<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
January 31, 1997 0-22906
- ----------------------------- ----------------------
For the Quarter Ended Commission File Number
ABC Rail Products Corporation
(Exact name of registrant as specified in its charter)
Delaware 36-3498749
- ----------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 South Michigan Avenue, Chicago, IL 60604-2402
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number (312) 322-0360
-------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------------------ ------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 28, 1997
- ---------------------------- -------------------------------------
Common Stock, $.01 par value 8,954,082 Shares
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I Financial Information
Item 1 Consolidated Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Unaudited Consolidated Financial Statements 7 - 10
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 11 - 16
Part II Other Information
Item 2 Changes in Securities 17
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 6 Exhibits and Reports on Form 8-K 17 - 18
</TABLE>
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of January 31, 1997 and July 31, 1996
<TABLE>
<CAPTION>
(In thousands, except share and per share data)
January 31, July 31,
ASSETS 1997 1996
- ------ ----------- --------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Accounts receivable, less
allowances of $767 and $865,
respectively $ 35,500 $ 31,515
Inventories (Note 3) 48,865 39,318
Prepaid expenses and other current
assets 3,415 1,810
Prepaid income taxes 3,522 3,625
-------- --------
Total current assets 91,302 76,268
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land 1,927 1,605
Buildings and improvements 12,182 12,127
Machinery and equipment 77,076 73,664
Construction in progress 23,360 15,459
-------- --------
114,545 102,855
Less - Accumulated depreciation (33,164) (30,106)
-------- --------
Net property, plant and equipment 81,381 72,749
-------- --------
INVESTMENT IN UNCONSOLIDATED JOINT
VENTURES 8,566 5,604
-------- --------
OTHER ASSETS - net 25,353 15,483
-------- --------
Total assets $206,602 $170,104
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Cash overdrafts $ 2,394 $ 3,907
Current maturities of long-term debt 7,301 6,942
Accounts payable 31,461 22,759
Accrued liabilities 16,874 14,798
-------- --------
Total current liabilities 58,030 48,406
-------- --------
LONG-TERM DEBT, less current maturities 60,537 49,443
-------- --------
DEFERRED INCOME TAXES 5,880 5,316
-------- --------
OTHER LONG-TERM LIABILITIES 4,266 4,265
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value;
1,000,000 shares authorized;
no shares issued or outstanding - -
Common stock, $.01 par value;
25,000,000 shares authorized;
8,954,082 shares and 8,271,026 shares
issued and outstanding as of January 31,
1997 and July 31, 1996, respectively 90 83
Additional paid-in capital 67,372 55,251
Retained earnings 10,427 7,340
-------- --------
Total stockholders' equity 77,889 62,674
-------- --------
Total liabilities and stockholders'
equity $206,602 $170,104
======== ========
</TABLE>
The accompanying notes to the unaudited consolidated financial statements are an
integral part of these consolidated balance sheets.
3
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended January 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share data)
Three Months Ended Six Months Ended
January 31 January 31
------------------ ------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $55,710 $58,545 $111,621 $117,119
COST OF SALES 47,102 50,081 97,640 100,573
------- ------- -------- --------
Gross profit 8,608 8,464 13,981 16,546
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,707 2,552 5,942 5,493
------- ------- -------- --------
Operating income 5,901 5,912 8,039 11,053
INTEREST EXPENSE 1,423 1,310 2,698 2,679
AMORTIZATION OF DEFERRED FINANCING COSTS 59 44 112 78
------- ------- -------- --------
Income before income taxes 4,419 4,558 5,229 8,296
PROVISION FOR INCOME TAXES 1,811 1,868 2,142 3,398
------- ------- -------- --------
Net income $ 2,608 $ 2,690 $ 3,087 $ 4,898
======= ======= ======== ========
NET INCOME PER COMMON SHARE $0.30 $0.33 $0.36 $0.59
======= ======= ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,777 8,216 8,552 8,235
======= ======= ======== ========
</TABLE>
The accompanying notes to the unaudited consolidated financial statements are an
integral part of these consolidated statements.
4
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Six Months Ended January 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
(In thousands)
Additional
Common Paid-in Retained
Stock Capital Earnings
------ ---------- --------
<S> <C> <C> <C>
BALANCE, July 31, 1995 $ 80 $49,671 $ 703
Net income - - 4,898
Exercised stock options - 350 -
------ ------- -------
BALANCE, January 31, 1996 $ 80 $50,021 $ 5,601
====== ======= =======
BALANCE, July 31, 1996 $ 83 $55,251 $ 7,340
Net income - - 3,087
Exercised stock options 1 1,484 -
Income tax benefit from exercised
stock options - 417 -
Shares issued in business acquisition 6 10,220 -
------ ------- -------
BALANCE, January 31, 1997 $ 90 $67,372 $10,427
====== ======= =======
</TABLE>
The accompanying notes to the unaudited consolidated financial statements are an
integral part of these consolidated statements.
5
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three and Six Months Ended January 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended Six Months Ended
January 31 January 31
------------------ -------------------
1997 1996 1997 1996
------- ------- -------- -------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,608 $ 2,690 $ 3,087 $ 4,898
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,635 2,492 6,353 5,244
Deferred income taxes 156 159 306 309
Changes in certain assets and liabilities, net of effect of
acquired business:
Accounts receivable - net 2,200 173 2,257 8,204
Inventories (7,853) (761) (9,356) (4,957)
Prepaid expenses and other current assets (509) (443) (1,505) (416)
Other assets - net (476) (292) (1,193) (680)
Accounts payable and accrued liabilities 7,350 (1,779) 7,327 (6,761)
Other long-term liabilities 2 3 1 (10)
------- ------- -------- -------
Total adjustments 4,505 (448) 4,190 933
------- ------- -------- -------
Net cash provided by operating activities 7,113 2,242 7,277 5,831
------- ------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,857) (2,361) (12,980) (4,751)
Business acquisitions, less cash acquired (2) - (2) -
Investment in joint ventures (650) - (2,921) -
------- ------- -------- -------
Net cash used in investing activities (7,509) (2,361) (15,903) (4,751)
------- ------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in cash overdrafts (2,597) 1,511 (1,661) 3,189
Activity under the Credit Agreement:
Net activity under revolving line of credit 4,922 326 9,416 (5,025)
Repayment of acquisition facility (1,563) (1,416) (3,028) (2,832)
Draw on acquisition facility - - 1,750 -
Issuance of other long-term debt - - 1,878 2,632
Repayment of other long-term debt (570) (573) (1,143) (1,082)
Payment of deferred financing costs (21) (79) (71) (278)
Exercised stock options 225 350 1,485 350
------- ------- -------- -------
Net cash provided by (used in) financing activities 396 119 8,626 (3,046)
------- ------- -------- -------
Net change in cash - - - (1,966)
CASH, beginning of period - - - 1,966
------- ------- -------- -------
CASH, end of period $ - $ - $ - $ -
======= ======= ======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,394 $ 1,274 $ 2,626 $ 2,444
Cash paid for income taxes, net 592 1,814 676 1,841
NON-CASH TRANSACTIONS:
Business acquisitions
Common stock issued $10,226 $ - $ 10,226 $ -
Cash paid 2 - 2 -
------- ------- -------- -------
Total consideration 10,228 - 10,228 -
Assets acquired 17,209 - 17,209 -
------- ------- -------- -------
Liabilities assumed $ 6,981 $ - $ 6,981 $ -
======= ======= ======== =======
</TABLE>
The accompanying notes to the unaudited consolidated financial
statements are an integral part of these consolidated statements.
6
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
ABC Rail Products Corporation (the "Company") is a leader in the
engineering, manufacturing and marketing of replacement products and
original equipment for the freight railroad and rail transit industries.
The Company's products include specialty trackwork, such as rail crossings
and switches; mechanical products, such as rail car, locomotive and idler
wheels, mounted wheel sets and metal brake shoes; classification yard
products and automation systems; and railway signal system installation and
maintenance.
The accompanying unaudited consolidated financial statements include, in
the opinion of management, all adjustments (consisting of only normal
recurring adjustments) necessary for a fair statement of the results of
operations and financial condition of the Company for and as of the interim
dates. Results for the interim period are not necessarily indicative of
results for the entire year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted as permitted by the Securities
and Exchange Commission. The Company believes that the disclosures
contained herein are adequate to make the information presented not
misleading. These unaudited consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
included in the Company's 1996 Annual Report to Stockholders.
2. Business Combinations
Effective May 31, 1996, the Company acquired Deco Industries Inc. of
Milwaukee, Wisconsin, and selected assets of Deco Automation located in
Norristown, Pennsylvania, for a combination of common stock and cash. The
acquired companies manufacture railroad classification yard retarder
control and automation systems. Under the purchase agreement, the prior
owners will be issued additional shares of common stock if certain earnings
goals are met over the next five years. For the three and six months ended
January 31, 1997, the assumed issuance of such contingent shares (along
with the assumed earnings level) would not reduce earnings per share.
Effective May 31, 1996, the Company purchased its partner's interest in the
ABC Rail Cogifer Industrial joint venture partnership. The initial purpose
of ABC Rail-Cogifer Industrial was to manufacture and sell trackwork from
the Cincinnati, Ohio, facility purchased by the partnership from Cogifer in
January 1994. The plant's new role within the Company has been redirected
towards both new and remanufactured track products.
Effective June 21, 1996, the Company began operating a wheel mounting,
wheel assembly and trackwork service business in Tacoma, Washington. The
Company is currently leasing the operating facility from the previous
operators with whom the Company also entered into certain employment,
consulting and non-compete agreements.
7
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Effective December 17, 1996, the Company acquired American Systems
Technologies, Inc. ("AST") of Verona, Wisconsin for common stock. AST
provides railway signal system installation and maintenance to the short
line, regional, commuter and transit railroads. As part of the purchase
agreement, the prior owners will be issued additional shares of common
stock if certain earnings goals are met over the next three years. For the
three and six months ended January 31, 1997, the assumed issuance of such
contingent shares (along with assumed earnings level) would not reduce
earnings per share.
3. Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method for substantially all inventories.
Inventory costs include material, labor and manufacturing overhead.
Supplies and spare parts primarily consist of manufacturing supplies and
equipment replacement parts.
Inventories at January 31, 1997, and July 31, 1996, consisted of the
following (in thousands):
<TABLE>
<CAPTION>
January 31, July 31,
1997 1996
----------- --------
<S> <C> <C>
Raw materials $26,427 $22,886
Work in process 11,073 7,779
Finished goods 6,966 4,497
Supplies and spare parts 4,399 4,156
------- -------
$48,865 $39,318
======= =======
</TABLE>
4. Debt
On November 15, 1996, the Company filed a Registration Statement with the
Securities and Exchange Commission for the issuance of up to $100 million
of Subordinated Debt Securities and/or shares of its Common Stock. Shortly
after the end of the current quarter, the Company completed an offering
(the "Offering") of $50 million of 9 1/8% Senior Subordinated Notes (the
"Notes"). The Company used the $47.9 million of net proceeds of the
Offering to repay certain outstanding indebtedness under its primary and
other credit facilities. A $0.3 million after-tax loss will be recognized
in the third quarter reflecting the early retirement of certain of the
indebtedness under the old credit agreement.
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future senior
indebtedness of the Company and other liabilities of the Company's
subsidiaries. The Notes will mature in 2004, unless repurchased earlier at
the option of the Company after January 15, 1999 at 102% of face value
prior to January 14, 2000, or at 100% of face value thereafter. The notes
are subject to mandatory repurchase or redemption prior to maturity upon a
change of control (as defined). The Indenture under which the Notes were
issued subjects the Company to various financial covenants which among
other things, require the Company to maintain (all as defined) (i) a
minimum Consolidated Net Worth, (ii) a minimum Operating Coverage Ratio and
(iii) a maximum Funded Debt to Consolidated Capitalization Ratio and limits
the Company's ability to (i) incur additional indebtedness, (ii) complete
certain mergers, consolidations and sales of assets, and (iii) pay
dividends or other distributions.
8
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Prior to the Offering, the Company's primary credit facilities included a
five year credit agreement (the "Credit Agreement") and two term loans. The
Credit Agreement included a $15.0 million non-amortizing term loan, a $50.0
million (as amended) revolving credit line and a $17.8 million (as amended)
acquisition facility.
Simultaneous with the consummation of the Offering, the Company amended and
restated the Credit Agreement. Under the amended Credit Agreement (i) the
non-amortizing term loan and the acquisition facility that existed under
the Credit Agreement were paid in full and canceled, (ii) the revolving
credit line that existed under the Credit Agreement was increased to $90
million and (iii) the terms of certain financial covenants were modified.
The modified financial covenants under the amended Credit Agreement are
similar to those under the Notes Indenture. The Company is in compliance
with the new debt covenants.
Interest on all amounts borrowed under the Credit Agreement is payable at
the option of the Company at either the base rate (as defined) plus 0.5%,
or LIBOR (as defined) plus 2.0% and is payable monthly while the base rate
is in effect or every one to six months while the LIBOR rate is in effect.
As of January 31, 1997, the weighted average interest rate of outstanding
borrowings under the Credit Agreement was 8.9%. The Company has pledged as
collateral under the Credit Agreement substantially all of its property,
plant and equipment, eligible accounts receivable and inventories,
intellectual property and capital stock of its subsidiaries. As of January
31, 1997, availability under the amended Credit Agreement was $40.0
million.
The Company entered into a seven-year term loan agreement on July 20, 1995,
to finance up to $12.5 million of capital expenditures for the rail mill
center located in Chicago Heights, Illinois. Through January 31, 1997, $4.5
million had been drawn under this term loan. The term loan is secured by
the related fixed assets, bears interest at 7.1% as of January 31, 1997 and
contains financial covenants which requires the Company to maintain minimum
levels of net worth and a minimum fixed charge coverage ratio. A second,
similar term loan was repaid in full with a portion of the proceeds from
the Offering. The Company was in compliance with all of its covenants under
the term loan as of January 31, 1997.
5. Commitments and Contingencies
In connection with its formation and the purchase of certain assets and
liabilities from the Railroad Products Group of Abex Corporation ("Abex")
in 1987, the Company obtained a comprehensive environmental indemnity from
Abex. The indemnity covers environmental conditions, whether or not then
known, in existence at the time of purchase, without dollar or time limit.
Shortly after the purchase, the Company performed surveys to assess the
environmental conditions at the time of the purchase.
9
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
As a result of these studies, the Company has undertaken environmental
projects, including underground storage tank removal, corrective action and
other remedial action as necessary. Some of these actions are ongoing and
similar actions may be necessary in the future. When Abex refused to
compensate the Company for costs incurred, the Company filed suit against
Abex on November 18, 1991. In a separate lawsuit filed in October 1994, the
Company also asserts that Abex is required to indemnify the Company for the
reduction in value of one of the sold properties (a Pennsylvania
manufacturing facility formerly owned by the Company) caused by the
environmental contamination at that site. In October 1995, a judgment in
the 1991 lawsuit was finalized with the Company receiving a payment of $2.8
million from Abex. The Company recorded the receipt of this payment as a
reserve to address other potential matters related to ongoing Abex issues.
The judgment is exclusive of indemnification for any future environmental
claims. While the Company believes the costs of environmental projects
related to ongoing Abex issues may be properly recoverable under the
indemnity, the Company is responsible for such costs irrespective of
whether it receives payment under the indemnity.
6. China Joint Venture
In May 1996, the Company entered into a joint venture agreement with
China's Ministry of Railroads to establish the Datong ABC Castings Company
Ltd. The joint venture will manufacture wheels in China primarily for the
rapidly growing Chinese railway markets. The Company's contribution of its
40% share in the joint venture will consist of technical know-how,
expertise and cash. The Company's cash infusion of approximately $9.3
million is expected to be made by mid-1997 and is expected to be funded
from operations. Through January 31, 1997, $4.3 million ($2.7 million
during the first half of fiscal 1997) has been contributed to the joint
venture and additional amounts have been deferred in organizing the
venture.
10
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and results of
operations during the interim periods included in the accompanying unaudited
Consolidated Financial Statements.
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended January 31, 1997 Compared to Three Months Ended January 31,
1996
Net Sales. Net sales decreased 4.8% to $55.7 million from $58.5 million. The
decrease in sales is due primarily to a reduction in sales of wheels and idlers,
offset by a small increase in sales of specialty trackwork. The decline in
sales of wheels and idlers reflects the decision to accelerate process
improvements at the wheel foundry in Calera, Alabama. While these foundry
process improvements resulted in temporary production slowdowns at this plant,
when completed, the foundry is expected to provide the quality input needed to
capitalize on the significant improvements recently instituted in the plant's
machine shop. The smaller than anticipated increase in specialty trackwork
sales reflects the merger-induced slowdown of order releases from the Western
Class I railroads and the acceleration of the planned manufacturing process
changes at the Company's trackwork plants. These process upgrades require major
reconfiguring of shop floor layouts into cell manufacturing centers resulting in
disruptions to the normal manufacturing process flow. The normal seasonal
fluctuation (coupled with the new orders expected now that the Union Pacific-
Southern Pacific merger is complete) made the first half of fiscal 1997 an
opportune time to absorb a mild, short-term setback in sales in exchange for
long-term improved capacity.
Gross Profit and Cost of Sales. Gross profit increased 1.7% to $8.6 million
from $8.5 million. While margins were lower during the quarter related to the
sales reduction discussed above, overall margins were higher due to improved
operating efficiencies. Gross margin for the current quarter was 15.5% versus
14.5% for the prior year quarter.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.2 million. The small increase in expenses
between quarters does not include any unusual items.
Operating Income. Operating income was flat between quarters at $5.9 million.
The small increase in gross profit, was offset by the increase in selling,
general and administrative expenses ($0.2 million). In addition to the issues
previously discussed, the Company's sales and profits are typically lower during
the first half of the Company's fiscal year than during the second half of the
fiscal year. See "Seasonality."
Other. Interest expense increased 8.6%, or $0.1 million, due primarily to an
overall higher level of outstanding debt to support expanding operations, offset
by the continuing repayment of the acquisition facility of the Credit Agreement
and a reduction in interest rates on a portion of the borrowings under the
Credit Agreement.
11
<PAGE>
Six Months Ended January 31, 1997 Compared to Six Months Ended January 31, 1996
Net Sales. Net sales decreased 4.7% to $111.6 million from $117.1 million. The
decrease in sales is due primarily to a reduction in sales of specialty
trackwork, and wheels and idlers. The reduction in specialty trackwork sales is
attributable to the merger-induced slowdown of order releases from the Western
Class I railroads and the acceleration of the planned manufacturing process
changes at the Company's trackwork plants. These process upgrades require major
reconfiguring of shop floor layouts into cell manufacturing centers resulting in
disruptions to the normal manufacturing process flow. The normal seasonal
fluctuation (coupled with the new orders expected now that the Union Pacific-
Southern Pacific merger is complete) made the first half of fiscal 1997 an
opportune time to absorb a mild, short-term setback in sales in exchange for
improved capacity. The decline in sales of wheels and idlers also reflects the
decision to accelerate process improvements at the wheel foundry in Calera,
Alabama. While these foundry process improvements resulted in temporary
production slowdowns at this plant, when completed, the foundry will provide the
quality input needed to capitalize on the significant improvements recently
instituted in the plant's machine shop.
Gross Profit and Cost of Sales. Gross profit decreased 15.5% to $14.0 million
from $16.5 million. The $2.5 million decrease was primarily due to the sales
changes discussed above. In addition, the track and wheel plants were further
impacted by reduced output due to manufacturing improvements with virtually no
change in fixed costs during the first half of fiscal 1997. Accordingly, gross
margin declined from 14.1% to 12.5% for the comparable six month periods.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.4 million. The small increase in expenses
between quarters does not include any unusual items.
Operating Income. Operating income decreased 27.3% to $8.0 million from $11.1
million. The decrease resulted largely from the 15.5% ($2.5 million) decrease
in gross profit. In addition to the issues previously discussed, the Company's
sales and profits are typically lower during the first half of the Company's
fiscal year than during the second half of the fiscal year. See "Seasonality."
Other. Interest expense was $2.7 million for each reporting period. While the
overall level of outstanding debt was higher during the current reporting
period, total interest expense was mitigated due to the continuing repayment of
the acquisition facility of the Credit Agreement and a reduction in interest
rates on a portion of the borrowings under the Credit Agreement.
12
<PAGE>
SEASONALITY
- -----------
The peak season for installation of specialty trackwork extends from March
through October, when weather conditions are generally favorable for
installation. As a result, net sales of specialty trackwork have historically
been more concentrated in the period from January through June, which roughly
corresponds to the second half of the Company's fiscal year. In addition, a
number of the Company's facilities close for regularly scheduled maintenance in
the late summer and late December. This also tends to reduce operating results
during the first half of the Company's fiscal year. Transit industry practice
with respect to specialty trackwork generally involves the periodic shipment of
large quantities, which may be unevenly distributed throughout the year. The
Company does not expect any significant departure from the historical demand
patterns during the present fiscal year ending July 31, 1997.
The following graphs illustrate the historical results of the Company's seasonal
pattern of sales and income.
QUARTERLY NET SALES
($ in millions)
[GRAPH APPEARS HERE]
Graph showing the following data (Description of Graph for Edgar Filing):
Quarterly Net Sales
In 1993: Q1 $31.8 million, Q2 $33.2 million, Q3 $40.5 million and Q4 $43.2
million
In 1994: Q1 $37.2 million, Q2 $40.1 million, Q3 $52.2 million and Q4 $57.7
million
In 1995: Q1 $54.6 million, Q2 $56.3 million, Q3 $62.1 million and Q4 $70.2
million
In 1996: Q1 $58.6 million, Q2 $58.5 million, Q3 $60.1 million and Q4 $63.4
million
In 1997: Q1 $55.9 million, Q2 $55.7 million
13
<PAGE>
QUARTERLY INCOME / (LOSS)*
($ in millions)
* Before Cumulative Effect of Accounting Change and Extraordinary Items.
[GRAPH APPEARS HERE]
Graph showing the following data (Description of Graph for Edgar Filing):
Quarterly Income / (Loss)*
In 1993: Q1 $0.1 million, Q2 $0.5 million, Q3 $1.2 million and Q4 $1.8 million
In 1994: Q1 $0.8 million, Q2 $1.3 million, Q3 $2.4 million and Q4 $2.4 million
In 1995: Q1 $2.0 million, Q2 $2.1 million, Q3 $3.8 million and Q4 $3.8 million
In 1996: Q1 $2.2 million, Q2 $2.7 million, Q3 ($2.5) million and Q4 $4.4
million
In 1997: Q1 $0.5 million, Q2 $2.6 million
* Before cumulative effect of accounting change and extraordinary items.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash generated from operations, structured borrowings, and debt and equity
offerings has been the major source of funds for working capital, capital
expenditures and acquisitions. For the six months ended January 31, 1997 and
1996, net cash provided by operating activities totaled $7.3 million and $5.8
million, respectively. The increase in operating cash flow is due primarily to
the net decrease in working capital items and increased levels of depreciation
and amortization.
Capital expenditures during the first half of fiscal 1997 and 1996 were $13.0
million (including $7.4 million related to the new rail mill located in Chicago
Heights, IL) and $4.8 million, respectively.
14
<PAGE>
In May 1996, the Company entered into a joint venture agreement with China's
Ministry of Railroads to establish the Datong ABC Castings Company Ltd. The
joint venture will manufacture wheels in China primarily for the rapidly growing
Chinese railway markets. The Company's contribution of its 40% share in the
joint venture will consist of technical know-how, expertise and cash. The
Company's cash infusion of approximately $9.3 million is expected to be made by
mid-1997, and is expected to be funded from operations. Through January 31,
1997, $4.3 million ($2.7 million during the first half of fiscal 1997) has been
contributed to the joint venture and additional amounts have been deferred in
organizing the venture.
For the six months ended January 31, 1997 and 1996, net cash provided by (used
in) financing activities totaled $8.6 million and ($3.0) million, respectively.
The increase in financing cash flows is due primarily to (a) the net draw on the
Credit Agreement to support the cash needs for operating activities and the
increased use of cash for investing activities; (b) a draw on the acquisition
facility to finance the purchase of the Company's partner's interest in the ABC
Rail-Cogifer Industrial joint venture partnership (see Note 2 for additional
information); (c) a draw on the term loan to support the capital expenditures
for the rail mill (see following for additional comments); and (d) proceeds from
the exercise of stock options.
On November 15, 1996, the Company filed a Registration Statement with the
Securities and Exchange Commission for the issuance of up to $100 million of
Subordinated Debt Securities and/or shares of its Common Stock. Shortly after
the end of the current quarter, the Company completed an offering (the
"Offering") of $50 million of 9 1/8% Senior Subordinated Notes (the "Notes").
The Company used the $47.9 million of net proceeds of the Offering to repay
certain outstanding indebtedness under its primary and other credit facilities.
A $0.3 million after-tax loss will be recognized in the third quarter reflecting
the early retirement of certain of the indebtedness under the old credit
agreement.
The Notes are general unsecured obligations of the Company and are subordinated
in right of payment to all existing and future senior indebtedness of the
Company and other liabilities of the Company's subsidiaries. The Notes will
mature in 2004, unless repurchased earlier at the option of the Company after
January 15, 1999 at 102% of face value prior to January 14, 2000, or at 100% of
face value thereafter. The notes are subject to mandatory repurchase or
redemption prior to maturity upon a change of control (as defined). The
Indenture under which the Notes were issued subjects the Company to various
financial covenants which among other things, require the Company to maintain
(all as defined) (i) a minimum Consolidated Net Worth, (ii) a minimum Operating
Coverage Ratio and (iii) a maximum Funded Debt to Consolidated Capitalization
Ratio and limits the Company's ability to (i) incur additional indebtedness,
(ii) complete certain mergers, consolidations and sales of assets, and (iii) pay
dividends or other distributions.
Prior to the Offering, the Company's primary credit facilities included a five
year credit agreement (the "Credit Agreement") and two term loans. The Credit
Agreement included a $15.0 million non-amortizing term loan, a $50.0 million (as
amended) revolving credit line and a $17.8 million (as amended) acquisition
facility.
Simultaneous with the consummation of the Offering, the Company amended and
restated the Credit Agreement. Under the amended Credit Agreement (i) the non-
amortizing term loan and the acquisition facility that existed under the Credit
Agreement were paid in full and canceled, (ii) the revolving credit line that
existed under the Credit Agreement was increased to $90 million and (iii) the
terms of certain financial covenants were modified.
The modified financial covenants under the amended Credit Agreement are similar
to those under the Notes Indenture. The Company is in compliance with the new
debt covenants.
Interest on all amounts borrowed under the Credit Agreement is payable at the
option of the Company at either the base rate (as defined) plus 0.5%, or LIBOR
(as defined) plus 2.0% and is payable monthly while the base rate is in effect
or every one to six months while the LIBOR rate is in effect. As of January 31,
1997, the weighted average interest rate of outstanding borrowings under the
Credit Agreement was 8.9%. The Company has pledged as collateral under the
Credit Agreement substantially all of its property, plant and equipment,
eligible accounts receivable and inventories, intellectual property and capital
stock of its subsidiaries. As of January 31, 1997, availability under the
amended Credit Agreement was $40.0 million.
15
<PAGE>
The Company entered into a seven-year term loan agreement on July 20, 1995, to
finance up to $12.5 million of capital expenditures for the rail mill center
located in Chicago Heights, Illinois. Through January 31, 1997, $4.5 million
had been drawn under this term loan. The term loan is secured by the related
fixed assets, bears interest at 7.1% as of January 31, 1997 and contains
financial covenants which requires the Company to maintain minimum levels of net
worth and a minimum fixed charge coverage ratio. A second, similar term loan
was repaid in full with a portion of the proceeds from the Offering. The
Company was in compliance with all of its covenants under the term loan as of
January 31, 1997.
FORWARD-LOOKING STATEMENTS
- --------------------------
The foregoing outlook contains forward-looking statements that are based on
current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from current expectations due to a number
of factors. Some of these factors include general economic conditions;
competitive factors and pricing pressures; shifts in market demand, the
performance and needs of industries served by the Company's businesses; actual
future costs of operating expenses such as rail and scrap steel, self-insurance
claims and employee wages and benefits; actual costs of continuing investments
in technology; and the risks described from time to time in the Company's SEC
reports.
16
<PAGE>
Part II OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 2 - Changes in Securities
During the second quarter, the Company issued 555,556 shares of Common
Stock to the prior owners of American Systems Technologies, Inc. ("AST")
as consideration paid for the Company's acquisition of AST effective
December 17, 1996. In addition, pursuant to the purchase agreement, the
Company agreed to issue additional shares of Common Stock to the prior
owners if certain earnings goals are met over the next three years. The
Company relied upon the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, for such issuances.
Item 4 - Submission of Matters to a Vote of Security Holders
On November 15, 1996 the annual stockholders' meeting was held. The
following individuals were elected directors at the meeting:
<TABLE>
<CAPTION>
Director Votes For Votes Against
----------------------- --------- -------------
<S> <C> <C>
Donald W. Grinter 6,349,711 13,125
D. Chisholm MacDonald 6,349,711 13,125
Jean-Pierre M. Ergas 6,168,511 194,325
Donald R. Gant 6,349,811 13,025
Clarence E. Johnson 6,349,811 13,025
James E. Martin 6,349,811 13,025
George W. Peck IV 6,349,811 13,025
</TABLE>
In addition, one other matter was submitted for shareholder approval at
the meeting which was the ratification of the appointment of Arthur
Andersen LLP for the fiscal year ended July 31, 1997. The votes cast for,
votes cast against and abstentions were as follows:
<TABLE>
<CAPTION>
In Favor Against Abstain
-------- ------- -------
<S> <C> <C>
6,334,878 1,900 900
</TABLE>
Item 6 - Exhibits and Reports on Form 8-K
(A) Exhibits
10.1 Second Amended and Restated Loan and Security Agreement
dated as of January 31, 1997, among the Company and ABC
Deco Inc. as the Borrowers, the Financial Institutions
Parties thereto, as Lenders, and American National Bank
and Trust Company of Chicago, as Agent.
27.1 Financial Data Schedule.
17
<PAGE>
(B) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated January
17, 1997 to report under Item 5, Other Events, the filing of,
and to file, certain exhibits that relate to the Company's
Registration Statement on Form S-3 filed with the Securities
and Exchange Commission on November 15, 1996 (Registration No.
333-16241) (the "Registration Statement").
The Company filed a Current Report on Form 8-K dated January
31, 1997 to report under Item 5, Other Events, the filing of,
and to file, certain exhibits that relate to the Registration
Statement.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABC RAIL PRODUCTS CORPORATION
/s/ D. Chisholm MacDonald
-------------------------
D. Chisholm MacDonald
Senior Vice President and
Chief Financial Officer
(Duly authorized Officer and
Principal Financial and Accounting Officer)
Date: March 6, 1997
------------------------
19
<PAGE>
EXHIBIT 10.1
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Dated as of January 31, 1997
Among
ABC RAIL PRODUCTS CORPORATION
and
ABC DECO INC.,
as Borrowers,
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders,
and
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
as Agent
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. DEFINITIONS............................................................ 1
1.1 General Terms................................................... 1
1.2 Accounting Terms................................................ 18
1.3 Other Terms Defined in Illinois Uniform Commercial Code......... 19
1.4 Other Definitional Provisions; Construction..................... 19
2. CREDIT................................................................. 19
2.1 [INTENTIONALLY OMITTED.]........................................ 19
2.2 [INTENTIONALLY OMITTED.]........................................ 19
2.3 Revolving Loan Facility......................................... 19
2.4 Determination of Borrowing Base................................. 20
2.5 Borrowing Mechanics............................................. 21
2.6 Settlements Among Agent and the Lenders......................... 24
2.7 Mandatory Payments; Reduction of Commitments; Increase of Total
Revolving Commitments........................................... 25
2.8 Payments and Computations....................................... 27
2.9 Borrower's Loan Account......................................... 27
2.10 Statements...................................................... 28
2.11 Taxes........................................................... 28
2.12 Affected Lenders................................................ 30
2.13 Sharing of Payments............................................. 31
2.14 Defaulting Lenders.............................................. 32
2.15 Term of this Agreement.......................................... 33
2.16 Additional Costs, Etc. With Respect to LIBOR Rate Advances...... 34
2.17 Indemnification for Losses...................................... 35
2.18 Capital Adequacy................................................ 35
2.19 Certificate..................................................... 36
2.20 Letters of Credit............................................... 36
(A) Issuance of Letters of Credit............................... 36
(B) Terms of Letters of Credit.................................. 37
(C) Lenders' Participation...................................... 37
(D) Notice of Issuance.......................................... 37
(E) Payment of Amounts Drawn Under Letters of Credit............ 37
(F) Payment by Lenders.......................................... 38
(G) Obligations Absolute........................................ 39
2.21 Interest, Fees and Expenses..................................... 39
(A) Interest.................................................... 39
(B) Facility Fees............................................... 39
(C) [INTENTIONALLY OMITTED.].................................... 39
(D) Maximum Lawful Rate......................................... 39
(E) Early Termination Charge.................................... 40
(F) Reimbursement of Expenses................................... 40
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
(G) Letter of Credit Fees....................................... 40
(H) Additional Fees............................................. 41
(I) Authorization to Charge Loan Account........................ 41
(J) Indemnification in Certain Events........................... 41
(K) Audit Fees.................................................. 42
2.22 No Novation..................................................... 42
3. REPORTING AND ELIGIBILITY REQUIREMENTS................................. 42
3.1 Monthly Reports and Collateral Reports.......................... 42
(A) Monthly Reports............................................. 42
(B) Collateral Reports.......................................... 43
(C) Electronic Transmission of Reports.......................... 44
3.2 Eligible Accounts............................................... 45
3.3 Account Warranties.............................................. 46
3.4 Verification of Accounts........................................ 47
3.5 Account Covenants............................................... 47
3.6 Collection of Accounts and Payments............................. 47
3.7 Appointment of Agent as Borrower's Attorney-in-Fact............. 48
3.8 Instruments and Chattel Paper................................... 49
3.9 Notice to Account Debtors....................................... 49
3.10 Eligible Inventory.............................................. 49
3.11 Inventory Warranties............................................ 49
3.12 Inventory Records............................................... 50
3.13 Safekeeping of Inventory and Inventory Covenants................ 50
3.14 Equipment Warranties............................................ 50
3.15 Equipment Records............................................... 50
3.16 Safekeeping of Equipment........................................ 51
3.17 Locations....................................................... 51
3.18 Certain Rail Mill Provisions.................................... 51
4. CONDITIONS OF LOANS, ADVANCES AND LETTER OF CREDIT..................... 51
4.1 [INTENTIONALLY OMITTED.]........................................ 51
4.2 Conditions to Each Revolving Loan and Letter of Credit.......... 51
(A) Letters of Credit........................................... 52
(B) No Material Adverse Change.................................. 52
(C) No Default.................................................. 52
(D) Representations and Warranties True and Correct............. 52
(E) Other Requirements.......................................... 52
4.3 [INTENTIONALLY OMITTED.]........................................ 52
5. COLLATERAL............................................................. 52
5.1 Security Interest............................................... 52
5.2 Preservation of Collateral and Perfection of Security Interests
Therein......................................................... 53
5.3 Real Property and Leaseholds.................................... 53
5.4 Loss of Value of Collateral..................................... 55
5.5 Setoff.......................................................... 55
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
5.6 Cash Collateral................................................. 55
5.7 Carry-Through of Liens in Favor of Agent........................ 56
6. WARRANTIES............................................................. 56
6.1 Corporate Existence; Capitalization............................. 56
6.2 Corporate Authority............................................. 57
6.3 Binding Effect.................................................. 57
6.4 Financial Data.................................................. 57
6.5 Collateral...................................................... 58
6.6 Solvency........................................................ 58
6.7 Chief Place of Business......................................... 58
6.8 Other Corporate Names........................................... 59
6.9 Tax Liabilities................................................. 59
6.10 Loans........................................................... 59
6.11 Use of Proceeds................................................. 59
6.12 Subsidiaries.................................................... 60
6.13 Litigation and Proceedings...................................... 60
6.14 Other Agreements................................................ 60
6.15 Employee Controversies.......................................... 60
6.16 Compliance with Laws and Regulations; Environmental Matters..... 60
(A) General Compliance.......................................... 60
(B) Health and Safety Compliance................................ 60
6.17 Patents, Trademarks and Licenses................................ 61
6.18 ERISA........................................................... 61
6.19 Financial Condition............................................. 62
6.20 Survival of Warranties.......................................... 62
7. AFFIRMATIVE COVENANTS.................................................. 62
7.1 Financial Statements............................................ 62
(A) Monthly..................................................... 62
(B) Annual...................................................... 63
(C) Budget...................................................... 64
(D) Letters from Accountants and Consultants.................... 64
(E) Default Notices............................................. 64
(F) List of Account Debtors..................................... 64
(G) Reports and Other Information............................... 64
(H) Joint Ventures; Excluded Subsidiaries....................... 64
(I) Other Information........................................... 65
7.2 Inspection...................................................... 66
7.3 Conduct of Business............................................. 66
7.4 Claims and Taxes................................................ 67
7.5 Agent's Closing Costs and Expenses.............................. 67
7.6 Borrower's Liability Insurance.................................. 67
7.7 Borrower's Property Insurance and Business Interruption
Insurance....................................................... 68
7.8 ERISA Reporting................................................. 69
7.9 Notice of Suit or Adverse Change in Business.................... 70
7.10 Supervening Illegality.......................................... 71
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
7.11 Environmental Safety and Health Laws............................ 71
7.12 Landlord Consents and Waivers................................... 71
8. NEGATIVE COVENANTS..................................................... 72
8.1 Encumbrances.................................................... 72
8.2 Indebtedness.................................................... 72
8.3 Consolidations, Mergers or Acquisitions......................... 73
8.4 Investments or Loans............................................ 74
8.5 Guarantees...................................................... 75
8.6 Disposal of Property............................................ 75
8.7 [INTENTIONALLY OMITTED.]........................................ 76
8.8 Dividends and Stock Redemptions................................. 76
8.9 Issuance of Stock............................................... 76
8.10 Amendment of Articles of Incorporation or By-Laws; Corporate
Name; Places of Business........................................ 76
8.11 Transactions with Subsidiaries and Affiliates................... 77
8.12 ERISA........................................................... 77
8.13 Financial Covenants............................................. 78
(A) Interest Coverage Ratio..................................... 78
(B) Minimum Consolidated Net Worth.............................. 78
(C) Capital Investment Limitations; Lease Limitations........... 78
8.14 Environmental................................................... 80
8.15 Fiscal Year..................................................... 80
8.16 Subsidiaries.................................................... 80
8.17 Subordinated Debt............................................... 80
9. DEFAULT, RIGHTS AND REMEDIES OF LENDERS AND AGENT...................... 80
9.1 Defaults........................................................ 80
9.2 Rights and Remedies Generally................................... 84
9.3 Entry Upon Premises and Access to Information................... 85
9.4 Sale or Other Disposition of Collateral by Agent................ 85
9.5 Waiver of Demand................................................ 85
9.6 Waiver of Notice................................................ 85
10. AGENT.................................................................. 86
10.1 Appointment of Agent............................................ 86
10.2 Nature of Duties of Agent....................................... 86
10.3 Lack of Reliance on Agent....................................... 86
10.4 Certain Rights of Agent......................................... 87
10.5 Reliance by Agent............................................... 87
10.6 Indemnification of Agent........................................ 87
10.7 Agent in its Individual Capacity................................ 88
10.8 Holders of Revolving Notes...................................... 88
10.9 Successor Agent................................................. 88
10.10 Collateral Matters.............................................. 89
10.11 Actions with Respect to Defaults................................ 90
10.12 Delivery of Information......................................... 90
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C> <C>
10.13 Loans by Lenders................................................ 90
10.14 Allocation of Payments.......................................... 91
11. MISCELLANEOUS.......................................................... 91
11.1 Waiver, Amendments.............................................. 91
11.2 Costs and Attorneys' Fees....................................... 92
11.3 Expenditures.................................................... 92
11.4 Custody and Preservation of Collateral.......................... 92
11.5 Reliance by Lenders............................................. 93
11.6 Parties; Assignability.......................................... 93
11.7 CHOICE OF LAW................................................... 95
11.8 CONSENT TO JURISDICTION......................................... 96
(A) EXCLUSIVE JURISDICTION...................................... 96
(B) OTHER JURISDICTIONS......................................... 96
11.9 SERVICE OF PROCESS.............................................. 96
11.10 WAIVER OF JURY TRIAL AND BOND................................... 97
(A) WAIVER OF JURY TRIAL........................................ 97
(B) WAIVER OF BOND.............................................. 97
11.11 ADVICE OF COUNSEL............................................... 97
11.12 SEVERABILITY.................................................... 97
11.13 Application of Payments......................................... 98
11.14 Marshalling; Payments Set Aside................................. 98
11.15 Section and Subsection Titles................................... 98
11.16 Continuing Effect............................................... 98
11.17 Notices......................................................... 98
11.18 Equitable Relief................................................ 99
11.19 Indemnification................................................. 99
11.20 Nonliability of Agent and Lenders............................... 100
11.21 Independent Nature of Lenders' Rights........................... 101
11.22 Effectiveness................................................... 101
11.23 Counterparts.................................................... 101
</TABLE>
v
<PAGE>
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Second Amended and Restated Loan and Security Agreement (this
"Agreement"), entered into as of the 31st day of January, 1997, by and among ABC
RAIL PRODUCTS CORPORATION, a Delaware corporation with its principal place of
business and chief executive office at 200 South Michigan Avenue, Chicago,
Illinois 60604 ("Rail"), ABC DECO INC., a Wisconsin corporation with its
principal place of business and chief executive office at 532 East Capital
Drive, Milwaukee, Wisconsin 53212 ("Deco"), the financial institutions
identified on Schedule 1 hereto (together with each of their successors and
assigns, referred to individually as a "Lender" and collectively as the
"Lenders"), and AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national
banking association with its chief executive office in Chicago, Illinois acting
as agent for the Lenders.
W I T N E S S E T H:
WHEREAS, the Lenders, the Borrowers and Agent are parties to that
certain Amended and Restated Loan and Security Agreement, dated as of August 7,
1996 (as heretofore amended, the "Original Agreement"); and
WHEREAS, the Lenders, the Borrowers and Agent desire to amend and
restate the Original Agreement as herein provided.
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or extensions of credit heretofore, now or hereafter
made to or for the benefit of the Borrowers by any Lender or Agent, the parties
hereto hereby agree that the Original Agreement is hereby amended and restated
in its entirety to read as follows:
1. DEFINITIONS.
1.1 General Terms. When used herein, the following terms shall have
the following meanings:
"ABC China Guaranty" shall mean that certain Guaranty Agreement dated
as of June 28, 1996 made by ABC Rail Products China in favor of Agent (as
amended, supplemented or otherwise modified from time to time).
"ABC China Joint Venture" shall mean that certain joint venture of ABC
Rail Products China and Datong Locomotive Works created by the ABC China
Joint Venture Agreement.
"ABC China Joint Venture Agreement" shall mean that certain Joint
Venture Contract dated March 27, 1996 between ABC Rail Products China and
Datong Locomotive Works.
"ABC Rail Products China" shall mean ABC Rail Products China
Investment Corporation, a Delaware corporation.
<PAGE>
"Acceptance Date" shall have the meaning given such term set forth in
Subsection 11.6(C).
"Account Debtor" shall mean the party who is obligated on or under an
Account.
"Accounting Systems Letters" shall have the meaning given such term
set forth in Subsection 7.1(D)
"Accounts" shall mean, collectively, all present and future rights of
any Borrower, and with respect to each Borrower all present and future
rights of such Borrower, to payment for goods sold or leased or for
services rendered, which are not evidenced by instruments or chattel paper,
and whether or not they have been earned by performance.
"Accounts Trial Balance" shall have the meaning given such term set
forth in Subsection 3.1(A).
"Advance" shall mean a borrowing hereunder consisting of the aggregate
amount of all or a portion of the several Revolving Loans made by the
Lenders to a Borrower of the same type and, in the case of LIBOR Rate
Advances, for the same Interest Period.
"Affiliate" shall mean any Person (a) that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is
under common control with a Borrower, (b) that directly or beneficially
owns or holds 5% or more of any class of the voting stock of a Borrower, or
(c) 5% or more of the voting stock (or in the case of a Person which is not
a corporation, 5% or more of the equity interest) of which is owned
directly or beneficially or held by a Borrower. Notwithstanding the
foregoing, neither any Lender nor any parent or subsidiary of any Lender
shall be deemed to be an Affiliate of any Borrower.
"Agent" shall mean American National Bank and Trust Company of Chicago
in its capacity as agent for the Lenders and the Issuing Bank hereunder,
and not in its individual capacity as a Lender or the Issuing Bank, and any
successor agent appointed pursuant to Subsection 10.9.
"Agreement" shall have the meaning given such term set forth in the
preamble hereto.
"ANB" shall mean American National Bank and Trust Company of Chicago,
in its individual capacity.
"Applicable BR Margin" shall mean one-half percent (0.5%).
"Applicable LIBOR Margin" shall mean two percent (2.0%).
2
<PAGE>
"Asset Acquisition" shall have the meaning set forth for such term in
Subsection 8.3.
"Assignment and Assumption Agreement" shall mean an assignment and
assumption agreement entered into by an assigning Lender and an assignee
Lender, and accepted by Agent, in accordance with Subsection 11.6
substantially in the form of Exhibit G.
"Auditors" shall have the meaning given such term set forth in
Subsection 7.1.
"Authorized Officer" shall mean, with respect to any Borrower, at any
time, an individual whose signature has been certified to Agent on behalf
of such Borrower pursuant to a Signature Authorization Certificate actually
received by Agent at such time and whose authority has not been revoked
prior to such time in the manner prescribed in such Signature Authorization
Certificate.
"Availability" means, with respect to any Borrower, at any time, the
amount of Revolving Loans available to such Borrower to borrow at such time
after giving effect to all conditions applicable thereto (including the
amount of the Current Asset Base of such Borrower and the amount of any
outstanding Letters of Credit and the maximum permissible amount of
Revolving Loans and Letters of Credit hereunder) as shown on the records of
Agent.
"Bankruptcy Code" shall have the meaning given such term set forth in
Subsection 6.6.
"Base Rate" shall mean the per annum rate of interest announced or
published from time to time by ANB at its principal place of business in
Chicago, Illinois as its base or equivalent rate of interest, which rate is
not necessarily the lowest rate of interest charged by ANB with respect to
commercial loans. Any change in the Base Rate shall be effective as of the
effective date stated in the announcement by ANB of such change.
"Base Rate Advance" shall mean an Advance bearing interest calculated
by reference to the Base Rate.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which any
Borrower or any of its Subsidiaries or an ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Blocked Accounts" shall have the meaning given such term set forth in
Subsection 3.6.
"Borrower" shall mean each of Rail and Deco, individually, and
"Borrowers" shall mean Rail and Deco, collectively.
3
<PAGE>
"Brake Shoe JV" shall mean that certain joint venture of Rail and
Anchor Brake Shoe Company (a) created by that certain Joint Venture
Agreement dated as of July 31, 1995 among Rail, Anchor Brake Shoe Company
and Anchor Brake Shoe, L.L.C. and (b) evidenced by Anchor Brake Shoe,
L.L.C.
"Business Day" shall mean a day, other than a Saturday or Sunday, on
which banks in Chicago, Illinois are open for the transaction of banking
business and, in the case of borrowing, continuation, payment or interest
rate selection of a LIBOR Rate Advance, on which dealings in Dollars are
carried on in the London interbank market.
"CAPEX Reserve" shall mean, at any time, the sum determined by taking
50% of the amount, if any, by which (a) the product of $4,000,000 and the
number of Fiscal Years completed at such time since the Fiscal Year ending
July 31, 1995, exceeds (b) the aggregate Unfunded Capital Expenditures for
all Fiscal Years completed at such time since the Fiscal Year ending July
31, 1995.
"Capital Expenditures" shall mean, with respect to any Person,
expenditures of such Person for fixed or capital assets, including, without
limitation, the incurrence of Capitalized Lease Obligations, all as
determined in accordance with GAAP.
"Capitalized Lease" shall mean, at any time, any lease which, in
accordance with GAAP, is required to be capitalized on the consolidated
balance sheet of Rail and its Subsidiaries at such time, and "Capitalized
Lease Obligations" of Rail and its Subsidiaries at any time shall mean the
aggregate amount which, in accordance with GAAP, is required to be reported
as a liability on the consolidated balance sheet of Rail and its
Subsidiaries at such time as lessee under Capitalized Leases.
"Change in Control" means (a) the acquisition (in any one or more
transactions) by any Person, or two or more Persons acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934) of 30%
or more of the outstanding shares of voting stock of Rail; (b) during any
period of 25 consecutive calendar months, commencing on the date of this
Agreement, the ceasing of those individuals (the "Continuing Directors")
who (i) were directors of Rail on the first day of each such period or (ii)
subsequently became directors of Rail and whose initial election or initial
nomination for election subsequent to that date was approved by a majority
of the Continuing Directors then on the board of directors of Rail, to
constitute a majority of the board of directors of Rail; or (c) the
occurrence of any
"Change of Control" as such term is defined in the Subordinated Debt
Indenture as in effect on the date hereof or the occurrence of any "Change
of Control" as such term may hereafter be defined therein.
"Closing Date" shall mean the date of this Agreement as set forth in
the first paragraph hereof.
"Code" shall mean the Uniform Commercial Code of the State of Illinois
as in effect on the date hereof.
4
<PAGE>
"Collateral" shall mean, collectively, all property and interests in
property now owned or hereafter acquired by any or all Borrowers in or upon
which a Lien is granted to Agent or any one or more of the Lenders by any
or all Borrowers whether under this Agreement, the other Financing
Agreements, or under any other documents, instruments or writings executed
by any or all Borrowers and delivered to Agent or any one or more of
Lenders it being understood that the Excluded Property shall not be deemed
to be Collateral unless and until so provided pursuant to Subsection 5.1).
"Collateral Assignment" shall mean that certain Intellectual Property
Pledge Agreement dated as of March 31, 1995 between Rail and Agent, as the
same may be amended, modified or supplemented from time to time.
"Collateral Documents" shall mean all contracts, instruments and other
documents now or hereafter executed and delivered in connection with this
Agreement, pursuant to which Liens are granted to Agent or any one or more
of the Lenders in the Collateral for the benefit of Agent and/or the
Lenders and/or the Issuing Bank.
"Collateral Report" shall have the meaning given such term set forth
in Subsection 3.1(B).
"Collecting Banks" shall have the meaning given such term set forth in
Subsection 3.6.
"Commitment Reduction Fee" shall have the meaning given such term set
forth in Subsection 2.7(C).
"Contingent Obligation" shall mean any contingent obligation of any
kind or nature (including, without limitation, obligations relating to
unasserted or threatened claims) and any liability or indebtedness that
would not appear on a balance sheet prepared in accordance with GAAP.
"Covered Taxes" shall have the meaning given such term set forth in
Subsection 2.11(A).
"Current Asset Base" shall have the meaning given such term set forth
in Subsection 2.4.
"Datong ABC Castings" shall mean Datong ABC Castings Company Limited,
a Sino-American joint venture limited liability company formed and
established pursuant to the ABC China Joint Venture Agreement.
"Datong Locomotive Works" shall mean Datong Locomotive Works, an
enterprise duly organized under the laws of the People's Republic of China.
"Deco" shall have the meaning given such term set forth in the
preamble hereto.
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"Default" shall mean the occurrence or existence of any one or more of
the events described in Subsection 9.1 hereof.
"Defaulting Lender" shall have the meaning given such term set forth
in Subsection 2.14(A).
"Dollars" and the sign "$" shall mean freely transferable lawful money
of the United States.
"EBITDA" shall have the meaning given such term set forth in
Subsection 8.13.
"Eligible Accounts" shall have the meaning given such term set forth
in Subsection 3.2.
"Eligible Inventory" shall have the meaning given such term set forth
in Subsection 3.10.
"Environmental Lien" shall mean a Lien in favor of any governmental
entity for (a) any liability under federal or state environmental laws or
regulations or (b) damages arising from, or costs incurred by such
governmental entity in response to, a release or threatened release of a
hazardous or toxic waste, substance or constituent, or other substance into
the environment.
"Equipment" shall mean, collectively, all of the equipment and
fixtures (as such terms are defined in the Code) of any Borrower, and, with
respect to each Borrower, all of such Borrower's equipment and fixtures (as
such terms are defined in the Code), together with any and all accessions,
parts and appurtenances thereto, whether presently owned or hereafter
acquired by such Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" shall mean, with respect to any Person, any (i)
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Internal Revenue Code) as such
Person; (ii) partnership, trade or business under common control (within
the meaning of Section 414(c) of the Internal Revenue Code) with such
Person; and (iii) solely for purposes of liability under Section 412(c)
(11) of the Internal Revenue Code, for the lien created under Section
412(n) of the Internal Revenue Code or for a tax imposed for failure to
meet minimum funding standards under Section 4971 of the Internal Revenue
Code, member of the same affiliated service group (within the meaning of
Section 414(m) of the Internal Revenue Code) as such Person, any
corporation described in clause (i) above or any partnership, trade or
business described in clause (ii) above.
"Event of Default" shall mean an event which through the passage of
time or the giving of notice or both would mature into a Default.
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"Excluded Capital Expenditures shall have the meaning given such term
set forth in Subsection 8.13.
"Excluded Property" shall mean that Equipment and other personal and
real property which is described on Schedule 5.1 hereto and shall include
all property described in Item 1 of Schedule 8.1.
"Excluded Subsidiary" shall have the meaning set forth for such term
in Subsection 8.3(A).
"Expenses" shall mean all present and future expenses incurred by or
on behalf of Agent in connection with this Agreement, any other Financing
Agreement or otherwise, whether incurred heretofore or hereafter, which
expenses shall include, without being limited to, the cost of record
searches, the reasonable fees and expenses of attorneys (including the
allocated cost of internal counsel) and paralegals, all costs and out-of-
pocket expenses incurred by Agent in opening bank accounts, depositing
checks, receiving and transferring funds, and any charges imposed on Agent
due to insufficient funds of deposited checks and Agent's standard fee
relating thereto, collateral examination fees and expenses, reasonable fees
and out-of-pocket expenses of accountants, appraisers or other consultants,
experts or advisors employed or retained by Agent, fees and taxes relative
to the filing or recording of financing statements, mortgages and other
Financing Agreements, costs of preparing financing statements, mortgages
and other Financing Agreements, all expenses, costs and fees set forth in
Section 2 of this Agreement, all other fees and expenses required to be
paid pursuant to the Fee Letter and all fees and out-of-pocket expenses
incurred in connection with releasing Collateral and the amendment or
termination of any of the Financing Agreements.
"Extension Letter" shall have the meaning given such term set forth
in Subsection 2.15(B).
"Facility Fee" shall have the meaning given such term set forth in
Subsection 2.21(B).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate per annum equal, for each day during such period, to the
weighted average of the rates on overnight Federal Funds transactions with
members of the Federal Reserve System arranged by Federal Funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by
Agent from three Federal Funds brokers of recognized standing selected by
it.
"Fee Letter" shall mean that certain letter agreement captioned "Fee
Letter," dated as of the date hereof, between Agent and Rail.
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<PAGE>
"Fees" shall mean, collectively, the Facility Fees, the L/C Fee,
Issuing Bank Fees, the Termination Charge, and the other fees provided for
herein or in the Fee Letter.
"Final Termination Date" shall mean the earlier of (a) March 31, 2005,
and (b) the date that is ninety-one (91) days prior to the stated maturity
of the Subordinated Notes.
"Financials" shall have the meaning set forth in Subsection 6.4
hereof.
"Financing Agreements" shall mean, collectively, all agreements,
instruments and documents, including, without limitation, this Agreement
and any security agreements, loan agreements, notes, letter of credit
applications, guarantees, mortgages, deeds of trust, leasehold mortgages,
leasehold deeds of trust, subordination agreements, pledges, powers of
attorney, consents, assignments, intercreditor agreements, mortgagee
waivers, reimbursement agreements, contracts, notices, leases, financing
statements and all other written matter whether heretofore, now or
hereafter executed by or on behalf of any Borrower or any guarantor of any
of the Liabilities and delivered to any one or more of Agent, the Issuing
Bank and the Lenders, together with all agreements, documents and
instruments referred to therein or contemplated thereby, and further
including without limitation the Collateral Assignment, the Mortgages and
any other Collateral Documents.
"FIRREA" shall mean the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, as amended from time to time.
"Fiscal Month" shall mean each fiscal month of a Fiscal Year.
"Fiscal Quarter" shall mean a quarter (consisting of three Fiscal
Months of a Fiscal Year ending on or about the last day of October,
January, April or July) of each Fiscal Year.
"Fiscal Year" shall mean the fiscal year of the Borrowers, which
fiscal year shall begin on August 1 of each year and shall end on July 31
of the following year.
"Fixed Overhead Inventory" shall mean that portion of Borrower's
"inventory" account recorded as "fixed overhead inventory" in Borrower's
books of account in accordance with GAAP.
"Funded Debt" shall mean indebtedness for borrowed money, Capitalized
Lease Obligations, and the deferred purchase price of goods and services,
all as determined for Rail and its Subsidiaries (other than Excluded
Subsidiaries for all purposes of this Agreement except Subsection 8.13(D),
but including Excluded Subsidiaries for purposes of Subsection 8.13(D)) on
a consolidated basis in accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States from time to time, applied in a manner
consistent with that used in the preparation of the Financials provided,
that (subject to the provisions of Subsection 1.2
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<PAGE>
hereof) for purposes of determining compliance with the financial covenants
set forth in Subsection 8.13, "GAAP" shall mean such accounting principles
as in effect on the date of this Agreement, together with any such other
accounting principles which take effect after the date of this Agreement to
the extent agreed to in writing by Borrowers, Agent and the Required
Lenders.
"General Intangibles" shall mean, collectively, all choses in action,
causes of action and all other intangible personal property of any Borrower
of every kind and nature (other than Accounts) now owned or hereafter
acquired by any Borrower, and with respect to each Borrower, all choses in
action, causes of action and all other intangible personal property of such
Borrower of every kind and nature (other than Accounts) now owned or
hereafter acquired by such Borrower, including in each case, without
limitation, corporate or other business records, inventions, designs,
patents, patent applications, service marks, trademarks, trademark
applications, trade names, trade styles, trade secrets, goodwill,
registrations, computer software, operational manuals, product formulas,
blueprints, drawings, copyrights, copyright applications, licenses,
franchises, customer lists, tax refunds, tax refund claims, rights and
claims against carriers and shippers, rights to indemnification and the
like, wherever located, proceeds of insurance covering the lives of key
employees on which such Borrower is beneficiary, and any letter of credit,
guaranty, security interest, lien rights or other security held by or
granted to such Borrower to secure payment by an Account Debtor.
"Good Faith" shall have the meaning set forth for that term in Section
1-201(19) of the Code.
"Goodwill" shall mean goodwill, patents, trademarks, trade names,
copyright, franchises and deferred charges (including, without limitation,
unamortized debt discount and expense, organization costs and deferred
research and development expenses) and such other assets as are properly
classified as "intangible assets" in accordance with GAAP.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Guaranty Agreement" shall mean each guaranty and similar arrangement
of any Liabilities including, without limitation, the ABC China Guaranty.
"Indemnified Matters" shall have the meaning given such term set forth
in Subsection 11.19.
"Indemnitees" shall have the meaning given such term set forth in
Subsection 11.19.
"Initial Monthly Report" shall have the meaning given such term set
forth in Subsection 3.1(A).
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<PAGE>
"Interest Coverage Ratio" shall have the meaning given such term set
forth in Subsection 8.13.
"Interest Expense" shall have the meaning given such term set forth in
Subsection 8.13.
"Interest Period" shall mean with respect to any LIBOR Rate Advance, a
period of one, two, three or six months commencing on a Business Day
selected by a Borrower pursuant to Subsection 2.5 of this Agreement. Each
such Interest Period shall end on (but exclude) the date which numerically
corresponds to such date one, two, three or six months thereafter,
provided, however, that if there is no such numerically corresponding day
in such next, second, third or sixth succeeding month, such Interest Period
shall end on the last Business Day of such next, second, third or sixth
succeeding month. If any Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end
on the immediately preceding Business Day.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and any successor statute.
"Interim Revolving Loan Period" shall have the meaning given such
term set forth in Subsection 2.5(B).
"Interim Revolving Loans" shall have the meaning given such term set
forth in Subsection 2.5(B).
"Inventory" shall mean, collectively, any and all goods, including,
without limitation, goods in transit, wheresoever located, whether now
owned or hereafter acquired by any Borrower, and with respect to each
Borrower, any and all goods, including, without limitation, goods in
transit, wheresoever located, whether now owned or hereafter acquired by
such Borrower, which are held for sale or lease, furnished under any
contract of service or held as raw materials, work in process or supplies,
and all materials used or consumed in such Borrower's business, and shall
include such property the sale or other disposition of which has given rise
to Accounts and which has been returned to or repossessed or stopped in
transit by such Borrower.
"Inventory Sublimit" shall mean, with respect to Rail, the "Rail
Inventory Sublimit" (as defined in Subsection 2.4 hereof) and, with respect
to Deco, the "Deco Inventory Sublimit" (as defined in Subsection 2.4
hereof).
"IRS" shall have the meaning given such term set forth in Subsection
7.8(i).
"Issuing Bank" shall mean ANB and any other Lender that may be
designated by Agent from time to time as an Issuing Bank.
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<PAGE>
"Issuing Bank Fees" shall have the meaning given such term set forth
in Subsection 2.21(G)(ii).
"Joint Ventures" shall mean, collectively, (a) ABC Rail-Cogifer
Technologies, a general partnership, (b) the Brake Shoe JV, and (c) the ABC
China Joint Venture.
"L/C Fee" shall have the meaning given such term set forth in
Subsection 2.21(G)(i).
"Lender" shall have the meaning given that term in the preamble hereto
and, in the case of any Lender, shall include such Lender's successors and
permitted assigns.
"Lending Affiliate" shall mean, as to any Lender, (a) each office and
branch of such Lender, and (b) each entity which, directly or indirectly,
is controlled by or under common control with such Lender or which controls
such Lender and each office and branch thereof.
"Letter of Credit Obligations" shall mean, at any time, the sum of (i)
the aggregate undrawn face amount of all Letters of Credit outstanding at
such time, plus (ii) the aggregate amount of all drawings under Letters of
Credit for which the Issuing Bank has not at such time been reimbursed
(either by a Borrower, or by a Revolving Loan made by Agent or the
Lenders), plus (iii) the aggregate amount of all payments made by each
Lender to the Issuing Bank with respect to such Lender's participation in
Letters of Credit as provided in Subsection 2.20(C) hereof for which a
Borrower has not at such time reimbursed the Lenders, whether by way of the
Revolving Loans or otherwise.
"Letter of Credit Request" shall have the meaning given such term set
forth in Subsection 2.20(D).
"Letters of Credit" shall mean all letters of credit issued for the
account of a Borrower pursuant to Subsection 2.20 hereof and all
amendments, renewals, extensions or replacements thereof.
"Liabilities" shall mean, collectively, all of the Borrowers'
liabilities, obligations and indebtedness to any one or more of Agent,
Lenders and the Issuing Bank, and, with respect to each Borrower, all of
such Borrower's liabilities, obligations and indebtedness to any one or
more of Agent, Lenders and the Issuing Bank, in each case, of any and every
kind and nature, whether heretofore, now or hereafter owing, arising, due
or payable and howsoever evidenced, created, incurred, acquired or owing,
whether primary, secondary, direct, contingent, fixed or otherwise
(including obligations of performance) and whether arising or existing
under written agreement, oral agreement or operation of law, including,
without limitation, all of each Borrower's contingent reimbursement
obligations with respect to Letters of Credit, all other Letter of Credit
Obligations and all of each Borrower's other indebtedness and obligations
to any one or more of Agent, any Lender and the Issuing Bank under this
Agreement and the other Financing Agreements.
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<PAGE>
"LIBOR Base Rate" shall mean, with respect to a LIBOR Rate Advance for
the relevant Interest Period, the rate determined by Agent to be the rate
at which deposits in Dollars are offered by The First National Bank of
Chicago (or, if no such deposits are so offered by such bank, then by such
other national bank as Agent may reasonably select) to prime banks in the
London interbank market at approximately 11:00 a.m. London time two (2)
Business Days prior to the first day of such Interest Period, in the
approximate amount of the relevant LIBOR Rate Advance and having a maturity
approximately equal to such Interest Period.
"LIBOR Rate Advance" shall mean an Advance bearing interest calculated
by reference to the LIBOR Rate.
"LIBOR Rate" shall mean the annual rate of interest, rounded upward to
the nearest 1/16th of 1% determined by Agent with respect to an Interest
Period, in accordance with the following formula:
LIBOR Rate = LIBOR Base Rate
------------------
(1 - Reserve Rate)
"Lien(s)" shall mean any lien, claim, charge, pledge, security
interest, deed of trust, mortgage, other encumbrance or other arrangement
having the practical effect of the foregoing or other preferential
arrangement of any other kind and shall include the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement.
"Loan Account" shall have the meaning given such term set forth in
Subsection 2.9.
"Loans" shall mean, collectively, the Revolving Loans and "Loan" shall
mean any Revolving Loan.
"Lock Box Accounts" shall have the meaning given such term set forth
in Subsection 3.6.
"Material Adverse Effect" shall mean a material adverse effect on (i)
Rail's business, operations, condition (financial or otherwise), properties
or prospects, (ii) Rail's ability to pay any Liabilities or otherwise
perform its other obligations under this Agreement and the other Financing
Agreements or (iii) the priority of Agent's security interest in, or the
value to Agent of, any material portion of the Collateral.
"Maximum Facility Amount" shall mean $90,000,000.
"Minimum ANW" shall have the meaning given such term set forth in
Subsection 8.13(B).
"Minimum Pro Forma Ratio" shall have the meaning given such term set
forth in Subsection 4.3(B).
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<PAGE>
"Monthly Report" shall have the meaning given such term set forth in
Subsection 3.1(A).
"Mortgages" shall have the meaning assigned to such term in Subsection
5.3.
"Multiemployer Plan" shall mean an employee benefit plan defined in
Section 4001(a) (3) of ERISA which is, or within the immediately preceding
six (6) years was, contributed to by a Borrower or any of its Subsidiaries
or an ERISA Affiliate of such Person.
"Net Income" shall have the meaning given such term set forth in
Subsection 8.13.
"Notes" shall mean, collectively, the Revolving Notes and "Note" shall
mean any thereof.
"Notice of Borrowing" shall have the meaning given that term in
Subsection 2.5(A) hereof.
"Notice of Conversion" shall have the meaning given that term in
Subsection 2.5(A) hereof.
"Obsolete Equipment" shall mean Equipment which is reasonably
determined by a Borrower to be obsolete or unusable by such Borrower.
"Original Agreement" shall have the meaning given such term set forth
in the recitals hereto.
"Original Guaranty Agreement" shall have the meaning given such term
set forth in the recitals hereto.
"Other Taxes" shall have the meaning given such term set forth in
Subsection 2.11(B).
"Parts Inventory" shall mean Inventory that consists of parts,
components or other accessions.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
Person succeeding to the functions thereof.
"Permitted Acquisition" shall mean a Stock Acquisition or an Asset
Acquisition, as the case may be.
"Permitted Consignments" shall have the meaning given such term set
forth in Subsection 3.10.
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"Permitted Liens" shall have the meaning given such term set forth in
Subsection 8.1.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, entity, party or
government (whether national, federal, state, provincial, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan defined in Section 3(3) of
ERISA (other than a Multiemployer Plan) in respect of which a Borrower or
any of its Subsidiaries or any ERISA Affiliate of such Borrower or such
Subsidiary is, or at any time within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"Pledge and Security Agreement" shall mean that certain Pledge and
Security Agreement dated as of November 3, 1995 made by ABC Rail Brake Shoe
Holdings, Inc. in favor of Agent (as amended, supplemented or otherwise
modified from time to time).
"Post-Default Rate" shall have the meaning given such term set forth
in Subsection 2.21(A).
"Proportionate Share" shall mean, as to each Lender at any time, the
percentage obtained by dividing (i) the amount of the Revolving Credit
Commitment of such Lender in effect at such time (or, if the Total
Revolving Commitments have been terminated, the sum of the outstanding
principal amount of the Liabilities owed to such Lender at such time (after
giving effect to Subsection 2.6), by (ii) the amount of the Total Revolving
Commitments in effect at such time (or, if the Total Revolving Commitments
have been terminated, the aggregate amount of all Liabilities at such
time).
"Rail" shall have the meaning given such term set forth in the
preamble hereto.
"Rail Mill" shall mean the property described on Schedule 1.1A annexed
hereto.
"Reduced Rate" shall have the meaning given such term set forth in
Subsection 2.11(E).
"Reduction Amount" shall have the meaning given such term set forth in
Subsection 2.7(C).
"Register" shall have the meaning given such term set forth in
Subsection 11.6(E).
"Required Lenders" shall mean, at any time, one or more Lenders whose
Proportionate Share, in the aggregate, exceed fifty percent (50%).
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<PAGE>
"Requirement of Law" shall mean, as to any Person, the organizational
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"Reserve Rate" shall mean the maximum reserve rate (including, without
limitation, basic, supplemental, marginal and emergency reserve
requirements), expressed as a decimal, determined by Agent to be the rate
which would be applicable to the relevant Interest Period under Regulation
D of the Board of Governors of the Federal Reserve System (or any successor
or similar regulation relating to such reserve requirements) with respect
to eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D) of a member of the Federal Reserve System,
whether or not such fundings were outstanding. The Reserve Rate on the
Closing Date is zero, but may change thereafter.
"Revolving Credit Commitment" of any Lender shall mean the amount set
forth opposite such Lender's name on Schedule 1, as such schedule may be
amended from time to time, under the heading "Revolving Credit Commitment,"
as such Revolving Credit Commitment may be adjusted from time to time
pursuant to the terms of this Agreement.
"Revolving Loans" shall have the meaning given such term in Subsection
2.3(A) hereof, and "Revolving Loan" shall mean any thereof.
"Revolving Notes" shall have the meaning given such term in Subsection
2.3(A) hereof, and "Revolving Note" shall mean any thereof.
"Settlement Date" shall have the meaning given such term set forth in
Subsection 2.6(B).
"Security Agreement" shall have the meaning given such term set forth
in the recitals hereto.
"Signature Authorization Certificate" shall mean a certificate
substantially in the form attached hereto as Exhibit H now or hereafter
executed on behalf of a Borrower and delivered to Agent.
"SP Agent" shall have the meaning given such term set forth in
Subsection 11.9.
"Stock Acquisition" shall have the meaning given to such term in
Subsection 8.3.
"Stock Inventory" shall mean Inventory consisting of scrap that is
usable in the production of finished goods.
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<PAGE>
"Sublimit" with respect to any Borrower shall mean that amount, if
any, agreed to by such Borrower, the Agent and the Required Lenders as such
Borrower's "Sublimit" as evidenced by a written instrument to such effect
signed by such Borrower, the Agent and the Required Lenders.
"Subordinated Debt" shall mean the aggregate principal amount of all
Subordinated Notes and all interest (and premiums, if any) thereon and all
other amounts payable in respect thereof (including, without limitation,
sinking fund payments (if any), defeasance payments (if any), and any and
all amounts payable on account of any redemption, repurchase, retirement or
other acquisition thereof).
"Subordinated Debt Documents" shall mean, collectively, the
Subordinated Debt Indenture, the Subordinated Notes and all other
instruments, certificates and agreements delivered by or on behalf of Rail
in connection with the Subordinated Debt Indenture or any Subordinated Note
(including, without limitation, any instrument or agreement evidencing any
Subordinated Debt).
"Subordinated Debt Indenture" shall mean that certain Indenture, dated
as of January 15, 1997, between Rail and First Trust National Association,
as trustee (the "Trustee") as supplemented by that certain First
Supplemental Indenture, dated as of January 15, 1997, between Rail and the
Trustee, in each case in the form attached hereto as Exhibit I and Exhibit
J, respectively, and as amended, supplemented or otherwise modified in
accordance with Subsection 8.17.
"Subordinated Notes" shall mean, collectively, all promissory notes
issued at any time under, or pursuant to, the Subordinated Debt Indenture.
"Subsequent Monthly Report" shall have the meaning given such term set
forth in Subsection 3.1(A).
"Subsidiary" shall mean, with respect to any Person (i) any
corporation of which more than fifty percent (50%) of the outstanding
securities having ordinary voting power (determined without giving effect
to any class of securities that does not possess ordinary voting power but
may have ordinary voting power by reason of the happening of any
contingency) shall be owned or controlled, directly or indirectly by such
Person or by one or more of its Subsidiaries, or (ii) any partnership,
limited liability company, association, joint venture or similar business
organization of which more than fifty percent (50%) of the ownership
interests having ordinary voting power (determined without giving effect to
any class of securities that does not possess ordinary voting power but may
have ordinary voting power by reason of the happening of any contingency)
shall at the time be so owned or controlled. Unless otherwise expressly
provided, all references herein to a "Subsidiary" shall mean a Subsidiary
of Rail.
"Tax Transferee" shall have the meaning given such term set forth in
Subsection 2.11(A).
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"Taxes" shall have the meaning given such term set forth in Subsection
2.11(A).
"Term" shall have the meaning given that term in Subsection 2.15(A)
hereof.
"Termination Charge" shall have the meaning given such term set forth
in Subsection 2.21(E).
"Termination Date" shall mean March 31, 2000 or such other date as may
be the end of the Term that is in effect pursuant to Subsection 2.15.
"Termination Event" shall mean (i) a reportable event described in
Section 4043 of ERISA or the regulations promulgated thereunder occurring
with respect to any Benefit Plan of a Borrower, any of its Subsidiaries or
any ERISA Affiliate of such Borrower or any of its Subsidiaries for which
the 30-day notice requirement has not been waived, or (ii) the withdrawal
of a Borrower, any of its Subsidiaries or any ERISA Affiliate of such
Borrower or any of its Subsidiaries from a Benefit Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA or the cessation of operations which results in the termination of
employment of 20% of Benefit Plan participants who are employees of such
Borrower, any of its Subsidiaries or any ERISA Affiliate of such Borrower
or any of its Subsidiaries, or (iii) the occurrence of an obligation of a
Borrower, any of its Subsidiaries or any ERISA Affiliate of such Borrower
or any of its Subsidiaries arising under Section 4041 of ERISA to provide
affected parties with a written notice of an intent to terminate a Benefit
Plan in a distress termination described in Section 4041(c) of ERISA, or
(iv) PBGC's institution of proceedings to terminate a Benefit Plan of a
Borrower, any of its Subsidiaries or any ERISA Affiliate of such Borrower
or any of its Subsidiaries, or (v) any event or condition which would
reasonably be expected to constitute grounds under Section 4041A or 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan of a Borrower, any of
its Subsidiaries or any ERISA Affiliate of such Borrower or any of its
Subsidiaries, or (vi) the partial or complete withdrawal (as defined in
Section 4203 and 4205 of ERISA) of a Borrower, any of its Subsidiaries or
any ERISA Affiliate of such Borrower or any of its Subsidiaries from a
Multiemployer Plan, or (vii) the existence in a Multiemployer Plan of a
material potential withdrawal liability of a Borrower, any of its
Subsidiaries or any ERISA Affiliate of such Borrower or any of its
Subsidiaries, or (viii) the occurrence of any nonexempt "prohibited
transaction" with respect to any Plan under Section 406 of ERISA or Section
4975 of the Internal Revenue Code or (ix) as of the last day of any plan
year, the present value of the benefit liabilities (determined in
accordance with Statement of Financial Accounting Standards No. 35) of any
Benefit Plan of a Borrower, any of its Subsidiaries or any ERISA Affiliate
of such Borrower or any of its Subsidiaries, as determined by the plan's
independent actuaries, exceeds the aggregate value as of such date, as
determined by such actuaries, of all assets of such plan by more than
$2,600,000 as to all Plans in the aggregate.
"Termination Notice" shall have the meaning given such term set forth
in Subsection 2.2(D).
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"Third Party Financed Equipment" shall have the meaning given such
term set forth in Subsection 8.2.
"Total Revolving Commitments" shall mean the aggregate of the
Revolving Credit Commitments of all the Lenders, which in the aggregate
shall not exceed $90,000,000.
"Type of Advance" shall have the meaning given such term set forth in
Subsection 2.1(B).
"UFCA" shall have the meaning given such term set forth in Subsection
6.6.
"UFTA" shall have the meaning given such term set forth in Subsection
6.6.
"Unfunded Capital Expenditure" shall mean Capital Expenditures other
than Capital Expenditures representing Capitalized Leases or funded with
proceeds of Funded Debt received from lenders other than the Lenders.
"Voting Shares" shall mean, with respect to any Person, all classes of
capital stock of such Person then outstanding and normally entitled to vote
in the elections of directors of such Person.
"Wheel Machining Center" shall mean the property described on Schedule
1.1(B) annexed hereto.
"Work-in-Process Inventory Sublimit" shall have the meaning given such
term set forth in Subsection 2.4 hereof.
1.2 Accounting Terms. Any accounting terms used in this Agreement
which are not specifically defined herein shall have the meanings customarily
given them in accordance with GAAP. Calculations and determinations of
financial and accounting terms used and not otherwise specifically defined
hereunder and the preparation of financial statements to be furnished to the
Lenders pursuant hereto shall be made and prepared, both as to classification of
items and as to amount, in accordance with GAAP as used in the preparation of
the Financials on the date of this Agreement. If any changes in accounting
principles or practices from those used in the preparation of the Financials are
hereafter occasioned by the promulgation of rules, regulations, pronouncements
and opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or any successor thereto or
agencies with similar functions), which results in a material change in the
method of accounting in the financial statements required to be furnished to
Lenders hereunder or in the calculation of financial covenants, standards or
terms contained in this Agreement or any other Financing Agreement, the parties
hereto agree to enter into negotiations in Good Faith to amend such provisions
so as equitably to reflect such changes to the end that the criteria for
evaluating the financial condition and performance of Rail and its Subsidiaries
will be the same after such changes as they were before such changes; and if the
parties fail to agree on the amendment of such provisions, Rail and its
Subsidiaries will furnish financial statements in accordance with such changes
but shall provide calculations for all financial covenants, perform all
financial
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covenants and otherwise observe all financial standards and terms in accordance
with applicable accounting principles and practices in effect immediately prior
to such changes. Calculations with respect to financial covenants required to be
stated in accordance with applicable accounting principles and practices in
effect immediately prior to such changes shall be reviewed and certified by the
Rail's accountants.
1.3 Other Terms Defined in Illinois Uniform Commercial Code. All
other terms contained in this Agreement (and which are not otherwise
specifically defined herein) shall have the meanings provided in Article 9 of
the Code on the date hereof to the extent the same are used or defined therein.
1.4 Other Definitional Provisions; Construction. Whenever the context
so requires, the neuter gender includes the masculine and feminine, the singular
number includes the plural, and vice versa. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and references to Article, Section, Subsection, Annex, Schedule,
Exhibit and like references are references to this Agreement unless otherwise
specified. A Default shall "continue" or be "continuing" until such Default has
been waived in accordance with Subsection 11.1 hereof. References in this
Agreement to any Person shall include such Person's successors and permitted
assigns. References to any "Subsection" shall be a reference to such Subsection
of this Agreement unless otherwise stated.
2. CREDIT.
2.1 [INTENTIONALLY OMITTED.]
2.2 [INTENTIONALLY OMITTED.]
2.3 Revolving Loan Facility.
(A) Subject to the terms and conditions set forth in this Agreement,
on and after the Closing Date and to and excluding the Termination Date, upon
the request of a Borrower pursuant to Subsection 2.5, each of the Lenders shall,
severally in proportion to its Proportionate Share, make loans and advances to
such Borrower (including Interim Revolving Loans) on a revolving credit basis
(collectively, for all Borrowers, the "Revolving Loans"). The Revolving Loans
advanced by each Lender to each Borrower shall be evidenced, in part, by a
promissory note made by such Borrower in favor of such Lender (each, a
"Revolving Note") substantially in the form attached hereto as Exhibit A with
the blanks appropriately filled and, the provisions of any Revolving Note
notwithstanding, shall become immediately due and payable as provided in
Subsection 9.1 hereof, and, without notice or demand, upon the termination of
this Agreement pursuant to Subsections 2.15 or 2.21(E) hereof.
(B) The Revolving Loans made to a Borrower shall consist of either
Base Rate Advances or LIBOR Rate Advances, as duly requested by such Borrower
pursuant to this Agreement. Each Borrower shall maintain a sufficient amount of
Base Rate Advances so that application of the proceeds of Collateral in
accordance with Subsections 2.8 and 3.6 will not
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necessitate a payment of a LIBOR Rate Advance on a day other than the last day
of the Interest Period applicable thereto.
2.4 Determination of Borrowing Base.
(A) Subject to Subsection 2.5(B): (i) the aggregate unpaid principal
amount of the Revolving Loans made to a Borrower shall not in the aggregate
exceed at any time the least of (A) the Total Revolving Commitments then in
effect minus the aggregate amount of all Letter of Credit Obligations with
respect to all Borrowers and minus the aggregate unpaid principal amount of all
Revolving Loans made to all other Borrowers, (B) the "Current Asset Base" (as
defined below) of such Borrower or (C) such Borrower's Sublimit, if any, minus
the aggregate amount of Letter of Credit Obligations with respect to Letters of
Credit issued for the account of such Borrower; and (ii) the aggregate unpaid
principal amount of all Revolving Loans shall not in the aggregate exceed at any
time the least of (A) the Total Revolving Commitments then in effect minus the
aggregate amount of all Letter of Credit Obligations with respect to all
Borrowers, (B) the sum of the "Current Asset Base" (as defined below) of all
Borrowers or (C) if there is a Sublimit for each Borrower, the sum of each
Borrower's Sublimit minus the aggregate amount of all Letter of Credit
Obligations with respect to all Borrowers.
(B) As used herein, "Current Asset Base" shall mean the following
with respect to the Borrower specified:
(i) with respect to Rail, as used herein, "Current Asset Base" shall
mean (i) up to eighty-five percent (85%) of the face amount (less maximum
discounts, credits and allowances which may be taken by or granted to
Account Debtors in connection therewith) then outstanding under existing
"Eligible Accounts" (as defined in Subsection 3.2 hereof), less such other
reserves as Agent in its sole discretion and in Good Faith elects to
establish; plus (ii) the lesser of the "Rail Inventory Sublimit" (as
hereinafter defined) and an amount equal to the sum of (X) up to sixty-five
percent (65%) of Rail's existing "Eligible Inventory" (as defined in
Subsection 3.10 hereof), other than work-in-process and Fixed Overhead
Inventory of Rail, valued at the lower of cost, determined on a first-in,
first-out basis, or market, less obsolescence reserves and such other
reserves as Agent in its sole discretion and in Good Faith elects to
establish, plus (Y) the sum of the following for each plant of Rail, the
lesser of the "Work-in-Process Inventory Sublimit" (as hereinafter defined)
for such plant and up to sixty percent (60%) of Rail's existing Eligible
Inventory at such plant consisting of work-in-process (but excluding Fixed
Overhead Inventory of Rail), valued at the lower of cost, determined on a
first-in, first-out basis, or market, less obsolescence reserves and such
other reserves as Agent in its sole discretion and in Good Faith elects to
establish, plus (Z) up to sixty percent (60%) of Rail's existing Eligible
Inventory consisting of Fixed Overhead Inventory of Rail, valued at the
lower of cost, determined on a first-in, first-out basis, or market, less
such reserves as Agent in its sole discretion and in Good Faith elects to
establish, minus (iii) the Letter of Credit Obligations with respect to
Letters of Credit issued for the account of Rail, minus (iv) the CAPEX
Reserve, and plus (v) $10,000,000; and
(ii) with respect to Deco, as used herein, "Current Asset Base" shall
mean (i) up to eighty-five (85%) of the face amount (less maximum
discounts, credits and
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allowances which may be taken by or granted to Account Debtors in
connection therewith) then outstanding under existing "Eligible Accounts"
(as defined in Subsection 3.2 hereof), less such other reserves as Agent in
its sole discretion and in Good Faith elects to establish; plus (ii) the
lesser of $500,000 and an amount equal to the sum of (X) up to sixty-five
percent (65%) of Deco's existing Eligible Inventory constituting Stock
Inventory and (Y) up to thirty percent (30%) of Deco's existing Eligible
Inventory constituting Parts Inventory, in each case valued at the lower of
cost, determined on a first-in, first-out basis, or market, less
obsolescence reserves and such other reserves as Agent in its sole
discretion and in Good Faith elects to establish.
(C) Notwithstanding the foregoing or anything in Subsection 3.10 to
the contrary, (1) the aggregate amount of Inventory deemed to be Eligible
Inventory of Rail shall not exceed an amount (the "Rail Inventory Sublimit")
equal at any time to the amount determined by taking the quotient determined by
dividing (a) 200% of Rail's cost of goods sold (adjusted in an manner
satisfactory to the Agent (in its sole discretion exercised in Good Faith) for
Asset Acquisitions made after the date of the Original Agreement) for the most
recent 6 months for which Lenders have received the financial statements
required to be furnished by Rail pursuant to Subsection 7.1(A) hereof, by (b)
6.0; and (2) the aggregate amount of work-in-process Inventory at any of the
following plants and "Additional Acceptable Plants" (as hereinafter defined)
deemed to be Eligible Inventory of Rail (and no work-in-process inventory
located other than at such plants shall be deemed to be Eligible Inventory)
shall not exceed an amount (the "Work-in-Process Inventory Sublimit") equal at
any time to the amount determined by taking the product determined by
multiplying (a) the quotient determined by dividing 26 into Rail's cost of goods
sold for such plant for the most recent 6 months for which Lenders have received
the financial statements required to be furnished by Rail pursuant to Subsection
7.1(A) hereof, by (b) the number of weeks set forth opposite such plant (or, in
the case of any Additional Acceptable Plant, such number of weeks as is
determined by Agent in its sole discretion exercised in Good Faith) below, and
by (c) the percentage set forth opposite such plant (or, in the case of any
Additional Acceptable Plant, such percentage as is determined by the Agent in
its sole discretion exercised in Good Faith) below:
Plant Weeks Percentage
----- ----- ----------
Calera 2 80%
Chicago Heights 6 75%
Pueblo 6 75%
Superior 2 75%
Newton 2 75%
Anderson 2 75%
As used herein, the term "Additional Acceptable Plant" shall mean any plant
acquired by Rail after the date hereof which produces work-in-process inventory
satisfactory to Agent in its sole discretion exercised in Good Faith for
inclusion in determining the Current Asset Base of Rail.
2.5 Borrowing Mechanics.
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(A) Base Rate Advances shall be made to a Borrower on irrevocable
telephonic or written notice given to Agent by such Borrower not later than
12:00 noon, Chicago time, on the Business Day on which the proposed Base Rate
Advance is requested to be made. At any time prior to the occurrence of a
Default or an Event of Default, a Borrower may request the continuation of a
LIBOR Rate Advance or the conversion of any Advance from one Type of Advance to
another pursuant to this Agreement; provided that (i) conversions of all or any
portion of a LIBOR Rate Advance may be made only as of the last date of the
Interest Period applicable thereto; (ii) such continuation or conversion would
not violate any other provisions of this Agreement; and (iii) without limiting
Subsections 9.1 or 9.2 or any other rights and remedies of Agent and each
Lender, after the occurrence of a Default or Event of Default, such a
continuation or conversion may only be made with the consent of the Agent.
LIBOR Rate Advances, and any continuations of, or conversions to LIBOR Rate
Advances, shall be in an aggregate principal amount of $1,000,000 or an integral
multiple thereof. LIBOR Rate Advances, or continuation of any LIBOR Rate
Advance, or conversion of any Base Rate Advance to a LIBOR Rate Advance, may be
made upon irrevocable written notice given to Agent by a Borrower no later than
12:00 noon, Chicago time, three Business Days prior to the commencement of the
Interest Period applicable thereto. In each such notice, such Borrower shall
specify, as to continuations and conversions, the amount of the Advance to be so
continued or converted, as to new LIBOR Rate Advances, the requested principal
amount thereof, and in any case the applicable Interest Period, and the first
and last day of the Interest Period, each of which shall be a Business Day.
LIBOR Rate Advances shall automatically convert to Base Rate Advances at the end
of the applicable Interest Period unless such Borrower gives the requisite
notice in accordance with the procedures set forth above to continue the same as
LIBOR Rate Advances. No Borrower shall be entitled to elect any Interest Period
with respect to a LIBOR Rate Advance if the provisions of this Agreement would
require such Borrower to repay or prepay any portion of such LIBOR Rate Advance
prior to the end of such Interest Period.
(i) Each notice described in this Subsection 2.5(A) shall be given by
an Authorized Officer of the Borrower giving such notice either by
telephone, telecopy, telex, or cable, and, if such notice (other than an
irrevocable notice of borrowing of a Base Rate Advance) is by telephone,
confirmed in writing, substantially in the form of Exhibit B in the case of
a request for an Advance (the "Notice of Borrowing") and in the form of
Exhibit C (the "Notice of Conversion") in the case a conversion or
continuation of an Advance; provided, however, that subject to Subsection
2.5(D), telephonic notices requesting a Base Rate Advance need not be
confirmed in writing unless requested by Agent. Each Notice of Borrowing
and Notice of Conversion shall be irrevocable by and binding on the
Borrower giving such Notice of Conversion or Notice of Borrowing.
(ii) Agent shall be entitled to rely conclusively on each Authorized
Officer's authority to request, convert or continue Advances on behalf of
such Borrower. Agent shall have no duty to verify the authenticity of the
signature appearing on any Notice of Borrowing, Notice of Conversion or
other writing delivered pursuant to this Subsection 2.5(A) and, with
respect to an oral request for an Advance or the conversion or continuation
thereof, Agent shall have no duty to verify the identity of any individual
representing himself as an Authorized Officer. Neither Agent nor any of the
Lenders shall incur any liability to any Borrower as a result of acting
upon any telephonic notice referred to in this Subsection 2.5(A) which
notice Agent believes in good faith to have
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been given by an Authorized Officer or other individual authorized to
request an Advance or convert or continue an Advance on behalf of such
Borrower or for otherwise acting in good faith under this Subsection 2.5(A)
and, upon the funding, conversion or continuation of an Advance by the
Lenders in accordance with this Agreement, pursuant to any such telephonic
notice, such Borrower shall be deemed to have borrowed or converted or
continued such Advance hereunder.
(iii) Borrowers may collectively request one or more (but not more
than six (6)) Advances, conversions of Advances and continuations of
Advances on a single day.
By giving notice as set forth above with respect to a LIBOR Rate Advance or with
respect to a conversion into or continuation of a LIBOR Rate Advance, such
Borrower shall, subject to the other provisions of this Section 2, specify the
applicable Interest Period. The determination of the Interest Period shall be
subject to the following provisions:
(i) the initial Interest Period for any LIBOR Rate Advance shall
commence on the date of such LIBOR Rate Advance which shall be a Business
Day and each Interest Period (if any) occurring thereafter for such LIBOR
Rate Advance shall commence on the day on which the next preceding Interest
Period for such LIBOR Rate Advance expires;
(ii) there shall be no more than six (6) Interest Periods in the
aggregate for all Borrowers in effect at any one time; and
(iii) no Interest Period may be selected which extends beyond the last
day of the Term.
(B) In the event a Borrower is unable to comply with (i) the Current
Asset Base limitations applicable to it set forth in Subsection 2.4 or (ii) the
conditions precedent to the making of a Revolving Loan, the Lenders authorize
Agent, in its sole discretion, to make Revolving Loans (and Lenders shall fund
their Proportionate Share of such Revolving Loans upon the request of Agent)
("Interim Revolving Loans") for a period commencing on the date Agent first
receives a Notice of Borrowing requesting an Interim Revolving Loan until the
earlier of (i) the 20th Business Day after such date, or (ii) the date such
Borrower is again able to comply with the Current Asset Base limitations
applicable to it and the conditions precedent to the making of Revolving Loans
set forth in Sections 2.4 and 4.2 hereof, or obtains an amendment or waiver with
respect thereto (in each case, the "Interim Revolving Loan Period"). Agent
shall not, in any event, make any Interim Revolving Loan if at such time the
amount of such Interim Revolving Loan when added to the then aggregate
outstanding principal amount of other Interim Revolving Loans made to all
Borrowers would exceed $5,000,000; provided that, notwithstanding any of the
foregoing limitations in this Subsection 2.5(B), Agent may make Revolving Loans
(consisting of one or more Base Rate Advances) in an amount not to exceed
$2,500,000 outstanding at any one time (and Lenders shall fund their
Proportionate Share of such Revolving Loans upon the request of Agent) intended
to preserve, protect or enhance the liquidation value of the Collateral. All
Interim Revolving Loans shall be Base Rate Advances. An Interim Revolving Loan
shall cease to be an Interim Revolving Loan (and shall be deemed to be an
Advance consisting of Revolving Loans) if the unsatisfied conditions giving rise
to such
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<PAGE>
Interim Revolving Loan shall thereafter be satisfied or the events which cause
such Advance to be an Interim Revolving Loan shall thereafter cease to exist.
(C) Each Lender shall be entitled to earn interest at the then
applicable rate of interest, calculated in accordance with Subsection 2.21
hereof, on outstanding Loans which it has funded to Agent.
(D) Notwithstanding the obligation of a Borrower to send written
confirmation of a Notice of Borrowing or Notice of Conversion made by telephone,
in the event that Agent acts upon a Notice of Borrowing or Notice of Conversion
made by telephone, such telephonic notice of borrowing or notice of conversion
shall be binding on such Borrower whether or not written confirmation is sent by
such Borrower or subsequently requested by Agent. Agent may act prior to the
receipt of any written confirmation, without any liability whatsoever, based
upon telephonic notice believed by Agent in good faith to be from such Borrower
or its Authorized Officers. Agent's records of the terms of any telephonic
Notices of Borrowing or Notice of Conversion shall be conclusive on each
Borrower and the Lenders in the absence of gross negligence or willful
misconduct on the part of Agent in connection therewith.
(E) Without limiting Subsection 2.17, or any other provision of this
Agreement, no Borrower may voluntarily prepay any LIBOR Rate Advance prior to
the last day of the Interest Period applicable thereto.
2.6 Settlements Among Agent and the Lenders.
(A) Except as provided in Subsection 2.6(B) (which provides for the
settlement by Agent of Revolving Loans made, and payments thereon on a weekly
basis at Agent's discretion to avoid daily settlements between Lenders), Agent
shall give to each Lender prompt notice of each Notice of Borrowing or Notice of
Conversion by telecopy, telex or cable. Except for Advances made as provided
pursuant to Subsection 2.6(B), no later than 2:00 p.m. Chicago time on the date
of each Advance to be made hereunder, each Lender will make available to Agent
at its principal office in Chicago, Illinois in immediately available funds, its
Proportionate Share of each Advance constituting Revolving Loans, whereupon
Agent will make such funds available to the applicable Borrower at account
number 18067417, at ANB's offices in Chicago Illinois. Unless Agent shall have
been notified by any Lender prior to the date of the Advance that such Lender
does not intend to make available to Agent its portion of the Advance to be made
on such date, Agent may assume that such Lender will make such amount available
to Agent on the Settlement Date (as defined below) and Agent, in reliance upon
such assumption, may but shall not be obligated to make available the amount of
the Advance to be provided by such Lender. Except as provided in Subsection
2.6(B) and subject to Subsection 2.14(C), promptly after its receipt of payments
from or on behalf of any Borrower (other than amounts payable to Agent to
reimburse Agent and the Issuing Bank for fees and expenses payable solely to
them), Agent will cause such payments to be distributed ratably to the Lenders.
The Lenders will apply such payments in accordance with Subsection 2.8(B).
(B) Agent on behalf of the Lenders may (but shall not be obligated to)
make Revolving Loans and receive and retain payments on the Revolving Loans in
accordance with
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this Subsection 2.6(B) without notice to, or settlement with, the Lenders;
provided, Agent shall settle the amount of the Revolving Loans with the Lenders
at least once a week as follows:
The amount of each Lender's Proportionate Share of outstanding Revolving
Loans shall be computed weekly (or more frequently in Agent's discretion)
and shall be adjusted upward or downward on the basis of the amount of
outstanding Revolving Loans as of 3:00 P.M. Chicago time on the last
Business Day of the period specified by Agent (such date being referred to
as the "Settlement Date"). Agent shall deliver to each of the Lenders
promptly after any Settlement Date a summary statement of the amount of
outstanding Revolving Loans for such period. The Lenders shall transfer to
Agent, or, subject to Subsection 2.14(C), Agent shall transfer to the
Lenders, such amounts as are necessary so that (after giving effect to all
such transfers) the amount of the Revolving Loans made by each Lender shall
be equal to such Lender's Proportionate Share of the aggregate amount of
the Revolving Loans outstanding as of such Settlement Date. If the summary
statement is received by the Lenders prior to 10:00 A.M. Chicago time on
any Business Day, each Lender shall make the transfers described above in
immediately available funds no later than 12:00 noon Chicago time on the
day such summary statement was received; and if such summary statement is
received by the Lenders after 10:00 A.M. Chicago time on such day, each
Lender shall make such transfers no later than 12:00 noon Chicago time on
the next succeeding Business Day. The obligation of each of the Lenders to
transfer such funds shall be irrevocable and unconditional and without
recourse to or warranty by Agent. Each of Agent and the Lenders agree to
mark their respective books and records on the Settlement Date to show at
all times the dollar amount of their respective Proportionate Shares of the
outstanding Revolving Loans. To the extent that the settlement described
above shall not yet have occurred, upon repayment of any part of the
Revolving Loans by any Borrower, Agent may first apply such amounts repaid
directly to the amounts made available by Agent pursuant to this Subsection
2.6(B).
Because Agent on behalf of the Lenders may be advancing and/or may be repaid all
or a portion of the Revolving Loans prior to the time when the Lenders will
actually advance and/or be repaid all or a portion of Revolving Loans, interest
with respect to the Revolving Loans shall be allocated by Agent to each Lender
and Agent in accordance with the amount of the Revolving Loans actually advanced
by and repaid to each Lender and Agent and shall accrue from and including the
date such Revolving Loans are so advanced to but excluding the date such
Revolving Loans are either repaid by any Borrower in accordance with Subsection
2.7 or actually settled by the applicable Lender as described in this Subsection
2.6(B).
2.7 Mandatory Payments; Reduction of Commitments; Increase of Total
Revolving Commitments.
(A) The aggregate outstanding principal amount of the Loans plus
Letter of Credit Obligations may not at any time exceed the Maximum Facility
Amount. Subject to Subsection 2.5(B) and without limiting any provision of
Section 9, (i) the aggregate outstanding principal amount, if any, of any Loans
in an amount in excess of the amount permitted to exist under Subsection 2.4 or
this Subsection 2.7 shall be immediately due and payable without the necessity
of any demand; and (ii) without limiting the foregoing clause (i) and by way of
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illustration, (a) the amount of the aggregate balance of the unpaid principal
amount of the Revolving Loans made to a Borrower plus the aggregate amount of
all Letter of Credit Obligations outstanding at any time with respect to Letters
of Credit issued for the account of such Borrower in excess of the lesser of (1)
the Current Asset Base of such Borrower and (2) such Borrower's Sublimit, if
any, and (b) the aggregate balance of the Revolving Loans made to a Borrower
based on Inventory in excess of the Inventory Sublimit for such Borrower, shall
be immediately due and payable without the necessity of any demand. Any amounts
paid in excess of the outstanding balance of the Revolving Loans or Letter of
Credit Obligations otherwise then due and owing may, at Agent's sole discretion,
be held by Agent as cash collateral for the Letter of Credit Obligations not
then due.
(B) On the Termination Date, the Revolving Credit Commitment of each
Lender shall automatically reduce to zero and may not be reinstated.
(C) Rail may permanently reduce the Total Revolving Commitments in
whole, or in part ratably among the Lenders in integral multiples of $5,000,000,
upon at least five Business Days' written notice to Agent, which notice shall
specify the amount of such reduction (the "Reduction Amount") and the effective
date thereof, provided, however, that (i) the amount of the Total Revolving
Commitments may not be reduced below the aggregate principal amount of the
outstanding Revolving Loans plus the then existing Letter of Credit Obligations,
and Borrower shall pay to Agent for the account of the Lenders a commitment
reduction fee (the "Commitment Reduction Fee"), determined without giving effect
to any reduction in the Total Revolving Commitments pursuant to Subsection
2.7(E), in an amount equal to (i) two percent (2.00%) of the Reduction Amount if
such commitment reduction is made on or prior to March 31, 1997, (ii) one
percent (1.00%) of the Reduction Amount if such commitment reduction occurs
after March 31, 1997 but on or prior to March 31, 1999, and (iii) one-half of
one percent ( 1/2%) of the Reduction Amount if such commitment reduction occurs
after March 31, 1999 but prior to March 31, 2000; provided, further, that
reduction in the Total Revolving Commitments in whole shall be deemed to
constitute a concurrent reduction in whole of all commitments of the Lenders,
Agent and the Issuing Bank to each Borrower with respect to Letters of Credit
and each Borrower shall be obligated also to prepay concurrently all of such
Borrower's outstanding Revolving Loans and other Liabilities, and the date of
such reduction in whole of the Revolving Commitment shall be deemed to be the
Termination Date for all purposes of this Agreement.
(D) [INTENTIONALLY OMITTED.]
(E) In the event a Borrower is permitted pursuant to the terms of this
Agreement to, and does, sell or otherwise dispose of any of its Equipment or
real property, concurrently with the consummation of any such sale or other
disposition, such Borrower shall cause the Loans to be immediately prepaid in an
aggregate amount equal to the gross proceeds from such sale or other disposition
net of reasonable expenses incurred by such Borrower incidental to such sale to
the extent the aggregate amount of such proceeds received by such Borrower
(together with proceeds of such sales and other dispositions received by all
other Borrowers) in any Fiscal Year other than from sales of Excluded Property
(determined at the time of sale) is greater than $500,000 (the "Excess Net
Proceeds") and whether or not any Revolving Loans are then outstanding if a
Default then exists the Maximum Facility Amount and Total Revolving Commitments
shall be concurrently and permanently reduced by the amount of
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such Excess Net Proceeds; provided, that prepayments made pursuant to this
subsection shall (i) first be applied against the outstanding balance of
Revolving Loans of such Borrower, and (ii) next be applied against any other
outstanding Liabilities of such Borrower or, at Agent's discretion, be held by
Agent as cash collateral for Letter of Credit Obligations or other Liabilities.
2.8 Payments and Computations.
(A) Each Borrower shall make each payment hereunder and under the
Notes not later than 12:00 noon Chicago time on the day when due in Dollars to
Agent at its address referred to in Subsection 11.17 hereof in immediately
available funds. Each Borrower's obligations to the Lenders with respect to
such payments shall be discharged by making such payments to Agent pursuant to
this Subsection 2.8.
(B) All amounts received by Agent from or for the account of a
Borrower for distribution to Agent, the Lenders or the Issuing Bank hereunder
pursuant to Subsection 3.6 or otherwise shall be distributed and applied as soon
as practicable in the following order: first, to the payment of any Fees,
Expenses or other Liabilities due and payable by such Borrower to Agent under
any of the Financing Agreements, including amounts advanced by Agent on behalf
of the Lenders pursuant to Subsection 2.6(B); second, to the payment of any
Fees, Expenses or other Liabilities due and payable by such Borrower to the
Issuing Bank under any of the Financing Agreements; third, to the ratable
payment of any Fees, Expenses or other Liabilities due and payable by such
Borrower to the Lenders under any of the Financing Agreements other than those
Liabilities specifically referred to below in this Subsection 2.8(B); fourth, to
the ratable payment of interest due by such Borrower on the Loans; and, fifth,
to the ratable payment of principal due by such Borrower on the Loans.
Application on account of the Liabilities constituting Loans shall be made by
Agent (i) first to all Base Rate Advances and (ii) only when no Base Rate
Advances are outstanding to LIBOR Rate Advances; provided, however, prior to
expiration of the Interest Period applicable thereto in lieu of applying amounts
to LIBOR Rate Advances, Agent may in its discretion retain such balances as cash
collateral for the Liabilities until applied to such LIBOR Rate Advances at the
expiration of the Interest Period applicable thereto. Any payment received
hereunder as a distribution in any proceeding referred to in Subsection 9.1(H)
or (I) shall, unless paid with respect to amounts specifically owing to Agent or
the Issuing Bank, be distributed and applied to the payment of the amounts due
hereunder and under the Notes ratably in accordance with such amounts (or, if a
court of competent jurisdiction shall otherwise specify, as specified by such
court).
2.9 Borrower's Loan Account. Agent shall maintain a loan account
(the "Loan Account") on its internal data control systems in which shall be
recorded (i) all loans and advances made by Agent or the Lenders to each
Borrower or for each Borrower's account pursuant to this Agreement, including
without limitation all Letter of Credit Obligations, (ii) all payments made by
each Borrower or for each Borrower's account on all such loans and advances and
Letter of Credit Obligations, and (iii) all other appropriate debits and credits
as provided in this Agreement, including, without limitation, all interest,
Fees, Expenses, and other charges, expenses and fees. All entries in each
Borrower's Loan Account shall be made in accordance with Agent's customary
accounting practices as in effect from time to time. Each Borrower will be
credited, in accordance with Subsection 2.8 above, with all amounts received by
or on behalf
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of Agent, the Lenders or the Issuing Bank from such Borrower or from others for
such Borrower's account, including, as set forth above, all amounts received by
Agent as set forth in Subsection 2.8(B). In no event shall prior recourse to any
Accounts or other Collateral be a prerequisite to Agent's right to demand
payment of any of the Liabilities upon its maturity. Further, Agent shall have
no obligation whatsoever to perform in any respect any of a Borrower's contracts
or obligations relating to the Accounts. Each Borrower promises to pay to Agent
and Lenders the amount reflected as owing by it under its Loan Account and all
of its other obligations hereunder and under any of the other Financing
Agreements as such amounts become due or are declared due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) pursuant to
the terms of this Agreement and the other Financing Agreements. Unless otherwise
agreed in writing from time to time hereafter, all payments which any Borrower
is required to make to the Lenders and Agent under this Agreement or under any
of the other Financing Agreements shall be made by appropriate debits to such
Borrower's Loan Account. Agent may in its sole discretion elect to bill such
Borrower for such amounts in which case the amount shall be immediately due and
payable with interest thereon as provided herein.
2.10 Statements. All Loans, Advances and other financial
accommodations to any Borrower, and all other debits and credits provided for in
this Agreement, may be evidenced by Agent in its internal data control systems
showing the date, amount and reason for each such debit or credit. Until such
time as Agent shall have rendered to a Borrower written statements of account as
provided herein, the balance in such Borrower's Loan Account, as set forth on
Agent's most recent printout, shall be rebuttably presumptive evidence of the
amounts due and owing to Agent and Lenders by such Borrower. Not more than
twenty (20) days after the last day of each calendar month, Agent shall render
to each Borrower a statement setting forth the balance of such Borrower's Loan
Account, including principal, interest, Expenses, Fees and any other expenses,
fees and charges. Each such statement shall be subject to subsequent adjustment
by Agent but shall, absent manifest errors or omissions, be presumed correct and
binding upon such Borrower and shall constitute an account stated unless, within
sixty (60) days after receipt of any statement from Agent, such Borrower shall
deliver to Agent written objection thereto specifying the error or errors, if
any, contained in such statement.
2.11 Taxes.
(A) Any and all payments by any Borrower hereunder, under the Notes or
in respect of the Letters of Credit which are made to or for the benefit of any
Lender, the Issuing Bank or Agent shall be made, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings and penalties, interests and all other liabilities with
respect thereto ("Taxes"), excluding, (i) in the case of each such Lender, the
Issuing Bank or Agent, taxes imposed on its net income (including, without
limitation, any taxes imposed on branch profits) or capital and franchise taxes
imposed on it by the jurisdiction under the laws of which such Lender, the
Issuing Bank or Agent (as the case may be) is organized or any political
subdivision thereof, (ii) in the case of each such Lender, the Issuing Bank and
Agent, any Taxes that are in effect and that would apply to a payment to such
Lender, the Issuing Bank or Agent, as applicable, as of the date of this
Agreement, and (iii) if any Person acquires any interest in this Agreement, any
Note or Letter of Credit Obligations pursuant to the provisions hereof, or Agent
or any Lender changes the office in which any Loan
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is made, accounted for or booked (any such Person or Agent or such Lender in
that event being referred to as a "Tax Transferee"), any Taxes to the extent
that they are in effect and would apply to a payment to such Tax Transferee as
of the date of the acquisition of such interest or change in office, as the case
may be (all such nonexcluded Taxes being hereinafter referred to as "Covered
Taxes"). If any Borrower shall be required by law to deduct any Covered Taxes
from or in respect of any sum payable hereunder, under any Note or in respect of
any Letter of Credit Obligations to or for the benefit of any Lender, the
Issuing Bank, Agent or any Tax Transferee, (A) the sum payable shall be
increased as may be necessary so that after making all required deductions of
Covered Taxes (including deductions of Covered Taxes applicable to additional
sums payable under this Subsection 2.11) such Lender, the Issuing Bank, Agent or
such Tax Transferee, as the case may be, receives an amount equal to the sum it
would have received had no such deductions been made, (B) such Borrower shall
make such deductions and (C) such Borrower shall pay the full amount so deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(B) In addition, Borrowers agree to pay any present or future stamp,
documentary, excise, privilege, intangible or similar levies that arise at any
time or from time to time (i) from any payment made under any and all Financing
Agreements, (ii) from the transfer of the rights of any Lender under any
Financing Agreements to any transferee, or (iii) from the execution or delivery
by a Borrower of, or from the filing or recording or maintenance of, or
otherwise with respect to the exercise by Agent or the Lenders of their rights
under, any and all Financing Agreements (hereinafter referred to as "Other
Taxes").
(C) The Borrowers will indemnify each Lender, the Issuing Bank, Agent,
and any Tax Transferee for the full amount of (i) Covered Taxes imposed on or
with respect to amounts payable hereunder, and (ii) Other Taxes, and any
liability (including penalties, interest and expenses) arising solely therefrom
or with respect thereto. Payment of this indemnification shall be made within
thirty (30) days from the date such Lender, the Issuing Bank, Agent or such Tax
Transferee provides the Borrowers with a certificate, certifying and setting
forth in reasonable detail the calculation thereof as to the amount and type of
such Taxes. Any such certificate submitted by such Lender, the Issuing Bank,
Agent or such Tax Transferee in good faith to the Borrowers shall, absent
manifest error, be final, conclusive and binding on all parties. The
obligations of the Borrowers under this Subsection 2.11 shall survive payment of
the Liabilities and termination of this Agreement.
(D) Within 30 days after any Borrower having received a receipt for
payment of Covered Taxes or Other Taxes, such Borrower will furnish to Agent, at
its address referred to in Subsection 11.17, the original or a certified copy of
a receipt evidencing payment thereof.
(E) If a Tax Transferee that is organized under the laws of a
jurisdiction outside of the United States acquires an interest in this Agreement
or any Note or Letter of Credit Obligation, the transferor shall cause such Tax
Transferee to agree that on or prior to the effective date of such acquisition,
it will deliver to the Borrowers and Agent (i) two valid, duly completed copies
of IRS Form 1001 or 4224 or successor applicable form, as the case may be, and
any other required form, certifying in each case that such Tax Transferee is
entitled to receive payments under this Agreement and the Notes payable to it
without deduction or withholding of United States federal income tax or with
such withholding imposed at a reduced
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rate other than the maximum rate otherwise required under the Internal Revenue
Code (the "Reduced Rate"); and (ii) a valid, duly completed IRS Form W-8 or W-9
or successor applicable form, as the case may be, to establish an exemption from
United States backup withholding tax. Each Tax Transferee that delivers to the
Borrowers and Agent a Form 1001 or 4224, and Form W-8 or W-9 and any other
required form, pursuant to the next preceding sentence, further undertakes to
deliver two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms, or other manner of required certification, as the
case may be, on or before the date that any such form expires or becomes
obsolete or otherwise is required to be resubmitted as a condition to obtaining
an exemption from a required withholding of United States federal income tax or
entitlement to having such withholding imposed at the Reduced Rate or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Borrowers and Agent, and such extensions or renewals
thereof as may reasonably be requested by the Borrowers and Agent, certifying
(i) in the case of a Form 1001 or 4224 that such Tax Transferee is entitled to
receive payments under this Agreement or Notes payable to it without deduction
or withholding of any United States federal income taxes or with such
withholding imposed at the Reduced Rate, unless any change in treaty, law or
regulation or official interpretation thereof has occurred after the effective
date of such acquisition or change and prior to the date on which any such
delivery would otherwise be required that renders all such forms inapplicable or
that would prevent such Tax Transferee from duly completing and delivering any
such form with respect to it, and such Tax Transferee advises the Borrowers and
Agent that it is not capable of receiving payments (a) without any deduction or
withholding of United States federal income tax or (b) with such withholding at
the Reduced Rate, as the case may be, or (ii) in the case of a Form W-8 or W-9,
establishing an exemption from United States backup withholding tax.
(F) If any Taxes for which a Borrower would be required to make
payment under this Subsection 2.11 are imposed, the applicable Lender, the
Issuing Bank, Agent or Tax Transferee, as the case may be, shall use its
reasonable efforts to avoid or reduce such Taxes by taking any appropriate
action (including, without limitation, assigning its rights hereunder to a
related entity or a different office) which would not, in the sole opinion of
such Lender, the Issuing Bank, Agent or Tax Transferee exercised in Good Faith
be otherwise disadvantageous to such Lender, the Issuing Bank, Agent or Tax
Transferee, as the case may be.
(G) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Subsection 2.11 shall survive the payment in full of the Liabilities and
termination of this Agreement.
2.12 Affected Lenders. If any Borrower is obligated to pay to any
Lender any amount under Subsections 2.11, 2.16, 2.18 or 2.21(J) hereof, or if
any Lender is a Defaulting Lender, Borrowers may, if no Default or Event of
Default then exists, replace such Lender with another lender acceptable to
Agent, and such Lender hereby agrees to be so replaced subject to the following:
(A) The obligations of the Borrowers hereunder to the Lender to be
replaced (including such increased or additional costs incurred from the date of
notice to the Borrowers of such increase or additional costs through the date
such Lender is replaced hereunder) shall be paid in full to such Lender
concurrently with such replacement;
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(B) If such replacement is a result of increased costs under
Subsections 2.11, 2.16, 2.18 or 2.21(J), the replacement Lender shall be a bank
or other financial institution that is not subject to such increased costs which
caused the Borrowers' election to replace any Lender hereunder, and each such
replacement Lender shall execute and deliver to Agent such documentation
satisfactory to Agent pursuant to which such replacement Lender is to become a
party hereto, conforming to the provisions of Subsection 11.6 hereof, with a
Revolving Credit Commitment equal to that of the Lender being replaced and shall
make Loans in the aggregate principal amount equal to the aggregate outstanding
principal amount of the Loans of the Lender being replaced;
(C) Upon such execution of such documents referred to in clause (B)
and repayment of the amounts referred to in clause (A), the replacement lender
shall be a "Lender" with a Revolving Credit Commitment as specified hereinabove
and the Lender being replaced shall cease to be a "Lender" hereunder, except
with respect to indemnification provisions under this Agreement, which shall
survive as to such replaced Lender;
(D) Agent shall reasonably cooperate in effectuating the replacement
of any Lender under this Subsection 2.12, but at no time shall Agent be
obligated to initiate any such replacement;
(E) Any Lender replaced under this Subsection 2.12 shall be replaced
at the Borrowers' sole cost and expense and at no cost or expense to Agent or
any of the Lenders; and
(F) If the Borrowers propose to replace any Lender pursuant to this
Subsection 2.12 because the Lender seeks reimbursement under either Subsections
2.11, 2.16, 2.18 or 2.21(J), then they must also replace any other Lender who
seeks similar levels of reimbursement (as a percentage of such Lender's
Revolving Credit Commitment under such subsections.
2.13 Sharing of Payments. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off or
otherwise) on account of the Loans made by it or its participation in the Letter
of Credit Obligations in excess of its allocable share pursuant to Subsection
10.14, of payments on account of the Loans or Letter of Credit Obligations
obtained by all the Lenders, such Lender shall forthwith purchase from the other
Lenders such participations in the Loans made by them or in their participation
in Letters of Credit as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them; provided, however, that if
all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and each
such Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery together with an amount equal to such Lender's ratable
share (according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
to the total amount so recovered. The Borrowers agree that any Lender so
purchasing a participation from another Lender pursuant to this Subsection 2.13
may, to the fullest extent permitted by law, exercise all of its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender were the direct creditor of such Borrower in the amount
of such participation.
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2.14 Defaulting Lenders.
(A) If any amount described in Subsection 2.5, Subsection 2.6 or in
Subsection 2.20(F) hereof is not made available to Agent by a Lender (such
Lender being hereinafter referred to as a "Defaulting Lender") and Agent has
made such amount available to a Borrower or the Issuing Bank, as applicable,
Agent shall be entitled to recover such amount on demand from such Defaulting
Lender together with interest as hereinafter provided. If such Defaulting
Lender does not pay such amount forthwith upon Agent's demand therefor, Agent
shall promptly notify such Borrower and such Borrower shall immediately (but in
no event later than five Business Days after such demand) pay such amount to
Agent together with the amounts provided for in the immediately succeeding
sentence. Agent shall also be entitled to recover from such Defaulting Lender
and/or such Borrower, as the case may be, (x) interest on such amount in respect
of each day from the date such corresponding amount was made available by Agent
to such Borrower to the date such amount is recovered by Agent, at a rate per
annum equal to either (i) if paid by such Defaulting Lender, the overnight
Federal Funds Rate or (ii) if paid by such Borrower, the then applicable rate of
interest, calculated in accordance with Subsection 2.21(A) hereof, plus (y) in
each case, an amount equal to any costs (including legal expenses) and losses
incurred as a result of the failure of such Defaulting Lender to provide such
amount as provided in this Agreement. Nothing herein shall be deemed to relieve
any Lender from its duty to fulfill its obligations hereunder or to prejudice
any rights which any Borrower may have against any Lender as a result of any
default by such Lender hereunder, including, without limitation, the right of a
Borrower to seek reimbursement from any Defaulting Lender for any amounts paid
by a Borrower under clause (y) above on account of such Defaulting Lender's
default.
(B) The failure of any Lender to make the Loans to be made by it as
part of any Advance or fund its participation in any drawing under a Letter of
Credit shall not relieve any other Lender of its obligation, if any, hereunder
to make its Loans on the date of such Advance or fund its participation in any
drawing under any Letter of Credit, but no Lender shall be responsible for the
failure of any other Lender to make its Loans to be made by such other Lender on
the date of any Advance or to fund any Lender's participation in any drawing
under a Letter of Credit.
(C) Notwithstanding anything contained herein to the contrary, so long
as any Lender is a Defaulting Lender or has rejected its Revolving Credit
Commitment, Agent shall not be obligated to transfer to such Lender any payments
made by any Borrower to Agent for the benefit of such Lender; and, such Lender
shall not be entitled to the sharing of any payments pursuant to Subsection
2.13. Amounts payable to such Lender under Subsection 2.13 shall instead be
paid to Agent. Agent may hold and, in its discretion, re-lend to a Borrower for
the account of such Lender the amount of all such payments received by it for
the account of such Lender. For purposes of voting or consenting to matters
with respect to the Financing Agreements and determining Proportionate Shares,
such Defaulting Lender shall be deemed not to be a "Lender" and such Lender's
Proportionate Share shall be deemed to be zero (O) and each other Lender's
Proportionate Share shall be deemed to be increased pro rata based on its
Proportionate Share theretofore existing. This Subsection 2.14(C) shall remain
effective with respect to such Lender until (x) the Liabilities under this
Agreement shall have been declared or shall have become immediately due and
payable or (y) the Required Lenders, Agent and the
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Borrowers shall have waived such Lender's default in writing. No Revolving
Credit Commitment of any Lender shall be increased or otherwise affected, and
performance by the Borrowers shall not be excused, by the operation of this
Subsection 2.14(C). Any payments of principal or interest which would, but for
this Subsection 2.14, be paid to any Lender, shall be paid to the Lenders who
shall not be in default under their respective Revolving Credit Commitments and
who shall not have rejected any Revolving Credit Commitment, for application to
the Revolving Loans or to provide cash collateral in such manner and order as
shall be determined by Agent.
2.15 Term of this Agreement.
(A) Subject to Subsection 2.15(B), this Agreement shall be effective
until the Termination Date (the period during which this Agreement is effective
being the "Term") and shall terminate on the Termination Date; provided,
however, that the Required Lenders shall retain the right to terminate this
Agreement at any time upon the occurrence and during the continuance of a
Default; and further provided, however, that (i) all of Agent's and each
Lender's rights and remedies under this Agreement and the other Financing
Agreements and (ii) all of Agent's and each Lender's security interests shall
survive such termination until all of the Liabilities have been fully paid and
satisfied and all Letters of Credit have expired, been canceled or terminated.
Upon the effective date of termination of this Agreement (including without
limitation any termination pursuant to Subsection 2.21(E)), all of the
Liabilities shall become immediately due and payable without notice or demand.
Notwithstanding any termination, until all of the Liabilities shall have been
fully paid and satisfied, all financing arrangements between each Borrower and
Agent and Lenders shall have been terminated and all Letters of Credit shall
have expired, been canceled or terminated, all of Agent's and each Lender's
rights and remedies under this Agreement and the other Financing Agreements
shall survive, Agent shall be entitled to retain its security interest in and to
all existing and future Collateral, and each Borrower shall continue to remit
collections of Accounts and proceeds as provided herein.
(B) The Termination Date in effect from time to time may be extended
for additional periods of one year respectively (but in no event may the
Termination Date be extended to a date after the Final Termination Date, and if
the last day of such period is not a Business Day, the new Termination Date
shall be the first preceding day that is a Business Day), by a written notice
executed by Agent and each Lender (an "Extension Letter") and delivered to the
Borrowers between the 90th and 60th day immediately prior to the Termination
Date then in existence stating that the Termination Date has been extended and
setting forth the new Termination Date, but Agent and the Lenders shall give
such notice only if Agent and the Lenders have received written notice from the
Borrowers between the 150th and 90th day prior to the Termination Date then in
existence requesting such an extension; provided, further, that (i) prior to any
extension of the Termination Date, Agent and each Lender shall have received
from the Borrowers all instruments, agreements, certificates, legal opinions and
other documents and matters as Agent may request, and (ii) the Termination Date
may not be extended if any Lender in its sole discretion determines not to agree
to extend the Termination Date. Each Borrower acknowledges that there is no
commitment on the part of Agent or any Lender to extend the Termination Date.
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2.16 Additional Costs, Etc. With Respect to LIBOR Rate Advances.
(A) If, in the reasonable determination of any Lender, any applicable
"law," which expression, as used in this Section 2, includes statutes, rules and
regulations thereunder and interpretations thereof by any competent court or by
any Governmental Authority or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to such Lender or any Lending Affiliate by any central bank or
other fiscal, monetary or other authority (whether or not having the force of
law) adopted, becoming effective, or any change in the interpretation or
administration thereof, or compliance by such Lender or any Lending Affiliate
maintaining any LIBOR Rate Advance, in each case after the date hereof, shall:
(i) subject such Lender or any Lending Affiliate to any tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature with
respect to LIBOR Rate Advances (other than taxes imposed on or measured by
the overall net income of such Lender), or
(ii) change the taxation of payments to such Lender or any Lending
Affiliate of principal or interest on or any other amount relating to any
LIBOR Rate Advances (other than taxes imposed on or measured by the overall
net income of such Lender), or
(iii) impose or increase or render applicable any special deposit,
assessment, insurance charge, reserve or liquidity or other similar
requirement (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by such Lender or any
Lending Affiliate, or
(iv) impose on such Lender or any Lending Affiliate any other
conditions or requirements with respect to LIBOR Rate Advances, and the
result of any of the foregoing is:
(I) to increase the cost to such Lender of making, funding or
maintaining its LIBOR Rate Advances, or
(II) to reduce the amount of principal, interest or other amount
payable to such Lender hereunder on account of LIBOR Rate Advances, or
(III) to require such Lender to make any payment or to forego any
interest or other sum payable under this Agreement,
then, and in each such case, the Borrowers will, upon demand made by such Lender
at any time and from time to time and as often as the occasion therefor may
arise, pay to such Lender such additional amounts as will be sufficient to
compensate such Lender for such additional cost, reduction, payment or foregone
interest or other sum. The foregoing shall not be deemed to apply to any change
in the Reserve Rate applied in the calculation of the LIBOR Rate.
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(B) Neither Agent nor any Lender shall in any event be responsible to
any Borrower in any way if Agent is not able for any reason beyond its control
to quote a LIBOR Rate with respect to any proposed Interest Period. If, on any
proposed date of determination of a LIBOR Rate, Agent shall determine (which
determination shall be conclusive and binding on the Borrowers) that it is
unable to determine the LIBOR Rate with respect to any proposed Interest Period,
Agent shall promptly notify the Borrowers and the Lenders of such determination.
In such event, any then pending notice by a Borrower requesting the making of a
LIBOR Rate Advance, or conversion of any Base Rate Advance to a LIBOR Rate
Advance, or continuation of any LIBOR Rate Advance shall be deemed and shall
constitute a request for the making of a Base Rate Advance or a conversion to a
Base Rate Advance, as the case may be.
(C) If Agent determines that either maintenance of a LIBOR Rate
Advance would violate any applicable law, or that deposits of a type and
maturity appropriate to match fund any LIBOR Rate Advance does not accurately
reflect the cost of making or maintaining such a LIBOR Rate Advance, then Agent
shall suspend the availability of LIBOR Rate Advances so long as any such
condition exists, and all affected LIBOR Rate Advances outstanding shall be
immediately repaid upon notice to the Borrowers from Agent to do so; provided,
however, that if otherwise permitted under this Agreement the Borrowers may
reborrow, as a Base Rate Advance, an amount equal to the principal amount of all
such affected LIBOR Rate Advances so repaid.
2.17 Indemnification for Losses. Without limiting any of the other
provisions of this Agreement, each Borrower will, on demand by any Lender, at
any time and from time to time and as often as the occasion therefor may arise,
indemnify each Lender against any losses, costs or expenses which such Lender
may at any time or from time to time sustain or incur with respect to LIBOR Rate
Advances as a consequence of:
(A) the failure by such Borrower to borrow or continue any LIBOR Rate
Advance on the date of borrowing, conversion or continuation designated by such
Borrower, or
(B) the failure by such Borrower to pay, punctually on the due date
thereof, any amount payable by such Borrower under this Agreement, or
(C) the accelerated payment of such Borrower's obligations under
this Agreement as a result of a Default, or
(D) any voluntary repayment or prepayment of any principal of any
LIBOR Rate Advance on a date other than the last day of the Interest Period
relating to the principal so repaid or prepaid or so converted.
Such losses, costs or expenses will include, but will not be limited
to, the reimbursement for any loss, expense or cost in liquidating or employing
deposits acquired to fund any affected LIBOR Rate Advance.
2.18 Capital Adequacy. If, after the date hereof, either (A) the
introduction of or any change in or in the interpretation of any law or (B)
compliance by any Lender or any
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Lending Affiliate with any guideline or request from any central bank or
Governmental Authority (whether or not having the force of law) (i) affects or
would affect the amount of capital required or expected to be maintained by any
Lender or any of its Lending Affiliates and the respective Lender reasonably
determines that the amount of such capital is increased by or based upon the
existence of the LIBOR Rate Advances then, upon demand by such Lender, the
Borrowers shall immediately pay to such Lender, from time to time as specified
by such Lender, additional amounts sufficient to compensate such Lender in light
of such circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of LIBOR Rate Advances or
(ii) has or would have the effect of reducing the rate of return on the capital
or assets of such Lender or any Person controlling such Lender as a consequence
of, as determined by the Lender in its sole discretion and in Good Faith, the
existence of such Lender's commitments or obligations under this Agreement or
any of the other Financing Agreements, then, upon demand by such Lender, the
Borrowers immediately shall pay to the Lender, from time to time as specified
by the Lender, additional amounts sufficient to compensate such Lender in light
of such circumstances. The obligations of the Borrowers under this Subsection
2.18 shall survive payment of the Liabilities and termination of this Agreement.
2.19 Certificate. A certificate signed by an officer of a Lender,
setting forth any additional amount required to be paid by any Borrower to the
Lender under any provision of Subsections 2.16 through 2.18 and the computations
made by such Lender to determine such additional amount, shall be submitted by
such Lender to such Borrower in connection with each demand made at any time by
such Lender upon such Borrower under any of such provisions. Such certificate,
in the absence of manifest error, shall be conclusive as to the additional
amount owed.
2.20 Letters of Credit.
(A) Issuance of Letters of Credit. Subject to the terms and
conditions of this Agreement (including, without limitation, the conditions
precedent set forth in Subsections 4.1 and 4.2) on and after the Closing Date
and to and excluding the Termination Date, Agent shall request the Issuing Bank
to issue, and the Issuing Bank shall issue, standby Letters of Credit hereunder
at the request of any Borrower and for its account, as more specifically
described below; provided, however, that Agent shall not be obligated to request
the Issuing Bank to issue, and the Issuing Bank shall not be obligated to issue,
any Letter of Credit for the account of any Borrower if at the time of
such requested issuance (a) the face amount of such requested Letter of Credit,
when added to the aggregate outstanding principal amount of the Revolving Loans
made to the Borrower for whose account such Letter of Credit is being issued and
all Letter of Credit Obligations of such Borrower then outstanding would cause
such Revolving Loans and Letter of Credit Obligations to exceed such Borrower's
Sublimit or the Current Asset Base of such Borrower; or (b) (i) the face amount
of such requested Letter of Credit, when added to the aggregate outstanding
principal amount of the Revolving Loans and all Letter of Credit Obligations
then outstanding would cause the sum of the Revolving Loans and Letter of Credit
Obligations to exceed the Total Revolving Commitments then in effect; (ii) the
face amount of such Letter of Credit when added to the Letter of Credit
Obligations then outstanding, would exceed $7,000,000; or (iii) any order,
judgment or decree of any Governmental Authority shall purport by its terms to
enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any
law or governmental rule, regulation, policy, guideline or directive (whether or
not
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having the force of law) from any Governmental Authority with jurisdiction
over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain
from, the issuance of Letters of Credit in particular or shall impose upon the
Issuing Bank with respect to any Letter of Credit any restriction or reserve or
capital requirement (for which the Issuing Bank is not otherwise compensated) or
any unreimbursed loss, cost or expense which was not in effect as of the date of
this Agreement and which the Issuing Bank in Good Faith deems material to it.
(B) Terms of Letters of Credit. Each Letter of Credit shall be in a
form and substance acceptable to Agent and the Issuing Bank. Each Borrower
shall execute the Issuing Bank's standard form of application and reimbursement
agreement for each Letter of Credit to be issued for such Borrower's account.
In no event may the term of any Letter of Credit issued hereunder exceed twenty
four (24) months or such greater period as may be acceptable to the Issuing Bank
in its sole discretion, and all Letters of Credit issued hereunder shall expire
no later than the date that is five (5) Business Days prior to the last day of
the Term. The Borrowers shall cause any Letter of Credit containing an
automatic renewal provision to also contain a provision pursuant to which,
notwithstanding any other provisions thereof, it shall expire no later than the
date that is five (5) Business Days prior to the last day of the Term.
(C) Lenders' Participation. Immediately upon issuance or amendment by
the Issuing Bank of any Letter of Credit in accordance with the procedures set
forth in Subsection 2.20(A), each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuing Bank, without recourse
or warranty, an undivided interest and participation to the extent of such
Lender's Proportionate Share in the liability with respect to such Letter of
Credit (including, without limitation, all obligations of a Borrower with
respect thereto, other than amounts owing to the Issuing Bank consisting of
Issuing Bank Fees) and any security therefor or guaranty pertaining thereto.
(D) Notice of Issuance. Whenever any Borrower desires the issuance of
a Letter of Credit, such Borrower shall give Agent a fully completed and duly
executed letter of credit application and agreement in such form as the Issuing
Bank and Agent may require and in accordance with the Issuing Bank's customary
practices for letters of credit of the type requested (a "Letter of Credit
Request") no later than 12:00 noon Chicago time at least four (4) Business Days
in advance of the proposed date of issuance of any Letter of Credit (or, in each
case, such shorter period as may be agreed to by the Issuing Bank). The
transmittal by a Borrower of each Letter of Credit Request shall be deemed to be
a representation and warranty by such Borrower that the Letter of Credit may be
issued in accordance with and will not violate any of the requirements of
Subsection 2.20(A). No Letter of Credit shall require payment against a
conforming draft to be made thereunder prior to the second business day (under
the laws of the jurisdiction of the Issuing Bank) after the date on which such
draft is presented, together with all documents and/or certificates required to
be presented in connection therewith under the terms of the applicable Letter of
Credit. A Letter of Credit Request may be given to Agent telephonically and, if
requested by Agent, with prompt confirmation in writing.
(E) Payment of Amounts Drawn Under Letters of Credit. In the event of
any drawing under any Letter of Credit by the beneficiary thereof, the Issuing
Bank shall notify Agent, which shall notify the Borrower for whose account the
Letter of Credit was issued of such draw, not later than 12:00 Noon, Chicago
time, on the Business Day immediately prior to
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the date on which the Issuing Bank intends to honor such drawing. Such Borrower
shall give notice to be received by Agent and the Issuing Bank not later than
2:00 P.M., Chicago time, on such Business Day if it intends to reimburse the
Issuing Bank for the amount of such drawing with funds other than the proceeds
of Revolving Loans. Such notice from a Borrower shall be irrevocable and, if
given, such Borrower shall reimburse the Issuing Bank not later than the close
of business Chicago time on the day on which such drawing is honored in an
amount in immediately available funds equal to the amount of such drawing. If
Agent shall not have timely received such notice (i) such Borrower shall be
deemed to have timely given a Notice of Borrowing to Agent to make a Base Rate
Advance on the date on which such drawing is honored in an amount equal to the
amount of such drawing and (ii) subject to satisfaction or waiver of the
conditions specified in Section 2 hereof and the other terms and conditions of
Advances contained herein, the Lenders shall, on the date of such drawing, make
Revolving Loans in the amount of such drawing, the proceeds of which shall be
applied directly by Agent to reimburse the Issuing Bank for the amount of such
drawing or payment. If for any reason, proceeds of such Revolving Loans are not
received by the Issuing Bank on such date in an amount equal to the amount of
such drawing, such Borrower shall be obligated to and shall reimburse the
Issuing Bank, on the business day (under the laws of the jurisdiction of the
Issuing Bank) immediately following the date of such drawing, in an amount in
immediately available funds equal to the excess of the amount of such drawing
over the amount of such Revolving Loans, if any, which are so received, plus
accrued interest on such amount at the rate set forth in Subsection 2.21(A)
hereof for Base Rate Advances on the Revolving Loans.
(F) Payment by Lenders. In the event that a Borrower does not
reimburse the Issuing Bank for the full amount of any drawing pursuant to
Subsection 2.20(E), unless Agent shall elect to make a Revolving Loan in
accordance with Subsection 2.6(B), Agent shall promptly notify each Lender of
the unreimbursed amount of such drawing and of such Lender's respective
participation therein. Unless Agent shall have so elected, each Lender shall
make available to Agent for the benefit of the Issuing Bank an amount equal to
such Lender's respective participation in immediately available funds, not later
than 2:00 P.M. Chicago time on the business day (under the laws of the
jurisdiction of the Issuing Bank) after the date notified by Agent. In addition,
in the event that any Lender fails to make available to Agent the amount of any
such Lender's participation in such Letter of Credit Obligations as provided in
this Subsection 2.20(F), Agent may, but shall not be obligated to, fund the
amount of such Defaulting Lender's participation in such Letter of Credit and
recover such amount on demand from such Defaulting Lender in accordance with
Subsection 2.14(A). In the event that any Lender fails to make available to
Agent the amount of such Lender's participation in such Letter of Credit as
provided in this Subsection 2.20(F), and Agent does not elect to fund to the
Issuing Bank such Defaulting Lender's participation in such Letter of Credit as
provided in the immediately preceding sentence, the Issuing Bank shall be
entitled to recover such amount on demand from such Lender together with
interest at the Federal Funds Rate for the first three Business Days while such
amount remains unpaid and thereafter at the Base Rate. Agent shall distribute to
each Lender which has paid all amounts payable by it under this Subsection
2.20(F) with respect to any Letter of Credit issued by the Issuing Bank such
Lender's Proportionate Share of all payments subsequently received by Agent from
the Borrower for whose account the Letter of Credit was issued in reimbursement
of drawings honored by the Issuing Bank under such Letter of Credit when such
payments are received.
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(G) Obligations Absolute. The obligations of the Lenders under
Subsection 2.20(F) hereof shall be unconditional and irrevocable and shall be
paid strictly in accordance with the terms of this Agreement under all
circumstances, provided, however, that the Lenders shall have no obligation
under Subsection 2.20(F) in the event of the Issuing Bank's willful misconduct
or gross negligence in determining whether documents presented under the Letter
of Credit comply with the terms of such Letter of Credit.
2.21 Interest, Fees and Expenses.
(A) Interest. Each Borrower shall pay to Agent for the account of the
Lenders interest on the outstanding principal balance of its Revolving Loans and
other Liabilities, other than the outstanding principal amount of LIBOR Rate
Advances, at a per annum rate equal to the Base Rate plus the Applicable BR
Margin. Each Borrower shall pay to the Lenders interest on the outstanding
principal balance of LIBOR Rate Advances comprising a portion of its Revolving
Loans at a per annum rate equal to the LIBOR Rate plus the Applicable LIBOR
Margin, it being expressly understood and agreed that interest shall be computed
by charging for the first day in each Interest Period but not for the last day
in such Interest Period. Interest in respect of Base Rate Advances shall be
payable monthly in arrears not later than the first Business Day of each
following month. Interest in respect of LIBOR Rate Advances shall be payable at
the end of the applicable Interest Period, and if the applicable Interest Period
is greater than three months at the end of each three-month period following
commencement of the Interest Period. All interest and fees provided for
hereunder shall be computed on the basis of a 360-day year for the actual number
of days elapsed. Following the occurrence of a Default and during the
continuance thereof, each Borrower shall pay to Agent for the account of the
Lenders interest from the date of such Default (or, in the event of a Default
other than as described in Subsections 9.1(A), (H) or (I) of this Agreement,
from the date of notice to such effect to Borrowers from Agent) at a rate (the
"Post-Default Rate") equal to the rate set forth above for each of the
Liabilities plus three percent (3.00%) per annum on the outstanding principal
balance of all of the Liabilities and such interest shall be payable as provided
above or, if sooner, on demand.
(B) Facility Fees. Rail shall pay to Agent for the account of all of
the Lenders (to be distributed among the Lenders according to their respective
Proportionate Shares) a facility fee (the "Facility Fee") equal to the sum of
three-eighths of one percent (3/8%) per annum of the average daily unused
portion of the first $50 million of the Maximum Facility Amount and one-half of
one percent (1/2%) per annum of the average daily unused portion of the
remaining Maximum Facility Amount. The Facility Fee shall be payable quarterly
in arrears on the first Business Day of each February, May, August and November,
and on the termination of this Agreement. The Facility Fee shall be computed on
the basis of a 360-day year for the actual number of days elapsed.
(C) [INTENTIONALLY OMITTED.]
(D) Maximum Lawful Rate. This Agreement and the Revolving Notes are
hereby limited by this Subsection 2.21(D). In no contingency, whether by reason
of acceleration of the maturity of the amounts due hereunder or otherwise, shall
interest and fees contracted for, charged, received, paid or agreed to be paid
to Agent or any Lender exceed the maximum
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amount permissible under applicable law. If, from any circumstance whatsoever,
interest and fees would otherwise be payable to Agent or any Lender in excess of
the maximum amount permissible under applicable law, the interest and fees shall
be reduced to the maximum amount permitted under applicable law. If from any
circumstance, Agent or any Lender shall have received anything of value deemed
interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excess of interest shall be applied to the reduction of the
principal amount of the Liabilities and not to the payment of fees or interest,
or if such excessive interest exceeds the unpaid balance of the principal amount
of Liabilities, such excess shall be refunded to the applicable Borrower.
(E) Early Termination Charge. Subject to the provisions contained in
Subsection 2.15, the Borrowers may terminate this Agreement at any time other
than at the end of the Term upon the payment by the Borrowers to Agent for the
account of the Lenders (based on their respective Proportionate Shares), in
addition to payment of the then outstanding principal and accrued interest and
payment and performance of all other Liabilities (including without limitation
any fees due under Section 2 hereof and any other fees owed to Agent or
Lenders), of a termination charge (the "Termination Charge"), determined without
giving effect to any reduction in the Maximum Facility Amount pursuant to
Subsection 2.7(E), in an amount equal to two percent (2.00%) of the Maximum
Facility Amount (minus the amount of any reduction in the Total Revolving
Commitments on which any Borrower has paid the Commitment Reduction Fee due with
respect thereto) if such termination occurs on or prior to March 31, 1997, one
percent (1.00%) of the Maximum Facility Amount (minus the amount of any
reduction in the Total Revolving Commitments on which any Borrower has paid the
Commitment Reduction Fee due with respect thereto) if such termination occurs
after March 31, 1997 but on or prior to March 31, 1999 and one-half of one
percent (1/2%) of the Maximum Facility Amount (minus the amount of any reduction
in the Total Revolving Commitments on which any Borrower has paid the Commitment
Reduction Fee due with respect thereto) if such termination occurs after March
31, 1999 but before March 31, 2000.
(F) Reimbursement of Expenses. From and after the Closing Date, each
Borrower shall promptly reimburse Agent for all reasonable Expenses of Agent as
the same are incurred by Agent and upon receipt of invoices therefor and, if
requested by any Borrower, such reasonable backup materials and information as
such Borrower shall reasonably request.
(G) Letter of Credit Fees.
(i) Agent, for the ratable benefit of the Lenders, shall be entitled
to charge to the account of any Borrower for whose account a Letter of Credit
has been issued on the last day of each month, a fee (the "L/C Fee"), in an
amount equal to one percent (1.00%) per annum of the average daily outstanding
Letter of Credit Obligations of such Borrower for each month (or portion
thereof), payable monthly in arrears on the first Business Day of each
following month. Notwithstanding the foregoing, L/C Fees after notice to the
Borrowers from Agent following the occurrence and during the continuance of a
Default shall be payable at a rate equal to the rate at which the L/C Fees are
charged pursuant to the immediately preceding sentence, plus two percent (2.00%)
per annum and shall be payable as provided above or, if sooner, on demand. The
L/C Fee shall be computed on the basis of a 360-day year for actual days
elapsed.
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(ii) Each Borrower shall pay the Issuing Bank all of the Issuing
Bank's customary charges for out-of-pocket and administrative expenses upon the
issuance of any Letter of Credit for such Borrower's account and for any other
out-of-pocket costs, fees and expenses incurred by the Issuing Bank in
connection with the application for, issuance of or amendment to any Letter of
Credit. Agent shall be entitled to charge to the account of such Borrower
therefor, together with, as and when incurred by Agent or any Lender, any other
charges, fees, costs and expenses charged to Agent or any Lender for such
Borrower's account by the Issuing Bank (other than any fees charged to Agent or
any Lender which would be duplicative of the L/C Fee paid to Agent for the
benefit of the Lenders) (collectively, including the amounts described in the
first sentence of this Subsection 2.21(G)(ii), the "Issuing Bank Fees") in
connection with the issuance of any Letters of Credit by the Issuing Bank. Each
determination by Agent of L/C Fees, Issuing Bank Fees and other fees under this
Subsection 2.21(G) shall be conclusive and binding for all purposes, absent
manifest error.
(H) Additional Fees. In addition, Rail shall pay to Agent, for its
own benefit, the other fees required to be paid in the Fee Letter.
(I) Authorization to Charge Loan Account. Each Borrower hereby
authorizes Agent to charge such Borrower's Loan Account with the amount of all
Fees, Expenses and other payments to be paid hereunder, under the Fee Letter and
under the other Financing Agreements as and when such payments become due. Each
Borrower confirms that any charges which Agent may so make to such Borrower's
Loan Account as herein provided will be made as an accommodation to such
Borrower and solely at Agent's discretion. Agent may in its sole discretion
elect to bill any Borrower for such amounts in which case such amounts shall be
immediately due and payable with interest as provided herein.
(J) Indemnification in Certain Events. If after the date of the
Original Agreement, either (i) any change in or in the interpretation of any law
or regulation is introduced, including, without limitation, with respect to
reserve requirements, applicable to Agent, any of the Lenders, the Issuing Bank
or any Lending Affiliate or (ii) Agent, any of the Lenders, the Issuing Bank or
any Lending Affiliate complies with any future guideline or request from any
central bank or other Governmental Authority or (iii) Agent, any of the Lenders,
the Issuing Bank or any Lending Affiliate determines that the adoption after the
date of the Original Agreement of any applicable law, rule or regulation
regarding capital adequacy, or any change therein after the date of the Original
Agreement, or any change after the date of the Original Agreement in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof has or would have the effect described below, or Agent, any of the
Lenders, the Issuing Bank or any Lending Affiliate complies 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, and in the case of any
event set forth in this clause (iii), such adoption, change or compliance has or
would have the direct or indirect effect of reducing the rate of return on
Agent's, any of the Lenders', the Issuing Bank's or any Lending Affiliate's
capital as a consequence of its obligations hereunder to a level below that
which Agent, such Lender, the Issuing Bank, or any Lending Affiliate could have
achieved but for such adoption, change or compliance (taking into consideration
Agent's, such Lender's, the Issuing Bank's or the Lending Affiliate's policies
as the case may be with respect to capital adequacy) by an amount deemed by
Agent, such Lender,
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the Issuing Bank or the Lending Affiliate to be material, and any of the
foregoing events described in clauses (i), (ii) or (iii) increases the cost to
Agent, the Issuing Bank, any of the Lenders or any Lending Affiliate of (A)
funding or maintaining any of the Total Revolving Commitments or (B) issuing,
making or maintaining any Letter of Credit or of purchasing or maintaining any
participation therein, or reduces the amount receivable in respect thereof by
Agent, the Issuing Bank, any Lender or any Lending Affiliate, then the Borrowers
shall upon demand by Agent, pay to Agent, for the account of Agent, each
applicable Lender or, as applicable, the Issuing Bank or Lending Affiliate,
additional amounts sufficient to indemnify Agent, the Lenders, the Issuing Bank
or the Lending Affiliate against such increase in cost or reduction in amount
receivable. A certificate as to the amount of such increased cost and setting
forth in reasonable detail the calculation thereof shall be submitted to the
Borrowers by Agent, or the applicable Lender, Issuing Bank or Lending Affiliate,
and shall be conclusive absent manifest error. The obligations of the Borrowers
under this Subsection 2.21(J) shall survive payment of the Liabilities and
termination of this Agreement.
(K) Audit Fees. The Borrowers shall pay to Agent, on the last day of
each calendar month during which an audit, inventory analysis or other business
analysis is performed by or for the benefit of Agent, or, if earlier, upon the
completion of such audit or analysis, an audit fee in an amount equal to $500.00
per day for each Person employed to perform such audit or analysis, which Person
may be an employee of Agent or an independent contractor; provided, however,
Agent shall not, prior to the occurrence of a Default or Event of Default,
charge any Borrower more than $15,000 in the aggregate in any year for such
audit fees plus, in any event, all reasonable out-of-pocket costs or expenses
incurred by Agent in the performance of such audit or analysis.
2.22 No Novation. This Agreement (i) merely reevidences the
indebtedness heretofore evidenced by the Original Agreement, (ii) is given in
substitution for, and not as payment of, the indebtedness evidenced by the
Original Agreement and (iii) is in no way intended to constitute a novation or
discharge of the indebtedness outstanding evidenced by the Original Agreement or
the Notes.
3. REPORTING AND ELIGIBILITY REQUIREMENTS.
3.1 Monthly Reports and Collateral Reports.
(A) Monthly Reports.
Each Borrower shall submit to Agent and to each Lender not later than
the twentieth (20th) day of each Fiscal Month, a report (the "Initial Monthly
Report"), accompanied by a certificate in the form attached hereto as Exhibit
D-1A, which shall be signed by an Authorized Officer of such Borrower. The
Initial Monthly Report shall include, as of the last Business Day of the
preceding month:
(i) an aged trial balance of such Borrower's Accounts ("Accounts Trial
Balance") prepared in a manner reasonably acceptable to Agent; and
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(ii) a schedule of Inventory owned by such Borrower and in such
Borrower's possession or otherwise, by location, valued at the lesser of
cost, determined on a first-in, first-out basis, or market, and adjusted
for such reserves as Agent has previously indicated to such Borrower are
deemed by Agent to be appropriate in its sole discretion, together with a
statement, showing the detail as to each plant of such Borrower, of such
Borrower's cost of goods sold for the six month period ending with such
Fiscal Month.
In addition, each Borrower shall submit to Agent and to each Lender not later
than the 20th Business Day after each Fiscal Month , a report (the "Subsequent
Monthly Report", and collectively with the Initial Monthly Report, the "Monthly
Report"), accompanied by a certificate in the form attached hereto as Exhibit
D-1B, which shall be signed by an Authorized Officer of such Borrower. The
Subsequent Monthly Report shall include, as of the last Business Day of the
preceding month:
(i) a report summarizing such Borrower's aged trial balance of
accounts payable prepared in a manner and in detail reasonably acceptable
to Agent or, at such Borrower's option, an aged trial balance of accounts
payable, in each case showing the name of each party to whom a payable is
due and the amounts, including an aging thereof, in such form as Agent may
reasonably request;
(ii) a reconciliation of such Borrower's Accounts and Inventory
between the amount shown on such Borrower's books and such Borrower's
collateral reports delivered to Agent in the form of Exhibit D-2 and
Exhibit D-3 attached hereto, respectively;
(iii) the outstanding principal balance of the Revolving Loans and the
undrawn face amount of all Letters of Credit;
(iv) a statement that there exists no Default or Event of Default, or,
if any Default or Event of Default exists, a specific description of the
nature and the period of existence thereof and the action such Borrower has
taken and proposes to take with respect thereto;
(v) a statement that no Equipment has been sold, damaged, destroyed,
abandoned, become obsolete (except for (a) ordinary depreciation and wear
and tear and (b) damage to or the destruction or retirement of Equipment
with a value (as such term is used in Subsection 8.6 hereof) not in excess
of $500,000 in the aggregate for all Borrowers in any one calendar year)
since the later of the date of the last Monthly Report or the schedule of
Equipment most recently delivered to Agent by such Borrower or, if any such
events have occurred, describing the same with such specificity as is
satisfactory to Agent; and
(vi) such additional information as Agent shall reasonably require.
(B) Collateral Reports.
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In addition, each Borrower shall provide to Agent a written report at
least once every month unless requested more often by Agent (the "Collateral
Report"), substantially in the form attached hereto as Exhibit D-4 describing or
including, in a form and with such specificity as is satisfactory to Agent:
(i) all Accounts created or acquired by such Borrower subsequent to
the immediately preceding Collateral Report; together with copies of any
other reports or information, in a form and with such specificity as is
satisfactory to Agent, concerning Accounts included, described or referred
to in the Collateral Reports and any other documents in connection
therewith requested by Agent, including, without limitation, but only if
specifically requested by Agent, copies of all invoices and bills of lading
prepared in connection with such Accounts;
(ii) any net decrease in the aggregate amount of Eligible Accounts of
such Borrower since that last reported to Agent in the preceding Collateral
Report, and, if specifically requested by Agent, information in connection
with (a) any Account which has ceased to be an Eligible Account (including
by reason of collection thereof) since the most recent Collateral Report
and (b) any other Account with respect to which any setoff, counterclaim or
dispute has been asserted by any Account Debtor or any allegation of
delayed performance or nonperformance has been made by any Account Debtor
accompanied by a statement of any modification, adjustment or compromise
with respect to any such Account which affects the amount due or the time
when payment of such Account is to be made; provided such Borrower shall
not be deemed to be in breach of this clause (ii) unless the aggregate
amount of Accounts as to any Account Debtor as to which such Borrower fails
to provide such information exceeds $250,000;
(iii) information on all amounts collected by such Borrower on
Accounts subsequent to the immediately preceding Collateral Report;
(iv) a calculation of such Borrower's Current Asset Base in a form
reasonably acceptable to the Agent; and
(v) such additional information as Agent shall require.
(C) Electronic Transmission of Reports. Notwithstanding anything
herein to the contrary, the Monthly Reports, Collateral Reports and other
reports with respect to Collateral delivered by the Borrowers to Agent may be
sent, for receipt by Agent by the time specified or required pursuant to the
terms of this Agreement, by electronic transmission (in lieu of other written
forms), provided that (i) the form of such electronic transmission shall be
reasonably acceptable to Agent; (ii) the electronic transmission shall contain
the electronically transmitted signature of an Authorized Officer of such
Borrower; and (iii) the form of such electronic transmission shall contain the
following legend:
Pursuant to, and in accordance with, the terms and provisions of that
certain Amended and Restated Loan and Security Agreement (the
"Agreement") dated as of August 7, 1996
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between American National Bank and Trust Company of Chicago, as Agent
("Agent"), ABC Rail Products Corporation, a Delaware corporation and
certain other parties, the undersigned Borrower (as defined in the
Agreement), is executing and delivering by electronic transmission to
Agent this report accompanied by supporting data (collectively
referred to as the "Report"). Borrower warrants and represents to
Agent that the Report is true, correct and based on information
contained in Borrower's own financial accounting records. Borrower, by
the execution of the Report, hereby ratifies, confirms and affirms all
of the terms, conditions and provisions of the Agreement, and further
certifies on this day of _______________, ________, that Borrower is
in compliance with the Agreement. The Authorized Officer whose name is
written below hereby adopts such written name as his signature with
present intention to authenticate a writing.
3.2 Eligible Accounts. Agent shall have the sole right, in its
discretion exercised in Good Faith, to determine which Accounts are eligible
(the "Eligible Accounts"). Without limiting Agent's discretion, the following
Accounts shall not be Eligible Accounts: (i) Accounts which remain unpaid one
hundred twenty (120) days after the original date of the applicable invoice;
(ii) all Accounts owing by a single Account Debtor, including a currently
scheduled Account, if fifty percent (50%) or more of the balance owing by such
Account Debtor to a Borrower are not, or would not be, Eligible Accounts as a
result of the application of the provisions of the preceding clause (i); (iii)
Accounts with respect to which the Account Debtor is a director, officer,
employee, Subsidiary or Affiliate of any Borrower; (iv) Accounts with respect to
which the Account Debtor is the United States of America or any department,
agency or instrumentality thereof, unless with respect to any such Account, the
applicable Borrower has complied to Agent's satisfaction with the provisions of
the Federal Assignment of Claims Act of 1940, including, without limitation,
executing and delivering to Agent all statements of assignment and/or
notification which are in form and substance acceptable to Agent and which are
deemed necessary by Agent to effectuate the assignment to Agent of such
Accounts; (v) Accounts with respect to which the Account Debtor is not a
resident of the United States or the Alberta, British Columbia, Manitoba, Nova
Scotia, Ontario, Ottawa or Saskatchewan Provinces of Canada, unless the Account
Debtor has supplied the applicable Borrower with an irrevocable letter of
credit, issued by a financial institution satisfactory to Agent, sufficient to
cover such Account in form and substance reasonably satisfactory to Agent; (vi)
Accounts with respect to which the Account Debtor has asserted a counterclaim or
has a right of setoff (but only to the extent of such asserted counterclaim or
setoff unless the Account Debtor is refusing to pay the remaining amount of such
Account or Accounts); (vii) Accounts for which the prospect of payment or
performance by the Account Debtor is or may be impaired as determined by Agent
in its sole discretion exercised in Good Faith; (viii) Accounts with respect to
which Agent does not have a first and valid fully perfected security interest;
(ix) Accounts with respect to which the Account Debtor is the subject of
bankruptcy or a similar insolvency proceeding or has made an assignment for the
benefit of creditors or whose assets have been conveyed to a receiver or
trustee; (x) Accounts with respect to which the Account Debtor's obligation to
pay the Account
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is conditional upon the Account Debtor's approval or is otherwise subject to any
repurchase obligation or return right, as with sales made on a bill-and-hold,
guaranteed sale, sale-or-return, sale on approval or consignment basis; (xi)
Accounts to the extent that the Account Debtor's indebtedness to the applicable
Borrower exceeds a credit limit determined by Agent in Agent's sole discretion
in Good Faith; and (xii) Accounts from Account Debtors located in a state where
the applicable Borrower has failed to file any required notice of business
activities or similar notice or failed to qualify to do business if one or both
of such actions is a condition to such Borrower's enforcement or collection of
such Account under state law. In the event that any previously scheduled
Eligible Accounts cease to be Eligible Accounts under the above described
criteria, the applicable Borrower shall notify Agent as required in Subsection
3.1(B); provided, however, that if as a result thereof there has been a net
decrease of more than $250,000 (other than as a result of collections of
Accounts received by Agent) in the aggregate amount of Eligible Accounts since
the amount reported to Agent in the preceding Collateral Report, such Borrower
shall notify Agent thereof immediately after such Borrower has obtained
knowledge thereof. Notwithstanding the foregoing or the provisions of Subsection
3.10 hereof, Accounts and Inventory arising (whether before or after the time of
acquisition) from any business acquired by any Borrower shall be subject to
criteria with respect to eligibility and inclusion in the Current Asset Base of
such Borrower, in addition to, or different from the foregoing or the criteria
set forth in Subsection 3.10 hereof or the percentage rates of advance or other
limitations set forth in Subsection 2.4 hereof, as Agent may in its sole
discretion determine from time to time.
3.3 Account Warranties. With respect to Accounts of any Borrower
scheduled, listed or referred to on any Accounts Trial Balance as Eligible
Accounts or which such Borrower wants Agent to consider as Eligible Accounts,
such Borrower warrants and represents to Agent and Lenders that (except as to an
aggregate amount of Accounts of all Borrowers not to exceed $250,000 at any
time): (i) they are genuine, are in all respects what they purport to be, and
are not evidenced by a judgment; (ii) they represent undisputed, bona fide
transactions, completed in accordance with the terms and provisions contained in
the documents, if any, delivered to Agent and Lenders with respect thereto;
(iii) to the best of such Borrower's knowledge the amounts shown on the
respective Accounts Trial Balance, such Borrower's books and records and all
invoices and statements which may be delivered to Agent and Lenders with respect
thereto are actually and absolutely owing to such Borrower and are not in any
way contingent; (iv) no payments have been or shall be made thereon except
payments immediately (except for payments directed to such Borrower in which
event such Borrower shall hold such payments in trust as provided in Subsection
3.6 and so deposit them within one Business Day of such Borrower's receipt
thereof) deposited into Lock Box Accounts (as hereinafter defined) or Blocked
Accounts (as hereafter defined) or delivered to Agent pursuant to this
Agreement; (v) to the best of such Borrower's knowledge there are no setoffs,
counterclaims or disputes existing or asserted with respect thereto (except to
the extent deducted from the amount of the relevant Account in determining the
amount of the relevant Eligible Account) and such Borrower has not made any
agreement with any Account Debtor for any deduction therefrom except a discount
or allowance allowed by such Borrower in the ordinary course of its business for
prompt payment; (vi) to the best of such Borrower'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 as shown on the Accounts
Trial Balance, such Borrower's books and records and all invoices and statements
delivered to Agent with respect thereto; (vii) to the best of such
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Borrower's knowledge, all Account Debtors have the capacity to contract and are
solvent; (viii) the services furnished and/or goods sold giving rise thereto are
not subject to any Lien or claim except that of Agent and except as specifically
permitted in Subsection 8.1 below; (ix) such Borrower has no knowledge of any
fact or circumstance which would impair the validity or collectibility thereof;
and (x) to the best of such Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor which might
result in any material adverse change in such Account Debtor's financial
condition. Each Borrower agrees to notify Agent with respect to any Accounts
(except as to Accounts not to exceed $250,000 in the aggregate for all Borrowers
at any time outstanding) scheduled on the Accounts Trial Balance with respect to
which the warranties in this Subsection 3.3 are not true and which such
Borrower, therefore, does not want Agent to consider as Eligible Accounts.
3.4 Verification of Accounts. Agent shall have the right, at any
time or times hereafter, in Agent's name or in the name of a nominee of Agent,
to verify the validity, amount or any other matter relating to any Accounts, by
mail, telephone, telegraph or otherwise and in any event to sign any Borrower's
name on any verification of Accounts and notices thereof to Account Debtors.
Prior to the occurrence of a Default or Event of Default, Agent shall give the
applicable Borrower telephonic or written notice prior to any such verification.
3.5 Account Covenants. Each Borrower shall promptly upon learning
thereof (except as to Accounts not to exceed $500,000 in the aggregate for all
Borrowers at any time outstanding): (i) inform Agent in writing of any material
violation of such Borrower's contractual obligations to any Account Debtor or of
any assertion of any claims, offsets or counterclaims by any Account Debtor;
(ii) furnish to and inform Agent of all material adverse information relating to
the financial condition of any Account Debtor; and (iii) notify Agent in writing
if any of its then existing Accounts scheduled to Agent with respect to which
Agent or any Lender has made an advance are no longer Eligible Accounts as to
which Agent and each Lender has not previously received notice from such
Borrower that the same have ceased to be Eligible Accounts hereunder.
3.6 Collection of Accounts and Payments. Each Borrower shall
establish lock box accounts ("Lock Box Accounts") and blocked accounts (the
"Blocked Accounts") with Agent and with such banks as are reasonably acceptable
to Agent (collectively, the "Collecting Banks") to which all Account Debtors
shall directly remit all payments on Accounts and in which each Borrower will
immediately deposit all cash and other payments made for Inventory and other
payments constituting proceeds of Collateral in the identical form in which such
payments were made, whether by cash or check. The Collecting Banks shall
acknowledge and agree in a manner satisfactory to Agent that all payments made
to the Lock Box Accounts and the Blocked Accounts are the sole and exclusive
property of Agent, that the Collecting Banks have no right to setoff against the
Lock Box Accounts or Blocked Accounts and that the Collecting Banks will wire or
otherwise transfer immediately available funds in a manner satisfactory to
Agent, funds deposited into the Lock Box Accounts and Blocked Accounts to Agent
on a daily basis as soon as such funds are collected. Each Borrower hereby
agrees that all payments made to the Lock Box Accounts, Blocked Accounts or
otherwise received by the Collecting Banks or Agent, whether on the Accounts or
as proceeds of such Borrower's other Collateral or otherwise will be the sole
and exclusive property of Agent and will be applied on account of such
Borrower's Revolving Loans and the other Liabilities as follows: (i) when the
funds have become available,
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for collection of checks and other instruments (including automatic clearing
house electronic funds transfers and depository transfer checks) received by
Agent at its offices in Chicago, Illinois, Agent will credit (conditional upon
final collection) all such payments to such Borrower's Loan Account and (ii) all
cash payments received by Agent at its offices in Chicago, Illinois, including,
without limitation, payments made by wire transfer of immediately available
funds received by Agent in time for posting to the account of Agent on the date
received, will be credited to such Borrower's Loan Account immediately upon
receipt. Application on account of the Liabilities shall be made by Agent (i)
first to all Base Rate Advances and (ii) only when no Base Rate Advances are
outstanding to LIBOR Rate Advances. Each Borrower and each of its Affiliates,
Subsidiaries, shareholders, directors, officers, employees, agents or those
Persons acting for or in concert with such Borrower shall, acting as trustee for
Agent, receive, as the sole and exclusive property of Agent, any monies, checks,
notes, drafts or any other payment relating to and/or proceeds of such
Borrower's Accounts or other Collateral which come into the possession or under
the control of such Borrower or any of its Affiliates, Subsidiaries,
shareholders, directors, officers, employees, agents or those Persons acting for
or in concert with such Borrower and immediately upon receipt thereof, such
Borrower shall remit the same or cause the same to be remitted, in kind, to
Agent, at Agent's address set forth below. Each Borrower agrees to pay to Agent
any and all fees, costs and expenses which Agent incurs in connection with
opening and maintaining such Borrower's Lock Box Accounts and Blocked Accounts
and depositing for collection by Agent any check or item of payment received
and/or delivered to any Collecting Bank or Agent, respectively, on account of
the Liabilities and such Borrower further agrees to reimburse Agent for any
claims asserted by the Collecting Banks in connection with such Borrower's
Blocked Accounts and any amounts paid to any Collecting Bank arising out of
Agent's indemnification of such Collecting Bank against damages incurred by such
Person in the operation of any Blocked Account.
3.7 Appointment of Agent as Borrower's Attorney-in-Fact. Each
Borrower hereby irrevocably designates, makes, constitutes and appoints Agent
(and all officers, employees, agents and other Persons designated by Agent) as
such Borrower's true and lawful attorney-in-fact, and authorizes Agent, in such
Borrower's or Agent's name, to: (a) following the occurrence and during the
continuance of a Default (i) demand payment of Accounts; (ii) enforce payment of
Accounts by legal proceedings or otherwise; (iii) exercise all of such
Borrower'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 Agent deems advisable; (v) settle, adjust, compromise,
extend or renew any Account; (vi) discharge and release any Account; (vii)
prepare, file and sign such Borrower's name on any proof of claim in bankruptcy
or other similar document against an Account Debtor; (viii) notify the post
office authorities to change the address for delivery of such Borrower's mail to
an address designated by Agent, and open and deal with all mail addressed to
such Borrower; and (ix) do all acts and things which are necessary, in Agent's
sole discretion, to fulfill such Borrower's obligations under this Agreement;
and (b) at any time (i) take control in any manner of any item of payment or
proceeds thereof; (ii) have access to any lockbox or postal box into which such
Borrower's mail is deposited; (iii) endorse such Borrower's name upon any items
of payment or proceeds thereof and deposit the same in Agent's account on
account of the Liabilities; (iv) endorse such Borrower's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Account or any goods pertaining thereto; and (v) sign such Borrower's
name on any verification of Accounts and notices thereof to Account Debtors.
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3.8 Instruments and Chattel Paper. Immediately upon any Borrower's
receipt thereof, such Borrower shall deliver or cause to be delivered to Agent,
with appropriate endorsement and assignment to vest title and possession in
Agent, for the benefit of the Lenders, all chattel paper and instruments which
such Borrower now owns or may at any time or times hereafter acquire.
3.9 Notice to Account Debtors. Upon and during the continuance of
any Event of Default or Default, Agent may, in its sole discretion, at any time
or times and without prior notice to any Borrower, notify any or all Account
Debtors that the Accounts have been assigned to Agent and that Agent has a
security interest therein. Agent may direct any or all Account Debtors to make
all payments upon the Accounts directly to Agent. Agent shall furnish the
applicable Borrower with a copy of any such notice.
3.10 Eligible Inventory. Agent shall have the sole right, in its
sole discretion, in Good Faith to determine which Inventory is eligible (the
"Eligible Inventory"). Without limiting Agent's discretion, the following
Inventory shall not be Eligible Inventory: (i) Inventory which is obsolete, not
in good condition, or not either currently usable or currently salable in the
ordinary course of such Borrower's business; (ii) Inventory which Agent
determines, in the exercise of Agent's sole discretion and in accordance with
Agent's customary business practices, to be unacceptable due to age, type,
category and/or quantity; (iii) Inventory which is not subject to internal
control and management procedures acceptable to Agent, in Agent's sole
discretion; (iv) Inventory with respect to which Agent does not have a first
priority and valid fully perfected security interest; (v) Inventory of a
Borrower which is stored or placed with a bailee, warehouseman, supplier, lessor
or similar party other than Inventory with warehousemen, bailees or lessors as
to which such Borrower has notified Agent in writing and which have signed an
agreement in favor of Agent in form and substance satisfactory to Agent; (vi)
Inventory delivered to a Borrower on consignment; (vii) Inventory sold by a
Borrower on consignment, other than such Inventory consisting of railcar wheels
furnished on consignment (each, a "Permitted Consignment"), provided that (a)
such Borrower has notified Agent in writing of such consignment and the location
thereof, (b) Agent has received a written agreement signed by the consignor
thereof as to Agent's rights in and to such Inventory which agreement is in form
and substance satisfactory to Agent, and (c) the amount (valued as provided in
Subsection 2.4) of such Inventory does not exceed $1,500,000 in the aggregate
for all Borrowers; (viii) Inventory constituting supplies; and (ix) Inventory
which is not located at one of the locations designated on Schedule 6.5 (other
than Permitted Consignments). In the event that previously scheduled Inventory
ceases to be Eligible Inventory under the above-described criteria, and as a
result there has been a material net decrease in the aggregate amount of
Eligible Inventory since that last reported in the preceding Collateral Report,
the Borrower experiencing such decrease shall notify Agent and each Lender
thereof immediately after such Borrower has obtained knowledge thereof.
3.11 Inventory Warranties. With respect to Inventory scheduled,
listed or referred to in any Monthly Report or Collateral Report, each Borrower
warrants that (i) it is located at one of the premises listed on Schedule 6.5 or
is in transit between such listed locations; (ii) it is located at the location
shown thereon for it; (iii) it is not subject to any Lien whatsoever except for
the security interest granted to Agent hereunder and except as specifically
permitted in Subsection 8.1 below; and (iv) it is of good and merchantable
quality, free from
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any defects which would affect the market value of such Inventory. Each Borrower
agrees to notify Agent with respect to any of its Inventory with respect to
which the warranties in this Subsection 3.11 are not true and which such
Borrower, therefore, does not want Agent to consider as Eligible Inventory if as
a result thereof there has been a material net decrease in the aggregate amount
of Eligible Inventory since that last reported in the preceding Collateral
Report.
3.12 Inventory Records. Each Borrower shall at all times hereafter
maintain a perpetual inventory, keeping correct and accurate records itemizing
and describing the kind, type, quality and quantity of Inventory and Eligible
Inventory, such Borrower's cost therefor and daily withdrawals therefrom and
additions thereto, all of which records shall be available during Borrower's
usual business hours at the request of any of Agent's or any Lender's officers,
employees or agents. Each Borrower shall conduct a physical count of the
Inventory at least once each year (and, following the occurrence of an Event of
Default or a Default, at such other intervals as may be requested by Agent or
any Lender) and promptly following such physical inventory shall supply Agent
and each Lender with a report in a form and with such specificity as may be
satisfactory to Agent or such Lender concerning such physical count of the
Inventory.
3.13 Safekeeping of Inventory and Inventory Covenants. Neither Agent
nor any Lender shall be responsible for: (i) the safekeeping of the Inventory;
(ii) any loss of or damage to the Inventory; (iii) any diminution in the value
of the Inventory; or (iv) any act or default of any carrier, warehouseman,
bailee, forwarding agency or any other Person. As between the Borrowers, Agent
and Lenders, all risk of loss, damage, destruction or diminution in value of the
Inventory shall be borne by Borrowers. No Inventory of a Borrower shall be,
without Agent's prior written consent, at any time or times hereafter stored
with a bailee, warehouseman, consignee or similar third party, other than
warehousemen or bailees as to which such Borrower has notified Agent and which
have signed an agreement in favor of Agent in form and substance satisfactory to
Agent. No Borrower shall sell any of its Inventory on a bill-and-hold,
guaranteed sale, sale-or-return, sale on approval or consignment basis or any
other basis subject to a repurchase obligation or return right (except Permitted
Consignments).
3.14 Equipment Warranties. With respect to Equipment of a Borrower
scheduled, listed or referred to in any Monthly Report or Collateral Report or
which is the subject of any Loan, such Borrower warrants that (i) it is the
lawful owner of the Equipment and it has the right to subject the same to a
security interest in favor of Agent; (ii) it is not subject to any Lien except
for the security interest granted to Agent hereunder and except as specifically
permitted in Subsection 8.1 hereof; and (iii) all such Equipment is in good
condition and repair and is currently used or usable in such Borrower's
business.
3.15 Equipment Records. Each Borrower shall at all times hereafter
keep correct and accurate records itemizing and describing the location, the
kind, type, age and condition of its Equipment, such Borrower's cost therefor
and accumulated depreciation thereof; and retirements, sales, or other
dispositions thereof; all of which records shall be available during such
Borrower's usual business hours on demand to any of Agent's or any Lender's
officers, employees or agents. All Equipment is and shall be kept at the
locations specified on Schedule 6.5.
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3.16 Safekeeping of Equipment. Neither Agent nor any Lender shall be
responsible for: (i) the safekeeping of the Equipment; (ii) any loss or damage
to the Equipment; (iii) any diminution in the value of the Equipment; or (iv)
any act or default of any repairman, bailee or any other Person with respect to
the Equipment. As between the Borrowers, Agent and Lenders, all risk of loss,
damage, destruction or diminution in value of the Equipment shall be borne by
the Borrowers.
3.17 Locations. All Collateral which is not in transit is, and shall
be, located at the locations set forth on Schedule 6.5 hereto (except for
Permitted Consignments).
3.18 Certain Rail Mill Provisions. Without limiting Subsection
3.17 of the Agreement, Rail acknowledges and agrees that it shall not permit or
cause any Collateral (other than motor vehicles on a temporary basis) to be
located at the Rail Mill without receiving the prior written consent of the
Lenders. Without limiting Subsection 11.2 of the Agreement, the Borrowers will
indemnify the Agent for all costs and expenses it may incur in connection with
the Mortgagee Waiver and Intercreditor Agreement dated as of September 29, 1995
between Agent and Creditanstalt Corporate Finance, Inc., which costs and
expenses will be payable on demand. The Purchase Agreement dated as of March
27, 1995 by and between Automated Machine Tools, Ltd. and Rail is no longer of
any force or effect; no purchases of any property will be made thereunder; and
any property heretofore purchased thereunder has been accurately described to
the Agent and the Lenders in writing. Rail will cause all property constituting
part of the Rail Mill to be maintained separate from all other property of the
Borrower and readily identifiable as distinct therefrom.
4. CONDITIONS OF LOANS, ADVANCES AND LETTER OF CREDIT.
4.1 [INTENTIONALLY OMITTED.]
4.2 Conditions to Each Revolving Loan and Letter of Credit.
Notwithstanding any other provision contained in this Agreement, the making of
any Revolving Loan and the issuance of any Letter of Credit under this
Agreement, including without limitation the continuation of any LIBOR Rate
Advance from one Interest Period to another or conversion of one Type of Advance
to another Type of Advance, shall be conditioned upon receipt by Agent of all
notices and other communications required under Subsection 2.5 and upon the
satisfaction of the following, in each case to the satisfaction of Agent, both
before and after giving effect thereto and to the application of the proceeds
therefrom (and each request for the borrowing of a Revolving Loan or request for
a Letter of Credit, as the case may be, and the continuation of any LIBOR Rate
Advance from one Interest Period to another or conversion of one Type of Advance
to another Type of Advance, and the acceptance by any Borrower of the proceeds
of such Revolving Loan or Advance or issuance of such Letter of Credit, shall
constitute a representation and warranty by such Borrower that on the date of
such Loan or Advance or issuance of such Letter of Credit before and after
giving effect thereto and to the application of the proceeds therefrom, the
following such statements are true); provided, however, that (i) Subsection
4.2(B) shall not apply to a continuation of a LIBOR Rate Advance from one
Interest Period to another Interest Period or to a conversion of one Type of
Advance to another Type of Advance and (ii) Subsection 4.2(C) shall not apply to
such a continuation or conversion if the
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Agent consents (as provided in Subsection 2.5(A)) to the making thereof
notwithstanding the failure of such Borrower to satisfy the conditions set forth
in Subsection 4.2(C):
(A) Letters of Credit. With respect to the issuance of any Letter of
Credit, none of the events set forth in Subsection 2.20(A) hereof which would
prohibit Agent from requesting the Issuing Bank to issue a Letter of Credit has
occurred and is continuing or would result from the issuance of such Letter of
Credit.
(B) No Material Adverse Change. No material adverse change, as
determined by Agent in its sole discretion, in the business, operations,
condition (financial or otherwise), properties or prospects of Rail shall have
occurred at any time or times subsequent to the most recent annual financial
statements provided pursuant to Subsection 7.1(B) hereof or of the Original
Agreement.
(C) No Default. There shall not have occurred any Default or Event of
Default which is then continuing, nor shall any such Default or Event of Default
occur after giving effect to the Loan, Advance or Letter of Credit as the case
may be.
(D) Representations and Warranties True and Correct. The
representations and warranties of each Borrower contained in this Agreement and
the other Financing Agreements shall be true and correct in all material
respects on and as of the date of any Loan, Advance or Letter of Credit as
though made on and as of such date other than any such representations or
warranties that by their terms, refer to a specific date.
(E) Other Requirements. Agent shall have received, in form and
substance reasonably satisfactory to Agent, all drafts, certificates, orders,
authorities, consents, opinions, affidavits, applications, schedules,
instruments, security agreements, financing statements, mortgages and other
documents which are provided for hereunder or under the other Financing
Agreements, or which Agent may at any time reasonably request, including without
limitation all documents required to be delivered to Agent under Subsections 5.2
and 7.1, and all Monthly Reports and Collateral Reports required as set forth in
Subsection 3.1 hereof.
4.3 [INTENTIONALLY OMITTED.]
5. COLLATERAL.
5.1 Security Interest. To secure payment and performance of its
Liabilities, each Borrower hereby grants to Agent, for the benefit of Agent, the
Lenders and the Issuing Bank, a right of setoff against and a continuing
security interest (and Rail and Deco hereby confirm, acknowledge, continue and
ratify in all respects the right of setoff and security interest granted under
the Original Agreement and Security Agreement, respectively, and all other
Financing Agreements executed in connection therewith) in and to all of the
property, and interests in property, of such Borrower, whether real or personal,
whether now owned or hereafter acquired by such Borrower and wheresoever
located, including without limitation: (i) Accounts, contract rights, General
Intangibles, tax refunds, chattel paper, instruments, notes, letters of credit,
documents, and documents of title; (ii) Inventory; (iii) Equipment; (iv) such
Borrower's deposit accounts (general or special) with and credits and other
claims against Agent
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or any Lender, or any other financial institution with which such Borrower
maintains deposits; (v) such Borrower's monies, and any and all other property
and interests in property of such Borrower now or hereafter coming into the
actual possession, custody or control of Agent or any Lender or any agent or
affiliate of Agent or any Lender in any way or for any purpose (whether for
safekeeping, deposit, custody, pledge, transmission, collection or otherwise);
(vi) insurance proceeds of or relating to any of the foregoing; (vii) insurance
proceeds relating to any key man life insurance policy covering the life of any
director, officer, employee or former director, officer or employee of such
Borrower; (viii) insurance proceeds relating to business interruption insurance;
(ix) books and records relating to any of the foregoing; and (x) all accessions
and additions to, substitutions for, and replacements, products and proceeds, of
any of the foregoing; provided, however, that the foregoing property, and
interest in property, shall not include the Excluded Property so long as the
Excluded Property is collateral for indebtedness of Rail permitted to exist
under Subsection 8.2 and the Lien thereon is permitted to exist under Subsection
8.1; provided, further, that immediately and automatically (without the need for
any further action) upon the repayment of all of the indebtedness and
obligations for which any Excluded Property is collateral, and the release by
the holder of such indebtedness of all of its liens on and security interests in
such Excluded Property, such Excluded Property shall be Collateral securing the
Liabilities, and the Borrowers shall take, or cause to be taken, all such
actions as Agent may request to assure Agent of its first priority perfected
security interest and Lien in such Excluded Property.
5.2 Preservation of Collateral and Perfection of Security Interests
Therein. Each Borrower shall execute and deliver to Agent, concurrently with
the execution of this Agreement, and at any time or times hereafter at the
request of Agent, all financing statements, instruments or other documents (and
pay the cost of filing or recording the same in all public offices reasonably
deemed necessary by Agent), as Agent may request, in a form reasonably
satisfactory to Agent, to perfect and keep, as a first priority perfected
security interest, the security interest and Liens in the Collateral granted by
such Borrower to Agent for the benefit of Agent, the Lenders and the Issuing
Bank to secure the payment and performance of all of the Liabilities, or to
otherwise protect and preserve the Collateral and Agent's security interest and
Liens therein or to enforce Agent's security interests and Liens in the
Collateral. Should any Borrower fail to do so, Agent is authorized to sign any
such financing statements as such Borrower's agent. Each Borrower further
agrees that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
5.3 Real Property and Leaseholds. Each Borrower shall, at its own
expense, with respect to any interest in real estate (other than the Excluded
Property) existing on the date of the Original Agreement or acquired after such
date, upon Agent's request therefor (i) as soon as practicable and in any event
within thirty (30) days of such request, duly execute and deliver to
Agent any and all mortgages, trust deeds, deeds of trust, leasehold mortgages,
leasehold deeds of trust, pledges, assignments and other security agreements
(collectively, the "Mortgages") as specified by and in form and substance
satisfactory to Agent securing payment in and to the real properties owned by
such Borrower and leaseholds of such Borrower as may be designated by Agent,
(ii) as soon as practicable and in any event within ten (10) days of such
request, deliver to Agent a description of such properties and leaseholds in
detail sufficient for recordation and otherwise satisfactory to Agent, (iii) as
soon as practicable and in any event within thirty (30)
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days of such request, deliver to Agent an ALTA survey of said real estate in
form and substance acceptable to Agent and certified to Agent, showing no
encroachments or other exceptions to title which affect marketability of title
other than those permitted in writing by Agent and stating that said real estate
is located in an area of minimal flooding or accompanied by evidence that flood
insurance to cover any flood risk has been obtained, together with flood zone
maps for the area in which the property is located from the Federal Emergency
Management Agency; (iv) as soon as practicable and in any event within thirty
(30) days of such request, deliver to Agent an environmental survey with respect
to said real estate in form and substance satisfactory to Agent and made by an
engineer reasonably satisfactory to Agent which reveals no environmental risk
not acceptable to Agent; (v) as soon as practicable and in any event within
thirty (30) days of such request, if the interest being acquired is a leasehold
interest (other than leases that individually or in the aggregate are not
material to such Borrower as determined by Agent), deliver to Agent the lease
(and a recorded memorandum of the lease or short form lease sufficient to
constitute constructive notice of such lease if such lease is not recorded), and
an agreement from the landlord to Agent, in each case in form and substance
reasonably satisfactory to Agent; (vi) as soon as practicable and in any event
within thirty (30) days of such request, deliver to Agent an ALTA loan policy in
form and substance reasonably satisfactory to Agent and from a title insurance
company reasonably satisfactory to Agent insuring that the Lien of the Mortgages
delivered pursuant to this Subsection 5.3 is a valid, first priority Lien on
such interest in real estate (but subject to the lien of any encumbrance
permitted pursuant to Subsection 8.1 hereof then of record against the property
upon which any such Mortgage is sought) with the following endorsements if such
endorsements are available from such title insurance company (or, if not,
comparable endorsements available from such title insurance company): revolving
credit, contiguity (if applicable), 3.1 zoning, encroachments, comprehensive
mortgage, usury, doing business, location, last dollar, access, tying and such
other endorsements as Agent may require and if such a provision is in the loan
policy, waiver of compulsory arbitration; (vii) as soon as practicable and in
any event within thirty (30) days of such request, deliver to Agent and the
Lenders an opinion of counsel authorized to practice law in the state in which
such real estate is located, as to such matters required by Agent and in form
and substance satisfactory to Agent; and (viii) as soon as practicable and in
any event within thirty (30) days of such request, take whatever action
(including, without limitation, the recording of any Additional Mortgage, the
filing of financing statements, the giving of notices and the endorsement of
notices on title documents) as may be necessary or advisable in the opinion of
Agent to vest in Agent (or in any representative of Agent designated by it), for
the benefit of Agent, the Lenders and the Issuing Bank, valid and subsisting
first priority liens and charges and valid and first priority, perfected
security interests in and to the properties purported to be subject to the
Mortgages delivered pursuant to this Subsection 5.3, enforceable in accordance
with their terms (but subject to the lien of any encumbrance permitted pursuant
to Subsection 8.1 hereof then of record against the property upon which any such
Mortgage is sought); provided, however, that such Borrower shall not be required
to deliver a Mortgage covering any Excluded Property, or otherwise comply with
clauses (i) through (viii) of this Subsection with respect to Excluded Property,
so long as such Excluded Property is collateral for indebtedness of such
Borrower permitted under Subsection 8.2 and the Lien thereon is permitted under
Subsection 8.1; provided, further that immediately after repayment of all of the
indebtedness and obligations for which such Excluded Property is collateral and
the release by the holder of such indebtedness of all of its liens on and
security interests in such Excluded Property, such Borrower shall comply with
clauses (i) through (viii) of this Subsection with
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respect to such Excluded Property. At any time and from time to time, each
Borrower shall promptly execute and deliver any and all further financing
statements, instruments and documents (and pay the cost of filing or recording
the same in all places deemed necessary by Agent) and take all such other action
as Agent may reasonably deem necessary in obtaining the full benefits of, or in
preserving the Liens of, the Mortgages delivered pursuant to this Subsection
5.3.
5.4 Loss of Value of Collateral. Each Borrower shall immediately
notify Agent of any loss or damage or destruction (other than ordinary wear and
tear), in excess of $500,000 in the aggregate for all Borrowers in the value of
the Collateral in any Fiscal Year.
5.5 Setoff. Each Borrower agrees that Agent, each Lender and the
Issuing Bank has all rights of setoff and banker's lien provided by applicable
law and, in addition thereto, each Borrower agrees that (in addition to Agent's
rights with respect to proceeds of Collateral) at any time (a) any amount owing
by it under this Agreement or any other Financing Agreement is then due or (b)
any Default exists, Agent, each Lender and the Issuing Bank may apply to the
payment of the Liabilities, any and all balances, credits, deposits, accounts or
moneys of such Borrower then or thereafter with the Agent, such Lenders or
Issuing Bank. Without limitation of the foregoing and in addition to Agent's
rights with respect to the proceeds of the Collateral, each Borrower agrees that
upon and after the occurrence of a Default, Agent, each Lender and the Issuing
Bank and each of their respective branches and offices is hereby authorized, at
any time and from time to time, without notice, (i) to setoff against, and to
appropriate and apply to the payment of, the Liabilities (whether matured or
unmatured, fixed or contingent or liquidated or unliquidated) any and all
amounts owing by Agent, any such Lender or Issuing Bank or any such office or
branch to such Borrower (whether matured or unmatured, and, in the case of
deposits, whether general or special, time or demand and however evidenced) and
(ii) pending any such action, to the extent necessary, to hold such amounts as
collateral to secure such Liabilities and to return as unpaid for insufficient
funds any and all checks and other items drawn against any deposits so held as
Agent, such Lender or Issuing Bank may elect in its sole discretion. Each Lender
or Issuing Bank exercising such rights shall notify Agent thereof and any amount
received as a result of the exercise of such rights shall be reallocated among
Agent, the Lenders, and the Issuing Bank as set forth in Subsection 2.13 hereof.
5.6 Cash Collateral. In the event that the Issuing Bank has issued
any Letter of Credit, at any time after (i) the occurrence of a Default, (ii)
demand by Agent for payment of the Liabilities as provided in Subsection 9.1
hereof, (iii) there exists no unpaid principal balance of the Liabilities, (iv)
this Agreement shall terminate for any reason pursuant to Subsection 2.15
hereof, (v) the amount of (a) the aggregate outstanding principal balance of the
Revolving Loans plus the aggregate undrawn face amount of Letters of Credit
outstanding shall exceed the amount of (b) the Current Asset Base plus the sum
of the undrawn face amount of any Letters of Credit outstanding, or (vi)
termination of the Revolving Commitments, Agent may request of any Borrower for
whose account a Letter of Credit was issued, and such Borrower thereupon shall
deliver to Agent, cash collateral for any or all outstanding Letters of Credit
in an amount equal to the aggregate undrawn face amount of such Letters of
Credit. If any Borrower fails to deliver such cash collateral to Agent promptly
upon Agent's request therefor, Agent may, without limiting Agent's rights or
remedies arising from such failure to deliver cash,
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retain, as cash collateral, cash proceeds of the Collateral in an amount equal
to the aggregate undrawn face amount of all Letters of Credit then outstanding.
Agent may at any time apply any or all of such cash and cash collateral to the
payment of any or all of the Liabilities, including, without limitation, to the
payment of any or all of any Borrower's reimbursement obligations with respect
to any Letter of Credit or any other Letter of Credit Obligations. Pending such
application, Agent may (but shall not be obligated to) (i) invest the same in a
savings account, under which deposits are available for immediate withdrawal,
with ANB or such other bank as Agent may, in its sole discretion select, or (ii)
hold the same as a credit balance in an account with ANB in a Borrower's name.
Interest payable on any such savings account described in the foregoing sentence
shall be collected by Agent and shall be paid to such Borrower as it is received
by Agent less any fees or other amounts owing by such Borrower to the Issuing
Bank, Agent and any Lender with respect to any Letter of Credit and less any
amounts necessary to pay any of the Liabilities which may be due and payable at
such time. Agent shall have no obligation to pay interest on any credit
balances in any account opened for any Borrower pursuant to this Agreement.
5.7 Carry-Through of Liens in Favor of Agent. Any lien, security
interest, claim or encumbrance granted to Agent in any Collateral by any
Borrower shall continue in such Collateral and the proceeds thereof upon a sale,
exchange, consignment or other transfer or disposition of such Collateral to any
other Borrower, and no purchase of goods by any Borrower from another Borrower
shall be deemed, as to Agent, to be in the ordinary course of business, and any
contrary provisions of Section 9-306 or Section 9-307 of the Code or any similar
provisions of any other applicable law are hereby expressly waived by each
Borrower in favor of Agent, and each Borrower hereby further agrees that any
lien, security interest, claim or encumbrance in favor of Agent on any goods
purchased by it or otherwise transferred to it from another Borrower shall carry
through to such goods (and acknowledges that any title it receives with respect
to any such goods is and shall continue to be subject to such lien, security
interest, claim or encumbrance) in the hands of such Borrower, and the proceeds
and products thereof (including without limitation Accounts arising from the
sale of such goods), and shall continue to attach thereto until this Agreement
and the other Financing Agreements have been terminated.
6. WARRANTIES.
Each Borrower represents and warrants that as of the date of the
execution of this Agreement, and continuing so long as any of such Borrower's
Liabilities remain outstanding, and (even if there shall be no Liabilities of
such Borrower outstanding) so long as this Agreement remains in effect as
follows:
6.1 Corporate Existence; Capitalization. Such Borrower and each of
its Subsidiaries is a corporation duly organized and in good standing under the
laws of its state of incorporation as set forth on Schedule 6.1 and is duly
qualified as a foreign corporation and in good standing in the states set forth
on Schedule 6.1 and any and all other states where the nature and extent of the
business transacted by it or the ownership of its assets makes such
qualification necessary, except for those jurisdictions in which the failure so
to qualify could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. All of the outstanding capital stock of such
Borrower has been duly and validly issued, and is fully paid and nonassessable.
None of the shares of such Borrower has been issued in violation of,
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or is subject to, any preemptive or subscription rights. Except as set forth on
Schedule 6.1, there are no outstanding rights, options, warrants or agreements
for the purchase of, or the sale or issuance by such Borrower of, any capital
stock of such Borrower or securities convertible into or exchangeable for
capital stock of such Borrower as of the date hereof.
6.2 Corporate Authority. The execution and delivery by such Borrower
and each of its Subsidiaries of this Agreement and of each of the other
Financing Agreements to which it is a party and the performance of each such
Person's obligations hereunder and thereunder: (i) are within such Person's
corporate powers; (ii) are duly authorized by the Board of Directors of such
Person and, if necessary, the stockholders of such Person; (iii) are not in
contravention of the terms of such Person's Certificate of Incorporation or
Articles of Incorporation (as the case may be), or By-Laws, or of any indenture,
or other agreement or undertaking to which such Person is a party or by which
such Person or any of its property is bound or any judgment, decree or order
applicable to such Person; (iv) do not, as of the execution hereof or thereof,
require any governmental consent, registration or approval; (v) do not
contravene any contractual or governmental restriction binding upon such Person;
and (vi) will not, except as contemplated herein, result in the imposition of
any Lien upon any property of such Person under any existing indenture,
mortgage, deed of trust, loan or credit agreement or other material agreement or
instrument to which such Person is a party or by which it or any of its property
may be bound or affected.
6.3 Binding Effect. This Agreement and all of the other Financing
Agreements to which such Borrower is a party have been duly executed and
delivered by such Borrower and each of its Subsidiaries that is a party thereto
and constitute the legal, valid and binding obligations of such Borrower and
each such Subsidiary that is a party thereto, enforceable against such Borrower
and each such Subsidiary that is a party thereto in accordance with their
respective terms, except as limited by applicable bankruptcy, reorganization,
insolvency or similar laws affecting the enforcement of creditor's rights
generally and except as limited by general principles of equity.
6.4 Financial Data. The Borrowers have furnished to each Lender all
of the financial statements required to be so furnished through the Closing Date
pursuant to Subsection 7.1(A) and 7.1(B) of the Original Agreement (the
"Financials"). The Financials are in accordance with the books and records of
Rail and its Subsidiaries and fairly present the financial condition of Rail and
its Subsidiaries at the dates thereof and the results of operations of Rail and
its Subsidiaries for the periods indicated and the Financials have been prepared
in accordance with GAAP. In addition, Deco has furnished to each Lender a
consolidated balance sheet of Deco and its subsidiaries as of June 1, 1996 (the
"Deco Opening Balance Sheet"). To the best of Deco's knowledge, the Deco
Opening Balance Sheet is in accordance with the books and records of Deco and
its subsidiaries and fairly presents the financial condition of Deco and its
subsidiaries at the date hereof, and it has been prepared in accordance with
GAAP. The historical financial statements to be furnished to Lenders in
accordance with Subsection 7.1 hereof will be in accordance with the books and
records of Rail and its Subsidiaries and will fairly present the financial
condition of Rail and its Subsidiaries at the dates thereof and the results of
operations of Rail and its Subsidiaries for the periods indicated (subject, in
the case of unaudited financial statements, to normal year-end adjustments) and
such financial statements will be prepared in conformity with GAAP consistently
applied throughout the periods involved.
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Since the date of the Financials, there have been no changes in the condition,
financial or otherwise, of Rail and its Subsidiaries as shown on the Financials,
except (a) as contemplated herein, and (b) for changes in the ordinary course of
business (none of which individually or in the aggregate has been materially
adverse). All information, reports and other papers and data furnished to Agent
or any Lender are or will be, at the time the same are so furnished to Agent or
any Lender, accurate and correct in all material respects and complete insofar
as completeness may be necessary to give Agent and the Lenders a true and
accurate knowledge of the subject matter thereof.
6.5 Collateral. Except for liens permitted pursuant to Subsection
8.1 hereof, all of the Collateral and other property and interests in property
of such Borrower and each of its Subsidiaries is and will continue to be owned
or leased by such Person, as applicable, has been fully paid for and is free and
clear of all Liens. The Collateral and all other property and interests in
property of such Borrower is and shall be located at the locations set forth on
Schedule 6.5 attached hereto, except for Inventory in transit and except for
Permitted Consignments; provided that Schedule 6.5 shall be deemed to be amended
to add or delete locations to the extent such Borrower gives the Agent ten (10)
Business Days prior written notice thereof, the addition of such location does
not cause the occurrence of a Default or Event of Default and Agent has received
such documents as it may reasonably require pursuant to Subsection 5.2, 5.3 and
7.12 with respect to such additional locations and the Collateral located and to
be located at such additional locations.
6.6 Solvency. Such Borrower and each of its Subsidiaries (i) is not
"insolvent" as that term is defined in Section 101(32) of the Federal Bankruptcy
Code (the "Bankruptcy Code") (11 U.S.C. (S) 101(32)), Section 2 of the Uniform
Fraudulent Transfer Act ("UFTA") or Section 2 of the Uniform Fraudulent
Conveyance Act ("UFCA"), (ii) does not have "unreasonably small capital," as
that term is used in Section 548(a)(2)(B)(ii) of the Bankruptcy Code or Section
5 of the UFCA, (iii) is not engaged or about to engage in a business or a
transaction for which its remaining property is "unreasonably small" in relation
to the business or transaction as that term is used in Section 4 of the UFTA,
(iv) is not unable to pay its debts as they mature or become due, within the
meaning of Section 548(a)(2)(B) (iii) of the Bankruptcy Code, Section 4 of the
UFTA or Section 6 of the UFCA, and (v) now owns assets having a value both at
"fair valuation" and at "present fair salable value" greater than the amount
required to pay its "debts" as such terms are used in Section 2 of the UFTA and
Section 2 of the UFCA. Neither such Borrower nor any of its Subsidiaries shall
be rendered insolvent (as defined above) by the execution, delivery and
performance of this Agreement or any of the other Financing Agreements to which
it is a party or by the transactions contemplated hereunder or thereunder.
6.7 Chief Place of Business. As of the execution hereof, the
principal place of business and the chief executive office of such Borrower is
located at the location identified on Schedule 6.7 attached hereto. If any
change in any such location occurs, such Borrower promptly shall notify Agent
and each Lender thereof in accordance with Subsection 8.10 hereof. As of the
execution hereof, the books and records of such Borrower, all records of account
and all chattel paper (to the extent the same have not been delivered to Agent)
are located at the locations specifically identified on Schedule 6.7 as the
locations of such books, records, records
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of account and chattel paper, and if any change in such location occurs, such
Borrower promptly shall notify Agent thereof in accordance with Subsection 8.10
hereof.
6.8 Other Corporate Names. Except as disclosed on Schedule 6.8
attached hereto, such Borrower has not used any corporate or fictitious name
other than the corporate name shown on such Borrower's Articles of Incorporation
or Certificate of Incorporation (as the case may be).
6.9 Tax Liabilities. Such Borrower and each of its Subsidiaries has
filed all federal, state and local tax reports and returns required by any law
or regulation to be filed by it except for extensions duly obtained, and has
either duly paid all taxes, duties and charges indicated due on the basis of
such returns and reports, or made adequate provision for the payment thereof
except for taxes, duties and charges which individually or in the aggregate are
immaterial in amount and as to which the failure to pay would not result in any
adverse consequence to the value of any material portion the Collateral. As of
the date of this Agreement, the assessment of any material amount of additional
taxes in excess of those paid and reported is not reasonably expected. As of
the date hereof, no federal income tax returns of such Borrower or any of its
Subsidiaries have been audited by the Internal Revenue Service. The reserves
for taxes reflected on the balance sheets included in the Financials are, and
the reserves for taxes reflected on the balance sheets of such Borrower
submitted to Agent in accordance with the terms of Subsection 7.1 hereof will
be, adequate in amount for the payment of all liabilities for all federal, state
and local taxes (whether or not disputed) of such Borrower and its Subsidiaries
accrued through the date of such balance sheets. There are no material
unresolved questions or claims concerning any tax liability of such Borrower or
any of its Subsidiaries.
6.10 Loans. Except as permitted in Subsection 8.2, there are no
loans, other indebtedness for borrowed money of such Borrower or any of its
Subsidiaries or any guaranties made by such Borrower or any of its Subsidiaries.
6.11 Use of Proceeds. Neither such Borrower nor any of its
Subsidiaries owns any margin security. None of the loans advanced or other
credit provided to such Borrower hereunder has been or will be directly or
indirectly used for the purpose of (a) purchasing or carrying any margin
security or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase any margin security or for any other purpose not
permitted by Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System, or (b) except as disclosed in writing by Rail to the Lenders and
the Agent prior to August 7, 1996, purchasing any property constituting part of
the Rail Mill or any other property which may constitute Excluded Property;
provided, however, that this Subsection 6.11 shall not prohibit Rail from
spending up to $750,000 in any rolling twelve month period for ordinary course
maintenance and repair of property constituting part of the Rail Mill or any
other property which may constitute Excluded Property. Without limiting the
foregoing, no Borrower may use, directly or indirectly, proceeds of any Loans in
excess of $25,000,000 in aggregate principal amount during the term of this
Agreement for the purpose of consummating any one or more Acquisitions.
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6.12 Subsidiaries. Except as disclosed on Schedule 6.12 and except
for Excluded Subsidiaries acquired by Rail after the date hereof, such Borrower
has no Subsidiaries.
6.13 Litigation and Proceedings. There are no judgments, orders,
writs or decrees outstanding against such Borrower or any of its Subsidiaries
nor is there now pending or, to the best of such Borrower's or any of its
Subsidiaries' knowledge after diligent inquiry, threatened, any litigation,
investigations, contested claim, arbitration or governmental proceeding by or
against such Borrower or any of its Subsidiaries, except judgments, orders,
writs and decrees and pending or threatened litigation, investigations,
contested claims, arbitration and governmental proceedings which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.14 Other Agreements. Neither such Borrower nor any of its
Subsidiaries is in default under any material contract, lease, or commitment to
which it is a party or by which it is bound. Neither such Borrower nor any of
its Subsidiaries knows of any dispute regarding any contract, lease, or
commitment which is material to the continued financial success and well-being
of such Borrower or any of its Subsidiaries.
6.15 Employee Controversies. There are no controversies pending or, to
the best of such Borrower's or any of its Subsidiaries' knowledge after diligent
inquiry, threatened or anticipated, between such Borrower or any of its
Subsidiaries and any of its employees, other than employee grievances arising in
the ordinary course of business which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Neither
such Borrower nor any of its Subsidiaries has any accrued and unpaid liability
to any of its employees arising under the Federal Fair Labor Standards Act, as
amended.
6.16 Compliance with Laws and Regulations; Environmental Matters.
(A) General Compliance. The execution and delivery by such Borrower
and each of its Subsidiaries of this Agreement and all of the other Financing
Agreements to which it is a party and the performance of such Person's
obligations hereunder and thereunder are not in contravention of any law or
laws. Such Borrower and each of its Subsidiaries is in compliance with all
laws, orders, regulations and ordinances of all Governmental Authorities
relating to its respective business, operations and assets, except for laws,
orders, regulations and ordinances the violation of which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(B) Health and Safety Compliance. The operations of such Borrower and
each of its Subsidiaries comply in all material respects with all applicable
federal, state or local environmental, health and safety statutes and
regulations, except where the failure to comply with such statutes and
regulations could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. Except as disclosed on Schedule 6.16, none
of the operations of such Borrower or any of its Subsidiaries is subject to any
pending or, to the knowledge of such Borrower, judicial or administrative
proceeding threatened in writing and alleging the violation of any federal,
state or local environmental, health or safety statute or regulation or to the
knowledge of such Borrower is the subject of any federal or state investigation
evaluating whether any remedial action is needed to respond to a release of any
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hazardous or toxic waste, substance or constituent, or other substance into the
environment or to remedy any occupational safety or health condition. Except as
disclosed on Schedule 6.16 neither such Borrower nor any of its Subsidiaries has
filed any notice under any federal or state law or regulation indicating past or
present treatment, storage or disposal of a hazardous waste or reporting a spill
or release of a hazardous or toxic waste, substance or constituent, or other
substance into the environment. Neither such Borrower nor any of its
Subsidiaries has any contingent liability of which such Borrower or any of its
Subsidiaries has knowledge or reasonably should have knowledge in connection
with any release of any hazardous or toxic waste, substance or constituent, or
any other substance, into the environment that could reasonably be expected to
have a Material Adverse Effect.
6.17 Patents, Trademarks and Licenses. Such Borrower and each of its
Subsidiaries possesses adequate assets, licenses, permits, patents, patent
applications, copyrights, service marks, trademarks, trademark applications,
trade styles and trade names, governmental approvals or other authorizations and
other rights that are necessary for such Borrower and each of its Subsidiaries
to continue to conduct its business as heretofore conducted by it or
contemplated to be conducted by it.
6.18 ERISA. Neither such Borrower, nor any of its Subsidiaries nor any
ERISA Affiliate of such Borrower or any of its Subsidiaries maintains or
contributes to any Benefit Plan other than a Benefit Plan listed on Schedule
6.18 attached hereto. Each Plan which is intended to be a qualified plan under
Section 401(a) of the Internal Revenue Code has been determined by the Internal
Revenue Service to be so qualified and each trust related to any such Plan has
been determined to be exempt from federal income tax under Subsection 501(a) of
the Internal Revenue Code or an application for such a determination is pending.
Except as otherwise disclosed on Schedule 6.18 attached hereto, neither such
Borrower, nor any of its Subsidiaries nor any ERISA Affiliate of such Borrower
or any of its Subsidiaries maintains or contributes to any employee welfare
benefit plan within the meaning of Subsection 3(1) of ERISA which provides
medical benefits to retirees. Each Plan has been administered in all material
respects in accordance with its terms and the terms of ERISA, the Internal
Revenue Code and all other statutes and regulations applicable thereto. Neither
such Borrower, nor to the best of such Borrower's knowledge any of its
Subsidiaries nor any ERISA Affiliate of such Borrower or any of its Subsidiaries
has breached in any material respect any of the responsibilities, obligations or
duties imposed on it by ERISA or regulations promulgated thereunder with respect
to any Plan. No accumulated funding deficiency (as defined in Section 302(a)(2)
of ERISA and Section 412(a) of the Internal Revenue Code) exists in respect to
any Benefit Plan. Neither such Borrower, nor to the best of such Borrower's
knowledge any of its Subsidiaries nor any ERISA Affiliate of such Borrower or
any of its Subsidiaries nor any fiduciary of any Plan has engaged in a nonexempt
"prohibited transaction" described in Section 406 of ERISA or Section 4975 of
the Internal Revenue Code with respect to any Plan. No Termination Event has
occurred which, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect. Schedule B to the most recent annual
report filed with the Internal Revenue Service with respect to each Benefit Plan
has been furnished to Agent and is complete and accurate; since the date of each
such Schedule B, there has been no material adverse change in the funding status
or financial condition of the Benefit Plan relating to such Schedule B. Neither
such Borrower, nor any of its Subsidiaries nor any ERISA Affiliate of such
Borrower or any of its Subsidiaries has incurred any liability to the PBGC which
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remains outstanding other than for premium payments not yet due. Neither such
Borrower, nor any of its Subsidiaries nor any ERISA Affiliate of such Borrower
or any of its Subsidiaries has (i) failed to make a required contribution or
payment to a Multiemployer Plan, or (ii) made or to the best of such Borrower's
knowledge expects to make a complete or partial withdrawal under Sections 4203
or 4205 of ERISA from a Multiemployer Plan for which such Borrower, any of its
Subsidiaries or any ERISA Affiliate of such Borrower or any of its Subsidiaries
has any material unpaid liability. Neither such Borrower, nor any of its
Subsidiaries nor any ERISA Affiliate of such Borrower or any of its Subsidiaries
has failed to make a required installment under Subsection (m) of Section 412 of
the Internal Revenue Code or any other payment required under Section 412 of the
Internal Revenue Code on or before the due date for such installment or other
payment which has resulted in a material unpaid interest charge or penalty.
Neither such Borrower, nor any of its Subsidiaries nor any ERISA Affiliate of
such Borrower or any of its Subsidiaries is required to provide security to a
Benefit Plan under Section 401(a)(29) of the Internal Revenue Code due to a
Plan amendment that results in an increase in current liability for the plan
year. The present value of the benefit liabilities (determined in accordance
with Statement of Financial Accounting Standards No. 35) of each Benefit Plan of
such Borrower, each Subsidiary and each ERISA Affiliate of such Borrower as of
the last day of the year for such plan, as determined by such Benefit Plan's
independent actuaries, does not exceed the aggregate value, as determined by
such actuaries, of all assets under such Benefit Plan by more than $2,600,000 in
the aggregate as to all such Benefit Plans. Neither such Borrower nor any ERISA
Affiliate of such Borrower is required to contribute to any Multiemployer Plan
except any Multiemployer Plan specifically identified as such on Schedule 6.18.
6.19 Financial Condition. Since July 31, 1995, there has been no
change or event having a Material Adverse Effect.
6.20 Survival of Warranties. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement.
7. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any Liabilities of
such Borrower remain outstanding, and (even if there shall be no Liabilities of
such Borrower outstanding) so long as this Agreement remains in effect:
7.1 Financial Statements. Such Borrower shall, and shall cause each
of its Subsidiaries to, keep proper books of record and account in which full
and true entries will be made of all dealings or transactions of or in relation
to the business and affairs of such Person, in accordance with GAAP, and such
Borrower shall cause to be furnished to each of the Lenders the following:
(A) Monthly. As soon as practicable, and in any event within thirty
(30) days after the end of each Fiscal Month (including each Fiscal Month
occurring during Rail's final Fiscal Quarter of each Fiscal Year):
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(i) consolidated statements of income, retained earnings and cash
flow of such Borrower and its Subsidiaries (other than Excluded
Subsidiaries) for such Fiscal Month and for the period from the beginning
of the then current Fiscal Year to the end of such Fiscal Month and a
consolidated balance sheet of such Borrower and its Subsidiaries (other
than Excluded Subsidiaries) as of the end of such Fiscal Month, all in
reasonable detail and certified as accurate by an Authorized Officer of
such Borrower pursuant to a certificate in the form of Exhibit E attached
hereto, subject to changes resulting from normal year-end adjustments;
(ii) statements in which the actual consolidated cash flow and
income of such Borrower and its Subsidiaries (other than Excluded
Subsidiaries) for such Fiscal Month and for the period from the start of
the then current Fiscal Year to the end of such Fiscal Month, and the
actual consolidated balance sheets of such Borrower and its Subsidiaries
(other than Excluded Subsidiaries) at the end of such Fiscal Month (in each
case as required to be delivered pursuant to Subsection 7.1(A)(i) hereof)
are compared with the corresponding consolidated projected statements of
income and balance sheet for such periods and time furnished to the Lenders
pursuant to Subsection 7.1(C) below, in each case in the same format as the
audited statement of income and the audited balance sheet;
(iii) (a) copies of all operating statements for such Fiscal Month
prepared by such Borrower and its Subsidiaries (other than Excluded
Subsidiaries) for internal use, including, without limitation, statements
of cash flow, purchases and sales of inventory and other similar data in
each case as Agent may reasonably request, and (b) a comparison of actual
capital expenditures for such Borrower and its Subsidiaries (other than
Excluded Subsidiaries) with amounts budgeted for such Fiscal Month;
(iv) calculations setting forth the compliance with the financial
covenants set forth in Subsection 8.13 for the most recently completed
Fiscal Month; and
(v) in the event that any of the foregoing statements indicate that
any Borrower has varied in any material respect from any financial
projections provided pursuant hereto, a statement of explanation of such
deviation from an Authorized Officer of such Borrower.
In addition, together with the financial statements provided to Lenders pursuant
to the preceding Subsection 7.1(A)(i) for each Fiscal Month constituting the
last month in a Fiscal Quarter, such Borrower shall furnish comparisons (1) in
the case of the consolidated statements of income, retained earnings and cash
flow furnished for such Fiscal Quarter and for the year-to-date, with the
corresponding periods in the prior Fiscal Year, and (2) in the case of the
consolidated balance sheets as of the end of such Fiscal Quarter, with the
corresponding date one year earlier, all in reasonable detail.
(B) Annual. As soon as practicable and in any event within ninety
(90) days after the end of each Fiscal Year, audited consolidated and unaudited
consolidating statements of income, retained earnings and cash flow of Rail and
its Subsidiaries (other than Excluded Subsidiaries) for such Fiscal Year, and an
audited consolidated and unaudited consolidating balance sheet of Rail and its
Subsidiaries (other than Excluded Subsidiaries) as of the end of such
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Fiscal Year, setting forth in each case, in comparative form, corresponding
figures for the period covered by the preceding annual balance sheets (in the
case of statements) and as of the end of the preceding Fiscal Year (in the case
of balance sheets), and, in the case of audited statements, all in reasonable
detail and audited by independent certified public accountants selected by Rail
and reasonably satisfactory to Agent (the "Auditors"), whose opinion shall be
satisfactory to Agent, and Rail shall use its best efforts to cause such opinion
to be the subject of a reliance letter from such accountants permitting Agent,
Lenders and the Issuing Bank to rely on the contents thereof as if prepared
specifically for use by Agent, Lenders and the Issuing Bank.
(C) Budget. As soon as practicable and in any event within thirty
(30) days after the start of each Fiscal Year, an annual budget of such Borrower
and its Subsidiaries for the succeeding Fiscal Year in reasonable detail (on a
Fiscal Month basis), including consolidated statements of anticipated income and
cash flow of such Borrower and its Subsidiaries and consolidated balance sheets
of such Subsidiary and its Subsidiaries for the succeeding Fiscal Year (on a
Fiscal Month basis) in reasonable detail, and a detailed statement of the
methods and assumptions used in the preparation of such budget.
(D) Letters from Accountants and Consultants. As soon as practicable
and in any event within ten (10) days of delivery to Rail, a copy of (i) each
"Management Letter" or "Accounting Systems Letter" prepared by the Auditors in
connection with the financial statements referred to in Subsection 7.1(B) hereof
and (ii) to the extent that such letters may from time to time be issued by the
Auditors (collectively, "Accounting Systems Letters"), any letter issued by the
Auditors with respect to recommendations relating to Rail's financial or
accounting systems or controls, and Rail shall use its best efforts to cause
each Management Letter and Accounting Systems Letter to be accompanied by a
reliance letter from such accountants permitting Agent, Lenders and the Issuing
Bank to rely on the contents of each of the above as if prepared specifically
for use by Agent, Lenders and the Issuing Bank.
(E) Default Notices. As soon as practicable (but in any event not
more than five (5) days after any officer of such Borrower obtains knowledge of
the occurrence of an event or the existence of a circumstance giving rise to an
Event of Default or a Default), notice of any and all Events of Default or
Defaults.
(F) List of Account Debtors. Prior to the occurrence of a Default or
an Event of Default at the reasonable request of Agent (which requests shall be
not unduly burdensome) and after the occurrence of a Default or an Event of
Default at the request of Agent, names, addresses and phone numbers of such
Borrower's Account Debtors.
(G) Reports and Other Information. Promptly upon the transmission
thereof, copies of all such financial statements, proxy statements, notices and
reports as such Borrower may send to Borrower's public stockholders and copies
of all registration statements (without exhibits) and all reports which such
Borrower files with the Securities and Exchange Commission (or any governmental
body or agency succeeding to the functions of the Securities and Exchange
Commission) and copies of all press releases such Borrower issues.
(H) Joint Ventures; Excluded Subsidiaries. (i) As soon as
practicable, and in any event within ninety (90) days after the end of each
Fiscal Year, statements of income,
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retained earnings and cash flow of each Person included in the Joint Ventures
for such Fiscal Year and for the period from the beginning of the current Fiscal
Year to the end of such Fiscal Year, and a balance sheet of each such Person as
of the end of such Fiscal Year, all in reasonable detail, audited by the
Auditors, and certified as accurate by the chief financial officer or treasurer
of such Person, and (ii) as soon as practicable, and in any event within thirty
(30) days after the end of each Fiscal Month , statements of income, retained
earnings and cash flow of each Excluded Subsidiary for such Fiscal Month and for
the period from the beginning of the current Fiscal Year to the end of such
Fiscal Month, and a balance sheet of each Excluded Subsidiary as of the end of
such Fiscal Month, all in reasonable detail and certified as accurate by the
chief financial officer or treasurer of such Excluded Subsidiary.
(I) Other Information. With reasonable promptness, such other
business or financial data as Agent or any Lender may reasonably request.
Rail further agrees that upon receipt by Rail of any "Management
Letter" or "Accounting Systems Letter" referred to in clause (D) above wherein
such accountants have made recommendations for improvements to the financial or
accounting systems or controls of such Borrower, and (2) the reasonable request
of Agent to do the following, such Borrower shall promptly commence actions to
correct any material defects in or make improvements to such financial or
accounting systems or controls unless such Borrower reasonably disagrees with
the need for such actions.
All financial statements delivered to Lenders pursuant to the
requirements of this Subsection 7.1 (except where otherwise expressly indicated)
shall be prepared in accordance with GAAP (subject in the case of interim
financial statements to the lack of footnotes and normal year-end adjustments)
consistently applied, except for changes therein with which the independent
certified public accountants issuing the opinion on the financial statements
delivered pursuant to Subsection 7.1(B) hereof have previously concurred in
writing. Together with each delivery of financial statements required by
Subsections 7.1(A) and 7.1(B) hereof, Rail shall deliver to Lenders a
certificate of an Authorized Officer of Rail in the form attached hereto as
Exhibit E setting forth in such detail as is reasonably acceptable to Agent
calculations with respect to Borrowers' compliance with each of the financial
covenants contained in this Agreement (including without limitation Subsection
8.13 hereof) and stating that there exists no Default or Event of Default, or,
if any Default or Event of Default exists, specifying the nature and the period
of existence thereof and what action Rail proposes to take with respect thereto.
Together with each delivery of financial statements required by Subsection
7.1(B) hereof, Rail shall deliver to Lenders a certificate of the independent
certified public accountants who performed the audit in connection with such
statements stating that in making the audit necessary to the issuance of a
report on such financial statements, they have obtained no knowledge of any
Default or Event of Default, or, if such accountants have obtained knowledge of
a Default or Event of Default, specifying the nature and period of existence
thereof. Such accountants shall not be liable by reason of any failure to obtain
knowledge of any Default or Event of Default which would not be disclosed in the
ordinary course of an audit.
Each Lender shall exercise reasonable efforts to keep such
information, and all information acquired by such Lender in connection with the
negotiation, exclusion and delivery of this Agreement and as a result of any
inspection conducted in accordance with Subsection 7.2
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hereof, confidential, provided that each Lender may communicate such information
(a) to any other Person in accordance with the customary practices of commercial
banks or financial institutions relating to routine trade inquiries, (b) to any
regulatory authority having jurisdiction over Lenders, (c) to any other Person
in connection with such Lender's sale of any participations in the Liabilities
or assignment of any of such Lender's rights and obligations under this
Agreement or any of the other Financing Agreements or in connection with any
refinancings or all or any portion of the Liabilities, (d) to any other Person
in connection with the exercise of such Lender's rights hereunder or under any
of the other Financing Agreements, (e) to any Person in any litigation in which
such Lender is a party, (f) to any other Lender, or (g) to any other Person if
such Lender believes in its sole discretion that disclosure is necessary or
appropriate to comply with any applicable law, rule or regulation or in response
to a subpoena, order or other legal process or informal investigative demand,
whether issued by a court, judicial or administrative or legislative body or
committee or other governmental authority. Notwithstanding the foregoing,
information shall not be deemed to be confidential to the extent such
information (i) was already lawfully in the possession of any Lender prior to
the date of this Agreement, (ii) is available in the public domain, (iii)
becomes available in the public domain other than as a result of unauthorized
disclosure by such Lender or (iv) is acquired from a Person not known by such
Lender to be in breach of an obligation of secrecy to any Borrower. Each
Borrower authorizes and shall cause each of its Subsidiaries to authorize Agent
and each Lender to discuss the financial condition of such Borrower and each of
its Subsidiaries with such Person's independent certified public accountants
and agrees that such discussion or communication shall be without liability to
Agent, such Lender or any such independent certified public accountants.
7.2 Inspection. Agent or any Person designated by Agent in writing
and, with respect to clause (i) below, each Lender, shall have the right, from
time to time hereafter, to call at the place or places of business of such
Borrower or any of its Subsidiaries (or any other place where the Collateral or
any information relating thereto is kept or located) during reasonable business
hours, and, without hindrance or delay, (i) to inspect, audit, check and make
copies of and extracts from such Borrower's and each such Subsidiary's books,
records, journals, orders, receipts and any correspondence and other data
relating to the business of such Borrower and its Subsidiaries or to any
transactions between such Borrower or any of its Subsidiaries and any one or
more of Agent and the Lenders, (ii) to make such verification concerning the
Collateral as Agent may consider reasonable under the circumstances, and (iii)
to discuss the affairs, finances and business of such Borrower and its
Subsidiaries with any officers, employees or directors of such Borrower or its
Subsidiaries. Such Borrower shall cause its Subsidiaries to permit the
inspection contemplated by this Subsection 7.2. Such Borrower shall pay on
demand all photocopying expenses incurred by Agent or the Lenders under this
Subsection 7.2.
7.3 Conduct of Business. Such Borrower shall, and shall cause each
of its Subsidiaries to, maintain its corporate existence (except to the extent
such Borrower shall, upon five (5) days' prior written notice to the Lenders
determine to liquidate or dissolve any such Subsidiary or merge such Subsidiary
with any other Subsidiary or into such Borrower (provided that such Borrower is
the survivor of such merger) and no Default or Event of Default shall occur
before or after giving effect to such liquidation, dissolution or merger),
maintain in full force and effect all licenses, bonds, franchises, leases,
patents, permits, contracts and other
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rights necessary or desirable to the profitable conduct of its business, and
continue in and limit its operations to the same general line of business as
that presently conducted by it. Such Borrower shall, and such Borrower shall
cause each of its Subsidiaries to, comply with all laws, orders, regulations and
ordinances of any federal, foreign, state or local governmental authority,
except for such laws, orders, regulations and ordinances the violation of which
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Such Borrower shall, and such Borrower shall cause each
of its Subsidiaries to, pay promptly all liabilities to all of its respective
employees arising under the minimum wage and maximum hour provisions of the Fair
Labor Standards Act, as the same may be amended from time to time.
7.4 Claims and Taxes. Such Borrower agrees to indemnify and hold
Agent, Lenders and the Issuing Bank and each of their respective Lending
Affiliates, officers, directors, employees, attorneys and agents harmless from
and against any and all claims, demands, liabilities, losses, damages,
penalties, costs, and expenses (including, without limitation, reasonable
attorneys' and consultants' fees) relating to or in any way arising out of the
possession, use, operation or control of any of the assets of such Borrower or
any of its Subsidiaries. Such Borrower shall, and shall cause each of its
Subsidiaries to, pay or cause to be paid all license fees, bonding premiums and
related taxes and charges, and shall pay or cause to be paid all of such
Person's real and personal property taxes, assessments and charges and all of
such Person's franchise, income, unemployment, use, excise, old age benefit,
withholding, sales and other taxes and other governmental charges assessed
against such Person, or payable by such Person, at such times and in such manner
as to prevent any penalty from accruing or any Lien from attaching to its
property, provided that such Person shall have the right to contest in good
faith, by an appropriate proceeding promptly initiated and diligently conducted,
the validity, amount or imposition of any such tax, assessment or charge, and
during the pendency of such good faith contest to delay or refuse payment
thereof, if (i) such Person establishes adequate reserves to cover such
contested taxes, assessments or charges, and (ii) such contest could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The obligations of the Borrowers under this Subsection 7.4
shall survive the payment of the Liabilities and the termination of this
Agreement.
7.5 Agent's Closing Costs and Expenses. Such Borrower shall
reimburse Agent on demand for all allocated costs and reasonable expenses and
fees of Agent's in-house attorneys and paralegals and all reasonable out-of-
pocket expenses and fees paid or incurred in connection with the documentation,
negotiation and closing of the loans and other extensions of credit described
herein, including, without limitation, lien search, filing and recording fees
and taxes and the reasonable fees and expenses of any attorneys and paralegals
of Agent (whether such attorneys and paralegals are employees of Agent or are
separately engaged by such Person), whether such expenses and fees are incurred
prior to or after the date hereof. All reasonable costs and expenses incurred
by Agent with respect to the negotiation, documentation and closing of the loans
and other extensions of credit described herein and the enforcement, collection
and protection of Agent's interest in the Collateral shall be additional
Liabilities, payable on demand, repaid as provided in Subsection 2.9 hereof, and
secured by the Collateral.
7.6 Borrower's Liability Insurance. In addition to insurance
required by Subsection 7.7 hereof, such Borrower shall, and shall cause each of
its Subsidiaries to, maintain,
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at such Person's expense, such public liability, third party property damage and
other insurance, in such amounts and with such deductibles as is ordinarily
carried by other businesses engaged in the same or similar businesses and as is
reasonably acceptable to Agent and shall name Agent and the Lenders as an
additional insured on all such insurance.
7.7 Borrower's Property Insurance and Business Interruption
Insurance. Such Borrower shall, and shall cause each of its Subsidiaries to, at
such Person's expense, keep and maintain such business interruption insurance as
is ordinarily carried by other businesses engaged in the same or similar
businesses and as is reasonably acceptable to Agent. In addition, such Borrower
shall, and shall cause each of its Subsidiaries to, at such Person's expense,
keep and maintain the Collateral and its property insured against loss or damage
by fire, theft, burglary, pilferage, loss in transit, explosion, spoilage and
all other hazards and risks ordinarily insured against by other owners or users
of such properties in similar businesses, in each case (A) with respect to such
Borrower in an amount at least equal to the lesser of (i) the outstanding
principal balance of the Liabilities of such Borrower and (ii) the full
insurable value of all such property and with such deductibles as are ordinarily
carried by other businesses engaged in the same or similar businesses and as are
reasonably acceptable to Agent, and (B) with respect to such Subsidiaries in an
amount ordinarily insured against by other owners or users of such properties in
similar businesses. All such policies of insurance shall be in form and
substance reasonably satisfactory to Agent and issued by an insurance carrier or
carriers reasonably satisfactory to Agent. Such Borrower shall, and shall cause
each of its Subsidiaries to, deliver to Agent the original (or a certified copy)
of each of its policies of insurance and evidence of payment of all premiums
therefor. Such Borrower's policies of insurance shall name Agent as an
additional insured and shall contain an endorsement, substantially in the form
attached hereto as Exhibit F or otherwise reasonably acceptable to Agent. Such
Borrower hereby directs all insurers under such policies of insurance insuring
any Collateral to pay all proceeds of insurance policies directly to Agent.
Agent is authorized to collect all proceeds of insurance insuring any Collateral
and, at Agent's option: (1) apply the proceeds against the Revolving Loans of
such Borrower and the other Liabilities of such Borrower, whether or not then
due or (2) allow such Borrower to use such money, or a part thereof, to repair
any damage or restore, replace or rebuild the property that was the subject of
such proceeds; provided, however, that notwithstanding the foregoing provisions,
as to proceeds of insurance for Equipment constituting Collateral or real
property if all of the following conditions are satisfied (i) no Default or
Event of Default has occurred and is continuing, (ii) in the reasonable judgment
of Agent the damaged Collateral or asset constitutes real property or equipment
that can be repaired, restored, replaced or rebuilt to an architectural and
economical unit of the same character and not less valuable than such Collateral
or asset was prior to such damage and destruction, (iii) in the case such
proceeds in the aggregate are greater than $250,000, such Borrower has delivered
to Agent a business plan in form and substance reasonably satisfactory to Agent
demonstrating, to Agent's reasonable satisfaction, that such Borrower will be
able to continue to operate its business at the same level in all material
respects as operated prior to such damage and destruction and (vi) the
Liabilities of such Borrower will at all times be collateralized to the same
extent as prior to such damage and destruction, then (X) if such proceeds are in
the aggregate less than $500,000, Agent shall release the proceeds of such
insurance as to Equipment or real property to such Borrower and such Borrower
shall immediately repair, restore, replace or rebuild the property that was the
subject of such proceeds to an architectural and economic unit of the same
character and not less valuable than such asset was prior to such damage or
destruction using such
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proceeds or (Y) if such proceeds are equal to or greater in the aggregate than
$500,000, Agent shall hold the proceeds of such insurance as to Equipment or
real property as Collateral and (provided that no Event of Default or Default
has occurred and is continuing or occurs, at which time Agent may in its
discretion apply such proceeds to the Liabilities of such Borrower) make them
available to such Borrower for repair, restoration, replacement or rebuilding of
such property, provided in either case such repaired, restored, replaced or
rebuilt property shall be free and clear of all Liens, and subject to such other
terms and conditions as Agent may reasonably determine; and further provided
that while in possession of such funds Agent shall not be required to invest the
same or to hold such funds separate and apart from Agent's other funds.
Notwithstanding anything herein to the contrary, at any time when a Default or
Event of Default has occurred and is continuing, if Agent receives proceeds of
insurance or is holding proceeds of insurance theretofore received by Agent,
Agent may apply the same to the Liabilities at any time and from time to time as
it may determine. Such Borrower irrevocably makes, constitutes and appoints
Agent (and all officers, employees or agents designated by Agent) as such
Borrower's true and lawful attorney-in-fact for the purpose of making, settling
and adjusting claims under all such policies of insurance, endorsing the name of
such Borrower on any check, draft, instrument or other item of payment received
by such Borrower, Agent or any Lender pursuant to any such policies of insurance
and for making all determinations and decisions with respect to such policies of
insurance. If such Borrower or any of its Subsidiaries at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above or to pay any premium in whole or in part relating thereto, then
Agent without waiving or releasing any obligation or Default by such Borrower or
any such Subsidiary hereunder, may at any time or times thereafter (but shall be
under no obligation to do so) obtain and maintain such policies of insurance and
pay such premiums and take any other action with respect thereto which Agent
deems advisable.
7.8 ERISA Reporting. Such Borrower shall deliver to Agent and
Lenders, at such Borrower's expense, the following information as and when
provided below:
(i) as soon as possible, and in any event within ten (10) days
after such Borrower, any of its Subsidiaries or any ERISA Affiliate of such
Borrower or any of its Subsidiaries knows or has reason to know that a
Termination Event has occurred, a written statement of an Authorized
Officer of such Borrower describing such Termination Event and the action,
if any, which such Borrower, such Subsidiary or such ERISA Affiliate has
taken, is taking or proposes to take with respect thereto, and when known,
any action taken or threatened by the Internal Revenue Service ("IRS"), the
Department of Labor ("DOL") or PBGC with respect thereto;
(ii) as soon as possible, and in any event within thirty (30) days,
after such Borrower, any of its Subsidiaries or any ERISA Affiliate of
such Borrower knows or has reason to know that a nonexempt prohibited
transaction (defined in Section 406 of ERISA and Section 4975 of the
Internal Revenue Code) has occurred with respect to any Plan, a statement
of an Authorized Officer of such Borrower describing such transaction;
(iii) promptly after the filing thereof with the DOL, IRS or PBGC,
copies of each annual report, including schedule B thereto, filed with
respect to each Benefit Plan;
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(iv) promptly after the filing thereof with the IRS, a copy of each
funding waiver request filed with respect to any Benefit Plan and all
communications received by such Borrower, any of its Subsidiaries or any
ERISA Affiliate of such Borrower or any of its Subsidiaries with respect to
such request;
(v) promptly upon the occurrence thereof, notification of any
material increases in the benefits of any existing Benefit Plan or the
commencement of contributions in excess of $100,000 per annum to any Plan
to which such Borrower, any of its Subsidiaries or any ERISA Affiliate of
such Borrower or any of its Subsidiaries was not previously contributing;
(vi) promptly upon, and in any event within two (2) Business Days
after, receipt by such Borrower, any of its Subsidiaries or any ERISA
Affiliate of such Borrower or any of its Subsidiaries of notice of the
PBGC's intention to terminate a Benefit Plan or to have a trustee appointed
to administer a Benefit Plan or notice is given by such Borrower or an
ERISA Affiliate of such Borrower to terminate any Benefit Plan, which
termination could result in a material liability to such Borrower, copies
of each such notice;
(vii) promptly upon, and in any event within two (2) Business Days
after, receipt by such Borrower, any of its Subsidiaries or any ERISA
Affiliate of such Borrower or any of its Subsidiaries of an unfavorable
determination letter from the IRS regarding the qualification of a Plan
under Section 401(a) of the Internal Revenue Code, copies of such letter;
(viii) promptly upon, and in any event within two (2) Business Days
after, receipt by such Borrower, any of its Subsidiaries or any ERISA
Affiliate of such Borrower or any of its Subsidiaries of a notice from a
Multiemployer Plan regarding the imposition of material withdrawal
liability, copies of such notice; and
(ix) promptly upon, and in any event within ten (10) Business Days
after, such Borrower, any of its Subsidiaries or any ERISA Affiliate of
such Borrower or any of its Subsidiaries fails to make a required
installment under Subsection (m) of Section 412 of the Code or any other
payment required under Section 412 on or before the due date for such
installment or payment, a notification of such failure.
7.9 Notice of Suit or Adverse Change in Business. Such Borrower
shall, and shall cause each of its Subsidiaries to, as soon as possible, and in
any event within five (5) Business Days after any officer of such Person learns
of the following, give written notice to the Lenders of (i) any material
proceeding(s) (including, without limitation, litigation, investigations,
arbitration or governmental proceedings) being instituted or threatened to be
instituted by or against such Person in any federal, state, local or foreign
court or before any commission or other regulatory body (federal, state, local
or foreign), (ii) notice that such Person's operations are not in full
compliance with all requirements of applicable federal, state or local
environmental, health and safety statutes and regulations, except for notices as
to matters which, either individually or in the aggregate, could not have a
Material Adverse Effect on such Person, (iii) notice that such Person is subject
to a federal or state investigation evaluating whether any
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remedial action is needed to respond to the release of any hazardous or toxic
waste, substance or constituent, or other substance into the environment, (iv)
notice that any properties or assets of such Person are subject to an
Environmental Lien, (v) any material adverse change in the such Person's
business, operations, condition (financial or otherwise), properties or
prospects, and (vi) any changes in the locations of any Collateral or assets of
such Borrower from the locations listed on Schedule 6.5.
7.10 Supervening Illegality. If, at any time or times hereafter,
there shall become effective any amendment to, deletion from or revision,
modification or other change in any provision of any statute, or any rule,
regulation or interpretation thereunder or any similar rule or regulation
adversely affecting, in Agent's sole determination (which determination shall be
conclusive in the absence of manifest error), any Lender's or the Issuing Bank's
extension of credit described in this Agreement and/or the selling of
participations therein, such Borrower shall, at such Borrower's option, either
(i) pay to Lenders the then outstanding balance of its Liabilities, and hold
Lenders harmless from and against any and all obligations, fees, liabilities,
losses, penalties, costs, expenses and damages, of every kind and nature,
imposed upon or incurred by such Borrower by reason of Agent's, any Lender's or
the Issuing Bank's failure or inability to comply with the terms of this
Agreement or any of the other Financing Agreements, or (ii) indemnify and hold
Agent, Lenders and each Issuing Bank harmless from and against any and all
obligations, fees, liabilities, losses, penalties, costs, expenses and damages,
of every kind and nature, imposed upon or incurred by Agent, any Lender or the
Issuing Bank by reason of such amendment, deletion, revision, modification, or
other change. The obligations of the Borrowers under this Subsection 7.10 shall
survive payment of the Liabilities and termination of this Agreement.
7.11 Environmental Safety and Health Laws. If such Borrower or any
of its Subsidiaries shall (a) receive any written notice that any violation of
any federal, state or local environmental law or regulation may have been
committed or is about to be committed by such Borrower or any of its
Subsidiaries, (b) receive any written notice that any administrative or judicial
complaint or order has been filed or is about to be filed against such Borrower
or any of its Subsidiaries alleging a violation of any federal, state or local
environmental law or regulation or requiring such Borrower or any of its
Subsidiaries to take any action in connection with the release of toxic or
hazardous substances into the environment, or (c) receive any written notice
from a federal, state, or local governmental agency, other Governmental
Authority or private party alleging that such Borrower or any of its
Subsidiaries may be liable or potentially responsible for costs associated with
a response to or cleanup of a release of a toxic or hazardous substance into the
environment or any damages caused thereby which could in any respect be material
to such Borrower or have a Material Adverse Effect, such Borrower shall, and
shall cause any such Subsidiary to, provide Agent with a copy of such notice or,
in the event of any such verbal notice, a written description of such
communication within fifteen (15) days of the receipt thereof. Within fifteen
(15) days of such Borrower having learned of the enactment or promulgation of
any federal, state or local environmental law or regulation that could
reasonably be expected to have a Material Adverse Effect, such Borrower shall
provide Agent with notice thereof.
7.12 Landlord Consents and Waivers. Such Borrower shall deliver to
Agent, upon the date of the execution of this Agreement with respect to each
lease of premises then in
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effect and on or before the date of execution of any lease of premises to such
Borrower with respect to any lease in effect thereafter, a landlord's waiver
(including, upon Agent's request therefor, a consent to a leasehold mortgage)
executed by the lessor of each location leased to such Borrower; provided,
however, that the foregoing provisions of this Subsection shall not apply to any
lease by such Borrower of a sales office where no Collateral is kept other than
immaterial office equipment. Each landlord's waiver so delivered shall be in
form and substance reasonably satisfactory to Agent. Such Borrower shall pay all
of its obligations under such leases of real property when due and promptly
shall notify Agent and Lenders of any breach of, or default under, any such
lease.
8. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that so long as any Liabilities of
such Borrower remain outstanding, and (even if there shall be no Liabilities of
such Borrower outstanding) so long as this Agreement remains in effect:
8.1 Encumbrances. Such Borrower shall not, and shall not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien or
other encumbrance of any nature whatsoever on any of its assets, including,
without limitation, the Collateral, other than the following (the "Permitted
Liens"): (i) Liens securing the payment of taxes, either not yet due or the
validity of which is being contested in good faith by appropriate proceedings,
and as to which such Borrower or such Subsidiary shall, if appropriate under
generally accepted accounting principles, have set aside on its books and
records adequate reserves; (ii) deposits under workmen's compensation,
unemployment insurance, social security and other similar laws, or to secure the
performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure indemnity, performance or other similar bonds for
the performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure statutory obligations or surety or appeal bonds, or
to secure indemnity, performance or other similar bonds in the ordinary course
of business; (iii) the Liens in favor of Agent; (iv) Liens which arise by
operation of law, other than Environmental Liens; (v) zoning restrictions,
easements, licenses, reservations, conditions, covenants and other restrictions
affecting the use of real property; (vi) Liens represented by Capitalized Leases
permitted under Subsection 8.2(iii) hereof; (vii) Liens listed on Schedule 8.1
hereto; (viii) Liens existing on the assets of any Excluded Subsidiary at the
time such Person becomes an Excluded Subsidiary; and (ix) other Liens and
encumbrances on property, which do not, in Agent's sole determination, (a)
materially impair the use of such property for purposes of this Agreement or
otherwise, or (b) materially lessen the value of such property to Agent or
otherwise. Such Borrower shall not, and shall not permit any of its Subsidiaries
to, permit the filing of any financing statement naming such Borrower or any of
its Subsidiaries as debtor, except for financing statements filed with respect
to liens or security interests expressly permitted by this Agreement.
8.2 Indebtedness. Such Borrower shall not, and such Borrower shall
not permit any of its Subsidiaries to, incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligations of a
type which would appear on a balance sheet of such Borrower or any of its
Subsidiaries prepared in accordance with GAAP as a liability, including
Capitalized Lease Obligations, or indebtedness, except (i) the Liabilities, (ii)
trade obligations and normal accruals in the ordinary course of business not yet
due and payable, or
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with respect to which such Borrower or such Subsidiary is contesting in good
faith the amount or validity thereof by appropriate proceedings, and then only
to the extent that such Borrower or such Subsidiary has set aside on its books
adequate reserves therefor, if appropriate under generally accepted accounting
principles, (iii) Capitalized Lease Obligations which are incurred in connection
with the purchase of any hereafter acquired Equipment or other Capital
Expenditures, so long as such indebtedness is used to finance not more than 100%
of the purchase price of such property (the "Third Party Financed Equipment")
and the aggregate amount of such Capitalized Lease Obligations incurred in any
Fiscal Year for all Borrowers and all of their Subsidiaries does not exceed
$2,000,000, (iv) indebtedness owed by Rail to any Subsidiary, or by any
Subsidiary to Rail (provided that the aggregate outstanding amount of all such
indebtedness does not at any time exceed $1,000,000) and indebtedness owed by
Deco to Rail permitted under Subsection 8.4(x), (v) indebtedness of any Excluded
Subsidiary existing at the time such Person becomes an Excluded Subsidiary and
any refinancing thereof, (vi) indebtedness listed on Schedule 8.2 hereto and any
refinancings (but not increases) thereof that is on terms no less favorable to
than the terms of the indebtedness being refinanced (provided, however, Rail
shall give Agent at least ten (10) days prior written notice of any such
refinancing and copies of all documents, instruments and agreements with respect
thereto), and (vii) the Subordinated Debt provided that the aggregate principal
amount thereof does not exceed $50,000,000 minus the aggregate amount of all (a)
prepayments, repayments, sinking fund payments, redemption payments, defeasance
payments and other payments of principal made with respect thereto, and (b)
purchases thereof made by any Borrower or any Affiliate of any Borrower. Except
for (i) prepayments made in the ordinary course of business to obtain prompt
payment discounts offered on trade obligations incurred in the ordinary course
of business, (ii) immaterial prepayments of obligations incurred in the ordinary
course and (iii) as otherwise permitted by this Agreement, such Borrower shall
not, and such Borrower shall not permit any of its Subsidiaries to, pay any
obligation or indebtedness before the same is due.
8.3 Consolidations, Mergers or Acquisitions. Such Borrower shall
not, and shall not permit any of its Subsidiaries to, recapitalize, consolidate
with, merge with, or otherwise acquire all or substantially all of the assets or
properties of any other Person or enter into any agreement with respect to any
of the foregoing; provided, however, that (A) Rail may acquire (a "Stock
Acquisition") one hundred percent (100%) of the stock of a corporation (an
"Excluded Subsidiary") if (i) the only consideration paid for the stock of such
Excluded Subsidiary is common stock issued by Rail, (ii) the consideration paid
for such stock of such Excluded Subsidiary together with the consideration paid
for all other Excluded Subsidiaries does not exceed twenty-five percent (25%) of
the common stock of Rail outstanding immediately prior to consummation of such
proposed acquisition, (iii) Rail does not assume, or in any way become directly
or contingently liable for (by operation of law or otherwise), any of the debts
or other obligations of such Excluded Subsidiary, (iv) no Default or Event of
Default exists immediately prior to, or would exist immediately after,
consummation of such acquisition of the stock of the Excluded Subsidiary, (v)
each Lender has received written notice of such acquisition as soon as
practicable, but in any event not less than five (5) Business Days prior to the
consummation of such acquisition together with copies of all agreements,
instruments and documents relating thereto, and (vi) on the date of consummation
of such acquisition before consummation thereof, Rail delivers to each Lender a
certificate dated such date and signed by the Chief Financial Officer of Rail
stating that all of the conditions set forth in this Subsection 8.3(A) have been
completely satisfied with respect to such acquisition; and (B) Rail may acquire
all or
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substantially all of the assets of a going business concern (an "Asset
Acquisition") if (i) Rail does not assume, or in any way become directly or
contingently liable for (by operation of law or otherwise), any Contingent
Obligations in connection with such Asset Acquisition which, individually or
when aggregated with any Contingent Obligations assumed by Rail or for which
Rail may be directly or contingently liable in connection with any other Assets
Acquisitions, exceeds $5,000,000; (ii) no Default exists immediately prior to,
or would exist immediately after, consummation of such Asset Acquisition; (iii)
each Lender has received written notice of such Asset Acquisition as soon as
practicable, but in any event not less than two (2) weeks prior to the
consummation thereof together with (a) copies of all material agreements,
instruments and other documents relating thereto, and (b) if such Asset
Acquisition involves the acquisition of real property, environmental surveys in
form and substance reasonably acceptable, and from a Person reasonably
satisfactory, to the Agent with respect to such real property, (iv) Agent shall
have a valid, first priority (subject to Subsection 8.1) perfected security
interest in all personal property and fixtures acquired pursuant to such Asset
Acquisition and a valid, first priority (subject to Subsection 8.1) Mortgage to
all real property acquired pursuant to such Asset Acquisition, and all necessary
or advisable actions in this regard shall have been completed at or prior to the
time of consummation of such Asset Acquisition to the reasonable satisfaction of
Agent and its counsel (including satisfaction of the requirements of Subsection
5.2 and 5.3 hereof), (v) Availability (with respect to Rail) immediately before
and immediately after giving effect to the Permitted Acquisition is not less
than $10,000,000, (vi) on the date of consummation of such acquisition, Rail
delivers a certificate to each Lender dated such date and signed by the Chief
Financial Officer of Rail stating that all of the conditions set forth in
Subsection 8.3(B)(i) through (v) have been completely satisfied with respect to
such acquisition (except that as to the matters referenced in Subsection
8.3(B)(i) such certificate shall be to the best of such officer's knowledge as
to the facts referenced therein after conducting a reasonable inquiry with
respect thereto), and (vii) within ninety (90) days after consummation of such
Asset Acquisition, Rail shall deliver to Agent written appraisals of the value
(determined on a forced sale basis and an orderly liquidation sale basis) of all
Equipment purchased pursuant to such Asset Acquisition and appraisals of the
value (determined on a fair market value basis) of all real property acquired
pursuant to such Asset Acquisition that comply with all requirements of FIRREA,
in each case prepared by an appraiser selected and retained by Agent at Rail's
expense and reasonably satisfactory in form, scope and methodology to Agent.
8.4 Investments or Loans. Such Borrower shall not, and shall not
permit any of its Subsidiaries to, make or permit to exist investments or loans
in or to any other Person, except (i) investments in short-term direct
obligations of the United States Government, (ii) investments in negotiable
certificates of deposit maturing within thirty (30) days from the date of
issuance, issued by any Lender or an affiliate of any Lender or by any other
federally insured bank (provided that any such investments do not exceed the
limit of any such federal insurance) satisfactory to Agent, in its reasonable
discretion, and payable to the order of such Borrower or any of its Subsidiaries
or to bearer and delivered to Agent, (iii) investments in commercial paper
issued by companies organized under the laws of the United States or any state
thereof, maturing in ninety (90) days or less from the date of issuance, which
at the time of acquisition by such Borrower or any such Subsidiary is rated
A-1/P-1 by Standard & Poor's Rating Services (a division of McGraw-Hill
Companies, Inc.) or Moody's Investor Services, Inc., (iv) demand deposits in
banks and similar financial institutions in reasonable amounts necessary to such
Borrower's and its Subsidiaries' operations, (v) advances and reimbursements for
travel and
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expenses to such Borrower's or its Subsidiaries' officers, directors
or employees in the ordinary course of business and consistent with past
practices, (vi) investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business, (vii) investments existing
on the date hereof by such Borrower in its Subsidiaries and the Joint Ventures
and described on Schedule 8.4, (viii) investments made after March 31, 1995 by
such Borrower in, and loans made after March 31, 1995 by such Borrower to,
Subsidiaries of such Borrower (other than Excluded Subsidiaries, it being
understood that the exception in this clause (ix) permitting certain investments
in, and loans to, Subsidiaries shall not permit any such investment in, or loan
to, any Excluded Subsidiary) and the Joint Ventures provided that the aggregate
amount of such investments and outstanding loans does not exceed $1,000,000 in
the aggregate at any time with respect to all Borrowers, (x) an intercompany
loan by Rail to Deco after the date of the Original Agreement in an amount up to
$3,500,000, provided that such intercompany loan is evidenced by a promissory
note duly pledged to Agent to secure payment and performance of Rail's
Liabilities, (xi) investments evidenced by the issuance of Rail's capital stock
to consummate the acquisition of an Excluded Subsidiary in a Stock Acquisition
in accordance with Subsection 8.3(A), (xii) intercompany loans by Deco to Rail
after the date of the Original Agreement, provided that (1) the aggregate
principal amount of all outstanding intercompany loans by Deco to Rail cannot at
any time exceed the tangible net worth of Deco at such time (determined in
accordance with GAAP, except in no event shall any account or note receivable
due to Deco from Rail be treated as an asset for purposes of determining such
tangible net worth), (2) no such intercompany loan may be made until such time
as the aggregate principal amount of the intercompany loan by Rail to Deco
existing on the date of the Original Agreement is paid in full and (3) no such
loan may be made if, after giving effect thereto, Deco could reasonably be
deemed to (a) be "insolvent" (as such term is used in Section 548 of the
Bankruptcy Code), (b) have "unreasonably small capital" (as such term is used in
Section 548 of the Bankruptcy Code), or (c) have debts beyond its "ability to
pay as such debts matured" (as such term is used in Section 548 of the
Bankruptcy Code), and (xii) additional investments not to exceed $100,000 in the
aggregate for all Borrowers and their Subsidiaries at any time outstanding.
8.5 Guarantees. Such Borrower shall not, and shall not permit any of
its Subsidiaries to, guarantee, endorse or otherwise in any way become or be
responsible for obligations of any other Person, whether by agreement to
purchase the indebtedness of any other Person or through the purchase of goods,
supplies or services, or maintenance of working capital or other balance sheet
covenants or conditions, or by way of stock purchase, capital contribution,
advance or loan for the purpose of paying or discharging any indebtedness or
obligation of such other Person or otherwise, except (i) endorsements of
negotiable instruments for collection in the ordinary course of business and
(ii) as listed on Schedule 8.5 hereto.
8.6 Disposal of Property. Such Borrower shall not, and shall not
permit any of its Subsidiaries to, sell, lease, transfer or otherwise dispose of
any of the Collateral or any of its other properties, assets and rights to any
Person, except for (i) sales of Inventory to customers in the ordinary course of
business and (ii) the sale by such Borrower of Obsolete Equipment of such
Borrower, provided that after giving effect to any such sale of Obsolete
Equipment, the aggregate value of all such Obsolete Equipment so sold by the
Borrowers in any Fiscal Year does not exceed $500,000; provided, however, that
such Borrower shall notify
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Agent at least five days prior to any sale of Equipment if after giving effect
thereto the aggregate value of all Equipment sold by all Borrowers in any Fiscal
Year (other than Obsolete Equipment sold as part of a trade in for (and credit
against the purchase price of) new Equipment of a similar type (other than Third
Party Financed Equipment)) shall exceed $500,000 and immediately upon the sale
of any such Equipment (other than Third Party Financed Equipment), such Borrower
shall make the payments out of such proceeds as required by Subsection 2.7(E)
hereof. For purposes of this Subsection 8.6, the term "value" shall mean the
greater of the book value or fair market value of such Equipment.
8.7 [INTENTIONALLY OMITTED.]
8.8 Dividends and Stock Redemptions. Such Borrower shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, (A) redeem,
purchase or otherwise retire any of its shares of capital stock, (B) declare or
pay any dividends on any class or classes of capital stock, (C) return capital
to its stockholders, or (D) make any other distribution on or in respect of any
shares of any class of capital stock, provided that (i) Rail may declare and
pay dividends on its capital stock if immediately before or immediately after
giving effect thereto no Default or Event of Default exists or would exist as a
result thereof (including, without limitation, any breach of Subsections 8.13(A)
or (B)), and Rail gives to Agent and the Lenders not less than thirty (30) days
prior written notice of any such action and (ii) any Subsidiary of a Borrower
may declare and pay dividends or otherwise make distributions to such Borrower
or any other wholly-owned Subsidiary of such Borrower.
8.9 Issuance of Stock. Such Borrower shall not, and shall not permit
any of its Subsidiaries to, issue or distribute any capital stock or other
securities (or any warrants or rights for the purchase of any capital stock or
other securities of Borrower) for consideration or otherwise except for (A)
issuances of Rail's common stock and options thereon, and (B) issuances of stock
to Rail by Rail's wholly owned Subsidiaries (provided such stock is pledged to
Agent pursuant to the Securities Pledge Agreement between Rail and Agent dated
as of March 31, 1995).
8.10 Amendment of Articles of Incorporation or By-Laws; Corporate
Name; Places of Business. Without prior written consent of the Required
Lenders, such Borrower shall not amend its Articles or Certificate of
Incorporation or By-Laws, except that such Borrower may amend its By-laws if
such amendment could not reasonably be expected to have a Material Adverse
Effect and such Borrower provides Agent with a copy of the By-laws as so
amended within ten (10) Business Days of such amendment, and such Borrower may
amend its Articles or Certificate of Incorporation to effect a change in its
corporate name, provided that such Borrower furnishes to Agent such financing
statements executed by such Borrower which Agent may request prior to the filing
of such amendment and furnishes to Agent and Lenders a copy of such amendment,
certified by the Secretary of State of its jurisdiction of incorporation, within
ten (10) days of the date such amendment is filed with such Secretary of State.
Such Borrower shall not make any change to the location of its principal place
of business, chief executive office, books and records, chattel paper or records
of account unless prior to the effective date of such change in location, such
Borrower delivers to Agent such financing statements executed by such Borrower
which Agent may request to reflect such change in location. Such Borrower shall
deliver such other documents and instruments as Agent may request in connection
with
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such change in name or location within ten (10) days of the effectiveness of
such change or Agent's request therefor.
8.11 Transactions with Subsidiaries and Affiliates. Except
transactions described on Schedule 8.11 (or guaranty agreements, security
agreements, pledge agreements or similar agreements made in favor of the Agent
(for the benefit of the Lenders)), such Borrower shall not, and shall not permit
any of its Subsidiaries to, enter into any transaction with any Affiliate,
including, without limitation: (A) the making of any loans to, or the payment of
any bonuses, fees or other money to, any Affiliate, and (B) the purchase, sale
or exchange of property or the rendering of any service to or by any Affiliate.
Unless otherwise expressly stated in Schedule 8.11, all transactions described
on Schedule 8.11 shall be fair and reasonable to each Borrower (as the case may
be) and on terms not less favorable to each such Borrower (as the case may be)
than such Borrower could obtain in such a transaction with a party other than
its Affiliate. The term "Affiliate" as used in this Subsection 8.11 shall have
the meaning given in Subsection 1.1 hereof and also shall include any executive
officer, director, employee or stockholder of any Affiliate of such Borrower or
any Person related to any such Person within the third degree of consanguinity.
8.12 ERISA. Such Borrower shall not, and shall not permit any of its
Subsidiaries, and shall use its best efforts not to permit any ERISA Affiliate
to:
(A) engage, with respect to any Plan, in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Internal Revenue Code
for which a statutory or class exemption is not available or a private exemption
has not been previously obtained from the DOL;
(B) permit to exist any accumulated funding deficiency for any Benefit
Plan (as defined in Subsection 302 of ERISA and Section 412 of the Internal
Revenue Code), whether or not waived;
(C) fail to pay timely required contributions or annual installments
due with respect to any Plan including without limitation any installments due
with respect to any waived funding deficiency to any Benefit Plan;
(D) terminate any Benefit Plan which would result in any material
liability of such Borrower or any of its Subsidiaries under Title IV of ERISA;
(E) fail to pay to any Benefit Plan any required installment under
section (m) of Section 412 of the Internal Revenue Code or any other payment
required under Section 412 of the Internal Revenue Code on or before the due
date for such installment or other payment;
(F) amend a Benefit Plan resulting in an increase in current liability
for the plan year such that such Borrower or any of its Subsidiaries is required
to provide security to such Plan under Section 401(a) (29) of the Internal
Revenue Code;
(G) withdraw from any Benefit Plan during a plan year for which such
Borrower or any of its Subsidiaries is a "substantial employer" with respect to
such Benefit Plan
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if such Borrower or any such Subsidiary would incur material liability to the
PBGC with respect to such Benefit Plan under Sections 4063 or 4064 of ERISA; or
(H) withdraw from any Multiemployer Plan if a material withdrawal
liability would result to such Borrower or any Subsidiary of such Borrower
pursuant to Section 4201 of ERISA.
8.13 Financial Covenants. Such Borrowers shall not:
(A) Interest Coverage Ratio. Permit the Interest Coverage Ratio for
any period of four consecutive Fiscal Quarters to be less than 2.60 to 1.00.
(B) Minimum Consolidated Net Worth. Permit Consolidated Net Worth at
the last day of any Fiscal Quarter to be less than (i) $61,530,000, plus (ii)
50% of Net Income for each completed Fiscal Quarter after October 26, 1996 (or
plus zero for any such Fiscal Quarter if Net Income for such period is
negative), plus (iii) 85% of the fair market value of the net proceeds (whether
cash or otherwise) received by Rail from the issuance, sale or other transfer,
after October 26, 1996, of any capital stock, options or warrants (such increase
under this clause (iii) to occur on the date of Rail's receipt thereof).
(C) Capital Investment Limitations; Lease Limitations. Incur (or
permit its Subsidiaries to incur) (i) Capital Expenditures (other than Excluded
Capital Expenditures and other than Capital Expenditures arising under
Capitalized Leases) in any period of four consecutive Fiscal Quarters ending on
or after July 31, 1995 which, together with Capital Expenditures (other than
Excluded Capital Expenditures and other than Capital Expenditures arising under
Capitalized Leases) of all Borrowers (and their Subsidiaries) for such period,
are in the aggregate greater than the sum of $12,000,000 plus the amount by
which Availability with respect to Rail is greater than $10,000,000 on the last
day of such period; or (ii) Capital Expenditures financed by Capitalized Leases
of more than $2,000,000 in the aggregate for all Borrowers (and their
Subsidiaries) in any period of four consecutive Fiscal Quarters ending on or
after July 31, 1995.
(D) Funded Debt to Capitalization Ratio. Permit the ratio of Funded
Debt to Consolidated Capitalization to exceed 70% at the end of any Fiscal
Quarter.
The following terms shall have the following meanings:
"Consolidated Capitalization" shall mean, at any time, Funded Debt,
plus (ii) Consolidated Net Worth, at such time.
"Consolidated Net Worth" shall mean the excess, as determined in
accordance with GAAP, after making appropriate deductions for any minority
interest in the net worth of consolidated Subsidiaries, of (i) the assets
of Rail and its consolidated Subsidiaries over (ii) the liabilities of Rail
and its consolidated Subsidiaries; provided, however, that any write-up in
the book value of any assets owned subsequent to the date of this Agreement
(other than a write-up required for assets acquired in connection with
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the purchase of a person or business and taken at the time of such
acquisition) shall not be taken into account.
"EBITDA" shall mean, for any period, an amount equal to the following
for Rail and its Subsidiaries (other than Excluded Subsidiaries) for such
period, determined on a consolidated basis:
(i) Net Income plus;
(ii) the sum of the following amounts to the extent deducted in
determining Net Income: (a) depreciation and amortization expense, (b)
income tax expense, and (c) Interest Expense less;
(iii) any amounts included in Net Income for such period attributable
to the Joint Ventures or Excluded Subsidiaries except to the extent of cash
dividends or cash distributions paid to Rail during such period by the
Joint Ventures or Excluded Subsidiaries.
"Excluded Capital Expenditures" shall mean (i) Capital Expenditures,
up to $12,500,000, made by Rail to acquire capital assets consisting of the
Rail Mill to the extent financed by Persons other than Rail and its
Affiliates; and (ii) Capital Expenditures, up to $11,000,000, made by Rail
to acquire capital assets consisting of the Wheel Machining Center in
Calera, Alabama, in each case to the extent funded with proceeds of Funded
Debt (other than the Loans).
"Interest Coverage Ratio" shall mean, for any period, an amount equal
to the ratio of EBITDA to Interest Expense for Rail and its Subsidiaries
(other than Excluded Subsidiaries) for such period.
"Interest Expense" shall mean, for any period, (i) the gross interest
expense of Rail and its Subsidiaries (other than Excluded Subsidiaries) for
such period, plus (ii) one-third of the aggregate rent expense of Rail and
its Subsidiaries (other than Excluded Subsidiaries), all as determined on a
consolidated basis in accordance with GAAP.
"Net Income" shall mean, for any period, the net income (or loss)
after taxes of Rail and its Subsidiaries (other than Excluded Subsidiaries
for all purposes of this Agreement except Subsection 8.13(B)(ii), but
including Excluded Subsidiaries for purposes of Subsection 8.13(B)(ii)) for
such period, as determined on a consolidated basis in accordance with GAAP;
provided, however, that there shall not be included in Net Income (i) any
net income (or loss) of a Subsidiary for any period during which it was not
a consolidated Subsidiary, (ii) any net income (or loss) of businesses,
properties or assets acquired or disposed of (by way of merger,
consolidation, purchase, sale or otherwise) by Rail or any Subsidiary for
any period prior to the acquisition thereof or subsequent to the
disposition thereof, (iii) the cumulative effect of accounting changes,
(iv) any non-cash extraordinary items during such period or (v) any non-
cash special charges or gains during such period.
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8.14 Environmental. Such Borrower shall not, and shall not permit
any of its Subsidiaries to, fail to conduct its business so as to comply in all
respects with all federal, state or local environmental laws and regulations,
including, without limitation, environmental or land use requirements or permits
or occupational safety or health laws, rules or regulations, requirements or
permits in all jurisdictions in which it is or may at any time be doing
business, including, without limitation, the Federal Resource Conservation and
Recovery Act, the Federal Comprehensive Environmental Response, Compensation and
Liability Acts, the Federal Clean Water Act, the Federal Clean Air Act and the
Federal Occupational Safety and Health Act, as the same may be amended from time
to time, and any successor statutes, except where the failure to so comply could
not individually or in the aggregate reasonably be expected to have a Material
Adverse Effect; and provided, however, that nothing contained in this Subsection
8.14 shall prevent such Borrower from contesting, in good faith by appropriate
legal proceedings, any such law, regulation, interpretation thereof or
application thereof; provided, further, that such Borrower shall comply with the
order of any court or other governmental body of applicable jurisdiction
relating to such laws unless such Borrower shall currently be prosecuting an
appeal or proceedings for review and shall have secured a stay of enforcement or
execution or other arrangement postponing enforcement or execution pending such
appeal or proceedings for review.
8.15 Fiscal Year. Such Borrower shall not change its Fiscal Year.
8.16 Subsidiaries. Such Borrower shall not, and shall not permit any
of its Subsidiaries to, form or acquire any Subsidiaries or permit any such
Subsidiaries to exist other than (A) the Subsidiaries disclosed on Schedule
6.12, and (B) Excluded Subsidiaries acquired after March 31, 1995 in accordance
with Subsection 8.3.
8.17 Subordinated Debt. Such Borrower shall not permit any payment
of any Subordinated Debt; provided, however, that Rail may pay interest on the
Subordinated Notes when due in accordance with the terms of the Subordinated
Notes (as in effect on the date hereof) so long as (A) no Default or Event of
Default exists or would exist as a result thereof, and (B) without limiting the
foregoing, there exists no (1) insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding, relative to Rail (or to its creditors, as such) or to its assets, or
(2) liquidation, dissolution or other winding up of Rail, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy or (3)
assignment for the benefit of creditors or any marshalling of assets and
liabilities of Rail. Rail shall not consent or otherwise agree to any
amendment, supplement or other modification to any Subordinated Debt Document
without the prior written consent of the Required Lenders.
9. DEFAULT, RIGHTS AND REMEDIES OF LENDERS AND AGENT.
9.1 Defaults. If any of the following events ("Defaults") shall
occur:
(A) Any Borrower fails to pay any of its Liabilities when such
Liabilities are due or are declared due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise);
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(B) Any Borrower (i) fails or neglects to perform, keep or observe any
of its covenants, conditions or agreements contained in any of the subsections
of this Agreement or any of the other Financing Agreements other than the
provisions in Subsection 3.1 of this Agreement which require such Borrower to
deliver a Monthly Report by a particular date, Subsections 7.1 (other than
Subsections 7.1(E) or (G)), 7.3 or 7.4 of this Agreement, (ii) fails or neglects
to deliver a Monthly Report when required pursuant to Subsection 3.1 of this
Agreement and such failure shall continue for two consecutive Business Days,
(iii) fails or neglects to perform, keep or observe any covenants, conditions or
agreements contained in Subsection 7.1 (other than Subsections 7.1(E) or 7.1(G))
of this Agreement and such failure shall continue for five consecutive Business
Days or (iv) fails or neglects to perform, keep or observe any of the covenants,
conditions or agreements contained in Subsections 7.3 or 7.4 of this Agreement
and such failure shall continue for thirty (30) consecutive days, provided that
such 30-day grace period shall not apply and a Default shall be deemed to have
occurred promptly upon such breach if (x) such breach cannot, in Agent's
reasonable determination, be cured by such Borrower during such period, or (y)
such breach shall be deemed by Agent (in its reasonable discretion) to have a
material adverse effect on the Collateral (or Agent's or the Lenders' interest
or rights therein or with respect thereto), the Current Asset Base of any
Borrower or the other rights of Agent or the Lenders under this Agreement or any
other Financing Agreement;
(C) any warranty or representation now or hereafter made by any
Borrower or any Subsidiary of a Borrower is untrue or incorrect in any material
respect when made, or any schedule, certificate, statement, report, financial
data, notice, or writing furnished at any time by or on behalf of such Borrower
or such Subsidiary to any of Agent, the Issuing Bank and the Lenders is untrue
or incorrect in any material respect, on the date as of which the facts set
forth therein are stated or certified or any of the foregoing omits to state a
fact necessary to make the statements therein contained not misleading in any
material respect;
(D) a final judgment or final order requiring payment in excess of
$1,000,000 with respect to Rail, or $250,000 with respect to Deco, shall be
rendered against such Borrower and such judgment or order shall remain
unsatisfied or undischarged and in effect for forty (40) consecutive days
without a stay of enforcement or execution, provided that this Subsection 9.1(D)
shall not apply to any judgment for which such Borrower is fully insured (except
for normal deductibles in connection therewith) and with respect to which the
insurer has assumed the defense and is not defending under reservation of right
and with respect to which Agent reasonably believes the insurer will pay the
full amount thereof (except for normal deductibles in connection therewith);
(E) a notice of Lien, levy, or assessment is filed or recorded with
respect to all or a substantial part of the assets of any Borrower by the United
States, or any department, agency or instrumentality thereof, or by any state,
county, municipality or other governmental agency or any taxes or debts owing at
any time or times hereafter to any one or more of them become a Lien upon all or
a substantial part of the Collateral or the assets of such Borrower, and such
Lien, levy or assessment is not discharged or released within thirty (30) days
of the notice or attachment thereof, provided that this Subsection 9.1(E) shall
not apply to Liens, levies or assessments which relate to current taxes not yet
due and payable or Permitted Liens;
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(F) there shall occur any loss, theft, substantial damage or
destruction of any item or items of any Borrower's assets for which such
Borrower is not fully insured (a "Loss"), if the amount of such Loss not fully
covered by insurance (including any deductible in connection therewith),
together with the amount of all other Losses incurred by all Borrowers not fully
covered by insurance (including any deductibles in connection therewith)
occurring in the same Fiscal Year, exceeds $1,000,000;
(G) all or any part of any Borrower's assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors and on or before the forty-fifth (45th) day thereafter such assets are
not returned to such Borrower and/or such writ, distress warrant or levy is not
dismissed, stayed or lifted if the amount of such Collateral or assets, together
with any other such Collateral and assets that is so attached, seized, subjected
to writ or distress warrant or levied upon, exceeds $1,000,000 at any time;
(H) a proceeding under any bankruptcy, reorganization, arrangement of
debt, insolvency, readjustment of debt or receivership law or statute is filed
(i) against any Borrower and an adjudication or appointment is made or order for
relief is entered, or such proceeding remains undismissed for a period in excess
of forty-five (45) days, or (ii) by any Borrower or any Borrower makes an
assignment for the benefit of creditors or any Borrower takes any corporate
action to authorize any of the foregoing;
(I) a proceeding under any bankruptcy, reorganization, arrangement of
debt, insolvency, readjustment of debt or receivership law or statute is filed
(i) against any Subsidiary of any Borrower and an adjudication or appointment is
made or order for relief is entered, or such proceeding remains undismissed for
a period in excess of forty-five (45) days, or (ii) any Subsidiary of any
Borrower makes an assignment for the benefit of creditors or any such Subsidiary
takes any action to authorize any of the foregoing;
(J) Any Borrower or any Subsidiary of a Borrower voluntarily or
involuntarily dissolves or is dissolved, terminates or is terminated (except for
a liquidation or dissolution of a Subsidiary permitted by Subsection 7.3
hereof);
(K) Any Borrower or any Subsidiary of a Borrower becomes insolvent or
fails generally to pay its debts as they become due;
(L) Any Borrower is enjoined, restrained, or in any way prevented by
the order of any court or any administrative or regulatory agency from
conducting all or any material part of its business affairs;
(M) a breach by any Borrower shall occur under any material agreement,
document or instrument (other than an agreement, document or instrument
evidencing the lending of money), whether heretofore, now or hereafter existing
between such Borrower and any other Person, and such breach involves an exposure
to such Borrower, or could give rise to liability of such Borrower, in excess of
$1,000,000 with respect to Rail, or $250,000 with respect to Deco, and the same
continues unwaived for more than forty-five (45) days after such breach first
occurs;
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(N) as to more than $500,000 individually, or $1,500,000 in the
aggregate for all Borrowers in indebtedness at any one time, (i) any Borrower
shall fail to make any payment due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) on any obligation for borrowed
money (including, without limitation, Subordinated Debt) other than the
Liabilities and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such indebtedness;
(ii) any other default under any agreement or instrument relating to any such
indebtedness (including, without limitation, Subordinated Debt), or any other
event, shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument if the effect of such default or event
is to accelerate, or to permit the acceleration of, the maturity of such
indebtedness; or (iii) any such indebtedness (including, without limitation,
Subordinated Debt) shall be declared to be due and payable or required to be
prepaid (other than, with respect to indebtedness other than the Subordinated
Debt, by a regularly scheduled required prepayment) prior to the stated maturity
thereof;
(O) a material and adverse change shall occur (i) in the present or
reasonably foreseeable prospective operations or financial condition of Rail or
in the value of any material portion of the Collateral, or (ii) which materially
impairs the ability of Rail to perform its obligations under this Agreement and
the other Financing Agreements, in each case as determined by Agent;
(P) the plan administrator of any Benefit Plan applies under Section
412(d) of the Internal Revenue Code for a waiver of the minimum funding
standards of Section 412(a) of the Internal Revenue Code and Agent in good faith
believes that the approval of such waiver could subject any Borrower, any of its
Subsidiaries or an ERISA Affiliate of such Borrower to liability in excess of
$1,000,000;
(Q) a Termination Event occurs which Agent in good faith believes
could individually, or together with any other Termination Events subject any
Borrower, any of its Subsidiaries or an ERISA Affiliate of such Borrower to
liability in excess of $1,000,000;
(R) a Change in Control shall occur;
(S) any guarantor shall fail to comply with the terms of, or otherwise
fail to perform any of its obligations under, any guaranty of the Liabilities or
any security or similar agreement relating thereto or shall take any action to
disaffirm any of its obligations under any such guaranty or agreement or any
such guaranty or agreement shall cease to be valid, enforceable or of effect
without the prior written consent of the Agent and the Lenders; or
(T) a "Default" under the Pledge and Security Agreement (a "Pledge
Default") occurs and shall continue for thirty (30) days, provided that such 30-
day grace period shall not apply and a Default hereunder shall be deemed to have
occurred promptly upon such Pledge Default if (x) such Pledge Default cannot in
Agent's reasonable determination be cured during such period, or (y) such Pledge
Default shall be deemed by Agent (in its reasonable discretion) to have a
material adverse effect on the "Pledged Collateral" (as defined in the Pledge
and Security Agreement) or Agent's or the Lender's interest or rights therein or
with respect thereto,
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or the rights or Agent or the Lenders under this Agreement or any other
Financing Agreement; or
then Agent shall, upon the written, telecopied or telex request of the Required
Lenders, upon notice to Rail take any or all of the following actions, without
prejudice to the rights of Agent, any Lender or the holder of any Revolving Note
to enforce its claim against the Borrowers, (i) terminate the Lenders'
obligations to make Revolving Loans to the Borrowers pursuant to Subsection 2.2
and the obligation of Agent to request the Issuing Bank to issue any Letters of
Credit and the obligation of the Issuing Bank to issue any Letter of Credit
pursuant to Subsection 2.20, and/or (ii) declare all of the Liabilities to be
immediately due and payable, whereupon all of the Liabilities shall become
immediately due and payable, except that in the event a Default described in
Subsection 9.1(H) or 9.1(I) hereof shall exist or occur, all of the Liabilities
shall automatically, without notice of any kind, be immediately due and payable.
If at any time after acceleration of the maturity of the Liabilities,
the Borrowers shall pay all arrears of interest and all payments on account of
principal of the Liabilities which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Defaults (other than nonpayment of principal of and accrued interest
on the Liabilities due and payable solely by virtue of acceleration) shall be
remedied or waived, then by written notice to the Borrowers, the Required
Lenders may elect, in the sole discretion of such Required Lenders, to rescind
and annul the acceleration of its consequences and return any cash collateral;
but such action shall not affect any subsequent Default or Event of Default or
impair any right or remedy consequent thereon. The provisions of the preceding
sentence are intended merely to bind the Lenders to a decision which may be made
at the election of the Required Lenders; they are not intended to benefit the
Borrowers and do not give the Borrowers the right to require the Lenders to
rescind or annul any acceleration hereunder or to return any cash collateral,
even if the conditions set forth herein are met.
9.2 Rights and Remedies Generally. In the event of a Default, Agent
shall have, in addition to any other rights and remedies contained in this
Agreement or in any of the other Financing Agreements, all of the rights and
remedies of a secured party under the Code and other applicable laws. All of
the rights and remedies of Agent and each Lender, whether under this Agreement,
the other Financing Agreements, the Code or other applicable laws or otherwise,
shall be cumulative, and non-exclusive, to the extent permitted by law. In
addition to all such rights and remedies, the sale, lease or other disposition
of the Collateral, or any part thereof, by Agent after Default may be for cash,
credit or any combination thereof, and Agent or any Lender may purchase all or
any part of the Collateral at public or, if permitted by law, private sale, and
in lieu of actual payment of such purchase price, may set-off the amount of such
purchase price against the Liabilities then owing. Any sales of the Collateral
may be adjourned from time to time with or without notice. Agent may, in its
sole discretion, cause the Collateral to remain on premises of a Borrower, at
such Borrower's expense, pending sale or other disposition of the Collateral.
Agent shall have the right to conduct such sales on such premises, at such
Borrower's expense, or elsewhere, on such occasion or occasions as Agent may see
fit.
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9.3 Entry Upon Premises and Access to Information. In the event of a
Default, Agent shall have the right to enter upon the premises of any Borrower
where the Collateral is located (or is believed to be located) without any
obligation to pay rent to any Borrower, or any other place or places where the
Collateral is believed to be located and kept, and render the Collateral
unusable or remove the Collateral therefrom to the premises of Agent, any Lender
or any agent of Agent or any Lender, for such time as Agent may desire, in order
effectively to collect or liquidate the Collateral, and/or Agent may require any
Borrower to assemble the Collateral and make it available to Agent or any Lender
at a place or places to be designated by Agent. In the event of a Default, Agent
shall have the right to obtain access to data processing equipment, computer
hardware and software of any Borrower relating to the Collateral and to use all
of the foregoing and the information contained therein in any manner Agent deems
appropriate; and Agent shall have the right to notify post office authorities to
change the address for delivery of mail of any Borrower to an address designated
by Agent and to receive, open and deal with all mail addressed to such Borrower.
9.4 Sale or Other Disposition of Collateral by Agent. Any notice
required to be given by Agent of a sale, lease or other disposition or other
intended action by Agent with respect to any of the Collateral which is
deposited in the United States mails, postage prepaid and duly addressed to a
Borrower at the address specified in Subsection 11.17 hereof, at least ten (10)
Business Days prior to such proposed action shall constitute fair and reasonable
notice of any such action. The net proceeds realized by Agent upon any such sale
or other disposition, after deduction for the expense of retaking, holding,
preparing for sale, selling or the like and the reasonable attorneys' fees and
legal expenses incurred by Agent in connection therewith, shall be applied as
provided herein toward satisfaction of the Liabilities, including, without
limitation, the Liabilities described in Subsections 7.5 and 11.2 hereof. Agent
and the Lenders shall account to the Borrowers for any surplus realized upon
such sale or other disposition, and the Borrowers shall remain liable to Agent
and each Lender for any deficiency. The commencement of any action, legal or
equitable, or the rendering of any judgment or decree for any deficiency shall
not affect Agent's security interest in the Collateral until the Liabilities are
fully paid. Each Borrower agrees that neither Agent nor any Lender has any
obligation to preserve rights to the Collateral against any other parties. Agent
is hereby granted a license or other right to use, without charge, labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks and advertising matter, or any property of a similar
nature of the Borrowers, as it pertains to the Collateral, in completing
production of, advertising for sale and selling any Collateral and rights under
all licenses and all franchise agreements of the Borrowers shall inure to
Agent's benefit until the Liabilities are paid.
9.5 Waiver of Demand. Demand, presentment, protest and notice of
nonpayment are hereby waived by the Borrowers. Each Borrower also waives the
benefit of all valuation, appraisal and exemption laws.
9.6 Waiver of Notice. UPON THE OCCURRENCE AND DURING THE CONTINUANCE
OF A DEFAULT, EACH BORROWER (PURSUANT TO AUTHORITY GRANTED BY ITS BOARD OF
DIRECTORS) HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO
THE EXERCISE BY AGENT OR ANY LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL
WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL
WITHOUT
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PRIOR NOTICE OR HEARING. EACH BORROWER ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY
COUNSEL OF ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS AGREEMENT.
10. AGENT
10.1 Appointment of Agent.
(A) Each Lender and the Issuing Bank hereby designates ANB as Agent to
act as herein specified. Each Lender and the Issuing Bank hereby irrevocably
authorizes, and each holder of any Note or participation in any Letter of Credit
by the acceptance of a Note or participation shall be deemed irrevocably to
authorize, Agent to take such action on its behalf under the provisions of this
Agreement and the Notes and any other instruments and agreements referred to
herein and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of Agent by the terms
hereof and thereof and such other powers as are reasonably incidental thereto.
Agent shall hold all Collateral and all payments of principal, interest, Fees,
charges and Expenses received pursuant to this Agreement or any other Financing
Agreements for the benefit of Lenders and the Issuing Bank to be distributed as
provided herein. Agent may perform any of its duties hereunder by or through
its agents or employees.
(B) The provisions of this Section 10 are solely for the benefit of
Agent, Lenders and the Issuing Bank, and no Borrower shall have any rights as a
third party beneficiary of any of the provisions hereof (other than Subsection
10.9) nor shall any Borrower have any obligations under this Section 10. In
performing its functions and duties under this Agreement, Agent shall act solely
as agent of Lenders the Issuing Bank and does not assume and shall not be deemed
to have assumed any obligation toward or relationship of agency or trust with or
for any Borrower.
10.2 Nature of Duties of Agent. Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
other Financing Agreements. Neither Agent nor any of its officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such hereunder or in connection herewith, unless caused by its or their own
gross negligence or willful misconduct. The duties of Agent shall be mechanical
and administrative in nature; Agent shall not have by reason of this Agreement
or the other Financing Agreements a fiduciary relationship in respect of any
Lender or the Issuing Bank; and nothing in this Agreement or the other Financing
Agreements, expressed or implied, is intended to or shall be so construed as to
impose upon Agent any obligations in respect of this Agreement or the other
Financing Agreements except as expressly set forth herein or therein.
10.3 Lack of Reliance on Agent.
(A) Independently and without reliance upon Agent, each Lender and the
Issuing Bank, to the extent it deems appropriate, has made and shall continue to
make (i) its own independent investigation of the financial or other condition
and affairs of the Borrowers in connection with the taking or not taking of any
action in connection herewith and (ii) its own appraisal of the creditworthiness
of the Borrowers, and, except as expressly provided in this
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Agreement, Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender or the Issuing Bank with any credit or
other information with respect thereto, whether coming into its possession
before the making of any Loan, Advance or issuance of any Letter of Credit or at
any time or times thereafter.
(B) Agent shall not be responsible to any Lender or the Issuing Bank
for any recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, priority or sufficiency of this Agreement, the
Notes or other Financing Agreements or the financial or other condition of the
Borrowers. Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement, the Notes or any of the other Financing Agreements, or the financial
condition of the Borrowers, or the existence or possible existence of any
Default or Event of Default, unless specifically requested to do so in writing
by any Lender or the Issuing Bank.
10.4 Certain Rights of Agent. Agent shall have the right to request
instructions from the Required Lenders at any time. If Agent shall request
instructions from the Required Lenders with respect to any act or action
(including the failure to act) in connection with this Agreement or any of the
other Financing Agreements, Agent shall be entitled to refrain from such act or
taking such action unless and until Agent shall have received instructions from
the Required Lenders, and Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, no Lender or the
Issuing Bank shall have any right of action whatsoever against Agent as a result
of Agent acting or refraining from acting hereunder in accordance with the
instructions of the Required Lenders.
10.5 Reliance by Agent. Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other documentary, teletransmission or telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person. Agent may consult with legal counsel (including counsel
for any Borrower with respect to matters concerning such Borrower and any of its
Subsidiaries), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel, accountants or
experts.
10.6 Indemnification of Agent. To the extent Agent is not reimbursed
and indemnified by the Borrowers, each Lender will reimburse and indemnify
Agent, in proportion to its Proportionate Share, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever (including all Expenses) which may be imposed on,
incurred by or asserted against Agent in performing its duties hereunder, in any
way relating to or arising out of this Agreement, provided that no Lender shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from Agent's gross negligence or willful misconduct.
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10.7 Agent in its Individual Capacity. With respect to its
obligation to lend under this Agreement, any Loans made by it and the Notes
issued to it, and its participation in Letters of Credit issued hereunder, or
its issuance as the Issuing Bank of any Letter of Credit, Agent in its
individual capacity shall have the same rights and powers hereunder as any other
Lender or holder of a Note or participation interests or the Issuing Bank, as
the case may be and may exercise the same as though it was not performing the
duties specified herein; and the terms "Lenders," "Required Lenders," "holders
of Notes," or "Issuing Bank" or any similar terms shall, unless the context
clearly otherwise indicates, include Agent in its individual capacity. Subject
to Subsection 10.13 hereof, Agent in its individual capacity may accept deposits
from, lend money to, acquire equity interests in, and generally engage in any
kind of banking, trust, financial advisory or other business with any Borrower
or any Affiliate of any Borrower as if it were not performing the duties
specified herein, and may accept fees and other consideration from any Borrower
for services in connection with this Agreement and otherwise without having to
account for the same to Lenders.
10.8 Holders of Revolving Notes. Agent may deem and treat the
original named 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 Agent. Any request, authority or consent of any Person
who, at the time of making such request or giving such authority or consent, is
the holder of any Note, shall be conclusive and binding on any subsequent
holder, transferee or assignee of such Note or of any Note or Notes issued in
exchange therefor.
10.9 Successor Agent.
(A) Agent may, upon five (5) Business Days' notice to the Lenders and
the Issuing Bank and the Borrowers, resign at any time (effective upon the
appointment of a successor Agent pursuant to the provisions of this Subsection
10.9) by giving written notice thereof to Lenders and the Borrowers. Upon any
such resignation, the Required Lenders shall have the right, upon five (5) days'
notice and approval by Rail (which approval shall not be unreasonably withheld),
to appoint a successor Agent. If no successor Agent (i) shall have been so
appointed by the Required Lenders, and (ii) shall have accepted such
appointment, within thirty (30) days after the retiring Agent's giving of notice
of resignation, then, upon five (5) days' notice, the retiring Agent may, on
behalf of Lenders, appoint a successor Agent. In the event that Agent ceases to
be, in its individual capacity, a Lender whose aggregate holding of outstanding
Revolving Loans plus the amount of its Revolving Loan Commitment (net of the
principal amount of its outstanding Revolving Loans) plus the amount of its
Proportionate Share of Letter of Credit Obligations equals or exceeds
$10,000,000 then such Agent's status as Agent hereunder may be terminated by the
Required Lenders (it being understood that no such termination shall affect
Agent in its capacity as a Lender or as the Issuing Bank or any Loans or
Revolving Credit Commitment made by Agent in its capacity as a Lender or Letter
of Credit issued by Agent in its capacity as the Issuing Bank) provided that the
Required Lenders concurrently appoint a successor Agent to which Rail consents
(which consent shall not be unreasonably withheld).
(B) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights,
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powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations under this Agreement. After
any retiring Agent's resignation hereunder as Agent, the provisions of this
Section 10 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
(C) In the event of a material breach by Agent of its duties
hereunder, Agent may be removed by the Required Lenders (other than Agent in its
capacity as a Lender or as the Issuing Bank and without giving effect to any
portion of the Loans or Revolving Credit Commitment or Acquisition Loan
Commitment made by Agent in its capacity as a Lender or Letters of Credit issued
by Agent in its capacity as the Issuing Bank) for cause and the provisions of
this Subsection 10.9 shall apply to the appointment of a successor Agent.
(D) If ANB is removed or resigns as Agent, ANB shall no longer be
required to act as the Issuing Bank with respect to Letters of Credit issued
after the effective date of its removal or resignation.
10.10 Collateral Matters.
(A) Each Lender and the Issuing Bank authorizes and directs Agent to
enter into the Financing Agreements for the benefit of Lenders and the Issuing
Bank. Each Lender and the Issuing Bank hereby agrees, and each holder of any
Note by the acceptance thereof will be deemed to agree, that, except as
otherwise set forth herein, any action taken by the Required Lenders in
accordance with the provisions of this Agreement or the Financing Agreements and
the exercise by the Required Lenders of the powers set forth herein or therein,
together with such other powers as are reasonably incidental thereto, shall be
authorized and binding upon all of Lenders and the Issuing Bank. Agent is hereby
authorized on behalf of all of the Lenders, without the necessity of any notice
to or further consent from any Lender or the Issuing Bank, from time to time
prior to a Default, to take any action with respect to any Collateral or
Financing Agreements which may be necessary to perfect and maintain perfected
the security interest in and Liens upon the Collateral granted pursuant to any
of the Financing Agreements.
(B) The Lenders hereby authorize Agent to release any Lien granted to
or held by Agent upon any Collateral upon termination of this Agreement and the
Revolving Credit Commitments and payment and satisfaction of all of the
Liabilities at any time arising under or in respect of this Agreement and the
other Financing Agreements or the transactions contemplated hereby or thereby.
In addition, the Lenders and the Issuing Bank hereby authorize Agent to release
any Lien granted to or held by Agent upon any Collateral (i) constituting
property being sold or disposed of upon receipt of the proceeds of such sale by
Agent if a Borrower certifies to Agent that the sale or disposition is made in
compliance with Subsection 8.6 hereof (and Agent may rely conclusively on any
such certificate, without further inquiry), or (ii) constituting Collateral with
a value as certified to Agent by a Borrower of less than $1,000,000 in the
aggregate in any Fiscal Year (and Agent may rely conclusively on any such
certificate, without further inquiry). Upon request by Agent at any time, the
Lenders and the Issuing Bank will confirm in writing Agent's authority to
release particular types or items of Collateral pursuant to this Subsection
10.10.
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(C) Upon the release of any Lien in accordance with Subsection
10.10(B), and upon at least five (5) Business Days' prior written request by a
Borrower, Agent shall (and is hereby irrevocably authorized by the Lenders and
the Issuing Bank to) execute such documents as may be necessary to evidence the
release of such Liens; provided that (i) Agent shall not be required to execute
any such document on terms which, in Agent's reasonable opinion, would expose
Agent to liability or create any obligation or entail any consequence other than
the release of such Liens without recourse or warranty and (ii) such release
shall not in any manner discharge, affect or impair the Liabilities or any Liens
upon (or obligations of such Borrower in respect of) all interests retained by
such Borrower, including (without limitation) the proceeds of the sale, all of
which shall continue to constitute part of the Collateral. In the event of any
sale or transfer of Collateral, or any foreclosure with respect to any of the
Collateral, Agent shall be authorized to deduct all of the Expenses reasonably
incurred by Agent from the proceeds of any such sale, transfer or foreclosure.
(D) Agent shall have no obligation whatsoever to the Lenders, the
Issuing Bank or to any other Person to assure that the Collateral exists or is
owned by any Borrower or any other Person or is cared for, protected or insured
or that the Liens granted to Agent herein or pursuant hereto have been properly
or sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise or to continue exercising at
all or in any manner or under any duty of care, disclosure or fidelity any of
the rights, authorities and powers granted or available to Agent in this
Subsection 10.10 or in any of the Financing Agreements it being understood and
agreed that in respect of the Collateral, or any act, omission or event related
thereto, Agent may act in any manner it may deem appropriate, in its sole
discretion, given Agent's own interest in the Collateral as one of the Lenders
and that Agent shall have no duty or liability whatsoever to the Lenders or the
Issuing Bank, except for Agent's gross negligence or willful misconduct.
10.11 Actions with Respect to Defaults. In addition to Agent's right
to take actions on its own accord as permitted under this Agreement, Agent shall
take such action with respect to a Default or Event of Default as shall be
directed by the Required Lenders; provided that until Agent shall have received
such directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable.
10.12 Delivery of Information. Agent shall not be required to
deliver to any Lender or the Issuing Bank originals or copies of any documents,
instruments, notices, communications or other information received by Agent from
the Borrowers, the Required Lenders, any Lender, the Issuing Bank or any other
Person under or in connection with this Agreement or any other Financing
Agreement except (i) as specifically provided in this Agreement or any other
Financing Agreement and (ii) as specifically requested from time to time in
writing by any Lender or the Issuing Bank with respect to a specific document,
instrument, notice or other written communication received by and in the
possession of Agent at the time of receipt of such request and then only in
accordance with such specific request.
10.13 Loans by Lenders. Without the prior written consent of the
Required Lenders, no Lender or the Issuing Bank shall extend credit to any
Borrower or any of its
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Subsidiaries (other than credit that is incidental to the maintenance of deposit
accounts) except pursuant to this Agreement.
10.14 Allocation of Payments. Subject to Subsections 2.6 and 2.8,
payments of principal of, and interest on, all Loans shall be allocated to the
Lenders based on their respective Proportionate Share.
11. MISCELLANEOUS.
11.1 Waiver, Amendments. Any failure by Agent, the Issuing Bank or
any Lender, at any time or times hereafter, to require strict performance by any
Borrower of any provision of this Agreement or any of the other Financing
Agreements shall not waive, affect or diminish any right of Agent, the Issuing
Bank or any Lender thereafter to demand strict compliance and performance
therewith. Any suspension or waiver of a Default by any Borrower under this
Agreement or any of the other Financing Agreements shall not suspend, waive or
affect any other Default by any Borrower under this Agreement or any of the
other Financing Agreements, whether the same is prior or subsequent thereto and
whether of the same or of a different kind or character. No amendment or waiver
of any provision of this Agreement or any other Financing Agreement, nor consent
to any departure by any Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Required Lenders (or by
Agent on their behalf), or if Lenders shall not be parties thereto, by the
parties thereto and consented to by the Required Lenders (or by Agent on their
behalf), and each such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided
that no amendment, waiver or consent shall, unless in writing and signed by all
Lenders, do any of the following: (i) increase the Total Revolving Commitments
of Lenders (except as provided in Subsection 2.7(D)) or subject Lenders to any
additional obligations, (ii) except as otherwise expressly provided in this
Agreement, reduce the principal of, or interest on, the Notes, any Letter of
Credit reimbursement obligations or any fees hereunder, (iii) postpone any date
fixed for any payment in respect of principal of, or interest on, the Notes, any
Letter of Credit reimbursement obligations or any fees hereunder, (iv) change
the percentage of the Revolving Credit Commitments (except as provided in
Subsection 2.7(D)), or any minimum requirement, necessary for Lenders or the
Required Lenders to take any action hereunder, (v) amend or waive this
Subsection 11.1, or change the definition of Required Lenders, (vi) extend the
Termination Date, or (vii) except as otherwise expressly provided in this
Agreement (including without limitation as provided in Subsection 10.10(B)
hereof), and other than in connection with the financing, refinancing, sale or
other disposition of any asset of any Borrower permitted under this Agreement,
release any Liens in favor of Agent on all or any substantial portion of the
Collateral; provided, further, that no amendment, waiver or consent affecting
the rights or duties of Agent or the Issuing Bank under any Financing Agreements
shall in any event be effective, unless in writing and signed by Agent or the
Issuing Bank (respectively), in addition to the Lenders required hereinabove to
take such action. Notwithstanding any of the foregoing to the contrary, the
consent of the Borrowers shall not be required for any amendment, modification
or waiver of the provisions of Section 10 (other than the provisions of
Subsection 10.9). In addition, the Borrowers and Lenders hereby authorize Agent
to modify this Agreement by unilaterally amending or supplementing Schedule 1
from time to time in the manner requested by the Borrowers, Agent or any Lender
in order to reflect any assignments or transfers of the Loans, any increase in
the Total Revolving
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Commitments under Subsection 2.7(D), and reductions in the Total Revolving
Commitment as provided for hereunder; provided, however, that Agent shall
promptly deliver a copy of any such modification to the Borrowers and each
Lender. All Defaults shall continue until the same are waived in accordance with
this Subsection 11.1. Any Default or Event of Default (as defined in the
Original Agreement) existing on the date hereof is not waived by the execution
of this Agreement or any other Financing Agreement and such Default or Event of
Default shall be a Default or Event of Default hereunder, as the case may be,
until waived in accordance with this Subsection 11.1. This Agreement shall not
operate as a waiver of any right, power or remedy of Lenders or Agent under the
Original Agreement or the Security Agreement.
11.2 Costs and Attorneys' Fees. If at any time or times hereafter
Agent employs counsel in connection with protecting or perfecting Agent's
security interest in the Collateral or in connection with any matters
contemplated by or arising out of this Agreement or any of the other Financing
Agreements, whether (a) to prepare, negotiate or execute (i) any amendment to or
modification or extension of this Agreement, any other Financing Agreements or
any instrument, document or agreement executed by any Person in connection with
the transactions contemplated by this Agreement, (ii) any new or supplemental
Financing Agreements, or any instrument, document or agreement to be executed by
any Person in connection with the transactions contemplated by this Agreement,
or (iii) any instrument, document or agreement in connection with any sale or
attempted sale of any interest herein to any Person, including any participant
(except such a sale by ANB prior to the occurrence of a Default or Event of
Default if after giving effect thereto the aggregate amount of Loans held by
ANB, and its unused Revolving Loan Commitment is less than $25,000,000 in the
aggregate), (b) to commence, defend, or intervene in any litigation or to file a
petition, complaint, answer, motion or other pleadings, (c) to take any other
action in or with respect to any suit or proceeding (bankruptcy or otherwise),
(d) to consult with officers of Agent or to advise Agent, (e) to protect,
collect, lease, sell, take possession of, release or liquidate any of the
Collateral, or (f) to attempt to enforce or to enforce any security interest in
any of the Collateral, or to enforce any rights of Agent or any Lender,
including, without limitation, Agent's or any Lender's rights to collect any of
the Liabilities, then in any of such events, all of the reasonable attorneys'
fees arising from such services, and any expenses, costs and charges relating
thereto, including, without limitation, all reasonable fees of all paralegals
and other staff employed by such attorneys, together with interest following
demand for payment thereof at the from time to time rate applicable to Base Rate
Advances, shall be part of the Liabilities, payable on demand and secured by the
Collateral.
11.3 Expenditures. In the event any Borrower shall fail to pay
taxes, insurance, assessments, costs or expenses which such Borrower is, under
any of the terms hereof, required to pay, or fail to keep the Collateral free
from other Liens, except as permitted herein, Agent or the Required Lenders may,
in its or their sole discretion, make expenditures for any or all of such
purposes, and the amount so expended, together with interest thereon at the rate
applicable to Base Rate Advances, shall be part of the Liabilities, payable on
demand and secured by the Collateral.
11.4 Custody and Preservation of Collateral. Agent shall be deemed
to have exercised reasonable care in the custody and preservation of any of the
Collateral in its possession if it takes such action for that purpose as any
Borrower shall request in writing, but
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failure by Agent to comply with any such request shall not of itself be deemed a
failure to exercise reasonable care, and no failure by Agent to preserve or
protect any right 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 the Borrowers shall of itself be deemed a failure to exercise reasonable care
in the custody or preservation of such Collateral.
11.5 Reliance by Lenders. All covenants, agreements, representations
and warranties made herein by the Borrowers shall, notwithstanding any
investigation by Agent or any Lender, be deemed to be material to and to have
been relied upon by Agent and each Lender.
11.6 Parties; Assignability.
(A) Whenever in this Agreement there is reference made to a Borrower,
Agent, the Issuing Bank or any Lender, such reference shall be deemed to
include, wherever applicable, a reference to the successors and permitted
assigns of such Borrower and the successors and permitted assigns of Agent, the
Issuing Bank and such Lender, and the provisions of this Agreement shall be
binding upon and shall inure to the benefit of said successors and permitted
assigns. Notwithstanding anything herein to the contrary, no Borrower may assign
or otherwise transfer its rights or obligations under this Agreement without the
prior written consent of the Lenders.
(B) Any Lender may make, carry or transfer Loans at, to or for the
account of, any of its Lending Affiliates.
(C) Upon 90 days' prior written notice to Agent, each Lender may, with
the consent of Agent (which consent shall not be unreasonably withheld), but
without the consent of any other Lender, assign to one or more banks or other
financial institutions all or a portion of its rights and obligations under this
Agreement and the Notes; provided that (i) such Lender has first offered to
assign such portion of its rights and obligations under this Agreement and the
Notes, at par, to Agent, (ii) for each such assignment, the parties thereto
shall execute and deliver to Agent, for its acceptance and recording in the
Register (as defined below), an Assignment and Assumption Agreement, together
with any Notes subject to such assignment, (iii) the aggregate outstanding
Loans, and unused Total Revolving Commitments so assigned shall not be less than
$5,000,000, unless such assignment is to a then-current holder of a Note or
consented to by Agent in writing, and (iv) subject to Subsection 2.7(D), each
assignment shall be of a constant, and not a varying, percentage interest of the
assigning Lender's rights and obligations and such assignment shall be of the
same proportionate amount of the assigning Lender's rights and obligations with
respect to all Borrowers (for example, no Lender may assign a percentage of its
rights and obligations hereunder with respect to Rail without simultaneously
assigning the same percentage of its rights and obligations hereunder with
respect to Deco) and with respect to each type of Loan hereunder, the Total
Revolving Commitments and the Letter of Credit Obligations. Upon such execution
and delivery of the Assignment and Assumption Agreement to Agent, from and after
the date specified as the effective date in the Assignment and Assumption
Agreement (the "Acceptance Date"), (x) the assignee thereunder shall be a party
hereto, and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Assumption Agreement, such
assignee shall have
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the rights and obligations of a Lender hereunder and (y) the assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Assumption Agreement, relinquish its rights
(other than any rights it may have pursuant to Subsections 2.11, 2.16, 2.17,
2.18, 2.21(J), 7.4, 7.10, 11.2, and 11.19 hereof which will survive) and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Assumption Agreement covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto).
(D) By executing and delivering an Assignment and Assumption
Agreement, the assignee thereunder confirms and agrees as follows: (i) other
than as provided in such Assignment and Assumption Agreement, the assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, the Notes
or any other instrument or document furnished pursuant hereto, (ii) such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrowers or the
performance or observance by the Borrowers of any of their obligations under
this Agreement or any other instrument or document furnished pursuant hereto,
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Subsection 7.1
hereof and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Assumption Agreement, (iv) such assignee will, independently and without
reliance upon Agent, such assigning Lender or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement, (v) such assignee appoints and authorizes Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement as are
delegated to Agent by the terms hereof, together with such powers as are
reasonably incidental thereto and (vi) such assignee agrees that it will perform
in accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(E) Agent shall maintain at its address referred to in Subsection
11.17 hereof a copy of each Assignment and Assumption Agreement delivered to and
accepted by it and a register for the recordation of the names, addresses and
Proportionate Shares of the Lenders and the Revolving Credit Commitments of each
Lender from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes absent manifest error, and the
Borrowers, Agent and Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
and copies of each Assignment and Assumption shall be available for inspection
by the Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(F) Upon its receipt of an Assignment and Assumption Agreement
executed by an assigning Lender, together with the Notes subject to such
assignment, Agent shall, if such Assignment and Assumption Agreement has been
completed and is in substantially the form of Exhibit G hereto and Agent
consents thereto, (i) accept such Assignment and Assumption Agreement, (ii)
record the information contained therein in the Register and (iii) give prompt
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notice thereof to the Borrowers. Within five (5) Business Days after its
receipt of such notice, each Borrower shall execute and deliver to Agent, in
exchange for the surrendered Notes, new Notes to the order of the assignee in an
amount equal to the Revolving Credit Commitment assumed by it pursuant to such
Assignment and Assumption Agreement and, if the assigning Lender has retained a
Revolving Credit Commitment hereunder, new Notes to the order of the assigning
Lender in an amount equal to the Revolving Credit Commitment retained by it
hereunder. Such new Notes shall re-evidence the Liabilities outstanding under
the old Notes and shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Notes, shall be dated the Closing
Date and shall otherwise be in substantially the form of the Notes subject to
such assignments.
(G) Upon 90 days' prior written notice to Agent, each Lender may
(provided such Lender shall have first offered to resell to Agent at par its
interest in the Liabilities) sell participations (without the consent of Agent,
any Borrower or any other Lender) to one or more parties in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Revolving Credit Commitment, the Loans owing
to it and the Notes held by it); provided that (i) such Lender's obligations
under this Agreement (including, without limitation, its Revolving Credit
Commitment to the Borrowers hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Lender shall remain the holder of any such Note
for all purposes of this Agreement, (iv) the Borrowers, Agent, and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
(v) such Lender shall not transfer, grant, assign or sell any participation
under which the participant shall have rights to approve any amendment or waiver
of this Agreement except to the extent such amendment or waiver would (A) extend
the final maturity date or the date for the payments of any installment of fees
or principal or interest of any Loans or Letter of Credit Obligations in which
such participant is participating, (B) reduce the amount of any installment of
principal of the Loans or Letter of Credit Obligations in which such participant
is participating, (C) except as otherwise expressly provided in this Agreement,
reduce the interest rate applicable to the Loans or Letter of Credit
reimbursement obligations in which such participant is participating, or
(D) except as otherwise expressly provided in this Agreement, reduce any Fees
payable to Lenders hereunder.
(H) Each Lender agrees that, without the prior written consent of the
Borrowers and Agent, it will not make any assignment hereunder in any manner or
under any circumstances that would require registration or qualification of, or
filings in respect of, any Loan, Note or other Liabilities under the securities
laws of the United States of America or of any jurisdiction.
(I) In connection with the efforts of any Lender to assign its rights
or obligations or to participate interests, such Lender may disclose any
information in its possession regarding the Borrowers, subject to Subsection
7.1.
11.7 CHOICE OF LAW. THIS AGREEMENT SHALL BE DEEMED TO BE EXECUTED
AND HAS BEEN DELIVERED AND ACCEPTED IN CHICAGO, ILLINOIS BY SIGNING AND
DELIVERING IT THERE. ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO
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THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND
WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE INTERNAL LAWS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE
STATE OF ILLINOIS.
11.8 CONSENT TO JURISDICTION.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION 11.8(B)
HEREOF, EACH OF THE PARTIES HERETO AGREE THAT ALL DISPUTES BETWEEN THEM ARISING
OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL COURTS
LOCATED IN COOK COUNTY, ILLINOIS, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY BE HEARD BY A COURT LOCATED OUTSIDE OF COOK
COUNTY, ILLINOIS. EACH BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. EACH BORROWER AGREES THAT AGENT AND ANY
LENDER SHALL HAVE THE RIGHT TO PROCEED AGAINST SUCH BORROWER OR ITS PROPERTY
("PROPERTY") IN A COURT IN ANY LOCATION TO ENABLE AGENT OR ANY LENDER TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE LIABILITIES, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF AGENT OR ANY LENDER. EACH
BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIM IN ANY
PROCEEDING BROUGHT BY AGENT OR ANY LENDER TO REALIZE ON PROPERTY, COLLATERAL OR
ANY OTHER SECURITY FOR THE LIABILITIES, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF AGENT OR ANY LENDER. EACH BORROWER WAIVES ANY OBJECTION THAT
IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH AGENT OR ANY LENDER HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION 11.8(B).
11.9 SERVICE OF PROCESS. EACH BORROWER HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND IRREVOCABLY APPOINTS PRENTICE-HALL
CORPORATION SYSTEM, INC., SUCH BORROWER'S REGISTERED AGENT, AS BORROWER'S AGENT
FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS WITHIN THE STATE OF ILLINOIS
(THE "SP AGENT"). AGENT AND EACH LENDER AGREES TO PROMPTLY FORWARD BY
REGISTERED MAIL (NO RETURN RECEIPT REQUIRED) A COPY OF ANY PROCESS SO SERVED BY
IT UPON THE SP AGENT TO SUCH BORROWER AT ITS ADDRESS SET FORTH IN SUBSECTION
11.17 HEREOF. EACH BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS AS AFORESAID.
EACH BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF THE
COURTS REFERRED TO IN SUBSECTION 11.8 HEREOF IN ANY SUCH ACTION OR PROCEEDING BY
MAILING COPIES OF SUCH SERVICE BY REGISTERED MAIL, POSTAGE PREPAID TO SUCH
BORROWER AT SAID
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ADDRESS. NOTHING IN THIS AGREEMENT SHALL AFFECT THE RIGHT OF AGENT OR ANY LENDER
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW BUT ANY FAILURE TO RECEIVE
SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS.
11.10 WAIVER OF JURY TRIAL AND BOND.
(A) WAIVER OF JURY TRIAL. THE BORROWERS, AGENT AND LENDERS EACH WAIVE
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, BETWEEN ANY OF THEM ARISING OUT OF, CONNECTED
WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED
THERETO. THE BORROWERS, AGENT AND LENDERS HEREBY AGREE AND CONSENT THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(B) WAIVER OF BOND. EACH BORROWER WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF AGENT OR ANY LENDER IN CONNECTION WITH ANY JUDICIAL
PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH OR LEVY UPON
COLLATERAL OR ANY OTHER SECURITY FOR THE LIABILITIES, TO ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF AGENT OR ANY LENDER, OR TO ENFORCE BY
SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT
INJUNCTION, THIS AGREEMENT, OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN AGENT OR
ANY LENDER AND ANY BORROWER.
11.11 ADVICE OF COUNSEL. EACH BORROWER ACKNOWLEDGES AND REPRESENTS TO
AGENT AND LENDERS THAT SUCH BORROWER HAS DISCUSSED THIS AGREEMENT AND THE OTHER
FINANCING AGREEMENTS WITH ITS LAWYERS AND ANY AND ALL ISSUES WITH RESPECT TO
THIS AGREEMENT AND THE OTHER FINANCING AGREEMENTS HAVE BEEN RESOLVED TO SUCH
BORROWER'S SATISFACTION.
11.12 SEVERABILITY. WHEREVER POSSIBLE, EACH PROVISION OF THIS
AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER
APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR
INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE ONLY TO THE
EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF
SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS AGREEMENT.
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11.13 Application of Payments. Notwithstanding any contrary
provision contained in this Agreement or in any of the other Financing
Agreements, each Borrower irrevocably waives the right to direct the application
of any and all payments at any time or times hereafter received by Agent or any
Lender from such Borrower or with respect to any of the Collateral, and such
Borrower does hereby irrevocably agree that Agent and each Lender shall have the
continuing exclusive right to apply and reapply any and all payments received at
any time or times hereafter, whether with respect to the Collateral or
otherwise, against the Liabilities in such manner as Agent or such Lender may
deem advisable, notwithstanding any entry by Agent or any Lender upon any of its
books and records.
11.14 Marshalling; Payments Set Aside. Neither Agent nor any Lender
shall be under any obligation to marshall any assets in favor of any Borrower or
any other party or against or in payment of any or all of the Liabilities. To
the extent that any Borrower makes a payment or payments to Agent or any Lender
or Agent or any Lender enforces its security interests or exercises its rights
of setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
11.15 Section and Subsection Titles. The section and subsection
titles contained in this Agreement shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties.
11.16 Continuing Effect. This Agreement, Agent's security interests
in the Collateral, and all of the other Financing Agreements shall continue in
full force and effect so long as any Liabilities shall be owed to Agent or any
Lender, and (even if there shall be no Liabilities outstanding) so long as this
Agreement has not been terminated as provided herein.
11.17 Notices. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
(i) three (3) Business Days after deposit in the United States mails, with
proper postage prepaid, (ii) when sent after receipt of confirmation or answer
back if sent by telecopy, or other similar facsimile transmission, (iii) one (1)
Business Day after deposited with a reputable overnight courier with all charges
prepaid, or (iv) when delivered, if hand-delivered by messenger, all of which
shall be properly addressed to the party to be notified and sent to the address
or number indicated as follows:
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(i) If to Agent at:
American National Bank and
Trust Company of Chicago
33 North LaSalle Street
Chicago, Illinois 60690
Attention: Dennis E. Harrison
Senior Vice President
Telecopy: 312/661-6929
Confirmation: 312/661-5728
(ii) If to any Lender to the address set forth for such Lender on
Schedule 1 hereto:
(iii) If to Rail at:
ABC Rail Products Corporation
200 South Michigan Avenue
Chicago, Illinois 60604
Attention: D. Chisholm MacDonald
Senior Vice President
Telecopy: 312/322-0397
Confirmation: 312/322-4579
(iv) If to Deco at:
ABC Rail Products Corporation
200 South Michigan Avenue
Chicago, Illinois 60604
Attention: D. Chisholm MacDonald
Senior Vice President
Telecopy: 312/322-0397
Confirmation: 312/322-4579
or to such other address or number as each party designates to the other in the
manner herein prescribed.
11.18 Equitable Relief. Each Borrower recognizes that, in the event
any Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Agent or any Lender; therefore, each Borrower agrees that Agent or any
Lender, if Agent or such Lender so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and the granting of any such relief shall not preclude Agent or
any Lender from pursuing any other relief or remedies for such breach.
11.19 Indemnification. Each Borrower agrees to defend, protect,
indemnify and hold harmless Agent, the Issuing Bank and each Lender and each of
their respective officers,
99
<PAGE>
directors, employees, attorneys, consultants and agents (collectively, the
"Indemnitees") from and against any and all 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 and consultants of such
Indemnitees in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitees shall be designated a party
thereto), which may be imposed on, incurred by, or asserted against such
Indemnitees (whether direct, indirect, or consequential and whether based on any
federal or state laws or other statutory regulations, including, without
limitation, securities, environmental and commercial laws and regulations, under
common law or at equitable cause or on contract or otherwise) in any manner
relating to or arising out of this Agreement, the Original Agreement or the
other Financing Agreements, or any act, event or transaction related or
attendant thereto, the agreements of Agent, the Issuing Bank and each Lender
contained herein, the making of any Loans or any other advances, the issuance of
any Letter of Credit, the management of such Loans, advances or Letters of
Credit or the Collateral (including any liability under federal, state or local
environmental laws or regulations) or the use or intended use of the proceeds of
such Loans, advances or Letters of Credit (collectively, the "Indemnified
Matters"); provided that the Borrowers shall have no obligation to any
Indemnitee hereunder with respect to Indemnified Matters finally judicially
determined in a proceeding which is binding upon such Indemnitee to have been
caused by or resulting from the willful misconduct or gross negligence of such
Indemnitee or to reimburse any Lender (other than ANB in its capacity as Agent)
for its legal fees and expenses incurred prior to the occurrence of a Default or
Event of Default in connection with the documentation and closing of the matters
contemplated by this Agreement. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this Subsection 11.19 may be unenforceable
because it is violative of any law or public policy, the Borrowers shall
contribute the maximum portion which it is permitted to pay and satisfy under
applicable law, to the payment and satisfaction of all Indemnified Matters
incurred by the Indemnitees. In addition, the Borrowers shall, upon demand, pay
to the Agent, any Lender and the Issuing Bank all costs and expenses (including
the reasonable fees and disbursements of counsel and other professionals) paid
or incurred by the Agent, the Issuing Bank or such Lender in (i) enforcing or
defending its rights under or in respect of this Agreement, the other Financing
Agreements or any other document or instrument now or hereafter executed and
delivered in connection herewith, (ii) in collecting the Loans, (iii) in
foreclosing or otherwise collecting upon the Collateral or any part thereof and
(iv) obtaining any legal, accounting or other advice in connection with any of
the foregoing after the occurrence of a Default or Event of Default. Each
Borrower's obligations hereunder shall survive any termination of this Agreement
and the other Financing Agreements and the payment in full of the Liabilities,
and are in addition to, and not in substitution of, any other of their
obligations set forth in this Agreement.
11.20 Nonliability of Agent and Lenders. The relationship between
the Borrowers and each Lender and Agent shall be solely that of borrower and
lender. Neither Agent nor any Lender shall have any fiduciary responsibilities
to any Borrower. Neither Agent nor any Lender undertakes any responsibility to
any Borrower to review or inform any Borrower of any matter in connection with
any phase of any Borrower's business or operations.
100
<PAGE>
11.21 Independent Nature of Lenders' Rights. The amounts payable at
any time hereunder to each Lender under such Lender's Notes shall be a separate
and independent debt.
11.22 Effectiveness. This Agreement shall become effective on the
date on which all of the parties hereto shall have signed a copy hereof (whether
the same or different copies) and shall have delivered the same to Agent
pursuant to Subsection 11.17 or, in the case of any Lenders which have not
executed and delivered the same as provided above, shall have given to Agent
written, telecopied or telex notice (actually received) at such office that the
same has been signed and mailed to it. After giving effect to this Agreement,
all references to the Original Agreement in any Financing Agreement (other than
this Agreement) shall mean and be a reference to this Agreement.
11.23 Counterparts. This Agreement may be executed and accepted in
any number of counterparts, each of which shall be an original with the same
effect as if the signatures were on the same instrument. The delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of a manually executed counterpart of this Agreement.
[REMAINDER INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
101
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
day and year first above written.
ABC RAIL PRODUCTS CORPORATION
By: /s/ D. Chisholm MacDonald
------------------------------------
D. Chisholm MacDonald
Title: Senior Vice President and Chief
Financial Officer
ABC DECO INC.
By: /s/ D. Chisholm MacDonald
------------------------------------
D. Chisholm MacDonald
Title: Vice President and Chief
Financial Officer
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
individually and as Agent
By: /s/ Elizabeth J. Limpert
------------------------------------
Title: Vice President
---------------------------------
BTM CAPITAL CORPORATION
By: /s/ James Torkelson
------------------------------------
LASALLE NATIONAL BANK
By: /s/ F. Ward Nixon
------------------------------------
Title: Senior Vice President
---------------------------------
MELLON BANK, N.A.
By: /s/ Michael R. Geissler
------------------------------------
Title: Vice President
---------------------------------
<PAGE>
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
By: /s/ Stephen R. Loso
------------------------------------
Title: Vice President
---------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Unaudited Consolidated Balance Sheets and Consolidated Statements of
Operations for the period ended January 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 35,500<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 48,865
<CURRENT-ASSETS> 91,302
<PP&E> 114,545
<DEPRECIATION> 33,164
<TOTAL-ASSETS> 206,602
<CURRENT-LIABILITIES> 58,030
<BONDS> 60,537
<COMMON> 90
0
0
<OTHER-SE> 77,799
<TOTAL-LIABILITY-AND-EQUITY> 206,602
<SALES> 111,621
<TOTAL-REVENUES> 111,621
<CGS> 97,640
<TOTAL-COSTS> 97,640
<OTHER-EXPENSES> 5,942
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,810
<INCOME-PRETAX> 5,229
<INCOME-TAX> 2,142
<INCOME-CONTINUING> 3,087
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,087
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
<FN>
<F1> Notes and accounts receivable - trade are reported net of allowances for
doubtful accounts in the Consolidated Balance Sheets.
</FN>
</TABLE>
