UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the eight months ended December 31, 1997
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
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14323 SOUTH OUTER FORTY, SUITE 600N, TOWN & COUNTRY, MISSOURI 63017
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(Address of principal executive offices) (Zip Code)
(314) 878-0155
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(Registrant's telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act:
CLASS A COMMON STOCK,
$0.01 PAR VALUE NEW YORK STOCK EXCHANGE
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(Title of class) (Name of each exchange on which registered)
Securities Registered pursuant to Section 12(g) of the Act: NONE
----
(Title of class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant at February 28, 1998 was $74,489,019 (computed by reference to the
closing price of the registrant's Class A common stock, as quoted by the New
York Stock Exchange, Inc. on such date). All of the Company's Class B common
stock, which is the only other voting stock of the Company, is held by
affiliates of the Company.
As of February 28, 1998, 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.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held May 7, 1998 (the "1998 Proxy Statement"),
are incorporated by reference into Part III of this report.
PART I
ITEM 1. BUSINESS
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BACKGROUND
- ----------
Huntco Inc. ("Huntco" or "the Company") was incorporated under Missouri law in
May 1993, to indirectly hold the common stock of Huntco Steel, Inc., a
Delaware corporation ("Huntco Steel") and Midwest Products, Inc., a Missouri
corporation ("Midwest"). The Company, through Huntco Steel, is a major
intermediate steel processor, specializing in the processing of flat rolled
carbon steel to specified close tolerances. Through Midwest, the Company is a
leading manufacturer of portable compressed air vessels for sale through mass
merchandisers and compressed air cylinders for use in tractor-trailer brake
systems.
The Company's products are delivered from facilities in Arkansas, Illinois,
Kentucky, Missouri, Oklahoma, South Carolina, Tennessee, and Texas to over
1,400 customers located primarily in the midwestern and southern regions of
the United States. The strategic location of the Company's steel processing
plants, with access to its major suppliers via the inland waterway system,
allows the Company to take delivery of raw materials by barge, in addition to
rail and truck, thereby minimizing inbound transportation costs. The
Company's primary processed products include hot rolled, hot rolled pickled
and oiled, hot rolled tempered and cold rolled steel, which is cut-to-length
into sheets, plates, or custom blanks; slit; edge conditioned; or in the case
of pickled and oiled, tempered and cold rolled products, sold as master coils.
The Company also produces custom metal stampings.
INDUSTRY OVERVIEW
- -----------------
Intermediate steel processors occupy a niche between the primary steel
producers and industrial customers who need processed steel for their end-
product manufacturing purposes and between the primary producers and general
steel service centers and distributors who handle broad product lines of
processed metal products and who tend to specialize more in distribution than
in processing. Intermediate steel processors specialize in value-added
processing of steel coils, such as cutting-to-length, slitting, blanking,
shape correction and surface improvement, pickling, cold reduction, annealing,
tempering, edge rolling, shearing and stamping. These processes produce steel
to specified lengths, widths, shapes and surface characteristics pursuant to
specific customer orders. The processing techniques typically require
specialized equipment and require high volume production in order to be
performed economically. Intermediate steel processors typically have lower
cost structures and provide better service in value-added processing than the
primary producers. The intermediate steel processors are able to perform many
of these processes more efficiently than steel service centers and
distributors because the intermediate steel processors specialize in a
narrower range of products and therefore are able to attract sufficient volume
to justify the investment in specialized processing equipment.
Primary steel producers historically have emphasized the sale of steel to
large volume purchasers and generally have viewed intermediate steel
processors as an integral part of their customer base. Furthermore, end
product manufacturers and service centers and distributors increasingly have
sought to purchase steel on shorter lead times and with more frequent and
reliable deliveries than normally can be provided by the primary producers.
Additionally, most manufacturers are not willing to commit to the investment
in technology, equipment and inventory required to process steel for use in
their own manufacturing operations. These industry forces have created a
market in which the success of an intermediate steel processor is based upon
its ability to purchase, process and deliver steel to the end user in a more
efficient and cost effective manner than the end user could achieve in dealing
directly with the primary producer of the steel or with another intermediate
steel processor.
PRODUCTS AND PROCESSING SERVICES
- --------------------------------
The Company maintains a substantial inventory of steel coils purchased from
the primary producers. This steel is in the form of a continuous sheet,
typically 36 to 84 inches wide, between .015 and .500 inches thick, and rolled
into 10 to 30-ton coils. Because of the size and weight of these coils and
the equipment required to move and process them into smaller sizes, such coils
do not meet the requirements, without further processing, of a majority of the
Company's customers. By purchasing various kinds of steel in large quantities
and at predetermined intervals, the Company attempts to purchase its raw
materials at the lowest competitive price for the quality purchased.
Customer orders are entered in a computerized order entry system, and
appropriate inventory is then selected and scheduled for processing in
accordance with the customer's specified delivery date. The Company attempts
to maximize yield by combining customer orders for processing to use each
purchased coil to the fullest extent practicable.
The Company uses techniques such as cold rolling, annealing, tempering,
pickling, cutting-to-length, slitting, blanking, edge rolling, shearing and
stamping to process steel to specified lengths, widths and shapes pursuant to
specific customer orders. Cold rolling and tempering reduce the thickness of
the steel by passing the steel through pressure reduction rolls, which also
improves the surface characteristics of the steel being processed. Annealing
involves heating the steel to soften it for further finishing after it has
been cold reduced. Pickling cleans the mill scale from the steel by
subjecting the steel to a series of hydrochloric acid baths. A portion of the
steel that the Company pickles serves as feed stock for the cold rolling mill.
Cutting-to-length involves cutting steel along the width of the coil.
Slitting involves cutting steel to specified widths along the length of the
coil. Blanking cuts the steel into close tolerance, specific shapes. Shape
correction improves the physical appearance of the steel by removing edge
wave, center buckle, crown or camber from the steel by a process known as
elongation, which includes equalizing and tension leveling, and which achieves
shape correction by stretching the fibers of the steel. Edge rolling imparts
round or smooth edges to produce strips or coils. Shearing cuts the steel
into small pieces. Stamping involves using presses to form previously
processed steel (e.g. slit coils) into parts.
The Company also manufactures compressed air cylinders for tractor-trailer air
brake systems and portable compressed air vessels to inflate objects, such as
automobile tires, which are sold to mass merchandisers and automotive
specialty stores. The air cylinders are fabricated from components processed
by a Company processing center, including the stamped heads, legs and handles
and the blanked wraps. The components are welded, painted, tested and
packaged as required.
REVIEW OF OPERATIONS
- --------------------
Blytheville Facility:
Located in Blytheville, Arkansas, with access to the Mississippi River, the
Blytheville facility continues to drive the Company's growth. The Company
began operations in Blytheville in October, 1992 with a new, heavy gauge, cut-
to-length line, followed by a new, heavy gauge, slitting line in June, 1993.
A push-pull coil pickling line was next placed into service in June, 1994.
The Company's cold rolling operation, which includes a cold rolling mill,
annealing furnaces, and a temper mill for coils up to 60 inches wide (the
"Cold Mill"), began limited production during the quarter ended July 31, 1995.
The initial phase of the Cold Mill had a productive capacity of up to 240,000
tons per year. During 1997, the Company completed capacity and quality
enhancements to the Cold Mill by adding more annealing furnaces and installing
shape meter rolls to the cold rolling mill, thereby increasing the capacity of
the Cold Mill to produce fully annealed cold rolled master coils to
approximately 360,000 tons per year. The Company plans to add a new
filtration system to the cold rolling mill and an electrostatic oiler to the
temper mill during 1998. These enhancements to the Cold Mill are expected to
result in higher product quality. The Company has also substantially
completed the installation of a second coil pickling line, beginning
production on this line in January, 1998. The new pickling line should
increase the Company's pickling capacity to approximately 900,000 tons per
year, and is expected to provide a higher quality feedstock for the Cold Mill.
During the summer of 1996, the Company completed the relocation of its
stamping operations from a facility located in Springfield, Missouri to a new
plant located within the Blytheville facility. In conjunction with this
relocation, the Company added new slitting and blanking equipment designed to
process both cold rolled and pickled and oiled steel.
On January 30, 1997, the Company acquired a hot rolled steel tempering
facility from Coil-Tec, Inc. The acquired plant was located immediately
adjacent to the Company's existing Blytheville operation, and has been
integrated into the Company's Blytheville facility.
The Company sells its hot rolled, pickled and oiled, and tempered products to
service centers, pipe and tube manufacturers, transportation equipment
manufacturers, metal building companies, original equipment manufacturers,
stampers, and fabricators. Cold rolled and stamping products are sold to
service centers, tube manufacturers, metal building companies, original
equipment manufacturers, stampers, and fabricators.
Chattanooga Facility:
Located in Chattanooga, Tennessee, on the Tennessee River, the Chattanooga
facility opened in July, 1994 with a heavy gauge, cut-to-length line. The
facility was expanded in April, 1995 with the addition of a new slitting line
and in June, 1995 with the addition of a new cut-to-length line, both of which
were designed to process cold rolled and pickled and oiled steel. The
Chattanooga facility provides the Company access to markets in the
southeastern United States, servicing customers such as service centers,
appliance and furniture manufacturers, tube mills, and other end users of both
hot rolled and cold rolled steel.
Berkeley Facility:
Located in Berkeley County, South Carolina, near Charleston, this new facility
is in close proximity to a new Nucor steel mill which produces both hot rolled
and cold rolled steel. The Company opened this facility late in its fiscal
year ended April 30, 1997 with a new, heavy gauge, sheet and plate cut-to-
length line and added a new high-speed, light gauge slitting line shortly
thereafter. The South Carolina facility has rail access as well as waterway
access to the Atlantic Ocean. The Company is serving markets along the
Atlantic seaboard to the north and south, as well as to the west, with
processed products from this location.
Gallatin Facility:
Located in Gallatin County, Kentucky, on a 20-acre tract of land immediately
adjacent to the Gallatin steel mill, and with access to the Ohio River, this
facility was opened by the Company in May, 1996 with a new, heavy gauge, sheet
and plate cut-to-length line. The facility sells processed sheets and plates
to manufacturers servicing the transportation and heavy machinery industries.
Madison Facility:
Located in the St. Louis metropolitan area with access to the Mississippi
River, the Madison, Illinois facility commenced operations in 1983. The
facility is equipped with two slitting lines. One of the slitting lines is
used to process heavy gauge, hot rolled steel while the other primarily
processes cold rolled and pickled and oiled steel. The facility also operates
a new cut-to-length line to process cold rolled and pickled and oiled steel
which was added in the quarter ended April 30, 1996. Early in the fiscal year
ended April 30, 1997, the Company expanded this facility to provide inside
rail access to better facilitate the handling of cold rolled products. The
facility provides processed steel products to a diverse group of customers,
including metal fabricators, service centers and tube, consumer durables and
transportation equipment manufacturers.
Catoosa Facility:
Located at the Port of Catoosa, near Tulsa, Oklahoma, the Catoosa facility is
situated on the western edge of the inland waterway system on the Arkansas
River. This facility commenced operations in 1978 and is equipped with a
heavy gauge, cut-to-length line which was purchased new in 1985. The facility
was expanded during the year ended April 30, 1996, to include a doubling of
the physical plant and the addition of a cut-to-length line to process cold
rolled and pickled and oiled steel. The building expansion also allows for
inside coil storage. The facility processes coils into sheets and plates,
primarily for heavy equipment manufacturers, manufacturers of tanks for
petroleum products and for wet and dry bulk storage, construction and metal
building companies.
Pasadena Facility:
Located on a 20-acre tract of land on the shipping channel near Houston,
Texas, the Pasadena facility commenced operations in 1982. The facility is
equipped with two heavy gauge cut-to-length lines, the first of which was
purchased new in 1982 and the second of which was added in December, 1994.
The Company plans to replace the original cut-to-length line during 1998. The
facility operates its own unloading facility and is capable of directly
discharging barges. The facility was expanded in 1996 with the addition of a
new climate controlled warehouse used to store cold rolled steel master coils.
The facility produces processed hot rolled sheets and plates for manufacturers
of heavy farm and construction equipment, storage tanks, metal building
companies, and various energy related concerns and distributes unprocessed
master coils of cold rolled and tempered steel.
Strafford Facility:
Located in Strafford, Missouri, this facility is home for the Company's
cylinder operation which produces approximately 800,000 units annually. These
products include air cylinders used in tractor trailer brake systems and
portable compressed air vessels used to fill inflatable objects such as
automobile tires. The major raw material used in the manufacture of the
cylinders is pickled steel, which has been blanked, slit or stamped by the
Company's stamping operation prior to delivery to the Strafford facility for
final assembly, welding and painting. The Company installed an electrostatic,
powder coating paint system at this facility during fiscal 1996, resulting in
higher product quality and lower costs, as well as opening new markets for the
Company.
QUALITY CONTROL
- ---------------
The procurement of high quality steel from suppliers on a consistent basis is
critical to the Company's business. Historically, about 2% of raw materials
have failed to conform to order specifications, with most of the nonconforming
raw material being diverted to less critical applications. The Company has
instituted quality control measures to attempt to assure that the quality of
purchased raw material will allow the Company to meet the specifications of
its customers and to reduce the costs and inefficiencies of production
interruptions. Physical and chemical analyses are performed on selected raw
materials to verify that their mechanical and dimensional properties,
cleanliness and surface characteristics meet the Company's requirements. The
Company believes that maintenance of high standards for accepting raw
materials ultimately results in reduced return rates from its customers.
Similar analyses are conducted on processed steel on a selected basis before
delivery to the customer. The Company also uses statistical process control
techniques to monitor its slitting process so management can document to
customers that required tolerances have been continuously maintained
throughout processing. The Company also maintains a test laboratory at its
Blytheville facility to provide timely and economical testing and quality
certifications.
SUPPLIERS
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The Company purchases steel coils for processing at regular intervals from a
number of primary steel producers including Nucor Corporation, Gallatin Steel,
AK Steel Corporation, Trico, National Steel Corporation, USX Corporation,
Geneva Steel, Inland Steel Company, Bethlehem Steel Corporation, and various
foreign suppliers (generally through trading companies). The Company orders
steel to specified physical qualities and alloy content. By purchasing in
large quantities at consistent predetermined intervals, the Company attempts
to purchase its raw materials at the lowest competitive prices for the quality
purchased. The Company believes that it is not dependent on any one of its
suppliers for raw materials and that it has good relationships with its
suppliers.
MARKETING
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The Company's products and services are sold primarily by Company sales
personnel supported by executive management of Huntco Steel, and by the
Company's technical support staff. The Company generally produces its
processed steel products to specific customer orders rather than for
inventory. The Company generally does not enter into fixed-price sales
contracts with its steel processing customers with terms longer than three
months. Many of the Company's customers commit to purchase on a quarterly
basis with the customer notifying the Company of specific release dates as
they require the processed products. Customers typically notify the Company
of release dates anywhere from a just-in-time basis up to approximately three
weeks before the release date. The Company is therefore required to carry
sufficient inventory of raw materials to meet the short lead-time and just-in-
time delivery requirements of its customers. Because the Company ships most
steel processing orders on short lead-times, the amount of backlog at any
point is not significant.
CUSTOMERS AND DISTRIBUTION
- --------------------------
Huntco sells its processed steel products to over 1,400 customers in market
areas reaching from the upper midwest, south to the Gulf of Mexico and from
the southeastern coastline, west to the Rocky Mountains. The Company's
customer base includes service centers and metal fabricators as well as
various storage tank, consumer durable, energy and transportation related
manufacturers. Other than one customer which accounted for 5.6% of the
Company's net sales, no other customer accounted for more than 5% of the
Company's net sales for the eight month transition period ended December 31,
1997. Steel service centers and distributors, which represent the Company's
largest single customer group, accounted for approximately one-third of the
Company's net sales for the transition period ended December 31, 1997. The
large geographic area the Company services helps to minimize the adverse
impact of regional economic changes.
While the Company ships products throughout the United States, its customers
are primarily located in the midwestern and southern regions of the United
States. Most of its steel processing customers are located within a 250-mile
radius of each of the Company's steel processing plants, facilitating an
efficient delivery system capable of handling a high frequency of short lead-
time orders. The Company transports a major portion of its products directly
to customers via independent trucking firms, supplemented by rail and barge.
The Company believes that its long-term relationships with many of its
customers are a significant factor in its business and that pricing and
service capabilities are the most critical factors in maintaining these
relationships.
COMPETITION
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Intermediate steel processing is a highly competitive industry in which
companies compete based on price, service and their ability to process and
deliver steel products based on short lead-time customer orders. The Company
competes primarily with other intermediate steel processors. Geographic
proximity to a customer is a significant factor. Specific, reliable data
concerning the size of the market in products which the Company processes, by
region, generally is not available. However, based on the Company's knowledge
of the market for processed steel, the amount of processed steel which it
sells to its customers, and a general knowledge of its competitors, the
Company believes that it is a significant competitor in all of the market
areas it serves and that it is one of the larger companies specializing in the
processing of flat rolled carbon steel. The Company's largest competitors
currently include Cargill, Inc., Ferralloy Corp. and Heidtman Steel Products
Inc. The primary competitors of the Company's Cold Mill are various foreign
suppliers, USX Corporation, Gulf States Steel and Nucor.
SEASONALITY
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Shipping volumes are lowest during the November and December holiday periods
and also tend to be lower during mid-summer, as many of the Company's
customers schedule plant shutdowns for vacations. These factors tend to
result in lower net sales and net income during these periods. Quarterly
results can also be affected, either negatively or positively, by changing
steel prices.
GOVERNMENTAL REGULATION
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The Company's processing centers and manufacturing facilities are subject to
many federal, state and local requirements relating to the protection of the
environment. The Company continually examines ways to reduce emissions and
waste and to effect cost savings relating to environmental compliance.
Management believes that it is in material compliance with all laws, does not
anticipate any material expenditures in order to meet environmental
requirements and generally believes that its processes and products do not
present any unusual environmental concerns. Expenditures incurred in
connection with compliance with federal, state and local environmental laws
have not had, and are not expected to have during the current calendar year, a
material adverse effect upon the capital expenditures, earnings or competitive
position of the Company or any of its subsidiaries.
The Company's operations are also governed by laws and regulations relating to
workplace safety and worker health, principally the Occupational Safety and
Health Act and regulations thereunder which, among other requirements,
establish noise and dust standards. Management believes that it is in
material compliance with these laws and regulations and does not believe that
future compliance with such laws and regulations will have a material adverse
effect on its results of operations or financial condition.
EMPLOYEES
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As of December 31, 1997, the Company employed 752 people. None of the
Company's employees are covered by collective bargaining agreements. The
Company has never experienced a significant work stoppage and considers its
employee relations to be good.
YEAR 2000
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The Company utilizes computer information systems to internally record and
track information, as well as to interact with certain customers, suppliers,
financial institutions, and other organizations. Management has preliminarily
assessed risks and costs related to addressing Year 2000 issues as they
pertain to the Company and its information systems. Based upon this
assessment, the Company does not believe that the modification of the
Company's systems to address such matters will have a material impact on the
Company's financial position or results of operations. However, there are
numerous uncertainties relating to addressing Year 2000 issues. These include
actual implementation of measures to address Year 2000 concerns, the impact of
outside parties appropriately addressing their Year 2000 issues, and other
factors, some of which may be out of the Company's control, and all of which
may cause results to be different than currently anticipated by the Company.
ITEM 2. PROPERTIES
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Reference should be made to the "REVIEW OF OPERATIONS" information found
within ITEM 1 for a further discussion of the Company's operating plant
facilities. The following sets forth certain additional information with
respect to each of these facilities:
<TABLE>
<CAPTION>
Square
Utilization Footage Owned or leased
- ------------------------------ ------- -------------------------------------
Blytheville, Arkansas:
---------------------
<S> <C> <C>
Cutting-to-length 80,000 Lease with a $100 purchase option.
Slitting
Tension leveling, shape
correction or elongation
Gauge verification and testing
Coil storage
Edge conditioning
Coil pickling 30,000 Owned improvements on leased realty.
Coil warehouse and storage 32,000 Owned improvements on leased realty.
Second coil pickling line 96,000 Leased equipment, with fair value
purchase option, other owned
improvements on leased realty
Cold rolling, annealing 194,000 Lease with $100 purchase option (1).
and tempering Certain annealing furnaces leased,
with fair value purchase options.
Cutting-to-length 152,000 Lease with $100 purchase option (1).
Slitting
Blanking
Tension leveling
Shearing and stamping
Gauge verification and testing
Design and tool engineering
Heavy gauge tempering 130,000 Leased facility and equipment, with
Gauge verification and testing certain fair value purchase options.
Cutting-to-length Selected owned improvements.
Chattanooga, Tennessee:
----------------------
Cutting-to-length 126,000 Lease with $10 purchase option (1).
Slitting
Tension leveling
Coil storage
Gauge verification and testing
Berkeley County, South Carolina:
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Cutting-to-length 130,000 Owned real estate;
Slitting leased processing equipment with
Tension leveling certain fair value purchase options.
Coil storage
Gauge verification and testing
Gallatin County, Kentucky:
-------------------------
Cutting-to-length 65,000 Owned.
Tension leveling
Coil storage
Gauge verification and testing
Madison, Illinois:
------------------
Cutting-to-length 128,000 Owned.
Slitting
Tension leveling
Edge conditioning
Coil storage
Gauge verification and testing
Catoosa, Oklahoma:
-----------------
Cutting-to-length 80,000 Owned improvements on leased realty.
Tension leveling
Coil storage
Gauge verification and testing
Pasadena, Texas:
---------------
Cutting-to-length 45,000 Owned.
Gauge verification and testing
Coil storage 21,000 Owned.
Strafford, Missouri:
-------------------
Gauge verification and testing 100,000 Owned.
Welding
Painting
(1) These leases represent arrangements by which title is held by the
respective County or municipality involved for tax abatement purposes via
capital lease arrangements, whereby the underlying capital lease obligation of
the operating subsidiary is owed to the Company's Huntco Nevada, Inc. finance
subsidiary. As such, these amounts are eliminated in consolidation, and such
property is reflected as owned property on the Company's consolidated balance
sheet.
</TABLE>
The above facilities are well maintained and in good operating condition.
With respect to capacity and utilization of such facilities, most of the
Company's steel processing plants operate an average of approximately 2 shifts
per day on a five day per week basis. The compressed air cylinder
manufacturing facility in Strafford, Missouri operates approximately 1.5
shifts per day.
ITEM 3. LEGAL PROCEEDINGS
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From time to time, the Company is named as a defendant in legal actions
arising out of the normal course of business. The Company is not currently a
party to any pending legal proceedings other than routine litigation
incidental to the business. Management believes the resolution of such
matters will not have a material adverse effect on the Company's results of
operations or financial condition. The Company maintains liability insurance
against risks arising out of the normal course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
No matters were submitted to the security holders of the Company during the
two months ended December 31, 1997.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
Class A common stock of the Company is traded on the New York Stock Exchange,
under the symbol "HCO". As of December 31, 1997, there were 74 holders of
record of the Company's Class A common stock and two holders of record of the
Company's Class B common stock.
All of the Company's 3,650,000 Class B Shares, the only other class of common
equity authorized for issuance under the Company's Restated Articles of
Incorporation (the "Articles"), are held by Huntco Acquisitions Holding, Inc.
and Huntco Farms, Inc., corporations controlled by Mr. B. D. Hunter, the
Company's Chairman of the Board and Chief Executive Officer.
There is no established public trading market for the Class B Shares as the
Articles provide that the Class B Shares are not transferrable except: (i)
upon conversion into Class A Shares as provided in the Articles; (ii) to the
Company for cancellation; or (iii) to any "Hunter Affiliate" or any member of
the "Hunter Group" as those terms are defined in the Articles.
The table below shows the Company's quarterly high and low Class A common
stock prices and quarterly per share dividend amounts paid on the Class A
common stock and the Class B common stock for the periods presented.
<TABLE>
<CAPTION>
High Low Dividends
------ ------ ---------
<S> <C> <C> <C>
Quarter ended July 31, 1995 $19.750 $14.250 $.025
Quarter ended October 31, 1995 18.375 12.375 .030
Quarter ended January 31, 1996 17.625 12.500 .030
Quarter ended April 30, 1996 21.750 15.375 .030
Quarter ended July 31, 1996 19.375 15.125 .030
Quarter ended October 31, 1996 20.125 15.375 .035
Quarter ended January 31, 1997 18.500 13.500 .035
Quarter ended April 30, 1997 14.000 10.000 .035
Quarter ended July 31, 1997 15.000 12.875 .035
Quarter ended October 31, 1997 14.875 13.375 .035
Two-month period
ended December 31, 1997 17.125 11.625 .035
</TABLE>
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
- ---------------------------------------------
<TABLE>
<CAPTION>
INCOME STATEMENT DATA (in thousands, except per share amounts):
Eight months
ended Year Ended April 30,
December 31, --------------------------------------------------
1997 (1) 1997 1996 1995 1994 1993
--------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net sales $246,324 $326,563 $264,087 $197,195 $146,213 $116,236
Cost of sales 227,871 294,455 245,863(2) 171,521 126,412 101,950
------- ------- ------- ------- ------- -------
Gross profit 18,453 32,108 18,224 25,674 19,801 14,286
Selling, general and
administrative expenses 11,757 15,383 13,147 9,638 8,183 7,076
------- ------- ------- ------- ------- -------
Income from operations 6,696 16,725 5,077 16,036 11,618 7,210
Interest, net (5,194) (6,239) (3,268) 5 (183) (2,523)
------- ------- ------- ------- ------- -------
Income before income taxes
and extraordinary item 1,502 10,486 1,809 16,041 11,435 4,687
Provision for income taxes 486 3,997 701 6,037 4,305 1,942
------- ------- ------- ------- ------- -------
Income before extraordinary item 1,016 6,489 1,108 10,004 7,130 2,745
Extraordinary item, net of tax - - - - - (683)(3)
------- ------- ------- ------- ------- -------
Net income 1,016 6,489 1,108 10,004 7,130 2,062
Preferred dividends 133 50 - - (399) -
------- ------- ------- ------- ------- -------
Net income available
for common shareholders $ 883 $ 6,439 $ 1,108 $10,004 $ 6,731 $ 2,062
======= ======= ======= ======= ======= =======
Earnings per common share (basic):
Income before extraordinary item $0.10 $0.72 $0.12 $1.12 $0.86 $0.61
Net income $0.10 $0.72 $0.12 $1.12 $0.86 $0.46
Weighted average common
shares outstanding 8,942 8,942 8,942 8,940 7,805 4,500
Earnings per common share (diluted):
Income before extraordinary item $0.10 $0.72 $0.12 $1.11 $0.85 $0.61
Net income $0.10 $0.72 $0.12 $1.11 $0.85 $0.46
Weighted average common
shares outstanding 8,951 8,942 8,948 9,048 7,926 4,500
Common cash dividends per share $0.11 $0.14 $0.12 $0.10 $0.06 -
(1) On October 23, 1997, the Company filed a Form 8-K announcing that it had determined to change its
fiscal year end from April 30 to a calendar year. As a result, the Company is reporting an eight-month
transition period ending December 31, 1997, in order to change to this new calendar year end.
(2) Includes an $8,000 lower of cost or market inventory adjustment recorded in the second quarter of the
year ended April 30, 1996. See Note 2 to the Consolidated Financial Statements.
(3) Relates to expensing of prepayment premiums and unamortized loan costs upon early retirement of
certain indebtedness.
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA (in thousands):
April 30,
December 31, ------------------------------------------------
1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Working capital $ 84,182 $ 79,502 $ 62,305 $ 84,046 $ 58,220 $ 23,796
Total assets 285,265 307,318 222,437 209,898 114,380 67,034
Short-term debt 209 189 189 371 357 2,782
Long-term debt
(net of current portion) 110,730 100,877 73,066 68,505 1,631 31,438
Preferred stock 4,500 4,500 - - - 5,470
Common shareholders' equity 116,505 116,561 111,366 111,252 102,097 11,530
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------
CALENDAR 1998 FORECAST:
The Company enters calendar 1998 with strong forward sales momentum and
expects that its net sales could increase by approximately 15% over calendar
1997 net sales of $366.6 million. The anticipated increase in net sales is
expected to reflect higher levels of tons sold which are expected to increase
to approximately 1.3 million tons (up from 1.1 million tons in calendar 1997).
While the Company expects that 1998 will likely begin with gross profit
margins at levels similar to those experienced during the eight-month
transition period ended December 31, 1997, as the year progresses, it expects
that its operating results should benefit from 1) a broader supply base and
increased inventory turnover; 2) greater operating efficiencies at its
stamping and cold rolling complex in Blytheville, at its South Carolina
facility and at its other facilities that have been expanded in recent years,
with such efficiencies resulting from equipment enhancements, higher volume
levels, improved product quality and more consistent on-time deliveries; and
3) a more focused sales and marketing effort as the Company will not be
challenged with the start-up of any further significant new operations during
1998, beyond the start-up of its expanded pickling capacity in Blytheville.
The Company recently commenced production on a new coil pickling line at its
Blytheville facility. This new pickling line is expected to provide a better
quality feed stock for the Company's cold rolling mill, in addition to
expanding the Company's pickling capacity. The Company has been operating its
other pickling line in Blytheville at full capacity levels for well over a
year.
In addition to its expanded pickling capacity, the Company plans to 1) replace
a cut-to-length line at its Pasadena facility; 2) install a new filtration
system on its cold rolling mill and an electrostatic oiler on its temper mill,
both at its Blytheville facility; and 3) add certain yield enhancing ancillary
equipment to its slitting lines at its Chattanooga, Madison and Blytheville
facilities. These and other projects currently planned for 1998 are
anticipated to result in capital expenditures of approximately $3.0 to $4.0
million.
RISK FACTORS - 1998 FORECAST:
This Annual Report contains certain statements that are forward-looking and
involve risks and uncertainties. Words such as "expects," "anticipates,"
"projects," "estimates," "plans," "believes," and variations of such words and
similar expressions are intended to identify such forward-looking statements.
These statements are based on current expectations and projections concerning
the Company's plans for 1998 and about the steel processing industry in
general, as well as assumptions made by Company management and are not
guarantees of future performance. Therefore, actual events, outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking statements. Achievement of these forward-looking results is
dependent upon numerous factors, circumstances and contingencies, certain of
which are beyond the control of the Company. Certain of the more important
factors which the Company believes could cause actual results to differ
materially from the forward-looking data presented include:
Impact of changing steel prices on the Company's results of operations:
As evidenced by the unfavorable impact on net income in the years ended April
30, 1996 and 1997, as well as the eight month transition period ended December
31, 1997, the Company's financial results can be significantly impacted by
changing steel prices. The Company's principal raw material is flat rolled
carbon steel coils. The steel industry is highly cyclical in nature and
prices for the Company's raw materials are influenced by numerous factors
beyond the control of the Company, including general economic conditions,
competition, labor costs, import duties and other trade restrictions and
currency exchange rates. Changing steel prices may cause the Company's
results of operations to fluctuate significantly.
To respond promptly to customer orders for its products, the Company maintains
a substantial inventory of steel coils in stock and on order. The Company's
commitments for steel purchases are generally at prevailing market prices in
effect at the time the Company places its orders. The Company has no
long-term, fixed-price steel purchase contracts. The Company generally does
not enter into fixed-price sales contracts with its steel processing customers
with terms longer than three months.
As steel producers change the effective selling price for the Company's raw
materials, competitive conditions may influence the amount of the change, if
any, in the Company's selling prices to its customers. Changing steel prices
could therefore affect the Company's net sales and net income, particularly as
it liquidates its inventory position. The Company believes that a major
portion of the effect of a steel price change on net income is likely to be
experienced within three months of the effective date of the change. When a
series of changes in steel prices occurs, the period in which net income may
be affected can extend beyond a three month period of time. Accordingly, the
Company believes that comparisons of its quarterly results of operations are
not necessarily meaningful in periods of changing steel prices.
Steel prices charged by the primary producers of hot rolled steel coils, both
domestic and foreign, have been extremely volatile over the previous three
years, and conditions exist which could cause this volatility to continue
during 1998. No assurance can be given that volatility in steel prices will
not again negatively impact the Company's results of operations and net
income.
Continued internal expansion involving new processes and markets:
Notwithstanding the fact that the growth in the Company's net sales has
resulted from increasing levels of tons processed and sold, with such
increases in tonnage primarily occurring at newly constructed facilities,
there can be no assurance that the Company will be successful in the continued
development and expansion of its pickling, cold rolling, stamping and hot
rolled tempering operations at its Blytheville, Arkansas facility, or that
these expansions will proceed as quickly as the Company anticipates.
Successful development of these projects requires the Company to develop new
customers, in new market territories and absolute assurance cannot be given
that this will occur on the timetable which the Company expects, if ever.
In addition, the continued ramp-up of the Company's stamping plant in
Blytheville, and the continued maturation of the Company's pickling, cold
rolling and tempering operations in Blytheville and of its South Carolina
facility will cause the Company to face new competition.
Cyclicality of demand for Company products:
Many of the Company's steel processing products are sold to industries that
experience significant fluctuations in demand based on economic conditions,
energy prices or other matters beyond the control of the Company. The Company
has increased the level of tons of steel sold and processed in each of its
last five fiscal years. However, no assurance can be given that the Company
will be able to increase or maintain its level of tons shipped, especially in
periods of economic stagnation or downturn. The expected increase in tons
processed and shipped assumes that the Company is able to maintain the base
volume of tons processed and shipped that it has realized through the period
ended December 31, 1997. This assumption is based upon the Company's
experience, the most relevant experience being over the previous five years,
and an assumption that economic conditions in the Company's primary market
areas will reflect a stable, slow-growth environment. There can be no
assurance, however, that economic conditions will continue to reflect a
stable, slow-growth environment or that other circumstances will not occur
leading to an economic stagnation or downturn.
Competition:
The principal markets served by the Company are highly competitive. The
Company has different competitors within each of its product lines.
Competition is based principally on price, service, production and delivery
scheduling. Further, new competition is expected in the sale of pickled and
cold rolled products over the next few years as new pickling and/or cold
rolling capacity is added by Nucor in Hickman, Arkansas and by Worthington
Industries, Steel Technologies (through its Mi-Tech joint venture) and Trico
in Decatur, Alabama.
Interest rates:
Borrowings under the Company's revolving credit agreement are at interest
rates which float generally with the prime rate or with LIBOR. The level of
interest expense incurred by the Company under the revolving credit agreement
will therefore fluctuate in line with changes in these rates of interest and
based upon outstanding borrowings under the revolving credit agreement.
RESULTS OF OPERATIONS:
TRANSITION PERIOD -- EIGHT MONTHS ENDED DECEMBER 31, 1997 (AUDITED)
COMPARED TO EIGHT MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
On October 23, 1997, the Company filed a Form 8-K announcing that it had
determined to change its fiscal year end from April 30 to a calendar year. As
a result, the Company is reporting an eight-month transition period ending
December 31, 1997, in order to change to this new calendar year end. The
following table sets forth comparative consolidated statements of income for
the eight month transition period ended December 31, 1997 ("TP97" or
"transition period") and the corresponding period in 1996 ("TP96"):
<TABLE>
<CAPTION>
Consolidated Statements of Income
for the eight months ended December 31,
1997 1996
(audited) (unaudited)
-------- --------
(in thousands, except per share amounts)
<S> <C> <C>
Net sales $246,324 $206,334
Cost of sales 227,871 184,751
------- -------
Gross profit 18,453 21,583
Selling, general and administrative expenses 11,757 10,082
------- -------
Income from operations 6,696 11,501
Interest, net (5,194) (3,883)
------- -------
Income before income taxes 1,502 7,618
Provision for income taxes 486 2,904
------- -------
Net income $ 1,016 $ 4,714
Preferred dividends 133 -
------- -------
Net income available for common shareholders $ 883 $ 4,714
======= =======
Earnings per common share
(basic and diluted) $ .10 $ .53
===== =====
Weighted average
common shares outstanding:
Basic 8,942 8,942
===== =====
Diluted 8,951 8,942
===== =====
</TABLE>
Net sales for the transition period were $246.3 million, an increase of 19.4%
over the TP96's net sales of $206.3 million. The improvement in net sales is
primarily attributable to increased levels of tons processed. The Company
processed 744,468 tons of steel during the transition period, an increase of
23.3% in comparison to the eight months ended December 31, 1996. A
substantial portion of this tonnage increase related to higher sales at the
Company's Blytheville facility (both processing and cold rolled sales), and at
its new South Carolina facility.
Approximately 24.5% of the tons processed during the transition period
represented customer-owned material processed on a per ton, fee basis. For
the eight months ended December 31, 1996, approximately 22.3% of the tons
processed by the Company represented customer-owned material. Processing
customer-owned material generally results in lower revenues per ton, but
higher gross profit expressed as a percentage of net sales, in comparison to
when the Company processes and sells its own steel inventory.
Reflecting lower cost material available in the Company's markets during TP97,
average per ton selling values declined approximately 2.7% for the transition
period, as compared to TP96.
The Company's gross profit margins came under pressure in late TP96, and this
margin pressure extended into and throughout TP97. The narrowing of gross
profit margins was partially attributable to higher domestic prices incurred
by the Company for its primary raw material, hot rolled steel coils, as
significant quantities of lower priced imported material became available in
its market territories. Gross profit was also negatively impacted during TP97
due to production inefficiencies realized by the Company at its recently
relocated stamping operation, as well as additional costs incurred in
conjunction with the ramp-up of the Company's newly expanded cold rolling
capacity. As a result of these gross margin pressures, gross profit expressed
as a percentage of net sales dropped to 7.5% for TP97, versus 10.5% for TP96.
Selling, general and administrative ("SG&A") expenses of $11.8 million for the
transition period reflect an increase of $1.7 million over TP96. However,
the Company's SG&A expenses expressed as a percentage of net sales have
remained relatively steady. During the transition period, SG&A expenses
expressed as a percentage of net sales decreased only .1% from the 4.9% of net
sales figure realized for the eight months ended December 31, 1996. The
increase in SG&A expenses is attributable to the higher level of business
activity conducted throughout the Company, including the new facilities in
Kentucky and South Carolina.
Income from operations was $6.7 million in the transition period, a decrease
of $4.8 million from TP96's income from operations of $11.5 million. This
decrease reflects the factors discussed in the preceding paragraphs.
Net interest expense of $5.2 million was incurred during TP97, an increase of
$1.3 million over TP96. This increase was the result of higher transition
period borrowings on the Company's revolving credit facility to support higher
working capital levels, as well as lower capitalized interest during TP97
versus TP96. The Company capitalized $.8 million of interest costs to
construction in progress during the transition period, versus $.9 million for
the eight months ended December 31, 1996.
The effective income tax rate experienced by the Company was 32.4% during the
transition period, which is lower than the 38.1% rate recognized by the
Company during TP96, due to certain state income tax benefits recorded by the
Company during the transition period.
Net income available for common shareholders for the transition period was $.9
million, or $.10 per share, which amounts decreased from net income available
for common shareholders for the eight months ended December 31, 1996 of $4.7
million, or $.53 per share. These decreases reflect the factors discussed in
the preceding paragraphs, as well as the accrual of preferred dividends of $.1
million during the transition period, related to preferred stock issued
subsequent to the end of TP96.
FISCAL YEAR ENDED APRIL 30, 1997 ("FY97") COMPARED TO FISCAL YEAR ENDED
APRIL 30, 1996 ("FY96"):
Net sales for FY97 were $326.6 million, an increase of 23.7% over the prior
year's net sales of $264.1 million. The improvement in net sales is primarily
attributable to increased levels of tons processed. The Company processed a
record 941,545 tons of steel in FY97, an increase of 22.0% in comparison to
FY96. A substantial portion of this tonnage increase related to the sale of
cold rolled products, which sales volume increased 98.4% over the prior year
to 181,313 cold rolled tons for FY97.
Approximately 22.2% of the tons processed during FY97 represented customer-
owned material processed on a per ton, fee basis. For FY96, approximately
23.9% of the tons processed by the Company represented customer-owned
material.
Reflecting low cost imported material available in the Company's markets
during FY97 and relatively high domestic prices for hot rolled steel at the
beginning of FY96, average per ton selling values declined approximately 0.7%
for the year ended April 30, 1997, as compared to the prior year.
The Company's gross profit margins came under pressure late in the second
quarter of FY97, and this margin pressure extended through the balance of the
fiscal year. The narrowing of gross profit margins during the second half of
FY97 was primarily due to higher domestic prices incurred by the Company for
its primary raw material, hot rolled steel coils, as significant quantities of
lower priced imported material became available in its market territories.
Gross profit margins were also negatively impacted during FY97 due to costs
stemming from the start-up of the Company's new plants, primarily the
relocated Blytheville stamping operation and the new facilities in Gallatin
County, Kentucky and Berkeley County, South Carolina. In addition, shipments
declined during the Company's third quarter of FY97 as Coil-Tec, Inc.
liquidated a substantial amount of hot-rolled steel inventory in the Company's
market territories prior to the sale of certain of its operating assets to the
Company on January 30, 1997. This third quarter volume decline served to
reduce the absorption of fixed manufacturing costs during the third quarter of
FY97, contributing to lower gross profit margins realized by the Company.
Despite these gross margin pressures, gross profit expressed as a percentage
of net sales increased to 9.8% for FY97, versus 6.9% for FY96. However, the
improvement in the Company's gross profit percentage was attributable to a
very low gross profit percentage in FY96 caused primarily by declining steel
prices and start-up expenses related to the Company's cold rolling mill. For
a further discussion of the prior year impact of declining steel prices and
the related lower of cost or market inventory adjustment, see Note 2 to the
Company's Consolidated Financial Statements, as well as the discussion
included in the comparison of the results of operations between FY96 and the
year ended April 30, 1995 which follows.
Selling, general and administrative ("SG&A") expenses of $15.4 million for
FY97 reflect an increase of $2.2 million over the prior year. However, SG&A
expenses declined as a percentage of net sales from 5.0% during FY96 to 4.7%
of net sales during FY97. The increase in SG&A expenses is attributable to
the higher level of business activity conducted throughout the Company, and
the new facilities in Kentucky and South Carolina.
Income from operations was $16.7 million in FY97, an increase of $11.6 million
over FY96's income from operations of $5.1 million. This increase reflects
the factors discussed in the preceding paragraphs.
Net interest expense of $6.2 million was incurred during FY97, an increase of
$2.9 million over the prior year. This increase was the result of higher FY97
borrowings on the Company's revolving credit facility in order to support
higher working capital levels, as well as lower capitalized interest during
FY97 versus FY96, as many of the Company's capital projects have been placed
into service. As a result, the Company capitalized $1.2 million of interest
costs to construction in progress in FY97, versus $2.1 million for FY96.
The effective income tax rate experienced by the Company was 38.1% during
FY97, which compares to a rate of 38.8% during the prior year. The decrease
in the effective rate reflects the impact of non-deductible expenses, such as
goodwill amortization, which have a lesser percentage impact upon the
Company's effective income tax rate at higher levels of taxable income.
Net income available for common shareholders for FY97 was $6.4 million, or
$.72 per share, which amounts increased over net income available for common
shareholders for FY96 of $1.1 million, or $.12 per share. These increases
reflect the factors discussed in the preceding paragraphs.
FISCAL YEAR ENDED APRIL 30, 1996 ("FY96") COMPARED TO FISCAL YEAR ENDED
APRIL 30, 1995 ("FY95"):
Net sales for FY96 were $264.1 million, an increase of 34.0% in comparison to
the $197.2 million of net sales for FY95. The improvement in net sales was
attributable to increased levels of tons sold. For FY96, the Company sold
771,937 tons of steel, an increase of 36.2% over the prior year. Included in
the FY96 tons sold figures were 91,373 tons of cold rolled steel products
produced at the Company's new cold rolling operation in Blytheville, Arkansas.
Net sales of cold rolled products totaled approximately $40.5 million for the
year ended April 30, 1996.
Approximately 23.9% and 26.2% of the tons sold in the years ended April 30,
1996 and 1995, respectively, represented customer-owned material processed and
sold on a per ton, fee basis.
Average per ton selling values for the Company's traditional hot rolled and
pickled and oiled products declined 3.7% in comparison to the previous fiscal
year. These selling price declines were primarily reflective of the lower
base price of hot rolled steel available from the primary domestic producers,
as discussed further below.
Starting late in FY95, and continuing through the second quarter of FY96, the
primary domestic 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 FY96, 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 a lower of cost or market
inventory adjustment in the second quarter of FY96, which reduced the carrying
value of its on hand inventories by approximately $8.0 million (before related
income tax benefits) as of October 31, 1995.
The decreases in the base price of hot rolled steel 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 FY96 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 FY95
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 FY95, 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 FY95, (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 was initiated by the primary domestic steel
producers.
In addition to the negative effects on the Company's net sales and gross
profit caused by the declining price of steel discussed above, lower
absorption of manufacturing costs associated with the start-up and ramp-up of
the Company's new cold rolling operation served to keep the Company's gross
profit under pressure during FY96.
As a result of the factors discussed in the preceding paragraphs, gross profit
as a percentage of net sales decreased from 13.0% in FY95 to 6.9% for FY96.
Selling, general and administrative ("SG&A") expenses increased $3.5 million
from FY95 to FY96, due to the increased sales activity of the Company and its
continued operational expansion. However, SG&A expenses remained relatively
constant as a percentage of net sales, showing only a negligible increase over
the prior year (i.e., 5.0% for FY96 versus 4.9% for FY95).
Income from operations declined to $5.1 million for FY96, from $16.0 million
for FY95. This decrease reflects the factors discussed in the preceding
paragraphs.
Net interest expense of $3.3 million was incurred during FY96, versus a
negligible amount of net interest income for FY95. The increase in interest
expense arose from borrowings to fund the Company's capital expansion program.
In addition, the Company capitalized $2.1 million and $1.8 million of interest
costs to construction in progress during FY96 and FY95, respectively.
The effective income tax rate experienced by the Company was 38.8% for FY96
versus 37.6% for FY95. The difference between the effective tax rate and the
federal statutory rate of 35.0% is primarily the result of state income taxes
and the non-deductible amortization of goodwill and other costs, the effect of
which is greater when the Company experiences lesser amounts of income before
income taxes.
The Company reported net income for FY96 of $1.1 million, or $.12 per common
share (basic), which compares to net income of $10.0 million, or $1.12 per
common share (basic) in the prior year. This decrease reflects the factors
discussed in the preceding paragraphs.
LIQUIDITY AND CAPITAL RESOURCES:
The Company invested $10.0 million, $28.1 million, $34.2 million, and $54.3
million of cash during the transition period, FY97, FY96, and FY95,
respectively, in new property, plant and equipment, as expenditures were made
in conjunction with the Company's capital expansion projects -- most
significantly the Company's second coil pickling line during the transition
period; the new Kentucky facility, the new stamping plant at the Blytheville
facility, the new South Carolina facility and the acquisition of certain
equipment from Coil-Tec, Inc. during FY97, and the new Blytheville cold
rolling operation during FY96 and FY95. Cash remaining from the Company's
November 1993 public stock offering provided the funds to allow the Company to
continue its capital expansion program into FY95. The Company has been able
to sustain its capital expansion efforts since this time primarily by way of
increased corporate borrowings.
During the transition period, the Company generated $.1 million of cash from
operations, within which it saw its inventory balance drop $24.0 million as
the Company concentrated its efforts on decreasing on hand and on order
inventory positions during the relatively slow November and December business
activity months. The drop in inventory, combined with other transition period
results of operations, allowed the Company to decrease its accounts payable
balance by $32.5 million by the end of the transition period.
During FY97 and FY95, net cash used by operations was $4.5 million and $22.6
million, respectively. Inventories registered significant increases in both
of these years (a) in support of the substantial growth in sales volumes
experienced by the Company, (b) in order to stage material for throughput on
the Company's new processing lines, and (c) as of April 30, 1995 as a
defensive measure by the Company in light of rising steel prices throughout
much of FY95. However, FY96 saw a large reduction in the Company's investment
in raw materials as the Company sought to reduce its exposure to raw material
price changes by maintaining a relatively lower balance of domestically
supplied steel coil inventory. At the same time, the Company continued to
increase its investment in accounts receivable consistent with the Company's
sales growth. As a result, net cash provided by operations in FY96 was $29.9
million.
In order to assist in the funding of the Company's investment in inventory
during FY97, the Company borrowed additional funds on its revolving credit
facility and significantly increased its trade accounts payable balance as of
April 30, 1997, electing to forego quick pay discounts on much of its
inventory purchases occurring late in FY97.
With respect to cash flows from financing activities, the Company refinanced
$50.0 million in long-term debt during FY96. On July 14, 1995, the Company
issued $50.0 million of ten-year term notes (the "1995 Notes") to a group of
domestic commercial lenders. The 1995 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 the 1995 Notes
were used to reduce the Company's outstanding borrowings on its line of credit
facility with a group of domestic commercial banks. As of December 31, 1997,
the Company had unused borrowing capacity of $18.9 million under its revolving
credit facility, which total facility was increased from $60.0 million to
$80.0 million effective December 17, 1996. However, the amount of unused
borrowing capacity was effectively limited to $10.1 million as of December 31,
1997, as discussed in the following paragraph.
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 December 31, 1997, the ratio of funded debt to total
capitalization was 47.8%. As such, the Company had unused borrowing capacity
of approximately $10.1 million as of December 31, 1997, in accordance with
this debt covenant.
During FY97, the Company entered into operating leases with domestic
commercial lenders for (a) a new cut-to-length line and a new slitting line
for its South Carolina facility, (b) the additional annealing furnaces
acquired for the expansion of its cold rolling facility, (c) a two-high temper
mill for processing hot rolled steel coils, and (d) the second coil pickling
line for the Blytheville facility. The Company also entered into an operating
lease with an affiliate of Coil-Tec, Inc. on January 30, 1997, in order to
obtain use of Coil-Tec's former plant facility in Blytheville. Annual
operating lease payments are expected to range between $3.7 million and $4.2
million over the next five years.
On January 30, 1997, the Company issued 225,000 shares of 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. 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 1933
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 other operating assets of Coil-Tec, Inc. on
January 30, 1997.
During the eight months ended December 31, 1997, the Company paid dividends of
$.9 million on its Class A and Class B common stock ("common stock"). The
Company paid dividends on its common stock of $1.2 million, $1.0 million, and
$.8 million during the years ended April 30, 1997, 1996, and 1995,
respectively.
Beyond completion of the second pickling line at the Blytheville facility
early in 1998, which line has been substantially completed and funded as of
December 31, 1997, the Company plans to: (a) replace a cut-to-length line at
its Pasadena facility, (b) install a new filtration system on its cold rolling
mill and an electrostatic oiler on its temper mill, both at its Blytheville
facility, and (c) add certain yield enhancing ancillary equipment to its
slitting lines at its Chattanooga, Madison and Blytheville facilities. These
and other projects currently planned are anticipated to result in capital
expenditures of approximately $3.0 million to $4.0 million for 1998. The
Company expects to fund these projects with cash provided from operations,
through the sale of excess cut-to-length lines located in Pasadena and
Blytheville, and by additional lease financing.
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, 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 1998.
The Company maintains the flexibility to issue additional equity in the form
of Class A common stock or additional series of preferred stock if and when
market circumstances 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 further operating lease financing for new business
expansions.
<PAGE>
COMPARATIVE CALENDAR 1997 VERSUS 1996 QUARTERLY DATA:
Summarized unaudited quarterly financial data for the calendar years ended
December 31, 1997 and 1996 appears below (dollars in thousands, except per
share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
quarter quarter quarter quarter Year
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net sales:
December 1997 $85,501 $93,657 $93,903 $93,492 $366,553
December 1996 78,345 79,960 82,102 72,081 312,488
Gross profit:
December 1997 7,349 9,056 8,167 4,407 28,979
December 1996 8,380 9,259 8,338 7,283 33,260
Net income (loss):
December 1997 1,224 1,572 1,197 (1,203) 2,790
December 1996 2,370 2,815 2,043 1,067 8,295
Earnings (loss) per
common share (basic
and diluted):
December 1997 .13 .17 .13 (.14) .29
December 1996 .27 .31 .23 .12 .93
</TABLE>
Summarized unaudited quarterly sales volume data for the Company for the
calendar years ended December 31, 1997 and 1996 appears below:
<TABLE>
<CAPTION>
First Second Third Fourth
quarter quarter quarter quarter Year
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Tons sold:
December 1997 193,010 212,776 219,447 209,547 834,780
December 1996 182,398 183,015 187,250 163,247 715,910
Tons toll processed:
December 1997 55,297 58,639 76,088 66,508 256,532
December 1996 50,728 48,653 55,810 43,062 198,253
Total tons sold and processed:
December 1997 248,307 271,415 295,535 276,055 1,091,312
December 1996 233,126 231,668 243,060 206,309 914,163
</TABLE>
<PAGE>
QUARTERLY EFFECTS AND SEASONALITY:
Shipping volumes are lowest during the November and December holiday periods
and also tend to be lower during mid-summer, as many of the Company's
customers schedule plant shutdowns for vacations. These factors tend to
result in lower net sales and net income during these time periods. Quarterly
results can also be affected, either negatively or positively, by changing
steel prices, as described previously herein.
INFLATION:
The Company's operations have not been, nor are they expected to be,
materially affected by inflation. However, the Company is affected by changes
in the price of steel charged by the primary producers, which are not
considered to be inflation-sensitive, but rather sensitive to changes in steel
demand as the primary producers use pricing policy to attempt to control their
order levels and backlog.
NEW ACCOUNTING STANDARDS:
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (FAS 128), which
requires public entities to present both basic and diluted earnings per share
amounts on the face of their financial statements, replacing the former
calculations of primary and fully diluted earnings per share. The Company has
adopted FAS 128 in these financial statements, which adoption did not have a
material effect on its reported earnings per common share for the transition
period or for prior years.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (FAS
130), which establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general purpose financial statements. The Company does not anticipate that
FAS 130, which is first effective for the Company's calendar 1998 first
quarter, will significantly impact the Company's financial reporting.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (FAS 131), which requires public entities
to report information about operating segments in annual financial statements
and requires that selected information about operating segments be reported in
interim financial reports issued to shareholders. The Company does not
anticipate that FAS 131, which is first effective for the Company's calendar
1998 first quarter, will significantly impact the Company's financial
reporting.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
HUNTCO INC.
CONSOLIDATED BALANCE SHEET
(amounts in thousands)
<TABLE>
<CAPTION>
December 31, April 30,
1997 1997 1996
----------- -------- --------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 27 $ 1,124 $ 2,737
Accounts receivable, net 41,643 46,452 36,804
Inventories 81,612 105,569 53,964
Other current assets 5,015 3,983 1,926
------- ------- -------
128,297 157,128 95,431
Property, plant and equipment, net 145,777 141,436 120,338
Other assets 11,191 8,754 6,668
------- ------- -------
$285,265 $307,318 $222,437
======= ======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 40,027 $ 72,569 $ 29,003
Accrued expenses 3,879 4,868 3,934
Current maturities of long-term debt 209 189 189
------- ------- -------
44,115 77,626 33,126
------- ------- -------
Long-term debt 110,730 100,877 73,066
Deferred income taxes 9,415 7,754 4,879
------- ------- -------
120,145 108,631 77,945
------- ------- -------
Commitments and contingencies (see Note 8) - - -
Shareholders' equity:
Series A preferred stock
(stated at liquidation value) 4,500 4,500 -
Common stock:
Class A (issued and outstanding, 5,292) 53 53 53
Class B (issued and outstanding, 3,650) 37 37 37
Additional paid-in-capital 86,530 86,530 86,567
Retained earnings 29,885 29,941 24,709
------- ------- -------
121,005 121,061 111,366
------- ------- -------
$285,265 $307,318 $222,437
======= ======= =======
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
HUNTCO INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Eight months ended Year Ended April 30,
December 31, 1997 1997 1996 1995
----------------- ------- ------- ------
<S> <C> <C> <C> <C>
Net sales $246,324 $326,563 $264,087 $197,195
Cost of sales 227,871 294,455 245,863 171,521
------- ------- ------- -------
Gross profit 18,453 32,108 18,224 25,674
Selling, general and
administrative expenses 11,757 15,383 13,147 9,638
------- ------- ------- -------
Income from operations 6,696 16,725 5,077 16,036
Interest, net (5,194) (6,239) (3,268) 5
------- ------- ------- -------
Income before income taxes 1,502 10,486 1,809 16,041
Provision for income taxes 486 3,997 701 6,037
------- ------- ------- -------
Net income $ 1,016 $ 6,489 $ 1,108 $ 10,004
Preferred dividends 133 50 - -
------- ------- ------- -------
Net income available
for common shareholders $ 883 $ 6,439 $ 1,108 $ 10,004
======= ======= ======= =======
Earnings per common share:
Basic $ .10 $ .72 $ .12 $ 1.12
===== ===== ===== =====
Diluted $ .10 $ .72 $ .12 $ 1.11
===== ===== ===== =====
Weighted average
common shares outstanding:
Basic 8,942 8,942 8,942 8,940
===== ===== ===== =====
Diluted 8,951 8,942 8,948 9,048
===== ===== ===== =====
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
HUNTCO INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(amounts in thousands)
<TABLE>
<CAPTION>
Eight months ended Year Ended April 30,
December 31, 1997 1997 1996 1995
----------------- ------ ------ ------
<S> <C> <C> <C> <C>
Series A preferred stock
Balance at beginning of period $ 4,500 $ - $ - $ -
January 30, 1997 share issuance - 4,500 - -
------ ------ ------ ------
Balance at end of period $ 4,500 $ 4,500 $ - $ -
====== ====== ====== ======
Class A common stock
Balance at beginning of period $ 53 $ 53 $ 53 $ 53
------ ------ ------ ------
Balance at end of period $ 53 $ 53 $ 53 $ 53
====== ====== ====== ======
Class B common stock
Balance at beginning of period $ 37 $ 37 $ 37 $ 37
------ ------ ------ ------
Balance at end of period $ 37 $ 37 $ 37 $ 37
====== ====== ====== ======
Additional paid-in-capital
Balance at beginning of period $86,530 $86,567 $86,533 $86,533
Other changes - (37) 34 -
------ ------ ------ ------
Balance at end of period $86,530 $86,530 $86,567 $86,533
====== ====== ====== ======
Retained earnings
Balance at beginning of period $29,941 $24,709 $24,629 $15,474
Net income 1,016 6,489 1,108 10,004
Dividends on:
Common stock (939) (1,207) (1,028) (849)
Series A preferred stock (133) (50) - -
------ ------ ------ ------
Balance at end of period $29,885 $29,941 $24,709 $24,629
====== ====== ====== ======
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
HUNTCO INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(amounts in thousands)
<TABLE>
<CAPTION>
Eight months ended Year Ended April 30,
December 31, 1997 1997 1996 1995
----------------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,016 $ 6,489 $ 1,108 $ 10,004
------ ------- ------- -------
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 6,018 8,225 6,561 3,589
Other 50 (675) (5) (5)
Decrease (increase) in:
accounts receivable 4,809 (9,648) (7,662) (9,977)
inventories 23,957 (51,605) 23,762 (45,085)
other current assets (1,032) (2,057) (961) 94
other assets (2,837) (2,632) (910) (653)
Increase (decrease) in:
accounts payable (32,542) 43,566 3,485 18,057
accrued expenses (989) 934 2,470 300
non-current deferred taxes 1,661 2,875 2,091 1,118
------ ------- ------- -------
Total adjustments (905) (11,017) 28,831 (32,562)
------ ------- ------- -------
Net cash provided (used) by operations 111 (4,528) 29,939 (22,558)
------ ------- ------- -------
Cash flows from investing activities:
Acquisition of property,
plant and equipment, net (10,008) (28,102) (34,153) (54,252)
------ ------- ------- -------
Net cash used by investing activities (10,008) (28,102) (34,153) (54,252)
------ ------- ------- -------
Cash flows from financing activities:
Issuance of Series A preferred stock - 4,500 - -
Net proceeds from newly-issued debt 10,000 28,000 50,000 67,250
Net payments on long-term debt (128) (189) (45,621) (362)
Common stock dividends (939) (1,207) (1,028) (849)
Preferred stock dividends (133) (50) - -
Other - (37) 34 -
------ ------- ------- -------
Net cash provided by financing activities 8,800 31,017 3,385 66,039
------ ------- ------- -------
Net decrease in cash (1,097) (1,613) (829) (10,771)
Cash, beginning of period 1,124 2,737 3,566 14,337
------ ------- ------- -------
Cash, end of period $ 27 $ 1,124 $ 2,737 $ 3,566
====== ======= ======= =======
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
HUNTCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
-----------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The policies utilized by the Company in the preparation of the financial
statements conform to generally accepted accounting principles, and require
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates. The significant accounting
policies followed by the Company are described below:
Change in fiscal year end:
On October 23, 1997, the Company filed a Form 8-K announcing that it had
determined to change its fiscal year end from April 30 to a calendar year. As
a result, the Company is reporting an eight-month transition period ending
December 31, 1997, in order to change to its new calendar year end.
Organization and operations:
Huntco Inc. ("Huntco" or "the Company") conducts its operations through its
wholly-owned subsidiaries Huntco Steel, Inc. ("Huntco Steel") and Midwest
Products, Inc. ("Midwest"). Huntco Steel operates seven steel processing
centers specializing in the processing and distribution of flat rolled carbon
steel, and sells its processed steel products to a diverse group of industrial
customers, steel service centers and distributors. Midwest is principally
engaged in the manufacture of compressed air cylinders used in the
transportation industry and sold through mass merchandisers.
Principles of consolidation:
The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Revenue recognition:
Revenue from the sale of processed steel and compressed air cylinders is
recognized upon shipment to the customer. Costs and related expenses to
process steel and manufacture compressed air cylinders are recorded as cost of
sales when the related revenue is recognized. Sales returns and allowances
are treated as reductions to net sales.
Cash and cash equivalents:
For purposes of the consolidated statement of cash flows, the Company
considers cash on hand and demand deposits with financial institutions with an
original maturity of three months or less to be cash.
Concentration of credit risk:
Huntco Steel sells its products to a wide variety of customers, including
steel service centers and distributors, general fabricators and stampers,
manufacturers of consumer durables, tank manufacturers and energy-related
users, primarily in the midwestern and southern regions of the United States.
Midwest sells its compressed air cylinders to customers in the transportation
industry, as well as through mass merchandisers. Concentration of credit risk
with respect to trade receivables is limited due to the size of the customer
base and its dispersion. The Company performs on-going credit evaluations of
its customers and generally does not require collateral. The Company
maintains reserves for potential credit losses and such losses have been
within management's expectations. As of December 31, 1997, April 30, 1997 and
April 30, 1996, the Company's allowance for doubtful accounts balance was
$333, $544 and $430, respectively.
Relationships with suppliers:
The Company procures raw materials from numerous primary steel producers.
Management believes it is not dependent on any one of its suppliers for raw
materials and that its relationships therewith are strong.
Inventories:
Inventories are valued at the lower of cost or market. Cost is determined
using the specific identification method for steel processing inventories and
on a first-in, first-out (FIFO) basis for its compressed air cylinder
products.
Property, plant and equipment:
Property, plant and equipment is recorded at cost and is depreciated using the
straight-line method over the estimated useful lives of the respective
property, ranging from three to thirty years. Expenditures for repairs,
maintenance and renewals are charged to income as incurred. Expenditures
which improve an asset or extend its useful life are capitalized. When
properties are retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts and any gain or loss is
included in income.
Leases meeting the criteria of a capital lease are recorded at the present
value of the noncancellable lease payments over the term of the lease.
Properties held under capital leases are amortized over the estimated useful
lives of the assets, ranging from five to twenty years. The interest portion
of the respective capital lease payment is charged to operations.
Environmental policy:
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations, and which do not contribute to current or
future revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable, and the costs
can be reasonably estimated. The Company has not been notified by regulatory
authorities of non-compliance with any federal, state or local environmental
law or regulation, nor is the Company aware of any such non-compliance.
Income taxes:
Deferred income taxes are accounted for under the liability method, whereby
deferred tax assets and liabilities are recognized based upon temporary
differences between the financial statement and tax bases of assets and
liabilities using presently enacted tax rates.
Earnings per common share:
Earnings per common share is computed by dividing net income available for
common shareholders by the weighted average number of common shares
outstanding for basic earnings per common share, and by the weighted average
number of common shares and share equivalents outstanding during the period
for diluted earnings per common share.
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (FAS 128), which
requires public entities to present both basic and diluted earnings per share
amounts on the face of their financial statements, replacing the former
calculations of primary and fully diluted earnings per share. The Company has
adopted FAS 128 in these financial statements, which adoption did not have a
material effect on its reported earnings per common share for the transition
period or for prior years.
2. INVENTORIES
Inventories consisted of the following as of:
<TABLE>
<CAPTION>
December 31, April 30,
1997 1997 1996
----------- -------- -------
<S> <C> <C> <C>
Raw materials $ 55,991 $ 84,046 $39,426
Finished goods 25,621 21,523 14,538
-------- -------- -------
$ 81,612 $105,569 $53,964
======== ======== =======
</TABLE>
The Company's investment in finished goods includes cold rolled steel coils
produced at the Company's Blytheville, Arkansas facility. 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.
The Company's cost of sales and gross profit were negatively impacted during
the year ended April 30, 1996, due to the recording of an $8,000 lower of cost
or market inventory adjustment. During the first half of the year ended April
30, 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 rapid price reductions impacted
the Company when its inventory volume of hot rolled steel coils was at higher
than normal levels. Due to unpredictable lead times for the receipt of
imported hot rolled steel coils purchased by the Company during fiscal 1995,
the delay in the start up of the Company's new cold rolling mill, and as a
result of steel purchased in advance of previously announced increases in raw
material steel prices from the primary producers, which price increases did
not come to pass, the Company's on hand inventory position became higher than
normal during the last half of fiscal 1995 and remained high into the first
half of fiscal 1996. Given the rapid decline in the price of hot rolled steel
coils during this time frame, the Company was not able to turn all of its on
hand inventory, which had been acquired at these higher prices, prior to
granting price accommodations to its customers due to competitive market
circumstances.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following as of the dates
presented:
<TABLE>
<CAPTION>
April 30,
December 31, -------------------
1997 1997 1996
------ ------- --------
<S> <C> <C> <C>
Land and improvements $ 3,664 $ 3,730 $ 1,981
Buildings and improvements 58,930 55,525 36,587
Machinery and equipment 96,925 94,603 76,749
------- ------- -------
159,519 153,858 115,317
Less accumulated depreciation 28,870 23,499 17,960
------- ------- -------
130,649 130,359 97,357
------- ------- -------
Construction in progress 15,128 11,077 22,981
------- ------- -------
$145,777 $141,436 $120,338
======= ======= =======
</TABLE>
4. LONG-TERM DEBT
On July 14, 1995, the Company issued $50,000 of ten-year term notes (the
"Notes") to a group of domestic commercial lenders. The Notes bear interest
at the fixed rate per annum of 8.13%, with interest payable semiannually each
January 15 and July 15, and mature in equal annual installments of $7,143 on
each July 15, 1999 - 2005. The proceeds from the issuance of the Notes were
utilized to reduce the Company's outstanding borrowings on its line of credit
facility with a group of domestic commercial banks.
The balance of long-term debt primarily consists of amounts outstanding under
a revolving credit agreement entered into with a group of domestic commercial
banks, which agreement provides for borrowings and issuances of letters of
credit in amounts totaling up to $80,000 (increased from $60,000 effective
December 17, 1996) until termination of the agreement on October 31, 1999. As
of December 31, 1997, the Company had unused borrowing capacity of $18,934
under this agreement, which was further limited as of December 31, 1997, as
discussed in the following paragraph. The agreement provides for borrowings
at varying interest rates set either below the prime rate for LIBOR-based
loans or at or slightly above the prime rate for daily revolving credit
advances, payable monthly or at the maturity of any LIBOR-based loans. The
agreement does not require compensating balances to be maintained.
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 Notes, agreeing with the purchasers of the Notes to a
covenant limiting the Company's funded debt to no more than 50% of total
capitalization. As of December 31, 1997, the ratio of funded debt to total
capitalization was 47.8%. As such, the Company had unused borrowing capacity
of $10,066 as of December 31, 1997, in accordance with this debt covenant.
On March 24, 1998, the Company amended its revolving credit facility and the
agreements under which the Notes are outstanding to provide these lenders with
security interests in the accounts receivable, inventory and selected fixed
assets of the Company. Effective with these amendments, the maximum amount of
borrowings available to the Company under its revolving credit facility will
be based upon percentages of eligible accounts receivable, inventory and
selected fixed assets, as defined in the amended revolving credit agreement.
The Notes and the revolving credit agreement both require the maintenance of
various financial covenants and ratios. The Company was in compliance with
the financial covenants and ratios required by the Notes as of December 31,
1997. The Company was also in compliance, or received necessary waivers for
areas of non-compliance, with the financial covenants and ratios required
under the revolving credit agreement as of December 31, 1997. Principal
payments due on the Company's long-term debt for each of the five years
following December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 209
1999 67,352
2000 7,330
2001 7,364
2002 7,249
Thereafter 21,429
--------
$110,933
========
</TABLE>
Total cash paid for interest during the eight months ended December 31, 1997
was $5,295. Total cash paid for interest in the years ended April 30, 1997,
1996, and 1995 was $7,552, $4,450, and $1,764, respectively. Of the Company's
total interest costs, it capitalized $774, $1,244, $2,091 and $1,786 to
construction in progress during the eight months ended December 31, 1997, and
the years ended April 30, 1997, 1996, and 1995, respectively.
5. Capital stock
The Company is authorized to issue 5,000,000 shares of $.01 per share par
value preferred stock. The Company is also authorized to issue two classes of
common stock, both of which possess a par value of $.01 per share and have
identical rights, preferences and powers, except the Class B common stock is
entitled to ten votes per share.
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) promulgated under the Securities Act of 1933 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 $4,500 of
depreciable assets and certain other operating assets of Coil-Tec, Inc. on
January 30, 1997.
The Company is authorized to issue 25,000,000 shares of Class A common stock,
of which 5,292,000 shares were issued as of December 31, 1997, and April 30,
1997 and 1996. The Company is authorized to issue 10,000,000 shares of Class
B common stock, of which 3,650,000 shares were issued as of December 31, 1997,
and April 30, 1997 and 1996. Shares of Class B common stock are not
transferrable to persons or entities unaffiliated with Mr. B. D. Hunter,
Chairman of the Board and Chief Executive Officer of the Company, who is in
control of all issued and outstanding shares of Class B common stock through
his personal and family interests. All shares of Class B common stock are
convertible into a like number of shares of Class A common stock at the sole
discretion of the holder of such Class B common stock, with such conversion
becoming mandatory at the date which follows ten years after the death of Mr.
B. D. Hunter.
6. Incentive stock plan
The Company maintains an incentive stock plan, which provides for the grant of
non-qualified stock options, incentive stock options, restricted shares and
stock appreciation rights to officers and key employees, as well as directors,
of the Company selected by a committee of the Board of Directors. A maximum
of 900,000 shares of Class A common stock may be issued under the plan.
Options issued under the plan may be exercised, subject to a ten-year maximum,
over periods determined by the committee.
A summary of the status of the Company's stock option plan as of December 31,
1997, and April 30, 1997 and 1996 and changes during the periods ending on
those dates, is as follows:
<TABLE>
<CAPTION>
Options Weighted Average
Outstanding Exercise Price
----------- ----------------
<S> <C> <C>
Balance at April 30, 1995 687,000 $18.73
Options granted 73,000 $19.50
Options exercised (2,000) $17.00
Options canceled or forfeited (12,500) $20.18
-------
Balance at April 30, 1996 745,500 $18.78
Options granted 98,500 $12.50
Options exercised - -
Options canceled or forfeited (8,000) $23.13
-------
Balance at April 30, 1997 836,000 $18.00
Options granted 353,000 $13.50
Options exercised - -
Options canceled or forfeited (342,750) $20.57
-------
Balance at December 31, 1997 846,250 $15.08
=======
</TABLE>
The following table summarizes stock options outstanding and exercisable as of
December 31, 1997:
<TABLE>
<CAPTION>
Outstanding Exercisable
---------------------------- ---------------------
Remaining Average Average
Exercise No. of Average Exercise No. of Exercise
Price Range Options Life Price Options Price
- ------------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
$17.00-$21.50 403,250 4.3 yrs $17.04 385,750 $17.04
$12.50-$13.50 443,000 3.5 yrs $13.30 - -
------- ------- ------ ------- ------
846,250 3.9 yrs $15.08 385,750 $17.04
======= ======= ====== ======= ======
</TABLE>
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," requires companies to measure employee stock compensation
plans based on the fair value method of accounting. However, the Statement
allows the alternative of continued use of Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees," with pro-forma
disclosure of net income and earnings per share determined as if the fair
value based method had been applied in measuring compensation cost. The
Company adopted the new standard in the fiscal year ending April 30, 1997, and
elected the continued use of APB Opinion No. 25. Accordingly, no compensation
expense has been recognized by the Company for its incentive stock plan. Had
the fair value method of accounting been applied to the Company's incentive
stock plan, the Company's net income and earnings per common share would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Eight
months ended
December 31, Year ended April 30,
1997 1997 1996
-------- ----- ------
<S> <C> <C> <C>
Net income available
for common shareholders:
As reported $ 883 $6,439 $1,108
Pro forma 827 6,402 1,106
Earnings per common share
(basic and diluted):
As reported $ .10 $ .72 $ .12
Pro forma .09 .72 .12
</TABLE>
The pro forma impact only takes into account options granted since April 1996,
and is likely to increase in future years as additional options are granted
and amortized ratably over the vesting period. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions used for the eight
months ended December 31, 1997, and the years ended April 30, 1997 and 1996,
respectively: risk-free interest rates of 5.7%, 6.7%, and 5.1%; dividend yield
of .9%; expected common stock market price volatility factor of 47.0%, 50.1%,
and 54.8%; and a weighted average expected life of the options of three to
five years. The weighted average fair value of options granted for the eight
months ended December 31, 1997, and the years ended April 30, 1997 and 1996,
respectively, was $1.90, $3.84, and $4.90.
7. Income taxes
The components of the provision for income taxes for the transition period
ended December 31, 1997, and for the years ended April 30, 1997, 1996, and
1995, respectively, are as follows:
<TABLE>
<CAPTION>
Eight months
ended Years ended April 30,
December 31, ------------------------
1997 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current:
Federal $(1,528) $1,284 $ - $4,736
State 65 43 (24) 326
------ ------ ------ ------
(1,463) 1,327 (24) 5,062
------ ------ ------ ------
Deferred (primarily Federal):
Current 288 (205) (1,366) (143)
Non-current 1,661 2,875 2,091 1,118
------ ------ ------ ------
1,949 2,670 725 975
------ ------ ------ ------
Provision for income taxes $ 486 $3,997 $ 701 $6,037
====== ====== ====== ======
</TABLE>
Deferred income taxes reflect the tax impact of temporary differences between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. The net deferred income tax
liabilities of the Company are comprised of the following as of:
<TABLE>
<CAPTION>
April 30,
December 31, -------------
1997 1997 1996
------ ------ ------
<S> <C> <C> <C>
Total deferred tax liabilities,
primarily related to property basis
differentials and related effects,
including accelerated tax depreciation $14,580 $8,929 $5,133
------- ------ ------
Deferred tax assets attributable to:
Non-deductible liabilities and reserves 1,247 1,588 1,514
Net operating loss carryovers
expiring through the year ending
December 31, 2017 5,095 1,052 -
------- ------ ------
Total deferred tax assets 6,342 2,640 1,514
------- ------ ------
Net deferred tax liabilities, net of
$1,177, $1,465 and $1,260, respectively,
reflected in other current assets $ 8,238 $6,289 $3,619
======= ====== ======
</TABLE>
A reconciliation of the provision for income taxes to the maximum statutory
Federal rate of 35% is as follows for the following periods:
<TABLE>
<CAPTION>
Eight months
ended Years ended April 30,
December 31, ------------------------
1997 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Tax at statutory Federal rate $ 526 $3,670 $ 633 $5,614
State income taxes, net
of federal tax benefit (143) 195 (94) 277
Amortization of goodwill 67 101 101 101
Other 36 31 61 45
----- ------ ------ ------
$ 486 $3,997 $ 701 $6,037
===== ====== ====== ======
</TABLE>
During the eight months ended December 31, 1997, and the years ended April 30,
1997, 1996, and 1995, the Company made cash payments for income taxes of
$1,016, $3,000, $50, and $5,587, respectively. During the year ended April
30, 1997, the Company claimed Federal tax refunds of $1,871, which refunds
were received in May 1997.
8. Commitments and contingencies
The Company is a party to various claims and legal proceedings generally
incidental to its business. Although the ultimate disposition of these
proceedings is not presently determinable, management does not believe that
adverse determination in any or all of such proceedings will have a material
adverse effect upon the financial condition or the results of operations of
the Company.
The Company leases a variety of assets for use in its operations. With
respect to operating leases of steel processing equipment and certain real
property, the Company has negotiated purchase options which are effective
prior to or at the end of the lease term of such operating lease agreements.
With respect to the Company's operating lease commitments, net aggregate
future lease payments as of December 31, 1997, are payable as follows:
<TABLE>
<S> <C>
1998 $ 4,155
1999 4,059
2000 3,925
2001 3,774
2002 3,730
Thereafter 11,325
-------
$30,968
=======
</TABLE>
9. Quarterly financial data (unaudited)
Summarized quarterly financial data for the eight month periods ended December
31, 1997 and 1996, and for the years ended April 30, 1997 and 1996 follows:
<TABLE>
<CAPTION>
Year or
First Second Third Fourth Stub transition
quarter quarter quarter quarter period (1) period
------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
December 1997 $90,514 $99,110 - - $56,700(1) $246,324(3)
December 1996 78,430 83,983 - - 43,921(1) 206,334(3)
April 1997 78,430 83,983 $73,391 $90,759 - 326,563(4)
April 1996 55,106 62,072 68,486 78,423 - 264,087(4)
Gross profit (loss):
December 1997 9,070 7,620 - - 1,763(1) 18,453(3)
December 1996 8,993 9,206 - - 3,384(1) 21,583(3)
April 1997 8,993 9,206 5,776 8,133 - 32,108(4)
April 1996 4,774 (3,480)(2) 8,028 8,902 - 18,224(4)
Income (loss) before
income taxes:
December 1997 4,759 3,205 - - (1,268)(1) 6,696(3)
December 1996 5,362 5,393 - - 746 (1) 11,501(3)
April 1997 5,362 5,393 2,014 3,956 - 16,725(4)
April 1996 1,779 (6,577)(2) 4,491 5,384 - 5,077(4)
Net income (loss):
December 1997 1,821 772 - - (1,577)(1) 1,016(3)
December 1996 2,570 2,417 - - (273)(1) 4,714(3)
April 1997 2,570 2,417 140 1,362 - 6,489(4)
April 1996 906 (4,653)(2) 2,153 2,702 - 1,108(4)
Earnings (loss)
per common share
(basic and diluted):
December 1997 .20 .08 - - (.18)(1) .10(3)
December 1996 .29 .27 - - (.03)(1) .53(3)
April 1997 .29 .27 .01 .15 - .72(4)
April 1996 .10 (.52)(2) .24 .30 - .12(4)
(1) Reflects the months of November and December, 1997 and 1996, respectively.
(2) See Note 2 for a discussion of the lower of cost or market inventory adjustment recorded in
the second quarter of the year ended April 30, 1996.
(3) Reflects the eight month periods ended December 31, 1997 and 1996, respectively, related to
the change of the Company's reporting year to December 31.
(4) Reflects results for the Company's years ended April 30, 1997 and 1996, based upon the
Company's former fiscal year.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Huntco Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of cash flows, and of changes in
shareholders' equity present fairly, in all material respects, the financial
position of Huntco Inc. and its subsidiaries at December 31, 1997, April 30,
1997, and April 30, 1996, and the results of their operations and their cash
flows for the eight months ended December 31, 1997, and for each of the three
years in the period ended April 30, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
/s/ Price Waterhouse LLP
St. Louis, Missouri
January 30, 1998, except for Note 4, which is as of March 24, 1998
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- ------------------------------------------------------------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Information regarding (i) directors of the Company and (ii) the only executive
officers of the Company (who are also directors of the Company), is
incorporated herein by reference to the information included under the title
"Proposal 1: Election of Directors --Nominees for Directors", "--Information
as of March 1, 1998 Regarding the Nominees for Directors to be Elected in 1998
for Terms Ending in 2001"; and "--Information as of March 1, 1998 Regarding
the Directors Who are Not Nominees for Election and Whose Terms Continue
Beyond 1998," contained within the Company's 1998 Proxy Statement. The
individuals identified in the 1998 Proxy Statement as executive officers of
the Company have been appointed to serve as such until their respective
successors are duly elected and have qualified, or until their earlier death,
resignation or removal.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
Information regarding executive compensation is incorporated herein by
reference to the information included under the titles "Proposal 1: Election
of Directors --Directors' Fees" contained within the Company's 1998 Proxy
Statement; "Executive Compensation --Summary Compensation Table", "--Options/
SAR Grants in Last Fiscal Year", "--Aggregated Option/SAR Exercises in Last
Fiscal Year and FY-End Option/SAR Values", "--Ten-Year Option/SAR Repricings",
"--Certain Contracts", and "--Compensation Committee Interlocks and Insider
Participation" contained within the Company's 1998 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
Information regarding security ownership of certain beneficial owners and
management is incorporated herein by reference to the information included
under the title "Voting, Voting Securities and Principal Holders Thereof --
Holdings of Management and Principal Shareholders" contained within the
Company's 1998 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Information regarding certain relationships and related transactions is
incorporated herein by reference to the information included under the title
"Certain Transactions" contained within the Company's 1998 Proxy Statement.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The Company's financial statements together with the report thereon
of Price Waterhouse LLP dated January 30, 1998, are set forth herein under
Item 8.
(2) Financial Statement Schedules -- Omitted, not applicable.
(3) Exhibits
These Exhibits are numbered in accordance with the Exhibit Table at
Item 601 of Regulation S-K. The following Exhibits listed in the Exhibit
Index are filed with this Report:
4(ii)(b)(1): Amended and Restated Revolving Credit Agreement dated March
24, 1998, 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, The First National Bank of
Chicago, Bank of America NT&SA, and SunTrust Bank, Atlanta.
4(ii)(b)(2): Form of Revolving Credit Note issued in connection with the
execution of the Amended and Restated Revolving Credit Agreement of March 24,
1998.
4(ii)(c)(2): First Amendment to Note Purchase Agreement dated July 14,
1995, entered into as of March 24, 1998, by and among Huntco Inc., 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..
4(ii)(c)(5): Subsidiary Guaranty dated March 24, 1998, from HSI
Aviation, Inc. entered into in connection with the First Amendment to Note
Purchase Agreement dated July 14, 1995.
4(ii)(d)(1): Form of Security Agreement dated March 24, 1998, executed by
each of Huntco Inc., Huntco Nevada, Inc., Huntco Steel, Inc., Midwest
Products, Inc., and HSI Aviation, Inc., in favor of Mercantile Bank National
Association, as Collateral Agent for the Company's creditors under that
certain Amended and Restated Revolving Credit Agreement dated March 24, 1998,
that certain Note Purchase Agreement dated July 14, 1995, as amended, and that
certain Collateral Agency and Intercreditor Agreement dated March 24, 1998.
4(ii)(d)(2): Collateral Agency and Intercreditor Agreement dated March
24, 1998, executed 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, The First National Bank
of Chicago, Bank of America NT&SA, SunTrust Bank, Atlanta; 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.
10(iii)(A)(7): Description of performance bonus arrangement for the
executive officers for the year ending December 31, 1998.
10(iii)(A)(9): Form of Option Agreement for Awards of Options under 1993
Incentive Stock Plan.
23(ii): Consent of Price Waterhouse LLP.
24: Powers of Attorney submitted by B. D. Hunter, Robert J. Marischen,
Terry J. Heinz, James J. Gavin, Jr., Donald E. Brandt and Michael M. McCarthy.
27: Financial Data Schedule.
For a listing of each management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Report, see the Exhibits listed
under Exhibit Nos. 10(iii)(A)(1) through 10(iii)(A)(10).
(b) Reports on Form 8-K
The Company filed a Form 8-K on November 17, 1997, which filing discussed the
Company's earnings for the three and six months ended October 31, 1997, and
certain forward-looking data for the eight month transition period ending
December 31, 1997.
The Company filed a Form 8-K on February 2, 1998, which filing discussed the
Company's earnings for the eight month transition period ended December 31,
1997, and certain forward-looking data for the calendar year ending December
31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HUNTCO INC.
(Registrant)
Date: March 25, 1998 By:/s/ Robert J. Marischen
-----------------------
Robert J. Marischen,
Vice Chairman of the Board
and Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints B. D. Hunter and Robert J. Marischen, and each of
them (with full power to each of them to act alone), his true and lawful
attorney-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this report and any and all amendments to this report, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/ B. D. Hunter Director, Chairman of the March 25, 1998
- --------------------------------- Board and Chief Executive
B. D. Hunter Officer
(Principal Executive Officer)
/s/ Robert J. Marischen Director, Vice Chairman of March 25, 1998
- --------------------------------- Board and Chief Financial
Robert J. Marischen Officer (Principal Financial
and Accounting Officer)
/s/ Terry J. Heinz Director, President and March 25, 1998
- --------------------------------- Chief Operating Officer
Terry J. Heinz
/s/ Donald E. Brandt Director March 25, 1998
- ---------------------------------
Donald E. Brandt
/s/ James J. Gavin, Jr. Director March 25, 1998
- ---------------------------------
James J. Gavin, Jr.
/s/ Michael M. McCarthy Director March 25, 1998
- ---------------------------------
Michael M. McCarthy
<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(i): Restated Articles of Incorporation of Huntco Inc. incorporated by
reference to Exhibit 3(i) of the Company's 1995 Annual Report on Form 10-K,
filed on July 28, 1995.
3(ii): Amended and Restated Bylaws of Huntco Inc., incorporated by
reference to Exhibit 3(ii) of the Company's Form 10-Q for the quarter ended
October 31, 1997, filed on December 15, 1997.
4(i)(a): Reference is made to Article III of the Restated Articles of
Incorporation of Huntco Inc., incorporated by reference to Exhibit 3(i) of the
Company's 1995 Annual Report on Form 10-K filed July 28, 1995.
4(i)(b): Certificate of Designation defining the terms and provisions of the
Company's Series A Preferred Stock, incorporated by reference to Exhibit
4(v)(a) of the Company's Form 10-Q for the quarter ended January 31, 1997,
filed on March 14, 1997.
4(i)(c): Registration Rights Agreement dated January 30, 1997, issued in
conjunction with the issuance of the Company's Series A Preferred Stock,
incorporated by reference to Exhibit 4(v)(b) of the Company's Form 10-Q for
the quarter ended January 31, 1997, filed on March 14, 1997.
4(ii)(a)(1): 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,
incorporated by reference to Exhibit 4(iii)(a) of the Company's Form 10-Q for
the quarter ended January 31, 1997, filed on March 14, 1997.
4(ii)(a)(2): Form of Revolving Credit Note issued in connection with the
execution of the Revolving Credit Agreement of December 17, 1996 (the
"Agreement"), and a schedule of the amount of each Revolving Credit Note
issued on December 17, 1996 in conjunction with this Agreement, incorporated
by reference to Exhibit 4(iii)(b) of the Company's Form 10-Q for the quarter
ended January 31, 1997, filed on March 14, 1997.
4(ii)(a)(3): First Amendment, dated April 30, 1997, to Revolving Credit
Agreement dated December 17, 1996, by and among Huntco Inc., Huntco Nevada,
Inc., Huntco Steel, Inc., HSI Aviation, Inc., Mercantile Bank National
Association, Harris Trust and Savings Bank, NBD Bank, Bank of America
Illinois, and SunTrust Bank, Atlanta, incorporated by reference to Exhibit
4(ii)(b)(3) of the Company's fiscal 1997 Annual Report on Form 10-K, filed on
July 25, 1997.
4(ii)(b)(1): Amended and Restated Revolving Credit Agreement dated March 24,
1998, 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, The First National Bank of
Chicago, Bank of America NT&SA, and SunTrust Bank, Atlanta.
4(ii)(b)(2): Form of Revolving Credit Note issued in connection with the
execution of the Amended and Restated Revolving Credit Agreement of March 24,
1998.
4(ii)(c)(1): Note Purchase Agreement dated July 14, 1995, providing for the
issuance of $50.0 million of 8.13% ten-year term notes, maturing in equal
annual installments from July 15, 1999-2005, by and among Huntco Inc. and each
of the purchasers listed on Schedule A thereto, incorporated herein by
reference to Exhibit 4(v)(a) of the Company's Form 8-K filed on July 18, 1995.
4(ii)(c)(2): First Amendment to Note Purchase Agreement dated July 14, 1995,
entered into as of March 24, 1998, by and among Huntco Inc., 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..
4(ii)(c)(3): Individual Notes due July 2005, sold pursuant to the Note
Purchase Agreement dated July 14, 1995, incorporated herein by reference to
Exhibits 4(b)-(j) of the Company's Form 8-K filed on July 18, 1995.
4(ii)(c)(4): Subsidiary Guaranty dated July 14, 1995, from Huntco Nevada,
Inc., Huntco Steel, Inc., and Midwest Products, Inc. entered into in
connection with the Note Purchase Agreement dated July 14, 1995, incorporated
herein by reference to Exhibit 4(k) of the Company's Form 8-K filed on July
18, 1995.
4(ii)(c)(5): Subsidiary Guaranty dated March 24, 1998, from HSI Aviation,
Inc. entered into in connection with the First Amendment to Note Purchase
Agreement dated July 14, 1995.
4(ii)(d)(1): Form of Security Agreement dated March 24, 1998, executed by each
of Huntco Inc., Huntco Nevada, Inc., Huntco Steel, Inc., Midwest Products,
Inc., and HSI Aviation, Inc., in favor of Mercantile Bank National
Association, as Collateral Agent for the Company's creditors under that
certain Amended and Restated Revolving Credit Agreement dated March 24, 1998,
that certain Note Purchase Agreement dated July 14, 1995, as amended, and that
certain Collateral Agency and Intercreditor Agreement dated March 24, 1998.
4(ii)(d)(2): Collateral Agency and Intercreditor Agreement dated March 24,
1998, executed 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, The First National Bank of
Chicago, Bank of America NT&SA, SunTrust Bank, Atlanta; 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.
4(ii)(e)(1): Lease Agreement dated as of June 1, 1992 by and between the City
of Blytheville, Arkansas and Huntco Steel, Inc., which Lease Agreement
represents a capital lease, incorporated herein by reference to Exhibit
10(ii)(D)(1) of the Company's Registration Statement on Form S-1 (33-62936)
and filed on May 19, 1993.
4(ii)(e)(2): First Amendment to Lease Agreement dated as of August 17, 1993
by and between the City of Blytheville, Arkansas and Huntco Steel, Inc., which
Lease Agreement represents a capital lease, incorporated herein by reference
to Exhibit 10(ii)(D)(1)(ii) to Amendment No. 1 to the Company's Registration
Statement on Form S-1 (33-71426) and filed on November 23, 1993.
9: Omitted - not applicable.
10(iii)(A)(1): Form of Executive Employment Agreement, incorporated by
reference to Exhibit 10(iii)(A)(1) of the Company's Form 10-Q for the quarter
ended July 31, 1993, filed on September 13, 1993.
10(iii)(A)(2): Form of Performance Bonus Agreement for fiscal year ending
April 30, 1995, incorporated by reference to Exhibit 10(iii)(A)(3) of the
Company's 1994 Annual Report on Form 10-K, filed on July 29, 1994.
10(iii)(A)(3): Form of Performance Bonus Agreement for fiscal year ending
April 30, 1996, incorporated by reference to Exhibit 10(iii)(A)(3) of the
Company's 1995 Annual Report on Form 10-K, filed on July 28, 1995.
10(iii)(A)(4): Form of Amended Performance Bonus Agreement for fiscal year
ending April 30, 1996, incorporated by reference to Exhibit 10(iii)(A) of the
Company's Form 10-Q for the quarter ended January 31, 1996, filed on February
28, 1996.
10(iii)(A)(5): Description of Performance Bonus Arrangement for executive
officers for the fiscal year ending April 30, 1997, incorporated by reference
to Exhibit 10(iii)(A)(5) of the Company's 1996 Annual Report on Form 10-K,
filed on July 26, 1996.
10(iii)(A)(6): Description of Performance Bonus Arrangement for executive
officers for the fiscal year ending April 30, 1998, incorporated by reference
to Exhibit 10(iii)(A)(6) of the Company's fiscal 1997 Annual Report on Form
10-K, filed on July 25, 1997.
10(iii)(A)(7): Description of Performance Bonus Arrangement for executive
officers for the calendar year ending December 31, 1998.
10(iii)(A)(8): Huntco Inc. 1993 Incentive Stock Plan, as Amended and Restated
in 1996, incorporated herein by reference to Exhibit 10(iii)(A)(2) of the
Company's Form 10-Q for the quarter ended July 31, 1996, filed on August 13,
1996.
10(iii)(A)(9): Form of Option Agreement for Awards of Options under 1993
Incentive Stock Plan.
10(iii)(A)(10): Description of tax reimbursement arrangement between the
Company and its executive employees upon exercise of non-qualified stock
options, incorporated herein by reference to Exhibit 10(iii)(A)(6) of the
Company's 1994 Annual Report on Form 10-K, filed on July 29, 1994.
11: Omitted - not applicable.
12: Omitted - not applicable.
13: Omitted - not applicable.
16: Omitted - not applicable.
18: Omitted - not applicable.
21: Subsidiaries of the Company, incorporated by reference to Exhibit 21 of
the Company's fiscal 1997 Annual Report on Form 10-K, filed on July 25, 1997.
22: Omitted - not applicable.
23(ii): Consent of Price Waterhouse.
24: Powers of attorney contained on the signature page found herein.
27: Financial Data Schedule.
99: Omitted - not applicable.
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this "Agreement")
is made and entered into this 24th day of March, 1998, 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 Banks party hereto (collectively, the "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 The First National Bank of Chicago in their capacities as Banks and as co-
agents under this Agreement.
WITNESSETH:
WHEREAS, Borrower, the Guarantors, Mercantile Bank National Association,
Harris Trust and Savings Bank, NBD Bank, Bank of America Illinois, SunTrust
Bank, Atlanta and Mercantile Bank National Association, as agent for the Banks
(in such capacity, the "Agent"), have heretofore entered into that certain
Revolving Credit Agreement dated December 17, 1996, as amended by that certain
First Amendment to Revolving Credit Agreement dated effective as of April 30,
1997 (as so amended, the "Original Revolving Credit Agreement"); and
WHEREAS, Bank of America NT&SA is the successor to Bank of America
Illinois; and
WHEREAS, pursuant to an Assignment and Assumption Agreement dated as of
March 13, 1998, by and between NBD Bank and The First National Bank of
Chicago, NBD Bank assigned to The First National Bank of Chicago all of the
rights and obligations of NBD Bank under the Original Revolving Credit
Agreement, including, without limitation, all of the rights and obligations of
NBD Bank under the Original Revolving Credit Agreement in respect of its
Commitment, its Revolving Credit Loans, its Pro Rata Share of the undrawn face
amount of each of the Letter(s) of Credit and its Pro Rata Share of each of
the Letter of Credit Loans, and The First National Bank of Chicago accepted
the assignment of such rights and assumed the corresponding obligations from
NBD Bank; and
WHEREAS, Borrower and the Guarantors desire to amend and restate the
Original Revolving Credit Agreement in the manner hereinafter set forth and
the Banks and the Agent are willing to agree thereto on the terms 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 amend
and restate the Original Revolving Credit Agreement so that as so amended and
restated it reads in its entirety as follows:
"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.
Account Debtor shall mean any Person who is and/or may become obligated
to Borrower or a Guarantor under or on account of any of the Accounts.
Accounts shall mean all trade accounts receivable of Borrower and each of
the Guarantors which have been invoiced by Borrower or the applicable
Guarantor, as the case may be.
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 (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.
Applicable Commitment Fee Rate shall mean: (a) during the period
commencing December 17, 1996, and ending March 31, 1997, One-Eighth of One
Percent (.125%) per annum; (b) during the period commencing April 1, 1997, and
ending April 30, 1997, Three-Sixteenths of One Percent (.1875%) per annum; (c)
during the period commencing May 1, 1997, and ending March 23, 1998, (i) One-
Sixteenth of One Percent (.0625%) per annum if the Consolidated Debt to
Consolidated EBITDA Ratio was less than 3.0 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 Consolidated Debt to Consolidated EBITDA Ratio was
equal to or greater than 3.0 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), (iii) Three-Sixteenths of
One Percent (.1875%) per annum if the Consolidated Debt to Consolidated EBITDA
Ratio was equal to or greater than 3.5 to 1.0 but less than 4.0 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 (iv)
Five-Sixteenths of One Percent (.3125%) per annum if the Consolidated Debt to
Consolidated EBITDA Ratio was equal to or greater than 4.0 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 (d) from
and after March 24, 1998, (i) Three-Sixteenths of One Percent (.1875%) per
annum if the Consolidated Debt to Consolidated EBITDA Ratio was 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), (ii)
One-Quarter of One Percent (.25%) per annum if the Consolidated Debt to
Consolidated EBITDA Ratio was equal to or greater than 3.5 to 1.0 but less
than 4.0 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-Eighths of One Percent (.375%) per annum if
the Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater
than 4.0 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 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 Consolidated Debt to Consolidated EBITDA Ratio as
of the end of the fiscal quarter of Borrower ended December 31, 1997, will be
determined from the consolidated financial statements of Borrower and its
Subsidiaries as of and for fiscal quarter ended December 31, 1997 (which are
required to be delivered to the Agent and the Banks on or before April 10,
1998), and will be used in determining the Applicable Commitment Fee Rate from
and after May 1, 1998. Notwithstanding the foregoing, in no event shall any
provision contained in this definition be construed as permitting Borrower to
any time have a Consolidated Debt to Consolidated EBITDA Ratio greater than
the maximum Consolidated Debt to Consolidated EBITDA Ratio permitted by
Section 6.01(q)(ii) of this Agreement at such time.
Applicable Margin shall mean:
(a) with respect to Prime Loans: (i) during the period commencing
December 17, 1996, and ending March 31, 1997, Zero Percent (0.00%) per annum;
(ii) during the period commencing April 1, 1997, and ending April 30, 1997,
One-Eighth of One Percent (.125%) per annum; (iii) during the period
commencing May 1, 1997, and ending March 23, 1998, (A) a negative One-Eighth
of One Percent (-.125%) per annum if the Consolidated Debt to Consolidated
EBITDA Ratio was less than 3.0 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
Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater than
3.0 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), (C) One-Quarter of One Percent (.25%) per annum
if the Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater
than 3.5 to 1.0 but less than 4.0 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), (D) Three-Quarters of One Percent (.75%)
per annum if the Consolidated Debt to Consolidated EBITDA Ratio was equal to
or greater than 4.0 to 1.0 but less than 4.5 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 (E) One Percent (1.00%) per
annum if the Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 4.5 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 (iv) from and after March 24, 1998, (A) Zero Percent
(0.00%) per annum if the Consolidated Debt to Consolidated EBITDA Ratio was
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), (B) One-Half of One Percent (.50%) per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater than
3.5 to 1.0 but less than 4.0 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), (C) One Percent (1.00%) per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater than
4.0 to 1.0 but less than 4.5 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 (D) One and One-Quarter Percent (1.25%) per
annum if the Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 4.5 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
December 17, 1996, and ending March 31, 1997, Three-Quarters of One Percent
(.75%) per annum; (ii) during the period commencing April 1, 1997, and ending
April 30, 1997, Seven-Eighths of One Percent (.875%) per annum; (iii) during
the period commencing May 1, 1997, and ending March 23, 1998, (A) Five-Eighths
of One Percent (.625%) per annum if the Consolidated Debt to Consolidated
EBITDA Ratio was less than 3.0 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 Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 3.0 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), (C) One Percent (1.00%) per annum
if the Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater
than 3.5 to 1.0 but less than 4.0 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), (D) One and One-Half Percent (1.50%) per
annum if the Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 4.0 to 1.0 but less than 4.5 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 (E) One and Three-Quarters
Percent (1.75%) per annum if the Consolidated Debt to Consolidated EBITDA
Ratio was equal to or greater than 4.5 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 (iv) from and after March 24,
1998, (A) Three-Quarters of One Percent (.75%) per annum if the Consolidated
Debt to Consolidated EBITDA Ratio was 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), (B) One and One-Quarter
Percent (1.25%) per annum if the Consolidated Debt to Consolidated EBITDA
Ratio was equal to or greater than 3.5 to 1.0 but less than 4.0 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), (C) One and
Three-Quarters Percent (1.75%) per annum if the Consolidated Debt to
Consolidated EBITDA Ratio was equal to or greater than 4.0 to 1.0 but less
than 4.5 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 (D) Two and One-Quarter Percent (2.25%) per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater than
4.5 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 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 Consolidated Debt to Consolidated EBITDA Ratio as of the end of
the fiscal quarter of Borrower ended December 31, 1997, will be determined
from the consolidated financial statements of Borrower and its Subsidiaries as
of and for the fiscal quarter ended December 31, 1997 (which are required to
be delivered to the Agent and the Banks on or before April 10, 1998), and will
be used in determining the Applicable Margin from and after May 1, 1998.
Notwithstanding the foregoing, in no event shall any provision contained in
this definition be construed as permitting Borrower to any time have a
Consolidated Debt to Consolidated EBITDA Ratio greater than the maximum
Consolidated Debt to Consolidated EBITDA Ratio permitted by Section
6.01(q)(ii) of this Agreement at such time.
Applicable Standby Letter of Credit Commitment Fee Rate shall mean: (a)
during the period commencing December 17, 1996, and ending March 31, 1997, One
Percent (1.00%) per annum; (b) during the period commencing April 1, 1997, and
ending April 30, 1997, One and One-Eighth Percent (1.125%) per annum; (c)
during the period commencing May 1, 1997, and ending March 23, 1998, (i)
Seven-Eighths of One Percent (.875%) per annum if the Consolidated Debt to
Consolidated EBITDA Ratio was less than 3.0 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 Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater
than 3.0 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), (iii) One and One-Quarter Percent (1.25%)
per annum if the Consolidated Debt to Consolidated EBITDA Ratio was equal to
or greater than 3.5 to 1.0 but less than 4.0 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), (iv) One and Three-Quarters Percent
(1.75%) per annum if the Consolidated Debt to Consolidated EBITDA Ratio was
equal to or greater than 4.0 to 1.0 but less than 4.5 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 (v) Two Percent
(2.00%) per annum if the Consolidated Debt to Consolidated EBITDA Ratio was
equal to or greater than 4.5 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 (d) from and after March 24, 1998, (i) One
Percent (1.00%) per annum if the Consolidated Debt to Consolidated EBITDA
Ratio was 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), (ii) One and One-Quarter Percent (1.25%) per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater than
3.5 to 1.0 but less than 4.0 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), (iii) Two Percent (2.00%) per annum if the
Consolidated Debt to Consolidated EBITDA Ratio was equal to or greater than
4.0 to 1.0 but less than 4.5 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 (iv) Two and One-Quarter Percent (2.25%) per
annum if the Consolidated Debt to Consolidated EBITDA Ratio was equal to or
greater than 4.5 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 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 Consolidated Debt to Consolidated EBITDA Ratio as
of the end of the fiscal quarter of Borrower ended December 31, 1997, will be
determined from the consolidated financial statements of Borrower and its
Subsidiaries as of and for fiscal quarter ended December 31, 1997 (which are
required to be delivered to the Agent and the Banks on or before April 10,
1998), and will be used in determining the Applicable Standby Letter of Credit
Commitment Fee Rate from and after May 1, 1998. Notwithstanding the
foregoing, in no event shall any provision contained in this definition be
construed as permitting Borrower to any time have a Consolidated Debt to
Consolidated EBITDA Ratio greater than the maximum Consolidated Debt to
Consolidated EBITDA Ratio permitted by Section 6.01(q)(ii) of this Agreement
at such time.
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 or any
default or event of default under any of the other Transaction Documents, (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, any other Obligor 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, any Subsidiary or any Collateral, (e) to protect,
collect, lease, sell, take possession of or liquidate any Collateral, (f) to,
if an Event of Default under this Agreement has occurred and is continuing,
attempt to enforce any security interest in or other Lien upon any Collateral
or to give any advice with respect to such enforcement and/or (g) to, if an
Event of Default under this Agreement has occurred and is continuing, enforce
any of the rights or remedies of the Agent or any of the Banks to collect any
of the Borrower's Obligations and/or any obligations of any of the Guarantors
under Section 9 of this Agreement.
Bank(s) shall mean each bank listed on the signature pages hereof, and
its successors and assigns.
Borrower Security Agreement shall mean that certain Security Agreement
dated March 24, 1998, and executed by Borrower in favor of the Collateral
Agent for the equal and ratable benefit of the Creditors, as the same may from
time to time be amended, modified, extended or renewed.
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 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.
Borrowing Base shall mean, as of the date of any determination thereof,
the sum of:
(a) Eighty Percent (80%) of the face amount of all then existing
Eligible Accounts of Borrower; plus
(b) Sixty-Five Percent (65%) of the Eligible Inventory of
Borrower, valued at the lower of cost or market in accordance with GAAP; plus
(c) Forty Percent (40%) of the net book value of all Eligible
Machinery and Equipment of Borrower, determined in accordance with GAAP; plus
(d) Eighty Percent (80%) of the face amount of all then existing
Eligible Accounts of Huntco Nevada; plus
(e) Sixty-Five Percent (65%) of the Eligible Inventory of Huntco
Nevada, valued at the lower of cost or market in accordance with GAAP; plus
(f) Forty Percent (40%) of the net book value of all Eligible
Machinery and Equipment of Huntco Nevada, determined in accordance with GAAP;
plus
(g) Eighty Percent (80%) of the face amount of all then existing
Eligible Accounts of Huntco Steel; plus
(h) Sixty-Five Percent (65%) of the Eligible Inventory of Huntco
Steel, valued at the lower of cost or market in accordance with GAAP; plus
(i) Forty Percent (40%) of the net book value of all Eligible
Machinery and Equipment of Huntco Steel, determined in accordance with GAAP;
plus
(j) Eighty Percent (80%) of the face amount of all then existing
Eligible Accounts of Midwest Products; plus
(k) Sixty-Five Percent (65%) of the Eligible Inventory of
Midwest Products, valued at the lower of cost or market in accordance with
GAAP; plus
(l) Forty Percent (40%) of the net book value of all Eligible
Machinery and Equipment of Midwest Products, determined in accordance with
GAAP; plus
(m) Eighty Percent (80%) of the face amount of all then existing
Eligible Accounts of HSI Aviation; plus
(n) Sixty-Five Percent (65%) of the Eligible Inventory of HSI
Aviation, valued at the lower of cost or market in accordance with GAAP; plus
(o) Forty Percent (40%) of the net book value of all Eligible
Machinery and Equipment of HSI Aviation, determined in accordance with GAAP;
plus
(p) $9,000,000.00; minus
(q) the then aggregate outstanding principal balances of all of the
Private Placement Notes.
Borrowing Base Certificate shall have the meaning ascribed thereto in
Section 2.01(b).
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 The First National
Bank of Chicago.
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.
Collateral shall have the meaning ascribed thereto in each of the
Security Agreements.
Collateral Agent shall mean Mercantile Bank National Association, in its
capacity as collateral agent under the Intercreditor Agreement and the
Security Agreements, and its successors in such capacity.
Collateral Release Date shall have the meaning ascribed thereto in the
Intercreditor Agreement.
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 The First National
Bank of Chicago, $20,000,000.00; with respect to Bank of America NT&SA,
$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 EBITDAR during such period to (b) the
sum of (i) the aggregate amount of all principal payments required to be made
by Borrower and its Subsidiaries on all Debt during the one (1) year period
immediately following the end of such period (including the principal portion
of payments in respect of Capitalized Leases but excluding principal payments
on the Loans) plus (ii) Consolidated Interest Expense during such period plus
(iii) Consolidated Operating Lease 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 such day to (b) Consolidated EBITDA for the four (4) consecutive fiscal
quarter period of Borrower ending on such day.
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 EBITDAR 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) the 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 plus
(iv) Consolidated Operating Lease Expense 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 Operating Lease Expense shall mean, for the period in
question, the aggregate amount of all Operating Lease Expenses of Borrower and
its Subsidiaries during such period, 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.
Creditors shall have the meaning ascribed thereto in the Intercreditor
Agreement.
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.
Eligible Accounts shall mean all Accounts other than: (a) Accounts which
remain unpaid for more than ninety (90) days after their invoice dates and
Accounts which are not due and payable within ninety (90) days after their
invoice dates; (b) Accounts which are evidenced by a promissory note or other
"instrument" (as defined in the applicable Uniform Commercial Code); (c)
Accounts with respect to which the Account Debtor is an Affiliate of Borrower
or any of the Guarantors; (d) Accounts with respect to which payment by the
Account Debtor is or may be conditional and Accounts commonly known as bill
and hold Accounts or Accounts of a similar or like arrangement; (e) Accounts
with respect to which the Account Debtor is the United States of America, any
state of the United States or any other governmental body or any department,
agency or instrumentality of any of the foregoing, unless such Accounts are
duly assigned to the Collateral Agent for the equal and ratable benefit of the
Creditors in accordance with all applicable governmental and regulatory rules
and regulations (including, without limitation, the Federal Assignment of
Claims Act of 1940, as amended, if applicable) so that the Collateral Agent is
recognized by the Account Debtor to have all of the rights of an assignee of
such Accounts; (f) Accounts with respect to which the goods giving rise
thereto have not been shipped and delivered to and accepted as satisfactory by
the Account Debtor thereof or with respect to which the services performed
giving rise thereto have not been completed and accepted as satisfactory by
the Account Debtor thereof; (g) Accounts which are not invoiced (and dated as
of such date) and sent to the Account Debtor thereof concurrently with or not
later than fifteen (15) days after the shipment and delivery to said Account
Debtor of the goods giving rise thereto or the performance of the services
giving rise thereto; (h) Accounts with respect to which possession and/or
control of the goods sold giving rise thereto is held, maintained or retained
by Borrower or any of the Guarantors (or by any agent or custodian of Borrower
or any of the Guarantors) for the account of or subject to further and/or
future direction from the Account Debtor thereof; (i) Accounts arising from a
consignment sale, a "sale on approval" or a "sale or return"; (j) Accounts
with respect to which the Account Debtor is located in the State of New
Jersey, the State of Minnesota or the State of West Virginia; provided,
however, that such restriction shall not apply if Borrower and/or the
applicable Guarantor(s), as the case may be, (i) have filed and have effective
(A) in respect of Account Debtors located in the State of New Jersey, a Notice
of Business Activities Report with the State of New Jersey Division of
Taxation for the then current year, (B) in respect of Account Debtors located
in the State of Minnesota, a Minnesota Business Activity Report with the
Minnesota Department of Revenue for the then current year or (C) in respect of
Account Debtors located in the State of West Virginia, a West Virginia
Business Activity Report with the West Virginia Department of Tax and Revenue
for the then current year, as applicable, or (ii) are otherwise exempt from
such reporting requirements under the laws of such State(s); and (k) Accounts
which are not subject to a first priority perfected security interest in favor
of the Collateral Agent for the equal and ratable benefit of the Creditors.
Eligible Inventory shall mean all Inventory of Borrower and each of the
Guarantors which consists of raw materials or finished goods (specifically
excluding any Inventory of Borrower and each of the Guarantors which consists
of work-in-process) other than: (a) any Inventory which is obsolete; (b) any
raw materials which have been in Inventory for more than one hundred twenty
(120) days; (c) any finished goods which have been in finished goods Inventory
for more than one hundred twenty (120) days; (d) any Inventory which is not
located in the continental United States of America; (e) any Inventory (other
than Inventory in transit to Borrower or the applicable Guarantor in the
ordinary course of its business) which is not located at the chief executive
office of Borrower or the applicable Guarantor, as the case may be, one of the
locations listed on Exhibit A to the Security Agreement executed by Borrower
or the applicable Guarantor, as the case may be, or another location with
respect to which Borrower or the applicable Guarantor, as the case may be, has
complied with all of the requirements of Section 3(b) of the Security
Agreement executed by Borrower or such Guarantor; (f) any Inventory which
Borrower or the applicable Guarantor, as the case may be, has sold to any
customer on consignment or on approval or on any other basis which entitles
the customer to return, or which may obligate Borrower or the applicable
Guarantor, as the case may be, to repurchase, such Inventory; and (g) any
Inventory which is not subject to a first priority perfected security interest
in favor of the Collateral Agent for the equal and ratable benefit of the
Creditors.
Eligible Machinery and Equipment shall mean all machinery and equipment
of Borrower and each of the Guarantors other than: (a) any machinery or
equipment which is not used or usable in the ordinary course of business of
Borrower or the applicable Guarantor; (b) any machinery and equipment which is
not located in the continental United States of America; (c) any machinery and
equipment which is not located at the chief executive office of Borrower or
the applicable Guarantor, as the case may be, one of the locations listed on
Exhibit A to the Security Agreement executed by Borrower or the applicable
Guarantor, as the case may be, or another location with respect to which
Borrower or the applicable Guarantor, as the case may be, has complied with
all of the requirements of Section 3(b) of the Security Agreement executed by
Borrower or such Guarantor; and (d) any machinery and equipment which is not
subject to a first priority perfected security interest in favor of the
Collateral Agent for the equal and ratable benefit of the Creditors.
Environmental Claim shall mean any administrative, regulatory or judicial
action, judgment, order, consent decree, suit, demand, demand letter, claim,
Lien, notice of noncompliance 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.
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. Section 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. Section 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. Section 9601 et seq.), as
amended; or (d) defined or regulated as a hazardous substance or hazardous waste
under any rules orregulations promulgated under any of the foregoing statutes.
HSI Aviation Security Agreement shall mean that certain Security
Agreement dated March 24, 1998, and executed by HSI Aviation in favor of the
Collateral Agent for the equal and ratable benefit of the Creditors, as the
same may from time to time be amended, modified, extended or renewed.
Huntco Nevada Security Agreement shall mean that certain Security
Agreement dated March 24, 1998, and executed by Huntco Nevada in favor of the
Collateral Agent for the equal and ratable benefit of the Creditors, as the
same may from time to time be amended, modified, extended or renewed.
Huntco Steel Security Agreement shall mean that certain Security
Agreement dated March 24, 1998, and executed by Huntco Steel in favor of the
Collateral Agent for the equal and ratable benefit of the Creditors, as the
same may from time to time be amended, modified, extended or renewed.
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.
Intercreditor Agreement shall mean that certain Collateral Agency and
Intercreditor Agreement dated March 24, 1998, by and among Borrower, the
Guarantors, the Creditors and the Collateral Agent, as the same may from time
to time be amended, modified, extended or renewed.
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.
Inventory shall mean all inventory of each of the Guarantors, valued at
the lower of cost or market in accordance with GAAP.
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 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
standby letter of credit) or an application and agreement for irrevocable
commercial letter of credit in the form of Exhibit F 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 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 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.
Midwest Products Security Agreement shall mean that certain Security
Agreement dated March 24, 1998, and executed by Midwest Products in favor of
the Collateral Agent for the equal and ratable benefit of the Creditors, as
the same may from time to time be amended, modified, extended or renewed.
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 amended by
that certain First Amendment to Note Purchase Agreements dated March 24, 1998,
and as the same may from time to time be further 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.
Operating Lease shall mean any lease of Property, whether real and/or
personal, by a Person as lessee which is not a Capitalized Lease.
Operating Lease Expenses shall mean with respect to any Person, for the
period in question, the aggregate amount of rental and other expenses incurred
by such Person in respect of Operating Leases during such period, all
determined in accordance with GAAP.
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 in favor of the Collateral Agent for the equal
and ratable benefit of the Creditors under the Security Agreements;
(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.
Private Placement Notes shall mean all of the notes from time to time
issued under the Note Purchase Agreements, as the same may from time to time
be amended, modified, extended or renewed.
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%; The First National Bank of Chicago - 25%;
Bank of America NT&SA - 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.
Security Agreements shall mean the Borrower Security Agreement, the HSI
Aviation Security Agreement, the Huntco Nevada Security Agreement, the Huntco
Steel Security Agreement and the Midwest Products Security Agreement.
Specified Collateral shall mean, with respect to a Person, all of such
Person's now owned and existing and hereafter created, acquired or arising
right, title and interest in, to and under the following described property,
wherever located: (a) all accounts, contract rights, chattel paper, documents,
instruments and other forms of obligation and other rights to the payment of
money, and all goods whose sale, lease, rental or other disposition by such
Person have given rise to Accounts and have been returned to or repossessed or
stopped in transit by such Person; (b) all inventory of such Person, whether
in transit, held by others for such Person's account, covered by warehouse
receipts, purchase orders and/or contracts, or in the possession of any
carriers, forwarding agents, truckers, warehousemen, vendors or other Persons,
including, without limitation, all raw materials, work in process, finished
goods, supplies, goods, incidentals, office supplies and packaging and
shipping materials; (c) all goods, machinery, equipment, appliances,
furniture, furnishings, fixtures, parts, tools and supplies, together with all
accessories and parts affixed or appertaining thereto or used in connection
therewith; (d) all books, records, computer records, computer disks, ledger
cards, programs and other computer materials, customer and supplier lists,
invoices, orders and other property at any time evidencing or relating to any
of the Collateral; (e) all accessions to any of the property described above
and all substitutions, renewals, improvements and replacements of and
additions thereto; and (f) all proceeds, including, without limitation,
proceeds which constitute property of the types described in (a), (b), (c),
(d) and (e) above and any rents and profits of any of the foregoing items,
whether cash or noncash, immediate or remote, including, without limitation,
all income, accounts, contract rights, general intangibles, chattel paper,
notes, drafts, acceptances, instruments and other rights to the payment of
money arising out of the sale, rental, lease, exchange or other disposition of
any of the foregoing items, and insurance proceeds, and all products of (a),
(b), (c), (d) and (e) above, and any indemnities, warranties and guaranties
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing items.
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 standby Letters of Credit outstanding as of such date.
Telerate Page 3750 shall mean the display designated as "Page 3750" on
the Dow Jones Markets 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, the Security Agreements, the Intercreditor Agreement and
any 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 or any of the Guarantors, 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. (a) 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 under this Agreement at any one time shall not exceed the
lesser of (a) such Bank's Commitment at such time or (b) such Bank's Pro Rata
Share of the lesser of (i) the sum of (A) the total Commitments of all of the
Banks at such time minus (B) the aggregate principal amount of all Letter of
Credit Loans outstanding at such time minus (C) the aggregate undrawn face
amount of all Letters of Credit outstanding at such time or (ii) the sum of
(A) the Borrowing Base at such time minus (B) the aggregate principal amount
of all Letter of Credit Loans outstanding at such time minus (C) the aggregate
undrawn face amount of all standby Letters of Credit outstanding at such time.
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.
(b) Borrower shall deliver to the Agent and each of the Banks on
March 24, 1998 (with respect to the month ended February 28, 1998) and on the
last day of each month commencing in the month of April, 1998, a borrowing
base certificate in the form of Exhibit A attached hereto and incorporated
herein by reference (a "Borrowing Base Certificate") setting forth:
(i) the Borrowing Base and its components as of the end of the
immediately preceding month;
(ii) the aggregate principal amount of all Revolving Credit
Loans outstanding as of the end of the immediately preceding month;
(iii) the aggregate principal amount of all Letter of Credit
Loans outstanding as of the end of the immediately preceding month;
(iv) the aggregate undrawn face amount of all standby Letters
of Credit outstanding as of the end of the immediately preceding month; and
(v) the difference, if any, between the Borrowing Base and the
Total Outstandings as of the end of the immediately preceding month.
The Borrowing Base shown in such Borrowing Base Certificate shall be and
remain the Borrowing Base hereunder until the next Borrowing Base Certificate
is delivered to the Agent and each of the Banks, at which time the Borrowing
Base shall be the amount shown in such subsequent Borrowing Base Certificate.
Each Borrowing Base Certificate shall be certified (subject to normal year-end
adjustments) as to truth and accuracy by the chief financial officer or
treasurer of Borrower.
(c) If the Borrowing Base as of any date is less than the Total
Outstandings as of such date, Borrower shall be automatically required
(without demand or notice of any kind by the Agent or any of the Banks, all of
which are hereby expressly waived by Borrower) to immediately repay the
Revolving Credit Loans and/or the Letter of Credit Loans and/or surrender for
cancellation the outstanding standby Letters of Credit, in either case in an
amount sufficient to reduce the amount of the Total Outstandings to the amount
of the Borrowing Base.
(d) If the total Commitments of all of the Banks as of any date should
be less than the sum of the Total Outstandings as of such date plus the
aggregate undrawn face amount of all commercial Letters of Credit outstanding
as of such date, whether as a result of Borrower's election to decrease the
amount of the Commitments of the Banks pursuant to Section 2.07 or otherwise,
Borrower shall be automatically required (without demand or notice of any kind
by the Agent or any of the Banks, all of which are hereby expressly waived by
Borrower) to immediately repay the Revolving Credit Loans and/or the Letter of
Credit Loans and/or surrender for cancellation the outstanding Letters of
Credit, in either case in an amount sufficient to reduce the sum of the Total
Outstandings plus the aggregate undrawn face amount of all commercial Letters
of Credit to an amount equal to or less than the total Commitments of all of
the Banks.
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 an Amended and Restated Revolving Credit Note of
Borrower dated March 24, 1998, and payable to the order of such Bank in a
principal amount equal to its Commitment in substantially the form of Exhibit
B attached hereto (with appropriate insertions) (collectively, as the same may
from time to time be amended, modified extended or renewed, the "Notes").
Upon the delivery of the original Note payable to a Bank to such Bank, the
original Revolving Credit Note of Borrower dated December 17, 1996 (or March
13, 1998 in the case of the original Revolving Credit Note payable to the
order of The First National Bank of Chicago) and payable to the order of such
Bank shall be deemed cancelled by amendment and restatement and of no further
force or effect and shall be promptly returned to Borrower marked "Cancelled
by Amended and Restated Revolving Credit Note dated March 24, 1998."
(b) Each Bank shall record in its books and records the date, amount,
type and maturity of each Revolving Credit Loan made by it and the date and
amount of each payment of principal and/or interest made by Borrower with
respect thereto; 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 any
mistake by any Bank in connection with any such recordation. The books and
records of each Bank 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 the maturity of the Notes, whether by reason of acceleration or
otherwise. From and after the maturity of the Notes, whether by reason of
acceleration or otherwise, each Prime Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to Two Percent (2%)
over and above the Adjusted Prime Rate.
(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 on each LIBOR Loan shall be
payable on the last day of the applicable Interest Period, unless the duration
of such 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, and at the maturity of the
Notes, whether by reason of acceleration or otherwise. From and after the
maturity of the Notes, whether by reason of acceleration or otherwise, each
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 Adjusted Prime Rate.
(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) Borrower hereby agrees to pay the Agent a semi-annual
collateral examination fee in the amount of $7,500.00 payable on the date
hereof and every six (6) months thereafter during the Revolving Credit Period.
In addition to said quarterly collateral examination fee, Borrower hereby
agrees to reimburse the Agent upon demand for any reasonable out-of-pocket
costs and expenses incurred by the Agent in connection with any collateral
examination conducted by the Agent.
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; 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. Borrower may,
upon at least one (1) Eurodollar Business Day's notice to the Agent specifying
that it is paying its LIBOR Loans, pay its LIBOR Loans to which a given
Interest Period applies on other than the last day of such Interest Period, 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 noon (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 2.10, 2.11, 2.12, 2.13 and 2.15 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 Revolving 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 C
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 lesser of (A) the sum of (1) total Commitments of all of the Banks
at such time minus (2) the aggregate undrawn face amount of all commercial
Letters of Credit outstanding at such time or (B) the Borrowing Base at 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 lesser of (1) the total Commitments of all of the Banks at
such time or (2) the sum of the Borrowing Base at such time plus the aggregate
undrawn face amount of all commercial letters of credit outstanding at 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;
(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 D 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, any
Letter of Credit Negotiation Fees and any interest on Letter of Credit Loans
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 Revolving Credit Period, Borrower
shall, on or before 12:00 noon (St. Louis time) on the last day of the
Revolving Credit Period, surrender the originals of the applicable Letter(s)
of Credit to Mercantile for cancellation; and (b) if the Borrower Security
Agreement is no longer in full force and effect, 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, if the Borrower
Security Agreement is no longer in full force and effect, 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) the Borrower Security Agreement and such Uniform
Commercial Code financing statements and other documents as the Collateral
Agent or any of the Creditors may require in connection therewith, each
executed by a duly authorized officer of Borrower;
(d) the Huntco Nevada Security Agreement and such Uniform
Commercial Code financing statements and other documents as the Agent or any
of the Banks may require in connection therewith, each executed by a duly
authorized officer of Huntco Nevada;
(e) the Huntco Steel Security Agreement and such Uniform
Commercial Code financing statements and other documents as the Agent or any
of the Banks may require in connection therewith, each executed by a duly
authorized officer of Huntco Steel;
(f) the Midwest Products Security Agreement and such
Uniform Commercial Code financing statements and other documents as the Agent
or any of the Banks may require in connection therewith, each executed by a
duly authorized officer of Midwest Products;
(g) the HSI Aviation Security Agreement and such Uniform
Commercial Code financing statements and other documents as the Agent or any
of the Banks may require in connection therewith, each executed by a duly
authorized officer of HSI Aviation;
(h) the Intercreditor Agreement, executed by duly
authorized officers of each of Borrower, the Guarantors, the Creditors and the
Collateral Agent;
(i) 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,
the Borrower Security Agreement, the Intercreditor Agreement and the other
Transaction Documents executed by the Borrower, certified by the Secretary of
Borrower;
(j) a copy of resolutions of the Board of Directors of
Huntco Nevada, duly adopted, which authorize the execution, delivery and
performance of this Agreement, the Huntco Nevada Security Agreement, the
Intercreditor Agreement and the other Transaction Documents executed by Huntco
Nevada, certified by the Secretary of Huntco Nevada;
(k) a copy of resolutions of the Board of Directors of
Huntco Steel, duly adopted, which authorize the execution, delivery and
performance of this Agreement, the Huntco Steel Security Agreement, the
Intercreditor Agreement and the other Transaction Documents executed by Huntco
Steel, certified by the Secretary of Huntco Steel;
(l) a copy of resolutions of the Board of Directors of
Midwest Products, duly adopted, which authorize the execution, delivery and
performance of this Agreement, the Midwest Products Security Agreement, the
Intercreditor Agreement and the other Transaction Documents executed by
Midwest Products, certified by the Secretary of Midwest Products;
(m) a copy of resolutions of the Board of Directors of HSI
Aviation, duly adopted, which authorize the execution, delivery and
performance of this Agreement, the HSI Aviation Security Agreement, the
Intercreditor Agreement and the other Transaction Documents executed by HSI
Aviation, certified by the Secretary of HSI Aviation;
(n) a copy of the Articles of Incorporation of Borrower,
including any amendments thereto, certified by the Secretary of State of the
State of Missouri;
(o) 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;
(p) 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;
(q) 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;
(r) 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;
(s) a copy of the By-Laws of Borrower, including any
amendments thereto, certified by the Secretary of Borrower;
(t) a copy of the By-Laws of Huntco Nevada, including any
amendments thereto, certified by the Secretary of Huntco Nevada;
(u) a copy of the By-Laws of Huntco Steel, including any
amendments thereto, certified by the Secretary of Huntco Steel;
(v) a copy of the By-Laws of Midwest Products, including
any amendments thereto, certified by the Secretary of Midwest Products;
(w) a copy of the By-Laws of HSI Aviation, including any
amendments thereto, certified by the Secretary of HSI Aviation;
(x) 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;
(y) 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 any of the Transaction
Documents;
(z) 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 any of the Transaction
Documents;
(aa) 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 any of the
Transaction Documents;
(bb) 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 any of the
Transaction Documents;
(cc) a certificate of corporate good standing of Borrower
issued by the Secretary of State of the State of Missouri;
(dd) a certificate of corporate good standing of Huntco
Nevada issued by the Secretary of State of the State of Nevada;
(ee) 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, Kansas, Kentucky and South
Carolina;
(ff) certificates of corporate good standing of Midwest
Products issued by the Secretaries of State of the States of Missouri and
Pennsylvania;
(gg) a certificate of corporate good standing of HSI
Aviation issued by the Secretary of State of the State of Missouri;
(hh) an opinion of counsel of Peper, Martin, Jensen,
Maichel and Hetlage, independent counsel for Borrower and the Guarantors, in
the form of Exhibit G attached hereto and incorporated herein by reference;
(ii) the initial Borrowing Base Certificate required by
Section 2.01(b);
(jj) 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; and
(kk) evidence satisfactory to the Agent of the insurance
required by the Security Agreements together with loss payable endorsements in
form and substance satisfactory to the Agent naming the Collateral Agent as
loss payee, duly executed by the insurance company;
(ll) 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 in this Agreement 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 current Borrowing Base
Certificate as required by Section 2.01(b);
(b) the Agent shall have received a Notice of Borrowing for
such Revolving Credit Loan as required by Section 2.02;
(c) 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;
(d) 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
(e) all of the representations and warranties of Borrower
and the Guarantors 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 (c), (d) and (e) of
this Section 4.02.
4.03 All Letters of Credit. Notwithstanding any provision contained
in this Agreement to the contrary, Mercantile shall have no obligation to
issue any Letter of Credit under this Agreement unless:
(a) Mercantile shall have received a current Borrowing Base
Certificate as required by Section 2.01(b);
(b) Mercantile shall have received a Letter of Credit
Request for such Letter of Credit as required by Section 3.01(a);
(c) 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;
(d) Borrower shall have complied with all of the procedures
and requirements set forth in Section 3.01;
(e) 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;
(f) 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;
(g) all of the representations and warranties of Borrower
and the Guarantors 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
(h) 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
(e), (f) and (g) of this Section 4.03.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to the Agent and 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 executed by Borrower are
within the corporate powers of Borrower and have been duly authorized by all
necessary corporate action on the part of Borrower. The execution, delivery
and performance by each Guarantor of this Agreement and the other Transaction
Documents to which it is a party are within the corporate powers of such
Guarantor and have been duly authorized by all necessary corporate action on
the part of such Guarantor.
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): (a) 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,
1997, all certified by Borrower's independent certified public accountants,
which financial statements have been prepared in accordance with GAAP
consistently applied; and (b) 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 October 31, 1997, 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 October 31, 1997; 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 Collateral Agent for the equal and ratable benefit
of the Creditors under the Security Agreements). 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 H 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 and the Guarantors 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. In addition to the collateral examination fees
set forth in Section 2.06 of this Agreement, 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 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. Section
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. Section
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 as of the last day of each fiscal quarter of
Borrower ending on or after the Collateral Release Date a Consolidated Debt to
Consolidated EBITDA Ratio of not more than 3.75 to 1.0.
(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 (A) 1.75 to 1.0 for the four (4) consecutive fiscal quarter period of
Borrower ended on December 31, 1997, (B) 1.75 to 1.0 for the four (4)
consecutive fiscal quarter period of Borrower ending on March 31, 1998, (C)
1.75 to 1.0 for the four (4) consecutive fiscal quarter period of Borrower
ending on June 30, 1998, (D) 1.0 to 1.0 for the four (4) consecutive fiscal
quarter period of Borrower ending on September 30, 1998, (E) 1.0 to 1.0 for
the four (4) consecutive fiscal quarter period of Borrower ending on December
31, 1998, and (F) 1.2 to 1.0 for each four (4) consecutive fiscal quarter
period of Borrower ending on or after March 31, 1999.
(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 and to secure said guaranty with a security
interest in and lien on all of the Specified Collateral of such Subsidiary,
all 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, upon the consummation of 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) either (a) 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 (b) guaranty the payment and performance of all of the Borrower's
Obligations and (y) grant the Collateral Agent for the equal and ratable
benefit of the Creditors a security interest in all of the Specified
Collateral of the continuing or surviving corporation as security for its
guaranty 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, upon the consummation of 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
any Private Placement 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 or any of the
Guarantors made in this Agreement, in any other Transaction Document to which
Borrower or any of the Guarantors 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 2.01(c), Section 2.01(d), 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 Any "Event of Default" (as defined therein) shall occur under or
within the meaning of any of the Security Agreements;
7.11 Other than by reason of the termination of the Intercreditor
Agreement in accordance with its terms, (a) the Intercreditor Agreement 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, (b) the
validity or enforceability of the Intercreditor Agreement shall be contested
or denied by Borrower or any of the Guarantors, (c) Borrower or any of the
Guarantors shall deny that it has any further liability or obligation under
the Intercreditor Agreement or (d) Borrower or any of the Guarantors shall
fail to comply with or observe any of the terms, provisions, conditions,
agreements or covenants contained in the Intercreditor Agreement;
7.12 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;
7.13 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);
7.14 Any "Event of Default" (as defined therein) shall occur under or
within the meaning of any of the Note Purchase Agreements;
7.15 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;
7.16 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
7.17 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 Collateral Agent, 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 $500,000,000.00.
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 and performance 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, any other
Obligor 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 from its obligations
under this Section 9.
(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 any of the other Guarantors 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, all
of the Letters of Credit have expired or been terminated 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, all of the
Letters of Credit have expired or been terminated 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 or any of the
Guarantors (any such notice being expressly waived by Borrower and each of the
Guarantors) 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 or
any of the Guarantors against any and all indebtedness, liabilities and
obligations of Borrower or the applicable Guarantor(s), as the case may be, to
the Agent and the Banks under this Agreement and the other Transaction
Documents 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 or the applicable Guarantor(s), as the case may be,
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 or any of the Guarantors and to apply the amount
subject to such exercise to the payment of indebtedness, liabilities or
obligations of Borrower or the applicable Guarantor(s), as the case may be,
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,
(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 and the Letter of
Credit Applications 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", "H" and "I" refer to annexed Exhibits "A", "B", "C", "D",
"E", "F", "G", "H" and "I" 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 I 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 or any of the Guarantors and theretofore
created and/or existing in favor of such Bank(s) or the Collateral Agent 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.
10.18 No Novation. This Agreement and the other Transaction Documents
are being amended and restated in their entirety for the convenience of the
parties hereto. This Agreement and the other Transaction Documents merely
amend, modify and restate the indebtedness, liabilities and obligations
evidenced hereby and thereby and do not constitute or effect, and it is the
express intent of the parties hereto that this Agreement and the other
Transaction Documents do not constitute or effect, a novation of the existing
indebtedness, liabilities and obligations incurred by the Borrower and the
Guarantors pursuant to the Original Revolving Credit Agreement and the other
"Transaction Documents" (as defined in the Original Revolving Credit
Agreement). Such indebtedness, liabilities and obligations continue to remain
outstanding and are amended and modified only to the extent this Agreement and
the other Transaction Documents amend and modify the Original Revolving Credit
Agreement and the other "Transaction Documents" (as defined in the Original
Revolving Credit Agreement).
IN WITNESS WHEREOF, Borrower, the Guarantors, the Agent and the Banks
have executed this Amended and Restated Revolving Credit Agreement this 24th
day of March, 1998.
HUNTCO INC.
By /s/ Robert J. Marischen
Title: Vice Chairman & CFO
14323 South Outer Forty Road
Suite 600 North
Town & Country, 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/ Anthony J. Verkruyse
Title: Vice President & Secretary
14323 South Outer Forty Road
Suite 600 North
Town & Country, Missouri 63017
Attention: Vice President
Telecopy number: (314) 878-4537
MIDWEST PRODUCTS, INC.
By /s/ Anthony J. Verkruyse
Title: Vice President & Secretary
14323 South Outer Forty Road
Suite 600 North
Town & Country, 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
Town & Country, Missouri 63017
Attention: President
Telecopy number: (314) 878-4537
MERCANTILE BANK NATIONAL ASSOCIATION
721 Locust Street
St. Louis, Missouri 63101
HARRIS TRUST AND SAVINGS BANK
111 West Monroe - 2C
Chicago, Illinois 60690
THE FIRST NATIONAL BANK OF CHICAGO
BANK OF AMERICA NT&SA
231 South LaSalle
Chicago, Illinois 60697
SUNTRUST BANK, ATLANTA
25 Park Place, N.E., Mail Code 124
Atlanta, Georgia 30303
MERCANTILE BANK NATIONAL ASSOCIATION, as Agent
721 Locust Street
St. Louis, Missouri 63101
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
$______________ St. Louis, Missouri
March 24, 1998
FOR VALUE RECEIVED, on the last day of the Revolving Credit Period, the
undersigned, HUNTCO INC., a Missouri corporation ("Borrower"), hereby promises
to pay to the order of __________________ ("Bank"), the principal sum of
______________ Million Dollars ($______________), 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 in its books and records 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 and/or interest made by Borrower with
respect thereto; 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 any mistake by Bank in connection with any such recordation.
The books and records of Bank 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 Notes referred to in the Amended and Restated
Revolving Credit Agreement dated March 24, 1998, 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.
This Note is secured by, among other things, the Borrower Security
Agreement, to which Borrower Security Agreement reference is hereby made for a
description of the security and a statement of the terms and conditions upon
which this Note is secured.
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 for
foreclosure of the Borrower Security Agreement, 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).
This Note is an amendment, restatement and continuation of that certain
Revolving Credit Note of Borrower dated ______________, 19__, and payable to
the order of Bank in the principal amount of $____________ (the "Original
Note") and not a novation thereof. Upon delivery of the original of this Note
by Borrower to Bank, the Original Note shall be deemed cancelled by amendment
and restatement and of no further force or effect and shall be promptly
returned to Borrower marked "Cancelled by Amended and Restated Revolving
Credit Note dated March 24, 1998."
HUNTCO INC.
By_________________________
Title:_____________________
HUNTCO INC.
14323 SOUTH OUTER FORTY DRIVE
SUITE 600 NORTH
TOWN & COUNTRY, MISSOURI 63017
First Amendment to Note Purchase Agreement dated July 14, 1995
with respect to the 8.13% Notes due July 15, 2005
March 24, 1998
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
This First Amendment to Note Purchase Agreement ("Amendment") is being entered
into with each of the Purchasers listed on Schedule A attached to the Note
Purchase Agreement (the "Purchasers"). On July 14, 1995, Huntco Inc., a
Missouri corporation (the "Company") entered into separate but identical Note
Purchase Agreements (the "Note Purchase Agreements") with each of the
Purchasers providing for the sale and purchase of $50,000,000 aggregate
principal amount of the Company's 8.13% Notes due July 15, 2005 (the "Notes").
On December 17, 1996, the Company entered into that certain unsecured
Revolving Credit Agreement by and among Mercantile Bank National Association,
as agent for the banks listed on Schedule C attached hereto (the "Banks") as
that agreement was subsequently amended effective as of April 30, 1997 and
amended and restated effective March 24, 1998 (the "Revolving Credit
Agreement"). The Revolving Credit Agreement provides for borrowings by the
Company of up to $80,000,000.00 at any time outstanding, of which $68,921,000
($68,000,000 of Revolving Credit loans and $921,000 of undrawn standby letters
of credit) are outstanding on the date hereof. All capitalized terms used but
not otherwise defined in this Amendment shall have the meanings ascribed to
them in the Note Purchase Agreements.
Pursuant to the terms of the Note Purchase Agreements, the Company covenanted
that the Company and the Subsidiaries would not permit to exist, create,
assume or incur, directly or indirectly, any Lien on its properties or assets
except for the Liens specifically allowed for in the Note Purchase Agreements.
In order to secure the Company's and its Subsidiaries' obligations under the
Revolving Credit Agreement, the Banks have requested the Company to cause the
Subsidiaries to grant the Banks a first priority security interest in all of
the Subsidiaries' personal property described on Schedule D (the
"Collateral"). The granting of a security interest in the Collateral will
constitute a Lien that is prohibited under the terms of the Note Purchase
Agreements. The Company and the Purchasers have agreed to amend the terms of
each of the Note Purchase Agreements and the Company and the Banks have agreed
to amend the Revolving Credit Agreement to allow Company to grant (i) to the
Purchasers as a group, and (ii) to the Banks as a group, pari passu, a first
priority security interest in the Collateral in accordance with the terms of
this Amendment and such additional documents referenced herein.
In order to effectuate the above, the Company and Purchasers agree as follows:
1. AMENDMENTS TO NOTE PURCHASE AGREEMENTS.
1.1 Amendment of Schedule 5.4.
Schedule 5.4 of the Note Purchase Agreements is amended to add HSI Aviation,
Inc., a Missouri corporation, and a wholly-owned subsidiary of Huntco Steel,
Inc., formed on October 8, 1996. The original Schedule 5.4 shall be replaced
in its entirety by the attached Schedule 5.4.
1.2 Amendment of Schedule 5.15.
Schedule 5.15 of the Note Purchase Agreement shall be deleted in its entirety
and replaced by the attached Schedule 5.15.
1.3 Amendment of Section 10.4
Section 10.4 of the Note Purchase Agreements is amended by adding the
following new paragraph (f):
(f) Liens existing on property or assets of the Company or a
Subsidiary arising from the Security Agreements and the Intercreditor
Agreement referenced in Schedule 10.4 securing, pari passu, the Notes and
Indebtedness outstanding under the Revolving Credit Agreement; and
Section 10.4 is further amended by redesignating the paragraph (f) as
paragraph (g) and by changing the reference "(e)" to "(f)" included in such
redesignated paragraph (g). Original Schedule 10.4 shall be replaced in its
entirety by the attached Schedule 10.4 to the Note Purchase Agreements.
1.4 Amendment of Section 10
Section 10 of the Note Purchase Agreement is further amended by adding a new
Section 10.8 to read as follows:
"Section 10.8 Economic Inducements.
The Company will not, and will not permit any Guarantor to, offer or pay,
directly or indirectly, any economic inducement (including without limitation,
any fees or other payments) to any of the Banks in connection with any waiver,
amendment or modification of any provision of, or an agreement to forebear
from taking any action under, the Revolving Credit Agreement, unless the same
economic inducement has been concurrently offered and paid on a pro-rata basis
(determined with respect to the aggregate principal amount outstanding under
the Notes and the aggregate principal amount of the loans and letters of
credit outstanding under the Revolving Credit Agreement) to all of the
Purchasers. The parties agree that the foregoing sharing arrangement shall
not apply to any fees or other economic inducements that the Company or
Guarantors pay to the Banks to renew or extend the term of the Revolving
Credit Agreement.
1.5 Amendment of Section 11
Section 11, subsection (c), is amended by deleting the reference to "10.7" and
inserting "10.8".
Section 11 of the Note Purchase Agreements is further amended by adding a new
paragraph (m) to read as follows:
"(m) Any "Event of Default" (as defined therein) shall occur under or
within the meaning of Section 7(b), (c) or (d) of any of the Security
Agreements."
1.6 Amendment of Schedule B.
Schedule B of the Note Purchase Agreements is amended by adding, in
appropriate alphabetical order, the following definitions:
"Amendment" means the First Amendment to Note Purchase Agreements dated
March 24, 1998 between the Company and the Purchasers.
"Banks" is defined in the first paragraph of the preamble to the
Amendment and includes any other financial institutions from time to time
party to the Revolving Credit Agreement.
"Collateral" is defined in the second paragraph of the preamble to the
Amendment.
"Collateral Agent" means Mercantile Bank National Association, as
collateral agent under the Intercreditor Agreement, and any successor
collateral agent appointed pursuant to the provisions of the Intercreditor
Agreement.
"Creditors" is defined in Section 2.1 of the Amendment.
"Financing Statements" is defined in Section 4.4 of the Amendment.
"Intercreditor Agreement" means the Collateral Agency and Intercreditor
Agreement dated as of March 24, 1998 among the Company, the Purchasers, the
Banks and the Collateral Agent, as such agreement may hereafter be amended or
modified from time to time.
"Revolving Credit Agreement" means the Amended and Restated Revolving
Credit Agreement dated March 24, 1998 among the Company, Mercantile Bank
National Association, as Agent, and the financial institutions party thereto,
as such agreement may hereafter be amended or modified from time to time.
"Security Agreements" is defined in Section 4.4 of the Amendment.
The definition of "Guarantor" is amended by deleting the word "or"
immediately before the word "Midwest," deleting the period at the end of the
definition and inserting therefor the phrase ", or HSI Aviation, Inc., a
Missouri corporation."
2. SECURITY INTEREST IN COLLATERAL, RELEASE OF COLLATERAL.
2.1 Security Interest in Collateral.
Company agrees to and shall cause each Subsidiary to grant a first priority
security interest in the Collateral to the Collateral Agent (as hereinafter
defined) for the benefit of the Purchasers and Banks (collectively the
"Creditors") pursuant to the terms of the Intercreditor Agreement and the
Security Agreements.
2.2 Release of Collateral.
The Purchasers agree that the Lien of the Security Agreements in the
Collateral and the Collateral shall be released upon the terms and in the
manner set forth in the Intercreditor Agreement.
3. CLOSING.
The closing of the transaction represented by this Amendment (the "Closing")
shall occur at the offices of Peper, Martin, Jensen, Maichel and Hetlage, 720
Olive Street, 24th Floor, St. Louis, Missouri at 10:00 a.m., St. Louis time,
on March 24, 1998 or on such other business day thereafter as may be agreed
upon by the Company, by you and the Other Purchasers.
4. CONDITIONS TO CLOSING.
Notwithstanding any provision contained in this Amendment to the contrary,
this Amendment is subject to the fulfillment to your satisfaction, prior to or
at the Closing hereof of the following conditions:
4.1 Representations and Warranties.
The representations and warranties of the Company in Section 5 of this
Amendment shall be correct when made and at the time of Closing.
4.2 Performance; No Default.
The Company shall have performed and complied with all agreements and
conditions contained in this Amendment required to be performed or complied
with by it prior to or at the closing and no Default or Event of Default shall
have occurred and be continuing.
4.3 Intercreditor Agreement.
You, the other Purchasers and the Banks shall have entered into an
Intercreditor Agreement dated as of Closing, in form satisfactory to you and
your special counsel, appointing Mercantile Bank National Association as agent
for the Creditors (the "Collateral Agent") to hold a first priority security
interest in the Collateral for the equal and ratable benefit of the Creditors.
4.4 Security Agreements and Financing Statements.
The Company and each of the Guarantors shall have entered into a separate
Security Agreement with the Collateral Agent dated as of the date of Closing
("Security Agreements"), in form satisfactory to you and your special counsel,
pursuant to which the Collateral Agent is granted a first priority security
interest in the Collateral for the equal and ratable benefit of the Creditors,
pari passu, to the extent of their prorata share of the outstanding
Indebtedness of the Company to the Creditors from time to time. The Company
and each of the Guarantors shall also have executed such UCC Financing
Statements as are necessary to perfect the security interest in the Collateral
(the "Financing Statements").
4.5 Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to you
an Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.8 have been fulfilled.
(b) Secretary's Certificate. The Company and the Guarantors shall
have delivered to you a certificate certifying as to the resolutions attached
thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Amendment, the amendment to the Revolving Credit
Agreement, the Intercreditor Agreement and related documents.
4.6 Opinions of Counsel.
You shall have received an opinion in form and substance satisfactory to you,
dated the date of the Closing from Peper, Martin, Jensen, Maichel and Hetlage,
counsel for the Company, covering such matters incident to the transactions
contemplated hereby as you or your special counsel, Gardner, Carton & Douglas,
may reasonably request (and the Company hereby instructs its counsel to
deliver such opinion to you).
4.7 Payment of Special Counsel Fees.
Without limiting the provisions of Section 15.1, the Company shall have paid
on or before the Closing the reasonable fees, charges and disbursements of
your special counsel referred to in Section 4.6 to the extent reflected in a
statement of such counsel rendered to the Company at least one business day
prior to the Closing which all of the parties agree shall not exceed
$20,000.00.
4.8 Changes in Corporate Structure.
Except as specified in Schedule 4.9 of the Note Purchase Agreements, the
Company shall not have changed its jurisdiction of incorporation or been a
party to any merger or consolidation and shall not have succeeded to all or
any substantial part of the liabilities of any other entity, at any time
following the date of the most recent financial statements provided to you
pursuant to the requirements of Section 7.1 of the Note Purchase Agreements.
4.9 Consent by Guarantors.
The Guarantors shall have executed and delivered this Amendment as consenting
parties.
4.10 Guaranty.
HSI Aviation, Inc. shall have executed and delivered the Subsidiary Guaranty.
4.11 Proceedings and Documents.
All corporate and other proceedings in connection with the transactions
contemplated by this Amendment and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and
you and your special counsel shall have received all such counterpart
originals or certified or other copies of such documents as you or they may
reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
5.1 Reaffirmation of Representations and Warranties.
The Company represents and warrants to you that the representations and
warranties set forth in Sections 5.1, 5.2, 5.4 (as amended herein by revised
Schedule 5.4), 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.11, 5.12, 5.15 (as amended
herein by revised Schedule 5.15), 5.18 and 5.19 are true and correct as of the
date hereof.
5.2 Additional Representations and Warranties.
The Company represents and warrants to you that:
(a) This Amendment, the Intercreditor Agreement, the Security
Agreements and the Subsidiary Guaranty have been duly authorized by all
necessary corporate action on the part of the Company and/or the Guarantors,
and this Amendment constitutes, and upon execution and delivery thereof of the
Intercreditor Agreement, each Security Agreement and the Subsidiary Guaranty
executed by HSI Aviation, Inc., will constitute, a legal, valid and binding
obligation each of the Company and/or each Guarantor party thereto,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principals of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
(b) The execution, delivery and performance by the Company and/or the
Guarantors of this Amendment, the Intercreditor Agreement, the Security
Agreements and the Subsidiary Guaranty will not (i) contravene, result in any
breach of, or constitute a default under, or result in the creation of any
Lien in respect of any property of the Company or any Subsidiary under any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to which
the Company or any Subsidiary is bound or by which the Company or any
Subsidiary or any of their respective properties may be bound or affected
other than the Lien created by the Intercreditor Agreements, Security
Agreements and related documents, (ii) conflict with or result in a breach of
any of the terms, conditions, or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority applicable to the
Company or any Subsidiary or (iii) violate any provision of any statute or
other rule or regulation of any Governmental Authority applicable to the
Company or any Subsidiary.
(c) The Company has not, directly or indirectly, paid any fee or
other consideration, howsoever characterized (including an increase in the
rate of interest or other fees payable under the Credit Agreement other than a
possible increase in the interest rate or unused credit line commitment fees
not to exceed 25 basis points if certain financial benchmarks are not reached
by the Company) in connection with the transactions contemplated by this
Amendment and the Intercreditor Agreement, other than the cost and expenses
relating to the preparation of the Amendment, Intercreditor Agreement, the
Revolving Credit Agreement, the Security Agreements and the costs of filing
any financing statements relating thereto.
(d) Neither the Company nor any Guarantor will offer any economic
inducement (including with limitation, any fees or other payments) to any of
the Banks under the Revolving Credit Agreement for the purpose of inducing the
Banks to enter into any waiver of any event of default under the Revolving
Credit 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
economic inducement has been concurrently offered and paid on a pro-rata basis
(determined with respect to the aggregate principal amount outstanding under
the Notes and the aggregate commitments of the Banks under the Revolving
Credit Agreement) to all of the Purchasers. The parties agree that the
foregoing sharing arrangement shall not apply to any fees or other economic
inducements that the Company or Guarantors pay to the Banks to renew or extend
the term of the Revolving Credit Agreement.
6. MISCELLANEOUS.
6.1 Amendment Costs.
Pursuant to Section 15 of the Note Purchase Agreements, the Company hereby
agrees to pay all costs and expenses (including reasonable attorneys' fees of
a special counsel and, if reasonably required, local or other counsel not to
exceed $20,000.00 in the aggregate for all Purchasers) incurred by you and
each Other Purchaser or holder of a Note in connection with the preparation,
negotiation, and execution of this Amendment and the related documents. All
of the obligations of the Company under this Section 6.1 shall survive the
repayment of the Notes and the termination of its obligations under the Note
Purchase Agreements as amended.
6.2 Note Purchase Agreements as Amended.
All references in the Note Purchase Agreements to this "Agreement" and any
other references of similar import shall henceforth mean the Note Purchase
Agreements as amended by this Amendment and any further amendments,
modifications, extensions and renewals thereof. To the extent there is any
conflict between the terms of this Amendment and the terms of the Note
Purchase Agreements, the terms of this Amendment shall control.
6.3 Ratification of Note Purchase Agreements.
Except to the extent specifically amended by this Amendment, all of the terms,
provisions, conditions, covenants, representations and warranties contained in
the Note Purchase Agreements shall be and remain in full force and effect and
the same are hereby ratified and confirmed.
6.4 Successors and Assigns.
This Amendment shall be binding upon and inure to the benefit of the Company,
the Purchasers and their respective successors and assigns.
6.5 Counterparts.
This Amendment 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. The parties agree that executed facsimiles of this
Amendment shall be deemed an original. The parties further agree that
following execution of this Amendment by facsimile, the parties will follow up
with the execution and delivery of signed counterparts to each of the other
parties.
If you are in agreement with the foregoing, please sign the accompanying
counterpart of this Amendment and return it to the Company, whereupon the
foregoing shall become a binding agreement between you and the Company
Very truly yours,
HUNTCO INC.
By: /s/ Robert J. Marischen
--------------------------
Robert J. Marischen
Vice Chairman of the Board
and Chief Financial Officer
CONSENT OF GUARANTORS
The undersigned Guarantors, guarantors of the Company's obligations under the
Note Purchase Agreements pursuant to that certain Subsidiary Guaranty dated
July 14, 1995 or that certain Subsidiary Guaranty dated March 24, 1998
(collectively the "Guaranty") hereby join in the execution of this Amendment
to acknowledge their consent to the terms of the Amendment and to ratify and
confirm that the Guaranty continues in full force and effect.
IN WITNESS WHEREOF, each Guarantor has executed this Amendment as of the date
first above written.
HSI AVIATION, INC.
By: /s/ Robert J. Marischen
--------------------------
Robert J. Marischen, President
HUNTCO NEVADA, INC.
By: /s/ George A. Stoecklin
--------------------------
George A. Stoecklin, President
HUNTCO STEEL, INC.
By: /s/ Anthony J. Verkruyse
--------------------------
Anthony J. Verkruyse
Vice President & Secretary
MIDWEST PRODUCTS, INC.
By: /s/ Anthony J. Verkruyse
--------------------------
Anthony J. Verkruyse
Vice President & Secretary
- ------------------------------------------------------------------------------
The foregoing is hereby agreed to as of the date thereof:
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
NIPPON LIFE INSURANCE COMPANY OF AMERICA,
By Its Attorney-in-Fact, PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY
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
THE SECURITY MUTUAL LIFE INSURANCE COMPANY OF LINCOLN, NEBRASKA
- ------------------------------------------------------------------------------
SCHEDULE C
BANKS
Harris Trust and Savings Bank
The First National Bank of Chicago, successor to NBD Bank
Bank of America NT&SA, successor to Bank of America Illinois
SunTrust Bank, Atlanta
Mercantile Bank National Association
- ------------------------------------------------------------------------------
SCHEDULE D
COLLATERAL
All of Company's and Subsidiaries' (collectively "Debtor") now owned and
existing and hereafter created, acquired or arising right, title and interest
in, to and under the following described property, wherever located, to the
extent not already pledged to another creditor as of the date of this
Agreement as set forth on Exhibit "B" to the respective Security Agreements
(collectively, the "Collateral"):
(a) all accounts (as defined in the Uniform Commercial Code enacted
in the State of Missouri), contract rights for the payment of money, chattel
paper, documents, instruments and other forms of obligation and other rights
to the payment of money (collectively, the Accounts"), and all goods whose
sale, lease, rental or other disposition by Debtor have given rise to Accounts
and have been returned to or repossessed or stopped in transit by Debtor;
(b) all inventory of Debtor, wherever located, whether in transit,
held by others for Debtor's account, covered by warehouse receipts, purchase
orders and/or contracts, or in the possession of any carriers, forwarding
agents, truckers, warehousemen, vendors or other Persons, including, without
limitation, all raw materials, work in process, finished goods, supplies,
goods, incidentals, office supplies and packaging and shipping materials
(collectively, the "Inventory");
(c) all goods, machinery, equipment, appliances, furniture,
furnishings, parts, tools and supplies, together with all accessories and
parts affixed or appertaining thereto or used in connection therewith but
excluding (i) equipment or such other property leased by Debtor as lessee
under an Operating Lease, (ii) motor vehicles, and (iii) aircraft or
airplanes;
(d) all books, records, computer records, computer disks, ledger
cards, programs and other computer materials, customer and supplier lists,
invoices, orders and other property at any time evidencing or relating to any
of the Collateral;
(e) all accessions to any of the property described above and all
substitutions, renewals, improvements and replacements of and additions
thereto; and
(f) all proceeds, including, without limitation, proceeds which
constitute property of the types described in (a), (b), (c), (d) and (e) above
and any rents and profits of any of the foregoing items, whether cash or
noncash, immediate or remote, including, without limitation, all income,
accounts, contract rights, general intangibles, chattel paper, notes, drafts,
acceptances, instruments and other rights to the payment of money arising out
of the sale, rental, lease, exchange or other disposition of any of the
foregoing items (provided, however, that nothing contained herein or in any
financing statement shall be deemed to permit or assent to any such
disposition other than as otherwise set forth in this Agreement), and
insurance proceeds, and all products of (a), (b), (c), (d) and (e) above, and
any indemnities, warranties and guaranties payable by reason of loss or damage
to or otherwise with respect to any of the foregoing items.
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY dated March 12, 1998 (the "Guaranty") is made by
HSI Aviation. Inc. (a "Guarantor" and, together with the Subsidiaries party to
the Subsidiary Guaranty dated July 14, 1995, the "Guarantors") in favor of (i)
the Purchasers (as hereinafter defined) under separate Note Purchase
Agreements dated July 14, 1995 (as amended or modified and in effect from time
to time, referred to herein as the "Note Purchase Agreements") by and among
Huntco Inc., a Missouri corporation (the "Company"), and the respective
Purchasers named therein (the "Purchasers") and (ii) each other holder of the
Company's 8.13% Notes due July 15, 2005 (the "Notes") from time to time and
their respective successors and assigns (collectively, such holders and their
respective successors and assigns are hereinafter referred to as the
"Holders"). All capitalized terms used herein and not otherwise defined herein
shall have the meanings attributed to such terms in the Note Purchase
Agreements.
WITNESSETH:
WHEREAS, the Company and the Purchasers have entered into the Note Purchase
Agreements;
WHEREAS, Guarantor is a Subsidiary of the Company;
WHEREAS, as an inducement to, and as part of the consideration for, its
purchase of the Notes, the Purchasers received, in accordance with the terms
of the Note Purchase Agreements, a guarantee of the Company's obligations
under the Note Purchase Agreements and the Notes from each Subsidiary of the
Company in existence at the time of the Note Purchase Agreements;
WHEREAS, the Guarantor has received benefits from the sale of the Notes;
WHEREAS, certain of the proceeds of the Notes were advanced to, or were
used, directly or indirectly, for the benefit of, the Guarantor, and thus, all
unpaid principal of and accrued and unpaid interest on and the Make-Whole
Amount, if any, with respect to the Notes and all other obligations of the
Company to the Holders now existing or hereafter arising under the Note
Purchase Agreements have been incurred for and inured to the benefit of the
Guarantors (which benefits are hereby acknowledged); and
WHEREAS, in consideration of the benefits that have inured to the
Guarantors, the Guarantor desires to guarantee the due and punctual payment of
all Guaranteed Debt (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby makes the following representations and
warranties and the Guarantor hereby jointly and severally covenants and agrees
as follows:
1. Guaranty. The Guarantor irrevocably and unconditionally guarantees (i)
the full and prompt payment when due (whether at stated maturity upon
acceleration or otherwise) of all unpaid principal of, accrued and unpaid
interest on, and Make-Whole Amount, if any, with respect to, the Notes, all
accrued and unpaid fees and all other obligations of the Company to the
Holders now existing or hereafter incurred under or arising out of or in
connection with the Notes or the Note Purchase Agreements and (ii) the
performance of the Notes and the Note Purchase Agreements (all such principal,
interest, Make-Whole Amount, fees, obligations and liabilities being
collectively referred to herein as the "Guaranteed Debt"), whether according
to the present terms of the Guaranteed Debt or any change or changes in the
terms, covenants and conditions of any of the Guaranteed Debt, now or at any
time hereafter made or granted, or at any earlier or accelerated date or dates
for payment or performance of the agreements set forth in the Guaranteed Debt.
It is understood that this Guaranty is a continuing guarantee of the payment
of the Guaranteed Debt, is not limited to a guarantee of collection of the
Guaranteed Debt and shall remain in full force and effect until the
indefeasible payment in full of the Guaranteed Debt. The Guarantor agrees that
all references in this Guaranty to Guaranteed Debt of the Company shall
include any successor or assignee of the Company so long as this Guaranty
remains in effect.
2. Waiver. The Guarantor waives notice of the acceptance of this Guaranty
and of the occurrence of any and all of the events described in Section 3. The
Guarantor further waives presentment, protest, notice, demand or action on
delinquency in respect of the Guaranteed Debt or any part thereof. The
Guarantor agrees that the whole or any part of the security held, if any, for
the Guaranteed Debt may be exchanged, compromised, or surrendered from time to
time; that the Holders shall have no obligation to protect, perfect, secure or
insure any such security interests, liens or encumbrances, if any, hereafter
held for the Guaranteed Debt or the properties subject thereto; that the time
or place of payment of the Guaranteed Debt may be changed or extended, in
whole or in part, to a time certain or otherwise, and may be renewed or
accelerated, in whole or in part; that the Company may be granted indulgences
generally; that any of the provisions of the Notes or the Note Purchase
Agreements may be modified, amended or waived; that any party liable for the
payment thereof may be granted indulgences or released; and that any other
party liable for the payment of the Guaranteed Debt or liable upon any
security therefor may be released, in whole or in part, at, before and/or
after the stated, extended or accelerated maturity of the Guaranteed Debt, all
without notice to or further assent by any Guarantor, which shall remain bound
thereon, notwithstanding any such exchange, compromise, surrender, extension,
renewal, acceleration, modification, indulgence or release.
3. Certain Rights of Holders. The validity and enforceability of this
Guaranty against the Guarantor shall not be impaired or affected by any of the
following, whether occurring before or after receipt by the Holders of any
notice of termination of this Guaranty: (a) any extension, modification,
continuation or renewal of, or indulgence with respect to, or substitutions
for, the Guaranteed Debt or any part thereof or any agreement relating thereto
(other than any agreement between the Purchaser or any other Holder and one or
more Guarantors specifically modifying or amending the terms of this Guaranty
in accordance with Section 10) at any time; (b) any failure or omission to
enforce any right, power or remedy with respect to the Guaranteed Debt or any
part thereof or any agreement relating thereto; (c) any waiver of any right,
power or remedy or of any default with respect to the Guaranteed Debt or any
part thereof; (d) any release, surrender, compromise, settlement, waiver,
subordination or modification, with or without consideration, of any other
guaranties with respect to the Guaranteed Debt or any part thereof, or any
other obligation of any Person with respect to the Guaranteed Debt or any part
thereof; (e) the enforceability or validity of the Guaranteed Debt or any part
thereof or the genuineness, enforceability or validity of any agreement
relating thereto; (f) the application of payments received from any source to
the payment of indebtedness of the Company or any Subsidiary other than the
Guaranteed Debt, or to amounts which are not covered by this Guaranty even
though a Holder might lawfully have elected to apply such payments to any part
or all of the Guaranteed Debt or to amounts which are not covered by this
Guaranty; or (g) any other circumstances which otherwise under the laws of any
jurisdiction constitute a legal or equitable discharge of a surety or a
guarantor or a bar (in the nature of a moratorium or otherwise) to the
enforcement of the rights of a Holder against the Company, all whether or not
any Guarantor shall have had notice or knowledge of any act or omission
referred to in the foregoing clauses (a) through (g) of this paragraph. The
Guarantor agrees that such Guarantor's obligation to make payment in
accordance with the terms of this Guaranty shall not be impaired, modified,
changed, released or limited in any manner whatsoever in the event any portion
of the Guaranteed Debt is invalid or unenforceable against the Company, or by
any impairment, modification, change, release or limitations of the liability
of the Company or its estate in bankruptcy resulting from the operation of any
present or future provision of the Federal Bankruptcy Code or other similar
federal or state statute, or from the decision of any court.
4. Absolute Guaranty. The obligations of the Guarantor under this Guaranty
are absolute and unconditional and shall remain in full force and effect
without regard to, and shall not be released, suspended, discharged,
terminated or otherwise affected by, without limitation: (a) any action or
inaction by a Holder or any other circumstance contemplated in Section 3; or
(b) the existence of any other guaranties of the Guaranteed Debt, whether or
not such other guaranties have been acted upon in any way.
5. Primary Liability of Guarantors. This Guaranty is a primary obligation
of the Guarantor. The Guarantor agrees that this Guaranty may be enforced by
the Holders, or any of them, without the necessity at any time of resorting to
or exhausting any other security and without the necessity at any time of
having recourse to the Notes or the Note Purchase Agreements, and the
Guarantor hereby waives the right to require the Holders (or any of them) to
proceed against the Company or any other person (including a co-guarantor) or
to require the Holders (or any of them) to pursue any other remedy or enforce
any other right. The Guarantor further agrees that nothing contained herein
shall prevent the Holders, or any of them, from suing on the Notes, the Note
Purchase Agreements or foreclosing its security interests, if any, in the
Guaranteed Debt or from exercising any other rights available to it under the
Notes, the Note Purchase Agreements or an instrument of security, if any, and
the exercise of any of the aforesaid rights and the completion of any
foreclosure proceedings shall not constitute a discharge of any of the
Guarantor's obligations hereunder.
6. Representations and Warranties. As an inducement to, and as part of the
consideration for, the purchase of the Notes pursuant to the Note Purchase
Agreements, the Guarantor makes the following representations, warranties and
agreements:
(a) Such Guarantor is a solvent corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and as
presently proposed to be conducted and to enter into and perform this
Guaranty.
(b) This Guaranty has been duly authorized on the part of such Guarantor,
and this Guaranty constitutes the legal, valid and binding obligation of such
Guarantor enforceable in accordance with its terms, except to the extent that
the enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application relating to
or affecting the enforcement of the rights of creditors or by equitable
principles, regardless of whether enforcement is sought in equity or at law.
The executions delivery and performance by such Guarantor of this Guaranty,
(i) are within its corporate powers, (ii) have been duly authorized by proper
corporate action and (iii) are legal, and to its knowledge, will not violate
any provisions of any law, rule, regulation or ordinance or any order,
judgment, decree or ruling of any court, arbitrator or governmental authority
or agency and will not result in any breach of any of the provisions of, or
constitute a default under, or result in the creation of any lien or
encumbrance on any property of such Guarantor under the provisions of, any
charter document, by-law, indenture, mortgage, deed of trust, loan, purchase
or credit agreement, lease or any other agreement or instrument to which it is
a party or by which it or its property may be bound or affected.
(c) Neither the nature of such Guarantor, nor its business or properties,
nor any relationship between such Guarantor and any other person is such as to
require a consents approval or authorization of, or withholding of objection
on the part of, or filing, registration or qualification with, any
governmental authority or agency on the part of such Guarantor in connection
with the execution, delivery or performance of this Guaranty that has not been
received or obtained.
(d) Such Guarantor has capital sufficient to carry on its business, is
solvent and is able to pay its debt and obligations as they mature in the
ordinary course. Such Guarantor now owns property having a value, both at fair
valuation and at present fair saleable value, greater than the amount required
to pay its debts, obligations and contingent liabilities.
(e) Such Guarantor further represents that it has knowledge of the
Company's financial condition and affairs and represents and agrees that it
will keep so informed while this Guaranty is in force. Such Guarantor agrees
that the Holders will have no obligation to investigate the financial
condition or affairs of the Company for the benefit of such Guarantor nor to
advise such Guarantor of any fact respecting, or any change in, the financial
condition or affairs of the Company which might come to the knowledge of the
Holders at any time, whether or not any Holder knows or believes or has reason
to know or believe that any such fact or change is unknown to such Guarantor
or might (or does) materially increase the risk of such Guarantor as
guarantor.
7. Continuing Guaranty. etc. This Guaranty shall continue in full force and
effect until the Guaranteed Debt is indefeasibly paid in full, notwithstanding
any extensions, modifications, renewals or indulgences with respect to, or
substitutions for, the Guaranteed Debt. Notwithstanding the foregoing, this
Guaranty shall continue to be effective, or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any of the Guaranteed Debt is
rescinded or must otherwise be restored or returned by any Holder upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Company or any
substantial part of its property, or otherwise, all as though such payments
had not been made. No failure or delay on the part of any Holder in exercising
any right, power or privilege hereunder and no course of dealing between any
Guarantor or any Holder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege. The rights, powers and remedies herein expressly provided
are cumulative and not exclusive of any rights, powers or remedies which any
Holder would otherwise have. No notice to or demand on any Guarantor in any
case shall entitle any Guarantor to any other or future notice or demand in
similar or other circumstances or constitute a waiver of the rights of any
Holder to act in any circumstances without notice or demand. Credit may be
granted or continued from time to time by the Holders to the Company without
notice to or authorization from any Guarantor regardless of the Company's
financial or other condition at the time of any such grant or continuation.
8. Maximum Liability of Guarantor. Anything herein or in any other
document, instrument or agreement executed and delivered in connection
herewith to the contrary notwithstanding, the maximum liability of a Guarantor
hereunder as at 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 Guaranty (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 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 the purpose of this
paragraph, "Maximum Guaranteed Amount" shall mean the greater of (i) the
aggregate amount of the Guaranteed Debt 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 the
purpose of this paragraph, "Valuable Transfer" shall mean the amount of (i)
all loans, advances or capital contributions made to the Guarantor with
proceeds of the Guaranteed Debt; (ii) all debt securities or other obligations
of the Guarantor acquired from the Guarantor or retired by the Guarantor with
proceeds of the Guaranteed Debt; (iii) the fair market value of all property
acquired with proceeds of the Guaranteed Debt and transferred, absolutely and
not as collateral, to the Guarantor; (iv) all equity securities of the
Guarantor acquired from the Guarantor with proceeds of the Guaranteed Debt;
and (v) the value of any quantifiable economic benefits not included in
clauses (i) through (iv), above, but includable in accordance with Applicable
Insolvency Law, accruing to the Guarantor as a result of the Guaranteed Debt.
For purposes of this paragraph, "Adjusted Net Worth" shall mean the excess of
(i) the amount of the "present fair salable value" of the assets of the
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 the
Guarantor for purposes of calculating the Maximum Guaranteed Amount for the
Guarantor, the liabilities of the Guarantor to be used in such determination
pursuant to clause (ii) of the preceding sentence shall in any event include
any amounts guaranteed by the Guarantor pursuant to clause (i) of the
definition of Maximum Guaranteed Amount.
9. Successors: Assigns. This Guaranty shall be binding upon the Guarantor
and its respective successors and permitted assigns and shall inure to the
benefit of the Purchaser, the other Holder and their respective successors and
assigns. The Guarantor expressly waives notice of transfer or assignment of
the Guaranteed Debt, or any part thereof, or of the rights of any Holder
hereunder. Failure to give notice will not affect the liabilities of the
Guarantor hereunder.
10. Amendment; Waiver. This Guaranty may be amended only by an instrument in
writing executed jointly by the Guarantors and the Holder of Notes then
outstanding.
11. Note Purchase Agreements. The Guarantor acknowledges that executed (or
conformed) copies of the Note Purchase Agreements have been made available to
its principal executive officers and such officers are familiar with the
contents thereof.
12. Setoff. In addition to, and without limitation of, any rights of the
Holders under applicable law, indebtedness, if any, from such Holders to any
Guarantor (including all account balances, whether provisional or final and
whether or not collected or available) may be offset and applied toward the
payment of the obligations owing to such Holders, whether or not the
Guaranteed Debt, or any part thereof, shall then be due.
13. Notices. All notices and other communications hereunder shall be made in
the manner and with the effect provided in Section 18 of the Note Purchase
Agreements, if to any Holder, at the address for notices specified in the Note
Purchase Agreements, and, if to any Guarantor, to the Guarantor as follows:
HSI Aviation, Inc., c/o Huntco Inc., 14323 South Outer Forty Drive, Suite 600
North, Chesterfield, MO 63017 Attention: Chief Financial Officer.
14. Liability of the Holders. If any claim is ever made upon any Holder for
repayment or recovery of any amount or amounts received in payment or on
account of any of the Guaranteed Debt and any of the aforesaid payees repays
all or part of said amount by reason of (a) any judgment, decree or order of
any court or administrative body having jurisdiction over such payee or any of
its property or (b) any settlement or compromise of any such claim effected by
such payee with any such claimant (including the Company), then and in such
event the Guarantor agrees that any such judgment, decree, order, settlement
or compromise shall be binding upon it, notwithstanding any revocation hereof
or the cancellation of any Note or other instrument evidencing any liability
of the Company, and the Guarantor shall be and remain liable to the aforesaid
payees hereunder for the amount so repaid or recovered to the same extent as
if such amount had never originally been received by such payee.
15. Choice of Law. This Guaranty shall be construed in accordance with the
internal laws (and not the law of conflicts) of the State of Illinois.
16. Expenses; Indemnity. In addition to its Maximum Guaranteed Amount, the
Guarantor agrees to reimburse (to the extent the Holder is not so reimbursed
by the Company or any other Guarantor) (i) each Holder for any costs and out-
of-pocket expenses (including reasonable attorneys' fees and reasonable time
charges of attorneys for such Holder, which attorneys may be employees of such
Holder) paid or incurred by such Holder in connection with any amendment and
modification of this Guaranty and (ii) each Holder for any costs and out-of-
pocket expenses (including attorneys' fees and time charges of attorneys for
such Holder, which attorneys may be employees of such Holder) paid or incurred
by such Holder in connection with the collection and enforcement of this
Guaranty. The Guarantor further agrees to indemnify each Holder, and its
directors, officers and employees, against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefor whether or not such Holder
is a party thereto) which it may pay or incur arising out of or relating to
this Guaranty, provided, however, that such Holder, and its directors,
officers or employees, shall not have a right to be indemnified or held
harmless hereunder for its own gross negligence or willful misconduct. The
obligations of the Guarantors under this Section shall survive the termination
of this Guaranty.
17. Entire Agreement. This Guaranty constitutes the entire agreement of the
Guarantors with the Purchasers with respect to the subject matter hereof and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
18. Captions. Captions are for reference only and in no way limit the terms
of the Guaranty.
19. Counterparts. This Guaranty may be executed in one or more counterparts,
each of which shall be deemed an original, but all such counterparts shall
together constitute one and the same instrument.
20. Severability of Provisions. Any provision in this Guaranty that is held
to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to
that jurisdiction, be inoperative, unenforceable, or invalid without affecting
the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and
to this end the provisions of this Guaranty are declared to be severable.
21. Release of Guaranty. Anything herein to the contrary notwithstanding,
this Guaranty is subject to Sections 9.5, 10.2, 10.3 and 10.7 of the Note
Purchase Agreements. In the event that the corporate existence of the
Guarantor is terminated or the Guarantor ceases to be a Subsidiary as a result
of any action taken in conformity with Sections 9.5, 10.2, 10.3 and/or 10.7 of
the Note Purchase Agreements, the Guarantor shall be deemed to be released
automatically from this Guaranty, provided that any proceeds from the
disposition of the Guarantor are received by the Company or a Wholly-Owned
Subsidiary.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
and delivered as of the date first above written.
HSI AVIATION, INC.
By:/s/ Robert J. Marischen
Title: President
FORM OF
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made this 24th day of March,
1998, by ________________, a ________________ corporation ("Debtor"), in favor
of MERCANTILE BANK NATIONAL ASSOCIATION, as collateral agent (in such
capacity, the "Collateral Agent") for the equal and ratable benefit of the
"Creditors" (as hereinafter defined).
WITNESSETH:
WHEREAS, "Huntco" (as hereinafter defined), Huntco Nevada, Inc., a Nevada
corporation, Huntco Steel, Inc., a Delaware corporation, Midwest Products,
Inc., a Missouri corporation, HSI Aviation, Inc., a Missouri corporation, the
"Banks" (as hereinafter defined) and the "Agent" (as hereinafter defined) are
herewith entering into the "Revolving Credit Agreement" (as hereinafter
defined); and
WHEREAS, Huntco and the "Noteholders" (as hereinafter defined) are herewith
entering into that certain First Amendment to Note Purchase Agreements dated
the date hereof (the "First Amendment to Note Purchase Agreements"); and
WHEREAS, as a condition precedent to the Agent and the Banks entering into the
Revolving Credit Agreement and to the Noteholders entering into the First
Amendment to Note Purchase Agreements, the Creditors have required that Debtor
execute and deliver this Agreement to the Collateral Agent for the equal and
ratable benefit of the Creditors; and
WHEREAS, in order to induce the Agent and the Banks to enter into the
Revolving Credit Agreement and to induce the Noteholders to enter into the
First Amendment to Note Purchase Agreements, Debtor has agreed to execute and
deliver this Agreement to the Collateral Agent for the equal and ratable
benefit of the Creditors;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby covenants and agrees with the Collateral Agent as
follows:
1. Definitions. In addition to the terms defined elsewhere in this
Agreement, for purposes of this Agreement, the following terms shall have the
following meanings:
Agent shall mean Mercantile Bank National Association in its capacity as
agent for the Banks under the Revolving Credit Agreement and its successors in
such capacity.
Approving Creditors shall mean the Required Banks and the Required
Noteholders acting together.
Banks shall mean the Banks from time to time party to the Revolving
Credit Agreement, and Bank shall mean any one of them.
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.
Collateral Agent shall mean Mercantile Bank National Association in its
capacity as collateral agent for the Creditors under the Intercreditor
Agreement and the Collateral Documents and its successors in such capacity.
Collateral Documents shall mean that certain Security Agreement dated the
date hereof and executed by Huntco Inc., a Missouri corporation in favor of
the Collateral Agent for the equal and ratable benefit of the Creditors, that
certain Security Agreement dated the date hereof and executed by Huntco
Nevada, Inc. in favor of the Collateral Agent for the equal and ratable
benefit of the Creditors, that certain Security Agreement dated the date
hereof and executed by Huntco Steel, Inc. in favor of the Collateral Agent for
the equal and ratable benefit of the Creditors, that certain Security
Agreement dated the date hereof and executed by Midwest Products, Inc. in
favor of the Collateral Agent for the equal and ratable benefit of the
Creditors, and that certain Security Agreement dated the date hereof and
executed by HSI Aviation, Inc. in favor of the Collateral Agent for the equal
and ratable benefit of the Creditors, all as the same may from time to time be
amended, modified, extended or renewed.
Commitments shall mean with respect to each Bank the amount of such
Bank's commitment to make Revolving Credit Loans, issue Letters of Credit
and/or otherwise extend credit to Huntco under the Revolving Credit Agreement.
Credit Agreements shall mean, collectively, the Note Purchase Agreements
and the Revolving Credit Agreement, and Credit Agreement means any one of
them.
Credit Documents shall mean, collectively, the Credit Agreements, the
Collateral Documents, the Intercreditor Agreement, the Notes, the Revolving
Credit Notes, the Guaranty, the Letter of Credit Applications and all other
agreements, documents or instruments from time to time evidencing or governing
any Letter of Credit Loan, and Credit Document means any one of them.
Creditors shall mean, collectively, (i) the Noteholders, (ii) the Banks,
(iii) the Agent and (iv) their respective successors and assigns, in each case
as a holder of Secured Obligations, and Creditor shall mean any one of them.
Eligible Accounts shall have the meaning ascribed thereto in the
Revolving Credit Agreement.
Eligible Inventory shall have the meaning ascribed thereto in the
Revolving Credit Agreement.
Foreclosure shall have the meaning ascribed thereto in the Intercreditor
Agreement.
GAAP shall mean generally accepted accounting principles at the time in
the United States.
Guaranty shall mean collectively that certain Subsidiary Guaranty dated
July 14, 1995, and executed by Huntco Nevada, Inc., a Nevada corporation,
Huntco Steel, Inc., a Delaware corporation, and Midwest Products, Inc., a
Missouri corporation in favor of the Noteholders, as the same may from time to
time be amended, modified, extended or renewed and the Subsidiary Guaranty
dated March 24, 1998 made by HSI Aviation, Inc., a Missouri corporation in
favor of the Noteholders, as the same may from time to time be amended,
modified, extended or renewed.
Huntco shall mean Huntco Inc., a Missouri corporation.
Intercreditor Agreement shall mean the Collateral Agency and
Intercreditor Agreement dated the date hereof by and among Huntco, Huntco
Nevada, Inc., Huntco Steel, Inc., Midwest Products, Inc., HSI Aviation, Inc.,
the Collateral Agent, the Banks, the Agent and the Noteholders, as the same
may from time to time be amended, modified, extended or renewed.
Letters of Credit shall mean all irrevocable standby and/or commercial
letters of credit issued and outstanding under the Revolving Credit Agreement,
and "Letter of Credit" shall mean any one of them.
Letter of Credit Applications shall have the same meaning ascribed
thereto in the Revolving Credit Agreement.
Letter of Credit Loans shall mean all loans made or deemed made by a
Creditor (whether as the lender or as a participant) to Huntco to reimburse
such Creditor for amounts paid in connection with a draw on a Letter of
Credit, and "Letter of Credit Loan" shall mean any one of them.
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.
Note Purchase Agreements shall mean those certain Note Purchase
Agreements dated July 14, 1995, by and among Huntco and the Noteholders as
amended by the First Amendment to Note Purchase Agreements dated March 24,
1998, as the same may from time to time be further amended, modified, extended
or renewed.
Noteholders shall mean 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, Provident Mutual Life and Annuity Company of America,
Berkshire Life Insurance Company, and The Security Mutual Life Insurance
Company of Lincoln, Nebraska.
Notes shall mean, collectively, the 8.13% Notes of Huntco in the initial
aggregate principal amount of $50,000,000.00 payable to Noteholders or any one
of them, as the same may from time to time be amended, modified, extended or
renewed, and "Note" shall mean any one of them.
Operating Lease shall mean any lease of property, whether real and/or
personal, by a Person as lessee which is not a Capitalized Lease.
Permitted Liens shall means Liens expressly permitted by both the Note
Purchase Agreements and the Revolving Credit Agreement.
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 Rate shall mean the interest rate announced from time to time by
Mercantile Bank National Association (or its successor) as its "prime rate" on
commercial loans (which rate shall fluctuate as and when said prime rate shall
change). Debtor acknowledges that such "prime rate" is a reference rate and
does not necessarily represent the lowest or best rate offered by Mercantile
Bank National Association to its respective customers.
Required Banks shall mean at any time Banks having Sixty-Six and 67/100
Percent (66.67%) or more of the aggregate amount of the Letter of Credit
Loans, Revolving Credit Loans or Letters of Credit then outstanding, or if no
such loans or Letters of Credit are then outstanding, Sixty-Six and 67/100
Percent (66.67%) of the total commitments of the Banks under the Revolving
Credit Agreement.
Required Noteholders shall mean at any time Noteholders having Sixty-One
Percent (61%) or more of the aggregate principal amount of the Notes then
outstanding.
Revolving Credit Agreement shall mean the Amended and Restated Revolving
Credit Agreement dated the date hereof by and among Huntco, Huntco Nevada,
Inc., Huntco Steel, Inc., Midwest Products, Inc., HSI Aviation, Inc., the
Banks and the Agent, as the same may from time to time be amended, modified,
extended or renewed.
Revolving Credit Loan shall mean any revolving credit loan outstanding
under the Revolving Credit Agreement.
Revolving Credit Notes shall mean the revolving credit notes issued and
evidencing revolving credit loans outstanding under the Revolving Credit
Agreement, as the same may from time to time be amended, modified, extended or
renewed and Revolving Credit Note shall mean any one of them.
Secured Obligations shall mean, collectively, (i) the full and punctual
payment when due of all amounts payable by Debtor (whether as principal,
guarantor, surety or otherwise) under the Credit Documents whether principal,
interest (including any interest accruing subsequent to the commencement of
any bankruptcy proceeding, whether or not allowed as a claim in such
proceeding), make-whole amounts or funding losses, if any, fees, collection
costs and expenses or other amounts, (ii) performance and observance of each
other term, covenant, agreement, requirement, condition and provision to be
performed or observed by Debtor arising out of or relating to the Credit
Documents, or any other agreement or instrument executed and delivered in
connection therewith or contemplated thereunder, heretofore, now or hereafter
made, incurred or created, including indemnification obligations and expense
obligations, and (iii) any payments made to a Creditor pursuant to clauses (i)
or (ii) above which payment is rescinded or must otherwise be restored or
resumed by such Creditor upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of Debtor, or upon or as a result of the
appointment of a custodian, receiver, trustee or other officer with similar
powers with respect to Debtor or any substantial part of its property, and
"Secured Obligation" shall mean any one of them.
2. Grant of Security Interest. For value received, Debtor hereby grants
to the Collateral Agent for the equal and ratable benefit of the Creditors a
security interest in and lien on all of Debtor's now owned and existing and
hereafter created, acquired or arising right, title and interest in, to and
under the following described property, wherever located, to the extent not
already pledged to another creditor as of the date of this Agreement as set
forth on Exhibit "B" hereto (collectively, the "Collateral"):
(a) all accounts (as defined in the Uniform Commercial Code enacted
in the State of Missouri), contract rights for the payment of money, chattel
paper, documents, instruments and other forms of obligation and other rights
to the payment of money (collectively, the Accounts"), and all goods whose
sale, lease, rental or other disposition by Debtor have given rise to Accounts
and have been returned to or repossessed or stopped in transit by Debtor;
(b) all inventory of Debtor, wherever located, whether in transit,
held by others for Debtor's account, covered by warehouse receipts, purchase
orders and/or contracts, or in the possession of any carriers, forwarding
agents, truckers, warehousemen, vendors or other Persons, including, without
limitation, all raw materials, work in process, finished goods, supplies,
goods, incidentals, office supplies and packaging and shipping materials
(collectively, the "Inventory");
(c) all goods, machinery, equipment, appliances, furniture,
furnishings, parts, tools and supplies, together with all accessories and
parts affixed or appertaining thereto or used in connection therewith but
excluding (i) equipment or such other property leased by Debtor as lessee
under an Operating Lease, (ii) motor vehicles, and (iii) aircraft or
airplanes;
(d) all books, records, computer records, computer disks, ledger
cards, programs and other computer materials, customer and supplier lists,
invoices, orders and other property at any time evidencing or relating to any
of the Collateral;
(e) all accessions to any of the property described above and all
substitutions, renewals, improvements and replacements of and additions
thereto; and
(f) all proceeds, including, without limitation, proceeds which
constitute property of the types described in (a), (b), (c), (d) and (e) above
and any rents and profits of any of the foregoing items, whether cash or
noncash, immediate or remote, including, without limitation, all income,
accounts, contract rights, general intangibles, chattel paper, notes, drafts,
acceptances, instruments and other rights to the payment of money arising out
of the sale, rental, lease, exchange or other disposition of any of the
foregoing items (provided, however, that nothing contained herein or in any
financing statement shall be deemed to permit or assent to any such
disposition other than as otherwise set forth in this Agreement), and
insurance proceeds, and all products of (a), (b), (c), (d) and (e) above, and
any indemnities, warranties and guaranties payable by reason of loss or damage
to or otherwise with respect to any of the foregoing items; to secure the
payment of any and all of the present and future Secured Obligations.
3. Representations and Covenants of Debtor. Debtor hereby represents and
warrants to the Collateral Agent and each of the Creditors (with respect to
the items listed in Section 3(a), (c), (d) and (j) only), and covenants and
agrees with the Collateral Agent and each of the Creditors, that:
(a) Debtor's chief executive office is that given at the end of this
Agreement [Huntco Steel only: "Debtor's registered office in Kentucky is in
Jefferson County, Kentucky"] and all other places of business of Debtor and
locations of any of the Collateral (except Inventory in transit to Debtor in
the ordinary course of its business, proceeds and mobile equipment in use and
as otherwise disclosed in any reports furnished by Debtor to Collateral Agent
hereunder) and of offices where it keeps its books and records respecting the
Collateral are listed on Exhibit A attached hereto and incorporated herein by
reference and unless otherwise consented to in writing by the Collateral
Agent, all of the Collateral is and will be kept at Debtor's chief executive
office or at one of the other locations of Debtor listed on Exhibit A attached
hereto and incorporated herein by reference (except Inventory in transit to
Debtor in the ordinary course of its business, proceeds and mobile equipment
in use and as otherwise disclosed in any reports furnished by Debtor to
Collateral Agent hereunder) and none of the Collateral will be attached to or
affixed to or become part of any real estate so as to become a fixture under
the Uniform Commercial Code of the applicable state or states or to other
personal property, other than items of Collateral (except for replacement
parts that are attached to or affixed to equipment that is subject to an
Operating Lease and is not an item of Collateral);
(b) Except for Inventory that is delivered to customers on
consignment and equipment that is sent to outside locations for repair, both
of which Debtor agrees to disclose to Collateral Agent in writing, Debtor will
not (i) change the location of its chief executive office, (ii) change the
location of any of its other places of business, (iii) change the location of
any of the Collateral from Debtor's chief executive office or one of the other
locations listed on Exhibit A attached hereto and incorporated herein by
reference or (iv) establish any additional places of business or additional
locations at which any of the Collateral is stored, kept or processed, unless
(A) such office or Collateral location is located within the continental
United States of America, (B) Debtor gives the Collateral Agent thirty (30)
days prior written notice of the same and (C) prior to making any such change
or establishing any such new location, Debtor executes and/or obtains and
delivers to the Collateral Agent any and all additional financing statements
and/or amendments thereto, mortgagee waivers, bailee waivers, landlord
waivers, warehousemen waivers and other agreements, documents or notices as
may be reasonably required by the Collateral Agent; [for Huntco Steel only add
"(iv) change the location of its registered office in Kentucky."]
(c) Debtor is, or, as to Collateral acquired after the date hereof,
will be, the sole and absolute owner of all of the Collateral, free and clear
of any and all Liens and claims of any kind or nature whatsoever other than
the security interest and lien granted hereby and other Permitted Liens, and
Debtor will defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein;
(d) no financing statement (other than any filed on behalf of the
Collateral Agent and any filed with respect to Permitted Liens) covering any
of the Collateral is or will be on file in any public office at any time
during the term of this Agreement (other than financing statements related to
de minimis equipment financings not to exceed $25,000 in the aggregate at any
given time);
(e) Debtor will not, without the prior written consent of the
Approving Creditors, sell, transfer, lease or otherwise dispose of or offer to
dispose of any of the Collateral or any interest therein other than (i) sales
of Inventory by Debtor in the ordinary course of its business (which does not
include any sale or other transfer of Inventory in partial or total
satisfaction of any Indebtedness) and (ii) other sales and other dispositions
permitted by both the Note Purchase Agreements and the Revolving Credit
Agreement;
(f) Debtor will at all times keep all of the Collateral consisting of
Inventory, goods, machinery, equipment and/or other tangible personal property
in good order and repair (ordinary wear and tear excepted), excepting any
loss, damage or destruction which is fully covered by proceeds of insurance,
and Debtor will not use any of the Collateral or permit any of the Collateral
to be used in violation of any law, rule, regulation, ordinance or insurance
policy;
(g) Debtor will pay promptly when due all taxes and assessments on
the Collateral or for its use or operation or upon this Agreement or any of
the Secured Obligations or with respect to the perfection of any security
interest or lien hereunder;
(h) Debtor will insure all items of Collateral (except Accounts)
against loss or damage of the kind customarily insured against by corporations
engaged in the same or similar businesses similarly situated, unless higher
limits or coverage are reasonably required in writing by the Creditors, 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 Approving Creditors; provided, however, that it
shall not be a breach of this Section if newly acquired Collateral (other than
Accounts) with a total fair market value of less than $500,000.00 (determined
with respect to all Collateral (other than Accounts) not covered by insurance
at any point in time) is not covered by such insurance so long as such
Collateral is insured within thirty (30) days after Debtor's acquisition of
the same. All insurance required by this Section shall be obtained by Debtor
within thirty (30) days of receipt by Debtor of each item of Collateral
required to be insured hereunder and 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 Approving Creditors; 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 Debtor 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 Approving Creditors. Such
policies of insurance shall contain an endorsement acceptable to the
Collateral Agent naming the Collateral Agent as loss payee as its interests
may appear. Such endorsement, or an independent instrument furnished to the
Collateral Agent, shall provide that the insurance companies will give the
Collateral Agent at least thirty (30) days written notice before any such
policy or policies of insurance shall be amended or cancelled and that no act
or default of Debtor or any other Person shall affect the right of the
Collateral Agent to recover under such policy or policies of insurance in the
event of any loss of or damage to any of the Collateral. Debtor hereby
directs all insurers under such policies of insurance to pay all proceeds
payable thereunder directly to the Collateral Agent as its interest may
appear. All such insurance may be subject to reasonable deductible amounts.
Debtor shall deliver to the Collateral Agent a certificate of an officer of
Debtor specifying the details of all insurance then in effect and evidence of
the payment of all premiums therefor annually. UNLESS DEBTOR PROVIDES
EVIDENCE OF THE INSURANCE COVERAGE REQUIRED UNDER THIS AGREEMENT THE
COLLATERAL AGENT MAY PURCHASE INSURANCE AT DEBTOR'S EXPENSE TO PROTECT THE
COLLATERAL AGENT'S INTEREST IN THE COLLATERAL. THIS INSURANCE MAY, BUT NEED
NOT, PROTECT DEBTOR'S INTERESTS. THE COVERAGE THAT THE COLLATERAL AGENT
PURCHASES MAY NOT PAY ANY CLAIM THAT DEBTOR MAY MAKE OR ANY CLAIM THAT IS MADE
AGAINST DEBTOR IN CONNECTION WITH THE COLLATERAL. DEBTOR MAY LATER CANCEL ANY
INSURANCE PURCHASED BY THE COLLATERAL AGENT, BUT ONLY AFTER PROVIDING EVIDENCE
THAT DEBTOR HAS OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT. IF THE
COLLATERAL AGENT PURCHASES INSURANCE FOR THE COLLATERAL, DEBTOR WILL BE
RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM,
INTEREST AND ANY OTHER CHARGES THE COLLATERAL AGENT MAY IMPOSE IN CONNECTION
WITH THE PLACEMENT OF INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION
OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO
THE AMOUNT OWED BY DEBTOR TO THE CREDITORS. THE COSTS OF THE INSURANCE MAY BE
MORE THAN THE COST OF INSURANCE DEBTOR MAY BE ABLE TO OBTAIN ON ITS OWN.
Debtor hereby directs all insurers under such policies of insurance to pay all
proceeds payable thereunder directly to the Collateral Agent as its interest
may appear. So long as no Event of Default under this Agreement and no event
which with the passage of time or the giving of notice or both would
constitute an Event of Default under this Agreement has occurred and is
continuing, all insurance proceeds received by the Collateral Agent on account
of any loss of or damage to any of the Collateral, after deducting therefrom
the reasonable charges and expenses paid or incurred in connection with the
collection and disbursement of said proceeds, may, at the option of Debtor,
either be used and applied for the sole purpose of paying the cost of repair,
restoration or replacement of the Collateral damaged or destroyed, or be
applied to the payment of the Secured Obligations in the order and manner set
forth in the Intercreditor Agreement. If any Event of Default under this
Agreement or any event which with the passage of time or the giving of notice
or both would constitute an Event of Default under this Agreement has occurred
and is continuing, all insurance proceeds received or held by the Collateral
Agent on account of any loss of or damage to any of the Collateral, after
deducting therefrom the reasonable charges and expenses paid or incurred in
connection with the collection and disbursement of said proceeds, shall be
applied to the payment of the Secured Obligations in the order and manner set
forth in the Intercreditor Agreement unless otherwise agreed to in writing by
the Debtor and the Approving Creditors. Debtor irrevocably makes, constitutes
and appoints the Collateral Agent (and all officers, employees or agents
designated by the Collateral Agent) as Debtor's true and lawful attorney (and
agent-in-fact) to, if any Event of Default under this Agreement or any event
which with the passage of time or the giving of notice or both would
constitute an Event of Default under this Agreement has occurred and is
continuing or if Debtor fails to do upon the demand of the Collateral Agent or
any of the Creditors, (i) make, settle and adjust claims under such policies
of insurance, (ii) endorse the name of Debtor on any check, draft, instrument
or other item of payment of the proceeds of such policies of insurance and
(iii) make all determinations and decisions with respect to such policies of
insurance.
(i) Debtor will permit the Collateral Agent to examine and inspect
the Collateral or any part thereof, wherever located, at any reasonable time
or times on reasonable notice and provided any review or inspection of the
Collateral does not unreasonably disrupt or interfere with Debtor's conduct of
Debtor's business;
(j) Debtor has not during the last five (5) years conducted any
business (other than a de minimis amount of business) or invoiced more than a
de minimis number of the Accounts under any name other than the Debtor's own
name. Debtor does not now and will not at any time during the term of this
Agreement conduct any business (other than a de minimis amount of business) or
invoice more than a de minimis number of the Accounts under any name other
than the Debtor's own name and Debtor will not change its name or adopt any
fictitious business name or trade name without the prior written consent of
the Collateral Agent.
(k) Debtor will from time to time, and within ten (10) days of
receipt of a written request and appropriate forms to do so, at its own
expense, execute and deliver to Collateral Agent for filing or recording such
financing and continuation statements and such amendments thereto under the
Uniform Commercial Code or other applicable law in each jurisdiction requested
by Collateral Agent where Debtor or any of the Collateral may be located and
such other agreements, documents and instruments and do such other acts and
things as may be necessary or as the Collateral Agent or any of the Creditors
may from time to time reasonably request, to establish and maintain a valid
and perfected first priority security interest in the Collateral in favor of
the Collateral Agent to secure the payment of the Secured Obligations. Debtor
hereby authorizes the Collateral Agent to file one or more financing or
continuation statements or amendments thereto under the Uniform Commercial
Code or other applicable law relating to all or any part of the Collateral
without the signature of Debtor where permitted by law; provided, however,
that nothing in this Agreement shall relieve Debtor of its obligation to
execute and deliver to Collateral Agent all necessary financing and
continuation statements and amendments thereto under the Uniform Commercial
Code or other applicable law in each jurisdiction where Debtor or any of the
Collateral may be located in order to perfect and protect the security
interest granted to the Collateral Agent under this Agreement. In addition,
Debtor covenants and agrees that with respect to Accounts with respect to
which the account debtor is the United States of America, any state of the
United States or any other governmental body or any department, agency or
instrumentality of any of the foregoing, if requested by the Collateral Agent,
Debtor will take such action and execute, deliver and file such agreements,
documents and instruments as may be necessary or as the Collateral Agent may
reasonably request to insure that such Accounts are duly assigned to the
Collateral Agent in compliance with all applicable governmental requirements
(including, without limitation, the Federal Assignment of Claims Act of 1940,
as amended, if applicable) so that the Collateral Agent is recognized by the
account debtor to have all of the rights of an assignee of such Accounts;
(l) Debtor will reimburse the Collateral Agent upon demand for (i)
all costs and expenses incident to perfecting, maintaining or terminating the
security interest granted hereby, including filing and recording fees, fees
for obtaining and transferring certificates of title and all taxes and
reasonable legal and other out-of-pocket fees and expenses paid or incurred by
the Collateral Agent in connection with any of the foregoing and (ii) all
costs and expenses, including, without limitation, reasonable attorneys' fees
and expenses, incurred by the Collateral Agent or any Creditor in seeking to
collect or enforce any rights under this Agreement or incurred by the
Collateral Agent or any Creditor in seeking to collect or enforce any of the
Secured Obligations, all of which costs and expenses shall constitute a part
of the Secured Obligations and be payable on demand.
4. Representations and Covenants of Debtor re: Accounts, Inventory and
Other Collateral. Debtor hereby represents and warrants to the Collateral
Agent and each of the Creditors (with respect to the items listed in Section
4(c) and Section 4(h) only), and covenants and agrees with the Collateral
Agent and each of the Creditors, that:
(a) Debtor will from time to time, as the Collateral Agent may from
time to time reasonably request, prepare and deliver to the Collateral Agent
at Debtor's expense (i) schedules identifying each Account and (ii) such
additional schedules, certificates, test verifications, and reports respecting
the Collateral and the proceeds thereof as the Collateral Agent may reasonably
request. Any such schedule, certificate or report shall be executed by a duly
authorized officer of Debtor and shall be in such form and detail as the
Collateral Agent or any of the Creditors may reasonably specify.
(b) Debtor shall promptly notify the Collateral Agent of the
occurrence of any event causing loss or depreciation in value of any material
portion of any of the Inventory or other Collateral, and the amount of such
loss or depreciation;
(c) With respect to Accounts scheduled, listed or referred to on any
report submitted by Debtor to the Collateral Agent, Debtor represents and
warrants to the Collateral Agent that, except as otherwise disclosed on the
applicable report: (i) they are genuine, in all respects what they purport to
be and are not evidenced by a judgment; (ii) they represent bona fide
transactions completed in accordance with the terms and provisions contained
in the invoices and other documents related thereto; (iii) the amounts thereof
shown on the applicable report are actually and absolutely owing to Debtor and
are not contingent for any reason; (iv) to the best of Debtor's knowledge,
there are no setoffs, counterclaims or disputes existing or asserted with
respect thereto; (v) Debtor has not made any agreement with any account debtor
thereof for any deduction therefrom except a discount or allowance allowed by
Debtor in the ordinary course of its business for prompt payment; (vi) to the
best of Debtor's knowledge, there are no facts, events or occurrences which in
any way impair the validity or enforcement thereof or tend to reduce the
amount payable thereunder from the amount thereof as shown on the applicable
report which have not been adequately reserved for by Debtor; (vii) to the
best of Debtor's knowledge, all account debtors thereof have the capacity to
contract and are solvent; (viii) the goods sold and/or services furnished
giving rise thereto are not subject to any Lien or claim except that of the
Collateral Agent and Permitted Liens; (ix) Debtor has no knowledge of any fact
or circumstance which would impair the validity or collectibility thereof; (x)
to the best of Debtor's knowledge, there are no proceedings or actions which
are threatened or pending against any account debtor thereof which could
result in any material adverse change in its financial condition; and (xi) to
the best of Debtor's knowledge, all of such Accounts are subject to a first
priority perfected security interest in favor of the Collateral Agent for the
equal and ratable benefit of the Creditors;
(d) After the occurrence and during the continuation of an Event of
Default, any officers, employees or agents of the Collateral Agent on request
of the Approving Creditors shall have the right, at any time or times, in the
name of the Collateral Agent, any of the Creditors or Debtor or in the name of
a nominee of the Collateral Agent or any of the Creditors, to verify the
validity, amount or any other matter relating to any Accounts by mail,
telephone, telegraph or otherwise. All costs, fees and expenses relating
thereto incurred by the Collateral Agent or any of the Creditors (or for which
the Collateral Agent or any of the Creditors becomes obligated) shall become
part of the Secured Obligations and be payable by Debtor to the Collateral
Agent and/or the applicable Creditors, as the case may be, on demand;
(e) Debtor will at all times maintain a record of Accounts at its
chief executive office, keeping correct and accurate records itemizing and
describing the names and addresses of account debtors, relevant invoice
numbers, shipping dates and due dates, collection histories and Accounts
agings, all of which records shall be available during such Debtor's usual
business hours at the request of the Collateral Agent on reasonable notice and
provided any review or inspection of such records does not unreasonably
disrupt or interfere with Debtor's conduct of Debtor's business. Debtor will
conduct a review (or cause its independent certified public accountants to
conduct a review) of its bad debt reserves and collection histories at least
once each year;
(f) From and after the occurrence of any Event of Default under this
Agreement and so long as such Event of Default is continuing, and so long as
the Collateral Agent is otherwise authorized to commence Foreclosure on the
Collateral under the terms of this Agreement and the Intercreditor Agreement,
the Collateral Agent may, without notice thereof to Debtor, (i) notify any or
all account debtors that the Accounts have been assigned to the Collateral
Agent and that the Collateral Agent has a security interest therein; (ii)
direct such account debtors to make all payments due from them to Debtor upon
the Accounts directly to the Collateral Agent; and (iii) enforce payment of
and collect, by legal proceedings or otherwise, the Accounts in the name of
the Collateral Agent and/or Debtor;
(g) Debtor will, at its own expense, use commercially reasonable
efforts to collect, as and when due, all amounts due with respect to the
Accounts;
(h) With respect to Inventory scheduled, listed or referred to in any
report to the Collateral Agent, Debtor represents and warrants to the
Collateral Agent that, except as otherwise disclosed in such reports: (i)
such Inventory (other than Inventory in transit to Debtor in the ordinary
course of its business) is located at Debtor's chief executive office, one of
the other locations of Debtor listed on Exhibit A or another location with
respect to which Debtor has complied with all of the requirements of Section
3(b) of this Agreement; (ii) Debtor has good, indefeasible and merchantable
title to such Inventory and such Inventory is not subject to any Lien or claim
whatsoever except for the security interest granted to the Collateral Agent
under this Agreement and except for Permitted Liens; (iii) such Inventory is
of good and merchantable quality, free from material defects; (iv) such
Inventory is not subject to any licensing, patent, royalty, trademark, trade
name or copyright agreements with any third parties; (v) the completion of
manufacture and sale or other disposition of such Inventory by the Collateral
Agent or any of the Creditors following an Event of Default will not require
the consent of any Person and will not constitute a breach or default under
any contract or agreement to which Debtor is a party or to which any of the
Inventory is subject; (vi) such Inventory has not been produced in violation
of the Fair Labor Standards Act and is not subject to the so-called "hot
goods" provision contained in Title 29 U.S.C. Section 215(a)(1); and (vii)
such Inventory is not on consignment with Debtor;
(i) Debtor will at all times maintain a perpetual inventory system or
physical inventory system keeping correct and accurate records describing the
kind, type, quality and quantity of Inventory, Debtor's cost therefor and
withdrawals therefrom and additions thereto, all of which records shall be
available during Debtor's usual business hours at the request of the
Collateral Agent on reasonable notice and provided any review or inspection of
such records does not unreasonably disrupt or interfere with Debtor's conduct
of Debtor's business. Debtor will conduct such physical counts of all or any
portion of its Inventory as the Collateral Agent may from time to time
reasonably request and will supply the Collateral Agent with a report in a
form and with such specificity as may be satisfactory to the Collateral Agent
concerning any physical count of any or all of the Inventory of Debtor; and
(j) Neither the Collateral Agent nor any of the Creditors shall be
responsible for: (i) the safekeeping of any of the Inventory; (ii) any loss or
damage to any of the Inventory; (iii) any diminution in the value of any of
the Inventory; or (iv) any act or default of any carrier, warehouseman,
bailee, forwarding agency or any other Person. As between Debtor, on the one
hand, and the Collateral Agent and the Creditors, on the other hand, all risk
of loss, damage, destruction or diminution in value of the Inventory shall be
borne by Debtor. From and after the occurrence of any Event of Default under
this Agreement and so long as any such Event of Default is continuing, the
Collateral Agent in its sole and absolute discretion may require that
Inventory be stored with a bailee, warehouseman or similar party and warehouse
receipts therefor be issued in the Collateral Agent's name and be delivered to
the Collateral Agent. Debtor agrees to do whatever acts are reasonably
required to effectuate the foregoing.
5. Collections of Collateral. Debtor hereby agrees that, at all times
during the continuance of any Event of Default under this Agreement, and so
long as the Collateral Agent is otherwise authorized to commence Foreclosure
on the Collateral under the terms of this Agreement and the Intercreditor
Agreement, Debtor will forthwith upon receipt transmit and deliver to the
Collateral Agent, in the form received, all cash, checks, drafts, chattel
paper and other instruments or writings for the payment of money (properly
endorsed, where required, so that such items may be collected by the
Collateral Agent) which may be received by Debtor at any time in full or
partial payment or otherwise as proceeds of the Accounts and/or any of the
other Collateral, the proceeds of which shall be applied by the Collateral
Agent to the payment of the Secured Obligations in the order and manner set
forth in the Intercreditor Agreement. Any such items which may be received by
Debtor will not be commingled with any other of Debtor's funds or property,
but will be held separate and apart from Debtor's own funds and property and
upon express trust for the Collateral Agent until delivery is made to the
Collateral Agent.
6. Additional Actions by the Collateral Agent. The Collateral Agent, at
its option, may from time to time perform any agreement of Debtor hereunder
which Debtor shall fail to perform and take any other action which the
Collateral Agent in good faith deems reasonably necessary for the maintenance
or preservation of any of the Collateral or its interest therein (including,
without limitation, the discharge of taxes or liens of any kind against the
Collateral or the procurement of insurance or the payment of warehousing
charges, landlord's bills or other charges), and Debtor agrees to forthwith
reimburse the Collateral Agent for all reasonable costs and expenses incurred
by the Collateral Agent in connection with the foregoing, together with
interest thereon at a rate per annum equal to the lesser of (i) Three Percent
(3%) over and above the Prime Rate (fluctuating as and when the Prime Rate
changes) and (ii) the highest rate of interest allowed by applicable law, from
the date incurred until reimbursed by Debtor. The Collateral Agent may for
the foregoing purposes act in its own name or that of Debtor and may also so
act for the purposes of adjusting, settling or canceling any policy of
insurance on the Collateral or endorsing any draft received in connection
therewith, in payment of a loss or otherwise, for all of which purposes Debtor
hereby grants to the Collateral Agent its power of attorney, irrevocable
during the term of this Agreement.
7. Defaults. The occurrence of any of the following events or conditions
shall constitute an "Event of Default" under this Agreement: (a) Debtor shall
fail to pay any principal of, interest on or other amount with respect to any
of the Secured Obligations as and when the same shall become due and payable,
whether by reason of demand, maturity, acceleration or otherwise; (b) default
by Debtor in the due performance or observance of any of the terms,
provisions, covenants or agreements contained in Sections 3(b), 3(d), 3(e),
3(h), 3(i), 3(j), 3(k), 4(c), 4(f) or 4(h) of this Agreement; (c) default by
Debtor in the due performance or observance of any of the other terms,
provisions, covenants or agreements contained in this Agreement and any such
default shall remain unremedied for thirty (30) days after the earlier of (i)
written notice of default is given to Debtor by the Collateral Agent or (ii)
any officer of Huntco obtains knowledge of such default; (d) any
representation or warranty made by Debtor in this Agreement shall be untrue or
incorrect in any material respect; (e) any "Event of Default" (as defined
therein) shall occur under or within the meaning of any of the Note Purchase
Agreements; or (f) any "Event of Default" (as defined therein) shall occur
under or within the meaning of the Revolving Credit Agreement.
8. Remedies. Upon the occurrence and during the continuation of any Event
of Default under this Agreement and so long as Collateral Agent is otherwise
authorized to commence Foreclosure on the Collateral under the terms of this
Agreement and the Intercreditor Agreement, (a) the Collateral Agent shall
have the right to take immediate possession of the Collateral covered hereby,
and, for that purpose may pursue the same wherever said Collateral may be
found, and may enter upon any of the premises of Debtor without breach of the
peace and with or without process of law, wherever said Collateral may be or
may be supposed to be, and search for the same, and, if found, take possession
of and remove and sell and dispose of said Collateral, or any part thereof;
(b) the Collateral Agent shall have the right to notify any account debtor
with respect to any Account to make all payments under the Accounts directly
to the Collateral Agent and demand, collect, receipt for, settle, compromise,
adjust, sue for, foreclose and realize on the Accounts and all amounts due
under the Accounts as the Collateral Agent may determine; (c) the Collateral
Agent shall have the right to exercise such of the other rights and remedies
accruing to a Creditor under the Uniform Commercial Code of the relevant state
or states and any other applicable law upon default by a debtor as the
Collateral Agent may elect; and (d) the Collateral Agent shall have the right
to enter, with or without process of law and without breach of the peace, any
premises where the books and records of Debtor pertaining to the Accounts or
any of the other Collateral are or may be located, and without charge or
liability on the part of the Collateral Agent therefor require Debtor to
provide photocopies of or to itself to make photocopies of said books and
records or remain upon said premises and use the same for the purpose of
collecting, preparing and disposing of the Collateral and/or for the purpose
of identifying and locating any of the Collateral. Debtor shall, upon the
Collateral Agent's request, assemble the Collateral and make the Collateral
available to the Collateral Agent at any place designated by the Collateral
Agent which is reasonably convenient to Debtor.
9. Foreclosure. Foreclosure on the Collateral covered hereby may be had
at public or private sale or sales, disposing of such portion or portions of
the Collateral at each such sale, for cash or on credit, on such terms, at
such place or places, and with or without the Collateral being present at such
sale, all as the Collateral Agent in its sole and absolute discretion shall
determine from time to time provided, however, that every aspect of the
disposition including the method, manner, time, place and terms must be
commercially reasonable in accordance with the Uniform Commercial Code, as
adopted in the applicable state or states, in effect at the time of any such
disposition. In the case of public sale, notice thereof shall be deemed and
held to be adequate and reasonable if such notice shall appear five (5) times
in a newspaper of general circulation published in the City or County wherein
the sale is to be held, the first such publication being at least thirty (30)
days before such sale and the last such publication being not more than three
(3) days before such sale. In the case of a private sale, notice thereof
shall be deemed and held to be adequate and reasonable if such notice shall be
mailed to Debtor at its last known address at least thirty (30) days before
such sale. The enumeration of these methods of notice shall not be deemed or
construed to render unreasonable any other similar method of notice which
would otherwise be reasonable under the circumstances. Any notice of public
sale must specify the date, time place and terms of sale.
10. Application of Proceeds and Deficiency. The Collateral Agent shall
apply the net proceeds of any sale, lease or other disposition of any of the
Collateral or of any other collection of any of the Collateral or any proceeds
of any of the Collateral, after deducting all costs and expenses of every kind
incurred therein or incidental to the retaking, holding, preparing for sale,
selling, leasing or the like of the Collateral on Debtor's premises, or
elsewhere, or in any way related to the Collateral Agent's rights hereunder
(including, without limitation, reasonable attorneys' fees and expenses, court
costs, bonds and other legal expenses, insurance, security guard and alarm
expenses incurred in connection with the holding of the Collateral,
advertisements of sale of the Collateral, and rental and utilities expense on
the premises or elsewhere in connection with storage and sale of the
Collateral) to the payment of the Secured Obligations in the order and manner
set forth in the Intercreditor Agreement. The Collateral Agent shall pay any
other amounts required by any existing or future provision of law (including
Section 9-504(1)(c) of the Uniform Commercial Code or any comparable statutory
provision of any jurisdiction where Debtor or any of the Collateral may at the
time be located). The Collateral Agent must account and promptly pay over to
Debtor or to whomever else may be legally entitled thereto the surplus, if
any. Debtor shall remain liable to the Collateral Agent and the Creditors for
the payment of any deficiency, with interest, provided Debtor remains liable
to Creditors therefor under applicable law.
11. The Collateral Agent's Care of Collateral. The Collateral Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if it takes such action for that purpose as
Debtor requests in writing, but failure of the Collateral Agent to comply with
any such request shall not of itself be deemed a failure to exercise
reasonable care, and no failure of the Collateral Agent to preserve or protect
any rights with respect to such Collateral against prior parties, or to do any
act with respect to the preservation of such Collateral not so requested by
Debtor, shall be deemed a failure to exercise reasonable care in the custody
or preservation of such Collateral.
12. Amendments; Waivers; Remedies Cumulative. No delay on the part of the
Collateral Agent in the exercise of any right hereunder shall operate as a
waiver thereof and no single or partial exercise by the Collateral Agent of
any right shall preclude other or further exercise thereof or the exercise of
any other right. Each and every right granted to the Collateral Agent
hereunder, under the other Credit Documents, or at law or in equity, shall be
deemed cumulative and may be exercised from time to time. Neither the
Collateral Agent nor any of the Creditors shall by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder and
no waiver whatsoever shall be valid unless in writing and signed by the
Collateral Agent and/or the applicable Creditors, as the case may be, and then
only to the extent therein set forth. A waiver by the Collateral Agent or any
of the Creditors of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Collateral Agent
and/or such Creditors would otherwise have on any future occasion. This
Agreement may not be amended except by a writing duly signed by Debtor and the
Collateral Agent and consented to in writing by the Approving Creditors. In
any event, this Agreement may not be amended to release Collateral, change the
definition of Collateral or of Secured Obligations or any similar amendment
materially adverse to any Creditor without the written consent of all
Creditors. The headings of the paragraphs hereof shall not be considered in
the construction or interpretation of this Agreement.
13. Irrevocable Power of Attorney. Debtor hereby irrevocably makes,
constitutes and appoints the Collateral Agent (and all Persons designated by
the Collateral Agent) as the true and lawful agent and attorney-in-fact of
Debtor with full power of substitution to: (a) if any Event of Default under
this Agreement has occurred and is continuing and provided and so long as
Collateral Agent is otherwise authorized to commence Foreclosure on the
Collateral under the terms of this Agreement and the Intercreditor Agreement,
(i) demand payment of Accounts, (ii) enforce payment of Accounts by legal
proceedings or otherwise, (iii) exercise all of Debtor's rights and remedies
with respect to proceedings brought to collect an Account, (iv) sell or assign
any Account upon such terms, for such amount and at such time or times as the
Collateral Agent deems advisable, (v) settle, adjust, compromise, extend or
renew an Account, (vi) discharge and release any Account, (vii) prepare, file
and sign Debtor's name on any proof of claim in bankruptcy or other similar
document against an account debtor, (viii) notify the postal authorities of
any change of the address for delivery of Debtor's mail to an address
designated by the Collateral Agent, and open all mail addressed to Debtor for
the purpose of collecting Accounts and the proceeds of any other Collateral
(with all other mail to be promptly returned to Debtor), (ix) take control in
any manner of any item of payment or proceeds of any Account or any other
Collateral, (x) have access to any lockbox or postal box into which Debtor's
mail is deposited, (xi) endorse Debtor's name upon any items of payment or
proceeds thereof and apply the same to the payment of the Secured Obligations,
(xii) endorse Debtor's name upon any chattel paper, document, instrument,
invoice or similar document or agreement relating to any Account or any goods
pertaining thereto, (xiii) endorse Debtor's name on any verification of
Accounts and notices thereof to account debtors and (xiv) do all acts and
things which are necessary, in the Collateral Agent's sole discretion, to
fulfill the Debtor's obligations under this Agreement; and (b) at any time,
(i) execute in Debtor's name and on Debtor's behalf any financing statements
and/or continuations thereof and/or amendments thereto under the Uniform
Commercial Code or other applicable law in any jurisdiction where Debtor or
any of the Collateral may be located and (ii) do any and all things necessary
and take such actions in the name and on behalf of Debtor to carry out the
intent of this Agreement, including, without limitation, the grant of the
security interest granted under this Agreement and to perfect and protect the
security interest granted to the Collateral Agent in respect to the Collateral
and the Collateral Agent's rights created under this Agreement. Debtor agrees
that neither the Collateral Agent nor any of its agents, designees or
attorneys-in-fact will be liable for any acts of commission or omission (other
than for acts of commission or omission which constitute gross negligence or
willful misconduct as determined by a court of competent jurisdiction in a
final, nonappealable order), or for any error of judgment or mistake of fact
or law in respect to the exercise of the power of attorney granted under this
Section. The power of attorney granted under this Section shall be
irrevocable during the term of this Agreement.
14. Notices. All notices provided for in this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
when deposited in the United States mail, registered or certified mail, return
receipt requested and postage prepaid, or deposited with Federal Express,
Airborne, or similar reasonably reliable company for overnight delivery,
postage prepaid, or sent by telecopy transmission, addressed as follows, or to
such other address as may hereafter be designated in writing by the respective
parties hereto by similar method: if to the Collateral Agent to 721 Locust
Street, St. Louis, Missouri 63101, Attention: Large Corporate Accounts,
Telecopy No.: (314) 425-2203 and if to Debtor, to the address or telecopy
number of the chief executive office of Debtor listed at the end of this
Agreement, Attention: President.
15. Applicable Law and Severability. It is the intention of the parties
hereto that this Agreement is entered into pursuant to the provisions of the
Uniform Commercial Code as it is in force in the State of Missouri (the
"UCC"). Any applicable provisions of the UCC, not specifically included
herein, shall be deemed a part of this Agreement in the same manner as if set
forth herein at length; and any provisions of this Agreement that might in any
manner be in conflict with any provision of the UCC shall be deemed to be
modified so as not to be inconsistent with the UCC. In all respects this
Agreement and all transactions, assignments and transfers hereunder, and all
the rights of the parties, shall be governed as to validity, construction,
enforcement and in all other respects by the substantive laws of the State of
Missouri (without reference to conflict of law principles); provided, however,
that the perfection of, and the effect of the perfection or non-perfection of,
the security interests and liens created by this Agreement on any property
located in jurisdiction other than the State of Missouri shall in all respects
be governed, construed, applied and enforced in accordance with the
substantive laws of the applicable jurisdiction. To the extent any provision
of this Agreement is not enforceable under applicable law, such provision
shall be deemed null and void and shall have no effect on the remaining
portions of this Agreement.
16. Successors and Assigns; Duration of Security Interest. This Agreement
shall be binding upon Debtor and shall inure to the benefit of the Collateral
Agent and its successors. Debtor may not assign any of its rights or delegate
any of its obligations under this Agreement. This Agreement shall continue in
full force and effect and the security interest and lien granted hereby and
all of the representations, warranties, covenants and agreements of Debtor
hereunder and all of the terms, conditions and provisions hereof relating
thereto shall continue to be fully operative until such time as: (i) (a)
Debtor shall have paid or caused to be paid, or otherwise discharged, all of
the Secured Obligations, (b) there shall be no remaining commitment or
obligation of the Collateral Agent or any of the Creditors to advance funds,
make loans or otherwise extend credit to Debtor under any of the Credit
Documents, (c) all of the Letters of Credit shall have expired or been
terminated, and (d) the Revolving Credit Agreement shall have been terminated;
or (ii) the occurrence of a Collateral Release Event as defined in the
Intercreditor Agreement. Debtor expressly agrees that to the extent a payment
or payments to the Collateral Agent or any of the Creditors, or any part
thereof, are subsequently invalidated, declared to be void or voidable or set
aside and are required to be repaid to a trustee, custodian, receiver or any
other party under any bankruptcy act, state or federal law, common law or
equitable cause, then to the extent of such payment or repayment, the
obligation or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if said payment had not been made.
17. Consent to Jurisdiction; Waiver of Jury Trial. DEBTOR IRREVOCABLY
SUBMITS 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 COLLATERAL AGENT MAY ELECT, IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. DEBTOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT TO SUCH SUIT, ACTION OR
PROCEEDING MAY BE HELD AND DETERMINED IN ANY OF SUCH COURTS. DEBTOR
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH DEBTOR MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT, AND DEBTOR FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. DEBTOR HEREBY
EXPRESSLY WAIVES ALL RIGHTS OF ANY OTHER JURISDICTION WHICH DEBTOR MAY NOW OR
HEREAFTER HAVE BY REASON OF ITS PRESENT OR SUBSEQUENT DOMICILES. DEBTOR
AUTHORIZES THE SERVICE OF PROCESS UPON DEBTOR BY REGISTERED MAIL SENT TO
DEBTOR AT ITS ADDRESS SET FORTH IN SECTION 14. DEBTOR (AND BY ITS ACCEPTANCE
HEREOF, THE COLLATERAL AGENT) HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY
JURY WITH RESPECT TO ANY ACTION IN WHICH DEBTOR AND THE AGENT ARE PARTIES
RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
IN THE EVENT ANY OF THE SECURED OBLIGATIONS SECURED HEREBY ARE PAYABLE ON
DEMAND, NEITHER THIS AGREEMENT NOR ANYTHING CONTAINED HEREIN SHALL BE DEEMED
TO ALTER OR IMPINGE UPON THE DEMAND CHARACTER OF SUCH OBLIGATION.
IN WITNESS WHEREOF, Debtor has executed this Security Agreement this 24th day
of March, 1998.
____________________________, Debtor
By: ________________________
Title:______________________
Address of Chief Executive Office
of Debtor and Location of Books and Records of Debtor:
Accepted this 24th day of March, 1998.
MERCANTILE BANK NATIONAL ASSOCIATION, as Collateral Agent
COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT
THIS COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT ("Agreement") is made
and entered into this 24th day of March, 1998, by and among 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 (all of the foregoing
parties are sometimes hereinafter individually referred to as a "Private
Noteholder" and collectively referred to as the "Private Noteholders"), Harris
Trust and Savings Bank ("Harris Trust"), The First National Bank of Chicago
("First Chicago"), Bank of America NT&SA ("Bank of America"), SunTrust Bank,
Atlanta ("SunTrust Bank"), and Mercantile Bank National Association
("Mercantile") in its capacity as a Bank and as agent ("Agent") for the Banks
under the Revolving Credit Agreement (as hereinafter defined) (Harris Trust,
First Chicago, Bank of America, SunTrust Bank and Mercantile are sometimes
hereinafter referred to individually as a "Bank" and collectively referred to
as the "Banks"), Mercantile Bank National Association, as collateral agent for
the "Creditors" (as hereinafter defined) under this Agreement and the
"Security Agreements" (as hereinafter defined) (in such capacity, the
"Collateral Agent"), Huntco Inc., a Missouri corporation ("Company"), Huntco
Nevada, Inc., a Nevada corporation which is a wholly-owned subsidiary of
Company ("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"), and 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).
RECITALS
A. Huntco Inc., a Missouri corporation ("Company") and the Private
Noteholders entered into those certain Note Purchase Agreements dated July 14,
1995, as amended by that certain First Amendment to Note Purchase Agreements
dated effective March 24, 1998 ("Note Purchase Agreements"), in which Private
Noteholders purchased from the Company its 8.13% Notes due July 15, 2005 (the
"Private Notes") in the aggregate principal amount of Fifty Million Dollars
($50,000,000.00).
B. Company and the Banks or their predecessors entered into that
certain Revolving Credit Agreement dated December 17, 1996, as amended by that
First Amendment to Revolving Credit Agreement dated effective April 30, 1997,
and as further amended and restated by that Amended and Restated Revolving
Credit Agreement dated effective March 24, 1998 ("Revolving Credit
Agreement"), in which Banks extended a revolving credit facility to Company up
to an aggregate principal amount not to exceed the lesser of the Borrowing
Base (as defined in the Revolving Credit Agreement) or Eighty Million Dollars
($80,000,000.00).
C. Each of the Private Noteholders represents and warrants to the
Company that it is the holder of the Private Notes outstanding as of the date
of this Agreement in the principal amount shown below its respective signature
blocks and each of the Banks represents and warrants to the Company that it is
the sole owner and holder of all of the rights and loans of such Bank under
the Revolving Credit Agreement as of the date of this Agreement in the amount
of its Commitment stated in the Revolving Credit Agreement and no third
parties have been granted participation interests therein as of the date of
this Agreement.
D. All of the Guarantors are guarantors of the Company's obligations
under the Revolving Credit Agreement and are guarantors of the Company's
obligations under the Note Purchase Agreements.
E. Company, Guarantors, Private Noteholders, Agent and Banks have
agreed that Company and each of the Guarantors will grant to the Collateral
Agent for the equal and ratable benefit of the Creditors a first priority
security interest in the Collateral (as defined herein) owned by them, as
security for the Company's and the Guarantors' fulfillment of their respective
obligations under the Note Purchase Agreements and the Revolving Credit
Agreement, and the Guarantor's fulfillment of their guaranty obligations
relating thereto.
F. The Private Noteholders, Agent and the Banks agree to release the
security interest in the Collateral if the Company satisfies the conditions of
Section 7.1 of this Agreement.
G. The parties are entering into this Agreement to, among other
things, appoint the "Collateral Agent" as collateral agent to hold a security
interest in the Collateral for the benefit of the Private Noteholders, Agent
and the Banks and to perform such additional duties as provided herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Private Noteholders, the Banks, the Agent, the Collateral
Agent, the Company and the Guarantors hereby mutually promise and agree as
follows:
SECTION 1. DEFINITIONS.
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, 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):
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.
Collateral shall mean the collateral in which the Company or the
Guarantors have granted a security interest pursuant to the terms of the
Security Agreements.
Collateral Agent shall mean Mercantile Bank National Association in
its capacity as collateral agent for the Creditors hereunder and its
successors in such capacity.
Commitments shall mean the Banks' commitments to make Loans to
Company or issue Letters of Credit for the account of Company pursuant to the
Revolving Credit Agreement and Commitment shall mean each Bank's individual
share of the Commitments pursuant to the terms of the Revolving Credit
Agreement.
Company Obligations shall mean any and all present and future
indebtedness (principal, interest, fees, collection costs and expenses,
reasonable attorneys' fees and other amounts), liabilities, obligations
(including, without limitation, reimbursement obligations with respect to
standby and/or commercial letters of credit issued by a Creditor for the
account of Company and/or any of the Guarantors) and indemnities of the
Company to the Collateral Agent and/or any one or more of the Creditors
evidenced by or arising under this Agreement, the Note Purchase Agreements,
the Revolving Credit Agreement and/or any of the other Credit Documents.
Consolidated Debt shall mean, as of the date of any determination
thereof, all Debt of Company and its Subsidiaries as of such date, 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 Company, the ratio of (a) Consolidated Debt
as of such day to (b) Consolidated EBITDA for the four (4) consecutive fiscal
quarter period of Company ending on such day.
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 the Company and its
Subsidiaries during such period (whether paid or deferred) plus (iii) all
depreciation and amortization expenses of the Company and its Subsidiaries
during such period, 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 Company and its
Subsidiaries (including, without limitation, all commissions, discounts and/or
related amortization and other fees and charges owed by Company and its
Subsidiaries with respect to letters of credit and bankers' acceptance
financing, the net costs associated with interest swap obligations of Company
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 Company 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 the Company or any Subsidiary in the
undistributed earnings of any corporation which is not a Subsidiary (unless
the Company 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 the Company 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 included in the Revolving
Credit Agreement) 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.
Creditors shall mean collectively, (i) the Banks, (ii) the Private
Noteholders, (iii) the Agent and (iv) their respective successors and assigns,
in each case as holder of the Secured Obligations.
Credit Documents shall mean this Agreement, the Security Agreements,
the Note Purchase Agreements, the Private Notes, the Subsidiary Guaranty, the
Revolving Credit Agreement, the Revolving Credit Notes, and the Letter of
Credit Applications.
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.
Escrow Release Date shall mean with respect to any Letter of Credit,
the earlier to occur of (A) a drawing on such Letter of Credit or (B) the
expiration or termination of such Letter of Credit.
Event of Default shall mean a Bank Loan Default or a Private Note
Default as defined in Section 3.1 herein.
Foreclosure shall mean foreclosure sale, assignment, transfer, sale,
collection or other disposition or application of any Collateral.
GAAP shall mean generally accepted accounting principles at the time
in the United States.
Guarantor Obligations shall mean, with respect to each Guarantor,
any and all present and future indebtedness, liabilities, obligations and
indemnities of such Guarantor to the Collateral Agent and/or any one or more
of the Creditors evidenced by or arising under this Agreement, the Note
Purchase Agreements, the Subsidiary Guaranty, the Revolving Credit Agreement,
the Security Agreements and/or any of the other Credit Documents.
Guarantors shall mean Huntco Nevada, Huntco Steel, Midwest Products
and HSI Aviation.
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.
Instruction Notice shall mean a notice delivered by the Required
Creditors to the Collateral Agent pursuant to Section 3.2, containing
direction as to action to be taken or not to be taken hereunder or under any
Credit Document and containing a certification by the Person(s) executing such
notice that such Person(s) are authorized to execute such notice on behalf of
the Required Creditors and that the aggregate principal and interest amount of
Total Outstandings held by such Required Creditors is as specified in such
notice.
Investment shall mean any investment by Company or any Subsidiary in
any Person, whether payment therefor is made in cash or capital stock of
Company 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) of the Revolving Credit Agreement.
Letter of Credit Application shall have the same meaning ascribed
thereto in the Revolving Credit Agreement.
Letter of Credit Loan shall have the meaning ascribed thereto in
Section 3.01(c) of the Revolving Credit Agreement.
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.
Loans shall mean the Revolving Credit Loans and the Letter of Credit
Loans made by the Banks pursuant to the Revolving Credit Agreement.
Mercantile shall mean Mercantile Bank National Association, a
national banking association, in its individual corporate capacity as a Bank
hereunder and not as Agent or Collateral Agent hereunder.
Notice of Cancellation shall mean any notice delivered to the
Collateral Agent from any Creditor(s) which previously delivered a Notice of
Default to the Collateral Agent stating that the Event of Default which was
the subject of such Notice of Default is no longer continuing.
Notice of Default shall mean any notice delivered to the Collateral
Agent from any Creditor(s) pursuant to Section 3.1 stating that an Event of
Default has occurred and is continuing.
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).
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, the Company 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 Creditor, a
percentage, the numerator of which is the sum of (i) the aggregate principal
and interest amount of all Revolving Credit Loans due to the Creditor that are
outstanding as of such date, plus (ii) such Creditor's pro rata share (whether
by way of participation or otherwise) of the aggregate principal and interest
amount of all Letter of Credit Loans that are outstanding as of such date plus
(iii) such Creditor's pro rata share (whether by way of participation or
otherwise) of the aggregate undrawn face amount of all Letters of Credit that
are outstanding as of such date reduced by any amounts held in escrow in
respect of such undrawn Letters of Credit by the Collateral Agent pursuant to
Section 5.5 plus (iv) the aggregate principal and interest amount of all
Private Notes due to the Creditor that are outstanding as of such date, and
the denominator of which is the Total Outstandings as of such date.
Reallocable Payment shall mean (i) any amount received by a Creditor
in respect of any Secured Obligations by virtue of an exercise of any right of
set-off or offset, (ii) any payment received by a Creditor or Collateral Agent
while any Event of Default has occurred and is continuing and with respect to
which a Notice of Default has been delivered to the Collateral Agent, (iii)
any amount received from any enforcement of any security interest in any of
the Collateral and (iv) any distribution made in connection with any
bankruptcy, liquidation, reorganization, dissolution, winding up or similar
proceedings with respect to the Company or any of the Guarantors attributable
to such Creditor's security interest in any of the Collateral.
Repayment Date shall mean the date on which all of the following
have occurred: (i) all Secured Obligations shall have been paid in full, (ii)
all Commitments shall have been terminated and all outstanding Letters of
Credit shall have expired, been terminated or surrendered and (iii) no other
amounts shall then be owing to any Creditor or the Collateral Agent under any
Credit Document.
Required Banks shall mean at any time Banks having Sixty-Six and
67/100 Percent (66.67%) or more of the aggregate principal 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 the Banks.
Required Creditors shall mean the actions or directions of both the
Required Banks and the Required Private Noteholders acting together, with
respect to any approvals or the amendment or modification of this Agreement as
allowed for hereunder; and with respect to any actions or directions to be
made by the Required Creditors pursuant to an Instruction Notice given to the
Collateral Agent to Foreclose or take any other enforcement action with
respect to the Collateral, the Required Creditors shall mean either: (i) the
actions or directions of both the Required Banks and the Required Private
Noteholders acting together, (ii) the action or directions of One Hundred
Percent (100%) of the Banks acting together following a Bank Loan Default
which is not also a Private Note Default, or (iii) the actions or directions
of the Required Banks following a Bank Loan Default that is also a Private
Note Default, or (iv) the actions or directions of the Private Noteholders
having Sixty-One Percent (61%) or more of the aggregate principal amount of
the Private Notes then outstanding following a Private Note Default.
Required Private Noteholders shall mean at any time Private
Noteholders having Sixty-One Percent (61%) or more of the aggregate principal
amount of Private Notes then outstanding.
Revolving Credit Loan shall have the meaning ascribed thereto in
Section 2.01(a) of the Revolving Credit Agreement.
Secured Obligations shall mean, as of any date during the term of
this Agreement any and all indebtedness, liabilities and obligations payable
by the Company and/or the applicable Guarantor, as the case may be, to any of
the Creditors pursuant to any Credit Document as of such date, including,
without limitation or duplication, (i) the aggregate unpaid principal balances
of the Revolving Credit Notes, together with all accrued and unpaid interest
thereon, (ii) the unpaid principal balance of all Letter of Credit Loans,
together with all accrued and unpaid interest thereon, (iii) the aggregate
undrawn face amount of all outstanding Letters of Credit, (iv) the aggregate
unpaid principal balances of the Private Notes, together with all accrued and
unpaid interest thereon, (v) commitment, issuance and other fees, (vi) funding
loss, increased cost and capital adequacy fees, costs and expenses, (vii)
yield-maintenance and other premiums and (viii) collection and enforcement
costs and expenses, including, without limitation, reasonable attorneys' fees
and expenses.
Security Agreements shall mean those certain Security Agreements
dated March 24, 1998, by and between Collateral Agent, as collateral agent for
the equal and ratable benefit of the Creditors and either Company or one of
the Guarantors, as the same may from time to time be amended, modified,
extended or renewed.
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 the Company or any
Subsidiary.
Subsidiary Guaranty shall mean collectively the Subsidiary Guaranty
dated July 14, 1995 made jointly and severally by Huntco Nevada, Huntco Steel
and Midwest Products in favor of the Private Noteholders, and the Subsidiary
Guaranty dated March 24, 1998 made by HSI Aviation in favor of the Private
Noteholders in which the Guarantors each guaranteed the Company's obligations
under the Note Purchase Agreements.
Total Outstandings shall mean, as of any date, the sum of (i) the
aggregate principal and interest amount of all Revolving Credit Loans
outstanding as of such date, plus (ii) the aggregate principal and interest
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 reduced by any amounts held in escrow in respect of such undrawn
Letters of Credit by the Collateral Agent pursuant to Section 5.6 plus (iv)
the aggregate principal and interest amount of all Private Notes outstanding
as of such date.
1.2 Defined Terms Included in Other Credit Documents. All defined
terms referenced in this Agreement shall have the meaning ascribed to them
herein. If the same or a similar term is defined in either the Note Purchase
Agreements or the Revolving Credit
Agreement or any of the other Credit Documents, the definition contained in
this Agreement shall prevail.
SECTION 2. COLLATERAL AGENT.
2.1 Appointment. Each Creditor hereby irrevocably designates and
appoints Mercantile Bank National Association as its collateral agent under
each of the Security Agreements, and each Creditor irrevocably authorizes
Mercantile Bank National Association, as collateral agent for such Creditor,
to execute and deliver the Security Agreements and to take such other action
or refrain from taking action, as provided in this Section 2 hereof, on its
behalf, under the provisions of this Agreement and to exercise such powers and
perform such duties as are expressly delegated to the Collateral Agent, by the
terms of this Agreement and the other Security Agreements, together with such
other powers as are reasonably incidental thereto. The Collateral Agent agrees
to act as such upon the express conditions contained in this Agreement.
2.2 Powers and Duties. The Collateral Agent shall have and may
exercise such powers hereunder as are specifically delegated to the Collateral
Agent by the terms of this Agreement and the Security Agreements, together
with such powers as are reasonably incidental thereto. The Collateral Agent
shall have no implied duties to the Creditors nor any obligation to the
Creditors to take any action under this Agreement or any of the Security
Agreements, except any action specifically provided by this Agreement or any
of the Security Agreements to be taken by the Collateral Agent. Without
limiting the generality of the foregoing, the Collateral Agent shall not be
required to take any action with respect to any Event of Default except as
expressly provided for in this Agreement.
2.3 General Immunity. Neither the Collateral Agent nor any of its
directors, officers or employees shall be liable to any of the Creditors for
any action taken or not taken by it in connection with this Agreement or any
of the Security Agreements (i) with the consent or at the request of the
Required Creditors (this clause (i), however, shall not exculpate the
Collateral Agent, its directors, officers or employees from their own gross
negligence or willful misconduct in the manner in which they take any action
with the consent of or at the request of the Required Creditors) or (ii) in
the absence of their own gross negligence or willful misconduct; nor shall the
Collateral Agent be responsible to any Creditor for the validity,
effectiveness, value, sufficiency or enforceability of this Agreement or any
other Credit Document or the Collateral (or any part thereof) or for the
creation, attachment, perfection or priority of any security interests or
liens purported to be granted to the Collateral Agent pursuant to any of the
Security Agreements or any other Credit Document.
2.4 Adequate Provision. Notwithstanding any other provision
contained in this Agreement to the contrary, to the extent Company fails to
reimburse the Collateral Agent pursuant to Section 8.2 or 8.3 of this
Agreement, or if any Instruction Notice is delivered to Collateral Agent under
this Agreement, the Creditors shall ratably in accordance with their
respective Pro Rata Shares indemnify the Collateral Agent and hold it harmless
from and against any and all liabilities, losses (except losses occasioned
solely by failure of Company to make any payments required by this Agreement
(excepting those described in Sections 8.2 or 8.3), or the Credit Documents),
costs and/or expenses, including, without limitation, any liabilities, losses,
costs and/or expenses arising from the failure of any Creditor to perform its
obligations hereunder or in respect of this Agreement, and also including,
without limitation, reasonable attorneys' fees and expenses, which the
Collateral Agent may incur, directly or indirectly, in connection with this
Agreement, or any of the Security Agreements or any action or transaction
related hereto or thereto; provided only that the Collateral 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 and the Security
Agreements, and shall survive the satisfaction and payment of the Company
Obligations and the Guarantor Obligations, the expiration or other termination
of the Letters of Credit and the termination of this Agreement.
2.5 Action Upon Instructions of Required Creditors. The Collateral
Agent agrees, upon the written request of the Required Creditors, to take any
action of the type specified in this Agreement or any of the Security
Agreements as being within the Collateral Agent's rights, duties, or powers.
Notwithstanding the foregoing, the Collateral 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 Creditors pro rata in accordance with
its Pro Rata Share 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 directly and solely caused by Collateral Agent's
gross negligence or willful misconduct. The Collateral Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with a written Instruction Notice by the Required Creditors, and
such instructions and any action taken or failure to act pursuant thereto
shall be binding on all of the Creditors. In the absence of a request by the
Required Creditors, the Collateral Agent shall have authority, in its sole
discretion, to take or not to take any action necessary for the protection or
preservation of the Collateral.
2.6 Employment of Collateral Agents and Counsel. The Collateral
Agent may execute any of its duties as Collateral Agent hereunder by or
through employees, agents and attorneys-in-fact and shall not be answerable to
the Creditors, 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
Collateral Agent shall be entitled to advice and opinion of legal counsel
concerning all matters pertaining to the duties of the agency hereby created.
2.7 Reliance on Documents; Counsel. The Collateral 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 Collateral Agent.
2.8 May Treat Payee as Owner. The Collateral Agent may deem and
treat the payee of any Private Note or Revolving Credit 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 Collateral
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 Private Note or Revolving Credit Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of
such Private Note or Revolving Credit Note or of any Private Note or Revolving
Credit Note issued in exchange therefor.
2.9 Collateral Agent's Reimbursement. Each Creditor agrees to
reimburse the Collateral Agent pro rata in accordance with its Pro Rata Share
for (a) any out-of-pocket costs and expenses not reimbursed by Company for
which the Collateral Agent is entitled to reimbursement by the Company under
this Agreement or any of the Security Agreements and (b) for any other
out-of-pocket costs and expenses incurred by the Collateral Agent on behalf of
the Creditors in connection with the preparation, execution, delivery,
amendment, modification, extension, renewal and/or enforcement of this
Agreement and/or any of the Security Agreements.
2.10 Rights as a Creditor. With respect to its rights and
obligations under this Agreement, the Collateral Agent shall have the same
rights and powers hereunder as any Creditor and may exercise the same as
though it were not the Collateral Agent, and the terms "Creditor" and
"Creditors" shall, unless the context otherwise indicates, include the
Collateral Agent in its individual capacity. The Collateral 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 Company and
its Subsidiaries and affiliates as if it were not the Collateral Agent.
2.11 Collateral Agent's Calculations. In making the determinations
and allocations required by Section 5.4 (with respect to proceeds from a
Foreclosure and Reallocable Payments), the Collateral Agent may rely upon
information supplied by the Creditors as to the amount payable with respect to
the Secured Obligations, absent manifest error, and the Collateral Agent, as
such, shall have no liability to the Company, any of the Guarantors or any
Creditor for actions taken in reliance on such information, except for its own
gross negligence or willful misconduct.
2.12 Resignation and Removal of Collateral Agent. Subject to the
appointment of a successor Collateral Agent, the Collateral Agent may resign
as Collateral Agent for the Creditors under this Agreement and the Security
Agreements at any time by thirty (30) days' notice in writing to the Creditors
and Company and Collateral Agent may be removed at any time by the vote of
Creditors owning a majority of the Total Outstandings ("Removal Vote"). Such
resignation or removal shall take effect upon appointment of such successor
Collateral Agent. The Creditors owning the majority of the Total Outstandings
at the time of said resignation or removal shall have the right to appoint a
successor Collateral Agent who shall be entitled to all of the rights of, and
vested with the same powers as, the original Collateral Agent under this
Agreement and the Security Agreements. In the event a successor Collateral
Agent shall not have been appointed within the thirty (30) day period
following the giving of notice of resignation by the Collateral Agent or
following delivery of notice to Collateral Agent of a Removal Vote, the
Collateral Agent may appoint its own successor. Resignation by the Collateral
Agent shall not affect or impair the rights of the Collateral Agent under
Sections 2.4, 2.9, 8.2 and 8.3 hereof with respect to all matters preceding
such resignation. Any successor Collateral 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 $500,000,000.00.
2.13 Collateral Agent Fee. As compensation for its services as
Collateral Agent, the Company and the Guarantors jointly and severally agree
to pay the Collateral Agent an annual fee equal to Five Thousand Dollars
($5,000.00) to be paid in arrears on each anniversary date of this Agreement.
2.14 Duration of Agency. The agency established by Section 2.1
hereof shall continue, and Sections 2.1 through and including this Section
2.14 shall remain in full force and effect until this Agreement and the
Security Agreements are released pursuant to Section 7.1.
SECTION 3. NOTICE OF DEFAULT AND REMEDIES.
3.1 Notice of an Event of Default. (a) The Private Noteholders
shall notify the Collateral Agent in writing within five (5) business days
after learning of the occurrence of an "Event of Default" as defined in the
Note Purchase Agreements which has not been waived in writing by the Private
Noteholders ("Private Note Default"). The Agent shall notify the Collateral
Agent in writing within five (5) business days after learning of the
occurrence of an "Event of Default" as defined in the Revolving Credit
Agreement which has not been waived in writing by the Banks ("Bank Loan
Default"). The foregoing notice of either a Private Note Default or a Bank
Note Default is referred to as a "Notice of Default".
(b) Upon receipt by the Collateral Agent of a Notice of Default, the
Collateral Agent shall promptly provide the Company and the Creditors with a
"Sharing Notice" (as defined in Section 6.1). Following Company's receipt of a
Sharing Notice from Collateral Agent, and so long as such Sharing Notice is in
effect, Company and each Guarantor thereafter shall make all payments due to
any of the Creditors directly to the Collateral Agent on the date when due in
accordance with Section 4.2 hereof. Following a Notice of Default, the
Collateral Agent shall exercise the rights and remedies provided in the
Security Agreements and in this Agreement, subject to the direction of the
Required Creditors as provided herein and therein. Except as permitted herein
and in the Security Agreements, the Collateral Agent is not empowered to
exercise any remedy hereunder or under the Security Agreements unless a Notice
of Default is in effect; provided, however, that the Collateral Agent may at
any time in its discretion (but shall not be obligated to) take any action
necessary for the protection or preservation of the Collateral. A Notice of
Default shall become effective upon receipt thereof by the Collateral Agent.
A Notice of Default, once effective, shall remain in effect unless and until
it is cancelled as provided hereinbelow. The Collateral Agent shall not be
deemed to have knowledge or notice of the occurrence of any Event of Default
unless such Collateral Agent has received a Notice of Default. A Notice of
Default may be cancelled by the delivery of a Notice of Cancellation to the
Collateral Agent, which shall become effective upon receipt thereof by the
Collateral Agent. The Collateral Agent shall promptly notify the Company,
each Guarantor and each Creditor as to the receipt and contents of any such
Notice of Cancellation.
3.2 Instruction Notice. Following the occurrence of an Event of
Default and receipt of the related Notice of Default, the Required Creditors
shall have the right to deliver a written Instruction Notice to the Collateral
Agent directing the Collateral Agent as to what action shall be taken or shall
not be taken, which shall include without limitation, directing the Collateral
Agent whether or not to commence to Foreclose on the Collateral. Following
receipt of an Instruction Notice, Collateral Agent shall provide written
notice thereof to the Company, the Guarantors and each of the other Creditors.
3.3 Enforcement Of Rights In Respect Of The Collateral. So long as
a Notice of Default shall remain in effect, (i) upon the delivery of an
Instruction Notice by the Required Creditors, the Collateral Agent shall
proceed in respect of, and enforce its rights with respect to, the Collateral
as specified in such Instruction Notice (provided, however, that the
Collateral Agent shall in all cases be fully justified in failing or refusing
to act under this Agreement unless it shall be indemnified to its satisfaction
by the Creditors based on their respective Pro Rata Shares against any and all
liabilities, costs and expenses that may be incurred by it by reason of taking
or continuing to take any such action), (ii) all proceeds resulting from any
Foreclosure, including interest thereon, shall be held by the Collateral Agent
in a separate, segregated account and applied in accordance with Section 5.4
and (iii) the Collateral Agent shall not release Collateral except pursuant to
an Instruction Notice or except as required by the applicable Credit Document.
3.4 Collateral Agent's Action Upon Instructions. Upon delivery of
one or more Instruction Notices at any time and from time to time from the
Required Creditors, the Collateral Agent shall take such of the following
actions as may be specified in such Instruction Notices (provided, however,
that the Collateral Agent shall in all cases be fully justified in failing or
refusing to act under this Agreement unless it shall be indemnified to its
satisfaction by the Creditors based on their respective Pro Rata Shares
against any and all liabilities, costs and expenses that may be incurred by it
by reason of taking or continuing to take any such action): (a) give such
notice, direction or consent or exercise such right, remedy or power or take
such action hereunder or under the Security Agreements or in respect of any
part of or all the Collateral, as it shall be entitled to take and as shall be
specified in such Instruction Notices; (b) take such action with respect to or
to preserve or protect the Collateral (including the discharge of Liens) as it
shall be entitled to take and as shall be specified in such Instruction
Notice; (c) approve (as satisfactory to it) or disapprove all matters required
by the terms of the Security Agreement to be satisfactory to the Collateral
Agent; and (d) release Collateral. Upon receiving an Instruction Notice from
the Required Creditors the Collateral Agent shall, or in the absence of such
Instruction Notice, the Collateral Agent may in its discretion (but shall not
be obligated to) execute and file or cause to be executed and filed any
instrument or document relating to any Collateral, or the security interest
granted in the Security Agreements as may be necessary to protect and preserve
the security interests created by or pursuant to the Security Agreements. An
Instruction Notice and the actions taken in accordance therewith shall be
binding upon all of the Creditors.
3.5 Rights Of Creditors . Except as set forth in this Agreement or
the other Credit Documents, the right of each Creditor to receive payment of
the Secured Obligations held by such Creditor when due (whether at the stated
maturity thereof, by acceleration or otherwise), and the obligations of the
Company and the Guarantors to pay such Secured Obligations when due, shall not
be impaired or affected by the terms of this Agreement or the other Credit
Documents without the consent of such Creditor.
SECTION 4. PAYMENTS DUE FROM COMPANY.
4. l Payments Prior to a Sharing Notice. Prior to Company's receipt
of a Sharing Notice and following a Notice of Cancellation, Company and each
Guarantor shall continue to make all required payments to the Creditors
pursuant to the terms of the Note Purchase Agreements (and the related Private
Notes) and the Revolving Credit Agreement (and the related Loans) and the
other Credit Documents (the "Payments").
4.2 Payments After a Sharing Notice. Upon Company's receipt of a
Sharing Notice from the Collateral Agent, Company and each Guarantor shall
thereafter make all Payments coming due to any of the Creditors directly to
the Collateral Agent for the benefit of the Creditors to be distributed to the
Creditors in accordance with the terms of this Agreement. The Company or the
applicable Guarantor, as the case may be, shall receive credit against amounts
due under the Credit Documents upon the delivery of the Payment to the
Collateral Agent. The Company shall continue to make all Payments as provided
in this Section 4.2 until the Company Obligations have been paid in full or
until Company receives a Notice of Cancellation. Each Guarantor shall
continue to make all Payments as provided in this Section 4.2 until the
Guarantor Obligations owed by such Guarantor has been paid in full or until
Company receives a Notice of Cancellation.
SECTION 5. DISBURSEMENT OF PAYMENTS AND PROCEEDS FROM COLLATERAL.
5.l Disbursement of Payments. The Collateral Agent shall promptly
distribute each Payment received by Collateral Agent following a Notice of
Default to each of the Creditors ("Payment Distribution") in accordance with
the provisions of Section 5.4.
5.2 Investment of Funds Held by Collateral Agent. Any funds
received by Collateral Agent pursuant to this Agreement that are held by
Collateral Agent for more than three (3) business days shall be invested by
Collateral Agent for the benefit of the Creditors in (i) marketable direct
obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America (or by any agency
thereof to the extent such obligations are backed by the full faith and credit
of the United States of America), in each case maturing not later than the
earlier of the anticipated disbursement date of such amounts and the date one
hundred eighty (180) days from the date of acquisition thereof; (ii)
investments in commercial paper maturing not later than the earlier of the
anticipated disbursement date of such amounts and the date one hundred eighty
(180) days from the date of acquisition thereof and having, at such date of
acquisition, a rating of "A-2" or better from Standard & Poor's Ratings Group
or a rating of "P-1" or better from Moody's Investors Service, Inc.; (iii)
investments in certificates of deposit, banker's acceptances and time deposits
maturing not later than the earlier of the anticipated distribution date of
such amounts and the date one hundred eighty (180) days from the date of
acquisition thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, the Collateral Agent or any office of
any other commercial bank which has a combined capital and surplus and
undivided profits of not less than $500,000,000 and which has a long-term bank
deposit rating of "A" or better from Standard & Poor's Ratings Group or from
Moody's Investors Service, Inc. and (iv) investments in repurchase agreements
with the Collateral Agent or any other commercial bank referred to in clause
(iii) above with respect to obligations of the type referred to in clause (i)
above, provided that such repurchase agreement is secured by such obligations
and requires repurchase thereunder within ten ( 10) day.
5.3 Accounting of Amounts Due Creditors. If Collateral Agent is
directed to foreclose on the Collateral pursuant to an Instruction Notice,
Collateral Agent shall provide each Creditor and Company with written notice
that the Collateral is to be foreclosed upon and a projected date for the
completion of the foreclosures ("Settlement Date"). Within five (5) business
days after receipt of such notice, each Creditor which is not a Bank and the
Agent on behalf of each of the Banks shall submit to Collateral Agent an
accounting of all Secured Obligations due from Company to the applicable
Creditor pursuant to the Credit Documents, which shall include a breakdown of
the Secured Obligations due each Creditor and Agent (less any Payments
received pursuant to the Sharing Provisions) (the "Settlement Statement").
The Settlement Statement shall also provide a per diem interest amount due for
each day after the Settlement Date based on the amount due to such Creditor
("Per Diem Interest"). Each Creditor which is not a Bank and the Agent on
behalf of each of the Banks shall also simultaneously provide a copy of the
Settlement Statement to the Company. Collateral Agent shall update each
Settlement Statement to reflect all Payments made by the Collateral Agent to
each Creditor after the date the Settlement Statement is delivered to
Collateral Agent.
5.4 Disbursements of Payments and Proceeds From Sale of Collateral.
Collateral Agent shall promptly distribute all Payments and Reallocable
Payments received, and within three (3) business days after receiving any
proceeds from a Foreclosure, shall distribute such foreclosure proceeds and
any interest earned thereon, in the following order of priority:
(a) First, to the Collateral Agent for any amounts due under Section
8.2 hereof and then to any other Creditor which has theretofore advanced or
paid such amounts, an amount equal to the amount thereof so advanced or paid
by such Creditor and for which such Creditor previously has not been
reimbursed;
(b) Second, to the Creditors, in an amount equal to the unpaid
principal and unpaid interest portion of the Secured Obligations held by the
Creditors (including the undrawn face amount of all outstanding Letters of
Credit, reduced by all amounts then held by the Collateral Agent in escrow in
accordance with Section 5.5); provided, however, that (i) if such moneys shall
be insufficient to pay such amounts in full, such moneys shall be distributed
or, if applicable, escrowed, as described below, on a pro rata and pari passu
basis to such Creditors in proportion to the unpaid amounts and (ii) the
amount of such proceeds allocable to outstanding but undrawn Letters of Credit
(the "Required Amount") shall be deposited in escrow and held by the
Collateral Agent until the Escrow Release Date and thereafter applied in
accordance with Section 5.5;
(c) Third, to the Creditors in an amount equal to all other sums
which constitute Secured Obligations held by such Creditors, including,
without limitation, the costs and expenses of such Creditors and their
representatives which are due and payable under the Credit Documents and which
constitute Secured Obligations; provided, however, that if such moneys shall
be insufficient to pay such sums in full, such moneys shall be distributed on
a pro rata and pari passu basis to such Creditors in proportion to such unpaid
amounts; and
(d) Fourth, to be held as part of the Collateral and applied to
Secured Obligations until the earlier of the Repayment Date or the Collateral
Release Date, whereupon any surplus or other amount then remaining, including
any interest earned thereon, shall be paid to the Company and/or the
applicable Guarantors, as the case may be, or their respective successors or
assigns or to whomsoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct.
For further clarity, each Creditor's pro rata share of second priority
payments shall be determined by multiplying the amount available by a
fraction, the numerator of which is the Secured Obligations of the type
specified in the second priority payment clause owing to such Creditor and the
denominator of which is the total Secured Obligations of the type specified in
the second priority payment clause. For purposes of such proration the amount
of the Secured Obligations (and each Creditor's pro rata share thereof) shall
be determined as of the date the payment is being made by Collateral Agent.
With respect to third priority payments, each Creditor's share shall be
determined by multiplying the amount available by a fraction, the numerator of
which is the amount owing, other than amounts included in the second priority
distribution, in respect of the Secured Obligations owing to such Creditor and
the denominator of which is the total Secured Obligations owing to all of the
Creditors.
All distributions made by the Collateral Agent pursuant to this Section
5.4 shall be (absent manifest error and subject to any decree of any court of
competent jurisdiction) final. Each Creditor hereby agrees that amounts
distributed to it in accordance with Section 5.4 shall be promptly applied by
such Creditor in accordance with its Credit Documents to reduction of the
Secured Obligations held by such Creditor.
The apportionment, allocation, and sharing of the Collateral and the
proceeds thereof and Reallocable Payments, as provided in this Agreement,
shall be made among the Creditors on a pro rata and pari passu basis, without
regard to their relative priorities, if any, of their security interests in
any of the Collateral, and shall not be affected by any lack of validity or
enforceability of the security interests conveyed by the Security Agreements,
the appointment of any receiver or similar individual or entity or any
provision of law that may provide to the contrary.
5.5 Letter Of Credit Escrow. (a) Any amounts placed in escrow
pursuant to the second priority clause of Section 5.4 shall be held in escrow
until the applicable Escrow Release Date. If on the applicable Escrow Release
Date, the corresponding Letter of Credit (i) has been drawn on, an amount
equal to the amount deposited in escrow with respect to such Letters of Credit
shall be disbursed to the applicable Creditors in satisfaction of its
corresponding Secured Obligation or (ii) has not been drawn on, the amount
held in escrow and relating to such Letter of Credit shall be disbursed as
proceeds of Collateral to those Creditors which would have received a
distribution of such proceeds and to the Company in such amounts as they would
have received as if the Letter of Credit had not been deemed to be issued and
outstanding for purposes of the distribution which gave rise to the escrow
deposit.
(b) Pending the disbursement thereof pursuant to the terms of this
Section 5.5, any amounts held in escrow shall (to the extent the Collateral
Agent deems practical) be invested by the Collateral Agent in (i) marketable
direct obligations of, or obligations the principal of and interest on which
are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing not later than
the earlier of the anticipated disbursement date of such amounts and the date
one hundred eighty (180) days from the date of acquisition thereof; (ii)
investments in commercial paper maturing not later than the earlier of the
anticipated disbursement date of such amounts and the date one hundred eighty
(180) days from the date of acquisition thereof and having, at such date of
acquisition, a rating of "A-2" or better from Standard & Poor's Ratings Group
or a rating of "P-1" or better from Moody's Investors Service, Inc.; (iii)
investments in certificates of deposit, banker's acceptances and time deposits
maturing not later than the earlier of the anticipated distribution date of
such amounts and the date one hundred eighty (180) days from the date of
acquisition thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, the Collateral Agent or any office of
any other commercial bank which has a combined capital and surplus and
undivided profits of not less than $500,000,000 and which has a long-term bank
deposit rating of "A" or better from Standard & Poor's Ratings Group or from
Moody's Investors Service, Inc. and (iv) investments in repurchase agreements
with the Collateral Agent or any other commercial bank referred to in clause
(iii) above with respect to obligations of the type referred to in clause (i)
above, provided that such repurchase agreement is secured by such obligations
and requires repurchase thereunder within ten ( 10) days.
SECTION 6. REALLOCABLE PAYMENTS AND SHARING
.
6.1 Sharing Notice. The Collateral Agent shall upon receipt of a
Notice of Default give written notice to each of the Creditors and Company
advising each party that a Notice of Default has been received, informing each
party of the contents of the Notice of Default and advising each party that
the provisions of this Section 6.1 are to be implemented effective as of the
date of the Notice of Default (hereinafter referred to as a "Sharing Notice").
Within three (3) business days following receipt of a Sharing Notice, each
Creditor which is not a Bank and the Agent on behalf of each of the Banks
shall provide to Collateral Agent and Company in writing a summary of the
amount of the Secured Obligations due to each Creditor as of the date of the
Sharing Notice. Collateral Agent shall prepare a written summary of the
Secured Obligations due to each Creditor individually and the total Secured
Obligations due to all Creditors in the aggregate ("Total Secured
Obligations"). The Total Secured Obligations summary shall be updated each
time Collateral Agent makes a Payment Distribution. Collateral Agent shall
deliver the Total Secured Obligations summary to each Creditor and to Company
each time a Payment Distribution is made or at any other time if requested by
any Creditor in writing. Any Sharing Notice shall be effective as of the date
it is sent by the Collateral Agent and shall remain effective until a Notice
of Cancellation has been delivered to the Collateral Agent.
6.2 Reallocable Payments. If any Creditor receives any Reallocable
Payment (whether by way of voluntary or involuntary payment, by virtue of an
exercise of any right of set-off or offset, by virtue of the application of
any provision of any of the Credit Documents (other than this Agreement) or in
any other manner except pursuant to this Agreement) in respect of any Secured
Obligation, such Creditor shall forthwith notify the Collateral Agent thereof
of its receiving the same and after receipt of a Sharing Notice pay to the
Collateral Agent for the account of the Creditors an amount equal to the
Reallocable Payment. Upon receipt of any such payment the Collateral Agent
shall distribute the same to the Creditors in accordance with the provisions
of Section 5.4.
6.3 Disgorged Payments. If, following the making by any Creditor (a
"Paying Creditor") of any payment pursuant to Section 6.2, the amount obtained
by the Paying Creditor which gave rise to such payment (the amount so obtained
being herein called the "relevant amount") or any part of the relevant amount
is required to be repaid by the Paying Creditor to the Company, any of the
Guarantors or any other Person, the Collateral Agent (if it shall then hold
the same) and each of the other Creditors which has received any part thereof
(each, a "Sharing Creditor") shall promptly (and in any event within five (5)
business days after its receipt of notification from the Collateral Agent
requiring such repayment, which notification the Collateral Agent shall
dispatch promptly upon its determining the amount of the repayment required
from the relevant Sharing Creditor) repay the relevant amount or the part
thereof received by the Collateral Agent or such Sharing Creditor, as the case
may be, to the Paying Creditor together with such amount as is equal to the
appropriate proportion of the interest, if any (in respect of the period
during which the Collateral Agent or such Sharing Creditor (as the case may
be) held such amount (or part thereof)), the Paying Creditor shall have been
obliged to pay when repaying such relevant amount as aforesaid.
6.4 Further Sharing Provisions. Each Creditor agrees that until
such Creditor has paid over or applied for the benefit of the other Creditors,
all Payments and all proceeds of the Collateral and Reallocable Payments due
to such other Creditors pursuant to the provisions of this Section 6 and
Section 5.4, such Payments and proceeds shall be held in trust for the benefit
of such other Creditors. Each Creditor receiving proceeds from another
Creditor pursuant to this Section 6 shall, within two (2) business days after
receipt thereof, notify the Company and the Guarantors of such receipt and the
amount thereof.
SECTION 7. TERM OF AGREEMENT, RELEASE OF COLLATERAL.
7.1 Term of Agreement. The Creditors, Collateral Agent, Company
and Guarantors agree that this Agreement shall continue in full force and
effect until such time as any of the following occurs:
(a) All of the Company Obligations and all of the Guarantor Obligations
under the Credit Documents shall have been paid in full, all of the Letters of
Credit have expired or been terminated and the Banks' commitments under the
Revolving Credit Agreement shall have terminated or expired.
(b) All of the Company Obligations and all of the Guarantor Obligations
under the Revolving Credit Agreement and the related Revolving Credit Loans
and the Letter of Credit Loans shall have been paid in full, all of the
Letters of Credit have expired or been terminated and the Banks' commitments
under the Revolving Credit Agreement shall have terminated or expired, and the
Private Notes are still outstanding and there exists no Private Note Default.
(c) The Company shall have complied with all of its covenants under the
Credit Documents and to each Creditor, no Event of Default and no event which
with the passage of time or the giving of notice or both would constitute an
Event of Default shall have occurred and be continuing and the Company shall
have achieved a Consolidated Debt to Consolidated EBITDA Ratio of less than
3.50:1 for three (3) consecutive fiscal quarters ("Collateral Release
Benchmark"). Upon achieving the Collateral Release Benchmark, Company shall
submit to Collateral Agent and to each Creditor Company's financial statements
for all of the fiscal quarters included in the calculation of the Consolidated
Debt to Consolidated EBITDA Ratio and an affidavit from the Company certifying
that the Company is in compliance with all of the covenants contained in the
Credit Documents and to each Creditor, and that no Event of Default and no
event which with the passage of time or the giving of notice or both would
constitute an Event of Default has occurred. Each Creditor agrees to notify
Collateral Agent within twenty-five (25) days after receipt of such financial
statements and affidavit and confirm with Collateral Agent that there are no
Events of Default that the Creditor is aware of, and acknowledging that
Collateral Agent is authorized to release the Collateral. Failure by any
Creditor to provide such acknowledgment within said twenty-five (25) day
period shall be deemed an acknowledgment that Collateral Agent is authorized
to release the Collateral to Company and the Guarantors, and such Creditor
thereby waives its right to object to the release of the Collateral at a later
date. At the end of said twenty-five (25) day period, the Collateral Agent
shall provide written notice to the Company and each of the Creditors that the
Collateral Release Benchmark has been achieved ("Collateral Release Date")
unless the Collateral Agent receives written notice from one or more Creditors
stating that the Collateral Release Benchmark has not been achieved and the
basis for said conclusion, notice of which shall be immediately forwarded to
the Company by Collateral Agent.
Upon the satisfaction of the requirements of either Section 7.1(a), (b)
or (c), Collateral Agent and all of the Creditors shall, at the expense of the
Company, promptly take all necessary actions to release the Collateral,
terminate the Security Agreements and all financing statements filed on the
Collateral and this Agreement shall automatically be deemed terminated, and of
no further force and effect ("Collateral Release Date").
SECTION 8. GENERAL.
8.1 No Waiver. No Failure or delay by the Collateral Agent or any
of the Creditors in exercising any right, remedy, power or privilege hereunder
or under any other Creditor 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 Credit 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 Creditors to
exercise any statutory or common law right of banker's lien or set-off, except
as specifically provided in Section 6.2.
8.2 Cost and Expenses. Company and the Guarantors, jointly and
severally, agree to pay the Collateral Agent, and each of the Creditors upon
demand (i) all reasonable out-of-pocket costs and expenses and all attorneys'
fees of the Collateral Agent in connection with the preparation,
documentation, negotiation and execution of this Agreement and Security
Agreements, (ii) all recording, filing and search fees and expenses incurred
in connection with this Agreement and the Security Agreements, (iii) all out-of-
pocket costs and expenses and all attorneys' fees of the Collateral Agent,
and each of the Creditors in connection with (a) the preparation,
documentation, negotiation and execution of any amendment, modification,
extension or renewal of this Agreement or the Security Agreements, (b) the
preparation of any waiver or consent hereunder or under any of the Security
Agreements or (c) any Bank Loan Default or Private Note Default or Event of
Default or alleged Event of Default, and (iv) if an Event of Default occurs,
all out-of-pocket costs and expenses and all attorneys' fees incurred by the
Collateral Agent, and each of the Creditors in connection with such Event of
Default and collection and other enforcement proceedings resulting therefrom.
Company further agrees to pay or reimburse the Collateral Agent and each of
the Creditors for charges or fees which may be payable with respect to the
execution, delivery, recording and/or filing of this Agreement or any of the
Security Agreements. All of the obligations of Company under this Section 8.2
shall survive the satisfaction and payment of Company Obligations and
Guarantor Obligations arising from the Credit Documents and the termination of
this Agreement.
8.3 General Indemnity. In addition to the payment of expenses
pursuant to Section 8.2, Company and the Guarantors, jointly and severally,
hereby agree to indemnify, pay and hold the Collateral Agent, and each of the
Creditors and any holder(s) of the Loans or Private Notes, and the officers,
directors, employees, agents and affiliates of the Collateral Agent, each of
the Creditors 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 Credit Documents or any other agreement, document or instrument
executed and delivered by Company in connection herewith or therewith,
(collectively, the "indemnified liabilities"); provided that Company 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, Company and the Guarantors shall
contribute the maximum portion that they are 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 8.3 shall survive the
satisfaction and payment of Company's Obligations and Guarantor Obligations
arising from the Credit Documents and the termination of this Agreement.
8.4 Authority to Act. The Collateral Agent shall be entitled to
act on any notices and instructions (telephonic or written) believed by the
Collateral Agent in good faith to have been sent or delivered by any person
identifying himself as an authorized representative of any of the Creditors,
regardless of whether such notice or instruction was in fact delivered by such
person.
8.5 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) business day after the day on which mailed, if sent by
registered or certified mail; provided, however, that notices to the
Collateral Agent under Section 3 shall not be effective until actually
received by the Collateral Agent.
8.6 Consent to Jurisdiction; Waiver of Jury Trial. COMPANY 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 COLLATERAL AGENT MAY ELECT, IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OTHER TRANSACTION DOCUMENT. COMPANY 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. COMPANY AND EACH GUARANTOR
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
COMPANY 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 COMPANY 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. COMPANY AND EACH GUARANTOR HEREBY EXPRESSLY WAIVE ALL RIGHTS OF ANY
OTHER JURISDICTION WHICH COMPANY OR SUCH GUARANTOR MAY NOW OR HEREAFTER HAVE
BY REASON OF ITS PRESENT OR SUBSEQUENT DOMICILES. COMPANY AND EACH GUARANTOR
AUTHORIZE THE SERVICE OF PROCESS UPON COMPANY OR SUCH GUARANTOR BY REGISTERED
MAIL SENT TO COMPANY OR SUCH GUARANTOR AT ITS ADDRESS SET FORTH IN SECTION
8.5. COMPANY, THE GUARANTORS, THE COLLATERAL AGENT AND THE CREDITORS
IRREVOCABLY WAIVE THE RIGHT TO TRIAL, BY JURY WITH RESPECT TO ANY ACTION IN
WHICH COMPANY AND/OR ANY OR THE GUARANTORS AND THE COLLATERAL AGENT AND/OR ANY
OF THE CREDITORS ARE PARTIES RELATING TO OR ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OF THE SECURITY AGREEMENTS.
8.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of Missouri
(without reference to conflict of law principles).
8.8 Amendments and Waivers. Any provision of this Agreement or any
of the Security Agreements may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by Company and the Required
Banks and the Required Private Noteholders (and, if the rights or duties of
the Collateral Agent in its capacity as Collateral Agent are affected thereby,
by the Collateral Agent).
8.9 References; Headings for Convenience. Unless otherwise
specified herein, all references herein to Section numbers refer to Section
numbers of this Agreement. 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.
8.10 Successors and Assigns. 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 Company 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 Collateral Agent and each of the Creditors.
8.11 Intercreditor Agreement Shall Control. The provisions
contained herein concerning the Collateral and proceeds thereof and payment
thereof after a Event of Default shall be controlling, notwithstanding the
terms of any agreement between any Creditor, the Collateral Agent and the
Company and/or any of the Guarantors under any other document or instrument
between such parties, whether or not bankruptcy, receivership or insolvency
proceedings shall at any time have been commenced. To the extent there is any
inconsistency between the terms and provisions of this Agreement and the other
Credit Documents, the provisions of this Agreement shall govern and control.
8.12 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.
8.13 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. The parties agree that
executed facsimiles of this Agreement shall be deemed an original. The
parties further agree that following execution of this Agreement by facsimile,
the parties will follow up with the execution and delivery of signed
counterparts to each of the other parties.
8.14 Resurrection of the Secured Obligations. To the extent that
any of the Creditors receives any payment on account of any of the Secured
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, the Secured
Obligations or part thereof intended to be satisfied and any and all Liens
upon or pertaining to any Property or assets of Company and/or any of the
Guarantors and theretofore created and/or existing in favor of such
Creditor(s) as security for the payment of such the Secured Obligations shall
be revived and continue in full force and effect, as if such payment(s) had
not been received by such Creditor(s) and applied on account of the Secured
Obligations.
IN WITNESS WHEREOF, the Private Noteholders, the Banks and the Collateral
Agent have executed this Intercreditor Agreement this 24th day of March, 1998.
BANKS:
- -----
MERCANTILE BANK NATIONAL ASSOCIATION,
as Collateral Agent, Agent and Bank
721 Locust Street
St. Louis, Missouri 63101
HARRIS TRUST AND SAVINGS BANK
111 West Monroe 2C
Chicago, Illinois 60603
THE FIRST NATIONAL BANK OF CHICAGO
1 First National Plaza
Mail Ste. 0173
Chicago, Illinois 60670-0173
BANK OF AMERICA NT&SA
231 South LaSalle
Chicago, Illinois 60697
SUNTRUST BANK, ATLANTA
25 Park Place, N.E., Mail Code 124
Atlanta, Georgia 30303
PRIVATE NOTEHOLDERS:
- -------------------
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
Holder of Private Notes in the principal amount of $29,600.000
711 High Street
Des Moines, Iowa 50392-0800
Attention: Investment Department Securities Division
NIPPON LIFE INSURANCE COMPANY OF AMERICA,
By Its Attorney-in-Fact, PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
Holder of Private Notes in the principal amount of $400,000
c/o Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0800
Attention: Investment Department Securities Division
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
Holder of Private Notes in the principal amount of $11,000,000
Transamerica Investment Services
1150 South Olive Street, Suite 2700
Los Angeles, California 90015
TRANSAMERICA ASSURANCE COMPANY
Holder of Private Notes in the principal amount of $2,000,000
Transamerica Investment Services
1150 South Olive Street, Suite 2700
Los Angeles, California 90015
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
Holder of Private Notes in the principal amount of $2,000,000
Transamerica Investment Services
1150 South Olive Street, Suite 2700
Los Angeles, California 90015
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
Holder of Private Notes in the principal amount of $2,000,000
1600 Market Street
Philadelphia, Pennsylvania 19103
BERKSHIRE LIFE INSURANCE COMPANY
Holder of Private Notes in the principal amount of $2,000,000
700 South Street
Pittsfield, Massachusetts 01201
Attention: Securities Department
THE SECURITY MUTUAL LIFE INSURANCE COMPANY OF LINCOLN, NEBRASKA
Holder of Private Notes in the principal amount of $1,000,000
200 Centennial Mall North (68508)
Lincoln, Nebraska 68501
Attention: Investment Department
COMPANY:
- -------
HUNTCO INC., a Missouri corporation
By: /s/ Robert J. Marischen
Title: Vice Chairman & CFO
14323 South Outer Forty Road
Suite 600 North
Town and Country, Missouri 63017
Attention: Vice Chairman and CFO
Telecopy number: (314) 878-4537
GUARANTORS:
- ----------
HUNTCO NEVADA, INC. a Nevada corporation
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., a Delaware corporation
By: /s/ Anthony J. Verkruyse
Title: Vice President & Secretary
14323 South Outer Forty Road
Suite 600 North
Town and Country, Missouri 63017
Attention: Vice President
Telecopy number: (314) 878-4537
MIDWEST PRODUCTS, INC., a Missouri corporation
By: /s/ Anthony J. Verkruyse
Title: Vice President & Secretary
14323 South Outer Forty Road
Suite 600 North
Town and Country, Missouri 63017
Attention: Vice President
Telecopy number: (314) 878-4537
HSI AVIATION, INC. a Missouri corporation
By: /s/ Robert J. Marischen
Title: President
14323 South Outer Forty Road
Suite 600 North
Town and Country, Missouri 63017
Attention: Vice President
Telecopy number: (314) 878-4537
Description of performance bonus arrangement for executive officers for the
calendar year ending December 31, 1998 ("1998"):
The executive officers of the Company will be entitled to receive
incentive bonus payments based on the Company's quarterly, year-to-date and
full year earnings per share for 1998.
If earnings per share for the first quarter of 1998 is at least $0.12,
the executive officers would each earn 10% of their respective annual base
salaries for 1998 ("1998 base salaries"). If first quarter earnings per share
is at least $0.15, they each would earn 20% of their respective 1998 base
salaries.
If after the first two quarters of 1998, earnings per share is at least
$0.32, $0.40 or $0.60, each would receive 20%, 40% or 60% of their respective
1998 base salaries, less the incentive bonus earned for the first quarter of
1998.
If earnings per share for the third quarter of 1998 is at least $0.20,
the executive officers would each earn 10% of their respective 1998 base
salaries. If third quarter earnings per share is at least $0.25, they each
would earn 20% of their respective 1998 base salaries.
If earnings per share for the full year of 1998 are at least $.65, $.80
or $1.20, each of the executive officers would earn 40%, 80% or 120% of their
respective 1998 base salaries, less all incentive bonus amounts previously
earned under this 1998 performance bonus arrangement. If full year earnings
per share fall between the aforementioned benchmarks, the percentage of their
respective 1998 base salaries used to calculate the full year annual incentive
bonus shall be the prorated percentage between the applicable full year
earnings per share targets.
<PAGE>
HUNTCO INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of the ______ day of ______________,_____, by
and between Huntco Inc. (the "Company") and _______________________ ("You" or
"Your").
RECITALS:
A. You are an employee of the Company or one of its Subsidiaries.
B. The Company wishes to enter into this Stock Option Agreement to
secure for the Company the benefits of the incentive inherent in common stock
ownership by a key employee of the Company, and to afford You the opportunity
to obtain or increase a proprietary interest in the Company and, thereby, to
have an opportunity to share in its success.
C. The granted option shall be a non-qualified stock option, which
does not satisfy the requirements of Section 422 of the Code.
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions. When used in this Agreement, the following terms
shall have the following meanings:
(a) "Agreement" shall mean this Stock Option Agreement.
(b) "Class A Common Stock" shall mean the Class A Common Stock of
the Company having a par value of $.01 per share.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Discharge" shall mean Termination of Employment other than a
Voluntary Termination.
(e) "Discharge for Aggravated Cause" shall mean a Discharge (i)
because You commit a dishonest or illegal act that causes substantial
financial harm to the Company, (ii) because You intentionally subvert the best
interest of the Company, or (iii) because of gross negligence by You.
(f) "Engage in Competition" shall mean a breach by You of the
non-competition or non-disclosure provisions of any written employment
agreement between You and the Company.
(g) "Expiration Date" is defined in Paragraph 3.
(h) "Fair Market Value" shall mean on any given date the closing
price per share of the Class A Common Stock of the Company prevailing on a
national securities exchange which is registered under the Securities Exchange
Act of 1934, or, if Class A Common Stock was not traded on such date, on the
next preceding date on which such Class A Common Stock was traded; or, if the
Class A Common Stock is not traded on such a national securities exchange, the
mean between the current bid and asked prices, as determined by the Company in
good faith, for the Class A Common Stock quoted by persons independent of the
Company and any of its affiliates, and in the case there is no generally
recognized market for the Class A Common Stock, the fair market value as
determined in good faith by the Company.
(i) "Grant Date" shall mean ___________.
(j) "Hunter Affiliate" is defined in Paragraph 6(d)(iii).
(k) "Hunter Group" is defined in Paragraph 6(d)(iii).
(l) "Notice Period" is defined in Paragraph 6(d).
(m) "Option Price" shall mean _________ per share.
(n) "Optioned Shares" is defined in Paragraph 2.
(o) "Option Term" is the period described in Paragraph 3.
(p) "Purchase Agreement" shall mean a stock purchase agreement in
substantially the form of Exhibit A to this Agreement.
(q) "Subsidiary" means any corporation that is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code with respect to
the Company.
(r) "Termination of Employment" shall mean termination of the
employment relationship between You and the Company or its Subsidiaries.
(s) "Voluntary Termination" shall mean a Termination of Employment
resulting solely from Your initiative without undue influence or coercion on
You caused by the Company.
2. Grant of Option. Subject to and upon the terms and conditions of
the Huntco Inc. 1993 Incentive Stock Plan (as amended and restated in 1996),
and the terms and conditions set forth in this Agreement, the Company hereby
grants to You, as of the Grant Date, an option to purchase up to _______
shares of the Company's Class A Common Stock (the "Optioned Shares") from time
to time during the Option Term at the Option Price.
3. Option Term. This option shall completely expire at the close of
business on the day before the fifth anniversary of the Grant Date (the
"Expiration Date"), unless sooner terminated in accordance with Paragraph 7.
In no event shall any option be exercisable at any time after its Expiration
Date.
4. Option Nontransferable. This option shall be neither transferable
nor assignable by You other than by will or by the laws of descent and
distribution, and may be exercised during Your lifetime only by You.
5. Dates of Exercise. _____________________ percent of the Optioned
Shares shall first become exercisable on _____________________ and an
additional _____________________ percent of the Optioned Shares shall first
become exercisable on each subsequent anniversary of such date, as illustrated
by the following schedule:
<PAGE>
EARLIEST EXERCISE DATE PERCENTAGE OF OPTIONED
SHARES THAT MAY BE EXERCISED
XX/XX/XX ___%
XX/XX/XX ___%
XX/XX/XX ___%
XX/XX/XX ___%
XX/XX/XX ___%
Pursuant to the provisions of this Agreement, during the Option Term You may
purchase any or all of the Optioned Shares that have become exercisable as
described above at any time or from time to time. In no event may You
purchase any nonvested Optioned Shares except as provided in Section 6 below.
6. Accelerated Dates of Exercise. The dates of exercise specified in
Paragraph 5 shall accelerate should one of the following provisions become
applicable.
(a) If You are Discharged as a part of an overall reduction in
the Company's work force and for reasons unrelated to your own specific job
performance before the dates specified in Paragraph 5, You shall have the
immediate right to purchase the entire number of Optioned Shares specified in
Paragraph 2 within three months after termination of Your employment, but in
no event shall this option be exercisable at any time after its Expiration
Date. Upon the expiration of such three month period or (if earlier) upon the
applicable Expiration Date, this option shall terminate and cease to be
exercisable.
(b) Should You die while this option is outstanding, the
executors or administrators of Your estate or Your heirs or legatees (as the
case may be) shall have the right to exercise this option for the entire
number of Optioned Shares specified in Paragraph 2. Such right shall lapse
and this option shall cease to be exercisable upon the earlier of (i) the
first anniversary of the date of Your death or (ii) the Expiration Date
applicable to each of such shares. From time to time, in a form acceptable to
the Company, You may designate any person or persons (concurrently,
contingently or successively) to whom the stock option shall be transferred in
the event that You shall die before You fully exercise the stock option. A
beneficiary designation form shall be effective only when the form is signed
by You and filed in writing with the Company while You are alive, and shall
cancel all beneficiary designation forms that You have previously signed and
filed.
(c) Should You become permanently disabled, such that You are
unable to perform the material duties of Your employment with the Company, and
cease by reason thereof to render periodic services to the Company at any time
during the Option Term, then You shall have the right for a period of twelve
months (commencing with the date of such cessation of service status) to
purchase the entire number of Optioned Shares specified in Paragraph 2;
provided, however, that in no event shall this option be exercisable at any
time after the Expiration Date applicable to each of such shares. Upon the
expiration of the limited period of exercisability or (if earlier) upon such
Expiration Date, this option shall terminate and cease to be exercisable.
(d) In the event of a Change in Control, pursuant to
Subparagraphs (i)-(ii) of this Paragraph 6(d), the Company shall provide You
with written notice of such Change in Control not less than ten (10) days
prior to the anticipated consummation thereof (the "Notice Period"), and You
shall have the immediate right during such Notice Period to purchase the
entire number of Optioned Shares specified in Paragraph 2, but in no event
shall this option be exercisable after the Expiration Date. In the event of a
Change in Control pursuant to Subparagraph (iii) of this Paragraph 6(d), You
shall have the immediate right to purchase the entire number of Optioned
Shares specified in Section 2, but in no event shall this option be
exercisable after the Expiration Date. Nothing in this Subparagraph 6(d)
shall be deemed to affect any rights you may have pursuant to Paragraph 8
hereof. A Change in Control means the happening of any of the following
events:
(i) a merger, consolidation or reorganization of the
Company in which the Company does not survive as a publicly held company; or
(ii) a sale of all or substantially all of the assets of
the Company; or
(iii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute a majority of such
Board. For purposes of this Paragraph 6(d)(iii), a director shall be
considered to be a director at the beginning of such two-year period if the
director's election was approved either (x) during the lifetime of B.D. Hunter
by the "Hunter Affiliates" as that term is defined in Article 6(b)(iv) of the
Company's Restated Articles of Incorporation (the "Restated Articles") or, if
after the death of B. D. Hunter, the "Hunter Group" as that term is defined in
Article 6(b)(i) of the Restated Articles, or (y) by a vote of at least 70
percent of the directors then still in office who were directors at the
beginning of the two-year period or who would be considered pursuant to this
sentence to be a director at the beginning of the two-year period.
7. Forfeiture of Options. The Option Term shall terminate (and this
option shall cease to be exercisable) prior to the Expiration Date should one
of the following provisions become applicable.
(a) Except as otherwise provided in subparagraph (b) below,
should You incur a Termination of Employment, other than a Discharge for
Aggravated Cause, then for a period of three months after the date of such
Termination of Employment You shall have the right to purchase only the number
of Optioned Shares (if any) for which this option has become exercisable on
the date of such a Termination of Employment, but in no event shall this
option be exercisable at any time after its Expiration Date. Upon the
expiration of such three month period or (if earlier) upon the applicable
Expiration Date, this option shall terminate and cease to be exercisable.
Options that have not become exercisable in accordance with Paragraph 5 at the
time of such a Termination of Employment shall terminate and never become
exercisable.
(b) Should You be Discharged for Aggravated Cause or Engage in
Competition with the Company at any time during the Option Term, You shall
forfeit the right to purchase any Optioned Shares pursuant to this Agreement
on or after such occasion.
8. Adjustment in Optioned Shares.
(a) In the event any change is made to the common stock of the
Company issuable under this Agreement by reason of any stock split, stock
dividend, combination of shares, or other change affecting the outstanding
common stock as a class without receipt of consideration, then appropriate
adjustments will be made to (i) the total number of Optioned Shares and (ii)
the Option Price in order to reflect such change and thereby preclude a
dilution or enlargement of benefits hereunder.
(b) If the Company is the surviving entity in any merger or
other business combination, then this option, if outstanding under this
Agreement immediately after such merger or other business combination, shall
be appropriately adjusted to apply and pertain to the number and class of
securities which would be issuable to You in the consummation of such merger
or business combination if the option were exercised immediately prior to such
merger or business combination, and appropriate adjustments shall be made to
the Option Price, provided the aggregate Option Price payable hereunder shall
remain the same.
(c) If the Company is not the surviving entity in a merger or
other business combination, then as to the balance of the Optioned Shares not
yet purchased by You, You shall have the right to receive on the effective
date of the merger the difference in cash between the aggregate Option Price
of said shares and the aggregate Fair Market Value for the Class A Common
Stock of the Company paid as a result of the merger or combination whether or
not You then had the right to exercise this option.
9. Privilege of Stock Ownership. As holder of this option, You shall
not have any of the rights of a shareholder with respect to the Optioned
Shares until You have exercised the option and paid the Option Price.
10. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any
part of the Optioned Shares for which this option is at the time exercisable,
You (or in the case of exercise after Your death, Your executor,
administrator, heir or legatee, as the case may be) must take the following
actions:
(i) Execute and deliver to the Secretary of the Company a
Purchase Agreement in the form attached hereto as Exhibit A; and
(ii) Pay the aggregate Option Price for the purchased
Optioned Shares in one or more of the following alternative forms:
(A) full payment, in cash or cash equivalents; or
(B) full payment in shares of Class A Common Stock
of the Company, by delivering shares of Class A Common Stock that You already
own having an aggregate Fair Market Value equal to the aggregate Option Price;
or
(C) full payment in a combination of shares of
Class A Common Stock of the Company valued at the Fair Market Value and cash
or cash equivalents, equal in the aggregate to the aggregate Option Price; or
(D) any other form which the Company may in its
discretion approve at the time of exercise of this option; and
(iii) Pay to the Company the amount of withholding
required pursuant to Paragraph 15.
(iv) Furnish to the Company appropriate documentation
that the person or persons exercising the option, if other than You, have the
right to exercise this option.
(b) Options shall be deemed to have been exercised with respect
to the number of Optioned Shares specified in the Purchase Agreement at such
time as the executed Purchase Agreement for such shares shall have been
delivered to the Company. Payment of the aggregate Option Price shall
immediately become due and shall accompany the Purchase Agreement. The Fair
Market Value of shares tendered in payment of the aggregate Option Price shall
be determined as of such date. As soon thereafter as practical, the Company
shall mail or deliver to You or to the other person or persons exercising this
option a certificate or certificates representing the Optioned Shares so
purchased and paid for.
11. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of Optioned
Shares upon such exercise shall be subject to compliance by the Company and
You with all applicable requirements of law relating thereto.
(b) In connection with the exercise of this option, You shall
execute and deliver to the Company such representations in writing as may be
requested by the Company in order for it to comply with the applicable
requirements of federal and state securities laws.
12. Successors and Assigns. Except to the extent otherwise provided
in Paragraph 4, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, Your successors, administrators, heirs, legal
representatives and assigns and the successors and assigns of the Company.
13. No Employment or Service Contract. Except to the extent the
terms of any employment or service contract between the Company and You may
expressly provide otherwise, no provision of this Agreement shall be construed
so as to grant You any right to remain as an employee of the Company or its
parent or subsidiary corporations, if any, for any period of specific
duration.
14. Notices. Any and all notices referred to or relating to this
Agreement shall be furnished in writing and delivered in person or sent by
registered mail to the representative parties at the addresses following their
signatures to this Agreement or at an address given in a notice that complies
with the terms of this Paragraph. A copy of all notices shall be sent to the
Company at Huntco Inc., 14323 South Outer Forty, Suite 600N, Town & Country,
Missouri 63017.
15. Withholding. If You acquire Optioned Shares, the Company shall
not deliver or otherwise make such shares available to You until You pay to
the Company in cash (or any other form acceptable to the Company) the amount
necessary to enable the Company to remit to the appropriate government entity
or entities on Your behalf the amount required to be withheld from Your wages
with respect to such transaction.
If, after a reasonable period of time after You exercise this option, You
have failed to remit to the Company the amount necessary to enable the Company
to remit to the appropriate government entity or entities on Your behalf the
amount required to be withheld from Your wages with respect to such
transaction, You hereby authorize, and explicitly grant a power of attorney,
to the Company to sell on Your behalf such number of the Optioned Shares as is
necessary for the Company to obtain such amount.
16. Construction. This Agreement and the option evidenced hereby are
in all respects limited by and subject to the express terms and provisions of
this Agreement. All decisions of the Company with respect to any question or
issue arising under this Agreement shall be conclusive and binding on all
persons having an interest in this option.
17. Governing Law. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of Missouri.
18. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in duplicate on its behalf by its duly authorized officer and You have also
executed this Agreement in duplicate, all as of the day and year indicated
above.
COMPANY
By: ______________________________
Title: ______________________________
Address:______________________________
______________________________
You: ______________________________
Address:______________________________
______________________________
<PAGE>
EXHIBIT A
STOCK PURCHASE AGREEMENT
This Agreement is made as of this ______ day of _________________, _____,
by and among Huntco Inc. (the "Company") and __________________________ ("You"
or "Your"), the holder of a stock option under the Stock Option Agreement
("Option Agreement") and _________________________ , Your spouse.
I. EXERCISE OF OPTION
1.1 Exercise. You hereby purchase ______ shares of Class A Common
Stock of the Company ("Purchased Shares") pursuant to that certain option
("Option") granted to You on _________________________ ("Grant Date") under
the Option Agreement to purchase up to _______ shares of the Company's Class A
Common Stock (the "Optioned Shares") at an option price of $_______
(________________ dollars) per share (the "Option Price").
1.2 Payment. Concurrently with the delivery of this Agreement to the
Secretary of the Company, You shall pay the aggregate Option Price for the
Purchased Shares and the withholding amount in accordance with the provisions
of the Option Agreement, and shall deliver whatever additional documents may
be required by the Option Agreement as a condition for exercise.
II. MISCELLANEOUS PROVISIONS
3.1 Power of Attorney. Your spouse hereby appoints You his or her
true and lawful attorney in fact, for him or her and in his or her name, place
and stead, and for his or her use and benefit, to agree to any amendment or
modification of this Agreement and to execute such further instruments and
take such further actions as may reasonably be necessary to carry out the
intent of this Agreement. Your spouse further gives and grants unto You as
his or her attorney in fact full power and authority to do and perform every
act necessary and proper to be done in the exercise of any of the foregoing
powers as fully as he or she might or could do if personally present, with
full power of substitution and revocation, hereby ratifying and confirming all
that You shall lawfully do and cause to be done by virtue of this power of
attorney.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first indicated above.
COMPANY
By: ______________________________
Title: ______________________________
Address:______________________________
______________________________
You: ______________________________
Address:______________________________
______________________________
Your Spouse:__________________________
Address:______________________________
______________________________
CONSENT OF PRICE WATERHOUSE LLP
We hereby consent to the incorporation by reference in the Registration
Statement on Forms S-8 (Nos. 33-68488, 33-71610, 333-662, and 333-19461) of
Huntco Inc. of our report dated January 30, 1998, except for Note 4, which is
as of March 24, 1998, appearing under Item 8 of this Annual Report on Form
10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
St. Louis, Missouri
March 27, 1998
<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 EIGHT MONTH TRANSITION PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 27
<SECURITIES> 0
<RECEIVABLES> 41,976
<ALLOWANCES> 333
<INVENTORY> 81,612
<CURRENT-ASSETS> 128,297
<PP&E> 174,647
<DEPRECIATION> 28,870
<TOTAL-ASSETS> 285,265
<CURRENT-LIABILITIES> 44,115
<BONDS> 110,730
0
4,500
<COMMON> 90
<OTHER-SE> 116,415
<TOTAL-LIABILITY-AND-EQUITY> 285,265
<SALES> 246,324
<TOTAL-REVENUES> 246,324
<CGS> 227,871
<TOTAL-COSTS> 227,871
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 31
<INTEREST-EXPENSE> 5,194
<INCOME-PRETAX> 1,502
<INCOME-TAX> 486
<INCOME-CONTINUING> 1,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,016
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
