UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1997, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-13600
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HUNTCO INC.
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(Exact name of registrant as specified in its charter)
MISSOURI 43-1643751
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14323 SOUTH OUTER FORTY, SUITE 600N, TOWN & COUNTRY, MISSOURI 63017
--------------------------------------------------------------------
(Address of principal executive offices)
(314) 878-0155
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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. [X] Yes [ ] No
As of March 10, 1997, the number of shares outstanding of each class of
the Registrant's common stock was as follows: 5,292,000 shares of Class A
common stock; and 3,650,000 shares of Class B common stock.<PAGE>
HUNTCO INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
January 31, 1997 (Unaudited) and April 30, 1996 (Audited)
Condensed Consolidated Statements of Operations
Nine and Three Months Ended January 31, 1997 and 1996 (Unaudited)
Condensed Consolidated Statements of Cash Flows
Nine Months Ended January 31, 1997 and 1996 (Unaudited)
Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------------
Item 1. Financial Statements
-----------------------------------
HUNTCO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
January 31, April 30,
1997 1996
---------- ----------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,161 $ 2,737
Accounts receivable, net 38,968 36,804
Inventories 78,902 53,964
Other current assets 2,612 1,926
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123,643 95,431
Property, plant and equipment, net 137,941 120,338
Other assets 8,453 6,668
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$270,037 $222,437
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LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,327 $ 29,003
Accrued expenses 2,062 3,934
Current maturities of long-term debt 189 189
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36,578 33,126
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Long-term debt 105,424 73,066
Deferred income taxes 7,973 4,879
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113,397 77,945
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Shareholders' equity:
Series A preferred stock (issued and outstanding,
225 and none, stated at liquidation value) 4,500 -
Common stock:
Class A (issued and outstanding, 5,292) 53 53
Class B (issued and outstanding, 3,650) 37 37
Additional paid-in-capital 86,531 86,567
Retained earnings 28,941 24,709
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120,062 111,366
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$270,037 $222,437
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See Accompanying Notes to Condensed Consolidated Financial Statements
/TABLE
<PAGE>
HUNTCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended January 31 Ended January 31
1997 1996 1997 1996
------- ------- ------ ------
<S> <C> <C> <C> <C>
Net sales $235,805 $185,664 $73,392 $68,486
Cost of sales 211,830 176,342 67,616 60,458
------- ------- ------ ------
Gross profit 23,975 9,322 5,776 8,028
Selling, general and
administrative expenses 11,205 9,629 3,762 3,537
------- ------- ------ ------
Income (loss) from operations 12,770 (307) 2,014 4,491
Interest expense, net (4,483) (2,188) (1,788) (1,052)
------- ------- ------ ------
Income (loss) before
income taxes 8,287 (2,495) 226 3,439
Provision (benefit) for
income taxes 3,161 (901) 86 1,286
------- ------- ------ ------
Net income (loss) $ 5,126 $ (1,594) $ 140 $ 2,153
======= ======= ====== ======
Earnings (loss) per common share $ .57 $ (.18) $ .02 $ .24
===== ===== ===== =====
Weighted average
common shares outstanding 8,952 8,940 8,942 8,940
===== ===== ===== =====
See Accompanying Notes to Condensed Consolidated Financial Statements
/TABLE
<PAGE>
HUNTCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended January 31,
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,126 $ (1,594)
------- -------
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 6,084 4,670
Other (450) (11)
Decrease (increase) in:
accounts receivable (2,164) (6,678)
inventories (24,938) 27,672
other current assets (685) (3,325)
other assets (2,196) (559)
Increase (decrease) in:
accounts payable 5,325 (1,977)
accrued expenses (1,873) 1,964
non-current deferred taxes 3,093 1,707
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Total adjustments (17,804) 23,463
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Net cash provided (used) by operations (12,678) 21,869
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Cash flows from investing activities:
Acquisition of property, plant and equipment, net (22,826) (22,478)
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Net cash (used) by investing activities (22,826) (22,478)
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Cash flows from financing activities:
Issuance of Series A preferred stock 4,500 -
Net proceeds from newly-issued debt 32,500 50,000
Net payments on long-term debt (142) (50,073)
Common stock dividends (894) (760)
Other (36) -
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Net cash provided (used) by financing activities 35,928 (833)
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Net increase (decrease) in cash 424 (1,442)
Cash, beginning of period 2,737 3,566
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Cash, end of period $ 3,161 $ 2,124
======= =======
See Accompanying Notes to Consolidated Financial Statements
/TABLE
<PAGE>
HUNTCO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
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1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of January 31, 1997, the condensed
consolidated statements of operations for three and nine months ended January
31, 1997 and 1996, and the condensed consolidated statements of cash flows for
the nine months ended January 31, 1997 and 1996 have been prepared by Huntco
Inc. (the "Company") without audit. In the opinion of management, all
adjustments (which include only normal, recurring adjustments) necessary to
present fairly the financial position at January 31, 1997, and the results of
operations and cash flows for the interim periods presented, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted where inapplicable. A summary of
the significant accounting policies followed by the Company is set forth in
Note 1 to the Company's consolidated financial statements included within Item
8 to the Company's annual report on Form 10-K (the "Form 10-K"), which Form
10-K was filed with the Securities and Exchange Commission on July 26, 1996.
The condensed consolidated financial statements included herein should be read
in conjunction with the consolidated financial statements and notes thereto
for the year ended April 30, 1996 included in the aforementioned Form 10-K.
The results of operations for the periods ended January 31, 1997 are not
necessarily indicative of the operating results for the full year.
2. INVENTORIES
Inventories consisted of the following as of:
<TABLE>
<CAPTION>
January 31, April 30,
1997 1996
------- --------
<S> <C> <C>
Raw materials $54,854 $39,426
Finished goods 24,048 14,538
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$78,902 $53,964
======= =======
</TABLE>
The Company classifies its inventory of cold rolled steel coils as finished
goods. These cold rolled coils can either be sold as master coils, without
further processing, or may be slit, blanked or cut-to-length by the Company
prior to final sale.
3. PREFERRED STOCK
On January 30, 1997, the Company issued 225,000 shares of its $.01 par value
Series A preferred stock (the "Series A Preferred"). Shares of Series A
Preferred are cumulative and non-voting, and accrue dividends at the annual
rate of $.888889 per share, with such dividends being payable quarterly
beginning March 1, 1997. Shares of Series A Preferred carry a liquidation
preference of $20.00 per share, and are convertible on a one-for-one basis
into shares of the Company's Class A common stock (a) at any time at the
option of the holder, and (b) at the option of the Company under certain
circumstances, including if at any time the applicable holding period under
Rule 144(k) of Regulation C promulgated under the Securities Act of 1993 has
been satisfied and the closing price of the Company's Class A common stock, as
reported by the New York Stock Exchange, is at least $25.00 per share for
thirty consecutive trading days. Under the Company's Restated Articles of
Incorporation, authorized but unissued preferred stock is issuable in series
under such terms and conditions as the Company's Board of Directors may
determine. However, no further shares of Series A Preferred may be issued by
the Company. The Company issued all 225,000 shares of Series A Preferred to
Coil-Tec, Inc. in connection with the Company's acquisition of $4.5 million of
depreciable assets and certain intangible assets of Coil-Tec, Inc.
4. DIVIDENDS
The Company's Board of Directors declared a dividend of $.035 per share on its
shares of Class A common stock and Class B common stock for shareholders of
record on February 28, 1997, which was paid on March 10, 1997. The Company
also declared the first dividend payable on its Series A Preferred Stock,
which dividend totaling $16,666.67 was paid on March 1, 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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UPDATE OF FISCAL 1997 OUTLOOK:
The Company expects that its fiscal 1997 fourth quarter net sales will exceed
second quarter amounts, resulting in shipping volumes for the full fiscal year
near 925,000 tons, the low end of the forecasted range of shipping volumes
established by the Company at the outset of fiscal 1997. While gross profit
margins have begun to slowly recover, they are expected to remain under
pressure during the fourth quarter of fiscal 1997, as the Company continues to
shift its supplier base to lower its relative raw material costs. The Company
expects that this process should be largely accomplished during the fourth
quarter. Further, the Company will be involved in various plant and facility
start-ups during the fourth quarter, including the new facility in South
Carolina, the expansion of its cold rolling operation in Blytheville,
Arkansas, and the start-up of the newly-acquired hot rolled tempering
operation in Blytheville, Arkansas. In light of these factors and current
market conditions, gross profit margins in the fourth quarter are only
expected to increase to around 9%, resulting in gross profit margins of around
10% for the year ended April 30, 1997.
We encourage those who make use of any forward-looking data found herein to
make reference to the discussion found under the title "Risk Factors - 1997
Forecast" included within Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, of the Company's Annual Report
on Form 10-K for the year ended April 30, 1996, as filed with the Securities
and Exchange Commission on July 26, 1996.
EXPANSION OF OPERATIONS
During the quarter ended July 31, 1996, the Company commenced operations at
its new facility in Ghent, Kentucky. The Company also completed the
relocation of its metal stamping operation from Springfield, Missouri to a new
plant at the Blytheville facility, where it also installed and began operating
slitting and blanking lines which are being used to process cold rolled and
light gauge pickled and oiled steel both for stamping applications and direct
commercial sales.
The Company commenced operations at its new facility in South Carolina during
January, 1997 with a heavy gauge cut-to-length line, and expects to install
and start-up a new coil slitting line at this facility during the fourth
quarter of fiscal 1997. The Company is also completing the doubling of its
fully annealed cold rolling capacity at its facility in Blytheville, Arkansas,
which additional capacity the Company anticipates will be operational by the
end of the fourth fiscal quarter of 1997.
On January 30, 1997, the Company purchased inventory and certain other
operating assets from Coil-Tec, Inc. On this same date, the Company leased
from an affiliate of Coil-Tec, Inc. and a commercial leasing company,
respectively, a plant facility and a two-high temper mill to be used in the
production of tempered, hot rolled steel products. The Company expects that
it will begin production with these assets during its fourth fiscal quarter of
1997.
The Company is in the early stages of construction related to the installation
of a second coil pickling line in Blytheville, Arkansas. This second pickling
line is expected to become operational sometime during the middle of fiscal
1998.
RESULTS OF OPERATIONS
Net sales for the third quarter of fiscal 1997 were $73.4 million, an increase
of 7.2% over the prior year's third quarter net sales of $68.5 million. Net
sales for the nine months ended January 31, 1997 were $235.8 million, an
increase of 27.0% over net sales of $185.7 million for the comparable period
of the prior year.
The improvement in net sales is primarily attributable to increased levels of
tons processed. The Company processed 210,864 tons of steel in the quarter
ended January 31, 1997, an increase of 5.6% in comparison to the quarter ended
January 31, 1996. The Company processed a record 680,902 tons of steel in the
nine months ended January 31, 1997, an increase of 23.8% in comparison to
prior year amounts. The Company sold 40,848 and 125,296 tons of cold rolled
products during the quarter and nine months ended January 31, 1997, which
compares to 28,852 tons and 49,287 tons in the comparable periods of the prior
year. Approximately 22.2% of the tons processed in the three and nine month
periods ended January 31, 1997, represented customer-owned material processed
on a per ton, fee basis. For the three and nine months ended January 31,
1996, approximately 21.7% and 26.0% of the tons processed by the Company
represented customer-owned material processed on a per ton, fee basis.
Reflecting low cost imported material available in the Company's markets
during fiscal 1997 and relatively high domestic prices for hot rolled steel at
the beginning of fiscal 1996, average per ton selling values declined
approximately 2.0% for the nine months ended January 31, 1997, when compared
to average per ton selling values for the corresponding period of the prior
year. However, average per ton selling values did show a slight increase of
2.1% when comparing the relative sales values for the third quarters of fiscal
1997 and fiscal 1996.
Net sales for the third quarter of fiscal 1997 declined from the record levels
attained in the second quarter of fiscal 1997 because of lower shipping volume
due to two primary factors. First, shipments declined due to lower sales
activity surrounding the November and December holiday periods, when the
midweek holidays of 1996 effectively limited the number of shipping days and
resulted in lower sales volume levels. Second, and more importantly,
shipments declined during November and December as Coil-Tec, Inc. liquidated a
substantial amount of hot-rolled steel inventories both at its Blytheville,
Arkansas and Bessemer, Alabama plants prior to the sale of certain of its
assets to the Company on January 30, 1997.
The Company's gross profit margins came under pressure late in the second
quarter of fiscal 1997, and this margin pressure extended into the third
quarter. This narrowing of gross profit margins was primarily due to higher
domestic prices for its primary raw material, hot rolled steel coils, as
significant quantities of lower priced imported material were available in its
market territories. The Company's gross profit margins were also negatively
impacted during the three months ended January 31, 1997, due to lower
absorption of operating costs, reflecting slower sales activity during much of
the Company's third quarter as compared to earlier in the fiscal year as
discussed above. This lower level of third quarter sales activity, when
combined with narrowing gross profit margins during most of the quarter,
depressed the Company's gross profit and operating margins.
Gross profit expressed as a percentage of net sales was 7.9% and 10.2% for the
three and nine months ended January 31, 1997. These amounts compare to
percentages of 11.7% and 5.0% for the corresponding periods of the prior year.
The improvement in the Company's gross profit percentage for the comparable
year-to-date figures is primarily attributable to the lower of cost or market
inventory adjustment recorded by the Company in the prior year's quarter ended
October 31, 1995, which adjustment reduced the carrying value of the Company's
on-hand inventories at that date by approximately $8.0 million, before related
income tax benefits.
As previously disclosed, starting in February 1995 and continuing through the
second quarter of fiscal 1996, the primary steel producers introduced multiple
reductions in the price of hot rolled steel, which is the primary raw material
used in the Company's steel processing business. These raw material price
reductions accelerated during the second quarter of fiscal 1996, as the base
price charged by the Company's suppliers of hot rolled steel declined from
$350.00 per ton as of August 1, 1995, to as low as $280.00 per ton during
September 1995. As a result of these price reductions, the Company recorded
the above-mentioned lower of cost or market inventory adjustment.
The decreases in the base price of hot rolled steel during 1995 initiated or
accelerated inventory stock reductions by steel processors, including the
Company, as well as by many of the Company's customers. In response to this
changed market situation, the Company at first delayed planned increases in
its selling prices, but as the first quarter of fiscal 1996 progressed, began
lowering its selling prices in advance of receiving lower cost raw materials.
The downward pressure on raw material hot rolled steel pricing during 1995
began at a time when the average cost of steel in the Company's inventory was
increasing. The Company had previously sold most of the lower cost foreign
material purchased during fiscal 1995, and was beginning to sell steel
purchased from domestic suppliers, which was purchased at prices in effect
before the series of sheet price reductions were implemented. Also, due to
(1) unpredictable lead times for receipt of the imported material purchased by
the Company during fiscal 1995, (2) delay in the start-up of the Company's new
cold rolling mill and (3) steel purchased in advance of further announced
price increases, the Company's on hand inventory position was at higher than
normal levels when this series of price reductions were initiated by the
primary steel producers.
Delay in the start-up of the cold rolling facility also served to keep the
Company's gross profits under pressure for the first half of fiscal 1996. The
Company spent a major portion of the first quarter of that year (1) fine
tuning the equipment to address quality concerns, (2) replacing a component of
the cold mill which had failed, and (3) addressing certain other operational
issues.
Selling, general and administrative ("SG&A") expenses of $3.8 and $11.2
million for the three and nine month periods ended January 31, 1997, reflect
increases of $.2 million and $1.6 million over the comparable periods of the
prior year. However, SG&A expenses declined as a percentage of net sales from
5.2% during the three and nine months ended January 31, 1996 to 5.1% and 4.8%
of net sales during the comparable periods of fiscal 1997. The increase in
SG&A expenses is attributable to the higher level of business activity
conducted throughout the Company.
Income from operations was $2.0 million and $12.8 million in the quarter and
nine months ended January 31, 1997. These amounts compare to income (losses)
from operations of $4.5 million and ($.3) million in the three and nine month
periods ended January 31, 1996. These changes reflect the factors discussed
in the preceding paragraphs.
Net interest expense of $1.8 million and $4.5 million were incurred during the
three and nine months ended January 31, 1997, which reflect increases over
comparable net interest expense amounts of $1.1 million and $2.2 million from
the corresponding periods of the prior year. These increases are the result
of higher fiscal 1997 borrowings on the Company's revolving credit facility in
order to support higher working capital levels, as well as lower capitalized
interest for the interim periods of fiscal 1997 versus fiscal 1996. The
Company capitalized $.2 million and $1.0 million of interest costs to
construction in progress in the three and nine months ended January 31, 1997,
versus $.3 million and $1.7 million in the comparable period of the prior
year.
The effective income tax rate experienced by the Company was 38.1% during the
three and nine months ended January 31, 1997, which compare to rates of 37.4%
and 36.1% recognized during the comparable period of the prior year. The
increased effective rates reflect the impact of non-deductible expenses, such
as goodwill amortization, which have a greater percentage impact upon a
Company's effective income tax rate at lower levels of taxable income.
Net income for the three and nine months ended January 31, 1997 was $.1
million, or $.02 per share, and $5.1 million, or $.57 per share, respectively.
These amounts compare to net income of $2.2 million, or $.24 per share, and a
net loss of $1.6 million, or $.18 per share, respectively, during the
corresponding periods of the prior year. These differences reflect the
factors discussed in the preceding paragraphs, including the $5.0 million, or
$.56 per share, after-tax impact of the lower of cost or market inventory
adjustment recorded by the Company during the second quarter of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company invested $22.8 million and $22.5 million in property, plant and
equipment during the nine months ended January 31, 1997 and 1996,
respectively, as expenditures continued to be made in conjunction with the
Company's capital expansion projects -- most significantly the new Ghent,
Kentucky facility and the new stamping plant in Blytheville, Arkansas during
the first half of fiscal 1997, the Company's new South Carolina facility and
the acquisition of certain equipment from Coil-Tec, Inc. during the third
quarter of fiscal 1997, and the new Blytheville cold rolling mill during the
first half of fiscal 1996. Increased borrowings on the Company's revolving
credit facility, as well as the issuance of $4.5 million of Series A preferred
stock on January 30, 1997, provided the funds for these expenditures during
fiscal 1997. For fiscal 1996, the funds used to acquire new property were
obtained from a combination of cash on hand and operating activities.
The Company borrowed additional funds on its revolving credit facility, which
increased by a total of $32.5 million during the nine months ended January 31,
1997, in order to fund its capital expenditures, as discussed above, as well
as increased levels of working capital. Specifically, the Company's inventory
balance increased $24.9 million from April 30, 1996 to January 31, 1997, in
support of higher sales being realized by the Company. Also included in this
increase was $6.8 million of inventory acquired from Coil-Tec, Inc. in
conjunction with the purchase of certain of its assets on January 30, 1997.
During the quarter ended July 31, 1995, the Company issued $50.0 million of
ten-year term notes to a group of domestic commercial lenders. These notes
bear interest at the fixed rate of 8.13% per annum and mature in equal annual
installments of $7.1 million on each July 15, 1999-2005. The proceeds from
the issuance of these notes were used to reduce the Company's outstanding
borrowings on its line of credit facility with a group of domestic commercial
banks. The Company established a policy to limit its long-term debt,
inclusive of current maturities (i.e., "funded debt"), to no more than 50% of
total capitalization (i.e., the sum of the Company's funded debt and total
shareholders' equity). The Company formalized this policy in connection with
the issuance of the 1995 Notes, agreeing with the purchasers of the 1995 Notes
to a covenant limiting the Company's funded debt to no more than 50% of total
capitalization. As of January 31, 1997, the ratio of funded debt to total
capitalization was 46.8%.
As of January 31, 1997, the Company had unused borrowing capacity of $17.8
million under its $80.0 million revolving credit facility, which facility was
renewed by the Company on December 17, 1996, and extended until October 31,
1999.
Capital expenditures for the balance of fiscal 1997 are expected to
approximate $5.0 million. The Company expects that its annealing/cold rolling
expansion, the new South Carolina facility, and the second coil pickling line
at Blytheville will comprise the bulk of the Company's capital spending for
the balance of fiscal 1997. The Company plans to fund these expenditures over
the balance of fiscal 1997 with net cash to be provided by operations and
through additional borrowings on its revolving credit facility.
During the quarter ended January 31, 1997, the Company entered into operating
leases with a domestic commercial lender for (a) a new cut-to-length line at
its South Carolina facility, (b) the additional annealing furnaces acquired
for the expansion of its cold rolling facility, and (c) a two-high temper mill
for processing hot rolled coils. The Company also entered into an operating
lease with an affiliate of Coil-Tec, Inc. on January 30, 1997 for various real
property in Blytheville, Arkansas in connection with its previously discussed
transaction with Coil-Tec, Inc.
The Company is in negotiations to procure the slitting equipment ordered for
its South Carolina facility, as well as the second coil pickling line
discussed above, via new operating leases from domestic commercial lenders.
The Company expects to enter into such operating leases during the fourth
quarter of fiscal 1997.
The Company's cash position, unused borrowing capacity, and cash anticipated
to be generated from operations is expected to be sufficient to meet its
commitments in terms of working capital growth due to business expansion,
capital expenditures and the payment of dividends on the outstanding shares of
Series A preferred stock and Class A and Class B common stock during fiscal
1997.
The Company maintains the flexibility to issue additional equity in the form
of Class A common stock or other series of preferred stock if and when market
circumstances should ever dictate. The Company, from time-to-time, explores
financing alternatives such as increasing its borrowing capacity on its
revolving credit facility, the possibility of issuing additional long-term
debt, or pursuing operating lease financing for new business expansions.
Beyond these financing options, the Company has traditionally maintained
liquidity in its working capital accounts by availing itself of quick pay
vendor discounts on much of its domestic raw material purchases. If
necessary, the Company could forego these quick pay discounts in order to
generate funds for general corporate purposes.
<PAGE>
PART II. OTHER INFORMATION
- -----------------------------
Item 2(c). Changes in Securities
- ---------------------------------
(a) On January 30, 1997, the Company issued 225,000 shares of Series
A Preferred having a par value of $.01 per share and a liquidation preference
of $20.00 per share. Holders of the Series A Preferred do not have voting
rights by virtue of their ownership of the Series A Preferred, except as
provided by Missouri law.
(b) All 225,000 shares of Series A Preferred Stock were issued to
Coil-Tec, Inc., an Alabama corporation. No underwriters were used in
connection with this preferred stock issuance.
(c) The Company issued all 225,000 shares of Series A Preferred Stock
to Coil-Tec, Inc. in connection with the Company's acquisition of $4.5 million
of depreciable assets and certain intangible assets of Coil-Tec, Inc.
(d) The sale of the Series A Preferred was an isolated transaction
with Coil-Tec, Inc., a subsidiary of a large multinational corporation, which
contracted with the Company to receive a portion of the consideration for the
acquisition of the aforementioned assets in the form of preferred stock of the
Company. The terms of the Series A Preferred were the subject of negotiation
between the parties. The exemption from the registration requirements of the
Securities Act of 1933 (the "Securities Act") on which the Company relied in
issuing and selling the Series A Preferred is set forth in Section 4(2) of the
Securities Act.
(e) Each share of Series A Preferred is convertible on a one-for-one
basis into shares of the Company's Class A common stock (a) at any time at the
option of the holder, and (b) at the option of the Company under certain
circumstances, including if at any time the holding period under Rule 144(k)
of Regulation C promulgated under the Securities Act has been satisfied and
the closing price of the Company's Class A common stock, as reported by the
New York Stock Exchange, is at least $25.00 per share for thirty consecutive
trading days.
Item 6. Exhibits and Reports on Form 8-K
- --------------------------------------------
(a) See the Exhibit Index included herein.
(b) Reports on Form 8-K:
The Company filed a Form 8-K on November 12, 1996, which filing discussed the
Company's earnings for the three and six month periods ended October 31, 1996,
as well as providing for an update of certain forward-looking data for the
fiscal year ending April 30, 1997.
The Company filed a Form 8-K on January 30, 1997, which filing discussed the
Company's purchase of certain assets from Coil-Tec, Inc. and provided an
update of its outlook for its third quarter ending January 31, 1997.
<PAGE>
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.
HUNTCO INC.
(Registrant)
Date: March 12, 1997 By: /s/ ROBERT J. MARISCHEN
-----------------------
Robert J. Marischen,
Vice Chairman of the Board
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of Item 601
of Regulation S-K.
2: Omitted - not applicable.
3: Omitted - not applicable.
4(iii)(a): Revolving Credit Agreement dated December 17, 1996, by and among
Huntco Inc., Huntco Nevada, Inc., Huntco Steel, Inc., Midwest Products, Inc.,
HSI Aviation, Inc., Mercantile Bank National Association, Harris Trust and
Savings Bank, NBD Bank, Bank of America Illinois, and SunTrust Bank, Atlanta.
4(iii)(b): Form of Revolving Credit Note issued in connection with the
execution of the Revolving Credit Agreement of December 17, 1996, incorporated
by reference to Exhibit 4(iii)(a) herein (the "Agreement"), and a schedule of
the amount of each Revolving Credit Note issued on December 17, 1996 in
conjunction with this Agreement.
4(v)(a): Certificate of Designation defining the terms and provisions of
the Company's Series A Preferred Stock.
4(v)(b): Registration Rights Agreement dated January 30, 1997, issued in
conjunction with the issuance of the Company's Series A Preferred Stock.
11: Omitted - not applicable.
15: Omitted - not applicable.
18: Omitted - not applicable.
19: Omitted - not applicable.
22: Omitted - not applicable.
23: Omitted - not applicable.
24: Omitted - not applicable.
27: Financial Data Schedule.
99: Omitted - not applicable.
REVOLVING CREDIT AGREEMENT
--------------------------
THIS REVOLVING CREDIT AGREEMENT (this "Agreement") is made and entered
into this 17th day of December, 1996, by and among HUNTCO INC., a Missouri
corporation ("Borrower"), HUNTCO NEVADA, INC., a Nevada corporation which is a
wholly-owned subsidiary of Borrower ("Huntco Nevada"), HUNTCO STEEL, INC., a
Delaware corporation which is a wholly-owned subsidiary of Huntco Nevada
("Huntco Steel"), MIDWEST PRODUCTS, INC., a Missouri corporation which is a
wholly-owned subsidiary of Huntco Nevada ("Midwest Products"), HSI AVIATION,
INC., a Missouri corporation which is a wholly-owned subsidiary of Huntco
Steel ("HSI Aviation") (Huntco Nevada, Huntco Steel, Midwest Products and HSI
Aviation are sometimes hereinafter individually referred to as a "Guarantor"
and collectively referred to as the "Guarantors"), and the undersigned Banks,
including Mercantile Bank National Association in its capacity as a Bank and
as agent for the Banks under this Agreement and Harris Trust and Savings Bank
and NBD Bank in their capacities as Banks and as co-agents under this
Agreement.
WITNESSETH:
----------
WHEREAS, Borrower has applied for a revolving credit facility from the
Banks consisting of revolving credit loans and letters of credit in an
aggregate amount of up to $80,000,000.00; and
WHEREAS, in order to induce the Banks to extend said revolving credit
facility to Borrower, each of the Guarantors has agreed to guaranty the
payment and performance to the Banks of the "Borrower's Obligations" (as
hereinafter defined); and
WHEREAS, the Banks are willing to extend said revolving credit facility
to Borrower upon, and subject to, the terms, provisions and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower, the Guarantors, the Banks and the Agent hereby
mutually promise and agree as follows:
SECTION 1. DEFINITIONS.
1.01 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement or in any Exhibit or Schedule hereto, when used in this Agreement,
the following terms shall have the following meanings (such meanings shall be
equally applicable to the singular and plural forms of the terms used, as the
context requires):
Acceptable Acquisition shall mean any Acquisition which has been (a) in
the event a corporation is the subject of such Acquisition, either (i)
approved by the Board of Directors of the corporation which is the subject of
such Acquisition or (ii) recommended by such Board of Directors to the
shareholders of such corporation, (b) in the event a partnership is the
subject of such Acquisition, approved by a majority (by percentage of voting
power) of the partners of the partnership which is the subject of such
Acquisition, (c) in the event an organization or entity other than a
corporation or partnership is the subject of such Acquisition, approved by a
majority (by percentage of voting power) of the governing body, if any, or by
a majority (by percentage of ownership interest) of the owners of the
organization or entity which is the subject of such Acquisition or (d) in the
event the corporation, partnership or other organization or entity which is
the subject of such Acquisition is in bankruptcy, approved by the bankruptcy
court or another court of competent jurisdiction.
Acquisition shall mean any transaction or series of related transactions,
consummated on or after the date of this Agreement, by which Borrower or any
of its Subsidiaries (a) acquires any going business or all or substantially
all of the assets of any corporation, partnership or other organization or
entity, whether through purchase of assets, merger or otherwise or (b)
directly or indirectly acquires (in one transaction or as the most recent
transaction in a series of transactions) at least (i) a majority (in number of
votes) of the stock and/or other securities of a corporation having
ordinary voting power for the election of directors (other than stock
and/or other securities having such power only by reason of the
happening of a contingency), (ii) a majority (by percentage of voting power)
of the outstanding partnership interests of a partnership or (iii) a majority
of the ownership interests in any organization or entity other than a
corporation or partnership.
Adjusted Prime Rate shall mean the Prime Rate plus the Applicable Margin.
The Adjusted Prime Rate shall be adjusted automatically on and as of the
effective date of any change in the Prime Rate or the Applicable Margin.
Affiliate shall mean any Person (other than a Wholly-Owned Subsidiary)
(a) which directly or indirectly through one or more intermediaries controls,
is controlled by or is under common control with Borrower or any Subsidiary,
(b) which directly or indirectly through one or more intermediaries
beneficially owns or holds or has the power to direct the voting power of Five
Percent (5%) or more of any class of capital stock of Borrower or any
Subsidiary, (c) which has Five Percent (5%) or more of any class of its
capital stock (or, in the case of a Person which is not a corporation, Five
Percent (5%) or more of its equity interest) beneficially owned or held,
directly or indirectly, by Borrower or any Subsidiary or (d) who is a
director, officer or employee of Borrower or any Subsidiary. For purposes of
this definition, "control" shall mean the power to direct the management and
policies of a Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise.
Agent shall mean Mercantile Bank National Association in its capacity as
agent for the Banks hereunder and its successors in such capacity.
Annualized Consolidated Debt to Consolidated EBITDA Ratio shall mean, as
of the last day of any fiscal quarter of Borrower, the ratio of (A)
Consolidated Debt as of the last day of such fiscal quarter to (B) the product
of (1) Consolidated EBITDA for such fiscal quarter multiplied by (2) Four (4);
provided, however, that for purposes of this definition, if Borrower's
acquisition of certain of the assets of Coil-Tec, Inc. is consummated, during
the period commencing on the date of the closing of such acquisition and
ending one year thereafter, Consolidated Debt shall not include the lesser of
(A) $2,250,000.00 or (B) the aggregate amount of Debt incurred or assumed by
Borrower in connection with such acquisition.
Applicable Commitment Fee Rate shall mean: (a) during the period
commencing on the date of this Agreement and ending October 31, 1997, (i) One-
Sixteenth of One Percent (.0625%) per annum if the Annualized Consolidated
Debt to Consolidated EBITDA Ratio was less than 2.5 to 1.0 as of the end of
the most recently ended fiscal quarter of Borrower for which consolidated
financial statements of Borrower and its Subsidiaries have been delivered to
the Agent and the Banks pursuant to Section 6.01(a); (ii) One-Eighth of One
Percent (.125%) per annum if the Annualized Consolidated Debt to Consolidated
EBITDA Ratio was equal to or greater than 2.5 to 1.0 but less than 3.5 to 1.0
as of the end of the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its Subsidiaries have been
delivered to the Agent and the Banks pursuant to Section 6.01(a); and (iii)
Three-Sixteenths of One Percent (.1875%) per annum if the Annualized
Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater than
3.5 to 1.0 as of the end of the most recently ended fiscal quarter of Borrower
for which consolidated financial statements of Borrower and its Subsidiaries
have been delivered to the Agent and the Banks pursuant to Section 6.01(a) and
(b) from and after November 1, 1997, (i) One-Sixteenth of One Percent (.0625%)
per annum if the Annualized Consolidated Debt to Consolidated EBITDA Ratio was
less than 2.5 to 1.0 as of the end of the most recently ended fiscal quarter
of Borrower for which consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks pursuant to
Section 6.01(a) and (ii) One-Eighth of One Percent (.125%) per annum if the
Annualized Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 2.5 to 1.0 as of the end of the most recently ended fiscal
quarter of Borrower for which consolidated financial statements of Borrower
and its Subsidiaries have been delivered to the Agent and the Banks pursuant
to Section 6.01(a). The determination of the Applicable Commitment Fee Rate
as of any date shall be based on the Annualized Consolidated Debt to
Consolidated EBITDA Ratio as of the end of the most recently ended fiscal
quarter of Borrower for which consolidated financial statements of Borrower
and its Subsidiaries have been delivered to the Agent and the Banks pursuant
to Section 6.01(a), and shall be effective for purposes of determining the
Applicable Commitment Fee Rate from and after the first day of the first month
immediately following the date on which such delivery of financial statements
is required until the first day of the first month immediately following the
next such date on which delivery of consolidated financial statements of
Borrower and its Subsidiaries is so required. For example, the Annualized
Consolidated Debt to Consolidated EBITDA Ratio as of the end of the fiscal
quarter of Borrower ended October 31, 1996, would be determined from the
consolidated financial statements of Borrower and its Subsidiaries as of and
for fiscal quarter ended October 31, 1996 (which are required to be delivered
to the Agent and the Banks on or before December 20, 1996), and would be used
in determining the Applicable Commitment Fee Rate from and after January 1,
1997. Notwithstanding the foregoing, during the period commencing on the date
of this Agreement and ending December 31, 1996, Applicable Commitment Fee Rate
shall mean One-Eighth of One Percent (.125%) per annum.
Applicable Margin shall mean:
(a) with respect to Prime Loans: (i) during the period
commencing on the date of this Agreement and ending October 31, 1997, (A) a
negative One-Eighth of One Percent
(-.125%) per annum if the Annualized Consolidated Debt to Consolidated EBITDA
Ratio was less than 2.5 to 1.0 as of the end of the most recently ended fiscal
quarter of Borrower for which consolidated financial statements of Borrower
and its Subsidiaries have been delivered to the Agent and the Banks pursuant
to Section 6.01(a), (B) Zero Percent (0.00%) per annum if the Annualized
Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater than
2.5 to 1.0 but less than 3.5 to 1.0 as of the end of the most recently ended
fiscal quarter of Borrower for which consolidated financial statements of
Borrower and its Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a) and (C) a One-Eighth of One Percent (.125%) per
annum if the Annualized Consolidated Debt to Consolidated EBITDA Ratio was
equal to or greater than 3.5 to 1.0 as of the end of the most recently ended
fiscal quarter of Borrower for which consolidated financial statements of
Borrower and its Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a); and (ii) from and after November 1, 1997, (A) a
negative One-Eighth of One Percent
(-.125%) per annum if the Annualized Consolidated Debt to Consolidated EBITDA
Ratio was less than 2.5 to 1.0 as of the end of the most recently ended fiscal
quarter of Borrower for which consolidated financial statements of Borrower
and its Subsidiaries have been delivered to the Agent and the Banks pursuant
to Section 6.01(a) and (B) Zero Percent (0.00%) per annum if the Annualized
Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater than
2.5 to 1.0 as of the end of the most recently ended fiscal quarter of Borrower
for which consolidated financial statements of Borrower and its Subsidiaries
have been delivered to the Agent and the Banks pursuant to Section 6.01(a);
and
(b) with respect to LIBOR Loans: (i) during the period
commencing on the date of this Agreement and ending October 31, 1997, (A)
Five-Eighths of One Percent (.625%) per annum if the Annualized Consolidated
Debt to Consolidated EBITDA Ratio was less than 2.5 to 1.0 as of the end of
the most recently ended fiscal quarter of Borrower for which consolidated
financial statements of Borrower and its Subsidiaries have been delivered to
the Agent and the Banks pursuant to Section 6.01(a), (B) Three-Quarters of One
Percent (.75%) per annum if the Annualized Consolidated Debt to Consolidated
EBITDA Ratio was equal to or greater than 2.5 to 1.0 but less than 3.5 to 1.0
as of the end of the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its Subsidiaries have been
delivered to the Agent and the Banks pursuant to Section 6.01(a) and (C)
Seven-Eighths of One Percent (.875%) per annum if the Annualized Consolidated
Debt to Consolidated EBITDA Ratio was equal to or greater than 3.5 to 1.0 as
of the end of the most recently ended fiscal quarter of Borrower for which
consolidated financial statements of Borrower and its Subsidiaries have been
delivered to the Agent and the Banks pursuant to Section 6.01(a); and (ii)
from and after November 1, 1997, (A) Five-Eighths of One Percent (.625%) per
annum if the Annualized Consolidated Debt to Consolidated EBITDA Ratio was
less than 2.5 to 1.0 as of the end of the most recently ended fiscal quarter
of Borrower for which consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks pursuant to
Section 6.01(a) and (B) Three-Quarters of One Percent (.75%) per annum if the
Annualized Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 2.5 to 1.0 as of the end of the most recently ended fiscal
quarter of Borrower for which consolidated financial statements of Borrower
and its Subsidiaries have been delivered to the Agent and the Banks pursuant
to Section 6.01(a).
The determination of the Applicable Margin as of any date shall be based on
the Annualized Consolidated Debt to Consolidated EBITDA Ratio as of the end of
the most recently ended fiscal quarter of Borrower for which consolidated
financial statements of Borrower and its Subsidiaries have been delivered to
the Agent and the Banks pursuant to Section 6.01(a), and shall be effective
for purposes of determining the Applicable Margin from and after the first day
of the first month immediately following the date on which such delivery of
financial statements is required until the first day of the first month
immediately following the next such date on which delivery of consolidated
financial statements of Borrower and its Subsidiaries is so required. For
example, the Annualized Consolidated Debt to Consolidated EBITDA Ratio as of
the end of the fiscal quarter of Borrower ended October 31, 1996, would be
determined from the consolidated financial statements of Borrower and its
Subsidiaries as of and for the fiscal quarter ended October 31, 1996 (which
are required to be delivered to the Agent and the Banks on or before December
20, 1996), and would be used in determining the Applicable Margin from and
after January 1, 1997. Notwithstanding the foregoing, during the period
commencing on the date of this Agreement and ending December 31, 1996,
Applicable Margin shall mean (i) with respect to Prime Loans, Zero Percent
(0.00%) per annum and (ii) with respect to LIBOR Loans, Three-Quarters of One
Percent (.75%) per annum.
Applicable Standby Letter of Credit Commitment Fee Rate shall mean:
a) during the period commencing on the date of this Agreement and ending
October 31, 1997, (i) Seven-Eighths of One Percent (.875%) per annum if the
Annualized Consolidated Debt to Consolidated EBITDA Ratio was less than 2.5 to
1.0 as of the end of the most recently ended fiscal quarter of Borrower for
which consolidated financial statements of Borrower and its Subsidiaries have
been delivered to the Agent and the Banks pursuant to Section 6.01(a); (ii)
One Percent (1.00%) per annum if the Annualized Consolidated Debt to
Consolidated EBITDA Ratio was equal to or greater than 2.5 to 1.0 but less
than 3.5 to 1.0 as of the end of the most recently ended fiscal quarter of
Borrower for which consolidated financial statements of Borrower and its
Subsidiaries have been delivered to the Agent and the Banks pursuant to
Section 6.01(a); and (iii) One and One-Eighth Percent (1.125%) per annum if
the Annualized Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 3.5 to 1.0 as of the end of the most recently ended fiscal
quarter of Borrower for which consolidated financial statements of Borrower
and its Subsidiaries have been delivered to the Agent and the Banks pursuant
to Section 6.01(a); and (b) from and after November 1, 1997, (i) Seven-Eighths
of One Percent (.875%) per annum if the Annualized Consolidated Debt to
Consolidated EBITDA Ratio was less than 2.5 to 1.0 as of the end of the most
recently ended fiscal quarter of Borrower for which consolidated financial
statements of Borrower and its Subsidiaries have been delivered to the Agent
and the Banks pursuant to Section 6.01(a) and (ii) One Percent (1.00%) per
annum if the Annualized Consolidated Debt to Consolidated EBITDA Ratio was
equal to or greater than 2.5 to 1.0 as of the end of the most recently ended
fiscal quarter of Borrower for which consolidated financial statements of
Borrower and its Subsidiaries have been delivered to the Agent and the Banks
pursuant to Section 6.01(a). The determination of the Applicable Standby
Letter of Credit Commitment Fee Rate as of any date shall be based on the
Annualized Consolidated Debt to Consolidated EBITDA Ratio as of the end of the
most recently ended fiscal quarter of Borrower for which consolidated
financial statements of Borrower and its Subsidiaries have been delivered to
the Agent and the Banks pursuant to Section 6.01(a), and shall be effective
for purposes of determining the Applicable Standby Letter of Credit Commitment
Fee Rate from and after the first day of the first month immediately following
the date on which such delivery of financial statements is required until the
first day of the first month immediately following the next such date on which
delivery of consolidated financial statements of Borrower and its Subsidiaries
is so required. For example, the Annualized Consolidated Debt to Consolidated
EBITDA Ratio as of the end of the fiscal quarter of Borrower ended October 31,
1996, would be determined from the consolidated financial statements of
Borrower and its Subsidiaries as of and for the fiscal quarter ended October
31, 1996 (which are required to be delivered to the Agent and the Banks on or
before December 20, 1996), and would be used in determining the Applicable
Standby Letter of Credit Commitment Fee Rate from and after January 1, 1997.
Notwithstanding the foregoing, during the period commencing on the date of
this Agreement and ending December 31, 1996, Applicable Standby Letter of
Credit Commitment Fee Rate shall mean One Percent (1.00%) per annum.
Attorneys' Fees shall mean the reasonable value of the services (and
costs, charges and expenses related thereto) of the attorneys (and all
paralegals, accountants and other staff employed by such attorneys) employed
by the Agent or any of the Banks (including, without limitation, attorneys and
paralegals who are employees of the Agent or any of the Banks or are employees
of any affiliate of the Agent or any of the Banks) from time to time (a) in
connection with the negotiation, preparation, execution, delivery, amendment,
modification, extension, renewal, administration and/or enforcement of this
Agreement and/or any of the other Transaction Documents, (b) in connection
with the preparation, negotiation or execution of any waiver or consent with
respect to this Agreement or any of the other Transaction Documents, (c) in
connection with any Default or Event of Default under this Agreement, (d) to
represent the Agent or any of the Banks in any litigation, contest, dispute,
suit or proceeding, or to commence, defend or intervene in any litigation,
contest, dispute, suit or proceeding, or to file any petition, complaint,
answer, motion or other pleading or to take any other action in or with
respect to any litigation, contest, dispute, suit or proceeding (whether
instituted by the Agent, any of the Banks, Borrower or any other Person and
whether in bankruptcy or otherwise) in any way or respect relating to this
Agreement or any of the other Transaction Documents, Borrower, any other
Obligor or any Subsidiary and/or (e) to enforce any of the rights and/or
remedies of the Agent or any of the Banks to collect any of the Borrower's
Obligations.
Bank(s) shall mean each bank listed on the signature pages hereof, and
its successors and assigns.
Borrower's Obligations shall mean any and all present and future
indebtedness (principal, interest, fees, collection costs and expenses,
Attorneys' Fees and other amounts), liabilities, obligations (including,
without limitation, reimbursement obligations with respect to standby and/or
commercial letters of credit issued by Mercantile for the account of Borrower)
and indemnities of Borrower to the Agent and/or any one or more of the Banks
evidenced by or arising under this Agreement, the Notes, the Letter of Credit
Applications and/or any of the other Transaction Documents.
Capital Expenditure shall mean any expenditure which, in accordance with
GAAP, is required to be capitalized on the balance sheet of the Person making
the same.
Capitalized Lease shall mean any lease of Property, whether real and/or
personal, by a Person as lessee which in accordance with GAAP is required to
be capitalized on the balance sheet of such Person.
Capitalized Lease Obligations of any Person shall mean, as of the date of
any determination thereof, the amount at which the aggregate rental
obligations due and to become due under all Capitalized Leases under which
such Person is a lessee would be reflected as a liability on a balance sheet
of such Person in accordance with GAAP.
CERCLA shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. Section 9601 et seq., and as the same
may from time to time be further amended.
Co-Agents shall mean Harris Trust and Savings Bank and NBD Bank.
Code shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the
Code shall be construed to also refer to any successor sections.
Commitment shall mean, subject to termination or reduction as set forth
in Section 2.07 and subject to any assignments of the Commitments by the
Banks: with respect to Mercantile, $20,000,000.00; with respect to Harris
Trust and Savings Bank, $20,000,000.00; with respect to NBD Bank,
$20,000,000.00; with respect to Bank of America Illinois, $10,000,000.00; and
with respect to SunTrust Bank, Atlanta, $10,000,000.00.
Consolidated Debt shall mean, as of the date of any determination
thereof, all Debt of Borrower and its Subsidiaries as of such date, determined
on a consolidated basis and in accordance with GAAP.
Consolidated Debt Service Coverage Ratio shall mean, for the period in
question, the ratio of (a) Consolidated EBITDA during such period to (b) the
aggregate amount of all principal payments made or required to be made by
Borrower and its Subsidiaries on all Debt during such period (including the
principal portion of payments in respect of Capitalized Leases but excluding
payments on the Loans) plus Consolidated Interest Expense during such period,
all determined on a consolidated basis and in accordance with GAAP.
Consolidated Debt to Consolidated EBITDA Ratio shall mean, as of the last
day of any fiscal quarter of Borrower, the ratio of (A) Consolidated Debt as
of the last day of such fiscal quarter to (B) the product of (1) the sum of
Consolidated EBITDA for such three of the four consecutive fiscal quarters of
Borrower ending on the last day of such fiscal quarter as may be selected by
Borrower multiplied by (2) Four-Thirds (4/3).
Consolidated EBITDA shall mean, for the period in question, the sum of
(a) Consolidated Net Income during such period plus (b) to the extent deducted
in determining Consolidated Net Income, the sum of (i) Consolidated Interest
Expense during such period, plus (ii) all provisions for any Federal, state,
local and/or foreign income taxes made by Borrower and its Subsidiaries during
such period (whether paid or deferred) plus (iii) all depreciation and
amortization expenses of Borrower and its Subsidiaries during such period, all
determined on a consolidated basis and in accordance with GAAP.
Consolidated Funded Debt shall mean, as of the date of any determination
thereof, all Debt of Borrower and its Subsidiaries as of such date which is
properly classified as long-term debt in accordance with GAAP, including,
without limitation, (a) all Debt of Borrower and its Subsidiaries which by its
terms matures more than one year from the date of creation or which may be
renewed or extended at the option of the obligor for more than one year from
such date, (b) all Capitalized Lease Obligations of Borrower and its
Subsidiaries and (c) all Guarantees by Borrower and its Subsidiaries of Funded
Debt of others (which Debt is properly classified as long-term debt in
accordance with GAAP), all determined on a consolidated basis and in
accordance with GAAP.
Consolidated Interest Expense shall mean, for the period in question,
without duplication, all gross interest expense of Borrower and its
Subsidiaries (including, without limitation, all commissions, discounts and/or
related amortization and other fees and charges owed by Borrower and its
Subsidiaries with respect to letters of credit and bankers' acceptance
financing, the net costs associated with interest swap obligations of Borrower
and its Subsidiaries, capitalized interest expense, the interest portion of
Capitalized Lease Obligations and the interest portion of any deferred payment
obligation) during such period, all determined on a consolidated basis and in
accordance with GAAP.
Consolidated Net Income and Consolidated Net Loss shall mean, for the
period in question, the after-tax net income or loss of Borrower and its
Subsidiaries during such period, determined on a consolidated basis and in
accordance with GAAP, but excluding in any event the following:
(a) any gains (net of expenses and taxes applicable thereto) in
excess of losses resulting from the sale, transfer or other disposition of
fixed or capital assets (i.e., assets other than current assets);
(b) any gains resulting from any reappraisal, revaluation or write-up
of assets;
(c) any equity of Borrower or any Subsidiary in the undistributed
earnings of any corporation which is not a Subsidiary (unless Borrower or any
Subsidiary owns a sufficient number of shares of voting stock of such
corporation to elect a majority of the Board of Directors of such
corporation);
(d) undistributed earnings of any Subsidiary to the extent that the
declaration or payment of dividends or other distributions by such Subsidiary
is not at the time permitted by the terms of its charter documents or any
agreement, document, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary;
(e) any earnings of any Person acquired by Borrower or any Subsidiary
through purchase, merger or consolidation or otherwise for any fiscal period
prior to the fiscal period in which the acquisition occurs;
(f) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the investment in such
Subsidiary;
(g) gains from the acquisition or disposition of Investments (other
than Investments of the types described in clauses (c), (d), (e) and (f) of
the definition of Restricted Investments) or from the retirement or
extinguishment of Debt;
(h) gains on collections from insurance (other than business
interruption insurance) policies or settlements (net of premiums paid or other
expenses incurred with respect to such gains during the fiscal period in which
the gain occurs, to the extent such premiums or other expenses are not already
reflected in Consolidated Net Income for such fiscal period);
(i) any restoration to income of any contingency reserve (but only if
such restoration to income is in an amount in excess of $500,000.00), except
to the extent that provision for such reserve was made out of income accrued
during such period;
(j) any net income or gain (but not any net loss) during such period
from any change in accounting principles, from any discontinued operations or
the disposition thereof or from any prior period adjustments; and
(k) any extraordinary gains and/or losses;
all determined in accordance with GAAP. If the preceding calculation results
in a number less than zero, such amount shall be considered a Consolidated Net
Loss.
Consolidated Net Worth shall mean, as of the date of any determination
thereof, the amount of the capital stock accounts (net of treasury stock, at
cost) of Borrower and its Subsidiaries as of such date plus (or minus in the
case of a deficit) the surplus and retained earnings of Borrower and its
Subsidiaries as of such date, all determined on a consolidated basis and in
accordance with GAAP.
Consolidated Tangible Net Worth shall mean, as of the date of any
determination thereof, the sum of (a) Consolidated Net Worth as of such date
minus (b) the book value of all Intangible Assets of Borrower and its
Subsidiaries as of such date minus (c) to the extent not reflected as a
liability on the consolidated balance sheet of Borrower and its Subsidiaries
as of such date, all Indebtedness of Borrower and its Subsidiaries of the
types described in clauses (b) and (c) of the definition of Indebtedness as of
such date, all determined on a consolidated basis and in accordance with GAAP.
Consolidated Total Capitalization shall mean, as of the date of any
determination thereof, the sum of (a) Consolidated Funded Debt as of such date
plus (b) Consolidated Net Worth as of such date, all determined on a
consolidated basis and in accordance with GAAP.
Default shall mean any event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default as defined in Section 7 hereof.
Debt of any Person shall mean, as of the date of determination thereof,
the sum of (a) all Indebtedness of such Person for borrowed money and/or which
has been incurred in connection with the purchase or other acquisition of
Property or assets (other than unsecured trade accounts payable incurred in
the ordinary course of business) and/or which bears interest plus (b) all
Capitalized Lease Obligations of such Person plus (c) all Guarantees by such
Person of Debt of others.
Distribution in respect of any corporation shall mean:
(a) dividends or other distributions (other than stock dividends and
stock splits) on or in respect of any of the capital stock of such
corporation; and
(b) the redemption, repurchase or other acquisition of any capital
stock of such corporation or of any warrants, rights or other options to
purchase any such capital stock (except when solely in exchange for such
stock).
Domestic Business Day shall mean any day except a Saturday, Sunday or
legal holiday observed by the Agent or by commercial banks in St. Louis,
Missouri.
Environmental Claim shall mean any administrative, regulatory or judicial
action, judgment, order, consent decree, suit, demand, demand letter, claim,
Lien, notice of non-compliance or violation, investigation or other proceeding
arising (a) pursuant to any Environmental Law or governmental or regulatory
approval issued under any such Environmental Law, (b) from the presence, use,
generation, storage, treatment, Release, threatened Release, disposal,
remediation or other existence of any Hazardous Substance, (c) from any
removal, remedial, corrective or other response action pursuant to an
Environmental Law or the order of any governmental or regulatory authority or
agency, (d) from any third party seeking damages, contribution,
indemnification, cost recovery, compensation, injunctive or other relief in
connection with a Hazardous Substance or arising from alleged injury or threat
of injury to health, safety, natural resources or the environment or (e) from
any Lien against any Property owned, leased or operated by Borrower or any
Subsidiary in favor of any governmental or regulatory authority or agency in
connection with a Release, threatened Release or disposal of a Hazardous
Substance.
Environmental Law shall mean any international, Federal, state or local
statute, law, rule, regulation, order, consent decree, judgment, permit,
license, code, covenant, deed restriction, common law, treaty, convention,
ordinance or other requirement relating to public health, safety or the
environment, including, without limitation, those relating to Releases to air,
water, land or groundwater, to the withdrawal or use of groundwater, to the
use and handling of polychlorinated biphenyls or asbestos, to the disposal,
treatment, storage or management of hazardous or solid waste, Hazardous
Substances or crude oil, or any fraction thereof, to exposure to toxic or
hazardous materials, to the handling, transportation, discharge or release of
gaseous or liquid Hazardous Substances and any rule, regulation, order, notice
or demand issued pursuant to such law, statute or ordinance, in each case
applicable to any of the Property owned, leased or operated by Borrower or any
Subsidiary or the operation, construction or modification of any such
Property, including, without limitation, the following: CERCLA, the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act
of 1976 and the Hazardous and Solid Waste Amendments of 1984, the Hazardous
Materials Transportation Act, as amended, the Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1976, the Safe Drinking Water
Control Act, the Clean Air Act of 1966, as amended, the Toxic Substances
Control Act of 1976, the Occupational Safety and Health Act of 1970, as
amended, the Emergency Planning and Community Right-to-Know Act of 1986, the
National Environmental Policy Act of 1975, the Oil Pollution Act of 1990 and
any similar or implementing state or local law, and any state or local statute
and any further amendments to these laws providing for financial
responsibility for cleanup or other actions with respect to the Release or
threatened Release of Hazardous Substances or crude oil, or any fraction
thereof and all rules, regulations, guidance documents and publication
promulgated thereunder.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
ERISA Affiliate shall mean any corporation, trade or business that is,
along with Borrower or any Subsidiary, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in
Sections 414(b) and 414(c), respectively, of the Code or Section 4001 of
ERISA.
Eurodollar Business Day shall mean any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
Event of Default shall have the meaning ascribed thereto in Section 7.
Existing Letters of Credit shall have the meaning ascribed thereto in
Section 3.02.
Existing Revolving Credit Agreement shall mean that certain Revolving
Credit Agreement dated October 28, 1994, by and among Borrower, the banks
party thereto and Mercantile Bank National Association as agent for the banks,
as amended by that certain First Amendment to Revolving Credit Agreement dated
February 28, 1995, that certain Second Amendment to Revolving Credit Agreement
dated April 27, 1995, that certain Third Amendment to Revolving Credit
Agreement dated November 8, 1995, and that certain Fourth Amendment to
Revolving Credit Agreement dated January 31, 1996.
Fed Funds Rate shall mean a rate per annum equal to Mercantile's quoted
rate as of the opening of business by Mercantile on each Domestic Business Day
for purchasing overnight federal funds in the national market, which rate
shall fluctuate as and when said quoted rate shall change.
Financial Covenant shall mean, with respect to any agreement, document or
instrument representing or governing Debt, any covenant (whether expressed as
a covenant, an event of default or a condition to a borrowing) contained
therein expressed in terms of (a) a minimum or maximum amount in or derived
from Borrower's financial statements or (b) a minimum or maximum ratio between
any such amounts described in clause (a) above or (c) any other financial or
finance-related test as the same may relate to the assets, liabilities,
revenues or expenses of Borrower and/or its Subsidiaries; provided that the
above shall not include a negative pledge covenant.
GAAP shall mean generally accepted accounting principles at the time in
the United States.
Guarantee by any Person shall mean any obligation (other than
endorsements of negotiable instruments for deposit or collection in the
ordinary course of business), contingent or otherwise, of such Person
guaranteeing, or in effect guaranteeing, any Indebtedness, liability, dividend
or other obligation of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by such Person: (a) to
purchase such Indebtedness or obligation or any Property or assets
constituting security therefor, (b) to advance or supply funds (i) for the
purchase or payment of such Indebtedness or obligation, (ii) to maintain
working capital or other balance sheet condition or otherwise to advance or
make available funds for the purchase or payment of such Indebtedness or
obligation, (iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make
payment of the Indebtedness or obligation or (iv) otherwise to assure the
owner of the Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of all computations made under this
Agreement, a Guarantee in respect of any Indebtedness for borrowed money shall
be deemed to be Indebtedness equal to the then outstanding principal amount of
such Indebtedness for borrowed money which has been guaranteed or such lesser
amount to which the maximum exposure of the guarantor shall have been
specifically limited, and a Guarantee in respect of any other obligation or
liability or any dividend shall be deemed to be Indebtedness equal to the
maximum aggregate amount of such obligation, liability or dividend or such
lesser amount to which the maximum exposure of the guarantor shall have been
specifically limited. Guarantee when used as a verb shall have a correlative
meaning.
Hazardous Substance shall mean any hazardous or toxic material, substance
or waste, pollutant or contaminant which is regulated under any Environmental
Law or any other statute, law, ordinance, rule or regulation of any local,
state, regional, Federal or international authority having jurisdiction over
any of the Property owned, leased or operated by Borrower or any Subsidiary or
its use, including, without limitation, any material, substance or waste which
is: (a) defined as a hazardous substance under Section 311 of the Federal
Water Pollution Control Act (33 U.S.C. Sec. 1317), as amended; (b) regulated
as a hazardous waste under Section 1004 or Section 3001 of the Federal Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act
(42 U.S.C. Sec. 6901 et seq.), as amended; (c) defined as a hazardous
substance under Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Sec. 9601 et seq.), as amended; or
(d) defined or regulated as a hazardous substance or hazardous waste under
any rules or regulations promulgated under any of the foregoing statutes.
Indebtedness shall mean, with respect to any Person, without duplication,
all indebtedness, liabilities and obligations of such Person which in
accordance with GAAP are required to be classified upon a balance sheet of
such Person as liabilities of such Person, and in any event shall include (a)
all obligations of such Person for borrowed money or which have been incurred
in connection with the purchase or other acquisition of Property or assets,
(b) all obligations secured by any Lien on, or payable out of the proceeds of
or production from, any Property or assets owned by such Person, whether or
not such Person has assumed or become liable for the payment of such
obligations, (c) all indebtedness, liabilities and obligations of third
parties, including joint ventures and partnerships of which such Person is a
venturer or general partner, recourse to which may be had against such Person,
(d) all obligations created or arising under any conditional sale or other
title retention agreement with respect to Property acquired by such Person,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to
repossession or sale of such Property, (e) all Capitalized Lease Obligations
of such Person, (f) all indebtedness, liabilities and obligations of such
Person under Guarantees and (g) all unpaid reimbursement obligations of such
Person with respect to letters of credit issued for the account of such Person
which have been drawn on.
Intangible Assets shall mean all patents, trademarks, service marks,
copyrights, trade names, goodwill (including any amounts, however designated,
representing the cost of acquisition of business and investments in excess of
the book value thereof), unamortized debt discount and expense, unamortized
deferred charges, deferred research and development costs, any write-up of
asset value after the date of this Agreement, non-competition covenants,
signing bonuses and any other assets treated as intangible assets under GAAP.
Interest Period shall mean with respect to each LIBOR Loan:
(a) initially, the period commencing on the date of such Loan and
ending 1, 2, 3 or 6 months thereafter (or such other period agreed upon in
writing by Borrower and all of the Banks), as the Borrower may elect in the
applicable Notice of Borrowing; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Loan and ending 1, 2, 3 or 6
months thereafter (or such other period agreed upon in writing by Borrower and
all of the Banks), as Borrower may elect pursuant to Section 2.04;
provided that:
(c) subject to clauses (d) and (e) below, any Interest Period which
would otherwise end on a day which is not a Eurodollar Business Day shall be
extended to the next succeeding Eurodollar Business Day unless such Eurodollar
Business Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Eurodollar Business Day;
(d) subject to clause (e) below, any Interest Period which begins on
the last Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Eurodollar Business Day of a
calendar month; and
(e) no Interest Period shall extend beyond the last day of the
Revolving Credit Period.
Investment shall mean any investment by Borrower or any Subsidiary in any
Person, whether payment therefor is made in cash or capital stock of Borrower
or any Subsidiary, and whether such investment is by acquisition of stock or
Indebtedness, or by loan, advance, transfer of property out of the ordinary
course of business, capital contribution, equity or profit sharing interest,
extension of credit on terms other than those normal in the ordinary course of
business or otherwise.
Letter of Credit and Letters of Credit shall have the meanings ascribed
thereto in Section 3.01(a).
Letter of Credit Application shall mean an application and agreement for
irrevocable standby letter of credit in the form of Exhibit D attached hereto
and incorporated herein by reference (or such other form as may then be
Mercantile's standard form of application and agreement for irrevocable
standby letter of credit) or an application and agreement for irrevocable
commercial letter of credit in the form of Exhibit E attached hereto and
incorporated herein by reference (or such other form as may then be
Mercantile's standard form of application and agreement for irrevocable
commercial letter of credit), as the case may be, in either case executed by
Borrower, as account party, and delivered to Mercantile pursuant to Section
3.01(a), as the same may from time to time be amended, modified, extended or
renewed.
Letter of Credit Commitment Fee shall have the meaning ascribed thereto
in Section 3.01(d).
Letter of Credit Issuance Fee shall have the meaning ascribed thereto in
Section 3.01(d).
Letter of Credit Loan shall have the meaning ascribed thereto in Section
3.01(c).
Letter of Credit Negotiation Fee shall have the meaning ascribed thereto
in Section 3.01(d).
Letter of Credit Period shall mean the period commencing on the date of
this Agreement and ending October 31, 1999.
Letter of Credit Request shall have the meaning ascribed thereto in
Section 3.01(a).
LIBOR Base Rate shall mean, with respect to the applicable Interest
Period, (a) the LIBOR Index Rate for such Interest Period, if such rate is
available or (b) if the LIBOR Index Rate cannot be determined, the average
(rounded upward, if necessary, to the next higher 1/100 of 1%) of the
respective rates per annum of interest at which deposits in dollars are
offered to Mercantile in the London interbank market by two (2) Eurodollar
dealers of recognized standing, selected by Mercantile in its sole discretion,
at such time on the date two (2) Eurodollar Business Days before the first day
of such Interest Period as Mercantile in its sole discretion elects, for
delivery on the first day of the applicable Interest Period for a number of
days comparable to the number of days in such Interest Period and in an amount
approximately equal to the principal amount of the LIBOR Loan to which such
Interest Period is to apply.
LIBOR Index Rate shall mean, with respect to the applicable Interest
Period, the rate per annum (rounded upwards, if necessary, to the next higher
1/100 of 1%) for deposits in U.S. Dollars for a period equal to such Interest
Period, which appears on the Telerate Page 3750 as of 9:00 a.m. (St. Louis
time) on the day two (2) Eurodollar Business Days before the first day of such
Interest Period.
LIBOR Loan shall mean any Revolving Credit Loan bearing interest at the
LIBOR Rate.
LIBOR Rate shall mean (a) the quotient of the (i) LIBOR Base Rate divided
by (ii) one minus the applicable LIBOR Reserve Percentage plus (b) the
Applicable Margin. The LIBOR Rate shall be adjusted automatically on and as
of the effective date of any change in the LIBOR Reserve Percentage and/or the
Applicable Margin.
LIBOR 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 for a member bank of the Federal
Reserve System in St. Louis, Missouri with respect to "Eurocurrency
liabilities" (or in respect of any other category of liabilities which
includes deposits by reference to which the interest rate on LIBOR Loans is
determined or any category of extensions of credit or other assets which
include loans by a non-United States office of any Bank to United States
residents). The LIBOR Rate shall be adjusted automatically on and as of the
effective date of any change in the LIBOR Reserve Percentage.
Lien shall mean any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract, including, without
limitation, any security interest, mortgage, deed of trust, pledge,
hypothecation, judgment lien or other lien or encumbrance of any kind or
nature whatsoever, any conditional sale or trust receipt, any lease,
consignment or bailment for security purposes and any Capitalized Lease. The
term "Lien" shall include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property.
Loan shall mean each Revolving Credit Loan (whether a Prime Loan or a
LIBOR Loan) and each Letter of Credit Loan and Loans shall mean any or all of
the foregoing.
Material Adverse Effect shall mean (a) a material adverse effect on the
Properties, assets, liabilities, business, operations, prospects, income or
condition (financial or otherwise) of Borrower and its Subsidiaries taken as a
whole, (b) material impairment of Borrower's or any Guarantor's ability to
perform any of its obligations under this Agreement, any of the Notes, any of
the Letter of Credit Applications or any of the other Transaction Documents or
(c) material impairment of the enforceability of the rights of, or benefits
available to, the Agent or any of the Banks under this Agreement, any of the
Notes, any of the Letter of Credit Applications or any of the other
Transaction Documents.
Mercantile shall mean Mercantile Bank National Association, a national
banking association, in its individual corporate capacity as a Bank hereunder
and not as Agent hereunder.
Moody's shall mean Moody's Investors Service, Inc.
Multi-Employer Plan shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is maintained for employees of Borrower, any
Subsidiary or any ERISA Affiliate or to which Borrower, any Subsidiary or any
ERISA Affiliate has contributed in the past or currently contributes.
Note Purchase Agreements shall mean those certain Note Purchase
Agreements dated July 14, 1995, by and among Borrower and each of Principal
Mutual Life Insurance Company, Nippon Life Insurance Company of America,
Transamerica Life Insurance and Annuity Company, Transamerica Assurance
Company, Transamerica Occidental Life Insurance Company, ProvidentMutual Life
and Annuity Company of America, Berkshire Life Insurance Company and The
Security Mutual Life Insurance Company of Lincoln, Nebraska, as the same may
from time to time be amended, modified, extended or renewed.
Notes shall have the meaning ascribed thereto in Section 2.03(a).
Notice of Borrowing shall have the meaning ascribed thereto in Section
2.02.
Obligor shall mean Borrower, each Guarantor and each other Person who is
or shall at any time hereafter become primarily or secondarily liable on any
of the Borrower's Obligations or who grants the Agent or any of the Banks a
Lien upon any of the Property or assets of such Person as security for any of
the Borrower's Obligations.
Occupational Safety and Health Laws shall mean the Occupational Safety
and Health Act of 1970, as amended, and any other Federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability or standards of conduct concerning employee
health and/or safety, as now or at any time hereafter in effect.
PBGC shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan shall mean a "pension plan," as such term is defined in
Section 3(2) of ERISA, which is established or maintained by Borrower, any
Subsidiary or any ERISA Affiliate, other than a Multi-Employer Plan.
Permitted Liens shall mean any of the following:
(a) Liens on Property or assets of a Subsidiary to secure
obligations of such Subsidiary to Borrower or a Guarantor;
(b) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, provided payment thereof is not at the time required by Section
6.01(d) and/or 6.01(e);
(c) Liens (other than any Liens imposed by ERISA) incidental to
the conduct of business or the ownership of Properties and assets (including
Liens in connection with worker's compensation, unemployment insurance and
other like laws, warehousemen's and attorneys' liens and statutory landlords'
liens) and Liens to secure the performance of bids, tenders or trade
contracts, or to secure statutory obligations, surety or appeal bonds or other
Liens of like general nature incurred in the ordinary course of business and
not in connection with the borrowing of money or the purchase or other
acquisition of Property; provided in each case the obligation secured is not
overdue or, if overdue, is being contested in good faith by appropriate
actions or proceedings being diligently conducted and for which adequate
reserves in accordance with GAAP have been set aside;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary or desirable for the conduct of the activities
of Borrower and its Subsidiaries or which customarily exist on properties of
corporations engaged in similar activities and similarly situated and which do
not in any event materially impair the use of such real properties in the
operation of the business of the Borrower and its Subsidiaries;
(e) Liens existing as of the date of this Agreement and listed
on Schedule 5.12 attached hereto; and
(f) other Liens created or incurred by Borrower or any
Subsidiary after the date of this Agreement on any Property or assets of
Borrower or any Subsidiary, provided that (i) all Indebtedness secured by
Liens permitted by this clause (f) shall have been incurred within the
limitations provided in this Agreement and (ii) the sum of (A) the aggregate
outstanding principal amount of all Indebtedness secured by Liens permitted by
this clause (f) plus (B) the aggregate outstanding principal amount of all
Indebtedness (other than Indebtedness permitted by Sections 6.02(a)(i),
6.02(a)(ii), 6.02(a)(iii), 6.02(a)(iv) and 6.02(a)(v) of this Agreement) of
the Subsidiaries of Borrower, determined on a combined basis for all
Subsidiaries of Borrower and without duplication, does not at any time exceed
Ten Percent (10%) of Consolidated Tangible Net Worth as of the end of the
fiscal quarter of Borrower immediately preceding the date of determination.
Person shall mean any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, entity or government (whether national,
Federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department
thereof).
Prime Loan shall mean any Revolving Credit Loan bearing interest at the
Adjusted Prime Rate.
Prime Rate shall mean the interest rate announced from time to time by
Mercantile as its "prime rate" on commercial loans (which rate shall fluctuate
as and when said prime rate shall change). Borrower acknowledges that such
"prime rate" is a reference rate and does not necessarily represent the lowest
or best rate offered by Mercantile or any of the Banks to their respective
customers.
Property shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible. Properties shall
mean the plural of Property. For purposes of this Agreement, Borrower and
each Subsidiary shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, financing lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person for security purposes.
Pro Rata Share shall mean, with respect to each Bank, a percentage, the
numerator of which is the Commitment of such Bank and the denominator of which
is the total Commitments of all of the Banks. The Pro Rata Shares of each of
the Banks as of the date of this Agreement are as follows: Mercantile - 25%;
Harris Trust and Savings Bank - 25%; NBD Bank - 25%; Bank of America Illinois
- - 12.5%; and SunTrust Bank, Atlanta - 12.5%.
Regulation D shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as amended.
Regulatory Change shall have the meaning ascribed thereto in Section
2.13.
Release shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing
(other than disposals in compliance with all applicable Environmental Laws)
into the environment, including, without limitation, the abandonment or
discarding of barrels, drums, containers, tanks and/or other receptacles
containing (or containing traces of) any Hazardous Substance.
Reportable Event shall have the meaning given to such term in ERISA.
Required Banks shall mean at any time Banks having Sixty-Six and 67/100
Percent (66.67%) of the aggregate amount of Loans and Letters of Credit then
outstanding or, if no Loans or Letters of Credit are then outstanding, Sixty-
Six and 67/100 Percent (66.67%) of the total Commitments of all of the Banks.
Restricted Agreement shall have the meaning ascribed thereto in Section
6.02(o).
Restricted Investment shall mean any Investment, or any expenditure or
any incurrence of any liability to make any expenditure for an Investment,
other than:
(a) loans and/or advances by Borrower or a Subsidiary to a
Subsidiary;
(b) loans and/or advances by any Subsidiary to Borrower which
are subordinated in writing to the payment of the Borrower's Obligations in
form and substance satisfactory to the Required Banks;
(c) direct obligations of the United States of America or any
instrumentality or agency thereof, the payment of which is unconditionally
guaranteed by the United States of America or any instrumentality or agency
thereof (all of which Investments must mature within twelve (12) months from
the time of acquisition thereof);
(d) Investments in readily marketable commercial paper which, at
the time of acquisition thereof by Borrower or any Subsidiary, is rated A-1 or
better by S&P and P-1 or better by Moody's and which matures within 270 days
from the date of acquisition thereof, provided that the issuer of such
commercial paper shall, at the time of acquisition of such commercial paper,
have a senior long-term debt rating of at least A by S&P and Moody's;
(e) negotiable certificates of deposit or negotiable bankers
acceptances issued by any of the Banks or any other bank or trust company
organized under the laws of the United States of America or any state thereof,
which bank or trust company (other than the Banks to which such restrictions
shall not apply) is a member of both the Federal Deposit Insurance Corporation
and the Federal Reserve System and is rated B or better by Thompsons Bank
Watch Service (all of which Investments must mature within twelve (12) months
from the time of acquisition thereof);
(f) repurchase agreements, which shall be collateralized for at
least 102% of face value, issued by any of the Banks or any other bank or
trust company organized under the laws of the United States or any state
thereof, which bank or trust company (other than the Banks to which such
restrictions shall not apply) is a member of both the Federal Deposit
Insurance Corporation and the Federal Reserve System and is rated B or better
by Thompsons Bank Watch Service (all of which Investments must mature within
twelve (12) months from the time of acquisition thereof);
(g) Investments existing as of the date hereof as described in
Schedule 5.18 attached hereto, and any future retained earnings in respect
thereof;
(h) Investments in a Subsidiary (including Investments in a
corporation which immediately becomes a Subsidiary as a result of such
Investments);
(i) additional Investments which in the aggregate do not exceed
the greater of (A) $15,000,000.00 or (B) Ten Percent (10%) of Consolidated
Tangible Net Worth as of the end of the fiscal quarter of Borrower immediately
preceding the date of determination; and
(j) loans or advances in the usual and ordinary course of
business to officers, directors and employees for business expenses.
Revolving Credit Loan and Revolving Credit Loans shall have the meanings
ascribed thereto in Section 2.01(a).
Revolving Credit Period shall mean the period commencing on the date of
this Agreement and ending October 31, 1999.
S&P shall mean Standard and Poor's Ratings Group.
Subordinated Indebtedness shall mean, as of the date of any determination
thereof, the aggregate principal amount of all Indebtedness of Borrower
outstanding as of such date which is subordinated in writing (either by its
terms or pursuant to a subordination agreement) to the payment and priority of
all of the Borrower's Obligations in form and substance satisfactory to the
Required Banks.
Subsidiary shall mean any corporation of which more than Fifty Percent
(50%) of the issued and outstanding capital stock entitled to vote for the
election of directors (other than by reason of default in the payment of
dividends) is at the time owned directly or indirectly by Borrower or any
Subsidiary.
Total Outstandings shall mean, as of any date, the sum of (i) the
aggregate principal amount of all Revolving Credit Loans outstanding as of
such date, plus (ii) the aggregate principal amount of all Letter of Credit
Loans outstanding as of such date plus (iii) the aggregate undrawn face amount
of all Letters of Credit outstanding as of such date.
Telerate Page 3750 shall mean the display designated as "Page 3750" on
the Telerate Service (or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for U.S. Dollar Deposits).
Transaction Documents shall mean this Agreement, the Notes, the Letter of
Credit Applications and all other agreements, documents and instruments
heretofore, now or hereafter delivered to the Agent or any of the Banks with
respect to or in connection with or pursuant to this Agreement, any Loans made
hereunder, any Letters of Credit issued hereunder or any of the other
Borrower's Obligations, and executed by or on behalf of Borrower, all as the
same may from time to time be amended, modified, extended or renewed.
Welfare Plan shall mean a "welfare plan" as such term is defined in
Section 3(1) of ERISA, which is established or maintained by Borrower, any
Subsidiary or any ERISA Affiliate, other than a Multi-Employer Plan.
Wholly-Owned when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) shall be owned by Borrower
and/or one or more of its Wholly-Owned Subsidiaries.
1.02 Accounting Terms and Determinations. Except as otherwise specified
in this Agreement, all accounting terms used in this Agreement shall be
interpreted, all accounting determinations under this Agreement shall be made
and all financial statements required to be delivered under this Agreement
shall be prepared in accordance with GAAP as in effect from time to time,
applied on a basis consistent (except for changes approved by the Required
Banks and by Borrower's independent certified public accountants) with the
most recent audited financial statements of Borrower delivered to the Banks.
Notwithstanding the foregoing, Borrower may from time to time change its
accounting methods, either at its option or in order to comply with GAAP,
provided that (a) any such change(s) are in accordance with GAAP and are
approved by the independent certified public accountants of Borrower and (b)
if the Required Banks, in good faith, determine that any such accounting
change(s), individually or in the aggregate, have any significant effect on
any of the financial covenants contained in this Agreement (i) with respect to
those financial covenant(s) upon which the effect of such accounting change(s)
can be determined with mathematical certainty, such financial covenant(s)
shall be amended to reflect the effect of such accounting change(s) (and
Borrower, each of the Guarantors, the Agent and each of the Banks shall be
obligated to promptly execute an amendment to such effect) and (ii) with
respect to those financial covenant(s) upon which the effect of such
accounting change(s) cannot be determined with mathematical certainty,
Borrower and the Banks shall, in good faith, negotiate and use their best
efforts to agree upon new financial covenant(s) reasonably acceptable to
Borrower and the Banks to replace the affected financial covenant(s) (which
new financial covenant(s) shall, to the extent reasonably possible,
approximate the effect of such accounting change(s) on the existing financial
covenant(s)), and if Borrower and the Banks cannot, in good faith, agree on
said new financial covenant(s), the existing financial covenant(s) shall
remain in full force and effect and shall be computed using the accounting
methods in effect prior to the applicable change in accounting methods. Each
such amendment shall be evidenced by an instrument in writing signed by
Borrower, each of the Guarantors, the Agent and each of the Banks and until
such amendment has been fully executed the existing financial covenant(s)
shall remain in full force and effect and shall be computed using the
accounting methods in effect prior to the applicable change in accounting
methods.
SECTION 2. THE REVOLVING CREDIT LOANS.
2.01 Commitments To Lend. Subject to the terms and conditions set forth
in this Agreement and so long as no Default or Event of Default under this
Agreement has occurred and is continuing, during the Revolving Credit Period,
each Bank severally agrees to make such loans to Borrower (individually, a
"Revolving Credit Loan" and collectively, the "Revolving Credit Loans") as
Borrower may from time to time request pursuant to Section 2.02. Each
Revolving Credit Loan under this Section 2.01 which is a Prime Loan shall be
for an aggregate principal amount of at least $200,000.00 or any larger
multiple of $50,000.00. Each Revolving Credit Loan under this Section 2.01
which is a LIBOR Loan shall be for an aggregate principal amount of at least
$2,000,000.00 or any larger multiple of $500,000.00. The aggregate principal
amount of Revolving Credit Loans which each Bank shall be required to have
outstanding hereunder at any one time shall not exceed the lesser of (a) such
Bank's Commitment or (b) such Bank's Pro Rata Share of the sum of (i) the
total Commitments of all of the Banks, minus (ii) the aggregate principal
amount of all outstanding Letter of Credit Loans minus (iii) the aggregate
undrawn face amount of all outstanding Letters of Credit. Each Revolving
Credit Loan under this Section 2.01 shall be made from the several Banks
ratably in proportion to their respective Pro Rata Shares. Within the
foregoing limits, Borrower may borrow under this Section 2.01, prepay under
Section 2.08 and reborrow at any time during the Revolving Credit Period under
this Section 2.01. The failure of any Bank to make any Revolving Credit Loan
required under this Agreement shall not release any other Bank from its
obligation to make Revolving Credit Loans as provided herein.
2.02 Method of Borrowing. (a) Borrower shall give notice (a "Notice of
Borrowing") to the Agent by 10:00 a.m. (St. Louis time) on the Domestic
Business Day of each Prime Loan, and by 10:00 a.m. (St. Louis Time) at least
three (3) Eurodollar Business Days before each LIBOR Loan, specifying:
(i) the date of such Revolving Credit Loan, which shall be a
Domestic Business Day in the case of a Prime Loan and a Eurodollar Business
Day in the case of a LIBOR Loan,
(ii) the aggregate principal amount of such Revolving Credit Loan,
(iii) whether such Revolving Credit Loan is to be a Prime Loan or a
LIBOR Loan, and
(iv) in the case of a LIBOR Loan, the duration of the initial
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing given to it, the Agent
shall notify each Bank by 11:30 a.m. (St. Louis time) on the date of receipt
of such Notice of Borrowing by the Agent (which must be a Domestic Business
Day) of the contents thereof and of such Bank's Pro Rata Share of such
Revolving Credit Loan. A Notice of Borrowing shall not be revocable by
Borrower.
(c) Not later than 2:00 p.m. (St. Louis time) on the date of each
Revolving Credit Loan, each Bank shall (except as provided in subsection (d)
of this Section) make available its Pro Rata Share of such Revolving Credit
Loan, in Federal or other funds immediately available in St. Louis, Missouri,
to the Agent at its address specified in or pursuant to Section 10.07. Unless
the Agent determines that any applicable condition specified in Section 4 has
not been satisfied, the Agent will make the funds so received from the Banks
available to Borrower immediately thereafter at the Agent's aforesaid address
by crediting such funds to a demand deposit account (or such other account
mutually agreed upon in writing between Agent and Borrower) of Borrower with
the Agent. The Agent shall not be required to make any amount available to
Borrower hereunder except to the extent the Agent shall have received such
amounts from the Banks as set forth herein, provided, however, that unless the
Agent shall have been notified by a Bank prior to the date a Revolving Credit
Loan is to be made hereunder that such Bank does not intend to make its Pro
Rata Share of such Revolving Credit Loan available to the Agent, the Agent may
assume that such Bank has made such Pro Rata Share available to the Agent on
such date, and the Agent may in reliance upon such assumption make available
to Borrower a corresponding amount. If such corresponding amount is not in
fact made available to the Agent by such Bank and the Agent has made such
amount available to Borrower, the Agent shall be entitled to receive such
amount from such Bank forthwith upon its demand, together with interest
thereon in respect of each day during the period commencing on the date such
amount was made available to Borrower and ending on but excluding the date the
Agent recovers such amount from such Bank at a rate per annum equal to the Fed
Funds Rate.
(d) If any Bank makes a new Revolving Credit Loan hereunder on a day
on which Borrower is required to or has elected to repay all or any part of an
outstanding Revolving Credit Loan from such Bank, such Bank shall apply the
proceeds of its new Revolving Credit Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Bank to the Agent as
provided in subsection (c) of this Section, or remitted by Borrower to the
Agent as provided in Section 2.09, as the case may be.
(e) Borrower hereby authorizes the Agent to rely on telephonic,
telegraphic, telecopy, telex or written instructions believed by the Agent in
good faith to have been sent or delivered by any person identifying himself as
B.D. Hunter, Robert J. Marischen, Terry J. Heinz or Anthony J. Verkruyse (or
any other individual from time to time authorized to act on behalf of Borrower
pursuant to a resolution adopted by the Board of Directors of Borrower and
certified by the Secretary of Borrower and delivered to the Agent) with
respect to any request to make a Revolving Credit Loan or a repayment
hereunder, and on any signature which the Agent in good faith believes to be
genuine, and Borrower shall be bound thereby in the same manner as if such
individual was actually authorized or such signature was genuine. Borrower
also hereby agrees to indemnify the Agent and each of the Banks and to hold
the Agent and each of the Banks harmless from and against any and all claims,
demands, damages, liabilities, losses, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) relating to or arising
out of or in connection with the acceptance of instructions for making
Revolving Credit Loans or repayments hereunder.
2.03 Notes. (a) The Revolving Credit Loans of each Bank to Borrower
shall be evidenced by a Revolving Credit Note of Borrower dated the date
hereof and payable to the order of such Bank in a principal amount equal to
its Commitment in substantially the form of Exhibit A attached hereto (with
appropriate insertions) (collectively, as the same may from time to time be
amended, modified extended or renewed, the "Notes").
(b) Each Bank shall record the date, amount, type and maturity of
each Revolving Credit Loan made by it and the date and amount of each payment
of principal made by Borrower with respect thereto, and may, if such Bank so
elects in connection with any transfer or enforcement of its Note, endorse on
the schedules forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Revolving Credit Loan then
outstanding; provided, however, that the obligation of Borrower to repay each
Revolving Credit Loan hereunder shall be absolute and unconditional,
notwithstanding any failure of any Bank to make any such recordation or
endorsement or any mistake by any Bank in connection with any such recordation
or endorsement. Each Bank is hereby irrevocably authorized by Borrower to so
endorse its Note and to attach to and make a part of its Note a continuation
of any such schedule as and when required. The books and records of each Bank
(including, without limitation, the schedules attached to its Note) showing
the account between such Bank and Borrower shall be admissible in evidence in
any action or proceeding and shall constitute prima facie proof of the items
therein set forth in the absence of manifest error.
2.04 Duration of Interest Periods and Selection of Interest Rates. (a)
The duration of the initial Interest Period for each LIBOR Loan shall be as
specified in the applicable Notice of Borrowing. Borrower shall elect the
duration of each subsequent Interest Period applicable to such LIBOR Loan and
the interest rate to be applicable during such subsequent Interest Period (and
Borrower shall have the option (i) in the case of any Prime Loan, to elect
that such Loan become a LIBOR Loan and the Interest Period to be applicable
thereto, and (ii) in the case of any LIBOR Loan, to elect that such Loan
become a Prime Loan), by giving notice of such election to the Agent by 10:00
a.m. (St. Louis time) on the Domestic Business Day of, in the case of the
election of the Adjusted Prime Rate, and by 10:00 a.m. (St. Louis time) at
least three (3) Eurodollar Business Days before, in the case of the election
of the LIBOR Rate, the end of the immediately preceding Interest Period
applicable thereto, if any; provided, however, that notwithstanding the
foregoing, in addition to and without limiting the rights and remedies of the
Agent and the Banks under Section 7 hereof, so long as any Default or Event of
Default under this Agreement has occurred and is continuing, Borrower shall
not be permitted to renew any LIBOR Loan as a LIBOR Loan or to convert any
Prime Loan into a LIBOR Loan.
(b) If the Agent does not receive a notice of election for a
Revolving Credit Loan pursuant to subsection (a) above within the applicable
time limits specified therein, Borrower shall be deemed to have elected to pay
such Revolving Credit Loan in whole pursuant to Section 2.08 on the last day
of the current Interest Period with respect thereto and to reborrow the
principal amount of such Revolving Credit Loan on such date as a Prime Loan.
2.05 Interest Rates. (a) Each Prime Loan shall bear interest on
the outstanding principal amount thereof, for each day from the date such Loan
is made until it becomes due, at a rate per annum equal to the Adjusted Prime
Rate. Such interest shall be payable monthly in arrears on the last day of
each month, commencing on the first such date after such Prime Loan is made,
and at maturity. Any overdue principal of and, to the extent permitted by
law, overdue interest on, any Prime Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of Two
Percent (2%) plus the otherwise applicable rate for such day.
(b) Each LIBOR Loan shall bear interest on the outstanding principal
amount thereof for each Interest Period applicable thereto at a rate per annum
equal to the applicable LIBOR Rate. Interest shall be payable for each
Interest Period on the last day thereof, unless the duration of the applicable
Interest Period exceeds three (3) months, in which case such interest shall be
payable at the end of the first three (3) months of such Interest Period and
on the last day of such Interest Period. Any overdue principal of and, to the
extent permitted by law, overdue interest on, any LIBOR Loan shall bear
interest, payable on demand, for each day until paid, at a rate per annum
equal to the sum of Two Percent (2%) plus the higher of (i) the LIBOR Rate for
the immediately preceding Interest Period applicable to such LIBOR Loan or
(ii) the rate applicable to Prime Loans for such day.
(c) The Agent shall determine each interest rate applicable to the
Loans hereunder and its determination thereof shall be conclusive in the
absence of manifest error.
2.06 Fees. (a) From the date of this Agreement to but excluding the
last day of the Revolving Credit Period, Borrower shall pay to the Agent for
the account of each Bank a nonrefundable commitment fee on the unused portion
of the Commitment of such Bank (determined by subtracting such Bank's Pro Rata
Share of the Total Outstandings (other than any portion of the Total
Outstandings consisting of the undrawn face amount of any Letters of Credit
which are commercial Letters of Credit) from such Bank's Commitment) at a rate
per annum equal to the Applicable Commitment Fee Rate. Such commitment fee
shall be (i) calculated on a daily basis, (ii) payable quarterly in arrears on
each January 1, April 1, July 1 and October 1 during the Revolving Credit
Period commencing January 1, 1997, and on the last day of the Revolving Credit
Period and (iii) calculated on an actual day, 360-day year basis.
(b) From the date of this Agreement to but excluding the last day of
the Revolving Credit Period, Borrower shall pay to the Agent for its own
account a nonrefundable fee on the unused portion of the total Commitments of
all of the Banks (determined by subtracting the Total Outstandings (other than
any portion of the Total Outstandings consisting of the undrawn face amount of
any Letters of Credit which are commercial Letters of Credit) from the total
Commitments of all of the Banks) at the rate of One-Sixteenth of One Percent
(1/16%) per annum. Such fee shall be (i) calculated on a daily basis, (ii)
payable quarterly in arrears on each January 1, April 1, July 1 and October 1
during the Revolving Credit Period commencing January 1, 1997, and on the last
day of the Revolving Credit Period and (iii) calculated on an actual day,
360-day year basis.
(c) Contemporaneously with the execution of this Agreement, Borrower
shall pay (i) the Agent a nonrefundable agent's fee in the amount of
$12,500.00, (ii) Harris Trust and Savings Bank a nonrefundable facility fee in
the amount of $6,250.00, (iii) NBD Bank a nonrefundable facility fee in the
amount of $6,250.00, (iv) Bank of America Illinois a nonrefundable facility
fee in the amount of $25,000.00 and (v) SunTrust Bank, Atlanta a nonrefundable
facility fee in the amount of $25,000.00.
2.07 Termination or Reduction of Commitments. Borrower may, upon
three (3) Domestic Business Days' prior written notice to the Agent, terminate
entirely at any time, or proportionately reduce from time to time on a pro
rata basis among the Banks based on their respective Pro Rata Shares by an
aggregate amount of $5,000,000.00 or any larger multiple of $1,000,000.00 the
unused portions of the Commitments; provided, however, that (i) at no time
shall the Commitments be reduced to a figure less than the Total Outstandings,
(ii) at no time shall the Commitments be reduced to a figure greater than zero
but less than $20,000,000.00 and (iii) any such termination or reduction shall
be permanent and Borrower shall have no right to thereafter reinstate or
increase, as the case may be, the Commitment of any Bank.
2.08 Early Payments. (a) Borrower may, upon notice to the Agent
specifying that it is paying its Prime Loans, pay without penalty or premium
its Prime Loans in whole at any time, or from time to time in part in amounts
aggregating $200,000.00 or any larger multiple of $50,000.00, by paying the
principal amount to be paid together with all accrued and unpaid interest
thereon to and including the date of payment; provided, however, that in no
event may Borrower make a partial payment of Prime Loans which results in the
total outstanding Prime Loans being greater than zero but less than
$200,000.00. Each such optional payment shall be applied to pay the Prime
Loans of the several Banks in proportion to their respective Pro Rata Shares.
(b) Borrower may, upon at least one (1) Eurodollar Business Day's
notice to the Agent specifying that it is paying its LIBOR Loans, pay without
penalty or premium on the last day of any Interest Period its LIBOR Loans to
which such Interest Period applies, in whole, or in part in amounts
aggregating $2,000,000.00 or any larger multiple of $500,000.00, by paying the
principal amount to be paid together with all accrued and unpaid interest
thereon to and including the date of payment and any funding losses and other
amounts payable under Section 2.10; provided, however, that in no event may
Borrower make a partial payment of LIBOR Loans which results in the total
outstanding LIBOR Loans with respect to which a given Interest Period applies
being greater than zero but less than $2,000,000.00. Each such optional
payment shall be applied to pay such LIBOR Loans of the several Banks in
proportion to their respective Pro Rata Shares.
(c) Upon receipt of a notice of payment pursuant to this Section, the
Agent shall promptly notify each Bank of the contents thereof and of such
Bank's Pro Rata Share of such payment and such notice shall not thereafter be
revocable by Borrower.
2.09 General Provisions as to Payments. Borrower shall make each
payment of principal of, and interest on, the Revolving Credit Loans and of
fees and all other amounts payable hereunder, not later than 12:00 P.M. (St.
Louis time) on the date when due, in Federal or other funds immediately
available in St. Louis, Missouri, to the Agent at its address referred to in
Section 10.07. The Agent will promptly distribute to each Bank in immediately
available funds its Pro Rata Share of each such payment received by the Agent
for the account of the Banks. Whenever any payment of principal of, or
interest on, the Revolving Credit Loans or of fees shall be due on a day which
is not a Domestic Business Day, the date for payment thereof shall be extended
to the next succeeding Domestic Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon, at
the then applicable rate, shall be payable for such extended time.
2.10 Funding Losses. Notwithstanding any provision contained herein
to the contrary, if Borrower makes any payment of principal with respect to
any LIBOR Loan (pursuant to Sections 2 or 7 or otherwise) on any day other
than the last day of an Interest Period applicable thereto, or if Borrower
fails to borrow or pay any LIBOR Loan after notice has been given to the Agent
in accordance with Section 2.02, 2.04 or 2.08(b), Borrower shall reimburse
each Bank on demand for any resulting losses and expenses incurred by it,
including, without limitation, any losses incurred in obtaining, liquidating
or employing deposits from third parties, but excluding loss of margin for the
period after any such payment, provided that such Bank shall have delivered to
Borrower a certificate as to the amount of such losses and expenses, which
certificate shall be conclusive in the absence of manifest error.
2.11 Basis for Determining Interest Rate Inadequate or Unfair. If
with respect to any Interest Period:
(i) the Agent is advised by Mercantile that deposits in dollars
(in the applicable amounts) are not being offered to Mercantile in the
relevant market for such Interest Period, or
(ii) Banks holding Notes evidencing 50% or more in aggregate
principal amount of the affected LIBOR Loans (or having 50% or more of the
aggregate amount of the total Commitments of all of the Banks, if no LIBOR
Loans are then outstanding) advise the Agent that the LIBOR Rate as determined
by the Agent will not adequately and fairly reflect the cost to such Banks of
maintaining or funding their LIBOR Loans for such Interest Period,
the Agent shall forthwith give notice thereof to Borrower and the Banks,
whereupon until the Agent notifies Borrower that the circumstances giving rise
to such suspension no longer exist, (a) the obligations of the Banks to make
LIBOR Loans shall be suspended, and (b) Borrower shall repay in full the then
outstanding principal amount of each of its LIBOR Loans together with all
accrued and unpaid interest thereon, on the last day of the then current
Interest Period applicable to such Loan. Concurrently with repaying each such
LIBOR Loan of each Bank pursuant to this Section, Borrower may borrow a Prime
Loan in an equal principal amount from such Bank, and, if Borrower so elects,
such Bank shall make such a Prime Loan to Borrower.
2.12 Illegality. If, after the date of this Agreement, the adoption
of any applicable law, rule or regulation, or any change therein, or any
change in the interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank with any
request or directive (whether or not having the force of law) of any such
governmental or regulatory authority, central bank or comparable agency shall
make it unlawful or impossible for any Bank to make, maintain or fund its
LIBOR Loans to Borrower and such Bank shall so notify the Agent, the Agent
shall forthwith give notice thereof to the other Banks and Borrower. Upon
receipt of such notice, Borrower shall repay in full the then outstanding
principal amount of each of its LIBOR Loans from such Bank, together with all
accrued and unpaid interest thereon, on either (a) the last day of the then
current Interest Period applicable to such LIBOR Loan if such Bank may
lawfully continue to maintain and fund its LIBOR Loans to such day or (b)
immediately if such Bank may not lawfully continue to fund and maintain its
LIBOR Loan to such day. Concurrently with repaying each LIBOR Loan of such
Bank, Borrower may borrow a Prime Loan in an equal principal amount from such
Bank, and, if Borrower so elects, such Bank shall make such a Prime Loan to
Borrower.
2.13 Increased Cost. (a) If (i) Regulation D or (ii) after the date
hereof, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by
any Bank with any request or directive (whether or not having the force of
law) of any such governmental or regulatory authority, central bank or
comparable agency (a "Regulatory Change"):
(A) shall subject any Bank to any tax, duty or other charge with
respect to its LIBOR Loans, its Note or its obligation to make LIBOR Loans, or
shall change the basis of taxation of payments to any Bank of the principal of
or interest on its LIBOR Loans or any other amounts due under this Agreement
in respect of its LIBOR Loans or its obligation to make LIBOR Loans (except
for taxes on or changes in the rate of tax on the overall net income of such
Bank); or
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of Governors
of the Federal Reserve System), special deposit, capital or similar
requirement against assets of, deposits with or for the account of, or credit
extended or committed to be extended by, any Bank or shall, with respect to
any Bank or the London interbank market, impose, modify or deem applicable any
other condition affecting its LIBOR Loans, its Note or its obligation to make
LIBOR Loans;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D, to impose a cost on or increase the cost to) such Bank
of making or maintaining any LIBOR Loan, or to reduce the amount of any sum
received or receivable by such Bank under this Agreement or under its Notes
with respect thereto, by an amount deemed by such Bank, in its good faith
judgment, to be material, and if such Bank is not otherwise fully compensated
for such increase in cost or reduction in amount received or receivable by
virtue of the inclusion of the reference to "LIBOR Reserve Percentage" in the
calculation of the interest rate applicable to LIBOR Loans, then, within
fifteen (15) days after notice by such Bank to Borrower together with a copy
of the official notice of the applicable change in law (if applicable) and a
work sheet showing how the increase in cost or reduction in amount received or
receivable was calculated (with a copy to the Agent and all of the other
Banks), Borrower shall pay for the account of such Bank as additional
interest, such additional amount or amounts as will compensate such Bank for
such increased cost or reduction. Each Bank will promptly notify Borrower,
the Agent and all of the other Banks of any event of which it has knowledge,
occurring after the date hereof, which will entitle such Bank to compensation
pursuant to this Section. The determination by any Bank under this Section of
the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount or
amounts, such Bank may use any reasonable averaging and attribution methods.
(b) If any Bank demands compensation under this Section, Borrower may
at any time, upon at least two (2) Domestic Business Days' prior notice to
such Bank and the Agent, repay in full its then outstanding LIBOR Loans from
such Bank, together with all accrued and unpaid interest thereon to the date
of prepayment and any funding losses and other amounts due under Section 2.10.
Concurrently with repaying such LIBOR Loans of such Bank, Borrower may borrow
from such Bank a Prime Loan in an amount equal to the aggregate principal
amount of such LIBOR Loans, and, if Borrower so elects, such Bank shall make
such a Prime Loan to Borrower.
2.14 Prime Loans Substituted for Affected LIBOR Loans. If notice has
been given by a Bank pursuant to Sections 2.11 or 2.12 or by Borrower pursuant
to Section 2.13 requiring LIBOR Loans of any Bank to be repaid, then, unless
and until such Bank notifies Borrower that the circumstances giving rise to
such repayment no longer apply, all Loans which would otherwise be made by
such Bank to Borrower as LIBOR Loans shall be made instead as Prime Loans.
Such Bank shall promptly notify Borrower if and when the circumstances giving
rise to such repayment no longer apply.
2.15 Capital Adequacy. If, after the date of this Agreement, any
Bank shall have determined in good faith 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 or regulatory authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by
such Bank 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 will have the effect of reducing the rate of return on such
Bank's capital in respect of its obligations hereunder to a level below that
which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy), then from time to time Borrower shall pay to such Bank upon
demand such additional amount or amounts as will compensate such Bank for such
reduction. All determinations made in good faith by such Bank of the
additional amount or amounts required to compensate such Bank in respect of
the foregoing shall be conclusive in the absence of manifest error. In
determining such amount or amounts, such Bank may use any reasonable averaging
and attribution methods.
2.16 Survival of Indemnities. All indemnities and all provisions
relating to reimbursement to Bank of amounts sufficient to protect the yield
to Bank with respect to the Revolving Credit Loans, including, without
limitation, Sections 2.11, 2.12 and 2.13 hereof, shall survive the payment of
the Notes and the other Borrower's Obligations and the termination of this
Agreement.
2.17 Discretion of Bank as to Manner of Funding. Notwithstanding any
provision contained in this Agreement to the contrary, each of the Banks shall
be entitled to fund and maintain its funding of all or any part of its LIBOR
Loans in any manner it elects, it being understood, however, that for purposes
of this Agreement all determinations hereunder (including, without limitation,
the determination of each Bank's funding losses and expenses under Section
2.10) shall be made as if such Bank had actually funded and maintained each
LIBOR Loan through the purchase of deposits having a maturity corresponding to
the maturity of the applicable Interest Period relating to the applicable
LIBOR Loan and bearing an interest rate equal to the applicable LIBOR Rate.
2.18 Late Payment Fees. If Borrower fails to make any payment of any
principal of or interest on any Revolving Credit Loan within ten (10) days
after the date the same shall become due and payable, whether by reason of
maturity, acceleration or otherwise, in addition to all of the other rights
and remedies of the Agent and the Banks under this Agreement and at law or in
equity, Borrower shall pay the Agent for the ratable benefit of the Banks on
demand with respect to each such late payment a late fee in an amount equal to
the greater of $100.00 or Five Percent (5%) of the amount of each such late
payment.
2.19 Computation of Interest. Interest on Prime Loans hereunder
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
Interest on LIBOR Loans shall be computed on the basis of a year of 360 days
and paid for the actual number of days elapsed, calculated as to each Interest
Period from and including the first day thereof to but excluding the last day
thereof.
2.20 Maturity. All Revolving Credit Loans not paid prior to the last
day of the Revolving Credit Period, together with all accrued and unpaid
interest thereon and all fees and other amounts owing by Borrower to the Banks
with respect thereto, shall be due and payable on the last day of the
Revolving Credit Period.
2.21 Sharing of Payments. The Banks agree among themselves that, in
the event that any of the Banks shall directly or indirectly obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, banker's lien or counterclaim, through the realization, collection,
sale or liquidation of any collateral or otherwise) on account of or in
respect of any of the Loans or any of the other Borrower's Obligations in
excess of its Pro Rata Share of all such payments, such Bank(s) shall
immediately purchase from the other Bank(s) participations in the Loans or
other Borrower's Obligations owed to such other Bank(s) in such amounts, and
make such other adjustments from time to time, as shall be equitable to the
end that the Banks share such payment ratably in accordance with their
respective Pro Rata Shares of the outstanding Loans and other Borrower's
Obligations. The Banks further agree among themselves that if any such excess
payment to a Bank shall be rescinded or must otherwise be restored, the other
Bank(s) which shall have shared the benefit of such payment shall, by
repurchase of participation theretofore sold, or otherwise, return its share
of that benefit to the Bank whose payment shall have been rescinded or
otherwise restored. Borrower agrees that any Bank(s) so purchasing a
participation in the Loans or other Borrower's Obligations owed to the other
Bank(s) may exercise all rights of set-off, banker's lien and/or counterclaim
as fully as if such Bank(s) were a holder of such Loan or other Borrower's
Obligations in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law any of the Banks receives a
secured claim in lieu of a set-off to which this Section 2.21 would apply,
such Bank(s) shall, to the extent practicable, exercise their rights in
respect of such secured claim in a manner consistent with the rights of the
Bank(s) entitled under this Section 2.21 to share in the benefits of any
recovery of such secured claim.
SECTION 3. LETTERS OF CREDIT.
3.01 Letter of Credit Commitment. (a) Subject to the terms and
conditions of this Agreement and so long as no Default or Event of Default
under this Agreement has occurred and is continuing (provided, however, that
Mercantile shall have no liability to any of the other Banks for issuing a
Letter of Credit after the occurrence of any Default or Event of Default under
this Agreement unless Mercantile has previously received notice in writing
from Borrower or any of the other Banks of the occurrence of such Default or
Event of Default), during the Letter of Credit Period, Mercantile hereby
agrees to issue irrevocable commercial and/or standby letters of credit for
the account of Borrower (individually, a "Letter of Credit" and collectively,
the "Letters of Credit") in an amount and for the term specifically requested
by Borrower by notice in writing to Mercantile in the form of Exhibit B
attached hereto and incorporated herein by reference (a "Letter of Credit
Request") at least three (3) Domestic Business Days prior to the requested
issuance thereof; provided, however, that:
(i) Borrower shall have executed and delivered to Mercantile a
Letter of Credit Application with respect to such Letter of Credit;
(ii) the term of any such Letter of Credit shall not extend
beyond the date one (1) year after the date of issuance thereof;
(iii) any Letter of Credit may only be utilized to guaranty
the payment of obligations of Borrower, a Subsidiary of Borrower or any other
entity in which Borrower or any Subsidiary of Borrower has an equity
investment to third parties;
(iv) the Total Outstandings shall not at any one time exceed
the total Commitments of all of the Banks as of such time;
(v) the sum of (A) the aggregate undrawn face amount of all
outstanding Letters of Credit plus (B) the aggregate principal amount of all
outstanding Letter of Credit Loans shall not at any one time exceed the lesser
of (A) the total Commitments of all of the Banks as of such time or (B)
$8,000,000.00; and
(vi) the text of any such Letter of Credit is provided to
Mercantile no less than three (3) Domestic Business Days prior to the
requested issuance date, which text must be acceptable to Mercantile in its
sole and absolute discretion.
(b) The payment of drafts under each Letter of Credit shall be made
in accordance with the terms thereof and, in that connection, Mercantile shall
be entitled to honor any drafts and accept any documents presented to it by
the beneficiary of such Letter of Credit in accordance with the terms of such
Letter of Credit and believed in good faith by Mercantile to be genuine.
Mercantile shall not have any duty to inquire as to the accuracy or
authenticity of any draft or other drawing document that may be presented to
it other than the duties contemplated by the applicable Letter of Credit
Application. If Mercantile shall have received documents that in its good
faith judgment constitute all of the documents that are required to be
presented before payment or acceptance of a draft under a Letter of Credit, it
shall be entitled to pay or accept such draft provided such documents conform
on their face to the requirements of such Letter of Credit.
(c) In the event of any payment by Mercantile of a draft presented
under a Letter of Credit, Borrower agrees to pay to Mercantile in immediately
available funds at the time of such drawing an amount equal to the sum of such
drawing plus Mercantile's customary negotiation, processing and other fees
related thereto. Borrower hereby authorizes Mercantile to charge or cause to
be charged Borrower's bank accounts at Mercantile to the extent there are
balances of immediately available funds therein, in an amount equal to the sum
of such drawing plus Mercantile's customary negotiation, processing and other
fees related thereto, and Borrower agrees to pay the amount of any such
drawing (and/or Mercantile's customary negotiation, processing and other fees
related thereto) not so charged prior to the close of business of Mercantile
on the day of such drawing. In the event any payment under a Letter of Credit
is made by Mercantile prior to receipt of payment from Borrower, such payment
by Mercantile shall constitute a loan (a "Letter of Credit Loan") by
Mercantile to Borrower, payable on demand of Mercantile. Borrower agrees to
pay interest on demand of Mercantile on any unpaid Letter of Credit Loan at a
rate per annum equal to Two Percent (2%) over and above the Adjusted Prime
Rate until such Letter of Credit Loan is paid in full, calculated on an actual
day, 360-day year basis.
(d) Borrower hereby further agrees to pay to the order of Mercantile:
(i) with respect to each Letter of Credit which is a standby
Letter of Credit, a nonrefundable issuance fee in the amount of $125.00 and
with respect to each Letter of Credit which is a commercial Letter of Credit,
a nonrefundable issuance fee in the amount of $135.00 (the "Letter of Credit
Issuance Fees"), which Letter of Credit Issuance Fees shall be due and payable
on the date of issuance of each such Letter of Credit;
(ii) with respect to each Letter of Credit which is a standby
Letter of Credit, a nonrefundable commitment fee at a rate per annum equal to
Applicable Standby Letter of Credit Commitment Fee Rate (calculated on an
actual day, 360-day year basis) on the face amount (taking into account any
scheduled increases or decreases therein during the period in question) of
each such Letter of Credit ("Letter of Credit Commitment Fee"), which Letter
of Credit Commitment Fee shall be due and payable quarterly in advance on the
date of issuance of each such Letter of Credit and on each January 1, April 1,
July 1 and October 1 during the term of each such Letter of Credit.
Mercantile shall, on the date of this Agreement, make appropriate adjustments
to the Letter of Credit Commitment Fees payable by Borrower with respect to
the Existing Letters of Credit to take into account letter of credit
commitment fees paid by Borrower prior to the date of this Agreement on or
with respect to the Existing Letters of Credit for the period after the date
of this Agreement;
(iii) with respect to each Letter of Credit which is a
commercial Letter of Credit, a nonrefundable negotiation fee in an amount
equal to One-Quarter of One Percent (1/4%) of the amount of each draw on each
such Letter of Credit ("Letter of Credit Negotiation Fee"), which Letter of
Credit Negotiation Fee shall be due and payable on the date of each draw of
each such Letter of Credit; and
(iv) with respect to each Letter of Credit, such other fees as
may be charged by Mercantile from time to time in accordance with Mercantile's
published schedule of fees in effect from time to time, which fees shall be
due and payable on demand by Mercantile.
3.02 Existing Letters of Credit. Notwithstanding any provision
contained in this Agreement to the contrary, (i) all references in this
Agreement to Letters of Credit shall include the irrevocable standby and
commercial letters of credit listed on Schedule 3.02 attached hereto which
have heretofore been issued by Mercantile for the account of Borrower (the
"Existing Letters of Credit") and (ii) all references in this Agreement to the
Letter of Credit Applications shall include the applications and agreements
for irrevocable standby and commercial letters of credit heretofore executed
by Borrower, as account party, with respect to the Existing Letters of Credit.
3.03 Participation by Other Banks. Upon the issuance of a Letter of
Credit by Mercantile (and on the date of this Agreement with respect to the
Existing Letters of Credit), an undivided participation interest therein
(including, without limitation, an undivided participation interest in the
reimbursement risk relating to such Letter of Credit, in all payments and
Letter of Credit Loans made by Mercantile in connection with such Letter of
Credit and in all collateral for such Letter of Credit) shall automatically be
granted by Mercantile to and accepted by each of the other Banks in an amount
based on each such other Bank's Pro Rata Share of the face amount of such
Letter of Credit, which participation shall be evidenced by a single Letter of
Credit Participation Certificate executed by Mercantile in favor of such Bank
in the form attached hereto as Exhibit C and incorporated herein by reference.
If Mercantile shall make payment on any draft presented or accepted under a
Letter of Credit, Mercantile shall give notice of such payment to the other
Banks, and each of the other Banks hereby authorizes and requests Mercantile
to advance for their respective accounts, pursuant to the terms hereof, their
respective shares of any such payment based upon their respective Pro Rata
Shares. If such drawing is not paid by Borrower in immediately available
funds prior to the close of business of Mercantile on the date of such
drawing, Mercantile shall promptly so notify the other Banks and each of the
other Banks agrees to immediately reimburse Mercantile in immediately
available funds for its Pro Rata Share of the amount of such drawing, plus
interest calculated on its Pro Rata Share of such amount at a rate per annum
equal to the Fed Funds Rate calculated from the date of such payment by
Mercantile to but excluding the date of reimbursement by such other Bank and
on an actual-day, 360-day year basis. Each of the other Banks will be
entitled to its Pro Rata Share of any Letter of Credit Commitment Fees
(including, without limitation, Letter of Credit Commitment Fees on the
Existing Letters of Credit for the period after the date of this Agreement)
and any Letter of Credit Negotiation Fees paid by Borrower, but such other
Banks shall have no right to share in any Letter of Credit Issuance Fees or
any other fees paid by Borrower to Mercantile in connection with any of the
Letters of Credit.
3.04 Replacement or Collateralization of Letters of Credit.
Notwithstanding any provision contained in this Agreement or any of the Letter
of Credit Applications to the contrary: (a) if any of the Letters of Credit
remain outstanding on the last day of the Letter of Credit Period, Borrower
shall, on or before 12:00 noon (St. Louis time) on the last day of the Letter
of Credit Period, (i) surrender the originals of the applicable Letter(s) of
Credit to Mercantile for cancellation or (ii) provide Mercantile with cash
collateral (or other collateral acceptable to the Required Banks in their sole
and absolute discretion) in an amount at least equal to the aggregate undrawn
face amount of all Letter(s) of Credit which remain outstanding at such time
and execute and deliver to Mercantile such agreements as the Required Banks
may require to grant Mercantile a first priority perfected security interest
in such cash or other collateral; and (b) upon the occurrence of any Event of
Default under this Agreement (including, without limitation, Borrower's
failure to comply with the requirements of clause (a) above), at Mercantile's
option and without demand or further notice to Borrower, an amount equal to
the aggregate undrawn face amount of all Letter(s) of Credit then outstanding
shall be deemed (as between Mercantile and Borrower) to have been paid or
disbursed by Mercantile (notwithstanding that such amounts may not in fact
have been so paid or disbursed by Mercantile), and a Letter of Credit Loan to
Borrower in such amount to have been made and accepted by Borrower, which
Letter of Credit Loan shall be immediately due and payable. In lieu of the
foregoing, at the election of Mercantile, Borrower shall, upon Mercantile's
demand, deliver to Mercantile cash, or other collateral acceptable to the
Required Banks in their sole and absolute discretion, having a value, as
determined by the Required Banks, at least equal to aggregate undrawn face
amount of all outstanding Letters of Credit and execute and deliver to
Mercantile such agreements as the Required Banks may require to grant
Mercantile a first priority perfected security interest in such cash or other
collateral. Any such collateral and/or any amounts received by Mercantile in
payment of the Letter of Credit Loan made pursuant to this Section 3.04 shall
be held by Mercantile in a separate account at Mercantile appropriately
designated as a cash collateral account in relation to this Agreement and the
Letters of Credit and retained by Mercantile as collateral security for the
payment of the Borrower's Obligations. Cash amounts delivered to Mercantile
pursuant to the foregoing requirements of this Section 3.04 shall be invested,
at the request and for the account of Borrower, in investments of a type and
nature and with a term acceptable to the Required Banks. Such amounts,
including in the case of cash amounts invested in the manner set forth above,
any investment realized thereon, shall not be used by Mercantile to pay any
amounts drawn or paid under or pursuant to any Letter of Credit, but may be
applied to reimburse Mercantile for drawings or payments under or pursuant to
the Letters of Credit which Mercantile has paid, or if no such reimbursement
is required to the payment of such other of Borrower's Obligations as the
Required Banks shall determine. Any amounts remaining in any cash collateral
account established pursuant to this Section 3.04 after the payment in full of
all of the Borrower's Obligations and the expiration or cancellation of all of
the Letters of Credit shall be returned to Borrower (after deduction of
Mercantile's expenses, if any).
SECTION 4. PRECONDITIONS TO LOANS AND LETTERS OF CREDIT.
4.01 Initial Revolving Credit Loan or Letter of Credit.
Notwithstanding any provision contained in this Agreement to the contrary,
none of the Banks shall have any obligation to make the initial Revolving
Credit Loan under this Agreement and Mercantile shall have no obligation to
issue the initial Letter of Credit under this Agreement unless the Agent shall
have first received:
(a) this Agreement, executed by a duly authorized officer of
Borrower and each of the Guarantors;
(b) the Notes, each executed by a duly authorized officer of
Borrower;
(c) a copy of resolutions of the Board of Directors of Borrower,
duly adopted, which authorize the execution, delivery and performance of this
Agreement, the Notes, the Letter of Credit Applications and the other
Transaction Documents, certified by the Secretary of Borrower;
(d) a copy of resolutions of the Board of Directors of Huntco
Nevada, duly adopted, which authorize the execution, delivery and performance
of this Agreement, certified by the Secretary of Huntco Nevada;
(e) a copy of resolutions of the Board of Directors of Huntco
Steel, duly adopted, which authorize the execution, delivery and performance
of this Agreement, certified by the Secretary of Huntco Steel;
(f) a copy of resolutions of the Board of Directors of Midwest
Products, duly adopted, which authorize the execution, delivery and
performance of this Agreement, certified by the Secretary of Midwest Products;
(g) a copy of resolutions of the Board of Directors of HSI
Aviation, duly adopted, which authorize the execution, delivery and
performance of this Agreement, certified by the Secretary of HSI Aviation;
(h) a copy of the Articles of Incorporation of Borrower,
including any amendments thereto, certified by the Secretary of State of the
State of Missouri;
(i) a copy of the Certificate of Incorporation of Huntco Nevada,
including any amendments thereto, certified by the Secretary of State of the
State of Nevada;
(j) a copy of the Certificate of Incorporation of Huntco Steel,
including any amendments thereto, certified by the Secretary of State of the
State of Delaware;
(k) a copy of the Articles of Incorporation of Midwest Products,
including any amendments thereto, certified by the Secretary of State of the
State of Missouri;
(l) a copy of the Articles of Incorporation of HSI Aviation,
including any amendments thereto, certified by the Secretary of State of the
State of Missouri;
(m) a copy of the By-Laws of Borrower, including any amendments
thereto, certified by the Secretary of Borrower;
(n) a copy of the By-Laws of Huntco Nevada, including any
amendments thereto, certified by the Secretary of Huntco Nevada;
(o) a copy of the By-Laws of Huntco Steel, including any
amendments thereto, certified by the Secretary of Huntco Steel;
(p) a copy of the By-Laws of Midwest Products, including any
amendments thereto, certified by the Secretary of Midwest Products;
(q) a copy of the By-Laws of HSI Aviation, including any
amendments thereto, certified by the Secretary of HSI Aviation;
(r) an incumbency certificate, executed by the Secretary of
Borrower, which shall identify by name and title and bear the signatures of
all of the officers of Borrower executing any of the Transaction Documents;
(s) an incumbency certificate, executed by the Secretary of
Huntco Nevada, which shall identify by name and title and bear the signatures
of all of the officers of Huntco Nevada executing this Agreement;
(t) an incumbency certificate, executed by the Secretary of
Huntco Steel, which shall identify by name and title and bear the signatures
of all of the officers of Huntco Steel executing this Agreement;
(u) an incumbency certificate, executed by the Secretary of
Midwest Products, which shall identify by name and title and bear the
signatures of all of the officers of Midwest Products executing this
Agreement;
(v) an incumbency certificate, executed by the Secretary of HSI
Aviation, which shall identify by name and title and bear the signatures of
all of the officers of HSI Aviation executing this Agreement;
(w) a certificate of corporate good standing of Borrower issued
by the Secretary of State of the State of Missouri;
(x) a certificate of corporate good standing of Huntco Nevada
issued by the Secretary of State of the State of Nevada;
(y) certificates of corporate good standing of Huntco Steel
issued by the Secretaries of State of the States of Delaware, Arkansas,
Missouri, Illinois, Oklahoma, Texas, Tennessee and Kansas;
(z) certificates of corporate good standing of Midwest Products
issued by the Secretaries of State of the States of Missouri and Pennsylvania;
(aa) a certificate of corporate good standing of HSI Aviation
issued by the Secretary of State of the State of Missouri;
(bb) an opinion of counsel of Peper, Martin, Jensen, Maichel and
Hetlage, independent counsel for Borrower and the Guarantors, in the form of
Exhibit F attached hereto and incorporated herein by reference;
(cc) the Notice of Borrowing required by Section 2.02 and/or the
Letter of Credit Request and the Letter of Credit Application required by
Section 3.01(a), as the case may be;
(dd) a letter agreement executed by Borrower terminating its
right to obtain any additional loans under the Existing Revolving Credit
Agreement;
(ee) evidence satisfactory to the Agent that the proceeds of the
initial Revolving Credit Loan under this Agreement will be used to pay all of
the "Borrower's Obligations" (as defined therein) under the Existing Revolving
Credit Agreement (other than the Existing Letters of Credit) in full;
(ff) evidence satisfactory to the Agent that the fees payable by
Borrower under Section 2.06(c) of this Agreement have been paid in full; and
(gg) such other agreements, documents, instruments and
certificates as the Agent or any of the Banks may reasonably request.
4.02 All Revolving Credit Loans. Notwithstanding any provision
contained herein to the contrary, none of the Banks shall have any obligation
to make any Revolving Credit Loan under this Agreement unless:
(a) the Agent shall have received a Notice of Borrowing for such
Revolving Credit Loan as required by Section 2.02;
(b) on the date of and immediately after such Revolving Credit
Loan, no Default or Event of Default under this Agreement shall have occurred
and be continuing;
(c) no material adverse change in the Properties, assets,
liabilities, business, operations, prospects, income or condition (financial
or otherwise) of Borrower and its Subsidiaries taken as a whole shall have
occurred since the date of this Agreement and be continuing; and
(d) all of the representations and warranties of Borrower
contained in this Agreement and in the other Transaction Documents shall be
true and correct in all material respects on and as of the date of such
Revolving Credit Loan as if made on and as of the date of such Revolving
Credit Loan (and for purposes of this Section 4.02(d), the representations and
warranties made by Borrower in Section 5.04 shall be deemed to refer to the
most recent financial statements of Borrower delivered to the Banks pursuant
to Section 6.01(a)).
Each request for a Revolving Credit Loan by Borrower hereunder shall be
deemed to be a representation and warranty by Borrower on the date of such
Revolving Credit Loan as to the facts specified in clauses (b), (c) and (d) of
this Section 4.02.
4.03 All Letters of Credit. Notwithstanding any provision contained
herein to the contrary, Mercantile shall have no obligation to issue any
Letter of Credit under this Agreement unless:
(a) Mercantile shall have received a Letter of Credit Request
for such Letter of Credit as required by Section 3.01(a);
(b) Mercantile shall have received a Letter of Credit
Application for such Letter of Credit as required by Section 3.01(a), duly
executed by an authorized officer of Borrower as account party;
(c) Borrower shall have complied with all of the procedures and
requirements set forth in Section 3.01;
(d) on the date of and immediately after the issuance of such
Letter of Credit, no Default or Event of Default under this Agreement shall
have occurred and be continuing;
(e) no material adverse change in the Properties, assets,
liabilities, business, operations, prospects, income or condition (financial
or otherwise) of Borrower and its Subsidiaries taken as a whole shall have
occurred since the date of this Agreement and be continuing;
(f) all of the representations and warranties of Borrower
contained in this Agreement and in the other Transaction Documents shall be
true and correct in all material respects on and as of the date of the
issuance of such Letter of Credit as if made on and as of the date of the
issuance of such Letter of Credit (and for purposes of this Section 4.03(f),
the representations and warranties made by Borrower in Section 5.04 shall be
deemed to refer to the most recent financial statements of Borrower delivered
to the Banks pursuant to Section 6.01(a)); and
(g) Mercantile shall have received such other documents,
certificates and agreements as it may reasonably request.
Each request for the issuance of a Letter of Credit by Borrower hereunder
shall be deemed to be a representation and warranty by Borrower on the date of
the issuance of such Letter of Credit as to the facts specified in clauses
(d), (e) and (f) of this Section 4.03.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to each of the Banks that:
5.01 Corporate Existence and Power. Borrower and each Subsidiary:
(a) is duly incorporated, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; (b) has all requisite corporate
powers required to carry on its business as now conducted; (c) has all
requisite governmental and regulatory licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except such
licenses, authorizations, consents and approvals the failure to have could not
reasonably be expected to have a Material Adverse Effect; and (d) is qualified
to transact business as a foreign corporation in, and is in good standing
under the laws of, all states in which it is required by applicable law to
maintain such qualification and good standing except for those states in which
the failure to qualify or maintain good standing could not reasonably be
expected to have a Material Adverse Effect.
5.02 Corporate Authorization. The execution, delivery and
performance by Borrower of this Agreement, the Notes, the Letter of Credit
Applications and the other Transaction Documents are within the corporate
powers of Borrower and have been duly authorized by all necessary corporate
action. The execution, delivery and performance by the Guarantors of this
Agreement are within the corporate powers of each of the Guarantors and have
been duly authorized by all necessary corporate action.
5.03 Binding Effect. This Agreement, the Notes, the Letter of Credit
Applications and the other Transaction Documents executed contemporaneously
with the execution of this Agreement have been duly executed and delivered by
such of Borrower and the Guarantors as are parties thereto and constitute the
legal, valid and binding obligations of such of Borrower and the Guarantors as
are parties thereto enforceable in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law); and the Letter of Credit Applications
and the other Transaction Documents not executed contemporaneously with the
execution of this Agreement, when executed and delivered in accordance with
this Agreement, will constitute the legal, valid and binding obligations of
such of Borrower and the Guarantors as are parties thereto enforceable in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
5.04 Financial Statements. Borrower has furnished each of the Banks
with the following financial statements, identified by the chief financial
officer of Borrower (or such other officer of Borrower as shall be reasonably
acceptable to the Required Banks): (i) a consolidated balance sheet and
statements of income, changes in shareholders' equity and cash flows of
Borrower and its Subsidiaries as of and for the fiscal year ended April 30,
1996, all certified by Borrower's independent certified public accountants,
which financial statements have been prepared in accordance with GAAP
consistently applied; and (ii) an unaudited consolidated balance sheet and
statements of income and cash flows of Borrower and its Subsidiaries as of and
for the fiscal quarter ended July 31, 1996, certified by the chief financial
officer of Borrower (or such other officer of Borrower as shall be reasonably
acceptable to the Required Banks) as being true and correct to the best of his
or her knowledge and as being prepared in accordance with GAAP consistently
applied. Borrower further represents and warrants to each of the Banks that:
(i) said balance sheets and their accompanying notes fairly present in all
material respects the condition of Borrower and its Subsidiaries as of the
dates thereof; (ii) there has been no material adverse change in the condition
or operation, financial or otherwise, of Borrower or any of its Subsidiaries
since July 31, 1996; and (iii) neither Borrower nor any of its Subsidiaries
had any direct or contingent liabilities which were not disclosed on said
financial statements or the notes thereto (to the extent such disclosure is
required by GAAP).
5.05 Litigation. Except as disclosed on Schedule 5.05 attached
hereto, there is no action or proceeding pending or, to the knowledge of
Borrower, threatened against or affecting Borrower or any Subsidiary before
any court, arbitrator or any governmental, regulatory or administrative body,
agency or official which, if adversely determined against Borrower or any
Subsidiary, could reasonably be expected to have a Material Adverse Effect.
Neither Borrower nor any Subsidiary is in default with respect to any order,
writ, injunction, decision or decree of any court, arbitrator or any
governmental, regulatory or administrative body, agency or official, a default
under which could reasonably be expected to have a Material Adverse Effect.
There are no outstanding judgments against Borrower or any Subsidiary.
5.06 Pension and Welfare Plans. Each Pension Plan and Welfare Plan
complies in all material respects with ERISA and all other applicable statutes
and governmental and regulatory rules and regulations; no Reportable Event has
occurred and is continuing with respect to any Pension Plan; neither Borrower
nor any Subsidiary nor any ERISA Affiliate has withdrawn from any Multi-
Employer Plan in a "complete withdrawal" or a "partial withdrawal" as defined
in Sections 4203 or 4205 of ERISA, respectively; neither Borrower nor any
Subsidiary nor any ERISA Affiliate has entered into an agreement pursuant to
Section 4204 of ERISA; neither Borrower nor any Subsidiary nor any ERISA
Affiliate has in the past contributed to or currently contributes to a Multi-
Employer Plan; neither Borrower nor any Subsidiary nor any ERISA Affiliate has
any withdrawal liability with respect to a Multi-Employer Plan; no steps have
been instituted by Borrower or any Subsidiary or any ERISA Affiliate to
terminate any Pension Plan; no condition exists or event or transaction has
occurred in connection with any Pension Plan, Multi-Employer Plan or Welfare
Plan which could result in the incurrence by Borrower or any Subsidiary or any
ERISA Affiliate of any material liability, fine or penalty; and neither
Borrower nor any Subsidiary nor any ERISA Affiliate is a "contributing
sponsor" as defined in Section 4001(a)(13) of ERISA of a "single-employer
plan" as defined in Section 4001(a)(15) of ERISA which has two or more
contributing sponsors at least two of whom are not under common control.
Except as disclosed on the consolidated financial statements of Borrower and
its Subsidiaries delivered by Borrower to the Banks, neither Borrower nor any
Subsidiary nor any ERISA Affiliate has any liability with respect to any
Welfare Plan.
5.07 Tax Returns and Payment. Borrower and its Subsidiaries have
filed all Federal, state, local and other tax returns which are required to be
filed and have paid all taxes which have become due pursuant to such returns
and all other taxes, assessments, fees and other governmental charges upon
Borrower and its Subsidiaries and upon their respective Properties, assets,
income and franchises which have become due and payable by Borrower or any of
its Subsidiaries, except those wherein the amount, applicability or validity
are being contested by Borrower or any such Subsidiary by appropriate
proceedings being diligently conducted in good faith and in respect of which
adequate reserves in accordance with GAAP have been established. There is no
proposed, asserted or assessed tax deficiency against Borrower or any of its
Subsidiaries which, if adversely determined, could reasonably be expected to
have a Material Adverse Effect.
5.08 Subsidiaries. Borrower has no Subsidiaries other than as
identified on Schedule 5.08 attached hereto, as the same may from time to time
be amended, modified or supplemented as provided herein. Schedule 5.08
attached hereto correctly sets forth, for each Subsidiary, the number of
shares of each class of common and preferred stock authorized for such
Subsidiary, the number of outstanding and the percentage of the outstanding
shares of each such class owned, directly or indirectly, by Borrower or one or
more of its Subsidiaries. All of the issued and outstanding capital stock of
each Subsidiary is duly authorized, validly issued and fully paid and
nonassessable. Except as disclosed on Schedule 5.08 attached hereto and
except for Investments permitted by clause (i) of the definition of Restricted
Investments, neither Borrower nor any of its Subsidiaries, individually or
collectively, owns or holds, directly or indirectly, any capital stock or
equity security of, or any equity interest in, any corporation or business
other than Borrower's Subsidiaries. Borrower may at any time amend, modify or
supplement Schedule 5.08 by notifying the Agent and each of the Banks in
writing of any changes thereto, including any formation, acquisition, merger
or liquidation of Subsidiaries or any change in the capitalization of any
Subsidiary, in each case, in accordance with the terms of this Agreement, and
thereby the representations and warranties contained in this Section 5.08
shall be amended accordingly so long as such amendment, modification or
supplement is made within thirty (30) days after the occurrence of any such
changes in the facts stated therein and that such changes reflect transactions
that are permitted under this Agreement.
5.09 Compliance With Other Instruments; None Burdensome. Neither
Borrower nor any Subsidiary is a party to any contract or agreement or subject
to any charter or other corporate restriction which could reasonably be
expected to have a Material Adverse Effect and which is not disclosed on
Borrower's financial statements heretofore submitted to the Banks; none of the
execution and delivery by Borrower and the Guarantors of the Transaction
Documents, the consummation of the transactions therein contemplated or the
compliance with the provisions thereof will violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Borrower or any
of the Guarantors, or any of the provisions of the Certificates or Articles of
Incorporation or By-Laws of Borrower or any of the Guarantors or any of the
provisions of any indenture, agreement, document, instrument or undertaking to
which Borrower or any of the Guarantors is a party or subject, or by which
Borrower or any of the Guarantors or any Property or assets of Borrower or any
of the Guarantors is bound, or conflict with or constitute a default
thereunder or result in the creation or imposition of any Lien pursuant to the
terms of any such indenture, agreement, document, instrument or undertaking
(other than in favor of the Agent and/or the Banks pursuant to the Transaction
Documents). No order, consent, approval, license, authorization or validation
of, or filing, recording or registration with, or exemption by, any
governmental, regulatory, administrative or public body or authority, or any
subdivision thereof, or any other Person is required to authorize, or is
required in connection with, the execution, delivery or performance of, or the
legality, validity, binding effect or enforceability of, any of the
Transaction Documents.
5.10 Other Debt, Guarantees and Capitalized Leases. Except as
disclosed on Schedule 5.10 attached hereto and except for Indebtedness of any
Subsidiary to Borrower or any other Subsidiary, neither Borrower nor any
Subsidiary is a borrower, guarantor or obligor with respect to, or a lessee
under, any Debt, Guarantees or Capitalized Leases. Borrower may at any time
amend, modify or supplement Schedule 5.10 by notifying the Agent and each of
the Banks in writing of any changes thereto, and thereby the representations
and warranties contained in this Section 5.10 shall be amended accordingly so
long as such amendment, modification or supplement is made within thirty (30)
days after the occurrence of any such changes in the facts stated therein and
that such changes reflect transactions that are permitted under this
Agreement.
5.11 Labor Matters. Neither Borrower nor any Subsidiary is a party
to any labor dispute which could reasonably be expected to have a Material
Adverse Effect. There are no strikes or walkouts relating to any labor
contract to which Borrower or any Subsidiary is subject. Hours worked and
payments made to the employees of Borrower and its Subsidiaries have not been
in violation of (a) the Fair Labor Standards Act or (b) any other applicable
law dealing with such matters, the violation of which could reasonably be
expected to have a Material Adverse Effect. All payments due from Borrower or
any Subsidiary, or for which any claim may be made against any of them, in
respect of wages, employee health and welfare insurance and/or other benefits
have been paid or accrued as a liability on their respective books.
5.12 Title to Property. Borrower and each Subsidiary is the sole and
absolute owner of, or has the legal right to use and occupy, all Property it
claims to own or which is necessary for Borrower or such Subsidiary to conduct
its business, and all of such Property is free and clear of all Liens other
than Permitted Liens. Borrower and its Subsidiaries enjoy peaceful and
undisturbed possession in all material respects under all material leases
under which they are operating as lessees.
5.13 Regulation U. 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 margin stock (within the meaning of Regulation U of
The Board of Governors of the Federal Reserve System, as amended) and no part
of the proceeds of any Loan will be used, whether directly or indirectly, and
whether immediately, incidentally or ultimately (i) to purchase or carry
margin stock or to extend credit to others for the purpose of purchasing or
carrying margin stock, or to refund or repay indebtedness originally incurred
for such purpose or (ii) for any purpose which entails a violation of, or
which is inconsistent with, the provisions of any of the Regulations of The
Board of Governors of the Federal Reserve System, including, without
limitation, Regulations G, U, T or X thereof, as amended. If requested by any
of the Banks, Borrower shall furnish to the Agent a statement in conformity
with the requirements of Federal Reserve Form U-1 referred to in Regulation U.
5.14 Multi-Employer Pension Plan Amendments Act of 1980. Borrower
and each Subsidiary is in compliance with the Multi-Employer Pension Plan
Amendments Act of 1980, as amended ("MEPPAA"), and has no liability for
pension contributions pursuant to MEPPAA.
5.15 Investment Company Act of 1940; Public Utility Holding Company
Act of 1935. Borrower is not an "investment company" as that term is defined
in, and is not otherwise subject to regulation under, the Investment Company
Act of 1940, as amended. Borrower is not a "holding company" as that term is
defined in, and is not otherwise subject to regulation under, the Public
Utility Holding Company Act of 1935, as amended.
5.16 Patents, Licenses, Trademarks, Etc. Except as disclosed on
Schedule 5.16 attached hereto, neither Borrower nor any Subsidiary has any
patents, trademarks, trademark rights or copyrights which are material to the
business of Borrower or any Subsidiary. Borrower may at any time amend,
modify or supplement Schedule 5.16 by notifying the Agent and each of the
Banks in writing of any changes thereto, and thereby the representations and
warranties contained in the first sentence of this Section 5.16 shall be
amended accordingly so long as such amendment, modification or supplement is
made within thirty (30) days after the occurrence of any such changes in the
facts stated therein and that such changes reflect transactions that are
permitted under this Agreement. Borrower and each Subsidiary possesses all
necessary patents, licenses, trademarks, trademark rights, trade names, trade
name rights and copyrights to conduct its business without conflict with any
patent, license, trademark, trade name or copyright of any other Person.
5.17 Environmental and Safety and Health Matters. Except as
disclosed on Schedule 5.17 attached hereto: (i) the operations of Borrower
and each Subsidiary comply in all material respects with (A) all applicable
Environmental Laws and (B) all applicable Occupational Safety and Health Laws;
(ii) none of the operations of Borrower or any Subsidiary are subject to any
Environmental Claim or any judicial, governmental, regulatory or
administrative proceeding alleging the violation of any Occupational Safety
and Health Law, which, if adversely determined, could reasonably be expected
to have a Material Adverse Effect; (iii) to the best of Borrower's knowledge
after due inquiry, none of the operations of Borrower or any Subsidiary is the
subject of any Federal or state investigation evaluating whether any remedial
action is needed to respond to any Release of Hazardous Substances or any
unsafe or unhealthful condition at any premises owned, leased or operated by
Borrower or such Subsidiary; (iv) neither Borrower nor any Subsidiary has
filed any notice under any Environmental Law or Occupational Safety and Health
Law indicating or reporting (A) any past or present Release into the
environment of, or treatment, storage or disposal of, any Hazardous Substance
or (B) any unsafe or unhealthful condition at any premises owned, leased or
operated by Borrower or such Subsidiary; and (v) neither Borrower nor any
Subsidiary has any material contingent liability in connection with (A) any
Release into the environment of, or otherwise with respect to, any Hazardous
Substances or (B) any unsafe or unhealthful condition at any premises owned,
leased or operated by Borrower or such Subsidiary.
5.18 Investments. Except as disclosed on Schedule 5.18 attached
hereto, neither Borrower nor any Subsidiary has any Restricted Investments.
5.19 No Default. No Default or Event of Default under this Agreement
has occurred and is continuing. There is no existing default or event of
default under or with respect to any indenture, contract, agreement, lease or
other instrument to which Borrower or any Subsidiary is a party or by which
any Property of Borrower or any Subsidiary is bound or affected, a default
under which could reasonably be expected to have a Material Adverse Effect.
Borrower and each Subsidiary of Borrower has and is in full compliance with
and in good standing with respect to all governmental permits, licenses,
certificates, consents and franchises necessary to continue to conduct its
business as previously conducted by it and to own or lease and operate its
Properties as now owned or leased by it, the failure to have or noncompliance
with which could reasonably be expected to have a Material Adverse Effect,
and, to the best of Borrower's knowledge, none of said permits, certificates,
consents or franchises contain any term, provision, condition or limitation
more burdensome than such as are generally applicable to Persons engaged in
the same or similar business as Borrower or such Subsidiary, as the case may
be. Neither Borrower nor any Subsidiary of Borrower is in violation of any
applicable statute, law, rule, regulation or ordinance of the United States of
America, of any state, city, town, municipality, county or of any other
jurisdiction, or of any agency thereof, a violation of which could reasonably
be expected to have a Material Adverse Effect.
5.20 Government Contracts. Neither Borrower nor any Subsidiary is a
party to or bound by any supply or purchase agreements with the Federal
government or any state or local government or any agency thereof, the
termination or cancellation of which could reasonably be expected to have a
Material Adverse Effect.
5.21 Purchase and Other Commitments and Outstanding Bids. No
material purchase or other commitment of Borrower or any Subsidiary is in
excess of the normal, ordinary and usual requirements of its business, or was
made at any price in excess of the then current market price, or, to the best
of Borrower's knowledge, contains terms and conditions more onerous than those
usual and customary in the applicable industry. There is no material
outstanding bid, sales proposal, contract or unfilled order of Borrower or any
Subsidiary which (i) will, or could if accepted, require Borrower or any
Subsidiary to supply goods or services at a cost to Borrower or any Subsidiary
in excess of the revenues to be received therefor or (ii) quotes prices which
do not include a markup over reasonably estimated costs consistent with past
markups on similar business based on market conditions current at that time.
5.22 Disclosure. Neither this Agreement nor any of the Exhibits or
Schedules hereto nor any certificate or other data furnished to the Agent or
any of the Banks in writing by or on behalf of Borrower or any Subsidiary in
connection with the transactions contemplated by this Agreement contains any
untrue or incorrect statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading. To the best knowledge of Borrower, there is no fact peculiar to
Borrower or any of its Subsidiaries which presently has a Material Adverse
Effect or in the future (so far as Borrower can now foresee) could reasonably
be expected to have a Material Adverse Effect, which has not heretofore been
disclosed in writing by Borrower to the Agent and each of the Banks.
SECTION 6. COVENANTS.
6.01 Affirmative Covenants of Borrower. Borrower covenants and
agrees that, so long as (i) any of the Banks has any obligation to make any
Loan under this Agreement or Mercantile has any obligation to issue any Letter
of Credit under this Agreement, (ii) any Letter of Credit remains outstanding
or (iii) any of Borrower's Obligations remain unpaid:
(a) Information. Borrower will deliver to each of the Banks:
(i) as soon as available and in any event within one hundred (100)
days after the end of each fiscal year of Borrower, a consolidated balance
sheet of Borrower and its Subsidiaries as of the end of such fiscal year and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for such fiscal year, setting forth in each case, in
comparative form, the figures for the previous fiscal year, all such financial
statements to be prepared in accordance with GAAP consistently applied and
reported on by and accompanied by the unqualified opinion of Price Waterhouse
or other independent certified public accountants of nationally recognized
standing selected by Borrower and reasonably acceptable to the Required Banks
together with (A) a certificate from such accountants to the effect that, in
making the examination necessary for the signing of such annual audit report,
such accountants have not become aware of any Default or Event of Default that
has occurred and is continuing, or, if such accountants have become aware of
any such event, describing it and the steps, if any, being taken to cure it
and (B) the computations of such accountants evidencing Borrower's compliance
with the financial covenants contained in Sections 6.01(q), 6.02(a)(vi),
6.02(b) and 6.02(i) of this Agreement (such accountants, however, shall not be
liable to the Agent or any of the Banks by reason of their failure to obtain
knowledge of any Default or Event of Default which would not be disclosed in
the course of an audit conducted in accordance with generally accepted
auditing standards); provided, however, that delivery pursuant to Section
6.01(a)(iii) below of copies of the Annual Report on Form 10-K of Borrower for
such fiscal year filed with the Securities and Exchange Commission (or any
governmental body or agency succeeding to the functions of the Securities and
Exchange Commission) shall be deemed to satisfy the requirements of this
Section 6.01(a)(i) with respect to consolidated financial statements;
(ii) as soon as available and in any event within fifty (50) days
after the end of each of the first three (3) fiscal quarters of each fiscal
year of Borrower, a consolidated balance sheet of Borrower and its
Subsidiaries as of the end of such fiscal quarter and the related consolidated
statements of income, changes in shareholders' equity and cash flows for such
fiscal quarter and for the portion of Borrower's fiscal year ended at the end
of such fiscal quarter, setting forth in each case in comparative form, the
figures for the corresponding fiscal quarter and the corresponding portion of
Borrower's previous fiscal year, all in reasonable detail and satisfactory in
form to the Required Banks and certified (subject to normal year-end
adjustments and footnote disclosures) as to fairness of presentation, GAAP and
consistency by the chief financial officer of Borrower (or such other officer
of Borrower as shall be reasonably acceptable to the Required Banks);
provided, however, that delivery pursuant to Section 6.01(a)(iii) below of
copies of the Quarterly Report on Form 10-Q of Borrower for such fiscal
quarter filed with the Securities and Exchange Commission (or any governmental
body or agency succeeding to the functions of the Securities and Exchange
Commission) shall be deemed to satisfy the requirements of this Section
6.01(a)(ii) with respect to consolidated financial statements;
(iii) within five (5) days after the sending or filing thereof,
copies of all such financial statements, proxy statements, notices and reports
as Borrower or any Subsidiary shall send to the holders of the Class A Common
Stock, $.01 par value, of Borrower and copies of all registration statements
(without exhibits) and all reports which Borrower or any Subsidiary files with
the Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission);
(iv) simultaneously with the delivery of each set of financial
statements referred to in Sections 6.01(a)(i) and (ii) above, a certificate of
the chief financial officer of Borrower (or such other officer of Borrower as
shall be reasonably acceptable to the Required Banks) in the form attached
hereto as Exhibit G and incorporated herein by reference, accompanied by
supporting financial work sheets where appropriate, (A) evidencing Borrower's
compliance with the financial covenants contained in Sections 6.01(q),
6.02(a)(vi), 6.02(b) and 6.02(i) of this Agreement, (B) stating whether there
exists on the date of such certificate any Default or Event of Default and, if
any Default or Event of Default then exists, setting forth the details thereof
and the action which Borrower is taking or proposes to take with respect
thereto and (C) certifying that all of the representations and warranties of
Borrower contained in this Agreement and in the other Transaction Documents
are true and correct in all material respects on and as of the date of such
certificate as if made on and as of the date of such certificate;
(v) promptly upon receipt thereof, any reports submitted to
Borrower or any Subsidiary (other than reports previously delivered pursuant
to Sections 6.01(a)(i) and (ii) above) by independent accountants in
connection with any annual, interim or special audit made by them of the books
of Borrower or any Subsidiary;
(vi) as soon as available and in any event within ninety (90) days
after the beginning of each fiscal year of Borrower, consolidated balance
sheet, income statement and cash flow projections for Borrower and its
Subsidiaries for such fiscal year, all in form and detail reasonably
acceptable to the Required Banks; and
(vii) with reasonable promptness, such further information
regarding the business, affairs and financial condition of Borrower or any
Subsidiary as the Agent or any of the Banks may from time to time reasonably
request.
Each of the Banks is hereby authorized to deliver a copy of any financial
statement or other information made available by Borrower or any Subsidiary to
any regulatory authority having jurisdiction over such Bank, pursuant to any
request therefor.
(b) Payment of Indebtedness. Borrower will, and it will cause each
of its Subsidiaries to, (i) pay and discharge any and all Indebtedness payable
or Guaranteed by Borrower or such Subsidiary, as the case may be, and any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) in accordance with the
agreement, document or instrument relating to such Indebtedness or Guarantee
and (ii) faithfully perform, observe and discharge all covenants, conditions
and obligations which are imposed upon Borrower or such Subsidiary, as the
case may be, by any and all agreements, documents, instruments and indentures
evidencing, securing or otherwise relating to such Indebtedness or Guarantee.
(c) Maintenance of Books and Records; Consultations and Inspections.
Borrower will, and it will cause each of its Subsidiaries to, maintain books
and records in accordance with GAAP and in which full, true and correct
entries shall be made of all dealings and transactions in relation to its
business and activities. Borrower will, and it will cause each of its
Subsidiaries to, upon two (2) Domestic Business Days prior oral or written
notice to Borrower from the Agent or any Bank (provided, however, that no
notice need be given if any Default or Event of Default under this Agreement
has occurred and is continuing), permit the Agent and each of the Banks (and
any Person appointed by the Agent or any of the Banks to whom the Borrower
does not reasonably object) to discuss the affairs, finances and accounts of
Borrower and each Subsidiary with the officers of Borrower and each Subsidiary
and their independent public accountants, all at such reasonable times and as
often as the Agent or any of the Banks may from time to time reasonably
request (but not so often as to materially interfere with the business of the
Borrower or any of its Subsidiaries). Borrower will also permit, and will
cause each of its Subsidiaries to permit, inspection of its Properties, books
and records by the Agent and each of the Banks during normal business hours
and at other reasonable times. Borrower will reimburse the Agent and each of
the Banks upon demand for all reasonable costs and expenses incurred by the
Agent or any of the Banks in connection with any such inspection conducted by
the Agent or any of the Banks while any Default or Event of Default under this
Agreement has occurred and is continuing. Borrower irrevocably authorizes the
Agent and each of the Banks to, upon two (2) Domestic Business Days prior oral
or written notice to Borrower from the Agent or any Bank (provided, however,
that no notice need be given if any Default or Event of Default under this
Agreement has occurred and is continuing), communicate directly with its
independent public accountants and irrevocably authorizes and directs such
accountants to disclose to the Agent and each of the Banks any and all
information with respect to the business and financial condition of Borrower
and its Subsidiaries as the Agent or any of the Banks may from time to time
reasonably request in writing.
(d) Payment of Taxes. Borrower will, and it will cause each of its
Subsidiaries to, duly file all Federal, state and local income tax returns and
all other tax returns and reports of Borrower or such Subsidiary, as the case
may be, which are required to be filed and duly pay and discharge promptly all
taxes, assessments and other governmental charges imposed upon it or any of
its Property; provided, however, that neither Borrower nor any Subsidiary
shall be required to pay any such tax, assessment or other governmental charge
the payment of which is being contested in good faith and by appropriate
proceedings being diligently conducted and for which adequate reserves in
accordance with GAAP have been provided, except that Borrower or such
Subsidiary, as the case may be, shall pay or cause to be paid all such taxes,
assessments and governmental charges forthwith upon the commencement of
proceedings to foreclose any Lien which is attached as security therefor,
unless such foreclosure is stayed by the filing of an appropriate bond in a
manner reasonably satisfactory to the Required Banks.
(e) Payment of Claims. Borrower will, and it will cause each of its
Subsidiaries to, promptly pay and discharge (i) all trade accounts payable in
accordance with usual and customary business practices (but in no event later
than thirty (30) days after the due date thereof) and (ii) all claims for
work, labor or materials which if unpaid might become a Lien upon any of its
Property or assets; provided, however, that neither Borrower nor any
Subsidiary shall be required to pay any such account payable or claim the
payment of which is being contested in good faith and by appropriate
proceedings being diligently conducted and for which adequate reserves in
accordance with GAAP have been provided, except that Borrower or such
Subsidiary, as the case may be, shall pay or cause to be paid all such
accounts payable and claims forthwith upon the commencement of proceedings to
foreclose any Lien which is attached as security therefor, unless such
foreclosure is stayed by the filing of an appropriate bond in a manner
reasonably satisfactory to the Required Banks.
(f) Corporate Existence. Borrower will, and it will cause each of
its Subsidiaries to, do all things necessary to (i) preserve and keep in full
force and effect at all times its corporate existence and all permits,
licenses, franchises and other rights material to its business and (ii) be
duly qualified to do business in all jurisdictions where the nature of its
business or its ownership of Property requires such qualification.
(g) Maintenance of Property. Borrower will, and it will cause each
of its Subsidiaries to, at all times, preserve and maintain all of the
Property used or useful in the conduct of its business in good condition,
working order and repair, ordinary wear and tear excepted.
(h) Compliance with Laws, Regulations, Etc. Borrower will, and it
will cause each of its Subsidiaries to, comply with any and all laws,
ordinances and governmental and regulatory rules and regulations to which
Borrower or such Subsidiary, as the case may be, is subject (including,
without limitation, all Occupational Safety and Health Laws and all
Environmental Laws) and obtain any and all licenses, permits, franchises and
other governmental and regulatory authorizations necessary to the ownership of
its Properties or to the conduct of its business, which violation or failure
to obtain could reasonably be expected to have a Material Adverse Effect.
(i) Environmental Matters. Borrower will, and it will cause each of
its Subsidiaries to, at all times comply with all requirements and agreements
contained in Section 5.17 hereof. Borrower shall give the Agent and each of
the Banks prompt written notice of (i) any Environmental Claim or any other
action or investigation with respect to the existence or potential existence
of any Hazardous Substances instituted or threatened with respect to Borrower
or any Subsidiary or any of the Properties or facilities owned, leased or
operated by Borrower or any Subsidiary which, if determined adversely to
Borrower or any Subsidiary, could reasonably be expected to have a Material
Adverse Effect and (ii) any condition or occurrence on any of the Properties
or facilities owned, leased or operated by Borrower or any Subsidiary which
constitutes a violation in any material respect of any Environmental Laws or
which gives rise to a reporting obligation or requires removal or remediation
under any Environmental Laws. Within thirty (30) days after the giving of any
such notice, Borrower shall deliver to each of the Banks Borrower's plan with
respect to removal or remediation and Borrower agrees to take all action which
is reasonably necessary in connection with such action, investigation,
condition or occurrence in accordance with such plan with due diligence and to
complete such removal or remediation as promptly as possible and in all events
within the time required by any Environmental Laws or any other applicable
law, rule or regulation. Borrower shall promptly provide the Agent and each
of the Banks with copies of all documentation relating thereto, and such other
information with respect to environmental matters as the Agent or any of the
Banks may request from time to time.
(j) ERISA Compliance. If Borrower, any Subsidiary or any ERISA
Affiliate shall have any Pension Plan, Borrower, such Subsidiary or such ERISA
Affiliate, as the case may be, shall comply in all material respects with all
requirements of ERISA relating to such Pension Plan. Without limiting the
generality of the foregoing, Borrower will not, and it will not cause or
permit any Subsidiary or any ERISA Affiliate to:
(i) permit any Pension Plan maintained by Borrower, any Subsidiary
or any ERISA Affiliate to engage in any nonexempt "prohibited transaction," as
such term is defined in Section 4975 of the Code;
(ii) permit any Pension Plan maintained by Borrower, any
Subsidiary or any ERISA Affiliate to incur any "accumulated funding
deficiency", as such term is defined in Section 302 of ERISA, 29 U.S.C. Sec.
1082, whether or not waived;
(iii) terminate any Pension Plan in a manner which could
result in the imposition of a Lien on any Property of Borrower, any Subsidiary
or any ERISA Affiliate pursuant to Section 4068 of ERISA, 29 U.S.C. Sec 1368;
or
(iv) take any action which would constitute a complete or partial
withdrawal from a Multi-Employer Plan within the meaning of Sections 4203 or
4205 of Title IV of ERISA.
Notwithstanding any provision contained in this Section 6.01(j) to the
contrary, an act by Borrower or any Subsidiary shall not be deemed to
constitute a violation of this Section 6.01(j) unless the Required Banks
determine in good faith that said action, individually or cumulatively with
other acts of Borrower and its Subsidiaries, has or could reasonably be
expected to have a Material Adverse Effect.
(k) Notices. Borrower will notify the Agent and each of the Banks in
writing of any of the following within three (3) Domestic Business Days after
learning of the occurrence thereof, describing the same and, if applicable,
the steps being taken by the Person(s) affected with respect thereto:
(i) the occurrence of any Default or Event of Default under this
Agreement;
(ii) the occurrence of any default or event of default by
Borrower, any other Obligor or any Subsidiary under any note, indenture, loan
agreement, mortgage, deed of trust, security agreement, lease or other similar
agreement, document or instrument to which Borrower, any other Obligor or any
Subsidiary, as the case may be, is a party or by which it is bound or to which
it is subject;
(iii) the institution of any litigation, arbitration
proceeding or governmental or regulatory proceeding affecting Borrower, any
other Obligor or any Subsidiary, whether or not considered to be covered by
insurance, in which the prayer or claim for relief seeks recovery of an amount
in excess of $500,000.00 (or, if no dollar amount is specified in the prayer
or claim for relief, in which there is a reasonable likelihood of recovery of
an amount in excess of $500,000.00) or any form of equitable relief;
(iv) the entry of any judgment or decree against Borrower, any
other Obligor or any Subsidiary;
(v) the occurrence of a Reportable Event with respect to any
Pension Plan; the filing of a notice of intent to terminate a Pension Plan by
Borrower, any ERISA Affiliate or any Subsidiary; the institution of
proceedings to terminate a Pension Plan by the PBGC or any other Person; the
withdrawal in a "complete withdrawal" or a "partial withdrawal" as defined in
Sections 4203 and 4205, respectively, of ERISA by Borrower, any ERISA
Affiliate or any Subsidiary from any Multi-Employer Plan; or the incurrence of
any material increase in the contingent liability of Borrower or any
Subsidiary with respect to any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA which covers retired employees and their beneficiaries;
(vi) the occurrence of any material adverse change in the
Properties, assets, liabilities, business, operations, prospects, income or
condition (financial or otherwise) of Borrower, any other Obligor or any
Subsidiary; and
(vii) any notices required to be provided pursuant to other
provisions of this Agreement and notice of the occurrence of such other events
as the Agent or any of the Banks may from time to time reasonably specify.
(l) Insurance. Borrower will, and it will cause each of its
Subsidiaries to, insure all of its Property of the character usually insured
by corporations engaged in the same or similar businesses similarly situated,
against loss or damage of the kind customarily insured against by such
corporations, unless higher limits or coverage are reasonably required in
writing by the Required Banks, and carry adequate liability insurance and
other insurance of a kind and in an amount generally carried by corporations
engaged in the same or similar businesses similarly situated, unless higher
limits or coverage are reasonably required in writing by the Required Banks.
All insurance required by this Section 6.01(l) shall be with insurers rated
A-XI or better by A.M. Best Company (or accorded a similar rating by another
nationally or internationally recognized insurance rating agency of similar
standing if A.M. Best Company is not then in the business of rating insurers
or rating foreign insurers) or such other insurers as may from time to time be
reasonably acceptable to the Required Banks; provided, however, that if any
such insurance is not available at commercially reasonable rates from any
insurer rated A-XI or better by A.M. Best Company (or accorded a similar
rating by another nationally or internationally recognized insurance rating
agency of similar standing if A.M. Best Company is not then in the business of
rating insurers or rating foreign insurers), then Borrower or such Subsidiary,
as the case may be, may obtain such insurance from an insurer rated B or
better by A.M. Best Company (or accorded a similar rating by another
nationally or internationally recognized insurance rating agency of similar
standing if A.M. Best Company is not then in the business of rating insurers
or rating foreign insurers) and such insurer shall be deemed to be reasonably
acceptable to the Required Banks . All such insurance may be subject to
reasonable deductible amounts. Simultaneously with each delivery of financial
statements under Section 6.01(a)(i), Borrower shall deliver to the Agent and
each of the Banks a certificate of an officer of Borrower specifying the
details of all insurance then in effect and evidence of the payment of all
premiums therefor.
(m) Further Assurances. Borrower will, and it will cause each of the
Guarantors to, execute and deliver to the Agent, at any time and from time to
time, any and all further agreements, documents and instruments, and take any
and all further actions which may be required under applicable law, or which
the Agent or any of the Banks may from time to time reasonably request, in
order to effectuate the transactions contemplated by this Agreement and the
other Transaction Documents.
(n) Accountant. Borrower will give each of the Banks prompt notice
of any change of Borrower's independent certified public accountants and a
statement of the reasons for such change (the Banks acknowledge that any
report on Form 8-K which may be filed by Borrower with the Securities and
Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission) in connection with any
change of the Borrower's independent certified public accountants shall be
deemed to satisfy the requirements of this sentence so long as a copy of the
same is promptly delivered to each of the Banks). Borrower shall at all times
utilize independent certified public accountants of nationally recognized
standing reasonably acceptable to the Required Banks.
(o) Ownership of Guarantors. Borrower will at all times be the sole
legal, beneficial and record owner of all of the issued and outstanding shares
of each class of capital stock of Huntco Nevada. Borrower will cause Huntco
Nevada to at all times be the sole legal, beneficial and record owner of all
of the issued and outstanding shares of each class of capital stock of each of
Huntco Steel and Midwest Products. Borrower will cause Huntco Steel to at all
times be the sole legal, beneficial and record owner of all of the issued and
outstanding shares of each class of capital stock of HSI Aviation.
(p) Covenant to Secure Borrower's Obligations Equally. Borrower
will, if it or any Subsidiary shall create or assume any Lien upon any of its
Property or assets, whether now owned or hereinafter acquired, other than
Permitted Liens (unless prior written consent to the creation or assumption
thereof shall have been obtained pursuant to Section 10.11 of this Agreement),
make or cause to be made effective provision whereby all of the Borrower's
Obligations will be secured by such Lien equally and ratably with any and all
other Indebtedness thereby secured so long as any such other Indebtedness
shall be so secured as evidenced by documentation which is acceptable to the
Required Banks. Borrower acknowledges and agrees that compliance with this
covenant will not cure a violation of Section 6.02(b) of this Agreement or any
other covenant contained in this Agreement.
(q) Financial Covenants.
(i) Minimum Consolidated Tangible Net Worth. Borrower will at all
times keep and maintain a Consolidated Tangible Net Worth in an amount not
less than the sum of (A) $100,000,000.00 plus (B) Sixty Percent (60%) of the
Consolidated Net Income of Borrower and its Subsidiaries for each fiscal
quarter of Borrower ending on or after October 31, 1996 (such required
increases to be cumulative for each such fiscal quarter), provided that for
purposes of the foregoing calculation, Consolidated Net Income shall be deemed
to be $0.00 for any fiscal quarter for which Consolidated Net Income is less
than or equal to $0.00.
(ii) Maximum Consolidated Debt to Consolidated EBITDA Ratio.
Borrower will have and maintain (A) as of the last day of each of the fiscal
quarters of Borrower ending on October 31, 1996, January 31, 1997, April 30,
1997, July 31, 1997, and October 31, 1997, a Consolidated Debt to Consolidated
EBITDA Ratio of no more than 3.7 to 1.0 and (B) as of the last day of each
fiscal quarter of Borrower ending on or after January 31, 1998, a Consolidated
Debt to Consolidated EBITDA Ratio of no more than 3.5 to 1.0; provided,
however, that for purposes of this covenant, if Borrower's acquisition of
certain of the assets of Coil-Tec, Inc. is consummated, during the period
commencing on the date of the closing of such acquisition and ending one year
thereafter, Consolidated Debt shall not include the lesser of (A)
$2,250,000.00 or (B) the aggregate amount of Debt incurred or assumed by
Borrower in connection with such acquisition.
(iii) Maximum Leverage Ratio. Borrower will at all times have and
maintain a ratio, expressed as a percentage, of (A) Consolidated Funded Debt
to (B) Consolidated Total Capitalization which is less than or equal to Fifty
Percent (50%).
(iv) Minimum Consolidated Debt Service Coverage Ratio. Borrower
will have and maintain a Consolidated Debt Service Coverage Ratio of at least
2.0 to 1.0 for each period of four (4) consecutive fiscal quarters of Borrower
commencing with the four (4) consecutive fiscal quarter period ending October
31, 1996.
(v) Minimum Consolidated Net Income. Borrower will have a
Consolidated Net Income of at least $100,000.00 during each period of two (2)
consecutive fiscal quarters of Borrower commencing with the two (2)
consecutive fiscal quarter period ended October 31, 1996.
(r) Guarantees by New Subsidiaries. If Borrower creates, forms or
acquires any Subsidiary on or after the date of this Agreement, Borrower will,
contemporaneously with the creation, formation or acquisition of such
Subsidiary, cause such Subsidiary to guaranty the payment and performance of
the Borrower's Obligations pursuant to documentation in form and substance
reasonably satisfactory to the Required Banks.
6.02 Negative Covenants of Borrower. Borrower covenants and agrees
that, so long as (i) any of the Banks has any obligation to make any Loan
under this Agreement or Mercantile has any obligation to issue any Letter of
Credit under this Agreement, (ii) any Letter of Credit remains outstanding or
(iii) any of the Borrower's Obligations remain unpaid, unless the prior
written consent of the Required Banks is obtained:
(a) Limitation on Indebtedness. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, incur or be obligated on any
Indebtedness, either directly or indirectly, by way of Guarantee, suretyship
or otherwise, other than:
(i) the Borrower's Obligations to the Agent and the Banks;
(ii) unsecured trade accounts payable and other normal accruals
incurred in the ordinary course of business which are not more than thirty
(30) days past due;
(iii) Indebtedness existing as of the date hereof and listed on
Schedule 5.10 attached hereto;
(iv) Subordinated Indebtedness;
(v) Indebtedness of any Subsidiary to Borrower or any other
Subsidiary;
(vi) Indebtedness of any Subsidiary to any Person other than
Borrower or any other Subsidiary not otherwise permitted by this Section
6.02(a), provided that after giving effect thereto the sum of (A) the
aggregate outstanding principal amount of all Indebtedness secured by Liens
permitted by clause (f) of the definition of Permitted Liens plus (B) the
aggregate outstanding principal amount of all such Indebtedness, determined on
a combined basis for all Subsidiaries of Borrower and without duplication,
does not at any time exceed Ten Percent (10%) of Consolidated Tangible Net
Worth as of the end of the fiscal quarter of Borrower immediately preceding
the date of determination; and
(vii) other Indebtedness of Borrower to the extent not otherwise
prohibited by this Agreement.
(b) Limitation on Liens. Borrower will not, and will not cause or
permit any of its Subsidiaries to, create, incur or assume, or suffer to be
incurred or to exist, any Lien on any of its or their Property or assets,
whether now owned or hereafter acquired, or upon any income or profits
therefrom, except for Permitted Liens.
(c) Consolidation, Merger, Sale of Assets, Etc. (i) Borrower will
not, and it will not cause or permit any Subsidiary to, directly or indirectly
merge or consolidate with or into any other Person or permit any other Person
to merge into or with or consolidate with it, except that: (A) any Subsidiary
may merge or consolidate with or into Borrower (provided that Borrower shall
be the continuing or surviving corporation) or with or into any one or more
other Subsidiaries; (B) any Subsidiary may merge or consolidate with or into
any other Person or permit any other Person to merge into or with or
consolidate with it, provided that, immediately after giving effect to such
merger or consolidation (1) the continuing or surviving corporation of such
merger or consolidation shall be a Subsidiary, (2) the continuing or surviving
corporation of such merger or consolidation shall, pursuant to documentation
reasonably acceptable to the Required Banks, (x) expressly assume all of the
obligations and liabilities of the Subsidiary being merged or consolidated
under Section 9 of this Agreement if such Subsidiary was a Guarantor or (y)
guaranty the payment and performance of all of the Borrower's Obligations and
(3) no Default or Event of Default shall exist; and (C) Borrower may permit
any Person to merge into or with or consolidate with it, provided that,
immediately after giving effect to such merger or consolidation (1) Borrower
is the continuing or surviving corporation of such merger or consolidation and
(2) no Default or Event of Default shall exist.
(ii) Borrower will not, and will not cause or permit any of its
Subsidiaries to, sell, assign, lease, transfer, abandon or otherwise dispose
of any of its Property (including, without limitation, any shares of capital
stock of a Subsidiary owned by Borrower or another Subsidiary) or issue, sell
or otherwise dispose of any shares of capital stock of any Subsidiary, except
for (A) sales of Inventory in the ordinary course of business, (B) sales of
fixed assets which are obsolete, worn-out or otherwise not used or useable in
the ordinary course of its business, so long as the net proceeds thereof are
used solely to purchase replacement fixed assets or assets of comparable
quality or to pay or prepay Debt of Borrower or such Subsidiary, as the case
may be, (C) other sales of fixed assets which are not used or useable in the
ordinary course of its business, so long as the gross sale proceeds from all
such asset sales by Borrower and its Subsidiaries does not exceed
$1,000,000.00 in the aggregate in any fiscal year, (D) sales or transfers of
fixed assets from (x) Borrower to any Subsidiary, (y) any Subsidiary to any
other Subsidiary or (z) any Subsidiary to Borrower and (E) sale and leaseback
transactions permitted by Section 6.02(d).
(d) Sale and Leaseback Transactions. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby Borrower or such Subsidiary shall in one or
more related transactions sell, transfer or otherwise dispose of any Property
owned by Borrower or such Subsidiary to any Person other than Borrower or a
Wholly-Owned Subsidiary and then rent or lease, as lessee, such Property or
any part thereof for a period or periods which in the aggregate would exceed
twelve (12) months from the date of commencement of the lease term (a "Sale-
Leaseback Transaction"); provided, however, that notwithstanding the
foregoing, Borrower or any of its Subsidiaries may enter into a Sale-Leaseback
Transaction with a municipal authority in connection with an industrial
revenue bond financing so long as (i) Borrower and/or one or more of its
Wholly-Owned Subsidiaries is the owner of all of the bonds issued in
connection with such industrial revenue bond financing, (ii) the net proceeds
of such Sale-Leaseback Transaction are used by the entity selling the Property
solely to pay down Debt of such entity and (iii) the consummation of such
Sale-Leaseback Transaction and the related industrial revenue bond financing
do not violate any of the other covenants contained in this Agreement. A
sale, transfer or other disposition by Borrower or any Subsidiary of rights
under a purchase order or other contract to purchase Property prior to the
purchase of such Property by Borrower or any Subsidiary shall not constitute a
Sale-Leaseback Transaction for purposes of this Section 6.02(d) even if such
Property is thereafter leased by Borrower or any Subsidiary from the Person
purchasing such Property so long as neither Borrower nor any Subsidiary pays
any portion of the purchase price of such Property.
(e) Sale or Discount of Accounts. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, sell or discount any of its notes
or accounts receivable or chattel paper.
(f) Transactions with Affiliates. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, enter into or be a party to any
material transaction or arrangement with any Affiliate (including, without
limitation, the purchase from, sale to or exchange of Property with, or the
rendering of any service by or for, any Affiliate), except in the ordinary
course of business and pursuant to the reasonable requirements of Borrower's
or such Subsidiary's business and upon fair and reasonable terms no less
favorable to Borrower or such Subsidiary than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate.
(g) Changes in Nature of Business. Borrower will not, and it will
not cause or permit any of its Subsidiaries to, engage in any business if, as
a result, the general nature of the business which would then be engaged in by
Borrower and its Subsidiaries, considered as a whole, would be substantially
changed from the general nature of the business engaged in (or proposed to be
engaged in) by Borrower and its Subsidiaries as of the date of this Agreement,
which is the business of metals processing, general manufacturing and related
distribution activities including transportation.
(h) Fiscal Year. Borrower will not, and it will not cause or permit
any of its Subsidiaries to, change its fiscal year unless (i) any such change
is effected in accordance with GAAP and in a manner approved by Borrower's
independent certified public accountants and (ii) if the Required Banks, in
their sole and absolute discretion, determine that any such change has any
significant effect on any of the financial covenants contained in this
Agreement (A) with respect to those financial covenant(s) upon which the
effect of such fiscal year change can be determined with mathematical
certainty, such financial covenant(s) shall be amended to reflect the effect
of such fiscal year change (and Borrower, each of the Guarantors, the Agent
and each of the Banks shall be obligated to promptly execute an amendment to
such effect) and (B) with respect to those financial covenant(s) upon which
the effect of such fiscal year change cannot be determined with mathematical
certainty, Borrower and the Banks shall, in good faith, negotiate and use
their best efforts to agree upon new financial covenant(s) reasonably
acceptable to Borrower and the Required Banks to replace the affected
financial covenant(s) (which new financial covenant(s) shall, to the extent
reasonably possible, approximate the effect of such fiscal year change on the
existing financial covenant(s)), and if Borrower and the Required Banks
cannot, in good faith, agree on said new financial covenant(s), the existing
financial covenant(s) shall remain in full force and effect. Each such
amendment shall be evidenced by an instrument in writing signed by Borrower,
each of the Guarantors, the Agent and each of the Banks and, until such
amendment has been fully executed, the existing financial covenant(s) shall
remain in full force and effect.
(i) Stock Redemptions and Distributions. Borrower will not, and it
will not cause or permit any of its Subsidiaries to, declare or incur any
liability to make any Distribution in respect of the capital stock of Borrower
or the capital stock of such Subsidiary, as the case may be, except that (i)
the Wholly-Owned Subsidiaries of Borrower shall be permitted to declare and
pay cash dividends on their respective capital stock and (ii) so long as no
Default or Event of Default under this Agreement has occurred and is
continuing or is created thereby or would result therefrom, (A) Borrower shall
be permitted to declare and pay cash dividends on its capital stock in an
aggregate amount of up to $5,000,000.00 during each fiscal year of Borrower,
(B) the Subsidiaries of Borrower (other than Wholly-Owned Subsidiaries of
Borrower) shall be permitted to declare and pay cash dividends on their
respective capital stock and (C) Borrower shall be permitted to redeem,
repurchase or otherwise acquire shares of its capital stock so long as the
aggregate consideration paid or committed to be paid by Borrower for all
shares so redeemed, repurchased or otherwise acquired by Borrower during any
fiscal year of Borrower does not exceed the sum of $250,000.00.
(j) Pension Plans. Borrower will not, and it will not cause or
permit any of its Subsidiaries to, (a) permit any condition to exist in
connection with any Pension Plan which might constitute grounds for the PBGC
to institute proceedings to have such Pension Plan terminated or a trustee
appointed to administer such Pension Plan or (b) engage in, or permit to exist
or occur, any other condition, event or transaction with respect to any
Pension Plan which could result in the incurrence by Borrower, any Subsidiary
or any ERISA Affiliate of any material liability, fine or penalty.
(k) Subordinated Indebtedness. Borrower will not make any payments
of principal, interest or other amounts on or with respect to any of its
Subordinated Indebtedness to the extent prohibited by the subordination
provisions governing the same.
(l) Limitations on Acquisitions. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, make or suffer to exist any
Acquisition of any Person, except Acceptable Acquisitions, unless such
Acquisitions are funded solely by, or from the proceeds of, the issuance of
capital stock by Borrower.
(m) Restricted Investments. Borrower will not, and it will not cause
or permit any of its Subsidiaries to, directly or indirectly, make any
Restricted Investments.
(n) Limitations on Restrictive Agreements. Borrower will not, and it
will not cause or permit any of its Subsidiaries to, enter into, or suffer to
exist, any agreement with any Person which prohibits or limits the ability of
any Subsidiary to (a) pay dividends or make other distributions or prepay any
Indebtedness owed to Borrower or any other Subsidiary, (b) make loans or
advances to Borrower or any other Subsidiary, (c) transfer any of its
properties or assets to Borrower or any other Subsidiary (other than with
respect to assets subject to Liens permitted by clause (f) of the definition
of Permitted Liens) or (d) create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired (other than with respect to assets subject to Liens permitted by
clause (f) of the definition of Permitted Liens); provided that the foregoing
shall not apply to (i) restrictions in effect on the date of this Agreement
contained in agreements governing Debt outstanding on the date of this
Agreement and listed on Schedule 6.02(n) attached hereto and, if such Debt is
renewed, extended or refinanced, restrictions in the agreements governing the
renewed, extended or refinanced Debt (and successive renewals, extensions and
refinancings thereof) if such restrictions are no more restrictive than those
contained in the agreements governing the Debt being renewed, extended or
refinanced or (ii) restrictions contained in agreements governing Debt
incurred after the date of this Agreement by Borrower or any Subsidiary in
compliance with this Agreement provided that such restrictions are no more
restrictive than those contained in this Agreement (without giving effect to
any amendment or modification thereof in violation of Section 6.02(o) hereof).
(o) Financial Covenants and Collateral Provisions of Note Purchase
Agreements and other Restricted Agreements. Borrower will not, and it will
not cause or permit any of its Subsidiaries to: (i) enter into any indenture,
agreement or other instrument under which any Debt of Borrower or any
Subsidiary may be issued (a "Restricted Agreement") or (ii) agree to any
amendment, waiver, consent, modification, refunding, refinancing or
replacement of any of the Note Purchase Agreements or any other Restricted
Agreement, in either case, with terms the effect of which is to (A) include a
Financial Covenant which is not contained in this Agreement, (B) revise or
alter any Financial Covenant contained therein the effect of which is to
increase or expand the restriction on Borrower or any Subsidiary or (C) except
for Permitted Liens, grant collateral for the obligations of Borrower or any
Subsidiary thereunder, unless Borrower or such Subsidiary, as the case may be,
concurrently incorporates herein such additional, altered or revised Financial
Covenant or grant of collateral (as the case may be). The incorporation of
each such additional Financial Covenant is hereby deemed to occur
automatically and concurrently by reason of the execution of this Agreement
without any further action or the execution of any additional document by any
of the parties to this Agreement (and Borrower hereby agrees to give the Agent
and each of the Banks prompt written notice of each such Financial Covenant so
incorporated into this Agreement). Without limiting the foregoing, neither
Borrower nor any Subsidiary, directly or indirectly, will offer any economic
inducement (including, without limitation, any collateral) to any holder of
notes under the Note Purchase Agreements or to any other Person who is a party
to any other Restricted Agreement for the purpose of inducing such holder or
such other Person to enter into any waiver of any event of default under the
Note Purchase Agreements or such other Restricted Agreement or event which
with the lapse of time or the giving of notice, or both, would constitute such
an event of default, unless the same such economic inducement has been
concurrently offered and paid on a pro-rata basis (determined with respect to
the aggregate Commitments hereunder, whether used or unused) to all of the
Banks (it being understood and agreed that the offering of such economic
inducement to the Banks shall not be deemed or construed to obligate any such
Bank to enter into any waiver of any Default or Event of Default hereunder).
Borrower acknowledges and agrees that compliance with this covenant will not
cure a violation of Section 6.02(b) of this Agreement or any other covenant
contained in this Agreement.
6.03 Use of Proceeds. Borrower covenants and agrees that (i) the
proceeds of the Revolving Credit Loans will be used solely for working capital
and general corporate purposes of Borrower and/or its Subsidiaries (including
the funding of all or any portion of any Acceptable Acquisitions); and (ii) no
part of the proceeds of any Loan will be used in violation of any applicable
law or regulation.
SECTION 7. EVENTS OF DEFAULT.
If any of the following (each of the following herein sometimes called
an "Event of Default") shall occur and be continuing:
7.01 Borrower shall fail to pay any of Borrower's Obligations
constituting interest within five (5) days after the date the same shall first
become due and payable, whether by reason of demand, maturity, acceleration or
otherwise;
7.02 Borrower shall fail to pay any of Borrower's Obligations (other
than interest) as and when the same shall become due and payable, whether by
reason of demand, maturity, acceleration or otherwise;
7.03 Any representation or warranty of Borrower made in this
Agreement, in any other Transaction Document to which Borrower is a party or
in any certificate, agreement, instrument or statement furnished or made or
delivered pursuant hereto or thereto or in connection herewith or therewith,
shall prove to have been untrue or incorrect in any material respect when made
or effected;
7.04 Borrower shall fail to perform or observe any term, covenant or
provision contained in Section 3.04, Section 6.01(c) (except the first
sentence of Section 6.01(c)), Section 6.01(k), Section 6.01(l), Section
6.01(m), Section 6.01(o), Section 6.01(p), Section 6.01(q), Section 6.02 or
Section 6.03;
7.05 Borrower shall fail to perform or observe any other term,
covenant or provision contained in this Agreement (other than those specified
in Sections 7.01, 7.02, 7.03 or 7.04 above) and any such failure shall remain
unremedied for thirty (30) days after the earlier of (i) written notice of
default is given to Borrower by the Agent or any of the Banks or (ii) any
officer of Borrower obtaining knowledge of such default;
7.06 This Agreement or any of the other Transaction Documents shall
at any time for any reason cease to be in full force and effect or shall be
declared to be null and void by a court of competent jurisdiction, or if the
validity or enforceability thereof shall be contested or denied by Borrower or
any of the Guarantors, or if the transactions completed hereunder or
thereunder shall be contested by Borrower or any of the Guarantors or if
Borrower or any of the Guarantors shall deny that it has any further liability
or obligation hereunder or thereunder;
7.07 Borrower, any other Obligor or any Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code or any other Federal, state or foreign
bankruptcy, insolvency, receivership, liquidation or similar law, (ii) consent
to the institution of, or fail to contravene in a timely and appropriate
manner, any such proceeding or the filing of any such petition, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator or similar official of itself or of a substantial part of its
Property or assets, (iv) file an answer admitting the material allegations of
a petition filed against itself in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in writing
its inability or fail generally to pay its debts as they become due or (vii)
take any corporate or other action for the purpose of effecting any of the
foregoing;
7.08 An involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of Borrower, any other Obligor or any Subsidiary, or of a
substantial part of the Property or assets of Borrower, any other Obligor or
any Subsidiary, under Title 11 of the United States Code or any other Federal,
state or foreign bankruptcy, insolvency, receivership, liquidation or similar
law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or
similar official of Borrower, any other Obligor or any Subsidiary or of a
substantial part of the Property or assets of Borrower, any other Obligor or
any Subsidiary or (iii) the winding-up or liquidation of Borrower, any other
Obligor or any Subsidiary; and such proceeding or petition shall continue
undismissed for sixty (60) consecutive days or an order or decree approving or
ordering any of the foregoing shall continue unstayed and in effect for sixty
(60) consecutive days;
7.09 Any of the Letter of Credit Applications shall at any time for
any reason cease to be in full force and effect or shall be declared to be
null and void by a court of competent jurisdiction, or if the validity or
enforceability of any of the Letter of Credit Applications shall be contested
or denied by Borrower, or if Borrower shall deny that it has any further
liability or obligation under any of the Letter of Credit Applications or if
Borrower shall fail to comply with or observe any of the terms, provisions or
conditions contained in any of the Letter of Credit Applications;
7.10 Borrower, any other Obligor or any Subsidiary shall be declared
by any of the Banks to be in default on, or pursuant to the terms of, (1) any
other present or future obligation to such Bank(s), including, without
limitation, any other loan, line of credit, revolving credit, guaranty or
letter of credit reimbursement obligation, or (2) any other present or future
agreement purporting to convey to such Bank(s) a Lien upon any Property or
assets of Borrower, such other Obligor or such Subsidiary, as the case may be;
7.11 The occurrence of any default or event of default under or
within the meaning of any agreement, document or instrument evidencing,
securing, guaranteeing the payment of or otherwise relating to any Debt of
Borrower, any other Obligor or any Subsidiary (other than the Borrower's
Obligations) having an aggregate outstanding principal balance in excess of
$500,000.00 which is not cured within any applicable cure period (if any);
7.12 Any "Event of Default" (as defined therein) shall occur under or
within the meaning of any of the Note Purchase Agreements;
7.13 Borrower, any other Obligor or any Subsidiary shall have a
judgment entered against it by a court having jurisdiction in the premises and
such judgment shall not be appealed in good faith or satisfied by Borrower,
such other Obligor or such Subsidiary, as the case may be, within thirty (30)
days after the entry of such judgment;
7.14 The occurrence of a Reportable Event with respect to any Pension
Plan; the filing of a notice of intent to terminate a Pension Plan by
Borrower, any ERISA Affiliate or any Subsidiary; the institution of
proceedings to terminate a Pension Plan by the PBGC or any other Person; the
withdrawal in a "complete withdrawal" or a "partial withdrawal" as defined in
Sections 4203 and 4205, respectively, of ERISA by Borrower, any ERISA
Affiliate or any Subsidiary from any Multi-Employer Plan; or the incurrence of
any material increase in the contingent liability of Borrower or any
Subsidiary with respect to any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA which covers retired employees and their beneficiaries;
or
7.15 The institution by Borrower, any ERISA Affiliate or any
Subsidiary of steps to terminate any Pension Plan if, in order to effectuate
such termination, Borrower, such ERISA Affiliate or such Subsidiary, as the
case may be, would be required to make a contribution to such Pension Plan, or
would incur a liability or obligation to such Pension Plan, in excess of
$500,000.00; or the institution by the PBGC of steps to terminate any Pension
Plan;
THEN, and in each such event (other than an event described in Sections
7.07 or 7.08), the Agent may, or if requested in writing by the Required Banks
the Agent shall, declare that the obligation of the Banks to make Revolving
Credit Loans under this Agreement and the obligation of Mercantile to issue
Letters of Credit under this Agreement have terminated, whereupon such
obligations of the Banks and Mercantile shall be immediately and forthwith
terminated, and the Agent may further, or if requested in writing by the
Required Banks the Agent shall further, declare on behalf of each of the Banks
that the entire outstanding principal balance of and all accrued and unpaid
interest on the Notes and all of the other Borrower's Obligations are
forthwith due and payable, whereupon all of the unpaid principal balance of
and all accrued and unpaid interest on the Notes and all such other Borrower's
Obligations shall become and be immediately due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by Borrower, and the Agent and the Banks may exercise
any and all other rights and remedies which any of them may have under this
Agreement or any of the other Transaction Documents or under applicable law;
provided, however, that upon the occurrence of any event described in Sections
7.07 or 7.08, the obligation of the Banks to make Revolving Credit Loans under
this Agreement and the obligation of Mercantile to issue Letters of Credit
under this Agreement shall automatically terminate and the entire outstanding
principal balance of and all accrued and unpaid interest on the Notes and all
of the other Borrower's Obligations shall automatically become immediately due
and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by Borrower, and the Agent and
the Banks may exercise any and all other rights and remedies which any of them
may have under this Agreement or any of the other Transaction Documents or
under applicable law.
SECTION 8. AGENT
8.01 Appointment. Mercantile Bank National Association is hereby
appointed by the Banks as Agent under this Agreement, the Notes and the other
Transaction Documents. The Agent agrees to act as such upon the express
conditions contained in this Agreement.
8.02 Powers. The Agent shall have and may exercise such powers hereunder
as are specifically delegated to the Agent by the terms of this Agreement and
the other Transaction Documents, together with such powers as are reasonably
incidental thereto. The Agent shall have no implied duties to the Banks, nor
any obligation to the Banks to take any action under this Agreement or any of
the other Transaction Documents, except any action specifically provided by
the this Agreement or any of the other Transaction Documents to be taken by
the Agent. Without limiting the generality of the foregoing, the Agent shall
not be required to take any action with respect to any Default or Event of
Default, except as expressly provided in Section 7.
8.03 General Immunity. Neither the Agent nor any of its directors,
officers, employees, agents or advisors shall be liable to any of the Banks
for any action taken or not taken by it in connection with this Agreement or
any of the other Transaction Documents (i) with the consent or at the request
of the Required Banks (this clause (i), however, shall not exculpate the Agent
from its own gross negligence or willful misconduct in the manner in which it
takes any action with the consent of or at the request of the Required Banks)
or (ii) in the absence of its own gross negligence or willful misconduct.
8.04 No Responsibility for Loans, Recitals, etc. Neither the Agent
nor any of its directors, officers, employees, agents or advisors shall (i) be
responsible for or have any duty to ascertain, inquire into or verify any
recitals, reports, statements, representations or warranties contained in this
Agreement or any of the other Transaction Documents or furnished pursuant
hereto or thereto; (ii) be responsible for any Loans or Letters of Credit
hereunder, (iii) be bound to ascertain or inquire as to the performance or
observance of any of the terms of this Agreement or any of the other
Transaction Documents; (iv) be responsible for the satisfaction of any
condition specified in Section 4, except receipt of items required to be
delivered to the Agent; (v) be responsible for the validity, effectiveness,
genuineness or enforceability of this Agreement or any of the other
Transaction Documents; or (vi) be responsible for the creation, attachment,
perfection or priority of any security interests or liens purported to be
granted to the Agent or any of the Banks pursuant to this Agreement or any of
the other Transaction Documents.
8.05 Right to Indemnity. Notwithstanding any other provision
contained in this Agreement to the contrary, to the extent Borrower fails to
reimburse the Agent pursuant to Section 10.03, Section 10.04 or Section 10.05,
or if any Default or Event of Default shall occur under this Agreement, the
Banks shall ratably in accordance with their respective Pro Rata Shares
indemnify the Agent and hold it harmless from and against any and all
liabilities, losses (except losses occasioned solely by failure of Borrower to
make any payments or to perform any obligations required by this Agreement
(excepting those described in Sections 10.03, 10.04 and 10.05), the Notes, the
Letter of Credit Applications or any of the other Transaction Documents),
costs and/or expenses, including, without limitation, any liabilities, losses,
costs and/or expenses arising from the failure of any Bank to perform its
obligations hereunder or in respect of this Agreement, and also including,
without limitation, reasonable attorneys' fees and expenses, which the Agent
may incur, directly or indirectly, in connection with this Agreement, the
Notes or any of the other Transaction Documents, or any action or transaction
related hereto or thereto; provided only that the Agent shall not be entitled
to such indemnification for any losses, liabilities, costs and/or expenses
directly and solely resulting from its own gross negligence or willful
misconduct. This indemnity shall be a continuing indemnity, contemplates all
liabilities, losses, costs and expenses related to the execution, delivery and
performance of this Agreement, the Notes and the other Transaction Documents,
and shall survive the satisfaction and payment of the Loans, the expiration or
other termination of the Letters of Credit and the termination of this
Agreement.
8.06 Action Upon Instructions of Required Banks. The Agent agrees,
upon the written request of the Required Banks, to take any action of the type
specified in this Agreement or any of the other Transaction Documents as being
within the Agent's rights, duties, powers or discretion. Notwithstanding the
foregoing, the Agent shall be fully justified in failing or refusing to take
any action hereunder, unless it shall first be indemnified to its satisfaction
by the Banks pro rata against any and all liabilities, losses, costs and
expenses (including, without limitation, attorneys' fees and expenses) which
may be incurred by it by reason of taking or continuing to take any such
action, other than any liability which may arise out of Agent's gross
negligence or willful misconduct. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder in accordance
with written instructions signed by the Required Banks, and such instructions
and any action taken or failure to act pursuant thereto shall be binding on
all of the Banks and on all holders of the Notes. In the absence of a request
by the Required Banks, the Agent shall have authority, in its sole discretion,
to take or not to take any action, unless this Agreement or any of the other
Transaction Documents specifically requires the consent of the Required Banks
or of all of the Banks.
8.07 Employment of Agents and Counsel. The Agent may execute any of
its duties as Agent hereunder by or through employees, agents and attorneys-
in-fact and shall not be answerable to the Banks, except as to money or
securities received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected by it in good
faith and with reasonable care. The Agent shall be entitled to advice and
opinion of legal counsel concerning all matters pertaining to the duties of
the agency hereby created.
8.08 Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of legal counsel selected by the Agent.
8.09 May Treat Payee as Owner. The Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have been
filed with the Agent. Any request, authority or consent of any person, firm
or corporation who at the time of making such request or giving such authority
or consent is the holder of any such Note shall be conclusive and binding on
any subsequent holder, transferee or assignee of such Note or of any Note
issued in exchange therefor.
8.10 Agent's Reimbursement. Each Bank agrees to reimburse the Agent pro
rata in accordance with its Pro Rata Share for (a) any out-of-pocket costs and
expenses not reimbursed by Borrower for which the Agent is entitled to
reimbursement by the Borrower under this Agreement or any of the other
Transaction Documents and (b) for any other out-of-pocket costs and expenses
incurred by the Agent on behalf of the Banks in connection with the
preparation, execution, delivery, amendment, modification, extension, renewal
and/or enforcement of this Agreement and/or any of the other Transaction
Documents.
8.11 Rights as a Bank. With respect to its Commitment, the Loans made by
it, the Letters of Credit issued by it and the Note issued to it, the Agent
shall have the same rights and powers hereunder as any Bank and may exercise
the same as though it were not the Agent, and the terms "Bank" and "Banks"
shall, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, issue
letters of credit for the account of and generally engage in any kind of
banking or trust business with the Borrower and its Subsidiaries and
Affiliates as if it were not the Agent.
8.12 Independent Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based
on the financial statements referred to in Section 5.04 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Transaction
Documents. Each Bank also acknowledges that it will, independently and
without reliance upon the Agent or any other Bank and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and
the other Transaction Documents.
8.13 Resignation of Agent. Subject to the appointment of a successor
Agent, the Agent may resign as Agent for the Banks under this Agreement and
the other Transaction Documents at any time by thirty (30) days' notice in
writing to the Banks and Borrower. Such resignation shall take effect upon
appointment of such successor Agent. The Required Banks shall have the right
to appoint a successor Agent who shall be entitled to all of the rights of,
and vested with the same powers as, the original Agent under this Agreement
and the other Transaction Documents. In the event a successor Agent shall not
have been appointed within the thirty (30) day period following the giving of
notice by the Agent, the Agent may appoint its own successor. Resignation by
the Agent shall not affect or impair the rights of the Agent under Sections
8.05 and 8.10 hereof with respect to all matters preceding such resignation.
Any successor Agent must be a national banking association or a bank chartered
in any State of the United States having a combined capital and surplus of at
least $100,000,000.00.
8.14 Duration of Agency. The agency established by Section 8.01 hereof
shall continue, and Sections 8.01 through and including this Section 8.14
shall remain in full force and effect, until all of the Borrower's Obligations
shall have been paid in full, all of the Letters of Credit have expired or
been terminated and the Banks' commitments to make Loans, issue Letters of
Credit and/or extend credit to or for the benefit of the Borrower shall have
terminated or expired.
SECTION 9. GUARANTY.
9.01 Guarantee. (a) Each of the Guarantors hereby absolutely and
unconditionally guarantees the due and punctual payment of all of the
Borrower's Obligations, including, without limitation, (i) the due and
punctual payment of the principal of and interest on the Revolving Credit
Loans and the Letter of Credit Loans made to Borrower pursuant to this
Agreement and (ii) the due and punctual payment of all other amounts
(including, without limitation, reimbursement obligations with respect to
Letters of Credit issued for the account of Borrower) payable by Borrower
under this Agreement or any of the other Transaction Documents. Upon failure
by Borrower to pay any such amount when due and payable, whether by reason of
demand, maturity, acceleration or otherwise, upon demand by the Agent or the
Required Banks, the Guarantors shall forthwith pay to the Agent for the
ratable account of each of the Banks the amount not so paid at the place and
in the manner and with the effect specified in this Agreement. Each of the
Guarantors hereby agrees: (i) that the obligation of such Guarantor under this
Section 9 is primary and may be enforced directly against such Guarantor
independently of and without proceeding against Borrower or any other Obligor
or Obligors or foreclosing any collateral pledged to the Agent or any of the
Banks; (ii) that the Agent and/or the Banks in their sole and absolute
discretion may extend the time of payment, change the interest rates and renew
or change the manner, place, time and terms of payment of and make any other
changes with respect to any or all of the Borrower's Obligations; (iii) that
the Agent and/or the Banks may in their sole and absolute discretion sell,
exchange, release, surrender and otherwise deal with all or any of the
collateral pledged to the Agent or any of the Banks by Borrower or any other
person to secure any or all of the Borrower's Obligations; (iv) that the Agent
and/or the Banks may in their sole and absolute discretion release and
otherwise deal with any other Obligor or Obligors; and (v) that the Agent
and/or the Banks may exercise or refrain from exercising any rights against
Borrower or any other Obligor or Obligors and otherwise act or refrain from
acting, and may settle or compromise any or all of the Borrower's Obligations
with Borrower; all without notice to or consent of such Guarantor and without
releasing such Guarantor.
(b) Notwithstanding the foregoing, the maximum liability of a
Guarantor under this Section 9 as of any date of determination thereof shall
in no event exceed such Guarantor's Maximum Guaranteed Amount (as defined
below) as determined as of the date of the execution and delivery of this
Agreement (unless a later date shall be deemed by a court of competent
jurisdiction to be applicable to the determination of the solvency of such
Guarantor for purposes of any applicable federal or state bankruptcy,
insolvency, fraudulent transfer, fraudulent conveyance or similar law
governing debtors and the enforceability of debtors' obligations ("Applicable
Insolvency Law"), in which event such other date shall apply), increased by
any increase (but not decreased by any subsequent decrease) in such
Guarantor's Maximum Guaranteed Amount, unless the inclusion of any such
increase is contrary to any Applicable Insolvency Law. For purposes of this
paragraph, "Maximum Guaranteed Amount" shall mean, with respect to each
Guarantor, the greater of (i) the aggregate amount of the Borrower's
Obligations to the extent the proceeds thereof are used to make a Valuable
Transfer (as defined below) to such Guarantor and (ii) Ninety-Five Percent
(95%) of the Adjusted Net Worth (as defined below) of such Guarantor, provided
that in no event shall the amount specified in this clause (ii) be an amount
that would result in such Guarantor having unreasonably small capital, as such
term is used in any Applicable Insolvency Law. For purposes of this
paragraph, a "Valuable Transfer" to a Guarantor shall mean the amount of (i)
all loans, advances or capital contributions made to such Guarantor with
proceeds of any of the Borrower's Obligations (and all loans, advances and/or
capital contributions made by Borrower to such Guarantor shall be deemed to
have been made directly or indirectly with the proceeds of the Borrower's
Obligations unless such Guarantor can prove otherwise), (ii) all debt
securities or other obligations of such Guarantor acquired from such Guarantor
or retired by such Guarantor with proceeds of any of the Borrower's
Obligations (and all debt securities and/or other obligations of such
Guarantor acquired by Borrower from such Guarantor shall be deemed to have
been acquired directly or indirectly with the proceeds of the Borrower's
Obligations unless such Guarantor can prove otherwise), (iii) the fair market
value of all property acquired with proceeds of any of the Borrower's
Obligations and transferred, absolutely and not as collateral, to such
Guarantor (and all property acquired by Borrower and transferred, absolutely
and not as collateral, to such Guarantor shall be deemed to have been acquired
directly or indirectly with the proceeds of the Borrower's Obligations unless
such Guarantor can prove otherwise), (iv) all equity securities of such
Guarantor acquired from such Guarantor with proceeds of any of the Borrower's
Obligations (and all equity securities of such Guarantor acquired by Borrower
from such Guarantor shall be deemed to have been acquired directly or
indirectly with the proceeds of the Borrower's Obligations unless such
Guarantor can prove otherwise), (v) the aggregate amount of all reimbursement
obligations with respect to all Letters of Credit issued for the account of
Borrower and for the benefit of or with respect to the obligations of such
Guarantor and (vi) the value of any quantifiable economic benefits not
included in clauses (i) through (v), above, but includable in accordance with
Applicable Insolvency Law, accruing to such Guarantor as a result of any of
the Guaranteed Indebtedness. For purposes of this paragraph, the "Adjusted
Net Worth" of a Guarantor shall mean the excess of (i) the amount of the
"present fair salable value" of the assets of such Guarantor as of the date of
determination, over (ii) the amount of all "liabilities of such Guarantor,
contingent or otherwise", as of the date of determination, as such quoted
terms are determined in accordance with Applicable Insolvency Law. In
determining the Adjusted Net Worth of a Guarantor for purposes of calculating
the Maximum Guaranteed Amount for such Guarantor, the liabilities of such
Guarantor to be used in such determination pursuant to clause (ii) of the
preceding sentence shall not include any amounts owed by such Guarantor under
this Section 9 unless inclusion of such amounts is required by any Applicable
Insolvency Law.
9.02 Unconditional Obligation. The obligations of each of the
Guarantors under this Section 9 shall be absolute and unconditional and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any of the Borrower's Obligations or of any of the
obligations of the other Guarantor under this Section 9;
(b) any change in the corporate existence, structure or
ownership of Borrower, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting Borrower or any of its Property or assets;
(c) the existence of any claims or set-off or other rights which
such Guarantor may have at any time against Borrower, the Agent, any of the
Banks or any other Person, whether in connection herewith or any unrelated
transactions;
(d) any invalidity or unenforceability relating to or against
Borrower for any reason of all or any provision of this Agreement or any of
the other Transaction Documents, or any provision of applicable law or
regulation purporting to prohibit the payment by Borrower of the principal of
or interest on any Loan or any of the other Borrower's Obligations; or
(e) any other act or omission to act or delay of any kind by
Borrower, the Agent, any of the Banks or any other Person or any other
circumstance whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of such Guarantor's obligations
under this Section 9.
9.03 Period in Force. The obligations of each Guarantor under this
Section 9 shall remain in full force and effect until all of the Borrower's
Obligations shall have been fully, finally and indefeasibly paid in cash and
this Agreement and the other Transaction Documents shall have terminated in
accordance with their terms. If at any time any payment of the principal of
or interest on any Loan made to Borrower or any of the other Borrower's
Obligations is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of Borrower or otherwise, the
obligations of each of the Guarantors under this Section 9 with respect to
such payment shall be revived and continued in full force and effect as if
such payment had not been made.
9.04 Waiver. EACH OF THE GUARANTORS HEREBY WAIVES ACCEPTANCE HEREOF,
PRESENTMENT, DEMAND, PROTEST AND ANY NOTICE NOT PROVIDED FOR HEREIN, AS WELL
AS ANY REQUIREMENT THAT AT ANY TIME ANY ACTION BE TAKEN BY ANY PERSON AGAINST
BORROWER OR ANY OTHER PERSON OR AGAINST ANY COLLATERAL OR OTHER SECURITY FOR
ANY OF THE BORROWER'S OBLIGATIONS. None of the Guarantors shall have any
right of subrogation, reimbursement, contribution or indemnity whatsoever with
respect to Borrower or any other guarantor(s) of any or all of the Borrower's
Obligations or any right of recourse to or with respect to any assets or
property of Borrower or any other guarantor(s) of any or all of the Borrower's
Obligations or to any collateral or other security for the payment of any of
the Borrower's Obligations unless and until all of the Borrower's Obligations
shall have been fully, finally and indefeasibly paid in cash and this
Agreement and the other Transaction Documents shall have been terminated.
9.05 Effect of Stay. In the event that the demand for payment of any
amount payable by Borrower under this Agreement or the other Transaction
Documents is stayed upon the insolvency, bankruptcy or reorganization of
Borrower, all such amounts otherwise subject to acceleration under the terms
of this Agreement or any of the other Transaction Documents shall nonetheless
be payable by the Guarantors hereunder forthwith upon demand by the Agent or
the Required Banks.
SECTION 10. GENERAL.
10.01 No Waiver. No failure or delay by the Agent or any of the Banks in
exercising any right, remedy, power or privilege hereunder or under any other
Transaction Document shall operate as a waiver thereof; nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The remedies
provided herein and in the other Transaction Documents are cumulative and not
exclusive of any remedies provided by law. Nothing herein contained shall in
any way affect the right of any of the Banks to exercise any statutory or
common law right of banker's lien or set-off.
10.02 Right of Set-Off. Upon the occurrence and during the continuance
of any Event of Default, each of the Banks is hereby authorized at any time
and from time to time, without notice to Borrower (any such notice being
expressly waived by Borrower) and to the fullest extent permitted by law, to
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by such Bank(s) and any and all other
indebtedness at any time owing by such Bank(s) to or for the credit or account
of Borrower against any and all of Borrower's Obligations irrespective of
whether or not such Bank(s) shall have made any demand hereunder or under any
of the other Transaction Documents and although such obligations may be
contingent or unmatured. Each of the Banks agrees to promptly notify Borrower
after any such set-off and application made by such Bank(s), provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Banks under this Section
10.02 are in addition to any other rights and remedies (including, without
limitation, other rights of set-off) which the Banks may have. Nothing
contained in this Agreement or any other Transaction Document shall impair the
right of any of the Banks to exercise any right of set-off or counterclaim it
may have against Borrower and to apply the amount subject to such exercise to
the payment of indebtedness of Borrower unrelated to this Agreement or the
other Transaction Documents.
10.03 Cost and Expenses. Borrower agrees, whether or not any Loan is
made hereunder or any Letter of Credit is issued hereunder, to pay the Agent
and each of the Banks upon demand (i) all reasonable out-of-pocket costs and
expenses and all Attorneys' Fees of the Agent in connection with the
preparation, documentation, negotiation and execution of this Agreement, the
Notes, the Letter of Credit Applications and the other Transaction Documents;
provided, however, that such Attorneys' Fees of the Agent shall not exceed the
sum of $15,000.00, (ii) all recording, filing and search fees and expenses
incurred in connection with this Agreement and the other Transaction
Documents, (iii) all out-of-pocket costs and expenses and all Attorneys' Fees
of the Agent and each of the Banks in connection with the (A) the preparation,
documentation, negotiation and execution of any amendment, modification,
extension or renewal of this Agreement, the Notes, the Letter of Credit
Applications and/or any of the other Transaction Documents, (B) the
preparation of any waiver or consent hereunder or under any of the other
Transaction Documents or (C) any Default or Event of Default or alleged
Default or Event of Default hereunder, (iv) if an Event of Default occurs, all
out-of-pocket costs and expenses and all Attorneys' Fees incurred by the Agent
and each of the Banks in connection with such Event of Default and collection
and other enforcement proceedings resulting therefrom and (v) all other
Attorneys' Fees incurred by the Agent or any of the Banks relating to or
arising out of or in connection with this Agreement or any of the other
Transaction Documents. Borrower further agrees to pay or reimburse the Agent
and each of the Banks for any stamp or other taxes which may be payable with
respect to the execution, delivery, recording and/or filing of this Agreement,
the Notes, the Letter of Credit Applications or any of the other Transaction
Documents. All of the obligations of Borrower under this Section 10.03 shall
survive the satisfaction and payment of Borrower's Obligations and the
termination of this Agreement.
10.04 Environmental Indemnity. Borrower hereby agrees to indemnify the
Agent and each of the Banks and hold the Agent and each of the Banks harmless
from and against any and all losses, liabilities, damages, injuries, costs,
expenses and claims of any and every kind whatsoever (including, without
limitation, court costs and attorneys' fees and expenses) which at any time or
from time to time may be paid, incurred or suffered by, or asserted against,
the Agent or any of the Banks for, with respect to or as a direct or indirect
result of the violation by Borrower or any Subsidiary of any Environmental
Laws; or with respect to, or as a direct or indirect result of the presence on
or under, or the Release from, properties utilized by Borrower and/or any
Subsidiary in the conduct of their respective businesses into or upon any
land, the atmosphere or any watercourse, body of water or wetland, of any
Hazardous Substances or any other hazardous or toxic waste, substance or
constituent or other substance (including, without limitation, any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or arising
under the Environmental Laws); and the provisions of and undertakings and
indemnification set out in this Section 10.04 shall survive the satisfaction
and payment of Borrower's Obligations and the termination of this Agreement.
10.05 General Indemnity. In addition to the payment of expenses pursuant
to Section 10.03, whether or not the transactions contemplated hereby shall be
consummated, Borrower hereby agrees to indemnify, pay and hold the Agent and
each of the Banks and any holder(s) of the Notes, and the officers, directors,
employees, agents and affiliates of the Agent, each of the Banks and such
holder(s) (collectively, the "Indemnitees") harmless from and against any and
all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitees shall be designated a party thereto), that may
be imposed on, incurred by or asserted against the Indemnitees, in any manner
relating to or arising out of this Agreement, any of the other Transaction
Documents or any other agreement, document or instrument executed and
delivered by Borrower or any other Obligor in connection herewith or
therewith, the statements contained in any commitment letters delivered by the
Agent or any of the Banks, the agreement of any of the Banks to make the Loans
hereunder, the agreement of Mercantile to issue the Letters of Credit
hereunder or the use or intended use of the proceeds of any Loan hereunder
(collectively, the "indemnified liabilities"); provided that Borrower shall
have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of that
Indemnitee as determined by a court of competent jurisdiction in a final
nonappealable order. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Borrower shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all indemnified liabilities incurred by the
Indemnitees or any of them. The provisions of the undertakings and
indemnification set out in this Section 10.05 shall survive the satisfaction
and payment of Borrower's Obligations and the termination of this Agreement.
10.06 Authority to Act. The Agent shall be entitled to act on any
notices and instructions (telephonic or written) believed by the Agent in good
faith to have been sent or delivered by any person identifying himself as B.D.
Hunter, Robert J. Marischen, Terry J. Heinz or Anthony J. Verkruyse (or any
other person from time to time authorized to act on behalf of Borrower
pursuant to a resolution adopted by the Board of Directors of Borrower and
certified by the Secretary of Borrower and delivered to the Agent), regardless
of whether such notice or instruction was in fact delivered by such person,
and Borrower hereby agrees to indemnify the Agent and hold the Agent harmless
from and against any and all losses and expenses, if any, ensuing from any
such action.
10.07 Notices. Any notice, request, demand, consent, confirmation or
other communication hereunder shall be in writing and delivered in person or
sent by telecopy or registered or certified mail, return receipt requested and
postage prepaid, to the applicable party at its address or telecopy number set
forth on the signature pages hereof, or at such other address or telecopy
number as any party hereto may designate as its address for communications
hereunder by notice so given. Such notices shall be deemed effective on the
day on which delivered or sent if delivered in person or sent by telecopy, or
on the third (3rd) Domestic Business Day after the day on which mailed, if
sent by registered or certified mail; provided, however, that notices to the
Agent under Section 2 shall not be effective until actually received by the
Agent.
10.08 Consent to Jurisdiction; Waiver of Jury Trial. BORROWER AND EACH
GUARANTOR IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY MISSOURI
STATE COURT OR ANY UNITED STATES OF AMERICA COURT SITTING IN THE EASTERN
DISTRICT OF MISSOURI, EASTERN DIVISION, AS THE AGENT MAY ELECT, IN ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT. BORROWER AND EACH GUARANTOR HEREBY IRREVOCABLY AGREE
THAT ALL CLAIMS IN RESPECT TO SUCH SUIT, ACTION OR PROCEEDING MAY BE HELD AND
DETERMINED IN ANY OF SUCH COURTS. BORROWER AND EACH GUARANTOR IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH BORROWER OR
SUCH GUARANTOR MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT, AND BORROWER AND EACH
GUARANTOR FURTHER IRREVOCABLY WAIVE ANY CLAIM THAT SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. BORROWER AND EACH GUARANTOR HEREBY EXPRESSLY WAIVE ALL RIGHTS OF ANY
OTHER JURISDICTION WHICH BORROWER OR SUCH GUARANTOR MAY NOW OR HEREAFTER HAVE
BY REASON OF ITS PRESENT OR SUBSEQUENT DOMICILES. BORROWER AND EACH GUARANTOR
AUTHORIZE THE SERVICE OF PROCESS UPON BORROWER OR SUCH GUARANTOR BY REGISTERED
MAIL SENT TO BORROWER OR SUCH GUARANTOR AT ITS ADDRESS SET FORTH IN SECTION
10.07. BORROWER, THE GUARANTORS, THE AGENT AND THE BANKS IRREVOCABLY WAIVE
THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION IN WHICH BORROWER AND/OR
ANY OR THE GUARANTORS AND THE AGENT AND/OR ANY OF THE BANKS ARE PARTIES
RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF
THE OTHER TRANSACTION DOCUMENTS.
10.09 Governing Law. This Agreement, the Notes, the Letter of Credit
Applications and all of the other Transaction Documents shall be governed by
and construed in accordance with the substantive laws of the State of Missouri
(without reference to conflict of law principles).
10.10 Amendments and Waivers. Any provision of this Agreement, the
Notes, the Letter of Credit Applications or any of the other Transaction
Documents may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by Borrower and the Required Banks (and, if the
rights or duties of the Agent in its capacity as Agent are affected thereby,
by the Agent; and if the rights or duties of Mercantile in its capacity as the
issuer or the Letters of Credit are affected thereby, by Mercantile); provided
that no such amendment or waiver shall, unless signed by all of the Banks, (i)
increase the Commitment of any Bank, (ii) reduce the principal amount of or
rate of interest on any Loan or any fees hereunder (other than any fees
relating to the Letters of Credit other than Letter of Credit Commitment Fees
and Letter of Credit Negotiation Fees), (iii) postpone the date fixed for any
payment of principal of or interest on any Loan or any fees hereunder, (iv)
change the percentage of the Commitments or of the aggregate principal amount
of Loans or Letters of Credit or the number of Banks which shall be required
for the Banks or any of them to take any action or obligations under this
Section or any other provision of this Agreement, (v) change the definition of
"Required Banks", (vi) voluntarily release any of the Guarantors from their
obligations under Section 9 of this Agreement, (vii) knowingly waive any of
the conditions precedent to the initial Loan set forth in Section 4.01 or
(viii) amend this Section 10.10.
10.11 References; Headings for Convenience. Unless otherwise specified
herein, all references herein to Section numbers refer to Section numbers of
this Agreement, all references herein to Exhibits "A", "B", "C", "D", "E",
"F", "G" and "H" refer to annexed Exhibits "A", "B", "C", "D", "E", "F", "G"
and "H" which are hereby incorporated herein by reference and all references
herein to Schedules 3.02, 5.05, 5.08, 5.10, 5.12, 5.16, 5.17, 5.18 and 6.02(n)
refer to annexed Schedules 3.02, 5.05, 5.08, 5.10, 5.12, 5.16, 5.17, 5.18 and
6.02(n) which are hereby incorporated herein by reference. The Section
headings are furnished for the convenience of the parties and are not to be
considered in the construction or interpretation of this Agreement.
10.12 Successors and Assigns. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that neither Borrower nor any of the
Guarantors may assign or otherwise transfer any of its rights or delegate any
of its obligations or duties under this Agreement without the prior written
consent of the Agent and each of the Banks.
(b) Any Bank may at any time grant to one or more banks or other
financial institutions (each a "Participant") participating interests in its
Commitment, any or all of its Loans or its interest in any of the Letters of
Credit. In the event of any such grant by a Bank of a participating interest
to a Participant, whether or not upon notice to Borrower and the Agent, such
Bank shall remain responsible for the performance of its obligations
hereunder, and Borrower and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement. Any agreement pursuant to which any Bank may grant such
a participating interest shall provide that such Bank shall retain the sole
right and responsibility to enforce the obligations of Borrower hereunder
including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement; provided, that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement described in clauses (i),
(ii) and (iii) of the proviso to Section 10.10 of this Agreement without the
consent of the Participant. Borrower agrees that each Participant shall, to
the extent provided in its participation agreement, be entitled to the
benefits of Sections 2.10, 2.11, 2.12, 2.13, 2.14, 2.15, 2.16 and 2.17 of this
Agreement with respect to its participating interest. An assignment or other
transfer which is not permitted by subsection (c) or (d) below shall be given
effect for purposes of this Agreement only to the extent of a participating
interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
financial institutions (each an "Assignee") all, or a proportionate part of
all, of its rights and obligations under this Agreement and its Note, and such
Assignee shall assume such rights and obligations, pursuant to an Assignment
and Assumption Agreement in substantially the form of Exhibit H attached
hereto executed by such Assignee and such transferor Bank, with (and subject
to) the subscribed consent of Borrower and the Agent, which, in each case,
shall not be unreasonably withheld or delayed; provided, however, that (i) if
any Assignee is an affiliate of such transferor Bank or, immediately prior to
such assignment, a Bank, no consent shall be required and (ii) if any Event of
Default under this Agreement has occurred and is continuing no consent of
Borrower to such assignment shall be required. Upon execution and delivery of
such instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and
such Assignee, such Assignee shall be a Bank party to this Agreement and shall
have all the rights and obligations of a Bank with a Commitment as set forth
in such instrument of assumption, and the transferor Bank shall be released
from its obligations hereunder to a corresponding extent, and no further
consent or action by any party shall be required. Upon the consummation of
any assignment pursuant to this subsection (c), the transferor Bank, the
Agent, Mercantile and Borrower shall make appropriate arrangements so that, if
required, new Note(s) and/or Letter of Credit Participation Certificate(s) are
issued to the Assignee. In connection with any such assignment, the
transferor Bank shall pay to the Agent an administrative fee for processing
such assignment in the amount of $2,500.00.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Lender from any of its obligations
hereunder.
10.13 NO ORAL AGREEMENTS; ENTIRE AGREEMENT. ORAL AGREEMENTS OR
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING
REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT
ENFORCEABLE. TO PROTECT BORROWER, THE GUARANTORS, THE AGENT AND THE BANKS
FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER,
THE GUARANTORS, THE AGENT AND THE BANKS COVERING SUCH MATTERS ARE CONTAINED IN
THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH AGREEMENT AND OTHER
TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS
AMONG BORROWER, THE GUARANTORS, THE AGENT AND THE BANKS, EXCEPT AS BORROWER,
THE GUARANTORS, THE AGENT AND THE BANKS MAY LATER AGREE IN WRITING TO MODIFY
THEM. This Agreement embodies the entire agreement and understanding between
the parties hereto and supersedes all prior
agreements and understandings (oral or written) relating to the subject matter
hereof.
10.14 Severability. In the event any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
10.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.16 Resurrection of Borrower's Obligations. To the extent that any of
the Banks receives any payment on account of any of Borrower's Obligations,
and any such payment(s) or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, subordinated and/or
required to be repaid to a trustee, receiver or any other Person under any
bankruptcy act, state or Federal law, common law or equitable cause, then, to
the extent of such payment(s) received, Borrower's Obligations or part thereof
intended to be satisfied and any and all Liens upon or pertaining to any
Property or assets of Borrower and theretofore created and/or existing in
favor of such Bank(s) as security for the payment of such Borrower's
Obligations shall be revived and continue in full force and effect, as if such
payment(s) had not been received by such Bank(s) and applied on account of
Borrower's Obligations.
10.17 Independence of Covenants. All of the covenants contained in this
Agreement and the other Transaction Documents shall be given independent
effect so that if a particular action, event or condition is prohibited by any
one of such covenants, the fact that it would be permitted by an exception to,
or otherwise be in compliance within the provisions of, another covenant shall
not avoid the occurrence of a Default or Event of Default if such action is
taken, such event occurs or such condition exists.
IN WITNESS WHEREOF, Borrower, the Guarantors, the Agent and the Banks
have executed this Revolving Credit Agreement this 17th day of December, 1996.
HUNTCO INC.
By /s/ Robert J. Marischen
Title: Vice Chairman & CFO
14323 South Outer Forty Road
Suite 600 North
Chesterfield, Missouri 63017
Attention: Vice Chairman and CFO
Telecopy number: (314) 878-4537
HUNTCO NEVADA, INC.
By /s/ George A. Stoecklin
Title: President
2437 East Cheyenne
North Las Vegas, Nevada 89030
Attention: President
Telecopy number: (702) 642-0669
HUNTCO STEEL, INC.
By /s/ Robert J. Marischen
Title: Vice President
14323 South Outer Forty Road
Suite 600 North
Chesterfield, Missouri 63017
Attention: Vice President
Telecopy number: (314) 878-4537
MIDWEST PRODUCTS, INC.
By /s/ Robert J. Marischen
Title: Vice President
14323 South Outer Forty Road
Suite 600 North
Chesterfield, Missouri 63017
Attention: Vice President
Telecopy number: (314) 878-4537
HSI AVIATION, INC.
By /s/ Robert J. Marischen
Title: President
14323 South Outer Forty Road
Suite 600 North
Chesterfield, Missouri 63017
Attention: President
Telecopy number: (314) 878-4537
MERCANTILE BANK NATIONAL ASSOCIATION
By /s/ Stephen M. Reese
Title: Vice President
721 Locust Street
St. Louis, Missouri 63101
Attention: Large Corporate Accounts
Telecopy number:
HARRIS TRUST AND SAVINGS BANK
By /s/ Peter B. McNitt
Title: Sr. Vice President
111 West Monroe - 2C
Chicago, Illinois 60690
Attention:
Telecopy number: (312) 461-2591
NBD BANK
By /s/ Janet M. Cerra
Title: Vice President
611 Woodward Avenue
Detroit, Michigan 482226
Attention: Mid-Large Corp Credit
Telecopy number: 313-225-1671
BANK OF AMERICA ILLINOIS
By /s/ Steve T. Standbridge
Title: Vice President
231 South LaSalle
Chicago, Illinois 60697
Attention: Steven T. Standbridge
Telecopy number: 312-828-1974
SUNTRUST BANK, ATLANTA
By /s/ Candace J. Cole
Title: Banking Officer
By /s/ Linda L. Dash
Title: Vice President
25 Park Place, N.E., Mail Code 124
Atlanta, Georgia 30303
Attention: Candace Cole
Telecopy number: (404) 588-8505
MERCANTILE BANK NATIONAL ASSOCIATION, as Agent
By /s/ Stephen M. Reese
Title: Vice President
721 Locust Street
St. Louis, Missouri 63101
Attention: Large Corporate Accounts
Telecopy number:
FORM OF
REVOLVING CREDIT NOTE
$__________ St. Louis, Missouri
December 17, 1996
FOR VALUE RECEIVED, on the last day of the Revolving Credit Period, the
undersigned, HUNTCO INC., a Missouri corporation ("Borrower"), hereby promises
to pay to the order of [NAME OF BANK] ("Bank"), the principal sum of _________
Million Dollars ($_______), or such lesser sum as may then constitute the
aggregate unpaid principal amount of all Revolving Credit Loans made by Bank
to Borrower pursuant to the Revolving Credit Agreement referred to below. The
aggregate principal amount of Revolving Credit Loans which Bank shall be
committed to have outstanding hereunder at any time shall not exceed _________
Million Dollars ($_______), which amount may be borrowed, paid, reborrowed and
repaid, in whole or in part, subject to the terms and conditions hereof and of
the Revolving Credit Agreement referred to below. Borrower further promises
to pay to the order of Bank interest on the aggregate unpaid principal amount
of such Revolving Credit Loans on the dates and at the rate or rates provided
for in the Revolving Credit Agreement. All such payments of principal and
interest shall be made in lawful currency of the United States in Federal or
other immediately available funds at the office of Mercantile Bank National
Association, 721 Locust Street, St. Louis, Missouri 63101.
Bank shall record the date, amount, type and maturity of each Revolving Credit
Loan made by it to Borrower and the date and amount of each payment of
principal made by Borrower with respect thereto, and may, if Bank so elects in
connection with any transfer or enforcement of this Note, endorse on the
schedules forming a part of this Note appropriate notations to evidence the
foregoing information with respect to each such Revolving Credit Loan then
outstanding; provided, however, that the obligation of Borrower to repay each
Revolving Credit Loan made to Borrower hereunder shall be absolute and
unconditional, notwithstanding any failure of Bank to make any such
recordation or endorsement or any mistake by Bank in connection with any such
recordation or endorsement. Bank is hereby irrevocably authorized by Borrower
to so endorse this Note and to attach to and make a part of this Note a
continuation of any such schedule as and when required. The books and records
of Bank (including, without limitation, the schedules attached to this Note)
showing the account between Bank and Borrower shall be admissible in evidence
in any action or proceeding and shall constitute prima facie proof of the
items therein set forth in the absence of manifest error.
This Note is one of the Revolving Credit Notes referred to in the Revolving
Credit Agreement dated the date hereof by and among Borrower, Huntco Nevada,
Inc., Huntco Steel, Inc., Midwest Products, Inc., HSI Aviation, Inc., the
Banks party thereto and Mercantile Bank National Association, as agent for the
Banks (as the same may from time to time be amended, modified, extended or
renewed, the "Revolving Credit Agreement"). The Revolving Credit Agreement,
among other things, contains provisions for acceleration of the maturity
hereof upon the occurrence of certain stated events and also for prepayments
on account of principal hereof and interest hereon prior to the maturity
hereof upon the terms and conditions specified therein. All capitalized terms
used and not otherwise defined in this Note shall have the respective meanings
ascribed to them in the Revolving Credit Agreement.
Upon the occurrence of any Event of Default under the Revolving Credit
Agreement, Bank's obligation to make additional Revolving Credit Loans under
this Note may be terminated in the manner and with the effect as provided in
the Revolving Credit Agreement and the entire outstanding principal balance of
this Note and all accrued and unpaid interest thereon may be declared to be
immediately due and payable in the manner and with the effect as provided in
the Revolving Credit Agreement.
In the event that any payment due under this Note shall not be paid when due,
whether by reason of maturity, acceleration or otherwise, and this Note is
placed in the hands of an attorney or attorneys for collection, or if this
Note is placed in the hands of an attorney or attorneys for representation of
Bank in connection with bankruptcy or insolvency proceedings relating hereto,
Borrower hereby promises to pay to the order of Bank, in addition to all other
amounts otherwise due hereon, the costs and expenses of such collection and
representation, including, without limitation, reasonable attorneys' fees and
expenses (whether or not litigation shall be commenced in aid thereof).
Borrower hereby waives presentment for payment, demand, protest, notice of
protest and notice of dishonor.
This Note shall be governed by and construed in accordance with the
substantive laws of the State of Missouri (without reference to conflict of
law principles).
HUNTCO INC.
By:________________________
Title:_____________________
<PAGE>
SCHEDULE OF REVOLVING CREDIT NOTES
ISSUED UNDER DECEMBER 17, 1996
REVOLVING CREDIT AGREEMENT
<TABLE>
<S> <C>
Mercantile Bank National Association..............$20,000,000
Harris Trust and Savings Bank.....................$20,000,000
NBD Bank..........................................$20,000,000
Bank of America Illinois..........................$10,000,000
SunTrust Bank, Atlanta............................$10,000,000
</TABLE>
CERTIFICATE OF DESIGNATION
SERIES A CONVERTIBLE PREFERRED STOCK
OF
HUNTCO INC.
(Pursuant to Section 351.180 of the
Missouri General and Business Corporation Law)
-----------------------
Huntco Inc., a corporation organized and existing under the General and
Business Corporation Law of the State of Missouri (the "Company"), hereby
certifies that the following Series A Convertible Preferred Stock Rights and
Preferences were adopted by the Executive Committee of the Board of Directors
of the Company in accordance with Section 351.180 of the General and Business
Corporation Law by written unanimous consent dated January 30, 1997.
WHEREAS, by the Restated Articles of Incorporation (the "Restated
Articles") of the Company, Five Million (5,000,000) shares of preferred stock,
with $.01 par value per share (the "Preferred Stock") are authorized; and
WHEREAS, in and by Article III of the Restated Articles, the Board of
Directors of the Company, pursuant to Section 351.180 of the General and
Business Corporation Law of Missouri (the "Act"), is expressly authorized to
provide for the issuance of Preferred Stock in series with any such voting
powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights,
including convertible rights and dividend rights, if any, and qualifications,
limitations or restrictions thereof as shall be stated in a resolution
providing for the issue thereof adopted by the Board of Directors; and
WHEREAS, the Board of Directors of the Company, acting through its
Executive Committee pursuant to Section 351.330 of the Act, now desires to fix
and determine such matters with respect to the issuance of certain shares of
Preferred Stock;
NOW, THEREFORE, BE IT RESOLVED that the Company does hereby designate a
Series A Convertible Preferred Stock in the form attached hereto as EXHIBIT A
and that there be authorized 225,000 shares of such Series A Convertible
Preferred Stock (the "Series A Preferred").
EXHIBIT A
---------
SECTION 1. DESIGNATION OF PREFERRED.
- ------------------------------------
There is hereby created a series of Preferred Stock to be designated as the
Series A Convertible Preferred Stock (the "Series A Preferred"). The Series A
Preferred shall be a closed series consisting of two hundred twenty-five
thousand (225,000) shares, each share of Series A Preferred having a
liquidation preference of Twenty Dollars ($20.00) per share. Each share of
Series A Preferred shall be identical in all respects with the other shares of
Series A Preferred.
SECTION 2. DIVIDEND RIGHTS OF THE SERIES A PREFERRED.
- -----------------------------------------------------
The holders of Series A Preferred shall be entitled to receive, out of any
funds legally available therefor, dividends at the rate of $.888889 per share
per annum (assuming a Three Hundred and Sixty (360) day year consisting of
four (4) ninety day quarters) and no more, commencing on the date of original
issuance of the Series A Preferred and payable quarterly on March 1, June 1,
September 1 and December 1 of each year and in preference and priority to any
payment of any dividend on the common stock of the Company which presently
consists of Class A Common Stock having a par value of $.01 per share ("Class
A Common") and the Class B Common Stock having a par value of $.01 per share
(the "Class B Common") (collectively, with any other classes of common stock
following the date hereof, the "Common" or the "Junior Shares") when and as
declared by the Board of Directors. Any accrued but unpaid dividend for any
not yet completed quarter shall be computed on the basis of the actual number
of days elapsed. The right to such dividends on the Series A Preferred shall
be cumulative. No dividends shall be declared or paid on any Junior Shares
unless and until all dividends due and accrued have been paid to the holders
of the Series A Preferred.
SECTION 3. LIQUIDATION PREFERENCE.
- ----------------------------------
(a) PREFERENTIAL DISTRIBUTION. In the event of any liquidation,
dissolution or winding up of the Company, either voluntary or involuntary, the
holders of Series A Preferred shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Company to the holders of the Junior Shares by reason of their ownership
thereof, the amount of $20.00 per share (the "Original Issuance Price") for
each share of Series A Preferred then held by them, and, in addition, an
amount equal to all accrued but unpaid dividends on the Series A Preferred
(including any accrued but unpaid dividends for any not yet completed quarter,
computed on the basis of the actual number of days elapsed). If, upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred are insufficient to permit the payment to
such holders of the full preferential amounts, then the entire assets and
funds of the Company legally available for distribution shall be distributed
ratably among the holders of the Series A Preferred in proportion to their
holdings of shares of Series A Preferred. After payment has been made to the
holders of the Series A Preferred of the full amounts to which they are
entitled, all remaining assets of the Company shall be distributed pro rata
among all holders of Junior Shares on the basis of their holdings of shares of
Junior Shares and the relative rights thereof.
(b) INCLUSION OF CERTAIN TRANSACTIONS. A liquidation, dissolution or
winding up of the Company shall be deemed to include (i) the sale of all or
substantially all of the Company's assets, (ii) the sale of all or
substantially all of the assets of Huntco Steel, Inc. ("Huntco Steel"), (iii)
the acquisition of the Company or the acquisition of Huntco Steel by another
individual, corporation, partnership, joint venture, limited liability
company, association, joint stock company, trust, unincorporated organization,
government or other agency or political subdivision thereof or other entity (a
"Person") by means of merger, consolidation or otherwise in which the Company
is not the continuing or surviving entity, (iv) a change-of-control of (x)
Huntco Steel where any Persons other than the Company become the beneficial
owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of securities of Huntco Steel representing
more than fifty percent (50%) of the combined voting power of Huntco Steel's
then outstanding voting securities or (y) the Company where any Persons (other
than those Persons who, on the date hereof, are the beneficial owners,
directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company's outstanding
voting securities) become the beneficial owner, directly or indirectly, of
securities of the Company representing more than fifty percent (50%) of the
combined voting power of the Company's then outstanding voting securities;
provided that a change-of-control resulting from any conversion of Class B
Common into Class A Common shall not be deemed to be a "Change-of-Control" for
purposes hereof (each, a "Change-of-Control"), and (v) the sale and leaseback
of assets with a combined book value in excess of fifty percent (50%) of the
book value of the assets of the Company and its subsidiaries on a consolidated
basis as of the date of the Company's latest balance sheet contained in the
Company's Reports on Form 10-Q or Form 10-K filed with the Securities and
Exchange Commission (each a "Liquidation Event").
SECTION 4. CONVERSION.
- ----------------------
The holders of Series A Preferred and the Company shall have the following
conversion rights (the "Conversion Rights"):
(a) RIGHT OF HOLDER TO CONVERT. Each share of Series A Preferred shall be
convertible, at the option of the holder thereof, at any time after the date
of issuance of such share, at the office of the Company or any transfer agent
for the Series A Preferred, into One (1) fully paid and nonassessable share of
Class A Common ("Conversion Ratio"), which Conversion Ratio shall be subject
to adjustment as provided in Section 4(d) below.
(b) RIGHT OF COMPANY TO CONVERT. Under the circumstances set forth in
Sections 4(b)(i) or 4(b)(ii) below (each a "Company Conversion Event"), the
Company may effect a conversion of all or a portion of the Series A Preferred
then outstanding into shares of Class A Common in accordance with the
Conversion Ratio (a "Company Conversion"):
(i) if the Company shall have offered the holder of the Series A
Preferred the right to participate in a secondary public offering of all of
the Class A Common into which the Series A Preferred may be converted, and (I)
the holder of such Series A Preferred shall have declined to participate in
such offering, and (II) the per share price, net of underwriting discounts,
commissions and expenses, which the Company shall have received for its Class
A Common (and which the holder would have received had it participated) in
such offering exceeds $25.00 per share (appropriately adjusted at any time
there is an adjustment to the Conversion Ratio hereunder), it being
acknowledged and agreed by the Company that the holders of the Series A
Preferred shall have the right to decline to participate in any such offering
at any time before, and immediately following such time that, the per share
price, net of underwriting discounts, commissions and expenses, which the
holder would receive for its Class A Common in such offering, shall have been
determined; or
(ii) if at any time after the applicable holding period then in
effect under Rule 144(k) of Regulation C promulgated under the Securities Act
of 1933, as amended (the "Securities Act") with respect to the Series A
Preferred has been met, the closing price of the Class A Common as reported by
the New York Stock Exchange (or any other national securities exchange on
which the Class A Common shall then be trading) shall be Twenty-Five Dollars
($25.00) (appropriately adjusted at any time there is an adjustment to the
Conversion Ratio hereunder) for more for thirty (30) consecutive trading days.
(c) MECHANICS OF CONVERSION. No fractional shares of Class A Common shall
be issued upon conversion of the Series A Preferred. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Company shall pay
cash equal to such fraction multiplied by the closing price for the Class A
Common as reported by the New York Stock Exchange (or by any other national
securities exchange on which the Class A Common shall then be trading) on the
date of the conversion of the Series A Preferred, determined as set forth
below.
(i) IF CONVERSION IS AT OPTION OF HOLDER. If conversion shall be at
the option of a holder of Series A Preferred, such holder shall first
surrender the certificate or certificates therefor, duly endorsed, at the
office of the Company or of any transfer agent for the Series A Preferred, and
shall give written notice to the Company at such office that such holder
elects to convert the same. The Company shall, within five (5) business days
thereafter, issue and deliver at such office to such holder of Series A
Preferred, or to the nominee of such holder, a certificate or certificates for
the number of shares of Class A Common to which such holder is entitled and a
check payable to such holder in the amount of any cash amounts payable as the
result of a conversion into fractional shares of Class A Common, plus any
accrued and unpaid dividends on the converted Series A Preferred (including
any accrued but unpaid dividends for any not yet completed quarter, computed
on the basis of the actual number of days elapsed). Such conversion shall be
deemed to have been made immediately prior to the closing of business on the
date of such surrender of the shares of Series A Preferred to be converted,
and the Person or Persons entitled to receive the shares of Class A Common
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Class A Common on such date. If the
conversion is in connection with an underwritten offer of securities
registered pursuant to the Securities Act, then the conversion may, at the
option of any holder tendering Series A Preferred for conversion, be
conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the Person(s) entitled to receive
the Class A Common Stock issuable upon such conversion of the Series A
Preferred shall not be deemed to have converted such Series A Preferred until
immediately prior to the closing of such sale of securities.
(ii) IF CONVERSION IS A COMPANY CONVERSION. If the conversion shall
be a Company Conversion, the Company shall give the holder of all the issued
and outstanding shares of Series A Preferred to be converted written notice of
such conversion (the "Company Conversion Notice") not later than thirty (30)
days following the applicable Company Conversion Event. The Company
Conversion Notice shall set forth the date of conversion (the "Company
Conversion Date") which shall not be less than ten (10) days after the date
the Company Conversion Notice is delivered to the holder of the Series A
Preferred. The Company Conversion Notice shall also instruct the holder of
the Series A Preferred to surrender such certificates, duly endorsed, at the
office of the Company or of any transfer agent for the Series A Preferred on
or before the Company Conversion Date. The Company shall, within five (5)
business days after such Series A Preferred certificates are surrendered,
issue and deliver at such office to such holder of the Series A Preferred to
be converted, or to the nominee of such holder, a certificate or certificates
for the number of shares of Class A Common to which such holder is entitled
and a check payable to such holder in the amount of any cash amounts payable
as the result of a conversion into fractional shares of Class A Common, plus
any accrued but unpaid dividends on the converted Series A Preferred
(including any accrued but unpaid dividends for any not yet completed quarter,
computed on the basis of the actual number of days elapsed). If at the time
the Company elects to effect a Company Conversion there shall be more than one
holder of Series A Preferred and the Company desires to convert less than all
of the Series A Preferred then outstanding, the Company shall have the sole
and complete discretion to determine which shares of Series A Preferred it
shall convert to Class A Common. Regardless of whether certificates for the
Series A Preferred subject to Company Conversion are surrendered pursuant
hereto, from and after the Company Conversion Date, such certificates shall
represent only the right to receive the number of shares of Class A Common
into which the Series A Preferred represented by the certificate are
convertible, and the holder or holders entitled to receive such Class A Common
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Class A Common as of the Company Conversion Date,
provided, however, that such holders shall not have the right to vote such
Class A Common or to receive dividends thereon until such time as the
certificates representing the Series A Preferred subject to Company Conversion
are surrendered as provided herein.
(d) ADJUSTMENTS TO CONVERSION RATIO FOR DILUTING ISSUANCES.
(i) STOCK DIVIDENDS AND SUBDIVISIONS. If the Company at any time or
from time to time after the original issuance date of the Series A Preferred
declares or pays any dividend on the Common payable in Common of the
respective class of such Common pursuant to Article III of the Restated
Articles, or effects a subdivision of the outstanding shares of either class
of Common into a greater number of shares of either class of Common (by
reclassification, stock split or by payment of a dividend in the respective
class of Common), then, and in each such event, the Conversion Ratio in effect
immediately prior to such dividend or subdivision shall be proportionately
increased. Such increase in the Conversion Ratio shall be deemed to have
occurred: (a) in the case of any such dividend, immediately after the close of
business on the record date for the determination of holders of any class of
securities entitled to receive such dividend; or (b) in the case of any such
subdivision, at the close of business on the date immediately prior to the
date upon which such corporate action becomes effective.
(ii) ADJUSTMENTS FOR COMBINATIONS OR CONSOLIDATION OF COMMON. If the
outstanding shares of Common are combined or consolidated, by
reclassification, recapitalization, merger, reorganization, combination or
exchange of shares, spin-off, split-off or otherwise, into a lesser number of
shares of Common, then the Conversion Ratio in effect immediately prior to
such combination or consolidation shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately decreased.
(iii) OTHER ADJUSTMENTS. The Conversion Ratio shall also be
appropriately adjusted in the event of an extraordinary or unusual event not
described in (i) or (ii) above by reason of which an adjustment would be
equitable under the circumstances.
(e) EXERCISE OF CONVERSION RIGHTS UPON A LIQUIDATION EVENT. If at least
ten (10) days prior to the consummation of any event described in (h)(i)(1),
(h)(i)(2), (h)(i)(3) or (h)(i)(4) below, any holder of Series A Preferred
elects to exercise its Conversion Rights, then the conversion may, at the
option of any holder tendering Series A Preferred for conversion, be
conditioned upon the consummation of such event, in which event the Person(s)
entitled to receive the Class A Common issuable upon such conversion of the
Series A Preferred shall not be deemed to have converted such Series A
Preferred until immediately prior to the consummation of such event.
(f) NO IMPAIRMENT. The Company will not, by amendment of its Restated
Articles or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issuance or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company or in any manner
directly or indirectly impair or change the rights or entitlements of the
holders of the Series A Preferred (except as set forth in Section 5), but will
at all times carry out of all the provisions of this Section 4 and take all
actions that may be necessary or appropriate to protect the Conversion Rights
of the holders of the Series A Preferred against impairment. Except as set
forth in Section 5, the Company may not create and issue additional series of
Preferred Stock with rights senior to or on parity with the Series A
Preferred, but nothing herein shall prevent the Company from issuing any
additional shares of Class A Common or Class B Common or from creating or
establishing any other class or series of common stock or Preferred Stock
having rights or preferences with respect to dividends, distribution or
dissolution which are junior to the Series A Preferred (any of which, after
issuance, shall be included for all purposes hereof in the definition of
"Junior Shares" hereunder).
(g) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment
or readjustment of the Conversion Ratio pursuant to this Section 4, the
Company, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms of this Section 4 and furnish to
each holder of Series A Preferred a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon written request at any time of
any holder of Series A Preferred, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Ratio in effect at the time, and (iii) the
number of shares of Common and the amount, if any, of other property that
would be received at the time upon conversion of the Series A Preferred.
(h) NOTICES.
(i) EVENTS TRIGGERING NOTICES. The Company shall be obligated to
issue notices to the holders of the Series A Preferred in accordance with the
provisions of Section 4(h)(ii) below if any of the following events occur:
(1) a declaration by the Company of any dividend or distribution
upon shares of its Common, whether in cash, property, stock or other
securities (other than regular cash dividends) and whether or not out of
earnings or earned surplus;
(2) a pro-rata offering by the Company to the holders of any
class or series of its stock to subscribe for any additional shares of stock
of any class or series or other rights;
(3) any reclassification or recapitalization by the Company of
its outstanding Common involving a change in the Common;
(4) any Liquidation Event; or
(5) any intent to have a public offering of Common.
(ii) TYPES OF NOTICES. In connection with each event described in
this Section 4, the Company shall send the following notices:
(1) at least twenty (20) days prior to the date on which a
record is to be taken for the dividend, distribution or subscription rights
referred to in Sections 4(h)(i)(1) and 4(h)(i)(2) above or the date for
determining rights to vote with regard to the matters referred to in Sections
4(h)(i)(3) and 4(h)(i)(4) above, the Company shall send a notice to each
holder of Series A Preferred setting forth the record or voting date, and the
nature of the action;
(2) in case of any event referred to in Section 4(d) above, at
least twenty (20) days prior to the date when the event is to take place, the
Company shall send a notice to each holder of Series A Preferred setting forth
the date on which the holders of shares of Common shall be entitled to
exchange their Common shares for securities or other property deliverable upon
the occurrence of such event; and
(3) in any event, at least twenty (20) days prior to the
consummation of any event described in 4(h)(i)(1), 4(h)(i)(2), 4(h)(i)(3) and
4(h)(i)(4) above, the Company shall send a notice to each holder of Series A
Preferred setting forth the date on which such event is to be consummated;
(iii) DELIVERY OF NOTICES. Each such written notice shall be addressed
to each holder of Series A Preferred at the address for each such holder as
shown on the books of the Company and delivered in accordance with Section 8
hereof.
SECTION 5. CREATION OF CAPITAL STOCK SUPERIOR OR EQUAL TO THE SERIES A
PREFERRED.
- -----------------------------------------------------------------------
(a) OFFER OF REDEMPTION UPON CREATION OF SENIOR SHARES. As long as any
Series A Preferred are issued and outstanding, the Company may create one or
more new series or classes of capital stock having rights and preferences with
respect to dividends, distribution or to dissolution that are prior, superior
or substantially equal to the Series A Preferred (the "Senior Shares") if and
only if the Company shall have first offered in writing to the holders of the
Series A Preferred to redeem all of the then outstanding Series A Preferred at
a redemption price equal to the liquidation preference of such shares as set
forth in Section 1 hereof, plus all accrued but unpaid dividends (including
any accrued but unpaid dividends for any not yet completed quarter, computed
on the basis of the actual number of days elapsed) (the "Redemption Price").
Such offer may be accepted only in writing which is delivered to the Company
not later than ten (10) business days following the date such holder of Series
A Preferred shall have received the Company's redemption offer. Such offer
may be accepted by all or less than all of the holders of all of the
outstanding Series A Preferred and as to all or less than all of the Series A
Preferred owned by each holder. If accepted, such redemption shall be
effected in accordance with the provisions of this Section 5 hereof.
(b) PROVISION OF REDEMPTION NOTICE. To the extent any or all of the
holders of the Series A Preferred accept the Company's offer to redeem their
Series A Preferred, such accepting holders shall thereupon be provided with
not less than ten (10) days prior written notice of the redemption. The
notice of redemption must set forth all of the following:
(i) the date fixed for redemption which date shall not be later than
the date of the issuance of any of the Senior Shares (the "Redemption Date");
(ii) the Redemption Price; and
(iii) the place at which the holders of the Series A Preferred may
obtain payment of the Redemption Price upon surrender of their certificates
representing their shares of Series A Preferred.
(c) MAILING OF REDEMPTION NOTICE. A copy of the notice of redemption must
be mailed to each holder of Series A Preferred of record as of the date fixed
by the Company's Board of Directors and addressed to the holder, at such
holder's address appearing on the Company's books or given by such holder to
the Company for the purpose of notice, or if no such address appears or is
given, at the place where the principal office of the Company is located, not
less than ten (10) days prior to the Redemption Date.
(d) FUNDS AVAILABLE FOR REDEMPTION PAYMENTS. The redemption payments may
be made from any legally available source or fund of the Company and shall
include all accrued dividends from the beginning of the year of such
redemption until the date of such redemption (including any accrued but unpaid
dividends for any not yet completed quarter which shall be computed on the
basis of the actual number of days elapsed.
(e) DEPOSIT OF FUNDS. On or before the Redemption Date, the Company must
deposit with any bank or trust company, as a trust fund, a sum sufficient to
redeem, on the Redemption Date, the Series A Preferred to be redeemed and to
pay, on or after the Redemption Date, the Redemption Price of the Series A
Preferred to the respective holders on the surrender of their certificates,
and from and after the Redemption Date, the Series A Preferred shall be deemed
to be redeemed, and dividends on those shares shall cease to accrue after the
Redemption Date. The deposit shall be deemed to constitute full payment of
the Series A Preferred to their holders, and from the Redemption Date the
Series A Preferred that were so redeemed shall be deemed to be no longer
outstanding, and the holders of the Series A Preferred shall cease to be
shareholders with respect to such shares, and shall have no rights with
respect to such Series A Preferred except the right to receive from the bank
or trust company payment of the Redemption Price of the Series A Preferred,
without interest, within seven business days following surrender of their
certificates along with any right to convert the Series A Preferred which may
exist. Such deposit shall be irrevocable and under no circumstances shall the
Company be entitled to withdraw any sums so deposited.
(f) SURRENDER OF CERTIFICATES. On or before the Redemption Date, each
holder of Series A Preferred being redeemed shall, unless such holder has
previously exercised such holder's option to convert such holder's Series A
Preferred as provided above, surrender the certificate for the Series A
Preferred to the Company at the place designated in the redemption notice and
shall then be entitled to receive payment of the Redemption Price.
SECTION 6. PREFERRED SHARES MAY NOT BE REISSUED.
- ------------------------------------------------
Shares of Series A Preferred converted as provided in Section 4 or redeemed as
provided in Section 5 may not be reissued.
SECTION 7. VOTING RIGHTS.
- -------------------------
The holders of Series A Preferred shall not have any voting rights except as
may be expressly required by law. For purposes of determining the voting
rights of holders of Series A Preferred in relation to those of holders of
other series of Preferred Stock, each holder of Series A Preferred Stock will
be entitled to one (1) vote per share of Series A Preferred Stock.
SECTION 8. METHODS OF GIVING NOTICES.
- -------------------------------------
Unless otherwise provided herein, all written offers, acceptances, notices and
other communications which are required or permitted hereunder shall be in
writing and shall be deemed to have been duly given when (i) delivered
personally, (ii) three (3) days after being sent by registered or certified
mail, return receipt requested, postage prepaid, (iii) one (1) day after being
sent by a nationally known overnight delivery service, or (iv) when sent by
telephone facsimile confirmed by overnight delivery service, to the parties at
the addresses or facsimile numbers provided to the Company, or at such other
address as shall be specified by notice.
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Company by its vice president, Anthony J. Verkruyse and its secretary,
Anthony J. Verkruyse, has affixed the corporate seal hereto and attested said
seal on the 30th day of January, 1997.
HUNTCO INC.
By: /s/ Anthony J. Verkruyse
-------------------------
Anthony J. Verkruyse,
Vice President
[SEAL]
ATTEST:
/s/ Anthony J. Verkruyse
- ---------------------------------
Anthony J. Verkruyse, Secretary
STATE OF MISSOURI )
) SS
COUNTY OF ST. LOUIS )
I, Celene T. Hanley, a Notary Public, do hereby certify that on this 30th
day of January, 1997, personally appeared before me ANTHONY J. VERKRUYSE, who,
being by me first duly sworn, declared that he is a Vice President of Huntco
Inc., that he signed the foregoing document as Vice President of the
corporation, and that the statements therein contained are true.
/s/ Celene T. Hanley
--------------------------
Notary Public
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (the "Agreement") is entered into as
of the 30th day of January, 1997, by and between Huntco Inc., a Missouri
corporation ("Huntco") and Coil-Tec, Inc. ("Coil-Tec"), an Alabama
corporation.
WHEREAS, Huntco and Coil-Tec are parties to that certain Asset Purchase
Agreement dated as of even date to which Huntco Steel, Inc., Huntco's
indirect, wholly-owned subsidiary and ARBED Americas, Inc., the majority
shareholder of Coil-Tec, are also parties (the "Asset Purchase Agreement"),
pursuant to which, inter alia, (i) Huntco shall issue and sell to Coil-Tec and
Coil-Tec shall purchase from Huntco, Two Hundred and Twenty-Five Thousand
(225,000) shares of Huntco's Series A Preferred Stock having a par value of
$.01 per share and a liquidation value of Twenty Dollars ($20.00) per share
(the "Series A Preferred Stock"), and (ii) Huntco has agreed to grant certain
registration rights with respect to the Two Hundred and Twenty-Five Thousand
shares of Huntco's Class A Common Stock having a par value of $.01 per share
(the "Class A Common Stock") into which the Series A Preferred Stock is
convertible, pursuant to the terms and conditions set forth in this Agreement.
1. DEFINITIONS. Unless otherwise defined herein, the capitalized terms
shall have the meanings ascribed to them below.
(a) "Affiliate" means an entity which, directly or indirectly, owns
or controls, is owned or is controlled by or is under common ownership or
control with another entity.
(b) "Asset Purchase Agreement" has the meaning ascribed to it in the
recital.
(c) "Class A Common Stock" has the meaning ascribed to it in the
recital, as well as, where applicable, any securities resulting from a
reclassification thereof.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
(e) "Holder" means Coil-Tec and any of its Affiliates or assignees
then holding Registrable Securities who have agreed to be bound by the
obligations imposed on such persons or entities in accordance with Section
10(g) hereof, unless the context clearly implies otherwise.
(f) "Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint stock company, trust,
unincorporated organization, government or other agency or political
subdivision thereof, or other entity.
(g) "Piggyback Notice" has the meaning ascribed to it in Section
2(a)(i).
(h) "Piggyback Registration" has the meaning ascribed to it in
Section 2(a).
(i) "Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other amendments and
supplements to the prospectus, including any post-effective amendments, and
all material incorporated or deemed to be incorporated by reference in such
prospectus.
(j) "Registrable Securities" means all shares of Class A Common Stock
held by a Holder upon the conversion of its Series A Preferred Stock into
Class A Common Stock pursuant to the terms of the Certificate of Designation
by which the Series A Preferred Stock was created, until the earlier of the
time (i) the rights, duties and obligations of each of the parties hereto
shall be satisfied or discharged or (ii) this Agreement shall otherwise expire
pursuant to its terms.
(k) "Registration Statement" means any registration statement of
Huntco filed under the Securities Act which covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including the
Prospectus relating thereto and all amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and
all material incorporated or deemed to be incorporated by reference in such
registration statement.
(l) "SEC" means the Securities and Exchange Commission or any
successor thereto.
(m) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder.
(n) "Series A Preferred Stock" has the meaning ascribed to it in the
recital.
(o) "Termination Date" has the meaning set forth in Section 2(a).
2. PIGGYBACK REGISTRATION.
(a) If at any time from the date hereof but prior to the third
anniversary thereafter (the "Termination Date"), Huntco shall determine to
register any of its Class A Common Stock (or any security resulting from a
reclassification thereof), either for its own account or the account of one or
more holders of the Class A Common Stock, other than a registration relating
solely to employee benefit plans, incentive stock option or similar plans, on
Form S-8 or a registration on Form S-4, relating to an SEC Rule 145
transaction, Huntco will:
(i) promptly give to Holder written notice of its registration
intent (the "Piggyback Notice"); and
(ii) include in such registration and in any underwriting
involved therein, all or such portion of the Registrable Securities held by
Holder, as specified in a written request or requests (the "Request for
Registration"), made within twenty (20) business days after receipt of the
Piggyback Notice by Holder, except as set forth in Section 2(b) below
("Piggyback Registration").
(b) If a registration for which Huntco gives a Piggyback Notice is
for a registered public offering involving an underwriting, Huntco shall so
advise Holder in the Piggyback Notice. In such event, the right of Holder to
registration of its Registrable Securities pursuant to this Section 2(b) shall
be conditioned upon Holder's participation in such underwriting and the
inclusion of Holder's Registrable Securities in the underwriting to the extent
provided herein. If Holder proposes to distribute its Registrable Securities
through such underwriting, it shall, together with Huntco and the other
Persons distributing their securities through such underwriting, enter into an
underwriting agreement in customary and reasonable form with the underwriter
or underwriters selected for such underwriting by Huntco. Notwithstanding any
other provision of this Section 2(b), if the managing underwriters of such
offering inform Huntco in writing that it is their opinion that the total
number of shares of Class A Common Stock which Holder, Huntco and any other
Persons desiring to participate in such registration intend to include in such
offering is such as to materially and adversely affect the success of such
offering, then the number of shares to be offered for the accounts of Holder
and for the accounts of all other Persons other than Huntco (assuming Huntco
is itself participating in the public offering), shall be reduced or limited
pro rata in proportion to the respective number of shares of Class A Common
Stock requested to be registered by Holder and all such other Persons, to the
extent necessary to reduce the total number of shares of Class A Common Stock
requested to be included in such offering to the number of shares, recommended
for inclusion by such managing underwriters. No securities excluded from the
underwriting by reason of the recommendation of the managing underwriters
shall be included in such registration. If Holder disapproves of the terms of
the underwriting, Holder may elect to withdraw therefrom by written notice to
Huntco and the managing underwriters, and the Registrable Securities so
withdrawn shall also be withdrawn from registration. Huntco shall not be
required to maintain the effectiveness of any Registration Statement with
respect to a Piggyback Registration beyond the earlier of one hundred twenty
(120) days after the effective date thereof or consummation of the
distribution by Huntco of the Class A Common Stock included by it in such
Registration Statement. Huntco shall select the managing underwriter, if any,
for any Piggyback Registration.
3. RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE SECURITIES.
Holder agrees, if requested (pursuant to a timely written notice and only
if all other Persons (other than Huntco) participating in such registration
are required to enter into similar agreements with no less restrictive
provisions) by the managing underwriter or underwriters in connection with a
Piggyback Registration, not to effect any public sale or distribution of any
of the Registrable Securities held by Holder, including a sale pursuant to
Rule 144 under the Securities Act (except as part of such underwritten
offering), without the consent of the managing underwriter or underwriters,
during the period beginning ten (10) days prior to, and ending up to, but not
more than, one hundred eighty (180) days after, the closing date of each
offering made pursuant to any such Piggyback Registration.
4. REGISTRATION PROCEDURES.
In connection with a registration to which Huntco's Piggyback
Registration obligations pursuant to Section 2 hereof apply, Huntco shall use
commercially reasonable efforts to effect such registration in accordance with
the intended method or methods of disposition thereof, and pursuant thereto
Huntco shall promptly:
(a) Notify the selling Holder, and, if requested by such Holder,
confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the SEC or any other federal or state
governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information, (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose,
(iv) if at any time the representations and warranties of Huntco contained in
any agreement (including any underwriting agreement) contemplated by Section
4(g) below cease to be true and correct in any material respect, (v) of the
happening of any event which makes any statement made in such Registration
Statement or a related Prospectus or any document incorporated or deemed
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus
or documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein, in light of the circumstances under which they
were made, not misleading and (vi) of Huntco's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(b) Use reasonable efforts promptly to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement.
(c) Furnish to the selling Holder a reasonable number of conformed
copies of the Registration Statement or Statements and each post-effective
amendment thereto, including financial statements (but excluding schedules,
all documents incorporated or deemed to be incorporated therein by reference,
and all exhibits, unless requested in writing by Holder or counsel for
Holder).
(d) Deliver to the selling Holder such number of copies of the
Prospectus or Prospectuses relating to such Registrable Securities (including
each form of prospectus) and each amendment or supplement thereto as Holder
may reasonably request; and Huntco hereby consents to the use of such
Prospectus or each amendment or supplement thereto by Holder, to the extent
such use is required or permitted by law, in connection with the offering and
sale of Registrable Securities covered by such Prospectus or any amendment or
supplement thereto.
(e) Cooperate with the selling Holder and the managing underwriters
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with The
Depositary Trust Company; and to facilitate the registration of such
Registrable Securities in such names as the managing underwriters or Holder
may request at least two (2) business days prior to any sale of Registrable
Securities.
(f) Upon occurrence of any event contemplated by Section 4(a)(ii),
4(a)(iv), 4(a)(v) and 4(a)(vi) above, as promptly as practicable prepare a
supplement or post-effective amendment to each Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated by reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading.
Holder agrees that, upon receipt of any written notice from Huntco of the
happening of any event of the kind described in Section 4(a)(ii) through
4(a)(vi) hereof, Holder shall forthwith discontinue disposition of such
Registrable Securities covered by such Registration Statement or Prospectus
until Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by this Section 4(f), or until it is advised in writing by Huntco
that the use of the applicable Prospectus in all jurisdictions may be resumed
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus. In such
event, the period during which Huntco is required pursuant to the terms hereof
to maintain the effectiveness of a Registration Statement filed pursuant to a
Piggyback Registration shall be extended by a period equal to the period
during which Holder is required to discontinue disposition of Registrable
Securities. Holder agrees that upon receipt of any amended or supplemental
Prospectus, Holder shall dispose of, or if requested in writing by Huntco,
return to Huntco any and all copies of the Prospectus which are then remaining
in the possession of Holder and which Huntco has requested Holder cease
distributing.
(g) Enter into such agreements reasonably requested (including an
underwriting agreement in form, scope and substance as is customary in
underwritten offerings and is reasonably satisfactory to Huntco) and take all
such other customary and reasonable actions in connection therewith (including
those reasonably requested by the managing underwriters or Holder) in order to
expedite or facilitate the disposition of such Registrable Securities.
(h) In connection with the preparation of such Registration
Statement, make available for inspection by a representative or
representatives, as the case may be, of Holder and any attorney or accountant
retained by the underwriter, at the offices where normally kept, during normal
business hours upon prior written notice, all financial and other records and
pertinent corporate documents of or pertaining to Huntco and its Affiliates,
and cause the officers, directors and employees of Huntco and its Affiliates
to supply all information in each case reasonably requested by such
representative, underwriter, attorney or accountant; provided, however, that
all such information shall be kept confidential by such Persons and their
designees unless (i) disclosure of such information is required by court or
administrative order, (ii) disclosure of such information, in the opinion of
counsel to such Person, after consultation with counsel to Huntco, is required
by law or (iii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by such Person.
Without limiting the foregoing, no such information shall be used by such
Person in connection with any market transactions in securities of Huntco or
its Affiliates in violation of the law.
(i) Comply in all material respects with all applicable rules and
regulations of the SEC and applicable state securities law authorities.
(j) Cause all Registerable Securities covered by such Registration
Statement to be listed on each securities exchange on which securities of the
same class are then listed.
5. INFORMATION FROM HOLDER.
Huntco may require Holder during a Piggyback Registration to furnish to
Huntco such information regarding Holder and the distribution of such
Registrable Securities as Huntco may, from time to time, reasonably request in
writing and which is required in connection with any Registration, and Huntco
may exclude from such Piggyback Registration the Registrable Securities of
Holder if it fails to furnish such reasonably requested information within a
reasonable time after receiving such request and in such event Huntco shall
have no further obligations under this Agreement.
6. UNDERWRITTEN REGISTRATIONS.
Holder may not participate in any registration hereunder unless Holder
(i) agrees to sell Holder's Registrable Securities on the basis provided in
the applicable underwriting arrangements, if any, containing customary terms
(applicable to all participants in such registration other than Huntco)
negotiated in good faith by Huntco and (ii) completes and executes all
customary questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required of all participants in such
registration other than Huntco, under the terms of such underwriting
arrangements.
7. REGISTRATION EXPENSES.
Huntco will pay all of the expenses in connection with the registration
of Registrable Securities including printing costs, listing fees, accounting
fees and the fees and expenses of its counsel, and Holder shall pay the fees
and expenses of its counsel, and all registration and filing fees and expenses
and underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of Holder's Registrable Securities
pursuant to any Registration Statement filed pursuant to Section 2 hereof. In
connection with the registration of Registrable Securities, Holder, its
Affiliates and all assignees or transferees of Holder shall be required to
designate one counsel to represent collectively the interests of all such
parties in such registration.
8. INDEMNIFICATION.
(a) Indemnification by Huntco. Huntco shall, without limitation as
to time or amount, indemnify and hold harmless, to the full extent permitted
by law, Holder and each of Holder's stockholders, directors, officers,
employees, agents, partners and Affiliates, from and against any and all
losses, claims, damages, liabilities (joint or several), costs (including,
without limitation, reasonable attorney's fees) and expenses (collectively,
"Losses") arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
Prospectus or form of prospectus or in any amendment or supplement thereto or
in any preliminary prospectus incident to any such registration or
qualification, or arising out of or based upon any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, except insofar as the same are based upon information
furnished in writing to Huntco by Holder or any underwriter specifically for
use therein; provided, however, that Huntco shall not be liable for any Losses
to the extent such Losses arise out of or based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
preliminary prospectus if (i) the Prospectus is not being distributed by an
underwriter and Holder failed to send or deliver a copy of the Prospectus with
or prior to the delivery of written confirmation of the sale by Holder to the
Person asserting the claim from which such Losses arise and (ii) the
Prospectus would have contained information correcting such untrue statement
or such omission; and provided further, that Huntco shall not be liable in any
such case to the extent that any such Losses arise out of or are based upon an
untrue statement or omission in the Prospectus, if (x) such untrue statement
or omission is corrected in an amendment or supplement to the Prospectus, and
(y) having previously been furnished by or on behalf of Huntco with copies of
the Prospectus as so amended or supplemented, Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior to or
concurrently with the sale of a Registrable Security to the Person asserting
the claims from which such Losses arise and the result of such correction,
amendment or supplement would have been no liability with respect to Holder.
(b) Indemnification by Holder. In connection with any Registration
Statement pursuant to which Holder is selling Registrable Securities, Holder
shall furnish to Huntco such information as Huntco reasonably requests in
writing and which is required in connection with any Registration Statement or
Prospectus and Holder agrees, without limitation as to time, severally and not
jointly, to indemnify and hold harmless to the full extent permitted by law,
Huntco, and each of Huntco's stockholders, directors, officers, employees,
agents, partners and affiliates, from and against any and all Losses arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or form of
prospectus or in any amendment or supplement thereto incident to any such
registration or qualification, or arising out of or based upon any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which they
were made, not misleading, to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission is contained in any
information furnished in writing by Holder to Huntco specifically for use in
such Registration Statement or Prospectus, but only to the extent that such
untrue statements or alleged untrue statements or omissions or alleged
omissions by Holder were not based on the authority of an expert as to which
Holder had no reasonable ground to believe, and did not believe, that the
statements made based on the authority of such expert were untrue or that
there was an omission to state a material fact. Notwithstanding the foregoing
provision, Holder shall not be required to pay under such provisions an amount
in excess of the proceeds received by Holder in payment of the Registrable
Securities sold by Holder pursuant to the Registration Statement. Huntco
shall be entitled to receive indemnities from underwriters, selling brokers,
dealer managers and similar securities industry professionals participating in
the distribution to the same extent as is provided above with respect to
information so furnished by such Persons for use in any Prospectus or
Registration Statement.
(c) Conduct of Indemnification Proceedings. Any Person claiming a
right to indemnity under this Agreement (an "indemnified party") shall give
prompt notice to the party from which such indemnity is sought (the
"indemnifying party") of any claim or of the commencement of any proceeding
with respect to which such indemnified party seeks indemnification or
contribution pursuant hereto. The indemnifying party shall have the right,
exercisable by giving written notice to an indemnified party promptly after
the receipt of written notice from such indemnified party of such claim or
proceeding, acknowledging the indemnifying party's obligation to provide
indemnification with respect to such claim based upon the facts known to the
indemnifying party at such time, to assume, at the indemnifying party's
expense, the defense of any such claim or proceeding, with counsel reasonably
satisfactory to such indemnified party; provided, however, that under such
circumstances an indemnified party shall have the right to employ separate
counsel in any such claim or proceeding 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: (1) the indemnifying party agrees to pay such
fees and expenses; or (2) the indemnifying party fails promptly to assume the
defense of such claim or proceeding or fails to employ counsel reasonably
satisfactory to such indemnified party; or (3) the indemnified party shall
have been advised by counsel that there may be one or more material defenses
available to such indemnified party that are different from or additional to
those available to the indemnifying party, in which case, if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense thereof, it being
understood, however, that the indemnifying party shall not, in connection with
any one such claim or proceeding or separate but substantially similar or
related claims or proceedings in the same jurisdiction, arising out of the
same general allegations or circumstances, be liable for the fees and expenses
of more than one separate firm of attorneys (together with appropriate local
counsel) at any time for such indemnified party, or for fees and expenses that
are not reasonable. Whether or not such defense is assumed by the
indemnifying party, such indemnifying party will not be subject to any
liability for any settlement made without its consent and the consent of the
indemnified party (but such consent will not be unreasonably withheld). The
indemnifying party shall not consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release, in
form and substance satisfactory to the indemnified party, from all liability
in respect of such claim or litigation for which such indemnified party would
be entitled to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this
Section 8 is insufficient or legally unavailable to an indemnified party in
respect of any Losses (or actions in respect thereof) referred to in this
Section 8, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such Losses (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by each indemnified and indemnifying party from the offering of Class A Common
Stock pursuant to a Piggyback Registration. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each indemnifying party shall contribute to such amount paid or
payable to such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault, as
applicable, of each indemnified and indemnifying party in connection with the
statements or omissions which resulted in such Losses (or actions in respect
thereof), as well as other relevant equitable considerations. The relative
benefits received by, as applicable, each indemnified and indemnifying party
shall be deemed to be in the same proportion as the net proceeds from the
offering (before deducting expenses) received by each indemnified and
indemnifying party, respectively, bear to the total net proceeds from the
offering (before deducting expenses). The relative fault of a party shall be
determined by reference to, among other things, whether the untrue statement
of a material fact or the omission or alleged omission to state a material
fact relates to information supplied by such party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission and any other relevant factors. Huntco and Holder
agree that it would not be just and equitable if contributions pursuant to
this subsection were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this subsection. The amount paid or payable by an
indemnified party as a result of the Losses (or actions in respect thereof)
referred to above in this subsection shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
above provisions, Holder shall not be required to contribute any amount in
connection with any Registration Statement in excess of the proceeds received
by Holder pursuant to such Registration Statement. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The obligations of Huntco and Holder under this Section 8 shall
survive the completion of any offering of Registrable Securities in a
Registration Statement under this Agreement and otherwise.
(f) Any indemnity agreements contained herein shall be in addition to
any other rights to indemnification or contribution which any indemnified
party may have pursuant to law or contract and shall remain operative and in
full force and effect regardless of any investigation made or omitted by or on
behalf of any indemnified party.
9. TERM OF AGREEMENT. This Agreement shall become effective as of the date
hereof and shall continue until the Termination Date. All indemnification
obligations set forth in Section 8 of this Agreement shall survive the
expiration or termination of this Agreement.
10. MISCELLANEOUS.
(a) All notices, consents, elections and directions required or
permitted under this Agreement (collectively "Notices") shall be given in
writing by registered or certified mail, postage prepaid, or by facsimile.
Any such notice shall be deemed given when so transmitted by facsimile if
followed by confirmation in the United States mails of a copy thereof; or, if
mailed, four (4) days after the date of deposit in the United States mails and
addressed as follows:
If to Holder:
Coil-Tec, Inc.
c/o Skyline Steel Corp.
8 Woodhollow Road
Parsippany, New Jersey 07054
Attn: Richard W. Lieb
Fax: (201) 428-8093
If to Huntco:
Huntco Inc.
14323 South Outer Forty, Suite 600 N.
Chesterfield, Missouri 63017
Attention: Robert J. Marischen
Fax: (314) 878-4537
or in either case to such other address as hereafter may be furnished in
writing by any party to the other parties.
(b) This Agreement shall be governed by and construed under the
internal laws, but not the conflict of law principles, of the State of
Missouri.
(c) This Agreement, the Asset Purchase Agreement and the Certificate
of Designation setting forth the rights and privileges with respect to the
Series A Preferred Stock (the "Certificate of Designation") constitute the
full and entire understanding and agreement between the parties with respect
to registration rights. This Agreement may be amended, waived, discharged or
terminated only by written consent of Huntco and Holder. Effective upon the
Closing of the Asset Purchase Agreement, and subject only to the conditions
set forth therein, all provisions relating to the granting of registration
rights and covenants made by Huntco and Holder shall be contained in this
Agreement and the Certificate of Designation. The registration rights and
covenants provided herein, in the Certificate of Designation and in the Asset
Purchase Agreement set forth the sole and entire agreement between Huntco and
Holder on the subject matter and supersede any and all registration rights
granted or registration covenants made under any other agreement.
(d) This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(e) In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
(f) The captions and headings to Sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used
to construe the meaning or interpretation of this Agreement.
(g) The rights to cause Huntco to register the Registrable Securities
pursuant to this Agreement may be assigned in whole or in part by a Holder to
one or more of its Affiliates or to one or more transferees or assignees of
not less than twenty-five percent of all Registrable Securities acquired by
the Holder pursuant to the Asset Purchase Agreement, provided that such
transferee or assignee delivers to Huntco a written instrument by which such
transferee or assignee agrees to be bound by the obligations imposed on
Holders under this Agreement to the same extent as if such transferee or
assignee was a party hereto. Each Holder shall give prompt written notice to
Huntco of any assignment under this Section 10(g). Notice of any assignment
shall include the notice information for the assignee.
(h) Reports under the Exchange Act. With a view to making available
to Coil-Tec or its Affiliates the benefits of Rule 144 under the Securities
Act and any other rule or regulation of the SEC that may at any time permit
Coil-Tec or its Affiliates to sell securities of Huntco to the public without
registration, for so long as the shares of Series A Preferred Stock owned by
Coil-Tec or its Affiliates bear any restrictive legend, Huntco agrees to:
(i) use diligent efforts to make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times.
(ii) use diligent efforts to file with the SEC in a timely manner
all reports and other documents required of Huntco under the Exchange Act; and
(iii) furnish to Coil-Tec and its Affiliates, so long as Coil-Tec
or any such Affiliate owns any Series A Preferred Stock, forthwith upon
request (x) a copy of the most recent annual report of Huntco and such other
reports and documents distributed by Huntco to the holders of Class A Common
Stock generally, and (y) such other information as may be reasonably requested
in availing Coil-Tec or its Affiliates of any rule or regulation of the SEC
which permits the selling of any such securities without registration or
pursuant to such form.
IN WITNESS WHEREOF, the parties have hereby executed this Agreement as of
the date first above written.
HUNTCO INC. COIL-TEC, INC.
By: /s/ Robert J. Marischen By: /s/ Richard W. Lieb
----------------------------- -------------------------------
Print Name: Robert J. Marischen Name: Richard W. Lieb
Title: Vice Chairman Title: Vice President of Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO OF HUNTCO INC. AT AND FOR
THE NINE MONTHS ENDED JANUARY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JAN-31-1997
<CASH> 3,161
<SECURITIES> 0
<RECEIVABLES> 39,545
<ALLOWANCES> 577
<INVENTORY> 78,902
<CURRENT-ASSETS> 123,643
<PP&E> 159,737
<DEPRECIATION> 21,796
<TOTAL-ASSETS> 270,037
<CURRENT-LIABILITIES> 36,578
<BONDS> 105,424
0
4,500
<COMMON> 90
<OTHER-SE> 115,472
<TOTAL-LIABILITY-AND-EQUITY> 270,037
<SALES> 235,805
<TOTAL-REVENUES> 235,805
<CGS> 211,830
<TOTAL-COSTS> 211,830
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 136
<INTEREST-EXPENSE> 4,483
<INCOME-PRETAX> 8,287
<INCOME-TAX> 3,161
<INCOME-CONTINUING> 5,126
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,126
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
</TABLE>
