<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number 0-21964
---------------------------
SHILOH INDUSTRIES, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0347683
-------------------------------------------- ------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
Suite 350, 1013 Centre Road, Wilmington, Delaware 19805
- - --------------------------------------------------------------------------------
(Address of principal executive offices - zip code)
(302) 998-0592
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
-------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS:
- - -------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Number of shares of Common Stock outstanding as of June 13, 1996 was 13,011,663
shares.
1
<PAGE> 2
SHILOH INDUSTRIES, INC.
-----------------------
INDEX
-----
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet 3
Consolidated Statement of Income 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 10
PART II. OTHER INFORMATION
Item 3. Submission of Matters to a Vote of Security-Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
SHILOH INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
---------------- ----------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ --- $ 2,391,645
Accounts receivable 31,842,676 31,908,590
Inventory 15,426,290 21,047,110
Deferred income taxes 2,447,195 2,860,311
Prepaid expenses 2,340,030 2,469,767
Investment in discontinued operations, net 12,177,264 ---
---------------- ----------------
Total current assets 64,233,455 60,677,423
---------------- ----------------
Property, plant and equipment, net 100,255,412 97,952,032
Goodwill 625,700 11,295,553
Other long-term assets 3,234,873 3,338,583
---------------- ----------------
Total assets $ 168,349,440 $ 173,263,591
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Accounts payable $ 9,561,270 $ 8,559,699
Current portion of long-term debt 1,750,000 2,350,000
Accrued income taxes 2,794,663 2,927,251
Other accrued expenses 6,871,511 10,435,319
---------------- ----------------
Total current liabilities 20,977,444 24,272,269
---------------- ----------------
Long-term debt 23,887,115 20,956,042
Deferred income taxes 7,284,018 9,494,277
Long-term pension liability --- 61,827
---------------- ----------------
Total liabilities 52,148,577 54,784,415
---------------- ----------------
Stockholders' equity
Common stock 130,116 130,116
Paid-in capital 38,375,152 38,375,152
Retained earnings 77,695,595 79,973,908
---------------- ----------------
Total stockholders' equity 116,200,863 118,479,176
---------------- ----------------
Commitments and contingent liabilities --- ---
---------------- ----------------
Total liabilities and stockholders' equity $ 168,349,440 $ 173,263,591
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended April 30, Six Months ended April 30,
---------------------------- ---------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 58,044,758 $ 56,319,706 $ 109,583,900 $ 108,452,165
Cost of sales 46,775,206 46,195,223 88,307,968 89,487,767
------------- ------------- ------------- -------------
Gross Profit 11,269,552 10,124,483 21,275,932 18,964,398
Selling, general and administrative expenses 3,870,429 3,436,859 7,687,088 7,292,644
------------- ------------- ------------- -------------
Operating income 7,399,123 6,687,624 13,588,844 11,671,754
Interest income (expense), net 2,290 (78,359) (112,116) (280,947)
Other income, net 2,957 3,458 10,368 25,655
------------- ------------- ------------- -------------
Income from continuing operations before
income taxes 7,404,370 6,612,723 13,487,096 11,416,462
Provision for income taxes 2,860,183 2,647,069 5,203,322 4,414,900
------------- ------------- ------------- -------------
Income from continuing operations 4,544,187 3,965,654 8,283,774 7,001,562
Loss from discontinued operations, net of
income taxes (3,205) (87,587) (379,311) (635,725)
Loss on sale of discontinued operations, net of
tax (10,197,972) --- (10,197,972) ---
Net income (loss) $ (5,656,990) $ 3,878,067 $ (2,293,509) $ 6,365,837
============= ============= ============= =============
Earnings per share:
Income per share from continuing operations $.35 $.31 $.64 $.54
Loss per share from discontinued operations ( .00) ( .01) ( .03) ( .05)
Loss per share on sale of discontinued
operations ( .78) .00 ( .78) .00
------ ------ ------ ------
Net income (loss) per share ($.43) $.30 ($.17) $.49
====== ====== ====== ======
Weighted average number of common shares: 13,011,663 12,999,673 13,011,663 12,994,172
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months ended April 30,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (2,293,509) $ 6,365,837
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,556,962 3,055,147
Loss on sale of discontinued operations 10,197,972 ---
Deferred income taxes --- 733,292
Loss (gain) on sale of assets --- 15,004
Changes in operating assets and liabilities:
Accounts receivable (1,831,272) (2,333,055)
Inventories 702,905 (4,622,200)
Prepaids and other assets (57,308) 3,183,232
Payables and accruals 597,849 6,285,277
Accrued income taxes (132,589) (1,137,129)
Discontinued operations - noncash charges
and working capital changes (725,020) 204,076
-------------- --------------
Net cash provided by operating activities 10,015,990 11,749,481
-------------- --------------
Cash Flows From Investing Activities:
Capital expenditures (14,738,708) (13,176,474)
Proceeds from sale of assets --- 10,000
-------------- --------------
Net cash used in investing activities (14,738,708) (13,166,474)
-------------- --------------
Cash Flows From Financing Activities:
Proceeds from short-term borrowings 6,000,000 6,500,000
Repayments of short-term borrowings (6,000,000) (5,500,000)
Proceeds from long-term borrowings 12,306,073 3,000,000
Repayments of long-term borrowings (9,975,000) (3,417,836)
Issuance of common stock --- 127,514
-------------- --------------
Net cash provided by financing activities 2,331,073 709,678
-------------- --------------
Net decrease in cash and cash equivalents (2,391,645) (707,315)
Cash and cash equivalents at beginning of period 2,391,645 946,827
-------------- --------------
Cash and cash equivalents at end of period $ 0 $ 239,512
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1- Basis of Presentation:
- - ------------------------------
The condensed consolidated financial statements have been prepared by
Shiloh Industries, Inc. (the "Company"), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. The information
furnished in the condensed consolidated financial statements includes normal
recurring adjustments and reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of such financial statements.
Certain information and footnote 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. Although
the Company believes that the disclosures are adequate to make the information
presented not misleading, it is suggested that these condensed consolidated
financial statements be read in conjunction with the audited financial
statements and the notes thereto included in the Company's 1995 Annual Report to
Shareholders.
Revenues and operating results for the six months ended April 30, 1996
are not necessarily indicative of the results to be expected for the full year.
The Consolidated Statement of Income and Consolidated Statement of Cash
Flows for the period ending April 30, 1995 have been reclassified to correspond
to current presentation for discontinued operations (see Note 2).
NOTE 2 - Discontinued Operations
- - --------------------------------
In May 1996, the Company entered into an agreement to sell the stock of
its Shafer Valve Company subsidiary, a distinct segment of the Company's
business, to Bettis Corporation for $13.2 million and has accounted for this
operation as a discontinued operation effective April 30, 1996, the measurement
date. Results of operations for 1995 have been reclassified for amounts
associated with the discontinued operation.
The sale of Shafer Valve is expected to be completed prior to the end
of the Company's 1996 fiscal year, subject to governmental approval. The Company
intends to use the net proceeds from the sale of the operation primarily to
reduce debt.
Results of the discontinued operation for the second quarter of fiscal
years 1996 and 1995, and for the first six months of fiscal years 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
Three months ended April 30, Six Months ended April 30,
------------------------------- ------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 3,691,537 $ 4,595,090 $ 7,727,868 $ 8,137,217
Loss from operations, net of tax (3,205) (87,587) (379,311) (635,725)
Loss on sale, net of tax ( 10,197,972) --- ( 10,197,972) ---
------------- ------------- ------------- -------------
Total loss on discontinued operations ($10,201,177) ($ 87,587) ($10,577,283) ($ 635,725)
============= ============= ============= =============
</TABLE>
The estimated loss on disposal of the discontinued operations is $10.2
million, net of tax, which includes a provision of $1 million for anticipated
operating losses and other disposal costs incurred until disposal.
6
<PAGE> 7
The investment in discontinued operations of $12.2 million consists of
the assets and liabilities of Shafer Valve Company less the estimated loss on
disposal of $10.2 million.
NOTE 3 - Inventories:
- - ---------------------
Inventories consist of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
------------ ------------
<S> <C> <C>
Raw materials $ 11,136,115 $ 14,521,604
Work-in-process 1,874,384 3,400,070
Finished goods 4,280,496 4,760,141
------------ ------------
Total at average cost 17,290,995 22,681,815
LIFO reserve (1,864,705) (1,634,705)
------------ ------------
Total $ 15,426,290 $ 21,047,110
============ ============
</TABLE>
NOTE 4 - Property, Plant and Equipment:
- - ---------------------------------------
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
-------------- --------------
<S> <C> <C>
Land $ 2,524,951 $ 3,199,675
Buildings and improvements 43,071,419 40,172,317
Machinery and equipment 73,916,566 77,314,621
Furniture and fixtures 4,930,563 5,836,662
Construction in progress 27,886,530 24,048,847
-------------- --------------
Total, at cost 152,330,029 150,572,122
Less: Accumulated depreciation (52,074,617) (52,620,090)
-------------- --------------
Net property, plant and equipment $ 100,255,412 $ 97,952,032
============== ==============
</TABLE>
7
<PAGE> 8
NOTE 5 - Financing Arrangements:
- - --------------------------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
------------- -------------
<S> <C> <C>
Revolving credit loan extending to February 28, 2000 -
interest at 6.0234%, at April 30, 1996 $ 10,000,000 $ 13,500,000
Revolving credit loan extending to February 28, 1998 -
interest at 6.0234%, at April 30, 1996 4,500,000 ---
Term loan - due in twenty quarterly installments
of $300,000 plus interest which is fixed at 8.78% --- 600,000
Term loan - due in quarterly installments of
$437,500 plus interest which is fixed 7.10% 7,000,000 7,875,000
Variable rate industrial development bond, secured by
letter of credit, weighted average interest rate at
3.9% payable on February 1, 2010 4,137,115 1,331,042
------------- -------------
$ 25,637,115 $ 23,306,042
Less: current portion (1,750,000) (2,350,000)
------------- -------------
Total $ 23,887,115 $ 20,956,042
============= =============
</TABLE>
Prior to April 16, 1996, the Company had a $23 million revolving credit facility
with Society National Bank ("Society"). In conjunction with the negotiation of
the new credit facility described below, this line was terminated. On April 16,
1996, the Company signed an agreement with Society National Bank ("Society") for
a revolving credit facility ("Facility") not to exceed $30 million. The term of
the Facility extends to February 28, 2000 with an option for successive one year
term extensions available at the Company's request and Society's approval, upon
proper written notification. The Company has the option to select the applicable
interest rate at Society's prime rate or the LIBOR rate plus 1/2% fixed in
increments of 30, 60 or 90 days. The terms of the agreement require an annual
commitment fee equal to 1/4% on the average unused amount of the facility.
On April 16, 1996, the Company acting as guarantor for Shiloh of Michigan,
L.L.C. signed an agreement with Society for a revolving credit facility
("Facility") not to exceed $23 million. The term of the Facility extends to
February 28, 1998 with an option for successive one year term extensions
available at the Company's request and Society's approval, upon proper written
notification. The Company has the option to select the applicable interest rate
at Society's prime rate or the LIBOR rate plus 1/2% fixed in increments of 30,
60 or 90 days. The terms of the agreement require an annual commitment fee equal
to 1/4% on the average unused amount of the facility.
Certain of the debt agreements described above contain various restrictive
covenants which, among others, require the Company's various operating
subsidiaries to maintain minimum net worth levels and financial ratios. The
agreements also place certain restrictions on additional indebtedness and
capital expenditures.
Amounts available under the Company's revolving credit facilities aggregated
$41.5 million at April 30, 1996.
8
<PAGE> 9
NOTE 6 - Other Information:
- - ---------------------------
During the six months ended April 30, 1996 and 1995, cash payments for interest
amounted to $776,292 and $655,822, respectively, while cash payments for income
taxes amounted to $5,061,784 and $4,690,100, respectively.
In 1995, the Company issued 22,813 shares as part of its required employer
contribution to the various Company administered defined contribution plans.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
- - -------
In 1995, the Company prepared a long-term business plan which included a
strategic decision to concentrate on the core steel processing segment. As a
result, the Company sought inquiries from prospective bidders for the sale of
its Shafer Valve subsidiary. In May 1996, the Company entered into an agreement
to sell the stock of Shafer Valve Company to Bettis Corporation. The sale is
expected to be completed prior to the end of the Company's 1996 fiscal year,
subject to governmental approval. With the pending sale of Shafer Valve, the
Company is accounting for this operation as a discontinued operation and is no
longer reporting results for the valve actuator segment.
The Company's steel processing segment typically experiences decreased revenue
and operating income during the first fiscal quarter of each year, usually
resulting from generally slower overall automobile production during the winter
months. The revenues and operating income in the third fiscal quarter can also
be affected by the typically lower automobile production activities in July due
to manufacturer's changeover in production lines.
The Company provides a full range of intermediate steel processing services
through two product lines: blanking and stamping and other steel processing
services, which includes pickling hot rolled steel and slitting, edge trimming,
roller leveling and cutting to length hot and cold rolled steel. In analyzing
the financial aspects of the Company's steel processing operations, a number of
factors must be considered. First, plant utilization levels are very important
to profitability because of the capital intensive nature of these operations.
Because the Company performs a number of different processing operations,
however, it is not meaningful to analyze simply the total tons of steel
processed. For example, blanking and stamping involve more operational
processes, from the design and manufacture of tools and dies to the production
and packaging of the final product, than the Company's other steel processing
services and therefore generally have higher margins. Second, a significant
portion of the Company's steel processing products and services is provided to
the customers on a toll processing basis. Under these arrangements, the Company
charges a specified toll processing fee for the processing operations performed
without acquiring ownership of the steel and being burdened with the attendant
costs of ownership and risk of loss. The Company estimates that during the past
three years approximately 86% of total tons processed was done on a toll
processing basis. Revenues from operations involving directly owned steel
include a component of raw material cost whereas toll processing revenues do
not. As a result, the proportion of toll processing revenues to total steel
processing revenues decreases as total revenues increase, provided the mix
between toll processing and directly owned steel processing remains relatively
constant. By product line, the Company's blanking and stamping operations use
more directly owned steel than do its other steel processing operations. Third,
because the cost of sales for toll processing revenue does not include raw
material costs, the gross profit margin for such revenue is significantly
higher. In addition, changes in the price of steel can impact the Company's
results of operations because raw material costs are by far the largest
component of cost of sales in processing directly owned steel.
The Company operates on an October 31 fiscal year end and, unless the context
requires otherwise, all references to years in this Management's Discussion and
Analysis of Financial Condition and Results of Operations are to be fiscal year
ending October 31 of the year referenced.
10
<PAGE> 11
Results of Operations
- - ---------------------
THREE MONTHS ENDED APRIL 30, 1996
COMPARED TO THREE MONTHS ENDED APRIL 30, 1995
REVENUES. Revenues increased by $1.7 million, or 3.1%, to $58.0 million for the
second quarter of 1996 from $56.3 million for the comparable period in 1995. The
increase in revenues is due primarily to increased sales volume and average
selling prices. The percentage of toll processing sales as a percentage of total
sales increased to 28.1% in the second quarter of 1996 from 25.6% in the second
quarter of 1995. Revenues from the blanking and stamping product line for the
second quarter of 1996 increased approximately 2.9% from the comparable period
of 1995, while revenues from the other steel processing product line increased
approximately 3.4%.
GROSS PROFIT. Gross profit increased by $1.1 million, or 11.3% to $11.3 million
for the second quarter of 1996 from $10.1 million for the comparable period in
1995. Gross margin increased to 19.4% for the second quarter of 1996 from 18.0%
for the comparable period in 1995. The increase in gross margin is principally
due to management's continued efforts to contain costs and to recover historical
steel price increases through higher sale prices to its customers. Continued
improvements in gross margin will be more difficult to achieve as the impact of
these price increases lessens. In addition, the increase in toll processing
sales as a percentage of total sales contributed to gross margin improvement.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $0.5 million, or 12.6%, to $3.9 million in
1996 from $3.4 million in the prior year. As a percentage of revenues, these
expenses increased to 6.7% in 1996 from 6.1% in 1995. This increase is primarily
due to the expansion of the corporate sales staff.
OTHER. Interest expense, net, decreased to $0.0 million in the second quarter
from $0.1 million in the prior year due primarily to capitalization of interest
related to expansion of several facilities. The provision for income taxes was
$2.9 million in the second quarter of 1996 compared with $2.6 million in 1995,
representing effective tax rates of 38.6% and 40.0%, respectively.
Discontinued Operations
- - -----------------------
In May 1996, the Company entered into an agreement to sell the stock of its
Shafer Valve Company subsidiary and accordingly has accounted for this operation
as discontinued operations in the accompanying financial statements. The
resulting charge to net income, net of tax, was $10.2 million reflecting the
estimated loss on sale of the discontinued operation.
11
<PAGE> 12
SIX MONTHS ENDED APRIL 30, 1996
COMPARED TO SIX MONTHS ENDED APRIL 30, 1995
REVENUES. Revenues increased by $1.1 million, or 1.0%, to $109.6 million for the
six months ended April 30, 1996 from $108.5 million for the comparable period in
1995. The increase in revenues reflects improvements in the other steel
processing product line. The increase in revenues is due primarily to increased
sales volume and average selling prices. Revenues from the blanking and stamping
product line for the first six months of 1996 decreased approximately 0.6% from
the comparable period of 1995 primarily as a result of increased tolling, while
revenues from the other steel processing product line increased 5.3%. The
percentage of toll processing sales as a percentage of total sales increased to
28.8% in the first six months of 1996 from 25.8% in the first six months of
1995.
GROSS PROFIT. Gross profit increased by $2.3 million, or 12.2% to $21.3 million
for the first six months of 1996 from $19.0 million for the comparable period in
1995. Gross margin increased to 19.4% for the first six months of 1996 from
17.5% for the comparable period in 1995. The increase in gross margin is
principally due to management's continued efforts to contain costs and to
recover historical steel price increases through higher sale prices to its
customers. Continued improvements in gross margin will be more difficult to
achieve as the impact of these price increases lessens. In addition, the
increase in toll processing sales as a percentage of total sales contributed to
gross margin improvement.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $0.4 million, or 5.4%, to $7.7 million in
1996 from $7.3 million in the prior year. As a percentage of revenues, these
expenses increased to 7.0% in 1996 from 6.7% in 1995. This increase is primarily
due to the expansion of the corporate sales staff.
OTHER. Interest expense, net, decreased to $0.1 million in the first six months
of 1996 from $0.3 million in the prior year due primarily to capitalization of
interest related to expansion of several facilities. The provision for income
taxes was $5.2 million in the first six months of 1996 compared with $4.4
million in 1995, representing effective tax rates of 38.6% and 38.7%,
respectively.
Discontinued Operations
- - -----------------------
In May 1996, the Company entered into an agreement to sell the stock of its
Shafer Valve Company subsidiary and accordingly has accounted for this operation
as discontinued operations in the accompanying financial statements. The
resulting charge to net income, net of tax, was $10.6 million, $10.2 million
reflecting the estimated loss on sale of discontinued operations and $0.4
million for loss from discontinued operations.
Liquidity and Capital Resources
- - -------------------------------
At April 30, 1996, the Company had $43.3 million of working capital,
representing a current ratio of 3.1 to 1 and debt of only 20.5% of total
capitalization. As a result of this strong financial condition, the Company will
be able to continue its planned investment in new equipment and facilities
through the next fiscal year.
Net cash provided by operating activities is primarily generated from net income
of the Company plus non-cash charges for depreciation and amortization, which
because of the capital intensive nature of the Company's business, are
substantial. Net cash provided by operating activities during the first six
months of 1996 was $9.9 million as compared to $11.7 million for the comparable
period in 1995. Fluctuations in working capital, including the working capital
of discontinued operations, was the primary factor causing the decrease in net
cash provided by operations from 1995 to 1996. The provision for loss on sale of
the discontinued operations had no effect on cash flow during the period. Net
cash provided by operating activities has historically been used by the Company
to fund a portion of its capital expenditures.
12
<PAGE> 13
Capital expenditures were $14.7 million during the first six months of 1996 and
$13.2 million for the comparable period in 1995. The capital expenditures during
the first half of 1996 were primarily for the expansion at the Company's steel
pickling operations in Valley City, Ohio. The project's total cost of
approximately $23 million is being funded by a combination of internal cash
flow, increased borrowings under existing credit facilities and additional debt
financing. As of April 30, 1996, $22.0 million had been spent on the project.
The Company's total capital budget for 1996, including this project, amounts to
approximately $52 million. The increased level of capital expenditures is
primarily due to the construction of a blanking facility in Romulus, Michigan, a
joint venture with Rouge Steel, as well as a $15 million expansion of stamping
operations at the Company's Sectional Stamping facility in Wellington, Ohio. As
of April 30, 1996, $8.1 million and $1.8 million had been spent on these
projects, respectively. These additions are being made to support increased
business and anticipated new business and to enhance productivity. The Company
anticipates financing its share of the initial investment in the Romulus
facility, approximately $15 million, and the Sectional Stamping expansion
through cash provided from operations as well as traditional bank financing.
Prior to April 16, 1996, the Company had a $23 million revolving credit facility
with Society National Bank ("Society"). In conjunction with the negotiation of
the new credit facility described below, this line was terminated. On April 16,
1996, the Company signed an agreement with Society for a revolving credit
facility ("Facility") not to exceed $30 million. The term of the Facility
extends to February 28, 2000 with an option for successive one year term
extensions available at the Company's request and Society's approval, upon
proper written notification. The Company has the option to select the applicable
interest rate at Society's prime rate or the LIBOR rate plus 1/2% fixed in
increments of 30, 60 or 90 days. The terms of the agreement require an annual
commitment fee equal to 1/4% on the average unused amount of the facility. In
addition, the Company is acting as an 80% guarantor for a $23 million revolving
credit facility entered into by Shiloh of Michigan, L.L.C.
The Company believes that it currently has sufficient liquidity and available
capital resources to meet its existing needs, and the financial capability to
increase its long-term borrowing level if that becomes appropriate due to
changes in its capital requirements. Total availability under the Company's line
of credit and revolving credit facility is $56.0 million, $41.5 million of which
was unused at April 30, 1996. The Company intends to use the proceeds of
approximately $13.2 million from the sale of its Shafer Valve Company subsidiary
primarily to reduce debt.
In March 1995, Medina County, Ohio issued on the behalf of the Company an
aggregate of $5.4 million in principal amount of variable rate industrial
revenue bonds due 2010, which are secured by the Company with a letter of
credit. The funds from these bonds are to be used to finance a portion of the
expansion at the Company's steel pickling operations in Valley City, Ohio. The
Company had withdrawn $4.1 million of such proceeds as of April 30, 1996, with
the balance of $1.3 million being held in trust for the benefit of the Company
pending use of such proceeds.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On March 14, 1996, at the Annual Meeting of Stockholders of Shiloh Industries,
Inc., the stockholders took the following actions:
(1) Elected as Class III Directors all nominees designated in the
Proxy Statement dated February 13, 1996; and
(2) Approved the appointment of the independent certified public
accountants of the Company for the current fiscal year.
The Directors were elected pursuant to the following vote:
<TABLE>
<CAPTION>
BROKER
NOMINEE FOR WITHHELD NON-VOTE
- - ------- --- -------- --------
<S> <C> <C> <C>
Robert L. Grissinger 12,732,637 6,557 --
Curtis E. Moll 12,732,637 6,557 --
Theodore K. Zampetis 12,732,637 6,557 --
</TABLE>
The approval of appointment of Price Waterhouse as independent certified public
accountants to the Company for its current fiscal year was approved by the
following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTE
- - --- ------- ------- --------
<S> <C> <C> <C>
12,735,844 1,850 1,500 --
</TABLE>
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
a. Exhibits: The following exhibits are filed herewith and made a
part hereof:
<TABLE>
<CAPTION>
<S><C> <C>
10.1 Credit Agreement, effective as of April 16, 1996, between Shiloh Industries,
Inc., the Banks listed on Annex A thereto and Society National Bank, as Agent.
10.2 Credit Agreement, effective as of April 16, 1996, between Shiloh of Michigan,
L.L.C., the Banks listed on Annex A thereto and Society National Bank, as Agent.
10.3 Guaranty of Payment, dated April 16, 1996, by Shiloh Industries, Inc. in favor
of the Banks named therein (with an attached schedule identifying the other
subsidiaries of the Company that have entered into an identical agreement).
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
<S><C> <C>
10.4 Loan Agreement, dated February 1, 1995, by and between Medina County, Ohio and
Valley City Steel Company.
10.5 Operating Agreement for Shiloh of Michigan, L.L.C., dated January 2, 1996, by
and among Shiloh of Michigan, L.L.C., Rouge Steel Company and Shiloh Industries,
Inc.
27 Financial Data Schedule
</TABLE>
b. Reports on Form 8-K: None.
15
<PAGE> 16
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.
Date: June 14, 1996 SHILOH INDUSTRIES, INC.
By: /s/ Robert L. Grissinger
-------------------------------
Robert L. Grissinger,
President and Chief
Executive Officer
By: /s/ G. Rodger Loesch
-------------------------------
G. Rodger Loesch,
Chief Financial Officer
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
- - ----------- -------------------
<S> <C>
10.1 Credit Agreement, effective as of April 16, 1996, between Shiloh Industries,
Inc., the Banks listed on Annex A thereto and Society National Bank, as Agent.
10.2 Credit Agreement, effective as of April 16, 1996, between Shiloh of Michigan,
L.L.C., the Banks listed on Annex A thereto and Society National Bank, as Agent.
10.3 Guaranty of Payment, dated April 16, 1996, by Shiloh Industries, Inc. in favor
of the Banks named therein (with an attached schedule identifying the other
subsidiaries of the Company that have entered into an identical agreement).
10.4 Loan Agreement, dated February 1, 1995, by and between Medina County, Ohio and
Valley City Steel Company.
10.5 Operating Agreement for Shiloh of Michigan, L.L.C., dated January 2, 1996, by
and among Shiloh of Michigan, L.L.C., Rouge Steel Company and Shiloh Industries,
Inc.
27 Financial Data Schedule
</TABLE>
17
<PAGE> 1
Exhibit 10.1
CREDIT AGREEMENT
CREDIT AGREEMENT, effective as of the 16th day of April, 1996, between
SHILOH INDUSTRIES, INC., a Delaware corporation, (hereinafter sometimes called
the "Borrower"); the financial institutions named in Annex A attached hereto and
made a part hereof and their permitted successors and assigns (hereinafter
sometimes collectively called the "Banks" and each individually a "Bank"); and
SOCIETY NATIONAL BANK, a national banking association, as Agent for the Banks
under this Agreement (hereinafter sometimes called the "Agent").
WITNESSETH:
-----------
WHEREAS, the Borrower, the Banks and the Agent desire to contract for
the establishment of a credit in the aggregate principal amount of Thirty
Million Dollars ($30,000,000), to be made available to the Borrower upon the
terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I. DEFINITIONS
-----------
As used in this credit agreement, the following terms shall have the
following meanings:
"ADJUSTED LIBOR" shall mean a rate per annum equal to the quotient
obtained (rounded upwards, if necessary, to the nearest 1/100th of 1%) by
dividing (i) the applicable LIBOR rate by (ii) 1.00 minus the Reserve
Percentage.
"ADVANTAGE" shall mean any payment (whether made voluntarily or
involuntarily, by offset of any deposit or other indebtedness or otherwise)
received by any Bank in respect of the Obligations owing by the Borrower to the
Banks if such payment results in that Bank having a lesser share of such
Obligations to the Banks than was the case immediately before such payment.
"AGENT" has the meaning assigned to such term in the preamble of this
Agreement and its successors hereunder pursuant to Article VIII-A.
"BANKING DAY" shall mean a day on which the main office of the Agent is
open for the transaction of business.
"BORROWED DEBT" shall mean, with respect to any Person, without
duplication, all obligations of such Person for money borrowed including,
without limitation, all notes payable and drafts accepted representing
extensions of credit (including,
-1-
<PAGE> 2
without limitation, as to the Borrower, the Notes), all obligations evidenced by
bonds, debentures, notes or other similar instruments (including, without
limitation, Subordinated indebtedness), capitalized lease or purchase money
obligations and obligations upon which interest charges are customarily paid or
discounted, and all guaranties of such obligations for money borrowed.
"COMMITMENT" shall mean, with respect to each Bank, the obligation
hereunder of such Bank to make Loans and issue Letters of Credit, up to the
amount set forth opposite such Bank's name under the column headed "Commitments"
as set forth in Annex A hereof during the Commitment Period.
"COMMITMENT PERIOD" shall mean the period from the date hereof to
February 28, 2000, as such date may be extended pursuant to Section 2.6 hereof.
"COMPANY" shall mean the Borrower or a Subsidiary.
"CONTROLLED GROUP" shall mean a controlled group of corporations as
defined in Section 1563 of the Internal Revenue Code of 1986, as may be amended
from time to time, of which any Company is a part.
"CONSOLIDATED NET EARNINGS" shall mean total net earnings of the
Companies, after taxes and after extraordinary items (but without giving effect
to any gain resulting from the re-appraisal or write-up of any asset or to the
sale of any asset other than inventory), as determined on a consolidated basis
in accordance with generally accepted accounting principles applied on a basis
not inconsistent with their present accounting procedures.
"CONSOLIDATED NET WORTH" shall mean the excess of the net book value
(after deduction of all applicable reserves and excluding any re-appraisal or
write-up of assets) of the assets of the Companies over all of the liabilities
as determined on a consolidated basis in accordance with generally accepted
accounting principles applied on a basis not inconsistent with the present
accounting procedures.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean the excess of the net book
value (after deduction of all applicable reserves and excluding any re-appraisal
or write-up of assets) of the assets (other than patents, good will, treasury
stock and similar intangibles) of the Companies over all of the liabilities as
determined on a consolidated basis in accordance with generally accepted
accounting principles applied on a basis not inconsistent with their present
accounting procedures.
-2-
<PAGE> 3
"DEBT" shall mean, collectively, all liabilities now owing or hereafter
incurred by the Borrower to any Bank and includes (without limitation) every
such liability whether owing by only the Borrower or by the Borrower with one or
more others in a several, joint or joint and several capacity, whether owing
absolutely or contingently, whether created by loan, overdraft, guaranty of
payment or other contract or by quasi-contract, tort, statute or other operation
of law, whether incurred directly to such Bank or acquired by such Bank by
purchase, pledge or otherwise, and whether participated to or from Bank in whole
or in part.
"ENVIRONMENTAL LAWS" shall mean all provisions of law, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by the government
of the United States of America or by any state or municipality thereof or by
any court, agency, instrumentality, regulatory authority or; commission of any
of the foregoing concerning health, safety and protection of, or regulation of
the discharge of substances into, the environment.
"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.
"FED FUNDS RATE" shall mean, 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 Banking Day, for the next preceding Banking Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Banking Day, the average of the quotations for such day on such
transactions received by the Agent from three (3) federal funds brokers of
recognized standing selected by it.
"FORMER AGENT" has the meaning assigned to such term in
Section 8A.13.
"FUNDED INDEBTEDNESS" shall mean indebtedness which (including any
renewal or extension in whole or in part) matures or remains unpaid more than
twelve months after the date on which originally incurred.
"GUARANTOR" shall mean one who pledges his or her credit or property in
any manner for the payment or other performance of the indebtedness, contract or
other obligation of another and includes (without limitation) any guarantor
(whether of payment or of collection), surety, co-maker, endorser or one who
agrees
-3-
<PAGE> 4
conditionally or otherwise to make any purchase, loan or investment in order
thereby to enable another to prevent or correct a default of any kind.
"INTEREST ADJUSTMENT DATE" shall mean the last day of each
Interest Period.
"INTEREST PERIOD" shall mean a period of 1, 2, or 3 months (as selected
by the Borrower commencing on the applicable borrowing date of each LIBOR Loan
and on each Interest Adjustment Date with respect thereto; provided, however,
that if any such period would be affected by a reduction in the Total Commitment
Amount as provided in Section 2.5 hereof, prepayment or conversion rights as
provided in Section 3.5 hereof or maturity of LIBOR Loans as provided in Section
2.1(a) hereof, such period shall be shortened to end on such date). If the
Borrower fails to select a new Interest Period with respect to an outstanding
LIBOR Loan at least two London Banking Days prior to any Interest Adjustment
Date, the Borrower shall be deemed to have selected a Prime Rate Loan.
"LETTER(S) OF CREDIT" and "LETTER OF CREDIT FEE" shall have the
meanings assigned to such terms in Section 2.7.
"LIBOR" shall mean the average (rounded upward to the nearest 1/16th of
1%) of the per annum rates at which deposits in immediately available funds in
United States dollars for the relevant Interest Period and in the amount of the
LIBOR Loan to be disbursed or to remain outstanding during such Interest Period,
as the case may be, are offered to the Reference Bank by prime banks in any
Eurodollar market reasonably selected by the Reference Bank, determined as of
11:00 a.m. London time (or as soon thereafter as practicable), two (2) London
banking days prior to the beginning of the relevant Interest Period pertaining
to a LIBOR Loan hereunder.
"LIBOR LOANS" shall mean those loans described in Section 2.1(a) hereof
on which the Borrower shall pay interest at a rate based on LIBOR.
"LOAN(S)" shall mean any loan(s) advanced hereunder, which shall be
either Prime Rate Loan(s) or LIBOR Loan(s).
"LONDON BANKING DAY" shall mean a day on which banks are open for
business in London, England, and quoting deposit rates for dollar deposits.
"MAJORITY BANKS" shall mean, at any time of determination, two or more
Banks having Commitments in the aggregate of at least sixty-six and two-thirds
percent (66 2/3%) of the Total Commitment Amount.
-4-
<PAGE> 5
"NOTE" or "NOTES" shall mean the revolving credit note or notes
executed and delivered pursuant to Section 2.1(b) hereof.
"OBLIGATIONS" shall mean the obligations of the Borrower under this
credit agreement, including, without limitation, the outstanding principal and
accrued interest in respect of any LIBOR Loans or Prime Rate Loans, the
outstanding face amount of any Letters of Credit, all Commitment Fees and Letter
of Credit Fees, any fees owing to the Banks or the Agent, and any expenses,
taxes, compensation or other amounts owing under this credit agreement, the
Notes, any Related Writing and any and all other amounts owed by the Borrower to
the Agent or the Banks pursuant to this credit agreement or the Notes.
"PERSON" shall mean an individual, partnership, corporation (including
a business trust), joint stock company, limited liability company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"PLAN" shall mean any employee pension benefit plan subject to Title IV
of the Employee Retirement Income Security Act of 1974, as amended, established
or maintained by any Company, any Subsidiary, or any member of the Controlled
Group, or any such Plan to which any Company, any Subsidiary, or any member of
the Controlled Group is required to contribute on behalf of any of its
employees.
"POSSIBLE DEFAULT" shall mean an event, condition or thing which
constitutes, or which with the lapse of any applicable grace period or the
giving of notice or both would constitute, any event of default referred to in
Article VII hereof and which has not been appropriately waived by the Majority
Banks in writing or fully corrected prior to becoming an actual event of
default.
"PRIME RATE" shall mean the variable interest rate from time to time
established by Society as its Prime Rate (or equivalent rate otherwise named)
whether or not such rate is publicly announced; the Prime Rate may not be the
lowest interest rate charged by Society for commercial or other extensions of
credit.
"PRIME RATE LOANS" shall mean those loans described in Section 2.1(a)
hereof on which the Borrower shall pay interest at a rate based on the Prime
Rate.
"RATABLE PORTION" shall mean, in respect of any Bank, the quotient
(expressed as a percentage) obtained at any time by dividing such Bank's
Commitment at such time by the Total Commitment Amount.
-5-
<PAGE> 6
"RECEIVABLE" shall mean a claim for moneys due or to become due,
whether classified as a contract right, account, chattel paper, instrument,
general intangible or otherwise.
"REFERENCE BANK" shall mean the Cayman Islands branch office
of Society.
"RELATED WRITING" shall mean the Notes and any assignment, mortgage,
security agreement, guaranty agreement (including, without limitation, the
guaranties of payment to be executed and delivered pursuant to Section 4.4),
Letter of Credit documentation, subordination agreement, financial statement,
audit report or other writing furnished by any Company or any of its officers to
Banks pursuant to or otherwise in connection with this credit agreement.
"REPORTABLE EVENT" shall mean a reportable event as that term is defined in
Title IV of the Employee Retirement Income Security Act of 1974, as amended,
except actions of general applicability by the Secretary of Labor under Section
110 of such Act.
"RESERVE PERCENTAGE" shall mean for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, all basic,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements) for
a member bank of the Federal Reserve System in Cleveland, Ohio, in respect of
"Eurocurrency Liabilities". The Adjusted LIBOR shall be adjusted automatically
on and as of the effective date of any change in the Reserve Percentage.
"SOCIETY" shall mean Society National Bank, a national
banking association.
"SUBORDINATED" as applied to indebtedness, shall mean that the
indebtedness has been subordinated (by written terms or agreement being in form
and substance satisfactory to the Majority Banks) in favor of the prior payment
in full of the Borrower's Obligations.
"SUBSIDIARY" shall mean an existing or future corporation, the majority
of the outstanding capital stock or voting power, or both, of which is (or upon
the exercise of all outstanding warrants, options and other rights would be)
owned at the time in question by the Borrower or by another such corporation or
by any combination of the Borrower and such corporations.
-6-
<PAGE> 7
"TOTAL COMMITMENT AMOUNT" shall mean the amount of Thirty Million
Dollars ($30,000,000).
Any accounting term not covered by a specific definition in this
Article I shall have the meaning ascribed thereto by generally accepted
accounting principles not inconsistent with Borrower's present accounting
procedures.
The foregoing definitions shall be applicable to the singulars and
plurals of the foregoing defined terms.
ARTICLE II. AMOUNT AND TERMS OF CREDIT
--------------------------
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms and
provisions of this credit agreement, each of the Banks shall, in its respective
Ratable Portion, grant Loans and issue Letters of Credit to the Borrower in such
aggregate amount as the Borrower shall request; provided, however, that in no
event shall the aggregate principal amount of all Loans and face amount of all
Letters of Credit outstanding under this credit agreement during the Commitment
Period be in excess of the Total Commitment Amount.
The aforementioned Loans shall be made as a revolving credit, as
follows:
(a) REVOLVING CREDIT. Subject to the terms and conditions of this
credit agreement, during the Commitment Period each Bank severally agrees to
make Loans to the Borrower in such amount or amounts as the Borrower may from
time to time request but not exceeding in aggregate principal amount at any one
time outstanding hereunder the Commitment of such Bank, and, as to each Bank, in
principal amount not exceeding its respective Ratable Portion of each borrowing.
The Borrower shall have the option, subject to the terms and conditions set
forth herein, to borrow hereunder up to the Total Commitment Amount by means of
any combination of (i) Prime Rate Loans maturing on the last day of the
Commitment Period drawn down in aggregate amounts of not less than One Hundred
Thousand Dollars ($100,000) or any multiple thereof, bearing interest at a rate
per annum equal to the Prime Rate or (ii) LIBOR Loans maturing not later than
the last day of the Commitment Period, drawn down in aggregate amounts of not
less than One Million Dollars ($1,000,000) or any multiple of One Hundred
Thousand Dollars ($100,000) in excess thereof, bearing interest at a rate per
annum equal to one-half per cent (1/2 of 1%) in excess of Adjusted LIBOR. The
Borrower shall pay interest (based on a year having 360 days and calculated for
the actual number of days elapsed) on the unpaid principal amount of Prime Rate
Loans outstanding from time to time from the date thereof until paid, payable on
the last day of February, May, August and November of each year commencing May
31, 1996, at a rate per
-7-
<PAGE> 8
annum equal to the Prime Rate from time to time in effect. Any change in the
Prime Rate shall be effective immediately from and after such change in the
Prime Rate. The Borrower shall pay interest (based on a year having 360 days and
calculated for the actual number of days' elapsed) at a fixed rate for each
Interest Period on the unpaid principal amount of each LIBOR Loan outstanding
from time to time from the date thereof until paid, payable on each Interest
Adjustment Date with respect to the Interest Period applicable to such LIBOR
Loan, at the rate per annum equal to one-half per cent (1/2 of 1%) in excess of
Adjusted LIBOR, fixed in advance of each Interest Period as herein provided for
each such Interest Period. At the request of the Borrower, and subject to the
notice provisions of Section 2.2(a), below, the Bank shall convert Prime Rate
Loans to LIBOR Loans at any time and shall convert LIBOR Loans to Prime Rate
Loans or new LIBOR Loans on any Interest Adjustment Date applicable to the
existing LIBOR Loan.
(b) The obligation of the Borrower to repay both the Prime Rate Loans
and the LIBOR Loans made by each Bank and to pay interest thereon shall be
evidenced by a Note of the Borrower substantially in the form of Exhibit A
hereto, with appropriate insertions, dated the date of this credit agreement and
payable to the order of such Bank on the last day of the Commitment Period in
the principal amount of such Bank's Commitment. The principal amount of the
Prime Rate Loans and the LIBOR Loans made by each Bank and all prepayments
thereof and the applicable dates with respect thereto shall be recorded by such
Bank from time to time on the records of the Bank by such method as such Bank
may generally employ; PROVIDED, HOWEVER, that failure to make any such entry
shall in no way detract from the Borrower's obligations under such Note. The
aggregate unpaid amount of Prime Rate Loans and LIBOR Loans set forth on the
records of such Bank shall be rebuttably presumptive evidence of the principal
amount owing and unpaid on such Note. If a Note shall not be paid at maturity,
whether such maturity occurs by reason of lapse of time or by operation of any
provision of acceleration of maturity therein contained, the principal thereof
and the unpaid interest thereon shall bear interest, until paid, for Prime Rate
Loans at a rate per annum equal to three percent (3%) in excess of the Prime
Rate from time to time in effect and for LIBOR Loans at a rate per annum equal
to three and one-half percent (3-1/2%) in excess of Adjusted LIBOR for the
relevant Interest Period. Subject to the provisions of this credit agreement the
Borrower shall be entitled under this paragraph (a) to borrow funds, repay the
same in whole or in part and reborrow hereunder at any time and from time to
time.
-8-
<PAGE> 9
SECTION 2.2. CONDITIONS TO LOANS.
(a) CONDITIONS TO EACH LOAN. The obligation of each Bank to make the
Loans hereunder is conditioned, in the case of each borrowing hereunder, upon
(i) receipt by the Agent not later than 12:00 noon, Cleveland, Ohio time of a
loan request in form and substance satisfactory to the Agent (A) on the date of
the borrowing of any Prime Rate Loans, which shall include the proposed date and
aggregate amount of the borrowing of any Prime Rate Loans and (B) on the date
which is three (3) London Banking Days' prior to the proposed date of borrowing
of any LIBOR Loans, which shall include the proposed date, aggregate amount and
initial Interest Period of any LIBOR Loans; (ii) the fact that no Possible
Default or Event of Default shall then exist or immediately after the Loan would
exist; and (iii) the fact that the representations and warranties contained in
Article VI hereof shall be true and correct in all material respects with the
same force and effect as if made on and as of the date of such borrowing except
to the extent that any thereof expressly relate to an earlier date. Each
borrowing by the Borrower hereunder shall be deemed to be a representation and
warranty by the Borrower as of the date of such borrowing as to the facts
specified in (ii) and (iii) above.
(b) BANKS TO FUND AGENT. Each Bank shall, before 2:00 P.M. (Cleveland,
Ohio time) on the date of each borrowing hereunder, make available to the Agent,
in immediately available funds at the account of the Agent maintained at the
payment office as specified by the Agent to the Banks prior to such date, such
Bank's Ratable Portion of the Loans comprising such borrowing. On the date
requested by the Borrower for a borrowing, after the Agent's receipt of the
funds representing a Bank's Ratable Portion of such borrowing and upon the
Borrower's fulfillment of the applicable conditions set forth in this Section
2.2, the Agent will make the funds of such Bank available to the Borrower.
(c) AVAILABILITY OF FUNDS. Unless the Agent shall have received notice
from a Bank prior to the date (except in the case of Prime Rate Loans, in which
case prior to the time) of any borrowing that such Bank will not make available
to the Agent such Bank's Ratable Portion of the borrowing, the Agent may assume
that such Bank has made its Ratable Portion of the borrowing available to the
Agent on the date of the borrowing in accordance with Section 2.2(b). In
reliance upon such assumption, the Agent may, but shall not be obligated to,
make available to the Borrower on such date a corresponding portion of the
borrowing. If and to the extent that such Bank shall not have made available to
the Agent its Ratable Portion of the loans to be made as to such borrowing, such
Bank and the Borrower severally agree to repay to the Agent, immediately upon
demand, the corresponding portion of the borrowing, together with
-9-
<PAGE> 10
interest thereon, for each day from the date such amount is advanced to the
Borrower until the date such amount is repaid to the Agent (i) in the case of
the Borrower, at the interest rate applicable at the time to the Loans
comprising such borrowing and (ii) in the case of such Bank, at the Fed Funds
Rate. If such Bank shall repay to the Agent such corresponding portion of the
borrowing, the amount so repaid shall constitute such Bank's Ratable Portion as
part of such borrowing.
(d) FAILURE OF BANK TO LOAN. The failure of any Bank to make the loan
to be made by it as its Ratable Portion of any borrowing shall not relieve any
other Bank of its obligation hereunder to make its loan on the date of such
borrowing. No Bank shall be responsible for the failure of any other Bank to
make the loan to be made by such other Bank on the date of any borrowing.
SECTION 2.3. PAYMENT ON NOTE, ETC. All payments of principal, interest and
commitment fees shall be made to the Agent for account of Banks in immediately
available funds. Once any such payment is made by the Borrower to the Agent, the
Banks shall look to the Agent, and not the Borrower, for the payment thereof.
Whenever any payment to be made hereunder, including without limitation any
payment to be made on the Notes, shall be stated to be due on a day which is not
a Banking Day, such payment shall be made on the next succeeding Banking Day and
such extension of time shall in each case be included in the computation of the
interest payable on the Notes; provided, however, that with respect to any LIBOR
Loan, if the next succeeding Banking Day falls in the succeeding calendar month,
such payment shall be made on the preceding Banking Day and the relevant
Interest Period shall be adjusted accordingly.
SECTION 2.4. PREPAYMENT. The Borrower shall have the right at any time or
from time to time, upon same day's notice (not later than 1:00 p.m. on such day)
to the Agent in the case of Prime Rate Loans, without the payment of any premium
or penalty, or upon four (4) London Banking Days' prior written notice to the
Agent in the case of LIBOR Loans (subject to the payment of prepayment
compensation as hereinafter described in this Section 2.4) to prepay all or any
part of the principal amount of the Prime Rate Loans or LIBOR Loans, as the case
may be, then outstanding as designated by the Borrower, plus interest accrued on
the amount so prepaid to the date of such prepayment. In any case of prepayment
of any LIBOR Loans, the Borrower agrees that if Adjusted LIBOR as determined as
of 11:00 a.m. London time two London Banking Days prior to the date of
prepayment of any LIBOR Loans (hereinafter, "Prepayment LIBOR") shall be lower
than the last Adjusted LIBOR previously determined for those LIBOR Loans with
respect to which prepayment is intended to be made (hereinafter, "Last LIBOR"),
then the Borrower shall, upon
-10-
<PAGE> 11
written notice by the Agent, promptly pay to the Agent, for the account of each
of the Banks in immediately available funds, a prepayment penalty measured by a
rate (the "Prepayment Compensation Rate") which shall be equal to the difference
between the Last LIBOR and the Prepayment LIBOR. In determining the Prepayment
LIBOR, Agent shall apply a rate equal to Adjusted LIBOR for a deposit
approximately equal to the amount of such prepayment which would be applicable
to an Interest Period commencing on the date of such prepayment and having a
duration as nearly equal as practicable to the remaining duration of the actual
Interest Period during which such prepayment is to be made. The Prepayment
Compensation Rate shall be applied to all or such part of the principal amounts
of the Notes as related to the LIBOR Loans to be prepaid, and the prepayment
compensation shall be computed for the period commencing with the date on which
such prepayment is to be made to that date which coincides with the last day of
the Interest Period previously established when the LIBOR Loans, which are to be
prepaid, were made. Each prepayment of a LIBOR Loan shall be in the aggregate
principal sum of not less than One Million Dollars ($1,000,000) or any amount in
excess thereof. In the event the Borrower cancels a proposed LIBOR Loan
subsequent to the delivery to the Agent of notice of the proposed date,
aggregate amount and initial Interest Period of such loan, but prior to the draw
down of funds thereunder, such cancellation shall be treated as a prepayment
subject to the aforementioned prepayment compensation.
SECTION 2.5. FEES; TERMINATION OR REDUCTION OF COMMITMENTS.
(a) The Borrower agrees to pay to each Bank, through the Agent, on the
last day of February, May, August and November of each year commencing May 31,
1996, as a consideration for its Commitment hereunder, a commitment fee
calculated at the rate of one-fourth percent (1/4 of 1%) per annum (based on a
year having 360 days and calculated for the actual number of days elapsed) from
the date hereof to and including the last day of the Commitment Period, on the
average daily unused amount of such Bank's Commitment hereunder, which shall be
determined by deducting from such Bank's Commitment its Ratable Portion of all
outstanding Loans and Letters of Credit. All fees set forth in this Section
2.5(a) shall be paid on the date due, in immediately available funds, to the
Agent for distribution, if and as appropriate, to the Banks and, once paid, none
of such fees shall be refundable under any circumstances.
(b) The Borrower may at any time or from time to time terminate in
whole or in part the Total Commitment Amount hereunder to an amount not less
than the aggregate principal amount of the loans then outstanding, by giving the
Agent not less than three (3) Banking Days' notice, provided that any such
partial termination shall be in an amount of not less than One
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Million Dollars ($1,000,000) and in an integral multiple of Five Hundred
Thousand Dollars ($500,000). After each such termination, the commitment fees
payable hereunder shall be calculated upon the Commitment of each Bank as so
reduced. If the Borrower terminates in whole the Total Commitment Amount, on the
effective date of such termination (the Borrower having prepaid in full the
unpaid principal balance, if any, of the Notes together with all interest (if
any) and commitment fees accrued and unpaid) the Notes shall be marked
"Canceled" and delivered to the Borrower. Any partial reduction in the Total
Commitment Amount shall be effective during the remainder of the Commitment
Period.
SECTION 2.6. EXTENSION. The Borrower may request in writing that the
Commitment Period be extended one (1) year to the anniversary date next
following the last day of the Commitment Period then in effect, which request
shall be addressed to the Agent on behalf of the Banks. The Agent shall promptly
deliver a copy of each such request to each of the Banks. The Banks agree to
give consideration to each such request and to respond in writing to the
Borrower affirmatively or negatively as to such request no later than sixty (60)
days after such request is received by the Agent. No Bank shall be obligated to
grant the Borrower any such extension, and unanimous written consent of all the
Banks shall be required to extend the Commitment Period. In the event of the
failure of any of the Banks to so respond affirmatively or negatively in writing
within such sixty (60) day period, such request for extension shall be deemed to
have been denied.
SECTION 2.7. LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, the Agent
may, in its sole discretion, at the request of the Borrower, issue in favor of
one or more of the Companies designated by the Borrower letters of credit (each
a "Letter of Credit" and, collectively, the "Letters of Credit") upon such terms
(including, without limitation, the execution and delivery by the Borrower of
such applications, notes and other instruments as the Agent may require) and in
such form and substance as are satisfactory to the Agent in its sole discretion;
provided, however, that the aggregate face amount of all Letters of Credit
outstanding at any time shall not exceed Ten Million Dollars ($10,000,000). For
purposes of the Total Commitment Amount in respect of Loans permitted pursuant
to the terms of Section 2.1(a), the issuance of a Letter of Credit by the Agent
on behalf of the Banks shall be deemed to be an advance by each Bank of a Loan
in an amount equal to such Bank's Ratable Portion times the face amount of the
Letter of Credit for so long as such Letter of Credit is in force, it being the
intent of the parties hereby that at no time shall the aggregate amount of Loans
then unpaid,
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PLUS the aggregate face amount of Letters of Credit then outstanding exceed the
Total Commitment Amount.
(b) In consideration of the Agent's issuance on behalf of the Banks of
each Letter of Credit hereunder, the Borrower shall pay to the Agent, on behalf
of the Banks, a fee (the "Letter of Credit Fee") equal to three quarters of one
percent (3/4 of 1%) per annum (for the term of the Letter of Credit to which it
applies) of the face amount of the Letter of Credit to which it applies. The
Letter of Credit Fee in respect of each Letter of Credit shall be paid by the
Borrower on such date or dates as the Agent and the Borrower shall agree at the
time of issuance of such Letter of Credit. The Borrower hereby authorizes the
Agent, automatically and without further instruction from the Borrower, to
withdraw from and charge any demand deposit or other account of the Borrower
maintained at the Agent to pay to the Banks any Letter of Credit Fee on the date
the same is due and payable, or the Agent may, at its option, advance a Prime
Rate Loan to the Borrower in the amount necessary to pay such Letter of Credit
Fee and the amount so advanced shall be added to the principal balance of the
Notes.
(c) In the event that the Banks pay any amount under any Letter of
Credit, the Borrower shall immediately reimburse the Banks for the amount so
paid. The Borrower hereby authorizes each Bank, automatically and without
further instruction from the Borrower, to withdraw from and charge any demand
deposit or other account of the Borrower maintained at such Bank to reimburse
the Banks for any payment made on a Letter of Credit, or the Agent may, at its
option, advance a Prime Rate Loan to the Borrower in the amount necessary to
reimburse the Banks for the amount paid under any Letter of Credit and the
amount so advanced shall be added to the principal balance of the Notes.
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR LOANS
---------------------------------------------
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If at any time any law,
treaty or regulation (including, without limitation, Regulation D of the Board
of Governors of the Federal Reserve System) or the interpretation thereof by any
governmental authority charged with the administration thereof or any central
bank or other fiscal, monetary or other authority shall impose (whether or not
having the force of law), modify or deem applicable any reserve and/or special
deposit requirement (other than reserves included in the Reserve Percentage, the
effect of which is reflected in the interest rate(s) of the LIBOR Loan(s) in
question) against assets held by, or deposits in or for the amount of any loans
by, any Bank, and the result of the foregoing is to increase the cost (whether
by incurring a cost or adding to a cost) to such Bank of making or maintaining
hereunder LIBOR Loans or to reduce the amount of principal or interest received
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by such Bank with respect to such LIBOR Loans, then upon demand by such Bank the
Borrower shall pay to such Bank from time to time on Interest Adjustment Dates
with respect to such Loans, as additional consideration hereunder, additional
amounts sufficient to fully compensate and indemnify such Bank for such
increased cost or reduced amount, assuming (which assumption such Bank need not
corroborate) such additional cost or reduced amount were allocable to such LIBOR
Loans. A certificate as to the increased cost or reduced amount as a result of
any event mentioned in this Section 3.1, setting forth the calculations
therefor, shall be promptly submitted by such Bank to the Borrower and shall, in
the absence of manifest error, be conclusive and binding as to the amount
thereof. Notwithstanding any other provision of this credit agreement, after any
such demand for compensation by any Bank, Borrower, upon at least three (3)
Banking Days' prior written notice to such Bank, may prepay the affected LIBOR
Loans in full or convert all LIBOR Loans to Prime Rate Loans regardless of the
Interest Period of any thereof. Any such prepayment or conversion shall be
subject to the prepayment penalties set forth in Section 2.4 hereof. Each Bank
will notify the Borrower as promptly as practicable of the existence of any
event which will likely require the payment by the Borrower of any such
additional amount under this Section.
SECTION 3.2. TAX LAW, ETC. In the event that by reason of any law,
regulation or requirement or in the interpretation thereof by an official
authority, or the imposition of any requirement of any central bank whether or
not having the force of law, any Bank shall, with respect to this credit
agreement or any transaction under this credit agreement, be subjected to any
tax, levy, impost, charge fee, duty, deduction or withholding of any kind
whatsoever (other than than any tax imposed upon the total net income of such
Bank), and if any such measures or any other similar measure shall result in an
increase in the cost to such Bank of making or maintaining any LIBOR Loan or in
a reduction in the amount of principal, interest or commitment fee receivable by
such Bank in respect thereof, then such Bank shall promptly notify the Borrower
stating the reasons therefor. The Borrower shall thereafter pay to such Bank
upon demand from time to time on Interest Adjustment Dates with respect to such
LIBOR Loans, as additional consideration hereunder, such additional amounts as
will fully compensate such Bank for such increased cost or reduced amount. A
certificate as to any such increased cost or reduced amount, setting forth the
calculations therefor, shall be submitted by such Bank to the Borrower and
shall, in the absence of manifest error, be conclusive and binding as to the
amount thereof.
Notwithstanding any other provision of this credit agreement, after any such
demand for compensation by any Bank, the Borrower, upon at least three (3)
Banking Days' prior written notice to
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such Bank, may prepay the affected LIBOR Loans in full or convert all LIBOR
Loans to Prime Rate Loans regardless of the Interest Period of any thereof. Any
such prepayment or conversion shall be subject to the prepayment penalties set
forth in Section 2.4 hereof.
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE
UNASCERTAINABLE. In respect of any LIBOR Loans, in the event that the Agent or
any Bank shall have determined that dollar deposits of the relevant amount for
the relevant Interest Period for such LIBOR Loans are not available to the
Reference Bank in the applicable Eurodollar market or that, by reason of
circumstances affecting such market, adequate and reasonable means do not exist
for ascertaining the LIBOR rate applicable to such Interest Period, as the case
may be, the Agent or such Bank shall promptly give notice of such determination
to the Borrower and (i) any notice of new LIBOR Loans previously given by the
Borrower and not yet borrowed shall be deemed a notice to make Prime Rate Loans,
and (ii) the Borrower shall be obligated either to prepay or to convert any
outstanding LIBOR Loans on the last day of the then current Interest Period or
Periods with respect thereto. Any such prepayment or conversion shall be subject
to the prepayment penalties set forth in Section 2.4 hereof.
SECTION 3.4. INDEMNITY. Without prejudice to any other provisions of this
Article III, the Borrower hereby agrees to indemnify each Bank against any loss
or expense which such Bank may sustain or incur as a consequence of any default
by the Borrower in payment when due of any amount due hereunder in respect of
any LIBOR Loan, including, but not limited to, any loss of profit, premium or
penalty incurred by such Bank in respect of funds borrowed by it for the purpose
of making or maintaining such LIBOR Loan, as determined by such Bank in the
exercise of its sole but reasonable discretion. A certificate as to any such
loss or expense shall be promptly submitted by such Bank to the Borrower and
shall, in the absence of manifest error, be conclusive and binding as to the
amount thereof.
SECTION 3.5. CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL. If at any time
any new law, treaty or regulation, or any change in any existing law, treaty or
regulation, or any interpretation thereof by any governmental or other
regulatory authority charged with the administration thereof, shall make it
unlawful for any Bank to fund any LIBOR Loans which it is committed to make
hereunder with moneys obtained in the Eurodollar market, the commitment of such
Bank to fund LIBOR Loans shall, upon the happening of such event forthwith be
suspended for the duration of such illegality, and such Bank shall by written
notice to the Borrower and the Agent declare that its commitment with respect to
such LIBOR Loans has been so suspended and, if and when such illegality ceases
to exist, such suspension shall cease and such
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Bank shall similarly notify the Borrower and the Agent. If any such change shall
make it unlawful for any Bank to continue in effect the funding in the
applicable Eurodollar market of any LIBOR Loan previously made by it hereunder,
such Bank shall, upon the happening of such event, notify the Borrower thereof
in writing stating the reasons therefor, and the Borrower shall, on the earlier
of (i) the last day of the then current Interest Period or (ii) if required by
such law, regulation or interpretation, on such date as shall be specified in
such notice, either convert all LIBOR Loans to Prime Rate Loans or prepay all
LIBOR Loans to the Banks in full. Any such prepayment or conversion shall be
subject to the prepayment penalties prescribed in Section 2.4 hereof.
SECTION 3.6. FUNDING. LIBOR Loans made by each Bank hereunder may, but shall
not be required to, be funded with funds obtained outside the United States.
SECTION 3.7. PRO RATA TREATMENT. Except as required by Section 3.5, each
borrowing, each payment or prepayment of principal of any borrowing, each
payment of interest on the Prime Rate Loans or LIBOR Loans, each payment of the
Commitment Fees or the Letter of Credit Fees, each reimbursement in respect of a
Letter of Credit, each reduction of the Commitments and each rate conversion or
rate continuation of Prime Rate Loans or LIBOR Loans shall be allocated among
the Banks in accordance with each Bank's Ratable Portion of the Total Commitment
Amount (or if the Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of each Bank's Prime Rate Loans
and LIBOR Loans).
ARTICLE IV. OPENING COVENANTS
-----------------
Prior to or concurrently with the execution and delivery of this credit
agreement, the Borrower shall furnish to the Agent the following:
SECTION 4.1. RESOLUTIONS. Certified copies of the resolutions of the board
of directors of the Borrower evidencing approval of the execution of this credit
agreement and the execution and delivery of the Notes as provided for herein.
SECTION 4.2. LEGAL OPINION. A favorable opinion of counsel for the Borrower
as to the matters referred to in Sections 6.1, 6.2, 6.3 and 6.9 of this credit
agreement and such other matters as Agent may reasonably request.
SECTION 4.3. CERTIFICATE OF INCUMBENCY. A certificate of the secretary or
assistant secretary of the Borrower certifying the names of the officers of the
Borrower authorized to sign this
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<PAGE> 17
credit agreement, and the Notes, together with the true signatures of such
officers.
SECTION 4.4. GUARANTIES OF PAYMENT. Guaranties of payment, in substantially
the form attached hereto as Exhibit B, of all of the Obligations incurred by the
Borrower to the Banks pursuant to this credit agreement, executed and delivered
to the Banks by each of Shiloh Corporation, Valley City Steel Corporation,
Medina Blanking, Inc. and Liverpool Coil Processing, Inc., together with
certified resolutions of the respective Boards of Directors of each such
corporation authorizing the execution, performance and delivery thereof. If the
Borrower shall not have consummated, on or before July 17, 1996, the sale to an
unaffiliated third party of all of the outstanding capital stock of Shafer Valve
Company (the consummation of such sale to be evidenced by documentation
reasonably satisfactory to the Banks), the Borrower shall, on July 17, 1996,
deliver to the Banks the guaranty of payment of Shafer Valve Company, in
substantially the form attached hereto as Exhibit B, of all of the Obligations
incurred by the Borrower to the Banks pursuant to this credit agreement,
together with an opinion of counsel in form and substance reasonably
satisfactory to the Agent relating thereto and certified resolutions of the
Board of Directors of Shafer Valve Company authorizing the execution,
performance and delivery thereof.
SECTION 4.5. NOTES. Notes, in favor of each of the Banks, in the principal
amount of such Bank's Commitment, each duly executed by the Borrower.
SECTION 4.6. PAYOFF LETTER. Evidence of the simultaneous payment of the
entire indebtedness (including, without limitation, all principal, interest, and
all outstanding fees and expenses) owing by the Borrower to Society in respect
of that certain Credit Agreement, dated as of July 25, 1994, by and between the
Borrower and Society, providing for the establishment of a credit in the
aggregate principal amount of Twenty-Three Million Dollars ($23,000,000).
ARTICLE V. COVENANTS
---------
The Borrower agrees that so long as any of the Obligations remain
outstanding, or any Bank shall have any Commitment outstanding, or any Letter of
Credit, Prime Rate Loan or LIBOR Loan shall remain unreimbursed or unpaid, the
Borrower will perform and observe and will cause each Subsidiary to perform and
observe all of the following provisions that are on their respective parts to be
complied with, namely:
SECTION 5.1. INSURANCE. Each Company will (a) keep itself
and all of its insurable properties insured at all times to such
extent, by such insurers, and against such hazards and
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liabilities as is generally and prudently done by like businesses, it being
understood that each Company's insurance coverage at the date of this credit
agreement meets the standards contemplated by this Section, (b) give each Bank
prompt written notice of each material change in that Company's insurance
coverage and the details of the change and (c) forthwith upon any Bank's written
request, furnish to such Bank such information about that Company's insurance as
such Bank may from time to time reasonably request, which information shall be
prepared in form and detail satisfactory to such Bank and certified by an
officer of that Company.
SECTION 5.2. MONEY OBLIGATIONS. Each Company will pay in full (a) prior in
each case to the date when penalties would attach, all taxes, assessments and
governmental charges and levies (except only those so long as and to the extent
that the same shall be contested in good faith by appropriate and timely
proceedings) for which it may be or become liable or to which any or all of its
properties may be or become subject, (b) all of its wage obligations to its
employees in compliance with the Fair Labor Standards Act (29 U.S.C. Sections
206-207) or any comparable provisions (except only those so long as and to the
extent that the same shall be contested in good faith by appropriate and timely
proceedings), and (c) all of its other obligations calling for the payment of
money (except only those so long as and to the extent that the same shall be
contested in good faith) before such payment becomes overdue.
SECTION 5.3. RECORDS. Each Company will (a) at all times maintain true and
complete records and books of account, and without limiting the generality of
the foregoing, maintain appropriate reserves for possible losses and
liabilities, all in accordance with generally accepted accounting principles
applied on a basis not inconsistent with its present accounting procedures and
(b) at all reasonable times and, so long as there does not then exist an Event
of Default of Possible Default, upon reasonable prior notice permit each Bank to
examine that Company's books and records and to make excerpts therefrom and
transcripts thereof.
SECTION 5.4. FRANCHISES. Each Company will preserve and maintain at all
times its corporate existence, rights and franchises; provided, however, that
this Section shall not prevent any merger or transfer permitted by Section 5.14
hereof.
SECTION 5.5. NOTICES. The Borrower will cause its treasurer, or in his or
her absence another officer designated by the treasurer, to promptly notify each
Bank whenever any Possible Default may occur hereunder or any other
representation or warranty made in Article VI hereof or elsewhere in this credit
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agreement or in any Related Writing may for any reason cease in
any material respect to be true and complete.
SECTION 5.6. ENVIRONMENTAL COMPLIANCE. Each Company will comply in all
material respects with any and all Environmental Laws including, without
limitation, all Environmental Laws in jurisdictions in which any Company owns or
operates a facility or site, arranges for disposal or treatment of hazardous
substances, solid waste or other wastes, accepts for transport any hazardous
substances, solid waste or other wastes or holds any interest in real property
or otherwise. Each Company will furnish to the Banks promptly after receipt
thereof a copy of any notice such Company may receive from any governmental
authority, private person or entity or otherwise that any litigation or
proceeding pertaining to any environmental, health or safety matter has been
filed or is threatened against any Company, any real property in which any
Company holds any interest or any past or present operation of any Company. No
Company will allow the release or disposal of hazardous waste, solid waste or
other wastes on, under or to any real property in which any Company holds any
interest or performs any of its operations in violation of any Environmental
Law. As used in this Section "litigation or proceeding" means any demand, claim,
notice, suit, suit in equity, action, administrative action, investigation or
inquiry whether brought by any governmental authority, private person or entity
or otherwise. Each Company shall defend, indemnify and hold the Agent and each
Bank harmless against all costs, expenses, claims, damages, penalties and
liabilities of every kind or nature whatsoever (including attorneys' fees)
arising out of or resulting from the noncompliance of any Company with any
Environmental Law.
SECTION 5.7. ERISA COMPLIANCE. No Company will incur any material
accumulated funding deficiency within the meaning of the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the regulations
thereunder, or any material liability to the Pension Benefit Guaranty
Corporation, established thereunder in connection with any Plan. Each Company
will furnish to the Banks (i) simultaneously with a filing with the Pension
Benefit Guaranty Corporation of a notice regarding any Reportable Event and in
any event within thirty (30) days after such Company knows or has reason to know
that any Reportable Event with respect to any Plan has occurred, a statement of
the chief financial officer of such Company setting forth details as to such
Reportable Event and the action which such Company proposes to take with respect
thereto, together with a copy of the notice of such Reportable Event given to
the Pension Benefit Guaranty Corporation if a copy of such notice is available
to such Company, (ii) promptly after the filing thereof with the Internal
Revenue Service, and upon the request of any Bank, copies of each annual report
with respect to each Plan
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established or maintained by such Company for each plan year, including (x)
where required by law, a statement of assets and liabilities of such Plan as of
the end of such plan year and statements of changes in fund balance and in
financial position, or a statement of changes in net assets available for plan
benefits, for such plan year, certified by an independent public accountant
satisfactory to the Majority Banks and (y) an actuarial statement of such Plan
applicable to such plan year, certified by an enrolled actuary of recognized
standing acceptable to the Majority Banks, and (iii) promptly after receipt
thereof a copy of any notice such Company, any Subsidiary or any member of the
Controlled Group may receive from the Pension Benefit Guaranty Corporation or
the Internal Revenue Service with respect to any Plan administered by such
Company; PROVIDED, that this latter clause shall not apply to notices of general
application promulgated by the Pension Benefit Guaranty Corporation or the
Internal Revenue Service. Each Company will promptly notify the Banks of any
taxes assessed, proposed to be assessed or which such Company has reason to
believe may be assessed against such Company by the Internal Revenue Service
with respect to any Plan. As used in this Section "material" means the measure
of a matter of significance which shall be determined as being an amount equal
to five percent (5%) of Borrower's Consolidated Tangible Net Worth.
SECTION 5.8. PLANS. No Company will suffer or permit any Plan to be amended
if, as a result of such amendment, the current liability under the Plan is
increased to such an extent that security is required pursuant to section 307 of
the Employee Retirement Income Security Act of 1974, as amended from time to
time. As used in this Section, "current liability" means current liability as
defined in section 307 of such Act.
SECTION 5.9. FINANCIAL STATEMENTS. The Borrower will furnish to each Bank
(a) within fifty (50) days after the end of each of the first three
quarter-annual periods of each of its fiscal years, balance sheets of the
Companies as at the end of that period and their profit and loss statements,
reconciliation of surplus statements and statements of cash flows for that
period, all prepared on a consolidating and consolidated basis in accordance
with generally accepted accounting principles consistently applied and in form
and detail satisfactory to each Bank and certified by a financial officer of the
Borrower, together with a covenant compliance certificate in form and substance
satisfactory to each Bank, (b) within one hundred (100) days after the end of
each of its fiscal years, a complete annual audit report of the Borrower for
that year prepared on a consolidating and consolidated basis in accordance with
generally accepted accounting principles consistently applied and in form and
detail satisfactory to each Bank and certified by an independent public
accountant satisfactory to each Bank, together
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with a certificate by the accountant setting forth the Events of Default or
Possible Defaults coming to its attention during the course of its audit or, if
none, a statement to that effect and a covenant compliance certificate of the
Borrower in form and substance satisfactory to each Bank, (c) as soon as
available, copies of all notices, reports, proxy statements and other similar
documents sent by any Company to its shareholders, to the holders of any of its
debentures or bonds or the trustee of any indenture securing the same or
pursuant to which they may be issued, to any securities exchange or to the
Securities and Exchange Commission or any similar federal agency having
regulatory jurisdiction over the issuance of that Company's securities, and (d)
forthwith upon any Bank's written request, such other information about the
financial condition, properties and operations of the Companies as such Bank may
from time to time reasonably request, which information shall be submitted in
form and detail satisfactory to such Bank and certified by a financial officer
of the Company or Companies in question.
SECTION 5.10. INTEREST COVERAGE RATIO. Borrower shall maintain at all times
a ratio of (a)(i) Consolidated Net Earnings (including proceeds of any sale of
capitalized assets to which the Majority Banks have given their prior written
consent) plus (ii) all taxes on Consolidated Net Earnings or based on
Consolidated Net Earnings, including deferred taxes, plus (iii) all interest on
all Borrowed Debtof the Companies (including Subordinated indebtedness) accrued
during the time period in question to (b) all interest on all Borrowed Debt of
the Companies (including Subordinated indebtedness) accrued during the time
period in question, of no less than 3.0 to 1.0, based upon the Borrower's
financial statements for the most recent fiscal quarter and the previous three
fiscal quarters.
SECTION 5.11. CONSOLIDATED TANGIBLE NET WORTH. The Borrower will not suffer
or permit its Consolidated Tangible Net Worth at any time to fall below the
current minimum amount required, which current minimum amount required shall be
Ninety-Five Million Dollars ($95,000,000) until November 1, 1996, when it shall
be increased by an amount equal to fifty percent (50%) of its positive
Consolidated Net Earnings during its 1996 fiscal year, and shall be increased on
each October 31 thereafter by an amount equal to fifty percent (50%) of its
positive Consolidated Net Earnings during such fiscal year. Such current minimum
amount required shall be further increased by an amount equal to one hundred
percent (100%) of the net proceeds to the Borrower from any equity offering by
the Borrower, as of the date any such proceeds are received by the Borrower.
SECTION 5.12. BORROWED DEBT TO TOTAL CAPITALIZATION. The Borrower will not
suffer or permit the ratio of all of its Borrowed Debt (determined on a
consolidated basis) to the
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aggregate of (i) all of its Borrowed Debt (determined on a consolidated basis)
plus (ii) its Consolidated Net Worth, at any time to exceed 0.5 to 1.0.
SECTION 5.13. INVESTMENTS. No Company will (a) create, acquire or hold any
Subsidiary, (b) make or hold any investment in any stocks, bonds or securities
of any kind, (c) be or become a party to any joint venture or other partnership
(other than Shiloh of Michigan LLC, a Michigan limited liability company in
which the Borrower will hold an 80% equity interest), (d) make or keep
outstanding any advance or loan or (e) be or become a Guarantor of any kind;
PROVIDED that this Section shall not apply to (i) any endorsement of a check or
other medium of payment for deposit or collection through normal banking
channels or any similar transaction in the normal course of business or (ii) any
investment in direct obligations of the United States of America or in
certificates of deposit issued by a member bank of the Federal Reserve System,
or (iii) any guaranty agreement executed in connection with this credit
agreement or running in favor of the Agent and the Banks, or (iv) any investment
in commercial paper which at the time of such investment is assigned the highest
quality rating in accordance with the rating systems employed by either Moody's
Investors Service, Inc. or Standard & Poor's Corporation, or (v) any investment
in the securities of any existing Subsidiary, or (vi) advances or loans from one
Company to another or (vii) investments by a Company in a Subsidiary formed
after the date hereof, so long as, not less than fifteen (15) days prior to
making any such investment such Company has delivered to each Bank evidence
reasonably satisfactory to such Bank that, after giving effect to such proposed
investment, no Event of Default or Possible Default would exist.
SECTION 5.14. ACQUISITIONS; BULK TRANSFERS. No Company will (a) be a party
to any consolidation or merger or (b) purchase all or a substantial part of the
assets of any corporation or other business enterprise, other than purchases by
a Company of all or a substantial part of the assets of a corporation or other
business enterprise, unless, not less than fifteen (15) days prior to making any
such purchase such Company has delivered to each Bank evidence reasonably
satisfactory to such Bank that, after giving effect to such proposed investment,
no Event of Default or Possible Default would exist, or (c) lease, sell or
otherwise transfer any assets having value, when added to the aggregate value of
all other assets leased, sold or otherwise transferred by all of the Companies
during the Commitment Period, in excess of Five Million Dollars
($5,000,000)(other than such chattels, if any, as may have become obsolete or no
longer useful in the continuance of its present business) except in the normal
course of its present business; PROVIDED, that this Section shall not apply to
any merger of a Subsidiary into the Borrower or to
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the Borrower's acquisition of any or all of the assets of a Subsidiary if no
Possible Default shall then exist or immediately thereafter will begin to exist.
SECTION 5.15. LIENS. No Company will (a) acquire any property subject to any
inventory consignment, lease, land contract or other title retention contract
(this section shall not apply to true leases, consignments, tolling or other
possessory agreements in respect of the property of others whereby the Borrower
does not have legal or beneficial title to such property and which, pursuant to
generally accepted accounting principles, are not required to be capitalized),
(b) sell or otherwise transfer any Receivables, whether with or without
recourse, or (c) suffer or permit any property now owned or hereafter acquired
by it to be or become encumbered by any mortgage, security interest, financing
statement or lien of any kind or nature; PROVIDED, that this Section shall not
apply to (i) any lien for a tax, assessment or governmental charge or levy which
is not yet due and payable or which is being contested in good faith and as to
which the Borrower or such Subsidiary shall have made appropriate reserves, (ii)
any lien securing only its workers' compensation, unemployment insurance and
similar obligations, (iii) any mechanics, carrier's or similar common law or
statutory lien incurred in the normal course of business, (iv) any transfer of a
check or other medium of payment for deposit or collection through normal
banking channels or any similar transaction in the normal course of business,
(v) any mortgage or security interest (including any refinance thereof in whole
or in part) created by a Company in the course of purchasing property, or
existing on property at the time of such purchase (whether or not assumed),
provided that such mortgage or security interest shall be restricted to the
property being purchased and provided, further, that the indebtedness secured
thereby shall not exceed two-thirds (2/3) of the purchase price in the case of
real estate or four-fifths (4/5) thereof in the case of personal property, (vi)
any mortgage, security interest or lien securing only indebtedness incurred to
the Banks, (vii) any financing statement perfecting only a security interest
permitted by this Section, (viii) easements, restrictions, minor title
irregularities and similar matters having no adverse effect as a practical
matter on the ownership or use of any Company's real property, or (ix) any other
liens existing on the date hereof; PROVIDED, HOWEVER, that the aggregate amount
of the indebtedness secured by the mortgages, security interests or liens
permitted by clauses (v) and (vi), above, shall not exceed Five Million Dollars
($5,000,000) in the aggregate.
SECTION 5.16. BORROWINGS. No Company will create, incur or suffer to exist
any indebtedness for borrowed money or any Funded Indebtedness of any kind;
provided, that this Section shall not apply to (i) the loans evidenced by the
Notes issued pursuant to
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this credit agreement or any other Borrowed Debt incurred by the Borrower to any
Bank, up to a permitted maximum principal amount of Ten Million Dollars
($10,000,000) of Debt incurred by the Borrower to all the Banks in the aggregate
under this clause (i), (ii) any purchase money indebtedness secured by a
purchase money mortgage or security interest permitted by Section 5.15 hereof,
(iii) any loan obtained by the Borrower and Subordinated in favor of the
Borrower's Debt to the Banks pursuant to a subordination agreement being in such
form and substance as the Majority Banks may require, or (iv) any other
indebtedness existing on the date hereof and listed on Schedule 5.16 hereto.
SECTION 5.17. SUBSIDIARIES. No Company shall create any Subsidiary unless
such Subsidiary shall immediately thereafter become a Guarantor of the
Obligations incurred by the Borrower to the Banks pursuant to this credit
agreement.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
------------------------------
Subject only to such exceptions, if any, as may be fully disclosed in an
officer's certificate or written opinion of counsel furnished by the Borrower to
each Bank prior to the execution and delivery hereof, the Borrower represents
and warrants to each Bank as follows:
SECTION 6.1. EXISTENCE. Each Company is a corporation duly organized and
validly existing and in good standing under the laws of the state of its
organization. Each Company is duly qualified to carry on its business as it is
currently being conducted in each jurisdiction where such qualification is
required except for those jurisdictions in which the failure to be so qualified
would not, taken in the aggregate, have a material adverse effect upon such
Company's financial condition, properties or operations.
SECTION 6.2. RIGHT TO ACT. No registration with or approval of any
governmental agency of any kind is required for the due execution and delivery
or for the enforceability of this credit agreement, any Related Writing and the
Notes issued pursuant to this credit agreement. The Borrower has legal power and
right to execute and deliver this credit agreement and the Notes issued pursuant
to this credit agreement and to perform and observe the provisions of this
credit agreement and the Notes issued pursuant hereto. Each Subsidiary executing
a guaranty of payment of debt in connection with this credit agreement has the
legal power and right to execute the same and to perform and observe the
provisions thereof. By executing and delivering this credit agreement, each
Related Writing and the Notes issued pursuant to this credit agreement and by
performing and observing the provisions thereof, no Company will violate any
existing provision of its articles of incorporation, code of regulations
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or bylaws or any applicable law or violate or otherwise become in default under
any existing contract or other obligation binding upon such Company. The
officers executing and delivering this credit agreement on behalf of the
Borrower have been duly authorized to do so, and this credit agreement and the
Notes, when executed, are legally binding upon the Borrower in every respect,
and are enforceable in accordance with their terms. The officers of each Company
executing and delivering a guaranty of payment of debt in connection with this
credit agreement have been duly authorized to do so and each such instrument is
legally binding upon the Company executing the same in every respect, and is
enforceable in accordance with its terms.
SECTION 6.3. LITIGATION AND LIENS. No litigation or proceeding is pending or
threatened which might, if successful, adversely affect any Company to a
material extent. The Internal Revenue Service has not alleged any default by any
Company in the payment of any tax or threatened to make any assessment in
respect thereof.
SECTION 6.4. ERISA COMPLIANCE. No Company has incurred any material
accumulated funding deficiency within the meaning of the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the regulations
thereunder. No Reportable Event has occurred with respect to any Plan. The
Pension Benefit Guaranty Corporation, established thereunder has not asserted
that any Company has incurred any material liability in connection with any
Plan. No lien has been attached and no person has threatened to attach a lien on
any of Company's property as a result of such Company's failure to comply with
such act or regulations. As used in this Section "material" means the measure of
a matter of significance which shall be determined as being an amount equal to
five per cent (5%) of the Borrower's Consolidated Tangible Net Worth.
SECTION 6.5. ACTUARIAL VALUATION REPORTS. To the best of the Borrower's
knowledge, the actuarial valuation reports respectively prepared and certified
by the actuaries and employee benefit consultants of the Borrower and its
Subsidiaries, with respect to each Plan as of the end of the Borrower's
preceding fiscal year, copies of which actuarial valuation reports have been
furnished to the Banks, fairly present the actuarial condition of each Plan as
of the end of the Borrower's preceding fiscal year and the annual contribution
requirements for the year in which this credit agreement is executed.
SECTION 6.6. ENVIRONMENTAL COMPLIANCE. Each Company is in substantial
compliance with any and all Environmental Laws including, without limitation,
all Environmental Laws in all jurisdictions in which any such Company owns or
operates, or has owned or operated, a facility or site, arranges or has arranged
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for disposal or treatment of hazardous substances, solid waste or other wastes,
accepts or has accepted for transport any hazardous substances, solid waste or
other wastes or holds or has held any interest in real property or otherwise,
except where such noncompliance could not reasonably be expected to result in a
material adverse effect on the business, operations or financial condition of
such Company. No litigation or proceeding arising under, relating to or in
connection with any Environmental Law is pending or threatened against the
Borrower or any Subsidiary, any real property in which the Borrower or any
Subsidiary holds or has held an interest or any past or present operation of the
Borrower or any Subsidiary. No release, threatened release or disposal of
hazardous waste, solid waste or other wastes is occurring, or has occurred, on,
under or to any real property in which the Borrower or any Subsidiary holds any
interest or performs any of its operations, in violation of any Environmental
Law, except where such violation could not reasonably be expected to result in a
material adverse effect on the business, operations or financial condition of
such Company. As used in this Section, "litigation or proceeding" means any
demand, claim, notice, suit, suit in equity, action, administrative action,
investigation or inquiry whether brought by any governmental authority, private
person or entity or otherwise.
SECTION 6.7. SOLVENCY. The Borrower has received consideration which is the
reasonable equivalent value of the obligations and liabilities that the Borrower
has incurred to the Banks. The Borrower is not insolvent as defined in any
applicable state or federal statute, nor will the Borrower be rendered insolvent
by the execution and delivery of this credit agreement or the Notes to the
Banks. The Borrower is not engaged or about to engage in any business or
transaction for which the assets retained by it shall be an unreasonably small
capital, taking into consideration the obligations to the Banks incurred
hereunder. The Borrower does not intend to, nor does it believe that it will,
incur debts beyond its ability to pay them as they mature.
SECTION 6.8. FINANCIAL CONDITION. The most recent consolidated financial
statements of the Borrower furnished to the Banks are true and complete
(including, without limiting the generality of the foregoing, a disclosure of
all material contingent liabilities) have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
those used during its next preceding fiscal year and fairly presents its then
financial condition and its operations for the year then ending. There has been
no material change in the Companies' financial condition, properties or business
since that date.
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SECTION 6.9. REGULATIONS. The Borrower is not engaged principally or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying any "margin stock" (within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System of the United States of
America). Neither the granting of any loans hereunder (or any conversion
thereof) nor the use of the proceeds of such loans will violate, or be
inconsistent with, the provisions of Regulation U or X of said Board of
Governors.
SECTION 6.10. DEFAULTS. No Event of Default or Possible Default exists
hereunder, nor will any begin to exist immediately after the execution and
delivery hereof.
SECTION 6.11. FULL DISCLOSURE. No information, exhibits or reports furnished
by the Borrower or any of its Subsidiaries to the Agent or any Bank omits to
state any fact necessary to make the statements contained therein not materially
misleading in light of the circumstances and purposes for which such information
was provided. The Borrower and each of its Subsidiaries has provided all
information requested by the Agent or any Bank and all such information is
complete and accurate in all material respects.
ARTICLE VII. EVENTS OF DEFAULT
-----------------
Each of the following shall constitute an Event of Default hereunder:
SECTION 7.1. PAYMENTS. If the principal of or interest on any Note or any
commitment or other fee or amount owing to the Banks (or any of them) or the
Agent hereunder shall not be paid in full punctually when due and payable and
shall remain unpaid for a period of five (5) consecutive days.
SECTION 7.2. COVENANTS. If any Company shall fail or omit (a) to perform and
observe any agreement or other provision (other than those referred to in
Sections 5.6, 5.10 or 7.1 hereof) contained or referred to in this credit
agreement or any Related Writing that is on such Company's part to be complied
with, and that Possible Default shall not have been fully corrected within
thirty (30) consecutive days after the giving of written notice thereof to the
Borrower by the Agent or any Bank that the specific Possible Default is to be
remedied or (b) to perform and observe any agreement or other provision
contained in Section 5.6 hereof, and that Possible Default shall not have been
fully corrected within thirty (30) consecutive days after the giving of written
notice thereof to the Borrower by the Agent or any Bank that the specific
Possible Default is to be remedied and, in addition to such thirty (30) day
period, within such additional period of time during which Borrower diligently
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undertakes appropriate actions to cause the Borrower to remedy the Possible
Default, or for which the Borrower makes an adequate reserve on its financial
statements; or (c) to perform or observe any agreement or other provision
contained in Sections 5.10 or 7.1 hereof.
SECTION 7.3. WARRANTIES. If any representations, warranty or statement made
in or pursuant to this credit agreement or any Related Writing or any other
material information furnished by any Company to the Banks or any other holder
of any Note, shall be false or erroneous in any material respect.
SECTION 7.4. CROSS DEFAULT. If any Company defaults in the payment of
principal or interest due and owing upon any other Borrowed Debt, the principal
amount of which, in the aggregate, exceeds Five Hundred Thousand Dollars
$500,000, beyond any period of grace provided with respect thereto or in the
performance of any other agreement, term or condition contained in any agreement
under which such Borrowed Debt is created or governed, if the effect of such
default is to accelerate the maturity of such Borrowed Debt or to permit the
holder thereof to cause such Borrowed Debt to become due prior to its stated
maturity.
SECTION 7.5. TERMINATION OF PLAN. If (a) any Reportable Event occurs and the
Majority Banks, in their sole determination, deem such Reportable Event to
constitute grounds (i) for the termination of any Plan by the Pension Benefit
Guaranty Corporation or (ii) for the appointment by the appropriate United
States district court of a trustee to administer any Plan and such Reportable
Event shall not have been fully corrected or remedied to the full satisfaction
of the Majority Banks within thirty (30) days after giving of written notice of
such determination to the Borrower by any Bank or (b) any Plan shall be
terminated within the meaning of Title IV of the Employee Retirement Income
Security Act of 1974, as amended, or (c) a trustee shall be appointed by the
appropriate United States district court to administer any Plan, or (d) the
Pension Benefit Guaranty Corporation shall institute proceedings to terminate
any Plan or to appoint a trustee to administer any Plan.
SECTION 7.6. SOLVENCY. If any Company shall (a) discontinue business, or (b)
generally not pay its debts as such debts become due, or (c) make a general
assignment for the benefit of creditors, or (d) apply for or consent to the
appointment of a receiver, a custodian, a trustee, an interim trustee or
liquidator of all or a substantial part of its assets, or (e) be adjudicated a
debtor or have entered against it an order for relief under Title 11 of the
United States Code, as the same may be amended from time to time, or (f) file a
voluntary petition in bankruptcy or file a petition or an answer seeking
reorganization or an arrangement with creditors or seeking to take advantage of
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any other law (whether federal or state) relating to relief of debtors, or admit
(by answer, by default or otherwise) the material allegations of a petition
filed against it in any bankruptcy, reorganization, insolvency or other
proceeding (whether federal or state) relating to relief of debtors, or (g)
suffer or permit to continue unstayed and in effect for thirty (30) consecutive
days any judgment, decree or order entered by a court or governmental commission
of competent jurisdiction, which assumes custody or control of such Company,
approves a petition seeking reorganization of such Company or any other judicial
modification of the rights of its creditors, or appoints a receiver, custodian,
trustee, interim trustee or liquidator for such Company or of all or a
substantial part of its assets, or (h) take, or omit to take, any action in
order thereby to effect any of the foregoing.
SECTION 7.7. JUDGMENTS. If (a) one or more judgments for the payment of
money in an aggregate amount in excess of $500,000 (unless such judgment (i)
shall have been reserved for by the Borrower on the date hereof or (ii) shall be
insured and the insurance carrier shall have acknowledged in writing liability
in respect of the full amount thereof or shall have been ordered by a court of
competent jurisdiction to pay such judgment) shall be rendered against the
Borrower, any Subsidiary or any combination thereof, and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or (b) any action shall be legally taken by a
judgment creditor to levy upon assets or properties of the Borrower or any
Subsidiary to enforce any judgment.
ARTICLE VIII. REMEDIES UPON DEFAULT
---------------------
Notwithstanding any contrary provision or inference herein or
elsewhere,
SECTION 8.1. OPTIONAL DEFAULTS. If any event of default referred to in
Section 7.1, 7.2, 7.3, 7.4, 7.5 or 7.7 hereof shall occur, the Majority Banks,
or in the event that the Commitments of the Banks shall have been terminated,
the Banks holding 66 2/3% of the aggregate amount of Prime Rate Loans and LIBOR
Loans and Letters of Credit then outstanding, shall have the right in their
discretion, by directing the Agent, on behalf of the Banks, to give written
notice to the Borrower, to:
(a) terminate the Commitment and the credit hereby established, if
not theretofore terminated, and forthwith upon such election
the obligations of the Banks to make any further Loans or
issue any further Letters of Credit hereunder immediately
shall be terminated, and/or
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(b) accelerate the maturity of all of the Borrower's
Obligations to the Banks (if it be not already due and
payable) whereupon all of the Borrower's Obligations to
the Banks (if it be not already due and payable), shall
become and thereafter be immediately due and payable in
full without any presentment or demand and without any
further or other notice of any kind, all of which are
hereby waived by the Borrower.
SECTION 8.2. AUTOMATIC DEFAULTS. If any event of default
referred to in Section 7.6 hereof shall occur,
(a) all the Commitments and the credit hereby established shall
automatically and forthwith terminate, if not theretofore
terminated, and no Bank thereafter shall be under any
obligation to grant any further Loans or issue any further
Letters of Credit hereunder, and
(b) the principal of and interest on the Notes, then outstanding,
and all of the Borrower's other Debt to the Banks and the
Agent shall thereupon become and thereafter be immediately due
and payable in full (if it be not already due and payable),
all without any presentment, demand or notice of any kind,
which are hereby waived by the Borrower.
SECTION 8.3. OFFSETS. If there shall occur or exist any Event of
Default or Possible Default referred to in Section 7.6 hereof or if the maturity
of the Notes is accelerated pursuant to Section 8.1 or 8.2 hereof, each Bank
shall have the right at any time to set off against, and to appropriate and
apply toward the payment of, any and all Debt then owing by the Borrower to such
Bank, whether or not the same shall then have matured, any and all deposit
balances and all other indebtedness then held or owing by such Bank to or for
the credit or account of the Borrower, all without notice to or demand upon the
Borrower or any other person, all such notices and demands being hereby
expressly waived by the Borrower.
SECTION 8.4 EQUALIZATION PROVISION; SHARING OF PAYMENT.
(a) EQUALIZATION OF ADVANTAGE. Each Bank agrees with the other Banks
that if it at any time shall obtain any Advantage over the other Banks in
respect of the Borrower's Obligations to the Banks (except under Section 3.1,
3.2, 3.3, 3.4, 9.3 or 9.5), it will purchase from the other Banks, for cash and
at par, such additional participation in the Borrower's Obligations to the Banks
as shall be necessary to nullify the Advantage. If any said Advantage resulting
in the purchase of an additional participation as aforesaid shall be recovered
in whole or in part
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from the Bank receiving the Advantage, each such purchase shall be rescinded,
and the purchase price restored (but without interest unless the Bank receiving
the Advantage is required to pay interest on the Advantage to the person
recovering the Advantage from such Bank) ratably to the extent of the recovery.
Each Bank further agrees with the other Banks that if it at any time shall
receive any payment for or on behalf of the Borrower on any indebtedness owing
by the Borrower to that Bank by reason of offset of any deposit or other
indebtedness, it will apply such payment first to any and all indebtedness owing
by the Borrower to that Bank pursuant to this credit agreement (including,
without limitation, any participation purchased or to be purchased pursuant to
this Section 8.4) until the Borrower's Obligations have been paid in full. The
Borrower agrees that any Bank so purchasing a participation from the other Banks
pursuant to this Section may exercise all its rights of payment (including the
right of set-off) with respect to such participation as fully as if such Bank
were a direct creditor of the Borrower in the amount of such participation.
ARTICLE VIII-A. THE AGENT
---------
SECTION 8A.1 THE AGENT. Each Bank irrevocably appoints Society to be
its Agent with full authority to take such actions, and to exercise such powers,
on behalf of the Banks in respect of this credit agreement and the Related
Writings as are therein respectively delegated to the Agent or as are reasonably
incidental to those delegated powers. Society in such capacity shall be deemed
to be an independent contractor of the Banks.
SECTION 8A.2 NATURE OF APPOINTMENT. The Agent shall have no fiduciary
relationship with any Bank by reason of this Agreement and the Related Writings.
The Agent shall not have any duty or responsibility whatsoever to any Bank
except those expressly set forth in this Agreement and the Related Writings.
Without limiting the generality of the foregoing, each Bank acknowledges that
the Agent is acting as such solely as a convenience to the Banks and not as a
manager of the commitments or the Obligations evidenced by the Notes. This
Article VIII-A does not confer any rights upon the Borrower or anyone else
(except the Banks), whether as a third party beneficiary or otherwise.
SECTION 8A.3 SOCIETY AS A BANK; OTHER TRANSACTIONS. Society's rights as
a Bank under this Agreement and the Related Writings shall not be affected by
its serving as the Agent. Society and its affiliates may generally transact any
banking, financial, trust, advisory or other business with the Borrower or its
Subsidiaries (including, without limitation, the acceptance of deposits, the
extension of credit and the acceptance of fiduciary appointments) without notice
to the Banks, without accounting to the Banks, and without prejudice to
Society's
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rights as a Bank under this Agreement and the Related Writings except as may be
expressly required under this Agreement.
SECTION 8A.4 INSTRUCTIONS FROM BANKS. The Agent shall not be required to
exercise any discretion or take any action as to matters not expressly provided
for by this credit agreement and the Related Writings (including, without
limitation, collection and enforcement actions in respect of any Obligations
under the Notes or this credit agreement and any collateral therefor) EXCEPT
that the Agent shall take such action (or omit to take such action) other than
actions referred to in Section 9.1, as may be reasonably requested of it in
writing by the Majority Banks with instructions and which actions and omissions
shall be binding upon all the Banks; PROVIDED, HOWEVER, that the Agent shall not
be required to act (or omit any act) if, in its judgment, any such action or
omission might expose the Agent to personal liability or might be contrary to
this credit agreement, any Related Writing or any applicable law.
SECTION 8A.5 BANK'S DILIGENCE. Each Bank (a) represents and warrants that it
has made its decision to enter into this credit agreement and the Related
Writings and (b) agrees that it will make its own decision as to taking or not
taking future actions in respect of this credit agreement and the Related
Writings; in each case without reliance on the Agent or any other Bank and on
the basis of its independent credit analysis and its independent examination of
and inquiry into such documents and other matters as it deems relevant and
material.
SECTION 8A.6 NO IMPLIED REPRESENTATIONS. The Agent shall not be liable for
any representation, warranty, agreement or obligation of any kind of any other
party to this credit agreement or anyone else, whether made or implied by the
Borrower or any Subsidiary in this credit agreement or any Related Writing or by
a Bank in any notice or other communication or by anyone else or otherwise.
SECTION 8A.7 SUB-AGENTS. The Agent may employ agents and shall not be liable
(except as to money or property received by it or its agents) for any negligence
or misconduct of any such agent selected by it with reasonable care. The Agent
may consult with legal counsel, certified public accountants and other experts
of its choosing (including, without limitation, Society's salaried employees or
any such persons otherwise not independent) and shall not be liable for any
action or inaction taken or suffered in good faith by it in accordance with the
advice of any such counsel, accountants or other experts which shall have been
selected by it with reasonable care.
SECTION 8A.8 AGENT'S DILIGENCE. The Agent shall not be
required (a) to keep itself informed as to anyone's compliance
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with any provision of this credit agreement or any Related Writing, (b) to make
any inquiry into the properties, financial condition or operation of the
Borrower or any of its Subsidiaries or any other matter relating to this credit
agreement or any Related Writing, (c) to report to any Bank any information
(other than which this credit agreement or any Related Writing expressly
requires to be so reported) that the Agent or any of its affiliates may have or
acquire in respect of the properties, business or financial condition of the
Borrower or any of its Subsidiaries or any other matter relating to this credit
agreement or any Related Writing or (d) to inquire into the validity,
effectiveness or genuineness of this credit agreement or any Related Writing.
SECTION 8A.9 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge of any Possible Default or Event of Default unless and until it shall
have received a written notice describing it and citing the relevant provision
of this credit agreement or any Related Writing. The Agent shall give each Bank
reasonably prompt notice of any such written notice except, of course, to any
Bank that shall have given the written notice.
SECTION 8A.10 AGENT'S LIABILITY. Neither the Agent nor any of its directors,
officers, employees, attorneys, and other agents shall be liable for any action
or omission on their respective parts except for gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent:
(i) may treat the payee of any Note as the holder thereof until the Agent
receives a fully executed copy of the Assignment Agreement required by Section
10.1(b) signed by such payee and in form satisfactory to the Agent and the fee
required by Section 10.1(b); (ii) may consult with legal counsel, 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 or such counsel, accountants or experts which have been selected by
the Agent with reasonable care; (iii) makes no warranty or representation to any
Bank and shall not be responsible to any Bank for any statements, warranties or
representations made in or in connection with this credit agreement or any
Related Writing, including, without limitation, the truth of the statements made
in any certificate delivered by the Borrower or any other notice or delivery by
the Borrower, the Agent being entitled for the purposes of determining
fulfillment of the conditions set forth therein to rely conclusively upon such
certificates; (iv) 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
credit agreement, the Notes or any other Related Writing or to inspect the
property (including the books and records) of the Companies; (v) shall not be
responsible to any Bank for the due execution, legality, validity,
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enforceability, genuineness, sufficiency or value of this credit agreement, any
collateral covered by any Related Writing and (vi) shall incur no liability
under or in respect of this credit agreement, the Notes or any other Related
Writing by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, telecopy, cable or telex) believed by it in
good faith to be genuine and correct and signed or sent by the proper party or
parties.
Neither the Agent nor any of its directors, officers, employees or agents
shall have any responsibility to the Borrower on account of the failure of or
delay in performance or breach by any Bank of any of its obligations hereunder
or to any Bank on account of the failure of or delay in performance or breach by
any other Bank or the Borrower of any of their respective obligations hereunder
or under any Related Writing or in connection herewith or therewith.
The Banks each hereby acknowledge that the Agent shall be under no duty to
take any discretionary action permitted to be taken by it pursuant to the
provisions of this credit agreement, the Notes or any other Related Writing
unless it shall be requested in writing to do so by the Majority Banks.
SECTION 8A.11 COMPENSATION. The Agent shall receive no other compensation
for its services as agent of the Banks in respect of this credit agreement and
the Related Writings, except any expressly referred to in this credit agreement,
but the Borrower shall reimburse the Agent periodically on its demand for
out-of-pocket expenses, if any, reasonably incurred by it as such and as to
which the Agent has delivered to the Borrower reasonable substantiation.
SECTION 8A.12 AGENT'S INDEMNITY. The Banks shall indemnify the Agent (to the
extent the Agent is not reimbursed by the Borrower) from and against (a) any
loss or liability (other than any caused by the Agent's gross negligence or
willful misconduct and other than any loss to the Agent resulting from the
Borrower's non-payment of agency fees owed solely to the Agent) incurred by the
Agent as such in respect of this credit agreement, the Notes or any Related
Writing (as the Agent) and (b) any out-of-pocket expenses incurred in defending
itself or otherwise related to this credit agreement, the Notes or any Related
Writing (other than any caused by the Agent's gross negligence or willful
misconduct) including, without limitation, reasonable fees and disbursements of
legal counsel of its own selection (including, without limitation, the
reasonable interdepartmental charges of its salaried attorneys) in the defense
of any claim against it or in the prosecution of its rights and remedies as the
Agent (other than the loss, liability or costs incurred by the Agent in the
defense of any claim
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against it by the Banks arising in connection with its actions in its capacity
as Agent); PROVIDED, HOWEVER, that each Bank shall be liable for only its
Ratable Portion of the whole loss or liability.
SECTION 8A.13 RESIGNATION. The Agent (or any successor) may at any time
resign as such by giving ten (10) days' prior written notice to the Borrower and
to each Bank; and the Majority Banks may remove the Agent at any time with or
without cause by giving written notice to the Agent and the Borrower. In any
such case, the Majority Banks may appoint a successor to the resigned or removed
agent (the "Former Agent"), provided that the Majority Banks obtain the
Borrower's prior written consent to the successor (which consent shall not be
unreasonably withheld), by giving written notice to the Borrower, the Former
Agent and each Bank not participating in the appointment; PROVIDED, HOWEVER,
that, if at the time of the proposed resignation or removal of an Agent, the
Borrower is the subject of an action referred to in Section 7.6 or an Event of
Default shall have occurred and be continuing the Borrower's consent shall not
be required. In the absence of a timely appointment, the Former Agent shall have
the right (but not the duty) to make a temporary appointment of any Bank (but
only with that Bank's consent) to act as its successor pending an appointment
pursuant to the immediately preceding sentence. In either case, the successor
Agent shall deliver its written acceptance of appointment to the Borrower, to
each Bank and to the Former Agent, whereupon (a) the Former Agent shall execute
and deliver such assignments and other writings as the successor Agent may
reasonably require to facilitate its being and acting as the Agent, (b) the
successor Agent shall in any event automatically acquire and assume all the
rights and duties as those prescribed for the Agent by this Article VIII-A and
(c) the Former Agent shall be discharged from its duties and obligations under
this credit agreement and the Related Writings.
SECTION 8A.14 BANK PURPOSE. Each Bank represents and warrants to the Agent,
the other Banks and the Borrower that such Bank is familiar with the Securities
Act of 1933, as amended, and the rules and regulations thereunder and is not
entering into this credit agreement with any intention to violate such Act or
any rule or regulation thereunder. Subject to the provisions of Sections 10.1
and 10.2, each Bank shall at all times retain full control over the disposition
of its assets subject only to this credit agreement and to all applicable Law.
SECTION 8A.15 BANK INDEMNIFICATION. Each Bank providing cash management or
similar services to the Borrower agrees to indemnify each of the other Banks
(the "Other Banks") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be
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<PAGE> 36
imposed on, incurred by, or asserted against any Other Bank in any way relating
to or arising out of the cash management or similar services provided by such
Bank to the Borrower or any of its Subsidiaries or any action or inaction of
such Bank in connection therewith.
ARTICLE IX. MISCELLANEOUS
-------------
SECTION 9.1. AMENDMENTS, CONSENTS, INTERPRETATION. No amendment,
modification, termination, or waiver of any provision of this credit agreement
or of the Notes, nor consent to any variance therefrom, shall be effective
unless the same shall be in writing and signed by the Majority Banks (and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given). Unanimous consent of all Banks shall be
required with respect to (i) the extension of maturity of any Note, or the
payment date of interest, principal and/or fees thereunder, or (ii) any
reduction in the rate of interest on the Notes, or in any amount of principal or
interest due on any Note, or in the manner of pro rata application of any
payments made by the Borrower to the Banks hereunder, or (iii) any change in any
percentage voting requirement in this Agreement, or (iv) any change in the
dollar amount or percentage of the Banks' Commitments or any Bank's Commitment,
or (v) any change in amount or timing of any fees payable under this credit
agreement, or (vi) any release of the Subsidiaries or any thereof from any
obligation of under any guaranty, or (vii) any change in any provision of this
credit agreement which requires all of the Banks to take any action under such
provision or (viii) any change in Section 10.1, 10.2 or this Section 9.1 itself.
Notice of amendments or consents ratified by the Banks hereunder shall
immediately be forwarded by the Borrower to all Banks. Each Bank or other holder
of a Note shall be bound by any amendment, waiver or consent obtained as
authorized by this section, regardless of its failure to agree thereto. No
omission or course of dealing on the part of Agent, any Bank or the holder of
any Note in exercising any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. The remedies herein provided are
cumulative and in addition to any other rights, powers or privileges held by
operation of law, by contract or otherwise. Any provision of this credit
agreement which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. The several captions to different sections and subsections of
this credit agreement are inserted for convenience only and shall be ignored in
interpreting the provisions hereof.
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<PAGE> 37
This credit agreement and each Related Writing shall be interpreted in
accordance with Ohio law and the respective rights and obligations of the Banks
and the Borrower shall be governed by Ohio law, without regard to principles of
conflict of laws.
SECTION 9.2 NOTICE. A notice to, demand upon or request of the Borrower
shall be deemed to have been given or made hereunder when a writing to that
effect shall have been delivered to an officer of the Borrower or forty-eight
(48) hours after a writing to that effect shall have been deposited in the
United States mail with postage prepaid by registered or certified mail to the
Borrower or delivered to a telegraph company at the address set forth below (or
to such other address as the Borrower may hereafter furnish to the Agent in
writing for that purpose). No other method of giving notice to, demand upon or
request of the Borrower is hereby precluded. Every notice or request required or
permitted to be given to a Bank pursuant to this credit agreement shall be
delivered to such Bank at its address set forth on the signature pages of this
credit agreement or at such other address as such Bank may furnish to Borrower
in writing for that purpose.
SECTION 9.3. COSTS. The Borrower agrees to pay on demand all reasonable
costs and expenses of the Agent in connection with the preparation, execution,
delivery, modification, administration and amendment of this credit agreement
(including, without limitation, any amendment), the Notes, the Related Writings
and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Agent with respect thereto (including any reasonable interdepartmental charges)
and with respect to advising the Agent as to its rights and responsibilities
under this credit agreement. Without limiting the generality of the foregoing,
such costs and expenses shall include: (a) reasonable attorneys' and paralegals'
costs, expenses and disbursements of counsel to the Agent; (b) extraordinary
expenses of Agent in connection with the administration of this credit
agreement, the Notes, any other Related Writing and the other instruments and
documents to be delivered hereunder; (c) the reasonable fees and out-of-pocket
expenses of special counsel for the Agent or the Agent for the benefit of the
Banks, with respect thereto and of local counsel, if any, who may be retained by
said special counsel with respect thereto; (d) costs and expenses (including
reasonable attorneys and paralegal costs, expenses and disbursements) for any
amendment, supplement, waiver, consent, or subsequent closing in connection with
this credit agreement, the Notes, any other Related Writing and the transactions
contemplated thereby; (e) sums paid or incurred to pay any amount or take any
action required of the Borrower under this credit agreement, the Notes or any
Related Writing that the Borrower fails to pay or take;
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<PAGE> 38
(f) the cost of any appraisal, survey, environmental audit or the retention of
any other professional service or consultant commenced after the occurrence and
continuation of an Event of Default and deemed reasonably necessary by the
Agent; (g) costs of inspections and periodic review of the records of the
Borrower or any of its Subsidiaries, including, without limitation, travel,
lodging, and meals for inspections of the Borrower's and its Subsidiaries'
operations by the Agent up to one time per year and at any time after the
occurrence and during the continuation of an Event of Default; (h) costs and
expenses of forwarding loan proceeds, fees, interest and other payments to the
Banks; and (i) costs and expenses (including, without limitation, attorneys'
fees) paid or incurred to obtain payment of the Obligations (including the
Obligations arising under this Section 9.3), enforce the provisions of the
credit agreement, the Notes or any Related Writing, or to defend any claims made
or threatened against the Agent arising out of the transactions contemplated
hereby (including without limitation, preparations for and consultations
concerning any such matters). The Borrower further agrees to pay on demand all
costs and expenses of each Bank, if any (including reasonable counsel fees and
expenses), in connection with the restructuring or the enforcement (whether
through negotiations, legal proceedings or otherwise) of this Agreement, the
Notes, any Related Writing and the other documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 9.3. The foregoing
shall not be construed to limit any other provisions of this Agreement, the
Notes or any Related Writing regarding costs and expenses to be paid by the
Borrower. All of the foregoing costs and expenses may be charged, in the Agent's
sole discretion, to the Borrower's loan account as Prime Rate Loans
(notwithstanding existence of any Possible Default or Event of Default or the
failure of the conditions of Article V to have been satisfied).
SECTION 9.4 OBLIGATIONS SEVERAL. The obligations of the Banks hereunder
are several and not joint. Nothing contained in this credit agreement and no
action taken by Agent or the Banks pursuant hereto shall be deemed to constitute
the Banks a partnership, association, joint venture or other entity. No default
by any Bank hereunder shall excuse the other Banks from any obligation under
this credit agreement; but no Bank shall have or acquire any additional
obligation of any kind by reason of such default.
SECTION 9.5. CAPITAL ADEQUACY. If any Bank shall determine, after the
date hereof, that the adoption of any applicable law, rule, regulation or
guideline regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
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<PAGE> 39
administration thereof, or compliance by such Bank (or its lending office) with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Bank's capital (or
on the capital of such Bank's holding company) as a consequence of its
obligations hereunder to a level below that which such Bank (or its holding
company) could have achieved but for such adoption, change or compliance (taking
into consideration such Bank's policies or the policies of its holding company
with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time, within 15 days after demand by such Bank, the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank (or its holding company) for such reduction. Such Bank will
designate a different leading office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. A certificate of such Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods. Failure on the part of such Bank to demand
compensation for any reduction in return on capital with respect to any period
shall not constitute a waiver of such Bank's rights to demand compensation for
any reduction in return on capital in such period or in any other period. The
protection of this Section shall be available to such Bank regardless of any
possible contention of the invalidity or inapplicability of the law, regulation
or other condition which shall have been imposed.
SECTION 9.6. ENTIRE AGREEMENT. This credit agreement, the Notes and any
other agreement, document or instrument attached hereto or referred to herein or
executed on or as of the date hereof integrate all the terms and conditions
mentioned herein or incidental hereto and supersede all oral representations and
negotiations and prior writings with respect to the subject matter hereof.
SECTION 9.7. EXECUTION IN COUNTERPARTS. This credit agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
SECTION 9.8. JURY TRIAL WAIVER. THE BORROWER, THE AGENT AND EACH BANK
EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE AGENT, THE BANKS AND
THE BORROWER ARISING
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<PAGE> 40
OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY NOTE OR
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY
AFFECT, WAIVE, LIMIT, AMEND OR MODIFY THE BANKS' ABILITY TO PURSUE REMEDIES
PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT BETWEEN THE AGENT, THE BANKS AND
THE BORROWER.
ARTICLE X. TRANSFERS AND ASSIGNMENTS.
--------------------------
SECTION 10.1 TRANSFER OF COMMITMENT. Each Bank shall have the right at
any time or times to transfer to another financial institution, without
recourse, all or any part of (a) that Bank's Commitment, (b) any loan made by
that Bank, (c) any Note, and (d) that Bank's participation, if any, purchased
pursuant to Section 8.4; PROVIDED, HOWEVER, in each such case, that the
transferor and the transferee shall have complied with the following
requirements:
(a) PRIOR CONSENT. No transfer may be consummated pursuant to this
Article X without the prior written consent of the Borrower and the Agent (other
than a transfer by any Bank to any affiliate of such Bank), which consent of the
Borrower shall not be unreasonably withheld; PROVIDED, HOWEVER, that, neither
the Borrower nor the Agent shall be deemed to be unreasonable in withholding its
respective consent if, (i) after giving effect to such transfer, any Bank's
(including any assignee becoming a Bank pursuant to this Section 10.1) Ratable
Portion of the Total Commitment Amount would be less than Five Million Dollars
($5,000,000), (ii) the proposed transferee is a financial institution not
organized under the Laws of a state or of the United States (unless such
institution is an affiliate of the transferring Bank) or (iii) if the proposed
transferee's long-term certificates of deposit shall be rated A or below by any
rating agency or the equivalent rating by Thompson's Bank Watch; PROVIDED,
FURTHER, that, if at the time of the proposed transfer the Borrower is the
subject of a proceeding referenced in Section 7.6 or any Event of Default shall
have occurred and be continuing, neither the Borrower's nor the Agent's consent
shall be required and any Bank may consummate a transfer contemplated by Section
10.1 notwithstanding the requirements of clauses (i), (ii) or (iii) of this
Section 10.1(a). Notwithstanding anything to the contrary, any Bank may at any
time assign all or any portion of its rights under this Agreement and its Notes
to a Federal Reserve Bank, and no such assignment shall release such assigning
Bank from its obligations hereunder.
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<PAGE> 41
(b) AGREEMENT; TRANSFER FEE. The transferor (i) shall remit to the
Agent an administrative fee of Two Thousand Five Hundred Dollars ($2,500) and
(ii) shall cause the transferee to execute and deliver to the Borrower, the
Agent and each Bank (A) an Assignment Agreement in the form specified by the
Agent (an "Assignment Agreement") together with any consents and releases and
any other documents referenced therein and (B) such additional amendments,
assurances and other writings as the Agent may reasonably require.
(c) NOTES. The Borrower shall execute and deliver (i) to the Agent, the
transferor and the transferee, any consent or release (of all or a portion of
the obligations of the transferor) to be delivered in connection with the
Assignment Agreement, (ii) if a Bank's entire interest in its Commitment and in
all of its loans have been transferred, to the transferee an appropriate Notes
against return of the Notes (marked "replaced") held by the transferor and (iii)
if only a portion of a Bank's interest in its Commitment and its loans has been
transferred, a new Note to each of the transferor and the transferee against
return of the original such Notes of the transferor (marked "replaced") held by
the transferor.
(d) PARTIES. Upon satisfaction of the requirements of this Section
10.1, including the payment of the fee and the delivery of the documents set
forth in Section 10.1(b), (i) the transferee shall become and thereafter be
deemed to be a "Bank" for the purposes of this credit agreement and (ii) the
transferor (A) shall continue to be a "Bank" for the purposes of this credit
agreement only if and to the extent that the transfer shall not have been a
transfer of its entire interest in its Commitment and its loans, (B) shall cease
to be and thereafter shall no longer be deemed to be a "Bank" in the case of any
transfer of its entire interest in its Commitment and its loans and (C) the
signature pages hereto and Annex A hereto shall be automatically amended,
without further action, to reflect the result of any such transfer.
SECTION 10.2 SALE OF PARTICIPATION. Each Bank shall have the right at
any time or times to sell one or more participation or subparticipations to a
financial institution, as the case may be, in all or any part of (a) that Bank's
Commitment, (b) any loan made by that Bank, (d) any Note delivered to that Bank
pursuant to this credit agreement, and (e) that Bank's participation, if any,
purchased pursuant to Section 8.4 or this Section 10.2.
(a) BENEFITS OF PARTICIPANT. The provisions of Article III and Section
9.5 shall inure to the benefit of each purchaser of a participation or
subparticipation (provided that each such participant shall look solely to the
seller of its participation
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<PAGE> 42
for those benefits and the Borrower's liabilities, if any, under any of those
sections shall not be increased as a result of the sale of any such
participation) and Agent shall continue to distribute payments pursuant to this
credit agreement as if no participation has been sold.
(b) RIGHTS RESERVED. In the event any Bank shall sell any participation
or subparticipation, that Bank shall, as between itself and the purchaser,
retain all of its rights (including, without limitation, rights to enforce
against the Borrower this credit agreement and the Related Writings) and duties
pursuant to this credit agreement and the Related Writings, including, without
limitation, that Bank's right to approve any waiver, consent or amendment
pursuant to Section 9.1, except if and to the extent that any such waiver,
consent or amendment would
(i) reduce any fee or commission allocated to the
participation or subparticipation, as the case may be,
(ii) reduce the amount of any principal payment on any loan
allocated to the participation or subparticipation, as the
case may be, or reduce the principal amount of any loan so
allocated or the rate of interest payable thereon, or
(iii) extend the time for payment of any amount allocated to the
participation or subparticipation, as the case may be.
(c) NO DELEGATION. No participation or subparticipation shall operate
as a delegation of any duty of the seller thereof. Under no circumstance shall
any participation or subparticipation be deemed a novation in respect of all or
any part of the seller's obligations pursuant to this credit agreement.
SECTION 10.3 CONFIDENTIALITY. Each Bank hereby (a) acknowledges that
the Borrower and each of its Subsidiaries have many trade secrets and much
financial, environmental and other data and information the confidentiality of
which is important to their business and (b) agrees to keep confidential any
such trade secret, data or information designated in writing by the Borrower or
any of its Subsidiaries as confidential, except that this Section shall not
preclude any Bank from furnishing any such secret, data or information: (i) as
may be required by order of any court of competent jurisdiction or requested by
any governmental agency having any regulatory authority over that Bank or its
securities or in response to legal process, (ii) to any other party to this
credit agreement, (iii) or to any affiliate of any Bank or to any actual or
prospective transferee, participant or subparticipant (so long as such affiliate
or prospective transferee, participant or subparticipant is a
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<PAGE> 43
financial institution) of all or part of that Bank's rights arising out of or in
connection with the Related Writings and this credit agreement or any thereof so
long as such affiliate, prospective transferee, participant or subparticipant to
whom disclosure is made agrees to be bound by the provisions of this Section
10.3, (iv) to anyone if it shall have been already publicly disclosed (other
than by that Bank in contravention of this Section 10.3), (v) to the extent
reasonably required in connection with the exercise of any right or remedy under
this credit agreement or any Related Writing, (vi) to that Bank's legal counsel,
auditors and accountants and (vii) in connection with any legal proceedings
instituted by or against the Agent or any Bank.
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<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed by their respective officers or agents thereunto duly
authorized, as of the date first above written.
SHILOH INDUSTRIES, INC.
/s/ G. Rodger Loesch
_________________________
By:
Title: CFO/Treasurer
402 Ninth Avenue
P.O. Box 2037
Mansfield, Ohio 44905
Attention:
Telecopy: (216) ___-____
SOCIETY NATIONAL BANK,
individually and as Agent
/s/ Richard A. Pohle
_________________________
By: Richard A. Pohle
Title: Vice President and
Manager
127 Public Square
Cleveland, Ohio 44114
Attention: Large Corporate
Group
Telecopy: (216) 689-4981
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<PAGE> 45
BANKS
-----
SOCIETY NATIONAL BANK
/s/ Richard A. Pohle
-------------------------
By: Richard A. Pohle
Title: Vice President and
Manager
Address for Notices:
Society National Bank
127 Public Square
Cleveland, Ohio 44114
Attention: Large Corporate
Group
Telecopy: (216) 689-4981
Lending Office:
Society National Bank
127 Public Square
Cleveland, Ohio 44114
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<PAGE> 46
NBD BANK
/s/ Lisa A. Ferris
-------------------------
By: Lisa A. Ferris
Title: Vice President
Address for Notices:
NBD BANK
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Lisa A. Ferris
Telecopy: (313) 225-3269
Lending Office:
NBD BANK
611 Woodward Avenue
Detroit, Michigan 48226
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<PAGE> 47
NATIONAL CITY BANK
/s/ David R. Evans
-------------------------
By: David R. Evans
Title: Senior Vice President
Address for Notices:
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
Attention: David R. Evans
Telecopy: (216) 575-9396
Lending Office:
1900 East Ninth Street
Cleveland, Ohio 44114
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<PAGE> 48
ANNEX A
-------
Banking Institutions Party to the Credit Agreement dated as of April 16, 1996,
with Shiloh Industries, Inc.
Commitments and Percentages
<TABLE>
<CAPTION>
Name of Bank Commitment Ratable Portion
- - ------------ ---------- ---------------
(in dollars) (percentage)
<S> <C> <C>
Society National Bank $15,000,000 50.00%
NBD Bank $ 7,500,000 25.00%
National City Bank $ 7,500,000 25.00%
---------- ------
Total Commitment Amount $30,000,000 100.00%
======================= ========== ======
</TABLE>
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<PAGE> 1
Exhibit 10.2
CREDIT AGREEMENT
CREDIT AGREEMENT, effective as of the 16th day of April, 1996, between
SHILOH OF MICHIGAN, LLC, a Michigan limited liability company, (hereinafter
sometimes called the "Borrower"); the financial institutions named in Annex A
attached hereto and made a part hereof and their permitted successors and
assigns (hereinafter sometimes collectively called the "Banks" and each
individually a "Bank"); and SOCIETY NATIONAL BANK, a national banking
association, as Agent for the Banks under this Agreement (hereinafter sometimes
called the "Agent").
WITNESSETH:
-----------
WHEREAS, the Borrower, the Banks and the Agent desire to contract for
the establishment of a credit in the aggregate principal amount of Twenty-Three
Million Dollars ($23,000,000), to be made available to the Borrower upon the
terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I. DEFINITIONS
-----------
As used in this credit agreement, the following terms shall have the
following meanings:
"ADJUSTED LIBOR" shall mean a rate per annum equal to the quotient
obtained (rounded upwards, if necessary, to the nearest 1/100th of 1%) by
dividing (i) the applicable LIBOR rate by (ii) 1.00 minus the Reserve
Percentage.
"ADVANTAGE" shall mean any payment (whether made voluntarily or
involuntarily, by offset of any deposit or other indebtedness or otherwise)
received by any Bank in respect of the Obligations owing by the Borrower to the
Banks if such payment results in that Bank having a lesser share of such
Obligations to the Banks than was the case immediately before such payment.
"AGENT" has the meaning assigned to such term in the preamble of this
Agreement and its successors hereunder pursuant to Article VIII-A.
"BANKING DAY" shall mean a day on which the main office of the Agent is
open for the transaction of business.
"BORROWED DEBT" shall mean, with respect to any Person, without
duplication, all obligations of such Person for money borrowed including,
without limitation, all notes payable and drafts accepted representing
extensions of credit (including, without limitation, as to the Borrower, the
Notes), all
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<PAGE> 2
obligations evidenced by bonds, debentures, notes or other similar instruments
(including, without limitation, Subordinated indebtedness), capitalized lease or
purchase money obligations and obligations upon which interest charges are
customarily paid or discounted, and all guaranties of such obligations for money
borrowed.
"COMMITMENT" shall mean, with respect to each Bank, the obligation
hereunder of such Bank to make loans under Loan A or Loan B, up to the amount
set forth opposite such Bank's name under the column headed "Commitments" as set
forth in Annex A hereof during the Commitment Period.
"COMMITMENT PERIOD" shall mean the period from the date hereof to
February 28, 1998, as such date may be extended pursuant to Section 2.6 hereof.
"CONTROLLED GROUP" shall mean a controlled group of corporations as
defined in Section 1563 of the Internal Revenue Code of 1986, as may be amended
from time to time, of which the Borrower is a part.
"CONSOLIDATED NET EARNINGS" shall mean total net earnings of the
Borrower, after taxes and after extraordinary items (but without giving effect
to any gain resulting from the re-appraisal or write-up of any asset or to the
sale of any asset other than inventory), as determined on a consolidated basis
in accordance with generally accepted accounting principles applied on a basis
not inconsistent with its present accounting procedures.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean the excess of the net book
value (after deduction of all applicable reserves and excluding any re-appraisal
or write-up of assets) of the assets (other than patents, good will, treasury
stock and similar intangibles) of the Companies over all of the liabilities as
determined on a consolidated basis in accordance with generally accepted
accounting principles applied on a basis not inconsistent with their present
accounting procedures.
"DEBT" shall mean, collectively, all liabilities now owing or hereafter
incurred by the Borrower to any Bank and includes (without limitation) every
such liability whether owing by only the Borrower or by the Borrower with one or
more others in a several, joint or joint and several capacity, whether owing
absolutely or contingently, whether created by loan, overdraft, guaranty of
payment or other contract or by quasi-contract, tort, statute or other operation
of law, whether incurred directly to such Bank or acquired by such Bank by
purchase, pledge or otherwise, and whether participated to or from Bank in whole
or in part.
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<PAGE> 3
"ENVIRONMENTAL LAWS" shall mean all provisions of law, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by the government
of the United States of America or by any state or municipality thereof or by
any court, agency, instrumentality, regulatory authority or; commission of any
of the foregoing concerning health, safety and protection of, or regulation of
the discharge of substances into, the environment.
"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.
"FED FUNDS RATE" shall mean, 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 Banking Day, for the next preceding Banking Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Banking Day, the average of the quotations for such day on such
transactions received by the Agent from three (3) federal funds brokers of
recognized standing selected by it.
"FORMER AGENT" has the meaning assigned to such term in
Section 8A.13.
"FUNDED INDEBTEDNESS" shall mean indebtedness which (including any
renewal or extension in whole or in part) matures or remains unpaid more than
twelve months after the date on which originally incurred.
"GUARANTOR" shall mean one who pledges his or her credit or property in
any manner for the payment or other performance of the indebtedness, contract or
other obligation of another and includes (without limitation) any guarantor
(whether of payment or of collection), surety, co-maker, endorser or one who
agrees conditionally or otherwise to make any purchase, loan or investment in
order thereby to enable another to prevent or correct a default of any kind.
"INTEREST ADJUSTMENT DATE" shall mean the last day of each
Interest Period.
"INTEREST PERIOD" shall mean a period of 1, 2, or 3 months (as selected
by the Borrower commencing on the applicable borrowing date of each LIBOR Loan
and on each Interest Adjustment Date with respect thereto; provided, however,
that if any such period would be affected by a reduction in the Total Commitment
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<PAGE> 4
Amount as provided in Section 2.5 hereof, prepayment or conversion rights as
provided in Section 3.5 hereof or maturity of LIBOR Loans as provided in Section
2.1(a) hereof, such period shall be shortened to end on such date). If the
Borrower fails to select a new Interest Period with respect to an outstanding
LIBOR Loan at least two London Banking Days prior to any Interest Adjustment
Date, the Borrower shall be deemed to have selected a Prime Rate Loan.
"LETTER(S) OF CREDIT" and "LETTER OF CREDIT FEE" shall have the
meanings assigned to such terms in Section 2.8.
"LIBOR" shall mean the average (rounded upward to the nearest 1/16th of
1%) of the per annum rates at which deposits in immediately available funds in
United States dollars for the relevant Interest Period and in the amount of the
LIBOR Loan to be disbursed or to remain outstanding during such Interest Period,
as the case may be, are offered to the Reference Bank by prime banks in any
Eurodollar market reasonably selected by the Reference Bank, determined as of
11:00 a.m. London time (or as soon thereafter as practicable), two (2) London
banking days prior to the beginning of the relevant Interest Period pertaining
to a LIBOR Loan hereunder.
"LIBOR LOANS" shall mean those Loans, whether in respect of Loan A or
Loan B, described in Section 2.1(a) hereof on which the Borrower shall pay
interest at a rate based on LIBOR.
"LOAN A" shall mean the revolving credit established by the Banks in
favor of the Borrower hereby, having a maximum Total Commitment Amount of Twenty
Million Dollars ($20,000,000).
"LOAN B" shall mean the revolving credit established by the Banks in
favor of the Borrower hereby, having a maximum Total Commitment Amount of Three
Million Dollars ($3,000,000).
"LOAN(S)" shall mean any loan(s) advanced hereunder, whether in respect
of Loan A or Loan B, which shall be either Prime Rate Loan(s) or LIBOR Loan(s),
and shall include, in respect of Loan A, the Term Loan, if any, elected by the
Borrower pursuant to Section 2.7(a), below.
"LONDON BANKING DAY" shall mean a day on which banks are open for
business in London, England, and quoting deposit rates for dollar deposits.
"MAJORITY BANKS" shall mean, at any time of determination, two or more
Banks having Commitments in the aggregate of at least sixty-six and two-thirds
percent (66 2/3%) of the Total Commitment Amount.
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"MEMBER" shall mean either of Shiloh Industries, Inc. or
Rouge Steel Company.
"NOTES" shall mean, collectively, the revolving credit notes executed
and delivered pursuant to Section 2.1(b) hereof.
"OBLIGATIONS" shall mean the obligations of the Borrower under this
credit agreement, including, without limitation, the outstanding principal and
accrued interest in respect of any LIBOR Loans or Prime Rate Loans, the
outstanding face amount of any Letters of Credit, all Commitment Fees and Letter
of Credit Fees, any fees owing to the Banks or the Agent, and any expenses,
taxes, compensation or other amounts owing under this credit agreement, the
Notes, any Related Writing and any and all other amounts owed by the Borrower to
the Agent or the Banks pursuant to this credit agreement or the Notes.
"PERSON" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government (whether
national, federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency body or department
thereof).
"PLAN" shall mean any employee pension benefit plan subject to Title IV
of the Employee Retirement Income Security Act of 1974, as amended, established
or maintained by the Borrower, any Subsidiary, or any member of the Controlled
Group, or any such Plan to which the Borrower or any member of the Controlled
Group is required to contribute on behalf of any of its employees.
"POSSIBLE DEFAULT" shall mean an event, condition or thing which
constitutes, or which with the lapse of any applicable grace period or the
giving of notice or both would constitute, any event of default referred to in
Article VII hereof and which has not been appropriately waived by the Majority
Banks in writing or fully corrected prior to becoming an actual event of
default.
"PRIME RATE" shall mean the variable interest rate from time to time
established by Society as its Prime Rate (or equivalent rate otherwise named)
whether or not such rate is publicly announced; the Prime Rate may not be the
lowest interest rate charged by Society for commercial or other extensions of
credit.
"PRIME RATE LOANS" shall mean those Loans, whether in respect of Loan A
or Loan B, described in Section 2.1(a) hereof on which the Borrower shall pay
interest at a rate based on the Prime Rate.
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"RATABLE PORTION" shall mean, in respect of any Bank, the quotient
(expressed as a percentage) obtained at any time by dividing such Bank's
Commitment at such time by the Total Commitment Amount.
"RECEIVABLE" shall mean a claim for moneys due or to become due,
whether classified as a contract right, account, chattel paper, instrument,
general intangible or otherwise.
"REFERENCE BANK" shall mean the Cayman Islands branch office
of Society.
"RELATED WRITING" shall mean the Notes and any assignment, mortgage,
security agreement, guaranty agreement (including, without limitation, the
guaranties of payment to be executed and delivered pursuant to Section 4.4),
Letter of Credit documentation, subordination agreement, financial statement,
audit report or other writing furnished by the Borrower or any Member any of
their respective officers to Banks pursuant to or otherwise in connection with
this credit agreement.
"REPORTABLE EVENT" shall mean a reportable event as that term is defined in
Title IV of the Employee Retirement Income Security Act of 1974, as amended,
except actions of general applicability by the Secretary of Labor under Section
110 of such Act.
"RESERVE PERCENTAGE" shall mean for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, all basic,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements) for
a member bank of the Federal Reserve System in Cleveland, Ohio, in respect of
"Eurocurrency Liabilities". The Adjusted LIBOR shall be adjusted automatically
on and as of the effective date of any change in the Reserve Percentage.
"SOCIETY" shall mean Society National Bank, a national
banking association.
"SUBORDINATED" as applied to indebtedness, shall mean that the
indebtedness has been subordinated (by written terms or agreement being in form
and substance satisfactory to the Majority Banks) in favor of the prior payment
in full of the Borrower's Obligations.
"SUBSIDIARY" shall mean an existing or future corporation, the majority
of the outstanding capital stock or voting power, or both, of which is (or upon
the exercise of all outstanding
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<PAGE> 7
warrants, options and other rights would be) owned at the time in question by
the Borrower or by another such corporation or by any combination of the
Borrower and such corporations.
"TOTAL COMMITMENT AMOUNT" shall mean, in respect of Loan A, the amount
of Twenty Million Dollars ($20,000,000) and, in respect of Loan B, the amount of
Three Million Dollars ($3,000,000).
Any accounting term not covered by a specific definition in this
Article I shall have the meaning ascribed thereto by generally accepted
accounting principles not inconsistent with Borrower's present accounting
procedures.
The foregoing definitions shall be applicable to the singulars and
plurals of the foregoing defined terms.
ARTICLE II. AMOUNT AND TERMS OF CREDIT
--------------------------
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms and
provisions of this credit agreement, each of the Banks shall, in its respective
Ratable Portion, grant Loans under Loan A or Loan B and issue Letters of Credit
under Loan B to the Borrower in such aggregate amount as the Borrower shall
request; provided, however, that in no event shall (i) the aggregate principal
amount of all Loans outstanding in respect of Loan A at any time exceed the
Total Commitment Amount for Loan A, or (ii) the sum of (A) the aggregate
principal amount of all Loans outstanding in respect of Loan B and (B) the
aggregate face amount of Letters of Credit outstanding at any time exceed the
Total Commitment Amount of Loan B.
The aforementioned Loans shall be made as a revolving credit, as follows:
(a) REVOLVING CREDIT. Subject to the terms and conditions of this
credit agreement, during the Commitment Period each Bank severally agrees to
make a Loan or Loans under Loan A or Loan B to the Borrower in such amount or
amounts as the Borrower may from time to time request but not exceeding in
aggregate principal amount at any one time outstanding hereunder the Commitment
of such Bank in respect of each such Loan, and, as to each Bank, in principal
amount not exceeding its respective Ratable Portion of each borrowing. The
Borrower shall have the option, subject to the terms and conditions set forth
herein, to borrow hereunder up to the Total Commitment Amount (for, as the case
may be, Loan A or Loan B) by means of any combination of (i) Prime Rate Loans
maturing on the last day of the Commitment Period drawn down in aggregate
amounts of not less than One Hundred Thousand Dollars ($100,000) or any multiple
thereof, bearing interest at a rate per annum equal to the Prime Rate or
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<PAGE> 8
(ii) LIBOR Loans maturing not later than the last day of the Commitment Period,
drawn down in aggregate amounts of not less than One Million Dollars
($1,000,000) or any multiple of One Hundred Thousand Dollars ($100,000) in
excess thereof, bearing interest at a rate per annum equal to one-half per cent
(1/2 of 1%) in excess of Adjusted LIBOR. The Borrower shall pay interest (based
on a year having 360 days and calculated for the actual number of days elapsed)
on the unpaid principal amount of Prime Rate Loans outstanding from time to time
from the date thereof until paid, payable on the last day of February, May,
August and November of each year commencing May 31, 1996, at a rate per annum
equal to the Prime Rate from time to time in effect. Any change in the Prime
Rate shall be effective immediately from and after such change in the Prime
Rate. The Borrower shall pay interest (based on a year having 360 days and
calculated for the actual number of days' elapsed) at a fixed rate for each
Interest Period on the unpaid principal amount of each LIBOR Loan outstanding
from time to time from the date thereof until paid, payable on each Interest
Adjustment Date with respect to the Interest Period applicable to such LIBOR
Loan, at the rate per annum equal to one-half per cent (1/2 of 1%) in excess of
Adjusted LIBOR, fixed in advance of each Interest Period as herein provided for
each such Interest Period. At the request of the Borrower, and subject to the
notice provisions of Section 2.2(a), below, the Bank shall convert Prime Rate
Loans to LIBOR Loans at any time and shall convert LIBOR Loans to Prime Rate
Loans or new LIBOR Loans on any Interest Adjustment Date applicable to the
existing LIBOR Loan.
(b) The obligation of the Borrower to repay both the Prime Rate Loans
and the LIBOR Loans made by each Bank and to pay interest thereon under Loan A
and Loan B shall be evidenced by Notes of the Borrower substantially in the form
of Exhibits A-1 and A-2, respectively, hereto, with appropriate insertions,
dated the date of this credit agreement and payable to the order of such Bank on
the last day of the Commitment Period in the principal amount of such Bank's
Commitment in respect of Loan A and Loan B. The principal amount of the Prime
Rate Loans and the LIBOR Loans made by each Bank in respect of Loan A or Loan B
and all prepayments thereof and the applicable dates with respect thereto shall
be recorded by such Bank from time to time on the records of the Bank by such
method as such Bank may generally employ; PROVIDED, HOWEVER, that failure to
make any such entry shall in no way detract from the Borrower's obligations
under any such Note. The aggregate unpaid amount of Prime Rate Loans and LIBOR
Loans set forth on the records of such Bank shall be rebuttably presumptive
evidence of the principal amount owing and unpaid on any such Note. If a Note
shall not be paid at maturity, whether such maturity occurs by reason of lapse
of time or by operation of any provision of acceleration of maturity therein
contained, the principal thereof and the unpaid interest
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thereon shall bear interest, until paid, for Prime Rate Loans at a rate per
annum equal to three percent (3%) in excess of the Prime Rate from time to time
in effect and for LIBOR Loans at a rate per annum equal to three and one-half
percent (3-1/2%) in excess of Adjusted LIBOR for the relevant Interest Period.
Subject to the provisions of this credit agreement, the Borrower shall be
entitled under this paragraph (a) to borrow funds, repay the same in whole or in
part and reborrow hereunder at any time and from time to time.
SECTION 2.2. CONDITIONS TO LOANS.
(a) CONDITIONS TO EACH LOAN. The obligation of each Bank to make the
Loans hereunder is conditioned, in the case of each borrowing hereunder, upon
(i) receipt by the Agent not later than 12:00 noon, Cleveland, Ohio time of a
loan request in form and substance satisfactory to the Agent (A) on the date of
the borrowing of any Prime Rate Loans, which shall include the proposed date and
aggregate amount of the borrowing of any Prime Rate Loans and shall state
whether the Loan is requested under Loan A or Loan B, and (B) on the date which
is three (3) London Banking Days' prior to the proposed date of borrowing of any
LIBOR Loans, which shall include the proposed date, aggregate amount and initial
Interest Period of any LIBOR Loans and shall state whether the Loan is requested
under Loan A or Loan B; (ii) the fact that no Possible Default or Event of
Default shall then exist or immediately after the Loan would exist; and (iii)
the fact that the representations and warranties contained in Article VI hereof
shall be true and correct in all material respects with the same force and
effect as if made on and as of the date of such borrowing except to the extent
that any thereof expressly relate to an earlier date. Each borrowing by the
Borrower hereunder shall be deemed to be a representation and warranty by the
Borrower as of the date of such borrowing as to the facts specified in (ii) and
(iii) above.
(b) BANKS TO FUND AGENT. Each Bank shall, before 2:00 P.M. (Cleveland,
Ohio time) on the date of each borrowing hereunder, make available to the Agent,
in immediately available funds at the account of the Agent maintained at the
payment office as specified by the Agent to the Banks prior to such date, such
Bank's Ratable Portion of the Loans comprising such borrowing. On the date
requested by the Borrower for a borrowing, after the Agent's receipt of the
funds representing a Bank's Ratable Portion of such borrowing and upon the
Borrower's fulfillment of the applicable conditions set forth in this Section
2.2, the Agent will make the funds of such Bank available to the Borrower.
(c) AVAILABILITY OF FUNDS. Unless the Agent shall have
received notice from a Bank prior to the date (except in the case
of Prime Rate Loans, in which case prior to the time) of any
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<PAGE> 10
borrowing that such Bank will not make available to the Agent such Bank's
Ratable Portion of the borrowing, the Agent may assume that such Bank has made
its Ratable Portion of the borrowing available to the Agent on the date of the
borrowing in accordance with Section 2.2(b). In reliance upon such assumption,
the Agent may, but shall not be obligated to, make available to the Borrower on
such date a corresponding portion of the borrowing. If and to the extent that
such Bank shall not have made available to the Agent its Ratable Portion of the
loans to be made as to such borrowing, such Bank and the Borrower severally
agree to repay to the Agent, immediately upon demand, the corresponding portion
of the borrowing, together with interest thereon, for each day from the date
such amount is advanced to the Borrower until the date such amount is repaid to
the Agent (i) in the case of the Borrower, at the interest rate applicable at
the time to the Loans comprising such borrowing and (ii) in the case of such
Bank, at the Fed Funds Rate. If such Bank shall repay to the Agent such
corresponding portion of the borrowing, the amount so repaid shall constitute
such Bank's Ratable Portion as part of such borrowing.
(d) FAILURE OF BANK TO LOAN. The failure of any Bank to make the Loan
to be made by it as its Ratable Portion of any borrowing shall not relieve any
other Bank of its obligation hereunder to make its Loan on the date of such
borrowing. No Bank shall be responsible for the failure of any other Bank to
make the Loan to be made by such other Bank on the date of any borrowing.
SECTION 2.3. PAYMENT ON NOTES, ETC. All payments of principal, interest and
commitment fees shall be made to the Agent for account of Banks in immediately
available funds. Once any such payment is made by the Borrower to the Agent, the
Banks shall look to the Agent, and not the Borrower, for the payment thereof.
Whenever any payment to be made hereunder, including without limitation any
payment to be made on the Notes, shall be stated to be due on a day which is not
a Banking Day, such payment shall be made on the next succeeding Banking Day and
such extension of time shall in each case be included in the computation of the
interest payable on the Notes; provided, however, that with respect to any LIBOR
Loan, if the next succeeding Banking Day falls in the succeeding calendar month,
such payment shall be made on the preceding Banking Day and the relevant
Interest Period shall be adjusted accordingly.
SECTION 2.4. PREPAYMENT. The Borrower shall have the right at any time or
from time to time, upon same day's notice (not later than 1:00 p.m. on such day)
to the Agent in the case of Prime Rate Loans, without the payment of any premium
or penalty, or upon four (4) London Banking Days' prior written notice to the
Agent in the case of LIBOR Loans (subject to the payment of
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prepayment compensation as hereinafter described in this Section 2.4) to prepay
all or any part of the principal amount of the Prime Rate Loans or LIBOR Loans,
as the case may be, then outstanding as designated by the Borrower, plus
interest accrued on the amount so prepaid to the date of such prepayment. In any
case of prepayment of any LIBOR Loans, the Borrower agrees that if Adjusted
LIBOR as determined as of 11:00 a.m. London time two London Banking Days prior
to the date of prepayment of any LIBOR Loans (hereinafter, "Prepayment LIBOR")
shall be lower than the last Adjusted LIBOR previously determined for those
LIBOR Loans with respect to which prepayment is intended to be made
(hereinafter, "Last LIBOR"), then the Borrower shall, upon written notice by the
Agent, promptly pay to the Agent, for the account of each of the Banks in
immediately available funds, a prepayment penalty measured by a rate (the
"Prepayment Compensation Rate") which shall be equal to the difference between
the Last LIBOR and the Prepayment LIBOR. In determining the Prepayment LIBOR,
Agent shall apply a rate equal to Adjusted LIBOR for a deposit approximately
equal to the amount of such prepayment which would be applicable to an Interest
Period commencing on the date of such prepayment and having a duration as nearly
equal as practicable to the remaining duration of the actual Interest Period
during which such prepayment is to be made. The Prepayment Compensation Rate
shall be applied to all or such part of the principal amounts of the Notes as
related to the LIBOR Loans to be prepaid, and the prepayment compensation shall
be computed for the period commencing with the date on which such prepayment is
to be made to that date which coincides with the last day of the Interest Period
previously established when the LIBOR Loans, which are to be prepaid, were made.
Each prepayment of a LIBOR Loan shall be in the aggregate principal sum of not
less than One Million Dollars ($1,000,000) or any amount in excess thereof. In
the event the Borrower cancels a proposed LIBOR Loan subsequent to the delivery
to the Agent of notice of the proposed date, aggregate amount and initial
Interest Period of such loan, but prior to the draw down of funds thereunder,
such cancellation shall be treated as a prepayment subject to the aforementioned
prepayment compensation.
SECTION 2.5. FEES; TERMINATION OR REDUCTION OF COMMITMENTS.
(a) The Borrower agrees to pay to each Bank, through the Agent, on the
last day of February, May, August and November of each year commencing May 31,
1996, as a consideration for its Commitment hereunder, a commitment fee
calculated at the rate of one-fourth percent (1/4 of 1%) per annum (based on a
year having 360 days and calculated for the actual number of days elapsed) from
the date hereof to and including the last day of the Commitment Period, on the
average daily unused amount of such Bank's Commitment hereunder under each of
Loan A and Loan B, which shall be determined by deducting from such Bank's
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Commitment in respect of Loan A its Ratable Portion of all outstanding Loans
under Loan A and by deducting from such Bank's Commitment in respect of Loan B
its Ratable Portion of all outstanding Loans under Loan B and Letters of Credit.
All fees set forth in this Section 2.5(a) shall be paid on the date due, in
immediately available funds, to the Agent for distribution, if and as
appropriate, to the Banks and, once paid, none of such fees shall be refundable
under any circumstances.
(b) The Borrower may at any time or from time to time terminate in
whole or in part the Total Commitment Amount hereunder to an amount not less
than the aggregate principal amount of the loans then outstanding, by giving the
Agent not less than three (3) Banking Days' notice, provided that any such
partial termination shall be in an amount of not less than One Million Dollars
($1,000,000) and in an integral multiple of Five Hundred Thousand Dollars
($500,000). After each such termination, the commitment fees payable hereunder
shall be calculated upon the Commitment of each Bank as so reduced. If the
Borrower terminates in whole the Total Commitment Amount, on the effective date
of such termination (the Borrower having prepaid in full the unpaid principal
balance, if any, of the Notes together with all interest (if any) and commitment
fees accrued and unpaid) the Notes shall be marked "Canceled" and delivered to
the Borrower. Any partial reduction in the Total Commitment Amount shall be
effective during the remainder of the Commitment Period.
SECTION 2.6. EXTENSION. The Borrower may request in writing that the
Commitment Period for Loan B be extended one (1) year to the anniversary date
next following the last day of the Commitment Period then in effect, which
request shall be addressed to the Agent on behalf of the Banks. The Agent shall
promptly deliver a copy of each such request to each of the Banks. The Banks
agree to give consideration to each such request and to respond in writing to
the Borrower affirmatively or negatively as to such request no later than sixty
(60) days after such request is received by the Agent. No Bank shall be
obligated to grant the Borrower any such extension, and unanimous written
consent of all the Banks shall be required to extend the Commitment Period. In
the event of the failure of any of the Banks to so respond affirmatively or
negatively in writing within such sixty (60) day period, such request for
extension shall be deemed to have been denied.
SECTION 2.7. CONVERSION OF LOAN A TO TERM LOAN.
(a) Upon 30 days' written notice to the Agent, the Borrower may elect
to convert the outstanding principal balance of Loan A into, and continue and
extend Loan A as, a five (5) year term loan (the "Term Loan"), upon the
expiration (or earlier
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termination pursuant to Section 2.5) of the Commitment Period, unless the
maturity of the Notes is accelerated by the Banks. The Term Loan shall evidenced
by Term Loan Notes substantially in the form of Exhibit A-3 hereto, and shall be
repayable in twenty (20) equal (or as nearly equal as practicable) consecutive
quarterly installments of principal PLUS accrued interest thereon, commencing on
the last Banking Day of the third month following the calendar month during
which termination of the Commitment Period occurs and continuing on the last
Banking Day of each third month thereafter until paid in full.
(b) The Term Loan shall bear interest, at the election of the Borrower,
at a fluctuating per annum rate equal to the Prime Rate or to the Adjusted LIBOR
plus one half of one percent (1/2 of 1%) in the manner specified for Prime Rate
Loans and LIBOR Loans, respectively, in Section 2.1(a), above.
SECTION 2.8. LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, the Agent
may, in its sole discretion, at the request of the Borrower, issue in favor of
the Borrower letters of credit (each a "Letter of Credit" and, collectively, the
"Letters of Credit") upon such terms (including, without limitation, the
execution and delivery by the Borrower of such applications, notes and other
instruments as the Agent may require) and in such form and substance as are
satisfactory to the Agent in its sole discretion. For purposes of the Total
Commitment Amount in respect of Loan B, the issuance of a Letter of Credit by
the Agent on behalf of the Banks shall be deemed to be an advance by each Bank
of a Loan in an amount equal to such Bank's Ratable Portion times the face
amount of the Letter of Credit for so long as such Letter of Credit is in force,
it being the intent of the parties hereby that at no time shall the aggregate
amount of Loans in respect of Loan B then unpaid, PLUS the aggregate face amount
of Letters of Credit then outstanding exceed the Total Commitment Amount in
respect of Loan B.
(b) In consideration of the Agent's issuance on behalf of the Banks of
each Letter of Credit hereunder, the Borrower shall pay to the Agent, on behalf
of the Banks, a fee (the "Letter of Credit Fee") equal to three-quarters of one
percent (3/4 of 1%) per annum (for the term of the Letter of Credit to which it
applies) of the face amount of the Letter of Credit to which it applies. The
Letter of Credit Fee in respect of each Letter of Credit shall be paid by the
Borrower on such date or dates as the Agent and the Borrower shall agree at the
time of issuance of such Letter of Credit. The Borrower hereby authorizes the
Agent, automatically and without further instruction from the Borrower, to
withdraw from and charge any demand deposit or other account of the Borrower
maintained at the Agent to pay to the Banks any
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Letter of Credit Fee on the date the same is due and payable, or the Agent may,
at its option, advance a Prime Rate Loan to the Borrower in the amount necessary
to pay such Letter of Credit Fee and the amount so advanced shall be added to
the principal balance of the Notes under Loan B.
(c) In the event that the Banks pay any amount under any Letter of
Credit, the Borrower shall immediately reimburse the Banks for the amount so
paid. The Borrower hereby authorizes each Bank, automatically and without
further instruction from the Borrower, to withdraw from and charge any demand
deposit or other account of the Borrower maintained at such Bank to reimburse
the Banks for any payment made on a Letter of Credit, or the Agent may, at its
option, advance a Prime Rate Loan in respect of Loan B to the Borrower in the
amount necessary to reimburse the Banks for the amount paid under any Letter of
Credit and the amount so advanced shall be added to the principal balance of the
Notes under Loan B.
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR LOANS
---------------------------------------------
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If at any time any law,
treaty or regulation (including, without limitation, Regulation D of the Board
of Governors of the Federal Reserve System) or the interpretation thereof by any
governmental authority charged with the administration thereof or any central
bank or other fiscal, monetary or other authority shall impose (whether or not
having the force of law), modify or deem applicable any reserve and/or special
deposit requirement (other than reserves included in the Reserve Percentage, the
effect of which is reflected in the interest rate(s) of the LIBOR Loan(s) in
question) against assets held by, or deposits in or for the amount of any loans
by, any Bank, and the result of the foregoing is to increase the cost (whether
by incurring a cost or adding to a cost) to such Bank of making or maintaining
hereunder LIBOR Loans or to reduce the amount of principal or interest received
by such Bank with respect to such LIBOR Loans, then upon demand by such Bank the
Borrower shall pay to such Bank from time to time on Interest Adjustment Dates
with respect to such Loans, as additional consideration hereunder, additional
amounts sufficient to fully compensate and indemnify such Bank for such
increased cost or reduced amount, assuming (which assumption such Bank need not
corroborate) such additional cost or reduced amount were allocable to such LIBOR
Loans. A certificate as to the increased cost or reduced amount as a result of
any event mentioned in this Section 3.1, setting forth the calculations
therefor, shall be promptly submitted by such Bank to the Borrower and shall, in
the absence of manifest error, be conclusive and binding as to the amount
thereof. Notwithstanding any other provision of this credit agreement, after any
such demand for compensation by any Bank, Borrower, upon at least three (3)
Banking Days' prior
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written notice to such Bank, may prepay the affected LIBOR Loans in full or
convert all LIBOR Loans to Prime Rate Loans regardless of the Interest Period of
any thereof. Any such prepayment or conversion shall be subject to the
prepayment penalties set forth in Section 2.4 hereof. Each Bank will notify the
Borrower as promptly as practicable of the existence of any event which will
likely require the payment by the Borrower of any such additional amount under
this Section.
SECTION 3.2. TAX LAW, ETC. In the event that by reason of any law,
regulation or requirement or in the interpretation thereof by an official
authority, or the imposition of any requirement of any central bank whether or
not having the force of law, any Bank shall, with respect to this credit
agreement or any transaction under this credit agreement, be subjected to any
tax, levy, impost, charge fee, duty, deduction or withholding of any kind
whatsoever (other than than any tax imposed upon the total net income of such
Bank), and if any such measures or any other similar measure shall result in an
increase in the cost to such Bank of making or maintaining any LIBOR Loan or in
a reduction in the amount of principal, interest or commitment fee receivable by
such Bank in respect thereof, then such Bank shall promptly notify the Borrower
stating the reasons therefor. The Borrower shall thereafter pay to such Bank
upon demand from time to time on Interest Adjustment Dates with respect to such
LIBOR Loans, as additional consideration hereunder, such additional amounts as
will fully compensate such Bank for such increased cost or reduced amount. A
certificate as to any such increased cost or reduced amount, setting forth the
calculations therefor, shall be submitted by such Bank to the Borrower and
shall, in the absence of manifest error, be conclusive and binding as to the
amount thereof.
Notwithstanding any other provision of this credit agreement, after any such
demand for compensation by any Bank, the Borrower, upon at least three (3)
Banking Days' prior written notice to such Bank, may prepay the affected LIBOR
Loans in full or convert all LIBOR Loans to Prime Rate Loans regardless of the
Interest Period of any thereof. Any such prepayment or conversion shall be
subject to the prepayment penalties set forth in Section 2.4 hereof.
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE
UNASCERTAINABLE. In respect of any LIBOR Loans, in the event that the Agent or
any Bank shall have determined that dollar deposits of the relevant amount for
the relevant Interest Period for such LIBOR Loans are not available to the
Reference Bank in the applicable Eurodollar market or that, by reason of
circumstances affecting such market, adequate and reasonable means do not exist
for ascertaining the LIBOR rate applicable to such Interest Period, as the case
may be, the Agent or such Bank
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<PAGE> 16
shall promptly give notice of such determination to the Borrower and (i) any
notice of new LIBOR Loans previously given by the Borrower and not yet borrowed
shall be deemed a notice to make Prime Rate Loans, and (ii) the Borrower shall
be obligated either to prepay or to convert any outstanding LIBOR Loans on the
last day of the then current Interest Period or Periods with respect thereto.
Any such prepayment or conversion shall be subject to the prepayment penalties
set forth in Section 2.4 hereof.
SECTION 3.4. INDEMNITY. Without prejudice to any other provisions of this
Article III, the Borrower hereby agrees to indemnify each Bank against any loss
or expense which such Bank may sustain or incur as a consequence of any default
by the Borrower in payment when due of any amount due hereunder in respect of
any LIBOR Loan, including, but not limited to, any loss of profit, premium or
penalty incurred by such Bank in respect of funds borrowed by it for the purpose
of making or maintaining such LIBOR Loan, as determined by such Bank in the
exercise of its sole but reasonable discretion. A certificate as to any such
loss or expense shall be promptly submitted by such Bank to the Borrower and
shall, in the absence of manifest error, be conclusive and binding as to the
amount thereof.
SECTION 3.5. CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL. If at any time
any new law, treaty or regulation, or any change in any existing law, treaty or
regulation, or any interpretation thereof by any governmental or other
regulatory authority charged with the administration thereof, shall make it
unlawful for any Bank to fund any LIBOR Loans which it is committed to make
hereunder with moneys obtained in the Eurodollar market, the commitment of such
Bank to fund LIBOR Loans shall, upon the happening of such event forthwith be
suspended for the duration of such illegality, and such Bank shall by written
notice to the Borrower and the Agent declare that its commitment with respect to
such LIBOR Loans has been so suspended and, if and when such illegality ceases
to exist, such suspension shall cease and such Bank shall similarly notify the
Borrower and the Agent. If any such change shall make it unlawful for any Bank
to continue in effect the funding in the applicable Eurodollar market of any
LIBOR Loan previously made by it hereunder, such Bank shall, upon the happening
of such event, notify the Borrower thereof in writing stating the reasons
therefor, and the Borrower shall, on the earlier of (i) the last day of the then
current Interest Period or (ii) if required by such law, regulation or
interpretation, on such date as shall be specified in such notice, either
convert all LIBOR Loans to Prime Rate Loans or prepay all LIBOR Loans to the
Banks in full. Any such prepayment or conversion shall be subject to the
prepayment penalties prescribed in Section 2.4 hereof.
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<PAGE> 17
SECTION 3.6. FUNDING. LIBOR Loans made by each Bank hereunder may, but
shall not be required to, be funded with funds obtained outside the United
States.
SECTION 3.7. PRO RATA TREATMENT. Except as required by Section 3.5,
each borrowing, each payment or prepayment of principal of any borrowing, each
payment of interest on the Prime Rate Loans or LIBOR Loans, each payment of the
Commitment Fees or the Letter of Credit Fees, each reimbursement in respect of a
Letter of Credit, each reduction of the Commitments and each rate conversion or
rate continuation of Prime Rate Loans or LIBOR Loans shall be allocated among
the Banks in accordance with each Bank's Ratable Portion of the Total Commitment
Amount (or if the Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of each Bank's Prime Rate Loans
and LIBOR Loans).
ARTICLE IV. OPENING COVENANTS
-----------------
Prior to or concurrently with the execution and delivery of this credit
agreement, the Borrower shall furnish to the Agent the following:
SECTION 4.1. RESOLUTIONS. Certified copies of the resolutions of the
Members of the Borrower evidencing approval of the execution of this credit
agreement and the execution and delivery of the Notes as provided for herein.
SECTION 4.2. LEGAL OPINION. A favorable opinion of counsel for the
Borrower as to the matters referred to in Sections 6.1, 6.2, 6.3 and 6.9 of this
credit agreement and such other matters as Agent may reasonably request.
SECTION 4.3. CERTIFICATE OF INCUMBENCY. A certificate of the secretary
or assistant secretary of the Borrower certifying the names of the officers of
the Borrower authorized to sign this credit agreement and the Notes, together
with the true signatures of such officers.
SECTION 4.4. GUARANTIES OF MEMBERS AND SUBSIDIARIES. Guaranties
executed by each of the Members, in substantially the form attached hereto as
Exhibits C-1 and C-2, respectively, and guaranties executed by each Subsidiary
of Shiloh Industries, Inc., other than Shafer Valve Company, in substantially
the form attached hereto as Exhibit C-3, of all of the Obligations incurred by
the Borrower to the Banks pursuant to this credit agreement, together with
certified resolutions of the respective Boards of Directors of each such Member
or Subsidiary authorizing the execution, performance and delivery thereof. If
the Borrower shall not have consummated, on or before July 17, 1996, the sale to
an unaffiliated third party of all of the outstanding capital
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<PAGE> 18
stock of Shafer Valve Company (the consummation of such sale to be evidenced by
documentation reasonably satisfactory to the Banks), the Borrower shall, on July
17, 1996, deliver to the Banks the guaranty of payment of Shafer Valve Company,
in substantially the form attached hereto as Exhibit C-3, of all of the
Obligations incurred by the Borrower to the Banks pursuant to this credit
agreement, together with an opinion of counsel in form and subsatnce reasonably
satisfactory to the Agent and certified resolutions of the Board of Directors of
Shafer Valve Company authorizing the execution, performance and delivery
thereof.
SECTION 4.5. NOTES. Notes, in favor of each of the Banks, in the
principal amount of such Bank's respective Commitment in respect of Loan A and
Loan B, each duly executed by the Borrower.
ARTICLE V. COVENANTS
---------
The Borrower agrees that so long as any of the Obligations remain
outstanding, or any Bank shall have any Commitment outstanding, or any Loan or
Letter of Credit shall remain unpaid or unreimbursed, the Borrower will perform
and observe and will cause each Subsidiary to perform and observe all of the
following provisions that are on their respective parts to be complied with,
namely:
SECTION 5.1. INSURANCE. The Borrower will (a) keep itself and all of
its insurable properties insured at all times to such extent, by such insurers,
and against such hazards and liabilities as is generally and prudently done by
like businesses, it being understood that the Borrower's insurance coverage at
the date of this credit agreement meets the standards contemplated by this
Section, (b) give each Bank prompt written notice of each material change in its
insurance coverage and the details of the change and (c) forthwith upon any
Bank's written request, furnish to such Bank such information about its
insurance as such Bank may from time to time reasonably request, which
information shall be prepared in form and detail satisfactory to such Bank and
certified by an officer of the Borrower.
SECTION 5.2. MONEY OBLIGATIONS. The Borrower will pay in full (a) prior
in each case to the date when penalties would attach, all taxes, assessments and
governmental charges and levies (except only those so long as and to the extent
that the same shall be contested in good faith by appropriate and timely
proceedings) for which it may be or become liable or to which any or all of its
properties may be or become subject, (b) all of its wage obligations to its
employees in compliance with the Fair Labor Standards Act (29 U.S.C. ss.206-207)
or any comparable provisions (except only those so long as and to the extent
that
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<PAGE> 19
the same shall be contested in good faith by appropriate and timely
proceedings), and (c) all of its other obligations calling for the payment of
money (except only those so long as and to the extent that the same shall be
contested in good faith) before such payment becomes overdue.
SECTION 5.3. RECORDS. The Borrower will (a) at all times maintain true
and complete records and books of account, and without limiting the generality
of the foregoing, maintain appropriate reserves for possible losses and
liabilities, all in accordance with generally accepted accounting principles
applied on a basis not inconsistent with its present accounting procedures and
(b) at all reasonable times and, so long as there does not then exist an Event
of Default or Possible Default, upon reasonable prior notice permit each Bank to
examine its books and records and to make excerpts therefrom and transcripts
thereof.
SECTION 5.4. OWNERSHIP; FRANCHISES. Shiloh Industries, Inc. will hold
at least an eighty percent (80%) equity ownership interest in the Borrower at
all times. The Borrower will preserve and maintain at all times its existence,
rights and franchises; provided, however, that this Section shall not prevent
any merger or transfer permitted by Section 5.12 hereof.
SECTION 5.5. NOTICES. The Borrower will cause its treasurer, or in his
or her absence another officer designated by the treasurer, to promptly notify
each Bank whenever any Possible Default may occur hereunder or any other
representation or warranty made in Article VI hereof or elsewhere in this credit
agreement or in any Related Writing may for any reason cease in any material
respect to be true and complete.
SECTION 5.6. ENVIRONMENTAL COMPLIANCE. The Borrower will comply in all
material respects with any and all Environmental Laws including, without
limitation, all Environmental Laws in jurisdictions in which it owns or operates
a facility or site, arranges for disposal or treatment of hazardous substances,
solid waste or other wastes, accepts for transport any hazardous substances,
solid waste or other wastes or holds any interest in real property or otherwise.
The Borrower will furnish to the Banks promptly after receipt thereof a copy of
any notice it may receive from any governmental authority, private person or
entity or otherwise that any litigation or proceeding pertaining to any
environmental, health or safety matter has been filed or is threatened against
it, any real property in which it holds any interest or any of its past or
present operations. The Borrower will not allow the release or disposal of
hazardous waste, solid waste or other wastes on, under or to any real property
in which it holds any interest or performs any of its operations in violation of
any Environmental Law. As used in this Section "litigation or proceeding" means
any demand, claim, notice, suit,
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<PAGE> 20
suit in equity, action, administrative action, investigation or inquiry whether
brought by any governmental authority, private person or entity or otherwise.
The Borrower shall defend, indemnify and hold the Agent and each Bank harmless
against all costs, expenses, claims, damages, penalties and liabilities of every
kind or nature whatsoever (including attorneys' fees) arising out of or
resulting from the noncompliance of the Borrower with any Environmental Law.
SECTION 5.7. ERISA COMPLIANCE. The Borrower will not incur any material
accumulated funding deficiency within the meaning of the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the regulations
thereunder, or any material liability to the Pension Benefit Guaranty
Corporation, established thereunder in connection with any Plan. The Borrower
will furnish to the Banks (i) simultaneously with a filing with the Pension
Benefit Guaranty Corporation of a notice regarding any Reportable Event and in
any event within thirty (30) days after the Borrower knows or has reason to know
that any Reportable Event with respect to any Plan has occurred, a statement of
the chief financial officer of the Borrower setting forth details as to such
Reportable Event and the action which the Borrower proposes to take with respect
thereto, together with a copy of the notice of such Reportable Event given to
the Pension Benefit Guaranty Corporation if a copy of such notice is available
to such Company, (ii) promptly after the filing thereof with the Internal
Revenue Service, upon the request of any Bank, copies of each annual report with
respect to each Plan established or maintained by the Borrower for each plan
year, including (x) where required by law, a statement of assets and liabilities
of such Plan as of the end of such plan year and statements of changes in fund
balance and in financial position, or a statement of changes in net assets
available for plan benefits, for such plan year, certified by an independent
public accountant satisfactory to the Majority Banks and (y) an actuarial
statement of such Plan applicable to such plan year, certified by an enrolled
actuary of recognized standing acceptable to the Majority Banks, and (iii)
promptly after receipt thereof a copy of any notice the Borrower or any member
of the Controlled Group may receive from the Pension Benefit Guaranty
Corporation or the Internal Revenue Service with respect to any Plan
administered by such Person; PROVIDED, that this latter clause shall not apply
to notices of general application promulgated by the Pension Benefit Guaranty
Corporation or the Internal Revenue Service. The Borrower will promptly notify
the Banks of any taxes assessed, proposed to be assessed or which the Borrower
has reason to believe may be assessed against the Borrower by the Internal
Revenue Service with respect to any Plan. As used in this Section "material"
means the measure of a matter of significance which shall be determined as being
an
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<PAGE> 21
amount equal to five percent (5%) of Borrower's Consolidated Tangible Net Worth.
SECTION 5.8. PLANS. The Borrower will not suffer or permit any Plan to
be amended if, as a result of such amendment, the current liability under the
Plan is increased to such an extent that security is required pursuant to
section 307 of the Employee Retirement Income Security Act of 1974, as amended
from time to time. As used in this Section, "current liability" means current
liability as defined in section 307 of such Act.
SECTION 5.9. FINANCIAL STATEMENTS. The Borrower will furnish to each
Bank (a) within fifty (50) days after the end of each of the first three
quarter-annual periods of each of its fiscal years, balance sheets as at the end
of that period and their profit and loss statements, reconciliation of surplus
statements and statements of cash flows for that period, all prepared on a
consolidating and consolidated basis basis in accordance with generally accepted
accounting principles consistently applied and in form and detail satisfactory
to each Bank and certified by a financial officer of the Borrower, together with
a covenant compliance certificate in form and substance satisfactory to each
Bank, (b) (i) within one hundred (100) days after the end of each of its fiscal
years ending prior to its conversion of Loan A into a term loan pursuant to
Section 2.7, above, and within one hundred (100) days after the end of the
fiscal year in which such conversion occurs, balance sheets as at the end of
that period and its profit and loss statements, reconciliation of surplus
statements and statements of cash flows for such fiscal year, all prepared on a
consolidating and consolidated basis in accordance with generally accepted
accounting principles consistently applied and in form and detail satisfactory
to each Bank and certified by a financial officer of the Borrower, together with
a covenant compliance certificate in form and substance satisfactory to each
Bank, and (ii) thereafter, within one hundred (100) days after the end of each
of its fiscal years commencing with the fiscal year immediately following the
fiscal year in which such conversion occurs, a complete annual audit report of
the Borrower for that year prepared on a consolidating and consolidated basis in
accordance with generally accepted accounting principles consistently applied
and in form and detail satisfactory to each Bank and certified by an independent
public accountant satisfactory to each Bank, together with a certificate by the
accountant setting forth the Events of Default or Possible Defaults coming to
its attention during the course of its audit or, if none, a statement to that
effect and a covenant compliance certificate of the Borrower in form and
substance satisfactory to each Bank, (c) as soon as available, copies of all
notices, reports, proxy statements and other similar documents sent by any
Company to its shareholders, to the holders of any of its debentures or bonds or
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<PAGE> 22
the trustee of any indenture securing the same or pursuant to which they may be
issued, to any securities exchange or to the Securities and Exchange Commission
or any similar federal agency having regulatory jurisdiction over the issuance
of that Company's securities, and (d) forthwith upon any Bank's written request,
such other information about the financial condition, properties and operations
of the Companies as such Bank may from time to time reasonably request, which
information shall be submitted in form and detail satisfactory to such Bank and
certified by a financial officer of the Company or Companies in question.
SECTION 5.10. INTEREST COVERAGE RATIO. The Borrower shall maintain a
ratio of (a)(i) Consolidated Net Earnings (including proceeds of any sale of
capitalized assets to which the Majority Banks have given their prior written
consent) plus (ii) all taxes on Consolidated Net Earnings or based on
Consolidated Net Earnings, including deferred taxes, plus (iii) all interest on
all Borrowed Debt of the Borrower (including Subordinated indebtedness) accrued
during the time period in question to (b) all interest on all indebtedness for
borrowed money of the Borrower (including Subordinated indebtedness) accrued
during the time period in question, of (i) commencing in respect of the
Borrower's fiscal quarter ending October 31, 1997, and in respect of each fiscal
quarter thereafter, no less than 1.25 to 1.0, based upon the Borrower's
financial statements for the most recent fiscal quarter and the previous three
fiscal quarters, and (ii) commencing in respect of the Borrower's fiscal quarter
ending October 31, 1998, and in respect of each fiscal quarter thereafter, 1.50
to 1.0, based upon the Borrower's financial statements for the most recent
fiscal quarter and the previous three fiscal quarters.
SECTION 5.11. INVESTMENTS. The Borrower will not (a) create, acquire or
hold any Subsidiary, (b) make or hold any investment in any stocks, bonds or
securities of any kind, (c) be or become a party to any joint venture or other
partnership, (d) make or keep outstanding any advance or loan or (e) be or
become a Guarantor of any kind; PROVIDED that this Section shall not apply to
(i) any endorsement of a check or other medium of payment for deposit or
collection through normal banking channels or any similar transaction in the
normal course of business or (ii) any investment in direct obligations of the
United States of America or in certificates of deposit issued by a member bank
of the Federal Reserve System, or (iii) any guaranty agreement executed in
connection with this credit agreement or running in favor of the Agent and the
Banks, or (iv) any investment in commercial paper which at the time of such
investment is assigned the highest quality rating in accordance with the rating
systems employed by either Moody's Investors Service, Inc. or Standard & Poor's
Corporation, or (v) advances to Members so long as the
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<PAGE> 23
aggregate amount of all such advances outstanding at any time does not exceed
One Million Dollars ($1,000,000).
SECTION 5.12. ACQUISITIONS; BULK TRANSFERS. The Borrower will not (a)
be a party to any consolidation or merger or (b) purchase all or a substantial
part of the assets of any corporation or other business enterprise, or (c)
lease, sell or otherwise transfer any assets (other than such chattels, if any,
as may have become obsolete or no longer useful in the continuance of its
present business) except in the normal course of its present business.
SECTION 5.13. LIENS. The Borrower will not (a) acquire any property
subject to any inventory consignment, lease, land contract or other title
retention contract (this section shall not apply to true leases, consignments,
tolling or other possessory agreements in respect of the property of others
whereby the Borrower does not have legal or beneficial title to such property
and which, pursuant to generally accepted accounting principles, are not
required to be capitalized), (b) sell or otherwise transfer any Receivables,
whether with or without recourse, or (c) suffer or permit any property now owned
or hereafter acquired by it to be or become encumbered by any mortgage, security
interest, financing statement or lien of any kind or nature; PROVIDED, that this
Section shall not apply to (i) any lien for a tax, assessment or governmental
charge or levy which is not yet due and payable or which is being contested in
good faith and as to which the Borrower shall have made appropriate reserves,
(ii) any lien securing only its workers' compensation, unemployment insurance
and similar obligations, (iii) any mechanics, carrier's or similar common law or
statutory lien incurred in the normal course of business, (iv) any transfer of a
check or other medium of payment for deposit or collection through normal
banking channels or any similar transaction in the normal course of business,
(v) any mortgage or security interest (including any refinance thereof in whole
or in part) created by the Borrower in the course of purchasing property, or
existing on property at the time of such purchase (whether or not assumed),
provided that such mortgage or security interest shall be restricted to the
property being purchased and provided, further, that the indebtedness secured
thereby shall not exceed two-thirds (2/3) of the purchase price in the case of
real estate or four-fifths (4/5) thereof in the case of personal property, (vi)
any mortgage, security interest or lien securing only indebtedness incurred to
the Banks, (vii) any financing statement perfecting only a security interest
permitted by this Section, (viii) easements, restrictions, minor title
irregularities and similar matters having no adverse effect as a practical
matter on the ownership or use of the Borrower's real property, or (ix) any
other liens existing on the date hereof; PROVIDED, HOWEVER, that
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the aggregate amount of the indebtedness secured by the mortgages, security
interests or liens permitted by clauses (v)
and (vi), above, shall not exceed Three Million Dollars ($3,000,000) in the
aggregate.
SECTION 5.14. BORROWINGS. The Borrower will not create, incur or suffer
to exist any indebtedness for borrowed money or any Funded Indebtedness of any
kind; provided, that this Section shall not apply to (i) the loans evidenced by
the Notes issued pursuant to this credit agreement, (ii) any purchase money
indebtedness secured by a purchase money mortgage or security interest permitted
by Section 5.13 hereof, (iii) any loan obtained by the Borrower and Subordinated
in favor of the Borrower's Debt to the Banks under this credit agreement
pursuant to a subordination agreement being substantially in the form of Exhibit
B hereto, or (iv) any other indebtedness existing on the date hereof and listed
on Schedule 5.14 hereto.
SECTION 5.15. USE OF PROCEEDS OF LOANS. The Borrower will use the
proceeds of Loan A (which may be converted to a term loan pursuant to Section
2.7) solely to finance the construction of a new blanking facility in Romulus,
Michigan. The Borrower will use the proceeds of Loan B solely for working
capital purposes.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
------------------------------
Subject only to such exceptions, if any, as may be fully disclosed in
an officer's certificate or written opinion of counsel furnished by the Borrower
to each Bank prior to the execution and delivery hereof, the Borrower represents
and warrants to each Bank as follows:
SECTION 6.1. EXISTENCE. The Borrower is a limited liability company
duly organized and validly existing and in good standing under the laws of the
state of its organization. The Borrower is duly qualified to carry on its
business as it is currently being conducted in each jurisdiction where such
qualification is required except for those jurisdictions in which the failure to
be so qualified would not, taken in the aggregate, have a material adverse
effect upon the Borrower's financial condition, properties or operations.
SECTION 6.2. RIGHT TO ACT. No registration with or approval of any
governmental agency of any kind is required for the due execution and delivery
or for the enforceability of this credit agreement, any Related Writing and any
Notes issued pursuant to this credit agreement. The Borrower has legal power and
right to execute and deliver this credit agreement and the Notes issued pursuant
to this credit agreement and to perform and observe the provisions of this
credit agreement and the Notes issued pursuant
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hereto. Each Member or other Person executing a guaranty of payment of debt in
connection with this credit agreement has the legal power and right to execute
the same and to perform and observe the provisions thereof. By executing and
delivering this credit agreement, each Related Writing and the Notes issued
pursuant to this credit agreement and by performing and observing the provisions
thereof, none of the Borrower, any Subsidiary of Shiloh Industries, Inc. or any
Member will violate any existing provision of its articles of organization,
operating agreement, articles of incorporation, code of regulations or bylaws
(or any other similar organic document), as the case may be, or any applicable
law or violate or otherwise become in default under any existing contract or
other obligation binding upon the Borrower or any such Member. The officers
executing and delivering this credit agreement on behalf of the Borrower have
been duly authorized to do so, and this credit agreement and the Notes, when
executed, are legally binding upon the Borrower in every respect, and are
enforceable in accordance with their terms. The officers of each Member
executing and delivering a guaranty of payment of debt in connection with this
credit agreement have been duly authorized to do so and each such instrument is
legally binding upon the Member executing the same in every respect, and is
enforceable in accordance with its terms. The officers of each Subsidiary of
Shiloh Industries, Inc. executing and delivering a guaranty of payment of debt
in connection with this credit agreement have been duly authorized to do so and
each such instrument is legally binding upon the Person executing the same in
every respect, and is enforceable in accordance with its terms.
SECTION 6.3. LITIGATION AND LIENS. No litigation or proceeding is
pending or threatened which might, if successful, adversely affect the Borrower
or any Member to a material extent. The Internal Revenue Service has not alleged
any default by the Borrower or any Member in the payment of any tax or
threatened to make any assessment in respect thereof.
SECTION 6.4. ERISA COMPLIANCE. The Borrower has not incurred any
material accumulated funding deficiency within the meaning of the Employee
Retirement Income Security Act of 1974, as amended from time to time, and the
regulations thereunder. No Reportable Event has occurred with respect to any
Plan. The Pension Benefit Guaranty Corporation, established thereunder has not
asserted that the Borrower has incurred any material liability in connection
with any Plan. No lien has been attached and no person has threatened to attach
a lien on any of the Borrower's property as a result of the Borrower's failure
to comply with such act or regulations. As used in this Section "material" means
the measure of a matter of significance which shall be determined as being an
amount equal to five per cent (5%) of the Borrower's Consolidated Tangible Net
Worth.
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SECTION 6.5. ACTUARIAL VALUATION REPORTS. To the best of the Borrower's
knowledge, the actuarial valuation reports, if any, respectively prepared and
certified by the actuaries and employee benefit consultants of the Borrower,
with respect to each Plan as of the end of the Borrower's preceding fiscal year,
copies of which actuarial valuation reports have been furnished to the Banks,
fairly present the actuarial condition of each Plan as of the end of the
Borrower's preceding fiscal year and the annual contribution requirements for
the year in which this credit agreement is executed.
SECTION 6.6. ENVIRONMENTAL COMPLIANCE. The Borrower is in substantial
compliance with any and all Environmental Laws including, without limitation,
all Environmental Laws in all jurisdictions in which any the Borrower owns or
operates, or has owned or operated, a facility or site, arranges or has arranged
for disposal or treatment of hazardous substances, solid waste or other wastes,
accepts or has accepted for transport any hazardous substances, solid waste or
other wastes or holds or has held any interest in real property or otherwise,
except where such noncompliance could not reasonably be expected to result in a
material adverse effect on the business, operations or financial condition of
the Borrower. No litigation or proceeding arising under, relating to or in
connection with any Environmental Law is pending or threatened against the
Borrower, any real property in which the Borrower holds or has held an interest
or any past or present operation of the Borrower. No release, threatened release
or disposal of hazardous waste, solid waste or other wastes is occurring, or has
occurred, on, under or to any real property in which the Borrower holds any
interest or performs any of its operations, in violation of any Environmental
Law, except where such violation could not reasonably be expected to result in a
material adverse effect on the business, operations or financial condition of
the Borrower. As used in this Section, "litigation or proceeding" means any
demand, claim, notice, suit, suit in equity, action, administrative action,
investigation or inquiry whether brought by any governmental authority, private
person or entity or otherwise.
SECTION 6.7. SOLVENCY. The Borrower has received consideration which is
the reasonable equivalent value of the obligations and liabilities that the
Borrower has incurred to the Banks. The Borrower is not insolvent as defined in
any applicable state or federal statute, nor will the Borrower be rendered
insolvent by the execution and delivery of this credit agreement or the Notes to
the Banks. The Borrower is not engaged or about to engage in any business or
transaction for which the assets retained by it shall be an unreasonably small
capital, taking into consideration the obligations to the Banks incurred
hereunder. The Borrower does not intend to, nor does it believe
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<PAGE> 27
that it will, incur debts beyond its ability to pay them as they mature.
SECTION 6.8. FINANCIAL CONDITION. The most recent consolidated
financial statements of the Borrower furnished to the Banks are true and
complete (including, without limiting the generality of the foregoing, a
disclosure of all material contingent liabilities) have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with those used during its next preceding fiscal year and fairly
presents its then financial condition and its operations for the year then
ending. There has been no material change in the Borrower's financial condition,
properties or business since that date.
SECTION 6.9. REGULATIONS. The Borrower is not engaged principally or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any "margin stock" (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System of the
United States of America). Neither the granting of any loans hereunder (or any
conversion thereof) nor the use of the proceeds of such loans will violate, or
be inconsistent with, the provisions of Regulation U or X of said Board of
Governors.
SECTION 6.10. DEFAULTS. No Event of Default or Possible Default exists
hereunder, nor will any begin to exist immediately after the execution and
delivery hereof.
SECTION 6.11. FULL DISCLOSURE. No information, exhibits or reports
furnished by the Borrower to the Agent or any Bank omits to state any fact
necessary to make the statements contained therein not materially misleading in
light of the circumstances and purposes for which such information was provided.
The Borrower has provided all information requested by the Agent or any Bank and
all such information is complete and accurate in all material respects.
ARTICLE VII. EVENTS OF DEFAULT
-----------------
Each of the following shall constitute an Event of Default hereunder:
SECTION 7.1. PAYMENTS. If the principal of or interest on any Note or
any commitment or other fee or amount owing to the Banks (or any of them) or the
Agent hereunder shall not be paid in full punctually when due and payable and
shall remain unpaid for a period of five (5) consecutive days.
SECTION 7.2. COVENANTS. If the Borrower or any Member shall fail or
omit (a) to perform and observe any agreement or other
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provision (other than those referred to in Sections 5.6, 5.10 or 7.1 hereof)
contained or referred to in this credit agreement or any Related Writing that is
on the Borrower's or such Member's part to be complied with, and that Possible
Default shall not have been fully corrected within thirty (30) consecutive days
after the giving of written notice thereof to the Borrower by the Agent or any
Bank that the specific Possible Default is to be remedied; or (b) to perform and
observe any agreement or other provision contained in Section 5.6 hereof, and
that Possible Default shall not have been fully corrected within thirty (30)
consecutive days after the giving of written notice thereof to the Borrower by
the Agent or any Bank that the specific Possible Default is to be remedied and,
in addition to such thirty (30) day period, within such additional period of
time during which Borrower diligently undertakes appropriate actions to cause
the Borrower to remedy the Possible Default, or for which the Borrower makes an
adequate reserve on its financial statements; or (c) to perform or observe any
agreement or other provision contained in Sections 5.10 or 7.1 hereof.
SECTION 7.3. WARRANTIES. If any representations, warranty or statement
made in or pursuant to this credit agreement or any Related Writing or any other
material information furnished by the Borrower or any Member to the Banks or any
other holder of any Note, shall be false or erroneous in any material respect.
SECTION 7.4. CROSS DEFAULT. If the Borrower or any Member defaults in
the payment of principal or interest due and owing upon any other Borrowed Debt
the principal amount of which, in the aggregate, exceeds Two Hundred Fifty
Thousand Dollars ($250,000), beyond any period of grace provided with respect
thereto or in the performance of any other agreement, term or condition
contained in any agreement under which such Borrowed Debt is created or
governed, if the effect of such default is to accelerate the maturity of such
Borrowed Debt or to permit the holder thereof to cause such Borrowed Debt to
become due prior to its stated maturity.
SECTION 7.5. TERMINATION OF PLAN. If (a) any Reportable Event occurs
and the Majority Banks, in their sole determination, deem such Reportable Event
to constitute grounds (i) for the termination of any Plan by the Pension Benefit
Guaranty Corporation or (ii) for the appointment by the appropriate United
States district court of a trustee to administer any Plan and such Reportable
Event shall not have been fully corrected or remedied to the full satisfaction
of the Majority Banks within thirty (30) days after giving of written notice of
such determination to the Borrower by any Bank or (b) any Plan shall be
terminated within the meaning of Title IV of the Employee Retirement Income
Security Act of 1974, as amended, or (c) a trustee shall be appointed by the
appropriate United States
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district court to administer any Plan, or (d) the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any Plan or to appoint a
trustee to administer any Plan.
SECTION 7.6. SOLVENCY. If the Borrower shall (a) discontinue business,
or (b) generally not pay its debts as such debts become due, or (c) make a
general assignment for the benefit of creditors, or (d) apply for or consent to
the appointment of a receiver, a custodian, a trustee, an interim trustee or
liquidator of all or a substantial part of its assets, or (e) be adjudicated a
debtor or have entered against it an order for relief under Title 11 of the
United States Code, as the same may be amended from time to time, or (f) file a
voluntary petition in bankruptcy or file a petition or an answer seeking
reorganization or an arrangement with creditors or seeking to take advantage of
any other law (whether federal or state) relating to relief of debtors, or admit
(by answer, by default or otherwise) the material allegations of a petition
filed against it in any bankruptcy, reorganization, insolvency or other
proceeding (whether federal or state) relating to relief of debtors, or (g)
suffer or permit to continue unstayed and in effect for thirty (30) consecutive
days any judgment, decree or order entered by a court or governmental commission
of competent jurisdiction, which assumes custody or control of the Borrower,
approves a petition seeking reorganization of the Borrower or any other judicial
modification of the rights of its creditors, or appoints a receiver, custodian,
trustee, interim trustee or liquidator for the Borrower or of all or a
substantial part of its assets, or (h) take, or omit to take, any action in
order thereby to effect any of the foregoing.
SECTION 7.7. JUDGMENTS. If (a) one or more judgments for the payment of
money in an aggregate amount in excess of $100,000 (unless such judgment (i)
shall have been reserved for by the Borrower on the date hereof or (ii) shall be
insured and the insurance carrier shall have acknowledged in writing liability
in respect of the full amount thereof or shall have been ordered by a court of
competent jurisdiction to pay such judgment) shall be rendered against the
Borrower and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or (b) any action
shall be legally taken by a judgment creditor to levy upon assets or properties
of the Borrower to enforce any judgment.
SECTION 7.8. DEFAULT UNDER GUARANTY. If an Event of Default (as defined
therein) shall have occurred and be continuing under either of the guaranties
executed and delivered by each Member pursuant to Section 4.4, above.
ARTICLE VIII. REMEDIES UPON DEFAULT
---------------------
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Notwithstanding any contrary provision or inference herein
or elsewhere,
SECTION 8.1. OPTIONAL DEFAULTS. If any event of default referred to in
Section 7.1, 7.2, 7.3, 7.4, 7.5, 7.7 or 7.8 hereof shall occur, the Majority
Banks, or in the event that the Commitments of the Banks shall have been
terminated, the Banks holding 66 2/3% of the aggregate amount of Loans and
Letters of Credit then outstanding, shall have the right in their discretion, by
directing the Agent, on behalf of the Banks, to give written notice to the
Borrower, to:
(a) terminate the Commitment and the credit hereby established, if
not theretofore terminated, and forthwith upon such election
the obligations of the Banks to make any further Loans or
issue any further Letters of Credit hereunder immediately
shall be terminated, and/or
(b) accelerate the maturity of all of the Borrower's
Obligations to the Banks (if it be not already due and
payable) whereupon all of the Borrower's Obligations to
the Banks (if it be not already due and payable), shall
become and thereafter be immediately due and payable in
full without any presentment or demand and without any
further or other notice of any kind, all of which are
hereby waived by the Borrower.
SECTION 8.2. AUTOMATIC DEFAULTS. If any event of default
referred to in Section 7.6 hereof shall occur,
(a) all the Commitments and the credit hereby established shall
automatically and forthwith terminate, if not theretofore
terminated, and no Bank thereafter shall be under any
obligation to grant any further Loans or issue any further
Letters of Credit hereunder, and
(b) the principal of and interest on the Notes, then outstanding,
and all of the Borrower's other Debt to the Banks and the
Agent shall thereupon become and thereafter be immediately due
and payable in full (if it be not already due and payable),
all without any presentment, demand or notice of any kind,
which are hereby waived by the Borrower.
SECTION 8.3. OFFSETS. If there shall occur or exist any Event of
Default or Possible Default referred to in Section 7.6 hereof or if the maturity
of the Notes is accelerated pursuant to Section 8.1 or 8.2 hereof, each Bank
shall have the right at any time to set off against, and to appropriate and
apply toward the payment of, any and all Debt then owing by the Borrower to such
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Bank, whether or not the same shall then have matured, any and all deposit
balances and all other indebtedness then held or owing by such Bank to or for
the credit or account of the Borrower, all without notice to or demand upon the
Borrower or any other person, all such notices and demands being hereby
expressly waived by the Borrower.
SECTION 8.4 EQUALIZATION PROVISION; SHARING OF PAYMENT.
EQUALIZATION OF ADVANTAGE. Each Bank agrees with the other Banks that
if it at any time shall obtain any Advantage over the other Banks in respect of
the Borrower's Obligations to the Banks (except under Section 3.1, 3.2, 3.3,
3.4, 9.3 or 9.5), it will purchase from the other Banks, for cash and at par,
such additional participation in the Borrower's Obligations to the Banks as
shall be necessary to nullify the Advantage. If any said Advantage resulting in
the purchase of an additional participation as aforesaid shall be recovered in
whole or in part from the Bank receiving the Advantage, each such purchase shall
be rescinded, and the purchase price restored (but without interest unless the
Bank receiving the Advantage is required to pay interest on the Advantage to the
person recovering the Advantage from such Bank) ratably to the extent of the
recovery. Each Bank further agrees with the other Banks that if it at any time
shall receive any payment for or on behalf of the Borrower on any indebtedness
owing by the Borrower to that Bank by reason of offset of any deposit or other
indebtedness, it will apply such payment first to any and all indebtedness owing
by the Borrower to that Bank pursuant to this credit agreement (including,
without limitation, any participation purchased or to be purchased pursuant to
this Section 8.4) until the Borrower's Obligations have been paid in full. The
Borrower agrees that any Bank so purchasing a participation from the other Banks
pursuant to this Section may exercise all its rights of payment (including the
right of set-off) with respect to such participation as fully as if such Bank
were a direct creditor of the Borrower in the amount of such participation.
ARTICLE VIII-A. THE AGENT
---------
SECTION 8A.1 THE AGENT. Each Bank irrevocably appoints Society to be
its Agent with full authority to take such actions, and to exercise such powers,
on behalf of the Banks in respect of this credit agreement and the Related
Writings as are therein respectively delegated to the Agent or as are reasonably
incidental to those delegated powers. Society in such capacity shall be deemed
to be an independent contractor of the Banks.
SECTION 8A.2 NATURE OF APPOINTMENT. The Agent shall have no fiduciary
relationship with any Bank by reason of this Agreement and the Related Writings.
The Agent shall not have any duty or
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responsibility whatsoever to any Bank except those expressly set forth in this
Agreement and the Related Writings. Without limiting the generality of the
foregoing, each Bank acknowledges that the Agent is acting as such solely as a
convenience to the Banks and not as a manager of the commitments or the
Obligations evidenced by the Notes. This Article VIII-A does not confer any
rights upon the Borrower or anyone else (except the Banks), whether as a third
party beneficiary or otherwise.
SECTION 8A.3 SOCIETY AS A BANK; OTHER TRANSACTIONS. Society's rights as
a Bank under this Agreement and the Related Writings shall not be affected by
its serving as the Agent. Society and its affiliates may generally transact any
banking, financial, trust, advisory or other business with the Borrower or its
Members (including, without limitation, the acceptance of deposits, the
extension of credit and the acceptance of fiduciary appointments) without notice
to the Banks, without accounting to the Banks, and without prejudice to
Society's rights as a Bank under this Agreement and the Related Writings except
as may be expressly required under this Agreement.
SECTION 8A.4 INSTRUCTIONS FROM BANKS. The Agent shall not be required
to exercise any discretion or take any action as to matters not expressly
provided for by this credit agreement and the Related Writings (including,
without limitation, collection and enforcement actions in respect of any
Obligations under the Notes or this credit agreement and any collateral
therefor) EXCEPT that the Agent shall take such action (or omit to take such
action) other than actions referred to in Section 9.1, as may be reasonably
requested of it in writing by the Majority Banks with instructions and which
actions and omissions shall be binding upon all the Banks; PROVIDED, HOWEVER,
that the Agent shall not be required to act (or omit any act) if, in its
judgment, any such action or omission might expose the Agent to personal
liability or might be contrary to this credit agreement, any Related Writing or
any applicable law.
SECTION 8A.5 BANK'S DILIGENCE. Each Bank (a) represents and warrants
that it has made its decision to enter into this credit agreement and the
Related Writings and (b) agrees that it will make its own decision as to taking
or not taking future actions in respect of this credit agreement and the Related
Writings; in each case without reliance on the Agent or any other Bank and on
the basis of its independent credit analysis and its independent examination of
and inquiry into such documents and other matters as it deems relevant and
material.
SECTION 8A.6 NO IMPLIED REPRESENTATIONS. The Agent shall not be liable
for any representation, warranty, agreement or obligation of any kind of any
other party to this credit agreement or anyone else, whether made or implied by
the Borrower
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or any Subsidiary in this credit agreement or any Related Writing or by a Bank
in any notice or other communication or by anyone else or otherwise.
SECTION 8A.7 SUB-AGENTS. The Agent may employ agents and shall not be
liable (except as to money or property received by it or its agents) for any
negligence or misconduct of any such agent selected by it with reasonable care.
The Agent may consult with legal counsel, certified public accountants and other
experts of its choosing (including, without limitation, Society's salaried
employees or any such persons otherwise not independent) and shall not be liable
for any action or inaction taken or suffered in good faith by it in accordance
with the advice of any such counsel, accountants or other experts which shall
have been selected by it with reasonable care.
SECTION 8A.8 AGENT'S DILIGENCE. The Agent shall not be required (a) to
keep itself informed as to anyone's compliance with any provision of this credit
agreement or any Related Writing, (b) to make any inquiry into the properties,
financial condition or operation of the Borrower or any Member or any other
matter relating to this credit agreement or any Related Writing, (c) to report
to any Bank any information (other than which this credit agreement or any
Related Writing expressly requires to be so reported) that the Agent or any of
its affiliates may have or acquire in respect of the properties, business or
financial condition of the Borrower or any Member or any other matter relating
to this credit agreement or any Related Writing or (d) to inquire into the
validity, effectiveness or genuineness of this credit agreement or any Related
Writing.
SECTION 8A.9 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge of any Possible Default or Event of Default unless and until it shall
have received a written notice describing it and citing the relevant provision
of this credit agreement or any Related Writing. The Agent shall give each Bank
reasonably prompt notice of any such written notice except, of course, to any
Bank that shall have given the written notice.
SECTION 8A.10 AGENT'S LIABILITY. Neither the Agent nor any of its
directors, officers, employees, attorneys, and other agents shall be liable for
any action or omission on their respective parts except for gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, the
Agent: (i) may treat the payee of any Note as the holder thereof until the Agent
receives a fully executed copy of the Assignment Agreement required by Section
10.1(b) signed by such payee and in form satisfactory to the Agent and the fee
required by Section 10.1(b); (ii) may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be
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taken in good faith by it in accordance with the advice or such counsel,
accountants or experts which have been selected by the Agent with reasonable
care; (iii) makes no warranty or representation to any Bank and shall not be
responsible to any Bank for any statements, warranties or representations made
in or in connection with this credit agreement or any Related Writing,
including, without limitation, the truth of the statements made in any
certificate delivered by the Borrower or any other notice or delivery by the
Borrower, the Agent being entitled for the purposes of determining fulfillment
of the conditions set forth therein to rely conclusively upon such certificates;
(iv) 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 credit
agreement, the Notes or any other Related Writing or to inspect the property
(including the books and records) of the Borrower and/or the Members; (v) shall
not be responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this credit agreement, any
collateral covered by any Related Writing and (vi) shall incur no liability
under or in respect of this credit agreement, the Notes or any other Related
Writing by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, telecopy, cable or telex) believed by it in
good faith to be genuine and correct and signed or sent by the proper party or
parties.
Neither the Agent nor any of its directors, officers, employees or
agents shall have any responsibility to the Borrower on account of the failure
of or delay in performance or breach by any Bank of any of its obligations
hereunder or to any Bank on account of the failure of or delay in performance or
breach by any other Bank or the Borrower of any of their respective obligations
hereunder or under any Related Writing or in connection herewith or therewith.
The Banks each hereby acknowledge that the Agent shall be under no duty
to take any discretionary action permitted to be taken by it pursuant to the
provisions of this credit agreement, the Notes or any other Related Writing
unless it shall be requested in writing to do so by the Majority Banks.
SECTION 8A.11 COMPENSATION. The Agent shall receive no other
compensation for its services as agent of the Banks in respect of this credit
agreement and the Related Writings, except any expressly referred to in this
credit agreement, but the Borrower shall reimburse the Agent periodically on its
demand for out-of-pocket expenses, if any, reasonably incurred by it as such and
as to which the Agent has delivered to the Borrower reasonable substantiation.
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SECTION 8A.12 AGENT'S INDEMNITY. The Banks shall indemnify the Agent
(to the extent the Agent is not reimbursed by the Borrower) from and against (a)
any loss or liability (other than any caused by the Agent's gross negligence or
willful misconduct and other than any loss to the Agent resulting from the
Borrower's non-payment of agency fees owed solely to the Agent) incurred by the
Agent as such in respect of this credit agreement, the Notes or any Related
Writing (as the Agent) and (b) any out-of-pocket expenses incurred in defending
itself or otherwise related to this credit agreement, the Notes or any Related
Writing (other than any caused by the Agent's gross negligence or willful
misconduct) including, without limitation, reasonable fees and disbursements of
legal counsel of its own selection (including, without limitation, the
reasonable interdepartmental charges of its salaried attorneys) in the defense
of any claim against it or in the prosecution of its rights and remedies as the
Agent (other than the loss, liability or costs incurred by the Agent in the
defense of any claim against it by the Banks arising in connection with its
actions in its capacity as Agent); PROVIDED, HOWEVER, that each Bank shall be
liable for only its Ratable Portion of the whole loss or liability.
SECTION 8A.13 RESIGNATION. The Agent (or any successor) may at any time
resign as such by giving ten (10) days' prior written notice to the Borrower and
to each Bank; and the Majority Banks may remove the Agent at any time with or
without cause by giving written notice to the Agent and the Borrower. In any
such case, the Majority Banks may appoint a successor to the resigned or removed
agent (the "Former Agent"), provided that the Majority Banks obtain the
Borrower's prior written consent to the successor (which consent shall not be
unreasonably withheld), by giving written notice to the Borrower, the Former
Agent and each Bank not participating in the appointment; PROVIDED, HOWEVER,
that, if at the time of the proposed resignation or removal of an Agent, the
Borrower is the subject of an action referred to in Section 7.6 or an Event of
Default shall have occurred and be continuing the Borrower's consent shall not
be required. In the absence of a timely appointment, the Former Agent shall have
the right (but not the duty) to make a temporary appointment of any Bank (but
only with that Bank's consent) to act as its successor pending an appointment
pursuant to the immediately preceding sentence. In either case, the successor
Agent shall deliver its written acceptance of appointment to the Borrower, to
each Bank and to the Former Agent, whereupon (a) the Former Agent shall execute
and deliver such assignments and other writings as the successor Agent may
reasonably require to facilitate its being and acting as the Agent, (b) the
successor Agent shall in any event automatically acquire and assume all the
rights and duties as those prescribed for the Agent by this Article VIII-A and
(c)
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the Former Agent shall be discharged from its duties and obligations under this
credit agreement and the Related Writings.
SECTION 8A.14 BANK PURPOSE. Each Bank represents and warrants to the
Agent, the other Banks and the Borrower that such Bank is familiar with the
Securities Act of 1933, as amended, and the rules and regulations thereunder and
is not entering into this credit agreement with any intention to violate such
Act or any rule or regulation thereunder. Subject to the provisions of Sections
10.1 and 10.2, each Bank shall at all times retain full control over the
disposition of its assets subject only to this credit agreement and to all
applicable Law.
SECTION 8A.15 BANK INDEMNIFICATION. Each Bank providing cash management
or similar services to the Borrower agrees to indemnify each of the other Banks
(the "Other Banks") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by, or asserted against any Other Bank in any way relating to or arising out of
the cash management or similar services provided by such Bank to the Borrower or
any of its Members or any action or inaction of such Bank in connection
therewith.
ARTICLE IX. MISCELLANEOUS
-------------
SECTION 9.1. AMENDMENTS, CONSENTS, INTERPRETATION. No amendment,
modification, termination, or waiver of any provision of this credit agreement
or of the Notes, nor consent to any variance therefrom, shall be effective
unless the same shall be in writing and signed by the Majority Banks (and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given). Unanimous consent of all Banks shall be
required with respect to (i) the extension of maturity of any Note, or the
payment date of interest, principal and/or fees thereunder, or (ii) any
reduction in the rate of interest on the Notes, or in any amount of principal or
interest due on any Note, or in the manner of pro rata application of any
payments made by the Borrower to the Banks hereunder, or (iii) any change in any
percentage voting requirement in this Agreement, or (iv) any change in the
dollar amount or percentage of the Banks' Commitments or any Bank's Commitment,
or (v) any change in amount or timing of any fees payable under this credit
agreement, or (vi) any release of the Members or either thereof from any
obligation of under any guaranty, or (vii) any change in any provision of this
credit agreement which requires all of the Banks to take any action under such
provision or (viii) any change in Section 10.1, 10.2 or this Section 9.1 itself.
Notice of amendments or consents ratified by the Banks hereunder shall
immediately be forwarded by the Borrower to all Banks. Each Bank
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or other holder of a Note shall be bound by any amendment, waiver or consent
obtained as authorized by this section, regardless of its failure to agree
thereto. No omission or course of dealing on the part of Agent, any Bank or the
holder of any Note in exercising any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The remedies herein
provided are cumulative and in addition to any other rights, powers or
privileges held by operation of law, by contract or otherwise.Any provision of
this credit agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. The several captions to different sections and subsections of this
credit agreement are inserted for convenience only and shall be ignored in
interpreting the provisions hereof. This credit agreement and each Related
Writing shall be interpreted in accordance with Ohio law and the respective
rights and obligations of the Banks and the Borrower shall be governed by Ohio
law, without regard to principles of conflict of laws.
SECTION 9.2 NOTICE. A notice to, demand upon or request of the Borrower
shall be deemed to have been given or made hereunder when a writing to that
effect shall have been delivered to an officer of the Borrower or forty-eight
(48) hours after a writing to that effect shall have been deposited in the
United States mail with postage prepaid by registered or certified mail to the
Borrower or delivered to a telegraph company at the address set forth below (or
to such other address as the Borrower may hereafter furnish to the Agent in
writing for that purpose). No other method of giving notice to, demand upon or
request of the Borrower is hereby precluded. Every notice or request required or
permitted to be given to a Bank pursuant to this credit agreement shall be
delivered to such Bank at its address set forth on the signature pages of this
credit agreement or at such other address as such Bank may furnish to Borrower
in writing for that purpose.
SECTION 9.3. COSTS. The Borrower agrees to pay on demand all reasonable
costs and expenses of the Agent in connection with the preparation, execution,
delivery, modification, administration and amendment of this credit agreement
(including, without limitation, any amendment), the Notes, the Related Writings
and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Agent with respect thereto (including any reasonable interdepartmental charges)
and with respect to advising the Agent as to its rights and
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responsibilities under this credit agreement. Without limiting the generality of
the foregoing, such costs and expenses shall include: (a) reasonable attorneys'
and paralegals' costs, expenses and disbursements of counsel to the Agent; (b)
extraordinary expenses of Agent in connection with the administration of this
credit agreement, the Notes, any other Related Writing and the other instruments
and documents to be delivered hereunder; (c) the reasonable fees and
out-of-pocket expenses of special counsel for the Agent or the Agent for the
benefit of the Banks, with respect thereto and of local counsel, if any, who may
be retained by said special counsel with respect thereto; (d) costs and expenses
(including reasonable attorneys and paralegal costs, expenses and disbursements)
for any amendment, supplement, waiver, consent, or subsequent closing in
connection with this credit agreement, the Notes, any other Related Writing and
the transactions contemplated thereby; (e) sums paid or incurred to pay any
amount or take any action required of the Borrower under this credit agreement,
the Notes or any Related Writing that the Borrower fails to pay or take; (f) the
cost of any appraisal, survey, environmental audit or the retention of any other
professional service or consultant commenced after the occurrence and
continuation of an Event of Default and deemed reasonably necessary by the
Agent; (g) costs of inspections and periodic review of the records of the
Borrower or any of its Members, including, without limitation, travel, lodging,
and meals for inspections of the Borrower's and its Members' operations by the
Agent up to one time per year and at any time after the occurrence and during
the continuation of an Event of Default; (h) costs and expenses of forwarding
loan proceeds, fees, interest and other payments to the Banks; and (i) costs and
expenses (including, without limitation, attorneys' fees) paid or incurred to
obtain payment of the Obligations (including the Obligations arising under this
Section 9.3), enforce the provisions of the credit agreement, the Notes or any
Related Writing, or to defend any claims made or threatened against the Agent
arising out of the transactions contemplated hereby (including without
limitation, preparations for and consultations concerning any such matters). The
Borrower further agrees to pay on demand all costs and expenses of each Bank, if
any (including reasonable counsel fees and expenses), in connection with the
restructuring or the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement, the Notes, any Related Writing and
the other documents to be delivered hereunder, including, without limitation,
reasonable counsel fees and expenses in connection with the enforcement of
rights under this Section 9.3. The foregoing shall not be construed to limit any
other provisions of this Agreement, the Notes or any Related Writing regarding
costs and expenses to be paid by the Borrower. All of the foregoing costs and
expenses may be charged, in the Agent's sole discretion, to the Borrower's loan
account as Prime Rate Loans (notwithstanding
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existence of any Possible Default or Event of Default or the failure of the
conditions of Article V to have been satisfied).
SECTION 9.4 OBLIGATIONS SEVERAL. The obligations of the Banks hereunder
are several and not joint. Nothing contained in this credit agreement and no
action taken by Agent or the Banks pursuant hereto shall be deemed to constitute
the Banks a partnership, association, joint venture or other entity. No default
by any Bank hereunder shall excuse the other Banks from any obligation under
this credit agreement; but no Bank shall have or acquire any additional
obligation of any kind by reason of such default.
SECTION 9.5. CAPITAL ADEQUACY. If any Bank shall determine, after the
date hereof, that the adoption of any applicable law, rule, regulation or
guideline regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank (or its lending office) with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Bank's capital (or
on the capital of such Bank's holding company) as a consequence of its
obligations hereunder to a level below that which such Bank (or its holding
company) could have achieved but for such adoption, change or compliance (taking
into consideration such Bank's policies or the policies of its holding company
with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time, within 15 days after demand by such Bank, the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank (or its holding company) for such reduction. Such Bank will
designate a different leading office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. A certificate of such Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods. Failure on the part of such Bank to demand
compensation for any reduction in return on capital with respect to any period
shall not constitute a waiver of such Bank's rights to demand compensation for
any reduction in return on capital in such period or in any other period. The
protection of this Section shall be available to such Bank regardless of any
possible contention of the invalidity or inapplicability of the law, regulation
or other condition which shall have been imposed.
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<PAGE> 40
SECTION 9.6. ENTIRE AGREEMENT. This credit agreement, the Notes and any
other agreement, document or instrument attached hereto or referred to herein or
executed on or as of the date hereof integrate all the terms and conditions
mentioned herein or incidental hereto and supersede all oral representations and
negotiations and prior writings with respect to the subject matter hereof.
SECTION 9.7. EXECUTION IN COUNTERPARTS. This credit agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
SECTION 9.8. JURY TRIAL WAIVER. THE BORROWER, THE AGENT AND EACH BANK
EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE AGENT, THE BANKS AND
THE BORROWER ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS CREDIT
AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS
WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY THE BANKS'
ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT
PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
BETWEEN THE AGENT, THE BANKS AND THE BORROWER.
ARTICLE X. TRANSFERS AND ASSIGNMENTS.
--------------------------
SECTION 10.1 TRANSFER OF COMMITMENT. Each Bank shall have the right at
any time or times to transfer to another financial institution, without
recourse, all or any part of (a) that Bank's Commitment, (b) any loan made by
that Bank, (c) any Note, and (d) that Bank's participation, if any, purchased
pursuant to Section 8.4; PROVIDED, HOWEVER, in each such case, that the
transferor and the transferee shall have complied with the following
requirements:
(a) PRIOR CONSENT. No transfer may be consummated pursuant to this
Article X without the prior written consent of the Borrower and the Agent (other
than a transfer by any Bank to any affiliate of such Bank), which consent of the
Borrower shall not be unreasonably withheld; PROVIDED, HOWEVER, that, neither
the Borrower nor the Agent shall be deemed to be unreasonable in withholding its
respective consent if, (i) after giving effect to such transfer, any Bank's
(including any assignee becoming a Bank pursuant to this Section 10.1) Ratable
Portion of the Total Commitment Amount would be less than Five Million Dollars
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<PAGE> 41
($5,000,000), (ii) the proposed transferee is a financial institution not
organized under the Laws of a state or of the United States (unless such
institution is an affiliate of the transferring Bank) or (iii) if the proposed
transferee's long-term certificates of deposit shall be rated A or below by any
rating agency or the equivalent rating by Thompson's Bank Watch; PROVIDED,
FURTHER, that, if at the time of the proposed transfer the Borrower is the
subject of a proceeding referenced in Section 7.6 or any Event of Default shall
have occurred and be continuing, neither the Borrower's nor the Agent's consent
shall be required and any Bank may consummate a transfer contemplated by Section
10.1 notwithstanding the requirements of clauses (i), (ii) or (iii) of this
Section 10.1(a). Notwithstanding anything to the contrary, any Bank may at any
time assign all or any portion of its rights under this Agreement and its Notes
to a Federal Reserve Bank, and no such assignment shall release such assigning
Bank from its obligations hereunder.
(b) AGREEMENT; TRANSFER FEE. The transferor (i) shall remit to the
Agent an administrative fee of Two Thousand Five Hundred Dollars ($2,500) and
(ii) shall cause the transferee to execute and deliver to the Borrower, the
Agent and each Bank (A) an Assignment Agreement in the form specified by the
Agent (an "Assignment Agreement") together with any consents and releases and
any other documents referenced therein and (B) such additional amendments,
assurances and other writings as the Agent may reasonably require.
(c) NOTES. The Borrower shall execute and deliver (i) to the Agent, the
transferor and the transferee, any consent or release (of all or a portion of
the obligations of the transferor) to be delivered in connection with the
Assignment Agreement, (ii) if a Bank's entire interest in its Commitment and in
all of its loans have been transferred, to the transferee an appropriate Notes
against return of the Notes (marked "replaced") held by the transferor and (iii)
if only a portion of a Bank's interest in its Commitment and its loans has been
transferred, a new Note to each of the transferor and the transferee against
return of the original such Notes of the transferor (marked "replaced") held by
the transferor.
(d) PARTIES. Upon satisfaction of the requirements of this Section
10.1, including the payment of the fee and the delivery of the documents set
forth in Section 10.1(b), (i) the transferee shall become and thereafter be
deemed to be a "Bank" for the purposes of this credit agreement and (ii) the
transferor (A) shall continue to be a "Bank" for the purposes of this credit
agreement only if and to the extent that the transfer shall not have been a
transfer of its entire interest in its Commitment and its loans, (B) shall cease
to be and thereafter shall no longer be deemed to be a "Bank" in the case of any
transfer of its
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<PAGE> 42
entire interest in its Commitment and its loans and (C) the signature pages
hereto and Annex A hereto shall be automatically amended, without further
action, to reflect the result of any such transfer.
SECTION 10.2 SALE OF PARTICIPATION. Each Bank shall have the right at
any time or times to sell one or more participation or subparticipations to a
financial institution, as the case may be, in all or any part of (a) that Bank's
Commitment, (b) any loan made by that Bank, (d) any Note delivered to that Bank
pursuant to this credit agreement, and (e) that Bank's participation, if any,
purchased pursuant to Section 8.4 or this Section 10.2.
(a) BENEFITS OF PARTICIPANT. The provisions of Article III and Section
9.5 shall inure to the benefit of each purchaser of a participation or
subparticipation (provided that each such participant shall look solely to the
seller of its participation for those benefits and the Borrower's liabilities,
if any, under any of those sections shall not be increased as a result of the
sale of any such participation) and Agent shall continue to distribute payments
pursuant to this credit agreement as if no participation has been sold.
(b) RIGHTS RESERVED. In the event any Bank shall sell any participation
or subparticipation, that Bank shall, as between itself and the purchaser,
retain all of its rights (including, without limitation, rights to enforce
against the Borrower this credit agreement and the Related Writings) and duties
pursuant to this credit agreement and the Related Writings, including, without
limitation, that Bank's right to approve any waiver, consent or amendment
pursuant to Section 9.1, except if and to the extent that any such waiver,
consent or amendment would
(i) reduce any fee or commission allocated to the participation or
subparticipation, as the case may be,
(ii) reduce the amount of any principal payment on any loan
allocated to the participation or subparticipation, as the
case may be, or reduce the principal amount of any loan so
allocated or the rate of interest payable thereon, or
(iii) extend the time for payment of any amount allocated to the
participation or subparticipation, as the case may be.
(c) NO DELEGATION. No participation or subparticipation shall operate
as a delegation of any duty of the seller thereof. Under no circumstance shall
any participation or subparticipation
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<PAGE> 43
be deemed a novation in respect of all or any part of the seller's obligations
pursuant to this credit agreement.
SECTION 10.3 CONFIDENTIALITY. Each Bank hereby (a) acknowledges that
the Borrower and each of its Members have many trade secrets and much financial,
environmental and other data and information the confidentiality of which is
important to their business and (b) agrees to keep confidential any such trade
secret, data or information designated in writing by the Borrower or any of its
Members as confidential, except that this Section shall not preclude any Bank
from furnishing any such secret, data or information: (i) as may be required by
order of any court of competent jurisdiction or requested by any governmental
agency having any regulatory authority over that Bank or its securities or in
response to legal process, (ii) to any other party to this credit agreement,
(iii) or to any affiliate of any Bank or to any actual or prospective
transferee, participant or subparticipant (so long as such affiliate or
prospective transferee, participant or subparticipant is a financial
institution) of all or part of that Bank's rights arising out of or in
connection with the Related Writings and this credit agreement or any thereof so
long as such affiliate, prospective transferee, participant or subparticipant to
whom disclosure is made agrees to be bound by the provisions of this Section
10.3, (iv) to anyone if it shall have been already publicly disclosed (other
than by that Bank in contravention of this Section 10.3), (v) to the extent
reasonably required in connection with the exercise of any right or remedy under
this credit agreement or any Related Writing, (vi) to that Bank's legal counsel,
auditors and accountants and (vii) in connection with any legal proceedings
instituted by or against the Agent or any Bank.
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<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed by their respective officers or agents thereunto duly
authorized, as of the date first above written.
SHILOH OF MICHIGAN, LLC
/s/ G. Rodger Loesch
_________________________
By:
Title: CFO/Treasurer
402 Ninth Avenue
P.O. Box 2037
Mansfield, OH 44905
Attention:
Telecopy: (216) ___-____
SOCIETY NATIONAL BANK,
individually and as Agent
/s/ Richard A. Pohle
_________________________
By: Richard A. Pohle
Title: Vice President and
Manager
127 Public Square
Cleveland, Ohio 44114
Attention: Large Corporate
Group
Telecopy: (216) 689-4981
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<PAGE> 45
BANKS
-----
SOCIETY NATIONAL BANK
/s/ Richard A. Pohle
-------------------------
By: Richard A. Pohle
Title: Vice President and
Manager
Address for Notices:
Society National Bank
127 Public Square
Cleveland, Ohio 44114
Attention: Large Corporate
Group
Telecopy: (216) 689-4981
Lending Office:
Society National Bank
127 Public Square
Cleveland, Ohio 44114
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<PAGE> 46
NBD BANK
/s/ Lisa A. Ferris
-------------------------
By: Lisa A. Ferris
Title: Vice President
Address for Notices:
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Lisa A. Ferris
Telecopy: (313) 225-3269
Lending Office:
NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
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<PAGE> 47
NATIONAL CITY BANK
/s/ David R. Evans
_________________________
By: David R. Evans
Title: Vice President
Address for Notices:
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
Attention: David R. Evans
Telecopy: (216) 575-9396
Lending Office:
1900 East Ninth Street
Cleveland, Ohio 44114
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<PAGE> 48
ANNEX A
-------
Banking Institutions Party to the Credit Agreement dated April 16, 1996 with
Shiloh of Michigan, L.L.C.
Commitments and Percentages
Loan A
<TABLE>
<CAPTION>
Name of Bank Commitment Ratable Portion
- - ------------ ---------- ---------------
(in dollars) (percentage)
<S> <C> <C>
Society National Bank $10,000,000 50.00%
NBD Bank $ 5,000,000 25.00%
National City Bank $ 5,000,000 25.00%
Total Commitment Amount $20,000,000 100.00%
- - ----------------------- ========== ======
<CAPTION>
Loan B
Name of Bank Commitment Ratable Portion
- - ------------ ---------- ---------------
(in dollars) (percentage)
<S> <C> <C>
Society National Bank $ 1,500,000 50.00%
NBD Bank $ 750,000 25.00%
National City Bank $ 750,000 25.00%
Total Commitment Amount $ 3,000,000 100.00%
- - ----------------------- ========= ======
</TABLE>
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<PAGE> 1
Exhibit 10.3
GUARANTY OF PAYMENT
-------------------
This GUARANTY OF PAYMENT (this "Agreement") is made as of this
16th day of April, 1996, by SHILOH INDUSTRIES, INC., a Delaware corporation
(the "Guarantor") , in favor of the Banks (as defined below) from time to time
parties to the Credit Agreement (as such term is hereinafter defined) .
RECITALS
--------
As a material inducement for the Banks to extend credit from
time to time to Shiloh of Michigan, LLC (the "Borrower"), in which the
Guarantor is a Member owning an eighty percent (80%) equity interest, including
particularly under the Credit Agreement among the Borrower, the Agent and the
Banks, dated as of April 16, 1996 (said Agreement, as it may hereafter be
amended or otherwise modified from time to time, being the "Credit Agreement"),
and acknowledging that the Banks would be unwilling so to extend credit absent
the guaranty of the Guarantor provided for herein, the Guarantor hereby agrees
as follows:
Section 1. DEFINITIONS. The terms defined in the Credit
Agreement and not otherwise defined herein are used herein as therein defined.
Section 2. GUARANTY. The Guarantor hereby unconditionally
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of the aggregate of (a) Eighty Percent (80%),
calculated as of any date of determination, of the Borrower's Obligations (as
defined in the Credit Agreement), whether or not allowed as a claim in
bankruptcy, including post-petition interest and fees (all such obligations of
the Borrower being referred to herein as of the "Guaranteed Obligations") and
agrees to pay any and all expenses (including counsel fees and expenses)
incurred by the Agent or the Banks in enforcing any rights under this
Agreement, PLUS (b) the amount, but in no event less than $0, equal to the
remainder produced by subtracting (i) $5,000,000 from (ii) an amount equal to
Twenty Percent (20%) of the full amount of the Guaranteed Obligations as of
such date of determination. Notwithstanding the foregoing, if Rouge Steel
Company shall cease to be a Member of the Borrower, the Guaranteed Obligations
thenceforth and without the necessity for any further action on the part of
either party hereto shall be One Hundred Percent (100%) of the Borrower's
Obligations, whether or not allowed as a claim in bankruptcy, including post-
petition interest and fees.
Section 3. GUARANTY ABSOLUTE. The Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms
of the Credit Agreement and the Related
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<PAGE> 2
Writings, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of the Agent or
the Banks with respect thereto. The liability of the Guarantor under this
Agreement shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Credit
Agreement, the Notes, the Related Writings or any other agreement or
instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations, or any
other amendment or waiver of or any consent to departure from the Credit
Agreement, the Notes, the Related Writings, or any other agreement or
instrument relating thereto;
(iii) any exchange, release or non-perfection of any collateral,
or any release or amendment or waiver of or consent to departure from
any other guaranty, for all or any of the Guaranteed Obligations;
(iv) failure by the Agent or the Banks to take any steps to
perfect and maintain its or their security interest in, or preserve its
or their rights to, any security or collateral for the Guaranteed
Obligations;
(v) the Agent's or any Bank's election in any proceeding
instituted under Chapter 11 of Title 11 of the United States Code (11
U.S.C. Section SC101 ET SEQ.) (the "Bankruptcy Code"), or the
application of Section 1111(b) (2) of the Bankruptcy Code;
(vi) any borrowing or grant of a security interest under
Section 364 of the Bankruptcy Code; or
(vii) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any surety or any guarantor or
the Borrower (other than discharge by reason in payment of full by the
Borrower) .
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Agent or any Bank upon the
insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as
though such payment had not been made.
Section 4. WAIVER. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Agreement and any
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<PAGE> 3
requirement that the Agent or any Bank protect, secure, perfect or insure any
security interest or lien or any property subject thereto or exhaust any right
or take any action against the Borrower or any other person or entity or any
collateral.
Section 5. SUBROGATION. Any and all rights and claims of
Guarantor against Borrower or any of its property, arising by reason of any
payment by Guarantor to the Banks pursuant to the provisions of this Guaranty
of Payment, shall be subordinate and subject in right of payment to the prior
and indefeasible payment in full of all of the Guaranteed Obligations to the
Banks, and until such time, Guarantor shall have no right of subrogation,
reimbursement, exoneration, contribution, indemnification or similar right and
hereby waives any right to enforce any remedy the Banks or Guarantor may now or
hereafter have agaisnt Borrower, any endorser or other guarantor of all or any
part of the Guaranteed Obligations and any right to participate in or benefit
from any security given to the Banks to secure any Guaranteed Obligations. Any
promissory note evidencing such liability of Borrower to the undersigned shall
be non-negotiable and shall expressly state that it is subordinated pursuant to
this Guaranty. All liens and security interests of Guarantor, whether now or
hereafter arising and however existing, in any assets of Borrower shall be and
hereby are subordinated to the rights and interests of the Banks in those
assets until the prior and indefeasible payment in full of all Guaranteed
Obligations to the Banks and the termination of all financing arrangements
between Borrower and the Banks, provided that the provisions of this sentence
shall not be construed as a waiver or modification of the provisions of Section
5.13 of the Credit Agreement restricting Borrower's right to grant or permit
liens or encumbrances on its property. The Guarantor also waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
Agreement and, until the Loans and the other Guaranteed Obligations are paid in
full and the Agent and the Banks have no further obligations under the Credit
Agreement to advance Loans or otherwise extend credit, all setoffs and
counterclaims. The Guarantor further waives all notices of the existence,
creation or incurring of new or additional indebtedness, arising either from
additional loans extended to the Borrower or otherwise, and also waives all
notices that the principal amount, or any portion thereof, and/or any interest
on any instrument or document evidencing all or any part of the Guaranteed
Obligations is due, notices of any and all proceedings to collect from the
Borrower, any endorser or any other guarantor of all or any part of the
Guaranteed Obligations, or from anyone else, and, to the extent permitted by
law, notices of exchange, sale, surrender or other handling of any security or
other collateral given to the Agent or the Banks to secure payment of the
Guaranteed Obligations.
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<PAGE> 4
Section 6. REPRESENTATIONS AND WARRANTIES. The Guarantor
hereby represents and warrants that (i) the Guarantor is a corporation duly
organized and existing in good standing and has full power and authority to
make and deliver this Agreement; (ii) the execution, delivery and performance
of this Agreement by the Guarantor have been duly authorized by all necessary
action of its directors and, if necessary, shareholders, and do not and will
not violate the provisions of, or constitute a default under, any presently
applicable law or its charter documents or bylaws or any agreement at present
binding on it; (iii) this Agreement has been duly executed and delivered by the
authorized officers of the Guarantor and constitutes its valid, binding and
legally enforceable obligation (subject to the United States Bankruptcy Code
and other similar laws generally affecting the enforcement of creditors'
rights); and (iv) the authorization, execution, delivery and performance of
this Agreement do not require notification to, registration with, or consent or
approval by, any federal, state or local regulatory body or administrative
agency.
Section 7. AUTHORIZATION. The Agent and each Bank are hereby
authorized, without notice or demand and without affecting the liability of the
Guarantor hereunder, from time to time, to (i) renew, extend, accelerate or
otherwise change the time for payment of, or other terms relating to, the
Guaranteed Obligations, or otherwise modify, amend or change the terms of the
Notes, any other promissory note or other agreement, document or instrument now
or hereafter executed by the Borrower and delivered to the Agent or any of the
Banks; (ii) accept partial payments on the Guaranteed Obligations; (iii) take
and hold security or collateral for the payment of this Agreement, any other
guarantees of the Guaranteed Obligations or other liabilities of the Borrower
and the Guaranteed Obligations guaranteed hereby or thereby, and exchange,
enforce, waive and release any such security or collateral; (iv) apply such
security or collateral and direct the order or manner of sale thereof as in its
discretion it may determine; and (v) settle, release, compromise, collect or
otherwise liquidate the Guaranteed Obligations and any security or collateral
therefor in any manner, without affecting or impairing the obligations of the
Guarantor hereunder.
Section 8. AMENDMENTS, ETC. No amendment or waiver of any
provisions of this Agreement nor consent to any departure by the Guarantor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Agent and the Majority Banks, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. No release or termination of this Agreement shall be effected
unless the same shall be in writing and executed by the Agent and each of the
Banks.
-4-
<PAGE> 5
Section 9. NO WAIVER; REMEDIES. No failure on the part of the
Agent or any Bank to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
Section 10. RIGHT OF SET-OFF. Upon the occurrence and during
the continuance of any Event of Default, each Bank and the Agent 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 general deposits (provisional or
final) at any time held and other indebtedness at any time owing by such Bank
to or for the credit or the account of the Guarantor against any and all of the
obligations of the Guarantor now or hereafter existing under this Agreement,
irrespective of whether or not such Bank shall have made any demand under this
Agreement and although such obligations may be contingent and unmatured. Each
Bank agrees promptly to notify the Guarantor after any such set-off and
application made by such Bank, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Bank under this Section 10 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which such Bank may
have.
Section 11. CONTINUING GUARANTY; TRANSFER OF REVOLVING NOTE.
This Agreement is a continuing guaranty and shall (i) remain in full force and
effect until the Guaranteed Obligations are paid in full and each Bank's
Commitment is terminated, (ii) be binding upon the Guarantor, its successors
and assigns, and (iii) inure to the benefit of and be enforceable by the Agent
and each Bank and their successors, transferees and assigns. Without limiting
the generality of the foregoing clause (iii), each Bank may assign or otherwise
transfer the Notes to any other person or entity in accordance with the
provisions of Article 10 of the Credit Agreement, and such other person or
entity shall thereupon become vested with all the rights in respect thereof
granted to such Bank herein or otherwise. As used in this Agreement the words
"paid", "paid in full", "payment in full", or similar phrases, when applied or
relating to the Guaranteed Obligations shall, in all instances, unless the
context requires otherwise, be deemed to mean indefeasibly paid or indefeasible
payment.
Section 12. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing (including telecopy,
telegraphic, telex or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered, if to the Guarantor, at its address shown below
its signature hereto; and if to the Agent or any Bank, at its address specified
in the Credit Agreement, or as to each party at such
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<PAGE> 6
other address as shall be designated by such party in a written notice to the
other party. All such notices and other communications shall, when mailed,
telecopied, telegraphed, telexed or cabled, be effective when deposited in the
mails, telecopied, delivered to the telegraph company, confirmed by telex
answerback or delivered to the cable company, respectively.
Section 13. SOLVENCY. The Guarantor is solvent (as defined in
the Credit Agreement) . The Guarantor does not believe that final judgments, if
any, against the Guarantor in actions for money damages at present pending will
be rendered at a time when, or in an amount such that, the Guarantor will be
unable to satisfy any such judgments promptly in accordance with their terms
(taking into account the maximum reasonable amount of such judgments in any
such actions and the earliest reasonable time at which such judgments might be
rendered) . The cash flow of the Guarantor, after taking into account all other
anticipated uses of the cash of the Guarantor (including the payments on or in
respect of debt referred to in this Section 13), will at all times be
sufficient to pay all such judgments promptly in accordance with their terms.
Section 14. WAIVER OF JURY TRIAL. THE GUARANTOR, THE BORROWER
AND, BY ACCEPTANCE HEREOF, THE BANKS AND THE AGENT ACKNOWLEDGE AND AGREE THAT
ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT, THE CREDIT AGREEMENT, THE
NOTES OR THE RELATED WRITINGS, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE,
WOULD INVOLVE DIFFICULT AND COMPLEX ISSUES AND THEREFORE AGREE, THAT ANY LAW
SUIT GROWING OUT OF OR INCIDENTAL TO ANY SUCH CONTROVERSY WILL BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
Section 15. JURISDICTION; VENUE; INCONVENIENT FORUM.
(a) JURISDICTION. EACH OF THE GUARANTOR, THE BORROWER AND, BY
ACCEPTANCE HEREOF, THE AGENT AND THE BANKS HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY OHIO STATE COURT OR FEDERAL COURT OF THE UNITED STATED OF
AMERICA SITTING IN CUYAHOGA COUNTY, OHIO, AND ANY COURT HAVING JURISDICTION
OVER APPEALS FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE CREDIT AGREEMENT, THE NOTES (AS DEFINED IN THE
CREDIT AGREEMENT) OR ANY RELATED WRITING (AS DEFINED IN THE CREDIT AGREEMENT),
OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF SUCH PERSONS
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT
OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH OHIO
STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE
GUARANTOR, THE BORROWER AND, BY ACCEPTANCE HEREOF, THE AGENT AND THE BANKS
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN
-6-
<PAGE> 7
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY SUCH PERSON MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT,
THE CREDIT AGREEMENT, ANY NOTE OR ANY RELATED WRITING IN THE COURTS OF ANY
JURISDICTION.
(b) VENUE; INCONVENIENT FORUM. EACH OF THE GUARANTOR, THE BORROWER
AND, BY ACCEPTANCE HEREOF, THE AGENT AND THE BANKS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO
SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE CREDIT AGREEMENT, ANY NOTE OR ANY OTHER RELATED WRITING IN ANY OHIO STATE
OR FEDERAL COURT SITTING IN CUYAHOGA COUNTY, OHIO. EACH OF THE GUARANTOR, THE
BORROWER AND, BY ACCEPTANCE HEREOF, THE AGENT AND THE BANKS HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT, PROVIDED, THAT
THE FOREGOING SHALL NOT BE DEEMED TO PRECLUDE OR LIMIT THE RIGHT OF THE AGENT
OR THE BANKS TO COMMENCE AN ACTION IN ANY JURISDICTION IN WHICH THE BORROWER,
THE GUARANTOR OR PROPERTY OF EITHER IS LOCATED. AS TO ITSELF, THE GUARANTOR
HEREBY CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE BY THE
GUARANTOR.
Section 16. COVENANTS OF GUARANTOR. The Guarantor agrees that
so long as any of the Guaranteed Obligations remain outstanding, or any Bank
shall have any Commitment outstanding, or any Prime Rate Loan or LIBOR Loan
remains unpaid, or any Letter of Credit remains unreimbursed, the Guarantor
will perform and observe and will cause each of its subsidiaries to perform and
observe all of the following provisions that are on their respective parts to
be complied with, namely:
(a) INSURANCE. The Guarantor and each of its subsidiaries will
(i) keep itself and all of its insurable properties insured at all times to
such extent, by such insurers, and against such hazards and liabilities as is
generally and prudently done by like businesses, it being understood that each
such entity's insurance coverage at the date hereof meets the standards
contemplated hereby, (ii) give each Bank prompt written notice of each material
change in that entity's insurance coverage and the details of the change and
(iii) forthwith upon any Bank's written request, furnish to such Bank such
information about that entity's insurance as such Bank may from time to time
reasonably request, which information shall be prepared in form and detail
satisfactory to such Bank and certified by an officer of that entity .
-7-
<PAGE> 8
(b) MONEY OBLIGATIONS. The Guarantor and each of its subsidiaries
will pay in full (i) prior in each case to the date when penalties would
attach, all taxes, assessments and governmental charges and levies
(except only those so long as and to the extent that the same shall be
contested in good faith by appropriate and timely proceedings) for which it may
be or become liable or to which any or all of its properties may be or become
subject, (ii) all of its wage obligations to its employees in compliance with
the Fair Labor Standards Act (29 U.S.C. Section 206-207) or any comparable
provisions (except only those so long as and to the extent that the same shall
be contested in good faith by appropriate and timely proceedings), and (iii)
all of its other obligations calling for the payment of money (except only
those so long as and to the extent that the same shall be contested in good
faith) before such payment becomes overdue.
(c) RECORDS. The Guarantor and each of its subsidiaries will (i)
at all times maintain true and complete records and books of account, and
without limiting the generality of the foregoing, maintain appropriate reserves
for possible losses and liabilities, all in accordance with generally accepted
accounting principles applied on a basis not inconsistent with its present
accounting procedures and (ii) at all reasonable times and, so long as there
does not then exist an Event of Default or Possible Default, upon reasonable
prior notice permit each Bank to examine that entity's books and records and to
make excerpts therefrom and transcripts thereof.
(d) FRANCHISES. The Guarantor and each of its subsidiaries will
preserve and maintain at all times its existence, rights and franchises;
provided, however, that this Section shall not prevent any merger or transfer
permitted by Section 5.12 of the Credit Agreement.
(e) NOTICES. The Borrower will cause its treasurer, or in his or
her absence another officer designated by the treasurer, to promptly notify
each Bank whenever any Possible Default may occur hereunder or any other
representation or warranty made in Lhe Credit Agreement or in any Related
Writing may for any reason cease in any material respect to be true and
complete.
(f) ENVIRONMENTAL COMPLIANCE. The Guarantor and each of its
subsidiaries will comply in all material respects with any and all
Environmental Laws including, without limitation, all Environmental Laws in
jurisdictions in which any such entity owns or operates a facility or site,
arranges for disposal or treatment of hazardous substances, solid waste or
other wastes, accepts for transport any hazardous substances, solid waste or
other wastes or holds any interest in real property or otherwise. The
Guarantor and each of its subsidiaries will furnish to the
-8-
<PAGE> 9
Banks promptly after receipt thereof a copy of any notice such entity may
receive from any governmental authority, private person or entity or otherwise
that any litigation or proceeding pertaining to any environmental, health or
safety matter has been filed or is threatened against any such entity, any real
property in which any such entity holds any interest or any past or present
operation of any such entity. The Guarantor will not, and will not permit any
of its subsidiaries to, allow the release or disposal of hazardous waste, solid
waste or other wastes on, under or to any real property in which any such
entity holds any interest or performs any of its operations in violation of any
Environmental Law. As used in this Section "litigation or proceeding" means
any demand, claim, notice, suit, suit in equity, action, administrative action,
investigation or inquiry whether brought by any governmental authority, private
person or entity or otherwise. The Guarantor and each of its subsidiaries
shall defend, indemnify and hold the Agent and each Bank harmless against all
costs, expenses, claims, damages, penalties and liabilities of every kind or
nature whatsoever (including attorneys' fees) arising out of or resulting from
the noncompliance of any such entity with any Environmental Law.
(g) ERISA COMPLIANCE. The Guarantor will not incur, and will
prevent each of its subsidiaries from incurring, any material accumulated
funding deficiency within the meaning of the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the regulations
thereunder, or any material liability to the Pension Benefit Guaranty
Corporation, established thereunder in connection with any Plan. The Guarantor
and each of its subsidiaries will furnish to the Banks (i) simultaneously with
a filing with the Pension Benefit Guaranty Corporation of a notice regarding
any Reportable Event and in any event within thirty (30) days after such entity
knows or has reason to know that any Reportable Event with respect to any Plan
has occurred, a statement of the chief financial officer of such entity setting
forth details as to such Reportable Event and the action which such entity
proposes to take with respect thereto, together with a copy of the notice of
such Reportable Event given to the Pension Benefit Guaranty Corporation if a
copy of such notice is available to such entity, (ii) promptly after the filing
thereof with the Internal Revenue Service, and at the request of any Bank,
copies of each annual report with respect to each Plan established or
maintained by such entity for each plan year, including (x) where required by
law, a statement of assets and liabilities of such Plan as of the end of such
plan year and statements of changes in fund balance and in financial position,
or a statement of changes in net assets available for plan benefits, for such
plan year, certified by an independent public accountant satisfactory to the
Majority Banks and (y) an actuarial statement of such Plan applicable to such
plan year, certified by an enrolled actuary of recognized standing
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<PAGE> 10
acceptable to the Majority Banks, and (iii) promptly after receipt thereof a
copy of any notice such entity or any member of the Controlled Group may
receive from the Pension Benefit Guaranty Corporation or the Internal Revenue
Service with respect to any Plan administered by such entity; PROVIDED, that
this latter clause shall not apply to notices of general application
promulgated by the Pension Benefit Guaranty Corporation or the Internal Revenue
Service. The Guarantor and each of its subsidiaries will promptly notify the
Banks of any taxes assessed, proposed to be assessed or which such entity has
reason to believe may be assessed against such entity by the Internal Revenue
Service with respect to any Plan. As used in this Section "material" means the
measure of a matter of significance which shall be determined as being an
amount equal to five percent (5%) of Guarantor's Consolidated Tangible Net
Worth.
(h) PLANS. The Guarantor will not, and will not permit any of
its subsidiaries to, suffer or permit any Plan to be amended if, as a result of
such amendment, the current liability under the Plan is increased to such an
extent that security is required pursuant to section 307 of the Employee
Retirement Income Security Act of 1974, as amended from time to time. As used
in this Section, "current liability" means current liability as defined in
section 307 of such Act.
(i) FINANCIAL STATEMENTS. The Guarantor will furnish to each
Bank (a) within fifty (50) days after the end of each of the first three
quarter-annual periods of each of its fiscal years, balance sheets of the
Guarantor and each of its subsidiaries as at the end of that period and their
profit and loss statements, reconciliation of surplus statements and statements
of cash flows for that period, all prepared on a consolidating and consolidated
basis in accordance with generally accepted accounting principles consistently
applied and in form and detail satisfactory to each Bank and certified by a
financial officer of Guarantor, together with a covenant compliance certificate
in form and substance satisfactory to each Bank, (b) within one hundred (100)
days after the end of each of its fiscal years, a complete annual audit report
of Guarantor for that year prepared on a consolidating and consolidated basis
in accordance with generally accepted accounting principles consistently
applied and in form and detail satisfactory to each Bank and certified by an
independent public accountant satisfactory to each Bank, together with a
certificate by the accountant setting forth the Events of Default or Possible
Defaults coming to its attention during the course of its audit or, if none, a
statement to that effect and a covenant compliance certificate of Guarantor in
form and substance satisfactory to each Bank, (c) as soon as available, copies
of all notices, reports, proxy statements and other similar documents sent by
Guarantor or any of its subsidiaries to its shareholders, to the holders of any
of its debentures or
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<PAGE> 11
bonds or the trustee of any indenture securing the same or pursuant to which
they may be issued, to any securities exchange or to the Securities and
Exchange Commission or any similar federal agency having regulatory
jurisdiction over the issuance of that entity's securities, and (d) forthwith
upon any Bank's written request, such other information about the financial
condition, properties and operations of Guarantor and its subsidiaries as such
Bank may from time to time reasonably request, which information shall be
submitted in form and detail satisfactory to such Bank and certified by a
financial officer of the entity or entities in question.
(j) INTEREST COVERAGE RATIO. Guarantor shall maintain at all
times a ratio of (i) (A) Consolidated Net Earnings (including proceeds of any
sale of capitalized assets to which the Majority Banks have given their prior
written consent) plus (B) all taxes on Consolidated Net Earnings or based on
Consolidated Net Earnings, including deferred taxes, plus (C) all interest on
all Borrowed Debt of the Guarantor and each of its subsidiaries (including
Subordinated indebtedness) accrued during the time period in question to (ii)
all interest on all Borrowed Debt of the Guarantor and each of its subsidiaries
(including Subordinated indebtedness) accrued during the time period in
question, of no less than 3.0 to 1.0, based upon the Guarantor's financial
statements for the most recent fiscal quarter and the previous three fiscal
quarters.
(k) CONSOLIDATED TANGIBLE NET WORTH. The Guarantor will not
suffer or permit its Consolidated Tangible Net Worth at any time to fall below
the current minimum amount required, which current minimum amount required
shall be Ninety-Five Million Dollars ($95,000,000) until November 1, 1996, when
it shall be increased by an amount equal to fifty percent (50%) of its positive
Consolidated Net Earnings during its 1996 fiscal year, and shall be increased
on each October 31 thereafter by an amount equal to fifty percent (50%) of its
positive Consolidated Net Earnings during such fiscal year. Such current
minimum amount required shall be further increased by an amount equal to one
hundred percent (100%) of the net proceeds to the Borrower from any equity
offering by the Borrower, as of the date any such proceeds are received by the
Borrower.
(1) BORROWED DEBT TO TOTAL CAPITALIZATION. The Guarantor will
not suffer or permit the ratio of all of its Borrowed Debt (determined on a
consolidated basis) to the aggregate of (i) all of its Borrowed Debt
(determined on a consolidated basis) plus (ii) its Consolidated Net Worth, at
any time to exceed 0.5 to 1.0.
(m) INVESTMENTS. None of the Guarantor or any of its
subsidiaries will (i) create, acquire or hold any Subsidiary,
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<PAGE> 12
(ii) make or hold any investment in any stocks, bonds or securities of any
kind, (iii) be or become a party to any joint venture or other partnership
(other than Shiloh of Michigan LLC, a Michigan limited liability company in
which the Guarantor will hold at least an 80% equity interest at all times),
(iv) make or keep outstanding any advance or loan or (v) be or become a
Guarantor of any kind; PROVIDED that this Section shall not apply to (i) any
endorsement of a check or other medium of payment for deposit or collection
through normal banking channels or any similar transaction in the normal course
of business or (ii) any investment in direct obligations of the United States
of America or in certificates of deposit issued by a member bank of the Federal
Reserve System, or (iii) any guaranty agreement executed in connection with the
Credit Agreement or running in favor of the Agent and the Banks, or (iv) any
investment in commercial paper which at the time of such investment is assigned
the highest quality rating in accordance with the rating systems employed by
either Moody's Investors Service, Inc. or Standard & Poor's Corporation, or (v)
any investment in the securities of any existing Subsidiary, or (vi) advances
or loans from one Company to another or (vii) investments by a Company in a
Subsidiary formed after the date hereof, so long as, not less than fifteen (15)
days prior to making any such investment such Company has delivered to each
Bank evidence reasonably satisfactory to such Bank that, after giving effect to
such proposed investment, no Event of Default or Possible Default would exist.
(n) ACQUISITIONS; BULK TRANSFERS. None of the Guarantor or any
of its subsidiaries will (i) be a party to any consolidation or merger or (ii)
purchase all or a substantial part of the assets of any corporation or other
business enterprise, unless, not less than fifteen (15) days prior to making
any such purchase such Company has delivered to each Bank evidence reasonably
satisfactory to such Bank that, after giving effect to such proposed
investment, no Event of Default or Possible Default would exist, or (iii)
lease, sell or otherwise transfer any assets having value, when added to the
aggregate value of all other assets leased, sold or otherwise transferred by
all of the Companies during the Commitment Period, in excess of Five Million
Dollars ($5,000,000) (other than such chattels, if any, as may have become
obsolete or no longer useful in the continuance of its present business) except
in the normal course of its present business; PROVIDED, that this Section shall
not apply to any merger of a Subsidiary into the Guarantor or to the
Guarantor's acquisition of any or all of the assets of a Subsidiary if no
Possible Default shall then exist or immediately thereafter will begin to
exist.
(o) LIENS. None of the Guarantor or any of its subsidiaries
will (i) acquire any property subject to any inventory
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<PAGE> 13
consignment, lease, land contract or other title retention contract (this
section shall not apply to true leases, consignments, tolling or other
possessory agreements in respect of the property of others whereby the Borrower
does not have legal or beneficial title to such property and which, pursuant to
generally accepted accounting principles, are not required to be capitalized) ,
(ii) sell or otherwise transfer any Receivables, whether with or without
recourse, or (iii) suffer or permit any property now owned or hereafter
acquired by it to be or become encumbered by any mortgage, security interest,
financing statement or lien of any kind or nature; PROVIDED, that this Section
shall not apply to (i) any lien for a tax, assessment or governmental charge or
levy, (ii) any lien securing only its workers' compensation, unemployment
insurance and similar obligations, (iii) any mechanics, carrier's or similar
common law or statutory lien incurred in the normal course of business, (iv)
any transfer of a check or other medium of payment for deposit or collection
through normal banking channels or any similar transaction in the normal course
of business, (v) any mortgage or security interest (including any refinance
thereof in whole or in part) created by the Guarantor or any of its
subsidiaries in the course of purchasing property, or existing on property at
the time of such purchase (whether or not assumed), provided that such mortgage
or security interest shall be restricted to the property being purchased and
provided, further, that the indebtedness secured thereby shall not exceed
two-thirds (2/3) of the purchase price in the case of real estate or
four-fifths (4/5) thereof in the case of personal property, (vi) any mortgage,
security interest or lien securing only indebtedness incurred to the Banks,
(vii) any financing statement perfecting only a security interest permitted by
this Section, (viii) easements, restrictions, minor title irregularities and
similar matters having no adverse effect as a practical matter on the ownership
or use of the real property of the Guarantor or any of its subsidiaries, or
(ix) any other liens existing on the date hereof; PROVIDED, HOWEVER, that the
aggregate amount of the indebtedness secured by the mortgages, security
interests or liens permitted by clauses (v) and (vi), above, shall not exceed
Five Million Dollars ($5,000,000) in the aggregate.
(p) BORROWINGS. None of the Guarantor or any of its
subsidiaries will create, incur or suffer to exist any indebtedness for
borrowed money or any Funded Indebtedness of any kind; provided, that this
Section shall not apply to (i) the loans evidenced by the Notes issued pursuant
to the Credit Agreement or any other Debt incurred by Guarantor to any Bank, up
to a permitted maximum principal amount of Ten Million Dollars ($10,000,000) of
Debt incurred by the Borrower to all the Banks in the aggregate under this
clause (i), (ii) any purchase money indebtedness secured by a purchase money
mortgage or security
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<PAGE> 14
interest permitted by Section 5.13 of the Credit Agreement, (iii) any loan
obtained by the Guarantor and Subordinated in favor of the Guarantor's Debt to
the Banks pursuant to a subordination agreement being in such form and
substance as the Majority Banks may require, or (iv) any other indebtedness
existing on the date hereof.
Section 17. EVENTS OF DEFAULT. An Event of Default shall have
occurred hereunder if (i) any fee or amount owing to the Agent or any one or
more of the Banks hereunder shall not be paid in full punctually when due and
payable; (ii) the Guarantor shall fail or omit to perform or observe any
agreement or other provision contained or referred to in this Guaranty (other
than those referred to in clause (i), above, or in Section 16(j), above) ,
which failure or omission shall not have been fully corrected within thirty
(30) consecutive days after the giving of written notice thereof to the
Guarantor by the Agent or any Bank that such failure or omission is to be
remedied; (iii) the Guarantor shall fail or omit to perform or observe any
agreement or other provision contained in Section 16(j); (iv) the Guarantor
shall fail or omit to perform or observe any agreement or other provision
contained in Section 16(f) hereof, and that Possible Default shall not have
been fully corrected within thirty (30) consecutive days after the giving of
written notice thereof to the Guarantor by the Agent or any Bank that the
specific Possible Default is to be remedied and, in addition to such thirty
(30) day period, within such additional period of time during which Guarantor
diligently undertakes appropriate actions to cause the Guarantor to remedy the
Possible Default, or for which the Guarantor makes an adequate reserve on its
financial statements; or (v) a Possible Default or Event of Default shall occur
and be continuing under that certain Credit Agreement, dated as of April 16,
1996, by and among the Guarantor, as Borrower, Society National Bank, as Agent,
and the financial institutions named therein, or under any refinancings,
renewals, modifications or extensions thereof, any supplements thereto or any
substitutions therefor.
Section 18. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Ohio.
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<PAGE> 15
IN WITNESS WHEREOF, the Guarantor has caused this Agreement to
be executed as of the date first above written.
SHILOH INDUSTRIES, INC.
/s/ G. Rodger Loesch
By: _______________________________
CFO/Treasurer
Its: ______________________________
___________________________________
___________________________________
Attention: ________________________
Telecopy: (419) 522-7545
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<PAGE> 16
Schedule to Guaranty of Payment of Debt
Pursuant to Note 2 to instructions to Item 601 of Regulation S-K, the
Company has omitted filing the Guaranty of Payment of Debt executed by Shiloh
Corporation, the Sectional Die Company, Sectional Stamping, Inc., Valley City
Steel, Medina Blanking Inc. and Liverpool Coil Processing Inc., each in favor
of the Banks named therein. Each omitted document is identical in all
respects to the filed Guaranty of Payment of Shiloh Industries, Inc., except
for the respective parties. The Company will file such omitted documents if so
requested by the Commission.
<PAGE> 1
Exhibit 10.4
================================================================================
MEDINA COUNTY, OHIO
and
VALLEY CITY STEEL COMPANY
LOAN AGREEMENT
Dated as of February 1, 1995
================================================================================
All right, title and interest of Medina County, Ohio in this Agreement (with the
exception of its rights under Sections 4.2(c), 5.3 and 6.3 hereof) has been
assigned pursuant to the Indenture referred to herein, for the benefit of the
owners of, and as security for payment of, the Bonds of said Issuer described
herein.
336288.01.06
20181 90/KAP:3/7/95
<PAGE> 2
LOAN AGREEMENT
(This Table of Contents is not
a part of this Loan Agreement
and is only for convenience of reference)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Parties ........................................................................ 1
Preambles ...................................................................... 1
ARTICLE I DEFINITION OF TERMS ............................................ 2
ARTICLE II REPRESENTATION ................................................. 6
Section 2.1. Representations of the Issuer .......................... 6
Section 2.2. Representations of the Company ......................... 7
ARTICLE III CONSTRUCTION OF THE PROJECT; ISSUANCE OF BONDS ................. 7
Section 3.1. Agreement to Construct and Equip the Project ........... 7
Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds . 8
Section 3.3. Disbursements from the Construction Fund ............... 8
Section 3.4. Establishment of Completion Date; Obligation of the
Company to Complete .................................... 9
Section 3.5. Investments ............................................ 11
Section 3.6. Arbitrage Certifications ............................... 11
ARTICLE IV LOAN OF BOND PROCEEDS; PAYMENT OBLIGATIONS ..................... 12
Section 4.1. Loan of Bond Proceeds .................................. 12
Section 4.2. Amounts Payable by Company ............................. 12
Section 4.3. No Defense or Set-Off; Unconditional Obligation ........ 14
Section 4.4. Assignment and Pledge of Issuer's Rights ............... 14
ARTICLE V SPECIAL COVENANTS AND AGREEMENTS ............................... 15
Section 5.1. Right of Access to the Project ......................... 15
Section 5.2. Company to Maintain Its Existence; Conditions under
Which Exceptions Permitted ............................. 15
Section 5.3. Release and Indemnification Covenants .................. 15
Section 5.4. Validity and Tax-Exempt Status of the Bonds ............ 17
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Section 5.5. Taxes And Governmental Charges ......................... 17
Section 5.6. Maintenance and Repair; Insurance ...................... 18
Section 5.7. Financial Reports ...................................... 18
Section 5.8. Letter of Credit ....................................... 18
Section 5.9. Option to Convert to Fixed Rate ........................ 20
Section 5.10. Prevailing Wages ....................................... 20
Section 5.11. Recordation ............................................ 20
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES ................................. 21
Section 6.1. Events Of Default ...................................... 21
Section 6.2. Remedies on Default .................................... 22
Section 6.3. Agreement to Pay Attorneys' Fees and Expenses .......... 23
Section 6.4. No Remedy Exclusive .................................... 23
Section 6.5. No Additional Waiver Implied by One Waiver ............. 24
ARTICLE VII PREPAYMENT ..................................................... 24
Section 7.1. Obligation to Prepay ................................... 24
Section 7.2. Option to Prepay ....................................... 25
Section 7.3. Redemption of the Bonds ................................ 25
ARTICLE VIII MISCELLANEOUS .................................................. 25
Section 8.1. Notices ................................................ 25
Section 8.2. Assignments ............................................ 26
Section 8.3. Severability ........................................... 26
Section 8.4. Execution of Counterparts .............................. 26
Section 8.5. Amounts Remaining in Any Fund or with Trustee .......... 26
Section 8.6. Amendments, Changes and Modifications .................. 27
Section 8.7. Governing Law .......................................... 27
Section 8.8. Authorized Company Representative ...................... 27
Section 8.9. Term of This Agreement ................................. 27
Section 8.10. Binding Effect ......................................... 27
Section 8.11. Limited Liability of Officers, etc ..................... 28
Section 8.12. Company May Act Through Subsidiaries ................... 28
Section 8.13. References to Bank, Letter of Credit and Credit Facility 28
Testimonium .................................................................... 29
SIGNATURES AND SEALS ........................................................... 29
</TABLE>
-ii-
<PAGE> 4
LOAN AGREEMENT
THIS LOAN AGREEMENT dated as of February 1, 1995, by and between MEDINA
COUNTY, OHIO, a political subdivision and a body politic and corporate of the
State of Ohio (the "Issuer"), and VALLEY CITY STEEL COMPANY, a corporation duly
organized and validly existing under the laws of the State of Ohio (the
"Company");
WITNESSETH:
WHEREAS, pursuant to Section 13 of Article VIII of the Ohio Constitution
and Chapter 165 of the Ohio Revised Code, as amended (the "Act"), the Issuer has
the authority to issue its revenue bonds to provide funds, by loans or
otherwise, for acquiring, constructing, reconstructing, enlarging, improving,
furnishing or equipping one or more "projects" as defined in the Act; and
WHEREAS, the Company has requested that the Issuer issue its revenue
bonds in order to provide funds to finance the costs of certain solid waste
disposal facilities (the "Project") at the manufacturing plant of the Company
located in the corporate boundaries of the Issuer;
WHEREAS, pursuant to and in accordance with the provisions of the Act,
and at the request of the Company, the Issuer has agreed to issue its Solid
Waste Disposal Revenue Bonds (Valley City Steel Company Project) Series 1995 in
the aggregate principal amount of $5,400,000 (the "Bonds") to finance the costs
of the acquisition, construction and equipping of the Project; and
WHEREAS, the Bonds will be secured by (i) an assignment and pledge of
the Issuer's rights under this Agreement (except its rights under Sections
4.2(c), 5.3 and 6.3 hereof) and (ii) moneys derived from drawings under the
irrevocable, transferable direct pay letter of credit issued by Society National
Bank, in favor of Society National Bank, as Trustee for the benefit of the
owners from time to time of the Bonds, and any other letter of credit or credit
facility issued in accordance with the terms hereof; and
WHEREAS, the execution and delivery of this Agreement have been in all
respects duly and validly authorized by action of the Issuer's governing body;
NOW, THEREFORE, in consideration of the respective representations and
agreements herein contained, the parties hereto agree as follows (provided, that
in the performance of the agreements of the Issuer herein contained, any
obligation it may thereby incur shall be payable solely out of the revenues and
receipts derived from this Agreement, the sale of the Bonds, the income from the
temporary investment thereof and moneys derived from any Credit Facility):
<PAGE> 5
ARTICLE I
DEFINITION OF TERMS
All words and phrases defined in Article I of the Indenture shall have
the same meanings in this Agreement. Certain terms used in this Agreement are
hereinafter defined in this Article I. When used herein, such terms shall have
the meanings given them by the language employed in this Article I defining such
terms unless the context clearly indicates otherwise:
"Agreement" means this Loan Agreement, as from time to time supplemented
and amended.
"Authorized Company Representative" means such person at the time and
from time to time designated to act on behalf of the Company by written
certificate furnished to the Issuer, the Bank and the Trustee, containing the
specimen signature of such person, signed on behalf of the Company by the chief
executive officer, the vice chairman, any vice president, the treasurer, any
assistant treasurer, the secretary or any assistant secretary of the Company.
Such certificate may designate an alternate or alternates.
"Bank" means Society National Bank, in its capacity as issuer of the
initial Letter of Credit described in Section 5.8(a) hereof, its successors in
such capacity and their assigns, and the issuer as provider of any substitute
Letter of Credit, pursuant to Section 5.8(b) hereof, its successors in such
capacity and their assigns.
"Bond Counsel" means the counsel who rendered the opinion as to the
tax-exempt status of the interest on the Bonds on the date of the issuance, sale
and delivery of the Bonds or such other nationally recognized municipal bond
counsel of recognized expertise with respect to such matters as may be mutually
satisfactory to the Issuer, the Company, the Bank and the Trustee.
"Bond Fund" means the fund created and established in Section 6.2 of the
Indenture.
"Bond Purchase Fund" means the fund created and established in Section
6.10 of the Indenture.
"Bonds" means the Solid Waste Disposal Revenue Bonds (Valley City Steel
Company Project) Series 1995 of the Issuer, in the aggregate principal amount of
$5,400,000, issued pursuant to the Indenture.
"Code" means the Internal Revenue Code of 1986, as amended, together
with any regulations promulgated thereunder or applicable thereto.
"Company" means Valley City Steel Company, a corporation duly organized
and validly existing under the laws of the State of Ohio, and any surviving,
resulting or transferee corporation as permitted by Section 5.2 hereof.
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"Completion Date" means the date of completion of construction of the
Project.
"Construction Fund" means the Construction Fund created and established
in Section 6.6 of the Indenture.
"Construction Period" means the period between the beginning of
construction of the Project or the date on which the Bonds are first delivered
to the purchasers thereof, whichever is earlier, and the Completion Date.
"Conversion Date" means the Business Day on which the Fixed Rate on the
Bonds shall be effective pursuant to Section 2.2 of the Indenture.
"Cost of the Project" means the sum of the items authorized to be paid
from the Construction Fund pursuant to the provisions of Section 3.3 hereof.
"Credit Facility" means any Letter of Credit provided to the Trustee in
accordance with the terms hereof and the Indenture.
"Determination of Taxability" means a decision by the Internal Revenue
Service or a court of competent jurisdiction, as a result of a proceeding in
which the Company participates or is given the opportunity to participate, from
which decision no further right of appeal exists, that as a result of any action
taken, permitted or omitted to be taken by the Company, the interest payable on
the Bonds (or any of the Bonds) is includable in the gross income of any owner
or Beneficial Owner thereof for federal income tax purposes (other than any
owner or Beneficial Owner who is a "substantial user" or a "related person"
within the meaning of Section 147(a) of the Code).
"Event of Default" means any occurrence or event specified as such in
and defined as such by Section 6.1 hereof.
"Event of Taxability" means the enactment of legislation, the issuance
or rendering of a judicial decision or decree, or an order, ruling, regulation
or official statement of general application of the Department of the Treasury
or of the Internal Revenue Service of the United States, the issuance or
revocation of any published ruling or other announcement or procedure of general
application by the Department of the Treasury or the Internal Revenue Service of
the United States, or the occurrence of any other act, event or circumstance,
but in all cases excluding the occurrence of a Determination of Taxability,
which, in the opinion of Bond Counsel, will cause interest income on the Bonds,
or any portion thereof, to be includable either currently or retroactively in
the gross income of any owner or Beneficial Owner thereof for federal income tax
purposes (other than an owner or Beneficial Owner, " who is a "substantial user
or related person" within the meaning of Section 147(a) of the Code).
Notwithstanding the foregoing, no Event of Taxability shall occur unless the
Company has been afforded the opportunity, at its expense, to contest any such
opinion of Bond Counsel and until the Issuer and the Company shall have agreed
with such opinion after such contest; provided, however, that such contest must
be completed within 180 days of such opinion of Bond Counsel or, if the Company
has decided to seek a determination by
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the Internal Revenue Service or a court of competent jurisdiction as to the
status of the interest income on the Bonds, then no Event of Taxability shall
occur until a Determination of Taxability occurs. Taxes which are or may be
imposed on the interest payable on the Bonds because such interest is or may be
treated as a specific preference item for individuals or corporations or as an
adjustment item in computing any minimum tax or in computing the environmental
tax imposed on certain corporations or in computing the branch profits tax
imposed on certain foreign corporations are examples of taxes which do not
result in the interest payable on the Bonds (or any of the Bonds) being
includable in the gross income of any owner or Beneficial Owner thereof for
federal income tax purposes.
"Fixed Rate" means the interest rate to be borne by the Bonds on and
after the Conversion Date, established in accordance with Section 2.2 of the
Indenture.
"Fixed Rate Period" means the period from and after the Conversion Date
until the payment of all the Bonds, whether at maturity, by redemption or
acceleration.
"Indenture" means the Indenture of Trust dated as of February 1, 1995,
by and between the Issuer and the Trustee, as from time to time supplemented and
amended.
"Issuer" means Medina County, Ohio, a political subdivision and a body
politic and corporate of the State of Ohio, and any successor body to the duties
or functions of the Issuer.
"Letter of Credit" means, during the Variable Rate Period, the initial
irrevocable, transferable Letter of Credit delivered to the Trustee as provided
in Section 5.8(a) hereof, and, unless the context or use indicates another or
different meaning or intent, any substitute Letter of Credit delivered to the
Trustee during the Variable Rate Period pursuant to Section 5.8(b) hereof.
"Letter of Credit Agreement" means the Reimbursement Agreement dated as
of February 1, 1995, between the Company and the Bank, as from time to time
supplemented and amended, under the terms of which the Bank has agreed to issue
and deliver the initial Letter of Credit to the Trustee, and, unless the context
or use indicates another or different meaning or intent, any letter of credit,
reimbursement or other agreement between the Company and the issuer of any
substitute Letter of Credit delivered to the Trustee pursuant to Section 5.8(b)
hereof, as from time to time supplemented and amended, which provides that it is
a Letter of Credit Agreement for purposes of this Agreement and the Indenture.
"Permitted Investments" means:
(a) Bonds or other obligations of the United States of America;
(b) Bonds or other obligations, the payment of the principal and
interest of which is unconditionally guaranteed by the United States of
America;
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(c) Obligations issued or guaranteed as to principal and
interest by any agency or person controlled or supervised by and acting
as an instrumentality of the United States of America pursuant to
authority granted by the Congress of the United States of America;
(d) Securities or receipts evidencing ownership interests in
obligations or specified portions (such as principal or interest) of
obligations described in (a), (b) or (c) above;
(e) Commercial or finance company paper which is rated either
P-1 or A-1 or an equivalent by Moody's or S&P (including investments in
pools or such commercial or finance company paper owned by the Trustee
or any affiliate of the Trustee);
(f) Obligations issued by or on behalf of any state of the
United States of America, or any political subdivision of any such
state, which are rated at least A (or an equivalent) by Moody's or S&P;
(g) Funds comprised of obligations described in (f) above to the
extent described in Treasury Regulation 1.148-8(e)(3)(iii), including
any such fund managed by the Trustee or any affiliate of the Trustee;
(h) Money market funds which are rated prime-1 or AAAm (or an
equivalent) by Moody's or S&P, including any such money market fund
managed by the Trustee or any affiliate of the Trustee; or
(i) Any other investment not prohibited by applicable law (as
evidenced by an opinion of Counsel furnished to the Trustee).
"Plans and Specifications" means the plans and specifications prepared
for the Project by the Company, as amended from time to time prior to the
Completion Date, which plans and specifications are on file at the principal
office of the Company.
"Project" means those items of machinery, equipment, structures and
related property acquired and constructed or installed with proceeds from the
sale of the Bonds or the proceeds of any payment by the Company pursuant to
Section 3.4 of this Agreement, as more particularly described in EXHIBIT A
hereto.
"Project Certificate" means the Project Certificate delivered by the
Company concurrently with the issuance of the Bonds.
"Remarketing Agent" means the Remarketing Agent and any successors
thereto, appointed in accordance with Section 10.11 of the Indenture.
"Shiloh" means Shiloh Industries, Inc., a Delaware corporation.
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"State" means the State of Ohio.
"Tax Agreement" means the Tax Exemption Certificate and Agreement, dated
the date of delivery of the Bonds, by and among the Issuer, the Company and the
Trustee, as from time to time supplemented and amended.
"Trustee" means the Trustee at the time serving as such under the
Indenture.
"Underwriter" means First Commerce Capital, a division of Morgan Keegan
& Company, Inc., Montgomery, Alabama, and its successors and assigns.
"Variable Rate Period" means the period from the date of the initial
delivery of the Bonds to the earlier of the Conversion Date or the payment of
all the Bonds, whether at maturity, by redemption or acceleration.
The words "hereof', "herein", "hereunder" and other words of similar
import refer to this Agreement as a whole.
Unless otherwise specified, references to Articles, Sections and other
subdivisions of this Agreement are to the designated Articles, Sections and
other subdivisions of this Agreement as originally executed.
The headings of this Agreement are for convenience only and shall not
define or limit the provisions hereof.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE ISSUER. The Issuer makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Issuer is a political subdivision and a body politic and
corporate of the State.
(b) Under the provisions of the Act and proceedings of the
Issuer, the Issuer has the power and authority to enter into the
transactions contemplated by, and to execute and deliver, this
Agreement, the Tax Agreement, the Indenture and the Bonds and to carry
out its obligations hereunder and thereunder.
(c) Neither the execution and delivery of this Agreement, the
Indenture, the Tax Agreement and the Bonds, the consummation of the
transactions contemplated hereby or thereby nor the fulfillment of or
compliance with the terms and conditions of this Agreement, the
Indenture, the Tax Agreement and the Bonds conflicts with or results in
a breach of the terms, conditions or provisions of any restriction or
any
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<PAGE> 10
agreement or instrument to which the Issuer is now a party or by which
it is bound, or constitutes a default under any of the foregoing.
(d) The Bonds are to be issued under the Indenture and the
payment of the principal of, premium, if any, and interest on the Bonds
are to be secured under the Indenture by an assignment and pledge to the
Trustee of all right, tide and interest of the Issuer in and to this
Agreement (except the rights of the Issuer under Sections 4.2(c), 5.3
and 6.3 hereof) and the Letter of Credit or any other Credit Facility.
(e) The Issuer has not assigned or pledged and will not assign
or pledge its right, tide or interest in or to this Agreement, other
than to secure the Bonds and as otherwise provided in the Indenture.
SECTION 2.2. REPRESENTATIONS OF THE COMPANY. The Company makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Company is a corporation duly organized and validly
existing under the laws of, is authorized to do business in, and is in
good standing under the laws of, the State, and has the power to enter
into, and by proper corporate action has been duly authorized to execute
and deliver, this Agreement and the Tax Agreement.
(b) Neither the execution and delivery of this Agreement and the
Tax Agreement, the consummation of the transactions contemplated hereby
or thereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement and the Tax Agreement, conflicts with or
results in a breach of any of the terms, conditions or provisions of any
restriction or any agreement or instrument to which the Company is now a
party or by which it is bound, or constitutes a default under any of the
foregoing, or results in the creation or imposition of any lien, charge
or encumbrance whatsoever upon any of the property or assets of the
Company or any subsidiary thereof (excluding any liens created in
contemplation of the issuance of the Bonds or otherwise permitted under
this Agreement or the Indenture).
(c) The statements, information, descriptions, estimates and
assumptions contained in the Project Certificate and in the Tax
Agreement are true, correct and complete and are based upon the best
information available to the Company.
ARTICLE III
CONSTRUCTION OF THE PROJECT; ISSUANCE OF BONDS
SECTION 3.1. AGREEMENT TO CONSTRUCT AND EQUIP THE PROJECT. The
Company agrees that it will acquire or construct, or complete the acquisition
and construction of, the Project substantially in accordance with the Plans and
Specifications.
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In the event that EXHIBIT A hereto is to be amended or supplemented in
accordance with the provisions of Section 12.1 of the Indenture, the Issuer will
enter into, and will instruct the Trustee to consent to, an amendment of or
supplement to EXHIBIT A hereto upon receipt of:
(i) a certificate of an Authorized Company Representative
describing in detail the proposed changes; and
(ii) a copy of the proposed form of amendment or supplement to
EXHIBIT A hereto and such other documents, certificates and showings as
may be required by counsel rendering the opinion in clause (iii) of this
paragraph; and
(iii) an opinion of Bond Counsel to the effect that such
amendment complies with the requirements of Section 12.1 of the
Indenture and this Section 3.1, is in proper form for execution and
delivery by the Issuer and will not adversely affect the validity of the
Bonds or the exemption from federal income taxes of the interest
thereon.
SECTION 3.2. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS. In
order to provide funds to finance the Cost of the Project, the Issuer agrees
that it will issue under the Indenture, sell and cause to be delivered to the
Underwriter, the Bonds in the aggregate principal amount of $5,400,000, bearing
interest and maturing as set forth in the Indenture. The Issuer will thereupon
deposit the proceeds received from the sale of the Bonds as follows: (1) in the
Bond Fund, a sum equal to the accrued interest, if any, paid by the Underwriter;
and (2) the balance of the proceeds from the sale of the Bonds (net of
underwriting discount) in the Construction Fund.
SECTION 3.3. DISBURSEMENTS FROM THE CONSTRUCTION FUND. The Issuer hereby
authorizes and directs the Trustee, upon compliance with Section 6.7 of the
Indenture, to disburse the moneys in the Construction Fund to or on behalf of
the Company for the following purposes (but, subject to the provisions of
Sections 3.4 and 3.5 hereof, for no other purpose):
(a) Payment to the Company of such amounts, if any, as shall be
necessary to reimburse the Company in full for all advances and payments
made by it at any time prior to or after the delivery of the Bonds for
expenditures in connection with the preparation of the Plans and
Specifications (including any preliminary study or planning of the
Project or any aspect thereof) and the construction and acquisition of
the Project.
(b) Payment of the initial or acceptance fee of the Trustee and
the Tender Agent, legal, financial and accounting fees and expenses,
rating agency fees, original issue discount, and printing and engraving
costs incurred in connection with the authorization, sale and issuance
of the Bonds, the execution and filing of the Indenture and the
preparation and recording or filing of all other documents in connection
therewith, and payment of all fees, costs and expenses for the
preparation of this
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<PAGE> 12
Agreement, the Tax Agreement, the Indenture and all other documents in
connection with the authorization, sale and issuance of the Bonds.
(c) Payment for labor, services, materials and supplies used or
furnished in the construction and acquisition of the Project, and
payment of amounts due under contracts for the acquisition, construction
and installation of the Project, all as provided in the plans,
specifications and work orders therefor.
(d) Payment of the fees, if any, for architectural, engineering,
legal, underwriting and supervisory services with respect to the
Project.
(e) To the extent not paid by a contractor for construction or
installation with respect to any part of the Project, payment of the
premiums on all insurance required to be taken out and maintained during
the Construction Period.
(f) Payment of the taxes, assessments and other charges, if any,
that may become payable during the Construction Period with respect to
the Project, or reimbursement thereof if paid by the Company.
(g) Payment of expenses incurred in seeking to enforce any
remedy against any contractor or subcontractor in respect of any default
under a contract relating to the Project.
(h) Interest on the Bonds during construction of the Project.
(i) Payment of any other costs which constitute part of the Cost
of the Project in accordance with generally accepted accounting
principles and which are permitted by the Act and will not affect the
exemption from federal income taxes of interest on any of the Bonds.
All moneys remaining in the Construction Fund after the Completion Date
and after payment or provision for payment of all other items provided for in
the preceding subsections (a) to (i), inclusive, of this Section, shall at the
direction of the Company be used in accordance with Section 3.4 hereof.
SECTION 3.4. ESTABLISHMENT OF COMPLETION DATE; OBLIGATION OF THE COMPANY
TO COMPLETE. As soon as practicable after the completion of construction of the
Project, and in any event not more than ninety (90) days thereafter, or, if the
construction of the Project is complete on the date of the issuance and delivery
of the Bonds, not more than ninety (90) days from the date of the issuance and
delivery of the Bonds, the Company shall furnish to the Trustee a certificate
signed by an Authorized Company Representative stating (i) that construction of
the Project has been completed substantially in accordance with the Plans and
Specifications, (ii) the Completion Date, (iii) the Cost of the Project, (iv)
the portion of the Cost of the Project which has then been paid and (v) the
portion of the Cost of the Project which has not yet then been paid. Such
certificate may state that it is given without prejudice to any rights against
third parties which exist at the date of such certificate
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or which may subsequently come into being. Moneys (including investment
proceeds) remaining in the Construction Fund on the date of such certificate may
be used, at the direction of an Authorized Company Representative, to the extent
indicated, for one or more of the following purposes:
(1) for the payment, in accordance with the provisions of this
Agreement, of any Cost of the Project not then paid as specified in the
above-mentioned certificate; or
(2) for transfer to the Bond Fund, but only if, and to the
extent that, the Trustee has been furnished with an opinion of Bond
Counsel to the effect that such transfer is permitted by the Act and
does not adversely affect the exemption from federal income taxes of
interest on any of the Bonds; or
(3) for the redemption of Bonds in accordance with the
provisions of Section 3.1(e) of the Indenture within 180 days following
the filing of said completion certificate with the Trustee, such moneys
to be used only to pay principal of Bonds upon any such redemption.
Any moneys (including investment proceeds) remaining in the Construction
Fund on the date of the aforesaid certificate and not set aside for the payment
of the Cost of the Project as specified in (1) above or transferred to the Bond
Fund pursuant to (2) above shall on such date be placed by the Trustee in a
separate segregated escrow account and used to pay principal of Bonds upon the
redemption thereof as provided in (3) above; provided that, until so used such
moneys may also be used, at the direction of the Company, for one or more of the
following purposes:
(a) to pay all or part of the price of purchasing Bonds on
tender, in the open market or at private sale, on or before such date or
dates of redemption, for the purpose of cancellation;
(b) for the payment of the cost of any additional solid waste
disposal facilities within the meaning of Section 142(a)(6) of the Code,
provided that prior to such use this Agreement is amended in accordance
with Section 3.1 hereof to include such additional facilities within the
definition of Project as used herein;
(c) for any other purpose;
provided that, no moneys on deposit in such escrow account may be used for any
of the purposes specified in (a), (b) or (c) in this paragraph unless and until
the Company delivers to the Trustee an opinion of Bond Counsel to the effect
that such use is permitted by the Act and does not adversely affect the
exemption from federal income taxes of interest on any of the Bonds; and
provided further that, until used for one or more of the foregoing purposes,
moneys on deposit in such escrow account may be invested in investments
authorized by the first paragraph of Section 3.5 of this Agreement, but may not
be invested to produce a yield on such moneys (computed by the Company from the
Completion Date and taking into
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<PAGE> 14
account any investment of such moneys during the period from the Completion Date
until such moneys were deposited in such escrow account) greater than the yield
on the Bonds, all as such terms are used in and determined in accordance with
relevant provisions of the Code and regulations promulgated or proposed
thereunder.
In the event the moneys in the Construction Fund available for payment
of the Cost of the Project should not be sufficient to pay the costs thereof in
full, the Company agrees to pay directly, or to deposit in the Construction Fund
moneys sufficient to pay, the costs of completing the Project as may be in
excess of the moneys available therefor in the Construction Fund. The Issuer
does not make any warranty, either express or implied, that the moneys which
will be paid into the Construction Fund and which, under the provisions of this
Agreement, will be available for payment of the Cost of the Project, will be
sufficient to pay all the costs which will be incurred in that connection. The
Company agrees that if after exhaustion of the moneys in the Construction Fund
the Company should pay, or deposit moneys in the Construction Fund for the
payment of, any portion of the Cost of the Project pursuant to the provisions of
this Section, it shall not be entitled to any reimbursement therefor from the
Issuer or from the Trustee or from the owners of any of the Bonds, nor shall it
be entitled to any diminution of the loan repayments or other amounts payable
under Section 4.2 hereof.
SECTION 3.5. INVESTMENTS. Any moneys held as a part of the Construction
Fund or the Bond Fund (other than the Credit Facility Account therein) shall be
invested or reinvested by the Trustee, at the direction of the Authorized
Company Representative as provided in Article VII of the Indenture and in the
Tax Agreement, to the extent permitted by law in Permitted Investments. Any such
investment may be purchased at the offering or market price thereof at the time
of such purchase. The Trustee may make any and all such investments through its
own bond department.
The investments so purchased shall be held by the Trustee and shall be
deemed at all times a part of the Construction Fund or the Bond Fund, as the
case may be, and the interest accruing thereon and any profit realized therefrom
shall be credited to such fund and any net losses resulting from such investment
shall be charged to such fund (on the date on which the proceeds of any such
investment are needed for the purposes of such fund) and paid by the Company.
The Company covenants that any funds (including investment proceeds) on
deposit in the Construction Fund more than three years after the date of
delivery of the Bonds will not be invested to produce a yield greater than the
yield on the Bonds, all as such terms are used in and determined in accordance
with the regulations promulgated or proposed under relevant provisions of the
Code.
Any moneys held as part of the Bond Purchase Fund or the Credit Facility
Account of the Bond Fund shall not be invested.
SECTION 3.6. ARBITRAGE CERTIFICATIONS. The Company reasonably expects,
based on its knowledge, information and belief, and hereby certifies and
represents to the
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<PAGE> 15
Issuer, and the Issuer hereby certifies that it reasonably expects, that the
proceeds of the Bonds will not be used in a manner that would cause the Bonds to
be classified as "arbitrage bonds" under Section 148 of the Code and regulations
prescribed under that Section. The Issuer and the Company jointly and severally
certify and covenant with all purchasers and owners of the Bonds from time to
time outstanding and with the Bank that so long as any of the Bonds remain
outstanding moneys on deposit in any fund or account in connection with the
Bonds, whether or not such moneys were derived from the proceeds of the sale of
the Bonds or from any other sources, will not be used in a manner which will
cause the Bonds to be "arbitrage bonds" within the meaning of the Code, and any
lawful regulations promulgated or proposed thereunder. The Company covenants for
the benefit of the Issuer and the purchasers of the Bonds and the Bank that all
actions with respect to the Bonds required by Section 148(f) of the Code shall
be taken.
ARTICLE IV
LOAN OF BOND PROCEEDS; PAYMENT OBLIGATIONS
SECTION 4.1. LOAN OF BOND PROCEEDS. The Issuer agrees, upon the terms
and conditions in this Agreement, to lend to the Company the proceeds (exclusive
of accrued interest, if any) received by the Issuer from the sale of the Bonds.
SECTION 4.2. AMOUNTS PAYABLE BY COMPANY. (a) The Company covenants and
agrees to pay to the Trustee as a loan repayment installment, on each date
provided in or pursuant to the Indenture for the payment of principal (whether
at maturity or upon redemption or acceleration) of, premium, if any, and/or
interest on the Bonds, until the principal of, premium, if any, and interest on
the Bonds shall have been fully paid or provision for the payment thereof shall
have been made in accordance with the Indenture, in lawful money of the United
States of America in federal or other immediately available funds, for deposit
in the Bond Fund, a sum equal to the amount payable on such date as principal
(whether at maturity or upon redemption or acceleration), premium, if any, and
interest upon the Bonds as provided in the Indenture. Each payment pursuant to
this Section 4.2(a) shall at all times be sufficient to pay the corresponding
amount of interest and principal (whether at maturity or upon redemption or
acceleration) and premium, if any, payable on the Bonds; provided that any
amount held by the Trustee in the Bond Fund on any due date for an installment
hereunder shall be credited against the amount due on such date to the extent
available for such purpose; and provided further that, subject to the provisions
of this Section 4.2(a), if at any time the amounts held by the Trustee in the
Bond Fund are sufficient to pay all of the principal of and interest and
premium, if any, on the Bonds as such payments become due, the Company shall be
relieved of any obligation to make any further payments under the provisions of
this Section 4.2(a). Notwithstanding the foregoing, if on any date the amount
held by the Trustee in the Bond Fund is insufficient to make any required
payments of principal of (whether at maturity or upon redemption or
acceleration) and interest and premium, if any, on the Bonds as such payments
become due, the Company shall forthwith pay such deficiency as an installment
hereunder. If the Company shall fail to pay any amount under this Section
4.2(a), the amount so in default
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<PAGE> 16
shall continue as an obligation of the Company until the amount so in default
shall have been fully paid, and the Company agrees to pay the same with interest
thereon until paid (to the extent legally enforceable) at a rate equal to the
rate borne by the Bonds from time to time from the due date thereof until paid.
(b) In addition to the payments required to be made by the Company
pursuant to Section 4.2(a) hereof, the Company agrees to pay to the Tender Agent
amounts sufficient and at such times as to enable the Tender Agent to pay the
purchase prices of any Bonds to be purchased pursuant to Section 4.1 or Section
4.2 of the Indenture on each purchase date of such Bonds as set forth in said
Section 4.1 or Section 4.2, as the case may be. All such payments shall be made
to the Tender Agent in lawful money of the United States of America in federal
or other immediately available funds at the designated corporate trust office of
the Tender Agent. Each payment pursuant to this Section 4.2(b) shall at all
times be sufficient to pay the purchase price of any Bonds to be purchased on
such date pursuant to Section 4.1 or Section 4.2 of the Indenture; provided that
any amount held by the Tender Agent in the Bond Purchase Fund on any such date
and available to pay any such purchase price pursuant to Section 6.11 (b)(i),
6.11 (b)(ii) or 6.11 (b) (iii) of the Indenture shall be credited against the
amount due on such date pursuant to this Section 4.2(b) to the extent available
to pay the purchase price of such Bonds on such date. So long as a Credit
Facility is in effect and no wrongful dishonor has occurred and is continuing
the Company agrees not to purchase, and not to permit any Insider of the Company
to purchase, any Bonds except with Available Moneys.
(c) The Company also agrees to pay to the Issuer its fees, if any, for
issuing the Bonds, plus the reasonable expenses of the Issuer incurred in
fulfilling the Issuer's obligations under this Agreement and the Indenture,
which are not otherwise required to be paid by the Company under the terms of
this Agreement.
(d) The Company also agrees to pay to the Bond Registrar, the Tender
Agent, the Paying Agent and the Trustee (1) the initial acceptance fee of the
Trustee and the Tender Agent and the costs and expenses, including reasonable
attorney's fees, incurred by the Trustee in entering into and executing the
Indenture, and (2) during the term of this Agreement (i) an amount equal to the
annual fee of the Trustee for the ordinary services of the Trustee, as trustee,
rendered and its ordinary expenses incurred under the Indenture, including
reasonable attorneys' fees, as and when the same become due, (ii) the fees,
charges and expenses of the Trustee, the Bond Registrar, the Paying Agent and
the Tender Agent, as and when the same become due, and (iii) the fees, charges
and expenses of the Trustee for the necessary extraordinary services rendered by
it and extraordinary expenses incurred by it under the Indenture, including
reasonable attorneys' fees, as and when the same become due.
(e) The Company also agrees to pay all fees, charges and expenses of the
Remarketing Agent as they become due and payable pursuant to Section 3 of the
Remarketing Agreement.
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(f) In the event that the Trustee is authorized and directed to take
such actions as are necessary to realize moneys under the Credit Facility in
accordance with the provisions of the Indenture to the extent necessary to pay
the principal of, premium, if any, and interest on the Bonds and the purchase
price of Bonds if and when due, any moneys so realized under the Credit Facility
shall constitute a credit against the obligation of the Company to make
corresponding payments under subsections (a) and (b) of this Section 4.2.
SECTION 4.3. NO DEFENSE OR SET-OFF; UNCONDITIONAL OBLIGATION. The
obligations of the Company to make the payments required in Section 4.2(a) and
(b) hereof shall be absolute and unconditional, irrespective of any defense or
any rights of set-off, recoupment or counterclaim it might otherwise have
against the Issuer, the Trustee, the Tender Agent, the Paying Agent or the Bond
Registrar. The Company shall pay net during the term of this Agreement the
payments to be made under Section 4.2(a) and (b) hereof free of any deductions
and without abatement, diminution or set-off other than those herein expressly
provided. Until such time as the principal of, premium, if any, and interest on
the Bonds shall have been fully paid, or provision for the payment thereof shall
have been made in accordance with the Indenture, the Company: (i) will not
suspend or discontinue any payments provided for in Section 4.2(a) and (b)
hereof; (ii) will perform and observe all of its agreements contained in this
Agreement; and (iii) will not terminate this Agreement for any cause, including,
without limiting the generality of the foregoing, the occurrence of any acts or
circumstances that may constitute failure of consideration, destruction of or
damage to the Project, commercial frustration of purpose, any change in the tax
laws of the United States of America or the State or any political subdivision
thereof, or any failure of the Issuer, the Trustee or the Bank to perform and
observe any agreement, whether express or implied, or any duty, liability or
obligation arising out of or connected with this Agreement, except to the extent
permitted by this Agreement.
SECTION 4.4. ASSIGNMENT AND PLEDGE OF ISSUER'S RIGHTS. As security for
the payment of its Bonds, the Issuer will assign and pledge to the Trustee the
Trust Estate including all right, title and interest of the Issuer in and to
this Agreement, including the right to receive payments hereunder and thereunder
(except the right to receive payments, if any, under Sections 4.2(c), 5.3 and
6.3 hereof and the rights to make determinations and receive notices as herein
provided) including drawings made under the Credit Facility by the Trustee, and
hereby directs the Company to make said payments directly to the Trustee. As
security for the obligations arising under, or in connection with, a Credit
Facility, the Issuer will further assign and pledge on a subordinate basis and
after payment in full of the Bonds a security interest in the Trust Estate to
the Trustee for the benefit of the Bank. The Company herewith assents to such
assignment and pledge and will make payments directly to the Trustee without
defense or set-off by reason of any dispute between the Company and the Issuer,
the Trustee, the Tender Agent, the Bond Registrar, the Paying Agent or the Bank.
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ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. RIGHT OF ACCESS TO THE PROJECT. The Company agrees that
during the term of this Agreement the Issuer, the Trustee, the Bank and their
duly authorized agents shall have the right during regular business hours, with
reasonable notice, to examine and inspect the Project. The Company agrees that
the Issuer, the Trustee, the Bank and their duly authorized agents shall have,
subject to such limitations, restrictions and requirements as the Company may
reasonably prescribe, such rights of access to the Project.
SECTION 5.2. COMPANY TO MAINTAIN ITS EXISTENCE; CONDITIONS UNDER WHICH
EXCEPTIONS PERMITTED. The Company agrees that during the term of this Agreement
it will maintain its corporate existence, will not dissolve or otherwise dispose
of all or substantially all of its assets, and will not consolidate with or
merge into another corporation or permit one or more corporations to consolidate
with or merge into it unless the Company is the surviving, resulting or
transferee corporation, as the case may be, provided, that the Company may,
without violating the agreements contained in this Section 5.2, consolidate with
or merge into another domestic corporation (i.e., a corporation incorporated and
existing under the laws of the United States of America or any state, district
or territory thereof) or permit one or more other domestic corporations to
consolidate with or merge into it, or sell or otherwise transfer to another
domestic corporation all or substantially all of its assets as an entirety and
thereafter dissolve, provided, in the event the Company is not the surviving,
resulting or transferee corporation, as the case may be, that the surviving,
resulting or transferee corporation (i) is a domestic corporation as aforesaid,
(ii) is qualified to do business in the State, (iii) assumes in writing all of
the obligations of the Company under this Agreement, the Tax Agreement and the
Letter of Credit Agreement, and (iv) has been approved in writing by the Bank.
SECTION 5.3. RELEASE AND INDEMNIFICATION COVENANTS. (a) The Company
agrees to indemnify and save the Issuer, its officials, officers and employees
(each an "indemnified party") harmless against and from all claims by or on
behalf of any person, firm or corporation arising from the conduct or management
of, or from any work or thing done on, the Project or relating to the issuance
of the Bonds, in each case while the Bonds remain outstanding, including but not
limited to (i) any condition of the Project, (ii) any breach or default on the
part of the Company in the performance of any of its obligations under this
Agreement, the Tax Agreement or the Indenture, (iii) any act of negligence of
the Company or of any of its agents, contractors, servants, employees or
licensees, (iv) any act of negligence of any assignee or lessee of the Company,
or of any agents, contractors, servants, employees or licensees of any assignee
or lessee of the Company, (v) any violation by the Company of state or federal
securities laws in connection with the offer and sale of the Bonds, or (vi) any
performance by any indemnified party of any act required under this Agreement,
the Tax Agreement or the Indenture or requested by the Company; excluding,
however, claims occasioned by the gross negligence or willful misconduct of the
indemnified party. The Company agrees to indemnify and save each indemnified
party harmless from and against all costs and expenses incurred in or in
connection with any such claim arising as
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aforesaid or in connection with any action or proceeding brought thereon. In
case any such claim shall be made or action brought based upon any such claim in
respect of which indemnity may be sought against the Company, upon receipt of
notice promptly given to the Company in writing from the indemnified party
setting forth the particulars of such claim or action, the Company shall assume
the defense thereof including the employment of counsel and the payment of all
costs and expenses. Each indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
indemnified party, unless (A) the employment of such counsel has been
specifically authorized in writing by the Company, or (B) representation of both
the indemnified party and the Company by the same counsel is inappropriate by
applicable standards of professional conduct which attorneys maintain in the
jurisdiction in which the suit shall have been instituted due to actual or
potential conflicting interests (it being understood that the Company shall not
be liable for the expense of more than one separate counsel representing such
indemnified party unless representation by more than one counsel shall have been
specifically authorized in writing by the Company). The Company shall not be
liable for any settlement of any such action effected without its consent, but
if settled with the consent of the Company or if there be a final judgment for
the plaintiff in any such action, the Company agrees to indemnify and hold
harmless the indemnified parties. The Company shall also have the right to
compromise or settle, with the identified party's prior written approval, any
claim or litigation regarding which it is required to indemnity. If the
indemnified party refuses to approve any compromise or settlement recommended by
the Company, which compromise or settlement would have concluded such litigation
or claim bur for such indemnified party's failure to give approval, the
Company's liability to the indemnified party hereunder with respect to such
claim or litigation shall not exceed the amount which the Company would have
paid pursuant to such proposed compromise or settlement.
(b) The Company also agrees to pay and to indemnify and hold harmless
the Remarketing Agent, the Trustee, the Bank, the Tender Agent, the Bond
Registrar, any person who "controls" the Remarketing Agent, the Bond Registrar,
the Tender Agent or the Trustee within the meaning of Section 15 of the
Securities Act of 1933, as amended, and any member, officer, director, official
and employee of the Remarketing Agent, the Bond Registrar, the Tender Agent, the
Bank or the Trustee (collectively called the "Indemnified Parties") from and
against, any and all claims, damages, demands, expenses, liabilities and losses
of every kind, character and nature asserted by or on behalf of any person
arising out of, resulting from, or in any way connected with, the condition,
use, possession, conduct, management, planning, design, acquisition,
construction, installation, renovation or sale of the Project or any part
thereof. The Company also covenants and agrees, at its expense, to pay, and to
indemnify and save the Indemnified Parties harmless of, from and against, all
costs, reasonable counsel fees, expenses and liabilities incurred in any action
or proceeding brought by reason of any such claim or demand subject, however, to
the provisions contained below in this paragraph and excluding claims occasioned
by the negligence or willful misconduct of the Indemnified Parties. In the event
that any action or proceeding is brought against any Indemnified Party by reason
of any such claim or demand, such Indemnified Party shall immediately notify the
Company, which shall resist and defend any action or proceeding on behalf of
such Indemnified Party, including the employment of
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counsel, the payment of all expenses and the right to negotiate and consent to
settlement. Any one or more of the Indemnified Parties shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Parties unless the (A) employment of such counsel has been
specifically authorized in writing by the Company or (B) representation of both
the Indemnified Parties and the Company by the same counsel is inappropriate by
applicable standards of professional conduct which attorneys maintain in the
jurisdiction in which the suit shall have been instituted due to actual or
potential conflicting interests (it being understood that the Company shall not
be liable for the expense of more than one separate counsel representing any of
the Indemnified Parties unless representation by more than one counsel shall
have been specifically authorized in writing by the Company). The Company shall
not be liable for any settlement of any such action effected without its
consent, but if settled with the consent of the Company or if there be a final
judgment for the plaintiff in any such action, the Company agrees to indemnify
and hold harmless the Indemnified Parties. The Company shall also have the right
to compromise or settle, with the Indemnified Party's prior written approval,
any claim or litigation regarding which it is required to indemnify. If the
Indemnified Party refuses to approve any compromise or settlement recommended by
the Company, which compromise or settlement would have concluded such litigation
or claim but for such Indemnified Party's failure to give approval, the
Company's liability to the Indemnified Party hereunder with respect to such
claim or litigation shall not exceed the amount which the Company would have
paid pursuant to such proposed compromise or settlement.
SECTION 5.4. VALIDITY AND TAX-EXEMPT STATUS OF THE BONDS. The Company
and the Issuer covenant and agree that they, and each of them, will not take or
fail to take or authorize or permit any action to be taken or not taken and have
not taken or not taken or authorized or permitted any action to be taken or not
to be taken which results in interest paid on the Bonds being included in gross
income of any Owner or Beneficial Owner thereof for purposes of federal income
taxation (other than an Owner or Beneficial Owner who is a "substantial user" of
the Project or a "related person" within the meaning of Section 147(a) of the
Code) or adversely affects the validity of the Bonds. Promptly after the Company
first becomes aware of any Determination of Taxability, the Company shall give
written notice thereof to the Issuer, the Trustee, the Remarketing Agent and the
Bank.
SECTION 5.5. TAXES AND GOVERNMENTAL CHARGES. The Company will promptly
pay, as the same become due, all lawful taxes, assessments, utility charges and
other governmental charges of any kind whatsoever levied or assessed by federal,
state or any municipal government upon or with respect to the Project or any
part thereof or any payments under this Agreement. The Company may, at its
expense and in its own name and behalf or in the name and behalf of the Issuer,
if it is a necessary party thereto, in good faith contest any such taxes,
assessments and other charges and, in the event of any such contest, permit the
taxes, assessments or other charges so contested to remain unpaid during the
period of such contest and any appeal therefrom, provided that such non-payment
does not adversely affect the payment by the Company of all other amounts
required to be paid by it hereunder or adversely affect the validity of the
Bonds or the tax-exempt status of the interest thereon.
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SECTION 5.6. MAINTENANCE AND REPAIR; INSURANCE. The Company will
maintain the Project in a reasonably safe and sound operating condition, making
from time to time all needed repairs thereto, and shall maintain insurance
coverage (including self-insurance) with respect to the Project, all in
accordance with its corporate practice for similar assets, and shall pay all
costs of such maintenance, repair and insurance.
SECTION 5.7. FINANCIAL REPORTS. The Company shall furnish to the Trustee
the following:
(a) Within one hundred twenty (120) days after the end of the
preceding fiscal year, copies of Shiloh's Form 10-K as filed with the
Securities and Exchange Commission and Shiloh's annual report to
shareholders which includes the consolidated balance sheet of Shiloh and
subsidiaries and the related statements of consolidated income,
consolidated shareholders' equity and consolidated cash flows for the
year ended that date, with its report thereon by Shiloh's public
accountants.
(b) Upon the request of any Bondholder, the Trustee may request
and the Company shall provide copies of Shiloh's Form 10-Q as filed with
the Securities and Exchange Commission.
(c) Upon the request of any Bondholder, the Trustee may request
and the Company shall provide copies of all of Shiloh's regular or
periodic financial statements or financial reports as Shiloh shall send
to its shareholders and copies of all regular or periodic reports which
are available for public inspection which Shiloh may be required to file
with the Securities and Exchange Commission.
The Company agrees that any such information furnished to the Trustee in
accordance with this Section 5.7 may be furnished by the Trustee to any
Bondholder who so requests.
SECTION 5.8. LETTER OF CREDIT. (a) On or prior to the issuance, sale and
delivery of the Bonds to the Underwriter pursuant to Section 2.6 of the
Indenture, the Company hereby covenants and agrees to obtain and deliver to the
Trustee the initial, irrevocable, transferable, direct pay Letter of Credit to
be issued by the Bank in favor of the Trustee for the benefit of the owners from
time to time of the Bonds in substantially the form of EXHIBIT B to the Letter
of Credit Agreement. The initial Letter of Credit shall be dated the Dated Date;
shall expire on February 28, 1999, or earlier as described in the Letter of
Credit, unless otherwise extended in accordance with the terms and provisions of
subsection (b) below and the Letter of Credit Agreement; shall be in the amount
of (i) the aggregate principal amount of the Bonds (A) to enable the Trustee to
pay the principal of the Bonds at maturity, upon call for redemption prior to
maturity or acceleration, and (B) to enable the Trustee to pay the portion of
the purchase price of Bonds tendered or deemed to be tendered to the Tender
Agent for purchase, equal to the aggregate principal amount of such Bonds plus
(ii) an amount equal to the interest to accrue on the Bonds for one hundred and
thirteen (113) days at a maximum rate of ten percent (10%) per annum calculated
on the basis of a year of 365 days (A) to enable the Trustee to pay interest
accrued on the Bonds on the dates and in the manner set forth in the Indenture,
and (B) to enable the Trustee to pay
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the portion of the purchase price of Bonds tendered or deemed to be tendered to
the Tender Agent for purchase, equal to the accrued interest on such Bonds.
(b) Except as hereinafter provided, at any time during the Variable Rate
Period, the Company may, at its option (if provided by, and in accordance with,
the terms of the Letter of Credit Agreement) provide for the extension of the
term of the Letter of Credit then in effect, if any, deliver to the Trustee a
substitute Letter of Credit as hereinafter provided or allow the Letter of
Credit then in effect to expire or terminate in accordance with its terms. The
term "substitute Letter of Credit" as used herein shall mean any Letter of
Credit delivered in accordance with the terms hereof, other than the initial
Letter of Credit delivered on the date of the initial delivery of the Bonds and
any extensions thereof. If the Company chooses to extend the term of the Letter
of Credit then in effect, such extension shall be for a period of at least one
(1) year after the Stated Termination Date of the existing Letter of Credit and
shall provide that it is to expire fifteen (15) days after a Variable Rate
Interest Payment Date, and the Company shall furnish proof of such extension or
a replacement Letter of Credit with terms identical to the existing Letter of
Credit (except for the Stated Termination Date), in the form of an amendment to
the Letter of Credit or a replacement Letter of Credit or a notice from the Bank
of such extension, as provided in the Letter of Credit, evidencing such
extension, to the Trustee no later than forty-five (45) days prior to the Stated
Termination Date of the Letter of Credit. If the Company chooses to provide a
substitute Letter of Credit to replace a Letter of Credit scheduled to
terminate, to replace an existing Letter of Credit at any time while a Letter of
Credit is in effect or at any time while no Letter of Credit is in effect, such
substitute Letter of Credit shall be an irrevocable letter of credit in
substantially the same form and tenor as the initial Letter of Credit in an
amount equal to the outstanding principal amount of the Bonds plus an amount
equal to the maximum interest to accrue on the Bonds then Outstanding for one
hundred and thirteen (113) days at a maximum rate of ten percent (10%) per annum
calculated on the basis of a year of 365 days, with administrative provisions
reasonably satisfactory to the Trustee, but provided to expire at least one (1)
year after the Stated Termination Date of the existing Letter of Credit (or, in
the case where no Letter of Credit is then in effect, having a term of at least
one (1) year), providing that it is to expire fifteen (15) days after a Variable
Rate Interest Payment Date, and to be issued by a commercial bank and delivered
to the Trustee at least two (2) Business Days before the Stated Termination Date
of the Letter of Credit, if any, then in effect to the Trustee. Simultaneously
with the delivery of such substitute Letter of Credit to the Trustee, the
Company shall also provide the Trustee with (i) if such substitute Letter of
Credit is issued by a bank other than a domestic commercial bank, an opinion or
opinions of Counsel acceptable to the Trustee that no registration of the Bonds
or such substitute Letter of Credit is required under the Securities Act of
1933, as amended, nor is the Indenture required to be qualified under the Trust
Indenture Act of 1939, as amended, (ii) an opinion of Counsel satisfactory to
the Trustee to the effect that such substitute Letter of Credit is a valid and
enforceable obligation of the issuer or provider thereof, and (iii) an opinion
of Bond Counsel that such substitute Letter of Credit is authorized under this
Agreement, complies with the terms hereof and that the provision thereof will
not have an adverse effect on the exclusion of the interest on the Bonds from
the gross income of the owners thereof for federal income tax purposes. If the
Company shall fail to furnish to the Trustee such opinions described above on
or before the specified date,
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the Trustee shall be deemed not to have received the substitute Letter of
Credit. Upon delivery of a substitute Letter of Credit and the foregoing
opinions, the Trustee is authorized and directed to surrender the existing
Letter of Credit, if any, then in effect and to approve the cancellation of the
existing Letter of Credit (by, INTER ALIA, completing and delivering the
appropriate certificate). The Bonds shall be subject to mandatory tender for
purchase pursuant to Section 4.2 of the Indenture upon the expiration or
termination of the Letter of Credit unless such Letter of Credit is replaced
with a Letter of Credit which will not result in the reduction, withdrawal or
suspension of the ratings then in effect on the Bonds. The Company hereby
covenants and agrees to give the Issuer, the Trustee, the Bank and the
Remarketing Agent written notice of its intention to deliver any such substitute
Letter of Credit or to terminate a Letter of Credit or of the expiration of a
Letter of Credit at least forty-five (45) days prior to the date on which the
Company expects to deliver such substitute Letter of Credit or on which such
termination or expiration is to occur.
(c) If the Company elects to exercise its option to cause the interest
rate on the Bonds to be converted to the Fixed Rate in accordance with the
provisions of Section 5.9 hereof, the Bonds shall not be secured by a Credit
Facility during the Fixed Rate Period.
SECTION 5.9. OPTION TO CONVERT TO FIXED RATE. The Company shall have,
and is hereby granted, the option to elect to convert the interest rate borne by
the Bonds to the Fixed Rate, pursuant to the provisions of Section 2.2 of the
Indenture, subject to the terms and conditions set forth therein.
SECTION 5.10. PREVAILING WAGES. The Company hereby agrees that all wages
paid to laborers and mechanics employed on the Project shall be paid at the
prevailing rates of wages of laborers and mechanics for the class of work called
for by the Project, which wages shall be determined in accordance with the
requirements of Chapter 4115 of the Ohio Revised Code, as amended, for
determination of prevailing wage rates, provided that the requirements of this
Section 5.10 shall not apply where the federal government or any of its agencies
furnished by loan or grant all or any part of the funds used in connection with
the Project and prescribes predetermined minimum wages to be paid to such
laborers and mechanics; and provided further that should the Company undertake,
as part of the Project, construction to be performed by its regular bargaining
until employees who are covered under a collective bargaining agreement which
was in existence prior to the date of the commitment instrument undertaking to
issue the Bonds then, in that event, the rate of pay provided under the
collective bargaining agreement may be paid to such employees.
SECTION 5.11. RECORDATION. The Company hereby agrees to comply with the
provisions of Section 5.4 of the Indenture.
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. The occurrence and continuation of any
one of the following shall constitute an Event of Default hereunder:
(a) failure by the Company to pay any amounts required to be
paid under Section 4.2(a) hereof on the dates and in the manner
specified herein; or
(b) failure by the Company to pay any amounts required to be
paid under Section 4.2(b) hereof on the dates and in the manner
specified herein; or
(c) failure by the Company to perform any covenant, condition or
agreement on its part to be observed or performed in this Agreement,
other than as referred to in subsections (a) and (b) above, for a period
of thirty (30) days after written notice, specifying such failure and
requesting that it be remedied, is given to the Company by the Issuer,
the Bank or the Trustee, unless (i) the Issuer, the Bank and the Trustee
shall agree in writing to an extension of such time prior to its
expiration or (ii) if the failure is such that it can be corrected but
not within such 30-day period, corrective action is instituted by the
Company within such period and diligently pursued until such failure is
corrected; or
(d) the dissolution or liquidation of the Company or the filing
by the Company of a voluntary petition in bankruptcy, or failure by the
Company promptly to lift any execution, garnishment or attachment of
such consequence as will impair its ability to carry on its obligations
hereunder, or an order for relief under Title 11 of the United States
Code, as amended from time to time, is entered against the Company, or a
petition or answer proposing the entry of an order for relief against
the Company under Title 11 of the United States Code, as amended from
time to time, or its reorganization, arrangement or debt readjustment
under any present or future federal bankruptcy act or any similar
federal or state law shall be filed in any court and such petition or
answer shall not be discharged within ninety (90) days after the filing
thereof, or the Company shall fail generally to pay its debts as they
become due, or a custodian (including without limitation a receiver,
trustee, assignee for the benefit of creditors or liquidator of the
Company) shall be appointed for or take possession of all or a
substantial part of its property and shall not be discharged within
ninety (90) days after such appointment or taking possession, or the
Company shall consent to or acquiesce in such appointment or taking
possession, or assignment by the Company for the benefit of its
creditors, or the entry by the Company into an agreement of composition
with its creditors, or the adoption of a resolution by the board of
directors of the Company or the taking of any other corporate action to
file a petition or answer proposing the entry of an order for relief
against the Company under Title 11 of the United States Code, as amended
from time to time, or its reorganization, arrangement or debt
readjustment under any present or future federal bankruptcy act or any
similar federal or state laws; provided, that the term
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"dissolution or liquidation of the Company", as used in this subsection
(d), shall not be construed to include the cessation of the corporate
existence of the Company resulting either from a merger or consolidation
of the Company into or with another domestic corporation or a
dissolution or liquidation of the Company following a transfer of all or
substantially all of its assets as an entirety, under the conditions
permitting such actions contained in Section 5.2 hereof; or
(e) any material warranty, representation or other statement
made by or on behalf of the Company contained herein, or in any document
or certificate furnished by the Company in compliance with or in
reference hereto, is false or misleading in any material respect; or
(f) an "event of default" shall occur and be continuing under
the Indenture.
SECTION 6.2. REMEDIES ON DEFAULT. Whenever any Event of Default shall
have occurred and be continuing hereunder, the Trustee may take any one or more
of the following remedial steps:
(a) The Trustee may exercise any right, power or remedy
permitted to it by law, and shall have in particular, without limiting
the generality of the foregoing, the right to declare the entire
principal payable under Section 4.2(a) hereof, provided, however, that
upon the occurrence of an Event of Default under this Agreement as a
result of an Event of Default described in Sections 6.1(d) or 6.1(f)
hereof (to the extent that the Event of Default under Section 6.1(f)
hereof results from an event of default under Sections 9.1(d) or (e) of
the Indenture), the amounts payable under Section 4.2(a) hereof shall
automatically be and become immediately due and payable, and upon such
declaration or acceleration all unpaid interest accrued thereon to the
date of such declaration or acceleration and any premium the Company
shall have become obligated to pay shall be immediately due and payable,
if concurrently with or prior to such declaration or acceleration the
unpaid principal of and all unpaid accrued interest and premium on the
Bonds have become or have been declared to be due and payable under the
Indenture, and upon such declaration or acceleration the principal
payable under Section 4.2(a) hereof, the unpaid accrued interest thereon
and such premium shall thereupon become forthwith due and payable in an
amount sufficient to pay the principal of, premium, if any, and interest
on the Bonds under Section 9.2 of the Indenture, without presentment,
demand or protest, all of which are hereby expressly waived; provided,
however that an Event of Default and the consequences thereof shall be
deemed, waived, rescinded and annulled without further action on the
part of the Trustee, when any declaration of acceleration on the Bonds
has been waived, rescinded and annulled pursuant to and in accordance
with Section 9.11 of the Indenture. The Company shall forthwith pay to
the Trustee the entire principal, premium, if any, and interest payable
under Section 4.2(a) hereof.
(b) The Issuer or the Trustee may take whatever action at law or
in equity may appear necessary or desirable to collect the payments and
other amounts then due and thereafter to become due or to enforce the
performance and observance of any obligation, agreement or covenant of
the Company under this Agreement.
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(c) Neither the Issuer nor the Trustee may exercise any remedy
without the Bank's prior written consent, so long as no wrongful
dishonor of the Credit Facility has occurred and is continuing, except
that the Bank may not direct the Trustee's actions hereunder in
connection with an Event of Default under Section 6.1(d) hereof or under
6.1(f) hereof (to the extent that the Event of Default under Section
6.1(f) hereof results from an event of default under Sections 9.1(d),
(e) or (g) of the Indenture (to the extent that the event of default
under Section 9.1(g) results from an Event of Default under Section
6.1(d) hereof), as provided in Section 9.13 of the Indenture.
In case the Issuer or the Trustee shall have proceeded to enforce its
rights under this Agreement, and such proceedings shall have been discontinued
or abandoned for any reason or shall have been determined adversely to the
Issuer or the Trustee, as the case may be, then and in every such case the
Company, the Issuer and the Trustee shall be restored respectively to their
several positions and rights hereunder, and all rights, remedies and powers of
the Company, the Issuer and the Trustee shall continue as though no such
proceeding had been taken.
In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company under the federal bankruptcy laws or any other
applicable law, or in case a receiver or trustee shall have been appointed for
the property of the Company, or in the case of any other similar judicial
proceedings relative to the Company, or to the creditors or property of the
Company, the Trustee shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Agreement and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee allowed in
such judicial proceedings relative to the Company, its creditors or its
property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized to make such payments to the Trustee, and
to pay to the Trustee any amount due it for compensation and expenses, including
reasonable counsel fees incurred by it up to the date of such distribution.
SECTION 6.3. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. In the event
the Issuer or the Trustee should reasonably employ attorneys or incur other
expenses for the collection of the payments due under this Agreement or the
enforcement of the performance or observance of any obligation or agreement on
the part of the Company herein contained, the Company agrees that it will on
demand therefor pay to the Issuer or the Trustee the reasonable fees of such
attorneys and such other expenses so incurred by the Issuer or the Trustee.
SECTION 6.4. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Issuer or the Trustee is intended to be exclusive of any other
available remedy or remedies but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Agreement and
the Indenture or now or
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<PAGE> 27
hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any Event of Default hereunder shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle the Issuer to exercise any remedy
reserved to it in this Article VI, it shall not be necessary to give any notice
other than such notice as may be herein expressly required. Such rights and
remedies as are given the Issuer hereunder shall also extend to the Trustee and
the Bank, and the Trustee, the Bank and the owners from time to time of the
Bonds shall be deemed third party beneficiaries of all covenants and agreements
herein contained.
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event
any agreement contained in this Agreement should be breached by the Company and
thereafter waived by the Issuer or the Trustee, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other
breach hereunder.
ARTICLE VII
PREPAYMENT
SECTION 7.1. OBLIGATION TO PREPAY. (a) Upon the occurrence of a
Determination of Taxability the Company shall have, and hereby accepts, the
obligation to prepay the principal payable under Section 4.2(a) hereof as a
whole, and not in part, on any date within ninety (90) days of the occurrence of
a Determination of Taxability, for redemption of the Bonds pursuant to Section
3.1(c) of the Indenture. The amount to be prepaid pursuant to this Section
7.1(a) in such event shall be an amount equal to 103% of the then outstanding
principal amount of the Bonds plus accrued interest to the date fixed for
redemption.
(b) Upon the occurrence of an Event of Taxability, the Company shall
have, and hereby accepts, the obligation to prepay the principal payable under
Section 4.2(a) hereof as a whole, and not in part, on any date within ninety
(90) days of the date of the occurrence of an Event of Taxability, for
redemption of the Bonds pursuant to Section 3.1(d) of the Indenture. The amount
to be prepaid pursuant to this Section 7.1(b) in such event shall be 100% of the
then outstanding principal amount of the Bonds plus accrued interest to the date
fixed for redemption.
(c) If proceeds of the Bonds, including income from the investment
thereof, shall remain after completion of the Project and the payment of all
Costs of the Project, the Company shall have, and hereby accepts, the obligation
to prepay the principal payable under Section 4.2(a) hereof as a whole or in
part as provided in Section 3.1(e) of the Indenture, on any date within one
hundred and eighty (180) days after the Company has notice or actual knowledge
of such proceeds remaining (which shall be deemed to occur on the date of the
filing of the completion certificate in accordance with Section 3.4 hereof), for
redemption of the Bonds pursuant to Section 3.1(e) of the Indenture. The amount
to be prepaid pursuant to this Section 7.1(c) in such event shall be equal to
the principal amount of
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<PAGE> 28
the Bonds to be redeemed pursuant to Section 3.1(e) of the Indenture plus
accrued interest to the date fixed for redemption.
(d) So long as a Credit Facility is in effect, and to the extent that
Available Moneys described in clauses (a) and (b) of Section 6.4 of the
Indenture are not on deposit in the Bond Fund and available to repay the
principal of and accrued interest payable under this Section 7.1, the Trustee
shall, in accordance with Section 6.4 of the Indenture, take such actions as are
necessary to realize moneys under such Credit Facility to prepay the principal
of and accrued interest payable under this Section 7.1 in accordance with the
terms of such Credit Facility.
SECTION 7.2. OPTION TO PREPAY. The Company shall have, and is hereby
granted, the option (with consent of the Bank) to prepay the principal payable
under Section 4.2(a) hereof with respect to the Bonds as a whole, or in part, by
paying to the Trustee an amount sufficient to redeem all or a portion of the
Bonds then Outstanding, in the manner, at the redemption prices (including
premium, if any), from the sources and on the dates specified in Sections 3.1(a)
and 3.1(b) of the Indenture. So long as a Credit Facility is in effect, and to
the extent that Available Moneys described in clauses (a) and (b) of Section 6.4
of the Indenture are not on deposit in the Bond Fund and available to prepay the
principal of and accrued interest payable under this Section 7.2, the Trustee
shall, in accordance with Section 6.4 of the Indenture, take such actions as are
necessary to realize moneys under such Credit Facility to prepay the principal
of and accrued interest payable under Section 7.2 in accordance with the terms
of such Credit Facility.
SECTION 7.3. REDEMPTION OF THE BONDS. To perform an obligation imposed
upon the Company or to exercise an option granted to the Company by this Article
VII, the Company shall give written notice to the Issuer, the Trustee, the Bank,
the Remarketing Agent and the Bond Registrar, which notice shall specify therein
the date upon which prepayment of the principal payable under Section 4.2(a)
hereof (or a portion thereof) will be made, which date shall be not less than
forty-five (45) days from the date the notice is mailed, and shall specify that
all of the principal amount payable under Section 4.2(a) hereof or a specified
portion thereof is to be so prepaid. The Issuer has directed the Trustee and the
Bond Registrar to take forthwith all steps (other than the payment of the money
required to redeem the Bonds) necessary under the applicable provisions of the
Indenture to effect the redemption of the Bonds (or a portion thereof) in
amounts equal to the amount of the principal so prepaid as provided in this
Article VII.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. NOTICES. All notices, certificates or other communications
shall be sufficiently given and shall be deemed given when the same are (i)
deposited in the United States mail and sent by first class mail, postage
prepaid, or (ii) delivered by hand, or
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<PAGE> 29
(iii) sent by confirmed facsimile transmission, in each case, to the parties at
the addresses set forth below or at such other address as a party may designate
by notice to the other parties: if to the Issuer, at Medina County, Ohio, 144
North Broadway, Medina, Ohio 44256, or Telecopy No. (216) 722-9206, Attention:
County Clerk; if to the Company, c/o Shiloh Industries, Inc., 402 Ninth Avenue,
Post Office Box 2037, Mansfield, Ohio 44905, or Telecopy No. (419) 522-7545
Attention: Treasurer; if to the Trustee, the Tender Agent or the Bond Registrar,
at 127 Public Square, Room 1503, Cleveland, Ohio 44114-1306, or Telecopy No.
(216) 689-7578, Attention: Corporate Trust Division; if to the Remarketing
Agent, at P.O. Box 5079, 272 Commerce Street, Montgomery, Alabama 36104, or
Telecopy No. (205) 262-0179, Attention: Robbins Taylor; and if the Bank, at 127
Public Square, Cleveland, Ohio, 44111-1306, or Telecopy No. (216) 689-4981,
Attention: Large Corporate Group. A duplicate copy of each notice, certificate
or other communication given hereunder by either the Issuer or the Company to
the other shall also be given to the Trustee, the Remarketing Agent, the Bank
and the Tender Agent.
SECTION 8.2. ASSIGNMENTS. This Agreement may not be assigned by either
party without the consent of the other and the Trustee and the Bank, except that
the Issuer shall assign and pledge to the Trustee certain of its right, title
and interest in and to this Agreement as provided by Section 4.4 hereof, and the
Company may without any consent assign to any surviving, resulting or transferee
corporation its rights under this Agreement as provided by Section 5.2 hereof
(other than any consent required by said Section 5.2).
SECTION 8.3. SEVERABILITY. If any provision of this Agreement shall be
held or deemed to be or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative or unenforceable to any
extent whatsoever.
SECTION 8.4. EXECUTION OF COUNTERPARTS. This Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument;
provided, however, that for purposes of perfecting a security interest in this
Agreement by the Trustee under Article 9 of the Uniform Commercial Code of the
State, only the counterpart assigned, pledged and delivered to the Trustee shall
be deemed the original.
SECTION 8.5. AMOUNTS REMAINING IN ANY FUND OR WITH TRUSTEE. It is
agreed by the parties hereto that, subject to Sections 6.11(d) and 6.12 of the
Indenture, after payment in full of (i) the principal of, premium, if any, and
interest on the Bonds, (ii) the purchase price of all Bonds tendered or deemed
to be tendered to the Tender Agent for purchase pursuant to Section 4.1 or
Section 4.2 of the Indenture, (iii) the fees, charges, and expenses of the
Issuer, the Trustee, the Tender Agent, the Bond Registrar and the Remarketing
Agent in accordance herewith and with the Indenture, and (iv) all other amounts
required to be paid under this Agreement and the Indenture, any amounts
remaining in any fund or account maintained under this Agreement or the
Indenture and not applied to the payment of the above in accordance with the
provisions of the Indenture or this Agreement shall belong to and be paid to the
Company by the Trustee; provided, that if the Trustee shall request a written
statement from the Bank as to whether or not the Bank
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<PAGE> 30
has been reimbursed by the Company for any and all amounts owing in respect of
such Credit Facility and for all other obligations under the Letter of Credit
Agreement, such amounts remaining in the Bond Fund or the Bond Purchase Fund
shall, upon written notice from the Bank that the Company has not reimbursed the
Bank under the Letter of Credit Agreement for any such payment under the Credit
Facility or any such obligations under the Letter of Credit Agreement (which
notice shall state the unreimbursed amount of such obligations under the Letter
of Credit Agreement), belong to and be paid to the Bank by the Trustee to the
extent that the Company has not so reimbursed the Bank.
SECTION 8.6. AMENDMENTS, CHANGES AND MODIFICATIONS. Except as otherwise
provided in this Agreement or the Indenture subsequent to the initial issuance
of the Bonds and prior to their payment in full, this Agreement may not be
effectively amended, changed, modified, altered or terminated without the
written consent of the Trustee and, while a Credit Facility is in effect or any
obligations are owing to the Bank under the Letter of Credit Agreement, the
Bank.
SECTION 8.7. GOVERNING LAW. This Agreement shall be governed exclusively
by and construed in accordance with the applicable law of the State.
SECTION 8.8. AUTHORIZED COMPANY REPRESENTATIVE. Whenever under the
provisions of this Agreement the approval of the Company is required or the
Company is required to take some action at the request of the Issuer, the
Trustee, the Tender Agent, the Bond Registrar, the Bank or the Remarketing
Agent, such approval or such request shall be given for the Company by the
Authorized Company Representative, and the Issuer, the Trustee, the Tender
Agent, the Bond Registrar, the Bank and the Remarketing Agent shall be
authorized to act on any such approval or request and neither party hereto shall
have any complaint against the other or against the Trustee, the Tender Agent,
the Bond Registrar, the Bank or the Remarketing Agent as a result of any such
action taken.
SECTION 8.9. TERM OF THIS AGREEMENT. This Agreement shall be in full
force and effect from the date hereof, and shall continue in effect until the
payment in full of all principal of, and premium, if any, and interest on the
Bonds, or provision for the payment thereof shall have been made pursuant to
Article VIII of the Indenture, all fees, charges, indemnities and expenses of
the Issuer, the Trustee, the Tender Agent, the Bond Registrar and the
Remarketing Agent have been fully paid or provision made for such payment (the
payment of which fees, charges, indemnities and expenses shall be evidenced by a
written certification of the Company that it has fully paid all such fees,
charges, indemnities and expenses) and all other amounts due hereunder have been
duly paid or provision made for such payment. All representations,
certifications and covenants by the Company as to the indemnification of various
parties as described in Section 5.3 hereof, the payment of fees and expenses of
the Issuer and the Trustee as described in Section 6.3 hereof, and all matters
affecting the tax-exempt status of the Bonds shall survive the termination of
this Agreement.
SECTION 8.10. BINDING EFFECT. This Agreement shall inure to the benefit
of and shall be binding upon the Issuer, the Company, the Bank and their
respective successors and assigns, subject, however, to the limitations
contained in Sections 4.4 and 5.2 hereof.
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<PAGE> 31
SECTION 8.11. LIMITED LIABILITY OF OFFICERS, ETC. No recourse shall be
had for the payment of the principal of, premium, if any, and interest on the
Bonds or for any claim based thereon or upon any obligation, covenant or
agreement contained in this Agreement, the Indenture or the Tax Agreement
against any past, present or future member, officer or employee of the Issuer,
or any incorporator, member, officer, employee, director or trustee of any
successor entity, as such, either directly or through the Issuer or any
successor entity, under any rule of law or equity, statute or constitution or by
the enforcement of any assessment or penalty or otherwise, and all such
liability of any such incorporator, member, officer, employee, director or
trustee as such is hereby expressly waived and released as a condition of and in
consideration for the execution of this Agreement and the Indenture and the
issuance of the Bonds.
SECTION 8.12. COMPANY MAY ACT THROUGH SUBSIDIARIES. The Company may take
any and all actions and fulfill obligations hereunder through one or more
subsidiaries; provided, however, that the provisions of this Section shall not
in any way alter the obligation of the Company to comply with the provisions
hereof, including without limitation the obligation to make all payments as
provided herein.
SECTION 8.13. REFERENCES TO BANK, LETTER OF CREDIT AND CREDIT FACILITY.
At any time while no Letter of Credit is in effect and if at such time there
shall be no Pledged Bonds outstanding and if no obligations are then owing to
the Bank under the Letter of Credit Agreement, all references herein to the
Bank, the Letter of Credit and Credit Facility shall be ineffective. Any
provisions hereof requiring the consent of the Bank shall be deemed ineffective
if the Bank has previously wrongfully dishonored a proper demand for payment
under the Letter of Credit, which wrongful dishonor is continuing.
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<PAGE> 32
IN WITNESS WHEREOF, the Issuer and the Company have caused this
Agreement to be executed in their respective names and attested by their duly
authorized officers and sealed, all as of the date first above written.
MEDINA COUNTY, OHIO
By /s/ Ferris Brown
-----------------------------
President
(SEAL)
Attest:
/s/ Pamela J. Terrill
- - ------------------------------
County Clerk
Valley City Steel Company
By /s/ R.L. Grissinger
-----------------------------
Treasurer
---------
(SEAL) N/A
Attest:
/s/ D. C. Fanello
- - -----------------------
President
---------
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<PAGE> 33
EXHIBIT A
DESCRIPTION OF PROJECT
Terms defined in the Loan Agreement to which this Exhibit A is attached
shall have the same meanings in this Exhibit A.
The Project consists of facilities for the disposal of solid wastes at
the manufacturing plant of the Company located in Medina County, Ohio, all as
more fully described in the Project Certificate.
<PAGE> 1
Exhibit 10.5
OPERATING AGREEMENT
FOR
SHILOH OF MICHIGAN, L.L.C.
A MICHIGAN LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT (the "Agreement") is made and entered
into effective as of the 2nd day of January, 1996 by and among Shiloh of
Michigan, L.L.C., a Michigan limited liability company (the "Company"), ROUGE
STEEL COMPANY, a Delaware corporation ("Rouge") and SHILOH INDUSTRIES, INC., a
Delaware corporation ("Shiloh") (Rouge and Shiloh individually a "Member", and
collectively, "Members"), who agree as follows:
ARTICLE I
ORGANIZATION
------------
1.1 FORMATION. The Company has been organized as a
Michigan limited liability company under and pursuant to the Michigan Limited
Liability Company Act, being Act No. 23, Public Acts of 1993 (the "Act"), by
the filing of Articles of Organization ("Articles") with the Department of
Commerce of the State of Michigan as required by the Act.
1.2 NAME. The name of the Company shall be Shiloh of
Michigan, L.L.C. The Company may also conduct its business under one or more
assumed names.
1.3 PURPOSES. The purposes of the Company are to engage
in any activity for which limited liability companies may be formed under the
Act. The Company shall have all the powers necessary or convenient to effect
any purpose for which it is formed, including all powers granted by the Act.
1.4 DURATION. The Company shall continue in existence
for a period of the earlier of: (a) thirty (30) years from the effective date
of the Articles of Organization or, (b) the earlier dissolution of the Company
in accordance with the Act or this Agreement.
1.5 REGISTERED OFFICE AND RESIDENT AGENT. The Registered
Office and Resident Agent of the Company shall be as designated in the initial
Articles or any amendment thereof. The Registered Office and/or Resident Agent
may be changed from time to time. Any such change shall be made in accordance
with the Act. If the Resident Agent shall ever resign, the Company shall
promptly appoint a successor.
1.6 INTENTION FOR COMPANY. The Members have formed the
Company as a limited liability company under and pursuant to the Act. The
Members specifically intend and agree that the Company not be a partnership
(including a limited partnership) or any other venture but a limited liability
company under and pursuant to the Act. No Member shall be construed to be a
partner in the Company or a partner of any other Member or person and the
Articles, this Agreement and the relationships created thereby and arising
therefrom shall not be construed to suggest otherwise.
<PAGE> 2
1.7 COMPETITION. Each Member will have access to the
blanking and/or tolling operations of the Company as a benefit of its ownership
in the Company. Although no specific allocations of capacity shall be made to
either Member, in determining to accept an order generated by the efforts of an
individual Member, the Company may consider factors such as longevity and
volume, in addition to the Company's operating margin, on a particular order.
A Member shall be entitled to enter into transactions that are competitive with
the business of the Company. Neither the Company nor any Member shall have any
right by virtue of this Agreement to share or participate in such other
transactions. If the Company generates orders to sell blanks, independent of
the efforts of an individual Member or said order does not specify the steel
supplier, the Company will offer Rouge a right of first refusal to supply the
steel to the Company on terms acceptable to the Company. Any Member may engage
in the business of selling steel blanks in competition with the Company or any
other Member, in any territory, at any time during the term of this Agreement,
whether directly or indirectly through another venture or entity, and no Member
shall be deemed to be in violation of a fiduciary duty to the Company on
account of the production and sale of steel blanks or related activities.
1.8 JOINT DEVELOPMENTS. Any and all developments,
inventions, patents, copyrights, or other confidential or proprietary
information relating to any of the foregoing, which is produced, generated or
developed by the Company or any of its employees or agents while working for
the Company (each a "Joint Development") shall be the property of, and belong
to, the Company. If either Rouge or Shiloh desires to use a Joint Development
in its own business or operations, they may do so without restraint by the
Company; provided, however, neither Rouge nor Shiloh may allow third parties,
other than wholly owned subsidiaries, direct or indirect, of Rouge or Shiloh,
to use a Joint Development unless Rouge and Shiloh shall agree to allow the
Company to enter into a license agreement with the third party which provides
for a non-exclusive license to use the Joint Development for a period of years,
not to exceed the period of existence of the Company, at a fair commercial
rate. The agreement of Rouge and Shiloh to such request shall not be
unreasonably withheld.
Any and all developments, inventions, patents, copyrights, or
other confidential or proprietary information of any Member which is disclosed
to the Company in confidence, shall at all times remain the property of such
disclosing Member and shall be for the sole use of the Company and the
disclosing Member only.
ARTICLE II
DEFINITIONS
-----------
For purposes of this Agreement, unless the context clearly
indicates otherwise, (i) all of the capitalized words in this Agreement shall
have the meanings set forth in the text or Appendix and (ii) all
non-capitalized words defined in the Act shall have the meanings set forth
therein.
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<PAGE> 3
ARTICLE III
BOOKS, RECORDS AND ACCOUNTING
-----------------------------
3.1 BOOKS AND RECORDS. The Company shall maintain
complete and accurate books and records of the Company's business and affairs
as required by the Act and such books and records shall be kept at the
Company's Registered Office.
3.2 FISCAL YEAR: ACCOUNTING. The Company's fiscal year
shall begin the first day of November and shall end on October 31 ("Fiscal
Year"). Subject to the terms of this Agreement, the particular accounting
methods and principles to be followed by the Company shall be selected by the
Members from time to time. The Company's method of accounting for
depreciation, capital purchases, expenses and amortization shall be consistent
with the procedures and methodology utilized by Shiloh.
3.3 REPORTS. The Members shall prepare reports
concerning the financial condition and results of operation of the Company and
the Capital Accounts of the Members in the time, manner and form as the Members
determine. Such reports shall be provided at least annually as soon as
practicable after the end of each fiscal year and shall include a statement of
each Member's share of Profits and other items of income, gain, Loss, deduction
and credit.
The books and records of the Company shall be examined as of
the close of each Fiscal Year by an independent certified public accountant
mutually acceptable to the Members, who shall make an annual audit thereon
within one hundred and twenty (120) days following the end of each Fiscal Year,
unless waived by a majority of the Members.
3.4 MEMBER'S ACCOUNTS. Separate Capital Accounts for
each Member shall be maintained by the Company. Each Member's Capital Account
shall reflect the Member's Capital Contributions and increases for the Member's
share of any net Profits, income or gain of the Company. Each Member's Capital
Account shall also reflect decreases for distributions made to the Member and
the Member's share of any Losses and deductions of the Company.
ARTICLE IV
CAPITAL CONTRIBUTIONS
---------------------
4.1 INITIAL COMMITMENTS AND CONTRIBUTIONS. By the
execution of this Agreement, the Members hereby agree to make the capital
contributions set forth in the attached Exhibit A, no later than February 15,
1996. The Sharing Ratios of the Members are set forth in Exhibit A. Any
additional Member (other than an assignee of a Membership Interest (as
hereinafter defined) who has been admitted as a Member) shall make the Capital
Contribution set forth in an Admission Agreement. No interest shall accrue on
any Capital Contribution and no Member shall have any right to withdraw or to
be repaid any Capital Contribution except as provided in this Agreement.
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<PAGE> 4
4.2 ADDITIONAL CONTRIBUTIONS. In addition to the initial
Capital Contributions, the Members may determine from time to time that
additional Capital Contributions are needed to enable the Company to conduct
its business and affairs. Upon making such a determination, notice thereof
shall be given to all Members in writing at least ten (10) business days prior
to the date on which such additional contributions are due. Such notice shall
describe in reasonable detail the purposes and uses of such additional capital,
the amounts of additional capital required, and the date by which payment of
the additional capital is required. Each Member shall make such additional
Capital Contributions in the ratio of its then current Sharing Ratio.
4.3 FAILURE TO CONTRIBUTE. Subject to Section 7.3
herein, if any Member fails to make a Capital Contribution when required, the
remaining Members may elect to contribute the amount of such required capital
itself. In such an event, the remaining Members shall be entitled to treat
such amounts as an extension of credit to such defaulting Member, payable upon
demand, with interest accruing thereon, until paid, at the long term Applicable
Federal Rate in effect for the month in which such capital contribution should
have been made by the defaulting Member, and such credit and interest thereon
shall be secured by such defaulting Member's interest in the Company. Each
Member who may hereafter default hereby grants to each Member who may hereafter
grant such an extension of credit a security interest in such defaulting
Member's interest in the Company.
4.4 CAPITAL ACCOUNT ADJUSTMENT. The purchase price paid
by a Member for another Member's Membership Interest shall be added to the
Member's Capital Account balance after such deemed sale and allocation. In
addition, the Sharing Ratios shall be adjusted to reflect the Membership
Interest purchased or sold so that the Sharing Ratio of each Member equals the
number of membership units owned by that Member.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
-----------------------------
5.1 ALLOCATIONS. Except as may be required by the Code
or this Agreement, net Profits, net Losses, and other items of income, gain,
Loss, deduction and credit of the Company shall be allocated among the Members
in accordance with their Sharing Ratios.
5.2 DISTRIBUTIONS. The Company may make distributions to
the Members from time to time. Distributions may be made only after the
Members determine in their reasonable judgment that the Company has sufficient
cash on hand which exceeds the current and the anticipated needs of the Company
to fulfill its business purposes (including needs for operating expenses, debt
service, acquisitions, reserves and mandatory distributions, if any). All
distributions shall be made to the Members in accordance with their Sharing
Ratios. Distributions shall be in cash or property or partially in both, as
determined by the Members. No distribution shall be declared or made if, after
giving it effect, the Company would not be able to pay its debts as they become
due in the usual course of business or the Company's total assets would be less
than the sum of its total liabilities plus the amount that would be needed if
the Company were to be dissolved at the time of the distribution to satisfy the
preferential rights
-4-
<PAGE> 5
of other Members upon dissolution that are superior to the rights of the
Members receiving the distribution.
ARTICLE VI
MEETINGS OF MEMBERS
-------------------
6.1 VOTING. All Members shall be entitled to vote on any
matter submitted to a vote of the Members. Each Member shall be entitled to a
vote weighted to reflect the proportion of the Member's Sharing Ratio to the
total Sharing Ratios of all Members.
Any vote or action by any Member of the Company will be by
such Member's Board of Directors or its Executive Committee acting on behalf of
the Board of Directors; provided, however, that the Board of Directors or the
Executive Committee of any Member may by resolution appoint an officer,
director, employee, consultant or agent to act as its proxy to vote or take
action on behalf of that Member. Assignees of a Member are entitled to receive
the Member/Assignor's economic interest only and are not automatically Members
and do not have a right to vote unless admitted as a Member.
6.2 REQUIRED VOTE. Unless a greater vote is required by
the Act or the Articles, the affirmative vote or consent of a majority of the
Sharing Ratios of all the Members entitled to vote or consent shall be required
on any matter submitted to a vote of the Members.
6.3 MEETINGS. An annual meeting of Members for the
transaction of such business as may properly come before the meeting shall be
held on the 15th day of January each year (or if that day is a legal holiday,
then on the next succeeding day not a holiday) at 10:00 a.m., at the Company's
principal place of business or at such other time or place as from time to time
may be determined by the Members, provided, however, that the failure to hold
an annual meeting shall not be grounds for dissolution of the Company. Special
meetings of Members for any proper purpose or purposes may be called at any
time by the holders of greater than ten percent (10%) of the Sharing Ratios of
all Members. The Company shall give notice stating the date, time, place and
purposes of any meeting to each Member entitled to vote at the meeting. The
notice shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting. All meetings of Members shall be presided over
by a Chairperson who shall be so designated by the Members. Meetings may be
held pursuant to teleconference or conference telephone call.
6.4 ACTION BY MEMBERS WITHOUT A MEETING. Any action
required or permitted to be taken at an annual or special meeting of the
Members may be taken without a meeting, without prior notice, and without a
vote, if consents in writing, setting forth the action so taken, are signed by
all of the Members who would be entitled to notice of a meeting for such
purpose, which writing or writings shall be filed or entered upon the records
of the Company.
6.5 QUORUM. The presence in person or by proxy of the
Members representing a majority of the Sharing Ratios of the Company, shall
constitute a quorum at any meeting of Members.
-5-
<PAGE> 6
ARTICLE VII
MANAGEMENT
----------
7.1 MANAGEMENT VESTED WITH MEMBERS. The business and
affairs of the Company shall be managed by the Members in proportion to their
respective Sharing Ratios, as adjusted from time to time to reflect any
additional contributions to or withdrawals from the capital of the Company by
the Members.
7.2 STANDARD OF CARE. Every Member shall discharge its
duties to the other Members in good faith, with the care an ordinary prudent
person in a like position would exercise under similar circumstances. Each
Member has other business interests and may engage in any other business,
trade, or employment and shall not be obligated to devote more time and
attention to the conduct of the business of the Company than shall be required
for the supervision of the ownership, operation and management of the Company's
business property.
7.3 MAJOR DECISIONS. The unanimous consent of all
Members shall be required prior to:
(a) Admitting a new Member other than pursuant to Article
IX of this Agreement;
(b) Establishing a capital budget for the Company (an
"Approved Budget"). The Members hereby approve an initial Approved Budget of
Nineteen Million Dollars ($19,000,000.00) for Phase I and an increase in the
Approved Budget by an additional Ten Million Dollars ($10,000,000.00) for Phase
II subject to a final review by Rouge and Shiloh and final approval by Shiloh
and its decision to move forward with Phase II;
(c) Amending or restating the Articles of Organization;
(d) Entering into or amending or terminating, other than
in accordance with the terms of such agreement, any agreement between the
Company and any Member of the Company;
(e) Becoming contingently liable with respect to the
indebtedness of others;
(f) Selling, leasing, exchanging or otherwise disposing
of substantially all of the property and assets, with or without the goodwill,
of the Company;
(g) Forming a corporation or other legal entity or
merging with or forming a legally binding affiliation or association with
another entity.
In the event that any such action is consummated without the
consent of all Members, such act is null and void, the provisions of Article
VIII shall not apply with respect
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<PAGE> 7
to such act and the Member taking such action shall indemnify the nonconsenting
Members from any and all costs, claims, liabilities, damages and obligations
arising therefrom unless the nonconsenting Members subsequently ratify and
approve such action.
7.4 COMPENSATION OF MEMBERS. No Member shall receive
monetary or any other form of compensation for routine services rendered to the
Company. It is anticipated that Shiloh or one of its direct or indirect
subsidiaries may provide management services, specialized engineering services
or make available specialized equipment for the benefit of the Company at fair
market rates.
7.5 EMPLOYEES. It is envisioned that the Company may
utilize the services of employees of the Members from time to time. In such
cases, the Company shall reimburse the Member for the cost of salary, payroll
taxes and benefits of such loaned or "seconded" employees, without any markup
for overhead. The Company shall not hire or appoint any outside, independent,
management. All key management employees of the Company must be directors,
officers, employees, agents or consultants of the Members. The Company shall
not hire any manager or otherwise appoint any officer or employee if such
conduct would jeopardize the Company's status as a limited liability company
analogous to a partnership for taxation and control purposes.
7.6 PRIOR DISCUSSIONS. Prior to undertaking the
following activities, the Members shall confer and discuss these issues and
allow each party to present its views and opinions concerning the anticipated
action in order to jointly develop a business strategy. The issues requiring
prior discussion are as follows:
(a) Establishing a credit facility in excess of One
Million Dollars ($1,000,000.00), or entering into,
amending or terminating any lease, contract, plan or
other agreement providing for payments by or to the
Company or a lien or encumbrance upon the assets or
property of the Company in excess of One Million
Dollars ($1,000,000.00) in any Fiscal Year;
(b) Expanding the current facility(ies) of the Company or
entering into any agreement or arrangement for the
opening of a new factory or manufacturing facility
for the Company other than as provided in an Approved
Budget if it would require any capital contribution
from a Member, create any contingent liability
against a Member or substantially exhaust the
Company's accumulated earnings and/or profits;
(c) Prior to initiating or settling any litigation for an
amount in excess of One Hundred Thousand Dollars
($100,000.00) and/or which is likely to affect a
significant customer relationship, except for
litigation involving routine employment matters.
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<PAGE> 8
ARTICLE VIII
EXCULPATION OF LIABILITY
------------------------
8.1 EXCULPATION OF LIABILITY. Unless otherwise provided
by law or expressly assumed, a person who is a Member shall not be personally
liable under any judgment of a court, or in any other manner, for any debt,
obligation, or liability of the Company, whether the liability or obligation
arises in contract, tort, or otherwise, solely by reason of being a Member of
the Company. The failure of the Company to observe any formalities or
requirements relating to the exercise of its powers or management of its
business or affairs under this Agreement or the Act shall not be grounds for
imposing personal liability on the Members for liabilities of the Company.
Notwithstanding the foregoing, any liability which could be imposed upon a
Member by a nonMember shall be limited to that Member's capital contribution.
No Member shall be obligated to restore a deficit balance in its Capital
Account except as required by law.
8.2 INDEMNIFICATION. Except for a (i) breach of
fiduciary duty as defined in the Act or (ii) a breach of Section 7.3, the
Company shall indemnify any former or present Member, manager, representative
or employee of the Company, or the legal representative of such Member,
manager, representative or employee ("Indemnitee") against judgments,
settlements, penalties, fines or expenses of any kind incurred in the capacity
or arising out of such Indemnitee's status related to the Company. Said
Indemnitee shall be indemnified by the Company against reasonable costs,
expenses, settlements and counsel fees paid or incurred in connection with any
action, suit or proceeding to which any such Indemnitee may be made a party by
reason of its being or having been an Indemnitee.
8.3 INSURANCE. The Company shall have the power to
purchase insurance on behalf of any Member against any liability asserted
against or incurred by such Member, in the capacity or arising out of such
Member's status as a Member of the Company.
ARTICLE IX
DISPOSITION OF MEMBERSHIP INTERESTS
-----------------------------------
9.1 GENERAL. A Member may not sell, assign, transfer,
exchange, mortgage, pledge, grant or dispose of any Membership Interest
(herein, a "Transfer" or any root derivation thereof) except as may be
expressly provided herein. No Membership Interest shall be disposed of (a)
without compliance with any and all applicable state and federal securities
laws and regulations, (b) unless the assignee or transferee of the Membership
Interest provides the Company with the information and agreements that the
Members may require in connection with such disposition and (c) unless such
Member shall have offered the other Member(s) in writing (pro rata to their
Membership Interests) the opportunity to purchase its Membership Interest on
the terms provided in this Article IX. Any Transferee must agree to become
bound by the terms and conditions of this Agreement. Any attempted disposition
of a Membership Interest in violation of this Article is invalid and shall be
null and void.
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<PAGE> 9
9.2 PERMITTED DISPOSITIONS.
(a) ASSIGNMENT. Subject to the provisions of this
Article, a Member may assign such Member's Membership Interest in the Company
in whole or in part. The assignment of a Membership Interest does not itself
entitle the Assignee to participate in the management and affairs of the
Company or to become a Member. Such Assignee is only entitled to receive, to
the extent assigned, the distributions the assigning Member would otherwise be
entitled to receive and shall have no other right.
(b) TRANSFER TO A CONTROLLED ENTITY. A Member may
Transfer any or all of its Membership Interest to any other entity owned or
controlled by it (i.e., at least fifty percent (50%)) at its sole discretion.
(c) TRANSFER UPON WRITTEN CONSENT. A Member may Transfer
all or any portion of its Membership Interest with the written consent of the
Company and the other Members; provided, however, that the portion of the
Membership Interest for which consent has been obtained is Transferred and,
provided further, that the Transferring Member and the Transferee comply with
such terms and conditions as may be required for such consent.
(d) TRANSFER BY SHILOH TO A NON-OWNED OR CONTROLLED THIRD
PARTY. Shiloh may Transfer all or any portion of its Membership Interest at
its discretion; provided, that no such Transfer shall be made unless Shiloh
shall have provided the Company and Rouge with a copy of the written offer to
purchase all or a portion of Shiloh's Membership Interest, as the case may be,
stating the terms and conditions upon which the purchase is to be made and the
consideration offered (the "Shiloh Offer"); and further provided that, Rouge
may, at its option, sell its own Membership Interest, or portion thereof, as
the case may be, to the intended Transferee pursuant to the Shiloh Offer
according to the same terms and at the same price as the Shiloh Offer. If
Rouge gives notice to the Company, Shiloh and Transferee of its intent to
Transfer its Membership Interest, or portion thereof, as the case may be,
together with Shiloh's Membership Interest, pursuant to the Shiloh Offer, the
Transferee shall be required to purchase the entire Membership Interest of
Rouge, or portion thereof, as the case may be, at such time as the Membership
Interest of Shiloh is purchased pursuant to the Shiloh Offer. Further, Rouge
has such right to tender its Membership Interest to such Transferee for
purchase upon the same terms and conditions, adjusted for any capital
contributions made by Rouge after receipt of the Shiloh offer, for an
additional three (3) year period from its receipt of the Shiloh Offer, and the
Transferee shall be required to purchase all of Rouge's Membership Interest
pursuant to such tender. The closing of any such purchase shall occur within
sixty (60) days of the Transferee's receipt of Rouge's intention to sell all of
its Membership Interest.
In the event Rouge does not initially elect to sell its
Membership Interest upon the terms and conditions set forth in the Shiloh
Offer, Rouge shall have the right of first refusal to purchase the Membership
Interest of Shiloh made the subject of the Shiloh Offer upon the same terms and
conditions as set forth in the Shiloh Offer. In the event that Rouge elects
not to sell its Membership Interest upon the terms and conditions set forth in
the Shiloh Offer (either initially or during the three (3) year period
subsequently) or to purchase the Membership Interest
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<PAGE> 10
of Shiloh upon the terms and conditions set forth in the Shiloh Offer, Rouge
shall continue to maintain its Membership Interest in accordance with the terms
and conditions of this Agreement.
9.3 TRANSFER BY ROUGE AFTER SEVEN YEARS.
(a) THE OFFER. If Rouge desires to sell all or any
portion of its Membership Interest after the first seven (7) years of the
existence of the Company, (measured from the filing date of the Articles),
Rouge shall first offer said Membership Interest to Shiloh or its designated
subsidiary, assignee, nominee and/or affiliated corporation, (the "Shiloh
Purchaser"). The Shiloh Purchaser shall have the option, but not the
obligation, to purchase such portion of Rouge's Membership Interest as is
offered for sale at the fair market value as determined pursuant to Section
9(c) herein. The purchase price payment will be paid in full at closing, which
closing shall occur within sixty (60) days of the receipt by Shiloh of Rouge's
offer to sell. If the Shiloh Purchaser declines to purchase the Rouge
Membership Interest offered for sale by way of a written acceptance received by
Rouge within thirty (30) days after the receipt of an offer to sell from Rouge,
Rouge may offer all or any portion of its Membership Interest for sale to third
parties. Rouge shall obtain from any proposed third party purchaser, the
Transferee, a bona fide written offer to purchase the Membership Interest,
stating the terms and conditions upon which the purchase is to be made and the
consideration offered (the "Offer"). Rouge must notify the remaining Members,
and the Company of its intention to sell, furnishing a copy of the Offer to
those remaining Members and the Company. For all purposes under this
Agreement, "bona fide offer" shall mean an Offer which is supported by adequate
consideration from an organization, entity or individual which possesses
sufficient cash resources and/or proven borrowing power to finance the
transaction contemplated by way of cash at the time of closing. It is the
intent of the parties that the Transferee be required to establish the bona
fide nature of said Offer by such means as may be commercially reasonable under
the circumstances existing at the time.
(b) ELECTION AND ACCEPTANCE OF OFFER. Within
thirty (30) days after the receipt of such Offer, the remaining Member(s) (or
their subsidiaries, assignees or nominees) may, at their option, purchase all,
but not less than all, (unless the Company agrees to purchase the balance of
Rouge's Membership Interest) of the Membership Interest in the Company owned by
Rouge in accordance with the price, terms and conditions of Section 9.3 hereof.
Said purchases shall be in accordance with the Members' pro rata ownership
interests or such other amount as the remaining Member(s) may agree. If such
Offer is not accepted by the remaining Member(s), or to the extent the offer is
not accepted by the remaining Member(s), the Company may, within forty-five
(45) days after the receipt of such Offer, at its option, purchase the
remaining portion of the Membership Interest in the Company owned by Rouge and
not purchased by the remaining Member(s). The Member(s) shall exercise their
election to purchase by giving notice thereof to Rouge and to the Company. The
Company shall exercise its election to purchase by giving notice thereof to
Rouge and to the Members. In either event, the notice shall specify a date for
the closing of the purchase which shall be not more than thirty (30) days after
the date of the giving notice of election to purchase. In the event that
neither the Company nor the other Member(s) purchase the entire Membership
Interest of Rouge, Rouge may sell to the Transferee named in the Offer upon the
terms and conditions set forth in the Offer. However, if Rouge shall fail to
complete such sale and Transfer within sixty (60) days following the expiration
of
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<PAGE> 11
time set forth in this Section 9.3(b) such Membership Interest of Rouge shall
again become subject to all restrictions of this Agreement.
(c) PURCHASE PRICE. The purchase price to be paid by
Shiloh or the Company shall be the greater of the Offer or the price
established pursuant to this Section 9.3(c)(i) and (ii).
(i) All assets (tangible and intangible) of the Company
shall be deemed sold at their then-current fair
market values as of the end of the calendar month
prior to the notice date, and the resulting Profit or
Loss shall be allocated to the Members in accordance
with Article V. Capital Accounts shall be adjusted
to reflect all liabilities which have accrued as of
the end of the calendar month prior to the notice
date.
(ii) For purposes of (i) above, the fair market value of
an asset shall be determined by agreement among the
Members. Should there fail to be an agreement as to
fair market value, an appraiser shall be appointed by
each of (i) the Company and (ii) the Member whose
interest is to be appraised or at whose request the
determination of fair market value is to be made, and
the appraisers so appointed shall attempt to agree
upon the fair market value of the interest of the
Company or other asset. If within sixty (60) days
the appraisers so appointed are unable to agree upon
the fair market value of the interest in the Company
or other asset, and the difference is less than ten
percent (10%) of the higher (in amount) of the two
appraisals, then the fair market value of the
interest in the Company or other asset shall be the
arithmetic average of the two appraisals. If the
difference between the appraisals is ten percent
(10%) or more of the higher (in amount) of the two
appraisals, then the two appraisers shall appoint a
third appraiser by agreement (or, if they are unable
to agree upon a third appraiser, they shall nominate
a third appraiser and the third appraiser shall be
chosen from among the two nominees by coin toss or
other random method) and the fair market value of the
interest in the Company or other asset shall be the
value determined by the third appraiser (but under no
circumstances shall fair market value be lower than
the lower value determined by either appraiser
appointed by a Member and the Company or higher than
the higher value determined by either appraiser
appointed by a Member and the Company).
9.4 ROUGE'S PUT OPTION. During the first seven (7)
years of the existence of the Company (as defined in Section 9.3(a)) Rouge
shall have a Put Option to sell its entire Membership Interest to Shiloh, or
its designated subsidiary, assignee, nominee and/or affiliated corporation,
(the "Obligor"). That is, at Rouge's option Shiloh will guaranty that the
Obligor must purchase Rouge's Membership Interest at a price equal to Rouge's
Capital Account balance provided that if Rouge's Capital Account balance is a
negative figure at that time, the purchase price shall be One Dollar ($1.00).
The purchase price payment will be made in full at closing, which closing shall
occur within ninety (90) days of the receipt by Shiloh of Rouge's Put Option,
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<PAGE> 12
and shall include full indemnification of Rouge by Shiloh for any contingent
liability arising from the operations of the Company to that time.
9.5 UNAUTHORIZED TRANSFER. The Company will not be
required to recognize the interest of any Transferee who has obtained a
purported interest as the result of a Transfer of ownership which is not an
authorized Transfer. If the Membership Interest is in doubt, or if there is
reasonable doubt as to who is entitled to a distribution of the income realized
from a Membership Interest, the Company may accumulate the income until this
issue is finally determined and resolved. Accumulated income will be credited
to the Capital Account of the Member whose interest is in question.
9.6 REQUIREMENTS FOR EFFECTIVENESS OF TRANSFER. As a
condition to recognizing the effectiveness of any proposed Transfer of
Membership Interest, the remaining Members may require the Transferor and/or
the proposed Transferee to perform all other acts which the remaining Members
may deem necessary or desirable to:
(a) Constitute such Transferee, as an Assignee or a
Substitute Member;
(b) Confirm that the Person acquiring a Membership
Interest, or being admitted as a Member, has agreed
to be subject to and bound by this Agreement, as it
may be further amended, regardless of whether the
Person is to be admitted as a Substitute Member or
will merely be an Assignee;
(c) Preserve the Company's status under the laws of each
jurisdiction in which the Company is qualified,
organized or does business after the Transfer;
(d) Maintain the Company's classification as a
partnership for federal income tax purposes; and
(e) Assure compliance with any applicable state and
federal laws including securities laws and
regulations.
9.7 PROHIBITED DISPOSITIONS. Except insofar as may
otherwise be required by law or Section 4.3 hereof, or permitted by Article IX
hereof, no Member's Membership Interest in the Company, in whole or in part,
shall be subject in any manner to alienation by anticipation, sale, transfer,
assignment, bankruptcy, pledge, attachment, charge, or encumbrance of any kind,
nor in any manner be subject to the debts or liabilities of any Member, and any
attempt to so alienate or subject any such Membership Interest shall be null
and void.
9.8 ADMISSION OF SUBSTITUTE MEMBERS. An Assignee of a
Membership Interest shall be admitted as a substitute Member and shall be
entitled to all the rights and powers of the assignor only if the other Members
unanimously consent in writing, which consent each Member may grant or withhold
in such Member's sole and absolute discretion. If admitted, the substitute
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<PAGE> 13
Member, shall have, to the extent assigned, all of the rights and powers, and
shall be subject to all of the restrictions and liabilities, of a Member.
ARTICLE X
DISSOLUTION AND WINDING UP
--------------------------
10.1 DISSOLUTION. The Company shall dissolve and its
affairs shall be wound up on the first to occur of the following events (a
"Dissolution Event"): (a) On the happening of any event or at any time
specified in the Articles or this Agreement; (b) by the unanimous consent of
all of the Members to dissolve and wind up the affairs of the Company; (c) upon
the withdrawal, expulsion, bankruptcy, or dissolution of a Member (the
"Withdrawing Member"); (d) the occurrence of any other event which terminates
the continued existence of a Member in the Company; and (e) upon entry of a
decree of judicial dissolution; unless within ninety (90) days after such event
all of the remaining Members consent to continue the business of the Company
and to the admission of one or more Members as necessary to maintain the
minimum number of Members under the Act. In the event that the remaining
Members desire to continue the Company and select a substitute Member who
consummates the purchase of the Membership Interest of the Withdrawing Member
as provided in Section 9.6 hereof, the Company shall not be dissolved;
provided, that the purchase price of the Membership Interest of the Withdrawing
Member shall be agreed upon by the Withdrawing Member and the purchaser of the
Membership Interest of the Withdrawing Member.
10.2 WINDING UP. Upon dissolution, the Company shall
cease carrying on its business and affairs and shall commence the winding up of
its business and affairs and complete the winding up as soon as practicable.
Upon the occurrence of any Dissolution Event, a certificate of dissolution
containing the information required by the Act shall be delivered to the
Department of Commerce of the State of Michigan for filing.
10.3 PROCEEDS OF LIQUIDATION. The proceeds from
liquidation of the rights, property and assets of the Company shall be applied
in the following order of priority and, upon the completion of the distribution
of such proceeds, the Company shall be deemed to have been entirely terminated:
(a) The satisfaction of any outstanding obligations and
liabilities to creditors of the Company who are not Members;
(b) Establishment of any reserves which such persons as
are supervising and controlling the liquidation of the Company may deem
advisable with respect to any contingent or unforeseen liabilities or
obligations of the Company, such reserves to be maintained in a regular trust
account and at the expiration of such reasonable period of time as such persons
shall deem advisable the remaining balance in the trust fund shall be
distributed to the Members in accordance with the priorities herein provided
for;
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(c) Payment to the Members of any accrued but unpaid
interest on and repayment, if any, of the outstanding principal of any loans
made to the Company by the Members hereunder or any other debts of the Company
to the Members;
(d) Distribution to the Members of that portion of such
property and assets then remaining as will result in a return to each Member of
the balance of its Capital Account; if such remaining property and assets are
not sufficient to return to the Members the entire amounts of their Capital
Accounts, such remaining property and assets shall be distributed between the
Members in proportion to their Capital Accounts; and
(e) Distribution of any balance remaining, after
deducting the cost of liquidation, to the Members in accordance with their
respective Sharing Ratios.
10.4 DEEMED DISTRIBUTION AND RECONTRIBUTION.
Notwithstanding any other provisions of Article X of this Agreement, in the
event the Company is "liquidated" within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g) but no event described in Section 10.1 has occurred, the
Company shall not be liquidated, the Company's liabilities shall not be paid or
discharged, and the Company's affairs shall not be wound up. Instead, the
Company shall be deemed to have distributed its assets in kind to the Members,
who shall be deemed to have assumed and taken such assets subject to all
Company liabilities, all in accordance with their respective Capital Accounts.
Immediately thereafter, the Members shall be deemed to have recontributed the
assets in kind to the Company, which shall be deemed to have assumed and taken
such assets subject to all such liabilities.
10.5 ALTERNATIVE DISTRIBUTION METHODS. In the discretion
of the Members, a pro rata portion of the distributions that would otherwise be
made to the Members pursuant to Article V of this Agreement may be:
(a) Distributed to a trust established for the benefit of
the Members for the purposes of liquidating Company assets, collecting amounts
owed to the Company, and paying any contingent or unforeseen liabilities or
obligations of the Company or the Members arising out of or in connection with
the Company. The assets of any such trust shall be distributed to the Members
from time to time, in the reasonable discretion of the Members, in the same
proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Members pursuant to this Agreement; or
(b) Withheld to provide a reasonable reserve for Company
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Company, provided that such withheld
amounts shall be distributed to the Members as soon as practicable.
10.6 REIMBURSEMENT OF EXPENSES. Subject to the
limitations contained herein including those set forth in Section 7.3, the
Members shall be entitled to reimbursement for out-of-pocket expenses incurred
in connection with the winding up and liquidation of the business carried on by
the Company. Such reimbursement shall be paid as an expense of the business
carried on by the Company after all liabilities to creditors of the Company
(other than
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<PAGE> 15
any of the Members) have been repaid but prior to any repayments of or
distributions to any of the Members.
ARTICLE XI
TAXES
-----
11.1 METHOD OF ACCOUNTING FOR TAX PURPOSES. The records
of the Company shall be maintained on the accrual method of accounting for
federal income tax purposes.
11.2 TAX MATTERS MEMBER. Shiloh shall be designated as
the "tax matters partner" of the Company pursuant to Section 6231(a)(7) of the
Code. Shiloh shall take such actions as are necessary to cause each other
Member and Assignee to become a "notice partner" within the meaning of Section
6223 of the Code. Shiloh shall not take any action contemplated by Sections
6223 through 6229 of the Code without the approval by a majority vote of the
Members.
11.3 TAX ALLOCATIONS. All tax allocations shall be
made in accordance with the provisions set forth in Article V and the Appendix.
ARTICLE XII
MISCELLANEOUS PROVISIONS
------------------------
12.1 TERMS. Nouns and pronouns will be deemed to refer to
the masculine, feminine, neuter, singular and plural, as the identity of the
person or persons, firm or corporation may in the context require.
12.2 HEADINGS. The headings contained in this Agreement
have been inserted only as a matter of convenience and for reference, and in no
way shall be construed to define, limit or describe the scope or intent of any
provision of this Agreement.
12.3 COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which will be deemed an original but all of which
will constitute one and the same instrument.
12.4 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement among the parties hereto and contains all of the agreements
among said parties with respect to the subject matter hereof. This Agreement
supersedes any and all other agreements, either oral or written, between said
parties with respect to the subject matter hereof.
12.5 SEVERABILITY. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision were omitted.
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<PAGE> 16
12.6 AMENDMENT. This Agreement may be amended or revoked
at any time by a written agreement executed by all of the parties to this
Agreement. No change or modification to this Agreement shall be valid unless
in writing and signed by all of the parties to this Agreement.
12.7 NOTICES. Any notice permitted or required under this
Agreement shall be conveyed to the party at the address reflected in this
Agreement and will be deemed to have been given, when deposited in the United
States mail, postage paid, certified mail return receipt requested, or when
delivered in person, or by courier or by facsimile transmission.
12.8 BINDING EFFECT. Subject to the provisions of this
Agreement relating to transferability, this Agreement will be binding upon and
shall inure to the benefit of the parties, and their respective distributees,
heirs, successors and assigns.
12.9 GOVERNING LAW. This Agreement is made under, and
shall be governed by and construed in accordance with, the law of the State of
Michigan applicable to contracts made and to be performed entirely within such
State and without giving effect to choice of law principles of such State. All
actions concerning any dispute arising hereunder or relating hereto or to the
transactions contemplated herein shall be filed and maintained only in a state
or federal court sitting in the State of Michigan.
12.10 RIGHTS OF CREDITORS AND THIRD PARTIES UNDER THIS
AGREEMENT. This Agreement is entered into among the Members for the exclusive
benefit of the Company, its Members, and their successors and assignees. This
Agreement is expressly not intended for the benefit of any creditor of the
Company or any other person. Except and only to the extent provided by
applicable statute, no creditor or third party shall have any rights under this
Agreement or any agreement between the Company and any Member with respect to
any Capital Contribution or otherwise.
12.11 NON-WAIVER. No delay or failure by a party to
exercise any right under this Agreement, and no partial or single exercise of
that right, shall constitute a waiver of that or any other right, unless
otherwise expressly provided herein.
12.12 ANTITRUST POLICY STATEMENT. The Company shall
abide by the terms, conditions and declarations in the Company's Antitrust
Policy Statement, executed by the appropriate representatives of the Members,
attached hereto and incorporated herein as Exhibit B.
12.13 SETTLEMENT OF DISPUTES. If a dispute arises out of
or relates to this Agreement, or the alleged breach thereof, then settlement of
the dispute shall first be attempted through direct negotiations between the
chief executive officers of the Member companies. If the dispute cannot be
settled through said direct negotiations, the chief executive officers may
agree to try in good faith to settle the dispute by mediation (under the
American Arbitration Association Mediation Rules), or some other alternative
dispute resolution procedure, or if no such procedure is implemented mutually
agreed to by the parties, any party to this Agreement may seek redress in a
court of competent jurisdiction.
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IN WITNESS WHEREOF, the parties hereto make and execute this
Agreement on the dates set below their names, to be effective on the date first
above written.
SHILOH OF MICHIGAN, L.L.C. Members:
--------
SHILOH INDUSTRIES, INC.
By: /s/ William Burton By: /s/ R. L. Grissinger,
------------------------------ ------------------------------
William Burton R. L. Grissinger, President
Its: Senior Vice President
-----------------------------
ROUGE STEEL COMPANY
By: /s/ Carl Valdiserri
------------------------------
Its: CEO
------------------------------
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APPENDIX
--------
&
-
TAX ALLOCATIONS
---------------
Capitalized words and phrases used in this Agreement and not
otherwise defined herein have the following meanings:
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant fiscal year, after giving effect to the following
adjustments:
(i) Credit to such Capital Account any amounts which such
Member is obligated to restore (pursuant to the terms
of such Member's promissory note, Section
1.704-1(b)(2)(ii)(c) of the Regulations or otherwise)
or is deemed to be obligated to restore pursuant to
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5).
(ii) Debit to such Capital Account the items described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6)
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"Adjusted Capital Contribution" means, as of any day, a
Member's Capital Contributions adjusted as follows:
(i) Increased by the amount of any Company liabilities
which, in connection with certain distributions, are
assumed by such Member, or are secured by any Company
property distributed to such Member, and
(ii) Reduced by the amount of cash and the Gross Asset
Value of any Company property distributed to such
Member and the amount of any liabilities of such
Member assumed by the Company or which are secured by
any property contributed by such Member to the
Company.
"Assignee" means an assignee of a Sharing Ratio who is not a
Member at the time of the assignment and is not admitted as a Substitute
Member.
"Capital Account" means, with respect to any Member, the
Capital Account maintained for such Member in accordance with the following
provisions:
Page 1 of 8 Pages
<PAGE> 19
(i) To each Member's Capital Account, there shall be
credited such Member's Capital Contributions, such
Member's distributive share of Profits and any items
in the nature of income or gain that are specially
allocated pursuant to this Agreement, and the amount
of any Company liabilities assumed by such Member or
which are secured by any Company property distributed
to such Member.
(ii) To each Member's Capital Account there shall be
debited the amount of cash and the Gross Asset Value
of any Company property distributed to such Member
pursuant to any provisions of this Agreement, such
Member's distributive share of Losses and any items
in the nature of expenses or losses which are
specially allocated pursuant to this Agreement, and
the amount of any liabilities of such Member assumed
by the Company or which are secured by any property
contributed by such Member to the Company.
(iii) In determining the amount of any liability for
purposes of subsections (i) and (ii) above, there
shall be taken into account Code Section 752(c), the
Regulations thereunder, and any other applicable
provisions of the Code and Regulations.
(iv) The transferee of a Membership Interest shall succeed
to the Capital Account attributable to the Membership
Interest transferred.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Code Section
704(b) and Regulations Section 1.704-1(b), and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the Members shall
determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto (including, without limitation,
debits or credits relating to liabilities that are secured by contributed or
distributed property or that are assumed by the Company or the Members), are
computed in order to comply with such Regulations, the Members may make such
modification, provided that the requirements in the Code and Regulations are
complied with and it is not likely to have a material effect on the amounts
distributable to any Member pursuant to Article X of this Agreement, upon the
dissolution of the Company. The Members also shall (A) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the Members and the amount of membership capital reflected on the
Company's balance sheet, as computed for book purposes in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g), and (B) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Sections 1.704-1(b) and 1.752-0 et.
seq.
"Capital Contribution" means, with respect to any Member, the
amount of money and the initial Gross Asset Value of any property (other than
money) contributed to the Company with respect to the Membership Interest held
by such Member pursuant to the terms of this Agreement. The principal amount
of a promissory note which is not readily traded on an established securities
market and which is contributed to the Company by the maker of the note shall
not be included in the Capital Account of any person until the Company makes a
taxable
Page 2 of 8 Pages
<PAGE> 20
disposition of the note or until (and to the extent) principal payments are
made on the note, all in accordance with Regulations Section
1.704-1(b)(2)(iv)(d)(2).
"Code" or "IRC" means the Internal Revenue Code of 1986, as
amended from time to time (or any corresponding provisions of succeeding law).
"Company Minimum Gain" has the meaning set forth in
Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
"Depreciation" means, for each fiscal year or other period, an
amount equal to the depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year or other period,
except that if the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such year or other
period, Depreciation shall be an amount that bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis; provided, however, that if the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the
Members.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the
gross fair market value of such asset, as determined
by the contributing Member and the Members;
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market
values, as determined by the Members, as of the
following times: (A) the acquisition of an
additional interest in the Company by any new or
existing Member in exchange for more than a de
minimis Capital Contribution; (B) the distribution by
the Company to a Member of more than a de minimis
amount of Company property as consideration for an
interest in the Company; and (C) the liquidation of
the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) provided, however, that the
adjustments pursuant to clauses (A) and (B) above
shall be made only if the Members reasonably
determine that such adjustments are necessary or
appropriate to reflect the relative economic
interests of the Members in the Company;
(iii) The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair
market value of such asset on the date of
distribution: and
(iv) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to
the
Page 3 of 8 Pages
<PAGE> 21
extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)
hereof; provided, however, that Gross Asset Values shall not be
adjusted pursuant to this subsection to the extent the Members
determine that an adjustment pursuant to subsection (ii) above is
necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this subsection (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant
to subsections (i), (ii) or (iv) above, such Gross Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect to such asset
for purposes of computing Profits and Losses.
"Membership Interest" shall mean the Member's rights in the
Company, including, but not limited to, the right to receive distributions of
the Company's assets and any right to vote or participate in the management of
the Company.
"Member Minimum Gain" means a Member's share of Company
Minimum Gain determined in accordance with Regulations Section 1.704-2(g).
"Member Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" has the meaning and is
determined according to the provisions set forth in Regulations Section
1.704-2(i)(3).
"Member Nonrecourse Deductions" has the meaning set forth in
Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2).
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1).
"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.704-2(b)(3).
"Profits" and "Losses" means, for each fiscal year or other
period, an amount equal to the Company's taxable income or loss for such year
or period, determined in accordance with Code Section 703(a) (for this purpose,
all items of income, gain, loss, or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or
loss), with the following adjustments:
(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this Section
shall be added to such taxable income or shall reduce
such loss;
(ii) Any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to
Page 4 of 8 Pages
<PAGE> 22
Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profits or
Losses pursuant to this Section, shall be subtracted
from such taxable income or added to such loss;
(iii) In the event the Gross Asset Value of any Company
asset is adjusted pursuant to the definition of
"Gross Asset Value" (ii) or (iii) hereof, the amount
of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for
purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of
Company property with respect to which gain or loss
is recognized for federal income tax purposes shall
be computed by reference to the Gross Asset Value of
the property disposed of, notwithstanding that the
adjusted tax basis of such property differs from its
Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in
computing such taxable income or loss, there shall be
taken into account Depreciation for such fiscal year
or other period, computed in accordance with the
definition of Depreciation herein ;
(vi) Notwithstanding any other provision of this
definition of Profits or Losses, any items that are
specially allocated pursuant to this Agreement shall
not be taken into account in computing Profits or
Losses;
(vii) With respect to property (other than money) which has
been contributed to the capital of the Company,
Profit and Loss shall be computed in accordance with
the provisions of Section 1.704-1(b)(2)(iv)(g) of the
Regulations by computing depreciation, amortization,
gain or loss upon the fair market value of such
property on the books of the Company;
(viii) With respect to any property of the Company which has
been revalued as required or permitted by the
Regulations under Section 704(b) of the Code, Profit
or Loss shall be determined based upon the fair
market value of such property as determined in such
revaluation; and
(ix) Interest paid on loans made to the Company by a
Member and fees and other compensation paid to any
Member shall be deducted in computing Profit and
Loss.
"Regulations" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Sharing Ratios" means the interests of the Members in the
Company as shown initially on Exhibit A hereto and which may be adjusted from
time to time in accordance with Article IV hereof.
Page 5 of 8 Pages
<PAGE> 23
SPECIAL ALLOCATIONS
-------------------
(a) MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations Section 1.704-2(f), notwithstanding any other provision
of Article V and this Appendix, if there is a net decrease in Company Minimum
Gain during a Company fiscal year, each Member shall be specially allocated
items of Company income and gain for such Company fiscal year (and, if
necessary, subsequent Company fiscal years) in an amount equal to such Member's
share of the net decrease in Company Minimum Gain, determined in accordance
with Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be allocated shall be
determined in accordance with Regulations Sections 1.704-2(f)(6) and
1.704-2(j)(2). This Section is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith.
(b) MEMBER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations Section 1.704-2(i)(4), notwithstanding any other
provision of Article V and this Appendix, if there is a net decrease in Member
Nonrecourse Debt Minimum Gain, attributable to a Member Nonrecourse Debt during
any Company fiscal year, each Member who has a share of the Member Nonrecourse
Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated
items of Company income and gain for such Company fiscal year (and, if
necessary, subsequent Company fiscal years) in an amount equal to such Member's
share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(i)(4) and 1.704-2(j)(2). This
Section is intended to comply with the minimum gain chargeback requirement in
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
(c) QUALIFIED INCOME OFFSET. In the event any Member
unexpectedly receives any adjustments, allocations or distributions described
in Regulations Section 1.704-1(b)(2)(ii)(d)(4), Section
1.704-1(b)(2)(ii)(d)(5), or Section 1.704-1(b)(2)(ii)(d)(6), items of Company
income and gain shall be specifically allocated to each such Member in an
amount and manner sufficient to eliminate, to the extent required by the
Regulations, the Adjusted Capital Account Deficit of such Member as quickly as
possible, provided that an allocation pursuant to this Section shall be made
only if and to the extent that such Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in Article VIII and
this Appendix have been tentatively made as if this subsection (c) were not in
the Agreement.
(d) GROSS INCOME ALLOCATION. In the event any Member has
a deficit Capital Account at the end of any Company fiscal year which is in
excess of the sum of (i) the amount such Member is obligated to restore
pursuant to any provision of this Agreement, and (ii) the amount such Member is
deemed to be obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
subsection (d) shall be made only if and to
Page 6 of 8 Pages
<PAGE> 24
the extent that such Member would have a deficit Capital Account in excess of
such sum after all other allocations provided for in Article V and this
Appendix have been made as if subsection (c) of this Section and this
subsection (d) were not in the Agreement.
(e) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for
any fiscal year or other period shall be specially allocated to the Members
pursuant to Regulations Sections 1.704-2 and 1.752-0 et seq.
(f) MEMBER NONRECOURSE DEDUCTIONS. Any Member
Nonrecourse Deductions for any fiscal year or other period shall be specially
allocated to the Member who bears the economic risk of loss with respect to the
Member Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Regulations Sections 1.704-2(i)(1).
(g) COMPLIANCE WITH REGULATIONS SECTION 1.704-2 AND
ORDERING RULES. The foregoing provisions and the other provisions of this
Agreement relating to allocations attributable to nonrecourse liabilities are
intended to comply with Regulations Sections 1.704-2 and 1.752-0 et seq., and
shall be interpreted and applied in a manner consistent with such Regulations.
Furthermore, for purposes of applying Regulations Section 1.704-2, the ordering
rules set forth in Regulations Section 1.704-2(j) shall apply. Finally,
notwithstanding any other provision in Regulations Sections 1.704-1, 1.704-2
and 1.752-0 ET seq. allocations of Member Nonrecourse Deductions, Nonrecourse
Deductions, and Minimum Gain Chargebacks shall be made before any other
allocations.
(h) CODE SECTION 754 ADJUSTMENTS. To the extent an
adjustment to the adjusted tax basis of any Company asset pursuant to Code
Section 734(b) or Code Section 743(b) is required, pursuant to Regulations
Sections 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into
account in determining Capital Accounts, the amount of such adjustment to the
Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specially allocated to the Members in
accordance with their interests in the Company in the event Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was
made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
CURATIVE ALLOCATIONS. The allocations set forth in "Special
Allocations" herein are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the extent possible, all
Special Allocations shall be offset either with other Special Allocations or
other regulatory allocations of other items of Company income, gain, loss, or
deduction. Therefore, notwithstanding any other tax provision of this
Agreement (other than the Special Allocations), the Members shall make such
offsetting special allocations of Company income, gain, loss, or deduction in
whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Member's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if
the Special Allocations were not part of the Agreement and all Company items
were allocated pursuant to Article V. In exercising their discretion
hereunder, the Members shall take into account future Special Allocations and
other regulatory allocations that, although not yet made, are likely to offset
other Special Allocations previously made.
Page 7 of 8 Pages
<PAGE> 25
OTHER TAX RULES.
---------------
(a) For purposes of determining the Profits, Losses, or
any other items allocable to any period, Profits, Losses, and any such other
items shall be determined on a daily, monthly, or other basis, as determined by
the Members using any permissible method under Code Section 706 and the
Regulations thereunder.
(b) Except as otherwise provided in this Agreement, all
items of Company income, gain, loss, deduction, and any other allocations not
otherwise provided for shall be divided among the Members in the same
proportions as they share Profits or Losses, as the case may be, for the year.
(c) The Members are aware of the income tax consequences
of the allocations made by this Agreement, and hereby agree to be bound by the
provisions of this Agreement in reporting their shares of Company income and
loss for income tax purposes.
(d) The Members shall cause the Company's accountants to
prepare all income and other tax returns of the Company and shall cause the
same to be filed in a timely manner. The Members shall timely furnish each
Member with all information necessary for the filing by such Member of all
applicable tax returns required to be filed by such Member.
(e) Shiloh shall be the initial "Tax Matters Member"
pursuant to Section 6231(a)(7) of the Code. The Members may name a substitute
or successor at any time.
TAX ALLOCATIONS: CODE SECTION 704(C).
------------------------------------
In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, shall
be divided among the Members so as to take account of any variation between the
adjusted basis of such property to the Company for federal income tax purposes
and its initial Gross Asset Value (computed in accordance with "Gross Asset
Value" herein).
In the event the Gross Asset Value of any Company asset is
adjusted pursuant to "Gross Asset Value" herein, subsequent allocations of
income, gain, loss, and deduction with respect to such asset shall take account
of any variation between the adjusted basis of such asset for federal income
tax purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations
shall be made by the Members in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Section are
solely for purposes of federal, state and local taxes and shall not affect, or
in any way be taken into account in computing, any Member's Capital Account or
share of Profits, Losses, other items, or distributions pursuant to any
provision of this Agreement.
Page 8 of 8 Pages
<PAGE> 26
INITIAL MEMBERS AND INITIAL CAPITAL CONTRIBUTIONS
EXHIBIT A
---------
<TABLE>
<CAPTION>
Initial Capital
Member Contributions Membership Units
- - ------ --------------- ----------------
<S> <C> <C>
Shiloh Industries, Inc. $ 80,000.00 80 units/80%
402 Ninth Avenue
Mansfield, OH 44905
Attn: R. L. Grissinger
Rouge Steel Company $ 20,000.00 20 units/20%
3001 Miller Road
Dearborn, MI 48121 ______________ _______________
Attn: Gary P. Latendresse
TOTALS $100,000.00 100 Units
</TABLE>
<PAGE> 27
ANTITRUST POLICY STATEMENT
OF THE MEMBERS OF
SHILOH OF MICHIGAN, L.L.C.
EXHIBIT B
---------
Shiloh of Michigan, L.L.C., (the "Company") is a limited liability
company owned by Shiloh Industries, Inc., ("Shiloh") and Rouge Steel Company
("Rouge"), as the Members of the Company. The Company and the Members intend
to follow a rigorous program of compliance with the Sherman Act, Clayton Act,
Federal Trade Commission Act and other antitrust statutes. This policy
statement has been established to prevent violations of the antitrust laws and
encourage good faith competition.
NO DISCUSSION OF PRICES OR PRICE LEVELS, AS USED BY EACH PARENT
COMPANY, IS PERMITTED AMONG THE MEMBERS. Any agreement as to price among
competitors, including any discussion of prices of products, supplies, or scrap
products, is prohibited as a probable violation of the Sherman Act, regardless
of reasonableness of the price set or whether the effect of the agreement is to
raise, lower, peg, or stabilize price levels unless such discussion is in the
context of a price quotation for work to be performed or product to be sold.
The Members shall not, in fact, or appearance, discuss or exchange
information regarding:
a. Member or individual parent company prices, price changes, price
differentials, markups, discounts, allowances, credit terms, etc., or
data that bears on the price at which competitive products will be
marked, e.g. cost, production, capacity, inventories, sales, terms of
sales, margins, etc.
b. Industry pricing policies, price levels, change differentials,
etc.
c. Individual parent company bids on contracts for particular
products, or procedures for responding to bid invitations.
d. Plans of individual parent companies concerning the design,
production, distribution or marketing of particular products,
including proposed territories or customers.
e. Matters relating to actual or potential individual suppliers that
might have the effect of excluding them from any market or of
influencing the business conduct of firms toward such suppliers or
customers.
f. The division of territories or customers or similar limitations on
the nature of business among the Members. THE MEMBERS SHALL NOT
ALLOCATE MARKETS.
THE COMPANY SHALL NOT ACTIVELY BLOCK OR REDUCE POTENTIAL COMPETITION.
The Members shall not stifle or otherwise prevent the future growth or
technological development of the Company or one of the Members. The Members
shall not enter into collateral restrictive agreements on competition.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000904979
<NAME> SHILOH INDUSTRIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> FEB-01-1996
<PERIOD-END> APR-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 31,842,676
<ALLOWANCES> 0
<INVENTORY> 15,426,290
<CURRENT-ASSETS> 64,233,455
<PP&E> 152,330,029
<DEPRECIATION> 52,074,617
<TOTAL-ASSETS> 168,349,440
<CURRENT-LIABILITIES> 20,977,444
<BONDS> 0
<COMMON> 130,116
0
0
<OTHER-SE> 116,070,747
<TOTAL-LIABILITY-AND-EQUITY> 168,349,440
<SALES> 109,583,900
<TOTAL-REVENUES> 109,583,900
<CGS> 88,307,968
<TOTAL-COSTS> 95,995,056
<OTHER-EXPENSES> (10,368)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112,116
<INCOME-PRETAX> 13,487,096
<INCOME-TAX> 5,203,322
<INCOME-CONTINUING> 8,283,774
<DISCONTINUED> (10,577,283)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,293,509)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
