________
5. Inventory (except phosphate rock) $____________
6. Less: Ineligibles $____________
7. Eligible Inventory
(except phosphate rock) (5-6) $____________
8. 70% of Eligible Inventory
(finished goods) $____________
9. Inventory (phosphate rock) $____________
10. Less: Ineligibles $____________
11. Eligible Inventory (phosphate rock) $____________
12. 35% of Eligible Inventory
(phosphate rock) $____________
13. undrawn amount of outstanding L/Cs $____________
14. Borrowing Base (4+8+12-13) $____________
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<PAGE>
EXHIBIT E
NU-WEST INDUSTRIES, INC.
COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished to Harris Trust and Savings
Bank, as agent (the "Agent"), pursuant to that certain Secured Credit Agreement
dated as of August 3, 1995 by and among Nu-West Industries, Inc. (the
"Company"), Harris Trust and Savings Bank and the other Banks parties thereto
(the "Agreement"). Unless otherwise defined herein, the terms used in this
Compliance Certificate have the meanings ascribed thereto in the Agreement.
The Undersigned Hereby Certifies That:
1. I am the duly elected _____________________________________ of the
Company;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Company during the accounting period covered by the
attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
a Potential Default or Event of Default during or at the end of the accounting
period covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. If attached financial statements are being furnished pursuant to
Section 7.4(a) or (b) of the Agreement, Schedule I attached hereto sets forth
financial data and computations, evidencing the Company's compliance with
certain covenants of the Agreement, all of which data and computations are true,
complete and correct.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Company has taken, is taking or proposes to
take with respect to each such condition or event:
_______________________________________________________
_______________________________________________________
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<PAGE>
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this ________ day of
______________________, 199__.
By Its
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<PAGE>
SCHEDULE 5.2
SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction of Percentage
Name Incorporation or Organization Ownership
<S> <C> <C>
1. Nu-West Mining, Inc. Delaware 100%
2. Nu-West Minerals, Inc. Delaware 100%
3. Nu-Tec Mineral & Chemical
Company Colorado 95%
</TABLE>
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<PAGE>
SCHEDULE 5.13
COMPLIANCE WITH LAWS
-96-
<PAGE>
SCHEDULE 7.17
EXISTING CAPITAL LEASES
<TABLE>
<CAPTION>
Lender Date Term Balance
------ ---- ---- -------
<S> <C> <C> <C>
Caterpillar Financial Services
Corporation (Manlift)
11/14/94 12 Months $ 7,713
First Security Leasing
Company (Dodge Intrepid)
02/23/94 36 Months $10,241
AT&T Capital Corporation
(Telephone System-Denver)
12/27/94 48 Months $21,063
</TABLE>
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<PAGE>
EXHIBIT 10(y) a.
Recording Requested By:
This Document Prepared By
and After Recording Return To:
Grace L. Shaff
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
SPACE ABOVE THIS LINE RESERVED FOR
RECORDER'S USE ONLY
================================================================================
MORTGAGE AND SECURITY AGREEMENT
WITH ASSIGNMENT OF RENTS
DATED AS OF AUGUST 3, 1995
FROM
NU-WEST INDUSTRIES, INC.
("Mortgagor")
to
================================================================================
HARRIS TRUST AND SAVINGS BANK,
================================================================================
individually and as Agent
================================================================================
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<PAGE>
("Mortgagee")
================================================================================
================================================================================
AMOUNT OF SECURED OBLIGATION: $75,000,000
MATURITY DATES:
(i) Revolving Credit Note: June 30, 2000
(ii) Term Credit 1 Notes: June 30, 2000
(iii) Term Credit 2 Notes: June 30, 2001
(iv) Letters of Credit: December 31, 1998
ATTENTION OF RECORDING OFFICERS: THIS MORTGAGE IS INTENDED ALSO TO BE, AND IS
TO BE INDEXED NOT ONLY AS A MORTGAGE BUT ALSO AS, A FILING COVERING FIXTURES AND
MINERALS.
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<PAGE>
MORTGAGE AND SECURITY AGREEMENT WITH
ASSIGNMENT OF RENTS
THIS MORTGAGE SECURES FUTURE ADVANCES.
This Mortgage and Security Agreement with Assignment of Rents (the
"Mortgage") dated as of August 3, 1995 from Nu-West Industries, Inc., a Delaware
corporation with its principal place of business and mailing address at 8400
East Prentice Avenue, Suite 1320, Englewood, Colorado 80111 (hereinafter
referred to as "Mortgagor") to HARRIS TRUST AND SAVINGS BANK, an Illinois
banking corporation with its mailing address at 111 West Monroe Street, Chicago,
Illinois 60690 (hereinafter referred to individually as "Harris"), as agent
hereunder for the Lenders hereinafter defined (Harris acting as such agent and
any successor or successors to Harris in such capacity being hereinafter
referred to as "Mortgagee");
W I T N E S S E T H T H A T:
WHEREAS, Mortgagor has entered into with Harris (individually and as
agent for the Lenders hereinafter defined) that certain Secured Credit Agreement
dated as of even date herewith (such Secured Credit Agreement, as the same may
from time to time be modified or amended, being hereinafter referred to as the
"Credit Agreement"), a true and correct copy of which Credit Agreement is on
file at the offices of Mortgagee, pursuant to which Harris and the lenders which
may hereafter become parties thereto (Harris and all such other lenders being
hereinafter referred to collectively as the "Lenders" and individually as a
"Lender") commit, subject to certain terms and conditions, (i) to make a
revolving credit facility (the "Revolving Credit") in the aggregate principal
amount of not to exceed $15,000,000 at any one time outstanding available to
Mortgagor during the period ending on June 30, 2000, (ii) to make term loans
(the "Term Credit 1") in the aggregate principal amount of $25,000,000 available
to Mortgagor, payable in installments with a final maturity of all principal and
interest not required to be sooner paid of June 30, 2000, (iii) to make term
loans (the "Term Credit 2") in the aggregate principal amount of $30,000,000
available to Mortgagor, payable in installments with a final maturity of all
principal and interest not required to be sooner paid of June 30, 2001 and (iv)
to issue letters of credit (individually, a "Letter of Credit" and collectively,
the "Letters of Credit") for the account of Mortgagor in an aggregate face
amount not to exceed $5,000,000 and with expiry dates no later than December 31,
1998;
WHEREAS, (i) the Revolving Credit is evidenced and to be evidenced by
Secured
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<PAGE>
Revolving Credit Notes (the "Revolving Credit Notes") of Mortgagor aggregating
$15,000,000 bearing even date herewith and payable to the order of the
respective Lender named thereon, whereby Mortgagor promises to pay the principal
sum set forth thereon on June 30, 2000, with interest as set forth in the Credit
Agreement, (ii) Term Credit 1 is evidenced and to be evidenced by Secured Term
Loan Notes (the "Term Credit 1 Notes") of Mortgagor aggregating $25,000,000 and
payable to the order of the respective Lender named thereon, with interest as
set forth in the Credit Agreement, in installments as set forth therein with a
final maturity of principal and interest not required to be sooner paid of June
30, 2000, (iii) Term Credit 2 is evidenced and to be evidenced by Secured Term
Loan Notes (the "Term Credit 2 Notes"; the Revolving Credit Notes, the Term
Credit 1 Notes and the Term Credit 2 Notes and any and all notes issued in
renewal thereof or in substitution or replacement therefor being hereinafter
collectively referred to as the "Notes") of Mortgagor aggregating $30,000,000
and payable to the order of the respective Lender named thereon, with interest
as set forth in the Credit Agreement, in installments as set forth therein with
a final maturity of principal and interest not required to be sooner paid of
June 30, 2001, and (iv) the Letters of Credit are to be respectively issued upon
and subject to the terms of applications and agreements for Letters of Credit to
be executed by Mortgagor (individually, an "Application" and collectively, the
"Applications");
NOW, THEREFORE, to secure (i) the payment of the principal and premium,
if any, of and interest on the Notes as and when the same become due and payable
(whether by lapse of time, acceleration or otherwise) and all advances now or
hereafter evidenced thereby, (ii) the payment of all sums owing in connection
with the Letters of Credit (collectively, the "Reimbursement Obligations") as
and when the same become due and payable, (iii) the obligation of Mortgagor to
pay to Mortgagee and the Lenders certain fees, costs, expenses, indemnities and
other amounts pursuant to the Credit Agreement and the Applications, (iv) the
payment of all other indebtedness, obligations and liabilities which this
Mortgage secures pursuant to any of its terms and (v) the observance and
performance of all covenants and agreements contained herein or in the Note or
in any other instrument or document at any time evidencing or securing any of
the foregoing or setting forth terms and conditions applicable thereto (all of
such indebtedness, obligations and liabilities described in clauses (i), (ii),
(iii), (iv) and (v) above being hereinafter collectively referred to as the
"indebtedness hereby secured"), Mortgagor does hereby grant, bargain, sell,
convey, mortgage, warrant, assign, and pledge unto Mortgagee, its successors and
assigns, and grant to Mortgagee, its successors and assigns, a continuing
security interest in, all and singular
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<PAGE>
the properties, rights, interests and privileges described in Granting Clauses
I, II, III, IV, V and VI below, all of the same being collectively referred to
herein as the "Mortgaged Premises":
GRANTING CLAUSE I
That certain real estate lying and being in County of Caribou and State
of Idaho more particularly described in Schedule I attached hereto and made a
part hereof.
GRANTING CLAUSE II
All buildings and improvements of every kind and description heretofore
or hereafter erected or placed on the property described in Granting Clause I
and all materials intended for construction, reconstruction, alteration and
repairs of the buildings and improvements now or hereafter erected thereon, all
of which materials shall be deemed to be included within the premises
immediately upon the delivery thereof to the said real estate, and all fixtures,
machinery, apparatus, equipment, fittings and articles of personal property of
every kind and nature whatsoever now or hereafter attached to or contained in or
used or useful in connection with said real estate and the buildings and
improvements now or hereafter located thereon and the operation, maintenance and
protection thereof, including but not limited to all machinery, motors,
fittings, radiators, awnings, shades, screens, all gas, coal, steam, electric,
oil and other heating, cooking, power and lighting apparatus and fixtures, all
fire prevention and extinguishing equipment and apparatus, all cooling and
ventilating apparatus and systems, all plumbing, incinerating, and sprinkler
equipment and fixtures, all elevators and escalators, all communication and
electronic monitoring equipment, all window and structural cleaning rigs and all
other machinery and equipment of every nature and fixtures and appurtenances
thereto and all items of furniture, appliances, draperies, carpets, other
furnishings, equipment and personal property used or useful in the operation,
maintenance and protection of the said real estate and the buildings and
improvements now or hereafter located thereon and all renewals or replacements
thereof or articles in substitution therefor, whether or not the same are or
shall be attached to said real estate, buildings or improvements in any manner,
and all proceeds thereof; it being mutually agreed, intended and declared that
all the aforesaid property shall, so far as permitted by law, be deemed to form
a part and parcel of the real estate and for the purpose of this Mortgage to be
real estate and covered by this Mortgage; and as to the balance of the property
aforesaid, this Mortgage is hereby deemed to be as well a Security Agreement
under the provisions of the Uniform Commercial Code for the purpose of creating
hereby a security interest in said property,
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<PAGE>
which is hereby granted by Mortgagor as debtor to Mortgagee as secured party,
securing the indebtedness hereby secured. The addresses of Mortgagor (debtor)
and Mortgagee (secured party) appear at the beginning hereof.
GRANTING CLAUSE III
All right, title and interest of Mortgagor now owned or hereafter
acquired in and to all and singular the estates, tenements, hereditaments,
privileges, easements, licenses, franchises, appurtenances and royalties, oil,
water, mining and mineral rights including, but not limited to, all unsevered
and unextracted minerals of any kind and nature, belonging or in any wise
appertaining to the property described in the preceding Granting Clause I and
the buildings and improvements now or hereafter located thereon and the
reversions, rents, issues, revenues and profits thereof, including all interest
of Mortgagor in all rents, issues and profits of the aforementioned property and
all rents, issues, profits, revenues, royalties, bonuses, rights and benefits
due, payable or accruing (including all deposits of money as advanced rent or
for security) under any and all leases or subleases and renewals thereof, or
under any contracts or options for the sale of all or any part of, said property
(including during any period allowed by law for the redemption of said property
after any foreclosure or other sale), together with the right, but not the
obligation, to collect, receive and receipt for all such rents and other sums
and apply them to the indebtedness hereby secured and to demand, sue for and
recover the same when due or payable; provided that the assignments made hereby
shall not impair or diminish the obligations of Mortgagor under the provisions
of such leases or other agreements nor shall such obligations be imposed upon
Mortgagee. By acceptance of this Mortgage, Mortgagee agrees, not as a limitation
or condition hereof, but as a personal covenant available only to Mortgagor that
until an Event of Default shall occur giving Mortgagee the right to foreclose
this Mortgage, Mortgagor may collect, receive (but not more than 30 days in
advance) and enjoy such rents.
GRANTING CLAUSE IV
All judgments, awards of damages, settlements and other compensation
heretofore or hereafter made resulting from condemnation proceedings or the
taking of the property described in Granting Clause I or any part thereof or any
building or other improvement now or at any time hereafter located thereon or
any easement or other appurtenance thereto under the power of eminent domain, or
any similar power or right (including any award from the United States
Government at any time after the allowance of the claim therefor, the
ascertainment of the
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<PAGE>
amount thereof and the issuance of the warrant for the payment thereof), whether
permanent or temporary, or for any damage (whether caused by such taking or
otherwise) to said property or any part thereof or the improvements thereon or
any part thereof, or to any rights appurtenant thereto, including severance and
consequential damage, and any award for change of grade of streets
(collectively, "Condemnation Awards").
GRANTING CLAUSE V
All property and rights, if any, which are by the express provisions of
this Mortgage required to be subjected to the lien hereof and any additional
property and rights that may from time to time hereafter, by installation or
writing of any kind, be subjected to the lien hereof by Mortgagor or by anyone
in Mortgagor's behalf.
GRANTING CLAUSE VI
All rights in and to common areas and access roads on adjacent
properties heretofore or hereafter granted to Mortgagor and any after-acquired
title or reversion in and to the beds of any ways, roads, streets, avenues and
alleys adjoining the property described in Granting Clause I or any part
thereof.
TO HAVE AND TO HOLD the Mortgaged Premises and the properties, rights
and privileges hereby granted, bargained, sold, conveyed, mortgaged, warranted,
pledged and assigned, and in which a security interest is granted, or intended
so to be, unto Mortgagee, its successors and assigns, forever; provided,
however, that this Mortgage is upon the express condition that if the principal
of and interest on the Notes and all sums from time to time advanced thereon
shall be paid in full and all other indebtedness hereby secured shall be fully
paid and performed (including all sums payable under or according to the
provisions of the Applications), all Letters of Credit shall have expired and
any commitment contained in the Credit Agreement to extend credit thereunder
shall have terminated, then this Mortgage and the estate and rights hereby
granted shall cease, determine and be void and this Mortgage shall be released
by Mortgagee upon the written request and at the expense of Mortgagor, otherwise
to remain in full force and effect.
Mortgagor hereby covenants and agrees with Mortgagee as follows:
1. Payment of the Indebtedness. The indebtedness hereby secured will
be promptly paid as and when the same becomes due.
2. Ownership of Mortgaged Premises. Mortgagor covenants and warrants
that it is
-7-
<PAGE>
lawfully seized of and has good and marketable title to the Mortgaged Premises
free and clear of all liens, charges and encumbrances whatever except those
exceptions to title listed on Schedule II attached hereto (the "Permitted
Exceptions") and Mortgagor has good right, full power and authority to convey,
transfer and mortgage the same to Mortgagee for the uses and purposes set forth
in this Mortgage; and Mortgagor will warrant and forever defend the title to the
Mortgaged Premises subject to the Permitted Exceptions against all claims and
demands whatsoever.
3. Further Assurances. Mortgagor will execute and deliver such
further instruments and do such further acts as may be necessary or proper to
carry out more effectively the purpose of this Mortgage and, without limiting
the foregoing, to make subject to the lien hereof any property agreed to be
subjected hereto or covered by the Granting Clauses hereof or intended so to be.
4. Possession. Provided no Event of Default has occurred and is
continuing hereunder, Mortgagor shall be suffered and permitted to remain in
full possession, enjoyment and control of the Mortgaged Premises, subject always
to the observance and performance of the terms of this Mortgage.
5. Payment of Taxes. Mortgagor shall pay before any penalty
attaches, all general taxes and all special taxes, special assessments, water,
drainage and sewer charges and all other charges of any kind whatsoever,
ordinary or extraordinary, which may be levied, assessed, imposed or charged on
or against the Mortgaged Premises or any part thereof and which, if unpaid,
might by law become a lien or charge upon the Mortgaged Premises or any part
thereof, and shall, upon written request, exhibit to Mortgagee official receipts
evidencing such payments, except that, unless and until foreclosure, distraint,
sale or other similar proceedings shall have been commenced, no such charge or
claim need be paid if being contested (except to the extent any full or partial
payment shall be required by law), after notice to Mortgagee, by appropriate
proceedings which shall operate to prevent the collection thereof or the sale or
forfeiture of the Mortgaged Premises or any part thereof to satisfy the same,
conducted in good faith and with due diligence and if Mortgagor shall have
furnished such security, if any, as may be required in the proceedings or
requested by Mortgagee.
6. Payment of Taxes on Indebtedness Hereby Secured, Mortgage or
Interest of Mortgagee. Mortgagor agrees that if any tax, assessment or
imposition upon this Mortgage or
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the indebtedness hereby secured, the Notes, the Applications, or the interest of
Mortgagee or any Lender in the Mortgaged Premises or upon Mortgagee or any
Lender by reason of or as a holder of any of the foregoing (including, without
limitation, corporate privilege, franchise and excise taxes, but excepting
therefrom any income tax on interest payments on the principal portion of the
indebtedness hereby secured imposed by the United States or any state) is
levied, assessed or charged, then, unless all such taxes are paid by Mortgagor
to, for or on behalf of Mortgagee or such Lender, as the case may be, as they
become due and payable (which Mortgagor agrees to do upon demand of Mortgagee,
to the extent permitted by law), or Mortgagee or any Lender, as the case may be,
is reimbursed for any such sum advanced by Mortgagee or such Lender, as the case
may be, all sums hereby secured shall become immediately due and payable, at the
option of Mortgagee or such Lender, as the case may be, upon thirty (30) days'
notice to Mortgagor, notwithstanding anything contained herein or in any law
heretofore or hereafter enacted, including any provision thereof forbidding
Mortgagor from making any such payment. Mortgagor agrees to exhibit to
Mortgagee, upon request, official receipts showing payment of all taxes and
charges which Mortgagor is required to pay hereunder.
7. Recordation and Payment of Taxes and Expenses Incident Thereto.
Mortgagor will cause this Mortgage, all mortgages supplemental hereto and any
financing statement or other notice of a security interest required by Mortgagee
at all times to be kept, recorded and filed at its own expense in such manner
and in such places as may be required by law for the recording and filing or for
the rerecording and refiling of a mortgage, security interest, assignment or
other lien or charge upon the Mortgaged Premises, or any part thereof, in order
fully to preserve and protect the rights of Mortgagee hereunder and, without
limiting the foregoing, Mortgagor will pay or reimburse Mortgagee for the
payment of any and all taxes, fees or other charges incurred in connection with
any such recordation or rerecordation, including any documentary stamp tax or
tax imposed upon the privilege of having this Mortgage or any instrument issued
pursuant hereto recorded.
8. Insurance. Mortgagor will, at its expense, keep all buildings,
improvements, equipment and other property now or hereafter constituting part of
the Mortgaged Premises insured against loss or damage by fire, lightning,
windstorm, explosion and such other risks as are usually included under extended
coverage policies, or which are usually insured against by owners of like
property, in amount sufficient to prevent Mortgagor or Mortgagee from becoming a
co-insurer of any partial loss under applicable policies and in any event not
less than the then
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full insurable value (actual replacement value without deduction for physical
depreciation) thereof, as determined at the request of Mortgagee and at
Mortgagor's expense by the insurer or insurers or by an expert approved by
Mortgagee, all under insurance policies payable, in case of loss or damage, to
Mortgagee (and, if Mortgagee so requests, naming Mortgagee or the Lenders or any
of the foregoing as an additional insured therein), such rights to be evidenced
by the usual standard non-contributory form of mortgage clause to be attached to
each policy. Mortgagor shall not carry separate insurance concurrent in kind or
form and contributing in the event of loss, with any insurance required hereby.
Mortgagor shall also obtain and maintain public liability, property damage and
workmen's compensation insurance in each case in form and content reasonably
satisfactory to Mortgagee and in amounts as are customarily carried by owners of
like property and approved by Mortgagee. Mortgagor shall also obtain and
maintain such other insurance with respect to the Mortgaged Premises in such
amounts and against such insurable hazards as Mortgagee from time to time may
reasonably require, including, without limitation, boiler and machinery
insurance, insurance against flood risks, host liquor liability, war risk
insurance when and to the extent obtainable from the United States Government or
any agency thereof, and insurance against loss of rent due to fire and risks now
or hereafter embraced by so-called "extended coverage". All insurance required
hereby shall be maintained with good and responsible insurance companies
reasonably satisfactory to Mortgagee and shall not provide for any deductible
amount in excess of $500,000 not approved in writing by Mortgagee, shall provide
that any losses shall be payable notwithstanding any act or negligence of
Mortgagor, shall provide that no cancellation thereof shall be effective until
at least thirty (30) days after receipt by Mortgagor and Mortgagee of written
notice thereof, and shall be reasonably satisfactory to Mortgagee in all other
respects. Upon the execution of this Mortgage and thereafter not less than
fifteen (l5) days prior to the expiration date of any policy delivered pursuant
to this Mortgage, Mortgagor will deliver to Mortgagee originals of any policy or
renewal policy, as the case may be, required by this Mortgage, bearing notations
evidencing the payment of all premiums. In the event of foreclosure, Mortgagor
authorizes and empowers Mortgagee to effect insurance upon the Mortgaged
Premises in amounts aforesaid for a period covering the time of redemption from
foreclosure sale provided by law, and if necessary therefor to cancel any or all
existing insurance policies.
9. Damage to or Destruction of Mortgaged Premises.
(a) Notice. In case of any material damage to or destruction of
the Mortgaged
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<PAGE>
Premises or any part thereof, Mortgagor shall promptly give written
notice thereof to Mortgagee, generally describing the nature and extent
of such damage or destruction.
(b) Restoration. In case of any damage to or destruction of the
Mortgaged Premises or any part thereof, Mortgagor, whether or not the
insurance proceeds, if any , received on account of such damage or
destruction shall be sufficient for the purpose, at Mortgagor's expense,
will promptly commence and complete (subject to unavoidable delays
occasioned by strikes, lockouts, acts of God, inability to obtain labor
or materials, governmental restrictions and similar causes beyond the
reasonable control of Mortgagor) the restoration, replacement or
rebuilding of the Mortgaged Premises as nearly as possible to its value,
condition and character immediately prior to such damage or destruction.
(c) Adjustment of Loss. Mortgagor hereby authorizes Mortgagee, at
Mortgagee's option, to adjust and compromise any losses exceeding
$100,000 under any insurance afforded, but unless Mortgagee elects to
adjust the losses as aforesaid, said adjustment and/or compromise shall
be made by Mortgagor, subject to final approval of Mortgagee.
(d) Application of Insurance Proceeds. Net insurance proceeds
received by Mortgagee under the provisions of this Mortgage or any
instruments supplemental hereto or thereto or under any policy or
policies of insurance covering the Mortgaged Premises or any part
thereof shall first be applied as a prepayment on the Notes (and
Mortgagee is hereby irrevocably authorized and directed to make such an
application whether or not the Notes may then be due or otherwise
adequately secured) and shall thereafter be applied to the reduction of
any other indebtedness hereby secured: provided, however, that such
proceeds shall be made available for the restoration of the portion of
the Mortgaged Premises damaged or destroyed if written application for
such use is made within thirty (30) days of receipt of such proceeds and
the following conditions are satisfied: (i) Mortgagor has in effect
business interruption insurance covering the income to be lost during
the restoration period as a result of the damage or destruction to the
Mortgaged Premises or provides Mortgagee with other evidence
satisfactory to it that Mortgagor has cash resources sufficient to pay
its obligations during the restoration period; (ii) the effect of the
damage to or destruction of the Mortgaged Premises giving rise to
receipt of the insurance proceeds is not to terminate, or give a lessee
the option to terminate, any lease
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<PAGE>
of all or any portion of the Mortgaged Premises; (iii) no Event of
Default, or event which, with the lapse of time, the giving of notice,
or both, would constitute an Event of Default, shall have occurred or be
continuing (and if such an event shall occur during restoration
Mortgagee may, at its election, apply any insurance proceeds then
remaining in its hands to the reduction of the indebtedness evidenced by
the Notes and the other indebtedness hereby secured); (iv) Mortgagor
shall have submitted to Mortgagee plans and specifications for the
restoration which shall be satisfactory to it; (v) Mortgagor shall
submit to Mortgagee fixed price contracts with good and responsible
contractors and materialmen covering all work and materials necessary to
complete restoration and providing for a total completion price not in
excess of the amount of insurance proceeds available for restoration,
or, if a deficiency shall exist, Mortgagor shall have deposited the
amount of such deficiency with Mortgagee and (vi) Mortgagor shall have
obtained a waiver of the right of subrogation from any insurer under
such policies of insurance who at that time claims that no liability
exists as to Mortgagor or the insured under such policies. Any insurance
proceeds to be released pursuant to the foregoing provisions may at the
option of Mortgagee be disbursed from time to time as restoration
progresses to pay for restoration work completed and in place and such
disbursements may at Mortgagee's option be made directly to Mortgagor or
to or through any contractor or materialman to whom payment is due or to
or through a construction escrow to be maintained by a title insurer
acceptable to Mortgagee. Mortgagee may impose such further conditions
upon the release of insurance proceeds (including the receipt of title
insurance) as are customarily imposed by prudent construction lenders to
insure the completion of the restoration work free and clear of all
liens or claims for lien. All title insurance charges and other costs
and expenses paid to or for the account of Mortgagor in connection with
the release of such insurance proceeds shall constitute so much
additional indebtedness hereby secured to be payable upon demand with
interest at the rate applicable to the Notes at the time such costs or
expenses are incurred. Mortgagee may deduct any such costs and expenses
from insurance proceeds at any time standing in its hands. If Mortgagor
fails to request that insurance proceeds be applied to the restoration
of the improvements or if Mortgagor makes such a request but fails to
complete restoration within a reasonable time, Mortgagee shall have the
right, but no the duty, to restore or rebuild said Mortgaged Premises or
any part thereof for or on behalf of Mortgagor in lieu of applying said
proceeds to the
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<PAGE>
indebtedness hereby secured and for such purpose may do all necessary
acts, including using funds deposited by Mortgagor as aforesaid and
advancing additional funds for the purpose of restoration, all such
additional funds to constitute part of the indebtedness hereby secured
payable upon demand with interest at the Default Rate.
10. Eminent Domain. Mortgagor acknowledges that Condemnation Awards
have been assigned to Mortgagee, which awards Mortgagee is hereby irrevocably
authorized to collect and receive, and to give appropriate receipts and
acquittances therefor and to apply the same toward the payment of the amount
owing on account of the indebtedness hereby secured in such order of application
as Mortgagee may elect and whether or not the same may then be due and payable
or otherwise adequately secured, and Mortgagor covenants and agrees that
Mortgagor will give Mortgagee prompt notice of the actual or threatened
commencement of any proceedings under condemnation or eminent domain affecting
all or any part of the Mortgaged Premises including any easement therein or
appurtenance thereof or severance and consequential damage and change in grade
of streets, and will deliver to Mortgagee copies of any and all papers served in
connection with any such proceedings. Mortgagor further covenants and agrees to
make, execute and deliver to Mortgagee, at any time or times upon request, free,
clear and discharged of any encumbrances of any kind whatsoever, any and all
further assignments and/or instruments deemed necessary by Mortgagee for the
purpose of validly and sufficiently assigning all awards and other compensation
heretofore and hereafter to be made to Mortgagor for any taking, either
permanent or temporary, under any such proceeding for application by Mortgagee
in accordance with this Mortgage.
11. Construction, Repair, Waste, Etc. Mortgagor agrees that no
building or other improvement on the Mortgaged Premises and constituting a part
thereof shall be materially altered, removed or demolished nor shall any
fixtures or appliances on, in or about said buildings or improvements be
severed, removed, sold or mortgaged, without the consent of Mortgagee and in the
event of the demolition or destruction in whole or in part of any of the
fixtures, chattels or articles of personal property covered hereby, Mortgagor
covenants that the same will be replaced promptly by similar fixtures, chattels
and articles of personal property at least equal in quality and condition to
those replaced, free from any security interest in or encumbrance thereon or
reservation of title thereto, except such an interest arising under this
Mortgage; to permit, commit or suffer no waste, impairment or deterioration of
the Mortgaged Premises or any part thereof; to keep and maintain said Mortgaged
Premises and every part thereof in good and first
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<PAGE>
class repair and condition; as appropriate for the business to effect such
repairs as Mortgagee may reasonably require and from time to time to make all
needful and proper replacements and additions so that said buildings, fixtures,
machinery and appurtenances will, at all times, be in good and first class
condition, fit and proper for the respective purposes for which they were
originally erected or installed; to comply with all statutes, orders,
requirements or decrees relating to the Mortgaged Premises by any federal, state
or municipal authority; to observe and comply with all conditions and
requirements necessary to preserve and extend any and all rights, licenses,
permits (including, but not limited to, zoning variances, special exceptions and
non-conforming uses), privileges, franchises and concessions which are
applicable to the Mortgaged Premises or which have been granted to or contracted
for by Mortgagor in connection with any existing or presently contemplated use
of the Mortgaged Premises or any part thereof and not to initiate or acquiesce
in any changes to or terminations of any of the foregoing or of zoning
classifications affecting the use to which the Mortgaged Premises or any part
thereof may be put without the prior written consent of Mortgagee; and to make
no material alterations in or improvements or additions to the Mortgaged
Premises except as required by governmental authority or as permitted by
Mortgagee.
12. Liens and Encumbrances. Mortgagor will not, without the prior
written consent of Mortgagee, directly or indirectly, create or suffer to be
created or to remain and will discharge or promptly cause to be discharged any
mortgage, lien, encumbrance or charge on, pledge of, or conditional sale or
other title retention agreement with respect to, the Mortgaged Premises or any
part thereof, whether superior or subordinate to the lien hereof, except for
this Mortgage and the Permitted Exceptions.
13. Right of Mortgagee to Perform Mortgagor's Covenants, Etc. If
Mortgagor shall fail to make any payment or perform any act required to be made
or performed hereunder, Mortgagee, without waiving or releasing any obligation
or default, may (but shall be under no obligation to) at any time thereafter
make such payment or perform such act for the account and at the expense of
Mortgagor, and may enter upon the Mortgaged Premises or any part thereof for
such purpose and take all such action thereon as, in the opinion of Mortgagee,
may be necessary or appropriate therefor. All sums so paid by Mortgagee and all
costs and expenses (including without limitation attorneys' fees and expenses)
so incurred, together with interest thereon from the date of payment or
incurrence at the Default Rate, shall constitute so much additional indebtedness
hereby secured and shall be paid by Mortgagor to Mortgagee on demand.
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<PAGE>
Mortgagee in making any payment authorized under this Section relating to taxes
or assessments may do so according to any bill, statement or estimate procured
from the appropriate public office without inquiry into the accuracy of such
bill, statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien or title or claim thereof. Mortgagee, in performing any act
hereunder, shall be the sole judge of whether Mortgagor is required to perform
same under the terms of this Mortgage.
14. After-Acquired Property. Any and all property hereafter acquired
which is of the kind or nature herein provided, or intended to be and become
subject to the lien hereof, shall ipso facto, and without any further
conveyance, assignment or act on the part of Mortgagor, become and be subject to
the lien of this Mortgage as fully and completely as though specifically
described herein; but nevertheless Mortgagor shall from time to time, if
requested by Mortgagee, execute and deliver any and all such further assurances,
conveyances and assignments as Mortgagee may reasonably require for the purpose
of expressly and specifically subjecting to the lien of this Mortgage all such
property.
15. Inspection by Mortgagee or Lenders. Mortgagee, any Lender and
their respective representatives shall have the right to inspect the Mortgaged
Premises at all reasonable times, and access thereto shall be permitted for that
purpose.
16. Financial Reports. Mortgagor will furnish Mortgagee with the
financial information required pursuant to the Credit Agreement.
17. Subrogation. Mortgagor acknowledges and agrees that Mortgagee
shall be subrogated to any lien discharged out of the proceeds of any extension
of credit evidenced by the Notes, the Letters of Credit or the Applications or
out of any advance by Mortgagee hereunder, irrespective of whether or not any
such lien may have been released of record.
18. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
(a) (i) default in the payment when due of any principal of any
Note or any Reimbursement Obligation or (ii) default in the payment when
due of any interest on any Note or Reimbursement Obligation or of any
other indebtedness hereby secured and the continuation thereof for two
(2) Business Days (as defined in the Credit Agreement); or
(b) the Mortgaged Premises or any part thereof shall be sold,
transferred, or conveyed, whether voluntarily or involuntarily, by
operation of law or otherwise, except
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for sales of obsolete, worn out or unusable fixtures or personal
property which are concurrently replaced with similar fixtures or
personal property at least equal in quality and condition to those sold
and owned by Mortgagor free of any lien, charge or encumbrance other
than the lien hereof; or
(c) any proceedings are commenced to foreclose or otherwise
realize upon any such lien or charge or to have a receiver appointed for
the property subject thereto or to place the holder of such indebtedness
or its representative in possession thereof; or
(d) any event occurs or condition exists which is specified as an
Event of Default under the Credit Agreement; or
(e) the Mortgaged Premises is abandoned.
19. Remedies. When any Event of Default has happened and is continuing
(regardless of the pendency of any proceeding which has or might have the effect
of preventing Mortgagor from complying with the terms of this instrument and of
the adequacy of the security for the Notes, the Reimbursement Obligations and
the other indebtedness hereby secured) and in addition to such other rights as
may be available under applicable law, but subject at all times to any mandatory
legal requirements:
(a) Acceleration. Mortgagee may, by written notice to Mortgagor,
declare the Notes and all unpaid indebtedness hereby secured, including
any interest then accrued thereon, to be forthwith due and payable,
whereupon the same shall become and be forthwith due and payable,
without other notice or demand of any kind.
(b) Uniform Commercial Code. Mortgagee shall, with respect to
any part of the Mortgaged Premises constituting property of the type in
respect of which realization on a lien or security interest granted
therein is governed by the Uniform Commercial Code of Idaho, have all
the rights, options and remedies of a secured party under said Uniform
Commercial Code, including without limitation, the right to the
possession of any such property, or any part thereof, and the right to
enter without legal process any premises where any such property may be
found, to the extent permitted by applicable law. Any requirement of
said Uniform Commercial Code for reasonable notification shall be met by
mailing written notice to Mortgagor at its address above set forth at
least ten (l0) days prior to the sale or other event for which such
notice is required. The reasonable costs and expenses of retaking,
selling, and otherwise disposing of said
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<PAGE>
property, including attorneys' fees and legal expenses incurred in
connection therewith, shall constitute so much additional indebtedness
hereby secured and shall be payable upon demand with interest at the
Default Rate. In connection with any sale or sales hereunder, Mortgagee
may elect to treat any of the Mortgaged Premises which consists of a
right in action or which is property that can be severed from the real
property covered hereby or any improvements thereon without causing
structural damage thereto as if the same were personal property, and
dispose of the same in accordance with applicable law, separate and
apart from the sale of real property.
(c) Foreclosure. Mortgagee may proceed to protect and enforce
the rights of Mortgagee hereunder (i) by any action at law, suit in
equity or other appropriate proceedings, whether for the specific
performance of any agreement contained herein, or for an injunction
against the violation of any of the terms hereof, or in aid of the
exercise of any power granted hereby or by law, or (ii) by the
foreclosure of this Mortgage.
(d) Appointment of Receiver. Mortgagee shall be entitled, to the
full extent provided by law, to the appointment by a court having
jurisdiction of a receiver or receivers to take possession of and
protect the Mortgaged Premises and the rents, issues and profits
thereof, with such power as the court making such appointment shall
confer, and Mortgagor hereby consents to the appointment of such
receiver and shall not oppose any such appointment. Any such receiver
may, to the extent permitted under applicable law, without notice, enter
upon and take possession of the Mortgaged Premises or any part thereof
by force, summary proceedings, ejectment or otherwise, and may remove
Mortgagor or other persons and any and all property therefrom, and may
hold, operate and manage the same and receive all earnings, income,
rents, issues and proceeds accruing with respect thereto or any part
thereof, whether during the pendency of any foreclosure or until any
right of redemption shall expire or otherwise.
(e) Taking Possession, Collecting Rents, Etc. Mortgagee may
enter and take possession of the Mortgaged Premises or any part thereof
and manage, operate, insure, repair and improve the same and take any
action which, in Mortgagee's judgment, is necessary or proper to
conserve the value of the Mortgaged Premises. Mortgagee may also take
possession of, and for these purposes use, any and all personal property
contained in the Mortgaged Premises and used in the operation, rental or
leasing thereof
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<PAGE>
or any part thereof. Mortgagee shall be entitled to collect and receive
all earnings, revenues, rents, issues and profits of the Mortgaged
Premises or any part thereof (and for such purpose Mortgagor does hereby
irrevocably constitute and appoint Mortgagee its true and lawful
attorney-in-fact for it and in its name, place and stead to receive,
collect and receipt for all of the foregoing, Mortgagor irrevocably
acknowledging that any payment made to Mortgagee hereunder shall be a
good receipt and acquittance against Mortgagor to the extent so made)
and to apply same to the reduction of the indebtedness hereby secured.
The right to enter and take possession of the Mortgaged Premises and use
any personal property therein, to manage, operate and conserve the same,
and to collect the rents, issues and profits thereof, shall be in
addition to all other rights or remedies of Mortgagee hereunder or
afforded by law, and may be exercised concurrently therewith or
independently thereof. The expenses (including any receiver's fees,
counsels' fees, costs and agent's compensation) incurred pursuant to the
powers herein contained shall be so much additional indebtedness hereby
secured which Mortgagor promises to pay upon demand together with
interest at the Default Rate. Mortgagee shall not be liable to account
to Mortgagor for any action taken pursuant hereto other than to account
for any rents actually received by Mortgagee. Without taking possession
of the Mortgaged Premises, Mortgagee may, in the event the Mortgaged
Premises becomes vacant or is abandoned, take such steps as it deems
appropriate to protect and secure the Mortgaged Premises (including
hiring watchmen therefor) and all costs incurred in so doing shall
constitute so much additional indebtedness hereby secured payable upon
demand with interest thereon at the Default Rate.
20. Waiver of Right to Redeem From Sale - Waiver of Appraisement,
Valuation, Etc. Mortgagor shall not and will not apply for or avail itself of
any appraisement, valuation, stay, extension or exemption laws, or any so-called
"Moratorium Laws", now existing or hereafter enacted in order to prevent or
hinder the enforcement or foreclosure of this Mortgage, but hereby waives the
benefit of such laws. Mortgagor for itself and all who may claim through or
under it waives any and all right to have the property and estates comprising
the Mortgaged Premises marshalled upon any foreclosure of the lien hereof and
agrees that any court having jurisdiction to foreclose such lien may order the
Mortgaged Premises sold as an entirety. In the event of any sale made under or
by virtue of this Mortgage, the whole of the Mortgaged Premises may be sold in
one parcel as an entirety or in separate lots or parcels at the same or
different times, all as the
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<PAGE>
Mortgagee may determine. Mortgagee shall have the right to become the purchaser
at any sale made under or by virtue of this Mortgage and Mortgagee so purchasing
at any such sale shall have the right to be credited upon the amount of the bid
made therefor by Mortgagee with the amount payable to Mortgagee out of the net
proceeds of such sale. In the event of any such sale, the Notes, the
Reimbursement Obligations and the other indebtedness hereby secured, if not
previously due, shall be and become immediately due and payable without demand
or notice of any kind. Mortgagor hereby waives any and all rights of redemption
prior to or from sale under any order or decree of foreclosure pursuant to
rights herein granted, on behalf of Mortgagor, and each and every person
acquiring any interest in, or title to the Mortgaged Premises described herein
subsequent to the date of this Mortgage, and on behalf of all other persons to
the extent permitted by applicable law.
21. Costs and Expenses of Foreclosure. In any suit to foreclose the
lien hereof there shall be allowed and included as additional indebtedness in
the decree for sale all expenditures and expenses which may be paid or incurred
by or on behalf of Mortgagee and/or any or all of the Lenders for attorneys'
fees, appraisers' fees, environmental auditors' fees, outlays for documentary
and expert evidence, stenographic charges, publication costs and costs (which
may be estimated as the items to be expended after the entry of the decree) of
procuring all such abstracts of title, title searches and examination, guarantee
policies, Torrens certificates and similar data and assurances with respect to
title as Mortgagee may deem to be reasonably necessary either to prosecute any
foreclosure action or to evidence to the bidder at any sale pursuant thereto the
true condition of the title to or the value of the Mortgaged Premises, all of
which expenditures shall become so much additional indebtedness hereby secured
which Mortgagor agrees to pay and all of such shall be immediately due and
payable with interest thereon from the date of expenditure until paid at the
Default Rate.
22. Application of Proceeds. The proceeds of any foreclosure sale of
the Mortgaged Premises or of any sale of property pursuant to Section 19(b)
hereof shall be distributed in the following order of priority: First, on
account of all costs and expenses incident to the foreclosure or other
proceedings including all such items as are mentioned in Sections 19(b) and 21
hereof; Second, to all other items which under the terms hereof constitute
indebtedness hereby secured in addition to that evidenced by the Notes or the
Applications or arising in connection with the Letters of Credit, with interest
thereon as herein provided; Third, to all principal of and interest on the Notes
and the Applications with any overplus to the person or persons lawfully
entitled
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<PAGE>
to same. If such indebtedness is not at the time due, an amount equal to the
amount thereof shall be held by Mortgagee unless and until the same becomes due
and then applied to the payment of the same.
23. Deficiency Decree. If at any foreclosure proceeding the Mortgaged
Premises shall be sold for a sum less than the total amount of indebtedness for
which judgment is therein given, the judgment creditor shall, to the extent
permitted by applicable law, be entitled to the entry of a deficiency decree
against Mortgagor and against the property of Mortgagor for the amount of such
deficiency; and Mortgagor does hereby irrevocably consent to the appointment of
a receiver for the Mortgaged Premises and the property of Mortgagor and of the
rents, issues and profits thereof after such sale and until such deficiency
decree is satisfied in full.
24. Mortgagee's and Lenders' Remedies Cumulative - No Waiver. No
remedy or right of Mortgagee or any Lender shall be exclusive of but shall be
cumulative and in addition to every other remedy or right now or hereafter
existing at law or in equity or by statute or otherwise. No delay in the
exercise or omission to exercise any remedy or right accruing on any default
shall impair any such remedy or right or be construed to be a waiver of any such
default or acquiescence therein, nor shall it affect any subsequent default of
the same or a different nature. Every such remedy or right may be exercised
concurrently or independently, and when and as often as may be deemed expedient
by Mortgagee.
25. Mortgagee or Lenders Party to Suits. If Mortgagee or any Lender
shall be made a party to or shall intervene in any action or proceeding
affecting the Mortgaged Premises or the title thereto or the interest of
Mortgagee or any Lender under this Mortgage (including probate and bankruptcy
proceedings), or if Mortgagee or any Lender employs an attorney to collect any
or all of the indebtedness hereby secured or to enforce any of the terms hereof
or realize hereupon or to protect the lien hereof, or if Mortgagee or any Lender
shall incur any costs or expenses in preparation for the commencement of any
foreclosure proceedings or for the defense of any threatened suit or proceeding
which might affect the Mortgaged Premises or the security hereof, whether or not
any such foreclosure or other suit or proceeding shall be actually commenced,
then in any such case, Mortgagor agrees to pay to Mortgagee or such Lender, as
the case may be, immediately and without demand, all reasonable costs, charges,
expenses and attorney's fees incurred by Mortgagee or such Lender, as the case
may be, in any such case, and the same shall constitute so much additional
indebtedness hereby secured payable upon demand
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with interest at the Default Rate.
26. Modifications Not to Affect Lien. Mortgagee, without notice to
anyone, and without regard to the consideration, if any, paid therefor, or the
presence of other liens on the Mortgaged Premises, may in its discretion release
any part of the Mortgaged Premises or any person liable for any of the
indebtedness hereby secured, may extend the time of payment of any of the
indebtedness hereby secured and may grant waivers or other indulgences with
respect hereto and thereto, and may agree with Mortgagor to modifications to the
terms and conditions contained herein or otherwise applicable to any of the
indebtedness hereby secured (including modifications in the rates of interest
applicable thereto), without in any way affecting or impairing the liability of
any party liable upon any of the indebtedness hereby secured or the priority of
the lien of this Mortgage upon all of the Mortgaged Premises not expressly
released, and any party acquiring any direct or indirect interest in the
Mortgaged Premises shall take same subject to all of the provisions hereof.
27. Notices. All communications provided for herein shall be in
writing and shall be deemed to have been given when delivered personally or
mailed by first class mail, postage prepaid, addressed to the parties hereto at
their addresses as shown at the beginning of this Mortgage and, if to the
Lenders, at their addresses as shown on the signature pages of the Credit
Agreement or to such other and different address as shall be designated by any
such party pursuant to a written notice sent in accordance with the provisions
of this Section.
28. Compliance with Environmental Laws. Mortgagor represents and
warrants that, to the best of Mortgagor's knowledge, after due inquiry, except
for matters or conditions which would not result in a material adverse effect on
or to Mortgagor or the Mortgaged Premises, and except as set forth in Schedule
5.13 to the Credit Agreement and the environmental reports concerning the
Mortgaged Premises dated October 1993 and July 1995 (collectively, the
"Environmental Disclosure"), (i) the Mortgaged Premises complies with all
applicable federal, state, regional, county or local laws, statutes, rules,
regulations or ordinances relating to public health, safety or the environment,
including, without limitation, relating to releases, discharges, emissions or
disposals to air, water, land or groundwater, to the use, handling or disposal
of polychlorinated biphenyls (PCB's), asbestos or urea formaldehyde, to the
treatment, storage, disposal or management of hazardous substances (including,
without limitation, petroleum, its derivatives or by-products, or other
hydrocarbons), to exposure to toxic, hazardous, or other
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controlled, prohibited or regulated substances, to the transportation, storage,
disposal, management or release of gaseous or liquid substances, and any
regulation, order, injunction, judgment, declaration, notice or demand issued
thereunder, including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. (S)9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. (S)6901 et seq., the Federal
Water Pollution Control Act, 33 U.S.C. (S)1251 et seq., the Toxic Substances
Control Act, 15 U.S.C. (S)2601 et seq., the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. (S)11001 et seq., the Clean Air Act, 42 U.S.C.
(S)7401 et seq., the National Environmental Policy Act, 42 U.S.C. (S)4321, the
Rivers and Harbors Act, 33 U.S.C. (S)401 et seq., the Occupational Safety and
Health Act, 29 U.S.C. (S)651 et seq., and the Safe Drinking Water Act, 42 U.S.C.
(S)300(f) et seq., and all rules or regulations promulgated thereunder, and any
of the above which may be amended from time to time (collectively, "Governmental
Regulations"), and (ii) the Mortgagor has not manufactured, used, treated,
stored, transported or disposed of any Hazardous Substances (as that term is
defined in paragraph 29 below), except in compliance with Governmental
Regulations.
29. Condition of Property. Mortgagor warrants and represents that,
to the best of its knowledge, after due inquiry, except for matters or
conditions which would not result in a material adverse effect on or to
Mortgagor or the Mortgaged Premises, and except to the extent that no applicable
Governmental Regulations are violated, and except as set forth in the
Environmental Disclosure: the Mortgaged Premises, including all personal
property, is free from contamination, that there has not been thereon a release,
discharge or emission, or threat of release, discharge or emission, of any
hazardous substance, gas or liquid (including, without limitation, petroleum,
its derivatives or by-products, or other hydrocarbons), or any other substance,
gas or liquid, which is prohibited, controlled or regulated under applicable
law, or which poses a threat or nuisance to safety, health or the environment
(collectively, "Hazardous Substances"), and that the Mortgaged Premises does not
contain, or is not affected by: (i) asbestos, (ii) urea formaldehyde foam
insulation, (iii) polychlorinated biphenyls (PCB's), (iv) underground storage
tanks, (v) landfills, land disposals or dumps.
30. Notice of Environmental Problem. Mortgagor represents and warrants
that, except as set forth in the Environmental Disclosure, it has not given nor
has it received, any notice, letter, citation, order, warning, complaint,
inquiry, claim or demand that: (i) Mortgagor has violated, or is about to
violate, any federal, state, regional, county or local environmental, health or
safety statute, law, rule, regulation, ordinance, judgment or order; (ii) there
has been a release,
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or there is threat of release, of hazardous substances (including, without
limitation, petroleum, its by-products or derivatives, or other hydrocarbons)
from the Mortgaged Premises; (iii) Mortgagor may be or is liable, in whole or in
part, for the costs or cleaning up, remediating or responding to a release of
hazardous substances (including, without limitation, petroleum, its by-products
or derivatives, or other hydrocarbons); (iv) any of the Mortgagor's property or
assets are subject to a lien in favor of any governmental body for any
liability, costs or damages, under federal, state or local environmental law,
rule or regulation arising from or costs incurred by such governmental entity in
response to a release of a hazardous substance (including, without limitation,
petroleum, its by-products or derivatives, or other hydrocarbons). In the event
that Mortgagor receives any notice of the type described in this Section,
Mortgagor shall promptly provide a copy to Mortgagee, and in no event, later
than fifteen (15) days from Mortgagor's receipt or submission thereof.
31. Use of Property and Facilities. Mortgagor covenants and agrees,
during the term of this Mortgage, that except to the extent that no applicable
Governmental Regulations are or will be violated in connection therewith and
except for matters or conditions which would not result in a material adverse
effect on or to Mortgagor or the Mortgaged Premises: it shall not conduct, any
business, operations or activity on the Mortgaged Premises, or employ or use the
personal property or facilities, to manufacture, use, generate, treat, store,
transport or dispose of any Hazardous Substances. The provisions of this Section
shall apply to all real and personal property, without limitation, owned or
operated by Mortgagor or its subsidiaries.
32. Default Rate. For purposes of this Mortgage, the term "Default
Rate" shall mean the rate per annum determined by adding 2% to the rate per
annum announced from time to time by Harris Trust and Savings Bank as its prime
commercial rate, with any change in such rate per annum as so determined by
reason of a change in such prime commercial rate to become effective on the date
of such change in said prime commercial rate.
33. Partial Invalidity. All rights, powers and remedies provided
herein are intended to be limited to the extent necessary so that they will not
render this Mortgage invalid, unenforceable or not entitled to be recorded,
registered or filed under any applicable law. If any term of this Mortgage
shall be held to be invalid, illegal or unenforceable, the validity and
enforceability of the other terms of this Mortgage shall in no way be affected
thereby.
34. Successors and Assigns. Whenever any of the parties hereto is
referred to, such
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reference shall be deemed to include the successors and assigns of such party;
and all the covenants, promises and agreements in this Mortgage contained by or
on behalf of Mortgagor, or by or on behalf of Mortgagee, shall bind and inure to
the benefit of the respective successors and assigns of such parties, whether so
expressed or not. If more than one party signs this instrument as Mortgagor,
then the term "Mortgagor" as used herein shall mean all of such parties, jointly
and severally.
35. Headings. The headings in this instrument are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provision hereof.
36. Changes, Etc. This instrument and the provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
37. Governing Law. The creation of the Mortgage, the perfection of the
lien or security interest in the Mortgaged Premises, and the rights and remedies
of Mortgagee with respect to the Mortgaged Premises, as provided herein and by
the laws of the state in which the Mortgaged Premises is located, shall be
governed by and construed in accordance with the internal laws of the state in
which the Mortgaged Premises is located without regard to principles of
conflicts of law. Otherwise, the Credit Agreement, the Notes, the Applications
and all other obligations of Mortgagor (including, but not limited to, the
liability of Mortgagor for any deficiency following a foreclosure or other sale
of all or any part of the Mortgaged Premises) shall be governed by and construed
in accordance with the internal laws of the State of Illinois without regard to
principles of conflicts of laws, such state being the state where such documents
were executed and delivered.
38. Liens Absolute, Etc. Mortgagor acknowledges and agrees that the
liens and security interests hereby created are absolute and unconditional and
shall not in any manner be affected or impaired by any acts or omissions
whatsoever of Mortgagee or any other holders of any of the indebtedness hereby
secured, and without limiting the generality of the foregoing, the lien and
security hereof shall not be impaired by any acceptance by Mortgagee or any
other holder of any of the indebtedness hereby secured of any other security for
or guarantors upon any of the indebtedness hereby secured or by any failure,
neglect or omission on the part of Mortgagee or any other holder of any of the
indebtedness hereby secured to realize upon or protect any of the indebtedness
hereby secured or any collateral security therefor. The lien and
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security hereof shall not in any manner be impaired or affected by any sale,
pledge, surrender, compromise, settlement, release, renewal, extension,
indulgence, alteration, substitution, exchange, change in, modification or
disposition of any of the indebtedness hereby secured, or of any collateral
security therefor, or of any guaranty thereof, or of any loan agreement executed
in connection therewith. In order to realize hereon and to exercise the rights
granted Mortgagee hereby and under applicable law, there shall be no obligation
on the part of Mortgagee or any other holder of any of the indebtedness hereby
secured at any time to first resort for payment to the obligor on any note
evidencing any of the indebtedness hereby secured or to any guaranty of any of
the indebtedness hereby secured or any part thereof or to resort to any other
collateral security, property, liens or any other rights or remedies whatsoever,
and Mortgagee shall have the right to enforce this instrument irrespective of
whether or not other proceedings or steps are pending seeking resort to or
realization upon or from any of the foregoing.
39. Direct and Primary Security -- No Subrogation. The lien and
security herein created and provided for stands as direct and primary security
for the Notes and the Applications as well as for any of the other indebtedness
hereby secured. No application of any sums received by Mortgagee in respect of
the Mortgaged Premises or any disposition thereof to the reduction of the
indebtedness hereby secured or any part thereof shall in any manner entitle
Mortgagor to any right, title or interest in or to the indebtedness hereby
secured or any collateral security therefor, whether by subrogation or
otherwise, unless and until all indebtedness hereby secured has been fully paid
and satisfied.
40. Revolving Credit Loan. This Mortgage is given to secure, among
other things, a revolving credit loan and shall secure not only presently
existing indebtedness under the Credit Agreement but also future advances,
whether such advances are obligatory or to be made at the option of Mortgagee,
or otherwise, as are made within twenty (20) years from the date hereof, to the
same extent as if such future advances were made on the date of the execution of
this Mortgage, although there may be no advance made at the time of execution of
this Mortgage and although there may be no indebtedness hereby secured
outstanding at the time any advance is made. The lien of this Mortgage shall be
valid as to all indebtedness hereby secured, including future advances, from the
time of its filing for record in the recorder's or registrar's office of the
county in which the Mortgaged Premises are located. The total amount of
indebtedness hereby secured may increase or decrease from time to time, but the
total unpaid balance of indebtedness hereby secured (including disbursements
which Mortgagee may make under this Mortgage, the
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Credit Agreement or any other documents related thereto) at any one time
outstanding shall not exceed a maximum principal amount of One Hundred Thirty
Million Dollars ($130,000,000) plus interest thereon and any disbursements made
for payment of taxes, special assessments or insurance on the Mortgaged Premises
and interest on such disbursements (all such indebtedness being hereinafter
referred to as the "maximum amount secured hereby"). This Mortgage shall be
valid and have priority over all subsequent liens and encumbrances, including
statutory liens, excepting solely taxes and assessments levied on the Mortgaged
Premises, to the extent of the maximum amount secured hereby.
41. Agent. Mortgagee has been appointed as agent pursuant to the
Credit Agreement. In acting under or by virtue of this Mortgage, Mortgagee
shall be entitled to all the rights, authority, privileges and immunities
provided in Section 10 of the Credit Agreement, a copy of which Section 10 is
attached hereto as Exhibit A, all of which provisions of said Section 10 are
incorporated by reference herein with the same force and effect as if set forth
herein. Mortgagee hereby disclaims any representation or warranty to the
Lenders concerning the perfection of the security interest granted hereunder or
the value of the Mortgaged Premises.
IN WITNESS WHEREOf, Mortgagor has caused these presents to be signed and
sealed the day and year first above written.
Nu-West Industries, Inc.
By Its
(Type or Print Name)
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State of ___________ )
) SS.
County of _________ )
On this ____ day of August, 1995, before me__________________________,a
notary public for said State, personally appeared_____________________________,
known or identified to me to be the ______________________________ of Nu-West
Industries, Inc., a Delaware corporation, the corporation that executed the
instrument or the person who executed the instrument on behalf of said
corporation, and acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
Residing at:
My Commission Expires:
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EXHIBIT A
SECTION 10 AGENCY PROVISIONS
.C.SECTION 10. THE AGENT;.
.c2.Section 10.1. Appointment and Authorization;. Each Bank hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers hereunder and under the Security Documents as are
designated to the Agent by the terms hereof and thereof together with such
powers as are reasonably incidental thereto. The Agent may waive receipt of a
Lien on any after acquired fixed assets or intangibles of the Company and on
negotiable instruments and documents. The Agent may resign at any time by
sending twenty (20) days prior written notice to the Company and the Banks and
may be removed by the Required Banks upon twenty (20) days prior written notice
to the Company and the Banks. In the event of any such resignation or removal
the Required Banks may appoint a new agent after consultation with the Company
and due consideration of its views, which shall succeed to all the rights,
powers and duties of the Agent hereunder and under the Security Documents. Any
resigning or removed Agent shall be entitled to the benefit of all the
protective provisions hereof with respect to its acts as an agent hereunder, but
no successor Agent shall in any event be liable or responsible for any actions
of its predecessor. If the Agent resigns or is removed and no successor is
appointed, the rights and obligations of such Agent shall be automatically
assumed by the Required Banks and (i) the Company shall be directed to make all
payments due each Bank hereunder directly to such Bank and (ii) the Agent's
rights in the Security Documents shall be assigned without representation,
recourse or warranty to the Banks as their interests may appear.
.c2.Section 10.2. Rights as a Bank;. The Agent has and reserves all of the
rights, powers and duties hereunder and under its Notes and the other Loan
Documents as any Bank may have and may exercise the same as though it were not
the Agent and the terms "Bank" or "Banks" as used herein and in all of such
documents shall, unless the context otherwise expressly indicates, include the
Agent in its individual capacity as a Bank.
.c2.Section 10.3. Standard of Care;. The Banks acknowledge that they have
received and approved copies of the Loan Documents, and such other information
and documents concerning the transactions contemplated and financed hereby as
they have requested to receive and/or review. The Agent makes no
representations or warranties of any kind or character to the Banks
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with respect to the validity, enforceability, genuineness, perfection, value,
worth or collectibility hereof or of the other Loan Documents or of the Liens
provided for thereby or of any other documents called for hereby or thereby or
of the Collateral. The Agent need not verify the worth or existence of the
Collateral and may rely exclusively on reports of the Company in computing the
Borrowing Base. Neither the Agent nor any director, officer employee, agent or
representative thereof (including any security trustee therefor) shall in any
event be liable for any clerical errors or errors in judgment, inadvertence or
oversight, or for action taken or omitted to be taken by it or them hereunder or
under the other Loan Documents or in connection herewith or therewith except for
its or their own gross negligence or willful misconduct. The Agent shall incur
no liability under or in respect of this Agreement or the other Loan Documents
by acting upon any notice, certificate, warranty, instruction or statement (oral
or written) of anyone (including anyone in good faith believed by it to be
authorized to act on behalf of the Company), unless it has actual knowledge of
the untruthfulness of same. The Agent may execute any of its duties hereunder by
or through employees, agents, and attorneys-in-fact and shall not be answerable
to the Banks for the default or misconduct of any such agents or attorneys-in-
fact selected with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agencies hereby created and its
duties hereunder, and shall incur no liability to anyone and be fully protected
in acting upon the advice of such counsel. The Agent shall be entitled to assume
that no Potential Default or Event of Default exists unless notified to the
contrary by a Bank. The Agent shall in all events be fully protected in acting
or failing to act in accord with the instructions of the Required Banks. Upon
the occurrence of an Event of Default hereunder, the Agent shall take such
action with respect to the enforcement of its liens on the Collateral and the
preservation and protection thereof as it shall be directed to take by the
Required Banks but unless and until the Required Banks have given such direction
the Agent shall take or refrain from taking such actions as it deems appropriate
and in the best of interest of all Banks. The Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall be indemnified
to its reasonable satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Agent may treat the owner of any Note as the holder thereof
until written notice of transfer shall have been filed with it signed by such
owner in form satisfactory to the Agent. Each Bank acknowledges that it has
independently and without reliance on the Agent or any other Bank and based upon
such information, investigations and inquiries as it deems
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appropriate made its own credit analysis and decision to extend credit to the
Company. It shall be the responsibility of each Bank to keep itself informed as
to the creditworthiness of the Company and the Agent shall have no liability to
any Bank with respect thereto.
.c2.Section 10.4;. Costs and Expenses;. Each Bank agrees to reimburse the
Agent for all out-of-pocket costs and expenses suffered or incurred by the Agent
or any security trustee in performing its duties hereunder and under the other
Loan Documents or in the exercise of any right or power imposed or conferred
upon the Agent hereby or thereby, to the extent that the Agent is not promptly
reimbursed for same by the Company or out of the Collateral, all such costs and
expenses to be borne by the Banks ratably in accordance with the amounts of
their respective Commitments. If any Bank fails to reimburse the Agent for its
share of any such costs and expenses, such costs and expenses shall be paid pro
rata by the remaining Banks, but without in any manner releasing the defaulting
Bank from its liability hereunder.
.c2.Section 10.5;. Indemnity;. The Banks shall ratably indemnify and hold
the Agent, and its directors, officers, employees, agents or representatives
(including as such any security trustee therefor) harmless from and against any
liabilities, losses, costs or expenses suffered or incurred by them hereunder or
under the Applications or the other Loan Documents or in connection with the
transactions contemplated hereby or thereby, regardless of when asserted or
arising, except to the extent they are promptly reimbursed for the same by the
Company or out of the Collateral and except to the extent that any event giving
rise to a claim was caused by the gross negligence or willful misconduct of the
party seeking to be indemnified. If any Bank defaults in its obligations under
this Section 10.5, its share of the obligations shall be paid pro rata by the
remaining Banks, but without in any manner releasing the defaulting Bank from
its liability hereunder.
.cl.
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SCHEDULE I
LEGAL DESCRIPTION
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SCHEDULE II
PERMITTED EXCEPTIONS
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EXHIBIT 10(y) b.
NU-WEST INDUSTRIES, INC.
SECURITY AGREEMENT
This Security Agreement (the "Agreement") dated as of August 3, 1995 by and
between Nu-West Industries, Inc., a Delaware corporation with its principal
place of business and mailing address at 8400 East Prentice Avenue, Suite 1320,
Englewood, Colorado 80111 (the "Company"), and Harris Trust and Savings Bank, an
Illinois banking corporation with its mailing address 111 West Monroe Street,
Chicago, Illinois 60690, acting as agent hereunder for the Lenders hereinafter
identified and defined (said Harris Trust and Savings Bank acting as such agent
and any successor or successors to said Harris Trust and Savings Bank acting in
such capacity being hereinafter referred to as the "Agent");
WITNESSETH THAT:
WHEREAS, the Company, Harris Trust and Savings Bank, individually and as
agent, and certain other lenders have entered into a Secured Credit Agreement of
even date herewith (such Credit Agreement as the same may be amended, modified
or restated from time to time being hereinafter referred to as the "Credit
Agreement"), pursuant to which such lenders (such lenders which are now or which
from time to time hereafter become party to the Credit Agreement being
hereinafter referred to collectively as the "Lenders" and individually as a
"Lender") have agreed, subject to certain terms and conditions, to extend a
revolving credit facility, a letter of credit facility and two term credit
facilities to the Company;
WHEREAS, the Company may from time to time enter into one or more interest
rate exchange, cap, collar, floor or other agreements with one or more of the
Lenders party to the Credit Agreement for the purpose of hedging or otherwise
protecting the Company against changes in interest rates on the Notes (the
liability of the Company in respect of such agreements with such Lenders being
hereinafter referred to as the "Hedging Liability"); and
WHEREAS, as a condition precedent to extending the credit facilities to the
Company under the Credit Agreement, the Lenders have required, among other
things, that the Company grant to the Agent a lien on and security interest in
certain real and personal properties of the Company as collateral security for
such credit facilities and related obligations pursuant to this Agreement and
various other instruments and documents (this Agreement and such other
instruments and documents being hereinafter referred to as the "Collateral
Documents");
NOW, THEREFORE, for and in consideration of the execution and delivery by
the Lenders
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of the Credit Agreement, and other good and valuable consideration, receipt
whereof is hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Grant of Security Interest in the Collateral; Obligations
Secured.
(a) The Company hereby grants to the Agent for the ratable benefit of the
Lenders a security interest in and right of set-off against, and acknowledges
and agrees that the Agent has and shall continue to have for the ratable benefit
of the Lenders a continuing security interest in and right of set-off against,
any and all right, title and interest of the Company, whether now owned or
existing or hereafter created, acquired or arising, in and to the following:
(i) Receivables. Receivables, whether now owned or existing or
hereafter created, acquired or arising, and however evidenced or acquired,
or in which the Company now has or hereafter acquires any rights (the term
"Receivables" means and includes all accounts, accounts receivable,
contract rights, instruments, notes, drafts, acceptances, documents,
chattel paper, any right of the Company to payment for goods sold or leased
or for services rendered, whether arising out of the sale of Inventory (as
hereinafter defined) or otherwise and whether or not earned by performance,
and all other forms of obligations owing to the Company, and all of the
Company's rights to any merchandise or other goods (including without
limitation any returned or repossessed goods and the right of stoppage in
transit) which is represented by, arises from or is related to any of the
foregoing);
(ii) General Intangibles. All general intangibles, whether now
owned or existing or hereafter created, acquired or arising, or in which
the Company now has or hereafter acquires any rights, including, without
limitation, all patents, patent applications, patent licenses, trademarks,
trademark registrations, trademark licenses, trade styles, trade names,
copyrights, copyright registrations, copyright licenses and other licenses
and similar intangibles, all customer, client and supplier lists (in
whatever form maintained), all rights in leases and other agreements
relating to real or personal property, all causes of action and tax refunds
of every kind and nature, all privileges, franchises, immunities, licenses,
permits and similar intangibles, all rights to receive payments in
connection with the termination of any pension plan or employee stock
ownership plan or trust established for the benefit of employees of the
Company and all other personal property (including things in action) not
otherwise covered by this Agreement;
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(iii) Inventory. Inventory, whether now owned or existing or
hereafter created, acquired or arising, or in which the Company now has or
hereafter acquires any rights and all documents of title at any time
evidencing or representing any part thereof (the term "Inventory" means and
includes all goods which are held for sale or lease or are to be furnished
under contracts of service or consumed in the Company's business, all goods
which are raw materials, work-in-process, finished goods, materials or
supplies of every kind and nature, in each case used or usable in
connection with the acquisition, manufacture, processing, supply,
servicing, storing, packing, shipping, advertising, selling, leasing or
furnishing of such goods, and any constituents or ingredients thereof, and
all goods which are returned or repossessed goods), including, without
limitation, Inventory consisting of: sulfur, sulfuric acid and ammonia raw
materials, phosphate rock and finished goods;
(iv) Equipment. Equipment, whether now owned or existing or
hereafter created, acquired or arising, or in which the Company now has or
hereafter acquires any rights (the term "Equipment" means and includes all
equipment, machinery, tools, trade fixtures, furniture, furnishings, office
equipment, vehicles [including vehicles subject to a certificate of title
law] and all other goods now or hereafter used or usable in connection with
the Company's business, together with all parts, accessories and
attachments relating to any of the foregoing);
(v) Contract Rights. Contract Rights, whether now existing or
hereafter arising, or in which the Company now has or hereafter acquires
any rights (the term "Contract Rights" means and includes, without
limitation, all of the Company's right, title and interest in, to and under
the Master Finance Lease (as amended from time to time, the "Lease") dated
as of November 2, 1993 between Caterpillar Financial Services Corporation,
as lessor ("Caterpillar") and the Company, as lessee, the Mining Equipment
Sublease Agreement dated as of November 1, 1993 (the "Sublease") between
the Company, as lessor, and Rhone-Poulenc Basic Chemicals Co., a division
of Rhone-Poulenc, Inc. ("Rhone"), as lessee, the Ore Purchase Agreement (as
amended from time to time, the "Rhone-Poulenc Agreement") dated as of June
15, 1993, between the Company and Rhone, and the Loan Agreement dated as of
July 28, 1994 (the "Kennecott Agreement") between the Company and Kennecott
Utah Copper Corporation, a Delaware corporation (the Lease, Sublease,
Kennecott Agreement and Rhone-Poulenc Agreement
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are hereinafter referred to collectively as the "Pledged Contracts") and
any other agreement, including, without limitation, any licensing
agreements, to which the Company is a party to or a third party beneficiary
thereof as each and any of such agreements may be amended, supplemented or
otherwise modified from time to time together with all rights of the
Company to receive monies due and to become due under or pursuant to said
agreements, all rights of the Company to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to said agreements, all claims
of the company for damages arising out of or for breach of or default under
said agreements, and all rights of the Company to terminate, amend,
supplement or modify said agreements to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder);
(vi) Pledged Note. That certain Senior Secured Promissory Note
dated November 2, 1993 (such promissory note and any and all notes issued
in renewal or extension thereof or substitution or replacement therefor,
being hereinafter referred to collectively as the "Pledged Note") of NuTec
Mineral & Chemical Company, a Colorado limited partnership ("NuTec")
payable to the order of the Company, and any sums due or to become due in
respect of the Pledged Note, all rights in and to any and all loan
agreements, mortgages, deeds of trust, assignments of leases and/or rents,
security agreements, financing statements, guaranties, title and hazard
insurance policies and any other instruments and documents of any kind or
character now or at any time hereafter securing or relating to the Pledged
Note;
(vii) Pledged Securities. All shares of the capital stock of the
issuers listed and described on Schedule C attached hereto and made a part
hereof now or hereafter delivered to and deposited with the Agent (those of
such shares delivered to and deposited with the Agent on the date hereof
being listed on Schedule C attached hereto), all substitutions and
additions to such shares, all dividends, distributions and sums
distributable or payable from, upon, or in respect of such shares, and all
rights or privileges incident to such shares (such shares and all of the
foregoing being hereinafter referred to collectively as the "Pledged
Securities");
(viii) Deposits and Property in Possession. All deposit accounts
(whether general, specific or otherwise) maintained with the Agent or any
of the Lenders and all sums now or hereafter on deposit therein or payable
thereon, and any and all other
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property or interests in property which now is or may from time to time
hereafter come into the possession, custody or control of the Agent or any
of the Lenders, or any agent or affiliate of any of them, in any way and
for any purpose (whether for safekeeping, custody, pledge, transmission,
collection or otherwise);
(ix) Records. Supporting evidence and documents relating to any of
the above-described property, including, without limitation, computer
programs, disks, tapes and related electronic data processing media, and
all rights of the Company to retrieve the same from third parties, written
applications, credit information, account cards, payment records,
correspondence, delivery and installation certificates, invoice copies,
delivery receipts, notes and other evidences of indebtedness, insurance
certificates and the like, together with all books of account, ledgers and
cabinets in which the same are reflected or maintained, all whether now
existing or hereafter arising;
(x) Accessions and Additions. All accessions and additions to and
substitutions and replacements of any and all of the foregoing, whether now
existing or hereafter arising; and
(xi) Proceeds and Products. All proceeds and products of the
foregoing and all insurance of the foregoing and proceeds thereof, whether
now existing or hereafter arising;
all of the foregoing being herein sometimes referred to as the "Collateral".
(b) This Agreement is made and given to secure, and shall secure, the
payment and performance of (i) any and all indebtedness, obligations and
liabilities of the Company under or in connection with or evidenced by (w) the
Credit Agreement or (x) the Notes of the Company heretofore or hereafter issued
under the Credit Agreement and the obligations of the Company to reimburse
Harris Trust and Savings Bank for the amount of all drawings on all Letters of
Credit issued for the account of the Company pursuant to the Credit Agreement,
and all other obligations of the Company under any and all applications for such
Letters of Credit or (y) any of the Collateral Documents or (z) agreements with
any one or more of the Lenders with respect to Hedging Liability, in each case
whether now existing or hereafter arising (and whether arising before or after
the filing of a petition in bankruptcy), due or to become due, direct or
indirect, absolute or contingent, and howsoever evidenced, held or acquired and
(ii) any and all expenses and charges, legal or otherwise, suffered or incurred
by the Agent and the Lenders in collecting
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or enforcing any of such indebtedness, obligations and liabilities or in
realizing on or protecting or preserving any security therefor, including,
without limitation, the lien and security interest granted hereby (all of the
indebtedness, obligations, liabilities, expenses and charges described in
clauses (i) and (ii) above being hereinafter referred to as the "Secured
Obligations").
Section 2. Terms defined in Credit Agreement. All capitalized terms
used herein without definition shall have the same meanings herein as such terms
have in the Credit Agreement.
Section 3. Covenants, Agreements, Representations and Warranties. The
Company hereby covenants and agrees with, and represents and warrants to, the
Agent and the Lenders that:
(a) The Company's Federal tax identification number is 82-0415557.
(b) The Collateral is and will remain in the Company's possession
or control at the locations listed under Item 1 on Schedule A attached
hereto (collectively, the "Permitted Collateral Locations"), except for
Collateral which in the ordinary course of the Company's business is in
transit between the Permitted Collateral Locations. If for any reason
Collateral is at any time kept or located at locations other than the
Permitted Collateral Locations, the Agent shall nevertheless have and
retain a security interest therein. The Company owns and will at all times
own all Permitted Collateral Locations, except to the extent otherwise
indicated on Schedule A. The Company's chief executive office and principal
place of business is at, and the Company keeps and shall keep all of its
books and records relating to Receivables only at, Suite 1320, 8400 East
Prentice Avenue, Englewood, Colorado 80111, and 3010 Conda Road, Soda
Springs, Idaho 83276; and the Company has no other executive offices or
places of business other than those listed under Item 2 on Schedule A. The
Company will not maintain an executive office or place of business at a
location other than those specified pursuant to the immediately preceding
sentence without first providing the Agent thirty (30) days' prior written
notice of the Company's intent to do so; provided, however, that the
Company will at all times maintain its chief executive office in the
contiguous continental United States of America.
(c) The Collateral and every part thereof is and will be free and
clear of all security interests, liens (including, without limitation,
mechanics', laborers' and statutory liens), attachments, levies and
encumbrances of every kind, nature and description and
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whether voluntary or involuntary, except for the security interest of the
Agent therein and as otherwise permitted by Section 7.16 of the Credit
Agreement. The Company will warrant and defend the Collateral against any
claims and demands of all persons or entities at any time claiming the same
or any interest in the Collateral adverse to the Agent or any Lender.
(d) The Company will promptly pay when due all taxes, assessments
and governmental charges and levies upon or against the Collateral, in each
case before the same become delinquent and before penalties accrue thereon,
unless and to the extent that the same are being contested in good faith by
appropriate proceedings which prevent foreclosure on or other realization
upon any Collateral and preclude interference with the operation of the
Company's business in the ordinary course and the Company shall have
established adequate reserves therefor.
(e) The Company will not waste or destroy the Collateral or any
part thereof and will not be negligent in the care or use of any
Collateral. The Company will not use, manufacture, sell or distribute any
Collateral in violation of any statute, ordinance or other governmental
requirement.
(f) This Agreement constitutes an assignment of rights only and not
an assignment of any duties, responsibilities or obligations under any of
the collateral. The Company will perform its duties and obligations under
the Pledged Contracts, the NuTec Loan Documents (as hereinafter defined)
and any other any contract or agreement constituting part of the
Collateral, it being understood and agreed that the Agent and the Lenders
have no responsibility to perform such duties and obligations.
(g) Subject to Sections 4(b), 5(a), 6(b) and 6(c) hereof, the
Company will not, without the Agent's prior written consent, sell, assign,
mortgage, lease or otherwise dispose of the Collateral or any interest
therein.
(h) The Company will insure the Collateral which is insurable
against such risks and hazards as other companies similarly situated
typically insure against, and including in any event loss or damage by
fire, theft, burglary, pilferage, loss in transit and such other hazards as
the Agent may specify, in amounts and under policies containing loss
payable clauses to the Agent as its interest may appear (and, if the Agent
requests, naming the Agent and the Lenders as additional insureds therein)
by insurers acceptable
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<PAGE>
to the Agent. Notwithstanding anything in the foregoing to the contrary,
the Company may self insure through deductibles or otherwise with respect
to each type of insurance required hereunder; provided, however, that such
self insurance does not exceed $500,000 per occurrence. Also
notwithstanding anything in the foregoing to the contrary, any insurance
maintained with respect to Collateral subject to any and all real estate
mortgages constituting Collateral Documents (collectively, the "Mortgages")
in compliance with the provisions of the Mortgages shall be deemed to
comply with the foregoing. All premiums on such insurance shall be paid by
the Company and the policies of such insurance (or certificates therefor)
delivered to the Agent. All insurance required hereby shall provide that
any loss shall be payable notwithstanding any act or negligence of the
Company, shall provide that no cancellation thereof shall be effective
until at least thirty (30) days after receipt by the Company and the Agent
of written notice thereof, and shall be satisfactory to the Agent in all
other respects. In case of any material loss, damage to or destruction of
the Collateral or any part thereof, the Company shall promptly give written
notice thereof to the Agent and the Lenders generally describing the nature
and extent of such damage or destruction. In case of any loss, damage to or
destruction of the Collateral or any part thereof, the Company, whether or
not the insurance proceeds, if any, received on account of such damage or
destruction shall be sufficient for that purpose, at the Company's cost and
expense, will promptly repair or replace the Collateral so lost, damaged or
destroyed, except to the extent (i) such Collateral, prior to its loss,
damage or destruction, had become uneconomical, obsolete or worn out or
(ii) such Collateral is not necessary for or of importance to the proper
conduct of the Company's business in the ordinary course and such
Collateral and all other Collateral lost, damaged or destroyed during the
immediately preceding twelve (12) calendar months had an aggregate fair
market value, prior to its loss, damage or destruction, of less than
$100,000. In the event the Company shall receive any proceeds of such
insurance, the Company will immediately pay over such proceeds to the
Agent. The Company hereby authorizes the Agent, at the Agent's option, to
adjust, compromise and settle any losses under any insurance afforded at
any time after the occurrence and during the continuation of any Event of
Default or event which, with the lapse of time, giving of notice, or both,
would constitute an Event of Default (a "Default"), and the Company does
hereby irrevocably constitute the Agent, its officers, agents and
attorneys, as the Company's attorneys-in-fact, with full power and
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<PAGE>
authority to effect such adjustment, compromise and/or settlement and to
endorse any drafts drawn by an insurer of the Collateral or any part
thereof and to do everything necessary to carry out such purposes and to
receive and receipt for any unearned premiums due under policies of such
insurance. Unless the Agent elects to adjust, compromise or settle losses
as aforesaid, any adjustment, compromise and/or settlement of any losses
under any insurance shall be made by the Company subject to final approval
of the Agent (regardless of whether or not a Default or an Event of Default
shall have occurred) in the case of losses exceeding $100,000. Net
insurance proceeds received by the Agent under the provisions hereof or
under any policy or policies of insurance covering the Collateral or any
part thereof shall be applied to the reduction of the Secured Obligations
(whether or not then due); provided, however, that the Agent agrees to
release such insurance proceeds to the Company for replacement or
restoration of the portion of the Collateral lost, damaged or destroyed
required by this Agreement to be so replaced or restored if, but only if,
(i) at the time of release no Default or Event of Default exists hereunder,
(ii) written application for such release is received from the Company
within thirty (30) days of receipt of such proceeds and (iii) the Agent has
received evidence reasonably satisfactory to it that the Collateral lost,
damaged or destroyed has been or will be replaced or restored to its
condition immediately prior to the loss, destruction or other event giving
rise to the payment of such insurance proceeds. Notwithstanding anything
herein to the contrary, if the event giving rise to any loss, damage or
destruction of the Collateral results in the payment of insurance proceeds
under insurance policies maintained on the property subject to the
Mortgages, the provisions of the Mortgages shall govern and control the
release of insurance proceeds hereunder. All insurance proceeds shall be
subject to the lien and security interest of the Agent hereunder.
(i) The Company will at all times allow the Agent, any Lender and
their respective representatives free access to and right of inspection of
the Collateral.
(j) If any Collateral is in the possession or control of any of the
Company's agents or processors and the Agent so requests, the Company
agrees to notify such agents or processors in writing of the Agent's
security interest therein and instruct them to hold all such Collateral for
the Agent's account and subject to the Agent's instructions. The Company
will, upon request of the Agent, authorize and instruct all bailees and any
other parties, if any, at any time processing, labeling, packaging,
holding, storing, shipping or
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transferring all or any part of the Collateral to permit the Agent, any
Lender and their respective representatives to examine and inspect any of
the Collateral then in such party's possession and to verify from such
party's own books and records any information concerning the Collateral or
any part thereof which the Agent, any Lender or their respective
representatives may seek to verify. As to any premises not owned by the
Company wherein any of the Collateral is located, if any, the Company
shall, unless the Agent requests otherwise, cause each party having any
right, title or interest in, or lien on, any of such premises to enter into
an agreement (any such agreement to contain a legal description of such
premises) whereby such party disclaims any right, title and interest in,
and lien on, the Collateral, allowing the removal of such Collateral by the
Agent or by the Lenders and otherwise in form and substance acceptable to
the Agent.
(k) The Company agrees from time to time to deliver to the Agent
and any Lender such evidence of the existence, identity and location of the
Collateral and of its availability as collateral security pursuant hereto
(including, without limitation, schedules describing all Receivables
created or acquired by the Company, copies of customer invoices or the
equivalent and original shipping or delivery receipts for all merchandise
and other goods sold or leased or services rendered, together with the
Company's warranty of the genuineness thereof, and reports stating the book
value of Inventory and Equipment by major category and location), in each
case as the Agent or such Lender may request. The Agent shall have the
right to verify all or any part of the Collateral in any manner, and
through any medium, which the Agent or the Lenders consider appropriate
(including, without limitation, the verification of Collateral by use of a
fictitious name), and the Company agrees to furnish all assistance and
information, and perform any acts, which the Agent may reasonably require
in connection therewith. The Company will promptly notify the Agent and
each Lender of any Collateral which the Company has determined to have been
rendered obsolete stating the prior book value of such Collateral, its type
and location.
(l) The Company will comply with the terms and conditions of any
and all leases, easements, right-of-way agreements and other agreements
binding upon the Company or affecting the Collateral, in each case which
cover the premises wherein the Collateral is located, and any orders,
ordinances, laws or statutes of any city, state or other governmental
entity, department or agency having jurisdiction with respect to such
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<PAGE>
premises or the conduct of business thereon.
(m) The Company has not invoiced Receivables or Contract Rights or
otherwise transacted business, and does not invoice Receivables or Contract
Rights or otherwise transact business, under any trade names other than the
Company's name set forth in the introductory paragraph of this Agreement.
The Company will not change its name or transact business under any other
trade name, in each case without first giving the Agent thirty (30) days'
prior written notice of its intent to do so.
(n) The Company agrees to execute and deliver to the Agent such
further agreements and assignments or other instruments and documents and
to do all such other things as the Agent may deem necessary or appropriate
to assure the Agent its security interest hereunder, including such
financing statement or statements or amendments thereof or supplements
thereto or other instruments and documents as the Agent may from time to
time require in order to comply with the Uniform Commercial Code as enacted
in the State of Illinois and any successor statute(s) thereto (the "Code").
The Company hereby agrees that a carbon, photographic or other reproduction
of this Agreement or any such financing statement is sufficient for filing
as a financing statement by the Agent without notice thereof to the Company
wherever the Agent in its sole discretion desires to file the same. In the
event for any reason the law of any jurisdiction other than Illinois
becomes or is applicable to the Collateral or any part thereof, or to any
of the Secured Obligations, the Company agrees to execute and deliver all
such instruments and documents and to do all such other things as the Agent
in its sole discretion deems necessary or appropriate to preserve, protect
and enforce the security interest of the Agent under the law of such other
jurisdiction. The Company agrees to mark its books and records to reflect
the security interest of the Agent in the Collateral.
(o) On failure of the Company to perform any of the covenants and
agreements herein contained, the Agent may at its option perform the same
and in so doing may expend such sums as the Agent may deem advisable in the
performance thereof, including, without limitation, the payment of any
insurance premiums, the payment of any taxes, liens and encumbrances,
expenditures made in defending against any adverse claims, and all other
expenditures which the Agent may be compelled to make by operation of law
or which the Agent may make by agreement or otherwise for the
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protection of the security hereof. All such sums and amounts so expended
shall be repayable by the Company immediately without notice or demand,
shall constitute additional Secured Obligations hereunder and shall bear
interest from the date said amounts are expended at the rate per annum
(computed on the basis of a 365/366-day year for the actual number of days
elapsed) determined by adding 2% to the rate per annum from time to time
announced by Harris Trust and Savings Bank as its prime commercial rate
with any change in such rate per annum as so determined by reason of a
change in such prime commercial rate to be effective on the date of such
change in said prime commercial rate (such rate per annum as so determined
being hereinafter referred to as the "Default Rate"). No such performance
of any covenant or agreement by the Agent on behalf of the Company, and no
such advancement or expenditure therefor, shall relieve the Company of any
default under the terms of this Agreement or in any way obligate the Agent
or any Lender to take any further or future action with respect thereto.
The Agent in making any payment hereby authorized may do so according to
any bill, statement or estimate procured from the appropriate public office
or holder of the claim to be discharged without inquiry into the accuracy
of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien or title or claim. The Agent in
performing any act hereunder shall be the sole judge of whether the Company
is required to perform the same under the terms of this Agreement. The
Agent is hereby authorized to charge any depository or other account of the
Company maintained with the Agent for the amount of such sums and amounts
so expended.
Section 4. Special Provisions Re: Receivables and Contract Rights.
(a) As of the time any Receivable or Contract Right becomes subject to
the security interest provided for hereby and at all times thereafter, the
Company shall be deemed to have warranted as to each and all of such Receivables
and Contract Rights that all warranties of the Company set forth in this
Agreement are true and correct with respect to each such Receivable and Contract
Right; that each Receivable and Contract Right and all papers and documents
relating thereto are genuine and in all respects what they purport to be; that
each Receivable and Contract Right is valid and subsisting and, if such
Receivable or Contract Right is an account, arises out of a bona fide sale of
goods sold and delivered by the Company to, or in the process of being delivered
to, or out of and for services theretofore actually rendered by the Company to,
the account debtor named therein; that no such Receivable or Contract Right is
evidenced by
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any instrument or chattel paper unless such instrument or chattel paper has
theretofore been endorsed by the Company and delivered to the Agent (except to
the extent the Agent specifically requests the Company not to do so with respect
to any such instrument or chattel paper); that no surety bond was required or
given in connection with such Receivable or Contract Right (except for standby
letters of credit issued for the account of the Company in connection with
Contract Rights arising pursuant to the Rhone-Poulenc Agreement and the Lease)
or the contracts or purchase orders out of which the same arose; and that if
said Receivable is scheduled, listed or referred to on any certificate
evidencing the Borrowing Base or is otherwise a Receivable which the Company
wants the Lenders to consider as an Eligible Receivable, that said Receivable
qualifies as an Eligible Receivable. Without limiting the foregoing, if any
Receivable which the Company desires to qualify as an Eligible Receivable arises
out of a contract with the United States of America or any of its departments,
agencies or instrumentalities, the Company agrees to notify the Agent and
execute whatever instruments and documents are required by the Agent in order
that such Receivable shall be assigned to the Agent and that proper notice of
such assignment shall be given under the federal Assignment of Claims Act (or
any successor statute).
(b) Unless and until an Event of Default hereunder occurs, any
merchandise or other goods which are returned by a customer or account debtor or
otherwise recovered may be resold by the Company in the ordinary course of its
business as presently conducted in accordance with Section 6(b) hereof; upon the
occurrence and during the continuation of any Event of Default hereunder, such
merchandise and other goods shall be set aside at the request of the Agent and
held by the Company as trustee for the Agent and the Lenders and shall remain
part of the Collateral. Unless and until an Event of Default hereunder occurs,
the Company may settle and adjust disputes and claims with its customers and
account debtors, handle returns and recoveries and grant discounts, credits and
allowances in the ordinary course of its business as presently conducted for
amounts and on terms which the Company in good faith considers advisable. Upon
the occurrence and during the continuation of any Event of Default hereunder,
unless the Agent requests otherwise, the Company shall notify the Agent promptly
of all returns and recoveries and, on the Agent's request, deliver any such
merchandise or other goods to the Agent. Upon the occurrence and during the
continuation of any Event of Default hereunder, unless the Agent requests
otherwise, the Company shall also notify the Agent promptly of all disputes and
claims and settle or adjust them at no expense to the Agent or the Lenders
hereunder, but no discount,
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credit or allowance other than on normal trade terms in the ordinary course of
business as presently conducted shall be granted to any customer or account
debtor and no returns of merchandise or other goods shall be accepted by the
Company without the Agent's consent. The Agent may, at all times upon the
occurrence and during the continuation of any Event of Default hereunder, settle
or adjust disputes and claims directly with customers or account debtors for
amounts and upon terms which the Agent considers advisable.
Section 5. Collection of Receivables and Contract Rights.
(a) Except as otherwise provided in this Agreement, the Company shall
make collection of all Receivables and Contract Rights and may use the same to
carry on its business in accordance with sound business practice and otherwise
subject to the terms hereof.
(b) During the existence of any Default or Event of Default hereunder
and whether or not the Agent has exercised any or all of its rights under other
provisions of this Section 5, in the event the Agent requests the Company to do
so:
(i) all instruments and chattel paper at any time constituting part
of the Receivables and Contract Rights (including any postdated checks)
shall, upon receipt by the Company, be immediately endorsed to and
deposited with Agent; and/or
(ii) the Company shall instruct all customers and account debtors
to remit all payments in respect of Receivables and Contract Rights to a
lockbox or lockboxes under the sole custody and control of Agent and which
are maintained at post offices selected by the Agent.
(c) During the existence of any Default or Event of Default hereunder and
whether or not the Agent has exercised any or all of its rights under other
provisions of this Section 5, the Agent or its designee may notify the Company's
customers and account debtors at any time that Receivables and Contract Rights
have been assigned to the Agent or of the Agent's security interest therein, and
either in its own name, or the Company's name, or both, demand, collect
(including, without limitation, through a lockbox analogous to that described in
Section 5(b)(ii) hereof), receive, receipt for, sue for, compound and give
acquittance for any or all amounts due or to become due on Receivables and
Contract Rights, and in the Agent's discretion file any claim or take any other
action or proceeding which the Agent may deem necessary or appropriate to
protect and realize upon the security interest of the Agent in the Receivables
and Contract Rights.
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(d) Any proceeds of Receivables, Contract Rights or other Collateral
transmitted to or otherwise received by the Agent pursuant to any of the
provisions of Sections 5(b) or 5(c) hereof may be handled and administered by
the Agent in and through a remittance account or accounts maintained at the
Agent or by the Agent at a commercial bank or banks selected by the Agent
(collectively the "Depositary Banks" and individually a "Depositary Bank"), and
the Company acknowledges that the maintenance of such remittance accounts by the
Agent is solely for the Agent's convenience and that the Company does not have
any right, title or interest in such remittance accounts or any amounts at any
time standing to the credit thereof. The Agent may apply all or any part of any
proceeds of Receivables, Contract Rights or other Collateral received by it from
any source to the payment of the Secured Obligations (whether or not then due
and payable), such applications to be made in such amounts, in such manner and
order and at such intervals as the Agent may from time to time in its discretion
determine, but not less often than once each week. The Agent need not apply or
give credit for any item included in proceeds of Receivables, Contract Rights or
other Collateral until the Depositary Bank has received final payment therefor
at its office in cash or final solvent credits current at the site of deposit
acceptable to the Agent and the Depositary Bank as such. However, if the Agent
does permit credit to be given for any item prior to a Depositary Bank receiving
final payment therefor and such Depositary Bank fails to receive such final
payment or an item is charged back to the Agent or any Depositary Bank for any
reason, the Agent may at its election in either instance charge the amount of
such item back against any such remittance accounts or any depository account of
the Company maintained with the Agent, together with interest thereon at the
Default Rate. Concurrently with each transmission of any proceeds of
Receivables, Contract Rights or other Collateral to any remittance account, the
Company shall furnish the Agent with a report in such form as Agent shall
require identifying the particular Receivable, Contract Rights or such other
Collateral from which the same arises or relates. The Company hereby indemnifies
the Agent and the Lenders from and against all liabilities, damages, losses,
actions, claims, judgments, costs, expenses, charges and attorneys' fees
suffered or incurred by the Agent or any Lender because of the maintenance of
the foregoing arrangements; provided, however, that the Company shall not be
required to indemnify the Agent or any Lender for any of the foregoing to the
extent they arise solely from the gross negligence or willful misconduct of the
person seeking to be indemnified. The Agent and the Lenders shall have no
liability or responsibility to the Company for the Agent or any other Depositary
Bank accepting any check, draft or other
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order for payment of money bearing the legend "payment in full" or words of
similar import or any other restrictive legend or endorsement whatsoever or be
responsible for determining the correctness of any remittance.
Section 6. Special Provisions Re: Inventory and Equipment.
(a) The Company will at its own cost and expense maintain, keep and
preserve the Inventory in good and merchantable condition and keep and preserve
the Equipment in good repair, working order and condition, ordinary wear and
tear excepted, and, without limiting the foregoing, make all necessary and
proper repairs, replacements and additions to the Equipment so that the
efficiency thereof shall be fully preserved and maintained.
(b) The Company may, until otherwise notified by the Agent, use, consume
and sell the Inventory in the ordinary course of its business, but a sale in the
ordinary course of business shall not under any circumstance include any
transfer or sale in satisfaction, partial or complete, of a debt owing by the
Company.
(c) The Company may, subject to the terms of the Credit Agreement and
until otherwise notified by the Agent, sell (X) obsolete, worn out or unusable
Equipment which is concurrently replaced with similar Equipment at least equal
in quality and condition to that sold and owned by the Company free of any lien,
charge or encumbrance other than the security interest granted hereby and (y)
Equipment which this Agreement would not require the Company to repair or
replace if the same were lost, damaged or destroyed.
(d) As of the time any Inventory or Equipment becomes subject to the
security interest provided for hereby and at all times thereafter, the Company
shall be deemed to have warranted as to any and all of such Inventory and
Equipment that all warranties of the Company set forth in this Agreement are
true and correct with respect to such Inventory and Equipment; that all of such
Inventory and Equipment is located at a location set forth pursuant to Section
3(b) hereof; and if such Inventory is scheduled, listed or referred to in any
certificate evidencing the Borrowing Base or is Inventory which the Company
wants the Lenders to consider as Eligible Inventory, such Inventory qualifies as
Eligible Inventory. The Company warrants and agrees that no Inventory is or will
be consigned to any other person or entity without the Agent's prior written
consent.
(e) Upon the Agent's request, the Company shall at its own cost and
expense cause the lien of the Agent in and to any portion of the Collateral
subject to a certificate of title law
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to be duly noted on such certificate of title or to be otherwise filed in such
manner as is prescribed by law in order to perfect such lien and will cause all
such certificates of title and evidences of lien to be deposited with the Agent.
(f) Except for Equipment from time to time located on the real estate
described on Schedule B attached hereto and as otherwise disclosed to the
Lenders in writing, none of the Equipment is or will be attached to real estate
in such a manner that the same may become a fixture.
(g) If any of the Inventory is at any time evidenced by a document of
title, such document shall be promptly delivered by the Company to the Agent.
Section 7. Special Provisions Re: Pledged Note and Pledged Contracts.
(a) The Company has endorsed the Pledged Note in blank and delivered the
same to the Agent in a form sufficient to transfer title thereto. The Company
shall also duly execute and deliver such other instruments of transfer or
assignments in blank as to any other Collateral granted pursuant hereto, all in
form and substance satisfactory to the Agent and in each case sufficient to
transfer title thereto. The Agent may at any time endorse the Pledged Note in
blank or to the order of the Agent or its nominee.
(b) The Company has delivered the only executed original of the Pledged
Note to the Agent and the same has not been amended or modified in any respect
(except for amendments and modifications reflected in written instruments,
copies of which are concurrently herewith being delivered to the Agent). There
is not and will not at any time hereafter be any defense, set-off or
counterclaim to the obligations of NuTec to pay the principal of and interest on
the Pledged Note as and when the same become due and payable.
(c) The Company has delivered to the Agent true and correct copies of all
instruments and documents securing the Pledged Note or setting forth terms and
conditions applicable thereto, including without limitation all such listed on
Schedule D hereto (collectively the "NuTec Loan Documents") and the same have
not been amended or modified in any respect (except for amendments and
modifications reflected in written instruments, copies of which are concurrently
herewith being delivered to the Agent).
(d) The Company and NuTec each is in full compliance with its respective
obligations under the Pledged Note and the NuTec Loan Documents, no default
having occurred or existing thereunder.
-17-
<PAGE>
(e) The Company will not amend, modify or waive any covenant or agreement
under the Pledged Note or any of the NuTec Loan Documents, and will not amend,
modify or waive any material covenant or agreement under any of the Pledged
Contracts, except in each case with the prior written consent of the Agent. The
Company agrees that it will not release any collateral or guarantors for the
Pledged Note, the NuTec Loan Documents or any of the Pledged Contracts or
otherwise take any action which would impair the value or collectability of all
or any part thereof. The Company further agrees to promptly deliver to the Agent
copies of all material statements, reports and other information and data
submitted by, Caterpillar, Rhone or any other party at any time a party to or
obligor with respect to the Pledged Note, the NuTec Loan Documents or the
Pledged Contracts (individually an "Obligor" and collectively the "Obligors") to
the Company and, at the Agent's request, copies of all other statements, reports
and other information and data submitted by any Obligor to the Company.
(f) The Company hereby authorizes and directs each Obligor upon receipt
of notice from the Agent that it has made demand for payment of all or any part
of the Secured Obligations, to make all distributions or payments now due or
hereafter to become due to the Company in respect of the Collateral directly to
the Agent, and the Company agrees that such payments or distributions to the
Agent as aforesaid shall be a good receipt and acquittance to the Company to the
extent so made. All distributions or payments constituting part of, and all
proceeds in respect of, the Collateral at any time received by the Agent may be
applied by the Agent to the satisfaction of the Secured Obligations (in whatever
order the Agent elects) whether or not the same may then be due or otherwise
adequately secured and, if not so applied by the Agent, may be held by the Agent
as part of the Collateral pledged under and subject to the terms of this
Agreement.
Section 8. Special Provisions Re: Pledged Securities.
(a) Unless and until an Event of Default hereunder has occurred and is
continuing:
(i) The Company shall be entitled to exercise all voting and/or
consensual powers pertaining to the Pledged Securities or any part thereof,
for all purposes not inconsistent with the terms of this Agreement, the
Credit Agreement or any other document evidencing or otherwise relating to
any Secured Obligations.
(ii) The Company shall be entitled to receive and retain all
dividends which are paid in cash out of earned surplus of the issuer of the
Pledged Securities but only to the
-18-
<PAGE>
extent such issuer is not prohibited from paying such dividends by the
Credit Agreement ("Permitted Dividends"); but except for such Permitted
Dividends, all dividends paid upon or in respect of the Pledged Securities
and all stock or property representing stock or liquidating dividends or a
distribution or return of capital upon or in respect of the Pledged
Securities or any part thereof or resulting from a split-up, revision or
reclassification of the Pledged Securities or any part thereof or received
in addition to, in substitution of or in exchange for the Pledged
Securities or any part thereof as a result of a merger, consolidation or
otherwise, shall be paid, delivered or transferred, as appropriate,
directly to the Agent immediately upon the receipt thereof by the Company
and shall, in the case of cash, be applied by the Agent to the satisfaction
of the Secured Obligations (in whatever order the Banks elect) whether or
not the same may then be due or otherwise adequately secured and shall, in
the case of all other property, together with any cash received by the
Agent and not applied as aforesaid, be held by the Agent pursuant hereto as
part of the Pledged Securities as additional Pledged Securities pledged
under and subject to the terms of this Agreement.
(iii) In order to permit the Company to exercise such voting and/or
consensual powers which it is entitled to exercise under clause (i) above
and to receive such distributions which the Company is entitled to receive
and retain under clause (ii) above, the Agent shall, if necessary, upon the
written request of the Company, from time to time execute and deliver to
the Company appropriate proxies and dividend orders.
(iv) In order to permit the Agent to receive all cash and other
property to which it may be entitled under clause (ii) above, the Company
shall, if necessary, upon the written request of the Agent, from time to
time execute and deliver to the Agent appropriate dividend orders.
(b) The certificates for all shares of stock now or at any time
constituting the Pledged Securities shall be delivered to the Agent duly
endorsed in blank for transfer or accompanied by an appropriate assignment or
assignments or an appropriate undated stock power or powers, in every case
sufficient to transfer title thereto. The Agent may at any time cause to be
transferred into its name or the name of its nominee or nominees any and all of
the Pledged Securities hereunder. The Agent shall at all times have the right to
exchange the certificates representing the Pledged Securities for certificates
of smaller or larger denominations.
-19-
<PAGE>
(c) The Pledged Securities have been validly issued and are fully paid
and non-assessable. There are no outstanding commitments or other obligations
of the issuers of the Pledged Securities to issue, and no options, warrants or
other rights of any individual or entity to acquire, any share of any class or
series of capital stock of such issuers. The Pledged Securities listed and
described on Schedule C attached hereto constitute all of the issued and
outstanding capital stock of every series and class of each issuer thereof. The
Pledgor further agrees that in the event any such issuer shall issue any
additional capital stock of any series or class, the Pledgor will forthwith
pledge and deposit hereunder or cause to be pledged and deposited hereunder, all
such additional shares of such capital stock.
Section 9. Power of Attorney. In addition to any other powers of
attorney contained herein, the Company hereby appoints the Agent, its nominee,
or any other person whom the Agent may designate as the Company's attorney in
fact, with full power upon the occurrence and during the continuation of an
Event of Default hereunder to sign the Company's name on verifications of
accounts, to send requests for verification of Receivables and Contract Rights
to the Company's customers and account debtors, to endorse the Company's name on
any checks, notes, acceptances, money orders, drafts and any other forms of
payment or security that may come into the Agent's possession, to sign the
Company's name on any invoice or bill of lading relating to any Receivables or
Contract Rights, on claims to enforce collection of any Receivable or Contract
Rights, on notices to and drafts against customers and account debtors, on
schedules and assignments of Receivables or Contract Rights, on notices of
assignment and on public records, and to do all things necessary to carry out
this Agreement and after an Event of Default has occurred hereunder and while
continuing, to notify the post office authorities to change the address for
delivery of the Company's mail to an address designated by the Agent and to
receive, open and dispose of all mail addressed to the Company. The Company
hereby ratifies and approves all acts of any such attorney and agrees that
neither the Agent nor any such attorney will be liable for any acts or omissions
nor for any error of judgment or mistake of fact or law other than their gross
negligence or willful misconduct. The foregoing power of attorney, being coupled
with an interest, is irrevocable until the Secured Obligations have been fully
paid and satisfied and the commitments of the Lenders to extend credit to or for
the account of the Company have terminated. The Agent may file one or more
financing statements disclosing its security interest in any or all of the
Collateral without the Company's signature appearing thereon. The Company also
hereby grants the Agent a power of attorney to execute any such
-20-
<PAGE>
financing statements, or amendments and supplements to financing statements, on
behalf of the Company without notice thereof to the Company, which power of
attorney is coupled with an interest and is irrevocable until the Secured
Obligations have been fully paid and satisfied and the commitments of the
Lenders to extend credit to or for the account of the Company have terminated.
Section 10. Defaults and Remedies.
(a) The occurrence of any event or the existence of any condition
which is specified as an "Event of Default" under the Credit Agreement shall
constitute an "Event of Default" hereunder.
(b) Upon the occurrence and during the continuation of any Event of
Default hereunder, the Agent shall have, in addition to all other rights
provided herein or by law, the rights and remedies of a secured party under the
Code (regardless of whether the Code is the law of the jurisdiction where the
rights or remedies are asserted and regardless of whether the Code applies to
the affected Collateral), and further the Agent may, without demand and without
advertisement, notice, hearing or process of law, all of which the Company
hereby waives, at any time or times, sell and deliver any or all Collateral held
by or for it at public or private sale, at any securities exchange or broker's
board or at any of the Agent's offices or elsewhere, for cash, upon credit or
otherwise, at such prices and upon such terms as the Agent deems advisable, in
its sole discretion. In the exercise of any such remedies, the Agent may sell
all the Collateral as a unit even though the sales price thereof may be in
excess of the amount remaining unpaid on the Secured Obligations. The Agent is
authorized at any sale or other disposition of the Pledged Securities, if it
deems it advisable so to do, to restrict the prospective bidders or 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 any
of the Pledged Securities. In addition to all other sums due the Agent or any
Lender hereunder, the Company shall pay the Agent and any Lender all costs and
expenses incurred by the Agent or such Lender, including attorneys' fees and
court costs, in obtaining, liquidating or enforcing payment of Collateral or the
Secured Obligations or in the prosecution or defense of any action or proceeding
by or against the Agent, such Lender or the Company concerning any matter
arising out of or connected with this Agreement or the Collateral or the Secured
Obligations, including, without limitation, any of the foregoing arising in,
arising under or related to a case under the United States Bankruptcy
-21-
<PAGE>
Code (or any successor statute). Any requirement of reasonable notice shall be
met if such notice is personally served on or mailed, postage prepaid, to the
Company in accordance with Section 14(b) hereof at least ten (10) days before
the time of sale or other event giving rise to the requirement of such notice;
provided however, no notification need be given to the Company if the Company
has signed, after an Event of Default hereunder has occurred, a statement
renouncing any right to notification of sale or other intended disposition. The
Agent shall not be obligated to make any sale or other disposition of the
Collateral regardless of notice having been given. The Agent or any Lender may
be the purchaser at any such sale. The Company hereby waives all of its rights
of redemption from any such sale. Subject to the provisions of applicable law,
the Agent may postpone or cause the postponement of the sale of all or any
portion of the Collateral by announcement at the time and place of such sale,
and such sale may, without further notice, be made at the time and place to
which the sale was postponed or the Agent may further postpone such sale by
announcement made at such time and place. In the event any of the Collateral
shall constitute restricted securities within the meaning of any applicable
securities laws, any disposition thereof in compliance with such laws shall not
render the disposition commercially unreasonable.
(c) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default hereunder, the Agent shall have
the right, in addition to all other rights provided herein or by law, to take
physical possession of any and all of the Collateral and anything found therein,
the right for that purpose to enter without legal process any premises where the
Collateral may be found (provided such entry be done lawfully), and the right to
maintain such possession on the Company's premises (the Company hereby agreeing
to lease such premises without cost or expense to the Agent or its designee if
the Agent so requests) or to remove the Collateral or any part thereof to such
other places as the Agent may desire. Upon the occurrence and during the
continuation of any Event of Default hereunder, the Agent shall have the right
to exercise any and all rights with respect to deposit accounts of the Company
maintained with the Agent or any Lender, including, without limitation, the
right to collect, withdraw and receive all amounts due or to become due or
payable under each such deposit account. Upon the occurrence and during the
continuation of any Event of Default hereunder, the Company shall, upon the
Agent's demand, assemble the Collateral and make it available to the Agent at a
place designated by the Agent. If the Agent exercises its right to take
possession of the Collateral, the Company shall also at its expense perform any
and all other steps requested
-22-
<PAGE>
by the Agent to preserve and protect the security interest hereby granted in the
Collateral, such as placing and maintaining signs indicating the security
interest of the Agent, appointing overseers for the Collateral and maintaining
Collateral records.
(d) Without in any way limiting the foregoing, the Company hereby grants
to the Agent and the Lenders a royalty-free irrevocable license and right to use
all of the Company's patents, patent applications, patent licenses, trademarks,
trademark registrations, trademark licenses, trade names, trade styles, and
similar intangibles in connection with any foreclosure or other realization by
the Agent or the Lenders on all or any part of the Collateral. The license and
right granted the Agent and the Lenders hereby shall be without any royalty or
fee or charge whatsoever.
(e) Without in any way limiting the foregoing, upon the occurrence of any
Event of Default hereunder, all rights of the Company to exercise the voting
and/or consensual powers which it is entitled to exercise pursuant to Section
8(a) hereof and/or to receive and retain the distributions which it is entitled
to receive and retain pursuant to Section 8(b) hereof, shall, at the option of
the Agent, cease and thereupon become vested in the Agent, which, in addition to
all other rights provided herein or by law, shall then be entitled solely and
exclusively to exercise all voting and other consensual powers pertaining to the
Pledged Securities and/or to receive and retain the distributions which the
Company would otherwise have been authorized to retain pursuant to Section 8(b)
hereof and shall then be entitled solely and exclusively to exercise any and all
rights of conversion, exchange or subscription or any other rights, privileges
or options pertaining to any shares of the Pledged Securities as if the Agent
were the absolute owner thereof including, without limitation, the rights to
exchange, at its discretion, any and all of the Pledged Securities upon the
merger, consolidation, reorganization, recapitalization or other readjustment of
the respective issuer thereof or upon the exercise by or on behalf of any such
issuer or the Agent of any right, privilege or option pertaining to any shares
of the Pledged Securities and, in connection therewith, to deposit and deliver
any and all of the Pledged Securities with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
the Agent may determine.
(f) Failure by the Agent to exercise any right, remedy or option under
this Agreement or any other agreement between the Company and the Agent or
provided by law, or delay by the Agent in exercising the same, shall not operate
as a waiver; and no waiver shall be effective
-23-
<PAGE>
unless it is in writing, signed by the party against whom such waiver is sought
to be enforced and then only to the extent specifically stated. Neither the
Agent, nor any Lender, nor any party acting as attorney for the Agent or any
Lender, shall be liable hereunder for any acts or omissions or for any error of
judgment or mistake of fact or law other than their gross negligence or willful
misconduct. The rights and remedies of the Agent and the Lenders under this
Agreement shall be cumulative and not exclusive of any other right or remedy
which the Agent or the Lenders may have. For purposes of this Agreement, a
Default or Event of Default shall be construed as continuing after its
occurrence until the same is waived in writing by the Lenders or the Required
Banks, as the case may be, in accordance with the Credit Agreement or, in the
case of a Default, the same is cured by the Company within any applicable cure
period.
Section 11. Application of Proceeds. The proceeds and avails of the
Collateral at any time received by the Agent after the occurrence and during the
continuation of any Event of Default hereunder shall, when received by the Agent
in cash or its equivalent, be applied by the Agent as provided in Section 3.8 of
the Credit Agreement.
The Company shall remain liable to the Agent and the Lenders for any
deficiency. Any surplus remaining after the full payment and satisfaction of the
foregoing shall be returned to the Company or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.
Section 12. Continuing Agreement. This Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until all
of the Secured Obligations, both for principal and interest, have been fully
paid and satisfied and the commitments of the Lenders to extend credit to or for
the account of the Company under the Credit Agreement have terminated. Upon such
termination of this Agreement, the Agent shall, upon the request and at the
expense of the Company, forthwith release its security interest hereunder.
Section 13. The Agent. In acting under or by virtue of this Agreement,
the Agent shall be entitled to all the rights, authority, privileges and
immunities provided in Section 10 of the Credit Agreement, all of which
provisions of said Section 10 are incorporated by reference herein with the same
force and effect as if set forth herein in their entirety. The Agent hereby
disclaims any representation or warranty to the Lenders concerning the
perfection of the security interest granted hereunder or in the value of any of
the Collateral.
Section 14. Miscellaneous.
-24-
<PAGE>
(a) This Agreement cannot be changed or terminated orally. This Agreement
shall create a continuing security interest in the Collateral and shall be
binding upon the Company, its successors and assigns and shall inure, together
with the rights and remedies of the Agent and the Lenders hereunder, to the
benefit of the Agent, the Lenders and their successors and assigns; provided,
however, that the Company may not assign its rights or delegate its duties
hereunder without the Agent's prior written consent. Without limiting the
generality of the foregoing, and subject to the provisions of Section 12.14 of
the Credit Agreement, any Lender may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any other person or entity,
and such other person or entity shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise, subject,
however, to the provisions of the Credit Agreement. The Company hereby releases
the Agent from any liability for any act or omission relating to the Collateral
or this Agreement, except for the Agent's gross negligence or willful
misconduct.
(b) Except as otherwise specified herein, all notices hereunder shall
be in writing (including, without limitation, notice by telecopy) and shall be
given to the relevant party, and shall be deemed to have been made when given to
the relevant party, in accordance with Section 12.9 of the Credit Agreement.
(c) No Lender shall have the right to institute any suit, action or
proceeding in equity or at law for the foreclosure against any Collateral
subject to this Agreement or for the execution of any trust or power hereof or
for the appointment of a receiver, or for the enforcement of any other remedy
under or upon this Agreement; it being understood and intended that no one or
more of the Lenders shall have any right in any manner whatsoever to affect,
disturb or prejudice the lien and security interest of this Agreement by its or
their action or to enforce any right hereunder, and that all proceedings at law
or in equity shall be instituted, had and maintained by the Agent in the manner
herein provided for the ratable benefit of the Lenders.
(d) In the event that any provision hereof shall be deemed to be invalid
by reason of the operation of any law or by reason of the interpretation placed
thereon by any court, this Agreement shall be construed as not containing such
provision, but only as to such jurisdictions where such law or interpretation is
operative, and the invalidity of such provision shall not affect the validity of
any remaining provisions hereof, and any and all other provisions hereof which
are otherwise lawful and valid shall remain in full force and effect.
-25-
<PAGE>
(e) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by, and construed in accordance with, the laws of
the State of Illinois. All terms which are used in this Agreement which are
defined in the Code shall have the same meanings herein as said terms do in the
Code unless this Agreement shall otherwise specifically provide. The headings in
this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning of any provision hereof.
(f) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and delivered in Denver, Colorado as of the date first above written.
NU-WEST INDUSTRIES, INC.
B
y
It
s
Accepted and agreed to in Chicago, Illinois as of the date first above
written.
HARRIS TRUST AND SAVINGS BANK,
as Agent as aforesaid for the Lenders
B
y
Its Vice President
-26-
<PAGE>
SCHEDULE A
LOCATIONS
Item 1. Permitted Collateral Locations (including Company's chief financial
office and principal place of business):
<TABLE>
<CAPTION>
ADDRESS OWNER OF PREMISES
<S> <C>
Suite 1320
8400 East Prentice Avenue
Englewood, Colorado 80111
3010 Conda Road
Soda Springs, Idaho 83276
</TABLE>
Item 2. Additional Places of Business:
<TABLE>
<S> <C> <C>
1. P.O. Box 310
One Highway 10, Seltice Way CENEX/Land O' Lakes
Post Falls, Idaho 83854
2. R.R. #3 Box 807
Pullman Highway
Pullman, Washington 99163 The McGregor Co.
3. 909 West 8th Street
Burley, Idaho 83318 Pacifex Fertilizer
4. 1701 NW Main Street
Blackfoot, Idaho Pacifex Fertilizer
5. 89 East Main Street
Aebel, California Crop Production Services
6. Wooley Valley Mine
Caribou County, Idaho Rhone-Poulenc Basic Chemicals Co.
</TABLE>
-27-
<PAGE>
[THIS PAGE LEFT BLANK INTENTIONALLY]
-28-
<PAGE>
SCHEDULE B
REAL ESTATE LEGAL DESCRIPTIONS
SEE LEGAL DESCRIPTIONS IN THE MORTGAGES
-29-
<PAGE>
SCHEDULE C
THE PLEDGED SECURITIES
<TABLE>
<CAPTION>
Issuer Type of Stock Certificate No. No. of Shares
<S> <C> <C> <C>
1. Nu-West Minerals, Inc. Common 1 100
2. Nu-West Mining, Inc. Common 1, 5 and 6 16,103
</TABLE>
<PAGE>
SCHEDULE D
SECURITY AGREEMENTS
1. Senior Subordinated Promissory Note dated November 2, 1993, made by NuTec
to the order of the Company in the amount of $3,393,500.
2. Leasehold Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing dated as of November 2, 1993, by NuTec, as mortgagor, in favor of
the Company, as mortgagee, relating to premises in Custer County, South
Dakota.
3. Leasehold Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing dated as of November 2, 1993 by NuTec, as mortgagor, to the Company,
as mortgagee, relating to premises in Caribou County, Idaho.
4. Subordination Agreement dated as of November 1, 1993 by NuTec, relating to
that certain Ground Lease dated January 1, 1991 between the Company, as
lessor and NuTec as lessee.
5. General Security Agreement dated as of November 2, 1993 by NuTec, as
pledgor, in favor of the Company, as pledgee.
6. Collateral Assignment and Consent dated as of November 2, 1993 by and
among the Company, NuTec and Maillinckrodt Specialty Chemicals Company
relating to that certain License Agreement dated September 29, 1990 from
IMCERA Group, Inc. to Mineral Technology Corporation.
7. UCC-1 Financing Statement - Idaho Secretary of State, NuTec, as debtor,
the company, as secured party and Banque Indosuez, New York Branch
("Indosuez"), as collateral agent and assignee of secured party.
8. UCC-1 Financing Statement - Caribou County, Idaho, NuTec, as debtor,
the Company, as secured party and Indosuez, as collateral agent and
assignee of secured party.
9. UCC-1 Financing Statement - Custer County Recorder, South Dakota,
NuTec, as debtor, the Company, as secured party and Indosuez, as collateral
agent and assignee of secured party.
10. UCC-1 Financing Statement - Pennington County Recorder, South Dakota,
NuTec, as debtor, the Company, as secured party and Indosuez, as collateral
agent and assignee of secured party.
<PAGE>
11. UCC-1 Financing Statement - South Dakota Secretary of State, NuTec, as
debtor, the Company, as secured party and Indosuez, as collateral agent and
assignee of secured party.
12. UCC-1 Financing Statement - Colorado Secretary of State, NuTec, as
debtor, the Company, as secured party and Indosuez, as collateral agent and
assignee of secured party.
<PAGE>
EXHIBIT 11
NU-WEST INDUSTRIES, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
For the Years Ended June 30,
(in thousands, except share amounts)
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) $ 9,701 $ 988 $ (4,630)
Preferred dividends (3,194) (3,194) (3,190)
---------- ---------- ----------
Net income (loss) applicable
to common shareholders 6,507 (2,206) (7,820)
Weighted average shares outstanding 8,086,363 5,758,827 2,507,167
Net effect of dilutive stock options and
warrants based on the treasury stock
method using average market price 931,653 - -
---------- ---------- ----------
9,018,016 5,758,827 2,507,167
========== ========== ==========
Primary earnings per share:
Net income (loss) before
extraordinary item $ .72 $ (.09) $ (3.12)
Extraordinary item - (.29) -
---------- ---------- ----------
Net income (loss) $ .72 $ (.38) $ (3.12)
========== ========== ==========
FULLY DILUTED EARNINGS PER SHARE
Net income (loss) applicable to
common shareholders 6,507 (2,206) (7,820)
Weighted average shares outstanding 8,086,363 5,758,827 2,507,167
Net effect of dilutive stock options and
warrants based on the treasury stock
method using the higher of the
quarter-end market price or
average market price 931,653 - -
---------- ---------- ----------
Net income (loss) 9,018,016 5,758,827 2,507,167
========== ========== ==========
Fully diluted earnings per share:
Net income (loss) before extraordinary item $ .72 $ (.09) $ (3.12)
Extraordinary item - (.29) -
---------- ---------- ----------
Net income (loss) $ .72 $ (.38) $ (3.12)
========== ========== ==========
</TABLE>
<PAGE>
EXHIBIT 22
----------
SUBSIDIARIES OF THE REGISTRANT
Subsidiaries of Nu-West and the jurisdiction in which each company was
incorporated are listed below. All of the voting securities of each subsidiary
are owned by the Company.
Jurisdiction of
Subsidiary Incorporation
---------- ---------------
Nu-West Minerals, Inc. Delaware
Nu-West Mining, Inc. Delaware
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
June 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 140
<SECURITIES> 0
<RECEIVABLES> 11,471
<ALLOWANCES> 264
<INVENTORY> 26,814
<CURRENT-ASSETS> 39,905
<PP&E> 71,249
<DEPRECIATION> 33,271
<TOTAL-ASSETS> 91,629
<CURRENT-LIABILITIES> 15,072
<BONDS> 58,692
<COMMON> 81
0
29,034
<OTHER-SE> (12,107)
<TOTAL-LIABILITY-AND-EQUITY> 91,629
<SALES> 103,327
<TOTAL-REVENUES> 103,327
<CGS> 79,302
<TOTAL-COSTS> 79,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,555
<INCOME-PRETAX> 9,701
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,701
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,701
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
