<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File #1-10459
GENEVA STEEL COMPANY
(Exact name of registrant as specified in its charter)
UTAH 93-0942346
(State of Incorporation) (I.R.S. Employer Identification No.)
10 South Geneva Road
Vineyard, Utah
(Address of principal executive offices)
84058
(Zip Code)
Registrant's telephone number, including area code: (801) 227-9000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each class of the issuer's common
stock, as of the latest practicable date.
13,454,958 and 19,151,348 shares of Class A and Class B common
stock, respectively, outstanding as of July 31, 1996.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
June 30, September 30,
1996 1995
--------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ 12,808
Accounts receivable, net 66,662 35,178
Inventories 89,878 89,909
Deferred income taxes 6,804 6,885
Prepaid expenses and other 14,265 2,661
--------- ---------
Total current assets 177,609 147,441
--------- ---------
Property, plant and equipment:
Land 1,990 1,941
Buildings 16,109 16,092
Machinery and equipment 597,538 576,066
Mineral property and development
costs 8,425 8,425
--------- ---------
624,062 602,524
Less accumulated depreciation (161,857) (132,134)
--------- ---------
Net property, plant and equipment 462,205 470,390
--------- ---------
Other assets 9,899 10,966
--------- ---------
$ 649,713 $ 628,797
========= =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these
condensed consolidated balance sheets.
Page 2 of 18
<PAGE> 3
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, September 30,
1996 1995
--------- -------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 63,067 $ 67,939
Accrued liabilities 22,790 19,045
Accrued payroll and related taxes 12,283 10,667
Production prepayments 15,000 10,000
Accrued interest payable 13,036 4,610
Accrued pension and profit
sharing costs 2,198 2,135
--------- ---------
Total current liabilities 128,374 114,396
--------- ---------
Long-term debt 367,555 342,033
--------- ---------
Deferred income tax liabilities 6,805 13,263
--------- ---------
Redeemable preferred stock 55,257 51,031
--------- ---------
Stockholders' equity:
Preferred stock -- --
Common stock:
Class A 87,979 87,926
Class B 10,110 10,163
Warrants to purchase Class A
common stock 5,360 5,360
Retained earnings 4,966 22,754
Class A common stock held in
treasury, at cost (16,693) (18,129)
--------- ---------
Total stockholders' equity 91,722 108,074
--------- ---------
$ 649,713 $ 628,797
========= =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these
condensed consolidated balance sheets.
Page 3 of 18
<PAGE> 4
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net sales $ 183,105 $ 175,196
Cost of sales 173,685 152,137
--------- ---------
Gross margin 9,420 23,059
Selling, general and administrative
expenses 6,871 6,132
--------- ---------
Income from operations 2,549 16,927
--------- ---------
Other income (expense):
Interest and other income 253 114
Interest expense (9,305) (7,296)
Other expense (638) (660)
--------- ---------
(9,690) (7,842)
--------- ---------
Income (loss) before provision (benefit)
for income taxes (7,141) 9,085
Provision (benefit) for income taxes (2,781) 3,389
--------- ---------
Net income (loss) (4,360) 5,696
Less redeemable preferred stock dividends and
accretion for original issue discount 2,295 2,029
--------- ---------
Net income (loss) applicable to common shares $ (6,655) $ 3,667
========= =========
Net income (loss) per common share $ (.43) $ .24
========= =========
Weighted average common shares outstanding 15,319 15,232
========= =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of
these condensed consolidated statements.
Page 4 of 18
<PAGE> 5
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net sales $ 509,326 $ 496,832
Cost of sales 479,899 442,018
--------- ---------
Gross margin 29,427 54,814
Selling, general and administrative
expenses 18,770 18,214
--------- ---------
Income from operations 10,657 36,600
--------- ---------
Other income (expense):
Interest and other income 525 303
Interest expense (26,188) (24,012)
Other expense (1,749) (1,667)
--------- ---------
(27,412) (25,376)
--------- ---------
Income (loss) before provision (benefit)
for income taxes (16,755) 11,224
Provision (benefit) for income taxes (6,378) 3,389
--------- ---------
Net income (loss) (10,377) 7,835
Less redeemable preferred stock dividends and
accretion for original issue discount 6,694 5,902
--------- ---------
Net income (loss) applicable to common shares $ (17,071) $ 1,933
========= =========
Net income (loss) per common share $ (1.12) $ .13
========= =========
Weighted average common shares outstanding 15,284 15,437
========= =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of
these condensed consolidated statements.
Page 5 of 18
<PAGE> 6
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(Dollars in thousands)
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(10,377) $ 7,835
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation 31,643 27,767
Amortization 1,864 1,578
Deferred income taxes (6,378) 3,388
(Gain) loss on sale of equipment (45) 5
(Increase) decrease in current
assets--
Accounts receivable, net (31,484) 13,030
Inventories 31 443
Prepaid expenses and other (11,604) 1,556
Increase (decrease) in current
liabilities--
Accounts payable (4,872) (1,678)
Accrued liabilities (885) 5,514
Accrued payroll and related taxes 2,336 2,705
Production prepayments 5,000 --
Accrued interest payable 8,426 8,170
Accrued pension and profit
sharing costs 63 821
-------- --------
Net cash provided by (used for)
operating activities (16,282) 71,134
-------- --------
Cash flows from investing activities:
Purchases of property, plant
and equipment (23,626) (52,122)
Proceeds from sale of property, plant
and equipment 213 15,966
Change in other assets 889 (995)
-------- --------
Net cash used for investing activities $(22,524) $(37,151)
-------- --------
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of
these condensed consolidated statements.
Page 6 of 18
<PAGE> 7
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of long-term debt $ 38,550 $ 16,724
Payments on long-term debt (13,028) (40,980)
Payments for deferred loan costs and
other assets (1,686) (1,600)
Change in bank overdraft 2,162 (1,341)
-------- --------
Net cash provided by (used for)
financing activities 25,998 (27,197)
-------- --------
Net increase (decrease) in cash and cash
equivalents (12,808) 6,786
Cash and cash equivalents at beginning
of period 12,808 --
Cash and cash equivalents at end
of period $ -- $ 6,786
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period
for:
Interest (net of amount capitalized) $ 24,188 $ 17,521
</TABLE>
Supplemental schedule of noncash financing activities:
For the nine months ended June 30, 1996 and 1995, the Company increased the
redeemable preferred stock liquidation preference by $3,690 and $5,377
respectively, in lieu of paying a cash dividend. In addition, for the same
periods, redeemable preferred stock was increased by $536 and $525,
respectively, for the accretion required over time to amortize the original
issue discount on the redeemable preferred stock incurred at the time of
issuance. At June 30, 1996, the Company had accrued dividends payable of
$2,468.
The accompanying notes to condensed consolidated financial statements are
an integral part of these condensed consolidated statements.
Page 7 of 18
<PAGE> 8
GENEVA STEEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
- -----------------------------------------------------------------------
(1) INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements of Geneva
Steel Company and Geneva Steel Funding Corporation, a wholly-owned subsidiary of
Geneva Steel Company (collectively, the "Company"), have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. The accompanying unaudited
condensed consolidated financial statements reflect all adjustments (consisting
only of normal recurring adjustments) which, in the opinion of management, are
necessary to present fairly the financial position and results of operations of
the Company.
It is suggested that these condensed consolidated financial statements be
read in conjunction with the financial statements and notes thereto included in
the Company's latest Annual Report on Form 10-K.
(2) INVENTORIES
Inventories were comprised of the following components:
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
-------- -------------
<S> <C> <C>
Raw materials $24,056 $27,784
Semi-finished and finished goods 58,405 54,191
Operating materials 7,417 7,934
------- -------
$89,878 $89,909
======= =======
</TABLE>
(3) NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is calculated based upon the weighted
average number of common and common equivalent shares outstanding during the
periods. Common equivalent shares consist of warrants and options to purchase
Class A common stock which have a dilutive effect when applying the treasury
stock method. Class B common stock is included in the weighted average number of
common shares outstanding at one share for every ten shares outstanding because
the Class B common stock is convertible to Class A common stock at this same
rate.
The net income (loss) for the three and nine-month periods ended June 30,
1996 and 1995 was adjusted for redeemable preferred stock dividends and the
accretion required over time to amortize the original issue discount on the
redeemable preferred stock incurred at the time of issuance.
Page 8 of 18
<PAGE> 9
(4) AMENDED AND RESTATED REVOLVING CREDIT FACILITY
In May 1996, the Company amended and restated its revolving credit
facility (the "Revolving Credit Facility") with a syndicate of banks led by
Citicorp USA, Inc., as agent, which is used primarily for the working capital
and capital expenditure needs of the Company. The Revolving Credit Facility, in
the amount of up to $125 million, is secured by the Company's inventories,
accounts receivable, general intangibles, and proceeds thereof, and expires on
May 14, 2000. Interest is payable monthly at the defined base rate (8.25% at
June 30, 1996) plus 1.50% or the defined LIBOR rate (5.44% at June 30, 1996)
plus 2.75%. The Company pays a monthly commitment fee based on an annual rate of
.50% of the average unused portion of the borrowing limit under the Revolving
Credit Facility. The amount available to the Company under the Revolving Credit
Facility currently ranges between 50 and 60 percent, in the aggregate, of
eligible inventories plus 85 percent of eligible accounts receivable. Borrowing
availability under the Revolving Credit Facility is also subject to other
financial tests and covenants. The Company's receivables securitization facility
was terminated in connection with the amendment. Certain deferred fees
associated with establishing the Company's receivables securitization facility
were expensed during the third fiscal quarter.
(5) CERTAIN RECLASSIFICATIONS
Certain reclassifications have been made in the prior period financial
statements to conform to the current period presentation.
Page 9 of 18
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain cost
and expense items to net sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -----------------
1996 1995 1996 1995
------- ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 94.9 86.8 94.2 89.0
----- ----- ----- -----
Gross margin 5.1 13.2 5.8 11.0
Selling, general and admini-
strative expenses 3.7 3.5 3.7 3.6
----- ----- ----- -----
Income from operations 1.4 9.7 2.1 7.4
----- ----- ----- -----
Other income (expense):
Interest and other income 0.1 0.1 0.1 0.1
Interest expense (5.1) (4.2) (5.2) (4.9)
Other expense (0.3) (0.4) (0.3) (0.3)
----- ----- ----- -----
(5.3) (4.5) (5.4) (5.1)
----- ----- ----- -----
Income (loss) before provision
(benefit) for income taxes (3.9) 5.2 (3.3) 2.3
Provision (benefit) for income taxes (1.5) 1.9 (1.3) 0.7
----- ----- ----- -----
Net income (loss) (2.4)% 3.3% (2.0)% 1.6%
===== ===== ===== =====
</TABLE>
The following table sets forth the sales product mix as a percentage of
net sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- --------------------
1996 1995 1996 1995
------- ------ ------ ------
<S> <C> <C> <C> <C>
Sheet 28.3% 36.9% 30.8% 44.6%
Plate 48.5 35.1 43.0 34.5
Pipe 8.5 7.0 6.4 6.0
Slab 12.0 18.7 17.1 12.1
Non-Steel 2.7 2.3 2.7 2.8
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
Page 10 of 18
<PAGE> 11
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1995
Net sales increased 4.5% due to increased shipments of approximately 48,200
tons and a shift in product mix to higher-priced plate and pipe products from
lower-priced sheet and slab products, offset in large part by decreased overall
average selling prices for the three months ended June 30, 1996 as compared to
the same period in the previous fiscal year. The weighted average sales price
(net of transportation costs) per ton of sheet, plate, pipe and slab products
decreased by 12.6%, 4.9%, 6.3% and 15.7%, respectively, in the three months
ended June 30, 1996 compared to the same period in the previous fiscal year. The
decrease in prices resulted from an increase in domestic hot-rolled capacity,
unfairly traded imports and other market factors. Shipped tonnage of plate and
pipe increased approximately 79,900 tons or 52.0% and 9,600 tons or 36.5%,
respectively, while shipped tonnage of sheet and slabs decreased approximately
16,700 tons or 8.5% and 24,600 tons or 20.6%, respectively, between the two
periods. Consistent with the Company's strategic objectives, plate shipments
have increased as various upgrades to plate processing and finishing equipment
have been integrated into the production process. The Company intends to
continue shifting its product mix toward higher-margin products, particularly
wide, light-gauge plate. The Company ships slabs to maximize production from the
continuous caster while efforts to increase rolling mill throughput continue.
Despite weakened slab prices, the Company expects that slab sales will continue.
The Company expects, however, that slab shipments will gradually decrease as
rolling mill throughput improves.
During the second and third fiscal quarter, the Company announced several
price increases. During the third fiscal quarter, the Company began to realize
and currently is realizing the benefit of those previously announced price
increases, although the pace of order entry has declined. The Company intends to
react to price increases or decreases in the market as justified by competitive
conditions. Domestic competition remains intense and imported steel continues to
adversely affect the market. The Company sells substantially all of its products
in the spot market at prevailing market prices. The Company believes its
percentage of such sales is significantly higher than that of most of the other
domestic integrated producers. Consequently, the Company may be affected by
price increases and decreases more quickly than many of its competitors.
Cost of sales includes raw materials, labor costs, energy costs,
depreciation and other operating and support costs associated with the
production process. The Company's cost of sales, as a percentage of net sales,
increased to 94.9% for the three months ended June 30, 1996 from 86.8% for the
same period in the previous fiscal year primarily as a result of lower average
selling prices. The overall average cost of sales per ton shipped increased
approximately $12 per ton between the two periods primarily as a result of a
shift in product mix to higher-cost plate and pipe products from lower-cost
sheet and slab products, offset in part by lower operating costs. Operating
costs decreased as a result of improved production yields and throughput rates,
offset in part by higher depreciation expense, the adverse impact of the
plant-wide power outage discussed below, increased raw materials costs, higher
wages and benefits, and other increased costs. The Company expects that
production yields and throughput will continue to improve in future periods as
completed capital projects continue to be integrated into the production
process.
A plant-wide power outage caused by unusual weather conditions in late
January 1996 had a significant effect on operating results during the second and
third fiscal quarters. The Company maintains insurance for both property damage
and
Page 11 of 18
<PAGE> 12
business interruption, subject to a deductible of $1 million per occurrence. The
Company is continuing to assess the full financial impact of the outage and
recorded a portion of the expected loss recovery during both quarters.
The Company's new plasma-fired cupola ironmaking facility became available
for operation during the three months ended June 30, 1996. The cupola will be
used to replace or supplement blast furnace iron production, particularly when
scrap prices are favorable or during relines and other periods requiring
additional ironmaking capacity. The facility lease cost of the cupola adds
approximately $2 per ton to finished product cost, effective July 1, 1996. The
full impact of the cupola facility on finished product cost will be dependent on
raw material costs and consumption rates, particularly with respect to scrap and
coke, and the level of use of the cupola.
Depreciation costs included in cost of sales increased approximately $0.7
million for the three months ended June 30, 1996 compared with the same period
in the previous fiscal year. This increase was due to increases in the asset
base resulting from capital expenditures. Depreciation expense will further
increase due to implementation of the Company's capital projects.
Selling, general and administrative expenses for the three months ended
June 30, 1996 increased approximately $0.7 million as compared to the same
period in the previous fiscal year. These higher expenses resulted primarily
from increased outside services that are not expected to reoccur.
Interest expense increased approximately $2.0 million during the three
months ended June 30, 1996 as compared to the same period in the previous fiscal
year as a result of significantly lower capitalized interest and higher levels
of borrowing. The higher levels of borrowing resulted from the termination of
the Company's receivables securitization facility discussed below.
In May 1996, the Company terminated its receivables securitization facility
in connection with an amendment to and restatement of the Company's revolving
credit facility. Deferred fees of approximately $550,000 associated with
establishing the receivables securitization facility were expensed to other
expense during the three months ended June 30, 1996.
For the three months ended June 30, 1996, the Company recognized a benefit
for income taxes by carrying back the loss to the prior year's income. As of
June 30, 1996, the Company is unable to carryback future losses.
In the month of July 1996, the Company returned to profitability. The
improved operating results were due to increased price realization as compared
to the immediately preceding quarter, improved operations, and a product mix
shift to higher margin products such as wide, light-gauge plate.
NINE MONTHS ENDED JUNE 30, 1996 COMPARED WITH NINE MONTHS ENDED JUNE 30, 1995
Net sales increased 2.5% due to increased shipments of approximately
152,900 tons, offset in part by decreased overall average selling prices for the
nine months ended June 30, 1996 as compared to the same period in the previous
fiscal year. The weighted average sales price (net of transportation costs) per
ton of sheet, plate and slab products decreased by 10.5%, 2.8% and 13.8%,
respectively, while the weighted average sales price of pipe products increased
by 0.4% in the nine months ended June 30, 1996 compared to the same period in
the previous fiscal
Page 12 of 18
<PAGE> 13
year. The overall average selling price realization per ton also decreased
between the periods as a result of a shift in product mix during the first six
months of the fiscal year to lower-priced slab products. This decrease was
offset, in part, by the Company's increased sales of higher-priced plate and
pipe products. Shipped tonnage of plate, pipe and slabs increased approximately
137,600 tons or 31.4%, 6,600 tons or 9.3% and 150,000 tons or 68.0%,
respectively, while shipped tonnage of sheet decreased approximately 141,300
tons or 20.8% between the two periods.
The Company's cost of sales, as a percentage of net sales, increased to
94.2% for the nine months ended June 30, 1996 from 89.0% for the same period in
the previous fiscal year as a result of lower average selling prices. The
overall average cost of sales per ton shipped decreased approximately $6 per ton
between the two periods. The decreased cost per ton resulted from lower
operating costs and increased sales of lower-cost slab products offset, in part,
by a shift in product mix to higher-cost plate products. Operating costs
decreased as a result of improved production yields and throughput rates offset
in part by higher depreciation expense, the adverse impact of the plant-wide
power outage, increased raw materials costs, higher wages and benefits and other
increased costs.
Depreciation costs included in cost of sales increased approximately $4.3
million for the nine months ended June 30, 1996 compared with the same period in
the previous fiscal year. This increase was due to increases in the asset base
resulting from capital expenditures.
Selling, general and administrative expenses for the nine months ended June
30, 1996 increased approximately $0.6 million as compared to the same period in
the previous fiscal year. The higher expenses resulted primarily from increased
outside services that are not expected to reoccur.
Interest expense increased approximately $2.2 million for the nine months
ended June 30, 1996 as compared to the same period in the previous fiscal year
reflecting lower levels of capitalized interest and higher levels of borrowing.
For the nine months ended June 30, 1996, the Company recognized a benefit
for income taxes by carrying back the loss to the prior year's income. The
Company recognized a reduced provision for income taxes of approximately 30.2%
for the nine months ended June 30, 1995 as a result of utilizing net operating
loss carryforwards for financial reporting purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise from capital expenditures and
working capital requirements, including interest payments. The Company has met
these requirements principally from the incurrence of additional long-term
indebtedness, including borrowings under the Company's various credit
facilities, the sale of preferred stock, equipment lease financing and cash
provided by operations.
On May 14, 1996, the Company amended and restated its revolving credit
facility (the "Revolving Credit Facility") with a syndicate of banks led by
Citicorp USA, Inc., as agent, which is used primarily for the working capital
and capital expenditure needs of the Company. The Revolving Credit Facility, in
the amount of up to $125 million, is secured by the Company's inventories,
accounts receivable, general intangibles, and proceeds thereof, and expires on
May 14, 2000. Interest is payable monthly at the defined base rate (8.25% at
June 30,
Page 13 of 18
<PAGE> 14
1996) plus 1.50% or the defined LIBOR rate (5.44% at June 30, 1996) plus 2.75%.
The Company pays a monthly commitment fee based on an annual rate of .50% of the
average unused portion of the borrowing limit under the Revolving Credit
Facility. The amount available to the Company under the Revolving Credit
Facility ranges between 50 to 60 percent, in the aggregate, of eligible
inventories plus 85 percent of eligible accounts receivable. Borrowing
availability under the Revolving Credit Facility is also subject to other
financial tests and covenants. The Company's receivables securitization facility
was terminated in connection with the amendment. As of June 30, 1996, the
Company's eligible inventories and accounts receivable supported access to $98.2
million under the Revolving Credit Facility. As of June 30, 1996, the Company
had $42.6 million in borrowings and $8.4 million in letters of credit
outstanding under the Revolving Credit Facility. As a result of the amendment to
the Revolving Credit Facility, the Company significantly increased its borrowing
availability.
In March 1993, the Company issued 400,000 shares of 14% cumulative
redeemable exchangeable preferred stock, no par value (the "Redeemable Preferred
Stock"). Dividends accrue at a rate equal to 14% per annum of the liquidation
preference ($151 per share as of June 30, 1996) and are payable quarterly in
cash from funds legally available therefor. Prior to April 1996, the Company
elected to add the dividends to the liquidation preference. The Redeemable
Preferred Stock is exchangeable, at the Company's option, into subordinated
debentures of the Company due 2003 (the "Exchange Debentures"). Restricted
payment limitations under the Company's 11 1/8% Senior Notes precluded payment
of the preferred stock dividend due on June 15, 1996. Based on the restricted
payment limitations and other covenants, the Company anticipates that it will be
precluded from paying the preferred stock dividend due on September 15, 1996.
Unpaid dividends will accumulate until paid.
The terms of the Revolving Credit Facility and the Company's 11 1/8% Senior
Notes issued in March 1993 and 9 1/2% Senior Notes issued in February 1994
(collectively, the "Senior Notes") include cross default and other customary
provisions. Financial covenants contained in the Revolving Credit Facility
and/or the Senior Notes also include, among others, a limitation on dividends
and distributions on capital stock of the Company, a tangible net worth
requirement, a cash interest coverage requirement, a cumulative capital
expenditure limitation, a limitation on the incurrence of additional
indebtedness unless certain financial tests are satisfied, a limitation on
mergers, consolidations and dispositions of assets and limitations on liens. In
the event of a change in control, the Company must offer to purchase all Senior
Notes then outstanding at a premium. Prior to the most recent amendment to and
restatement of the Revolving Credit Facility, the Company entered into various
amendments modifying or waiving the financial covenants and tests contained in
the revolving credit facility.
Besides these and other financing activities, the Company's major source of
liquidity has been cash provided by operating activities. Net cash used for
operating activities was $16.3 million for the nine months ended June 30, 1996
compared with net cash provided by operating activities of $71.1 million for the
nine months ended June 30, 1995. The uses of cash for operating activities
during the nine months ended June 30, 1996, resulted primarily from a $11.6
million increase in prepaid expenses, a $31.7 million reduction in fundings
under the Company's receivables securitization facility when the facility was
terminated in May 1996, a decrease in accounts payable of $4.9 million, a
decrease in the deferred tax liability of $6.4 million and a net loss of $10.4
million. These uses of cash flow were offset by depreciation and amortization of
$33.5 million, an increase in production prepayments of $5.0 million, an
increase in accrued
Page 14 of 18
<PAGE> 15
liabilities of $1.5 million and an increase in accrued interest of $8.4 million.
The Company expects to receive a $5 million partial payment related to the
power-outage loss, within 60 days. The Company previously entered into an
arrangement with one of its major customers whereby the customer makes a
production prepayment of up to $10 million upon entry of new orders. During the
three months ended June 30, 1996, the Company completed an amendment increasing
the maximum amount of production prepayments to $15 million.
Capital expenditures were approximately $23.6 million for the nine months
ended June 30, 1996. Capital expenditures for fiscal year 1996 have to date been
lower than expected due in part to the longer-than-anticipated performance of
blast furnace number one. The Company expects to begin a reline of blast furnace
number one during the first fiscal quarter of 1997. Capital projects for fiscal
year 1996 consist of various projects designed to reduce costs and increase
product quality and throughput. Substantially all of the equipment for the
rolling mill finishing stand improvements has been completed. The Company has,
however, elected to defer installation of that equipment until at least the 1997
fiscal year. The Company anticipates that it may incur significant start-up and
transition costs when the equipment is installed and implemented. The Company
also continues to evaluate its slab heating requirements and may elect to
install additional heating capacity. Depending on market, operational, liquidity
and other factors, the Company may elect to adjust the design, timing and
budgeted expenditures of its capital plan. The Revolving Credit Facility
contains certain limitations on capital expenditures that are dependent, in
part, on the Company's future operating results.
The Company is required to make substantial interest and dividend payments
on the Senior Notes, its Redeemable Preferred Stock or in the alternative
exchange debentures, and outstanding balances under the Revolving Credit
Facility. Currently, the Company's annual cash interest expense is approximately
$37.0 million and its annual preferred stock dividends are approximately $8.4
million.
FACTORS AFFECTING FUTURE RESULTS
The Company's future operations will be impacted by, among other factors,
pricing, product mix, throughput levels and production efficiencies. The Company
has efforts underway to increase throughput and production efficiencies and to
continue shifting its product mix to higher-margin products. There can be no
assurance that the Company's efforts will be successful or that sufficient
demand will exist to support the Company's additional throughput capacity.
Pricing in future periods is a key variable that remains subject to uncertainty.
Future pricing will be affected by several factors including the level of
imports, future capacity additions, and other market factors.
The short-term and long-term liquidity of the Company is also dependent
upon several factors, including availability of financing, foreign currency
fluctuations, competitive and market forces, capital expenditures and general
economic conditions. Moreover, the United States steel market is subject to
cyclical fluctuations that may affect the amount of cash internally generated
by the Company and the ability of the Company to obtain external financing.
Although the Company believes that the anticipated cash from future operations
and borrowings under the Revolving Credit Facility will provide sufficient
liquidity for the Company to meet its debt service requirements and to fund
ongoing operations, including required capital expenditures, there can be no
assurance that these or other possible sources will be adequate. Moreover,
because of the Company's current leverage situation, its financial flexibility
is limited.
Page 15 of 18
<PAGE> 16
Inflation can be expected to have an effect on many of the Company's
operating costs and expenses. Due to worldwide competition in the steel
industry, the Company may not be able to pass through such increased costs to
its customers.
This quarterly report may contain certain forward-looking statements with
respect to the Company that are subject to risks and uncertainties that include,
but are not limited to, those identified in this report, described from time to
time in the Company's other Securities and Exchange Commission filings or
discussed in the Company's press releases. Actual results may vary materially
from expectations.
Page 16 of 18
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit Filed
Number Exhibit Herewith
------- ------- --------
<S> <C> <C>
10.1 Second Amended and Restated Revolving X
Credit Agreement among the Registrant,
the Lender Parties named therein,
Citicorp USA, Inc. and Heller Financial
Inc., dated May 14, 1996
10.2 Second Amended and Restated Security X
Agreement dated May 14, 1996
10.3 Third Amendment to the Agreement for the
Sale and Purchase of Coke between the
registrant and Mitsubishi International
Corporation, dated May 22, 1996 X
10.4 Amended and Restated Sales Representation
Agreement between Mannesmann Pipe & Steel
Corporation and the Registrant dated
April 1, 1996. X
27 Financial data schedule X
</TABLE>
(b) Reports on Form 8-K.
The Company has not filed any reports on Form 8-K during the three months
ended June 30, 1996.
Page 17 of 18
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENEVA STEEL COMPANY
By: /s/ Dennis L. Wanlass
-----------------------------------------
Vice President, Treasurer and
Chief Financial Officer
Dated: August 14, 1996
Page 18 of 18
<PAGE> 1
This SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as
of May 14, 1996, among GENEVA STEEL COMPANY, a Utah corporation (the
"Borrower"), the financial institutions listed on the signature pages hereof
(each individually a "Lender" and collectively the "Lenders"), the issuers party
hereto (the "Issuers"), and CITICORP USA, INC., a Delaware corporation ("CUSA"),
as agent hereunder for the Lenders and the Issuers (in such capacity, the
"Agent"), and HELLER FINANCIAL, INC., as co-agent (the "Co- Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, certain lenders identified therein, Citibank,
N.A., as issuer thereunder, and CUSA, as agent thereunder, are party to a
certain Amended and Restated Revolving Credit Agreement, dated as of November 4,
1994 (as amended prior to the date hereof, the "Existing Credit Agreement"); and
WHEREAS, the Borrower has requested that the Lenders (a) finance the
working capital requirements of the Borrower and (b) provide funds to the
Borrower (x) to continue its outstanding indebtedness under the Existing Credit
Agreement, (y) to repurchase Accounts sold to Funding pursuant to the
Receivables Securitization (and thereby terminate the Receivables
Securitization) and (z) for other corporate purposes; and
WHEREAS, the Lenders are willing to make funds available for such
purposes upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Borrower has requested that the Issuers commit to provide
the Borrower with letters of credit for general corporate purposes, and the
Issuers are willing to issue letters of credit upon the terms and subject to the
conditions contained herein; and
WHEREAS, each of the Borrower, the Lenders, the Issuers, the Agent and
the Co-Agent desires to amend and restate the Existing Credit Agreement in its
entirety;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto hereby agree that the Existing
Credit Agreement is hereby amended and restated to read in its entirety as
follows:
<PAGE> 2
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms. As used in this Agreement, the following terms have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Accounts" has the meaning specified in the Second Amended and Restated
Security Agreement.
"Additional Discretionary Amount" means, for any date of determination,
an amount (which shall not be less than zero) equal to the sum of (a) 75% of the
net (after payment of fees, commissions, expenses and the like) cash proceeds
received by the Borrower in respect of the issuance of Additional Equity from
the date hereof to the date of such determination, (b) 75% of the difference
(which shall not be less than zero) between (i) the Tangible Net Worth of the
Borrower at the date of determination less (ii) the sum of (A) $107,000,000 plus
(B) 75% of the net (after payment of fees, commissions, expenses and the like)
cash proceeds received by the Borrower in respect of the issuance of Additional
Equity from the date hereof to the date of determination, and (c) 50% of the
Indebtedness permitted to be incurred by the Borrower pursuant to Sections
7.2(f) and (g).
"Additional Equity" means Stock or Stock Equivalents issued by the
Borrower, whether voting or non-voting, other than preferred stock with a
mandatory redemption date earlier than the tenth anniversary of the date hereof.
"Additional Equity Adjustment I" means a permanent reduction of .25%
per annum commencing on the first day of the month next succeeding the receipt
by the Borrower of net (after payment of fees, commissions, expenses and the
like) cash proceeds of the issuance of Additional Equity after the Closing Date
of at least $25,000,000 in the aggregate.
"Additional Equity Adjustment II" means a permanent reduction of .25%
per annum commencing on the first day of the month next succeeding the receipt
by the Borrower of net (after payment of fees, commissions, expenses and the
like) cash proceeds of the issuance of Additional Equity after the Closing Date
of at least $45,000,000 in the aggregate.
2
<PAGE> 3
"Affiliate" means, as to any Person, any Subsidiary of such Person and
any Person which, directly or indirectly, controls, is controlled by or is under
common control with such Person and includes each officer, director, general
partner, member or manager of such Person, and each Person who is the beneficial
owner of 5% or more of any class of voting Stock of such Person. For the
purposes of this definition, "control" means the possession of the power to
direct or cause the direction of management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Second Amended and Restated Revolving Credit
Agreement, together with all Exhibits and Schedules hereto, as the same may be
amended, supplemented or otherwise modified from time to time.
"Amendment Agreement" means the agreement, dated as of the date hereof,
among the parties to the Existing Credit Agreement.
"Annual Report" means the annual report of the Borrower on Form 10-K
filed with the Securities and Exchange Commission for the period ended September
30, 1995.
"Applicable Base Rate Margin" means 1.50% per annum, subject to the
Additional Equity Adjustment I and the Additional Equity Adjustment II.
"Applicable Eurodollar Rate Margin" means 2.75% per annum, subject to
the Additional Equity Adjustment I and the Additional Equity Adjustment II.
"Applicable Lending Office" means, with respect to each Lender, its
Domestic Lending Office in the case of a Base Rate Loan and its Eurodollar
Lending Office in the case of a Eurodollar Rate Loan.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender or an Issuer and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit D.
"Available Credit" means, at any time, an amount (not less than zero)
equal to (a) the lowest of (i) the then effective Revolving Credit Commitments
of the Lenders, (ii) the Borrowing Base at such time and (iii) two times the
Borrower's EBITDA for the rolling twelve-month period ended on the last day of
the immediately preceding month, minus (b) the aggregate of the outstanding
principal amount of the Loans at such time and the Letter of Credit Obligations
at such time.
3
<PAGE> 4
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall be
equal at all times to the highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent)
of (i) 1/2 of one percent per annum, plus (ii) the rate per annum obtained by
dividing (A) the latest three-week moving average of secondary market morning
offering rates in the United States for three-month certificates of deposit of
major United States money market banks, such three-week moving average being
determined weekly on each Monday (or, if any such day is not a Business Day, on
the next succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates reported by certificate
of deposit dealers to and published by the Federal Reserve Bank of New York or,
if such publication shall be suspended or terminated, on the basis of quotations
for such rates received by Citibank from three New York certificate of deposit
dealers of recognized standing selected by Citibank, by (B) a percentage equal
to 100% minus the average of the daily percentages specified during such
three-week period by the Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for Citibank in respect of liabilities consisting of or including
(among other liabilities) three-month U.S. dollar nonpersonal time deposits in
the United States, plus (iii) the average during such three-week period of the
maximum annual assessment rates payable to the Federal Deposit Insurance
Corporation (or any successor) by banks which are members of the Bank Insurance
Fund for insuring U.S. dollar deposits in the United States; and
(c) the sum (adjusted to the nearest one percent or, if there
is no nearest one percent, to the next higher one percent) of (i) one percent
per annum plus (ii) the Federal Funds Rate.
"Base Rate Loan" means any outstanding principal amount of any Loan of
any Lender that bears interest with reference to the Base Rate.
"Blocked Account" has the meaning specified in Section 6.18.
"Borrowing Base" means, at any time, the sum of (a) 85% of Eligible
Receivables at such time plus (b) the lesser of (i) such amount of the Eligible
Inventory at such time as
4
<PAGE> 5
determined in accordance with the advance rate formulae set forth on Schedule I
and (ii) the Inventory Availability Sublimit, less, in each case, such reserves
as the Agent, in its sole discretion (based upon its customary practice), may
deem appropriate, plus (c) all cash on deposit at such time in the Cash
Collateral Account and the L/C Cash Collateral Account; provided, however, that
the aforementioned advance rates in respect of Eligible Inventory may be
prospectively adjusted by the Agent from time to time upon at least five
Business Days' prior written notice to the Borrower to conform to the Agent's
regular business practices and policies applicable to asset based loans with
advance rates based on current assets in effect from time to time, which
practices and policies may be changed by the Agent in its sole discretion;
provided, however, that any increase in the advance rates above those set forth
on Schedule I shall require the written consent of Lenders having two-thirds or
more of the Revolving Credit Commitments, and any changes with respect to
reserves (as contemplated above) to be evidenced by notice to the Borrower and
applicable prospectively on the Borrowing Base Certificate following such
notice.
"Borrowing Base Certificate" means a certificate of the Borrower
substantially in the form of Exhibit F.
"Business Day" means a day of the year on which banks are not required
or authorized to close in New York City or the State of Utah and, if the
applicable Business Day relates to a Eurodollar Rate Loan, a day on which
dealings are also carried on in the London interbank market.
"Capital Expenditures" means, for any Person for any period, the
aggregate of all expenditures by such Person and its Restricted Subsidiaries
during such period (including, without limitation, renewals, improvements,
replacements and capitalized repairs) that would be reflected as additions to
property, plant or equipment on a consolidated balance sheet of such Person and
its Restricted Subsidiaries prepared in accordance with GAAP. For the purpose of
this definition, (a) the purchase price of equipment which is acquired
simultaneously with the trade-in of existing equipment owned by such Person or
any of its Restricted Subsidiaries or with insurance proceeds shall be included
in Capital Expenditures only to the extent of the gross amount of such purchase
price less the credit granted by the seller of such equipment being traded in at
such time or the amount of such insurance proceeds, as the case may be, and (b)
the purchase price of equipment which is acquired within 180 days after the sale
of existing equipment owned by such Person or any of its Restricted Subsidiaries
shall be included in Capital Expenditures only to the extent of the gross amount
of such purchase price less the lower of the sales price or book value of such
equipment being sold at such time.
5
<PAGE> 6
"Capitalized Lease" means, as to any Person, any lease of property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with GAAP.
"Capitalized Lease Obligations" means, as to any Person, the
capitalized amount of all obligations of such Person and its Restricted
Subsidiaries under Capitalized Leases, as determined on a consolidated basis in
accordance with GAAP.
"Cash Collateral Account" has the meaning set forth in the Cash
Collateral Agreement.
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States government or any agency thereof and backed by the full faith and
credit of the United States, (b) certificates of deposit, eurodollar time
deposits, overnight bank deposits and bankers' acceptances of any Lender or any
bank or trust company organized under the laws of the United States or any state
thereof, having capital, surplus and undivided profits aggregating at least
$100,000,000 and which, at the date of determination, are rated at least A+ by
Standard & Poor's Corporation or A-1 by Moody's Investors Services, Inc., having
maturities of one year or less from the date of acquisition, and (c) commercial
paper and money market preferred stock of an issuer rated at least A-2 by
Standard & Poor's Corporation or P-2 by Moody's Investors Services, Inc., or
carrying an equivalent rating by a nationally recognized rating agency if both
of the two named rating agencies cease publishing ratings of investments.
"Cash Interest Expense" means, for any Person for any period, the Net
Interest Expense of such Person for such period, plus (a) interest expense
capitalized for such period to the extent deducted in the determination of such
Net Interest Expense, less (b) Non-Cash Interest Expense of such Person for such
period.
"Change in Control" means (a) each and every issue, sale, series of
sales or other disposition or purchase or series of purchases of shares of
Voting Stock of the Borrower or other event or agreement with respect to shares
of Voting Stock of the Borrower which results in a Person or group of Persons
acting in concert (other than one or more present holders of the Class B Common
Stock of the Borrower listed on Schedule II hereto, any spouse or child of such
holder, any Person controlled by any such holder or any other Person which has
entered into a shareholders' agreement with any of the foregoing to provide veto
rights to such Person with respect to certain corporate matters of the Borrower)
obtaining majority voting control or the right to elect the majority of the
board of directors of the Borrower, or (b) the consolidation or merger by the
Borrower with
6
<PAGE> 7
another corporation, in a transaction in which the then existing shareholders of
the Borrower hold less than a majority of the combined voting power of the then
outstanding securities of the surviving corporation of such merger or the
corporation resulting from such consolidation ordinarily (and apart from rights
arising under special circumstances) having the right to vote in the election of
directors (other than in connection with the creation of a holding company not
involving a change in shareholders provided such holding company owns
beneficially 100% of the issued Stock of the Borrower). In the event the
Borrower becomes a wholly-owned subsidiary of any such holding company, a
"change in control" as defined and used herein shall also apply to such holding
company, with references to Class B Common Stock in the case of the holding
company being deemed a reference to the equivalent equity of such holding
company. As used in the parenthetical above relating to holders of Class B
Common Stock, the term "control" shall have the same meaning set forth in the
definition of the term "Affiliate".
"Citibank" means Citibank, N.A., a national banking association.
"Closing Date" means May 14, 1996.
"Code" means the Internal Revenue Code of 1986 (or any successor
legislation thereto), as amended from time to time.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by the Borrower in or upon which a Lien
is granted (and not released) under any Collateral Document.
"Collateral Documents" means the Second Amended and Restated Security
Agreement, the Second Amended and Restated Cash Collateral Agreement, the Second
Amended and Restated Blocked Account Letter and any other document executed and
delivered by the Borrower or a Subsidiary of the Borrower granting a Lien on any
of its property to secure, or to guarantee, payment of the Obligations (whether
pursuant to Section 7.16 or otherwise).
"Commodity Contracts" means commodity options, futures, swaps, and
other similar agreements and arrangements designed to provide protection against
fluctuations in commodity prices.
"Computation Date" has the meaning specified in Section 2.17.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste and any substance regulated or forming the basis of
liability under any
7
<PAGE> 8
Environmental Law, including, without limitation, any special waste, petroleum
or petroleum-derived substance or waste, or any constituent of such substance or
waste.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
Indebtedness or Contractual Obligation of another Person, if the purpose or
intent of such Person in incurring the Contingent Obligation is to provide
assurance to the obligee of such Indebtedness or Contractual Obligation that
such Indebtedness or Contractual Obligation will be paid or discharged, or that
any agreement entered into by such other Person relating to such Indebtedness or
Contingent Obligation will be complied with, or that any holder of such
Indebtedness or Contractual Obligation will be protected against loss in respect
thereof. Contingent Obligations of a Person include, without limitation, (a) the
direct or indirect guarantee, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of an obligation of another Person, and (b)
any liability of such Person for an obligation of another Person through any
agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of a loan, advance,
stock purchase, capital contribution or otherwise), (ii) to maintain the
solvency or any balance sheet item, level of income or financial condition of
another Person, (iii) to make take-or-pay or similar payments, if required,
regardless of non-performance by any other party or parties to an agreement,
(iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase
or sell services, primarily for the purpose of enabling the debtor to make
payment of such obligation or to assure the holder of such obligation against
loss, or (v) to supply funds to or in any other manner invest in such other
Person (including, without limitation, to pay for property or services
irrespective of whether such property is received or such services are
rendered), if in the case of any agreement or liability described under
subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary purpose or
intent thereof is as described in the preceding sentence; provided, however,
that it is understood the transactions contemplated in agreements such as the
Mannesmann Agreement shall not be deemed "Contingent Obligations" for any
purpose of this Agreement. The amount of any Contingent Obligation shall be
equal to the lesser of (i) the amount payable under such Contingent Obligation
(if quantifi- able), or (ii) the portion of the obligation so guaranteed or
otherwise supported.
"Contractual Obligation" of any Person means any obligation, agreement,
undertaking or similar provision of any security issued by such Person or of any
agreement, undertaking, contract, lease, indenture, mortgage, deed of trust or
other instrument to which such Person is a party or by which it or any of its
property is bound or to which any of its properties is subject including, in the
case of the Borrower, any such provision
8
<PAGE> 9
contained in the Mannesmann Agreement, the 1993 Senior Notes Indenture, the 1993
Senior Notes, the Exchange Debentures Indenture, the Exchange Debentures, the
1994 Senior Notes Indenture and the 1994 Senior Notes.
"Cumulative Preferred Stock" means the Borrower's Cumulative Redeemable
Exchangeable Preferred Stock, no par value per share, having an annual dividend
rate of 14.0%, and any other preferred stock of the Borrower exchanged for, and
having terms identical to, such Cumulative Redeemable Exchangeable Preferred
Stock.
"Default" means any event which with the passing of time or the giving
of notice or both would become an Event of Default.
"DOL" means the United States Department of Labor, or any successor
thereto.
"Dollars" and the sign "$" each mean the lawful money of the United
States of America.
"Domestic Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Domestic Lending Office" opposite its name on
Schedule III or such other office of such Lender as such Lender may from time to
time specify to the Borrower and the Agent.
"EBITDA" means, for any Person and its Restricted Subsidiaries for any
period, the Net Income (Loss) of such Person and its Restricted Subsidiaries for
such period taken as a single accounting period, plus (a) the sum of the
following amounts of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP to the extent
included in the determination of such Net Income (Loss): (i) depreciation
expense, (ii) amortization expense, (iii) Net Interest Expense, (iv) provision
for income taxes and similar taxes, and (v) extraordinary losses, less (b) the
sum of the following amounts of such Person and its Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP to the extent
included in the determination of such Net Income (Loss): (i) extraordinary
gains, (ii) the Net Income (Loss) (which, if it is a negative, shall be added)
of any other Person that is accounted for by the equity method of accounting,
after deducting the amount of dividends or distributions paid by such other
Person to such Person, (iii) the Net Income (Loss) (which, if it is a negative,
shall be added) of any other Person acquired by such Person or a Restricted
Subsidiary of such Person in a transaction accounted for as a pooling of
interests for any period prior to the date of such acquisition, and (iv) other
non-operating income.
9
<PAGE> 10
"Eligible Assignee" means any commercial bank or other non-bank
financial institution including, without limitation, any insurance company,
savings bank or savings and loan association, in each case approved in writing
by the Borrower and the Agent as an Eligible Assignee for purposes of this
Agreement; provided that the Borrower's approval shall not be unreasonably
withheld. Without limitation of the foregoing, the Borrower may withhold its
consent of any such Person if (a) the proposed assignment of any portion of any
Lender's or any Issuer's rights and obligations under this Agreement to such
Person would significantly increase (i) the amount of payments required to be
made by the Borrower under Sections 2.10, 2.12 or 2.14 (determined as of the
date on which such bank or other financial institution is proposed to become a
Lender or an Issuer hereunder), or (ii) the likelihood that any such financial
institution will give the notice and make the demand contemplated by Section
2.11, or (b) in the case of an assignee of any Issuer, such assignee's letters
of credit are not generally accepted in commercial markets.
"Eligible Inventory" means such of the Inventory of the Borrower,
valued at the lower of (a) market, or (b) cost (determined on a weighted average
basis consistent with the past practices of the Borrower), as the Agent, in its
sole discretion (in accordance with its customary practice), deems eligible,
less all reserves as the Agent, in its sole discretion (in accordance with its
customary practices), from time to time deems appropriate (any such changes to
be evidenced by notice to the Borrower and applicable prospectively on the
Borrowing Base Certificate following receipt of such notice) and which
constitutes Collateral in which the Agent has a fully perfected first priority
security interest. For the purposes of this definition, the Agent does not
intend to treat the following Inventory as eligible: (a) Inventory in transit
(unless otherwise determined to be eligible by the Agent in its sole discretion
in accordance with its customary practice after a request for such a
determination by the Borrower), (b) Inventory held by a bailee (including,
without limitation, processors) or Inventory held on leased premises where the
bailee or landlord thereof, as the case may be, has not executed a waiver in
form and substance reasonably satisfactory to the Agent, (c) Inventory subject
to a Lien prior in right to that of the Lien in favor of the Agent, for the
ratable benefit of the Secured Parties (unless determined to be eligible by the
Agent in its sole discretion after a request for such a determination by the
Borrower), or subject to any other Lien other than a Permitted Lien, and (d)
Inventory acquired by the Borrower after the date hereof, outside the
jurisdictions in which the Agent for the ratable benefit of the Secured Parties
has a perfected, first priority Lien, subject to Permitted Liens. Nothing in the
preceding sentence shall limit the Agent's right, in its sole discretion (in
accordance with its customary practice), to treat any item of Inventory as
ineligible (any such ineligibility to be evidenced by notice to the Borrower and
applicable prospectively on the Borrowing Base Certificate following such
notice).
10
<PAGE> 11
"Eligible Receivables" means the gross outstanding balance, less (a)
all finance charges, late fees and other unearned fees, (b) sales, excise or
similar taxes, and (c) credits or allowances granted, of those Accounts of the
Borrower arising out of sales of merchandise, goods or services in the ordinary
course of business, made by the Borrower to a Person which is not an Affiliate
of the Borrower, and which constitute Collateral in which the Agent, for the
ratable benefit of the Secured Parties, has a fully perfected first priority
security interest, and, if the account debtor is a Governmental Authority, the
Borrower has assigned its rights to payment of such account to the Agent
pursuant to the Assignment of Claims Act of 1940, as amended, in the case of a
federal Governmental Authority, and pursuant to applicable state law, if any, in
the case of any other Governmental Authority, and such assignment has been
accepted and acknowledged by the appropriate government officers (it being
understood and agreed that (i) the Borrower shall be responsible for the
preparation and delivery of all necessary filings and notifications to such
Governmental Authorities, and (ii) the Agent shall execute such appropriate
documentation prepared by the Borrower as is necessary to effect such
assignment); provided, however, that (without duplication) an Account shall not
be an Eligible Receivable, unless otherwise determined by the Agent in its sole
discretion, if:
(a) such Account is more than (i) 90 days past the original
invoice date thereof, in respect of sales having payment terms not in excess of
60 days or (ii) in respect of sales having payment terms exceeding 60 days (A)
30 days past due, according to the original terms of sale, or (B) 120 days past
the original invoice date thereof; or
(b) the sale represented by such Account is on payment terms
more than 60 days but less than 120 days, to the extent of the excess of the
aggregate amount of such Accounts over 10% of the aggregate of all Eligible
Receivables; or
(c) any warranty contained in this Agreement or any other Loan
Document with respect either to Accounts or Eligible Receivables in general or
to such specific Account is not true and correct in all material respects with
respect to such Account; or
(d) the account debtor on such Account is disputing liability
or is making any claim with respect to any other Account due from such account
debtor to the Borrower or any of its Subsidiaries; provided, however, that the
aggregate ineligibility of such Accounts shall only extend to the amount of such
disputed liability or claim; or
(e) the account debtor on such Account has (i) filed a
petition for bankruptcy or any other relief under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, (ii) made a general
assignment for the benefit of
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creditors, (iii) had filed against it any petition or other application for
relief under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors and such petition or application has remained undismissed or
unstayed for a period of 60 days, (iv) failed, suspended business operations,
became insolvent, called a general meeting of its creditors for the purpose of
obtaining any financial concession or accommodation, or (v) had or suffered a
receiver or a trustee to be appointed for all or a significant portion of its
assets or affairs; or
(f) the account debtor on such Account is also a supplier to
or creditor of the Borrower or any of its Subsidiaries unless such supplier or
creditor has executed a no-offset letter reasonably satisfactory to the Agent;
provided, however, that if such account debtor is listed on Schedule IV (as the
same may be amended or supplemented from time to time in accordance with Section
6.11(g)), the ineligibility of such Account shall extend only to the amounts on
the date of the applicable Borrowing Base Certificate owing by the Borrower or
its Subsidiaries to such account debtor; or
(g) the sale represented by such Account is to an account
debtor outside the continental United States, unless the sale is on letter of
credit or acceptance terms or is otherwise guaranteed on terms acceptable to the
Agent in its sole judgment exercised reasonably; or
(h) the sale to such account debtor on such Account is on a
bill-andhold (or any similar arrangement whereby the Borrower has delivered or
otherwise transported goods to third parties to be held pending payment unless
previously approved by the Agent in its sole discretion in accordance with its
customary practice), sale-and-return, sale-on-approval or consignment basis; or
(i) such Account is subject to a Lien in favor of any Person
other than for the benefit of the Secured Parties; or
(j) such Account is subject to (i) any existing deduction,
offset, counterclaim or return privilege (other than in respect of the
Mannesmann Agreement); provided, however, that the ineligibility of such Account
shall extend only to the amount claimed (if determinable) by the account debtor
in connection with such deduction, offset, counterclaim or return privilege;
provided, further, however, that if such amount claimed is not determinable with
reasonable certainty, the entire Account shall be ineligible, or (ii) other
existing conditions to the extent they call into question the payment of such
Account; or
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<PAGE> 13
(k) the account debtor on such Account is located in the state
of New Jersey or Minnesota, unless the Borrower (i) has received a certificate
of authority to do business and is in good standing in such state or (ii) has
filed a Notice of Business Activities Report with the appropriate office or
agency of such state for the current year; or
(l) 50% or more of the outstanding Accounts of the account
debtor on such Account that constituted Eligible Receivables at the time they
arose have become, or have been determined by the Agent to be, ineligible, in
each case pursuant to the terms hereof; or
(m) the sale represented by such Account is denominated other
than in Dollars unless such sale is on terms acceptable to the Agent in its sole
discretion, which discretion shall not be exercised in a manner inconsistent
with past practice; or
(n) the Agent believes, in its sole discretion, which
discretion shall not be exercised in a manner inconsistent with past practice,
that the collection of such Account is insecure or that such Account may not be
paid (any such determination to be evidenced by notice to the Borrower and
applicable prospectively on the Borrowing Base Certificate following receipt of
such notice); or
(o) such Account is not evidenced by an invoice or other
writing, in form acceptable to the Agent in its sole discretion, which
discretion shall not be exercised in a manner inconsistent with past practice;
or
(p) the Borrower or any of its Subsidiaries, in order to be
entitled to collect such Account, is required to perform any additional service
for, or perform or incur any additional obligation to, the Person to whom or to
which it was made; or
(q) Accounts of such account debtor represent more than 12.5%
of the Eligible Receivables at such time (such percentage being subject to
adjustment from time to time by the Agent in its sole discretion, which
discretion shall not be exercised in a manner inconsistent with past practice,
and any such adjustment to be evidenced by notice to the Borrower and applicable
prospectively on the Borrowing Base Certificate following receipt of such
notice); provided, however, that such ineligibility of such Accounts shall only
extend to the amount (if determinable) of such excess; or
(r) such Account has been assigned to the Borrower by
Mannesmann in accordance with Section 8 (or any successor provision) of the
Mannesmann Agreement; or
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(s) the Agent, in accordance with its customary criteria,
deems such Account ineligible (any such determination to be evidenced by notice
to the Borrower and applicable prospectively on the Borrowing Base Certificate
following receipt of such notice).
"Environmental Laws" means all federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any judicial or administrative
interpretation thereof, including, without limitation, any applicable judicial
or administrative order, consent decree or judgment, relating to the regulation
and protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include but are not limited to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Section 9601 et seq.) ("CERCLA"); the Hazardous Material Transportation
Act, as amended (49 U.S.C. Section 1801 et seq.); the Federal Insecticide,
Fungicide, and Rodenticide Act, as amended (7 U.S.C. Section 136 et seq.); the
Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et
seq.) ("RCRA"); the Toxic Substances Control Act, as amended (15 U.S.C. Section
2601 et seq.); the Clean Air Act, as amended (42 U.S.C. Section 7400 et seq.);
the Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251 et
seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. Section 651
et seq.); and the Safe Drinking Water Act, as amended (42 U.S.C. Section 300f et
seq.), and their state and local counterparts or equivalents and any applicable
transfer of ownership notification or approval statutes such as the New Jersey
Environmental Cleanup Responsibility Act (N.J. Stat. Ann. Section 13:1K-6 et
seq.) ("ECRA").
"Environmental Liabilities and Costs" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim or
demand by any other Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including, without
limitation, any thereof arising under any Environmental Law, Permit, order or
agreement with any Governmental Authority or other Person, and which relate to
any environmental, health or safety condition, or a Release or threatened
Release.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
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<PAGE> 15
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with a Loan Party within the meaning of
Section 414(b), (c), (m) or (o) of the Code.
"ERISA Event" means, with respect to any Loan Party or any ERISA
Affiliate, (a) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan, (b) the withdrawal of any Loan Party or any ERISA Affiliate
from a Title IV Plan subject to Section 4063 of ERISA during a plan year in
which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA,
(c) the complete or partial withdrawal of any Loan Party or any ERISA Affiliate
from any Multiemployer Plan, (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA, (e) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC, or (f) any other event or condition
which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Title IV Plan or Multiemployer Plan or the imposition
of any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" below its
name on Schedule III (or, if no such office is specified, its Domestic Lending
Office) or such other office of such Lender as such Lender may from time to time
specify to the Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the rate of interest
determined by the Agent to be the rate (rounded upward to the nearest whole
multiple of 1/16 of 1% per annum, if such rate is not such a multiple) per annum
at which deposits in Dollars are offered by the principal office of Citibank in
London, England to prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the first day of such Interest Period in
an amount substantially equal to the Eurodollar Rate Loan of CUSA during such
Interest Period and for a period equal to such Interest Period by (b) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such
Interest Period.
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<PAGE> 16
"Eurodollar Rate Loan" means any outstanding principal amount of the
Revolving Credit Loans of any Lender that, for an Interest Period, bears
interest at a rate determined with reference to the Eurodollar Rate.
"Eurodollar Rate Reserve Percentage" means for any Interest Period the
reserve percentage applicable two Business Days before the first day of such
Interest Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of liabilities
which includes deposits by reference to which the Eurodollar Rate is determined)
having a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 8.1.
"Exchange Debentures" means the Borrower's Exchange Debentures, due
March 15, 2003, issuable in exchange for the Cumulative Preferred Stock in an
aggregate principal amount equal to the liquidation preference of the Cumulative
Preferred Stock exchanged, bearing interest at an annual rate of 14.25%, as
amended, modified or extended from time to time.
"Exchange Debentures Indenture" means that certain Indenture, dated as
of a date to be determined, among the Borrower and a trustee to be designated,
as Trustee, pursuant to which the Exchange Debentures are to be issued, as the
same may be amended, supplemented or otherwise modified from time to time.
"Existing Credit Agreement" has the meaning set forth in the first
recital hereof.
"Fair Market Value" means (a) with respect to any asset (other than a
marketable security) at any date, the value of the consideration obtainable in a
sale of such asset at such date assuming a sale by a willing seller to a willing
purchaser dealing at arm's length and arranged in an orderly manner over a
reasonable period of time having regard to the nature and characteristics of
such asset or, if such asset shall have been the subject of a relatively
contemporaneous appraisal by an independent third party appraiser, the basic
assumptions underlying which have not materially changed since its date, as set
forth in such appraisal, and (b) with respect to any marketable security at any
date, the closing sale price of such security on the business day (on which any
national securities exchange is open for the normal transaction of business)
next preceding such date, as appearing in any published list of any national
securities exchange or in the National Market List of the
16
<PAGE> 17
National Association of Securities Dealers, Inc. or, if there is no such closing
sale price of such security, the final price for the purchase of such security
at face value quoted on such business day by a financial institution of
recognized standing which regularly deals in securities of such type.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fiscal Quarter" means the three month period ending on March 31, June
30, September 30 or December 31.
"Fiscal Year" means the 12 month period ending on September 30.
"Funding" means Geneva Steel Funding Corporation, a Utah corporation,
which is a wholly owned Subsidiary of the Borrower.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board, or in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination except that, for purposes of Article V and the defined terms used
therein, GAAP shall be determined on the basis of such principles in effect on
the date hereof and consistent with those used in the preparation of the audited
financial statements referred to in Section 4.5(a).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"IMDG" means Inland Materials Distribution Group, a Delaware
corporation, or its successor.
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<PAGE> 18
"IMDG Joint Venture" means the limited liability company to be formed
in which each of a Subsidiary of the Borrower and IMDG (or one of its
Subsidiaries) will hold a 50% interest.
"Improvements" has the meaning specified in Section 4.20(d).
"Indebtedness" of any Person means (a) all indebtedness of such Person
for borrowed money (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured) or for the deferred purchase price of
property or services, (b) all obligations of such Person evidenced by notes,
bonds, debentures or similar instruments, (c) all indebtedness of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (d) all Capitalized Lease
Obligations of such Person, (e) all Contingent Obligations of such Person, (f)
all obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any Stock or Stock Equivalents of such Person with a mandatory
repurchase or redemption date of less than ten years from the date of issuance
thereof valued, in the case of redeemable preferred stock with a mandatory
redemption date of less than ten years, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends; provided,
however, that any obligation of the Borrower to repurchase Stock or Stock
Equivalents arising solely as a result of the Borrower making an offer to
purchase such Stock or Stock Equivalents shall constitute Indebtedness if the
Borrower fails to repurchase such Stock or Stock Equivalents in accordance with
such offer, if accepted, (g) all obligations of such Person under Interest Rate
Contracts and Commodity Contracts, (h) all Indebtedness referred to in clause
(a), (b), (c), (d), (e), (f) or (g) above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien upon or in property (including, without limitation, Accounts and
general intangibles) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness, (i) in the case
of the Borrower, the Obligations, (j) all liabilities of such Person which would
be shown on a balance sheet of such Person prepared in accordance with GAAP, and
(k) all liabilities of such Person in connection with the failure to make when
due any contribution or payment pursuant to or under any Plan.
"Indemnitee" has the meaning specified in Section 10.4(b).
"Interest Period" means, (a) initially, the period commencing on the
date a Eurodollar Rate Loan is made or on the date of conversion of a Base Rate
Loan to such
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<PAGE> 19
Eurodollar Rate Loan and ending one, three, six, nine or twelve months
thereafter, as selected by the Borrower in its Notice of Borrowing or Notice of
Conversion or Continuation given to the Agent pursuant to Section 2.2(a) or 2.7,
and (b) thereafter, if such Loan is continued, in whole or in part, as a
Eurodollar Rate Loan pursuant to Section 2.7, a period commencing on the last
day of the immediately preceding Interest Period therefor and ending one, three,
six, nine or twelve months thereafter, as selected by the Borrower in its Notice
of Conversion or Continuation given to the Agent pursuant to Section 2.7;
provided, however, that:
(i) if any Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day, unless the result of such extension would
be to extend such Interest Period into another calendar month, in which
event such Interest Period shall end on the immediately preceding
Business Day;
(ii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month;
(iii) the Borrower may not select any Interest Period which
ends after the Termination Date; and
(iv) there shall be outstanding at any one time no more than
four Interest Periods in the aggregate.
"Interest Rate Contracts" means interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, interest rate insurance,
and other agreements or arrangements designed to provide protection against
fluctuations in interest rates.
"Inventory" has the meaning specified in the Second Amended and
Restated Security Agreement.
"Inventory Availability Sublimit" means Seventy Five Million Dollars
($75,000,000).
"Investments" has the meaning specified in Section 7.6.
"IRS" means the Internal Revenue Service, or any successor thereto.
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<PAGE> 20
"Issuers" means Citibank and such other Lender who shall agree with the
Agent to act as an Issuer.
"L/C Cash Collateral Account" has the meaning specified in Section
8.3(a).
"Leases" means, with respect to the Borrower or any of its Restricted
Subsidiaries, all of those leasehold estates in real property now owned as
lessee or hereafter acquired, as such may be amended, supplemented or otherwise
modified from time to time to the extent permitted by this Agreement.
"Letter of Credit" means any letter of credit issued for the account of
the Borrower by any Issuer pursuant to Section 2.16.
"Letter of Credit Obligations" means, at any time, all liabilities at
such time of the Borrower to an Issuer with respect to Letters of Credit,
whether or not any such liability is contingent, and includes the sum of (a) the
Reimbursement Obligations at such time and (b) the Letter of Credit Undrawn
Amounts at such time.
"Letter of Credit Reimbursement Agreement" has the meaning specified in
Section 2.16(c).
"Letter of Credit Request" has the meaning specified in Section
2.16(d).
"Letter of Credit Undrawn Amounts" means, at any time, the aggregate
amount available to be drawn under all Letters of Credit outstanding at such
time.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement or the
interest of a lessor under a Capitalized Lease Obligation or any Other Lease.
"Loan" means a Revolving Credit Loan or a Swing Loan, made by a Lender
to the Borrower pursuant to Article II.
"Loan Documents" means, collectively, this Agreement, the Second
Amended and Restated Revolving Credit Notes, each Letter of Credit Reimbursement
Agreement (if any) and the Collateral Documents.
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"Loan Party" means the Borrower and each Subsidiary of the Borrower;
provided, however, that for the purposes of Sections 4.9, 6.11(d)(iv), 6.12(e),
6.12(f), 6.12(g), 6.12(h), 6.12(i), 6.12(j), 6.14 and 8.1(g) "Loan Party" means
the Borrower and each Restricted Subsidiary of the Borrower.
"Long-Term Leases" means any lease of real or personal property (other
than a Capitalized Lease) having an original term, including any period for
which the lease may be renewed or extended at the option of the lessor, of more
than three years.
"Majority Lenders" means any Lender or Lenders having more than 50% of
the Revolving Credit Commitments.
"Mannesmann" means Mannesmann Pipe & Steel Corporation, a New York
corporation, and any successor thereto.
"Mannesmann Agreement" means that certain Sales Representation
Agreement, dated as of December 8, 1988, between the Borrower and Mannesmann, as
the same may be amended from time to time.
"Material Adverse Change" means a material adverse change in any of (a)
the condition (financial or otherwise), business, performance, prospects,
operations or properties of the Borrower or the Borrower and its Subsidiaries
taken as one enterprise, (b) the legality, validity or enforceability of any
Loan Document, (c) the perfection or priority of the Liens granted pursuant to
the Collateral Documents (it being understood that the existence and effect of
Permitted Liens on the priority of the Liens granted pursuant to the Collateral
Documents, shall not, in and of itself, constitute such a change), (d) the
ability of the Borrower to repay the Obligations or of any Loan Party to perform
its obligations under any Loan Document, or (e) the rights and remedies of the
Lenders or the Agent under the Loan Documents; provided, however, that for
purposes hereof and without influencing the interpretation of any of the
foregoing, (i) the net losses of approximately $9,100,000 of the Borrower for
the first six months of its 1996 Fiscal Year, (ii) the results set forth in, or
contemplated by, the Projections of the Borrower in effect on the date hereof,
and (iii) the incurrence or suffering to exist of any Indebtedness or the
granting or suffering to exist of any Liens by an Unrestricted Subsidiary shall
not, in and of themselves, constitute a Material Adverse Change.
"Material Adverse Effect" means an effect that has a reasonable
likelihood of resulting in or causing a Material Adverse Change.
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<PAGE> 22
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, and to which any Loan Party or any ERISA Affiliate is
making, is obligated to make, has made or been obligated to make, contributions
on behalf of participants who are or were employed by any of them.
"Net Income (Loss)" means, for any Person for any period, the aggregate
of net income (or loss) from continuing operations of such Person and its
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
"Net Interest Expense" means, for any Person for any period, (a) the
gross interest expense of such Person and its Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP, plus (b) the
following for such Person and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP: the sum of (i) losses for such
period on Interest Rate Contracts (to the extent not included in such gross
interest expense), (ii) the amount of expenses for upfront costs or fees for
such period associated with Interest Rate Contracts (to the extent not included
in gross interest expense) and (iii) in respect of any Person and its Restricted
Subsidiaries, an amount equal to the yield paid by such Person and its
Restricted Subsidiaries plus other related financing expenses in respect of
sales of Accounts pursuant to the Receivables Securitization during such period,
less (c) the following for such Person and its Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP: the sum of (i)
interest capitalized during construction for such period, (ii) interest income
for such period, (iii) gains for such period on Interest Rate Contracts (to the
extent not included in interest income above and to the extent not deducted in
the calculation of such gross interest expense), and (iv) the net interest
expense of any other Person acquired by such Person or a Restricted Subsidiary
of such Person in a transaction accounted for as a pooling of interests for any
period prior to the date of such acquisition.
"Net Worth" of any Person means, at any date, the difference between
Total Assets of such Person at such date and Total Liabilities of such Person at
such date.
"1994 Senior Notes" means the Borrower's Senior Notes, which are due on
January 15, 2004, in an initial aggregate principal amount of $190,000,000,
bearing interest at an annual rate of 9.5%, issued under the 1994 Senior Notes
Indenture, as amended, modified or extended from time to time.
"1994 Senior Notes Indenture" means that certain Indenture, dated as of
January 15, 1994 among the Borrower and Bankers Trust Company, as Trustee,
pursuant to which the 1994 Senior Notes were issued, as the same may be amended,
supplemented or otherwise modified from time to time.
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<PAGE> 23
"1993 Senior Notes" means the Borrower's Senior Notes due March 15,
2001, in an initial aggregate principal amount of $135,000,000, bearing interest
at an annual rate of 11-1/8%, issued under the 1993 Senior Notes Indenture, as
amended, modified or extended from time to time.
"1993 Senior Notes Indenture" means that certain Indenture, dated as of
March 15, 1993 among the Borrower and Bankers Trust Company, as Trustee,
pursuant to which the 1993 Senior Notes were issued, as the same may be amended,
supplemented or otherwise modified from time to time.
"Non-Cash Interest Expense" means, for any Person for any period, the
sum of the following amounts to the extent included in Net Interest Expense of
such Person for such period: (a) the amount of amortized debt discount, (b)
charges relating to write-ups or write-downs in the book or carrying value of
existing Indebtedness, and (c) any increase in pay-in-kind interest payable less
any decrease in pay-in-kind interest payable.
"Notice of Borrowing" has the meaning specified in Section 2.2(a).
"Notice of Conversion or Continuation" has the meaning specified in
Section 2.7.
"Obligations" means the Swing Loans, the Revolving Credit Loans, the
Letter of Credit Obligations and all other advances, debts, liabilities,
obligations, covenants and duties arising under this Agreement or under any
other Loan Document owing by the Borrower to the Agent, any Lender, any
Affiliate of any of them or any Indemnitee of every type and description,
present or future, whether or not evidenced by any note, guaranty or other
instrument, whether or not for the payment of money, whether arising by reason
of an extension of credit, issuance or amendment of a Letter of Credit or
payment of any draft drawn thereunder or any fees and expenses associated
therewith, and, with respect to the Agent and its Affiliates, any loan,
guaranty, indemnification, foreign exchange transaction, Interest Rate Contract,
or Commodity Contract, in all cases, whether direct or indirect (including,
without limitation, those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however acquired. The
term "Obligations" includes, without limitation, all interest, charges,
expenses, fees, attorneys' fees and disbursements and any other sum chargeable
to the Borrower under this Agreement or any other Loan Document.
"Old Revolving Credit Notes" means the "Revolving Credit Notes," as
defined in the Existing Credit Agreement, which notes will be exchanged for the
Second Amended and Restated Revolving Credit Notes on the Closing Date.
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"Other Lease" means any financing lease having substantially the same
economic effect as a conditional sale, title retention agreement or similar
arrangement.
"Other Taxes" has the meaning specified in Section 2.14(b).
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Pension Plan" means an employee pension benefit plan, as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which any
Loan Party or, if a Title IV Plan or a Plan subject to Section 412 of the Code,
any ERISA Affiliate maintains, contributes to or has an obligation to contribute
to on behalf of participants who are or were employed by any of them.
"Permit" means any permit, approval, authorization, license, variance
or permission required from a Governmental Authority under an applicable
Requirement of Law.
"Permitted Liens" has the meaning specified in Section 7.1.
"Person" means an individual, partnership, corporation (including,
without limitation, a business trust), joint stock company, limited liability
company, trust, unincorporated association, joint venture or other entity, or a
Governmental Authority.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
ERISA, which any Loan Party maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any of them.
"Prepayment Period" means a period commencing on any date on which the
sum of the Loans and the Letter of Credit Obligations outstanding is equal to or
greater than $5,000,000 and ending on the date, if any, which is 30 days after
the later to occur of (i) the decrease of the aggregate Loans and Letter of
Credit Obligations outstanding to zero and (ii) the written request by the
Borrower to the Agent made after the commencement of such period to terminate
such period.
"Projections" means those financial projections of the Borrower, dated
April 18, 1996, as updated periodically by the Borrower in the ordinary course
of business in a manner consistent with its past practices.
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"Proxy Statement" means the Borrower's proxy statement, dated January
29, 1996.
"Qualified Plan" means an employee pension benefit plan, as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan), which is intended to be
tax-qualified under Section 401(a) of the Code, and which any Loan Party or, if
subject to Section 412 of the Code, any ERISA Affiliate maintains, contributes
to or has an obligation to contribute to on behalf of participants who are or
were employed by any of them.
"Ratable Portion" or "ratably" means, with respect to any Lender, the
quotient obtained by dividing the Revolving Credit Commitment of such Lender by
the Revolving Credit Commitments of all the Lenders.
"Real Estate" means all of those plots, pieces or parcels of land now
owned or hereafter acquired by any Loan Party (the "Land"), including, without
limitation, those listed on Schedule 4.20(a), together with the right, title and
interest of such Loan Party, if any, in and to the streets, the land lying in
the bed of any streets, roads or avenues, opened or proposed, in front of,
adjoining or abutting the Land to the center line thereof, the air space and
development rights pertaining to the Land and the right to use such air space
and development rights, all rights of way, privileges, liberties, tenements,
hereditaments and appurtenances belonging or in any way appertaining thereto,
all fixtures, all easements now or hereafter benefiting the Land and all
royalties and rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil
and gas rights, together with all of the buildings and other improvements now or
hereafter erected on the Land, and any fixtures appurtenant thereto.
"Receivables Securitization" means the transactions effected pursuant
to the Securitization Documents.
"Register" has the meaning specified in Section 10.7(c).
"Reimbursement Obligations" means all reimbursement or repayment
obligations of the Borrower to the Issuer with respect to Letters of Credit
including, without limitation, pursuant to any applicable Letter of Credit
Reimbursement Agreement.
"Release" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration of a Contaminant into the indoor or outdoor environment or into or
out of any property owned or operated by such Person, including, without
limitation, the movement of Contaminants through or in the air, soil, surface
water, ground water or property.
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"Remedial Action" means all actions required or voluntarily undertaken
to (a) clean up, remove, treat or in any other way address Contaminants in the
indoor or outdoor environment, (b) prevent the Release or threat of Release or
minimize the further Release of Contaminants so they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment, or (c) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"Rentals" means, as of the date of determination, all fixed payments
(including as such all payments which the lessee is obligated to make to the
lessor on termination of the lease or surrender of the property) payable by the
Borrower or a Restricted Subsidiary, as lessee or sublessee under a lease of
real or personal property, but excluding any amounts required to be paid by the
Borrower or a Restricted Subsidiary (whether or not designated as rents or
additional rents) on account of maintenance, repairs, insurance, taxes and
similar charges. Fixed rents under any so-called "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be paid
by the lessee regardless of sales volume or gross revenues.
"Reportable Event' means any of the events described in Section
4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Requirement of Law" means, as to any Person, the articles of
incorporation and by-laws or other organizational or governing documents of such
Person, and all federal, state and local laws, rules, regulations and executive
orders, including, without limitation, federal, state or local securities,
antitrust and licensing laws, health and safety laws, and all applicable trade
laws and requirements, including, without limitation, all disclosure
requirements of Environmental Laws, ERISA and all orders, judgments, decrees or
other determinations of any Governmental Authority or arbitrator, applicable to
or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer" means, with respect to the Borrower, any of the
executive officers of the Borrower listed on Schedule V.
"Restricted Party" means the Borrower and any Restricted Subsidiary.
"Restricted Subsidiary" means any Subsidiary (a) which is organized
under the laws of the United States or any State thereof, (b) which conducts
substantially all of its business and has substantially all of its assets within
the United States, (c) of which more than 80% (by number of votes) of the Voting
Stock is owned by the Borrower and/or one or more Restricted Subsidiaries, and
(d) which at the time of creation or acquisition
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thereof by the Borrower is designated by written notice to the Agent,
accompanied by a resolution of the Board of Directors of the Borrower, to be
included in the definition of Restricted Subsidiary for all purposes of this
Agreement; provided, however, that once a Subsidiary is so designated a
Restricted Subsidiary it may never become an Unrestricted Subsidiary; and
provided further, however, that Funding shall be deemed a Restricted Subsidiary.
"Revolving Credit Borrowing" means a borrowing by the Borrower
consisting of Revolving Credit Loans made on the same day.
"Revolving Credit Commitment" means, as to each Lender, the commitment
of such Lender to make Revolving Credit Loans to the Borrower pursuant to
Section 2.1(a) in the aggregate principal amount outstanding not to exceed the
amount set forth opposite such Lender's name on Schedule VI under the caption
"Revolving Credit Commitment," as such amount may be reduced or modified
pursuant to this Agreement.
"Revolving Credit Loan" means a Loan made by a Lender to the Borrower
pursuant to Section 2.1(a).
"Second Amended and Restated Blocked Account Letter" means a letter
agreement, substantially in the form of Exhibit E, executed by the Borrower and
the Agent and acknowledged and agreed to by Citibank, as such letter agreement
may be amended, supplemented or otherwise modified from time to time.
"Second Amended and Restated Cash Collateral Agreement" means an
agreement, in substantially the form of Exhibit A, executed by the Borrower and
the Agent, as such agreement may be amended, supplemented or otherwise modified
from time to time.
"Second Amended and Restated Revolving Credit Note" means a promissory
note of the Borrower payable to the order of each Lender in a maximum principal
amount equal to the amount of such Lender's Revolving Credit Commitment, in
substantially the form of Exhibit B, evidencing the aggregate Indebtedness of
the Borrower to such Lender resulting from the Revolving Credit Loans (and, in
the case of the Swing Bank, its Swing Loans) made by such Lender, as such
promissory note may be amended, supplemented or otherwise modified from time to
time.
"Second Amended and Restated Security Agreement" means an agreement, in
substantially the form of Exhibit C, executed by the Borrower and CUSA, in its
capacity as the Agent, as such agreement may be amended, supplemented or
otherwise modified from time to time.
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"Secured Parties" has the meaning specified in the Second Amended and
Restated Security Agreement.
"Securitization Documents" means each agreement, document and
instrument entered into by the Borrower or Funding in connection with the
Receivables Securitization, including, without limitation, the Receivables
Purchase Agreement between the Borrower and Funding, dated as of November 4,
1994, and the subordinated promissory note of Funding in favor of the Borrower
made in connection therewith.
"Senior Mortgage Notes" means the Senior Mortgage Notes, which shall be
issued in exchange for not less than $162,500,000 in aggregate principal amount
of 1993 Notes and/or 1994 Notes and not more than $325,000,000 in aggregate
principal amount of 1993 Notes and/or 1994 Notes, to be issued by the Borrower.
"Settlement Date" has the meaning specified in Section 2.17.
"Solvent" means, with respect to any Person, that the value of the
assets of such Person (both at fair value and present fair saleable value) is,
on the date of determination, greater than the total amount of liabilities
(including, without limitation, contingent and unliquidated liabilities) of such
Person as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and does not have
unreasonably small capital. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities will be computed at the
amount which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"Stock" means shares of capital stock, beneficial, membership or
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation or equivalent entity, whether voting or
non-voting, and includes, without limitation, common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or
exchangeable for Stock and all warrants, options or other rights to purchase or
subscribe for any Stock, whether or not presently convertible, exchangeable or
exercisable.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity of which an aggregate of more than 50% of
the outstanding Stock having ordinary voting power to elect a majority of the
board of directors, managers, trustees or other controlling persons, is, at the
time, directly or indirectly, owned or controlled by such Person and/or one or
more Subsidiaries of such Person (irrespective of
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whether, at the time, Stock of any other class or classes of such entity shall
have or might have voting power by reason of the happening of any contingency).
"Swing Bank" means CUSA, or such other Lender who shall (a) also be the
Agent, or (b) agree with the Agent to act as Swing Bank.
"Swing Loan" means a Loan made by the Swing Bank to the Borrower
pursuant to Section 2.1(b).
"Swing Loan Available Credit" means the Swing Bank's Ratable Portion of
the Available Credit.
"Swing Loan Borrowing" means a borrowing consisting of a Swing Loan.
"Tangible Net Worth" of any Person means, at any date, the Net Worth of
such Person at such date, excluding, however, (a) from the determination of the
Total Assets of such Person at such date (to the extent the same are included in
the determination of Total Assets and without duplication), (i) all goodwill,
organizational expenses, research and development expenses, trademarks, trade
names, copyrights, patents, patent applications, licenses and rights in any
thereof, and other similar intangibles, (ii) all deferred charges or unamortized
debt discount and expense, (iii) all reserves carried and not deducted from
assets or carried as a liability, (iv) treasury stock and capital stock of such
Person and its Restricted Subsidiaries, and all obligations or other securities
of, or capital contributions to, or investments in or advances or loans to, any
Unrestricted Subsidiary of such Person or any of its Subsidiaries, (v)
securities which are not readily marketable, (vi) cash held in a sinking or
other analogous fund established for the purpose of redemption, retirement,
defeasance or prepayment of any Stock, (vii) any write-up in the book value of
any asset resulting from a revaluation thereof, and (viii) any items not
included in clauses (i) through (vii) above which are treated as intangibles in
conformity with GAAP, and (b) the carrying value of all outstanding Cumulative
Preferred Stock."
"Tax Affiliate" means, as to any Person, any Affiliate of such Person
with which such Person files or is eligible to file consolidated, combined or
unitary tax returns.
"Tax Returns" has the meaning specified in Section 4.3.
"Taxes" has the meaning specified in Section 2.14(a).
"Termination Date" means the earlier of (a) May 14, 2000 and (b) the
date of termination in whole of the Revolving Credit Commitments pursuant to
Section 2.4 or 8.2.
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"Title IV Plan" means a Pension Plan, other than a Multiemployer Plan,
which is covered by Title IV of ERISA.
"Total Assets" of any Person means, at any date, the total assets of
such Person and its Restricted Subsidiaries at such date determined on a
consolidated basis in accordance with GAAP.
"Total Liabilities" of any Person means, at any date, the total
liabilities of such Person and its Restricted Subsidiaries at such date
determined on a consolidated basis in accordance with GAAP.
"Unfunded Pension Liability" means, as of any determination date, the
aggregate amount, if any, of the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions in effect under such Title IV
Plan.
"Unrestricted Subsidiary" means any Subsidiary which is not a
Restricted Subsidiary.
"Voting Stock" means with respect to any Person, the Stock or other
securities of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the board of directors
of such Person (or Persons performing similar functions).
"Warrants" means the Borrower's warrants, dated the date of issuance of
the Cumulative Preferred Stock, each of which is exercisable into one share of
the Borrower's Class A Common Stock (or such other class of the Borrower's Stock
having rights (other than voting rights) substantially equivalent to the
Borrower's Class A Common Stock).
"Welfare Benefit Plan" means an employee welfare benefit plan, as
defined in Section 3(1) of ERISA, to which any Loan Party maintains, contributes
to, or contributed to prior to the Closing Date, or has an obligation to
contribute to, on behalf of its former or active employees (or their
beneficiaries).
1.2. Computation of Time Periods. In this Agreement, in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding" and the word "through" means "to and including".
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1.3. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in accordance with GAAP.
1.4. Certain Terms. (a) The words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole, and not to
any particular Article, Section, subsection or clause in this Agreement.
References herein to an Exhibit, Schedule, Article, Section, subsection or
clause refer to the appropriate Exhibit or Schedule to, or Article, Section,
subsection or clause in, this Agreement.
(b) The terms "Lender," "Issuer" and "Agent" include their
respective successors and the term "Lender" or "Issuer" includes each assignee
of such Lender or such Issuer who becomes a party hereto pursuant to Section
10.7.
(c) For purposes of Articles IV and VI only, the terms "Loan
Party" and "Subsidiary" shall include an Unrestricted Subsidiary only if the
consequences of such inclusion (i) in the case of a representation or warranty
contained in Article IV, would cause a breach thereof, the circumstances of
which would have a Material Adverse Effect, and (ii) in the case of a covenant
contained in Article VI, would, upon a breach of such covenant due to such
inclusion, have a Material Adverse Effect.
(d) Any Default or Event of Default which occurred on a
specified date or during a specified period (such as a date or period specified
in Article V) shall not be "continuing" or "in continuance" if, as of any
subsequent date or for any subsequent period of determination, the Default or
Event of Default no longer exists even though the Default or Event of Default
occurred on the former date or for the former period of determination.
(e) The phrase "the date hereof" and other words of similar
import means May 14, 1996.
ARTICLE II
AMOUNTS AND TERMS OF THE REVOLVING CREDIT LOANS
2.1. The Loans.
(a) The Revolving Credit Loans. On the terms and subject to
the conditions contained in this Agreement, each Lender severally agrees to make
loans (each a "Revolving Credit Loan") to the Borrower from time to time on any
Business Day during
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the period from the date hereof until the Termination Date in an aggregate
amount not to exceed at any time outstanding such Lender's Revolving Credit
Commitment; provided, however, that at no time (except as provided for in
Section 2.13(c)), shall any Lender be obligated to make a Revolving Credit Loan
in excess of such Lender's Ratable Portion of the Available Credit. Each Lender
agrees to make Revolving Credit Loans in accordance with Section 2.17. Within
the limits of each Lender's Revolving Credit Commitment, until the Termination
Date, amounts prepaid pursuant to Section 2.6 may be reborrowed under this
Section 2.1(a) and Section 2.17. The Revolving Credit Loans of each Lender shall
be evidenced by a Second Amended and Restated Revolving Credit Note payable to
the order of such Lender.
(b) The Swing Loans. The Swing Bank, in its sole discretion,
on the terms and subject to the conditions contained in this Agreement, may make
loans (each a "Swing Loan") to the Borrower from time to time on any Business
Day during the period from the date hereof until the Termination Date as
provided herein and in lieu of the making of Revolving Credit Loans in an
aggregate amount not to exceed at any time outstanding (except as provided for
in Section 2.13(c)), the lesser of (i) the Swing Loan Available Credit or (ii)
the difference between (x) the Swing Bank's Revolving Credit Commitment and (y)
the sum of the aggregate outstanding principal amount of the Swing Loans and the
Revolving Credit Loans made by the Swing Bank and the Swing Bank's Ratable
Portion of the outstanding Letter of Credit Obligations. The Swing Bank shall be
entitled to rely on the most recent Borrowing Base Certificate delivered to the
Agent. Within the limits set forth in clauses (i) and (ii) in the first sentence
of this Section 2.1(b), amounts prepaid pursuant to Section 2.6 may be
reborrowed under this Section 2.1(b).
2.2. Making the Loans. (a) Except as provided in Section 2.17, each
Revolving Credit Borrowing shall be made on written notice, given by the
Borrower to the Agent not later than 11:00 A.M. (New York City time) (i) on the
Business Day of the proposed Revolving Credit Borrowing, in the case of Base
Rate Loans, and (ii) on the fourth Business Day prior to the date of the
proposed Revolving Credit Borrowing, in the case of Eurodollar Rate Loans. Each
such notice (a "Notice of Borrowing") shall be in substantially the form of
Exhibit G and executed by a Responsible Officer, specifying therein (A) the date
of such proposed Revolving Credit Borrowing, (B) the aggregate amount of such
proposed Revolving Credit Borrowing, (C) the amount thereof, if any, requested
to be Eurodollar Rate Loans, (D) the initial Interest Period for any such
Eurodollar Rate Loans, and (E) that the proposed Revolving Credit Borrowing does
not, to the knowledge of the Responsible Officer executing such notice, exceed
the Available Credit. The Revolving Credit Loans shall be made as Base Rate
Loans unless (subject to Section 2.11) the Notice of Borrowing specifies that
all or a pro rata portion thereof shall be Eurodollar Rate Loans; provided,
however, that the aggregate of the Eurodollar Rate
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Loans for each Interest Period must be in an amount of not less than $8,000,000
or an integral multiple of $1,000,000 in excess thereof. No later than 4:00 P.M.
(New York City time) on the second Business Day prior to a proposed Revolving
Credit Borrowing consisting in whole or in part of Eurodollar Rate Loans, the
Agent shall notify the Borrower of the Eurodollar Rate(s) applicable to such
proposed Eurodollar Rate Loans.
(b) Each Swing Loan Borrowing shall be made upon such notice
as the Swing Bank and the Borrower shall agree. All Swing Loan Borrowings shall
be made as Base Rate Loans.
(c) The Agent shall give to each Lender prompt notice (but in
any event on or prior to 12:00 noon (New York City time) on the date of the
proposed Revolving Credit Borrowing) of the Agent's receipt of a Notice of
Borrowing with respect to Revolving Credit Loans and, if Eurodollar Rate Loans
are properly requested in such Notice of Borrowing, the applicable interest rate
under Section 2.8(b) and the applicable Interest Period. Each Lender shall,
before 1:00 P.M. (New York City time) on the date of the proposed Revolving
Credit Borrowing, make available for the account of its Applicable Lending
Office to the Agent at its address referred to in Section 10.2, in immediately
available funds, such Lender's Ratable Portion of such proposed Revolving Credit
Borrowing. After the Agent's receipt of such funds, the Agent will (i) upon
fulfillment of the applicable conditions set forth in Article III, make such
funds available to the Borrower as soon as is customarily practicable, by
depositing the same in the bank account referred to in Section 6.18(b) or as the
Borrower shall otherwise direct, or (ii) if the applicable conditions set forth
in Article III have not been so fulfilled, promptly notify the Borrower of such
determination. In the event a Loan is not made to the Borrower, the Agent shall
promptly return to each Lender the funds delivered to it pursuant to this
Section 2.2(c) in respect of such Loan. Each Revolving Credit Borrowing shall be
in an aggregate amount of not less than $100,000.
(d) Each Notice of Borrowing shall be irrevocable and binding
on the Borrower; provided, however, that the Borrower may revoke a Notice of
Borrowing in respect of requested Eurodollar Rate Loans within one hour of
receipt of the notice contemplated in the last sentence of Section 2.2(a).
(e) In the case of any proposed Revolving Credit Borrowing
which the related Notice of Borrowing specifies is to be comprised of Eurodollar
Rate Loans, the Borrower shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to fulfill on the
date specified in such Notice of Borrowing for such proposed Revolving Credit
Borrowing the applicable conditions set forth in Article III, including, without
limitation, any loss, cost or expense incurred by reason of
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the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund any Eurodollar Rate Loan to be made by such Lender as part of
such proposed Revolving Credit Borrowing when such Eurodollar Rate Loan, as a
result of such failure, is not made on such date.
(f) Unless the Agent shall have received notice from a Lender
prior to the date of any proposed Revolving Credit Borrowing that such Lender
will not make available to the Agent such Lender's Ratable Portion of such
Revolving Credit Borrowing, the Agent may assume that such Lender has made such
Ratable Portion available to the Agent on the date of such Revolving Credit
Borrowing in accordance with this Section 2.2 and the Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such Ratable Portion available to the Agent, such Lender and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, the interest rate applicable at the
time to the Revolving Credit Loans comprising such Revolving Credit Borrowing
and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender
shall repay to the Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Revolving Credit Loan as part of such Revolving Credit
Borrowing for purposes of this Agreement. If the Borrower shall repay to the
Agent such corresponding amount, such payment shall not relieve such Lender of
any obligation it may have hereunder.
(g) The failure of any Lender to make the Revolving Credit
Loan to be made by it as part of any Revolving Credit Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its
Revolving Credit Loan on the date of such Revolving Credit Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Revolving Credit Loan to be made by such other Lender on the date of any
Revolving Credit Borrowing.
2.3. Fees. (a) The Borrower agrees to pay to each Lender a commitment
fee (the "Commitment Fee") on the average daily unused portion of such Lender's
then effective Revolving Credit Commitment from the date hereof until the
Termination Date at the rate of 0.50% per annum, computed in arrears on (i) the
first day of each month during the term of such Lender's Revolving Credit
Commitment, commencing on the first day of the first month after the date
hereof, and (ii) on the Termination Date, which fees shall automatically and
without further action on the part of the Borrower or compliance with any other
terms hereof be added to the outstanding principal amount of the Revolving
Credit Loans that are Base Rate Loans.
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(b) The Borrower has agreed to pay to CUSA additional fees,
the amount and dates of payment of which are embodied in a separate agreement
between the Borrower and CUSA.
2.4. Reduction and Termination of the Commitments. The Borrower may (a)
upon notice to the Agent no later than 10:00 A.M. (New York City time) on the
date of termination, in the case of a termination, and (b) upon at least one
Business Day's prior notice to the Agent, in the case of a reduction, terminate
in whole or reduce ratably the portions of the respective Revolving Credit
Commitments of the Lenders in excess of the outstanding Loans and Letter of
Credit Obligations; provided, however, that each partial reduction shall be in
the aggregate amount of not less than $1,000,000 or an integral multiple of
$1,000,000 in excess thereof.
2.5. Repayment. The Borrower shall repay the entire unpaid principal
amount of the Loans on the Termination Date.
2.6. Prepayments. (a) The Borrower shall have no right to prepay the
principal amount of any Loan other than as provided in this Section 2.6.
(b) Other than with respect to prepayments pursuant to Section
2.6(c) and 2.6(d), the Borrower may, upon at least one Business Day's prior
written notice to the Agent, stating the proposed date and aggregate principal
amount of the prepayment, prepay the outstanding principal amount of the Loans
in whole or ratably in part; provided, however, that (i) any such prepayment
shall be applied first to the outstanding Swing Loans, next to the outstanding
Revolving Credit Loans that are Base Rate Loans and next to the outstanding
Eurodollar Rate Loans, (ii) any prepayment of any Eurodollar Rate Loan shall be
made on, and only on, the last day of an Interest Period for such Eurodollar
Rate Loan, and (iii) each prepayment of Revolving Credit Loans shall be in an
aggregate principal amount equal to the outstanding aggregate principal amount
thereof or, if such Loans are being prepaid in part, not less than $1,000,000 or
integral multiples of $1,000,000 in excess thereof. Upon the giving of such
notice of prepayment, the principal amount of the Loans specified to be prepaid
shall become due and payable on the date specified for such prepayment.
(c) If, to the knowledge of an officer of the Borrower, at any
time, the sum of the aggregate principal amount of the Loans and Letter of
Credit Obligations outstanding at such time exceeds the lowest of, (i) the
Revolving Credit Commitments, (ii) the Borrowing Base at such time and (iii) two
times the Borrower's EBITDA for the rolling twelve-month period ended on the
last day of the immediately preceding month, the Borrower shall forthwith prepay
the Swing Loans then outstanding in an amount equal to
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such excess, and if there are no Swing Loans outstanding or if such prepayment
of the Swing Loans does not eliminate such excess, the Revolving Credit Loans
that are Base Rate Loans then outstanding in an amount equal to such excess, and
if there are no Revolving Credit Loans that are Base Rate Loans outstanding or
if such prepayment of Revolving Credit Loans that are Base Rate Loans does not
eliminate such excess, the Revolving Credit Loans that are Eurodollar Rate Loans
then outstanding in an amount equal to such excess, and if there are no
Revolving Credit Loans that are Eurodollar Rate Loans outstanding or if such
prepayment of Revolving Credit Loans that are Eurodollar Rate Loans does not
eliminate such excess, to fund the L/C Cash Collateral Account (if there are any
Letters of Credit then outstanding) in an amount equal to the lesser of (i) such
excess, and (ii) the amount necessary to fully fund the L/C Cash Collateral
Account as contemplated by Section 8.3; provided, however, that if the excess of
the outstanding principal amount of the Loans and the Letter of Credit
Obligations over the Borrowing Base results solely from the establishment of
reserves by the Agent as contemplated by the definitions of "Borrowing Base",
"Eligible Receivables" and "Eligible Inventory" or the adjustments of advance
rates by the Agent as contemplated by the definition of "Borrowing Base" or the
determination by the Agent that certain Inventory or Accounts previously
included in a Borrowing Base Certificate are ineligible as contemplated by the
definitions of "Eligible Inventory" or "Eligible Receivables", then, in each
case, the mandatory prepayments required to be made by the Borrower pursuant to
this Section 2.6(c) attributable solely to such actions or determinations of the
Agent shall not be due and payable until five days after the Borrower is
notified of such action or determination by the Agent; provided that if such
fifth day is not a Business Day such amount shall be due and payable on the next
succeeding Business Day and further provided that during such five day (or
longer) period prior to the making of such prepayment the Banks shall have no
obligation to make Loans (except as provided in Section 2.17) or issue Letters
of Credit.
(d) Except as provided in Section 2.6(e) hereof, upon the
occurrence and during the continuance of an Event of Default or during a
Prepayment Period, all immediately available funds in the Blocked Account and,
upon the occurrence and during the continuance of an Event of Default, in
addition, in the Cash Collateral Account, shall be applied on the date on which
they are immediately available first to the outstanding principal amount of the
Swing Loans, next to the outstanding principal amount of the Revolving Credit
Loans that are Base Rate Loans, next to the outstanding principal amount of the
Revolving Credit Loans that are Eurodollar Rate Loans, and finally (if there are
any Letters of Credit then outstanding and then only to the extent the Available
Credit is insufficient to cover any drawings under such Letters of Credit, or if
there shall have occurred and be continuing any Event of Default) to fund the
L/C Cash Collateral Account pursuant to Section 8.3; provided, however, to the
extent there is any excess
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after application of such funds as described above and in the absence of the
occurrence and continuance of an Event of Default, such excess shall be
deposited in Borrower's operation account with Citibank (or an Affiliate
thereof) and provided further, however, and without limiting the generality of
the foregoing, that subject to the satisfaction of the applicable conditions set
forth in Section 3.3 (without regard to the minimum amount of Base Rate Loans),
the Borrower may, from time to time, borrow Swing Loans and Revolving Credit
Loans that are Base Rate Loans and deposit the proceeds thereof in the Cash
Collateral Account (to avoid the incurrence by any Lender of losses, costs or
expenses of the type described in Section 10.4(c) or otherwise) and the amount
so borrowed (i) shall not be applied to Revolving Credit Loans that are
Eurodollar Rate Loans and (ii) shall be deemed to have been repaid with the
funds in the Blocked Account and the Cash Collateral Account in accordance with
this Section 2.6(d).
(e) All proceeds of Collateral received by the Secured Parties
after the giving of notice to the Borrower pursuant to clause (a) or (b) of the
first sentence of Section 8.2 or the occurrence of an Event of Default specified
in Section 8.1(e) shall be applied first to fund the L/C Cash Collateral
Account, and if the L/C Cash Collateral Account has been fully funded pursuant
to Section 8.3, to pay any Swing Loans then outstanding together with accrued
interest thereon, and if no Swing Loans are outstanding, ratably, to pay, pari
passu, (i) all of the Revolving Credit Loans that are Base Rate Loans
outstanding together with accrued interest thereon, and if no such Revolving
Credit Loans or accrued interest are outstanding, to pay all of the Revolving
Credit Loans that are Eurodollar Rate Loans outstanding, if any, together with
accrued interest thereon, and (ii) all other Obligations hereunder and, finally,
to the person or persons legally entitled thereto.
2.7. Conversion/Continuation Option. The Borrower may elect (a) at any
time and from time to time to convert Revolving Credit Loans that are Base Rate
Loans or any portion thereof to Eurodollar Rate Loans, or (b) at the end of any
Interest Period with respect thereto, to convert Revolving Credit Loans that are
Eurodollar Rate Loans or any portion thereof into Base Rate Loans, or to
continue such Revolving Credit Loans that are Eurodollar Rate Loans or any
portion thereof for one or more additional Interest Periods; provided, however,
that the aggregate of the Eurodollar Rate Loans for each Interest Period
therefor must be in the amount of $8,000,000 or an integral multiple of
$1,000,000 in excess thereof. Each conversion or continuation shall be allocated
among the Revolving Credit Loans of all Lenders in accordance with their Ratable
Portion. Each such election shall be in substantially the form of Exhibit H
hereto (a "Notice of Conversion or Continuation") and shall be made by giving
the Agent at least three Business Days' prior written notice thereof specifying
(i) the amount and type of conversion or continuation, (ii) in the case of a
conversion to or a continuation of Eurodollar Rate Loans, the Interest Period
therefor, and (iii) in the case of a conversion,
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the date of conversion (which date shall be a Business Day and, if a conversion
from Eurodollar Rate Loans, shall also be the last day of the Interest Period
therefor). No conversion of any Swing Loan to a Eurodollar Rate Loan may be
made. The Agent shall promptly notify each Lender of its receipt of a Notice of
Conversion or Continuation and of the contents thereof. Notwithstanding the
foregoing, no conversion in whole or in part of Base Rate Loans to Eurodollar
Rate Loans, and no continuation in whole or in part of Eurodollar Rate Loans
upon the expiration of any Interest Period therefor, shall be permitted at any
time at which a Default or an Event of Default shall have occurred and be
continuing. If, within the time period required under the terms of this Section
2.7, the Agent does not receive a Notice of Conversion or Continuation from the
Borrower containing a permitted election to continue any Eurodollar Rate Loans
for an additional Interest Period or to convert any such Eurodollar Rate Loans,
then, upon the expiration of the Interest Period therefor, such Eurodollar Rate
Loans will be automatically converted to Base Rate Loans. Each Notice of
Conversion or Continuation shall be irrevocable and binding on the Borrower.
2.8. Interest. Each Loan shall bear interest on the unpaid principal
amount thereof from the date thereof until the principal amount thereof shall be
paid in full, at the following rates per annum:
(a) Base Rate Loans. For Base Rate Loans, at a rate per annum
equal at all times to the Applicable Base Rate Margin plus the Base Rate in
effect from time to time, computed in arrears monthly on the first day of each
month, on the Termination Date and on the date any Base Rate Loan is converted
or paid in full; provided, however, that during the continuance of an Event of
Default, all Base Rate Loans shall bear interest, payable on demand, at a rate
per annum equal at all times to 2.00% above the Base Rate in effect plus the
Applicable Base Rate Margin.
(b) Eurodollar Rate Loans. For Eurodollar Rate Loans, at a
rate per annum equal at all times during the applicable Interest Period for each
Eurodollar Rate Loan to the sum of the Eurodollar Rate for such Interest Period
plus the Applicable Eurodollar Rate Margin in effect on the first day of such
Interest Period, computed in arrears on the last day of such Interest Period;
provided, however, that during the continuance of an Event of Default, all
Eurodollar Rate Loans shall bear interest, payable on demand, at a rate per
annum equal at all times to 2.00% above the Eurodollar Rate in effect from time
to time plus the Applicable Eurodollar Rate Margin.
(c) Accrued interest shall, except as provided in Section
2.8(e), be paid by adding the same, automatically and without any action on the
part of the Borrower or any other Person, to the outstanding principal amount of
(i) the Swing Loans or Base Rate
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Loans, as the case may be, on the first day of each month, and (ii) Eurodollar
Rate Loans, on the last day of each Interest Period in respect thereof and, in
the case of a Eurodollar Rate Loan having an Interest Period of greater than
three months, on the first day of each month. The Agent will give timely
notification to the Borrower of all interest paid pursuant to this subsection
(c).
(d) The addition of interest to the principal amount of the
Loans pursuant to Section 2.8(c) shall not constitute the making of Loans for
purposes of Section 3.3.
(e) The Borrower shall, on the repayment of the Loans on the
Termination Date and on the date of any prepayment of Revolving Credit Loans
made in accordance with Section 2.6, pay, in cash, all accrued interest on the
outstanding principal amount of the Loans so repaid or prepaid.
2.9. Interest Rate Determination and Protection. (a) The Eurodollar
Rate for each Interest Period for Eurodollar Rate Loans shall be determined by
the Agent two Business Days before the first day of such Interest Period.
(b) The Agent shall give prompt notice to the Borrower and the
Lenders of the applicable interest rate determined by the Agent for purposes of
Section 2.8(b).
(c) If, with respect to Eurodollar Rate Loans, the Majority
Lenders notify the Agent that the Eurodollar Rate for any Interest Period
therefor will not adequately reflect the cost to such Lenders, or any
corporation controlling any of such Lenders, of making such Eurodollar Rate
Loans or funding or maintaining their respective Eurodollar Rate Loans for such
Interest Period, the Agent shall forthwith so notify the Borrower and the
Lenders, whereupon:
(i) each Eurodollar Loan of each Lender will
automatically, on the last day of the then existing Interest Period
therefor, convert into a Base Rate Loan; and
(ii) the obligations of all the Lenders to make
Eurodollar Rate Loans or to convert Base Rate Loans into Eurodollar
Rate Loans shall be suspended until the Agent shall notify the Borrower
that such Lenders have determined that the circumstances causing such
suspension no longer exist.
2.10. Increased Costs. If, due to either (a) the introduction of or any
change in or in the interpretation of any law or regulation after the date
hereof (other than any change by way of imposition or increase of reserve
requirements included in determining the
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Eurodollar Rate Reserve Percentage), or (b) compliance with any guideline or
request from any central bank or other Governmental Authority promulgated after
the date hereof (whether or not having the force of law), there shall be any
increase in the cost to any Lender of agreeing to make or making, funding or
maintaining any Eurodollar Rate Loans (and such Lender is not able to designate
a different Eurodollar Lending Office which will avoid or reduce such cost and
will not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender), then the Borrower shall from time to time, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender additional amounts sufficient to compensate
such Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrower and the Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error. If the Borrower
so notifies the Agent within five Business Days after any Lender notifies the
Borrower of any increased cost pursuant to the foregoing provisions of this
Section 2.10, the Borrower may either (i) prepay in full all Eurodollar Rate
Loans of all Lenders then outstanding in accordance with Section 2.6(b) and,
additionally, reimburse such Lender for such increased cost in accordance with
this Section 2.10 or (ii) convert all Eurodollar Rate Loans of all Lenders then
outstanding into Base Rate Loans, in accordance with Section 2.7 and,
additionally, reimburse such Lender for such increased cost in accordance with
this Section 2.10.
2.11. Illegality. Notwithstanding any other provision of this
Agreement, if the introduction of or any change in or in the interpretation of
any law or regulation after the date hereof shall make it unlawful, or any
central bank or other Governmental Authority shall after the date hereof assert
that it is unlawful, for any Lender or its Eurodollar Lending Office to make
Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate Loans
(and such Lender is not able to designate a different Eurodollar Lending Office
which will avoid or reduce such cost and will not, in the reasonable judgment of
such Lender, be otherwise disadvantageous to such Lender), then, on notice
thereof and demand therefor by such Lender to the Borrower through the Agent,
(a) the obligations of all the Lenders to make or to continue Eurodollar Rate
Loans and to convert Base Rate Loans into Eurodollar Rate Loans shall be
suspended until the Lender shall notify the Borrower and the Agent that such
Lender has determined that the circumstances causing such suspension no longer
exist, and (b) the Borrower shall forthwith prepay in full all Eurodollar Rate
Loans of all the Lenders then outstanding, together with interest accrued
thereon, unless the Borrower, within five Business Days of such notice and
demand, and notwithstanding Section 2.7, converts all Eurodollar Rate Loans of
all Lenders then outstanding into Base Rate Loans.
2.12. Capital Adequacy. As long as any of the Obligations or the
Revolving Credit Commitments remain outstanding, if (a) after the date hereof
the introduction of or
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any change in or in the interpretation of any law or regulation, (b) compliance
with any law or regulation hereinafter enacted or promulgated, or (c) compliance
with any guideline or request hereinafter promulgated or made from any central
bank or other Governmental Authority (whether or not having the force of law)
increases the amount of capital required or expected to be maintained by any
Lender or any Issuer or any corporation controlling any Lender or any Issuer and
such Lender or such Issuer reasonably determines that such amount is based upon
the existence of such Lender's or such Issuer's Revolving Credit Commitment,
Loans, Letters of Credit, Letter of Credit Obligations and other commitments and
loans of this type, including, without limitation, such Issuer's commitments in
respect of letters of credit (or similar contingent obligations), then, upon
demand by such Lender or such Issuer (with a copy of such demand to the Agent),
the Borrower shall pay to the Agent for the account of such Lender or such
Issuer, from time to time as specified by such Lender or such Issuer, additional
amounts sufficient to compensate such Lender or such Issuer in the light of such
circumstances, to the extent that such Lender or such Issuer reasonably
determines such increase in capital to be allocable to the existence of such
Lender's or such Issuer's Revolving Credit Commitment, Loans, Letters of Credit,
Letter of Credit Obligations and its agreements herein with respect to the
making, issuance or maintenance of any thereof. A certificate as to such amounts
submitted to the Borrower and the Agent by such Lender or such Issuer shall be
conclusive and binding for all purposes absent manifest error.
2.13. Payments and Computations. (a) The Borrower shall make each
payment and prepayment hereunder and under the Second Amended and Restated
Revolving Credit Notes not later than 11:00 A.M. (New York City time) on the day
when due, in Dollars, to the Agent at its address referred to in Section 10.2 in
immediately available funds without set-off or counterclaim. The Agent will
promptly thereafter cause to be distributed like funds relating to the payment
of principal of or interest on the Revolving Credit Loans or fees (other than
amounts payable pursuant to Sections 2.10, 2.11, 2.12, 2.14 or 2.16(h)) to the
Lenders, in accordance with their respective Ratable Portions, for the account
of their respective Applicable Lending Offices, and like funds relating to the
payment of any other amount payable to any Lender to such Lender for the account
of its Applicable Lending Office, in each case to be applied in accordance with
the terms of this Agreement; provided, however, that payment of principal
pursuant to Section 2.6(d) need not be distributed by the Agent prior to the
Settlement Date. With respect to Swing Loans, after receipt of payment of
principal of or interest thereon, the Agent will promptly distribute the same to
the Swing Bank for the account of its Applicable Lending Office. Payment
received by the Agent after 11:00 A.M. (New York City time) shall be deemed to
be received on the next Business Day.
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(b) Upon the occurrence and during the continuance of an Event
of Default or during a Prepayment Period, all amounts credited to the Blocked
Account and the Cash Collateral Account shall be applied by the Agent against
the outstanding balance of the Obligations in accordance with Sections 2.6(d)
and 2.6(e); provided, however, that in no event shall any such amount be
required to be applied by the Agent against the outstanding balance of the
Obligations unless and until such amount shall have been credited in immediately
available funds to the Blocked Account or the Cash Collateral Account.
(c) The Borrower hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made when due hereunder, to charge
from time to time against any or all of the Borrower's accounts with such Lender
or its Affiliates any amount so due or to treat any amounts due hereunder as
having been paid by proceeds of a Revolving Credit Borrowing. The Borrower and
the Lenders hereby authorize the Swing Bank to pay directly any amount due
hereunder and to treat such payment as a Swing Loan.
(d) All computations of interest and fees shall be made by the
Agent on the basis of a year of 360 days and the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest and fees are payable. Each determination by the Agent of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error or miscalculation thereof by the Agent in a manner inconsistent
with this Agreement; provided, however, that any objection to such calculations
shall be raised no later than 10 Business Days after receipt by the Borrower of
the Agent's customary monthly loan statement.
(e) Whenever any payment hereunder or under the Second Amended
and Restated Revolving Credit Notes shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of payment of interest or fee, as the case may be; provided,
however, that if such extension would cause payment of interest on or principal
of any Eurodollar Rate Loan to be made in the next calendar month, such payment
shall be made on the next preceding Business Day.
(f) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due hereunder to the Lenders
that the Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent the Borrower shall not have so
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made such payment in full to the Agent, each Lender shall repay to the Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Agent, at the
Federal Funds Rate.
2.14. Taxes. (a) Any and all payments by the Borrower hereunder or
under the Second Amended and Restated Revolving Credit Notes and Letter of
Credit Reimbursement Agreements shall be made, in accordance with Section 2.13,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, (i) in the case of each Lender, each Issuer and the
Agent, taxes measured by its net income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which such Lender, such Issuer or the Agent
(as the case may be) is organized or any political subdivision thereof, (ii) in
the case of each Lender and Issuer, taxes measured by its net income, and
franchise taxes imposed on it, by the jurisdiction of such Lender's or Issuer's
Applicable Lending Office or any political subdivision thereof, and (iii) in the
case of each Lender and Issuer organized under the laws of a jurisdiction
outside the United States, United States federal withholding tax payable with
respect to payments by the Borrower that would not have been imposed had such
Lender or Issuer, to the extent then required hereunder, delivered to the
Borrower or the Agent the forms prescribed by the first sentence of Section
2.14(f) (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder to any Lender or the Agent (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including, without limitation, deductions applicable to additional sums payable
under this Section 2.14) such Lender or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions, and (iii) the Borrower shall
pay the full amount deducted to the relevant taxing authority or other authority
in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges, duties or similar assessment or reserve, special deposit or similar
levies of the United States or any political subdivision thereof or any
applicable foreign jurisdiction which arise from any payment made by the
Borrower hereunder or under any Letter of Credit Reimbursement Agreement or
under any of the other Loan Documents or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any of the
other Loan Documents (hereinafter referred to as "Other Taxes").
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(c) The Borrower will indemnify each Lender, each Issuer and
the Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes and Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender, such Issuer or the Agent
(as the case may be) and any liability (including, without limitation, for
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted. The
Agent, each Lender and such Issuer agrees to promptly notify the Borrower of any
payment of the foregoing made by any of them and, if practicable, any request,
demand or notice received in respect thereof prior to such payment. This
indemnification shall be made within 30 days from the date such Lender, such
Issuer or the Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes, the Borrower will furnish to the Agent, at its address referred to
in Section 10.2, the original or a certified copy of a receipt evidencing
payment thereof.
(e) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.14 shall survive the payment in full of principal
and interest hereunder and under the Second Amended and Restated Revolving
Credit Notes and all Obligations in respect of Letter of Credit Reimbursement
Agreements.
(f) Prior to the Closing Date in the case of each Lender, and
on the date of the Assignment and Acceptance pursuant to which it becomes a
Lender in the case of each Eligible Assignee and from time to time thereafter if
either required by law due to a change in circumstances or reasonably requested
by the Borrower or the Agent (unless such Lender is unable to do so by reason of
a change in law (including, without limitation, any statute, treaty, regulation,
ruling, determination, guideline or policy) occurring subsequent to the Closing
Date or the date of the Assignment and Acceptance, as the case may be), each
Lender organized under the laws of a jurisdiction outside the United States
shall provide the Agent and the Borrower with an IRS Form 4224 or Form 1001 or
other applicable form, certificate or document prescribed by the IRS certifying
as to such Lender's entitlement to full exemption from United States withholding
tax with respect to all payments to be made to such Lender hereunder and under
the Second Amended and Restated Revolving Credit Notes and any Letter of Credit
Reimbursement Agreement. Unless the Borrower and the Agent have received forms
or other documents satisfactory to them indicating that payments hereunder or
under any Second Amended and Restated Revolving Credit Note or Letter of Credit
Reimbursement Agreement are not subject to United States withholding tax, the
Borrower or the Agent shall, in the case of payments for any such Lender
organized under the laws of a jurisdiction outside the United States,
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(i) withhold Taxes for such payments at the applicable statutory rate or at a
rate reduced by an applicable tax treaty (provided that the Borrower and the
Agent have received forms or other documents satisfactory to them indicating
that such reduced rate applies), and (ii) pay such Lender such payment net of
any Taxes withheld.
2.15. Sharing of Payments, Etc. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Revolving Credit Loans made by it (other than
pursuant to Sections 2.10, 2.11, 2.12, 2.14 or 2.16(h)) in excess of its Ratable
Portion of payments on account of the Revolving Credit Loans obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in their Revolving Credit Loans as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (a) the amount of
such Lender's required repayment to (b) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.15 may, to the fullest extent permitted by law,
exercise all its rights of payment (including, without limitation, the right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation.
2.16. Letter of Credit Facility. (a) On the terms and subject to the
conditions contained in this Agreement, each Issuer agrees promptly to issue one
or more Letters of Credit at the request of the Borrower for the account of the
Borrower from time to time during the period commencing on the date hereof and
ending 30 days prior to the Termination Date; provided, however, that no Issuer
shall issue any Letter of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator of which the Issuer is aware shall purport by
its terms to enjoin or restrain the Issuer from issuing such Letter of
Credit or any Requirement of Law applicable to the Issuer or any
request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuer shall
prohibit, or request that the Issuer refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or
shall impose upon the Issuer with respect to such Letter of Credit any
restriction or reserve or capital requirement (for which the Issuer is
not otherwise compensated) not in effect on
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the date hereof or result in any loss, cost or expense which (A) was
not applicable, in effect or known to the Issuer as of the date hereof
and which the Issuer in good faith deems material to it, and (B) the
reimbursement of which is not provided for hereunder;
(ii) the Issuer shall have received written notice
from the Agent or the Borrower, on or prior to the Business Day prior
to the requested date of issuance of such Letter of Credit, that one or
more of the applicable conditions contained in Article III is not then
satisfied;
(iii) after giving effect to the issuance of such
Letter of Credit, the Letter of Credit Obligations exceed $26,000,000;
(iv) the amount of the Letter of Credit requested
exceeds the Available Credit; or
(v) fees due in connection with a requested issuance
have not been paid.
None of the Lenders (other than a Lender which becomes the Issuer) shall have
any obligation to issue any Letters of Credit.
(b) In no event shall:
(i) the expiration date of any Letter of Credit be
more than (A) one year (or such longer period as agreed to by the Agent
in its sole discretion), in the case of a Letter of Credit that is a
standby letter of credit, or (B) 90 days (or such longer period as
agreed to by the Agent in its sole discretion), in the case of a Letter
of Credit that is a trade (documentary) letter of credit, after the
date of issuance thereof, nor shall the expiration date of any Letter
of Credit fall after 10 days prior to the Termination Date; or
(ii) the Issuer issue any Letter of Credit for the
purpose of supporting the issuance of any letter of credit by any other
Person other than as permitted by the Agent in its sole discretion.
(c) Prior to the issuance of each Letter of Credit, and as a
condition of such issuance and of the participation of each Lender (other than
the Issuer) in the Letter of Credit Obligations arising with respect thereto,
the Borrower shall have delivered to the Issuer, if requested by the Issuer, a
letter of credit reimbursement agreement, in a form
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satisfactory to the Issuer and the Borrower (a "Letter of Credit Reimbursement
Agreement"), signed by the Borrower, and such other documents or items as may be
required pursuant to the terms thereof. In the event of any conflict between the
terms of any Letter of Credit Reimbursement Agreement and this Agreement, the
terms of this Agreement shall govern.
(d) In connection with the issuance of each Letter of Credit,
the Borrower shall give the Issuer and the Agent at least four Business Days'
prior written notice (a "Letter of Credit Request"), in substantially the form
of Exhibit I of the requested issuance of such Letter of Credit. Such notice
shall be irrevocable and binding on the Borrower and shall specify (i) the
stated amount of the Letter of Credit requested, which stated amount shall not
be less than $100,000, (ii) the date of issuance of such requested Letter of
Credit (which day shall be a Business Day), (iii) the date on which such Letter
of Credit is to expire (which date shall be a Business Day and shall in no event
be later than 10 days prior to the Termination Date), (iv) the Person for whose
benefit the requested Letter of Credit is to be issued, and (v) such other terms
and conditions of the proposed Letter of Credit as are requested by the Borrower
and acceptable to the Issuer. Such notice, to be effective, must be received by
such Issuer and the Agent not later than 11:00 A.M. (New York City time) on the
last Business Day on which notice can be given under the immediately preceding
sentence. Prior to the close of business on the second Business Day following
the Business Day on which the Agent first received such notice, the Agent shall
confirm to the Issuer of the requested Letter of Credit that the applicable
conditions in Article III are satisfied.
(e) Subject to the terms and conditions of this Section 2.16
and provided that the applicable conditions set forth in Article III have been
satisfied, the Issuer shall, on the requested date, issue a Letter of Credit on
behalf of the Borrower in accordance with the instructions set forth in Section
2.16(d), the applicable Letter of Credit Request and the Issuer's usual and
customary business practices and in a final form satisfactory to the Borrower.
(f) Immediately upon the issuance by the Issuer of a Letter of
Credit in accordance with the terms and conditions of this Agreement, the Issuer
shall be deemed to have sold and transferred to each Lender, and each Lender
shall be deemed irrevocably and unconditionally to have purchased and received
from the Issuer, without recourse or warranty, an undivided interest and
participation, to the extent of such Lender's Ratable Portion, in such Letter of
Credit and the obligations of the Borrower with respect thereto (including,
without limitation, all Letter of Credit Obligations with respect thereto) and
any security therefor and guaranty pertaining thereto and each Lender's
Revolving Credit
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Commitment shall be deemed used to the extent of such Lender's Ratable Portion
of such Letter of Credit Obligations.
(g) In determining whether to pay under any Letter of Credit,
the Issuer shall not have any obligation relative to the Lenders other than to
confirm that any documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to comply on their face with
the requirements of such Letter of Credit. Any action taken or omitted to be
taken by the Issuer under or in connection with any Letter of Credit, if taken
or omitted in the absence of gross negligence or willful misconduct, shall not
put the Issuer under any resulting liability to any Lender.
(h) In the event that any Issuer makes any payment under any
Letter of Credit, the Issuer shall promptly notify the Agent, who shall promptly
notify each Lender, and each Lender shall promptly and unconditionally pay to
the Agent for the account of the Issuer the amount of such Lender's Ratable
Portion of such payment in Dollars and in same day funds (and upon receipt, the
Agent shall promptly pay the same to the Issuer), which payment shall be deemed
to be and shall constitute a Revolving Credit Loan that is a Base Rate Loan made
by such Lender to the Borrower; provided, however, that if the Swing Bank so
elects, and if a Swing Loan can be made in such amount, the Agent shall promptly
notify the Swing Bank of such payment by the Issuer, and the Swing Bank shall,
and the Borrower hereby authorizes the Swing Bank to, pay to the Agent for the
account of the Issuers the amount of such payment in Dollars and in same day
funds, which payment shall be deemed to be and shall constitute a Swing Loan
made by the Swing Bank to the Borrower. The Revolving Credit Loans shall be
made, or the Swing Loan may be made as contemplated in the preceding sentence
notwithstanding the Borrower's failure to satisfy the conditions set forth in
Section 3.3 (without regard to the minimum amount of Base Rate Loans). If the
Agent so notifies such Lender prior to 11:00 A.M. (New York City time) on any
Business Day, such Lender shall make available to the Agent for the account of
the Issuer its Ratable Portion of the amount of such payment on such Business
Day in same day funds. If and to the extent such Lender shall not have so made
such Lender's Ratable Portion of the amount of such payment available to the
Agent for the account of the Issuer, such Lender agrees to repay to the Agent
for the account of such Issuer forthwith on demand such amount together with
interest thereon, for each day from such date until the date such amount is
repaid to the Agent for the account of the Issuer, at the Federal Funds Rate.
The failure of any Lender to make available to the Agent for the account of the
Issuer its Ratable Portion of any such payment shall not relieve any other
Lender of its obligation hereunder to make available to the Agent for the
account of the Issuer its Ratable Portion of any payment on the date such
payment is to be made, but no Lender shall be responsible for the failure of any
other Lender to make available to the
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Agent for the account of the Issuer such other Lender's Ratable Portion of any
such payment.
(i) Whenever the Issuer receives a payment of a Reimbursement
Obligation pursuant to Section 2.16(l) as to which the Agent has received for
the account of the Issuer any payment from a Lender pursuant to Section 2.16(h),
the Issuer shall pay to the Agent and the Agent shall promptly pay to such
Lender, in same day funds, an amount equal to such Lender's Ratable Portion of
the amount so received and such payment shall be treated as a prepayment
pursuant to Section 2.6(b) (without regard to the minimum amount of prepayment
specified therein).
(j) Upon the request of any Lender, the Issuer shall furnish
to such Lender copies of any Letter of Credit Reimbursement Agreement to which
the Issuer is a party and such other documentation as may reasonably be
requested by such Lender.
(k) The obligations of the Lenders to make payments to the
Agent for the account of the Issuer with respect to Letters of Credit shall be
irrevocable and not subject to any qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances (except as expressly provided in Section 2.16(g)),
including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, set-off, defense or
other right which the Borrower may have at any time against a
beneficiary named in a Letter of Credit, any transferee of any Letter
of Credit (or any Person for whom any such transferee may be acting),
the Agent, the Issuer, any Lender or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including, without
limitation, any underlying transaction between the Borrower and the
beneficiary named in any Letter of Credit);
(iii) any draft, certificate or any other document
presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security
for the performance or observance of any of the terms of any of the
Collateral Documents; or
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(v) the occurrence of any Default or Event of Default.
(l) Notwithstanding Section 2.16(h), the Borrower may pay to
the Issuer the amount of all Reimbursement Obligations owing to the Issuer under
any Letter of Credit, irrespective of any claim, set-off, defense or other right
which the Borrower may have at any time against the Issuer or any other Person.
Any such payments shall be made no later than the date on which such payment by
the Issuer was made. If the Borrower does not pay any such Reimbursement
Obligation pursuant to this Section 2.16(l), such Reimbursement Obligation shall
immediately constitute, without necessity of further act or evidence, a loan
made by the Issuer payable on demand in an aggregate principal amount equal to
such Reimbursement Obligation remaining unpaid or, to the extent the Agent has
received any payments from Lenders for the account of such Issuer, Revolving
Credit Loans that are Base Rate Loans or Swing Loans, as the case may be,
pursuant to Section 2.16(h). If any payment made by or on behalf of the Borrower
and received by the Issuer with respect to any Letter of Credit pursuant to this
Section 2.16(l) is rescinded or must otherwise be returned by the Issuer for any
reason, each such Lender shall, upon notice by the Issuer, forthwith pay over to
the Issuer an amount equal to such Lender's Ratable Portion of the amount which
must be so returned by the Issuer or the Swing Bank may, upon notice to the
Issuer, forthwith pay over to the Issuer an amount equal to the amount which
must be returned by the Issuer, and such payments shall be deemed and constitute
Base Rate Loans or a Swing Loan, as the case may be, made to the Borrower.
(m) The Borrower agrees to pay the following amounts with
respect to Letters of Credit issued at its request:
(i) to the Agent for the ratable benefit of each
Lender who has purchased or has been deemed to have purchased
participations in the Letters of Credit, an administrative fee equal to
2.25% per annum of the maximum amount available from time to time to be
drawn under such Letter of Credit, subject to the Additional Equity
Adjustment I and the Additional Equity Adjustment II, computed monthly
in arrears on the first day of each month and on the termination of
such Letter of Credit, and calculated on the basis of a 360-day year
and the actual number of days elapsed, which amounts shall, without
further action on the part of the Borrower, be added to the outstanding
principal amount of the Revolving Credit Loans as Base Rate Loans;
provided, however, that during the continuance of an Event of Default,
such administrative fee shall increase by 2.00% per annum and shall be
payable on demand.
(ii) to the Agent for the benefit of the Issuer, an
administrative fee equal to 0.50% per annum of the maximum amount
available from time to time to
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be drawn under such Letter of Credit, computed monthly in arrears on
the first day of each month and on the termination of such Letter of
Credit, and calculated on the basis of a 360-day year and the actual
number of days elapsed; and
(iii) to the Issuer, with respect to the issuance,
amendment or transfer of each Letter of Credit and each drawing made
thereunder, documentary and processing charges in accordance with the
Issuer's standard schedule for such charges in effect at the time of
issuance, amendment, transfer or drawing, as the case may be.
(n) The Issuer agrees to forward to the Borrower copies of all
Letters of Credit issued on behalf of the Borrower and all correspondence to and
from the beneficiary and any advising or confirming bank thereof.
(o) Any Letter of Credit requested by the Borrower to be
issued by the Issuer may, at the request of such Issuer, and with the consent of
the Borrower, the Agent and the Majority Lenders, be issued by any Lender
pursuant to the provisions of this Agreement. In any such case, to the extent
applicable, references in this Agreement with respect to the Issuer regarding a
Letter of Credit shall be deemed to be references to such Lender issuing such
Letter of Credit pursuant to this Section 2.16(o).
(p) For purposes of this Agreement, the letter of credit No.
NY- 08681-30017302 dated May 19, 1995 issued by Citibank, N.A. to GATX Capital
Corporation under the Existing Credit Agreement and outstanding on the date
hereof, shall be deemed to be a Letter of Credit for all purposes hereunder and
to have been issued in compliance with Sections 2.16(a) and 2.16(b).
2.17. Settlement of Accounts. The Agent shall notify each Lender no
less frequently than weekly, as determined by the Agent, of the principal amount
of Swing Loans outstanding as of 1:00 P.M. (New York City time) as of such date
(the "Computation Date") and each Lender's Ratable Portion thereof. Each Lender
shall before 11:00 A.M. (New York City time) on the next Business Day (the
"Settlement Date") make available to the Agent, in immediately available funds,
the amount of its Ratable Portion of such principal amount of Swing Loans
outstanding. Upon such payment by a Lender, such Lender shall be deemed to have
made a Revolving Credit Loan as a Base Rate Loan to the Borrower,
notwithstanding any failure by the Borrower to satisfy the conditions contained
in Section 3.3 (without regard to the minimum amount of Base Rate Loans). The
Agent shall use such funds to repay the principal amount of Swing Loans to the
Swing Bank. All interest due on the Swing Loans shall be payable to the Swing
Bank in accordance with Sections 2.8 and 2.13.
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2.18. Payments to Lenders. The Lenders and Borrower agree that Swing
Loans may be made to allow the Agent to pay to each Lender on the first Business
Day of each month its share of fees and interest accrued on the Loans
outstanding hereunder in respect of the preceding month.
ARTICLE III
CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT
3.1. Conditions Precedent to Initial Loans and Letters of Credit. The
obligation of each Lender to continue to make Loans hereunder (or to make its
initial Loan hereunder, as the case may be) and of the Issuer to issue any
additional Letter of Credit issued hereunder is subject to satisfaction of the
conditions precedent that the Agent shall have received, on the Closing Date,
the following, each dated the Closing Date unless otherwise indicated, in form
and substance satisfactory to the Agent and (except for the Second Amended and
Restated Revolving Credit Notes) in sufficient copies for each Lender:
(a) Each of the Second Amended and Restated Revolving Credit
Notes, duly executed by the Borrower, payable to the order of each of the
Lenders, respectively.
(b) Certified copies of (i) the resolutions of the Board of
Directors of the Borrower approving each Loan Document and the transactions
contemplated thereby, and (ii) all documents evidencing other necessary
corporate action and required governmental approvals, licenses and consents with
respect to each Loan Document and the transactions contemplated thereby.
(c) A copy of the articles of incorporation of the Borrower,
certified as of a recent date by the Director of the Division of Corporations
and Commercial Code of the Department of Commerce of the State of Utah, together
with a certificate of such official as of a recent date attesting to the good
standing of the Borrower, and a copy of the articles of incorporation and the
by-laws of the Borrower certified as of the Closing Date by the Secretary or an
Assistant Secretary of the Borrower.
(d) A certificate of the Secretary or Assistant Secretary of
the Borrower certifying the names and true signatures of each Responsible
Officer of the Borrower who has executed and delivered any Loan Document or
other document required hereunder to be executed and delivered by or on behalf
of the Borrower.
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(e) The Second Amended and Restated Security Agreement, duly
executed by the Borrower, together with:
(i) acknowledgment copies of proper Financing Statements
(Form UCC-1) or amendments thereto (Form UCC-3) duly filed under the
Uniform Commercial Code in each jurisdiction as may be necessary or, in
the opinion of the Agent, desirable to continue perfection of the Lien
continued by the Second Amended and Restated Security Agreement;
(ii) certified copies of Requests for Information or
Copies (Form UCC-11), or equivalent reports, listing all other
effective financing statements which name the Borrower (under its
present name and/or previous name) as debtor and which are filed in the
jurisdictions referred to in said clause (i) above, together with
copies of such other financing statements (none of which, other than
those relating to the Receivables Securitization, shall cover the
Collateral purported to be covered by the Second Amended and Restated
Security Agreement);
(iii) evidence that the insurance required by the terms of
the Second Amended and Restated Security Agreement and by Section 6.4
is in full force and effect; and
(iv) acknowledgment copies of proper termination statements
(Form UCC-3) duly filed under the Uniform Commercial Code in each
jurisdiction as may be necessary to terminate any Liens with respect to
the Accounts repurchased by the Borrower pursuant to the Receivables
Securitization;
(f) The Second Amended and Restated Blocked Account Letter and
the Second Amended and Restated Cash Collateral Agreement, each duly executed by
the Borrower.
(g) A favorable opinion of (i) Kimball, Parr, Waddoups, Brown
& Gee, counsel to the Borrower, (ii) Howard, Darby & Levin, special New York
counsel to the Borrower, and (iii) Ken C. Johnsen, Esq., general counsel to the
Borrower, in substantially the form of Exhibits J, K and L, respectively, and as
to such other matters as any Lender through the Agent may reasonably request.
(h) A certificate of the chief financial officer of the
Borrower, stating that the Borrower is and would be Solvent after giving effect
to Revolving Credit Loans in an amount outstanding equal to the aggregate
Revolving Credit Commitments, the application of the proceeds thereof in
accordance with Section 6.10 and the payment of all
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estimated legal, investment banking, accounting and other fees related hereto.
(i) A certificate, signed by a Responsible Officer of the
Borrower, stating that the conditions specified in Sections 3.2(a) and (d) and
3.3 have been met.
(j) A copy of a letter from the Borrower's independent public
accountants, substantially in the form of Exhibit M.
(k) A copy of the Projections.
(l) The balance sheets of the Borrower as at March 31, 1996,
and the related statements of income, retained earnings and cash flow of the
Borrower for the six months then ended, certified by the chief financial officer
of the Borrower and prepared in conformity with GAAP.
(m) The Amendment Agreement.
(n) The letter referred to in Section 7.2(n) hereof.
(o) The letter from the Borrower to the Lenders referred to in
Section 4.6 hereof.
(p) Such additional documents, information and materials as
any Lender, through the Agent, may reasonably request.
3.2. Additional Conditions Precedent to Initial Loans and Initial
Letters of Credit. The obligation of each Lender to continue to make Loans
hereunder (or to make its initial Loan hereunder, as the case may be) and of any
Issuer to issue any additional Letter of Credit is subject to the further
conditions precedent that:
(a) On the Closing Date, the following statements shall be
true:
(i) There has been no Material Adverse Change since
September 30, 1995;
(ii) Since September 30, 1995, there has been no material
adverse change in the capital structure of the Borrower which has not
been disclosed to the Lenders and the Agent;
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(iii) The aggregate principal amount of Indebtedness of the
Borrower for or in respect of borrowed money outstanding (it being
understood that amounts payable by the Borrower under the Mannesmann
Agreement do not constitute such Indebtedness and without giving effect
to the obligations of the Borrower, if any, under the Securitization
Documents) does not exceed $390,000,000;
(iv) All necessary governmental and third party approvals
required to be obtained by the Borrower in connection with the
transactions contemplated hereby, including, without limitation, its
obtaining the Revolving Credit Loans and Letters of Credit, have been
obtained and remain in effect, and all applicable waiting periods have
expired without any action being taken by any competent authority which
restrains, prevents, impedes, delays or imposes materially adverse
conditions upon, the consummation of the transactions contemplated
hereby;
(v) There exists no judgment, order, injunction or other
restraint prohibiting or, in the reasonable judgment of the Lenders,
imposing any materially adverse conditions on the Borrower or the
consummation of the transactions contemplated hereby; and
(vi) There exists no claim, action, suit, investigation or
proceeding (including, without limitation, shareholder or derivative
litigation) pending or, to the knowledge of the Borrower, threatened in
any court or before any arbitrator or Governmental Authority which
relates to the financing hereunder or which has a reasonable likelihood
of having a Material Adverse Effect.
(b) All costs and accrued and unpaid fees and expenses
(including, without limitation, legal fees and expenses) required to be paid to
the Lenders on or before the Closing Date, including, without limitation, those
referred to in Sections 2.3 and 10.4, to the extent then due and payable, shall
have been paid.
(c) Nothing contained in any public disclosure made by the
Borrower after September 30, 1995 or in any information disclosed to the Lenders
by the Borrower shall lead any Lender, in its sole judgment, exercised
reasonably, to determine that the Borrower's condition (financial or otherwise),
operations, performance, properties or prospects are different in any materially
adverse respect from that contained in public filings (and other documents
delivered to the Agent prior to the date hereof) of the Borrower at such date.
(d) The Borrower's Tangible Net Worth shall be not less than
$82,000,000 as of the Closing Date.
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(e) No Lender in its sole judgment, exercised reasonably,
shall have determined (i) that there has been any Material Adverse Change since
September 30, 1995 or (ii) that there has occurred any adverse change which such
Lender deems material in the financial markets generally, since September 30,
1995 and nothing shall have occurred since September 30, 1995, which, in the
judgment of any Lender, has had a Material Adverse Effect.
(f) No Lender, in its sole judgment, exercised reasonably,
shall have determined that there is any claim, action, suit, investigation,
litigation or proceeding (including, without limitation, shareholder or
derivative litigation) pending or threatened in any court or before any
arbitrator or Governmental Authority which would have a Material Adverse Effect.
(g) The Borrower (i) shall have provided to the Agent copies
of all information requests under Section 104(e) of CERCLA, notices of
violation, inspection reports (or summaries thereof), consent agreements and
decrees, settlement agreements, and memoranda of understanding in respect of
Environmental Laws to which the Borrower or any of its Subsidiaries has been
subject or to which any of them is a party, together with all correspondence
from the Borrower related thereto, in each case, since September 30, 1995, and
(ii) as of the Closing Date, shall have disclosed to the Agent all budgeted
Capital Expenditures expected to exceed $1,000,000, projected as of such date to
be made in respect of Remedial Actions.
3.3. Conditions Precedent to Each Loan and Letter of Credit. The
obligation of each Lender to make any Loan (including any Loan being made by
such Lender on the Closing Date) and of any Issuer to issue any Letter of Credit
shall be subject to the further conditions precedent that:
(a) The following statements shall be true on the date of such
Loan or issuance, both before and after giving effect thereto and to the
application of the proceeds therefrom (and the acceptance by the Borrower of the
proceeds of such Loan or by the beneficiary thereof or its designee of such
Letter of Credit shall constitute a representation and warranty by the Borrower
that on the date of such Loan or such issuance such statements are true):
(i) The representations and warranties of the
Borrower contained in Article IV and of each Loan Party in the other
Loan Documents are correct on and as of such date as though made on and
as of such date or, as to those representations and warranties limited
by their terms to a specified date, were correct on and as of such
date; and
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(ii) No Default or Event of Default is continuing or
would result from the Loans being made or the Letter of Credit being
issued on such date.
(b) The making of the Loans or the issuance of such Letter of
Credit on such date does not violate any Requirement of Law and is not enjoined,
temporarily, preliminarily or permanently.
(c) No Revolving Credit Loans shall be made if any Swing Loans
are outstanding unless the proceeds of such Revolving Credit Loans are being
used, in whole or in part, to repay in full the outstanding Swing Loans.
(d) The Agent shall have received such additional documents,
information and materials as any Lender or any Issuer, through the Agent, may
reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lenders, the Issuer and the Agent to enter into
this Agreement, the Borrower represents and warrants to the Lenders, the Issuer
and the Agent that:
4.1. Corporate Existence; Compliance with Law. Each Loan Party (a) is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, (b) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where such
qualification is necessary, except for failures which in the aggregate would
have no Material Adverse Effect, (c) has all requisite corporate power and
authority and the legal right to own, pledge, mortgage and operate its
properties, to lease the property it operates under lease and to conduct its
business as now or currently proposed to be conducted, (d) is in compliance with
its articles of incorporation and by-laws, (e) is in compliance with all other
applicable Requirements of Law except for such non-compliances as in the
aggregate would have no Material Adverse Effect, and (f) has all necessary
licenses, permits, consents or approvals from or by, has made all necessary
filings with, and has given all necessary notices to, each Governmental
Authority having jurisdiction, to the extent required for such ownership,
operation and conduct, except for licenses, permits, consents or approvals which
can be obtained by the taking of ministerial action to secure the grant or
transfer thereof or failures which in the aggregate would have no Material
Adverse Effect.
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4.2. Corporate Power; Authorization; Enforceable Obligations. (a) The
execution, delivery and performance by each Loan Party of the Loan Documents to
which it is a party and the consummation of the transactions related to the
financing contemplated hereby:
(i) are within such Loan Party's corporate powers;
(ii) have been duly authorized by all necessary corporate
action, including, without limitation, the consent of stockholders
where required;
(iii) do not and will not (A) contravene any Loan Party's
articles of incorporation or by-laws or other comparable governing
documents, (B) violate any other applicable Requirement of Law
(including, without limitation, Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System), or any order or decree of
any Governmental Authority or arbitrator, (C) conflict with or result
in the breach of, or constitute a default under, or result in or permit
the termination or acceleration of, any Contractual Obligation of any
Loan Party, or (D) result in the creation or imposition of any Lien
upon any of the property of any Loan Party, other than those in favor
of the CUSA pursuant to the Second Amended and Restated Security
Agreement; and
(iv) do not require the consent of, authorization by,
approval of, notice to, or filing or registration with, any
Governmental Authority or any other Person, other than (A)
informational filings made with the Securities and Exchange Commission
in the ordinary course of the Borrower's business, and (B) those which
have been obtained or made and copies of which have been or will be
delivered to the Agent pursuant to Section 3.1, each of which on the
Closing Date will be in full force and effect.
(b) This Agreement has been and each of the other Loan
Documents will have been upon delivery thereof, duly executed and delivered by
each Loan Party party thereto. This Agreement is, and the other Loan Documents
will be, when delivered hereunder, the legal, valid and binding obligation of
each Loan Party party thereto, enforceable against such Loan Party in accordance
with their respective terms except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws or
equitable principles relating to or limiting creditors' rights generally.
4.3. Taxes. All federal and all material state, local and foreign tax
returns, reports and statements (collectively, the "Tax Returns") required to be
filed by the Borrower or any of its Tax Affiliates have been filed with the
appropriate governmental agencies in all
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jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns are true and correct in all material respects, and all taxes,
charges and other impositions due and payable have been timely paid prior to the
date on which any fine, penalty, loss or interest or late charge may be added
thereto for non-payment thereof (other than interest and late charges in an
aggregate amount not in excess of $500,000 for any Fiscal Year), except where
contested in good faith and by appropriate proceedings if (a) adequate reserves
therefor have been established on the books of the Borrower or such Tax
Affiliate in accordance with GAAP, and (b) the non-payment and contest thereof
and the establishment of such reserves in the aggregate are not reasonably
likely to have a Material Adverse Effect. To the Borrower's knowledge, proper
and accurate amounts have been withheld by the Borrower and each of its Tax
Affiliates from their respective employees for all periods in full and complete
compliance with the tax, social security and unemployment withholding provisions
of applicable federal, state, local and foreign law and such withholdings have
been timely paid to the respective Governmental Authorities. Except as disclosed
on Schedule 4.3 or disclosed after the Closing Date to the Agent in writing,
neither the Borrower nor any of its Tax Affiliates has (i) executed or filed
with the IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any charges, (ii) agreed or been requested to make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise, or (iii) any obligation under any written or oral tax sharing
agreement with any Person other than a Tax Affiliate (it being understood and
agreed that tax indemnification, reimbursement or gross-up obligations of the
type contained in Section 2.14 do not constitute tax sharing agreements).
4.4. Full Disclosure. No written statement prepared or furnished by any
Loan Party or any of its Affiliates in connection with any of the Loan Documents
or the consummation of the transactions contemplated thereby, and no financial
statement delivered pursuant hereto or thereto, contained, as of the date of
such statement, any untrue statement of a material fact or, as of the date of
such statement, omitted to state a material fact necessary to make the
statements contained herein or therein not misleading at the time such statement
was so prepared, furnished or delivered. All information and facts known to the
Borrower which the Borrower believes are material to an understanding of the
financial condition, business, properties or prospects of the Borrower and its
Subsidiaries taken as one enterprise, have been disclosed to the Lenders.
4.5. Financial Matters. (a) The balance sheet of the Borrower as at
September 30, 1995, and the related statements of income, retained earnings and
cash flow of the Borrower for the fiscal year then ended, certified by Arthur
Anderson LLP, and the balance sheets of the Borrower as at March 31, 1996, and
the related statements of income, retained earnings and cash flow of the
Borrower for the six months then ended,
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<PAGE> 60
certified by the chief financial officer of the Borrower, copies of which have
been furnished to each Lender, fairly present the financial condition of the
Borrower as at such dates and the results of the operations of the Borrower for
the period ended on such dates, all in conformity with GAAP.
(b) Since September 30, 1995, there has been no Material
Adverse Change and there have been no events or developments that in the
aggregate have had a Material Adverse Effect.
(c) The Borrower did not have at September 30, 1995 any
material obligation, contingent liability or liability for taxes, Long-Term
Leases or unusual forward or long-term commitment which is not reflected in the
Annual Report.
(d) The Borrower is, and the Borrower and its Subsidiaries
are, on a consolidated basis, Solvent.
4.6. Litigation. All pending and, to the Borrower's knowledge,
threatened actions or proceedings to which the Borrower is a party as of the
date hereof and involving claims against the Borrower related to the same
proceedings in excess of $500,000 are described in a separate letter from the
Borrower to the Lenders of even date herewith. There are no such pending or, to
the Borrower's knowledge, threatened actions, investigations or proceedings
affecting any Loan Party before any court, Governmental Authority or arbitrator,
other than those that in the aggregate, are not reasonably likely to have a
Material Adverse Effect. The performance of any action by any Loan Party
required or contemplated by any of the Loan Documents and the consummation of
the transactions contemplated thereby is not restrained or enjoined (either
temporarily, preliminarily or permanently), and no material adverse condition
has been imposed by any Governmental Authority or arbitrator upon any of the
foregoing transactions.
4.7. Margin Regulations. (a) No proceeds of any Revolving Credit
Borrowing will be used to acquire any margin security of a class which is
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended.
(b) The Borrower is not 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 proceeds of any Revolving Credit Borrowing will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
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<PAGE> 61
4.8. Ownership of Borrower; Subsidiaries. (a) As of the date hereof,
the authorized capital stock of the Borrower consists of (i) 60,000,000 shares
of Class A common stock, no par value per share, of which 13,359,847 shares are
issued and outstanding as of January 24, 1996, (ii) 50,000,000 shares of Class B
common stock, no par value per share, of which 19,151,348 shares are issued and
outstanding as of January 24, 1996, and (iii) 4,000,000 shares of Cumulative
Preferred Stock, of which 400,000 shares are issued and outstanding as of
January 24, 1996. All of the outstanding capital stock of the Borrower has been
validly issued, is fully paid and nonassessable. Except (x) as set forth in the
Borrower's Annual Report and Proxy Statement, and (y) for the Warrants, on the
date hereof (A) no authorized but unissued shares, no treasury shares and no
other outstanding shares of capital stock of the Borrower are subject to any
option, warrant, right of conversion or purchase or any similar right granted by
the Borrower, and (B) the Borrower is not a party to any agreement or
understanding with respect to the voting, sale or transfer of any shares of
capital stock of the Borrower.
(b) Schedule 4.8 lists each of the Borrower's Subsidiaries as
of the date hereof. Except as set forth on Schedule 4.8, as of the date hereof
the Borrower has no Subsidiaries, and does not own or hold, directly or
indirectly, any capital stock or equity security of, or any equity interest in,
any Person.
4.9. ERISA. (a) Schedule 4.9 sets forth by category all Plans, all
Qualified Plans and all unfunded Pension Plans and all other Plans subject to
Section 412 of the Code as of the date hereof. There are no Title IV Plans or
Multiemployer Plans as of the date hereof. Except as set forth on Schedule 4.9
hereto, there are no Welfare Benefit Plans that provide post-retirement life
insurance or medical benefits (other than continuation coverage required to be
provided pursuant to Section 4980B of the Code and which are required to be paid
100% by the recipient, the recipient's spouse or the recipient's parent) as of
the date hereof.
(b) Each Qualified Plan has received a favorable determination
letter from the IRS with respect to its qualification under Section 401 of the
Code, and the trusts created under each such Qualified Plan are exempt from tax
under the provisions of Section 501 of the Code, and to the knowledge of the
Borrower, nothing has occurred which would cause the loss of such qualification
or tax-exempt status.
(c) Each Plan (other than a Multiemployer Plan) is in
compliance in all material respects with applicable provisions of ERISA and the
Code, including, without limitation, the filing of reports required under the
Code or ERISA which are true and correct in all material respects as of the date
filed, and with respect to each such Plan, and
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<PAGE> 62
all required contributions and benefits have been paid in accordance with the
provisions of each such Plan.
(d) There are no pending or, to the knowledge of any Loan
Party, threatened claims, actions or lawsuits (other than claims for benefits in
the normal course) asserted or instituted against any Loan Party or ERISA
Affiliate with respect to a Title IV Plan. To the knowledge of the Borrower
there are no pending or threatened claims, actions or lawsuits (other than
claims for benefits in the normal course), asserted or instituted against (i)
any Plan or its assets, or (ii) any fiduciary with respect to any Plan.
(e) Within the last five years, no Loan Party or ERISA
Affiliate has engaged in a transaction which resulted in a Title IV Plan with
any Unfunded Pension Liability being transferred outside of the "controlled
group" (within the meaning of Section 4001(a)(14) of ERISA) of any such entity.
(f) Each Loan Party and each ERISA Affiliate has complied in
all material respects with the notice and continuation coverage requirements of
Section 4980B of the Code and the regulations thereunder.
(g) No Loan Party has engaged in a prohibited transaction, as
defined in Section 4975 of the Code or Section 406 of ERISA, in connection with
any Plan, which would subject or has any reasonable likelihood of subjecting any
Loan Party (after giving effect to any exemption) to a material tax on
prohibited transactions imposed by Section 4975 of the Code or any other
material liability.
(h) No Loan Party or any ERISA Affiliate has any liability
under any terminated "employee benefit plan", as defined in Section 3(2) of
ERISA, of any related or unrelated entity or any Multiemployer Plan other than
liability for benefit payments payable in the ordinary course.
(i) The present value of any liability as of the date hereof
with respect to any unfunded Pension Plan of each Loan Party is reflected on the
audited financial statements referred to in Section 4.5(a) or is provided on
Schedule 4.9, together with the assumptions utilized in the calculations.
(j) Except as set forth on Schedule 4.9, as supplemented from
time to time by the Borrower, none of the assets of any Plan (other than a
Multiemployer Plan) are invested in a guaranteed annuity contract with any
insurance company that is not rated the highest available rating by Standard &
Poor's Corporation, Moody's Investors Service and A.M. Best Company, Inc.
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4.10. Liens. There are no Liens of any nature whatsoever on any
properties of any Restricted Party other than Permitted Liens. The Liens granted
by the Borrower to the Agent, for the ratable benefit of the Secured Parties,
pursuant to the Collateral Documents are fully perfected first priority Liens in
and to the collateral described therein (other than Collateral consisting of
unidentifiable proceeds), subject only to Permitted Liens.
4.11. No Burdensome Restrictions; No Defaults. (a) No Loan Party is (i)
a party to any Contractual Obligation the compliance with which would have a
Material Adverse Effect or the performance of which by any Restricted Party,
either unconditionally or upon the happening of an event, will result in the
creation of a Lien (other than a Lien granted pursuant to the Collateral
Documents or other Permitted Liens) on the property or assets of any Restricted
Party, or (ii) subject to any charter or corporate restriction which is
reasonably likely to have a Material Adverse Effect.
(b) No Loan Party is, and, to the knowledge of the Borrower,
no other party is in default under (i) the 1993 Senior Notes Indenture, the
Senior Notes, the Exchange Debenture Indenture, the Exchange Debentures, the
1994 Senior Notes Indenture, or the 1994 Senior Notes, or (ii) any other
Contractual Obligation other than, in the case of this clause (ii), those
defaults which in the aggregate are not
reasonably likely to have a Material Adverse Effect.
(c) No Event of Default or Default has occurred and is
continuing.
(d) There is no Requirement of Law the compliance with which
by any Loan Party is reasonably likely to have a Material Adverse Effect.
4.12. No Other Ventures. No Restricted Party is engaged in any joint
venture or partnership with any other Person, except as permitted under Section
7.6.
4.13. Investment Company Act. The Borrower is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended. The making of the Loans by the Lenders, the
application of the proceeds and repayment thereof by the Borrower and the
consummation of the transactions contemplated by the Loan Documents will not
violate any provision of such Act or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
4.14. Insurance. All current policies of insurance of any kind or
nature owned by or issued to each Restricted Party, including, without
limitation, policies of life, fire, theft,
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<PAGE> 64
product liability, public liability, property damage, other casualty, employee
fidelity, workers' compensation and employee health and welfare insurance, are
in full force and effect and are of a nature and provide such coverage as is
sufficient and as is customarily carried by companies of the size and character
of such Restricted Party. The Borrower has no reason to believe that it will be
unable to comply with Section 6.4.
4.15. Labor Matters. (a) There are no strikes, work stoppages,
slowdowns or lockouts pending or, to the Borrower's knowledge, threatened,
against or involving any Loan Party, other than those which in the aggregate
have no reasonable likelihood of having a Material Adverse Effect.
(b) There are no arbitrations or grievances pending against or
involving any Loan Party, nor to the Borrower's knowledge are there any
arbitrations or grievances threatened involving any Loan Party, other than those
which, in the aggregate, have no reasonable likelihood of having a Material
Adverse Effect.
(c) Except as set forth in the Borrower's Annual Report, as of
the date hereof no Loan Party is a party to, and has no obligations under, any
collective bargaining agreement.
(d) There is no organizing activity involving any Loan Party
pending or, to the Borrower's knowledge, threatened, by any labor union or group
of employees, other than those which in the aggregate have no reasonable
likelihood of having a Material Adverse Effect. There are no representation
proceedings pending or, to the Borrower's knowledge, threatened with the
National Labor Relations Board, and no labor organization or group of employees
of any Loan Party has made a pending demand on the Borrower for recognition,
other than those which in the aggregate have no reasonable likelihood of having
a Material Adverse Effect.
(e) There are no unfair labor practice charges, grievances or
complaints pending or in process or, to the Borrower's knowledge, threatened, by
or on behalf of any employee or group of employees of any Loan Party, other than
those which in the aggregate have no reasonable likelihood of having a Material
Adverse Effect.
(f) There are no complaints or charges against any Loan Party
pending or, to the Borrower's knowledge, threatened to be filed with any
federal, state or local court, governmental agency or arbitrator based on,
arising out of, in connection with, or otherwise relating to the employment by
any Loan Party of any individual, other than those which in the aggregate have
no reasonable likelihood of having a Material Adverse Effect.
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<PAGE> 65
(g) Each Loan Party is in compliance with all laws, and all
orders of any court, Governmental Authority or arbitrator, relating to the
employment of labor including all such laws relating to wages, hours, collective
bargaining, discrimination, civil rights, and the payment of withholding and/or
social security and similar taxes, other than those the non-compliance with
which in the aggregate would have no Material Adverse Effect.
4.16. Force Majeure. Neither the business nor the properties of any
Loan Party are currently suffering from the effects of any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), other than those the consequences of
which in the aggregate would have no Material Adverse Effect.
4.17. Use of Proceeds. The proceeds of the Loans and the Letters of
Credit are being used by the Borrower solely for (a), in the case of the Loans,
(x) the continuance of all outstanding Indebtedness incurred under the Existing
Credit Agreement, and (y) the repurchase of the Accounts conveyed to Funding
pursuant to the Receivables Securitization and to thereby terminate the
Receivables Securitization, and/or (b) in the case of the Loans and the Letters
of Credit, general working capital and corporate purposes.
4.18. Environmental Protection. (a) The operations of each Loan Party
and, to the Borrower's knowledge, its tenants comply with all applicable
Environmental Laws other than such non-compliance the consequences of which in
the aggregate would not give rise to any Environmental Liabilities and Costs
that are reasonably likely to have a Material Adverse Effect;
(b) Each Loan Party has obtained all environmental, health and
safety Permits necessary for its operations, and all such Permits are in good
standing and the Borrower is in compliance with the terms and conditions of such
Permits other than such failures to obtain, lack of good standing and
non-compliance the consequences of which in the aggregate would give rise to any
Environmental Liabilities and Costs that are not reasonably likely to have a
Material Adverse Effect;
(c) No Loan Party has currently or previously owned or leased
real property or operations subject to any threatened or outstanding order or
judgment from, or consent decree or similar agreement in response thereto with,
any Governmental Authority or other Person or subject to any judicial or
docketed administrative proceeding respecting (i) Environmental Laws, (ii)
Remedial Action, or (iii) any Environmental Liabilities and Costs arising from a
Release or threatened Release, other than those the consequences of
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<PAGE> 66
which in the aggregate would give rise to any Environmental Liabilities and
Costs that are not reasonably likely to have a Material Adverse Effect;
(d) There are no conditions or circumstances associated with
the currently or previously owned or leased real property or operations of any
Loan Party or, to the Borrower's knowledge, their respective tenants, which
would give rise to any Environmental Liabilities and Costs other than those
which in the aggregate are not reasonably likely to have a Material Adverse
Effect;
(e) No Loan Party owns or operates a treatment, storage or
disposal facility requiring a permit under the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq., the regulations thereunder or any
state analog. Each Loan Party is in compliance with all applicable financial
responsibility requirements of all Environmental Laws, including, without
limitation, those contained in 40 C.F.R., parts 264 and 265, subpart H, and any
state equivalents;
(f) No Loan Party has failed to file any notice required under
any applicable Environmental Law reporting a Release, the consequences of which
in the aggregate would give rise to Environmental Liabilities and Costs that
would have a Material Adverse Effect;
(g) No Environmental Lien and, to the Borrower's knowledge, no
unrecorded Environmental Lien has attached to any property owned, leased or
operated by any Loan Party, except as permitted by Section 7.1(k); and
(h) There is not now on or in the property owned, leased or
operated by any Loan Party (i) any underground storage tanks or surface
impoundments, (ii) any polychlorinated biphenyls ("PCBs") used in electrical or
other equipment, or (iii) to the knowledge of the Borrower, any
asbestos-containing material, the existence of any of which is reasonably likely
to have a Material Adverse Effect.
4.19. Intellectual Property. Each Loan Party owns or licenses or
otherwise has the right to use all material licenses, permits, patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, copyright applications, franchises, authorizations and other
intellectual property rights that are necessary for the operations of its
businesses, without infringement upon or conflict with the rights of any other
Person with respect thereto, including, without limitation, all trade names. To
the knowledge of the Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by any Loan Party infringes upon or conflicts with
any rights owned by any
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other Person, which infringement or conflict is reasonably likely to have a
Material Adverse Effect, and no claim or litigation regarding any of the
foregoing is pending or, to the Borrower's knowledge, threatened, the existence
of which is reasonably likely to have a Material Adverse Effect. No patent,
invention, device, application, principle or any statute, law, rule, regulation,
standard or code is pending or, to the knowledge of the Borrower, proposed,
other than those the consequences of which in the aggregate have no reasonable
likelihood of having a Material Adverse Effect.
4.20. Title. (a) Each Restricted Party has good and marketable title to
all of the Real Estate purported to be owned by it, which Real Estate is at the
date hereof described on Schedule 4.20(a), and good title to, or valid leasehold
interests in, all other properties and assets purported to be owned by such
Restricted Party, including, without limitation, valid leasehold interests
pursuant to the Leases and all property reflected in the balance sheet referred
to in Section 4.5(a), and none of such properties and assets, including, without
limitation, the Real Estate and the Leases, is subject to any Lien, except
Permitted Liens. Each Restricted Party has received all deeds, assignments,
waivers, consents, non-disturbance and recognition or similar agreements, bills
of sale and other documents, and has duly effected all recordings, filings and
other actions necessary to establish, protect and perfect its right, title and
interest in and to all such property as are necessary for the continued use and
operation thereof in the manner currently being used and operated.
(b) All real property leased at the date hereof by the
Restricted Parties which is material to the operations of the Borrower, and the
termination dates of the related leases, are listed on Schedule 4.20(b). Each of
the Leases is valid and enforceable in accordance with its terms and is in full
force and effect. The Borrower has, to the extent so requested by the Agent,
delivered to the Agent true and complete copies of each of the Leases and all
documents affecting the rights or obligations of each Loan Party which is a
party thereto, including, without limitation, any non-disturbance and
recognition agreements, subordination agreements, attornment agreements and
agreements regarding the term or rental of any of the Leases. No Loan Party and,
to the knowledge of the Borrower, no other party to any Lease is in default of
its obligations thereunder or has delivered or received any notice of default
under any such Lease, nor has any event occurred which, with the giving of
notice, the passage of time or both, would constitute a default under any such
Lease, except for defaults the consequences of which in the aggregate are not
reasonably likely to have a Material Adverse Effect.
(c) As of the date hereof, no Restricted Party owns or holds,
or is obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell, assign or dispose of any real
property owned or leased by such Restricted Party having an aggregate Fair
Market Value in excess of $3,000,000.
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(d) All components of all improvements included within the
real property owned or leased by each Restricted Party (hereinafter collectively
referred to as the "Improvements"), including, without limitation, the roofs and
structural elements thereof and the heating, ventilation, air conditioning,
plumbing, electrical, mechanical, sewer, waste water, storm water, paving and
parking equipment, systems and facilities included therein, which are necessary
to the conduct of its business, are in good working order and repair, except
where the failure to be in such order and repair is not reasonably likely to
have a Material Adverse Effect. All water, gas, electrical, steam, compressed
air, telecommunication, sanitary and storm sewage lines and systems and other
similar systems serving the real property owned or leased by each Restricted
Party, which are necessary to the conduct of its business, are installed and
operating and are sufficient to enable the real property owned or leased by such
Restricted Party to continue to be used and operated in the manner currently
being used and operated, and the Borrower has no knowledge of any factor or
condition that could result in a termination or impairment of the furnishing
thereof that is not reasonably likely to have a Material Adverse Effect. No
material Improvement or portion thereof is dependent for its access, operation
or utility on any land, building or other Improvement (other than public streets
and roads) not included in the real property owned or leased by a Restricted
Party.
(e) All Permits required to have been issued or appropriate to
enable all real property owned or leased by each Loan Party to be lawfully
occupied and used for all of the purposes for which they are currently occupied
and used, have been lawfully issued and are in full force and effect, other than
such failures the consequences of which in the aggregate are not reasonably
likely to have a Material Adverse Effect.
(f) No Restricted Party has received any notice, nor does the
Borrower have any knowledge of, any pending, threatened or contemplated
condemnation proceeding affecting any real property owned or leased by any
Restricted Party or any part thereof which is material to the operation its
business, or any proposed termination or impairment of any parking at any such
real property or of any sale or other disposition of such real property or any
part thereof in lieu of condemnation.
(g) No portion of any real property owned or leased by any
Loan Party which is material to the operation of its business has suffered any
material damage by fire or other casualty loss which is not covered by insurance
or which has not heretofore been completely repaired and restored to its
original condition or which the Borrower is not diligently working to repair. No
material portion of the Borrower's operating facility is located in a special
flood hazard area designated "Zone A".
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4.21. Certain Indebtedness. Schedule 4.21 separately identifies as of
the date hereof all Indebtedness (other than current liabilities (including the
current portion of long-term Indebtedness)) of the Borrower which is either (a)
for borrowed money, (b) incurred outside of the ordinary course of the business
or in a manner and to the extent inconsistent with past practice, or (c)
material to the financial condition, business, operations or prospects of the
Borrower, $1,000,000 being hereby deemed material for purposes of this Section
4.21.
4.22. Restricted Payments. Since September 30, 1995 to the date hereof,
no Restricted Party has done any of the following, except as expressly permitted
by this Agreement: (a) declared or made any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its Stock, (b) made any payment or
distribution on account of any Indebtedness for or in respect of borrowed money
(other than the making of regularly scheduled fee, interest and principal
payments) including, without limitation, to secure any waiver or consent in
respect of any such Indebtedness, (c) purchased, redeemed, or otherwise acquired
for value or made any payment in respect of any of its Stock or Stock
Equivalents or (d) purchased, redeemed, prepaid, defeased or otherwise acquired
for value any Indebtedness for or in respect of borrowed money.
4.23. Seniority. The Obligations rank at least pari passu with all
other Indebtedness of the Borrower.
4.24. Bank Accounts. Schedule 4.24 lists as of the date hereof each of
the bank accounts maintained by the Borrower and the purpose thereof.
ARTICLE V
FINANCIAL COVENANTS
As long as any of the Obligations or the Revolving Credit
Commitments remain outstanding, unless the Majority Lenders otherwise consent in
writing:
5.1. Maintenance of Tangible Net Worth. The Borrower shall maintain,
during each of the periods set forth below, Tangible Net Worth no less than the
sum of (a) the amounts set forth below plus (b) an amount equal to 75% of the
net (after payment of fees, commissions, expenses and the like) cash proceeds
received by the Borrower from the sale of Additional Equity since the date
hereof:
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<TABLE>
<CAPTION>
Minimum
Period Amount
------ --------
<S> <C>
April 30, 1996 - July 30, 1996 $74,200,000
July 31, 1996 - October 30, 1996 $74,200,000
October 31, 1996 - January 30, 1997 $74,200,000
January 31, 1997 - April 29, 1997 $72,200,000
April 30, 1997 - July 30, 1997 $69,700,000
July 31, 1997 - October 30, 1997 $67,200,000
October 31, 1997 - January 30, 1998 $65,000,000
January 31, 1998 - April 29, 1998 $65,000,000
April 30, 1998 - July 30, 1998 $65,000,000
July 31, 1998 - October 30, 1998 $67,200,000
October 31, 1998 - January 30, 1999 $67,200,000
January 31, 1999 - April 29, 1999 $70,200,000
April 30, 1999 - July 30, 1999 $72,200,000
July 31, 1999 - October 30, 1999 $79,200,000
October 31, 1999 - January 30, 2000 $83,200,000
January 31, 2000 - April 29, 2000 $87,200,000
April 30, 2000 and thereafter $92,200,000
</TABLE>
5.2. Capital Expenditures. The Borrower shall not make cumulative
Capital Expenditures for the period from October 1, 1995 through the date set
forth below in excess of the amount set forth below:
<TABLE>
<CAPTION>
Maximum Amount of
During the Cumulative Capital
Period Ending Expenditures
------------- -------------------
<S> <C>
June 30, 1996 $36,000,000
September 30, 1996 $40,000,000
December 31, 1996 $56,800,000
March 31, 1997 $69,400,000
June 30, 1997 $77,800,000
September 30, 1997 $82,000,000
December 31, 1997 $99,200,000
March 31, 1998 $112,100,000
June 30, 1998 $120,700,000
September 30, 1998 $125,000,000
December 31, 1998 $143,000,000
March 31, 1999 $156,500,000
</TABLE>
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<TABLE>
<S> <C>
June 30, 1999 $165,500,000
September 30, 1999 $170,000,000
December 31, 1999 $188,000,000
March 31, 2000 $201,500,000
Quarters Ending Thereafter $210,500,000
</TABLE>
provided, however, that the Borrower may, in any calendar month, make Capital
Expenditures in amounts in addition to the amounts set forth above in an
aggregate amount (for such additional amounts of Capital Expenditures) not in
excess of the difference between (a) the Additional Discretionary Amount, and
(b) the sum of (i) all cash Investments in Subsidiaries made by the Borrower
from September 30, 1995 to the date of such determination (other than in
connection with the repurchase by the Borrower of the Accounts conveyed to
Funding pursuant to the Receivables Securitization), plus (ii) all cash
dividends or other distributions paid and Indebtedness of the Borrower and its
Subsidiaries purchased, redeemed, prepaid, defeased or otherwise acquired for
value or paid by the Borrower and its Restricted Subsidiaries from September 30,
1995 to the date of such determination (other than (A) the repurchase by the
Borrower of Accounts conveyed to Funding pursuant to the Receivables
Securitization and the exchange by the Borrower of 1993 Senior Notes and/or 1994
Senior Notes for the Senior Mortgage Notes, and (B) purchases, redemptions,
prepayments, defeasances, acquisitions for value or payments that are required
payments or are specifically permitted by Sections 7.4(a)(i) and 7.4(a)(ii)(A)
and (C) and 7.4(b)(i) through (vii)).
5.3. EBITDA to Cash Interest Expense Ratio. The Borrower shall achieve
as of the last day of each Fiscal Quarter commencing with the Fiscal Quarter
ending June 30, 1996, determined on the basis of the four Fiscal Quarters ending
on the date of determination, a ratio of (a) EBITDA for such period to (b) Cash
Interest Expense for such period, not less than the ratio set forth below:
<TABLE>
<CAPTION>
For the Fiscal Minimum
Quarter Ending Ratio Required
- -------------- --------------
<S> <C>
June 30, 1996 1.40 : 1.0
September 30, 1996 1.40 : 1.0
December 31, 1996 1.40 : 1.0
March 31, 1997 1.40 : 1.0
June 30, 1997 1.50 : 1.0
September 30, 1997 1.50 : 1.0
December 31, 1997 1.50 : 1.0
</TABLE>
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March 31, 1998 1.60 : 1.0
June 30, 1998 1.75 : 1.0
September 30, 1998 2.00 : 1.0
December 31, 1998 2.15 : 1.0
March 31, 1999 2.30 : 1.0
June 30, 1999 2.40 : 1.0
September 30, 1999 2.60 : 1.0
December 31, 1999 2.75 : 1.0
March 31, 2000 and thereafter 3.00 : 1.0
ARTICLE VI
ADDITIONAL AFFIRMATIVE COVENANTS
As long as any of the Obligations or the Revolving Credit
Commitments remain outstanding, unless the Majority Lenders otherwise consent in
writing:
6.1. Compliance with Laws, Etc. The Borrower shall, and shall cause
each of its Subsidiaries to, comply in all material respects, with all
Requirements of Law, Contractual Obligations, commitments, instruments,
licenses, permits and franchises, including, without limitation, all Permits,
other than such non-compliances the consequences of which in the aggregate are
not reasonably likely to have a Material Adverse Effect.
6.2. Conduct of Business. Except as otherwise permitted by this
Agreement, the Borrower shall, and shall cause each of its Subsidiaries to, (a)
conduct its business in a regular manner and (b) use its reasonable efforts, in
the ordinary course and consistent with past practice, to (i) preserve its
business and the goodwill and business of the customers, advertisers, suppliers
and others with whom it has business relations, (ii) keep available the services
and goodwill of its present employees, and (iii) preserve all rights, permits
(including all Permits), licenses, approvals, privileges, registered patents,
trademarks, trade names, copyrights and service marks and other intellectual
property with respect to its business.
6.3. Payment of Taxes, Etc. The Borrower shall, and shall cause each of
its Subsidiaries to, pay and discharge, before the same shall become delinquent,
all lawful governmental claims, taxes, assessments, charges and levies, except
(a) in the case of a Restricted Party, where contested in good faith, by proper
proceedings, if adequate reserves therefor have been established on the books of
the Borrower or such Subsidiary, as the case may be, in conformity with GAAP and
(b) where the consequence of all such
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non-payments and, in the case of a Restricted Party, contests and reserves, in
the aggregate is not reasonably likely to have a Material Adverse Effect.
6.4. Maintenance of Insurance. The Borrower shall, and shall cause each
of its Subsidiaries to, maintain insurance with responsible and reputable
insurance companies or associations in such amounts and types and covering such
risks and with such deductibles as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general areas in
which the Borrower or such Subsidiary, as the case may be, operates and as
otherwise satisfactory to the Agent, in its sole judgment, exercised reasonably,
and, in any event in the case of the Borrower, all insurance required by the
Second Amended and Restated Security Agreement; provided, however, that the
Borrower may self-insure an amount of its health insurance and workers'
compensation insurance in an amount to be agreed upon by the Agent and the
Borrower. All such insurance in respect of the Collateral shall name the Agent
and the Lenders as additional insured or loss payees as their interests may
appear, as the Agent shall determine. The Borrower will furnish to the Lenders
from time to time any information as may be reasonably requested as to such
insurance in respect of the Collateral and such information as to other
insurance as is in its possession or which can be readily obtained.
6.5. Preservation of Corporate Existence, Etc. Except as permitted
under Section 7.5, the Borrower shall, and shall, unless otherwise consented to
in writing by the Agent, cause each of its Subsidiaries to, preserve and
maintain its corporate existence, rights (charter and statutory) and material
franchises, unless the failure to so preserve and maintain is not reasonably
likely to have a Material Adverse Effect.
6.6. Access. The Borrower shall, and shall cause each of its
Subsidiaries to, at any reasonable time and from time to time upon at least two
Business Days' prior notice from the Agent (unless an Event of Default shall
have occurred and be continuing, in which case no prior notice is necessary),
permit the Agent (either individually or together with one or more of the
Lenders), or any agents or representatives thereof, to (a) examine and make
copies of and abstracts from the records and books of account of each Loan
Party, (b) visit the properties of each Loan Party, (c) discuss the affairs,
finances and accounts of each Loan Party with any of its officers or directors
who may then be reasonably available, and (d) communicate directly with each
Loan Party's independent certified public accountants. The Borrower shall
authorize its independent certified public accountants to disclose to the Agent
or any Lender any and all financial statements and other information of any
kind, including, without limitation, copies of any management letter, or the
substance of any oral information that such accountants may have with respect to
the business, financial condition, results of operations or other affairs of the
Borrower and each of its Subsidiaries.
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6.7. Keeping of Books. The Borrower shall, and shall cause each of its
Subsidiaries to, keep books of record and account, in which entries shall be
made of all financial transactions and the assets and business of the Borrower
or such Subsidiary, as the case may be, in conformity with GAAP and any
Requirement of Law.
6.8. Maintenance of Properties, Etc. The Borrower shall, and shall
cause each of its Subsidiaries to, maintain and preserve all of its properties
which are used in the conduct of its business in good working order and
condition (reasonable wear and tear excepted), except where the failure to so
maintain or preserve is not reasonably likely to have a Material Adverse Effect.
6.9. Performance and Compliance with Other Covenants. The Borrower
shall, and shall cause each of its Subsidiaries to, perform and observe all the
terms, covenants and conditions required to be performed and observed by it
under its Contractual Obligations (including, without limitation, to pay all
rent and other charges payable under any lease and all debts and other
obligations as the same become due), and do all things necessary to preserve and
to keep unimpaired its rights under such Contractual Obligations, other than
such failures the consequences of which in the aggregate are not reasonably
likely to have a Material Adverse Effect.
6.10. Application of Proceeds. The Borrower shall use the entire amount
of the proceeds of each Revolving Credit Loan as provided in Section 4.17.
6.11. Financial Statements. The Borrower shall furnish to the Lenders:
(a) as soon as available and in any event within 30 days after
the end of each month other than the last month of a Fiscal Quarter,
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as of the end of such month and consolidated and consolidating
statements of income and cash flows of the Borrower and its Subsidiaries for the
period commencing at the end of the previous Fiscal Year and ending with the end
of such month, certified by the chief financial officer of the Borrower as
fairly presenting the financial condition and results of operations of the
Borrower and its Subsidiaries at such date and for such period, together with
(i) a certificate of said officer stating that no Default or Event of Default
has occurred and is continuing or, if a Default or an Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
which the Borrower proposes to take with respect thereto, (ii) a schedule in
form satisfactory to the Agent of the computations used by the Borrower in
determining compliance with all financial covenants contained herein, and (iii)
a written operating and financial summary by the management of the Borrower of
the financial statements furnished in respect of such month;
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(b) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year,
consolidated and consolidating balance sheets of the Borrower as of the end of
such quarter and consolidated and consolidating statements of income, retained
earnings and cash flows of the Borrower for the period commencing at the end of
the previous Fiscal Year and ending with the end of such Fiscal Quarter,
certified by the chief financial officer of the Borrower as fairly presenting
the financial condition and results of operations of the Borrower and its
Subsidiaries at such date and for such period, together with (i) a certificate
of said officer stating that no Default or Event of Default has occurred and is
continuing or, if a Default or an Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which the
Borrower proposes to take with respect thereto, (ii) a schedule in form
satisfactory to the Agent of the computations used by the Borrower in
determining compliance with all financial covenants contained herein, and (iii)
a written discussion and analysis by the management of the Borrower of the
financial statements furnished in respect of such Fiscal Quarter;
(c) as soon as available and in any event within 45 days after
the end of each Fiscal Year, consolidated and consolidating balance sheets of
the Borrower as of the end of such Fiscal Year and consolidated and
consolidating statements of income, retained earnings and cash flows of the
Borrower for the period commencing at the end of the previous Fiscal Year and
ending with the end of such Fiscal Year, certified by the chief financial
officer of the Borrower as fairly presenting the financial condition and results
of operations of the Borrower and its Subsidiaries at such date and for such
period, together with (i) a certificate of said officer stating that no Default
or Event of Default has occurred and is continuing or, if a Default or an Event
of Default has occurred and is continuing, a statement as to the nature thereof
and the action which the Borrower proposes to take with respect thereto, (ii) a
schedule in form satisfactory to the Agent of the computations used by the
Borrower in determining compliance with all financial covenants contained
herein, and (iii) a written discussion and analysis by the management of the
Borrower of the financial statements furnished in respect of such Fiscal Year;
(d) as soon as available and in any event within 90 days after
the end of each Fiscal Year, consolidated and consolidating balance sheets of
the Borrower and its Subsidiaries as of the end of such year and consolidated
and consolidating statements of income, retained earnings and cash flows of the
Borrower for the period commencing at the end of the previous Fiscal Year and
ending with the end of such Fiscal Year, certified without qualification as to
the scope of the audit by Arthur Andersen LLP or other independent public
accountants acceptable to the Majority Lenders, together with (i) a certificate
of such accounting firm stating that in the course of the regular audit of the
business of the Borrower and its Subsidiaries, which audit was conducted by such
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accounting firm in accordance with generally accepted auditing standards, such
auditing firm has obtained no knowledge that a Default or Event of Default has
occurred and is continuing, or, if in the opinion of such accounting firm, a
Default or Event of Default has occurred and is continuing, a statement as to
the nature thereof, (ii) a schedule in form satisfactory to the Agent of the
computations used by such accountants in determining, as of the end of such
Fiscal Year, the Borrower's compliance with all financial covenants contained in
Article V hereof, (iii) a written discussion and analysis by the Management of
the Borrower of the financial statements furnished in respect of such Fiscal
Year, and (iv) the present value of any liability as of the end of such Fiscal
Year with respect to any unfunded Pension Plan of each Loan Party together with
the assumptions utilized in the calculations;
(e) not later than the date on which the Borrower shall
deliver to the Lenders the financial statements referred to in Section 6.11(c)
for any Fiscal Year, a letter from the Borrower's independent public
accountants, substantially in the form of Exhibit M;
(f) promptly after the same are received by the Borrower, a
copy of each management letter provided to the Borrower by its independent
certified public accountants which refers in whole or in part to any inadequacy,
defect, problem, qualification or other lack of fully satisfactory accounting
controls utilized by the Borrower or any of its Subsidiaries;
(g) on the Closing Date and prior to the Borrower's close of
office hours on the twentieth Business Day of each month thereafter, a Borrowing
Base Certificate, signed by a Responsible Officer of the Borrower, setting
forth, on an itemized basis, the Borrowing Base as of the close of office hours
on the last day of the preceding month, and the Borrowing Base computations
based thereon, as well as (i) a schedule listing changes (if any) to Schedule
4.24, Schedule IV and Schedule V and (ii) a certification by a Responsible
Officer of the Borrower that from the date of the most recent Borrowing Base
Certificate previously delivered to the date of the new Borrowing Base
Certificate, no Default or Event of Default has occurred and is continuing or,
if a Default or an Event of Default has occurred and is continuing, a statement
as to the nature thereof and the action which the Borrower proposes to take with
respect thereto. Each Borrowing Base Certificate shall become effective upon the
Agent's review and implementation thereof and shall remain in effect until the
review and implementation by the Agent of the next Borrowing Base Certificate to
be delivered hereunder;
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(h) promptly after such a determination, written notification
that the Borrowing Base is, in the belief of any officer of the Borrower, an
amount less than the Revolving Credit Commitments; and
(i) at the time of delivery of each Borrowing Base
Certificate, electronic tapes providing inventory and accounts receivable
reporting.
6.12. Reporting Requirements. The Borrower shall furnish:
(a) to the Lenders, as soon as available and in any event
within 30 days prior to the end of each Fiscal Year, the proposed projections of
the Borrower and its Subsidiaries for the succeeding Fiscal Year and all
associated data and material assumptions, displaying on a monthly and quarterly
basis anticipated balance sheets, forecasted revenues, net income and cash flow,
all on a consolidating and consolidated basis, and EBITDA and sales on a
consolidated and consolidating basis;
(b) to the Lenders, as soon as available and in any event
within 30 days prior to the end of each Fiscal Year, commencing with the 1997
Fiscal Year, a forecast of annual sales, EBITDA, Capital Expenditures, working
capital requirements and projected cash flow results of the Borrower and its
Subsidiaries on a consolidated and consolidating basis for each of the next
succeeding three Fiscal Years;
(c) to the Lenders, as soon as available and in any event
prior to the end of the first month immediately after the end of each Fiscal
Year, final projections (and all associated data and material assumptions) and
forecasts covering the matters identified in clauses (a) and (b) above;
(d) to the Lenders, as soon as available and in any event
within 45 days after the end of each Fiscal Quarter, revisions or updates to the
reports delivered pursuant to Section 6.12(c);
(e) to the Agent, promptly and in any event within 10 Business
Days after any officer of any Loan Party or any ERISA Affiliate knows or has
reason to know that any ERISA Event has occurred, a written statement of the
chief financial officer or other appropriate officer of such Loan Party or ERISA
Affiliate describing such event and the action, if any, which such Loan Party or
such ERISA Affiliate proposes to take with respect thereto;
(f) to the Agent, promptly and in any event within 10 Business
Days after any officer of any Loan Party or any ERISA Affiliate knows or has
reason to know that a
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contribution or payment under any Plan has not been made when due (except for
contributions to defined contribution plans that are de minimis in amount and
result from reasonable administrative delays and which are timely corrected in
the ordinary course) a written statement of the chief financial officer of such
Loan Party or ERISA Affiliate describing such event and the action, if any,
which such ERISA Affiliate proposes to take with respect thereto;
(g) to the Agent, promptly and in any event within 30 days
after the filing thereof by any Loan Party, with respect to any Pension Plan,
and by any ERISA Affiliate, with respect to any Pension Plan subject to Section
412 of the Code, a copy of each annual report (Form 5500 Series, including
Schedule B thereto), and upon request by any Lender through the Agent with
respect to any other Plan including any Multiemployer Plan to the extent any
Loan Party may obtain such report through reasonable efforts;
(h) to the Agent, promptly and in any event within 10 Business
Days after receipt thereof, a copy of any adverse notice, determination letter,
ruling or opinion any Loan Party or any ERISA Affiliate receives from the DOL or
IRS with respect to any Plan and, at the request of any Lender, a copy of any
favorable notice, determination letter, ruling or opinion with respect thereto
from any such Governmental Authority;
(i) to the Agent, promptly and in any event within 10 Business
Days after receipt of knowledge or written notice of commencement thereof,
notice of any action, suit or proceeding before any Governmental Authority or
arbitrator affecting any Loan Party or any ERISA Affiliate with respect to any
Plan, except those which in the aggregate have no reasonable likelihood of
having a Material Adverse Effect;
(j) to the Agent, promptly and in any event within 10 days
after notice or knowledge thereof by an officer of the Borrower, notice that any
Loan Party has become liable to pay the tax on prohibited transactions imposed
by Section 4975 of the Code, and a copy of Form 5330 as soon as available
thereafter;
(k) to the Agent, promptly and in any event within 10 Business
Days after an officer of the Borrower receives notice of the commencement
thereof, notice of all actions, suits and proceedings before any domestic or
foreign Governmental Authority or arbitrator, affecting any Loan Party, except
those which in the aggregate have no reasonable likelihood of having a Material
Adverse Effect;
(l) to the Agent, promptly and in any event within 10 Business
Days after an officer of the Borrower becomes aware of the existence of (i) any
Default or Event of Default, (ii) any breach or non-performance of, or any
default under, or any claim of any
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of the foregoing in respect of, any Contractual Obligation of any Loan Party
which is material to the business, prospects, operations or financial condition
of the Borrower and the Borrower and its Subsidiaries taken as a whole, or (iii)
any Material Adverse Change or any event or development or other circumstance
which is reasonably likely to cause or result in a Material Adverse Change,
telephonic or telegraphic notice in reasonable detail specifying the nature of
the Event of Default, Default, development or circumstance, including, without
limitation, the anticipated effect thereof, which notice shall be promptly
confirmed in writing within five days after the notice is given;
(m) to the Lenders, promptly after the sending or filing
thereof, copies of all reports which any Loan Party sends to its security
holders generally, and copies of all reports and registration statements which
any Loan Party files with the Securities and Exchange Commission or any national
securities exchange and, in addition, to the Agent, copies of all press
releases;
(n) to the Agent, upon its request, copies of all Tax Returns
filed by each Loan Party in respect of taxes measured by income (excluding
sales, use and like taxes);
(o) to the Agent, promptly and in any event within 45 days of
any officer of the Borrower learning of any of the following, written notice of
any of the following:
(i) except for the amounts contemplated by the
Projections, knowledge that any Loan Party is or could reasonably be
expected to be liable for Environmental Liabilities and Costs of
$1,000,000 or more in any twelve month period as a result of a Release
or threatened Release;
(ii) the receipt by any Loan Party of written notification
that any real or personal property of such Loan Party is subject to any
Environmental Lien;
(iii) the receipt, after the date hereof, by any Loan Party
of any written notice from a Governmental Authority of any violation of
any Requirement of Law involving environmental, health or safety
matters, except for violations the consequence of which in the
aggregate are not reasonably likely to subject such Loan Party to
Environmental Liabilities and Costs of $500,000 or more in any 12-month
period; provided, however, that from and after the date the aggregate
of all Environmental Liabilities and Costs under Section 6.12(o)(iii),
(iv) and (vi) in any 12-month period exceeds $1,000,000, the Borrower
shall furnish written notice of each subsequent violation which
individually is reasonably likely to subject any Loan Party to
Environmental Liabilities and Costs in excess of $250,000.
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(iv) the commencement of any judicial or administrative
proceeding or investigation by any Governmental Authority alleging a
violation of any Requirement of Law involving environmental, health or
safety matters other than those the consequences of which in the
aggregate are not reasonably likely to subject any Loan Party to
Environmental Liabilities and Costs of $500,000 or more in any 12-month
period; provided, however, that from and after the date the aggregate
of all Environmental Liabilities and Costs under Section 6.12(o)(iii),
(iv) and (vi) in any 12-month period exceeds $1,000,000, the Borrower
shall furnish written notice of each subsequent violation which
individually is reasonably likely to subject any Loan Party to
Environmental Liabilities and Costs in excess of $250,000.
(v) any proposed acquisition of stock, assets or real
estate, or any proposed leasing of property by any Loan Party other
than those the consequences of which in the aggregate have no
reasonable likelihood of subjecting such Loan Party to Environmental
Liabilities and Costs of $250,000 or more in any 12-month period;
(vi) any proposed action taken by any Loan Party to
commence, recommence or cease manufacturing, industrial or other
operations other than those the consequences of which in the aggregate
have no reasonable likelihood of requiring the Borrower to obtain
additional environmental, health or safety Permits that collectively
require the expenditure of $500,000 or more or become subject to
additional Environmental Liabilities and Costs of $500,000 or more in
any 12-month period; provided, however, that from and after the date
the aggregate of all Environmental Liabilities and Costs under Section
6.12(o)(iii), (iv) and (vi) in any 12-month period exceeds $1,000,000,
the Borrower shall furnish written notice of each subsequent violation
which individually is reasonably likely to subject any Loan Party to
Environmental Liabilities and Costs in excess of $250,000; and
(vii) any proposed Capital Expenditures of any Loan Party
intended or designed to implement any existing or additional Remedial
Action other than those which in the aggregate will not exceed the
amounts set forth in the Projections;
(p) upon the written request of the Agent, a report providing
an update of the status of any environmental, health or safety compliance,
hazard or liability issue identified in any notice or report required pursuant
to this Section 6.12 and any other environmental, health or safety compliance
obligation, remedial obligation or liability, other than those which in the
aggregate are not reasonably likely to subject any Loan Party to Environmental
Liabilities and Costs of $250,000 or more in any 12-month period;
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(q) to the Agent, promptly upon any officer of the Borrower
becoming aware that any Loan Party has been refused insurance for which it
applied or had any policy of insurance terminated (other than at its request),
all information relating to such refusal or termination;
(r) to the Agent, within five Business Days after the end of
each month, a statement as to any change in any previously delivered schedule of
bank accounts maintained by the Borrower;
(s) to the Agent, promptly upon the termination or non-renewal
of any material lease to which the Borrower is a party (which lease is not
replaced by a comparable lease), all information relating to such termination or
non-renewal;
(t) to the Agent, promptly and in any event within 30 days of
the Borrower entering into any tax sharing agreement with any of its
Subsidiaries; and
(u) such other information respecting the business,
properties, condition, financial or otherwise, or operations of each Loan Party
as the Agent may from time to time reasonably request.
6.13. Broker's Fee. The Borrower shall indemnify the Agent and the
Lenders for, and hold the Agent and the Lenders harmless from and against, any
and all claims for brokerage commissions, fees and other compensation made
against the Agent and the Lenders for any broker, finder or consultant with
respect to any agreement, arrangement or understanding made by or on behalf of
the Borrower in connection with the transactions contemplated by this Agreement.
6.14. Employee Plans. (a) For each Qualified Plan hereafter adopted or
maintained by any Loan Party or any ERISA Affiliate, the Borrower shall (i)
seek, and cause, as applicable, each other Loan Party and its ERISA Affiliates
to seek, and receive determination letters from the IRS to the effect that such
Qualified Plan is qualified within the meaning of Section 401(a) of the Code,
and (ii) from and after the adoption of any such Qualified Plan, cause such plan
to be administered in all material respects in accordance with the requirements
of ERISA and Section 401(a) of the Code.
(b) With respect to each Welfare Benefit Plan hereafter
adopted or maintained by any Loan Party or any ERISA Affiliate that is subject
to the requirements of Section 4980B of the Code, the Borrower shall, and shall
cause such of its Restricted Subsidiaries and ERISA Affiliates to, comply in all
material respects with the notice and
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continuation coverage requirements of Section 4980B of the Code and any final
regulations thereunder.
6.15. Interest Rate Contracts. The Borrower shall, within 45 days after
the aggregate principal amount of Indebtedness for borrowed money of the
Borrower which bears interest at floating rates exceeds 60% of all Indebtedness
for borrowed money of the Borrower, enter into or have in effect such Interest
Rate Contracts on terms and with counterparties satisfactory to the Agent, to
provide protection against such interest rates on Indebtedness for borrowed
money bearing floating interest rates and for such period (not later than the
Termination Date) as the Agent may request, covering a notional amount equal to
such excess.
6.16. Fiscal Year. The Borrower shall maintain as its Fiscal Year the
twelve-month period ending on September 30 of each year.
6.17. Borrowing Base Determination. (a) The Borrower shall promptly
furnish to the Agent any information which the Agent may reasonably request
which was either used by the Borrower in the determination and calculation of
the Borrowing Base or is otherwise relevant in respect thereof which is readily
available to the Borrower including, without limitation, correct and complete
copies of any invoices, underlying agreements, instruments or other documents
and the identity of all obligors.
(b) The Borrower shall immediately notify the Agent (by
telephone, facsimile transmission or mailing by overnight courier service on the
date any officer of the Borrower obtains such knowledge) in the event that the
Borrower receives or otherwise gains knowledge that (i) the Borrowing Base is
less than 75% of the Borrowing Base reflected in the most recent Borrowing Base
Certificate delivered pursuant to Section 6.11(g) or (ii) the Revolving Credit
Loans borrowed and the Letter of Credit Obligations incurred under Section 2.1
outstanding at such time exceed the amount set forth in clause (a) of the
definition of Available Credit as a result of any decrease in the Borrowing
Base, and the amount of such excess.
6.18. The Blocked Account. (a) The Borrower shall establish and
maintain, pursuant to the Second Amended and Restated Blocked Account Letter, an
account with Citibank, such account to be in the name and under the sole
dominion and control of the Agent (the "Blocked Account"). All amounts in the
Blocked Account shall be applied to the Obligations by the Agent as specified in
Section 2.6(d).
(b) Except for the funds held in the bank accounts otherwise
permitted by Section 7.22, the Borrower shall cause all cash, Cash Equivalents,
checks, notes, drafts or
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similar items of payments which constitute (i) payments from account debtors for
Accounts, and (ii) proceeds of all other Collateral, to be deposited promptly
upon the receipt thereof in the Blocked Account.
6.19. Environmental. Upon receipt of any notification or otherwise
obtaining knowledge of any Release or other event that could result in Borrower
incurring Environmental Liabilities and Costs, the Borrower shall, at its
cost, conduct or pay for consultants to conduct, such tests or assessments of
environmental condition at such operations or properties (if any), including,
without limitation, the investigation and testing of subsurface conditions, and
shall take such remedial, investigational or other action as any Governmental
Authority requires (except where contested in good faith, by proper proceedings
and where the consequence of such contest is not reasonably likely to have a
Material Adverse Effect) or as is appropriate and consistent with good business
practice. If, in the reasonable judgment of the Agent, such Environmental
Liabilities and Costs would have a Material Adverse Effect, and if the
consultant selected by the Borrower is not reasonably acceptable to the Agent,
the Agent shall (i) select a consultant of its own choosing to monitor the work
of the Borrower's consultant and the Borrower shall pay for all reasonable costs
incurred by the Agent's consultant in connection with performing such monitoring
activities, and (ii) promptly notify the Borrower of such determination and
appointment. Nothing contained in this Agreement shall be construed as limiting
or impeding the Borrower's rights and obligations to take any and all actions
necessary and desirable to address any Release or Environmental Liabilities and
Costs or to comply with all Environmental Laws.
6.20. Utilization of Intellectual Property. Upon the occurrence and
during the continuance of an Event of Default, the Borrower shall utilize its
intellectual property (including, without limitation, trademarks and service
marks) in such a manner as the Agent may deem necessary or advisable in order
for the Agent to take possession of, hold, preserve, process, assemble, prepare
for sale or lease, market for sale or lease, sell or lease, or otherwise dispose
of, any Collateral.
ARTICLE VII
NEGATIVE COVENANTS
As long as any of the Obligations or Revolving Credit
Commitments remain outstanding, without the written consent of the Majority
Lenders:
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7.1. Liens, Etc. The Borrower shall not, and shall not permit (x) any
of its Restricted Subsidiaries, or (y) in respect of Sections 7.1(e) and (k),
any of its Subsidiaries, to, create or suffer to exist any Lien upon or with
respect to any of its properties, whether now owned or hereafter acquired, or
assign any right to receive income, except for the following, none of which
Liens, except in respect of those permitted in clauses (a) and (e), shall be
Liens on the Collateral (collectively, "Permitted Liens"):
(a) Liens created pursuant to the Loan Documents;
(b) Purchase money Liens upon or in any property of the
Borrower or such Restricted Subsidiary, as the case may be, and used by the
Borrower or such Restricted Subsidiary in the ordinary course of business, which
Liens secure the obligation to pay the purchase price of such property, related
payment and performance obligations and the obligation to pay the cost of
services in respect of such property or to secure Indebtedness and related
payment and performance obligations incurred solely for the purpose of financing
the acquisition of such property or such services, and Liens existing on such
property at the time of its acquisition; provided, however, that the aggregate
principal amount of outstanding Indebtedness secured by the Liens referred to in
this clause (b) shall not at any time exceed the sum of (i) $20,000,000 from the
Closing Date to the first anniversary thereof, $40,000,000 from the Closing Date
to the second anniversary thereof, $50,000,000 from the Closing Date to the
third anniversary thereof and $60,000,000 from the Closing Date to the
Termination Date, plus (ii) the amount of Indebtedness outstanding under Section
7.2(p);
(c) Any Lien securing the renewal, extension or refunding of
any Indebtedness or other Obligation secured by any Lien permitted by
subsections (b), (i), (j), (l) or (n) of this Section 7.1 without any increase
in the amount secured thereby (except for increases in respect of transaction
expenses related thereto) or in the assets subject to such Lien;
(d) Liens in favor of materialmen, mechanics, warehousemen,
carriers, handlers, lessors, bankers (solely in respect to rights of setoff
arising by operation of law) or other similar Persons incurred by the Borrower
or any of its Restricted Subsidiaries in the ordinary course of business
(including the incurrence of Capital Expenditures contemplated by the
Projections) which secure obligations to such Person; provided, however, that
(i) neither the Borrower nor any of its Restricted Subsidiaries is in default
with respect to such payment obligation to such Person, or the Borrower or such
Restricted Subsidiary, as the case may be, is in good faith and by appropriate
proceedings diligently contesting such obligation and adequate provision is made
for the payment
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thereof and (ii) the likely liability in respect of all such Liens in the
aggregate would have no Material Adverse Effect;
(e) Liens (excluding Environmental Liens) securing taxes,
assessments or governmental charges or levies; provided, however, that (i)
neither the Borrower nor any of its Subsidiaries is in default in respect of any
payment obligation with respect thereto unless the Borrower or such Subsidiary
is in good faith and by appropriate proceedings diligently contesting such
obligation and adequate provision is made for the payment thereof and (ii) the
likely liability in respect of all such Liens in the aggregate would have no
Material Adverse Effect;
(f) Liens incurred or pledges and deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, oldage pensions and other social security benefits;
(g) Liens securing trustee's fees and the performance of bids,
tenders, leases, contracts (other than for the repayment of borrowed money),
statutory obligations, surety and appeal bonds and other obligations of like
nature, incurred as an incident to and in the ordinary course of business, and
judgment, attachment or award liens; provided, however, that (i) with respect to
judgment, attachment or award liens, such Liens (A) are against property of the
Borrower or a Restricted Subsidiary other than the Collateral, and (B) are
terminated or otherwise extinguished within 60 days after the creation thereof,
and (ii) all such Liens (A) in the aggregate have no Material Adverse Effect and
(B) do not secure directly or indirectly judgments, attachments or awards in
excess of $1,000,000 in the aggregate;
(h) Zoning restrictions, easements, rights of way, survey
exceptions, encroachments, covenants, licenses, reservations, leasehold
interests, restrictions on the use of real property or minor irregularities
incident thereto which do not in the aggregate materially detract from the value
or use of the property or assets of the Borrower or any of its Restricted
Subsidiaries or impair, in any material manner, the use of such property for the
purposes for which such property is held by the Borrower or any of its
Restricted Subsidiaries;
(i) Liens existing on the date of this Agreement and disclosed
on Schedule 7.1 and any related payment and performance obligations in respect
of the Indebtedness secured thereby;
(j) Liens to secure Capitalized Lease Obligations and Other
Leases and any related payment and performance obligations if the incurrence of
such Indebtedness is
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permitted by Section 7.2(g); provided, however, that: (i) any such Lien is
created solely for the purpose of securing Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including, without
limitation, the cost of construction and the reasonable fees and expenses
relating to such Indebtedness) of the property subject thereto, (ii) the
principal amount of the Indebtedness secured by such Lien does not exceed 100%
of such cost, and (iii) such Lien does not extend to or cover any other property
other than such item of property and any improvements on such item;
(k) Environmental Liens, that (i) are being contested in good
faith by appropriate proceedings, unless such contest is reasonably likely to
have a Material Adverse Effect, (ii) do not materially interfere with the
business operations of such Loan Party as presently conducted and, (iii) the
consequences of which in the aggregate would not subject any Loan Party to
Environmental Liabilities and Costs in excess of $5,000,000 in any 12-month
period (after the application of insurance and indemnification proceeds
receivable with respect to which the insurer or indemnifying party, as the case
may be, does not contest or dispute);
(l) The interests of lessors or lessees of property leased
pursuant to leases permitted hereunder;
(m) Liens in favor of the Agent and/or any of its Affiliates;
(n) Liens on property, plant and equipment of the Borrower and
proceeds thereof (other than the Collateral), securing the Senior Mortgage
Notes; and
(o) Liens on the assets of the Borrower or any of its
Restricted Subsidiaries (other than the Collateral) securing up to $7,500,000 of
Indebtedness.
7.2. Indebtedness. The Borrower shall not, and shall not permit (x) any
of its Restricted Subsidiaries, or (y) in respect of Section 7.2(k), any of its
Unrestricted Subsidiaries, to, create or suffer to exist any Indebtedness
except:
(a) the Obligations;
(b) Indebtedness with respect to Contingent Obligations
permitted by Section 7.12;
(c) current liabilities in respect of taxes, assessments and
governmental charges or levies incurred, or liabilities for labor, materials,
inventory, services, supplies and rentals incurred, or for goods or services
purchased, or amounts properly payable to
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Mannesmann under the Mannesmann Agreement, in the ordinary course of business
consistent with industry practice in respect of arm's length transactions and
the past practice of the Borrower or such Restricted Subsidiary, as the case may
be;
(d) Indebtedness of the Borrower outstanding on the Closing
Date and reflected on Schedule 4.21;
(e) Indebtedness arising under (i) any leases or contracts
(other than for the repayment of borrowed money) or (ii) any surety, payment or
performance bond reimbursement obligation or similar obligations relating to the
performance of bids, tenders, leases, contracts (other than for the repayment of
borrowed money), statutory obligations and surety and appeal bonds, in each case
entered into in the ordinary course of the Borrower's or any of its Restricted
Subsidiaries' business and consistent with their respective past practices;
(f) Indebtedness of the type and in the amount contemplated by
Section 7.1(b)(i), whether secured by Liens described therein or not;
(g) Indebtedness of the Borrower or any of its Restricted
Subsidiaries under Capitalized Lease Obligations and Other Leases; provided,
however, that the aggregate amount of Capitalized Lease Obligations and Other
Leases incurred under this clause (g) by the Borrower and its Restricted
Subsidiaries and the aggregate amount of Indebtedness incurred pursuant to
clause (f) above by the Borrower and its Restricted Subsidiaries shall not
exceed $20,000,000 from the Closing Date to the first anniversary thereof,
$40,000,000 from the Closing Date to the second anniversary thereof, $50,000,000
from the Closing Date to the third anniversary thereof and $60,000,000 from the
Closing Date to the Termination Date, at any one time outstanding;
(h) Obligations pursuant to (i) Interest Rate Contracts, and
(ii) Commodity Contracts permitted under Section 7.18, to the extent such
obligations constitute Indebtedness;
(i) Indebtedness of the Borrower arising under the 1993 Senior
Notes Indenture and the 1994 Senior Notes Indenture in the outstanding principal
amount of (i) $135,000,000 incurred under the 1993 Senior Notes Indenture, plus
(ii) $190,000,000 incurred under the 1994 Senior Notes Indenture less (iii) the
aggregate outstanding principal amount of such notes exchanged for Senior
Mortgage Notes;
(j) Indebtedness constituting a renewal, extension,
refinancing or refunding of Indebtedness (or any refinancing thereof) described
in Section 7.2(d), (f), (g), (i), (l),
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(m), (n) and (p), (i) in a principal amount which does not exceed the then
outstanding principal amount, together with all prepayment fees, penalties and
expenses in respect of the Indebtedness being renewed, extended, refinanced or
refunded, and (ii) on terms and conditions as in each instance are as or more
favorable to the Borrower and no less favorable to the Lenders as the
Indebtedness being renewed, extended, refinanced or refunded;
(k) Indebtedness of Unrestricted Subsidiaries of the Borrower
in an aggregate principal amount outstanding at any time not in excess of
$50,000,000;
(l) Indebtedness consisting of the Cumulative Preferred Stock;
(m) Indebtedness of the Borrower evidenced by the Exchange
Debentures in an aggregate outstanding principal amount equal to the liquidation
value of the Cumulative Preferred Stock at the time of the exchange of Exchange
Debentures for Cumulative Preferred Stock, provided that no Event of Default (i)
arising from the breach by the Borrower of any of the covenants set forth in
Article V or (ii) of the type described in Section 8.1(a) is continuing or is
reasonably likely to result from the incurrence of such Indebtedness;
(n) Indebtedness incurred in connection with the issuance by
the Borrower of the Senior Mortgage Notes; provided, however, that such Notes
have terms no less favorable to the Borrower than those set forth in a letter
from the Borrower to the Lenders dated the date hereof;
(o) Indebtedness constituting trade payables arising in the
ordinary course of business;
(p) Indebtedness in an aggregate principal amount at any time
outstanding not in excess of an amount which, after giving pro forma effect to
the incurrence thereof and the application of the proceeds thereof as of the
last day of the immediately preceding month, in the case of clause (A), and as
of the last day of the immediately preceding twelve-month period, in the case of
clause (B), would not cause (A) the ratio of Total Liabilities to Tangible Net
Worth for such month to exceed 4.6 to 1.0, or (B) the ratio of EBITDA to Cash
Interest Expense for such twelve-month period to be less than 3.1 to 1.0.;
provided, however, that the documentation pursuant to which any such
Indebtedness is incurred shall not contain any financial maintenance tests (or
related representations, warranties, covenants or defaults) of any type, other
than an Indebtedness incurrence test;
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(q) Indebtedness in an aggregate principal amount at any time
outstanding which, when added to Indebtedness outstanding pursuant to Section
7.2(r), does not exceed $10,500,000 in the aggregate; provided, however, that
the documentation pursuant to which any such Indebtedness is incurred shall not
contain any financial maintenance tests (or related representations, warranties,
covenants or defaults) of any type, other than an Indebtedness incurrence test;
and
(r) Indebtedness in an aggregate principal amount at any time
outstanding not in excess of $3,000,000.
7.3. Lease Obligations. (a) Except for existing leases listed on
Schedules 4.20(b) and 7.3, the Borrower shall not, and shall not permit its
Restricted Subsidiaries to, create or suffer to exist any obligations as lessee
for the rental or hire of real or personal property of any kind under other
leases or agreements to lease (other than Capitalized Leases and Other Leases)
having an original term of one year or more which would cause the aggregate
direct or contingent liabilities of the Borrower and its Restricted Subsidiaries
in respect of all such obligations to exceed $7,500,000 payable in any period of
12 consecutive months.
(b) Except as permitted by Section 7.3(a) and subsections (g),
(p), (q) and (r) of Section 7.2, neither the Borrower nor any of its Restricted
Subsidiaries shall become or remain liable as lessee or guarantor or other
surety with respect to any lease, whether an operating lease or a Capitalized
Lease, of any property material to the operations of their respective businesses
(whether real or personal or mixed), whether now owned or hereafter acquired,
which (i) the Borrower or such Restricted Subsidiary has sold or transferred or
is to sell or transfer to any other Person, or (ii) the Borrower or such
Restricted Subsidiary intends to use for substantially the same purposes as any
other property which has been or is to be sold or transferred by that entity to
any other Person in connection with such lease.
7.4. Restricted Payments. The Borrower shall not, and shall not permit
its Restricted Subsidiaries to, (a) declare or make any dividend payment or
other distribution of assets, properties, cash, rights, obligations or
securities on account or in respect of any of its Stock or Stock Equivalents
except (so long as an Event of Default under any other provision hereof shall
not be continuing or result therefrom) (i) dividends paid to the Borrower or any
wholly-owned Restricted Subsidiary of the Borrower by any direct or indirect
wholly-owned Subsidiary of the Borrower, and (ii) dividends paid by the Borrower
(A) solely in Stock or Stock Equivalents of the Borrower, (B) from and after
March 31, 1996, in cash in respect of the Cumulative Preferred Stock in an
aggregate amount in any Fiscal Year of 14% of the liquidation preference of the
outstanding shares of Cumulative
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Preferred Stock at the time of payment of such dividends, and (C) the exchange
of the Cumulative Preferred Stock for the Exchange Debentures; or (b) purchase,
redeem, prepay, defease or otherwise acquire for value or make any payment
(other than required payments) on account or in respect of any principal amount
of Indebtedness of the Borrower or any of its Subsidiaries for borrowed money,
now or hereafter outstanding, except (i) the Loans, (ii) required scheduled
payments on permitted Indebtedness, (iii) the repayment of any Indebtedness
which is permitted to be refinanced pursuant to Sections 7.2(j) and 7.2(m), (iv)
repayment of Indebtedness referred to in clause (a) of Section 4.17, (v) any
payments pursuant to the Contingent Obligations permitted under Section 7.12,
(vi) redemptions of the Exchange Debentures in accordance with the terms
thereof, and (vii) the exchange by the Borrower of 1993 Senior Notes and/or 1994
Senior Notes for the Senior Mortgage Notes; provided, however, that commencing
in the Borrower's 1997 fiscal year, in addition to the foregoing, the Borrower
and its Restricted Subsidiaries may: (A) declare and pay cash dividends or other
distributions in respect of or otherwise acquire for value its Stock (other than
the common stock of the Borrower); (B) declare and pay cash dividends or other
distributions in an aggregate amount not in excess of $2,800,000, less cash
dividends, if any, on the Borrower's common stock, in respect of the Warrants;
and (C) declare or make any dividend payment or other distribution or purchase,
redeem, prepay, defease or otherwise acquire for value or make payments on
account of or in respect of such Indebtedness, in an aggregate amount not in
excess of the difference between (x) the Additional Discretionary Amount (to the
extent not previously utilized pursuant to Section 5.2), and (y) the sum of (i)
all prior cash Investments in Subsidiaries made by the Borrower from September
30, 1995 to the date of such determination, plus (ii) all prior cash dividends
or other distributions paid and Indebtedness of the Borrower and its
Subsidiaries purchased, redeemed, prepaid, defeased or otherwise acquired for
value or paid by the Borrower from September 30, 1995 to the date of such
determination (other than purchases, redemptions, prepayments, defeasances,
acquisitions for value or payments that are required payments or are
specifically permitted by Sections 7.4(a)(i) and 7.4(a)(ii)(A) and (C), and
7.4(b)(i) through (vii)).
7.5. Mergers, Stock Issuances, Sale of Assets, Etc. (a) The
Borrower shall not, and shall not permit any of its Restricted Subsidiaries to,
(i) merge or consolidate with any Person, (ii) acquire all or substantially all
of the Stock or Stock Equivalents of any Person except as permitted under
Sections 7.6 or 7.16, or (iii) except for Capital Expenditures permitted
hereunder, acquire all or substantially all of the assets of any Person or all
or substantially all of the assets constituting the business of a division,
branch or other unit operation of any Person; provided, however, that so long as
no Event of Default shall be continuing under any other provision hereof or
result therefrom, any Restricted Subsidiary may merge or consolidate with or
into any other Person (including the Borrower) so long as in any merger or
consolidation involving a Restricted Subsidiary and any other Person,
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the surviving corporation shall be a Restricted Subsidiary and, in any merger or
consolidation involving a Restricted Subsidiary and the Borrower, the Borrower
shall be the surviving corporation; and provided further, that the Borrower or a
Restricted Subsidiary may so acquire such Stock, Stock Equivalents and assets if
(A) both before and after such acquisition, no Event of Default shall be
continuing under any other provision hereof, and (B) in respect of acquisitions
not constituting Capital Expenditures, the aggregate purchase price paid by the
Borrower and/or its Restricted Subsidiaries for all acquisitions contemplated in
clauses (ii) and (iii) does not exceed $8,000,000 in cash or property other than
common stock.
(b) The Borrower shall not, and shall not permit any of its
Restricted Subsidiaries to, sell, convey, transfer, lease or otherwise dispose
of any of its assets (including, without limitation, the Stock of a Subsidiary)
or any interest therein to any Person, or permit or suffer any other Person to
acquire any interest in any of the assets of the Borrower or such Restricted
Subsidiary, except (i) the sale or disposition of inventory in the ordinary
course of business or assets which have become obsolete or are replaced in the
ordinary course of business, (ii) the lease or sublease of property, to the
extent not otherwise prohibited by this Agreement, (iii) as long as no Default
or Event of Default shall have occurred and be continuing or result therefrom,
any such sale of any assets (other than assets constituting Collateral) for the
Fair Market Value thereof; provided, however, that with respect to any such sale
pursuant to this clause (iii), the aggregate Fair Market Value of all assets
sold pursuant to this clause (iii) during any Fiscal Year shall not exceed
$10,000,000, (iv) Permitted Liens, or (v) as permitted in clause (c) below.
(c) The Borrower shall not, and shall not permit any of its
Restricted Subsidiaries to, sell or otherwise dispose of, or factor at maturity
or collection, any Accounts (it being understood and agreed that performance by
the Borrower under the Mannesmann Agreement shall not constitute such a sale,
disposition or factor arrangement), except Accounts which have been released as
Collateral pursuant to the Collateral Documents.
7.6. Investments in Other Persons. The Borrower shall not, and shall
not permit any of its Restricted Subsidiaries to, directly or indirectly, make
or maintain any loan or advance to any other Person or own, purchase or
otherwise acquire any Stock, Stock Equivalents, other equity interest,
obligations or other securities of, or otherwise invest in, any other Person
(any such transaction being an "Investment"), except:
(a) Investments in accounts, contract rights and chattel paper
(each as defined in the Uniform Commercial Code), notes receivable and similar
items arising or acquired in the ordinary course of business consistent with the
past practice of the Borrower and its Restricted Subsidiaries and the proceeds
thereof;
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(b) loans or advances to employees of the Borrower, which
loans and advances shall not in the aggregate exceed $5,000,000 outstanding at
any time;
(c) Investments in Cash Equivalents;
(d) Investments by the Borrower and its Restricted
Subsidiaries (including the capitalization of Subsidiaries and Investments in
joint ventures (other than, in the case of the Borrower, Investments
constituting general partnership interests which result in the Borrower being or
becoming a general partner for partnership liability purposes)) which
Investments are complementary to the Borrower's business and consistent with the
provisions of Section 7.8; provided, however, that the aggregate amount of such
Investments made after September 30, 1995, together with all Contingent
Obligations of the Borrower and its Restricted Subsidiaries with respect to the
Indebtedness of such Subsidiaries and joint ventures incurred after September
30, 1995 shall not exceed the difference between (i) the Additional
Discretionary Amount (to the extent not previously utilized pursuant to Section
5.2), and (ii) the sum of (A) all prior cash Investments in Subsidiaries made by
the Borrower and its Restricted Subsidiaries from September 30, 1995 to the date
of such determination, plus (B) all prior cash dividends or other distributions
paid and Indebtedness of the Borrower and its Subsidiaries purchased, redeemed,
prepaid, defeased or otherwise acquired for value or paid by the Borrower and
its Restricted Subsidiaries from September 30, 1995 to the date of such
determination (other than dividends, distributions, purchases, redemptions,
prepayments, defeasances, acquisitions for value or payments that are required
payments or are specifically permitted by Sections 7.4(a)(i) and 7.4(a)(ii)(A)
and (C) and 7.4(b)(i) through (vii)); and provided, further, that after giving
effect to any such Investment, no Default or Event of Default under any other
provision hereof has occurred and is continuing or is reasonably likely to
result therefrom;
(e) Investments consisting of the ownership by the Borrower of
shares of the capital stock of The West Union Canal Company; provided, however,
that the purchase price for all such stock purchased after the date hereof shall
not exceed $500,000;
(f) Investments by the Borrower in a Subsidiary in an
aggregate amount not in excess of $2,000,000 in respect of the Borrower's
Corex(TM) project; provided, however, that the Borrower may invest an additional
$1,000,000 in such project if the Tangible Net Worth of the Borrower, at the
time of each such additional Investment, is greater than or equal to $3,500,000,
plus the amount of Tangible Net Worth required to be maintained by the Borrower
pursuant to Section 5.1 at such time; and
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(g) Investments by the Borrower in the Borrower's Subsidiary
that is a member of the IMDG Joint Venture in an aggregate amount not in excess
of $6,000,000;
7.7. Maintenance of Ownership of Subsidiaries. The Borrower shall not
permit any Subsidiary to issue, sell or otherwise dispose of any shares of its
Stock or any Stock Equivalent or the Stock or any Stock Equivalent of any other
Subsidiary, except to the Borrower or a Subsidiary of the Borrower.
7.8. Change in Nature of Business. The Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, change the nature
or conduct of its business from the manufacturing and sale of steel and
businesses or activities related or incident thereto.
7.9. Plans. The Borrower shall not, and shall not permit any of its
Restricted Subsidiaries or ERISA Affiliates to, (a) adopt or become obligated to
contribute to any Title IV Plan or any Multiemployer Plan or any other Plan
subject to Section 412 of the Code (except for any such Plan listed on Schedule
4.9 on the Closing Date), (b) establish or become obligated with respect to any
new Welfare Benefit Plan, or modify any existing Welfare Benefit Plan, which is
reasonably likely to result in an increase of the present value of future
liabilities for post-retirement life insurance and medical benefits under all
such plans to increase by more than $1,000,000, or (c) establish or become
obligated to contribute to any new unfunded Pension Plan, or modify any existing
unfunded Pension Plan, which is reasonably likely to result in an increase in
the present value of future liabilities under all such plans of more than
$1,000,000.
7.10. Modification of Material Agreements. The Borrower shall not, and
shall not permit any of its Restricted Subsidiaries to, alter, amend, modify
(unless such alteration, amendment or modification results in terms more
favorable to the Borrower), rescind, terminate or waive any of, its material
rights under any of, or fail to comply in all material respects with all of, its
material Contractual Obligations as in effect on the date hereof; provided,
however, that, with respect to any Contractual Obligations other than the Loan
Documents, the 1993 Senior Notes Indenture, the Senior Notes, the Exchange
Debentures Indenture, the Exchange Debentures, the 1994 Senior Notes Indenture,
and the 1994 Senior Notes, the Borrower or its Restricted Subsidiaries may do so
if the consequences thereof are not reasonably likely to have a Material Adverse
Effect; and provided, further, that in the event of any breach or event of
default thereunder by a Person other than the Borrower or any of its Restricted
Subsidiaries, as the case may be, the Borrower shall promptly notify the Agent
of any such breach or event of default and take all such action as may be
reasonably necessary in order to cause (or cause such Restricted Subsidiary to
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cause) such breach or event of default to be cured, unless such breach or event
of default would have no Material Adverse Effect.
7.11. Accounting and Tax Reporting Changes. The Borrower shall not, and
shall not permit any of its Restricted Subsidiaries to, make any change in
accounting treatment and reporting practices or tax reporting treatment, except
if such practices or treatment is in conformity with GAAP and disclosed by the
Borrower in advance in writing to the Lenders and the Agent.
7.12. Contingent Obligations. The Borrower shall not, and shall not
permit any of its Restricted Subsidiaries to, incur, assume, endorse, be or
become liable for, or guarantee, directly or indirectly, or permit or suffer to
exist, any Contingent Obligation of the Borrower or such Restricted Subsidiary,
except for:
(a) Contingent Obligations evidenced by a Loan Document;
(b) Contingent Obligations in addition to those permitted in
subsection (a) with respect to any Indebtedness, including, without limitation,
Indebtedness of a Subsidiary of the Borrower; provided, however, that the
aggregate liability of the Borrower and all Restricted Subsidiaries pursuant to
this subsection (b) shall not exceed (i) $5,000,000 at any time outstanding with
respect to Indebtedness of an Affiliate of the Borrower and (ii) $5,000,000 at
any time outstanding with respect to Indebtedness of any other Person, it being
understood and agreed that all Contingent Obligations contemplated in clause (i)
above shall constitute a part of and not be in addition to the amount permitted
under Section 7.6(d), and all Contingent Obligations contemplated in clause (ii)
above shall constitute a part of and not be in addition to the amount permitted
under Section 7.2(b);
(c) Contingent Obligations of the Borrower with respect to any
obligations of the Borrower's Subsidiary that is a member of the IMDG Joint
Venture in an aggregate amount not to exceed $15,000,000 in respect of the IMDG
Joint Venture; and
(d) Contingent Obligations in connection with take-or-pay
agreements or other similar agreements for the purchase of raw materials and
commodities used in the Borrower's ordinary course of business, and subject to
the Agent's prior approval, services; provided that such agreements are entered
into in the Borrower's ordinary course of business in arms-length transactions.
7.13. Transactions with Affiliates. The Borrower shall not, and shall
not permit any of its Restricted Subsidiaries to, except as otherwise expressly
permitted herein, do
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any of the following: (a) make any Investment in an Affiliate of the Borrower
except as permitted in Section 7.6(b), (c), (d), (e) and (f) and Section 7.12,
(b) transfer, sell, lease, assign or otherwise dispose of any asset to any
Affiliate of the Borrower or any Subsidiary of the Borrower, (c) purchase or
acquire assets from any Affiliate of the Borrower or any Subsidiary of the
Borrower, (d) prepay any Indebtedness to any Affiliate of the Borrower or any
Subsidiary of the Borrower, or (e) enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate of the Borrower or any of
its Subsidiaries (including, without limitation, guaranties and assumptions of
obligations of any such Affiliate) except for (i) in the case of clauses (b),
(c) or (e), transfers, sales, leases, assignments, dispositions, purchases or
acquisitions of assets and transactions in the ordinary course of business on a
basis no less favorable to the Borrower or any Restricted Subsidiary as would be
obtained in a comparable arm's length transaction with a Person not an Affiliate
involving assets that are not material to the business and operations of the
Borrower or any Restricted Subsidiary, it being understood and agreed that any
transfer or assignment of any such asset to an Unrestricted Subsidiary by the
Borrower or any Restricted Subsidiary shall constitute an Investment pursuant to
Section 7.6(d) and (ii) salaries, fees and other compensation to officers or
directors of the Borrower or any Restricted Subsidiary of the Borrower.
7.14. Adverse Transactions. The Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into or be a party to any transaction
the performance of which in the future would be inconsistent in any material
respect with or reasonably likely to result in a breach of any covenant
contained herein or give rise to a Default or Event of Default.
7.15. Cancellation of Indebtedness Owed to It. The Borrower shall not,
and shall not permit any of its Restricted Subsidiaries to, cancel any claim or
Indebtedness owed to it except for legitimate business purposes in the
reasonable judgment of the Borrower or such Restricted Subsidiary and in the
ordinary course of business.
7.16. Subsidiaries. (a) Upon the incorporation or other organization of
any Subsidiary, the Borrower shall, and shall cause each of its Subsidiaries to
notify the Agent promptly after such Person becomes a Subsidiary of the Borrower
or such Sub- sidiary and whether such Subsidiary is to be designated a
Restricted Subsidiary.
(b) Prior to the Borrower or any of its Restricted
Subsidiaries making any Investment in a Subsidiary (other than (i) in respect of
the Investments described in Section 7.6(f) and (g), or (ii) with the prior
written consent of the Agent), which together with all other Investments of the
Borrower and its Restricted Subsidiaries in Subsidiaries, would equal or exceed
$1,000,000 in the aggregate, the Borrower shall either (i) pledge all of the
Stock of such Subsidiary, then or thereafter issued, to the Agent for the
benefit
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of the Lenders pursuant to such pledge agreement or other arrangement as shall
be reasonably satisfactory to the Agent and which results in the creation and
perfection of a first priority security interest in such Stock in favor of the
Agent for the benefit of the Lenders, or (ii) cause each such Subsidiary, and
any Subsidiary formed or acquired by such Subsidiary to execute and deliver a
guaranty agreement, substantially in the form of Exhibit N, and, in either case,
to deliver proof of corporate action, incumbency of officers, opinions of
counsel and other documents as the Agent may reasonably request. The obligations
of any Subsidiary under any such guaranty agreement shall terminate on and as of
the date all of the issued and outstanding stock of such Subsidiary is pledged
to the Agent for the benefit of the Lenders pursuant to such pledge agreement or
other arrangement, which is mutually satisfactory to the Agent and the pledgor
of such Stock and which results in the creation and perfection of a first
priority security interest in such Stock in favor of the Agent for the benefit
of the Lenders. Upon receipt of a first priority security interest in the Stock
of any such Subsidiary, the Agent shall take such action as may be required to
terminate the outstanding guaranty of the Obligations by such Subsidiary. The
agreement contained in the immediately preceding sentence shall be for the
benefit of any Subsidiary the Stock of which is pledged pursuant hereto and such
Subsidiary shall be entitled to rely on such agreement and to enforce such
agreement.
7.17. Capital Structure. The Borrower shall not, and shall not permit
any of its Restricted Subsidiaries to, make any change in its capital structure
(including, without limitation, in the terms of its outstanding Stock), amend
its articles of incorporation or by-laws or make any change in any of its
business objectives, purposes or operations other than changes or amendments
which in the aggregate are not reasonably likely to have a Material Adverse
Effect (it being understood and agreed that any amendment of the articles of
incorporation of the Borrower (x) to change the voting terms or the dividend or
liquidation rights of the Borrower's Stock (provided no term is included
requiring mandatory redemption prior to the tenth anniversary of the date hereof
or cash distributions which, if not paid, would entitle the holder thereof to
sue to collect such payments) (y) to change the status of ownership of the
Borrower's Class B Common Stock (provided such change does not constitute a
Change in Control) or (z) to create a new class or series of preferred stock
(provided no term is included requiring mandatory redemption prior to the tenth
anniversary of the date hereof or cash distributions which, if not paid, would
entitle the holder thereof to sue to collect such payments), shall not
constitute such a change or amendment).
7.18. No Speculative Transactions. The Borrower shall not, and shall
not permit any of its Restricted Subsidiaries to, engage in any speculative
transaction or in any transaction involving commodity options or swaps or
futures contracts except in either
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case for the sole purpose of hedging in the normal course of business and
consistent with industry practices.
7.19. Margin Regulations. The Borrower shall not use the proceeds of
any Revolving Credit Loans to purchase or carry any margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System).
7.20. Environmental. The Borrower shall not, shall not permit any
Subsidiary to, and shall not knowingly permit any lessee or any other Person to,
dispose of any Contaminant by placing it in or on the ground or waters of any
property owned or leased by the Borrower or any of its Subsidiaries, except for
such dispositions the consequences of which in the aggregate are not reasonably
likely to have a Material Adverse Effect.
7.21. Management and Consulting Fees. From and after the date hereof,
the Borrower shall not, directly or indirectly, enter into any agreement to pay
any management, consulting or similar fee to, (a) any Affiliate of the Borrower
(other than directors' fees and employment compensation in the ordinary course
of business consistent with past practice) except for renewals and extensions of
existing agreements, or (b) any other Person except as, in good faith, the
Borrower deems necessary for legitimate business purposes.
7.22. Bank Accounts. The Borrower shall maintain no bank account other
than those provided for in Section 6.18, the Cash Collateral Account and those
listed on Schedule 4.24 for the purposes listed thereon; provided, however, that
no such bank account listed on Schedule 4.24 shall contain funds more than
necessary for such stated purposes. Notwithstanding the foregoing, provided the
Agent receives prior written notification thereof, the Borrower shall be
entitled to open new accounts (a) in replacement of those identified in Schedule
4.24 having the same purposes, and (b) for specified purposes including employee
payroll, trustee and escrow accounts.
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default. Each of the following events shall be an Event
of Default:
(a) The Borrower shall fail to pay any principal (including,
without limitation, mandatory prepayments of principal) of, or interest on, any
Loan when the same becomes due and payable; or
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(b) (i) Any representation or warranty made or deemed made by
any Restricted Party in any Loan Document or by any Restricted Party (or any of
its officers) pursuant to any Loan Document shall prove to have been incorrect
in any material respect when made or deemed made, or (ii) any representation or
warranty made or deemed made by any Unrestricted Subsidiary in any Loan Document
or by any Unrestricted Subsidiary (or any of its officers) pursuant to any Loan
Document shall prove to have been incorrect in any material respect when made or
deemed made and the circumstances of which is reasonably likely to have a
Material Adverse Effect; or
(c) Any Loan Party shall (i) fail to perform or observe any
term, covenant or agreement contained in Articles V, VI or VII hereof or in any
Collateral Document, or (ii) fail to (A) pay any fee, any other amount due
hereunder or under the other Loan Documents or other of the Obligations when the
same becomes due and payable or (B) comply with any other term, covenant or
agreement contained in this Agreement or in any other Loan Document, if (1) any
such failure under this clause (ii) shall remain unremedied for five Business
Days after the earlier of the date on which (x) an officer of the Borrower
becomes aware of such failure or (y) written notice thereof shall have been
given to the Borrower by the Agent or any Lender, and (2) in the case of any
failure by an Unrestricted Subsidiary pursuant to clause (ii)(B), such failure
is reasonably likely to have a Material Adverse Effect; or
(d) Any Restricted Party shall fail to pay any principal of or
premium or interest on any Indebtedness of such Restricted Party (excluding
Indebtedness evidenced by the Second Amended and Restated Revolving Credit
Notes) having an aggregate outstanding principal amount of $3,000,000 or more,
when the same becomes due and payable after giving effect to any applicable
grace periods (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) or any other event shall occur or condition shall exist
under any agreement or instrument relating to any Indebtedness of any Restricted
Party having an aggregate outstanding principal amount of $3,000,000 or more, if
the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment or in connection with a refinancing
or refunding permitted under Section 7.2(j)), prior to the stated maturity
thereof; or
(e) Any Loan Party shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors, or
any proceeding shall be instituted by or against any Loan Party seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of
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it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee or other similar official for it or
for any substantial part of its property and, in the case of any such
proceedings instituted against any Loan Party (but not instituted by it), either
such proceedings shall remain undismissed or unstayed for a period of 60 days or
any of the foregoing actions sought in such proceedings shall occur; or any Loan
Party shall take any corporate action to authorize any of the actions set forth
above in this subsection (e); provided, however, that none of the foregoing
events listed in this subsection (e) if in respect of an Unrestricted
Subsidiary, shall constitute an Event of Default in and of itself unless the
same is reasonably likely to have a Material Adverse Effect; or
(f) One or more judgments or orders for the payment of money
exceeding in the aggregate $1,000,000 shall be rendered against any Restricted
Party and either (i) enforcement proceedings shall have been commenced by any
creditor upon any such judgment or order, or (ii) there shall be any period of
30 consecutive days during which a stay of enforcement of any such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; or
(g) (i) With respect to any Plan, a prohibited transaction
within the meaning of Section 4975 of the Code or Section 406 of ERISA occurs
which, in the reasonable determination of the Majority Lenders, has a
substantial probability of resulting in direct or indirect liability to any Loan
Party, (ii) with respect to any Title IV Plan, the filing of a notice to
voluntarily terminate any such plan in a distress termination, (iii) with
respect to any Multiemployer Plan any Loan Party or any ERISA Affiliate shall
incur withdrawal liability, (iv) with respect to any Qualified Plan, any Loan
Party or any ERISA Affiliate shall incur an accumulated funding deficiency or
request a funding waiver from the IRS, or (v) with respect to any Title IV Plan
or Multiemployer Plan which has an ERISA Event which is not described in clauses
(ii) - (iv) hereof, in the reasonable determination of the Majority Lenders
there is a substantial probability of the termination of any such plan by the
PBGC under Section 4042 of ERISA; provided, however, that the events listed in
clauses (i) - (v) hereof shall constitute Events of Default only if the amount
of the liability, deficiency or waiver request of the Loan Party or ERISA
Affiliate, assessed or reasonably expected to be assessed, exceeds $100,000 in
any case set forth in (i) through (v) above, or exceeds $500,000 in the
aggregate for all such cases; or
(h) Any provision of any Collateral Document shall for any
reason cease to be valid and binding on the Loan Party party thereto other than
by reason of the application of applicable bankruptcy, insolvency,
reorganization or other similar laws or
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the application of equitable principles relating to or limiting creditors'
rights generally, or such Loan Party shall so state in writing; or
(i) Except as provided in the Collateral Documents, any
Collateral Document shall, for any reason, cease to create a valid Lien on any
of the Collateral purported to be covered thereby, or such Lien shall cease to
be a perfected and first priority Lien on the Collateral (other than (i)
unidentifiable cash proceeds, and (ii) Inventory sold or disposed of, and
Proceeds applied, as permitted hereunder and under the Second Amended and
Restated Security Agreement and the Second Amended and Restated Cash Collateral
Agreement), subject only to Permitted Liens; or
(j) There shall occur any Change of Control; or
(k) There shall occur a Material Adverse Change or an event
which is reasonably likely to have a Material Adverse Effect; or
(l) Any Loan Party shall have entered into any consent or
settlement decree or agreement or similar arrangement with any Governmental
Authority or any judgment, order, decree or similar action shall have been
entered against any Loan Party, in either case based on or arising from the
violation of or pursuant to any Environmental Law, or the generation, storage,
transportation, treatment, disposal or Release of any Contaminant and, in
connection with all the foregoing, such Loan Party is likely to incur
Environmental Liabilities and Costs, other than those contemplated by the
Projections, in any 12 month period, in excess of $5,000,000.
8.2. Remedies. If there shall occur and be continuing any Event of
Default, the Agent (a) shall at the request, or may with the consent, of the
Majority Lenders by notice to the Borrower, declare the obligation of each
Lender to make Loans and of the Issuer to issue Letters of Credit to be
terminated, whereupon the same shall forthwith terminate, and (b) shall at the
request, or may with the consent, of the Majority Lenders by notice to the
Borrower, declare the Loans, all interest thereon and all other amounts and
Obligations payable under this Agreement to be forthwith due and payable,
whereupon the Second Amended and Restated Revolving Credit Notes, all such
interest and all such amounts and Obligations shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower; provided, however,
that upon the occurrence of the Event of Default specified in Section 8.1(e),
(A) the obligation of each Lender to make Loans and of the Issuer to issue
Letters of Credit shall automatically be terminated and (B) the Loans, all such
interest and all such amounts and Obligations shall automatically become and be
due and payable, without presentment, demand, protest or any notice of any kind,
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all of which are hereby expressly waived by the Borrower. In addition to the
remedies set forth above, the Agent may exercise any remedies provided for by
the Collateral Documents in accordance with the terms thereof or any other
remedies provided by applicable law.
8.3. Actions in Respect of Letters of Credit. (a) Upon the giving of
notice to the Borrower pursuant to clause (a) or (b) of the first sentence of
Section 8.2 and automatically upon the occurrence of an Event of Default
specified in Section 8.1(e), the Borrower shall pay to the Agent in same day
funds at each of the Agent's office specified in the Second Amended and Restated
Revolving Credit Notes, for deposit in a special non-interest-bearing cash
collateral account (the "L/C Cash Collateral Account") to be maintained in the
name of the Agent on behalf of the Secured Parties at such place as shall be
designated by the Agent, an amount equal to all outstanding Letter of Credit
Obligations.
(b) The Agent shall, from time to time after funds are
deposited in the L/C Cash Collateral Account, apply funds then held in the L/C
Cash Collateral Account to the payment of any amounts, in such order as the
Agent may elect, as shall have become or shall become due and payable by the
Borrower to the Issuer or Lenders in respect of the Obligations.
(c) Neither the Borrower nor any Person claiming on behalf of
or through the Borrower shall have any right to withdraw any of the funds held
in the L/C Cash Collateral Account until all of the Obligations have been paid
or satisfied in full.
(d) The Borrower agrees that it will not (i) sell or otherwise
dispose of any interest in the L/C Cash Collateral Account or any funds held
therein or (ii) create or permit to exist any Lien upon or with respect to the
L/C Cash Collateral Account or any funds held therein, except as provided in or
contemplated by this Agreement.
(e) Upon the occurrence and during the continuation of an
Event of Default, the Agent may also exercise, in its sole discretion, in
respect of the L/C Cash Collateral Account, in addition to the other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party upon default under the Uniform Commercial Code in
effect in the State of New York at that time, and the Agent may, without notice
except as specified below, sell the L/C Cash Collateral Account or any part
thereof in one or more parcels at public or private sale, at any of the Agent's
offices or elsewhere, for cash, or credit or for future delivery, and upon such
other terms as the Agent may deem commercially reasonable. The Borrower agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to the Borrower of the time
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and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Agent shall not be obligated
to make any sale of the L/C Cash Collateral Account, regardless of notice of
sale having been given. The Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
(f) Any cash held in the L/C Cash Collateral Account, and all
cash proceeds received by the Agent in respect of any sale of, collection from
or other realization upon all or any part of the L/C Cash Collateral Account,
shall be applied (after the expiration of all outstanding Letters of Credit and
the payment of any amounts payable pursuant to Section 10.4) in whole or in part
by the Agent against all or any part of the other Obligations in such order as
the Agent shall elect. Any surplus of such cash or cash proceeds held by the
Agent and remaining after the indefeasible cash payment in full of all of the
Obligations shall be paid over to the Borrower or to whomsoever may be lawfully
entitled to receive such surplus.
ARTICLE IX
THE AGENT
9.1. Authorization and Action. Each Lender hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Second Amended and Restated Revolving Credit
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders, and such instructions shall be binding upon all Lenders
and all holders of Second Amended and Restated Revolving Credit Notes; provided,
however, that the Agent shall not be required to take any action which the Agent
in good faith believes exposes it to personal liability or is contrary to this
Agreement or applicable law. The Agent agrees to give to each Lender prompt
notice of each notice given to it by the Borrower pursuant to the terms of this
Agreement or the other Loan Documents.
9.2. Agent's Reliance, Etc. None of the Agent or any of its Affiliates
or any of the respective directors, officers, agents or employees of the Agent
or any such Affiliate shall
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be liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents, except for its or
their own gross negligence or wilful misconduct. Without limitation of the
generality of the foregoing, the Agent (a) may treat the payee of any Second
Amended and Restated Revolving Credit Note as the holder thereof until such note
has been assigned in accordance with Section 10.7, (b) may consult with legal
counsel (including, without limitation, counsel to the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts, (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or any of the other Loan Documents, (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or any of the other Loan Documents on
the part of any Loan Party or to inspect the property (including, without
limitation, the books and records) of any Loan Party, (e) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto, and (f) shall incur no liability under or in respect of this
Agreement or any of the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party or
parties.
9.3. CUSA and Affiliates. With respect to its Revolving Credit
Commitment, the Loans made by it and the Second Amended and Restated Revolving
Credit Note issued to it, CUSA shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include CUSA in its individual capacity. CUSA and its Affiliates may
accept deposits from, lend money to, act as trustee under indentures of, and
generally engage in any kind of business with, the Borrower, its Subsidiaries
and any Person who may do business with or own securities of the Borrower or its
Subsidiaries, all as if CUSA were not the Agent and without any duty to account
therefor to the Lenders.
9.4. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements referred to in Section 4.5 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and
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information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Loan Documents.
9.5. Indemnification. The Lenders agree to indemnify the Agent and its
Affiliates, and their respective directors, officers, employees, agents and
advisors (to the extent not reimbursed by the Borrower), ratably according to
the respective principal amounts of the Second Amended and Restated Revolving
Credit Notes then held by each of them and the Letter of Credit Obligations
(including, without limitation, participations therein) owing to them (or if no
Second Amended and Restated Revolving Credit Notes or Letter of Credit
Obligations are at the time outstanding, ratably according to the respective
amounts of the aggregate of their Revolving Credit Commitments), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements (including, without
limitation, fees and disbursements of legal counsel) of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against, the Agent
in any way relating to or arising out of this Agreement or the other Loan
Documents or any action taken or omitted by the Agent under this Agreement or
the other Loan Documents; provided, however, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Agent's gross negligence or wilful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse the Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including, without limitation,
fees and disbursements of legal counsel) incurred by the Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of its rights or responsibilities
under, this Agreement or the other Loan Documents, to the extent that the Agent
is not reimbursed for such expenses by the Borrower.
9.6. Successor Agent. The Agent may resign at any time by giving
advance written notice thereof to the Lenders and the Borrower and may be
removed at any time with or without cause by Lenders having 80% or more of the
Revolving Credit Commitments upon advance written notice from such Lenders. Upon
any such resignation or removal, such Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation or the Lenders' removal of the
retiring Agent, then the retiring Agent, on behalf of the Lenders, or the
Lenders shall appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $100,000,000. Upon the
acceptance of any
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appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from any further duties and obligations under this Agreement and the other Loan
Documents. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement and
the other Loan Documents.
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ARTICLE X
MISCELLANEOUS
10.1. Amendments, Etc. No amendment or waiver of any provision of this
Agreement nor consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be in writing and signed by the
Majority Lenders; (provided, however, that if any provision of this Agreement
requires the consent of a greater percentage of Lenders, such provision may only
be amended upon the written consent of such percentage of Lenders), and then any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no amendment,
waiver or consent shall, unless in writing and signed by all the Lenders do any
of the following:
(a) waive any of the conditions specified in Article III
except as otherwise provided therein;
(b) increase the Revolving Credit Commitments of the Lenders
or subject the Lenders to any additional obligations;
(c) except as otherwise provided herein, reduce the principal
of, or interest on, the Revolving Credit Loans or any fees or other amounts
payable hereunder;
(d) postpone any date fixed for any payment of principal of,
or interest on, the Revolving Credit Loans or any fees or other amounts payable
hereunder;
(e) change the percentage of the Revolving Credit Commitments,
the aggregate unpaid principal amount of the Second Amended and Restated
Revolving Credit Notes, or the number of Lenders which shall be required for the
Lenders or any of them to take any action hereunder;
(f) release, subordinate or share a material portion of the
Collateral (as determined by the Agent but in any event not more than $1,000,000
in any calendar year) except as shall otherwise be provided in this Agreement or
in the Collateral Documents;
(g) amend this Section 10.1;
(h) amend the definition of Majority Lenders; or
(i) amend the definition of Termination Date to postpone such
date.
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and provided, further, that no amendment, waiver or consent shall affect the
rights or duties of the Agent or the Issuers under this Agreement or the other
Loan Documents, unless such amendment, waiver or consent shall be in writing and
signed by the Agent or the Issuers, as the case may be, in addition to the
Lenders required above to take such action.
10.2. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing (including, without limitation, telegraphic,
telex, telecopy or cable communication) and mailed, telegraphed, telexed,
telecopied, cabled or delivered by hand, if to the Borrower, at its address at
10 South Geneva Road, Vineyard, Utah 84058 (telecopy number: (801) 227-9016)
(telephone number: (801) 227-9302), Attention: Chief Financial Officer; if to
any Lender, at its Domestic Lending Office specified opposite its name on
Schedule III; if to any Issuer, at its address specified opposite its name on
Schedule III; and if to the Agent, at its address at 399 Park Avenue, Sixth
Floor, New York, New York 10043 (telecopy number: (212) 793-1290) (telephone
number: (212) 559-3149), Attention: Keith Karako, with a copy to Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, New York, New York 10153, Attention: Marsha E.
Simms, Esq.; or, as to the Borrower or the Agent, at such other address as shall
be designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and the Agent. All such notices and
communications shall, when mailed, telegraphed, telexed, telecopied, cabled or
delivered, be effective when deposited in the mails, delivered to the telegraph
company, confirmed by telex answerback, telecopied with confirmation of receipt,
delivered to the cable company or delivered by hand to the addressee or its
agent, respectively, except that notices and communications to the Agent
pursuant to Article II or IX shall not be effective until received by the Agent.
10.3. No Waiver; Remedies. No failure on the part of any Lender or the
Agent to exercise, and no delay in exercising, any right hereunder or under any
Second Amended and Restated Revolving Credit Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
10.4. Costs; Expenses; Indemnities. (a) The Borrower agrees to pay on
demand (i) all costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Agreement, each of the other Loan Documents and each of the other documents
to be delivered hereunder and thereunder, including, without limitation, the
fees and out-of-pocket expenses of counsel, accountants, consultants or industry
experts retained by the Agent with respect thereto
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and of counsel to the Agent with respect to advising the Agent as to its rights
and responsibilities under this Agreement and the other Loan Documents, (ii) all
costs and expenses of the Agent in connection with the Agent's quarterly
Borrowing Base audit, (iii) wire transfer, duplicating and photocopying,
telephone, travel and other administrative costs and expenses, and (iv) all
costs and expenses of the Agent, each Lender and each Issuer (including, without
limitation, counsel fees and expenses) in connection with the restructuring or
enforcement (whether through negotiation, legal proceedings or otherwise) of
this Agreement, the other Loan Documents and the other documents to be delivered
hereunder or thereunder.
(b) The Borrower agrees to defend, indemnify and hold harmless
the Agent, each Lender and the Issuers and their respective Affiliates, and the
directors, officers, employees, agents, attorneys, consultants and advisors of
or to any of the foregoing (including, without limitation, those retained in
connection with the satisfaction or attempted satisfaction of any of the
conditions set forth in Article III) (each of the foregoing being an
"Indemnitee") from and against any and all claims, damages, liabilities,
obligations, losses, penalties, actions, judgments, suits, costs, disbursements
and expenses of any kind or nature (including, without limitation, fees and
disbursements of counsel to any such Indemnitee) which may be imposed on,
incurred by or asserted against any such Indemnitee in connection with or
arising out of any investigation, litigation or proceeding, whether or not any
such Indemnitee is a party thereto, whether direct, indirect, or consequential
and whether based on any federal, state or local law or other statutory
regulation, securities or commercial law or regulation, or under common law or
in equity, or on contract, tort or otherwise, in any manner relating to or
arising out of this Agreement, any other Loan Document, any Obligation, any
Letter of Credit, or any act, event or transaction related or attendant to any
thereof, including, without limitation, (i) all Environmental Liabilities and
Costs arising from or connected with the past, present or future operations of
the Borrower and its Subsidiaries involving any property subject to the Second
Amended and Restated Security Agreement, or damage to real or personal property
or natural resources or harm or injury alleged to have resulted from any Release
of Contaminants on, upon or into such property or any contiguous real estate,
(ii) any costs or liabilities incurred in connection with the investigation,
removal, cleanup and/or remediation of any Contaminant present or arising out of
the operations of any facility of the Borrower or its Subsidiaries, (iii) any
costs or liabilities incurred in connection with any Environmental Lien, (iv)
any costs or liabilities incurred in connection with any other matter affecting
any facility pursuant to Environmental Laws, including, without limitation,
CERCLA and applicable state property transfer laws, whether, with respect to any
of the foregoing, such Indemnitee is a mortgagee pursuant to any leasehold
mortgage, a mortgagee in possession, the successor in interest to the Borrower
or any of its
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Subsidiaries, or the owner, lessee or operator of any facility of the Borrower
or any of its Subsidiaries by virtue of foreclosure, except, with respect to any
of the foregoing referred to in clauses (i), (ii), (iii) and (iv), to the extent
incurred following (x) foreclosure by the Agent, any Lender or any Issuer, or
(y) the Agent, any Lender or any Issuer having become the successor in interest
to the Borrower or any of its Subsidiaries, attributable solely to acts of the
Agent, such Lender or such Issuer or any agent on behalf of the Agent, such
Lender or such Issuer, (v) the making of any assignments of or participations in
the Revolving Credit Loans or Letters of Credit and the management of such
Revolving Credit Loans and Letters of Credit, or (vi) the use or intended use of
the proceeds of the Revolving Credit Loans or Letters of Credit or in connection
with any investigation of any potential matter covered hereby (collectively, the
"Indemnified Matters"); provided, that the Borrower shall not have any
obligation under this Section 10.4(b) to an Indemnitee with respect to any
Indemnified Matter caused by or resulting from the gross negligence or willful
misconduct of that Indemnitee, as determined by a court of competent
jurisdiction in a final non-appealable judgment or order.
(c) If any Lender receives any payment of principal of, or is
subject to a conversion of, any Eurodollar Rate Loan other than on the last day
of an Interest Period relating to such Loan, as a result of any payment or
conversion made by the Borrower or acceleration of the maturity of the Second
Amended and Restated Revolving Credit Notes pursuant to Section 8.2 or for any
other reason, the Borrower shall, upon demand by such Lender (with a copy of
such demand to the Agent), pay to the Agent for the account of such Lender all
amounts required to compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment or
conversion, including, without limitation, any loss (including, without
limitation, loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund or maintain such Eurodollar Rate Loan.
(d) The Agent, each Lender and the Issuer agree that in the
event that any such investigation, litigation or proceeding set forth in
subparagraph (b) above is asserted or threatened in writing or instituted
against it or any other Indemnitee, or any remedial, removal or response action
is requested of it or any of its officers, directors, agents and employees, for
which any Indemnitee may desire indemnity or defense hereunder, such Indemnitee
shall promptly notify the Borrower in writing.
(e) The Borrower, at the request of any Indemnitee, shall have
the obligation to defend against such investigation, litigation or proceeding or
requested remedial, removal or response action, and the Borrower, in any event,
may participate in the defense thereof with legal counsel of the Borrower's
choice. In the event that such Indemnitee requests the Borrower to defend
against such investigation, litigation or proceeding or requested remedial,
removal or response action, the Borrower shall promptly do so and
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such Indemnitee shall have the right to have legal counsel of its choice
participate in such defense. No action taken by legal counsel chosen by such
Indemnitee in defending against any such investigation, litigation or proceeding
or requested remedial, removal or response action shall vitiate or in any way
impair the Borrower's obligation and duty hereunder to indemnify and hold
harmless such Indemnitee.
(f) The Agent shall give the Borrower reasonable prior notice
of any settlement, compromise or similar disposition by the Agent, any Lender or
the Issuer of any investigation, litigation or proceeding pursuant to which the
Borrower has an obligation to defend.
(g) The obligations of the Borrower under this Section 10.4
shall survive the repayment of the Revolving Credit Loans and the termination of
the Revolving Credit Commitments.
10.5. Right of Set-off. Upon the occurrence and during the continuance
of any Event of Default each Lender and its Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits, whether general or special, time or demand,
provisional or final, at any time held and other indebtedness at any time owing
by such Lender or any of its Affiliates to or for the credit or the account of
the Borrower against any and all of the Obligations now or hereafter existing
irrespective of whether or not such Lender shall have made any demand under this
Agreement or any Second Amended and Restated Revolving Credit Note, any
Reimbursement Agreement or any other Loan Document and although such Obligations
may be unmatured. Each Lender agrees promptly to notify the Borrower after any
such set-off and application made by such Lender or its Affiliates; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender under this Section 10.5
are in addition to the other rights and remedies (including, without limitation,
other rights of set-off) which such Lender may have.
10.6. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower and the Agent and when the Agent shall
have been notified by each Lender and each Issuer that such Lender and such
Issuer has executed it and thereafter shall be binding upon and inure to the
benefit of the Borrower, the Agent, each Lender and each Issuer and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lenders and the Issuers.
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10.7. Assignments and Participations. (a) Each Lender and each Issuer
may sell, transfer, negotiate or assign to one or more other Lenders or Eligible
Assignees all or a portion of its Revolving Credit Commitments, commitment to
issue Letters of Credit, Loans, the Letter of Credit Obligations owing to it and
the Second Amended and Restated Revolving Credit Notes held by it and a
commensurate portion of its rights and obligations hereunder and under the other
Loan Documents; provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all of the assigning Lender's or
Issuer's rights and obligations under this Agreement, (ii) the aggregate amount
of the Revolving Credit Commitments, Letters of Credit, Letter of Credit
Obligations and Loans being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than the lesser of (A) the assigning
Lender's Revolving Credit Commitment on the date thereof and (B) $10,000,000 or
an integral multiple of $1,000,000 in excess thereof, or, in the case of the
Issuer, all of its rights hereunder, (iii) such Lender or Issuer pay the Agent
an assignment fee of $3,000 on the date of each such assignment and (iv) each
assignee hereunder shall also be an Eligible Assignee. The parties to each
assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together, in the case
of the Lenders, with the Second Amended and Restated Revolving Credit Note
subject to such assignment. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in such Assignment and
Acceptance, (A) the assignee thereunder shall become a party hereto and, to the
extent that rights and obligations under the Loan Documents have been assigned
to such assignee pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender, or the Issuer, as the case may be, hereunder and
thereunder, and (B) the assignor thereunder shall, to the extent that rights and
obligations under this Agreement have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under the Loan Documents, such Lender shall cease to be a party
hereto and shall be released from any further obligations hereunder).
(b) By executing and delivering an Assignment and Acceptance,
the Lender or an Issuer assignor thereunder and the assignee thereunder confirm
to and agree with each other and the other parties hereto as follows: (i) other
than as provided in such Assignment and Acceptance, such assigning Lender or
Issuer makes no representation or warranty and assumes no responsibility with
respect to any of the statements, warranties or representations made in or in
connection with this Agreement or any other Loan Document furnished pursuant
thereto or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document or any other
instrument or document furnished pursuant hereto or thereto, (ii) such assigning
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Lender or Issuer makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other Loan Document or of any other instrument or document
furnished pursuant hereto or thereto, (iii) such assignee confirms that it has
received a copy of this Agreement and each of the Loan Documents together with a
copy of each of the financial statements referred to in Section 4.5 of this
Agreement and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Acceptance, (iv) such assignee will, independently and without reliance upon the
Agent, such assigning Lender, any other Lender or the Issuer, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement, (v) such assignee confirms that it is an Eligible Assignee, (vi) such
assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto, and (vii) such assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of this Agreement are required to be performed by it as a Lender or an
Issuer, as the case may be.
(c) The Agent shall maintain at its address referred to in
Section 10.2 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and the Issuer and the Revolving Credit Commitments of, Letter of Credit
Obligations owing to, and principal amount of the Revolving Credit Loans owing
to, each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender or Issuer, as the case may be, for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower,
the Agent, any Lender and the Issuer at any reasonable time and from time to
time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender or Issuer and an assignee representing that it is an
Eligible Assignee, together with the Second Amended and Restated Revolving
Credit Note subject to such assignment, the Agent shall, if such Assignment and
Acceptance has been completed, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give notice
thereof to the Borrower within three days after the receipt of such Assignment
and Acceptance. Within five Business Days after its receipt of such notice, the
Borrower, at its own expense, shall execute and deliver to the Agent, in
exchange for such surrendered Second Amended and Restated Revolving Credit Note,
a
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new Second Amended and Restated Revolving Credit Note to the order of such
Eligible Assignee in an amount equal to the Revolving Credit Commitment assumed
by it pursuant to such Assignment and Acceptance and, if the assigning Lender
has retained a Revolving Credit Commitment hereunder, a new Second Amended and
Restated Revolving Credit Note to the order of the assigning Lender in an amount
equal to the Revolving Credit Commitment retained by it hereunder. Such new
Second Amended and Restated Revolving Credit Notes shall be dated the same date
as the surrendered Second Amended and Restated Revolving Credit Note and be in
substantially the form of Exhibit B.
(e) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Revolving Credit Loans owing to it and the Second Amended and Restated Revolving
Credit Note(s) held by it in favor of any Federal Reserve Bank in accordance
with Regulation A of the Board of Governors of the Federal Reserve System).
(f) Each Lender may sell participations to one or more banks
or other financial institutions or other corporations which purchase loans in
the ordinary course in or to all or a portion of its rights and obligations
under the Loan Documents (including, without limitation, all or a portion of its
Revolving Credit Commitment, its commitment to issue Letters of Credit, the
Letter of Credit Obligations owing to it, the Loans owing to it and the Second
Amended and Restated Revolving Credit Note held by it) and such Lender shall
notify the Agent (who, in turn, will notify the Borrower) of any such
participations sold, identifying the purchaser and amount thereof. The terms of
such participation shall not, in any event, require or allow the participant's
consent to any amendments, waivers or other modifications of any provision of
any Loan Documents, the consent to any departure by any Loan Party therefrom, or
to the exercising or refraining from exercising any powers or rights which such
Lender may have under or in respect of the Loan Documents (including, without
limitation, the right to enforce the obligations of the Borrower), except if any
such amendment, waiver or other modification or consent would (i) reduce the
amount, or postpone any date fixed for, any amount (whether of principal,
interest or fees) payable to such participant under the Loan Documents, to which
such participant would otherwise be entitled under such participation or (ii)
result in the release of all or substantially all of the Collateral other than
in accordance with the Second Amended and Restated Security Agreement. In the
event of the sale of any participation by any Lender, (A) such Lender's
obligations under the Loan Documents (including, without limitation, its
Revolving Credit Commitment and commitment to issue Letters of Credit) shall
remain unchanged, (B) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (C) such Lender shall
remain the holder of such Second Amended and Restated Revolving Credit Notes and
Obligations for all purposes
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of this Agreement, and (v) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement.
(g) In the event that CUSA is removed as the Agent for any
reason (other than by reason of the Agent's gross negligence or wilful
misconduct), the Lenders who have voted to remove the Agent shall, or shall
cause an Eligible Assignee to, purchase from CUSA all Revolving Credit Loans,
Letter of Credit Obligations and Revolving Credit Commitments held by CUSA.
(h) In the event any Lender shall not agree to any amendment,
waiver or consent requiring the unanimous approval of the Lenders pursuant to
Section 10.1, at the joint request of the Borrower and the Agent, the Lenders
who have so agreed shall have the right (but not the obligation) to, or to cause
an Eligible Assignee(s) to, purchase from such Lender (at the face amount
thereof) all Revolving Credit Loans, Letter of Credit Obligations and Revolving
Credit Commitments held by such Lender, and, upon such purchase, such Lender
shall relinquish its rights and be released from its obligations hereunder and
shall cease to be a party hereto.
(i) If, on two or more occasions within any 12-month period, a
notice or demand has been given by any Lender pursuant to Sections 2.9(c), 2.10,
2.11 or 2.12 requiring or permitting Eurodollar Rate Loans of such Lender to be
repaid, or amounts to be paid or reimbursed, and such Lender shall not have
convinced the Agent and the Borrower that such notices and demands are not
reasonably likely to continue, the Borrower and the Agent shall in good faith
seek a mutually satisfactory substitute bank or banks or one or more other
financial institutions (which may be one or more of the Lenders) to purchase
from such Lender all Revolving Credit Loans, Letter of Credit Obligations and
Revolving Credit Commitments held by such Lender, and, upon such purchase, such
Lender shall relinquish its rights and be released from its obligations
hereunder and shall cease to be a party hereto.
10.8. Governing Law; Severability. This Agreement and the Second
Amended and Restated Revolving Credit Notes and the rights and obligations of
the parties hereto and thereto shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York. Wherever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
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10.9. Submission to Jurisdiction. (a) Any legal action or proceeding
with respect to this Agreement or the Second Amended and Restated Revolving
Credit Notes or any document related thereto may be brought in the courts of the
State of New York or of the United States of America for the Southern District
of New York, and, by execution and delivery of this Agreement, the Borrower
hereby accepts for itself and, to the maximum extent permitted by law, in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. The parties hereto hereby irrevocably waive any objection,
including, without limitation, any objection to the laying of venue or based on
the grounds of forum non conveniens, which any of them may now or hereafter have
to the bringing of any such action or proceeding in such respective
jurisdictions.
(b) The Borrower irrevocably consents to the service of
process of any of the aforesaid courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Borrower at its address provided herein.
(c) Nothing contained in this Section 10.9 shall affect the
right of the Agent, any Lender, any holder of an Second Amended and Restated
Revolving Credit Note or any Issuer to serve process in any other manner
permitted by law or commence legal proceedings or otherwise proceed against the
Borrower in any other jurisdiction.
10.10. Section Titles. The Section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
10.11. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
10.12. Entire Agreement, Etc. This Agreement, together with all of the
other Loan Documents and all certificates and documents delivered hereunder or
thereunder, and the fee agreement referred to in Section 2.3(b) embody the
entire agreement of the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof.
10.13. Confidentiality. Each Lender, Issuer and the Agent agree to keep
information obtained by it pursuant hereto and the other Loan Documents
confidential in accordance with such Lender's, Issuer's and the Agent's, as the
case may be, customary practices and agrees that it will only use such
information in connection with the
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transactions contemplated by this Agreement and not disclose any of such
information other than (a) to each of such Lender's, Issuer's or the Agent's, or
any of their respective Affiliates, as the case may be, employees,
representatives and agents who are or are expected to be involved in the
evaluation of such information in connection with the transactions contemplated
by this Agreement and who are advised of the confidential nature of such
information, (b) to the extent such information presently is or hereafter
becomes available to such Lender, Issuer or the Agent, as the case may be, on a
non-confidential basis from a source other than the Borrower, (c) to the extent
disclosure is required by law, regulation or judicial order (which requirement
or order shall be promptly notified to the Borrower) or requested or required by
bank regulators or auditors, or (d) to assignees or participants or potential
assignees or participants who agree to be bound by the provisions of this
sentence.
10.14. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES ANY
RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL, OR WRITTEN
STATEMENT OR ACTION OF ANY PARTY HERETO.
10.15. No Novation. The terms and conditions of the Existing Credit
Agreement, the Old Revolving Credit Notes and the "Loan Documents" (as defined
in the Existing Credit Agreement) are amended as set forth in, and restated in
their entirety and superseded by, this Agreement, the Amended and Restated
Revolving Credit Notes and the other Loan Documents. It is expressly understood
and acknowledged that nothing in this Agreement shall be deemed to work a
novation of the Old Revolving Credit Notes or any obligation under the Existing
Credit Agreement. Notwithstanding any provision of this Agreement or any other
Loan Document, the execution and delivery of this Agreement and the incurrence
of Obligations hereunder and under the Second Amended and Restated Revolving
Credit Notes shall be in substitution for, but not in payment of, the Old
Revolving Credit Notes and obligations owing to the Lenders under the Existing
Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
GENEVA STEEL COMPANY
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By: /s/ Dennis L. Wanlass
--------------------
Name: Dennis L. Wanlass
Title: Vice President, Treasurer
and Chief Financial Officer
CITICORP USA, INC.
as Agent
By: /s/ Keith R. Karako
--------------------
Name: Keith R. Karako
Title: Attorney-in-Fact
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Lenders
CITICORP USA, INC.
By: /s/ Keith R. Karako
---------------------------
Name: Keith R. Karako
Title: Attorney-in-Fact
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Michael P. McGonigle
---------------------------
Name: Michael P. McGonigle
Title: Vice President
IBJ SCHRODER BANK & TRUST
COMPANY
By: /s/ Robert R. Wallace
---------------------------
Name: Robert R. Wallace
Title: Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Perry Vavoules
---------------------------
Name: Perry Vavoules
Title: Vice President
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CORESTATES BANK, N.A.
By: /s/ Michele A. Walcoff
---------------------------
Name: Michele A. Walcoff
Title: Vice President
HELLER FINANCIAL, INC.
By: /s/ Jeffrey A. Schumacher
---------------------------
Name: Jeffrey A. Schumacher
Title: Assistant Vice President
MELLON BANK, N.A.
By: /s/ Michael F. Aliberto, III
---------------------------
Name: Michael F. Aliberto, III
Title: Vice President
LASALLE BUSINESS CREDIT, INC.
By: /s/ Gregory A. Jones
---------------------------
Name: Gregory A. Jones
Title: First Vice President
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BTM CAPITAL CORPORATION
By: /s/ William York
---------------------------
Name: William York
Title: Senior Vice President
NATIONSBANK, N.A.
By: /s/ Joseph R. Antinozzi
---------------------------
Name: Joseph R. Antinozzi
Title: Vice President
THE BANK OF NEW YORK
COMMERCIAL CORPORATION
By: /s/ Stephen V. Mangiante
---------------------------
Name: Stephen V. Mangiante
Title: Vice President
SANWA BUSINESS CREDIT
CORPORATION
By: /s/ Peter L. Skavla
---------------------------
Name: Peter L. Skavla
Title: Vice President
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CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Bonnie Schain
-------------------------------
Name:
Title: Assistant Vice President
Issuer
CITIBANK, N.A.
By: /s/ Keith R. Karako
-------------------------------
Name: Keith R. Karako
Title: Attorney-in-Fact
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SECOND AMENDED AND RESTATED SECURITY AGREEMENT
This SECOND AMENDED AND RESTATED SECURITY AGREEMENT (the "Agreement"),
dated as of May 14, 1996, made by GENEVA STEEL COMPANY, a Utah corporation (the
"Grantor"), in favor of CITICORP USA, INC., as the agent under the Credit
Agreement referred to below (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Grantor and the Agent are parties to a certain Amended and
Restated Security Agreement, dated as of November 7, 1994 (the "Existing
Security Agreement"); and
WHEREAS, the Grantor has entered into a Second Amended and Restated
Revolving Credit Agreement, dated as of May 14, 1996, with the financial
institutions party thereto and the Agent (said Agreement, as it may be amended,
supplemented, restated or otherwise modified from time to time, being the
"Credit Agreement" and capitalized terms not defined herein but defined therein
being used herein as therein defined); and
WHEREAS, the Grantor and the Agent desire to amend and restate the
Existing Security Agreement in its entirety; and
WHEREAS, it is a condition precedent to the making of Loans and the
issuance of Letters of Credit that the Grantor shall enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make Revolving Credit Loans and the Issuers to issue Letters of
Credit, the Grantor hereby agrees with the Agent that the Existing Security
Agreement is hereby amended and restated in its entirety as follows:
1. Defined Terms. As used in this Agreement, the following terms have
the meanings specified below (such meanings being equally applicable to both the
singular and plural forms of the terms defined):
"Account" means any "account," as such term is defined in
Section 9-106 of the UCC, now owned or hereafter acquired by the
Grantor and, in any event, includes, without limitation, but subject to
the foregoing, (a) all Accounts arising out of the sale of steel plate,
steel sheet, steel pipe, steel slab and any other goods sold or leased
or services rendered by the Grantor and (b) all Accounts of the
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Grantor arising under the Mannesman Agreement now owned or hereafter
received or acquired by or belonging or owing to the Grantor
(including, without limitation, under any trade name, style or division
thereof).
"Account Debtor" means any "account debtor," as such term is
defined in Section 9-105(1)(a) of the UCC.
"Collateral" has the meaning assigned to such term in Section
2 of this Agreement.
"General Intangible" means any "general intangible," as such
term is defined in Section 9-106 of the UCC, now owned or hereafter
acquired by the Grantor, and includes, without limitation, all customer
lists, licenses, permits, rights of indemnification and all right,
title and interest which the Grantor may now or hereafter have in or
under any contract or agreement, now owned or hereafter acquired by the
Grantor (in all cases to the extent assignable and to the extent the
security interest and Lien created hereunder are not prohibited by
agreement).
"Inventory" means any "inventory," as such term is defined in
Section 9-109(4) of the UCC, now owned or hereafter acquired by the
Grantor, and wherever located, and, in any event, includes, without
limitation, all inventory, merchandise, goods and other personal
property now owned or hereafter acquired by the Grantor which are held
for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process
or materials used or consumed or to be used or consumed in the
Grantor's business, or the processing, packaging, delivery or shipping
of the same, and all finished goods held for sale or lease, and
including, without limitation, all steel plate, steel sheet, steel
pipe, steel slab, coal, coke, iron ore, iron ore pellets, scrap metal
and limestone.
"Proceeds" means "proceeds," as such term is defined in
Section 9-306(1) of the UCC.
"Secured Obligations" means the Obligations and all
obligations of the Grantor now or hereafter existing pursuant to this
Agreement.
"Secured Parties" means the Agent, the Lenders and the
Issuers.
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"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of New York; provided, however,
in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of the Secured Parties'
security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
New York, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
2. Grant of Security Interest.
(a) As collateral security for the full and prompt payment
when due (whether at stated maturity, by acceleration or otherwise) of, and the
performance of, all the Secured Obligations, the Grantor hereby confirms and
continues the security interest created pursuant to the Existing Security
Agreement and assigns, conveys, mortgages, pledges, hypothecates and transfers
to the Agent, on behalf of and for the ratable benefit of the Secured Parties,
and hereby grants to the Agent, on behalf of and for the ratable benefit of the
Secured Parties, a security interest in, all of the Grantor's right, title and
interest in, to and under the following (all of which being hereinafter
collectively called the "Collateral"):
i) all Accounts of the Grantor;
ii) all General Intangibles of the Grantor;
iii) all Inventory of the Grantor; and
iv) to the extent not otherwise included, all Proceeds of each
of the foregoing.
(b) Notwithstanding Section 2(a) hereof, the security
interests created or granted hereby in Accounts determined not to be Eligible
Receivables pursuant to paragraph (a) or (b) of the definition of Eligible
Receivables and spare parts, if any, each as may be now owned or hereafter
acquired by the Grantor, may be released, in the Agent's sole discretion, upon
the Borrower's request; provided, however, that the aggregate Fair Market Value
of any Collateral released pursuant to this Section 2(b) from the Closing Date
through the Termination Date shall not exceed $25,000,000; and provided,
further, however, that the security interest in the Collateral requested to be
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released shall not be released except upon receipt by the Agent of the proceeds
of the sale, or financing secured by a Lien on, such Collateral. Any items of
Collateral so released pursuant to the foregoing sentence, shall no longer be
deemed Collateral for purposes of this Agreement. Upon any such release, the
Agent shall (without recourse upon, or any warranty whatsoever by, the Agent),
at the request and sole expense of the Grantor, execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
release.
3. Rights of the Agent; Limitations on the Agent's Obligations.
(a) Subject to Section 6.18(b) of the Credit Agreement, all Proceeds
shall be deposited in the Blocked Account. Any Proceeds, if not deposited in the
Blocked Account, when first collected by the Grantor shall be promptly delivered
by the Grantor in precisely the form received (with all necessary endorsements)
to the Agent, and until so turned over shall be deemed to be held in trust by
the Grantor for and as the Agent's property and shall not be commingled with the
Grantor's other funds or properties. Such Proceeds, when so turned over, shall
continue to be collateral security for all of the Secured Obligations and shall
not constitute payment thereof until applied as provided in the Credit
Agreement. Upon the occurrence and during the continuation of an Event of
Default, at the request of the Agent the Grantor shall deliver to the Agent all
original and other documents evidencing, and relating to, the sale and delivery
of the Inventory or the performance of labor or service which created such
Accounts, including, without limitation, all original orders, invoices and
shipping receipts; and, prior to the occurrence of an Event of Default, the
Grantor shall deliver photocopies thereof to the Agent at its request.
(b) The Agent may at any time, after the occurrence and during the
continuation of an Event of Default, notify Account Debtors of the Grantor, that
the Accounts have been assigned to the Agent and that payments shall be made
directly to the Agent, and upon the request of the Agent, the Grantor will so
notify such Account Debtors.
(c) The Agent may, in its own name or in the name of others,
communicate with such Account Debtors, to verify with such persons to the
Agent's satisfaction the existence, amount and terms of any such Accounts.
(d) Upon reasonable prior notice to the Grantor (it being agreed that
the Agent will use its best efforts to give at least two Business Day's prior
notice, unless an Event of Default shall have occurred and be continuing, in
which case no notice is necessary), the Agent shall have the right to make test
verifications of the Accounts and physical verifications of the Inventory in any
manner and through any medium that it considers
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advisable, and the Grantor agrees to furnish such reasonable assistance and
information as the Agent may require in connection therewith. After the
occurrence and during the continuation of an Event of Default, at the Agent's
request the Grantor, at its own cost and expense, will cause certified
independent public accountants satisfactory to the Agent to prepare and deliver
to the Agent, at any time and from time to time promptly upon the Agent's
request, the following reports: (i) a reconciliation of all its Accounts, (ii)
an aging of all its Accounts, (iii) trial balances, and (iv) a test verification
of such Accounts as the Agent may request. The Grantor, at its expense, will
cause certified independent public accountants satisfactory to the Agent to
deliver to the Agent at its request the results of any periodic and cyclical
verification of the Borrower's Inventory made or observed by such accountants.
4. Representations and Warranties. The Grantor hereby represents and
warrants to the Secured Parties as follows:
(a) Each of the representations and warranties made by the Grantor in
the Credit Agreement are true and correct in all material respects.
(b) The Grantor is the sole owner of each item of the Collateral in
which it purports to grant a security interest hereunder, having good title
thereto, free and clear of any and all Liens, except for the security interest
granted pursuant to this Agreement and Permitted Liens. No Accounts are
evidenced by instruments (however, certain Proceeds of Accounts may be evidenced
by instruments).
(c) No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except (i) such
as may have been filed by the Grantor in favor of the Secured Parties pursuant
to this Agreement, and (ii) those for which a valid release has been executed
and filed with the appropriate public office.
(d) Appropriate financing statements having been filed in the
jurisdictions listed on Schedule I hereto, this Agreement is effective to create
a valid and continuing Lien on the Collateral (other than Collateral consisting
of Inventory located outside of such jurisdictions at the time when the Borrower
first takes title thereto or otherwise first acquires any interest therein)
prior to all other Liens (other than Permitted Liens and with respect to
unidentifiable Proceeds). All action necessary or desirable to protect and
perfect such security interest in each item of the Collateral has been duly
taken except as above stated in respect of certain Inventory. If, after the date
hereof, additional filings are required to create a valid and continuing Lien on
the Collateral prior to all other Liens
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(other than Permitted Liens and with respect to unidentifiable Proceeds),
Borrower shall promptly notify the Agent, submit an appropriate amendment to
Schedule I hereto and file all such financing statements.
(e) Except as otherwise designated in advance by the Grantor pursuant
to Section 5(n), the Grantor's principal place of business and the place where
its records concerning the Collateral are kept, and the location of its
Inventory are set forth on Schedule II hereto.
(f) The amount represented by the Grantor to the Agent from time to
time as owing by each Account Debtor or by all Account Debtors in respect of the
Accounts of the Grantor will at such time be, to the best knowledge of the
Grantor, the correct amount actually and unconditionally owing by such Account
Debtors thereunder except as set forth therein.
5. Covenants. The Grantor covenants and agrees with the Secured Parties
that from and after the date of this Agreement and until the Secured Obligations
are fully satisfied:
(a) Further Documentation; Pledge of Instruments. At any time and from
time to time, upon the written request of the Agent, and at the sole expense of
the Grantor, the Grantor will promptly and duly execute and deliver any and all
such further instruments and documents and take such further action as the Agent
may reasonably deem desirable to obtain the full benefits of this Agreement and
of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the UCC with respect to
the liens and security interests granted hereby and transferring Proceeds to the
Agent's possession (if a security interest in such Proceeds must be perfected by
possession). The Grantor also hereby authorizes the Agent to file any such
financing or continuation statement without the signature of the Grantor to the
extent permitted by applicable law. If any of the Collateral shall be or become
evidenced by any instrument, the Grantor agrees to pledge such instrument to the
Agent and shall duly endorse (without representation, warranty or recourse) such
instrument in a manner reasonably satisfactory to the Agent and promptly deliver
the same to the Agent.
(b) Maintenance of Records. The Grantor will keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. For the Secured Parties' further security, the Grantor agrees that
the Secured Parties shall have a special property interest in all
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of the Grantor's books and records pertaining to the Collateral and, if an Event
of Default shall have occurred and be continuing, the Grantor shall deliver and
turn over any such books and records (or copies thereof) to the Agent or to its
representatives at any time on demand of the Agent.
(c) Indemnification. In any suit, proceeding or action brought by any
Secured Party relating to any Account or General Intangible for any sum owing
thereunder, or to enforce any provision of any Account or General Intangible,
the Grantor will save, indemnify and keep the Secured Parties harmless from and
against all expense, loss or damage suffered by reason of any defense, set-off,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by the Grantor of any obligation thereunder
or arising out of any other agreement, indebtedness or liability at any time
owing to, or in favor of, such obligor or its successors from the Grantor, and
all such obligations of the Grantor shall be and remain enforceable against and
only against the Grantor and shall not be enforceable against any Secured Party.
(d) Compliance with Laws, Etc. The Grantor will comply, in all material
respects, with all Requirements of Law applicable to the Collateral or any part
thereof or to the operation of the Grantor's business; provided, however, that
the Grantor may contest any Requirements of Law in any reasonable manner which
shall not, in the sole judgment of the Agent exercised reasonably, adversely
affect the Secured Parties' rights hereunder or adversely affect the lien on and
security interest in the Collateral.
(e) Payment of Obligations. The Grantor will pay promptly before the
same shall become delinquent all taxes, assessments and governmental charges or
levies imposed upon the Collateral or in respect of its income or profits
therefrom and all claims of any kind (including, without limitation, claims for
labor, materials and supplies), except that no such charge need be paid if (i)
such non-payment does not involve a reasonable likelihood of the sale,
forfeiture or loss of any of the Collateral or any interest therein, and (ii)
such charge is adequately reserved against in accordance with and to the extent
required by GAAP.
(f) Compliance with Terms of Accounts, Etc. In all material respects,
the Grantor will comply with and perform with all obligations, covenants,
conditions and agreements with respect to any Account which is Collateral.
(g) Limitation on Liens on Collateral. The Grantor will not create,
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any lien on the Collateral (other than
Permitted Liens), and will defend the
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right, title and interest of the Secured Parties in and to any of the Grantor's
rights under the General Intangibles which are Collateral and to the Inventory
which is Collateral and Accounts which are Collateral and in and to the Proceeds
thereof against the claims and demands of all persons whomsoever, subject
however, to the Grantor's right to sell such Accounts and Inventory and to
disburse cash Proceeds, in each case as provided in the Credit Agreement.
(h) Limitations on Modifications of Accounts. During the continuance of
an Event of Default, the Grantor will not, without the Agent's prior written
consent, grant any extension of the time of payment of any of the Accounts, or
compromise, compound or settle the same for less than the full amount thereof,
or release, wholly or partly, any person liable for the payment thereof, or
allow any credit or discount whatsoever thereon.
(i) Maintenance of Insurance. The Grantor will maintain, with
financially sound and reputable companies, insurance policies insuring its
Inventory against loss by fire, explosion, theft and such other casualties as
are usually insured against by companies engaged in the same or similar
businesses, such policies to be in such amounts, with such deductibles, and
against at least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business, with a lender loss
payable clause in favor of the Agent, for the benefit of the Secured Parties.
The Grantor shall, if so requested by the Agent, deliver to the Agent as often
as the Agent may reasonably request, a report of a reputable insurance broker
satisfactory to the Agent with respect to the insurance on its Inventory. All
insurance with respect to the Inventory shall (i) contain a clause which
provides that the interest of the Agent, for the benefit of the Secured Parties,
under the policy will not be invalidated by any act or omission of, or any
breach of warranty by, the insured, and (ii) provide that no cancellation,
reduction in amount or change in coverage thereof shall be effective until at
least 30 days after receipt by the Agent of written notice thereof.
(j) Limitations on Disposition. The Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so, except as permitted under the Credit Agreement.
(k) Further Identification of Collateral. The Grantor will, if so
requested by the Agent, furnish to the Agent, as often as the Agent reasonably
requests, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the Agent
may reasonably request, all in reasonable detail.
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(l) Notices. The Grantor will advise the Agent promptly, in reasonable
detail, (i) of any Lien or claim made or asserted against any of the Collateral
(other than pursuant to the Blocked Account Letter, Permitted Liens on Inventory
and disbursement of cash Proceeds), and (ii) of the occurrence of any other
event which is reasonably likely to have a material adverse effect on the
aggregate value of the Collateral or in the security interests created
hereunder.
(m) Right of Inspection. The Agent shall at any reasonable time and
from time to time upon reasonable prior notice to the Grantor (it being agreed
that the Agent will use its best efforts to give at least two Business Days'
prior notice, and unless an Event of Default shall have occurred and be
continuing, in which case no prior notice is necessary) have full and free
access to all the books and records and (subject to any legal privilege)
correspondence of the Grantor, and the Agent or its representatives may examine
the same, take extracts therefrom and make photocopies thereof, and the Grantor
agrees to render to the Agent, at the Grantor's cost and expense, such clerical
and other assistance as may be reasonably requested with regard thereto. The
Agent and its representatives shall at all times also have the right to enter
into and upon any premises belonging to, or under the control of, the Borrower
where any of the Inventory is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein, after giving
any appropriate notice as required above.
(n) Continuous Perfection. The Grantor will not change its name,
identity or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9-402(7) of the UCC (or any other then applicable
provision of the UCC) unless the Grantor shall have given the Agent at least 30
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend such financing statement or continuation
statement so that it is not seriously misleading. The Grantor will not change
its principal place of business or remove its records or change the location of
its Inventory as set forth on Schedule II hereto, unless it gives the Agent at
least 30 days' prior written notice thereof and has taken such action as is
necessary to cause the security interest of the Secured Parties in the
Collateral to continue to be perfected.
6. The Agent's Appointment as Attorney-in-Fact.
(a) The Grantor hereby irrevocably constitutes and appoints the Agent
and any officer or agent thereof, with full power of substitution, as its true
and lawful
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attorney-in-fact with full irrevocable power and authority in the place and
stead of the Grantor and in the name of the Grantor or in its own name, from
time to time in the Agent's discretion, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate action and to execute
and deliver any and all documents and instruments which the Agent may deem
necessary or desirable to accomplish the purposes of this Agreement and, without
limiting the generality of the foregoing, hereby gives the Agent the power and
right, on behalf of the Grantor, without notice to or assent by the Grantor to
do the following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under any
Collateral and, in the name of the Grantor or in its own name or
otherwise, to take possession of and endorse (without representation,
warranty or recourse whatsoever) and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under
any Collateral and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any and all such
moneys due under any Collateral whenever payable; and
(ii) to pay or discharge taxes, Liens, security interests or
other encumbrances levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the
terms of this Agreement and to pay all or any part of the premiums
therefor and the costs thereof; and
(iii) (A) to direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due, and to
become due thereunder, directly to the Agent or as the Agent shall
direct; (B) to receive payment of and receipt for any and all moneys,
claims and other amounts due, and to become due at any time, in respect
of or arising out of any Collateral; (C) to sign and indorse (without
representation, warranty or recourse whatsoever) any invoices, freight
or express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in
connection with Accounts and other documents constituting or relating
to the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction
to collect the Collateral or any part thereof and to enforce any other
right in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against the Grantor with respect to any Collateral;
(F) to settle, compromise or adjust any suit, action or proceeding
described above and, in connection therewith, to give such discharges
or releases as the Agent may deem
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appropriate; and (G) generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Agent were the absolute owner
thereof for all purposes, and to do, at the Agent's option and the
Grantor's expense, at any time, or from time to time, all acts and
things which the Agent reasonably deems necessary to protect, preserve
or realize upon the Collateral and the Secured Parties' Lien therein,
in order to effect the intent of this Agreement, all as fully and
effectively as the Grantor might do.
(b) The Agent agrees that, except after the occurrence and during the
continuance of an Event of Default, it will forbear from exercising the power of
attorney or any powers or rights granted to the Agent pursuant to this Section
6. The Grantor hereby ratifies, to the extent permitted by law, all that any
said attorney shall lawfully do or cause to be done by virtue hereof. The power
of attorney granted pursuant to this Section 6, being coupled with an interest,
shall be irrevocable until the Secured Obligations are indefeasibly paid in
full.
(c) The powers conferred on the Agent hereunder are solely to protect
the Secured Parties' interests in the Collateral and shall not impose any duty
upon it to exercise any such powers. The Agent shall be required to give an
accounting only for amounts that it actually receives as a result of the
exercise of such powers and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Grantor for any act or failure
to act, except for its own gross negligence or willful misconduct.
(d) The Grantor also authorizes the Agent, at any time and from time to
time after the occurrence and during the continuance of an Event of Default, to
execute without recourse and without representation or warranty of any kind
(except as to ability to convey title), in connection with the sale provided for
in Section 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
7. Performance by the Agent of the Grantor's Obligations. If the
Grantor fails to perform or comply with any of its agreements contained herein
and the Agent, as provided for by the terms of this Agreement, shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement, the reasonable expenses of the Agent incurred in connection with such
performance or compliance shall, without further action on the part of the
Grantor or compliance with Section 3.3 (or minimum borrowing amounts) of the
Credit Agreement, be added to the outstanding principal amount of Revolving
Credit Loans made as Base Rate Loans.
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8. Remedies, Rights After Event of Default.
(a) After the occurrence and during the continuance of an Event of
Default, the Agent may exercise in addition to all other rights and remedies
granted to it in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the UCC. Without limiting the generality of
the foregoing, the Grantor expressly agrees that in any such event the Agent,
without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private
sale) to or upon the Grantor or any other person (all and each of which demands,
advertisements and/or notices are hereby expressly waived to the maximum extent
permitted by the UCC and other applicable law), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give an option or options to purchase, or sell or
otherwise dispose of and deliver said Collateral (or contract to do so), or any
part thereof, in one or more parcels at public or private sale or sales, at any
exchange or broker's board or any of the Agent's offices or elsewhere at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. Each of the Secured Parties shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of said
Collateral so sold to the extent allowed by law, free of any right or equity of
redemption, which equity of redemption the Grantor hereby releases. The Grantor
further agrees, at the Agent's request, to assemble the Collateral and make it
available to the Agent at the Grantor's premises or such other location near the
Grantor's premises to which the Agent has full access (in the case of Inventory)
or otherwise at places which the Agent shall reasonably select, whether at the
Grantor's premises or elsewhere. The Agent shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale as
provided in Section 8(e) hereof, the Grantor remaining liable for any deficiency
remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by the Agent of any other amount required by any
provision of law, including Section 9-504(1)(c) of the UCC, need the Agent
account for the surplus, if any, to the Grantor. To the maximum extent permitted
by applicable law, the Grantor waives all claims, damages, and demands against
the Agent arising out of the repossession, retention or sale of the Collateral.
The Grantor agrees that the Agent need not give more than ten days' notice of
the time and place of any public sale or of the time after which a private sale
may take place and that such notice is reasonable notification of such matters.
The Grantor shall remain liable for any deficiency if the proceeds of any sale
or disposition of the Collateral are insufficient to pay all amounts to which
the Secured Parties are entitled, the Grantor also being liable for the fees and
expenses of any attorneys employed by any Secured Party to collect such
deficiency.
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(b) Any Secured Party shall have the right (but not the obligation) to
take any action and use any equipment of the Grantor necessary or desirable to
complete any work-in-process.
(c) The Grantor also agrees to pay all costs of the Secured Parties,
including, without limitation, attorneys' fees and expenses, incurred in
connection with the enforcement of any of their rights and remedies hereunder.
(d) The Grantor hereby waives presentment, demand, protest or any
notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(e) The Proceeds of any sale, disposition or other realization upon all
or any part of the Collateral shall be distributed by the Agent in the following
order of priorities:
First, to the payment of the reasonable costs and expenses of
such sale, including, without limitation, all reasonable expenses of
the Agent and its agents including the fees and expenses of its
counsel, and all expenses, liabilities and advances made or incurred by
the Secured Parties in connection therewith or pursuant to Section 7
hereof;
Next, to the Secured Parties, for the payment in full of the
Secured Obligations in accordance with the terms of the Credit
Agreement; and
Finally, after payment in full of all the Secured Obligations,
to the Grantor, or its successors or assigns, or to whomsoever may be
lawfully entitled to receive the same as a court of competent
jurisdiction may direct.
9. Limitation on the Secured Parties' Duty in Respect of Collateral.
None of the Secured Parties shall have any duty as to any Collateral in their
possession or control or in the possession or control of any agent or nominee of
any of them or any income thereon or as to the preservation of rights against
prior parties or any other rights pertaining thereto, except that each Secured
Party shall use reasonable care with respect to the Collateral in its possession
or under its control. Upon request of the Grantor, each Secured Party shall
account for any moneys received by it in respect of any foreclosure on or
disposition of the Collateral.
10. Notices. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telex, telecopy, or cable
communication) and mailed,
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telegraphed, telexed, telecopied, cabled or delivered by hand, if to the
Grantor, addressed to it at 10 South Geneva Road, Vineyard, Utah 84058,
Attention: Chief Financial Officer, and if to any Secured Party, addressed to it
in care of the Agent at 399 Park Avenue, New York, New York 10043, Attention:
Keith Karako, or, as to each party, at such other address as shall be designated
by such party in a written notice to each other party complying as to delivery
with the terms of this Section. All such notices and other communications shall,
when mailed, telegraphed, telexed, telecopied, cabled or delivered, be effective
when deposited in the mails, delivered to the telegraph company, confirmed by
telex answerback, telecopied with confirmation or receipt, delivered to the
cable company, or delivered by hand to the addressee or its agent, respectively.
11. Amendments, Etc. No amendment or waiver of any provision of this
Agreement nor consent to any departure by the Grantor therefrom shall in any
event be effective unless the same shall be in writing and signed by the Agent,
and then any such waiver or consent shall only be effective in the specific
instance and for the specific purpose for which given.
12. No Waiver; Remedies. (a) No failure on the part of any Secured
Party to exercise, and no delay in exercising any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative, may be exercised
singly or concurrently, and are not exclusive of any remedies provided by law or
any of the other Loan Documents.
(b) Failure by any Secured Party at any time or times hereafter to
require strict performance by the Grantor of any of the provisions, warranties,
terms or conditions contained in any of the Loan Documents now or at any time or
times hereafter executed by the Grantor or any such other person and delivered
to the Secured Parties shall not waive, affect or diminish any right of the
Secured Parties at any time or times hereafter to demand strict performance
thereof, and such right shall not be deemed to have been modified or waived by
any course of conduct or knowledge of any Secured Party, or any agent, officer
or employee thereof.
13. Successors and Assigns. This Agreement and all obligations of the
Grantor hereunder shall be binding upon the successors and assigns of the
Grantor, and shall, together with the rights and remedies of the Secured Parties
hereunder, inure to the benefit of the Secured Parties and their respective
successors and assigns.
14
<PAGE> 15
14. Governing Law. This Agreement shall be governed by, and be
construed and interpreted in accordance with, the law of the State of New York.
Wherever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and without invalidating the remaining provisions of this Agreement.
15. WAIVER OF JURY TRIAL. EACH OF THE GRANTOR AND EACH SECURED PARTY
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES HEREUNDER OR UNDER ANY OF THE OTHER
LOAN DOCUMENTS OR ANY OTHER DOCUMENT RELATING TO ANY OF THE FOREGOING.
16. Further Indemnification. The Grantor agrees to pay, and to save the
Secured Parties harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all excise, sales or other similar
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
17. Section Titles. The Section titles contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of this Agreement.
18. Termination of Security Interest. Subject to Section 2(b) hereof,
this Agreement and the security interests created or granted hereby shall
terminate when the Secured Obligations shall have been fully and indefeasibly
paid and satisfied and the Revolving Credit Commitments terminated, at which
time the Agent (without recourse upon, or any warranty whatsoever by, the Agent)
shall promptly execute and deliver to the Grantor, for filing in each office in
which this Agreement or any related notice or filing, or any part thereof, shall
have been filed, an instrument releasing the Secured Parties' security interest
granted hereby as the Grantor may reasonably request, all without recourse upon,
or any warranty whatsoever by, the Agent and at the cost and expense of the
Grantor.
15
<PAGE> 16
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
executed and delivered by its duly authorized officer on the date first above
written.
GENEVA STEEL COMPANY
By: /S/Dennis L. Wanlass
---------------------------------
Name: Dennis L. Wanlass
Title: Vice President, Treasurer and
Chief Financial Officer
Accepted and acknowledged by:
CITICORP USA, INC., as Agent
By: /S/Keith R. Karako
-------------------------------
Name: Keith R. Karako
Title: Attorney-in-Fact
16
<PAGE> 17
SCHEDULE I TO
SECOND AMENDED AND RESTATED SECURITY AGREEMENT
FILINGS
Filings under the Uniform Commercial Code have been made in the office of the
Secretary of State (or similar appropriate central filing office) in all 50
states of the United States and in the District of Columbia. In addition, county
filings have been made in the appropriate county offices for filings under the
Uniform Commercial Code in each of the following counties:
Cambria County, Pennsylvania
Somerset County, Pennsylvania
Dickenson County, Virginia
<PAGE> 18
SCHEDULE II TO
SECOND AMENDED AND RESTATED SECURITY AGREEMENT
LOCATION OF RECORDS AND CERTAIN COLLATERAL
Location of Books
and Records
Geneva Steel Company
10 South Geneva Road
Vineyard, Utah 84058
(Chief Executive Office)
and
manufacturing and mining
facilities located at the
following addresses:
12370 South West Mountain Road
Genola, Utah 84655
12 miles west of Cedar City on
Highway 56, then two Miles North
on Iron County Road in Iron County, Utah
Location of
Inventory
1. Several manufacturing and mining locations
within the State of Utah and Minnesota.
2. Temporarily stockpiled or in transit to or
from various locations, including, primarily
(as of the date hereof) the States of
Minnesota, Texas, Louisiana, Illinois,
Pennsylvania, Virginia, West Virginia,
Colorado, Nevada, Missouri, Ohio,
<PAGE> 19
California, Oregon, Washington, Oklahoma,
Iowa, Tennessee, Alabama, Nebraska, Idaho
and Kansas.
3. Various locations in the State of Utah for
processing.
<PAGE> 1
THIRD AMENDMENT
TO
AGREEMENT FOR THE SALE AND PURCHASE OF COKE
This Third Amendment to the Agreement for the Sale and Purchase of Coke (the
'Third Amendment') is entered into this 22nd of May 1996, between Geneva Steel
Company, a Utah corporation ('Buyer') and Mitsubishi International Corporation,
a New York corporation ('Seller').
Recitals:
A. On or about 9th November, 1993, Buyer and Seller entered into a certain
Agreement for Sale and Purchase of Coke effective 12th January, 1993, as amended
28th December, 1993, and further amended June 1995 (the 'Agreement'), wherein
Seller agreed to sell and Buyer agreed to purchase certain Coke.
B. Buyer and Seller desire to further amend the Agreement as set forth herein.
Third Amendment:
NOW, THEREFORE, in consideration of the premises, terms and conditions set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound, agree as follows:
1. Definitions
Except as otherwise expressly indicated herein, the capitalized terms used in
this Third Amendment, including the Recitals hereto, shall have the same
meanings ascribed to such terms in this Agreement.
2. Quantity
Effective from and after the date hereof, Sections 2 (ii) and 3 (iii) of the
Second Amendment are hereby deleted entirely and replaced with the following
language;
(i) The second shipment shall be effected in the second
quarter (April to June) of 1997 at the Purchase Price
for the Third Contract Year, and shall be a Vessel
with a loaded tonnage not less than 38,000 tons; and
(ii) The third shipment is hereby canceled without any
further liability or obligation of either party
hereof with respect to such shipment, provided,
however, that Seller shall remit a default penalty of
US $ to the designated bank account of Buyer due no
later than 28th June 1996.
<PAGE> 2
3. Benefit
This Third Amendment is for the sole benefit of the parties hereto and shall not
be for the benefit of or enforceable by any other person or entity.
4. Ratification
Except as specifically amended by this Third Amendment, Seller and Buyer hereby
ratify and reaffirm the terms, warranties and conditions set forth in the
Agreement.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be executed
effective as of the date first above written.
'Buyer'
Geneva Steel Company, a Utah corporation
by: \s\ Keith L. Hanks
- ----------------------------------------------------------------
Mr. Keith L. Hanks
Direction, Purchasing and Traffic
'Seller'
Mitsubishi International Corporation, a New York corporation
by: \s\ Hiroshi Matsumoto
- ----------------------------------------------------------------
Mr. Hiroshi Matsumoto
Deputy General Manager, Fuel Division
<PAGE> 3
U.S. $125,000,000
SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
Dated as of May 14, 1996
Among
GENEVA STEEL COMPANY
as Borrower
and
THE LENDERS PARTY HERETO,
THE ISSUERS PARTY HERETO
and
CITICORP USA, INC.
as Agent
and
HELLER FINANCIAL, INC.
as Co-Agent
<PAGE> 4
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<S> <C>
1.1. Defined Terms................................................................................................. 2
1.2. Computation of Time Periods................................................................................... 31
1.3. Accounting Terms.............................................................................................. 31
1.4. Certain Terms................................................................................................. 31
ARTICLE II
AMOUNTS AND TERMS OF THE REVOLVING CREDIT LOANS
2.1. The Loans.................................................................................................... 32
2.2. Making the Loans............................................................................................. 33
2.3. Fees......................................................................................................... 35
2.4. Reduction and Termination of the Commitments................................................................. 36
2.5. Repayment.................................................................................................... 36
2.6. Prepayments.................................................................................................. 36
2.7. Conversion/Continuation Option............................................................................... 38
2.8. Interest..................................................................................................... 39
2.9. Interest Rate Determination and Protection................................................................... 40
2.10. Increased Costs.............................................................................................. 40
2.11. Illegality................................................................................................... 41
2.12. Capital Adequacy............................................................................................. 42
2.13. Payments and Computations.................................................................................... 42
2.14. Taxes........................................................................................................ 44
2.15. Sharing of Payments, Etc..................................................................................... 46
2.16. Letter of Credit Facility.................................................................................... 46
2.17. Settlement of Accounts....................................................................................... 53
2.18. Payments to Lenders.......................................................................................... 53
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE III
CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT
<S> <C>
3.1. Conditions Precedent to Initial Loans and Letters of Credit................................................... 53
3.2. Additional Conditions Precedent to Initial Loans and
Initial Letters of Credit............................................................................... 56
3.3. Conditions Precedent to Each Loan and Letter of Credit........................................................ 58
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Corporate Existence; Compliance with Law..................................................................... 59
4.2. Corporate Power; Authorization; Enforceable Obligations...................................................... 59
4.3. Taxes........................................................................................................ 60
4.4. Full Disclosure.............................................................................................. 61
4.5. Financial Matters............................................................................................ 61
4.6. Litigation................................................................................................... 62
4.7. Margin Regulations........................................................................................... 62
4.8. Ownership of Borrower; Subsidiaries.......................................................................... 62
4.9. ERISA........................................................................................................ 63
4.10. Liens........................................................................................................ 64
4.11. No Burdensome Restrictions; No Defaults...................................................................... 65
4.12. No Other Ventures............................................................................................ 65
4.13. Investment Company Act....................................................................................... 65
4.14. Insurance.................................................................................................... 65
4.15. Labor Matters................................................................................................ 66
4.16. Force Majeure................................................................................................ 67
4.17. Use of Proceeds.............................................................................................. 67
4.18. Environmental Protection..................................................................................... 67
4.19. Intellectual Property........................................................................................ 68
4.20. Title........................................................................................................ 69
4.21. Certain Indebtedness......................................................................................... 71
4.22. Restricted Payments.......................................................................................... 71
4.23. Seniority.................................................................................................... 71
4.24. Bank Accounts................................................................................................ 71
</TABLE>
ii
<PAGE> 6
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE V
FINANCIAL COVENANTS
<S> <C>
5.1. Maintenance of Tangible Net Worth............................................................................. 71
5.2. Capital Expenditures.......................................................................................... 72
5.3. EBITDA to Cash Interest Expense Ratio......................................................................... 73
ARTICLE VI
ADDITIONAL AFFIRMATIVE COVENANTS
6.1. Compliance with Laws, Etc.................................................................................... 74
6.2. Conduct of Business.......................................................................................... 74
6.3. Payment of Taxes, Etc........................................................................................ 75
6.4. Maintenance of Insurance..................................................................................... 75
6.5. Preservation of Corporate Existence, Etc..................................................................... 75
6.6. Access....................................................................................................... 75
6.7. Keeping of Books............................................................................................. 76
6.8. Maintenance of Properties, Etc............................................................................... 76
6.9. Performance and Compliance with Other Covenants.............................................................. 76
6.10. Application of Proceeds...................................................................................... 76
6.11. Financial Statements......................................................................................... 76
6.12. Reporting Requirements....................................................................................... 79
6.13. Broker's Fee................................................................................................. 84
6.14. Employee Plans............................................................................................... 84
6.15. Interest Rate Contracts...................................................................................... 84
6.16. Fiscal Year.................................................................................................. 85
6.17. Borrowing Base Determination................................................................................. 85
6.18. The Blocked Account.......................................................................................... 85
6.19. Environmental................................................................................................ 85
6.20. Utilization of Intellectual Property......................................................................... 86
ARTICLE VII
NEGATIVE COVENANTS
7.1. Liens, Etc................................................................................................... 86
7.2. Indebtedness................................................................................................. 89
7.3. Lease Obligations............................................................................................ 91
</TABLE>
iii
<PAGE> 7
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
7.4. Restricted Payments.......................................................................................... 92
7.5. Mergers, Stock Issuances, Sale of Assets, Etc................................................................ 93
7.6. Investments in Other Persons................................................................................. 94
7.7. Maintenance of Ownership of Subsidiaries..................................................................... 96
7.8. Change in Nature of Business................................................................................. 96
7.9. Plans........................................................................................................ 96
7.10. Modification of Material Agreements.......................................................................... 96
7.11. Accounting and Tax Reporting Changes......................................................................... 97
7.12. Contingent Obligations....................................................................................... 97
7.13. Transactions with Affiliates................................................................................. 97
7.14. Adverse Transactions......................................................................................... 98
7.15. Cancellation of Indebtedness Owed to It...................................................................... 98
7.16. Subsidiaries................................................................................................. 98
7.17. Capital Structure............................................................................................ 99
7.18. No Speculative Transactions.................................................................................. 99
7.19. Margin Regulations...........................................................................................100
7.20. Environmental................................................................................................100
7.21. Management and Consulting Fees...............................................................................100
7.22. Bank Accounts................................................................................................100
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default.............................................................................................101
8.2. Remedies......................................................................................................103
8.3. Actions in Respect of Letters of Credit.......................................................................104
ARTICLE IX
THE AGENT
9.1. Authorization and Action......................................................................................106
9.2. Agent's Reliance, Etc.........................................................................................106
9.3. CUSA and Affiliates...........................................................................................107
9.4. Lender Credit Decision........................................................................................107
9.5. Indemnification...............................................................................................107
9.6. Successor Agent...............................................................................................108
</TABLE>
iv
<PAGE> 8
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE X
MISCELLANEOUS
<S> <C>
10.1. Amendments, Etc.............................................................................................109
10.2. Notices, Etc................................................................................................110
10.3. No Waiver; Remedies.........................................................................................110
10.4. Costs; Expenses; Indemnities................................................................................110
10.5. Right of Set-off............................................................................................113
10.6. Binding Effect..............................................................................................113
10.7. Assignments and Participations..............................................................................114
10.8. Governing Law; Severability.................................................................................117
10.9. Submission to Jurisdiction..................................................................................118
10.10. Section Titles..............................................................................................118
10.11. Execution in Counterparts...................................................................................118
10.12. Entire Agreement, Etc.......................................................................................119
10.13. Confidentiality.............................................................................................119
10.14. Waiver of Jury Trial........................................................................................119
10.15. No Novation.................................................................................................119
</TABLE>
v
<PAGE> 9
SCHEDULES
Schedule I - Advance Rates on Eligible Accounts and Inventory
Schedule II - Certain Holders of Voting Stock
Schedule III - Applicable Lending Offices and
Addresses for Notices
Schedule IV - Account Debtors
Schedule V - Responsible Officers
Schedule VI - Revolving Credit Commitments
Schedule 4.3 - Taxes
Schedule 4.8 - Subsidiaries
Schedule 4.9 - ERISA
Schedule 4.20(a) - Borrower's Owned Real Estate
Schedule 4.20(b) - Borrower's Leased Real Estate
Schedule 4.21 - Certain Indebtedness
Schedule 4.24 - Bank Accounts
Schedule 7.1 - Liens
Schedule 7.3 - Leases
vi
<PAGE> 10
EXHIBITS
Exhibit A - Second Amended and Restated Cash Collateral Agreement
Exhibit B - Second Amended and Restated Revolving Credit Note
Exhibit C - Second Amended and Restated Security Agreement
Exhibit D - Assignment and Acceptance
Exhibit E - Second Amended and Restated Blocked Account Letter
Exhibit F - Borrowing Base Certificate
Exhibit G - Notice of Borrowing
Exhibit H - Notice of Conversion/Continuation
Exhibit I - Letter of Credit Request
Exhibit J - Opinion of Counsel for the Borrower
Exhibit K - Opinion of Special New York Counsel for the Borrower
Exhibit L - Opinion of General Counsel to the Borrower
Exhibit M - Letter from Borrower's Accountants
Exhibit N - Guaranty Agreement
vii
<PAGE> 1
AMENDED AND RESTATED
SALES REPRESENTATION AGREEMENT
This Sales Representation Agreement (this "Agreement") is the
restatement of an agreement entered into as of the 8th day of December, 1988 and
amended April 18, 1991, April 17, 1992 and April 1, 1996 between Geneva Steel
Company, a Utah corporation ("Geneva"), and Mannesmann Pipe & Steel Corporation,
a New York corporation ("Mannesmann").
Agreement
In consideration of the mutual promises contained herein, and other
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties hereto agree as follows:
1. Grant. Subject to the terms and conditions contained in this
Agreement, Geneva grants to Mannesmann the sole and exclusive right to purchase
from Geneva, sell and distribute to customers now or hereafter located in the
geographical area defined on Exhibit A, attached hereto and by this reference
incorporated herein (the "Territory"), and to those customers listed in Exhibit
A1 attached hereto and by this reference incorporated herein at locations east
of the Territory ("Mannesmann Eastern Customers"), those steel products produced
by Geneva that are more particularly described on Exhibit B attached hereto and
by this reference incorporated herein ("Products"); provided, however, with
respect to electric resistance welded pipe, currently produced by Geneva, such
grant shall apply to the Territory and to all states east of the Territory and,
as used herein with respect to such pipe, the term "Territory" shall mean and
include the Territory and such states. For purposes of this Section 1 a customer
will be deemed to be located within the Territory only if that customer's
purchasing and delivery locations for the Products it orders are located within
the Territory; provided, however, that Northwest Pipe & Casing ("NP&C"), will be
deemed located in the Territory to the extent Products are ordered by such
company from locations outside the Territory if the delivery locations for such
Products are located within the Territory.
2. Reservation of Right. Notwithstanding Section 1 of this Agreement,
Geneva reserves the right, subject to Section 4.10 of
<PAGE> 2
this Agreement, to sell Products and other materials produced by Geneva ("other
materials") to any customer in the Territory; provided, however, Geneva agrees,
so long as Mannesmann is complying with its obligations pursuant to Section 4.1
hereof, not to expand its marketing or sales efforts within the Territory for
the purpose of increasing the number of customers within the Territory that
purchase Products directly from Geneva. Any contact relating to the marketing or
sale of Products by Geneva with any actual or potential customer within the
Territory, other than those customers identified on Exhibit C attached hereto
("Geneva House Accounts") or Exhibit D attached hereto ("Geneva Direct
Customers"), shall be coordinated with Mannesmann, in advance when practicable.
No sales of Products by Geneva to any actual or potential customer of Mannesmann
in the Territory (other than to a Geneva House Account or a Geneva Direct
Customer) shall be concluded without notice of such sale to Mannesmann.
3. Products Delivered for Pickling. a. Products subject to an order
obtained by Mannesmann will be deemed to be sold within the Territory if such
Products are delivered for pickling outside the Territory and, as soon as is
commercially reasonable, shipped to a customer within the Territory.
b. Products subject to any order will not be deemed
to be sold within the Territory if such Products are delivered for pickling,
cutting or other processing to a location within the Territory and, as soon as
is commercially reasonable, delivered to a customer outside the Territory.
4. Sale of Product.
4.1 Sales Effort of Mannesmann. Mannesmann will use its best
efforts to engage in a consistent, deliberate sales effort that is, in good
faith, calculated to optimize the sale of Products in the Territory, the net
mill return to Geneva, and the integration of such effort with Geneva's sales
efforts and overall sales philosophy. For purposes of this Agreement, "net mill
return to Geneva" shall mean the total sales price actually received by Geneva
for Products or other materials, as the case may be, less transportation charges
incurred in delivering Products or other materials to customers.
2
<PAGE> 3
4.2 Coordinated Sales. In addition to the sales efforts of
Mannesmann pursuant to Section 4.1 above, the parties hereby agree to a
coordinated sales effort in the area east of the Territory as well as to Geneva
Direct Customers within the Territory. Pursuant to such effort, Geneva will
continue its marketing efforts in the area east of the Territory and to Geneva
Direct Customers within the Territory. Mannesmann shall use its best efforts to
sell Products and other materials to all customers resulting from such efforts
and shall alone be responsible for ordering, sales administration, Product and
other material servicing, invoicing and, subject to Section 6 hereof, collecting
of funds resulting from such sales. In connection therewith, Geneva shall advise
Mannesmann in writing of all pertinent information concerning such customers,
the Products or other material to be purchased from Mannesmann by such customer
as is necessary to allow Mannesmann to process, in accordance with Section 4.3
of the Agreement, the customer's purchase order, such as the name and address of
the customer, the Products and other materials to be sold, the prices at which
such Products and other materials are to be sold and the anticipated promise
date or dates. Notwithstanding the foregoing, Geneva may, at Geneva's option and
notwithstanding any provision hereof to the contrary, sell Products and other
materials directly to any customer within or east of the Territory. Geneva
agrees to exercise such option in a manner as not to unduly disrupt service by
Mannesmann to customers.
4.3 Acceptance of Orders. Geneva shall, in its sole
discretion, have the right to accept or reject any order for Products or other
materials that is submitted by Mannesmann; provided, however, that any such
order shall be deemed accepted by Geneva if notice of a rejection thereof is not
given to Mannesmann as soon as is reasonable under the circumstances, but in no
event later than (a) within five business days after Geneva received such order
from Mannesmann, if such order is wholly for Products or other materials that
are generally and regularly produced by Geneva and at Geneva's then current and
applicable published price for such Products or other materials, and (b) within
10 business days after Geneva receives such order from Mannesmann if any portion
of such order is for Products or other materials that are not generally and
regularly produced by Geneva, or at a price that is lower than Geneva's then
current and applicable published price for such Products or other materials.
3
<PAGE> 4
4.4 Sales Forecast Reports. On or before the first business
day of the calendar month preceding each calendar quarter, Mannesmann shall
submit to Geneva, in writing, a forecast for such quarter that sets forth
Mannesmann's anticipated sales of Products and other materials. On a best effort
basis by Mannesmann, each such forecast shall include a breakdown of anticipated
sales for each calendar month falling within the calendar quarter covered by
such forecast and shall otherwise include such details as are reasonably
requested by Geneva upon reasonable notice to Mannesmann.
4.5 Sales Representatives. Mannesmann shall, at all times,
maintain a sales force and support personnel that are adequate and qualified to
exploit and develop Mannesmann's marketing opportunities within the Territory.
Geneva reserves the right to approve or disapprove of any salesperson that
Mannesmann proposes to engage to sell Products within the Territory that was not
selling Products for Mannesmann in the Territory on April 1, 1996. Any such
salesperson that Geneva, in its reasonable judgment, disapproves shall not be
used by Mannesmann to sell Products within the Territory.
4.6 Efforts of Geneva to Hire Sales Personnel. Mannesmann
agrees that it will not interfere in any way with efforts by Geneva to hire any
Mannesmann salesperson to sell Products or other materials directly for Geneva.
Such efforts may include, without restriction, obtaining letters of intent from
Mannesmann salespersons to become employed by Geneva upon the termination of
this Agreement. Mannesmann agrees that it will take no action that is
detrimental to any salesperson of Mannesmann by reason of such salesperson's
signing such a letter of intent or agreeing to become employed by Geneva.
4.7 Marketing. Mannesmann agrees to incorporate into the
marketing effort it makes to sell Products within the Territory, on a good faith
basis, any reasonable directions or suggestions made by Geneva with respect to:
a. marketing techniques and general policies
Mannesmann adopts with respect to the sale of Products within the
Territory; and
4
<PAGE> 5
b. information, including without restriction,
literature, brochures, and verbal instructions given by sales personnel to
customers and prospective customers within the Territory for the purpose of
soliciting sales of Products.
Without limiting the generality of the foregoing, Mannesmann agrees that,
without the specific prior consent of Geneva, it will not, except as provided in
the last sentence of this Section 4.7, sell or distribute within the Territory
or to Mannesmann Eastern Customers or NP&C at locations east of the Territory,
any product of any manufacturer or distributor (other than Geneva) that competes
with any of the Products. As used in this Section, a Product or other materials
shall not be deemed to be "produced" by Geneva until such time as such Product
is actually available for order by customers. In the event the parties mutually
and in good faith agree that Geneva is not making available to Mannesmann
sufficient quantities of certain Products to permit Mannesmann to maintain a
market presence with respect thereto (the "Short Products"), then Mannesmann
shall have the right to sell Short Products produced by other manufacturers to
any customer in the Territory or to Mannesmann Eastern Customers or NP&C at
locations east of the Territory; provided, however, that Mannesmann shall only
sell Short Products produced by other manufacturers in the quantities necessary
to maintain a reasonable market presence.
4.8 Market Data Reports. Mannesmann will submit to Geneva on a
regular basis, but not less frequently than four times each month, a marketing
report that will include:
a. a brief description of the marketing efforts on
behalf of Geneva that have been made since the last marketing report submitted
by Mannesmann;
b. customer responses to Geneva's currently quoted
prices for Products;
c. price structures, to the extent available, of
steel products produced by competitors of Geneva;
d. any general market data that could reasonably be
expected to have an effect on Geneva's pricing structure of Products or sales
efforts in the Territory;
5
<PAGE> 6
e. customers and prospective customers that have been
contacted in an effort to sell Products within the Territory; and
f. a report for each customer that has, since the
last report, expressed to Mannesmann, its employees or agents, any
dissatisfaction with Mannesmann, Geneva, Products or other materials, with
details regarding the reason for any such dissatisfaction.
4.9 Pricing of Products. Geneva shall, on or before the 45th
day prior to the first business day of each calendar quarter, notify Mannesmann
of its pricing structure of Products for such quarter that apply in the
Territory. Geneva will make a good faith effort to maintain pricing structures
throughout each quarter at a competitive level and to immediately notify
Mannesmann of any price change applicable in the Territory.
4.10 Sales Allowance and Commission.
a. Mannesmann shall be entitled to receive as a sales
allowance with respect to sales to Mannesmann of Products and other materials
shipped, or anticipated to be shipped, to Mannesmann customers located within
the Territory and to Mannesmann customers located east of the Territory an
amount equal to the total of (x) the Variable Allowance for such sale plus (y)
either (A) in the case of a sale to Mannesmann with respect to which an
Accelerated Payment Invoice has been paid by Mannesmann pursuant to Section 6.2,
[____]% of the difference between (1) the invoice amount with respect to such
sale minus (2) [______________________] for such sale or (B) in the case of a
sale to Mannesmann with respect to which an Accelerated Payment Invoice has not
been paid by Mannesmann pursuant to Section 6.2, [____]% of the difference
between (1) the invoice amount with respect to such sale minus (2)
[_______________________________] sale. The allowance provided in this Section
4.10a shall be deducted by Mannesmann, at the times hereafter indicated, from
the funds remitted by Mannesmann to Geneva.
b. Mannesmann shall be entitled to receive as a sales
allowance with respect to sales by Geneva to any customer other than Mannesmann
located within the Territory (including a
6
<PAGE> 7
Geneva Direct Customer) an amount equal to [______________________
_____________]. The allowance provided in this Section 4.10b shall be paid by
Geneva to Mannesmann within thirty days after receipt of payment by Geneva of
the invoice for the sale. Geneva shall also provide Mannesmann within thirty
days following the last day of each month a written accounting for all sales
made by Geneva in the preceding month for which the commission specified in this
Section 4.10b is payable to Mannesmann. Within a reasonable time after request
therefor by Mannesmann, Geneva shall allow reasonable access by Mannesmann to
its sales records with respect to such sales for the purpose of verifying
compliance with the obligation set forth in this Section 4.10b.
c. The Variable Allowance for sales referred to in
Sections 4.10a and 4.10b is a percentage of the net invoice amount for each ton
of Product and other material shipped by Geneva for which a sales allowance is
provided pursuant to this Agreement in each sales year equal to [___]% on each
ton so shipped up to and including [_______] tons in the aggregate and [__]% on
each ton so shipped above [_______] tons in the aggregate; provided, however,
the Variable Allowance for sales of electric resistance welded pipe shall be
[____]%; provided, further, however, the tons of such pipe shipped shall not be
included in the tons of Product and other materials shipped by Geneva for
purposes of determining the percentage used in the calculation of the Variable
Allowance; provided, still further, however, the Variable Allowance for sales of
discrete plate to Inland Metals Distribution Group and affiliated companies
("IMDG") (i) until the commencement of commercial operations of a plate
processing facility to be constructed and owned by a limited liability company
(or other entity) jointly owned, directly or indirectly, by Geneva and IMDG
shall be [___]% of the invoice amount therefor and (ii) after such commencement
shall be [___]% of the invoice amount therefor, and the tons of such plate so
sold shall not be included for purposes of determining the percentage used in
the calculation of the Variable Allowance. The parties acknowledge that as of
April 1, 1996, Geneva, Mannesmann and IMDG are still negotiating a long term
plate supply contract, but, as between Geneva and Mannesmann, it is the
intention of Geneva and Mannesmann that sales pursuant to such contract shall be
made by Mannesmann pursuant hereto.
7
<PAGE> 8
d. Following each calendar quarter in any sales year
either party hereto may propose an adjustment to the portion of the sales
allowance described in Section 4.10a(y) above, to be effective for sales during
the then current calendar quarter, reflecting (1) changes in (A) the prime rate
and (B) the average aging of receivables for accounts of Mannesmann arising from
sales by Mannesmann of Products and other materials purchased by Mannesmann
under this Agreement from those in effect on the date hereof and (2) with
respect to the portion of the sales allowance described in Section 4.10a(y)(A)
only, the time elapsed between the submission by Mannesmann of purchase orders
hereunder and shipments by Geneva with respect thereto (which the parties hereto
believe is approximately three weeks). Such proposal shall be accompanied by
detailed justification for such adjustment. In the event the parties hereto fail
to agree to the adjustment proposed, such element of the sales allowance then in
effect shall continue until an adjustment is agreed. Geneva shall have the
right, exercisable from time to time upon reasonable advance notice, to audit
and copy all or portions of Mannesmann's books and records to determine
Mannesmann's compliance with its obligation hereunder.
e. If for credit reasons Mannesmann elects not to
sell to any customer located in the Territory, Geneva will have the right to
sell to such customer, either directly or through another sales representative,
and no commission will be payable to Mannesmann thereon.
4.11 Exception. Notwithstanding Section 4.10 of this
Agreement, Geneva shall not be obligated to pay any sales allowance or
commission to Mannesmann for any Product that is sold to any customer identified
on Exhibit C to this Agreement or for any other materials that are sold by
Geneva to any customer located within the Territory or east of the Territory.
5. Warranty Provisions.
5.1 Warranty. The Products and other materials produced by
Geneva and sold under this Agreement are warranted to conform to contract
specifications. The obligations of Geneva under this warranty are limited to an
amount equal to the original invoice price of Products or other materials that
have been reported by Mannesmann not to conform to such specifications and that
have been
8
<PAGE> 9
so found by Geneva after inspection, such amount to be paid either by delivery
of replacement product or offset against future invoices as the parties may in
good faith mutually agree.
5.2 Claims. All claims under the warranty set forth at Section
6.1 shall be made in writing by Mannesmann within five working days after
receipt by Mannesmann from its customer of notice of defect. Geneva will not be
responsible for any claim if notice thereof is not received by Geneva promptly
following delivery by Geneva to Mannesmann or Mannesmann's customer, whichever
is earlier, of the Products or other materials produced by Geneva that are the
subject of such claim. Notwithstanding the foregoing, Geneva will not, in any
event, be responsible for such a claim if notice thereof is not received by
Geneva within the same time limit Geneva contractually prescribes from time to
time for customers to whom Geneva sells directly. Geneva agrees in good faith to
settle any warranty claim in a timely fashion.
5.3 Sole Remedy for Defects. Mannesmann agrees to accept the
warranty hereinabove contained in lieu of all other warranties, statutory or
otherwise, as the sole and exclusive remedy against Geneva for any defects of
any nature whatsoever. ANY STATUTORY OR IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE IS HEREBY WAIVED. EXCEPT FOR THE WARRANTY SET
FORTH IN SECTION 5.1 AND THE REMEDY PROVIDED IN SECTION 5.1, ALL WARRANTIES,
UNDERTAKINGS AND CONDITIONS, EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, ARE
HEREBY EXCLUDED. IN NO EVENT SHALL GENEVA BE LIABLE FOR ANY DIRECT, INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES SUFFERED BY MANNESMANN OR ANY CUSTOMER OF
MANNESMANN.
5.4 Disputes Regarding Warranty. If Geneva and Mannesmann do
not agree regarding the merits of a warranty claim, the disagreement will be
settled by the good faith appointment by the parties of a qualified and neutral
inspection company that is agreed to by the parties to investigate and report to
the parties within a reasonable time regarding the merits of the warranty claim.
The results of such report shall be final and binding on the parties hereto.
6. Credit Risk and Payment.
9
<PAGE> 10
6.1 Credit Risk. The credit risk on all Products and other
materials shipped by Geneva upon Mannesmann's order shall be borne by Geneva.
6.2 Accelerated Payment Invoices for Purchase Orders.
Notwithstanding any provision in this Agreement to the contrary, with respect to
any purchase order received from Mannesmann by Geneva under this Agreement,
approximately three weeks prior to shipment by Geneva of the Products and other
materials ordered Geneva shall forward, by U.S. Mail or, at the discretion of
Geneva, a faster medium such as overnight courier or facsimile transmission,
invoices relating to the relevant purchase orders (each an "Accelerated Payment
Invoice"). Each Accelerated Payment Invoice shall specify the purchase orders to
which it relates, the promise date with respect thereto (which the parties
estimate is approximately three weeks) and the status of production of the
order. Mannesmann shall, every Thursday of the week, remit to Geneva by wire
transfer in U.S. funds the full amount of all Accelerated Payment Invoices from
Geneva with respect to which such payment has not previously been made less the
sales allowance owed Mannesmann for shipments to be made pursuant to such
orders; provided, however, the aggregate amount of all payments for Accelerated
Payment Invoices at any one time outstanding that have not been credited to
Shipment Invoices pursuant to Section 6.3 hereof shall not exceed $[__________].
6.3 Payment of Funds Collected. Within five business days
after an order submitted by Mannesmann and accepted by Geneva pursuant to
Section 4.3 hereof is shipped by Geneva, Geneva shall forward by U.S. mail or,
at the discretion of Geneva, a faster medium, Geneva's invoice, mill test
certificate and bills of lading for such order. The invoice date will coincide
with the date of the bill of lading. Mannesmann shall promptly, after receiving
Geneva's invoice, bill its customer for the Product or other materials subject
to such invoice. Each of Mannesmann's billings shall be on a net 30 day term or
such other term as may be agreed to by Geneva in writing and in advance of
Geneva's shipment. Thereafter, Mannesmann will use its best efforts to collect
full payment of such invoice from its customer. Mannesmann shall, every Thursday
of the week, remit to Geneva by wire transfer in U.S. funds the amount of all
outstanding invoices from Geneva for sales of Products and other materials (each
a "Shipment Invoice") less
10
<PAGE> 11
any sales allowance owed Mannesmann for Products and other materials for which
no sales allowance has previously been deducted or paid. Notwithstanding the
foregoing, every Thursday during the term of this Agreement, Mannesmann shall
compare the Accelerated Payment Invoices it paid three weeks previously with the
Shipment Invoices it is supposed to pay on such Thursday and shall credit
against such Shipment Invoices, the total of (i) the amount Mannesmann paid on
the Accelerated Payment Invoices three weeks previously plus (ii) the amount
Mannesmann deducted from payment on such Accelerated Payment Invoices as a sales
allowance or commission. If the Shipment Invoices less sales allowances to be
paid on such Thursday are less than the amounts paid and the sales allowance
deducted three weeks previously with respect to the Accelerated Payment
Invoices, the difference shall be deducted from the amount to be paid with
respect to the Accelerated Payment Invoices less sales allowances to be paid on
the same day the Shipment Invoices are to be paid. If there are no Accelerated
Payment Invoices from which such difference can be deducted, Geneva shall pay
such difference to Mannesmann by wire transfer within five days. Geneva and
Mannesmann agree to meet periodically to reconcile their records with respect to
the transactions hereunder to assure that Mannesmann is paid the applicable
sales allowance and, if necessary, to review and adjust the procedures for
billing and payment hereunder.
6.4 Assignment of Uncollected Accounts. Mannesmann shall keep
an accurate accounting of all customer accounts receivable for customers to
which Mannesmann sells Products or other materials. With respect to Products and
other materials shipped by Geneva pursuant to a purchase order given by
Mannesmann to Geneva pursuant hereto, Mannesmann may, at its option, notify
Geneva of the failure of a customer to pay any invoice from Mannesmann for such
Products and other materials within 90 days from shipment date, specifying the
customer, the amount unpaid, the invoice relating to the account and the reason,
if any, asserted for non-payment. Within five business days after receipt by
Geneva of such notice by Mannesmann, (which notice shall be timely given under
the circumstances) Geneva shall remit to Mannesmann by wire transfer in U.S.
funds the amount of the invoice from Mannesmann to its customer which has not
been paid less the Variable Allowance in the case of a sale as to which a
Variable Allowance was paid. Geneva shall use its best efforts to collect each
account
11
<PAGE> 12
receivable with respect to which Geneva has so remitted funds and will remit to
Mannesmann, within 30 days after collection, Mannesmann's portion of the sales
allowance on the amount so collected. As to any invoice so paid by Geneva,
Mannesmann hereby absolutely, irrevocably, presently and unconditionally without
further act or deed of any kind or nature whatsoever assigns to Geneva, without
recourse to Mannesmann, the accounts receivable represented thereby, all present
and future rights to collect from such customer any such unpaid amounts,
interest thereon and other amounts in accordance with the terms of the Agreement
between Mannesmann and such customer. Mannesmann shall further (a) give Geneva
reasonable access to its sales records to allow Geneva to verify accounts
receivable so assigned to Geneva, (b) upon request of Geneva, execute such other
documents and instruments as Geneva may reasonably determine to be necessary to
evidence such assignment and (c) cooperate with Geneva as Geneva reasonably
determines necessary to collect such accounts receivable.
7. Force Majeure. Geneva will not be liable for any failure or delay in
delivery caused by an act of God, labor strike, accident, governmental
restriction, raw material shortage, or any other cause beyond Geneva's control,
or because of equipment failure.
8. Special or Consequential Damage. Neither party hereto shall be
liable to the other party for any special or consequential damages arising from
the breach of any obligation under this Agreement.
9. Relationship of the Parties. The relationship between the parties
hereto shall be one of independent contractors. Neither party hereto is
authorized to bind the other contractually or otherwise, or to make any
representation not permitted herein on behalf of the other party without such
other party's consent.
10. Right to Set-Off. Geneva and Mannesmann agree that if Geneva
purchases materials from Mannesmann during the term of this Agreement
("Materials"), and fails to pay for such Materials upon the terms agreed to
between the parties, the parties will automatically set-off any such monies that
are past due and owing by Geneva to Mannesmann for the Materials against monies
due and owed by Mannesmann to Geneva for Products and other materials. For
12
<PAGE> 13
purposes of this Agreement, Materials shall mean, without limitation, any goods
the parties may agree upon from time to time. Geneva and Mannesmann agree to use
their best efforts to promptly, diligently and in good faith, establish and
maintain appropriate accounting procedures necessary to implement any set-off
allowed for in this Section 10.
11. Term of Agreement. This Agreement shall expire at the close of
business on March 31, 1999, if notice of such termination is given by a party
hereto to the other party not less than six months prior to such termination
date. If timely notice of such termination is not given, the term of this
Agreement shall be extended automatically for an additional three year term and
for additional three year terms thereafter until notice of termination is given
by a party hereto to the other party not less than six months prior to the next
termination date.
12. Termination. a. Notwithstanding Section 11, this Agreement may be
terminated:
(i) by the non-defaulting party if the other party is
adjudicated bankrupt, makes a general assignment for the benefit of creditors,
admits in writing its inability to pay its debts as they become due, ceases to
conduct business in the ordinary course, has a receiver appointed, files a
petition under any bankruptcy, reorganization, debt arrangement, insolvency,
liquidation or distribution law or a petition under any bankruptcy,
reorganization, debt arrangement, insolvency, liquidation or distribution law is
filed against it and is not dismissed within sixty days; or
(ii) by the non-defaulting party if the other party
materially breaches any of the terms of this Agreement, unless such breach is
cured within thirty days after written notice thereof.
b. Mannesmann may terminate its obligations to pay
Accelerated Payment Invoices pursuant to Section 6.2 (i) upon ninety days
advance written notice if the "Total stockholders equity" of Geneva, as reported
on any consolidated balance sheet of Geneva prepared after April 1, 1996 in
accordance with generally accepted accounting principles is less than
$90,000,000 and (ii) on March 31 of any year upon giving advance written notice
on or
13
<PAGE> 14
before December 31 of the preceding year; provided, however, Mannesmann shall
not be entitled to give the notice referred to in this subparagraph (ii) unless
it (or any of its affiliates) is not able to continue maintaining existing
levels of insurance coverage on reasonable economic terms relating to
Mannesmann's obligations hereunder. Mannesmann shall use reasonable efforts to
inform Geneva of the status of availability of such insurance coverage. In the
event of such termination (x) Mannesmann shall continue to pay Shipment Invoices
pursuant to Section 6.3 hereof and (y) Geneva shall have the right, but not the
obligation, to terminate this Agreement upon not less than ninety days written
notice to Mannesmann.
13. Post-Termination Transition. Following a timely notice of termination
pursuant to Section 11 of this Agreement, or actual termination effected
pursuant to Section 12 of this Agreement, Mannesmann shall promptly afford
Geneva its full good faith cooperation in aiding Geneva to effect a transition
of Geneva's sales force to replace Mannesmann's sales force that deals with
purchasers of the Products and other materials. The cooperation contemplated by
this Section 13 includes all acts of Mannesmann reasonably necessary in such
transition including, but not limited to, the following:
a. Mannesmann will provide Geneva with a comprehensive list of
customers to whom Mannesmann has sold Products or other materials pursuant to
this Agreement.
b. For each customer on the list supplied pursuant to Section
13a., Mannesmann will supply Geneva with:
(i) all historical sales information kept by
Mannesmann relating to Products and other materials purchased by Mannesmann
pursuant to this Agreement;
(ii) the names of the employees or other
representatives of such customer that are Mannesmann's primary sales contact for
such customer;
(iii) the names of key management personnel of such
customer;
14
<PAGE> 15
(iv) the names of all competitor steel product
suppliers from whom such customer purchases;
(v) the address of the headquarters and of each
branch location of such customer;
(vi) a list of all equipment owned by such customer
that is used or that can be used to process Products and/or other materials,
including any technical specifications relating to such equipment that
Mannesmann may possess; and
(vii) a list of all steel products such customer is
capable of producing.
c. Mannesmann will facilitate an introduction of the employees
or other representatives of such customer responsible for making purchasing
decisions for Products and other materials to the person or persons designated
by Geneva at such time and under such circumstances that, in the best judgment
of Mannesmann, will afford Geneva's designated representative with the best
opportunity to effect a transition of such customer's purchasing Products and
other materials directly from Geneva.
14. Promotion of Geneva. Mannesmann will use its best efforts at all
times that this Agreement is in force to promote and maintain a positive
reputation for Geneva among Mannesmann's customers and potential customers with
a view to minimizing any inconvenience, concern or confusion on the part of any
such customer or potential customer caused by Geneva's taking over all sales
efforts in the Territory upon termination of this Agreement.
15. Insurance. Geneva shall cause Mannesmann to be named as an
additional insured on any product liability insurance obtained by Geneva that
covers Products and other materials. Geneva will direct the carrier of any such
insurance to forward to Mannesmann a certificate of insurance naming Mannesmann
as an additional insured on the policy obtained and to give Mannesmann 90 days
notice of the termination, for any reason, of such policy.
16. Notice. Any notice required or permitted hereunder shall be in
writing and sent by registered or certified mail, postage prepaid, as follows:
15
<PAGE> 16
If to Geneva:
Geneva Steel
Attention: Ken C. Johnsen
P.O. Box 2500
Provo, Utah 84603
with a copy to:
Kimball, Parr, Waddoups, Brown & Gee
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
Attention: David K. Redd
If to Mannesmann:
Mannesmann Pipe & Steel Corporation
1990 Post Oak Boulevard, 18th Floor
Houston, Texas 77056
or at such other address as either party to this Agreement may from time to time
designate by notice in writing to the other party. Notice shall be deemed given
two business days after being mailed in the manner set forth above.
17. Amendments. Any amendment to this Agreement must be in writing, and
signed by all parties to this Agreement.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Utah.
19. Required Performance. The failure of either party to this Agreement
to require the performance of any term of this Agreement or the waiver by either
party of any breach under this Agreement shall not prevent the subsequent
enforcement of such term and shall not be deemed a waiver of any subsequent
breach.
20. Costs Upon Default. In the event of a default under the terms of
this Agreement, the non-defaulting party shall be entitled to recover from the
defaulting party, all costs of the non-defaulting party, including a reasonable
attorney's fee, in enforcing the rights of the non-defaulting party hereunder.
16
<PAGE> 17
21. Severability. If any provision of this Agreement is held to be
invalid or void by any court of competent jurisdiction, such provision shall be
deemed severable from the remainder of this Agreement and shall not effect any
other provision hereof. If such provision shall be deemed invalid due to its
scope or breadth, such provision shall be deemed valid to the extent of the
scope or breadth permitted by law.
22. Assignability. Neither party to this Agreement shall assign any
rights or delegate any obligations of such party hereunder, without the prior
written consent of the other party hereto, which consent shall not be
unreasonably withheld.
23. Merger. This Agreement contains the entire understanding between
the parties with respect to the subject matter hereof and supercedes all prior
understandings between the parties. In the event of any conflict between the
terms of this Agreement and any purchase order or any document submitted by
Mannesmann to Geneva, this Agreement shall govern.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of April 1, 1996.
GENEVA STEEL COMPANY
By: /s/ Ken C. Johnsen
_______________________________
Mr. Ken C. Johnsen
Vice President
MANNESMANN PIPE & STEEL CORPORATION
By: /s/ Rudolf Georg
_______________________________
Mr. Rudolf Georg
President
17
<PAGE> 18
EXHIBIT A
(Attached to and forming a part of the
Amended and Restated
Sales Representation Agreement)
The term "Territory" shall include the states of:
Arkansas
Illinois
Iowa
Kansas
Louisiana
Michigan
Minnesota
Missouri
Nebraska
New Mexico
North Dakota
Oklahoma
South Dakota
Texas
Wisconsin
<PAGE> 19
EXHIBIT A1
Existing Mannesmann customers with locations
East of the Territory
which will be deemed located in the Territory
(Attached to and forming a part of the
Amended and Restated
Sales Representation Agreement)
GERRARD AND COMPANY
A.M. CASTLE AND COMPANY
AFCO METALS
(DIVISION OF J.M. TULL METALS COMPANY, INC.)
CAINE STEEL COMPANY (DIVISION OF L.F. STEEL, INC.)
(A SEAWAY AFFILIATE)
CARGILL STEEL & WIRE
DELTA STEEL, INC.
GLAZER STEEL & ALUMINUM
INTSEL SOUTHWEST
MCCLAIN INDUSTRIES, INC.
NAMASCO
NATIONAL MATERIAL COMPANY
O'NEAL STEEL, INC.
J.T. RYERSON/CENTRAL
BERG PIPE in Panama City, Florida
<PAGE> 20
EXHIBIT B
(Attached to and forming a part of the
Amended and Restated
Sales Representation Agreement)
The term "Products" shall mean all steel products manufactured within
the mill capabilities by Geneva on April 1, 1996 or thereafter, including hot
rolled bands and sheets in thickness of 12 gauge and above, black or temper
passed coils, hot rolled plate, floor plate and welded pipe; provided, however,
that such term shall not include non-prime or secondary items, products for sale
to Geneva or any of its affiliates, slabs or ingots.
<PAGE> 21
EXHIBIT C
Geneva House Accounts
(Attached to and forming a part of the
Amended and Restated
Sales Representation Agreement)
1. Butler Manufacturing Company
2. Pittsburgh DesMoines Steel (PDM)
3. Reliance Steel & Aluminum
4. Trinity Industries
<PAGE> 22
EXHIBIT D
Geneva Direct Customers within the Territory
(Attached to and forming a part of the
Amended and Restated
Sales Representation Agreement)
1. Avondale Industries
2. Central Steel & Wire
3. D & R Tank Co.
4. Delta Commodities
5. Eidson Steel
6. Havens Steel Comp.
7. Huntco Steel Inc.
8. Mega Corp.
9. Norfolk Iron & Metal
10. Singer Steel Inc.
11. Southwest Steel
12. Yaffe Steel Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
REGISTRANTS BALANCE SHEET AND STATEMENT OF OPERATIONS AS OF AND FOR THE NINE
MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
(B) FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 66,662
<ALLOWANCES> 4,120
<INVENTORY> 89,878
<CURRENT-ASSETS> 177,609
<PP&E> 624,062
<DEPRECIATION> 161,857
<TOTAL-ASSETS> 649,713
<CURRENT-LIABILITIES> 128,374
<BONDS> 367,555
55,257
0
<COMMON> 81,396
<OTHER-SE> 10,326
<TOTAL-LIABILITY-AND-EQUITY> 649,713
<SALES> 509,326
<TOTAL-REVENUES> 509,326
<CGS> 479,899
<TOTAL-COSTS> 479,899
<OTHER-EXPENSES> 18,770
<LOSS-PROVISION> 2,779
<INTEREST-EXPENSE> 26,188
<INCOME-PRETAX> (16,755)
<INCOME-TAX> (6,378)
<INCOME-CONTINUING> (10,377)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,377)
<EPS-PRIMARY> (1.12)
<EPS-DILUTED> (1.12)
</TABLE>
