<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
-------------
[X]Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended March 31, 1997
or
[ ]Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to
----------- -----------
Commission file number: 0-25900
REPUBLIC ENGINEERED STEELS, INC.
(Exact Name of Company as Specified in its Charter)
DELAWARE 52-1635079
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
410 OBERLIN ROAD, S.W.
MASSILLON, OHIO 44647
(330) 837-6000
(Address, Including Zip Code, and Telephone Number, Including Area Code
of Company's Principal Executive Offices)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the company: (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 company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the issuer's common stock, as of
April 30, 1997: 19,706,578 shares
- --------------------------------------------------------------------------------
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Page 1 of 18
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPUBLIC ENGINEERED STEELS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . $196,610 $197,749
Cost of product sold (including depreciation
of $6,501 and $6,199 for 1997 and 1996) (Note 2). . . . . 180,164 188,787
--------- ---------
Gross profit. . . . . . . . . . . . . . . . . . . . . . 16,446 8,962
Selling expenses . . . . . . . . . . . . . . . . . . . . . 2,532 2,750
General and administrative expenses. . . . . . . . . . . . 8,168 8,660
Special charges (Note 6) . . . . . . . . . . . . . . . . . 2,763 3,890
Other Postretirement benefits charges. . . . . . . . . . . 4,319 4,080
Non-cash ESOP charges. . . . . . . . . . . . . . . . . . . 7,352 8,030
Other charges (credits), net . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . 6,883 6,765
Interest income . . . . . . . . . . . . . . . . . . . . (112) (116)
Miscellaneous, net. . . . . . . . . . . . . . . . . . . (209) (75)
--------- ---------
Loss before income taxes . . . . . . . . . . . . . . . (15,250) (25,022)
Income tax benefit. . . . . . . . . . . . . . . . . . . 6,100 10,009
--------- ---------
Net loss . . . . . . . . . . . . . . . . . . . . . . ($9,150) ($15,013)
--------- ---------
--------- ---------
Net loss per Common Share
Primary . . . . . . . . . . . . . . . . . . . . . . . ($0.46) ($0.76)
Average shares and share equivalents outstanding . . . 19,706,578 19,706,578
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
Page 2 of 18
<PAGE>
REPUBLIC ENGINEERED STEELS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
NINE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . $554,705 $553,680
Cost of product sold (including depreciation of
$19,450 and $14,298 for 1997 and 1996 (Note 2) . . . . . 515,532 509,772
---------- ----------
Gross profit. . . . . . . . . . . . . . . . . . . . . . . 39,173 43,908
Selling expenses . . . . . . . . . . . . . . . . . . . . . 7,775 8,246
General and administrative expenses. . . . . . . . . . . . . 25,383 26,795
Special charges (Note 6) . . . . . . . . . . . . . . . . . 2,763 3,890
Other postretirement benefits charges. . . . . . . . . . . . 12,957 12,239
Non-cash ESOP charges. . . . . . . . . . . . . . . . . . . . 22,957 24,191
Other charges (credits), net . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . 20,224 19,902
Capitalized interest. . . . . . . . . . . . . . . . . . . -- (8,491)
Interest income . . . . . . . . . . . . . . . . . . . . (380) (440)
Miscellaneous, net. . . . . . . . . . . . . . . . . . . . (657) (430)
---------- ----------
Loss before income taxes . . . . . . . . . . . . . . . . . (51,849) (41,994)
Income tax benefit . . . . . . . . . . . . . . . . . . . . 20,740 16,798
---------- ----------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . ($31,109) ( $25,196)
---------- ----------
---------- ----------
Net loss per Common Share
Primary . . . . . . . . . . . . . . . . . . . . . . . . . ($1.58) ($1.28)
Average shares and share equivalents outstanding. . . . . 19,706,578 19,706,578
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
Page 3 of 18
<PAGE>
REPUBLIC ENGINEERED STEELS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND JUNE 30, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
3/31/97 6/30/96*
----------- ----------
ASSETS (Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,329 $2,074
Receivables, less allowance for doubtful accounts of $1,620 (unaudited)
at March 31, 1997 and $1,949 at June 30, 1996 . . . . . . . . . . . . . . . . . 77,052 76,712
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,360 163,426
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,896 10,639
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,711 2,052
----------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253,348 254,903
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . 315,592 331,079
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,731 21,248
Intangibles and other assets, net. . . . . . . . . . . . . . . . . . . . . . . . . 29,815 31,097
Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,282 2,250
----------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $642,768 $640,577
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt. . . . . . . . . . . . . . . .. . . . . $ -- $ --
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,870 112,723
----------- ----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,870 112,723
----------- ----------
Long-term debt, excluding current maturities . . . . . . . . . . . . . . . . . . . 280,944 280,956
Other postretirement benefits .. . . . . . . . . . . . . . . . . . . . . . . . . . 124,520 113,169
Defined benefit pension. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,776 21,601
Environmental costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,544 19,605
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,551 3,550
----------- ----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,205 551,604
----------- ----------
Shareholders' equity
Special preferred stock, $.01 par value; one share authorized, one share
issued, liquidation value of $1,500. . . . . . . . . . . . . . . . . . . . . . . 2 2
Common stock, $.01 par value; authorized 27,000,000 shares;
issued 19,707,923 shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 197
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275,270 275,270
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (169,877) (138,767)
105,592 136,702
----------- ----------
Less receivable from Employee Stock Ownership Trust. . . . . . . . . . . . . . . . 24,021 47,721
Less treasury stock, at cost, including 1,345 (unaudited) common shares at
March 31, 1997 and 1,345 common shares at June 30, 1996 . . . . . . . . . . . . 8 8
----------- ----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,563 88,973
Commitments and contingencies (Notes 4,5) . . . . . . . . . . . . . . . . . . . . -- --
$642,768 $640,577
----------- ----------
----------- ----------
</TABLE>
* Condensed from audited consolidated financial statements.
See accompanying notes to the condensed consolidated financial statements.
Page 4 of 18
<PAGE>
REPUBLIC ENGINEERED STEELS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE-MONTHS ENDED MARCH 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ($31,109) ($25,196)
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 21,871 16,846
Provision for non-cash ESOP charges . . . . . . . . . . . . . . . . 22,957 24,191
Deferred income tax benefit . . . . . . . . . . . . . . . . . . . . (20,740) (16,798)
Special charges . . . . . . . . . . . . . . . . . . . . . . . . . . 2,763 3,890
Change in operating assets and liabilities
(Increase) decrease in working capital. . . . . . . . . . . . . . . 1,669 (14,353)
Decrease in other operating assets and liabilities. . . . . . . . . 6,544 9,264
----------- -----------
Total Adjustments. . . . . . . . . . . . . . . . . . . . . . . . 35,064 19,150
----------- -----------
Net cash (used) provided by operating activities. . . . . . . . 3,955 (6,046)
----------- -----------
Cash flows from investing activities
Additions to property, plant and equipment. . . . . . . . . . . . . (5,471) (30,228)
Capitalized interest. . . . . . . . . . . . . . . . . . . . . . . . -- (8,491)
----------- -----------
Net cash used by investing activities . . . . . . . . . . . . . . . (5,471) (38,719)
----------- -----------
Cash flows from financing activities
Proceeds from debt. . . . . . . . . . . . . . . . . . . . . . . . . -- 49,500
Restricted cash - environmental bonds . . . . . . . . . . . . . . . 968 2,538
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . -- (12,012)
Other financing activities. . . . . . . . . . . . . . . . . . . . . 1,803 1,633
----------- -----------
Net cash provided by financing activities . . . . . . . . . . . 2,771 41,659
----------- -----------
Net increase (decrease) in cash and cash equivalents . . . . . . . 1,255 (3,106)
Cash and cash equivalents at beginning of period . . . . . . . . . . 2,074 4,609
----------- -----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . $3,329 $1,503
----------- -----------
----------- -----------
Supplemental disclosure of cash flow information
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . $13,914 $15,810
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
Page 5 of 18
<PAGE>
REPUBLIC ENGINEERED STEELS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
MARCH 31, 1997 (UNAUDITED) AND JUNE 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) FINANCIAL STATEMENT PRESENTATION:
The consolidated interim financial statements presented herein have been
prepared by Republic Engineered Steels, Inc., without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission with respect to
Form 10-Q. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that all adjustments necessary for a
fair presentation have been made. These interim financial statements should be
read in conjunction with the financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1996.
(b) ORGANIZATION
On April 28, 1995, the Company issued 8,050,000 shares of its common stock
in an Initial Public Offering (IPO). Prior to the IPO, the Company was owned by
substantially all of its employees through an Employee Stock Ownership Plan
(ESOP). The ESOP acquired all of the originally issued common shares of the
Company on November 28, 1989 with the proceeds of two loans from the Company in
the amounts of $190 million (Loan A) and $30 million (Loan B), respectively,
each bearing interest at 10 percent per annum. The ESOP obtains the funds to
repay the loans primarily through tax deductible contributions made by the
Company to the ESOP based on annual stipulated percentages of employee
compensation or dividends. The ESOP repaid Loan A on March 31, 1997 and will
repay Loan B (plus interest) over its defined maturity period. As of March 31,
1997, the ESOP owned approximately 57 percent of the common stock of the
Company.
The company produces a wide range of special bar quality (SBQ) hot-rolled
and cold finished steels and specialty steel bars for the automotive, heavy
equipment maunfacturing, aerospace and power generation industries.
The Company's principal customers are manufacturers in the automotive,
machinery, industrial equipment, machine and hand tools, and aviation and
aerospace industries, as well as independent forgers who supply finished parts
to the aforementioned industries. The Company also has significant sales to
steel service centers.
Although the Company has a nationwide customer base, approximately 67
percent of its shipments for fiscal year 1996 were to customers in the states of
Indiana, Illinois, Michigan, New York, Ohio and Pennsylvania.
(c) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Republic
Engineered Steels, Inc. and its wholly owned subsidiaries, Nimishillen &
Tuscarawas Railway Company and The Oberlin Insurance Company. All significant
intercompany balances have been eliminated in consolidation.
Page 6 of 18
<PAGE>
(d) CASH EQUIVALENTS
The Company considers all short-term investments with maturities at date of
purchase of three months or less to be cash equivalents.
(e) INVENTORIES
Inventories are carried at the lower of cost or market, with cost
determined using the last-in, first-out (LIFO) method.
(f) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost less depreciation
accumulated to date. Depreciation is computed on the straight-line method over
the estimated useful lives of the assets; the range of useful lives is 15-25
years for buildings and 3-25 years for machinery and equipment. Accelerated
methods are used for income tax purposes.
(g) INTANGIBLES
Intangible assets consist primarily of deferred loan and bond fees and
intangible pension assets. The deferred loan and bond fees are being amortized
on a straight-line basis over the lives of the related debt instruments and the
pension asset is being amortized over the workforce's estimated remaining years
of service.
(h) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities resulting from a change in tax rates is recognized in
income in the period that includes the enactment date.
(i) ENVIRONMENTAL COSTS
The Company and other basic steel companies are subject to increasingly
demanding environmental standards imposed by federal, state, and local
environmental laws and regulations. It is the policy of the Company to endeavor
to comply with applicable environmental laws and regulations. The Company
established a liability for an amount which the Company believes is adequate,
based on information currently available, to cover the costs of remedial
actions it will likely be required to take to comply with existing environmental
laws and regulations.
The stated amount represents an estimate of the environmental remediation
costs associated with future events triggering or confirming the losses that are
likely to occur in management's judgment. This estimate is based on currently
available facts, existing technology, and presently enacted laws and
regulations, and it takes into consideration the likely effects of inflation and
other societal and economic factors. The precise timing of such events cannot
be reliably determined at this time due to absence of any deadlines for
remediation under the applicable environmental laws and regulations pursuant to
which such remediation costs will be expended. No claims for recovery are
netted against the stated amount.
Page 7 of 18
<PAGE>
(j) NET LOSS PER COMMON SHARE
The net loss per common share computations are based upon the weighted
average number of common stock equivalents outstanding during each period.
(k) RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform to
the current reporting presentation.
(2) INVENTORIES
Inventories are carried at the lower of cost or market with cost determined
using the last-in, first-out (LIFO) method.
<TABLE>
<CAPTION>
Inventories consist of the following :
(in thousands)
March 31, June 30,
1997 1996
----------- ---------
(unaudited)
<S> <C> <C>
Raw materials $11,934 $10,401
Finished and semifinished product 145,988 150,711
Supplies, molds, and stools 1,438 2,314
-------- --------
$159,360 $163,426
-------- --------
-------- --------
</TABLE>
Third quarter results for fiscal year 1997 include a $3 million credit to
cost of sales related to the estimated impact of Lifo liquidations.
(3) LONG-TERM DEBT
Long-term debt of the Company consists of the following:
<TABLE>
<CAPTION>
(in thousands)
March 31, June 30,
1997 1996
---------- ---------
(unaudited)
<S> <C> <C>
9% Solid Waste Revenue Bonds, Series 1996, due June 1, 2021 $53,700 $53,700
8 1/4% Solid Waste Revenue Bonds, Series 1994, due October 1, 2014 20,200 20,200
9 7/8% First Mortgage Notes due December 15, 2001 200,000 200,000
Revolving Credit Agreement 7,000 7,000
Other 44 56
--------- --------
280,944 280,956
Less Current Maturities of Long-term debt -- --
--------- --------
$280,944 $280,956
--------- --------
--------- --------
</TABLE>
Page 8 of 18
<PAGE>
On October 28, 1994, the Company obtained $20.2 million of financing
through the issuance of 8 1/4 percent Solid Waste Revenue Bonds due October
1, 2014 (the "1994 Bonds") in connection with the solid waste disposal
facilities installed at it's CAST-ROLL-TM- facility. On June 1, 1996, the
company obtained $53.7 million of financing through the issuance of 9 percent
Solid Waste Revenue Bonds, Series 1996, due June 1, 2021 (the "1996 Bonds")
in connection with the solid waste recycling facilities installed at its
CAST-ROLL-TM- facility. As of March 31, 1997, the Company had available
$1.282 million of the 1996 Bonds, which is classified as long-term restricted
cash in the accompanying consolidated balance sheet.
On December 15, 1993, the Company issued $200 million aggregate principal
amount of 9 7/8% First Mortgage Notes due December 15, 2001 (the "Notes") in an
underwritten public offering. The Notes are redeemable, in whole or in part, at
the option of the Company, on or after December 15, 1998 at specified premiums
set forth therein which decline over three years. The Notes are secured by a
mortgage on substantially all of the Company's property, plant and equipment as
of December 15, 1993. The Notes contain affirmative and negative covenants,
including provisions for restrictions on additional borrowings, investments, the
sale or disposal of assets, the payment of dividends and liens, as well as
change of control provisions.
As of March 31, 1997, the Company's $90 million revolving credit facility
had a four-year term expiring in December 1997. As of March 31, 1997
(unaudited), $83.0 million of that credit facility remained
available. The facility was secured by the Company's receivables, inventories,
subsidiaries' stock, short-term investments, and certain intangible assets.
Advances under the facility were limited to specified percentages of the
Company's eligible receivables and inventories which, since inception exceeded
the total facility. As of March 31, 1997, the Company had $7.0 million
outstanding under the facility. However, that revolving credit facility
has since been amended (as described immediately below) and the $7.0 million is
classified as long term debt. Otherwise, no long term debt matures during the
next five years.
Effective April 25, 1997, the Company amended and restated its $90
million revolving credit facility (the "Second Amended and Restated Revolving
Credit Agreement", hereinafter referred to as the "Revolving Credit
Agreement"). The Revolving Credit Agreement expires April 25, 2000,
permitting borrowings up to $115 million. The Revolving Credit Agreement is
secured by the Company's receivables, inventories, subsidiaries stock, short
term investments and certain intangible assets. Advances under the facility
are limited to specified percentages of the Company's eligible receivables
and inventories.
The Revolving Credit Agreement provides up to $20 million for letters of
credit. Borrowings under the Revolving Credit Agreement bear interest at a
per annum rate equal to the higher of the base rate of BankBoston and 1/2
percent above the Federal Funds effective rate plus 1/4 percent; or LIBOR
plus 2 1/4 percent, at the Company's option.The borrowing base under the
Revolving Credit Agreement is the sum of 55 percent of "Eligible Inventory"
up to a maximum of $75 million and 85 percent of "Eligible Accounts
Receivable." Fees of 2 1/2 percent per annum on the maximum drawing amount
of each standby or documentary letter of credit are payable on the date of
issuance of such letter of credit. A commitment fee of 0.375 percent per
annum on the average unused portion of the facility is payable quarterly.
The Revolving Credit Agreement contains certain limited negative and
affirmative covenants, including failure to pay interest or principal when
due, inaccurate or false representations or warranties and limitations on
restricted payments.
Page 9 of 18
<PAGE>
(4) ENVIRONMENTAL COMPLIANCE
The Company is subject to a broad range of federal, state and local
environmental laws and regulations, including those governing discharges into
the air and water, the handling and disposal of solid and hazardous wastes and
the remediation of contamination associated with the disposal of waste. The
Company continuously monitors its compliance with such environmental laws and
regulations and, accordingly, believes that it is currently in substantial
compliance with such laws and regulations. The Company does not anticipate the
need to make substantial expenditures for environmental control measures during
the next twenty-four months. As is the case with most steel producers, the
Company could possibly incur significant costs related to environmental
compliance, in particular those arising from remediation costs for historical
waste disposal practices at certain facilities. The Company believes that these
costs are most likely to be in the range of $12.3 million to $26.1 million.
This range represents the estimated aggregate cost to resolve the environmental
contingencies. The Company does not anticipate any third party recoveries. The
reserve to cover potential environmental liabilities was $17.8 million
(unaudited) at March 31, 1997 and $20.0 million at June 30, 1996.
The reserve has been established and is monitored based on continuing
reviews of the reserve, each matter comprising the reserve, and whether any new
matters should be included in the reserve, using currently available information
relative to enacted laws and regulations and existing technology. These reviews
are performed periodically by an in-house committee comprised of representatives
experienced in environmental matters from the environmental, law, operating, and
accounting departments in consultation with outside legal and technical experts,
as necessary.
(5) LEGAL PROCEEDINGS
In September 1992, a lawsuit was filed against the Company in the U.S.
District Court for the Northern District of Ohio (Eastern Division) on behalf of
nineteen former Company salaried employees whose employment was terminated on
February 19, 1991. The claims asserted on behalf of each former employee are
age discrimination under both federal and state laws, breach of employment
contract, promissory estoppel and violation of Ohio public policy (by reason of
age discrimination). The relief sought for each former employee is lost pay and
fringe benefits, liquidated damages (doubling the claimed lost pay and
benefits), compensatory damages of $500,000 on each count, punitive damages of
$500,000 under the public policy count, prejudgment interest and attorneys'
fees. The Company has denied all of the claims and is contesting them
vigorously. The Company's motion for summary judgment with respect to these
cases was partially granted on May 15, 1996, dismissing all claims of the former
employees other than the age discrimination claims. Management does not believe
that these actions will have a material adverse effect upon the Company.
The Company is involved in other legal proceedings, including various
environmental proceedings with governmental authorities, product liability
litigation and claims by present and former employees under federal and
counterpart state anti-discrimination and other laws relating to employment.
The Company does not believe that any of these proceedings, either individually
or in the aggregate, will have a material adverse effect on the consolidated
financial condition or results of operations of the Company.
Page 10 of 18
<PAGE>
In accordance with mid-contract re-opener provisions contained in the six
year collective bargaining agreement dated as of June 1, 1993 between the
Company and the United Steelworkers of America ("USWA"), negotiations between
the Company and the USWA on economic items (wages, payroll items and benefits)
did not result in an agreement and, unresolved issues were submitted to an
impartial arbitrator.
On February 19, 1997, the arbitrator issued a decision which, in effect,
rejected both the Company's and Union's demands and ruled that any increases in
wages and/or pension benefits must be derived from future savings, if any, from
the existing cost reduction program. The company is currently in
discussion with the USWA on the appropriate method to implement the arbitrators
decision. If the parties are unable to reach agreement then any unresolved
issues will be submitted to the arbitrator for final resolution on May 9, 1997.
(6) OTHER
Following the January 23, 1997 meeting of the Company's Board of Directors,
the Company announced a plan for organizational restructuring and cost cutting
initiatives. In addition, the Board of Directors approved a revision to the
salaried employees retiree health care plan changing eligibility requirements
for receiving retiree health care benefits from age 57 with 30 years service or
age 60 with 15 or more years service to age 65 with 15 or more years service.
For the transition to the new plan, the Board also approved a Special Retirement
Window which will provide retiree health care benefits under the old plan to
employees who were eligible for benefits as of March 31, 1997 under the old
plan and who retired by March 31, 1997. Sixty-eight (68) individuals elected to
avail themselves to the Special Retirement Window.
The Company also announced plans to restructure and reduce the salaried
work force over the next several months by more than 200 people and to further
reduce the hourly work force by more than 300 people as the Company reaches full
capacity utilization of its CAST-ROLL-TM- facility and completes other smaller
capital projects. On April 24, 1997, fifty-two (52) salaried employees were
involuntarily terminated and attrition has resulted in an additional twenty-five
(25) positions being eliminated.
The financial impact of the restructuring of the salaried workforce is
estimated to be $2.8 million and is reflected as a special charge in the current
quarter financial statements. The Company's plan to restructure the hourly
workforce has not yet been approved as negotiations with the USWA continue.
Generally, the restructuring of the hourly workforce will be covered by a
supplemental unemployment benefit plan and other plans covered by union
contracts. Therefore, reasonable estimates resulting from a restructuring
cannot be made without the final resolution of these negotiations. The special
charge of $3.9 million in the year earlier quarter reflects the accrual for the
shutdown of the Company's 8" bar mill.
Page 11 of 18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1996
The Company's financial results for the third quarter of fiscal year 1997
reflects a marked improvement versus the year earlier quarter. Despite a 15%
decrease in average selling price per ton, gross profit was improved by 84% as
shipping volume was increased by 17% and manufacturing costs per ton were
improved by nearly 19% versus the year earlier quarter.
During the third quarter of fiscal year 1997 the production level from the
CAST-ROLL-TM- facility was again increased and averaged nearly 78% of its
capacity for the quarter.
Net sales for the third quarter totaled approximately $196.6 million on
271,609 net tons of steel shipments compared to approximately $197.7 million and
shipments of 232,179 net tons for the year earlier quarter. Despite the 17%
increase in shipping volume, total sales revenues decreased by $1.1 million as a
result of lower raw material surcharges, a decrease in shipments of higher
priced stainless products which have been adversely affected by increased
imports, and also as a result of generally weaker selling prices created by the
threat of excess supply versus demand and the competitors resolve to maintain
their market share.
The Company's cost of goods sold decreased to $180.2 million from $188.8
million for the year earlier quarter despite the overall 17% increase in
shipment level. The decrease is the result of higher utilization rates,
decreased raw material prices for scrap, nickel and molybdenum, decreased
operating costs of CAST-ROLL-TM- facility and other cost reduction initiatives.
In addition, the Company recorded a pretax $3 million Lifo credit which is
primarily the result of inventory reductions which had been increased during
fiscal year 1996 in anticipation of the shutdown of the 8" bar mill; and, the
Company also recognized a pretax gain of $1.5 million to reflect a current
independent estimate reducing probable environmental liabilities for certain
historical waste disposal practices.
Selling, general and administrative expenses decreased from approximately
$11.4 million in the quarter ended March 31, 1996 to approximately $10.7 million
in the quarter ended March 31, 1997. The decrease is primarily the result of
lower salaried employment costs associated with reduced levels of salaried
employees although it does not reflect the significant reduction that occurred
subsequent to March 31, 1997.
During the third quarter, the Company recorded a pretax $2.8 million
special charge for the reduction of the salaried workforce. In the year ago
quarter, the Company recorded a $3.9 million special charge associated with the
shutdown of it's 8" bar mill formerly located at its Canton, Ohio 8th Street
plant.
Net periodic other postretirement benefits accrued during the third quarter
of fiscal year 1997 totaled $4.3 million compared to $4.1 million in the year
earlier quarter primarily as the result of additional service and interest
costs. The Company made
Page 12 of 18
<PAGE>
related cash payments of $.4 million for each of the quarters ended March 31,
1997 and 1996.
Non-cash ESOP charges decreased approximately $.7 million to approximately
$7.4 million compared to approximately $8.0 million in the year earlier quarter.
The decrease was the result of lower manpower utilization despite the increased
shipment level.
Net interest expense totaled approximately $6.9 million for the third
quarter of fiscal year 1997, an increase of $.1 million versus the year
earlier quarter as the result of higher interest rates.
NINE MONTHS ENDED MARCH 31, 1997 COMPARED WITH NINE MONTHS ENDED
MARCH 31, 1996
The Company's financial results for the nine months ended March 31, 1997
reflect a decrease of $93 per ton or 11% in average selling price which
outweighed decreases totaling 10.3% in raw materials and other operating
costs versus the year earlier period.
During the nine months ended March 31, 1997, production from the
CAST-ROLL-TM- facility represented approximately 70% of the facility's
capacity.
Net sales for the first nine months of fiscal year 1997 totaled $554.7
million on 738,720 net tons of steel shipments compared to $553.7 million on
shipments of 656,063 net tons for the year earlier period. Sales revenues
increased by only .2% despite the 12.6% increase in net tons shipped. The
average selling price dropped from $844 per ton to $751 per ton and is the
result of a higher percentage of semi-finished carbon and alloy products, a
lower percentage of value added cold finished and specialty products coupled
with decreased prices created by new entrants into the SBQ market.
The Company's cost of product sold increased by 1.1% to $515.5 million
versus $509.8 for the year earlier period. The increase is the result of
higher production and shipment levels and a $5.2 million increase in
depreciation expense associated with the CAST-ROLL-TM- facility. Scrap costs
decreased to 23.3% of total cost of goods sold during the nine months ended
March 31, 1997 compared to 24.1% during the same period one year earlier.
Prices were also lower on other raw materials, particularly nickel and
molybdenum. In addition, the Company recorded a $3 million pretax Lifo
credit which is primarily the result of inventory reductions which had been
increased during fiscal year 1996 in anticipation of the shutdown of the 8"
bar mill, and the Company also recognized a pretax gain of $1.5 million to
reflect a current independent estimate reducing probable environmental
liabilities for certain historical waste disposal practices. Overall, on a
cost per ton basis, manufacturing costs decreased by 10.2% from $777 per ton
to $698 per ton in the current period.
Selling, general and administrative expenses decreased from $35.0 million
to $33.2 million for the first nine months of fiscal year 1997 compared to the
same period in the prior fiscal year. The decrease is primarily the result of
lower salaried employment costs associated with reduced levels of salaried
employees although it does not reflect the significant reduction that occurred
subsequent to March 31, 1997.
Page 13 of 18
<PAGE>
For the nine month period ended March 31, 1997, the Company recorded a $2.8
million special charge for the reduction of the salaried workforce. In the year
earlier period, the Company recorded a special charge of $3.9 million associated
with the shutdown of it's 8" bar mill formerly located at it's Canton, Ohio 8th
Street plant.
Net periodic postretirement benefits accrued during the nine months ended
March 31, 1997 amounted to an expense of $13.0 million compared to $12.2 million
in the same period of the prior fiscal year primarily as the result of
additional service and interest costs. Cash payments for postretirement
benefits totaled $1.6 million and $1.4 million during the nine months ended
March 31, 1997 and 1996, respectively.
Non-cash ESOP charges totaled $23.0 million for the first nine months of
fiscal year 1997 as compared to $24.2 million for the same period in the prior
fiscal year. This decrease is primarily the result of the lower manpower
utilization.
Net interest expense totaled approximately $19.8 million for the nine
months ended March 31, 1997, an increase of $8.8 million versus the year
earlier nine month period and is primarily the result of capitalized interest
of $8.5 million for the nine month period ended March 31, 1996 associated
with the construction of the CAST-ROLL-TM- facility. Effective January 1,
1996 the old vertical caster was shutdown and the CAST-ROLL-TM- facility was
substantially complete and operational. Accordingly, interest is no longer
being capitalized.
LIQUIDITY AND CAPITAL RESOURCES
Unrestricted cash and cash equivalents as of March 31, 1997 totaled $3.3
million compared to $2.1 million as of June 30, 1996. Also, as of March 31,
1997, the Company had available $83.0 million under its $90 million revolving
credit agreement with the First National Bank of Boston ("the Revolving Credit
Agreement").
On December 15, 1993, the Company issued $200 million aggregate principal
amount of 9 7/8 percent First Mortgage Notes due December 15, 2001 (Notes) in an
underwritten public offering. The Notes are redeemable, in whole or in part, at
the option of the Company, on or after December 15, 1998 at specified premiums
set forth therein which decline over three years. The Notes are secured by a
mortgage on substantially all of the Company's property, plant and equipment as
of December 15, 1993. Capital expenditures subsequent to that date for
property, plant and equipment (including the CAST-ROLL-TM- facility) aggregating
approximately $212.8 million are not part of the security for the Notes. The
Notes contain affirmative and negative covenants including provisions for
restrictions on additional borrowings, certain investments, certain payments,
sale or disposal of assets, payment of dividends and liens, as well as change of
control provisions.
On October 28, 1994, the Ohio Water Development Authority ("the Authority")
issued $20.2 million of 81/4 percent Solid Waste Revenue Bonds ("the 1994
Bonds") due 2014, on behalf of the State of Ohio, at 98% of the face amount in
connection with the solid waste disposal facilities installed at its
CAST-ROLL-TM- facility. Additionally, on June 1, 1996, the Authority issued
$53.7 million of 9.0% Solid Waste Revenue Bonds ("the 1996 Bonds") due June 1,
2021 in connection with the solid waste recycling facilities installed at the
CAST-ROLL-TM- facility. The proceeds of the 1996 Bonds were used to reduce the
outstanding borrowings under the revolving credit facility. The Company had
Page 14 of 18
<PAGE>
available $1.282 million and $2.25 million as of March 31, 1997 and June 30,
1996, respectively, from the 1996 Bonds which are classified as restricted cash
in the accompanying consolidated balance sheet.
The Company's $90 million revolving credit facility, which was due to
expire in December 1997, had $7.0 million outstanding as of March 31, 1997.
However, that revolving credit facility has since been amended (as described
above) and the $7.0 million is classified as long term debt.
Otherwise, no long term debt matures during the next five years.
The new Revolving Credit Agreement expires April 25, 2000, permitting
borrowings up to $115 million. The new credit facility is secured by the
Company's receivables, inventories, subsidiaries stock, short term
investments and certain intangible assets. Advances under the facility are
limited to specified percentages of the Company's eligible receivables and
inventories.
The Revolving Credit Agreement provides up to $20 million for letters of
credit. Borrowings under the Revolving Credit Agreement bear interest at a
per annum rate equal to the higher of the base rate of BankBoston and 1/2
percent above the Federal Funds effective rate plus 1/4 percent; or LIBOR
plus 2 1/4 percent, at the Company's option. The borrowing base under the
Revolving Credit Agreement is the sum of 55 percent of "Eligible Inventory"
up to a maximum of $75 million and 85 percent of "Eligible Accounts
Receivable." Fees of 2 1/2 percent per annum on the maximum drawing amount
of each standby or documentary letter of credit are payable on the date of
issuance of such letter of credit. A commitment fee of 0.375 percent per
annum on the average unused portion of the facility is payable quarterly.
The Revolving Credit Agreement contains certain limited negative and
affirmative covenants, including failure to pay interest or principal when
due, inaccurate or false representations or warranties and limitations on
restricted payments.
A copy of the Revolving Credit Agreement has been filed with this report on
Form 10-Q as Exhibit 10.1(e).
The Company believes that cash on hand, cash flow from operations and
borrowings under The Revolving Credit Agreement will be sufficient
to meet its cash needs in the foreseeable future.
Forward looking statements herein are made pursuant to safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. Readers
are cautioned not to place undue reliance on these forward looking statements
which speak only as of the date hereof. Such risks and uncertainties include,
but are not limited to, general business and economic conditions; competitive
factors such as the availability and pricing of steel, fluctuations in demand,
specifically in the automotive market; potential equipment malfunction; and
construction and repair delays.
Page 15 of 18
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Item 1, Financial Statements, footnote (5) Legal
Proceedings.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1(e) - Second Amended and Restated
Revolving Credit Agreement dated as of
April 25, 1997.
(b) REPORTS ON FORM 8-K
None.
Page 16 of 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.
REPUBLIC ENGINEERED STEELS, INC.
By: /s/ R. W. Majer
-----------------------------
Russell W. Maier
President
and Chief Executive Officer
By: /s/ James Burns Riley
-----------------------------
James Burns Riley
Executive Vice President
and Chief Financial Officer
Dated: April 30, 1997
Page 17 of 18
<PAGE>
EXHIBIT 10.1(e)
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT,
DATED AS OF APRIL 25, 1997
Page 18 of 18
<PAGE>
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
by and among
REPUBLIC ENGINEERED STEELS, INC.,
BANKBOSTON, N.A.
AND THE LENDING INSTITUTIONS LISTED ON SCHEDULE 1 HERETO
and
BANKBOSTON, N.A.,
AS AGENT
with
BANCBOSTON SECURITIES, INC.,
AS ARRANGER
April 25, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. DEFINITION AND RULES OF INTERPRETATION
Section 1.1 Definitions..................................
Section 1.2 Rules of Interpretation......................
Section 2. THE REVOLVING CREDIT FACILITY...............................
Section 2.1 Commitment to Lend...........................
Section 2.2 Commitment Fee...............................
Section 2.3 Reduction of Total Commitment................
Section 2.4 The Revolving Credit Notes...................
Section 2.5 Interest on Revolving Credit Loans...........
Section 2.6 Requests for Revolving Credit Loans..........
Section 2.7 Conversion Options...........................
2.7.1 Conversion to Different Type of
Revolving Credit Loan..............
2.7.2 Continuation of Type of Revolving
Credit Loan........................
2.7.3 Eurodollar Rate Loans..............
Section 2.8 Funds for Revolving Credit Loan..............
2.8.1 Funding Procedures.................
2.8.2 Advances by Agent..................
Section 2.9 Change in Borrowing Base.....................
Section 3. REPAYMENT OF THE REVOLVING CREDIT LOANS.....................
Section 3.1 Maturity.....................................
Section 3.2 Mandatory Repayments of Revolving Credit
Loans........................................
Section 3.3 Optional Repayments of Revolving Credit
Loans........................................
Section 4. LETTERS OF CREDIT...........................................
Section 4.1 Letter of Credit Commitments.................
4.1.1 Commitment to Issue Letters
of Credit..........................
4.1.2 Letter of Credit Applications......
4.1.3 Terms of Letter of Credit..........
4.1.4 Reimbursement Obligations of
Banks..............................
4.1.5 Participation of Banks.............
Section 4.2 Reimbursement Obligation of the Borrower.....
Section 4.3 Letter of Credit Payments....................
Section 4.4 Obligations Absolute.........................
Section 4.5 Reliance by Issuer...........................
Section 4.6 Letter of Credit Fee.........................
<PAGE>
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Page
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Section 5. CERTAIN GENERAL PROVISIONS..................................
Section 5.1 Fees.........................................
Section 5.2 Funds for Payments...........................
5.2.1 Payments to Agent..................
5.2.2 No Offset, Etc.....................
Section 5.3 Computations.................................
Section 5.4 Inability to Determine Eurodollar Rate.......
Section 5.5 Illegality...................................
Section 5.6 Additional Costs, Etc........................
Section 5.7 Capital Adequacy.............................
Section 5.8 Certificate..................................
Section 5.9 Indemnity....................................
Section 5.10 Interest After Default.......................
5.10.1 Overdue Amounts....................
5.10.2 Maximum Interest...................
Section 6. COLLATERAL SECURITY.........................................
Section 7. REPRESENTATIONS AND WARRANTIES..............................
Section 7.1 Corporate Authority..........................
7.1.1 Incorporation; Good Standing.......
7.1.2 Authorization......................
7.1.3 Enforceability.....................
Section 7.2 Governmental Approvals.......................
Section 7.3 Title to Properties; Leases..................
Section 7.4 Financial Statements and Projections.........
` 7.4.1 Financial Statements...............
7.4.2 Projections........................
Section 7.5 No Material Changes, Etc.....................
Section 7.6 Franchises, Patents, Copyrights, Etc.........
Section 7.7 Litigation...................................
Section 7.8 No Materially Adverse Contracts, Etc.........
Section 7.9 Compliance with Other Instruments, Law, Etc..
Section 7.10 Tax Status...................................
Section 7.11 No Event of Default..........................
Section 7.12 Holding Company and Investment Company Acts..
Section 7.13 Absence of Financing Statements, Etc.........
Section 7.14 Perfection of Security Interest..............
Section 7.15 Certain Transactions.........................
Section 7.16 Employee Benefit Plans.......................
7.16.1 In General.........................
7.16.2 Welfare Plans......................
7.16.3 Guaranteed Pension Plans...........
7.16.4 Multiemployer Plans................
<PAGE>
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Page
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Section 7.17 Regulations U and X..........................
Section 7.18 Environmental Compliance.....................
Section 7.19 Subsidiaries, Etc............................
Section 7.20 Bank Accounts................................
Section 7.21 Fiscal Year..................................
Section 7.22 Disclosure...................................
Section 8. AFFIRMATIVE COVENANTS OF THE BORROWER.......................
Section 8.1 Punctual Payment.............................
Section 8.2 Maintenance of Office........................
Section 8.3 Records and Accounts.........................
Section 8.4 Financial Statements, Certificates and
Information..................................
Section 8.5 Notices......................................
8.5.1 Defaults...........................
8.5.2 Environmental Events...............
8.5.3 Notification of Claim against
Collateral.........................
8.5.4 Notice of Litigation and Judgments.
Section 8.6 Corporate Existence; Maintenance of
Properties...................................
Section 8.7 Insurance....................................
Section 8.8 Taxes, Etc...................................
Section 8.9 Inspection of Properties and Books, Etc......
8.9.1 General............................
8.9.2 Commercial Finance Examinations....
8.9.3 Communications with Accountants....
Section 8.10 Compliance with Laws, Contracts, Licenses and
Permits......................................
Section 8.11 Employee Benefit Plans.......................
Section 8.12 Use of Proceeds..............................
Section 8.13 Bank Accounts; Agency Account Arrangements...
8.13.1 Bank Accounts......................
8.13.2 Agency Account Arrangements........
Section 8.14 Borrowing Base...............................
Section 8.15 Further Assurances...........................
Section 9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER..................
Section 9.1 Restrictions on Indebtedness.................
Section 9.2 Restrictions on Liens........................
Section 9.3 Restrictions on Investments..................
Section 9.4 Change in Terms of Capital Stock;
Distributions................................
Section 9.5 Merger and Consolidation.....................
Section 9.6 Sale and Leaseback; Disposition of Assets....
Section 9.7 Compliance with Environmental Laws...........
Section 9.8 First Mortgage Note Debt.....................
Section 9.9 Employee Benefit Plans.......................
Section 9.10 Bank Accounts................................
Section 9.11 Limitation on Issuance of Shares of
Subsidiaries; Disposition....................
<PAGE>
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Page
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of Shares and Indebtedness of Subsidiaries....
Section 9.12 Contributions to ESOP Trust...................
Section 9.13 No Material Changes, etc......................
Section 9.14 No Subsidiaries...............................
Section 10. FINANCIAL COVENANTS OF THE BORROWER..........................
Section 10.1 Capital Expenditures..........................
Section 11. CONCERNING THE EFFECTIVE DATE; CONDITIONS TO EFFECTIVENESS...
Section 11.1 Loan Documents................................
Section 11.2 Certified Copies of Charter Documents.........
Section 11.3 Corporate Action..............................
Section 11.4 Incumbency Certificate........................
Section 11.5 Validity of Liens.............................
Section 11.6 Perfection Certificates and UCC Search
Results.......................................
Section 11.7 Certificates of Insurance.....................
Section 11.8 Borrowing Base Report.........................
Section 11.9 Opinions of Counsel...........................
Section 11.10 Payment of Fees...............................
Section 11.11 Repayment of Portion of Existing Indebtedness.
Section 11.12 Payment of Interest and Fees under Prior
Credit Agreement..............................
Section 11.13 Supplementary Letter Agreement................
Section 11.14 Commercial Finance Examination................
Section 12. CONDITIONS TO ALL BORROWINGS.................................
Section 12.1. Representations True..........................
Section 12.2. No Legal Impediment...........................
Section 12.3 Governmental Regulation.......................
Section 12.4 Proceedings and Documents.....................
Section 12.5 Borrowing Base Report.........................
Section 13. EVENTS OF DEFAULT; ACCELERATION; ETC.........................
Section 13.1 Events of Default and Acceleration............
Section 13.2 Termination of Commitments....................
Section 13.3 Remedies......................................
Section 13.4 Distribution of Collateral Proceeds...........
Section 14. SETOFF.......................................................
Section 15. THE AGENT....................................................
<PAGE>
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Page
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Section 15.1 Authorization.................................
Section 15.2 Employees and Agents..........................
Section 15.3 No Liability..................................
Section 15.4 No Representations............................
Section 15.5 Payments......................................
15.5.1 Payments to Agent...................
15.5.2 Distribution by Agent...............
15.5.3 Delinquent Banks....................
Section 15.6 Holders of Revolving Credit Notes.............
Section 15.7 Indemnity.....................................
Section 15.8 Agent as Bank.................................
Section 15.9 Resignation...................................
Section 15.10 Notification of Defaults and Events
of Default....................................
Section 15.11 Duties in the Case of Enforcement.............
Section 16. EXPENSES.....................................................
Section 17. INDEMNIFICATION..............................................
Section 18. SURVIVAL OF COVENANTS, ETC...................................
Section 19. ASSIGNMENT AND PARTICIPATION.................................
Section 19.1 Conditions to Assignment by Banks.............
Section 19.2 Certain Representations and Warranties;
Limitations; Covenants........................
Section 19.3 Register......................................
Section 19.4 New Revolving Credit Notes....................
Section 19.5 Participations................................
Section 19.6 Disclosure....................................
Section 19.7 Assignee or Participant Affiliated with the
Borrower......................................
Section 19.8 Miscellaneous Assignment Provisions...........
Section 19.9 Assignment by Borrower........................
Section 20. NOTICES, ETC.................................................
Section 21. GOVERNING LAW................................................
Section 22. HEADINGS.....................................................
Section 23. COUNTERPARTS.................................................
Section 24. ENTIRE AGREEMENT, ETC........................................
Section 25. WAIVER OF JURY TRIAL.........................................
Section 26. CONSENTS, AMENDMENTS, WAIVERS, ETC...........................
<PAGE>
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Page
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Section 27. SEVERABILITY.................................................
Section 28. TRANSITIONAL ARRANGEMENTS....................................
Section 28.1 Prior Credit Agreement Superseded.............
Section 28.2 Returning and Cancellation of Notes...........
Section 28.3 Assignments...................................
Section 28.4 Revolving Credit Loans........................
Section 28.5 Existing Letter of Credit Instruments.........
<PAGE>
SCHEDULES
Schedule 1 Banks; Commitments; Commitment Percentage
Schedule 7.3 Title to Properties and Leases
Schedule 7.7 Litigation
Schedule 7.16.2 Welfare Plans - Prohibition on Terminations
Schedule 7.18 Environmental Compliance
Schedule 7.19 Joint Venture; Partnerships
Schedule 7.20 Bank Accounts
Schedule 9.1 Existing Indebtedness
Schedule 9.2 Existing Liens
Schedule 9.3 Existing Investments
EXHIBITS
Exhibit A Form of Borrowing Base Report
Exhibit B-1 Form of Second Amended and Restated Revolving Credit Note
Exhibit B-2 Form of Revolving Credit Note
Exhibit C Form of Loan Request
Exhibit D Form of Agency Agreement
Exhibit E Form of Compliance Certificate
Exhibit F Form of Supplementary Letter Agreement
Exhibit G-1 Form of Opinion of Counsel to Borrower
Exhibit G-2 Form of Opinion of Borrower's General Counsel
Exhibit H Form of Assignment and Acceptance
<PAGE>
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of
the 25th day of April 1997, by and among REPUBLIC ENGINEERED STEELS, INC. (the
"Borrower"), a Delaware corporation having its principal place of business at
410 Oberlin Road, S.W., Massillon, Ohio 44646, BANKBOSTON, N.A., F/K/A THE
FIRST NATIONAL BANK OF BOSTON and the other lending institutions listed on
SCHEDULE 1 hereto as in effect immediately prior to the date hereof (the
"Existing Banks"), Congress, Financial Corporation (New England), a
Massachusetts corporation ("Congress") and BANKBOSTON, N.A., F/K/A THE FIRST
NATIONAL BANK OF BOSTON as agent for itself and such other lending institutions.
The Borrower, the Agent and the Existing Banks entered into a Revolving
Credit and Term Loan Agreement, dated as of November 28, 1989, which agreement
was amended and restated pursuant to an Amended and Restated Revolving Credit
Agreement dated as of December 21, 1993, which agreement has been amended from
time to time (as so amended prior to the date hereof, the "Prior Credit
Agreement"). Congress wishes to become a party to the Credit Agreement and the
Borrower, the Agent, and the Existing Banks have consented thereto. The
Borrower has requested, and the Banks and the Agent have agreed subject to the
terms and conditions specified herein, to make certain amendments to, and to
restate in its entirety, the Prior Credit Agreement. Accordingly, the parties
hereto agree to amend and restate the Prior Credit Agreement as follows and
further agree that from and after the date hereof, the Prior Credit Agreement
shall remain in effect only as amended and restated herein:
Section 1. DEFINITIONS AND RULES OF INTERPRETATION.
Section 1.1. DEFINITIONS. The following terms shall have the meanings
set forth in this Section 1 or elsewhere in the provisions of this Credit
Agreement referred to below:
ACCOUNTS RECEIVABLE. All rights of the Borrower or any of its Subsidiaries
to payment for goods sold, leased or otherwise marketed in the ordinary course
of business and all rights of the Borrower or any of its Subsidiaries to payment
for services rendered in the ordinary course of business and all sums of money
or other proceeds due thereon pursuant to transactions with account debtors
recorded on books of account in accordance with generally accepted accounting
principles. Solely for the purpose of calculating the Borrowing Base, Accounts
Receivable shall not include that portion of the sum of money or other proceeds
due thereon that relate to sales, use or property taxes in conjunction with such
transactions with account debtors.
ADJUSTMENT DATE. The first day of each calendar month.
AFFILIATE. Any Person that would be considered to be an affiliate of the
Borrower under Rule 144(a) of the Rules and Regulations of the Securities and
Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
<PAGE>
-2-
AGENT. BankBoston, N.A., acting as agent for the Banks.
AGENT'S HEAD OFFICE. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
AGENT'S SPECIAL COUNSEL. Bingham, Dana & Gould LLP or such other counsel
as may be approved by the Agent.
AGENCY AGREEMENT. See Section 8.13.2.
APPLICABLE MARGIN. For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each a "Rate
Adjustment Period"), the Applicable Margin shall be the applicable margin set
forth below with respect to the Borrower's Excess Availability for the
calendar month ending immediately prior to the applicable Rate Adjustment
Period. For purposes of calculating Excess Availability for each calendar
month, Excess Availability shall be deemed to be the average daily Excess
Availability for such calendar month.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Letter of Credit
Base Rate Eurodollar Rate Fee
Applicable Applicable Applicable
Excess Availability Margin Margin Margin
------------------- ------ ------ ------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Greater than $75,000,000 0.25% 2.25% 2.25%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Less than or equal to $75,000,000 but
greater than or equal to $35,000,000 0.50% 2.50% 2.50%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Less than $35,000,000 0.75% 2.75% 2.75%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, for Revolving Credit Loans and Letters of Credit
outstanding during the period commencing on the Closing Date through June 1,
1997, the Base Rate Applicable Margin shall be 0.25%, the Eurodollar Rate
Applicable Margin shall be 2.25%, and the Letter of Credit Fee Applicable Margin
shall be 2.25%.
ASSIGNMENT AND ACCEPTANCE. See Section 19.1.
AVAILABILITY. As of any date of determination, the lesser of (a) the Total
Commitment and (b) the Borrowing Base.
BALANCE SHEET DATE. June 30, 1996.
BANKS. BKB and the other lending institutions listed on SCHEDULE 1 hereto
and any other Person who becomes an assignee of any rights and obligations of a
Bank pursuant to Section 19.
<PAGE>
-3-
BASE RATE. The higher of (a) the annual rate of interest announced from
time to time by BKB at its head office in Boston, Massachusetts, as its "base
rate" and (b) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall
mean for any day, the rate per annum equal 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 the Agent from three funds brokers of recognized
standing selected by the Agent.
BASE RATE LOANS. Revolving Credit Loans bearing interest calculated by
reference to the Base Rate.
BKB. BankBoston, N.A., f/k/a The First National Bank of Boston.
BLOCKED ACCOUNT. See Section 8.13.2.
BLOCKED ACCOUNT BANK. See Section 8.13.2.
BORROWER. As defined in the preamble hereto.
BORROWING BASE. At the relevant time of reference thereto, an amount
determined by the Agent by reference to the most recent Borrowing Base Report
which is equal to the sum of:
(a) 85% of Eligible Accounts Receivable for which invoices have been
issued and are payable; plus
(b) 55% of the net book value (determined on a first-in first-out
basis at lower of cost or market) of Eligible Inventory; PROVIDED, that in no
event shall the amount of the Borrowing Base allocable to Eligible Inventory
exceed $75,000,000; MINUS
(c) $25,000,000;
provided however, the Banks reserve the right to change, upon five (5) business
days notice to the Borrower but without its consent, the percentages set forth
in clauses (a) and (b) above from time to time based upon the results of any
commercial finance examination conducted pursuant to Section 8.9.2 which
demonstrates in the Banks' reasonable judgment a change in the collectability of
Accounts Receivable and/or the marketability of inventory not reflected in
reserves taken by the Borrower. Notwithstanding the foregoing, any decrease in
the Borrowing Base availability may be made solely by the Agent based upon the
foregoing.
BORROWING BASE REPORT. A Borrowing Base Report signed by the treasurer or
other authorized financial officer of the Borrower and in substantially the form
of EXHIBIT A hereto.
<PAGE>
-4-
BUSINESS DAY. Any day on which banking institutions in Boston,
Massachusetts, are open for the transaction of banking business and, in the case
of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day.
CAPITAL ASSETS. Fixed assets (such as land, buildings, fixtures, machinery
and equipment) and intangible assets (such as patents, copyrights, trademarks,
franchises and goodwill); PROVIDED that Capital Assets shall not include any
item customarily charged directly to expense or depreciated over a useful life
of twelve (12) months or less in accordance with generally accepted accounting
principles.
CAPITAL EXPENDITURES. Amounts paid or indebtedness incurred by the
Borrower or any of its Subsidiaries in connection with the purchase or lease by
the Borrower or any of its Subsidiaries of Capital Assets that would be required
to be capitalized and shown on the balance sheet of such Person in accordance
with generally accepted accounting principles.
CAPITALIZED INTEREST. For any period, the aggregate amount of interest
paid or accrued, without duplication as to any previous period, by the Borrower
during such period in respect of the financing of the Project and required to be
capitalized in accordance with generally accepted accounting principles.
CAPITALIZED LEASES. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. See Section 7.18.
CODE. The Internal Revenue Code of 1986, as amended from time to time.
COLLATERAL. All of the property, rights and interests of the Borrower
(other than real estate, machinery and equipment) including, without limitation,
all accounts receivable, inventory, intangibles (including, without limitation,
patents, copyrights, trademarks, franchises and goodwill), Investments of the
Borrower and the stock of its existing Subsidiaries that are or are intended to
be subject to the security interests created by the Security Documents.
COMMITMENT. With respect to each Bank, the amount set forth on SCHEDULE 1
hereto as the amount of such Bank's commitment to make Revolving Credit Loans
to, and to participate in the issuance, extension and renewal of Letters of
Credit for the account of, the Borrower, as the same may be reduced from time to
time pursuant to the provisions hereof; or if such commitment is terminated
pursuant to the provisions hereof, zero.
COMMITMENT PERCENTAGE. With respect to each Bank, the percentage set forth
on SCHEDULE 1 hereto as such Bank's percentage of the aggregate Commitments of
all of the Banks, as such percentages may be adjusted for assignments from time
to time.
COMMON STOCK. The Borrower's common stock, $0.01 par value per share.
<PAGE>
-5-
CONGRESS. As defined in the preamble hereto.
CONSOLIDATED OR CONSOLIDATED. With reference to any term defined herein,
shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
CONVERSION REQUEST. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Revolving Credit Loan in accordance
with Section 2.7.
CREDIT AGREEMENT. This Second Amended and Restated Revolving Credit
Agreement, including the Schedules and Exhibits hereto, all as amended and in
effect from time to time.
DEFAULT. See Section 13.1.
DELINQUENT BANK. See Section 15.5.3.
DISTRIBUTION. The declaration or payment of any dividend on or in respect
of any shares of any class of capital stock of the Borrower, other than
dividends payable solely in shares of Common Stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower.
DOLLARS OR $. Dollars in lawful currency of the United States of America.
DOMESTIC LENDING OFFICE. Initially, the office of each Bank designated as
such in SCHEDULE 1 hereto; thereafter, such other office of such Bank, if any,
located within the United States that will be making or maintaining Base Rate
Loans.
DRAWDOWN DATE. The date on which any Revolving Credit Loan is made or is
to be made, and the date on which any Revolving Credit Loan is converted or
continued in accordance with Section 2.7.
EFFECTIVE DATE. The first date on which the conditions set forth in
Section 11 and Section 12 have been satisfied or waived in writing by each of
the Banks and any Revolving Credit Loans are to be converted or made or any
Letter of Credit is to be issued hereunder.
ELIGIBLE ACCOUNTS RECEIVABLE. The aggregate of the unpaid portions of
Accounts Receivable (net of any credits, rebates, offsets, holdbacks, contras or
other adjustments or commissions payable to third parties that are adjustments
to such Accounts Receivable) as to which the Borrower has furnished reasonably
detailed information to the Banks in a Borrowing Base Report (i) that the
Borrower reasonably and in good faith determines to be collectible; (ii) that
are with account debtors that (A) are not factors or Affiliates of the Borrower,
(B) purchased the goods or services giving rise to the relevant Account
Receivable in an arm's length transaction, (C) are not insolvent or involved in
any case or proceeding, whether voluntary or involuntary, under any bankruptcy,
reorganization, arrangement, insolvency, adjustment of debt, dissolution,
liquidation or similar law of any
<PAGE>
-6-
jurisdiction and (D) are, in the Agent's reasonable judgment, creditworthy (in
the event the Agent determines that any account debtor is not creditworthy, the
Agent shall endeavor to notify the Borrower as to such account debtor); (iii)
that are in payment of obligations that have been fully performed and are not
subject to dispute or any other similar claims that would reduce the cash amount
payable therefor; (iv) that are not subject to any pledge, restriction, security
interest or other lien or encumbrance other than those created by the Loan
Documents; (v) in which the Agent has a valid and perfected first priority
security interest; (vi) that are neither more than thirty (30) days past due
under the original terms of the sale nor outstanding more than ninety (90) days
past the invoice date therefor; (vii) that are not due from an account debtor
located in Minnesota or New Jersey unless the Borrower (A) has received a
certificate of authority to do business and is in good standing in such state or
(B) has filed a notice of business activities report with the appropriate office
or agency of such state for the current year; (viii) that are not due from any
single account debtor if more than fifty percent (50%) of the aggregate amount
of all Accounts Receivable owing from such account debtor would otherwise not be
Eligible Accounts Receivable; (ix) that are payable in Dollars; and (x) that are
not payable from an office outside of the United States or Canada unless such
account debtor has provided to the Borrower an irrevocable letter of credit from
a financial institution reasonably satisfactory to the Agent to secure such
account debtor's obligations to the Borrower (but only to the extent of the
amount of such letter of credit and such Letter of Credit is immediately
assigned to, and delivered into the possession of, the Agent).
ELIGIBLE ASSIGNEE. Any of (a) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, PROVIDED that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; and (e) any other bank,
insurance company, commercial finance company or other financial institution
approved by the Agent, such approval not to be unreasonably withheld.
ELIGIBLE FINISHED GOODS INVENTORY. With respect to the Borrower, the gross
book value, determined in accordance with the first-in, first-out method of
inventory accounting, as reflected on the Borrower's books in accordance with
generally accepted accounting principles consistently applied, of finished goods
inventory owned by the Borrower and as to which the Borrower has furnished
reasonably detailed information to the Banks in a Borrowing Base Report;
PROVIDED that Eligible Inventory shall not include any inventory (i) held on
consignment, or not otherwise owned by the Borrower, or of a type no longer sold
by the Borrower, (ii) which has been returned by a customer and is not in
saleable condition or is damaged or subject to any legal encumbrance, (iii)
which is not in the possession of the Borrower unless the Agent has received a
waiver from the party in possession of such inventory in form and substance
satisfactory to the Agent, (iv) which is held by the Borrower on property leased
by the Borrower, unless the Agent has received a waiver from
<PAGE>
-7-
the lessor of such leased property and, if any, sublessor thereof in form and
substance satisfactory to the Agent, (v) as to which the Agent does not have a
valid and perfected first priority security interest, (vi) which has been
shipped to a customer of the Borrower regardless of whether such shipment is on
a consignment basis, (vii) which is not located within the United States of
America, (viii) which the Agent reasonably deems to be obsolete or not
marketable, (ix) which constitutes supplies or spare parts of the Borrower, or
(x) which constitutes off-site inventory, railroad inventory or conversion
inventory, in each case as such is reflected on the Borrower's books. Finished
goods inventory immediately loses the status of Eligible Finished Goods
Inventory if and when the Borrower sells it, otherwise passes title thereto, or
consumes it or the Agent releases or transfers its security interest therein, or
if and when an Eligible Account Receivable arises by virtue of constituting
proceeds of such inventory. Notwithstanding the foregoing, but without
duplication, Eligible Finished Goods Inventory shall be reduced by the amount of
any specific reserve established by the Borrower with respect to any Eligible
Finished Goods Inventory other than the LIFO reserve maintained by the Borrower
in accordance with generally accepted accounting principles.
ELIGIBLE INVENTORY. Eligible Finished Goods Inventory, Eligible
Work-in-Process and Eligible Raw Materials.
ELIGIBLE RAW MATERIALS. An amount equal to the gross book value,
determined in accordance with the first-in, first-out method of inventory
accounting, as reflected on the Borrower's books in accordance with generally
accepted accounting principles consistently applied, of raw materials used to
produce the Borrower's inventory, including any finished goods inventory
returned by a customer or no longer sold by the Borrower and which has been
converted into Eligible Raw Materials, which are located on property owned or
leased by the Borrower as to which the Borrower has acquired title and the Agent
has a valid and perfected first-priority security interest under all applicable
law and as to which the Borrower has furnished reasonably detailed information
to the Banks in a Borrowing Base Report, after taking into account all charges
and liens (other than those of the Agent and carrier, warehouse, customs and
similar statutory liens arising in the ordinary course of business) of all kinds
against such raw materials and reductions in the market value thereof, all as
determined by the Agent in its reasonable business judgment, which, absent
manifest error, shall be final and binding upon the Borrower. Without limiting
the generality of the foregoing, Eligible Raw Materials shall not include any
raw materials covered by a document of title until the document of title has
been delivered to the Agent or which the Agent reasonably deems to be obsolete
or not useable raw materials. Raw material immediately loses the status of
Eligible Raw Material if and when the Borrower sells it, otherwise passes title
thereto, consumes it, or materially changes it in the course of processing the
same, or the Agent releases or transfers its security interest therein.
Notwithstanding the foregoing, but without duplication, Eligible Raw Materials
shall be reduced by the amount of any specific reserve established by the
Borrower with respect to any Eligible Raw Materials other than the LIFO reserve
maintained by the Borrower in accordance with generally accepted accounting
principles.
ELIGIBLE WORK-IN-PROCESS. An amount equal to the gross book value, as
reflected on the Borrower's books in accordance with generally accepted
accounting principles consistently applied, of usable work-in-process of the
Borrower and as to which the Borrower has furnished reasonably detailed
information to the Banks in a Borrowing Base
<PAGE>
-8-
Report in connection with the manufacture of its products in the ordinary course
of its business, including any finished goods inventory returned by a customer
or no longer sold by the Borrower and which has been converted into Eligible
Work-in-Process, which is located on property owned or leased by the Borrower as
to which the Borrower has title and the Agent has a valid and perfected
first-priority security interest. Without limiting the generality of the
foregoing, Eligible Work-in-Process shall not include work-in-process which the
Agent reasonably deems to be obsolete or not marketable. Work-in-process
immediately loses the status of Eligible Work-in-Process if and when the
Borrower sells it, otherwise passes title thereto, consumes it, or the Agent
releases or transfers its security interest therein. Notwithstanding the
foregoing, but without duplication, Eligible Work-in-Process shall be reduced by
the amount of any specific reserves established by the Borrower with respect to
any Eligible Work-in-Process other than the LIFO reserve maintained by the
Borrower in accordance with generally accepted accounting principles.
EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
ENVIRONMENTAL LAWS. See Section 7.18(a).
ERISA. The Employee Retirement Income Security Act of 1974, as amended and
in effect from time to time.
ERISA AFFILIATE. Any Person which is treated as a single employer with the
Borrower under Section 414 of the Code.
ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder.
ESOP. The Republic Engineered Steels, Inc. Employee Common Stock Ownership
Plan effective November 28, 1989, and the ESOP Trust, as amended on May 5, 1995,
each in the form delivered to the Banks prior to the Effective Date.
ESOP DOCUMENTS. The ESOP, the ESOP Loan Documents and the ESOP Stock
Purchase Documents.
ESOP LOAN. Collectively, the loans from the Borrower to the ESOP made
pursuant to the ESOP Loan Documents.
ESOP LOAN DOCUMENTS. The Loan Agreement for ESOP Loan A and the Loan
Agreement for ESOP Loan B, each dated as of November 28, 1989, between the
Borrower and the ESOP Trust and the related promissory notes, each in the form
delivered to the Banks prior to the Effective Date.
ESOP STOCK PURCHASE DOCUMENTS. The ESOP Stock Purchase Agreement dated as
of November 28, 1989 between the Borrower and the ESOP Trust, each in the form
delivered to the Banks on or prior to the Effective Date.
<PAGE>
-9-
ESOP TRUST. The trust created under the Republic Engineered Steels, Inc.
Common Stock Ownership Plan Trust Agreement, executed on and effective as of
November 28, 1989, between the Borrower and the Trustee (as such term is defined
therein), and amended on May 5, 1995, in the form delivered to the Banks prior
to the Effective Date.
EUROCURRENCY RESERVE RATE. For any day with respect to a Eurodollar Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
EURODOLLAR BUSINESS DAY. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
EURODOLLAR LENDING OFFICE. Initially, the office of each Bank designated
as such in SCHEDULE 1 hereto; thereafter, such other office of such Bank, if
any, that shall be making or maintaining Eurodollar Rate Loans.
EURODOLLAR RATE. For any Interest Period with respect to a Eurodollar Rate
Loan, the rate of interest equal to (a) the arithmetic average of the rates per
annum for each Reference Bank (rounded upwards to the nearest 1/16 of one
percent) of the rate at which such Reference Bank's Eurodollar Lending Office is
offered Dollar deposits two (2) Eurodollar Business Days prior to the beginning
of such Interest Period in the interbank eurodollar market where the eurodollar
and foreign currency and exchange operations of such Eurodollar Lending Office
are customarily conducted, for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to the
amount of the Eurodollar Rate Loan of such Reference Bank to which such Interest
Period applies, divided by (b) a number equal to 1.00 minus the Eurocurrency
Reserve Rate, if applicable.
EURODOLLAR RATE LOANS. Revolving Credit Loans bearing interest calculated
by reference to the Eurodollar Rate.
EVENT OF DEFAULT. See Section 13.1.
EXCESS AVAILABILITY. As of any date of determination, the result of (a)
the Availability as of such date, MINUS (b) the sum of (i) the outstanding
amount of the Revolving Credit Loans as of such date PLUS (ii) the Maximum
Drawing Amount PLUS (iii) all Unpaid Reimbursement Obligations.
FEE LETTER. See Section 5.1.
FIRST MORTGAGE NOTE DEBT. Indebtedness of the Borrower evidenced by the
First Mortgage Notes, the aggregate principal amount of which shall not exceed
$200,000,000.
<PAGE>
-10-
FIRST MORTGAGE NOTE INDENTURE. The Indenture dated December 15, 1993,
between the Borrower, as the issuer and Bankers Trust Company, as the trustee.
FIRST MORTGAGE NOTE DOCUMENTS. The First Mortgage Notes and the First
Mortgage Note Indenture.
FIRST MORTGAGE NOTEHOLDERS. The holders of the First Mortgage Notes.
FIRST MORTGAGE NOTES. The 9.875% First Mortgage Notes due December 15,
2001, issued by the Borrower under the First Mortgage Note Indenture, the
aggregate principal amount of which shall not exceed $200,000,000.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. (a) When used in Section 10,
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(ii) to the extent consistent with such principles, the accounting practice of
the Borrower reflected in its financial statements for the year ended on the
Balance Sheet Date, and (b) when used in general, other than as provided above,
means principles that are (i) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time, and (ii) consistently applied with past financial
statements of the Borrower adopting the same principles, PROVIDED that in each
case referred to in this definition of "generally accepted accounting
principles" a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in which such principles have
been properly applied.
GUARANTEED PENSION PLAN. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
HAZARDOUS SUBSTANCES. See Section 7.18(b).
INDEBTEDNESS. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect; (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the debtor to make payment of
the indebtedness held by such owner or otherwise, and the obligations to
reimburse the issuer
<PAGE>
-11-
in respect of any letters of credit. In calculating (x) the amount of any such
Indebtedness consisting of a guaranty which is limited in amount, the amount of
such Indebtedness shall be equal to the amount to which such guaranty is limited
and (y) the amount of any such Indebtedness consisting of a liability secured by
a lien on property of the obligor, but which has not been assumed by the
obligor, the amount of such Indebtedness shall be equal to the fair market value
of such property.
INTEREST PAYMENT DATE. (a) As to any Base Rate Loan, the last day of the
calendar month which includes the Drawdown Date thereof; and (b) as to any
Eurodollar Rate Loan in respect of which the Interest Period is (i) 3 months or
less, the last day of such Interest Period and (ii) more than 3 months, the date
that is 3 months from the first day of such Interest Period and, in addition,
the last day of such Interest Period.
INTEREST PERIOD. With respect to each Revolving Credit Loan, (a)
initially, the period commencing on the Drawdown Date of such Loan and ending
on, (i) for any Base Rate Loan, the last day of the calendar month; and (ii) for
any Eurodollar Rate Loan, the last day of the 1, 2, 3, or 6 month period as
selected by the Borrower in a Loan Request; and (b) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Revolving Credit Loan and ending on the last day of the next calendar month
for any Base Rate Loan and the last day of one of the periods set forth above,
as selected by the Borrower in a Conversion Request, for any Eurodollar Rate
Loan; PROVIDED that all of the foregoing provisions relating to Interest Periods
are subject to the following:
(A) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar Business Day
unless the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on the
immediately preceding Eurodollar Business Day;
(B) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the next
succeeding Business Day;
(C) if the Borrower shall fail to give notice as provided in Section
2.7, the Borrower shall be deemed to have requested a conversion of the affected
Eurodollar Rate Loan to a Base Rate Loan and the continuance of all Base Rate
Loans as Base Rate Loans on the last day of the then current Interest Period
with respect thereto;
(D) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Eurodollar Business Day of a
calendar month; and
(E) any Interest Period relating to any Eurodollar Rate Loan that
would otherwise extend beyond the Revolving Credit Loan Maturity Date shall end
on the Revolving Credit Loan Maturity Date.
<PAGE>
-12-
INVESTMENTS. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property (other than
sales of inventory in the ordinary course of business) to, or in respect of any
guaranties of (or other commitments as described under Indebtedness), or
obligations of, any Person. In determining the aggregate amount of Investments
outstanding at any particular time: (a) the amount of any Investment represented
by a guaranty shall be taken at not less than the principal amount of the
obligations guaranteed and still outstanding, except that if such guaranty is
limited in amount, the amount of such Investment shall be equal to the amount to
which such guaranty is limited; (b) there shall be included as an Investment all
interest accrued with respect to Indebtedness constituting an Investment unless
and until such interest is paid; (c) there shall be deducted in respect of each
such Investment any amount received as a return of capital (but only by
repurchase, redemption, retirement, repayment, liquidating dividend or
liquidating distribution); (d) there shall not be deducted in respect of any
Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise, except that accrued interest included as
provided in the foregoing clause (b) may be deducted when paid; and (e) there
shall not be deducted from the aggregate amount of Investments any decrease in
the value thereof.
LETTER OF CREDIT. See Section 4.1.1.
LETTER OF CREDIT APPLICATION. See Section 4.1.1.
LETTER OF CREDIT FEE. See Section 4.6.
LETTER OF CREDIT PARTICIPATION. See Section 4.1.4.
LOAN DOCUMENTS. This Credit Agreement, the Revolving Credit Notes, the
Letter of Credit Applications, the Letters of Credit, and the Security
Documents.
LOAN REQUEST. See Section 2.6.
MAJORITY BANKS. As of any date, the Agent and the Banks holding more than
fifty percent (50%) of the outstanding principal amount of the Revolving Credit
Notes on such date; and if no such principal is outstanding, the Agent and the
Banks whose aggregate Commitments constitutes more than fifty percent (50%) of
the Total Commitment.
MAXIMUM DRAWING AMOUNT. The maximum aggregate amount from time to time
that the beneficiaries may draw under issued and outstanding Letters of Credit,
as such aggregate amount may be reduced from time to time pursuant to the terms
of the Letters of Credit.
MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of Section
3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
OBLIGATIONS. All indebtedness, obligations and liabilities of any of the
Borrower and its Subsidiaries to any of the Banks and the Agent, individually or
collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or
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unsecured, arising by contract, operation of law or otherwise (including any
indebtedness of Borrower incurred in connection with cash management services
provided by BKB), arising or incurred under this Credit Agreement, any of the
other Loan Documents, or in respect of any of the Revolving Credit Loans made or
Reimbursement Obligations incurred, or any of the Revolving Credit Notes, Letter
of Credit Application, Letter of Credit, or other instruments at any time
evidencing any thereof.
OPERATING ACCOUNT. The Borrower's operating account (No. 53132381)
maintained with BKB.
OUTSTANDING. With respect to the Revolving Credit Loans, the aggregate
unpaid principal thereof as of any date of determination.
PATENT ASSIGNMENT. The Patent Collateral Assignment and Security
Agreement, dated as of November 28, 1989 (as amended as of December 21, 1993 and
as of the date hereof and as further amended and in effect from time to time),
made by the Borrower in favor of the Agent.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of
ERISA and any successor entity or entities having similar responsibilities.
PERFECTION CERTIFICATE. The Perfection Certificate as defined in the
Security Agreement.
PERMITTED LIENS. Liens, security interests and other encumbrances
permitted by Section 9.2.
PERSON. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
REAL ESTATE. All real property at any time owned or leased (as lessee or
sublessee) by the Borrower or any of its Subsidiaries.
RECORD. The grid attached to a Revolving Credit Note, or the continuation
of such grid, or any other similar record, including computer records,
maintained by any Bank with respect to any Revolving Credit Loan referred to in
such Note.
REFERENCE BANK. BKB.
REGISTER. See Section 19.30.
REIMBURSEMENT OBLIGATION. The Borrower's obligation to reimburse the
Agent and the Banks on account of any drawing under any Letter of Credit as
provided in Section 5.2.
RENTAL OBLIGATIONS. All present or future obligations of the Borrower or
any of its Subsidiaries under any rental agreements or leases of real or
personal property, other than (a) obligations that can be terminated by the
giving of notice without liability to the
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Borrower or such Subsidiary in excess of the liability for rent due within
thirty (30) days of the date on which such notice is given and under which no
penalty or premium is paid as a result of any such termination, and (b)
obligations in respect of Capitalized Leases.
REVOLVING CREDIT LOAN MATURITY DATE. April 25, 2000.
REVOLVING CREDIT LOANS. Revolving credit loans made or to be made by the
Banks to the Borrower pursuant to Section 2.
REVOLVING CREDIT NOTE RECORD. A Record with respect to a Revolving Credit
Note.
REVOLVING CREDIT NOTES. See Section 2.4.
SECURITY AGREEMENT. The Security and Pledge Agreement dated as of November
28, 1989 (as amended as of December 21, 1993 and as of the date hereof and as
further amended and in effect from time to time), between the Borrower and the
Agent.
SECURITY DOCUMENTS. The Security Agreement, the Patent Assignment, the
Trademark Assignment, and the Agency Agreements.
SETTLEMENT. The making of, or receiving of payments, in immediately
available funds, by the Banks, to the extent necessary to cause each Bank's
actual share of the outstanding amount of Revolving Credit Loans (after giving
effect to any Loan Request) to be equal to each Bank's Commitment Percentage of
the outstanding amount of such Revolving Credit Loans (after giving effect to
any Loan Request), where, prior to such event or action, the actual share is not
so equal.
SETTLEMENT AMOUNT. See Section 2.8.1.
SETTLING BANK. See Section 2.8.1.
SETTLING DATE. (a) The Drawdown Date of any Loan Request, (b) the last
Business Day of each calendar week or (c) such other date as the Agent may
designate to the Banks from time to time.
SPECIAL PREFERRED STOCK. The Borrower's Special Preferred Stock, $.01 par
value, having the terms and conditions set forth in the Borrower's Amended and
Restated Certificate of Incorporation filed with the Secretary of State of
Delaware on May 5, 1995 and as further amended and in effect from time to time.
SPECIAL PREFERRED STOCK TRUST. The trust formed by the Borrower for the
purpose of holding the issued and outstanding share(s) of the Special Preferred
Stock, pursuant to a declaration of trust dated May 5, 1995, a copy of which has
been delivered to each of the Banks.
SUBSIDIARY. Any corporation, association, trust, or other business entity
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.
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TOTAL COMMITMENT. The sum of the Commitments of the Banks, as in effect
from time to time. The Total Commitment as of the Effective Date is
$115,000,000.
TRADEMARK ASSIGNMENT. The Trademark Collateral Assignment Agreement, dated
as of November 28, 1989 (as amended as of December 21, 1993 and as of the date
hereof and as further amended and in effect from time to time), made by the
Borrower in favor of the Agent.
TRUSTEE. State Street Bank & Trust Company, in its capacity as trustee
under the ESOP, or any successor trustee selected in accordance with the terms
of the ESOP.
TYPE. As to any Revolving Credit Loan, its nature as a Base Rate Loan or a
Eurodollar Rate Loan.
UNIFORM CUSTOMS. With respect to any Letter of Credit, the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Agent in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
UNPAID REIMBURSEMENT OBLIGATION. Any Reimbursement Obligation for which
the Borrower does not reimburse the Agent and the Banks on the date specified in
and in accordance with Section 4.2.
VOTING STOCK. Stock or similar interests, of any class or classes (however
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
Section 1.2. RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
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(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have the
meanings assigned to them therein, with the term "instrument" being that defined
under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "Section " refers to that section of
this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any particular
section or subdivision of this Credit Agreement.
Section 2. THE REVOLVING CREDIT FACILITY.
Section 2.1. COMMITMENT TO LEND. Subject to the terms and conditions set
forth in this Credit Agreement, each of the Banks severally agrees to lend to
the Borrower and the Borrower may borrow, repay, and reborrow from time to time
between the Effective Date and the Revolving Credit Loan Maturity Date upon
notice by the Borrower to the Agent given in accordance with Section 2.6, such
sums as are requested by the Borrower up to a maximum aggregate amount
outstanding (after giving effect to all amounts requested) at any one time equal
to such Bank's Commitment MINUS such Bank's Commitment Percentage of the sum of
the Maximum Drawing Amount and all Unpaid Reimbursement Obligations, PROVIDED
that the sum of the outstanding amount of the Revolving Credit Loans (after
giving effect to all amounts requested) PLUS the Maximum Drawing Amount and all
Unpaid Reimbursement Obligations shall not at any time exceed the Availability.
The Revolving Credit Loans shall be made PRO RATA in accordance with each Bank's
Commitment Percentage. Each request for a Revolving Credit Loan hereunder shall
constitute a representation and warranty by the Borrower that the conditions set
forth in Section 11 and Section 12, in the case of the initial Revolving Credit
Loans, and Section 12, in the case of all other Revolving Credit Loans, have
been satisfied on the date of such request.
Section 2.2. COMMITMENT FEE. The Borrower agrees to pay to the Agent for
the accounts of the Banks in accordance with their respective Commitment
Percentages a commitment fee calculated at the rate of three-eighths of one
percent (3/8%) per annum on the average daily amount during each calendar
quarter or portion thereof from the Effective Date to the Revolving Credit Loan
Maturity Date, by which the Total Commitment minus the Maximum Drawing Amount
and all Unpaid Reimbursement Obligations exceeds the outstanding amount of
Revolving Credit Loans during such period or calendar quarter. The commitment
fee shall be payable quarterly in arrears on the first day of each calendar
quarter for the immediately preceding calendar quarter commencing on the first
such date following the date hereof, with a final payment on the Revolving
Credit Maturity Date or any earlier date on which the Commitments shall
terminate.
Section 2.3. REDUCTION OF TOTAL COMMITMENT. The Borrower shall have
the right at any time with respect to any unused portion of the Total
Commitment and at the end of the applicable Interest Period with respect to
Eurodollar Rate Loans, and from time to time upon three (3) Business Days'
prior written notice to the Agent to reduce by $10,000,000 or
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an integral multiple thereof the Total Commitment or terminate entirely the
Total Commitment, whereupon the Commitments of the Banks shall be reduced PRO
RATA in accordance with their respective Commitment Percentages of the amount
specified in such notice or, as the case may be, terminated. Promptly after
receiving any notice of the Borrower delivered pursuant to this Section 2.3, the
Agent will notify the Banks of the substance thereof. Upon the effective date
of any such reduction or termination, the Borrower shall pay to the Agent for
the respective accounts of the Banks the full amount of any commitment fee then
accrued on the amount of the reduction. If the Borrower reduces the Total
Commitment in part or in its entirety, the Borrower shall pay to the Agent for
the PRO RATA account of the Banks (in accordance with their respective
Commitment Percentages) a premium in an amount calculated as follows:
(a) if any such reduction of the Total Commitment is concluded on or
prior to the first anniversary of the Effective Date, an amount equal to two
percent (2%) of the amount by which the Total Commitment is reduced at such
time;
(b) if any such reduction of the Total Commitment is concluded after
the first anniversary of the Effective Date but on or prior to the second
anniversary of the Effective Date, an amount equal to one percent (1%) of the
amount by which the Total Commitment is reduced at such time; and
(c) if such reduction of the Total Commitment is concluded after the
second anniversary of the Effective Date, no premium shall be payable.
No reduction or termination of the Commitments may be reinstated.
Section 2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans
shall be evidenced by separate promissory notes of the Borrower in substantially
the form of EXHIBIT B-1 or EXHIBIT B-2 hereto, as applicable (each a "Revolving
Credit Note"), dated as of the Effective Date (or other such date on which a
Bank may become a party hereto in accordance with Section 19 hereof) and
completed with appropriate insertions. One Revolving Credit Note shall be
payable to the order of each Bank in a principal amount equal to such Bank's
Commitment or, if less, the outstanding amount of all Revolving Credit Loans
made by such Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about the time of the Drawdown Date of any Revolving Credit Loan or at the time
of receipt of any payment of principal on such Bank's Revolving Credit Note, an
appropriate notation on such Bank's Revolving Credit Note Record reflecting the
making of such Revolving Credit Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Revolving Credit Loans set forth on such
Bank's Revolving Credit Note Record shall be PRIMA FACIE evidence of the
principal amount thereof owing and unpaid to such Bank, but the failure to
record, or any error in so recording, any such amount on such Bank's Revolving
Credit Note Record shall not limit or otherwise affect the obligations of the
Borrower hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
Section 2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise
provided in Section 5.10,
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(a) Each Base Rate Loan shall bear interest at the rate per annum
equal to the Base Rate PLUS the Applicable Margin.
(b) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate per annum equal to the
Eurodollar Rate determined for such Interest Period PLUS the Applicable Margin.
(c) The Borrower promises to pay interest on each Revolving Credit
Loan in arrears on each Interest Payment Date with respect thereto.
Section 2.6. REQUESTS FOR REVOLVING CREDIT LOANS. The Borrower shall
give to the Agent written notice in the form of EXHIBIT C hereto (or telephonic
notice confirmed in a writing in the form of EXHIBIT C hereto) of each Revolving
Credit Loan requested hereunder (a "Loan Request") no later than 11:00 a.m.
(Boston time) on the proposed Drawdown Date of any Base Rate Loan and (b) three
(3) Eurodollar Business Days prior to the proposed Drawdown Date of any
Eurodollar Rate Loan. Each such notice shall specify (i) the principal amount
of the Revolving Credit Loan requested, (ii) the proposed Drawdown Date of such
Revolving Credit Loan, (iii) the Type of such Revolving Credit Loan and (iv) the
Interest Period for such Revolving Credit Loan if a Eurodollar Rate Loan.
Promptly upon receipt of any such notice, the Agent shall notify each of the
Banks thereof. Each Loan Request shall be irrevocable and binding on the
Borrower and shall obligate the Borrower to accept the Revolving Credit Loan
requested from the Banks on the proposed Drawdown Date. Each Loan Request shall
be in a minimum aggregate amount of (X) $500,000 or an integral multiple of
$100,000 in excess thereof with respect to Base Rate Loans and (Y) $2,500,000 or
an integral multiple of $500,000 in excess thereof with respect to Eurodollar
Rate Loans and no more than five (5) Eurodollar Rate Loans Interest Periods may
run concurrently at any time during the term of this Credit Agreement.
Section 2.7. CONVERSION OPTIONS.
2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN. The
Borrower may elect from time to time to convert any outstanding Revolving
Credit Loan to a Revolving Credit Loan of another Type, PROVIDED that (a)
with respect to any such conversion of a Revolving Credit Loan to a Base Rate
Loan, the Borrower shall give the Agent at least one (1) Business Day's prior
written notice of such election; (b) with respect to any such conversion of a
Revolving Credit Loan to a Eurodollar Rate Loan, the Borrower shall give the
Agent at least three (3) Eurodollar Business Days' prior written notice of
such election; (c) with respect to any such conversion of a Eurodollar Rate
Loan into a Revolving Credit Loan of another Type, such conversion shall only
be made on the last day of the Interest Period with respect thereto and (d)
no Revolving Credit Loan may be converted into a Eurodollar Rate Loan when
any Default or Event of Default has occurred and is continuing. On the date
on which such conversion is being made each Bank shall take such action as is
necessary to transfer its Commitment Percentage of such Revolving Credit
Loans to its Domestic Lending Office or its Eurodollar Lending Office, as the
case may be. All or any part of outstanding Revolving Credit Loans of any
Type may be converted into a Revolving Credit Loan of another Type as
provided herein, provided that any partial conversion shall be in an
aggregate principal amount of $500,000 or an integral multiple of
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$100,000 in excess thereof. Each Conversion Request relating to the conversion
of a Revolving Credit Loan to a Eurodollar Rate Loan shall be irrevocable by the
Borrower.
2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any
Revolving Credit Loan of any Type may be continued as a Revolving Credit Loan
of the same Type upon the expiration of an Interest Period with respect
thereto by compliance by the Borrower with the notice provisions contained in
Section 2.7.1; PROVIDED that no Eurodollar Rate Loan may be continued as such
when any Default or Event of Default has occurred and is continuing, but
shall be automatically converted to a Base Rate Loan on the last day of the
first Interest Period relating thereto ending during the continuance of any
Default or Event of Default of which officers of the Agent active upon the
Borrower's account have actual knowledge. In the event the Borrower fails to
provide any such notice with respect to the continuation of any Eurodollar
Rate Loan as such, then such Eurodollar Rate Loan shall be automatically
converted to a Base Rate Loan on the last day of the Interest Period relating
thereto. The Agent shall notify the Banks promptly when any such automatic
conversion contemplated by this Section 2.7 is scheduled to occur.
2.7.3. EURODOLLAR RATE LOANS. Any conversion to or from Eurodollar
Rate Loans shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of all
Eurodollar Rate Loans having the same Interest Period shall not be less than
$1,000,000 or an integral multiple of $500,000 in excess thereof.
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Section 2.8. FUNDS FOR REVOLVING CREDIT LOAN.
2.8.1. FUNDING PROCEDURES. Not later than 11:00 a.m. (Boston time)
on the proposed Drawdown Date (other than the date on which any Revolving
Credit Loan is converted or continued in accordance with Section 2.7) of any
Revolving Credit Loans, each of the Banks will make available to the Agent,
at its Head Office, in immediately available funds, the amount of such Bank's
Commitment Percentage of the amount of the requested Revolving Credit Loans.
Upon receipt from each Bank of such amount, and upon receipt of the documents
required by Sections 11 and 12 on the Effective Date and thereafter required
by Section 12 and the satisfaction of the other conditions set forth therein,
to the extent applicable, the Agent will make available to the Borrower the
aggregate amount of such Revolving Credit Loans made available to the Agent
by the Banks. The failure or refusal of any Bank to make available to the
Agent at the aforesaid time and place on any such Drawdown Date the amount of
its Commitment Percentage of the requested Revolving Credit Loans shall not
relieve any other Bank from its several obligation hereunder to make
available to the Agent the amount of such Bank's Commitment Percentage of any
requested Revolving Credit Loans.
2.8.2. ADVANCES BY AGENT. The Agent may, unless notified to the
contrary by any Bank prior to a Drawdown Date (other than the date on which
any Revolving Credit Loan is converted or continued in accordance with
Section 2.7), assume that such Bank has made available to the Agent on such
Drawdown Date the amount of such Bank's Commitment Percentage of the
Revolving Credit Loans to be made on such Drawdown Date, and the Agent may
(but it shall not be required to), in reliance upon such assumption, make
available to the Borrower a corresponding amount. If any Bank makes
available to the Agent such amount on a date after such Drawdown Date, such
Bank shall pay to the Agent on demand an amount equal to the product of (a)
the average computed for the period referred to in clause (c) below, of the
weighted average interest rate paid by the Agent for federal funds acquired
by the Agent during each day included in such period, times (b) the amount of
such Bank's Commitment Percentage of such Revolving Credit Loans, times (c) a
fraction, the numerator of which is the number of days that elapse from and
including such Drawdown Date to the date on which the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans shall become immediately
available to the Agent, and the denominator of which is 365. A statement of
the Agent submitted to such Bank with respect to any amounts owing under this
paragraph shall be PRIMA FACIE evidence of the amount due and owing to the
Agent by such Bank. If the amount of such Banks Commitment Percentage of
such Revolving Credit Loans is not made available to the Agent by such Bank
within three (3) Business Days following such Settling Date, the Agent shall
be entitled to recover such amount from the Borrower on demand, with interest
thereon at the rate per annum applicable to the Revolving Credit Loans made
most recently preceding such Drawdown Date.
Section 2.8.3. SETTLEMENTS. On each Settling Date, the Agent shall
not later than 12:00 noon (Boston time), give telephonic or facsimile notice
to the Banks of the amount (a "Settlement Amount") that each Bank (the
"Settling Bank") shall pay or receive to effect a Settlement. A statement of
the Agent submitted to the Banks and the Borrower or to the Banks with
respect to any amounts owing under this Section 2.8 shall be PRIMA FACIE
evidence of the amount due and owing. Each Settling Bank shall, not later
than 2:00 p.m. (Boston
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time) on such Settling Date, effect a wire transfer of immediately available
funds to the Agent in the amount of the Settlement Amount it is to pay to effect
a Settlement. The Agent shall, not later than 3:00 p.m. (Boston time) on such
Settling Date, effect a wire transfer of immediately available funds to the
Settling Bank in the amount of the Settlement Amount it is to receive to effect
a Settlement. All funds advanced by any Bank as a Settling Bank pursuant to
this Section 2.8 shall for all purposes be treated as a Revolving Credit Loan
made by such Settling Bank to the Borrower and all funds received by any Bank
pursuant to this Section 2.8 shall for all purposes be treated as repayment of
amounts owed with respect to Revolving Credit Loans made by such Bank. The
failure or refusal of any Bank to make available to the Agent at the aforesaid
time and place on any Settling Date the amount of such Bank's Settlement Amount
necessary to effect a Settlement shall not relieve any other Bank from its
several obligation hereunder to make available to the Agent the amount of such
other Bank's Settlement Amount.
Section 2.9. CHANGE IN BORROWING BASE. The Borrowing Base shall be
determined at the end of each calendar month and, with respect to the Eligible
Accounts Receivable component of the Borrowing Base, weekly (or at such other
interval as may be specified pursuant to Section 8.4(i)) by the Agent by
reference to the Borrowing Base Report.
Section 3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
Section 3.1. MATURITY. The Borrower promises to pay on the Revolving
Credit Loan Maturity Date, and there shall become absolutely due and payable on
the Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans
outstanding on such date, together with any and all accrued and unpaid interest
thereon.
Section 3.2 MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any
time the sum of the outstanding amount of the Revolving Credit Loans, the
Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the
Availability, then the Borrower shall immediately pay the amount of such excess
to the Agent for the respective accounts of the Banks for application: FIRST, to
any Unpaid Reimbursement Obligations; SECOND, in the absence of instruction by
the Borrower, to the principal of Base Rate Loans and then to the principal of
Eurodollar Rate Loans; and THIRD, to provide to the Agent cash collateral for
Reimbursement Obligations as contemplated by Section 4.2(b) and (c). Each
payment of any Unpaid Reimbursement Obligations or prepayment of Revolving
Credit Loans shall be allocated among the Banks, in proportion, as nearly as
practicable, to each Unpaid Reimbursement Obligation or (as the case may be) the
respective unpaid principal amount of each Bank's Revolving Credit Note, with
adjustments to the extent practicable to equalize any prior payments or
repayments not exactly in proportion.
Section 3.3. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. The Borrower
shall have the right, at its election, to repay the outstanding amount of the
Revolving Credit Loans, as a whole or in part, at any time without penalty or
premium, provided that any full or partial prepayment of the outstanding amount
of any Eurodollar Rate Loans pursuant to this Section 3.3 may be made only on
the last day of the Interest Period relating thereto. The Borrower shall give
the Agent, no later than 11:00 a.m., Boston time, on the day of the proposed
repayment prior written notice of any proposed prepayment pursuant to this
Section 3.3 of Base Rate Loans, and three (3) Eurodollar Business Days' notice
of any proposed prepayment pursuant to this Section 3.3 of Eurodollar Rate
Loans, in each case
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specifying the proposed date of prepayment of Revolving Credit Loans and the
principal amount to be prepaid. Each such partial prepayment of the Revolving
Credit Loans shall be in an integral multiple of $1,000,000 and shall be
applied, in the absence of instruction by the Borrower, first to the principal
of Base Rate Loans and then to the principal of Eurodollar Rate Loans. Each
partial prepayment shall be allocated among the Banks, in proportion, as nearly
as practicable, to the respective unpaid principal amount of each Bank's
Revolving Credit Note, with adjustments to the extent practicable to equalize
any prior repayments not exactly in proportion.
Section 4. LETTERS OF CREDIT.
Section 4.1. LETTER OF CREDIT COMMITMENTS.
4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms
and conditions hereof and the execution and delivery by the Borrower of a
letter of credit application on the Agent's customary form (a "Letter of
Credit Application"), the Agent on behalf of the Banks and in reliance upon
the agreement of the Banks set forth in Section 4.1.4 and upon the
representations and warranties of the Borrower contained herein, agrees, in
its individual capacity, to issue, extend and renew for the account of the
Borrower one or more standby or documentary letters of credit (individually,
a "Letter of Credit"), in such form as may be requested from time to time by
the Borrower and agreed to by the Agent; PROVIDED, HOWEVER, that, after
giving effect to such request, (a) the sum of the aggregate Maximum Drawing
Amount shall not exceed $20,000,000 at any one time and (b) the sum of (i)
the Maximum Drawing Amount on all Letters of Credit, (ii) all Unpaid
Reimbursement Obligations, and (iii) the amount of all Revolving Credit Loans
outstanding shall not exceed the Availability.
4.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
Application shall be completed to the satisfaction of the Agent. In the
event that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the provisions
of this Credit Agreement shall, to the extent of any such inconsistency,
govern.
4.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (a) provide for the
payment of sight drafts for honor thereunder when presented in accordance
with the terms thereof and when accompanied by the documents described
therein, and (b) have an expiry date no later than the date which is fourteen
(14) days (or, if the beneficiary is located outside of the United States of
America, forty-five (45) days) prior to the Revolving Credit Loan Maturity
Date. Each Letter of Credit so issued, extended or renewed shall be subject
to the Uniform Customs.
4.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank and the
Borrower hereby acknowledge that each Letter of Credit issued by the Agent
pursuant to this Credit Agreement is issued by the Agent on behalf of the
Banks. Each Bank severally agrees that it shall be absolutely liable, without
regard to the occurrence of any Default or Event of Default or any other
condition precedent whatsoever, to the extent of such Bank's Commitment
Percentage, to reimburse the Agent on demand for the amount of each draft
paid by the Agent under each Letter of Credit to the extent that such amount
is not
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reimbursed by the Borrower pursuant to Section 4.2 (such agreement for a Bank
being called herein the "Letter of Credit Participation" of such Bank).
4.1.5. PARTICIPATION OF BANKS. Each such payment made by a Bank
shall be treated as the purchase by such Bank of a participating interest in
the Borrower's Reimbursement Obligation under Section 4.2 in an amount equal
to such payment. Each Bank shall share in accordance with its participating
interest in any interest which accrues pursuant to Section 4.2.
Section 4.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to
induce the Agent to issue, extend and renew each Letter of Credit and the Banks
to participate therein, the Borrower hereby agrees to reimburse or pay to the
Agent, for the account of the Agent or (as the case may be) the Banks, with
respect to each Letter of Credit issued, extended or renewed by the Agent
hereunder,
(a) except as otherwise expressly provided in Section 4.2(b) and (c),
on each date that any draft presented under such Letter of Credit is honored by
the Agent, or the Agent otherwise makes a payment with respect thereto, (i) the
amount paid by the Agent under or with respect to such Letter of Credit, and
(ii) the amount of any taxes, fees, charges or other costs and expenses
whatsoever incurred by the Agent or any Bank in connection with any payment made
by the Agent or any Bank, under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total Commitment
to an amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Agent for the benefit of the Banks
and the Agent as cash collateral for all Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the acceleration
of the Reimbursement Obligations with respect to all Letters of Credit in
accordance with Section 13, an amount equal to the then Maximum Drawing Amount
on all Letters of Credit, which amount shall be held by the Agent for the
benefit of the Banks and the Agent as cash collateral for all Reimbursement
Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid
by the Borrower under this Section 4.2 at any time from the date such amounts
become due and payable (whether as stated in this Section 4.2, by acceleration
or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Agent on demand at the rate specified in Section 5.10 for overdue
principal on the Revolving Credit Loans.
Section 4.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented
or other demand for payment shall be made under any Letter of Credit, the Agent
shall notify the Borrower of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honor such demand for payment. If the Borrower fails to reimburse the Agent as
provided in Section 4.2 on or before the date that such draft is paid or other
payment is made by the Agent, the Agent may at any time thereafter notify the
Banks of the amount of any such Unpaid Reimbursement Obligation. No later than
3:00 p.m. (Boston time) on the Business Day
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next following the receipt of such notice, each Bank shall make available to the
Agent, at its Head Office, in immediately available funds, such Bank's
Commitment Percentage of such Unpaid Reimbursement Obligation, together with an
amount equal to the product of (i) the average, computed for the period referred
to in clause (iii) below, of the weighted average interest rate paid by the
Agent for federal funds acquired by the Agent during each day included in such
period, TIMES (ii) the amount equal to such Bank's Commitment Percentage of such
Unpaid Reimbursement Obligation, TIMES (iii) a fraction, the numerator of which
is the number of days that elapse from and including the date the Agent paid the
draft presented for honor or otherwise made payment to the date on which such
Bank's Commitment Percentage of such Unpaid Reimbursement Obligation shall
become immediately available to the Agent, and the denominator of which is 360.
The responsibility of the Agent to the Borrower and the Banks shall be only to
determine that the documents (including each draft) delivered under each Letter
of Credit in connection with such presentment shall be in conformity in all
material respects with such Letter of Credit.
Section 4.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this
Section 4 to repay drawings under the Letters of Credit as provided hereunder
shall rank PARI PASSU with the obligations of the Borrower to repay all other
Revolving Credit Loans, and shall be absolute and unconditional under any and
all circumstances and irrespective of the occurrence of any Default or Event of
Default or any condition precedent whatsoever or any setoff, counterclaim or
defense to payment which the Borrower may have or have had against the Agent,
any Bank or any beneficiary of a Letter of Credit. The Borrower further agrees
with the Agent and the Banks that the Agent and the Banks shall not be
responsible for, and the Borrower's Reimbursement Obligations under Section 4.2
shall not be affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, fraudulent or forged, or any dispute
between or among the Borrower, the beneficiary of any Letter of Credit or any
financing institution or other party to which any Letter of Credit may be
transferred or any claims or defenses whatsoever of the Borrower against the
beneficiary of any Letter of Credit or any such transferee. The Agent and the
Banks shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Borrower agrees that
any action taken or omitted by the Agent or any Bank under or in connection with
each Letter of Credit and the related drafts and documents, if done in good
faith, shall be binding upon the Borrower and shall not result in any liability
on the part of the Agent or any Bank to the Borrower.
Section 4.5. RELIANCE BY ISSUER. To the extent not inconsistent with
Section 4.4, the Agent shall be entitled to rely, and shall be fully protected
in relying upon, any Letter of Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement unless
it shall first have received such advice or concurrence of the Majority Banks as
it reasonably deems appropriate or it shall first be indemnified to its
reasonable satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
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action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request of the
Majority Banks, and such request and any action taken or failure to act pursuant
thereto shall be binding upon the Banks and all future holders of the Revolving
Credit Notes or of a Letter of Credit Participation.
Section 4.6. LETTER OF CREDIT FEE. The Borrower shall pay a fee (in each
case, a "Letter of Credit Fee") to the Agent at a rate per annum (a) in respect
of each standby Letter of Credit equal to (i) the Applicable Margin PLUS
one-fourth of one percent (1/4%) per annum of the face amount of such standby
Letter of Credit PLUS (ii) the Agent's customary issuance fee, and (b) in
respect of each documentary Letter of Credit equal to (i) the Agent's customary
issuance fee or amendment fee, as the case may be, plus (ii) the Agent's
customary time negotiation fee per document examination PLUS (iii) an amount
equal to the Applicable Margin PLUS one-fourth of one percent (1/4%) per annum
of the face amount of such documentary Letter of Credit. Each issuance,
amendment, negotiation or document examination fee and, with respect to each
Letter of Credit, a portion of the Letter of Credit Fee in the amount of
one-fourth of one percent (1/4%) of the face amount of each standby Letter of
Credit and each documentary Letter of Credit shall be for the Agent's own
account and the remaining portion of each Letter of Credit Fee shall be for the
accounts of the Banks in accordance with their respective Commitment
Percentages. The Letter of Credit Fee referred to in clauses (a)(i) and
(b)(iii) shall be payable quarterly in arrears, and all such other Letter of
Credit Fees shall be payable upon issuance, amendment or negotiation, as the
case may be.
Section 5. CERTAIN GENERAL PROVISIONS.
Section 5.1. FEES. The Borrower shall pay to the Agent for the Agent's
own account a closing fee and such other fees as specified in a letter agreement
of even date herewith (the "Fee Letter").
Section 5.2. FUNDS FOR PAYMENTS.
5.2.1. PAYMENTS TO AGENT. All payments of principal, interest,
Reimbursement Obligations, commitment fees, Letter of Credit Fees and any
other amounts due hereunder or under any of the other Loan Documents shall be
made to the Agent, for the respective accounts of the Banks and the Agent, at
the Agent's Head Office or at such other location in the Boston,
Massachusetts, area that the Agent may from time to time designate, in each
case in immediately available funds.
5.2.2. NO OFFSET, ETC
(a) All payments by the Borrower hereunder and under any of the other
Loan Documents shall be made without setoff or counterclaim and, except as
provided in paragraph (c) below, free and clear of and without deduction for any
taxes, levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof or
taxing or other authority therein unless the Borrower is compelled by law to
make such deduction or withholding. If any such obligation is imposed upon the
Borrower with respect to any amount payable by it hereunder or under any of the
other
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Loan Documents, the Borrower will, except as provided in paragraph (c) below,
pay to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or under
such other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Banks or the Agent to receive the same net amount which
the Banks or the Agent would have received on such due date had no such
obligation been imposed upon the Borrower. The Borrower will deliver promptly
to the Agent certificates or other valid vouchers for all taxes or other
charges deducted from or paid with respect to payments made by the Borrower
hereunder or under such other Loan Document.
(b) Each Bank and the Agent that is organized under the laws of a
jurisdiction outside the United States hereby agrees that, if and to the extent
it is legally able to do so, it shall, prior to the date of the first payment by
the Borrower hereunder to be made to such Bank or the Agent or for such Bank's
or the Agent's account, deliver to the Borrower and the Agent, as applicable,
such certificates, documents or other evidence, as and when required by the Code
or Treasury Regulations issued pursuant thereto, including two (2) duly
completed copies of Internal Revenue Service Form 1001 or Form 4224 and any
other certificate or statement of exemption required by Treasury Regulations, or
any subsequent versions thereof or successors thereto, properly completed and
duly executed by such Bank or the Agent establishing that with respect to
payments of principal, interest or fees hereunder it is (i) not subject to
United States federal withholding tax under the Code because such payment is
effectively connected with the conduct by such Bank or Agent of a trade or
business in the United States or (ii) totally exempt from United States federal
withholding tax under a provision of an applicable tax treaty. Each Bank or
Agent agrees that it shall, promptly upon a change of its lending office or the
selection of any additional lending office, to the extent the forms previously
delivered by it pursuant to this section are no longer effective, and promptly
upon the Borrower's or the Agent's reasonable request after the occurrence of
any other event (including the passage of time) requiring the delivery of a Form
1001 or Form 4224 in addition to or in replacement of the forms previously
delivered, deliver to the Borrower and the Agent, as applicable, if and to the
extent it is properly entitled to do so, a properly completed and executed Form
1001 or Form 4224 (or any successor forms thereto). Unless the Borrower and the
Agent have received forms or other documents satisfactory to them indicating
that such payments hereunder or under the other Loan Documents are not subject
to the United States federal withholding tax, the Borrower or the Agent shall
withhold taxes from such payments at the applicable statutory rate, or a reduced
rate pursuant to an applicable tax treaty if such Bank has delivered a form
evidencing such tax treaty benefit.
(c) Notwithstanding paragraph (a) above, the Borrower shall not be
required to pay any additional amounts to any Bank or the Agent for the account
of the lending office of such Bank or Agent, pursuant to this Section 5.2.2, if
(i) the obligation to pay such additional amounts would not have arisen but for
a failure by such Bank or the Agent to comply with the provisions of subsection
(b) above; (ii) the Bank or the Agent is not eligible, in respect of such
lending office, for complete exemption from United States federal withholding
tax with respect to payments of interest, principal or fees under this Credit
Agreement or under any of the other Loan Documents, other than by reason of any
change, after the Initial Date, of any applicable law, treaty or regulation by
any governmental authority or other agency charged with the interpretation or
administration thereof; or (iii) the tax is an income or franchise tax imposed
on net income either by the jurisdiction under
<PAGE>
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which such Bank or the Agent is organized or any political subdivision thereof
or by the jurisdiction of such Bank's or Agent's lending office or any political
subdivision thereof. For purposes of this subsection (c), the term "Initial
Date" shall mean, with respect to any Bank or the Agent which is a party hereto
on the Effective Date, and with respect to each assignee or transferee of any
Bank, the date of the grant of the participation in, or transfer or assignment
of an interest hereunder to such assignee or transferee.
Section 5.3. COMPUTATIONS. All computations of interest on the Revolving
Credit Loans and of commitment fees, Letter of Credit Fees or other fees shall,
unless otherwise expressly provided herein be based on a 360-day year and paid
for the actual number of days elapsed. Except as otherwise provided in the
definition of the term "Interest Period" with respect to Eurodollar Rate Loans,
whenever a payment hereunder or under any of the other Loan Documents becomes
due on a day that is not a Business Day, the due date for such payment shall be
extended to the next succeeding Business Day, and interest shall accrue during
such extension. The outstanding amount of the Revolving Credit Loans as
reflected on the Revolving Credit Note Records from time to time shall be
considered correct and binding on the Borrower unless within five (5) Business
Days after receipt of any notice by the Agent or any of the Banks of such
outstanding amount, the Agent or such Bank shall notify the Borrower to the
contrary.
Section 5.4. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior
to the commencement of any Interest Period relating to any Eurodollar Rate Loan,
the Agent shall determine or be notified by the Majority Banks that adequate and
reasonable methods do not exist for ascertaining the Eurodollar Rate that would
otherwise determine the rate of interest to be applicable to any Eurodollar Rate
Loan during any Interest Period, the Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrower and the
Banks) to the Borrower and the Banks. In such event (a) any Loan Request or
Conversion Request with respect to Eurodollar Rate Loans shall be automatically
withdrawn and shall be deemed a request for Base Rate Loans, (b) each Eurodollar
Rate Loan will automatically, on the last day of the then current Interest
Period relating thereto, become a Base Rate Loan, and (c) the obligations of the
Banks to make Eurodollar Rate Loans shall be suspended until the Agent or the
Majority Banks determines that the circumstances giving rise to such suspension
no longer exist, whereupon the Agent or, as the case may be, the Agent upon the
instruction of the Majority Banks, shall so notify the Borrower and the Banks.
Section 5.5. ILLEGALITY. Notwithstanding any other provisions herein, if
any present or future law, regulation, treaty or directive or in the
interpretation or application thereof shall make it unlawful for any Bank to
make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice of
such circumstances to the Borrower and the other Banks and thereupon (a) the
commitment of such Bank to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (b) such
Bank's Revolving Credit Loans then outstanding as Eurodollar Rate Loans, if any,
shall be converted automatically to Base Rate Loans on the last day of each
Interest Period applicable to such Eurodollar Rate Loans or within such earlier
period as may be required by law. The Borrower hereby agrees promptly to pay
the Agent for the account of such Bank, upon demand by such Bank, any additional
amounts necessary to compensate such Bank for any costs incurred by such Bank in
making any conversion in accordance with this
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Section 5.5, including any interest or fees payable by such Bank to lenders of
funds obtained by it in order to make or maintain its Eurodollar Loans
hereunder.
Section 5.6. ADDITIONAL COSTS, ETC. If any present or future applicable
law, which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental 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 any Bank by any central bank or other fiscal, monetary or
other authority (whether or not having the force of law), shall:
(a) subject any Bank to any tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature with respect to this Credit Agreement,
the other Loan Documents, any Letters of Credit, such Bank's Commitment or such
Bank's Revolving Credit Loans (other than taxes based upon or measured by the
income or profits of such Bank), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or the
interest on any Revolving Credit Loans or any other amounts payable to any Bank
or the Agent under this Credit Agreement or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans by or letters of credit issued by,
or commitments of an office of such Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan Documents,
any Letters of Credit, the Revolving Credit Loans, such Bank's Commitment or any
class of loans, letters of credit or commitments of which any of the Revolving
Credit Loans or such Bank's Commitment forms a part, and the result of any of
the foregoing is
(i) to increase the cost to any Bank of making, funding, issuing,
renewing, extending or maintaining any of the Revolving Credit Loans or
such Bank's Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Bank or the Agent hereunder on
account of such Bank's Commitment, any Letter of Credit or any of the
Revolving Credit Loans, or
(iii) to require such Bank or the Agent to make any payment or to
forego any interest or Reimbursement Obligation or other sum payable
hereunder, the amount of which payment or foregone interest or
Reimbursement Obligation or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by such Bank or the
Agent from the Borrower hereunder,
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then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as will be sufficient in the good faith opinion of such Bank or the
Agent, to compensate such Bank or the Agent for such additional cost, reduction,
payment or foregone interest or Reimbursement Obligation or other sum. Each
Bank shall allocate such costs (or the effect of such reductions, payments or
foregone interest) among its customers similarly situated in good faith and on
an equitable basis.
Section 5.7. CAPITAL ADEQUACY. If after the date hereof any Bank or the
Agent determines that (a) the adoption of or change in any law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) regarding capital requirements for banks or bank holding companies
or any change in the interpretation or application thereof by a court or
governmental authority with appropriate jurisdiction, or (b) compliance by such
Bank or the Agent or any corporation controlling such Bank or the Agent with any
law, governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law) of any such entity regarding capital adequacy, has
the effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Revolving Credit Loans to a level below that which such Bank or
the Agent could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's on the Agent's then existing policies
with respect to capital adequacy and assuming full utilization of such entity's
capital) by any amount deemed by such Bank or (as the case may be) the Agent to
be material, then such Bank or the Agent may notify the Borrower of such fact.
To the extent that the amount of such reduction in the return on capital is not
reflected in the Base Rate, the Borrower and such Bank or the Agent, as the case
may be, shall thereafter attempt to negotiate in good faith, within thirty (30)
days of the day on which the Borrower receives such notice, an adjustment
payable hereunder that will adequately compensate such Bank or the Agent, as the
case may be, in light of these circumstances. If the Borrower and such Bank or
the Agent, as the case may be, are unable to agree to such adjustment within
thirty (30) days of the date on which the Borrower receives such notice, then
commencing on the date of such notice (but not earlier than the effective date
of any such increased capital requirement), the fees payable hereunder shall
increase by an amount that will, in such Bank's reasonable determination,
provide adequate compensation. Each Bank and the Agent shall allocate such cost
increases among its customers in good faith and on an equitable basis.
Section 5.8. CERTIFICATE. A certificate setting forth any additional
amounts payable pursuant to Sections 5.6 or 5.7 and a brief explanation of such
amounts which are due, submitted by any Bank or the Agent to the Borrower, shall
be conclusive, absent manifest error, that such amounts are due and owing.
Section 5.9. INDEMNITY. The Borrower agrees to indemnify each Bank and
to hold each Bank harmless from and against any loss, cost or expense
(including loss of anticipated profits) that such Bank may sustain or incur as a
consequence of (a) default by the Borrower in payment of the principal amount of
or any interest on any Eurodollar Rate Loans as and when due and payable,
including any such loss or expense arising from interest or fees payable by such
Bank to lenders of funds obtained by it in order to maintain its Eurodollar Rate
Loans, (b) default by the Borrower in making a borrowing or conversion after the
Borrower has given (or is deemed to have given) a Loan Request or a Conversion
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Request relating thereto in accordance with Section 2.6 or Section 2.7 or (c)
the making of any payment of a Eurodollar Rate Loan or the making of any
conversion of any such Loan to a Base Rate Loan on a day that is not the last
day of the applicable Interest Period with respect thereto, including interest
or fees payable by such Bank to lenders of funds obtained by it in order to
maintain any such Loans. The Borrower hereby authorizes the Agent to debit from
time to time its Operating Account for the amount of any such loss, cost or
expense.
Section 5.10. INTEREST AFTER DEFAULT.
5.10.1. OVERDUE AMOUNTS. Overdue principal and (to the
extent permitted by applicable law) interest on the Revolving Credit Loans and
all other overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest compounded monthly and payable on demand at a rate
per annum equal to two percent (2%) above the Base Rate plus the Applicable
Margin otherwise applicable to Base Rate Loans until such amount shall be paid
in full (after as well as before judgment).
5.10.2. MAXIMUM INTEREST. Notwithstanding any other term
of this Credit Agreement or any Revolving Credit Note or any other document
referred to herein or therein, the maximum amount of interest which may be
charged to or collected from any person liable hereunder or under any Revolving
Credit Note by the Banks shall be absolutely limited to, and shall in no event
exceed, the maximum amount of interest which could lawfully be charged or
collected under applicable law (including, to the extent applicable, the
provisions of Section 5197 of the Revised Statutes of the United States of
America, as amended, 12 U.S.C. Section 85, as amended), so that the maximum of
all amounts constituting interest under applicable law, howsoever computed,
shall never exceed as to any person liable therefor such lawful maximum, and any
term of this Credit Agreement or any Revolving Credit Note or any other document
referred to herein or therein which could be construed as providing for interest
in excess of such lawful maximum shall be and hereby is made expressly subject
to and modified by the provisions of this paragraph.
Section 6. COLLATERAL SECURITY. The Obligations shall continue to be
secured by a perfected first-priority security interest (subject only to
Permitted Liens entitled to priority under applicable law) in certain of the
assets of the Borrower, whether now owned or hereafter acquired, pursuant to the
Security Documents.
Section 7. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Banks and the Agent as follows:
Section 7.1. CORPORATE AUTHORITY.
7.1.1. INCORPORATION; GOOD STANDING. Each of the Borrower
and its Subsidiaries (a) is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated, and (c) is in good standing as a
foreign corporation and is duly authorized to do business in each jurisdiction
where such qualification is necessary except where a failure to be so qualified
would not have a material adverse effect on the business, assets or financial
condition of the Borrower or such Subsidiary.
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7.1.2. AUTHORIZATION. The execution, delivery and
performance of this Credit Agreement and the other Loan Documents by the
Borrower and the transactions contemplated hereby and thereby (a) are within the
corporate authority of the Borrower, (b) have been duly authorized by all
necessary corporate proceedings, (c) do not conflict with or result in any
breach or contravention of any provision of law, statute, rule or regulation to
which the Borrower is subject or any judgment, order, writ, injunction, license
or permit applicable to the Borrower and (d) do not conflict with any provision
of the corporate charter or bylaws of, or any agreement or other instrument
binding upon, the Borrower.
7.1.3. ENFORCEABILITY. The execution and delivery of this
Credit Agreement and the other Loan Documents by the Borrower will result in
valid and legally binding obligations of the Borrower enforceable against it in
accordance with the respective terms and provisions hereof and thereof, except
as enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement of
creditors' rights and except to the extent that availability of the remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be brought.
Section 7.2. GOVERNMENTAL APPROVALS. The execution, delivery and
performance by the Borrower of this Credit Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby do not require
the approval or consent of, or filing with, any governmental agency or authority
other than those already obtained.
Section 7.3. TITLE TO PROPERTIES; LEASES. Except as indicated on
SCHEDULE 7.3 hereto, the Borrower and its Subsidiaries own all of the assets
reflected in the consolidated balance sheet of the Borrower and its Subsidiaries
as at the Balance Sheet Date or acquired since that date (except property and
assets sold or otherwise disposed of in the ordinary course of business since
that date or otherwise permitted hereunder), subject to no rights of others,
including any mortgages, leases, conditional sales agreements, title retention
agreements, liens or other encumbrances except Permitted Liens.
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Section 7.4. FINANCIAL STATEMENTS AND PROJECTIONS.
7.4.1. FINANCIAL STATEMENTS. There has been furnished to
each of the Banks a consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date, and a consolidated statement of
income of the Borrower and its Subsidiaries for the fiscal year then ended,
certified by the Borrower's independent certified public accountants. Such
balance sheet and statement of income have been prepared in accordance with
generally accepted accounting principles and fairly present the financial
condition of the Borrower as at the close of business on the date thereof and
the results of operations for the fiscal year then ended. There are no
contingent liabilities of the Borrower or any of its Subsidiaries as of such
date involving material amounts, known to the officers of the Borrower, which
were not disclosed in such balance sheet and the notes related thereto.
7.4.2. PROJECTIONS. The projections of the annual
operating budgets of the Borrower and its Subsidiaries on a consolidated basis,
calculated on a monthly basis, including monthly balance sheets and cash flow
statements for the 1997 and 1998 fiscal years and the annual operating budgets
of the Borrower and its Subsidiaries on a consolidated basis, annual balance
sheets and cash flow statements for the 1998 to 2000 fiscal years, copies of
which have been delivered to each Bank, disclose all assumptions made with
respect to general economic, financial and market conditions used in formulating
such projections. To the knowledge of the Borrower or any of its Subsidiaries,
no facts exist that (individually or in the aggregate) would (a) as of the
Effective Date, result in any material change in any of such projections or (b)
as of any Drawdown Date, result in any material change in the updated
projections most recently delivered to the Agent pursuant to Section 8.4(k).
The projections (including any updated projections) are based upon reasonable
estimates and assumptions, have been prepared on the basis of the assumptions
stated therein and reflect the reasonable estimates of the Borrower and its
Subsidiaries of the results of operations and other information projected
therein.
Section 7.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date
there has occurred no materially adverse change in the financial condition or
business of the Borrower and its Subsidiaries as shown on or reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries as at the
Balance Sheet Date, or the consolidated statement of income for the fiscal year
then ended, other than changes in the ordinary course of business that have not
had any material adverse effect in the aggregate on the business or financial
condition of the Borrower and its Subsidiaries, taken as a whole. Since the
Balance Sheet Date, except to the extent permitted under this Credit Agreement,
the Borrower has not made any Distribution.
Section 7.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Borrower
and its Subsidiaries possesses all franchises, patents, copyrights, trademarks,
trade names, licenses and permits, and rights in respect of the foregoing,
adequate for the conduct of its business substantially as now conducted without
known conflict with any rights of others.
Section 7.7. LITIGATION. Except as set forth in SCHEDULE 7.7 hereto,
there are no actions, suits, proceedings or investigations of any kind pending
or threatened against the Borrower or any of its Subsidiaries before any court,
tribunal or administrative agency or board that would be reasonably likely to,
either in any case or in the aggregate, materially adversely
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affect the properties, assets, financial condition or business of the Borrower
and its Subsidiaries or materially impair the right of the Borrower and its
Subsidiaries, taken as a whole, to carry on business substantially as now
conducted by them, or result in any substantial liability not adequately covered
by insurance, or for which adequate reserves are not maintained on the
consolidated balance sheet of the Borrower and its Subsidiaries, or which
question the validity of this Credit Agreement or any of the other Loan
Documents, or any action taken or to be taken pursuant hereto or thereto.
Section 7.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Borrower
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a materially adverse effect on the business,
assets or financial condition of the Borrower or any of its Subsidiaries.
Neither the Borrower nor any of its Subsidiaries is a party to any contract or
agreement that has or is expected, in the judgment of the Borrower's principal
executive officers, to have any materially adverse effect on the business of the
Borrower or any of its Subsidiaries.
Section 7.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the
Borrower nor any of its Subsidiaries is in violation of any provision of its
charter documents, bylaws, or any agreement or instrument to which it is subject
or by which it or any of its properties is bound or any decree, order, judgment,
statute, license, rule or regulation, in any of the foregoing cases in a manner
that could result in the imposition of substantial penalties or materially and
adversely affect the financial condition, properties or business of the Borrower
and its Subsidiaries, taken as a whole.
Section 7.10. TAX STATUS. The Borrower and its Subsidiaries (a) have made
or filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which any of them is subject, (b)
have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) have
established on their books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Borrower know of no basis for any such claim. The Borrower has not consented to
be treated as a "consenting corporation" as defined in Section 341(f) of the
Code.
Section 7.11. NO EVENT OF DEFAULT. No Default or Event of Default has
occurred and is continuing.
Section 7.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the
Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935; nor is
it an "investment company", or an "affiliated company" or a "principal
underwriter" of an "investment company", as such terms are defined in the
Investment Company Act of 1940.
Section 7.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect
to Permitted Liens and financing statements filed to give notice that the
Borrower holds certain raw
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materials on consignment from vendors or to give notice of operating leases
permitted under Section 9.1(f), there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any filing records, registry or other public office, that purports
to cover, affect or give notice of any present or possible future lien on, or
security interest in, any assets or property of the Borrower or any rights
relating thereto.
Section 7.14. PERFECTION OF SECURITY INTEREST. All filings, assignments,
pledges and deposits of documents or instruments have been made and all other
actions have been taken that are necessary or advisable, under applicable law,
to establish and perfect the Agent's security interest in the Collateral. The
Collateral and the Agent's rights with respect to the Collateral are not
subject to any setoff, claims, withholdings or other defenses. The Borrower is
the owner of the Collateral free from any lien, security interest, encumbrance
and any other claim or demand, except for Permitted Liens.
Section 7.15. CERTAIN TRANSACTIONS. Except for arm's length transactions
pursuant to which the Borrower or any of its Subsidiaries makes payments in the
ordinary course of business upon terms no less favorable than the Borrower or
such Subsidiary could obtain from third parties, none of the officers,
directors, or employees of the Borrower or any of its Subsidiaries is presently
a party to any transaction with the Borrower or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any officer, director or any such employee has a substantial interest
or is an officer, director, trustee or partner.
Section 7.16. EMPLOYEE BENEFIT PLANS.
7.16.1. IN GENERAL. Each Employee Benefit Plan and each
Guaranteed Pension Plan has been maintained and operated in compliance in all
material respects with the provisions of ERISA and, to the extent applicable,
the Code, including but not limited to the provisions thereunder respecting
prohibited transactions and the bonding of fiduciaries and other Persons
handling plan funds as required by Section 412 of ERISA. The Borrower has
heretofore delivered to the Agent the most recently completed annual report,
Form 5500, with all required attachments, and actuarial statement required to be
submitted under Section 103(d) of ERISA, with respect to each Guaranteed Pension
Plan.
7.16.2. WELFARE PLANS. Except as disclosed in Schedule
7.16.2, the Borrower has reserved the right by the terms of each Employee
Benefit Plan which is an employee welfare benefit plan within the meaning of
Section 3(1) or Section 3(2)(B) of ERISA to terminate such Plan at any time (or
at any time subsequent to the expiration of any applicable bargaining agreement)
in the discretion of the Borrower without liability to any Person other than for
claims arising prior to termination.
7.16.3. GUARANTEED PENSION PLANS. Each contribution
required to be made to a Guaranteed Pension Plan, whether required to be made to
avoid the incurrence of an accumulated funding deficiency, the notice or lien
provisions of Section 302(f) of ERISA, or otherwise, has been timely made. No
waiver of an accumulated funding deficiency or
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extension of amortization periods has been received with respect to any
Guaranteed Pension Plan, and neither the Borrower nor any ERISA Affiliate is
obligated to or has posted security in connection with an amendment of a
Guaranteed Pension Plan pursuant to Section 307 of ERISA or Section 401(a)(29)
of the Code. No liability to the PBGC (other than required insurance premiums,
all of which have been paid) has been incurred by the Borrower or any ERISA
Affiliate with respect to any Guaranteed Pension Plan, and there has not been
any ERISA Reportable Event with respect to which the requirement of thirty (30)
days notice has not been waived, or any other event or condition which presents
a material risk of termination of any Guaranteed Pension Plan by the PBGC. Based
on the latest valuation of each Guaranteed Pension Plan (which in each case
occurred within twelve months of the date of this representation), and on the
actuarial methods and assumptions employed for that valuation, the aggregate
present value of accumulated benefits of all such Guaranteed Pension Plans did
not exceed the aggregate value of the assets of all such Guaranteed Pension
Plans, disregarding for this purpose the accumulated benefits and assets of any
Guaranteed Pension Plan with assets in excess of accumulated benefits, by more
than $23,000,000.
7.16.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any
ERISA Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a
result of a sale of assets described in Section 4204 of ERISA. Neither the
Borrower nor any ERISA Affiliate has been notified that any Multiemployer Plan
is in reorganization or insolvent under and within the meaning of Section 4241
or Section 4245 of ERISA or is at risk of entering reorganization or becoming
insolvent, or that any Multiemployer Plan intends to terminate or has been
terminated under Section 4041A of ERISA.
Section 7.17. REGULATIONS U AND X. The proceeds of the Revolving Credit
Loans shall be used for, and the Borrower will obtain Letters of Credit solely
for, working capital and general corporate purposes. No portion of any
Revolving Credit Loan is to be used, and no portion of any Letter of Credit is
to be obtained, for the purpose of purchasing or carrying any "margin security"
or "margin stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
Section 7.18. ENVIRONMENTAL COMPLIANCE. Except as previously disclosed to
the Banks in writing or as set forth on SCHEDULE 7.18 attached hereto, to the
knowledge of the Borrower:
(a) none of the Borrower, its Subsidiaries or any operator of the
Real Estate or any operations thereon has received a notice that it is in
violation of any applicable Environmental Law, which includes the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, and any
analogous state or local statute, regulation, ordinance, or order or decree to
which the Borrower or any of its Subsidiaries is a party relating to health,
safety or the environment (hereinafter "Environmental Laws"), which violation
would have a material adverse effect on the environment or the business, assets
or financial condition of the Borrower and its Subsidiaries, taken as a whole;
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(b) neither the Borrower nor any of its Subsidiaries has received
notice from any third party including, without limitation: any federal, state or
local governmental authority, (i) that any one of them has been identified by
the United States Environmental Protection Agency ("EPA") as a potentially
responsible party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that any hazardous waste,
as defined by 42 U.S.C. Section 6903(5), any hazardous substances as defined by
42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42
U.S.C. Section 9601(33) and any toxic substances, oil or hazardous materials or
other chemicals or substances regulated by any Environmental Laws ("Hazardous
Substances") which any one of them has generated, transported or disposed of has
been found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that any Borrower or any of its Subsidiaries
conduct a remedial investigation, removal or other response action pursuant to
any Environmental Law which would result in expenditures in excess of
$5,000,000; or (iii) that it is or shall be a named party to any claim, action,
cause of action, complaint, or legal or administrative proceeding (in each case,
contingent or otherwise) arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the
release of Hazardous Substances on the Real Estate or generated, transported or
disposed of by the Borrower or any of its Subsidiaries which would result in
expenditures in excess of $5,000,000;
(c) except where non-compliance would not have a material adverse
effect on the business or financial condition of the Borrower or its
Subsidiaries, taken as a whole, (i) no portion of the Real Estate has been used
by the Borrower or any of its Subsidiaries for the handling, processing, storage
or disposal of Hazardous Substances except in compliance with applicable
Environmental Laws; and no underground tank or other underground storage
receptacle for Hazardous Substances is located on any portion of the Real
Estate; (ii) in the course of any activities conducted by the Borrower, its
Subsidiaries or operators of its properties, no Hazardous Substances have been
discharged, emitted, generated or used except in accordance with applicable
Environmental Laws; (iii) in addition, any Hazardous Substances that have been
transported from the Real Estate have been transported offsite only by carriers
having an identification number issued by the EPA, treated or disposed of only
by treatment or disposal facilities maintaining valid permits as required under
applicable Environmental Laws, which transporters and facilities have been and
are, to the best of the Borrower's knowledge, operating in compliance with such
permits and applicable Environmental Laws; (iv) there have been no releases
(i.e., any past or present releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of the Borrower or its Subsidiaries, which releases would have a
material adverse effect on the value of the Real Estate or adjacent properties
or the environment; and (v) to the best of Borrower's knowledge, there have been
no releases on, upon, from or into any real property in the vicinity of any of
the Real Estate which, through soil or groundwater contamination, may have come
to be located on, and which would have a material adverse effect on the value
of, the Real Estate; and
(d) none of the Borrower and its Subsidiaries nor any of the Real
Estate is subject to any applicable environmental law requiring the performance
of Hazardous Substances site assessments or the removal or remediation of
Hazardous Substances, or the giving of notice to any governmental agency or the
recording or delivery to other
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Persons of an environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby.
Section 7.19. SUBSIDIARIES, ETC. The Nimishillen & Tuscarawas Railway
Company, the Special Preferred Stock Trust and Oberlin Insurance Company are the
only Subsidiaries of the Borrower. Except as set forth on SCHEDULE 7.19 hereto,
neither the Borrower nor any Subsidiary of the Borrower is engaged in any joint
venture or partnership with any other Person.
Section 7.20. BANK ACCOUNTS. SCHEDULE 7.20 sets forth the account numbers
and location of all bank accounts of the Borrower or any of its Subsidiaries.
Section 7.21. FISCAL YEAR. The Borrower has a fiscal year which ends on
June 30 in each year.
Section 7.22. DISCLOSURE. No representation or warranty made by the
Borrower in any of the Loan Documents or any agreement, instrument, document,
certificate or letter furnished by or on behalf of the Borrower pursuant to any
Loan Document or in connection with any of the transactions contemplated thereby
contains any untrue statement of any material fact or omits to state any
material fact necessary in order to make the statement contained therein not
misleading. There is no fact known to the Borrower (excluding general economic
and political conditions affecting business generally) which materially
adversely affects, or which could reasonably be expected to materially adversely
affect in the reasonable foreseeable future the financial condition, business,
operations, or affairs or the Borrower, which has not been disclosed in writing
to the Agent.
Section 8. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower
covenants and agrees that, so long as any Revolving Credit Loan, Letter of
Credit or Revolving Credit Note is outstanding or any Bank has any obligation to
make any Revolving Credit Loans or the Agent has any obligation to issue, extend
or renew any Letters of Credit:
Section 8.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay
or cause to be paid the principal and interest on the Revolving Credit Loans,
all Reimbursement Obligations, the Letter of Credit Fees, the commitment fees,
the Agent's fee and all other amounts provided for in this Credit Agreement and
the other Loan Documents, all in accordance with the terms of this Credit
Agreement and such other Loan Documents.
Section 8.2. MAINTENANCE OF OFFICE. The Borrower will maintain its chief
executive office in Massillon, Ohio, or at such other place in the United States
of America as the Borrower shall designate upon written notice to the Agent,
where notices, presentations and demands to or upon the Borrower in respect of
the Loan Documents to which the Borrower is a party may be given or made.
Section 8.3. RECORDS AND ACCOUNTS. The Borrower will (a) keep, and cause
each of its Subsidiaries to keep, true and accurate records and books of account
in which full, true and correct entries will be made in accordance with
generally accepted accounting principles and (b) maintain adequate accounts and
reserves for all taxes (including income taxes),
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depreciation, depletion, obsolescence and amortization of its properties and the
properties of its Subsidiaries, contingencies, and other reserves.
Section 8.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The
Borrower will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than ninety
(90) days after the end of each fiscal year of the Borrower, the consolidated
balance sheet of the Borrower and its Subsidiaries and the consolidating balance
sheet of the Borrower and its Subsidiaries, each as at the end of such year, and
the related consolidated statement of income and retained earnings and
consolidated statement of cash flow and consolidating statement of income and
retained earnings and consolidating statement of cash flow for such year, each
setting forth in comparative form the figures set forth in the projections
delivered pursuant to Section 7.4.2 for the comparable period and those figures
for the previous fiscal year and all such consolidated and consolidating
statements to be in reasonable detail, prepared in accordance with generally
accepted accounting principles, and, with respect to the consolidated financial
statements, certified without qualification (except for qualification for a
change in accounting principles with which the independent public accountant
concurs) by a nationally recognized firm of independent certified public
accountants satisfactory to the Agent, together with a written statement from
such accountants to the effect that they have read a copy of this Credit
Agreement, and that, in making the examination necessary to said certification,
they have obtained no knowledge of any Default or Event of Default, or, if such
accountants shall have obtained knowledge of any then existing Default or Event
of Default they shall disclose in such statement any such Default or Event of
Default; PROVIDED that such accountants shall not be liable to the Banks for
failure to obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of the
Borrower, copies of the unaudited consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such quarter, and the related consolidated
statement of income and retained earnings and consolidated statement of cash
flow for the portion of the Borrower's fiscal year then elapsed, each setting
forth in comparative form the figures set forth in the projections delivered
pursuant to Section 7.4.2 (or, if updated, pursuant to Section 8.4(k)) for the
comparable period and those figures for the comparable period in the preceding
fiscal year, all in reasonable detail and prepared in accordance with generally
accepted accounting principles, together with a certification by the treasurer
or other authorized financial officer of the Borrower that the information
contained in such financial statements fairly presents the financial position of
the Borrower and its Subsidiaries on the date thereof (subject to year-end
adjustments and the exclusion of footnotes);
(c) as soon as practicable, but in any event within thirty (30) days
after the end of each month in each fiscal year of the Borrower, copies of the
unaudited monthly consolidated balance sheet of the Borrower and its
Subsidiaries for such month, and the related consolidated statement of income
and retained earnings and consolidated statement of cash flow for the portion of
the Borrower's fiscal year then elapsed, each setting forth in comparative form
the figures set forth in the projections delivered pursuant to Section 7.4.2
(or, if updated, pursuant to Section 8.4(k)) for the comparable period and those
figures for the comparable period in the preceding fiscal year, all in
reasonable detail and prepared in
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accordance with generally accepted accounting principles, together with a
certification by the treasurer or other authorized financial officer of the
Borrower that the information contained in such financial statements fairly
presents the financial condition of the Borrower and its Subsidiaries on the
date thereof (subject to year-end adjustments and the exclusion of footnotes);
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a), (b) and (c) above, a statement certified by the
treasurer or other authorized financial officer of the Borrower in substantially
the form of EXHIBIT E hereto and setting forth in reasonable detail computations
evidencing compliance with the covenants contained in Section 10 and (if
applicable) reconciliations to reflect changes in generally accepted accounting
principles since the Balance Sheet Date and on a quarterly basis, a report in
form and substance reasonably satisfactory to the Agent, on the status of
environmental matters affecting the Borrower, including any material changes in
remedial activity requested by any governmental agency or authority and the
impact, if any, of such changes on the budget for the year delivered pursuant to
subsection (h) below;
(e) simultaneously with delivery of the financial statements referred
to in subsections (a) and (b), a certificate, executed by the treasurer or other
authorized financial officer of the Borrower, stating that such officer has
caused this Credit Agreement to be reviewed and has no knowledge of any material
default by the Borrower in the performance or observance of any of the
provisions of this Credit Agreement, during the applicable quarter or at the end
of the applicable year, or, if such officer has such knowledge, specifying each
default and the nature thereof;
(f) promptly upon receipt thereof, copies of all final management
letters of substance and other material reports of substance which are submitted
to the Borrower by its independent accountants in connection with any annual or
interim audit of the books of the Borrower made by such accountants;
(g) as soon as practicable but, in any event, within ten (10)
Business Days after the issuance thereof, copies of such other financial
statements and reports as the Borrower shall send to its stockholders as such,
and copies of all regular and periodic reports which the Borrower may be
required to file with the Securities and Exchange Commission or any similar or
corresponding governmental commission, department or agency substituted
therefor, or any similar or corresponding governmental commission, department,
board, bureau, or agency, federal or state;
(h) within thirty (30) days after the first day of each fiscal year
of the Borrower, the budget for the Borrower and its Subsidiaries for such
fiscal year prepared by the Borrower for its Board of Directors, which shall
include detail by month and shall include projected spending for such year
relating to Capital Expenditures, including with respect to environmental
matters affecting the Borrower;
(i) (i) on the twentieth day of each calendar month a Borrowing Base
Report setting forth the Eligible Inventory component of the Borrowing Base as
at the end of the preceding calendar month or at such earlier time as the Agent
may reasonably request, and (ii) (A) so long as the Excess Availability is
greater than or equal to $35,000,000, on Wednesday of each week or at such
earlier time as the Agent may
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reasonably request, or (B) so long as the Excess Availability is less than
$35,000,000 or if an Event of Default shall have occurred and be continuing, on
a daily basis, a Borrowing Base Report setting forth the Eligible Accounts
Receivable component of the Borrowing Base as at the end of the preceding week
or the preceding day, as the case may be, or such other date so requested by the
Agent;
(j) within fifteen (15) days after the end of each calendar month, an
Accounts Receivable aging report;
(k) simultaneously with delivery of each annual budget pursuant to
Section 8.4(h) and from time to time upon request of the Agent, projections of
the Borrower and its Subsidiaries (including, without limitation, as to
availability of the Revolving Credit Loans) updating those projections delivered
to the Banks and referred to in Section 7.4.2 or, if applicable, updating any
later such projections delivered pursuant to this Section 8.4(k); and
(l) from time to time such other financial data and information
(including accountants and management letters) as the Agent or any Bank may
reasonably request.
Section 8.5. NOTICES.
8.5.1. DEFAULTS. The Borrower will promptly notify the
Agent and each of the Banks in writing of the occurrence of any Default or Event
of Default. If any Person shall give any notice or take any other action in
respect of a claimed default (whether or not constituting an Event of Default)
under this Credit Agreement or any other note, evidence of indebtedness,
indenture or other obligation, the amount of which is in excess of $500,000, to
which or with respect to which the Borrower or any of its Subsidiaries is a
party or obligor, whether as principal, guarantor, surety or otherwise, the
Borrower shall forthwith give written notice thereof to the Agent and each of
the Banks, describing the notice or action and the nature of the claimed
default.
8.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly
give written notice to the Agent and each of the Banks (i) of any violation of
any Environmental Law that the Borrower or any of its Subsidiaries reports in
writing or is reportable by the Borrower or any of its Subsidiaries in writing
(or for which any written report supplement to any oral report is made) to any
federal, state or local environmental agency and (ii) upon becoming aware
thereof of any inquiry, proceeding, investigation, or notice of violation, or
order from any agency of potential environmental liability, or any federal,
state or local environmental agency or board, that has the potential to
materially affect the assets, liabilities, financial conditions or operations of
the Borrower and its Subsidiaries, taken as a whole, or the Agent's security
interests pursuant to the Security Documents.
8.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The
Borrower will, immediately upon becoming aware thereof, notify the Agent and
each of the Banks in writing of any setoff, claims (including, with respect to
the Real Estate, environmental claims in excess of $500,000), withholdings or
other defenses to which any of the Collateral, or the Agent's rights with
respect to the Collateral, are subject.
8.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower
will, and will cause each of its Subsidiaries to, give notice to the Agent and
each of the Banks in writing
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within fifteen (15) days of becoming aware of any litigation or proceedings
threatened in writing or any pending litigation and proceedings affecting the
Borrower or any of its Subsidiaries or to which the Borrower or any of its
Subsidiaries is or becomes a party involving an uninsured claim against the
Borrower or any of its Subsidiaries that could reasonably be expected to have a
materially adverse effect on the Borrower or any of its Subsidiaries and stating
the nature and status of such litigation or proceedings. The Borrower will, and
will cause each of its Subsidiaries to, give notice to the Agent and each of the
Banks, in writing, in form and detail satisfactory to the Agent, within twenty
(20) days of any judgment not covered by insurance, final or otherwise, against
the Borrower or any of its Subsidiaries in an amount in excess of $100,000.
Section 8.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. The
Borrower will do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights and franchises and
those of its Subsidiaries and will not, and will not cause or permit any of its
Subsidiaries to, convert to a limited liability company. It (a) will cause all
of its properties and those of its Subsidiaries used or useful in the conduct of
its business or the business of its Subsidiaries to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment, (b) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will, and will cause each of its Subsidiaries to, continue to engage primarily
in the businesses now conducted by them and in related businesses; PROVIDED that
nothing in this Section 8.6 shall prevent the Borrower from discontinuing the
operation and maintenance of any of its properties or any of those of its
Subsidiaries if such discontinuance is, in the judgment of the Borrower,
desirable in the conduct of its or their business and that do not in the
aggregate materially adversely affect the business of the Borrower and its
Subsidiaries on a consolidated basis.
Section 8.7. INSURANCE.
(a) The Borrower will and will cause each of its Subsidiaries to
maintain with an insurer rated B+ or better by A.M. Best, insurance with respect
to its properties and business against such casualties and contingencies as
shall be in accordance with sound business practices of businesses engaged in
similar activities in similar geographic areas. Such insurance shall be in such
minimum amounts that the Borrower will not be deemed a co-insurer under
applicable insurance laws, regulations and policies and otherwise shall be in
such amounts, contain such terms, be in such forms and be for such periods as
may be reasonably satisfactory to the Agent. In addition, all insurance (except
third party liability insurance) insuring any of the Collateral and the
interruption of the business of the Borrower shall be payable to the Agent as a
loss payee under a standard loss payee clause for the benefit of the Banks and
the Agent and shall designate the Agent as an additional insured, as applicable.
With respect to the business interruption insurance maintained by the Borrower,
in the event of a loss all proceeds thereof shall be paid on a PRO RATA basis to
the Agent and the trustee under the First Mortgage Note Indenture as co-loss
payees and allocated based upon the ratio, the numerator of which shall be equal
to (i) the outstanding amount of the Obligations with respect to the Agent and
the Banks and (ii) the outstanding amount of the indebtedness of the Borrower
under the First Mortgage Note Indenture with respect to the trustee thereunder,
and the denominator of which shall be
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equal to the sum of the Obligations PLUS the outstanding amount of indebtedness
of the Borrower under the First Mortgage Note Indenture, in each case determined
as of the date of such payment. Without limiting the foregoing, the Borrower
will, and will cause each of its Subsidiaries to, (i) keep all of its physical
property insured with casualty or physical hazard insurance on an "all risks"
basis, with broad form flood and earthquake coverages and electronic data
processing coverage, with a full replacement cost endorsement and an "agreed
amount" clause in an amount equal to 100% of the full replacement cost of such
property exclusive of deductibles and self insurance in amounts not greater than
those generally maintained by businesses engaged in similar activities in
similar geographic areas, (ii) maintain all such workers' compensation or
similar insurance or self-insurance as may be required by law, and (iii)
maintain, in amounts and with deductibles or retentions equal to those generally
maintained by businesses engaged in similar activities in similar geographic
areas, general public liability insurance against claims for bodily injury,
death or property damage occurring on, in or about the properties of the
Borrower or its Subsidiaries, business interruption insurance and product
liability insurance.
(b) The proceeds of any casualty insurance in respect of any casualty
loss of any of the Collateral shall, subject to the rights, if any, of other
parties with a prior interest in the property covered thereby, (i) so long as no
Default or Event of Default has occurred and is continuing and to the extent
that the amount of such proceeds is less than $50,000, be disbursed to the
Borrower for direct application by the Borrower solely to the repair or
replacement of the Borrower's property so damaged or destroyed and (ii) in all
other circumstances, be held by the Agent as cash collateral for the
Obligations. The Agent may, at its sole option, disburse from time to time all
or any part of such proceeds so held as cash collateral, upon such terms and
conditions as the Agent may reasonably prescribe, for direct application by the
Borrower solely to the repair or replacement of the Borrower's property so
damaged or destroyed, or the Agent may apply all or any part of such proceeds to
the Obligations with the Total Commitment (if not then terminated) being reduced
by the amount so applied to the Obligations.
(c) All policies of an insurance shall provide for thirty (30) days
prior written minimum cancellation notice to the Agent. In the event of failure
to provide and maintain insurance as herein provided, the Agent may, at its
option, after giving notice to the Borrower provide such insurance and charge
the amount thereof to the Borrower. The Borrower shall furnish to the Agent
certificates or other evidence satisfactory to the Agent of compliance with the
foregoing insurance provision.
Section 8.8. TAXES, ETC. The Borrower will, and will cause each of its
Subsidiaries to, duly pay and discharge, or cause to be paid and discharged,
before the same shall become overdue, all taxes, assessments and other
governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; PROVIDED that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Borrower or such Subsidiary shall have established on its books
adequate reserves with respect thereto; and PROVIDED FURTHER that the Borrower
and each Subsidiary of the Borrower will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
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foreclose any lien that may have attached as security therefor unless the
Borrower has obtained a stay of such proceedings which remains in effect.
Section 8.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
8.9.1. GENERAL. The Borrower shall permit the Banks,
through the Agent or any of the Banks' other designated representatives, to
visit and inspect any of the properties of the Borrower or any of its
Subsidiaries, to examine the books of account of the Borrower and its
Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss
the affairs, finances and accounts of the Borrower and its Subsidiaries with,
and to be advised as to the same by, its and their officers, all at such
reasonable times and intervals as the Agent or any Bank may reasonably request.
The Agent and the Banks will, to the extent practicable, exercise their rights
under this Section 8.9.1 in a manner which causes no material disruption of the
Borrower's operations. Each of the Agent and the Banks agrees that it will
treat in confidence all financial information with respect to the Borrower and
its Subsidiaries, and all information obtained during such inspection which is
designated by the Borrower as confidential and will not, without the consent of
the Borrower, disclose such information to any third party and, if any
representative or agent of the Agent or the Bank shall not be an employee of the
Agent or such Bank or any affiliate of the Agent or such Bank, such designee
shall be reputable and of recognized standing and shall agree in writing to
treat in confidence the information obtained during any such inspection and,
without the prior written consent of the Borrower, not to disclose such
information to any third party or make use of such information for personal
gain. Notwithstanding the foregoing, the Borrower hereby authorizes the Agent
and each Bank to disclose information obtained pursuant to this Credit Agreement
to other banks or financial institutions who are participants in the Revolving
Credit Loans and Letters of Credit made or issued or to be made or issued
hereunder and to potential participants with the consent of the Borrower, such
consent not to be unreasonably withheld; PROVIDED that such participant or
potential participant agrees to be bound by the confidentiality provisions of
this Section 8.9.1, and where required or requested by governmental or
regulatory authorities.
8.9.2. COMMERCIAL FINANCE EXAMINATIONS. The Borrower will
permit the Agent's examiners and, if accompanied by the Agent or its examiners,
a Bank's examiners, from time to time, to conduct, at the Borrower's reasonable
expense, commercial finance examinations of the Borrower and its Subsidiaries.
8.9.3. COMMUNICATIONS WITH ACCOUNTANTS. The Borrower
authorizes the Agent and, if accompanied by the Agent, the Banks to communicate
with the Borrower's independent certified public accountants and authorizes such
accountants to disclose to the Agent and the Banks any and all financial
statements and other supporting financial documents and schedules including
copies of any management letter with respect to the business, financial
condition and other affairs of the Borrower or any of its Subsidiaries. At the
request of the Agent, the Borrower shall deliver a letter addressed to such
accountants instructing them to comply with the provisions of this Section
8.9.3.
Section 8.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
Borrower will, and will cause each of its Subsidiaries to, comply with (a) the
applicable laws and regulations wherever its business is conducted, including
all Environmental Laws, (b)
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the provisions of its charter documents and by-laws, and all agreements and
instruments by which it or any of its properties may be bound except to the
extent that such non-compliance will not materially adversely affect the
properties, assets, financial condition or business of the Borrower and its
Subsidiaries, taken as a whole, and (c) all applicable decrees, orders, and
judgments. If any authorization, consent, approval, permit or license from any
officer, agency or instrumentality of any government shall become necessary or
required in order that the Borrower may fulfill any of its obligations hereunder
or any of the other Loan Documents, the Borrower will immediately take or cause
to be taken all reasonable steps within the power of the Borrower to obtain such
authorization, consent, approval, permit or license and furnish the Agent and
the Banks with evidence thereof.
Section 8.11. EMPLOYEE BENEFIT PLANS. The Borrower will (a) promptly upon
request of the Agent, furnish to the Agent a copy of the most recent actuarial
statement required to be submitted under Section 103(d) of ERISA and Annual
Report, Form 5500, with all required attachments, in respect of each Guaranteed
Pension Plan and (b) promptly upon receipt or dispatch, furnish to the Agent any
notice, report or demand sent or received in respect of a Guaranteed Pension
Plan under Sections 302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA,
or in respect of a Multiemployer Plan, under Sections 4041A, 4202, 4219, 4242,
or 4245 of ERISA.
Section 8.12. USE OF PROCEEDS. The Borrower will use the proceeds of the
Revolving Credit Loans, and will obtain Letters of Credit, solely for working
capital and general corporate purposes.
Section 8.13. BANK ACCOUNTS; AGENCY ACCOUNT ARRANGEMENTS.
Section 8.13.1. BANK ACCOUNTS. The Borrower will, and will
cause each of its Subsidiaries to, require all account debtors to make payments
directly to one of the Blocked Accounts. The Borrower will, and will cause each
of its Subsidiaries to, together with the employees, agents and other Persons
acting on behalf of the Borrower or any such Subsidiary, receive and hold in
trust for the Agent and the Banks all payments constituting proceeds of Accounts
Receivable or other Collateral which, not withstanding the foregoing, come into
their possession or under their control and, immediately upon receipt thereof,
deposit such payments in the form received, with any appropriate endorsements,
in one of the Blocked Accounts designated as a central depository account on
SCHEDULE 7.20.
Section 8.13.2. AGENCY ACCOUNT ARRANGEMENTS.
(a) The Borrower will, and will cause each of its Subsidiaries
to, execute and deliver to the Agent for the benefit of the Agent and the Banks,
an Agency Agreement in substantially the form of EXHIBIT D hereto (an "Agency
Agreement") or otherwise in a form and substance acceptable to the Banks
executed by the Borrower and its Subsidiaries and the financial institution
(each a "Blocked Account Bank") in which the Borrower or its Subsidiaries have
any depository accounts which are permitted by the Agent (each a "Blocked
Account") simultaneous with the opening of such Blocked Account, except to the
extent that the Borrower has delivered to the Agent prior to the Effective Date
an agency agreement executed by the Borrower and the applicable Blocked Account
Bank with respect to such Blocked Account Bank and such agency agreement is in
effect. The Agent shall be granted a security interest by the Borrower and each
of its Subsidiaries
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in all Blocked Accounts. No Agency Agreement may be modified or amended without
the prior written consent of the Agent.
(b) The Borrower expressly agrees that (i) following notice to
the Blocked Account Banks (A) of the existence and continuance of a Default or
an Event of Default the Agent may at anytime, or (B) that the Excess
Availability is less than $35,000,000 the Agent will, require that, from and
after the date specified in such notice, all monies deposited in the Blocked
Accounts be transferred on a daily basis to a cash concentration account with
the Agent, which monies shall be credited against Obligations, and (ii) in the
event such transfer is required, upon the request of the Agent, the Borrower
will take any steps necessary, to effect such transfer, including, without
limitation, the execution and delivery of amendments to each of the Agency
Agreements. From time to time, upon the Agent's reasonable request, the
Borrower shall furnish to the Agent copies of all bank statements and other
notices received by it with respect to the Blocked Accounts.
Section 8.14. BORROWING BASE. The Borrower represents, warrants and
covenants as follows:
(a) At the time any Eligible Account Receivable is included in the
Borrowing Base and to the extent of the value of such Eligible Account
Receivable as reflected in the Borrowing Base, such Eligible Account Receivable
shall be a valid account representing an undisputed indebtedness incurred by the
account debtor for goods held subject to delivery instructions or theretofore
shipped or delivered pursuant to a contract of sale; there shall be no setoffs
or counterclaims against the account; no agreement under which any deduction or
discount may be claimed shall have been made with the account debtor unless
written notice thereof has theretofore been or concurrently is given to the
Agent; no agreement under which any goods may be returned shall have been made
with the account debtor; and the Borrower shall be the lawful owner of such
Eligible Account Receivable and shall have good right to subject the same to a
security interest in favor of the Agent.
(b) The Borrower is, and as to Eligible Inventory to be acquired after
the date hereof and to be included in the Borrowing Base, shall be the owner of
all Eligible Inventory to be included in the Borrowing Base and (except for the
liens for carrier, warehouse, customs and similar statutory liens arising in the
ordinary course of business) shall neither create or suffer to exist any lien or
encumbrance thereon or security interest therein nor sell, assign, transfer or
create or suffer to exist any lien or encumbrance on or security interest in any
account or contract right to or in favor of any Person other than the Agent.
(c) The Borrower shall give the Agent on the Effective Date a list
of, and thereafter shall give thirty (30) days written notice prior to any
change in, each warehouse location at which inventory is or will be kept and
each office of the Borrower at which the records of the Borrower pertaining to
Eligible Accounts Receivable and contract rights are kept. All Eligible
Inventory is and shall be kept, and all records pertaining to Eligible Accounts
and contract rights are and shall be kept, only at locations of which the Agent
has been given notice as provided in this Section 8.14(c).
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(d) The Borrower shall promptly notify the Agent of any of the
following events of which any senior or executive officer of the Borrower
becomes aware: any material loss or depreciation in value of Eligible Inventory
and the amount of the loss or depreciation; rejection, return, repossession or
loss of any material amount of goods giving rise to any Eligible Account
Receivable; material damage to any such goods; any request by an account debtor
for any credits or adjustments of Eligible Accounts Receivable which are
material in the aggregate; any adjustments of the amounts owing on Eligible
Accounts Receivable which are material in the aggregate; any other disputes
which are material in the aggregate; any other event which materially affects
Eligible Inventory or Eligible Accounts Receivable or the value or amount
thereof, PROVIDED, that during any period when Eligible Accounts Receivable are
being determined on a daily basis, all applicable adjustments to the amount
thereof shall be taken on the day such adjustment(s) are made, and shall not be
delayed by virtue of this Section 8.14(d). For purposes of this Section
8.14(d), "material" shall mean involving amounts in excess of $1,000,000 in the
aggregate in the case of Eligible Accounts Receivable and $5,000,000 in the
aggregate in the case of Eligible Inventory.
Section 8.15. FURTHER ASSURANCES. The Borrower will, and will cause each
of its Subsidiaries to, cooperate with the Banks and the Agent and execute such
further instruments and documents as the Banks or the Agent shall reasonably
request to carry out to their satisfaction the transactions contemplated by this
Credit Agreement and the other Loan Documents.
Section 9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The Borrower
covenants and agrees that, so long as any Revolving Credit Loan, Letter of
Credit or Revolving Credit Note is outstanding or any Bank has any obligation to
make any Revolving Credit Loans or the Agent has any obligations to issue,
extend or renew any Letters of Credit:
Section 9.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and
will not permit any of its Subsidiaries to, create, incur, assume, guarantee or
be or remain liable, contingently or otherwise, with respect to any Indebtedness
other than:
(a) Indebtedness to the Banks and the Agent arising under any of the
Loan Documents;
(b) current liabilities of the Borrower or such Subsidiary incurred
in the ordinary course of business not incurred through (i) the borrowing of
money, or (ii) the obtaining of credit except for credit on an open account
basis customarily extended and in fact extended in connection with normal
purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the extent
that payment therefor shall not at the time be required to be made in accordance
with the provisions of Section 8.8;
(d) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Borrower or such
Subsidiary shall at the time
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in good faith be prosecuting an appeal or proceedings for review and in respect
of which a stay of execution shall have been obtained pending such appeal or
review;
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary course
of business;
(f) Indebtedness consisting of Rental Obligations under operating
leases with aggregate payments due in any year not in excess of $12,000,000;
(g) Indebtedness consisting of contingent liabilities in respect of
litigation against the Borrower so long as such Indebtedness would not be
required by the Borrower's independent public accountants to be included in the
footnotes to the financial statements delivered pursuant to Section 8.4(a) or
the reserves for which required to be established on the books of the Borrower
are not in excess of $5,000,000;
(h) Indebtedness of the Borrower and its Subsidiaries incurred in
connection with the acquisition after the date hereof of personal property by
the Borrower or any Subsidiary; PROVIDED that the principal amount of such
Indebtedness shall not exceed in any case 90% of the cost, to the Borrower or
such Subsidiary, of the personal property so acquired, and PROVIDED, FURTHER,
that the aggregate principal amount of such Indebtedness outstanding shall not
exceed $10,000,000 at any time;
(i) Indebtedness under the First Mortgage Notes not exceeding the
aggregate principal amount of $200,000,000;
(j) Indebtedness existing on the date hereof and listed and described
on SCHEDULE 9.1 hereto;
(k) Indebtedness of a Subsidiary of the Borrower to the Borrower not
exceeding $5,000,000 in the aggregate;
(l) Indebtedness with respect to surety bonds required in the
ordinary course of business of the Borrower and its Subsidiaries, PROVIDED that
such Indebtedness shall not at any time exceed $3,000,000 in the aggregate;
(m) Indebtedness consisting of contingent liabilities with respect to
Guaranteed Pension Plans to the extent permitted under Section 9.9;
(n) Indebtedness incurred under any interest rate swap, cap, collar
or similar arrangements or foreign currency exchange transactions with respect
to Indebtedness under the Revolving Credit Notes;
(o) Indebtedness not otherwise permitted by this Section 9.1 not
exceeding $10,000,000 in the aggregate; and
(p) Indebtedness of the Borrower to the Ohio Water Development
Authority in respect of (i) up to $25,000,000 aggregate principal amount of
Solid Waste Revenue Bonds issued by the Ohio Water Development Authority and
bearing interest at a rate not to exceed 8.5 percent per annum and having a
maturity of not less than 20 years, in
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connection with the acquisition by the Borrower of certain solid waste
facilities to be located at the Borrower's continuous cast direct billet process
plant in Canton, Ohio, and incurred under the terms of the Loan Agreement, Note
and Indenture in the form delivered to the Banks prior to the date hereof, and
(ii) up to $55,000,000 aggregate principal amount of State of Ohio Solid Waste
Revenue Bonds, Series 1996 issued by the Ohio Water Development Authority and
bearing interest at a rate not to exceed 10.0 percent per annum and having a
maturity of not less than 15 years, in connection with the financing and
refinancing of a portion of the costs of the Borrower's solid waste disposal
facilities to be installed in its Canton, Ohio plant, and incurred under the
terms of the Loan Agreement, Project Note and Indenture, dated as of June 1,
1996 and in the form delivered to the Banks prior to the date hereof, and in the
case of each Loan Agreement, Note and Indenture referred to in each of the
clauses (i) and (ii) above, such documents shall not be amended in a manner
affecting the rights or obligations of the Borrower thereunder without the
consent of the Majority Banks, which consent, in the case of amendments which do
not affect maturity, interest rate, payment terms, tighten covenants, create
additional obligations on the Borrower or require the provision of any
collateral security or guaranty, will not unreasonably be withheld.
Section 9.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not
permit any of its Subsidiaries to, (a) create or incur or suffer to be created
or incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire any property or assets upon
conditional sale or other title retention or purchase money security agreement,
device or arrangement; (d) suffer to exist for a period of more than thirty (30)
days after the same shall have been incurred any Indebtedness or claim or demand
against it that if unpaid might by law or upon bankruptcy or insolvency, or
otherwise, be given any priority whatsoever over its general creditors; or (e)
sell, assign, pledge or otherwise transfer any accounts, contract rights,
general intangibles, chattel paper or instruments, with or without recourse;
PROVIDED that the Borrower and any Subsidiary of the Borrower may create or
incur or suffer to be created or incurred or to exist:
(i) liens in favor of the Borrower on all or part of the assets of
Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries of
the Borrower to the Borrower;
(ii) liens to secure taxes, assessments and other government charges
in respect of obligations not overdue or liens on properties to secure
claims for labor, material or supplies in respect of obligations not
overdue (or which are being contested in good faith and by appropriate
proceedings and as to which adequate reserves have been provided);
(iii) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
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(iv) liens on properties in respect of judgments or awards, the
Indebtedness with respect to which is permitted by Section 9.1(d);
(v) liens of carriers, warehousemen, mechanics and materialmen in
existence less than 120 days from the date of creation thereof in respect
of obligations not overdue;
(vi) encumbrances on Real Estate consisting of easements, rights of
way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord's or lessor's
liens under leases to which the Borrower or a Subsidiary of the Borrower is
a party, and other minor liens or encumbrances none of which in the opinion
of the Borrower interferes materially with the use of the property affected
in the ordinary conduct of the business of the Borrower and its
Subsidiaries, which defects do not individually or in the aggregate have a
materially adverse effect on the business of the Borrower individually or
of the Borrower and its Subsidiaries on a consolidated basis;
(vii) liens existing on the date hereof and listed on SCHEDULE 9.2
hereto;
(viii) purchase money security interests in personal property
acquired after the date hereof to secure purchase money Indebtedness of the
type and amount permitted by Section 9.1(h), incurred in connection with
the acquisition of such property, which security interests cover only the
personal property so acquired;
(ix) liens in favor of the First Mortgage Noteholders under the First
Mortgage Note Documents, which liens shall in no event include any lien or
encumbrance of any kind on the Collateral;
(x) liens securing surety bonds to the extent permitted by Section
9.1(l) on assets of the Borrower not constituting Collateral; and
(xi) liens in favor of the Agent for the benefit of the Banks and the
Agent under the Loan Documents.
Section 9.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and
will not permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United States
of America that mature within one (1) year from the date of purchase by the
Borrower;
(b) demand deposits, certificates of deposit, Eurodollar deposits,
bankers acceptances and time deposits of United States banks having total assets
in excess of $1,000,000,000, or foreign subsidiaries of such banks;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated and
the ratings for which are not less than "P 1" if rated by Moody's Investors
Services, Inc., and not less than "A 1" if rated
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by Standard and Poor's Ratings Group or, so long as no Obligations are
outstanding, not less than "P 2" if rated by Moody's Investors Services, Inc.,
and not less than "A 2" if rated by Standard and Poor's Ratings Group;
(d) debt of any state or political subdivision that is rated "A" or
better and due within one (1) year from the date of purchase by the Borrower;
(e) repurchase agreements secured by any one or more of the
foregoing;
(f) Investments existing on the date hereof and listed on SCHEDULE
9.3 hereto;
(g) Investments with respect to Indebtedness permitted by Section
9.1(k) so long as such entities remain Subsidiaries of the Borrower;
(h) Investments consisting of promissory notes received as proceeds
of asset dispositions permitted by Section 9.5.2;
(i) shares of any so-called "money market fund", PROVIDED that such
fund is registered under the Investment Company Act of 1940, has net assets of
at least $500,000,000 and has an investment portfolio with an average maturity
of 365 days or less;
(j) Investments in securities of any corporation acquired in full or
partial satisfaction of liabilities of said corporation to the Borrower, in a
workout or a bankruptcy or insolvency proceeding with respect to such
corporation;
(k) Investments in capital stock of the Borrower occurring as a
result of the repurchase of such capital stock from the ESOP Trust as permitted
under Section 9.4;
(l) the ESOP Loan;
(m) Investments in interest rate swaps, caps, collars or similar
arrangements or foreign currency exchange transactions entered into in
connection with respect to Indebtedness under the Revolving Credit Notes; and
(n) Investments in the Special Preferred Stock Trust not exceeding an
aggregate of $2,000, made in connection with the formation and establishment of
the Special Preferred Stock Trust;
PROVIDED, HOWEVER, that, if an Event of Default shall have occurred and be
continuing, with respect to all Investments other than demand deposits referred
to in Section 9.3(b), Investments other than short term Investments listed on
SCHEDULE 9.3 hereto or described in clause (h) above and Investments of the type
described in clauses (g) and (j) through (l), either (i) such Investments shall
be immediately converted into cash and deposited in a Blocked Account or (ii)
all actions with respect to such Investments shall be taken to the satisfaction
of the Agent to provide to the Agent, for the benefit of the Banks and the
Agent, a first-priority perfected security interest in such Investments free of
all encumbrances other than Permitted Liens.
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Section 9.4. CHANGE IN TERMS OF CAPITAL STOCK; DISTRIBUTIONS. The
Borrower shall not, and shall not permit any Subsidiary to, effect or permit any
change in or amendment to any document or instrument pertaining to the terms of
the Borrower's or such Subsidiary's capital stock. The Borrower will not, and
will not permit any of its Subsidiaries to, make any Distributions except:
(a) Subsidiaries of the Borrower may make Distributions to the Borrower
without limitation;
(b) the Borrower may repurchase shares of its Common Stock from retired
employees to the extent required by the terms of the ESOP or ERISA; and
(c) the Borrower may pay dividends on its Common Stock held by the ESOP
Trust; PROVIDED that such dividends are deductible expenses under the Code and
that immediately following receipt of each such dividend, the ESOP Trust repays
to the Borrower a portion of the principal of and/or interest on the ESOP Loan
at least equal to the amount of such dividend.
Section 9.5. MERGER AND CONSOLIDATION. The Borrower will not, and will
not permit any of its Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or stock acquisition
(other than the acquisition of assets in the ordinary course of business
consistent with past practices) except the merger or consolidation of one or
more of the Subsidiaries of the Borrower with and into the Borrower, or the
merger or consolidation of two or more Subsidiaries of the Borrower.
Section 9.6. SALE AND LEASEBACK; DISPOSITION OF ASSETS. The Borrower
will not, and will not permit any of its Subsidiaries to, enter into any
arrangement, directly or indirectly, whereby the Borrower or any Subsidiary of
the Borrower shall sell, transfer, lease or otherwise dispose of any assets or
property owned by it or hereafter acquired by it in one transaction or a series
of transactions, including, without limitation, in order then or thereafter to
lease such property or lease other property that the Borrower or any Subsidiary
of the Borrower intends to use for substantially the same purpose as the
property being sold or transferred other than (a) the disposition of assets in
the ordinary course of business, consistent with past practices and (b) so long
as no Default or Event of Default shall have occurred and be continuing, (i) the
disposition of Investments permitted by Section 9.3 and (ii) such other
transactions, PROVIDED that 100% of the sales price is paid in cash, the sales
price is in an amount equal to no less than the fair market value of the assets
being disposed of and the aggregate sales price for all such transactions does
not exceed $5,000,000 in any fiscal year of the Borrower.
Section 9.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. Except for actions
which are in material compliance with Environmental Laws, the Borrower will not,
and will not permit any of its Subsidiaries to, (a) use any of the Real Estate
or any portion thereof for the handling, processing, storage or disposal of
Hazardous Substances, (b) cause or permit to be located on any of the Real
Estate any underground tank or other underground storage receptacle for
Hazardous Substances, (c) generate any Hazardous Substances on any of the Real
Estate, (d) conduct any activity at any Real Estate or use any Real Estate in
any manner so as to cause a release (i.e. releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping) or
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threatened release of Hazardous Substances on, upon or into the Real Estate or
(e) otherwise conduct any activity at any Real Estate or use any Real Estate in
any manner that would cause a violation of Environmental Laws the result of
which violation would have a material adverse effect on the business or
financial condition of the Borrower or its Subsidiaries, taken as a whole.
Section 9.8. FIRST MORTGAGE NOTE DEBT. The Borrower will not amend,
supplement or otherwise modify the terms of the First Mortgage Note Debt to
increase the interest rate on, or principal amount or any premium thereof,
shorten the average maturity thereof, or permit or require the granting or
pledging of collateral in addition to the collateral granted or pledged under
the First Mortgage Note Indenture as of the date hereof, or make any provisions
thereof more restrictive on the Borrower than they are on the date hereof, or
otherwise if, in the reasonable opinion of the Banks, such amendment, supplement
or modification could be adverse to the interests of the Banks, or prepay,
redeem or repurchase any of the First Mortgage Note Debt other than as required
under the First Mortgage Note Indenture as of the date hereof.
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Section 9.9. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA
Affiliate will:
(a) engage in any non-exempt "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code which is reasonably
likely to result in a material liability for the Borrower or any of its
Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in Section 302 of ERISA, whether or
not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could result
in the imposition of a lien or encumbrance on the assets of the Borrower or any
of its Subsidiaries pursuant to Section 302(f) or Section 4068 of ERISA;
(d) amend any Guaranteed Pension Plan in circumstances requiring the
posting of security pursuant to Section 307 of ERISA or Section 401(a)(29) of
the Code; or
(e) permit or take any action which would result in the aggregate
benefit liabilities (within the meaning of Section 4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of such
Plans, disregarding for this purpose the benefit liabilities and assets of any
such Plan with assets in excess of benefit liabilities, by more than the amount
set forth in Section 7.16.3.
Section 9.10. BANK ACCOUNTS. The Borrower will not, and will not permit
any of its Subsidiaries to, (a) establish any bank accounts other than those
listed on SCHEDULE 7.20 without the Agent's prior written consent, which consent
shall not be unreasonably withheld, (b) violate directly or indirectly any bank
agency agreement in favor of the Agent for the benefit of the Banks and the
Agent with respect to such account, or (c) deposit into any of the payroll
accounts listed on SCHEDULE 7.20 any amounts in excess of amounts necessary to
pay current payroll obligations from such accounts based on the Borrower's
reasonable estimates of such amounts.
Section 9.11. LIMITATION ON ISSUANCE OF SHARES OF SUBSIDIARIES;
DISPOSITION OF SHARES AND INDEBTEDNESS OF SUBSIDIARIES.
(a) Except as permitted by Section 9.4, the Borrower will not permit any
of its Subsidiaries to issue, sell or otherwise dispose of any shares of such
Subsidiary or any securities convertible into or exchangeable for or carrying
rights to subscribe for shares of such Subsidiary, except (i) to the Borrower,
or (ii) for the purpose of qualifying directors. The Borrower will not, in any
event, permit any Subsidiary to have outstanding any preferred shares, other
than preferred shares owned by the Borrower.
(b) Except as permitted by Section 9.4, the Borrower will not sell,
transfer or otherwise dispose of any shares (except for the purpose of
qualifying directors) or any Indebtedness of any Subsidiary.
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Section 9.12. CONTRIBUTIONS TO ESOP TRUST. The Borrower will not, and
will not cause or permit any of its Subsidiaries to, make any contributions to
the ESOP Trust which do not consist of shares of the Borrower's Common Stock,
PROVIDED, HOWEVER, that the Borrower may make cash contributions to the ESOP
Trust, but only to the extent that the Trustee has agreed or is required to
apply such contributions to (a) repay (including prepayments) principal and
interest on the Borrower's loans to the ESOP Trust or (b) purchase shares of the
Borrower's Common Stock from the Borrower, as contemplated by the ESOP
Documents.
Section 9.13. NO MATERIAL CHANGES, ETC. The Borrower shall not permit, at
any time after the Balance Sheet Date, any fact or circumstance (whether or not
the result thereof would be covered by insurance) as to which singly or in the
aggregate there is a reasonable likelihood of (a) a material adverse change with
respect to the value of the Collateral, or (b) the inability of the Banks or the
Agent to enforce in any material respect their rights to be granted hereunder or
under any of the other Loan Documents or the Obligations (including realizing on
the Collateral).
Section 9.14. NO SUBSIDIARIES. The Borrower will not, and will not permit
any of its Subsidiaries to, create or form, by acquisition or otherwise, any
Subsidiary in addition to the Subsidiaries of the Borrower described in Section
7.19.
Section 10. FINANCIAL COVENANTS OF THE BORROWER. The Borrower covenants
and agrees that, so long as any Revolving Credit Loan, Letter of Credit or
Revolving Credit Note is outstanding or any Bank has any obligation to make any
Revolving Credit Loans or the Agent has any obligation to issue, extend or renew
any Letters of Credit:
Section 10.1. CAPITAL EXPENDITURES. In the event that at any time during
any calendar month the Excess Availability is less than $25,000,000, the
Borrower will not make, or permit any Subsidiary of the Borrower to make,
Capital Expenditures during the period of twelve consecutive calendar months
commencing immediately following such month that exceed, in the aggregate for
the Borrower and its Subsidiaries, $25,000,000 during such period, so long as no
Default or Events of Default shall have occurred and be continuing or result
after giving effect thereto, exclusive of any irrevocable prior written
commitments up to $10,000,000 in the aggregate. Notwithstanding the foregoing,
if at any time during such twelve consecutive month period Excess Availability
shall be greater than $25,000,000 for at least sixty (60) consecutive days, then
Capital Expenditures will no longer be limited to $25,000,000 effective as of
the day following such sixty (60) day period.
Section 11. CONCERNING THE EFFECTIVE DATE; CONDITIONS TO EFFECTIVENESS.
Upon the Effective Date, all of the obligations of the Borrower under or in
respect of the Prior Credit Agreement shall be evidenced solely by the terms of
this Credit Agreement and the other Loan Documents. The Agent's and the Banks'
obligations to convert their claims against the Borrower under this Credit
Agreement and the obligation of the Banks to make the Revolving Credit Loans and
to issue, extend or renew any Letters of Credit provided for in this Credit
Agreement shall be subject to satisfaction of the following conditions precedent
on or prior to the Effective Date:
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Section 11.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto, shall be in full
force and effect and shall be in form and substance satisfactory to each of the
Banks. The Agent shall have received a sufficient number of fully executed
copies of each such document for distribution to the Banks.
Section 11.2. CERTIFIED COPIES OF CHARTER DOCUMENTS.
(a) The Agent shall have received from the Borrower a copy, certified by a
duly authorized officer of such Person to be true and complete on the Effective
Date, of each of (a) its charter or other incorporation documents as in effect
on such date of certification, and (b) its by-laws as in effect on such date.
(b) The Agent shall have received from the Borrower a certificate from the
Secretary of State, or other appropriate authority of the jurisdiction of its
incorporation, evidencing its good standing in such jurisdiction and in each
other jurisdiction in which a failure to so qualify could have a material
adverse effect on the business or financial condition of the Borrower.
Section 11.3. CORPORATE ACTION. All corporate action necessary for the
valid execution, delivery and performance by the Borrower of this Credit
Agreement and the other Loan Documents shall have been duly and effectively
taken, and evidence thereof satisfactory to the Banks shall have been provided
to the Agent.
Section 11.4. INCUMBENCY CERTIFICATE. The Agent shall have received from
the Borrower an incumbency certificate, dated as of the Effective Date, signed
by a duly authorized officer of the Borrower, and giving the name and bearing a
specimen signature of each individual who shall be authorized: (a) to sign, in
the name and on behalf of the Borrower, each of the Loan Documents; (b) to make
Loan Requests and Conversion Requests and to apply for Letters of Credit; and
(c) to give notices and to take other action on its behalf under the Loan
Documents.
Section 11.5. VALIDITY OF LIENS. The Security Documents shall be
effective to create in favor of the Agent a legal, valid and enforceable first
(except for Permitted Liens entitled to priority under applicable law) security
interest in and lien upon the Collateral. All filings, recordings, deliveries
of instruments and other actions necessary or desirable in the opinion of the
Agent to protect and preserve such security interests shall have been duly
effected. The Agent shall have received evidence thereof in form and substance
satisfactory to the Agent.
Section 11.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Agent
shall have received from the Borrower a completed and fully executed Perfection
Certificate and the results of UCC searches with respect to the Collateral,
indicating no liens other than Permitted Liens and otherwise in form and
substance satisfactory to the Agent.
Section 11.7. CERTIFICATES OF INSURANCE. The Agent shall have received
(a) a certificate of insurance from an independent insurance broker dated as of
the Effective Date, identifying insurers, types of insurance, insurance limits,
and policy terms, and otherwise describing the insurance obtained in accordance
with the provisions of Section 8.7 and (b) certified
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copies of all policies evidencing such insurance (or certificates therefor
signed by the insurer or an agent authorized to bind the insurer).
Section 11.8. BORROWING BASE REPORT. The Agent shall have received from
the Borrower a Borrowing Base Report for the preceding month and, with respect
to the calculation of Eligible Accounts Receivable component of the Borrowing
Base, for the preceding week.
Section 11.9. OPINIONS OF COUNSEL. Each of the Banks and the Agent shall
have received a favorable legal opinion addressed to the Banks and the Agent,
dated as of the Effective Date, substantially in the form of (a) EXHIBIT G-1
hereto, from Weil, Gotshal & Manges LLP, counsel to the Borrower and (b) EXHIBIT
G-2, from the Borrower's general counsel, Harold V. Kelly.
Section 11.10. PAYMENT OF FEES. The Borrower shall have paid to the Banks
or the Agent, as appropriate, all fees due and payable as of the Effective Date,
including, without limitation, the commitment fee pursuant to Section 2.2, the
fees pursuant to Section 5.1 and, if applicable, Letter of Credit Fees pursuant
to Section 4.6.
Section 11.11. REPAYMENT OF PORTION OF EXISTING INDEBTEDNESS. The Banks
shall have received from the Borrower an amount equal to the difference between
(a) the sum of the current outstanding amount of the Revolving Credit Loans (as
defined in the Prior Credit Agreement), including interest thereon through the
Effective Date, plus any amounts owing to the Agent with respect to any Letter
of Credit or Letter of Credit Fee under the Prior Credit Agreement and (b) the
Availability under this Credit Agreement, in readily available funds.
Section 11.12. PAYMENT OF INTEREST AND FEES UNDER PRIOR CREDIT AGREEMENT.
All interest and fees in respect of the Prior Credit Agreement accrued and
unpaid as of the Effective Date shall have been paid in full.
Section 11.13. AGENCY AGREEMENTS AND SUPPLEMENTARY LETTER AGREEMENTS. The
Agent shall have received (a) an Agency Agreement from each of the banks listed
on SCHEDULE 7.20 hereto which have not previously executed an Agency Agreement
and (b) an executed supplementary letter agreement, substantially in the form of
EXHIBIT F hereto, with respect to each Blocked Account Bank.
Section 11.14. COMMERCIAL FINANCE EXAMINATION. The Banks shall have
received the report of the Agent's commercial finance examiners and such report
shall be in form and substance satisfactory to the Banks.
Section 12. CONDITIONS TO ALL BORROWINGS. The obligations of the Banks
to make any Revolving Credit Loan, and of the Agent to issue, extend or renew
any Letter of Credit, in each case whether on or after the Effective Date, shall
also be subject to the satisfaction of the following conditions precedent.
Section 12.1. REPRESENTATIONS TRUE. Each of the representations and
warranties of any of the Borrower and its Subsidiaries contained in this
Credit Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with this Credit Agreement shall be
true as of the date as of which they were made and
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shall also be true at and as of the time of the making of such Revolving Credit
Loan or the issuance, extension or renewal of such Letter of Credit, with the
same effect as if made at and as of that time (except to the extent of changes
resulting from transactions contemplated or permitted by this Credit Agreement
and the other Loan Documents and changes occurring in the ordinary course of
business that singly or in the aggregate are not materially adverse, and to the
extent that such representations and warranties relate expressly to an earlier
date) and no Default or Event of Default shall have occurred and be continuing.
Section 12.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any
law or regulations thereunder or interpretations thereof that in the
reasonable opinion of any Bank would make it illegal for such Bank to make
such Revolving Credit Loan or to participate in the issuance, extension or
renewal of such Letter of Credit or in the reasonable opinion of the Agent
would make it illegal for the Agent to issue, extend or renew such Letter of
Credit.
Section 12.3. GOVERNMENTAL REGULATION. Each Bank shall have received
such statements in substance and form reasonably satisfactory to such Bank as
such Bank shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of
the Federal Reserve System.
Section 12.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection
with the transactions contemplated by this Credit Agreement, the other Loan
Documents and all other documents incident thereto shall be satisfactory in
substance and in form to the Banks and to the Agent and the Agent's Special
Counsel, and the Banks, the Agent and such counsel shall have received all
information and such counterpart originals or certified or other copies of
such documents as the Agent may reasonably request.
Section 12.5. BORROWING BASE REPORT. The Agent shall have received the
most recent Borrowing Base Report required to be delivered to the Agent in
accordance with Section 8.4(i) and, if requested by the Agent, a Borrowing
Base Report dated within one (1) Business Day of the Drawdown Date of such
Revolving Credit Loan or of the date of issuance, extension or renewal of
such Letter of Credit.
Section 13. EVENTS OF DEFAULT; ACCELERATION; ETC.
Section 13.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
(a) the Borrower shall fail to pay any principal of the Revolving
Credit Loans when the same shall become due and payable, whether at the stated
date of maturity or any accelerated date of maturity or at any other date fixed
for payment;
(b) the Borrower shall fail to pay any interest on the Revolving
Credit Loans, the commitment fee, any Letter of Credit Fee, the Agent's fee, or
other sums due hereunder or under any of the other Loan Documents, within three
(3) days of the stated date of maturity or any accelerated date of maturity or
at any other date fixed for payment;
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(c) the Borrower shall fail to comply with any of its covenants
contained in Section 8.1 (including, as it applies to Section 13.1(b), any grace
period applicable thereto), Section 8.4, Section 8.5.1, Section 8.5.4, the first
sentence of Section 8.6, Section 8.7, Section 8.12, Sections 9.1 through 9.6,
Sections 9.8 through 9.13 or Section 10;
(d) the Borrower shall fail to perform any term, covenant or
agreement contained herein or in any of the other Loan Documents (other than
those specified elsewhere in this Section 13.1) for thirty (30) days after
written notice of such failure has been given to the Borrower by the Agent;
(e) any representation or warranty of the Borrower or any of its
Subsidiaries in this Credit Agreement or any of the other Loan Documents or in
any other document or instrument delivered pursuant to or in connection with
this Credit Agreement shall prove to have been false in any material respect
upon the date when made or deemed to have been made or repeated;
(f) the Borrower or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligation for borrowed
money or credit received or in respect of any Capitalized Leases the outstanding
principal amount of which exceeds $5,000,000, or fail to observe or perform any
material term, covenant or agreement contained in any agreement by which it is
bound, evidencing or securing borrowed money or credit received or in respect of
any Capitalized Leases, the outstanding principal amount of which exceeds
$5,000,000, for such period of time as would permit (assuming the giving of
appropriate notice if required) the holder or holders thereof or of any
obligations issued thereunder to accelerate the maturity thereof;
(g) the Borrower or any of its Subsidiaries shall make an assignment
for the benefit of creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or become due, or shall petition
or apply for the appointment of a trustee or other custodian, liquidator or
receiver of the Borrower or any of its Subsidiaries or of any substantial part
of the assets of the Borrower or any of its Subsidiaries or shall commence any
case or other proceeding relating to the Borrower or any of its Subsidiaries
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law of any jurisdiction, now or
hereafter in effect, or shall take any action to authorize or in furtherance of
any of the foregoing, or if any such petition or application shall be filed or
any such case or other proceeding shall be commenced against the Borrower or any
of its Subsidiaries and the Borrower or any of its Subsidiaries shall indicate
its approval thereof, consent thereto or acquiescence therein or such petition
or application shall not have been dismissed within forty-five (45) days
following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any of its
Subsidiaries bankrupt or insolvent, or approving a petition in any such case or
other proceeding, or a decree or order for relief is entered in respect of the
Borrower or any Subsidiary of the Borrower in an involuntary case under federal
bankruptcy laws as now or hereafter constituted;
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(i) there shall remain in force, undischarged, unsatisfied, unstayed
and unbonded, for more than thirty (30) days, whether or not consecutive, any
final judgment against the Borrower or any of its Subsidiaries that, with other
outstanding final judgments, undischarged, unsatisfied, unstayed and unbonded,
against the Borrower or any of its Subsidiaries exceeds in the aggregate
$100,000;
(j) there shall occur (i) an "Event of Default" under and as defined
in the First Mortgage Note Indenture or (ii) an "event of default" or "Event of
Default" under and as defined in any Loan Agreement, Note or Indenture described
in Section 9.1(p);
(k) if the Borrower or any Subsidiary shall default in the
performance of any term, covenant or agreement contained in the Security
Documents (which default would not also constitute a default under subsections
(a), (b) or (c) hereof) and the continuance of such default for thirty (30) days
after written notice of such failure has been given to the Borrower by the
Agent;
(l) if any material covenant, agreement or obligation of the Borrower
or any Subsidiary contained in or evidenced by any ESOP Document or any Security
Document shall cease to be legal, valid, binding, or enforceable in accordance
with the terms thereof;
(m) if any ESOP Document shall be amended (except for technical or
conforming amendments which are required to obtain Internal Revenue Service
approval for the ESOP Documents and other amendments which do not, in either
case, alter in any material respect the substance of the ESOP Documents) the
effect of which shall result in the loss of the Borrower's tax deduction with
respect to its contributions to the ESOP Trust or change the requirement that
the ESOP must use all contributions to repay the ESOP Loan, or waived, canceled,
terminated, revoked or rescinded otherwise than in accordance with the express
prior written agreement, consent or approval of the Banks; or any court or any
other governmental or regulatory authority or agency of competent jurisdiction
shall make a determination that, or shall issue a judgment, order, decree or
ruling to the effect that any one or more of the ESOP Documents or any one or
more of the obligations of any Person or Persons under any one or more of the
ESOP Documents are illegal, invalid, or unenforceable in accordance with the
terms thereof (except that a determination by the Internal Revenue Service that
the ESOP Documents are not qualified under the Code shall not constitute an
Event of Default hereunder if such determination may be revised by technical or
conforming changes to the ESOP Documents which do not alter in any material
respect the substance of the ESOP Documents and the Borrower effects such
amendments and obtains such reversal within thirty (30) days after the date of
the original determination by the Internal Revenue Service);
(n) if any of the Loan Documents shall be canceled, terminated,
revoked or rescinded or the Agent's security interests or liens in a substantial
portion of the Collateral shall cease to be perfected, or shall cease to have
the priority contemplated by the Security Documents in each case otherwise than
in accordance with the terms thereof or with the express prior written
agreement, consent or approval of the Banks, or any action at law, suit or in
equity or other legal proceeding to cancel, revoke or rescind any of the Loan
Documents shall be commenced by or on behalf of the Borrower or any of its
Subsidiaries party thereto or any of their respective stockholders, or any court
or any other
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governmental or regulatory authority or agency of competent jurisdiction shall
make a determination that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof;
(o) the Borrower or any ERISA Affiliate incurs any liability to the
PBGC or in the event of a termination or withdrawal from a Guaranteed Pension
Plan pursuant to Title IV of ERISA in an aggregate amount exceeding $100,000;
the Borrower or any ERISA Affiliate is assessed withdrawal liability pursuant to
Title IV of ERISA by a Multiemployer Plan requiring aggregate annual payments
exceeding $100,000, or any of the following occurs with respect to a Guaranteed
Pension Plan: (i) an ERISA Reportable Event, or a failure to make a required
installment or other payment (within the meaning of Section 302(f)(1) of ERISA),
provided the Agent determines in its reasonable judgment that such event (A)
could be expected to result in liability of the Borrower to the PBGC or the Plan
in an aggregate amount exceeding $100,000 and (B) could constitute grounds for
the termination of such Plan by the PBGC, for the appointment by the appropriate
United States District Court of a trustee to administer such Plan or for the
imposition of a lien in favor of the Guaranteed Pension Plan; (ii) the
appointment by a United States District Court of a trustee to administer such
Plan; or (iii) the institution by the PBGC of proceedings to terminate such
Plan;
(p) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of its
business and such order shall continue in effect for more than thirty (30) days;
(q) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike, lockout,
labor dispute, embargo, condemnation, act of God or public enemy, or other
casualty, which in any such case causes, for more than fifteen (15) consecutive
days, the cessation or substantial curtailment of revenue producing activities
at any facility of the Borrower or any of its Subsidiaries if such event or
circumstance is not covered by business interruption insurance and would have a
material adverse effect on the business or financial condition of the Borrower
and such Subsidiary, taken as a whole;
(r) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by the
Borrower or any of its Subsidiaries if such loss, suspension, revocation or
failure to renew would have a material adverse effect on the business or
financial condition of the Borrower or such Subsidiary;
(s) the Borrower or any of its Subsidiaries shall be convicted for a
federal crime, a punishment for which could include the forfeiture of any assets
of the Borrower or such Subsidiary included in the Borrowing Base or any assets
of the Borrower or such Subsidiary not included in the Borrowing Base but having
a fair market value in excess of $10,000,000;
(t) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange
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Commission under said Act) of 50% or more of the outstanding shares of Common
Stock; or, during any period of twenty-four consecutive calendar months,
individuals who were directors of the Borrower on the first day of such period
shall cease to constitute a majority of the board of directors of the Borrower
and any new director is not approved by a majority of the directors who were on
the board of directors of the Borrower at the beginning of such period; or
(u) the Availability shall at any time be less than zero;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Revolving Credit Notes and the other Loan Documents to be, and they shall
thereupon forthwith become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrower; PROVIDED that in the event of any Event of Default
specified in Sections 13.1(g), 13.1(h), or 13.1(j), all such amounts shall
become immediately due and payable automatically and without any requirement of
notice from the Agent or any Bank.
Section 13.2. TERMINATION OF COMMITMENTS. If any one or more of the
Events of Default specified in Section 13.1(g) or Section 13.1(h) shall occur,
any unused portion of the credit hereunder shall forthwith terminate and each of
the Banks shall be relieved of all further obligations to make Revolving Credit
Loans to the Borrower and the Agent shall be relieved of all further obligations
to issue, extend or renew Letters of Credit. If any other Event of Default
shall have occurred and be continuing, or if on any Drawdown Date or other date
for issuing, extending or renewing any Letter of Credit the conditions precedent
to the making of the Revolving Credit Loans to be made on such Drawdown Date or
(as the case may be) to issuing, extending or renewing such Letter of Credit on
such other date are not satisfied, the Agent may and, upon the request of the
Majority Banks, shall, by notice to the Borrower, terminate the unused portion
of the credit hereunder, and upon such notice being given such unused portion of
the credit hereunder shall terminate immediately and each of the Banks shall be
relieved of all further obligations to make Revolving Credit Loans and the Agent
shall be relieved of all further obligations to issue, extend or renew Letters
of Credit. No termination of the credit hereunder shall relieve the Borrower or
any of its Subsidiaries of any of the Obligations.
Section 13.3. REMEDIES. In case any one or more of the Events of Default
shall have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Revolving Credit Loans pursuant to Section 13.1,
each Bank, if owed any amount with respect to the Revolving Credit Loans, may,
with the consent of the Majority Banks, but not otherwise, proceed to protect
and enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Credit Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Bank are evidenced,
including as permitted by applicable law the obtaining of the EX PARTE
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Bank. No remedy herein conferred upon any Bank
or the Agent or the holder of any Revolving Credit Note or purchaser of any
Letter of Credit Participation is intended to be exclusive of any other
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remedy and each and every remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or any other provision of law.
Section 13.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that,
following the occurrence or during the continuance of any Default or Event of
Default, the Agent or any Bank, as the case may be, receives any monies in
connection with the enforcement of any the Security Documents, or otherwise with
respect to the realization upon any of the Collateral, such monies shall be
distributed for application as follows:
(a) FIRST, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs, expenses,
disbursements and losses which shall have been incurred or sustained by the
Agent in connection with the collection of such monies by the Agent, for the
exercise, protection or enforcement by the Agent of all or any of the rights,
remedies, powers and privileges of the Agent under this Credit Agreement or any
of the other Loan Documents or in respect of the Collateral or in support of any
provision of adequate indemnity to the Agent against any taxes or liens which by
law shall have, or may have, priority over the rights of the Agent to such
monies;
(b) SECOND, to all other Obligations (other than those Obligations
arising or incurred under any ancillary facilities provided by the Agent to the
Borrower) in such order or preference as the Majority Banks may determine;
PROVIDED, HOWEVER, that distributions in respect of (i) such obligations shall
be made PARI PASSU among Obligations with respect to the Agent's fee payable
pursuant to Section 5.1 and all other Obligations and (ii) Obligations owing to
the Banks with respect to each type of Obligation such as interest, principal,
fees and expenses, shall be made among the Banks PRO RATA; and PROVIDED,
FURTHER, that the Agent may in its discretion make proper allowance to take into
account any Obligations not then due and payable;
(c) THIRD, to those Obligations arising under any cash management
services or any other ancillary facilities provided by BKB to the Borrower in
connection with this Agreement;
(d) FOURTH, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agent of all of the
Obligations, to the payment of any obligations required to be paid pursuant to
Section 9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of
Massachusetts; and
(e) FIFTH, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
Section 14. SETOFF. Regardless of the adequacy of any collateral,
during the continuance of any Event of Default, any deposits or other sums
credited by or due from any of the Banks to the Borrower and any securities or
other property of the Borrower in the possession of such Bank may be applied to
or set off by such Bank against the payment of Obligations and any and all other
liabilities, direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, of the Borrower to such Bank. Each of the
Banks agrees with each other Bank that (a) if an amount to be set off is to be
applied to Indebtedness of the Borrower to such Bank, other than Indebtedness
evidenced
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by the Revolving Credit Notes held by such Bank or constituting Reimbursement
Obligations owed to such Bank, such amount shall be applied ratably to such
other Indebtedness and to the Indebtedness evidenced by all such Notes held by
such Bank or constituting Reimbursement Obligations owed to such Bank and (b) if
such Bank shall receive from the Borrower, whether by voluntary payment,
exercise of the right of setoff, counterclaim, cross action, enforcement of the
claim evidenced by the Revolving Credit Notes held by, or constituting
Reimbursement Obligations owed to, such Bank by proceedings against the Borrower
at law or in equity or by proof thereof in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or otherwise, and shall retain
and apply to the payment of the Revolving Credit Note or Notes held by, or
constituting Reimbursement Obligations owed to, such Bank any amount in excess
of its ratable portion of the payments received by all of the Banks with respect
to the Revolving Credit Notes held by all of the Banks, such Bank will make such
disposition and arrangements with the other Banks with respect to such excess,
either by way of distribution, PRO TANTO assignment of claims, subrogation or
otherwise as shall result in each Bank receiving in respect of the Revolving
Credit Notes held by it or Reimbursement Obligations owed it, its proportionate
payment as contemplated by this Credit Agreement; PROVIDED that if all or any
part of such excess payment is thereafter recovered from such Bank, such
disposition and arrangements shall be rescinded and the amount restored to the
extent of such recovery, but without interest.
Section 15. THE AGENT.
Section 15.1. AUTHORIZATION.
(a) The Agent is authorized to take such action on behalf of each of
the Banks and to exercise all such powers as are hereunder and under any of the
other Loan Documents and any related documents delegated to the Agent, together
with such powers as are reasonably incident thereto, PROVIDED that no duties or
responsibilities not expressly assumed herein or therein shall be implied to
have been assumed by the Agent.
(b) The relationship between the Agent and each of the Banks is that
of an independent contractor. The use of the term "Agent" is for convenience
only and is used to describe, as a form of convention, the independent
contractual relationship between the Agent and each of the Banks. Nothing
contained in this Credit Agreement nor the other Loan Documents shall be
construed to create an agency, trust or other fiduciary relationship between the
Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder and
under the other Loan Documents, the Agent is nevertheless a "representative" of
the Banks, as that term is defined in Article 1 of the Uniform Commercial Code,
for purposes of actions for the benefit of the Banks and the Agent with respect
to all collateral security and guaranties contemplated by the Loan Documents.
Such actions include the designation of the Agent as "secured party",
"mortgagee" or the like on all financing statements and other documents and
instruments, whether recorded or otherwise, relating to the attachment,
perfection, priority or enforcement of any security interests, mortgages or
deeds of trust in collateral security intended to secure the payment or
performance of any of the Obligations, all for the benefit of the Banks and the
Agent.
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Section 15.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to its
rights and duties under this Credit Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent in its sole
discretion may reasonably determine, and all reasonable fees and expenses of any
such Persons shall be paid by the Borrower.
Section 15.3. NO LIABILITY. Neither the Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent or employee thereof, shall be liable for any
waiver, consent or approval given or any action taken, or omitted to be taken,
in good faith by it or them hereunder or under any of the other Loan Documents,
or in connection herewith or therewith, or be responsible for the consequences
of any oversight or error of judgment whatsoever, except that the Agent or such
other Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
Section 15.4. NO REPRESENTATIONS. The Agent shall not be responsible for
the execution or validity or enforceability of this Credit Agreement, the
Revolving Credit Notes, the Letters of Credit, any of the other Loan Documents
or any instrument at any time constituting, or intended to constitute,
collateral security for the Revolving Credit Notes, or for the value of any such
collateral security or for the validity, enforceability or collectability of any
such amounts owing with respect to the Revolving Credit Notes, or for any
recitals or statements, warranties or representations made herein or in any of
the other Loan Documents or in any certificate or instrument hereafter furnished
to it by or on behalf of the Borrower or any of its Subsidiaries, or be bound to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, covenants or agreements herein or in any instrument at any time
constituting, or intended to constitute, collateral security for the Revolving
Credit Notes or to inspect any of the properties, books or records of the
Borrower or any of its Subsidiaries. The Agent shall not be bound to ascertain
whether any notice, consent, waiver or request delivered to it by the Borrower
or any holder of any of the Revolving Credit Notes shall have been duly
authorized or is true, accurate and complete. The Agent has not made nor does
it now make any representations or warranties, express or implied, nor does it
assume any liability to the Banks, with respect to the creditworthiness or
financial conditions of the Borrower or any of its Subsidiaries. Each Bank
acknowledges that it has, independently and without reliance upon the Agent or
any other Bank, and based upon such information and documents as it has deemed
appropriate, made its own credit analysis and decision to enter into this Credit
Agreement.
Section 15.5. PAYMENTS.
15.5.1. PAYMENTS TO AGENT. A payment by the Borrower to
the Agent hereunder or any of the other Loan Documents for the account of any
Bank shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's PRO RATA share of payments received by the
Agent for the account of the Banks except as otherwise expressly provided herein
or in any of the other Loan Documents.
15.5.2. DISTRIBUTION BY AGENT. If in the opinion of the
Agent the distribution of any amount received by it in such capacity hereunder,
under the Revolving
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Credit Notes or under any of the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent jurisdiction.
If a court of competent jurisdiction shall adjudge that any amount received and
distributed by the Agent is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to the Agent its
proportionate share of the amount so adjudged to be repaid or shall pay over the
same in such manner and to such Persons as shall be determined by such court.
15.5.3. DELINQUENT BANKS. Notwithstanding anything to the
contrary contained in this Credit Agreement or any of the other Loan Documents,
any Bank that fails (a) to make available to the Agent its PRO RATA share of any
Revolving Credit Loan or to purchase or make any payment on account of any
Letter of Credit Participation or (b) to comply with the provisions of Section
14 with respect to making dispositions and arrangements with the other Banks,
where such Bank's share of any payment received, whether by setoff or otherwise,
is in excess of its PRO RATA share of such payments due and payable to all of
the Banks, in each case as, when and to the full extent required by the
provisions of this Credit Agreement or Section 15.7, shall be deemed delinquent
(a "Delinquent Bank") and shall be deemed a Delinquent Bank until such time as
such delinquency is satisfied. A Delinquent Bank shall be deemed to have
assigned any and all payments due to it from the Borrower, whether on account of
outstanding Revolving Credit Loans, Unpaid Reimbursement Obligations, interest,
fees or otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective PRO RATA shares of all outstanding Revolving
Credit Loans and Unpaid Reimbursement Obligations. The Delinquent Bank hereby
authorizes the Agent to distribute such payments to the nondelinquent Banks in
proportion to their respective PRO RATA shares of all outstanding Revolving
Credit Loans and Unpaid Reimbursement Obligations. A Delinquent Bank shall be
deemed to have satisfied in full a delinquency when and if, as a result of
application of the assigned payments to all outstanding Revolving Credit Loans
of the nondelinquent Banks, the Banks' respective PRO RATA shares of all
outstanding Revolving Credit Loans and Unpaid Reimbursement Obligations have
returned to those in effect immediately prior to such delinquency and without
giving effect to the nonpayment causing such delinquency. Until such
delinquency is satisfied, the Delinquent Bank shall have no right to participate
in any vote on or consent to any matter in respect of or in connection with this
Credit Agreement.
Section 15.6. HOLDERS OF REVOLVING CREDIT NOTES. The Agent may deem and
treat the payee of any Revolving Credit Note and the purchaser of any Letter of
Credit Participation as the absolute owner or purchaser thereof for all purposes
hereof until it shall have been furnished in writing with a different name by
such payee or by a subsequent holder, assignee or transferee.
Section 15.7. INDEMNITY. The Banks ratably agree hereby to indemnify and
hold harmless the Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agent has not been reimbursed by the Borrower as
required by Section 16), and liabilities of every nature and character arising
out of or related to this Credit Agreement, the Revolving Credit Notes, or any
of the other Loan Documents or the transactions contemplated or evidenced hereby
or thereby, or the Agent's actions taken hereunder or thereunder, except to the
extent that any of the same shall be directly caused by the Agent's willful
misconduct or gross negligence.
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Section 15.8. AGENT AS BANK. In its individual capacity, BKB shall have
the same obligations and the same rights, powers and privileges in respect to
its Commitment and the Revolving Credit Loans made by it, and as the holder of
any of the Revolving Credit Notes and as the purchaser of any Letter of Credit
Participations, as it would have were it not also the Agent.
Section 15.9. RESIGNATION. The Agent may resign at any time by giving
sixty (60) days' prior written notice thereof to the Banks and the Borrower.
Upon any such resignation, the Majority Banks shall have the right to appoint a
successor Agent. Unless a Default or Event of Default shall have occurred and
be continuing, such successor Agent shall be reasonably acceptable to the
Borrower. If no successor Agent shall have been so appointed by the Majority
Banks and shall have accepted such appointment within thirty (30) days after the
retiring Agent's giving of notice of resignation, then the retiring Agent may,
on behalf of the Banks, appoint a successor Agent, which shall be a financial
institution having a rating of not less than A or its equivalent by Standard &
Poor's Ratings Group. 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, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this
Credit Agreement and the other Loan Documents shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
Section 15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank
hereby agrees that, upon learning of the existence of a Default or an Event of
Default, it shall promptly notify the Agent thereof. The Agent hereby agrees
that upon receipt of any notice under this Section 15.10 it shall promptly
notify the other Banks of the existence of such Default or Event of Default.
Section 15.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more
Events of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (a) so
requested by the Majority Banks and (b) the Banks have provided to the Agent
such additional indemnities and assurances against expenses and liabilities as
the Agent may reasonably request, proceed to enforce the provisions of the
Security Documents authorizing the sale or other disposition of all or any part
of the Collateral and exercise all or any such other legal and equitable and
other rights or remedies as it may have in respect of such Collateral. The
Majority Banks may direct the Agent in writing as to the method and the extent
of any such sale or other disposition, the Banks hereby agreeing to indemnify
and hold the Agent harmless from all liabilities incurred in respect of all
actions taken or omitted in accordance with such directions, provided that the
Agent need not comply with any such direction to the extent that the Agent
reasonably believes the Agent's compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.
Section 16. EXPENSES. The Borrower agrees to pay (a) the reasonable
costs of producing and reproducing this Credit Agreement, the other Loan
Documents and the other agreements and instruments mentioned herein, (b) any
excise taxes or current or future stamp or documentary taxes or similar charges
(including any interest and penalties in
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respect thereto) payable by the Agent or any of the Banks (other than taxes
based upon the Agent's or any Bank's net income) on or with respect to the
transactions contemplated by this Credit Agreement (the Borrower hereby agreeing
to indemnify the Agent and each Bank with respect thereto), (c) the reasonable
fees, expenses and disbursements of the Agent's Special Counsel and any local
counsel to the Agent incurred in connection with the preparation,
administration, interpretation or syndication of the Loan Documents and other
instruments mentioned herein, each closing hereunder, and amendments,
modifications, approvals, consents or waivers hereto or hereunder, (d) the fees,
expenses and disbursements of the Agent incurred by the Agent in connection with
the preparation, administration, interpretation or syndication of the Loan
Documents and other instruments mentioned herein, including all appraisal
charges and charges of other professionals retained by the Agent, (e) the fees,
expenses and disbursements of the Agent incurred by the Agent in connection with
all commercial finance examinations conducted by or on behalf of the Agent, (f)
any fees, costs, expenses and bank charges, including bank charges for returned
checks, incurred by the Agent in establishing, maintaining or handling agency
accounts, lock box accounts and other accounts for the collection of any of the
Collateral; (g) all reasonable out-of-pocket expenses (including without
limitation reasonable attorneys' fees and costs, which attorneys may be
employees of any Bank or the Agent, and reasonable consulting, accounting,
appraisal, investment banking and similar professional fees and charges)
incurred by any Bank or the Agent in connection with (i) the enforcement of or
preservation of rights under any of the Loan Documents against the Borrower or
any of its Subsidiaries or the administration thereof after the occurrence of a
Default or Event of Default and (ii) any litigation, proceeding or dispute
whether arising hereunder or otherwise, in any way related to any Bank's or the
Agent's relationship with the Borrower or any of its Subsidiaries and (h) all
reasonable fees, expenses and disbursements of any Bank or the Agent incurred in
connection with UCC searches or UCC filings. The covenants of this Section 16
shall survive payment or satisfaction of all other Obligations.
Section 17. INDEMNIFICATION. The Borrower agrees to indemnify and hold
harmless the Agent and the Banks from and against any and all claims, actions
and suits whether groundless or otherwise, and from and against any and all
liabilities, losses, damages and reasonable expenses of every nature and
character arising out of this Credit Agreement or any of the other Loan
Documents or the transactions contemplated hereby including, without limitation,
(a) any actual or proposed use by the Borrower or any of its Subsidiaries of the
proceeds of any of the Revolving Credit Loans or Letters of Credit, (b) the
reversal or withdrawal of any provisional credits granted by the Agent upon the
transfer of funds from bank agency or lock box accounts or in connection with
the provisional honoring of checks or other items, (c) any actual or alleged
infringement of any patent, copyright, trademark, service mark or similar right
of the Borrower or any of its Subsidiaries comprised in the Collateral, (d) the
Borrower or any of its Subsidiaries entering into or performing this Credit
Agreement or any of the other Loan Documents or (e) with respect to the Borrower
and its Subsidiaries and their respective properties and assets, the violation
of any Environmental Law, the disposal, discharge, release or threatened release
of any Hazardous Substances or any action, suit, proceeding or investigation
brought or threatened with respect to any Hazardous Substances (including, but
not limited to, claims with respect to wrongful death, personal injury or damage
to property), in each case including, without limitation, the reasonable fees
and disbursements of counsel and allocated costs of internal counsel incurred in
connection with any such investigation, litigation or other proceeding. In
litigation, or the preparation therefor, the
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Banks and the Agent shall be entitled to select their own counsel and, in
addition to the foregoing indemnity, the Borrower agrees to pay promptly the
reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Borrower under this Section 17 are unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment in satisfaction of such indemnified obligations which is permissible
under applicable law. The covenants contained in this Section 17 shall survive
payment or satisfaction in full of all other Obligations.
Section 18. SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
representations and warranties made herein, in the Revolving Credit Notes, in
any of the other Loan Documents or in any documents or other papers delivered by
or on behalf of the Borrower or any of its Subsidiaries pursuant hereto shall be
deemed to have been relied upon by the Banks and the Agent, notwithstanding any
investigation heretofore or hereafter made by any of them, and shall survive the
making by the Banks of any of the Revolving Credit Loans and the issuance,
extension or renewal of any Letters of Credit, as herein contemplated, and shall
continue in full force and effect so long as any Letter of Credit or any amount
due under this Credit Agreement or the Revolving Credit Notes or any of the
other Loan Documents remains outstanding or any Bank has any obligation to make
any Revolving Credit Loans or the Agent has any obligation to issue, extend or
renew any Letter of Credit, and for such further time as may be otherwise
expressly specified in this Credit Agreement. All statements contained in any
certificate or other paper delivered to any Bank or the Agent at any time by or
on behalf of the Borrower or any of its Subsidiaries pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower or such Subsidiary hereunder.
Section 19. ASSIGNMENT AND PARTICIPATION.
Section 19.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided
herein, each Bank may assign to one or more Eligible Assignees all or a portion
of its interests, rights and obligations under this Credit Agreement (including
all or a portion of its Commitment Percentage and Commitment and the same
portion of the Revolving Credit Loans at the time owing to it, the Revolving
Credit Notes held by it and its participating interest in the risk relating to
any Letters of Credit); provided that (a) each of the Agent and, unless a
Default or Event of Default shall have occurred and be continuing, the Borrower
shall have given its prior written consent to such assignment, which consent, in
the case of the Borrower, will not be unreasonably withheld, (b) each such
assignment shall be of a constant, and not a varying, percentage of all the
assigning Bank's rights and obligations under this Credit Agreement, (c) each
assignment shall be in an amount that is not less than $10,000,000, and (d) the
parties to such assignment shall execute and deliver to the Agent, for recording
in the Register (as hereinafter defined), an Assignment and Acceptance,
substantially in the form of EXHIBIT H hereto (an "Assignment and Acceptance"),
together with any Revolving Credit Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder,
and (ii) the assigning Bank shall, to the extent provided in
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such assignment and upon payment to the Agent of the registration fee referred
to in Section 19.3, be released from its obligations under this Credit
Agreement.
Section 19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS;
COVENANTS. By executing and delivering an Assignment and Acceptance, the
parties to the assignment thereunder confirm to and agree with each other and
the other parties hereto as follows: (a) other than the representation and
warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim, the assigning Bank makes
no representation or warranty, express or implied, and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with this Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit Agreement, the
other Loan Documents or any other instrument or document furnished pursuant
hereto or the attachment, perfection or priority of any security interest or
mortgage; (b) the assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower and
its Subsidiaries or any other Person primarily or secondarily liable in respect
of any of the Obligations, or the performance or observance by the Borrower and
its Subsidiaries or any other Person primarily or secondarily liable in respect
of any of the Obligations or any of their other obligations under this Credit
Agreement or any of the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; (c) such assignee confirms that it has
received a copy of this Credit Agreement, together with copies of the most
recent financial statements referred to in Section 7.4 and Section 8.4 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (d)
such assignee will, independently and without reliance upon the assigning Bank,
the Agent or any other Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Credit Agreement; (e) such assignee
represents and warrants that it is an Eligible Assignee; (f) such assignee
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Credit Agreement and the other Loan Documents
as are delegated to the Agent by the terms hereof or thereof, together with such
powers as are reasonably incidental thereto; (g) such assignee agrees that it
will perform in accordance with their terms all of the obligations that by the
terms of this Credit Agreement are required to be performed by it as a Bank; (h)
such assignee represents and warrants that it is legally authorized to enter
into such Assignment and Acceptance; and (i) such assignee acknowledges that it
has made arrangements with the assigning Bank satisfactory to such assignee with
respect to its PRO RATA share of Letter of Credit Fees in respect of outstanding
Letters of Credit.
Section 19.3. REGISTER. The Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register or similar list (the
"Register") for the recordation of the names and addresses of the Banks and the
Commitment Percentage of, and principal amount of the Revolving Credit Loans
owing to and Letter of Credit Participations purchased by, the Banks from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all purposes of
this Credit Agreement. The Register shall be available for inspection by the
Borrower and the Banks at any reasonable time and from time to time upon
reasonable prior notice.
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Upon each such recordation, the assigning Bank agrees to pay to the Agent a
registration fee in the sum of $3,000.
Section 19.4. NEW REVOLVING CREDIT NOTES. Upon its receipt of an
Assignment and Acceptance executed by the parties to such assignment, together
with each Revolving Credit Note subject to such assignment, the Agent shall (a)
record the information contained therein in the Register, and (b) give prompt
notice thereof to the Borrower and the Banks (other than the assigning Bank).
Within five (5) Business Days after receipt of such notice, the Borrower, at its
own expense, shall execute and deliver to the Agent, in exchange for each
surrendered Revolving Credit Note, a new Revolving Credit Note to the order of
such Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Revolving Credit
Note to the order of the assigning Bank in an amount equal to the amount
retained by it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Revolving Credit Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Revolving Credit Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be substantially in the form of
the assigned Revolving Credit Notes. The surrendered Revolving Credit Notes
shall be canceled and returned to the Borrower.
Section 19.5. PARTICIPATIONS. Each Bank may sell participations to one or
more banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
that (a) each such participation shall be in an amount of not less than
$10,000,000, (b) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (c) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Revolving Credit Loans, extend the term
or increase the amount of the Commitment of such Bank as it relates to such
participant, reduce the amount of any commitment fees or Letter of Credit Fees
to which such participant is entitled or extend any regularly scheduled payment
date for principal or interest.
Section 19.6. DISCLOSURE. The Borrower agrees that in addition to
disclosures made in accordance with standard and customary banking practices any
Bank may disclose information obtained by such Bank pursuant to this Credit
Agreement to assignees or participants and potential assignees or participants
hereunder; PROVIDED that such Bank has complied with the provisions of Section
8.9.1.
Section 19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If
any assignee Bank is an Affiliate of the Borrower, then any such assignee Bank
shall have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Agent pursuant to Section 13.1 or Section
13.2, and the determination of the Majority Banks shall for all purposes of this
Agreement and the other Loan Documents be made without regard to such assignee
Bank's interest in any of the Revolving Credit Loans. If any Bank sells a
participating interest in any of the Revolving Credit Loans to a participant,
and such
<PAGE>
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participant is the Borrower or an Affiliate of the Borrower, then such
transferor Bank shall promptly notify the Agent of the sale of such
participation. A transferor Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the Agent
pursuant to Section 13.1 or Section 13.2 to the extent that such participation
is beneficially owned by the Borrower or any Affiliate of the Borrower, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to the interest of
such transferor Bank in the Revolving Credit Loans to the extent of such
participation.
Section 19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank
shall retain its rights to be indemnified pursuant to Section 16 with respect to
any claims or actions arising prior to the date of such assignment. If any
assignee Bank is not incorporated under the laws of the United States of America
or any state thereof, it shall, prior to the date on which any interest or fees
are payable hereunder or under any of the other Loan Documents for its account,
deliver to the Borrower and the Agent certification as to its exemption from
deduction or withholding of any United States federal income taxes. If any
Reference Bank transfers all of its interest, rights and obligations under this
Credit Agreement, the Agent shall, in consultation with the Borrower and with
the consent of the Borrower and the Majority Banks, appoint another Bank to act
as a Reference Bank hereunder. Anything contained in this Section 19 to the
contrary notwithstanding, any Bank may at any time pledge all or any portion of
its interest and rights under this Credit Agreement (including all or any
portion of its Revolving Credit Notes) to any of the twelve Federal Reserve
Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section
341. No such pledge or the enforcement thereof shall release the pledgor Bank
from its obligations hereunder or under any of the other Loan Documents.
Section 19.9. ASSIGNMENT BY BORROWER. The Borrower shall not assign or
transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each of the Banks.
Section 20. NOTICES, ETC. Except as otherwise expressly provided in
this Credit Agreement, all notices and other communications made or required to
be given pursuant to this Credit Agreement or the Revolving Credit Notes or any
Letter of Credit Applications shall be in writing and shall be delivered in
hand, mailed by United States registered or certified first class mail, postage
prepaid, sent by overnight courier, or sent by facsimile and confirmed by
delivery via courier or postal service or by facsimile transmission
confirmation, as the case may be, addressed as follows:
(a) if to the Borrower, at 410 Oberlin Road, S.W., Massillon, Ohio
44646, Attention: Chief Executive Officer, or at such other address for notice
as the Borrower shall last have furnished in writing to the Person giving the
notice;
(b) if to the Agent, at 100 Federal Street, Boston, Massachusetts
02110, USA, Attention: Howard C. Bailey, Vice President, Asset Based Lending, or
such other address or addressee for notice as the Agent shall last have
furnished in writing to the Person giving the notice; and
<PAGE>
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(c) if to any Bank, at such Bank's address set forth on SCHEDULE 1
hereto, or such other address for notice as such Bank shall have last furnished
in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile
with transmission confirmed and (ii) if sent by registered or certified
first-class mail, postage prepaid, on the third Business Day following the
mailing thereof.
Section 21. GOVERNING LAW. THIS CREDIT AGREEMENT AND, EXCEPT AS
OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE
CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL
PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID
COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH
OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN Section 20.
THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
Section 22. HEADINGS. The captions in this Credit Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
Section 23. COUNTERPARTS. This Credit Agreement and any amendment
hereof may be executed in several counterparts and by each party on a separate
counterpart, each of which when executed and delivered shall be an original, and
all of which together shall constitute one instrument. In proving this Credit
Agreement it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
Section 24. ENTIRE AGREEMENT, ETC. The Loan Documents and any other
documents executed in connection herewith or therewith express the entire
understanding of the parties with respect to the transactions contemplated
hereby. Neither this Credit Agreement nor any term hereof may be changed,
waived, discharged or terminated, except as provided in Section 26.
Section 25. WAIVER OF JURY TRIAL. The Borrower hereby waives its right
to a jury trial with respect to any action or claim arising out of any dispute
in connection with this Credit Agreement, the Revolving Credit Notes or any of
the other Loan Documents, any rights or obligations hereunder or thereunder or
the performance of which rights and obligations. Except as prohibited by law,
the Borrower hereby waives any right it may
<PAGE>
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have to claim or recover in any litigation referred to in the preceding sentence
any special, exemplary, punitive or consequential damages or any damages other
than, or in addition to, actual damages. The Borrower (a) certifies that no
representative, agent or attorney of any Bank or the Agent has represented,
expressly or otherwise, that such Bank or the Agent would not, in the event of
litigation, seek to enforce the foregoing waivers and (b) acknowledges that the
Agent and the Banks have been induced to enter into this Credit Agreement, the
other Loan Documents to which it is a party by, among other things, the waivers
and certifications contained herein.
Section 26. CONSENTS, AMENDMENTS, WAIVERS, ETC. Any consent or approval
required or permitted by this Credit Agreement to be given by all of the Banks
may be given, and any term of this Credit Agreement, the other Loan Documents or
any other instrument related hereto or mentioned herein may be amended, and the
performance or observance by the Borrower or any of its Subsidiaries of any
terms of this Credit Agreement, the other Loan Documents or such other
instrument or the continuance of any Default or Event of Default may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Borrower and the
written consent of the Majority Banks. Notwithstanding the foregoing, any
decrease in the rate of interest on the Revolving Credit Notes, any extension of
maturity of the Revolving Credit Notes, any increase in the amount of the
Commitments of the Banks, any increase in the percentages or decrease in the
reserve (i.e., clause (c)) set forth in the definition of BORROWING BASE, any
decrease in the amount of commitment fee or Letter of Credit Fees hereunder and
any Amendment of this Section 26 requires the written consent of the Borrower
and the written consent of each Bank affected thereby, the definition of
"Majority Banks" may not be amended and nor may Collateral be released (except
as provided below) without the written consent of all of the Banks, PROVIDED
that (i) Collateral having an aggregate fair market value of less than or equal
to $2,000,000 in any calendar year may be released with the written consent of
the Agent and (ii) Collateral having an aggregate fair market value of less than
or equal to $10,000,000 in any calendar year may be released with the written
consent of the Majority Banks; and the amount of the Agent's fee, any Letter of
Credit Fees or any other fees payable for the Agent's account and Section 15 may
not be amended without the written consent of the Agent. No waiver shall extend
to or affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Agent or
any Bank in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto. No notice to or demand upon the Borrower shall entitle
the Borrower to other or further notice or demand in similar or other
circumstances.
Section 27. SEVERABILITY. The provisions of this Credit Agreement are
severable and if any one clause or provision hereof shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction, and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision of this Credit
Agreement in any jurisdiction.
Section 28. TRANSITIONAL ARRANGEMENTS.
Section 28.1. PRIOR CREDIT AGREEMENT SUPERSEDED. This Credit Agreement
shall supersede the Prior Credit Agreement in its entirety, except as provided
in this Section 28. On the
<PAGE>
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Effective Date, the rights and obligations of the parties under the Prior Credit
Agreement and the "Revolving Credit Notes" as defined therein shall be subsumed
within and be governed by this Credit Agreement and the Revolving Credit Notes
as defined herein; PROVIDED, HOWEVER, that each of the "Revolving Credit Loans"
(as such term is defined in the Prior Credit Agreement) outstanding under the
Prior Credit Agreement on the Effective Date shall, for purposes of this Credit
Agreement, be Revolving Credit Loans; and provided further that each "Letter of
Credit" (as defined in the Prior Credit Agreement) outstanding under the Prior
Credit Agreement on the Effective Date shall, for purposes of this Credit
Agreement, be a Letter of Credit. SCHEDULE 1 of the Prior Credit Agreement is
deleted in its entirety and replaced with SCHEDULE 1 attached hereto.
Section 28.2. RETURNING AND CANCELLATION OF NOTES. Upon its receipt of
its Revolving Credit Note hereunder on the Effective Date, each Bank shall
promptly return to the Borrower, marked "Substituted," any note of the Borrower
held by such Bank pursuant to the Prior Credit Agreement.
Section 28.3. ADDITION OF NEW BANK. Each of the Existing Banks, the Agent
and the Borrower consent to the addition of Congress as a Bank hereunder such
that, after giving effect thereto and as of the Effective Date, Congress shall
be a party to this Credit Agreement and shall have the rights and obligations of
a Bank hereunder. Congress (a) represents and warrants that (i) it is duly and
legally authorized to enter into this Credit Agreement, (ii) the execution,
delivery and performance of this Credit Agreement do not conflict with any
provision of law or of the charter or by-laws of Congress, or of any agreement
binding on Congress, (iii) all acts, conditions and things required to be done
and performed and to have occurred prior to the execution, delivery and
performance of this Credit Agreement, and to render the same the legal, valid
and binding obligation of Congress, enforceable against it in accordance with
its terms, have been done and performed and have occurred in due and strict
compliance with all applicable laws; (b) confirms that it has received a copy of
this Credit Agreement, together with copies of the most recent financial
statements delivered pursuant to Sections 7.4 and 8.4 and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Credit Agreement; (c) agrees that it will,
independently and without reliance upon the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Credit Agreement; (d) appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under this Credit Agreement
and the other Loan Documents as are delegated to the Agent by the terms of this
Credit Agreement and such other Loan Documents, respectively, together with such
powers as are reasonably incidental thereto; and (e) agrees that it will perform
in accordance with their terms all the obligations which by the terms of this
Credit Agreement are required to be performed by it as a Bank.
Section 28.4. REVOLVING CREDIT LOANS. As of the Effective Date, each Bank
shall make such dispositions and arrangements with each other Bank with respect
to the then outstanding Loans as shall result in the amount of Revolving Credit
Loans owed to each Bank being equal to the product of such Bank's Commitment
Percentage multiplied by the aggregate Revolving Credit Loans outstanding on the
Effective Date. As of the Effective Date, the Commitment Percentage of each
Bank shall be as set forth in SCHEDULE 1.
<PAGE>
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Section 28.5. EXISTING LETTER OF CREDIT INSTRUMENTS. As of the Effective
Date, each Bank shall make such dispositions and arrangements with each other
Bank with respect to the Letter of Credit Participations of the Banks in each
Letter of Credit then outstanding as shall result in the Letter of Credit
Participations held by each Bank in each such Letter of Credit being equal to
the product of such Bank's Commitment Percentage multiplied by the aggregate
Letter of Credit Participations in such Letter of Credit on the Effective Date.
[Remainder of Page Left Blank Intentionally]
<PAGE>
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IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
REPUBLIC ENGINEERED STEELS, INC.
By:------------------------------------------
John B. George, Treasurer
BANKBOSTON, N.A., F/K/A THE FIRST NATIONAL BANK OF
BOSTON, individually and as Agent
By:------------------------------------------
Howard C. Bailey, Vice President
BANKAMERICA BUSINESS CREDIT, INC.
By:------------------------------------------
Name:
Title:
CONGRESS FINANCIAL CORPORATION
(NEW ENGLAND)
By:------------------------------------------
Marc Swartz, First Vice President
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