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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO ____
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COMMISSION FILE NUMBER : 0-25642
COMMONWEALTH ALUMINUM CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 13-3245741
(State of incorporation) (I.R.S. Employer Identification No.)
1200 Meidinger Tower
Louisville, Kentucky 40202
(Address of principal executive office) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (502) 589-8100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK; STOCK PURCHASE RIGHTS
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
The aggregate market value of the common stock held by non-affiliates
of the registrant as of February 19, 1997 was $190,635,000.
The number of shares outstanding of the registrant's common stock as of
February 19, 1997 was 10,202,500.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement dated March 14, 1997 for the
1997 Annual Meeting of Shareholders to be held April 17, 1997 are incorporated
by reference into Part III.
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COMMONWEALTH ALUMINUM CORPORATION
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
INDEX
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PART I PAGE
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Item 1. Business................................................................... 3
Item 2. Properties................................................................. 11
Item 3. Legal...................................................................... 11
Proceedings................................................................ 11
Item 4. Submission of Matters to a Vote of Security Holders........................ 11
Item E.O. Executive Officers of the Registrant....................................... 11
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters....... 13
Item 6. Selected Financial Data.................................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 15
Item 8. Financial Statements and Supplementary Data................................ 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures................................................ 36
PART III
Item 10. Directors and Executive Officers of the Registrant......................... 36
Item 11. Executive Compensation..................................................... 36
Item 12. Security Ownership of Certain Beneficial Owners and Management............. 36
Item 13 Certain Relationships and Related Transactions............................. 36
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K............. 36
Signatures................................................................. 40
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PART I
ITEM 1. BUSINESS.
Commonwealth Aluminum Corporation (the "Company") is one of
North America's leading manufacturers of aluminum sheet and, through its Alflex
Corporation subsidiary ("Alflex"), of electrical flexible conduit and prewired
armored cable.
The Company's aluminum sheet products are produced using the
conventional, direct-chill rolling ingot casting process at the Company's
multi-purpose aluminum rolling mill located in Lewisport, Kentucky, one of the
largest in North America, and by the continuous casting process at its
facilities located in Uhrichsville, Ohio ("Uhrichsville") and Carson, California
("Carson"). The Company operates paint lines at its facilities in Torrance,
California ("Torrance"); Bedford, Ohio ("Bedford"); and Lewisport, Kentucky
("Lewisport"). It operates a tube mill at the Carson operation and has a second
tube mill under construction in Bedford. The electrical flexible conduit and
prewired armored cable products are manufactured at the Alflex facilities in
Long Beach, California ("Long Beach"). The Ohio and California facilities were
acquired through the purchase by the Company of CasTech Aluminum Group Inc.
("CasTech") on September 20, 1996.
The aluminum sheet products manufactured by the Company are
generally referred to as common alloy products. They are produced in a number of
aluminum common alloys with thicknesses (gauge) of 0.008 to 0.250 inches, widths
of up to 72 inches, physical properties and packaging to meet customer
specifications. These products are sold to distributors and end-users,
principally for use in building and construction products such as roofing,
siding, windows and gutters; transportation equipment such as truck trailers and
bodies and automotive parts; beverage cans; and consumer durables such as
cookware, appliances and lawn furniture. The Carson and, beginning in 1997, the
Bedford facilities also fabricate aluminum sheet into welded tube products for
various markets. Substantially all of the Company's aluminum sheet products are
produced in response to specific customer orders. Following the acquisition of
CasTech in September 1996, the aluminum sheet operations of the Company have
been integrated into a single unit, with consolidated buying of aluminum scrap
and other raw materials, scheduling of plant production and marketing of
products. Production is expected to exceed one billion pounds of aluminum sheet
products in 1997. In 1995, the North American market for aluminum sheet
products, excluding aluminum beverage cans, was approximately five billion
pounds.
Alflex manufactures metallic (aluminum and steel) and
non-metallic (plastic) electrical flexible conduit and prewired armored cable,
principally from aluminum sheet manufactured by the Company. These products
provide mechanical protection for electrical wiring installed in buildings in
accordance with local building codes. Armored cable differs from electrical
conduit in that it is prewired by Alflex, whereas installers must pull wire
through electrical conduit when it is installed. These products are used
primarily by electrical contractors in the construction, renovation and
remodeling of commercial and industrial facilities and multi-family dwellings.
They also are used in the heating, ventilating and air-conditioning ("HVAC"),
original equipment manufacturers ("OEM") and Do-It-Yourself ("DIY") markets. The
products include preassembled and prepackaged products for the commercial and
DIY markets and commercial pre-fabricated wiring systems which provide
significant savings in labor and installation costs for end-users.
Historically, electrical wires were housed in rigid pipes in
the walls of buildings. Rigid pipe remains the most widely used means of
protecting wiring in commercial and other non-residential construction.
Electrical flexible conduit made from steel was introduced in the 1920s.
Flexible conduit is significantly easier to install than rigid pipe, resulting
in cost savings to the installer. Aluminum flexible conduit, introduced to the
market by Alflex, has in recent years become a significant factor due to its
ease of installation, lighter weight and ease of cutting compared to steel
flexible conduit or rigid pipe. In wet, harsh or corrosive environments,
non-metallic or plastic jacketed steel flexible conduit may
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be used. Armored cable (conduit with pre-installed wire) made of steel or
aluminum has captured an increasing share of the market from rigid pipe due to
its pre-assembly, ease of installation and overall cost effectiveness.
Pre-fabricated wiring systems consisting of armored cable cut to specified
lengths with pre-installed end connectors and junction boxes have recently been
introduced by Alflex, and the Company is optimistic that installations of this
product will increase as contractors become more familiar with the labor saving
potential of these electrical systems.
The Company estimates that at December 31, 1996 it had a
backlog of firm orders for which product specifications have been defined of
175.8 million pounds of aluminum sheet products with an aggregate sales price of
$163.2 million, compared to an estimated combined backlog of the Company and
CasTech of 193.1 million pounds with an aggregate sales price of $203.6 million
at December 31, 1995. Backlog is not a significant factor for the Company's
electrical products.
The CasTech Acquisition
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On September 20, 1996, the Company purchased all of the
outstanding shares of capital stock of CasTech for approximately $283 million
(including fees and expenses). CasTech was the nation's leading manufacturer of
continuous cast aluminum sheet and also a leading manufacturer of electrical
flexible conduit and prewired armored cable. The acquisition created the largest
independent aluminum rolling operation in the United States and is expected to
offer many strategic benefits including improved product mix, enhanced
technology, expanded geographic presence and cost savings.
The transaction was accounted for under the purchase method of
accounting and, unless otherwise stated, the information in this report includes
the acquired operations only from September 20, 1996.
Manufacturing
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The Company's aluminum sheet manufacturing facilities are
comprised of the Lewisport rolling mill and the former CasTech rolling mills
located in Uhrichsville and Carson and coating facilities located in Bedford and
Torrance.
The Lewisport mill uses the conventional, vertical
direct-chill, rolling ingot casting process. This process permits the production
of traditional aluminum sheet with strength, hardness, formability, finishing
and other characteristics preferred for many applications. The flexibility
permitted by this multi-purpose rolling mill enables the Company to target
higher margin products, to manufacture a variety of products with consistent
high quality and to respond quickly to shifts in market demand. In 1996, the
Lewisport mill produced 619 million pounds of aluminum sheet products, up from
599 million pounds in 1995. The increase in production was achieved by focusing
upon plant operating efficiencies, improving labor productivity, eliminating
manufacturing bottlenecks, emphasizing on-time production and delivery to
minimize scheduling disruptions, improving plant yields, improving plant
maintenance practices to increase machine utilization and increasing market
share by emphasizing quality, on-time delivery and customer service. Increased
production has reduced the unit costs of production, in part because a large
portion of the costs of a rolling mill are fixed costs which do not vary with
production volume. Unit costs of converting metal to aluminum sheet products at
Lewisport declined by 26% from 1991 to 1996 and are believed to be among the
lowest in the industry for plants using the conventional process. The Company
plans to increase production capacity at the Lewisport mill by continuing the
programs that have steadily increased production over the past five years. This
increase may require an increase in casting capacity as mentioned below under
"Casting and Rolling".
The Uhrichsville and Carson mills use low-cost, scrap-based
twin-belt continuous casting production technology. This process permits the
efficient production of aluminum sheet alloys used in building and construction
and other applications not requiring the more complex alloys or the physical
characteristics better provided by the conventional casting method. The process
eliminates several steps associated with conventional technology, thereby
reducing manufacturing costs. Capital
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costs also are significantly lower than for mills using the conventional
casting process. Over the past several years the annual capacity of the
Uhrichsville and Carson mills has been increased by over 25% from approximately
250 million pounds to 320 million pounds. The increased capacity combined with
the closures of inefficient facilities and a continuous improvement program
resulted in a significant reduction in sheet production costs. The Company
believes that its continuous cast mill in Uhrichsville has one of the lowest
conversion costs per pound in the world. An upgrade of the cold mill at
Uhrichsville in 1996 increased mill speed capability and significantly improved
gauge and flatness control. A current capital spending program is expected to
bring the annual capacity of the continuous cast mills to 390 million pounds by
the end of 1998.
Aluminum Supply
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Much of the aluminum metal used by the Company's rolling mills
is purchased, principally from aluminum scrap brokers and dealers, in the form
of aluminum scrap. The Company believes it is one of the largest users of
aluminum scrap other than beverage cans in the United States, and that the
volume of its purchases assists it in obtaining scrap at competitive prices.
The Company's remaining requirements are met with purchased
primary metal, including metal produced in the former Soviet Union to
specifications that differ from the industry standard for primary aluminum but
that is appropriate for the Company's needs.
Casting and Rolling
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At Lewisport, scrap, in some cases after processing in the
Company's recycling facilities, and primary aluminum are melted in induction or
reverbatory furnaces. Small amounts of copper, magnesium, manganese and other
metals are added to produce alloys with the desired hardness, formability and
other physical characteristics. The molten aluminum is then poured through a
mold surrounded by circulating water which cools and solidifies the aluminum
into an ingot about 24 inches thick and weighing as much as 40,000 pounds. The
cooled ingot is then transported for processing in the rolling mill. The casting
facilities at Lewisport are sufficient to supply the mill's rolling ingot needs.
However, additional casting capacity may be required to achieve planned
increases in production. Approximately 68% of the current casting facilities is
not expected to meet the more stringent clean air environmental legislative
standards which come into effect in 2001. It may, therefore, be necessary to
modify those facilities or replace them with expansion of other facilities, new
facilities or purchases of rolling ingot from third parties. Engineering studies
suggest the cost of new facilities, which would also improve productivity and
efficiency, could be as much as $75 million. That sum has been included in the
Company's long range capital expenditure plan but no decision as to the course
to be taken has yet been made.
The rolling ingots are heated to a malleable state in soaking
pits or tunnel furnaces. Then, in the next two stages--hot and cold rolling--the
ingot is passed between rolls under pressure, causing it to become thinner and
longer. The first rolling stage takes place in a "reversing" mill, so named
because the ingot is passed back and forth between the work rolls, reversing
itself after each pass. After it passes through the reversing mill the aluminum
sheet moves through a three stand tandem hot mill, and then is cooled and cold
rolled to its final thickness.
The Uhrichsville and Carson rolling mills employ the
continuous casting process in which molten aluminum is fed into a caster which
produces a continuous thin slab that is immediately hot rolled in a single
manufacturing process. The aluminum sheet is then cooled and cold rolled to its
final thickness as in the conventional process. The Uhrichsville and Carson
mills use twin-belt thin-slab continuous casting which the Company believes is
the most efficient and most productive form of continuous casting.
The Company and IMCO Recycling, Inc ("IMCO"), the world's
largest aluminum recycler, are parties to a Supply Agreement under which IMCO
serves as the exclusive source of recycled aluminum for the Company's
Uhrichsville mill. Under the Supply Agreement, the Company
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purchases aluminum scrap and delivers it to IMCO who then processes and converts
it into molten metal at its recycling and processing facility located adjacent
to the Company's mill. The Company is responsible for the treatment and disposal
of the waste generated as a result of IMCO's processing services on behalf of
the Company. The Supply Agreement expires March 31, 2003, subject to the
Company's option to renew the agreement for an additional 10-year term. The
Company has an option to purchase up to a 49% interest in the IMCO facility and
a right of first refusal if IMCO wishes to sell the facility.
The Carson rolling mill processes its own scrap to produce
molten metal, utilizing current delacquering and melting technology.
The Company has paid a one-time license fee for certain
technology used in its continuous casting process. The license agreement allows
the Company the use of certain inventions, technical discoveries and apparatus
of the licensor in the manufacturing process.
Finishing and Coating
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After hot and cold rolling is complete, the aluminum sheet is
leveled to ensure required flatness and may be slit into narrower widths,
embossed or painted to customers' specifications.
The Company is an industry leader in the development and
production of superior quality coated aluminum products and operates at
Lewisport the largest coating line integrated with a United States rolling mill.
Coating lines at the Company's Bedford and Torrance facilities serve the
Uhrichsville and Carson rolling mills. In the coating process, aluminum sheet is
chemically cleaned, painted and then cured to produce a durable coated surface.
Packaging and Shipping
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Finished products are shipped to customers by truck or rail in
coils of various size weighing up to 30,000 pounds.
Electrical Products
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Alflex fabricates its flexible conduit and armored cable at
its Long Beach facility. Alflex purchases its aluminum sheet from the Company's
nearby Carson rolling mill, making Alflex the only integrated manufacturer of
electric flexible conduit and cable. This integration has allowed the Company to
develop a lower cost aluminum alloy used in the fabrication of Alflex electrical
products. Alflex also uses significant amounts of copper and steel as raw
materials.
Alflex designs and builds much of the equipment used to
manufacture its products. The Company believes that the ability of Alflex to
design and build its own equipment has significantly reduced its manufacturing
costs by lowering its cost of capital, increasing output and reducing set-up
times and waste.
Alflex fabricates its electrical products by slitting aluminum
or steel sheet on specialized narrow-width slitting equipment, after which the
sheet is coiled. The coils are then fed through proprietary forming machines to
produce the flexible conduit. For its cable products, Alflex draws copper into
wire, coats the wire with plastic insulation and, for certain products, wraps
the coated wire with paper or plastic. The protective armoring is then wrapped
around the cabled wire. To produce its non-metallic conduit, Alflex uses a
specialized co-extrusion process involving both rigid and flexible plastics
(PVC). After production, the conduit and cable products are cut to length and
packaged.
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Customers and Markets
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The Company's aluminum sheet products are sold to distributors
as well as end-users, principally in the building and construction,
transportation, consumer durables and beverage can markets.
A major portion of the Company's aluminum sheet sales is to
aluminum distributors in North America, amounting to approximately 39% of its
1996 aluminum sheet revenues. Distributors resell the Company's products into
end-use markets, including the building and construction, transportation and
consumer durables markets. The Company believes that it is the largest supplier
of common alloy aluminum sheet to distributors, with an estimated 22% of the
market in 1996.
The building and construction sector is the second largest
end-use market for common alloy aluminum sheet products. The Company estimates
that it had approximately 23% market share in 1996, and that sales to this
market accounted for about 24% of its aluminum sheet revenues in that year.
Direct sales of aluminum sheet products to North American
manufacturers of transportation equipment, including truck trailers and bodies,
recreational vehicles and automobile parts accounted for about 12% of the
Company's 1996 aluminum sheet revenue. The Company is one of the largest
suppliers to this market with an estimated 17% market share in 1996.
The Company also produces aluminum sheet for the manufacture
of beverage cans. Can sheet is the largest single end-use of aluminum sheet,
accounting for about one-half of the estimated world-wide market. Much of this
product is produced by large, single-purpose rolling mills. The Company
participates in this market in recognition of the size of the market and the
strategic importance of maintaining a position in that business. In addition,
many of the advances in aluminum rolling mill technology are developed for the
production of can sheet. Participation in this market supports the Company's
effort to maintain its technological proficiency for all products to serve a
broad marketing strategy of its business. The Company's sales to the beverage
can stock market represented about 10% of the Company's 1996 aluminum sheet
revenues.
The largest volume in the category of consumer durables and
other markets for the Company is reroll stock sold for further processing into
aluminum foil. The Company estimates that its share of the consumer durables
market was 2% in 1996. The other major end-uses of this product category are
cookware, appliances and heat exchanger fin stock.
Market share estimates exclude heat-treated aluminum plate and
sheet, which the Company does not produce. The Company estimates that
heat-treated products constitute an immaterial portion of the end-use markets
served by the Company.
The inclusion of the former CasTech operations for a full year
is expected to result in a further increase in the Company's share of the market
for aluminum sheet products, particularly the distribution, building and
construction and consumer durable markets, viewed on an annual basis. Also, it
is expected to result in a further increase in the proportion of the Company's
annual business accounted for by the building and construction and consumer
durables markets.
Company sales are made to customers located primarily
throughout North America. Sales outside North America have not been significant.
In 1996, subsidiaries of Reynolds Metals Company accounted for
approximately 11%, and the Company's top 10 customers represented about 52%, of
the Company's revenues. No other single customer accounted for more than 10% of
1996 revenues.
Sales of aluminum sheet products are made through the
Company's own sales force which is strategically located to provide national
coverage. An integrated computer system provides the
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Company's employees with on-line access to inventory status, production
schedules, shipping information and pricing data to facilitate immediate
response to customer inquiries.
Several of the Company's aluminum sheet markets are seasonal.
Demand in the building and construction and transportation markets is generally
lower in the fall and winter seasons than in the spring and summer. Warmer
temperatures in the spring and summer boost sales of can sheet as a result of
increased beverage consumption. Such factors typically result in higher
operating income in the spring and summer months.
Alflex electrical products are sold primarily through
independent sales representatives to electrical wholesalers. Wholesalers
represented more than 83% of Alflex sales in 1996. The remaining sales are made
to the DIY, OEM and HVAC markets. The independent sales representatives do not
market Alflex's products exclusively, but they may not sell products that are in
direct competition with products manufactured and sold by Alflex. Alflex serves
approximately 5,100 customers.
Alflex maintains registered trademarks on certain of its
flexible conduit and armored cable systems, including Ultratite, Galflex, Alflex
and its design, Electrician's Choice, Computer Blue, Duraclad, Armorlite and
PowerSnap. While Alflex considers these trademarks to be important to its
business, it does not believe it is dependent upon the trademarks for the
continuation of its business.
Competition
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The Company competes in the production and sale of common
alloy aluminum sheet products with some 28 other aluminum rolling mills in North
America, including large, single-purpose can sheet mills, and with imported
products.
Aluminum Company of America ("Alcoa"), Alcan Aluminium Ltd.
and Reynolds Metals Company have a significantly larger share of the United
States market for aluminum sheet products, including can sheet and aluminum
foil. However, in the market for common alloy aluminum sheet products other than
can sheet and aluminum foil, the market leaders are Alcoa, Alumax Inc., Noranda
Inc., Reynolds Metals Company and the Company.
The Company competes with other rolled products suppliers on
the basis of quality, price, timeliness of delivery and customer service.
Aluminum also competes with other materials such as steel, plastic and glass for
various applications.
Alflex competes with national and regional competitors, both
in the electrical flexible conduit and prewired armored cable industry and in
the pipe and wire industry. Competition is principally on the basis of product
availability and features, price and customer service.
Research and Development
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The Company conducts research and development activities at
its rolling mills as part of its ongoing efforts to improve product quality and
reduce manufacturing costs. Outside consultants also are used.
Alflex focuses its research and development activities on the
development of new products, the improvement of its conduit and cable
manufacturing processes through the development of proprietary manufacturing
equipment and the reduction of scrap.
The estimated amounts spent during 1996, 1995 and 1994 on
Company and CasTech sponsored research and development activities were $0.4
million, $1.6 million and $1.6 million, respectively.
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Environmental Matters
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The Company's operations are subject to increasingly stringent
environmental laws and regulations governing air emissions, wastewater
discharges, the handling and remediation of hazardous substances and wastes and
employee health and safety. These laws can impose joint and several liability
for releases or threatened releases of hazardous substances upon statutorily
defined parties, including the Company, regardless of fault or the lawfulness of
the original activity or disposal. The Company believes it is currently in
material compliance with applicable environmental laws and regulations.
Future regulations, under the Clean Air Act and otherwise, are
expected to impose stricter emission requirements on the aluminum industry.
While the Company believes that current pollution control measures at most of
the emission sources at its facilities will meet these anticipated future
requirements, additional measures at some sources at Lewisport will be required
as discussed above under "Casting and Rolling".
The Company has been named as a potentially
responsible party at four federal superfund sites which were acquired in
the CasTech acquisition and is conducting remedial investigations at two of the
sites for past waste disposal activity associated with closed recycling
facilities. A trust fund exists to fund the activity at one of the sites
undergoing remediation and was established through contributions from two other
parties in exchange for indemnification from further liability. The Company is
reimbursed from the fund as approved remediation expenditures are incurred at
the site. The balance remaining in the trust fund at December 31, 1996 was
approximately $4.3 million. The Company anticipates that the assets of the trust
fund plus the future trust earnings will not be sufficient to satisfy the
required remediation and associated costs. The estimated trust deficiency has
been considered in the Company's aggregate environmental contingency accrual.
At the two other federal superfund sites, the Company is a
minor contributor and expects to resolve its liability for a nominal amount. The
Company is under orders by agencies in three states for environmental
remediation at plants, one of which is currently operating and two of which have
been closed. Based on currently available information, the Company estimates the
range of possible losses with respect to these matters is between $12 million
and $16 million.
The Company acquired its Lewisport rolling mill and an
aluminum smelter at Goldendale, Washington ("Goldendale"), from Lockheed Martin
in 1985. In connection with the transaction, Lockheed Martin indemnified the
Company against expenses relating to environmental matters arising during the
period of Lockheed Martin's ownership of those facilities.
The Company has been named as a potentially responsible party
at three third-party disposal sites relating to Lockheed Martin operations, for
which Lockheed Martin has assumed responsibilitiy.
Environmental sampling at Lewisport has disclosed the presence
of contaminants, including polychlorinated biphenyls (PCBs), in a closed Company
landfill. The Company has not yet determined the extent of the contamination or
the nature and extent of remedial measures that may be required. Accordingly,
the Company cannot, at present, estimate the cost of any remediation that may be
necessary. Management believes the contamination occurred at the facility when
it was owned by Lockheed Martin and continues to be covered by the Lockheed
Martin indemnification, which Lockheed Martin disputes.
The aluminum smelter at Goldendale was operated by Lockheed
Martin until 1985 and by the Company from 1985 to 1987 when it was sold to
Columbia Aluminum Corporation ("Columbia"). Past aluminum smelting activities at
Goldendale have resulted in environmental contamination and regulatory
involvement. A 1993 Settlement Agreement among the Company, Lockheed Martin, and
Columbia allocated responsibility for future remediation at 11 sites at the
Goldendale smelter. If remediation is required, estimates by outside consultants
of the probable
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aggregate cost to the Company for these sites range from $1.3 million to $7.2
million. The apportionment of responsibility for other sites at Goldendale is
left to alternative dispute resolution procedures if and when these locations
become the subject of remedial requirements.
The Company's aggregate loss contingency accrual for
environmental matters was $15.2 million at December 31, 1996, which covers all
environmental loss contingencies that the Company has determined to be probable
and reasonably estimable. It is not possible, however, to predict the amount or
timing of cost for future environmental matters which may subsequently be
determined. Although the outcome of any such matters, to the extent they exceed
any applicable accrual, could have a material adverse effect on the Company's
consolidated results of operations for the applicable period, the Company
believes that such outcome will not have a material adverse effect on the
Company's consolidated financial condition, results of operations or cash flows.
The Company has incurred and will continue to incur capital
and operating expenditures for matters relating to environmental control and
monitoring. Capital expenditures of the Company for environmental control and
monitoring for 1996 and 1995 were $2.3 million and $0.6 million, respectively.
All other environmental expenditures of the Company, including remediation
costs, for 1996, 1995 and 1994 were $1.5 million, $1.9 million, and $2.0
million, respectively.
The Company has planned environmental capital expenditures for
1997 and 1998 of $4.2 million and $4.8 million, respectively, in addition to any
amounts which may be spent to meet future clean air requirements at Lewisport as
discussed above under "Casting and Rolling".
Employees
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At December 31, 1996, the Company employed 1,997 persons, of
whom 1,403 were full-time hourly employees including 760 at Lewisport
represented by the United Steel Workers of America ("USW") and 188 at the
Uhrichsville and Bedford facilities represented by the Glass, Molders, Pottery,
Plastic & Allied Workers International, AFL-CIO, CLC union ("GMP"). Three-year
collective bargaining agreements with the USW and the GMP expire in July 1998
and December 1997, respectively. The Company believes its relationships with its
employees are good.
The Company provides a gain sharing plan for its employees at
Lewisport. Contributions to the plan are based upon a formula which compares
actual performance results to targets agreed upon by the Company's management
and the USW.
A profit-sharing plan is provided for all non-union employees
at the Company's Uhrichsville, Bedford, Carson and Torrance plants, and Alflex
provides a non-qualified defined contribution plan for eligible workers.
Contributions to both plans are at the discretion of the Company's Board of
Directors.
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ITEM 2. PROPERTIES.
The following table sets forth certain information with
respect to the Company's principal operating properties. Substantially all of
these properties collateralize borrowings under the Company's senior secured
bank credit facility.
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LOCATION NATURE SQUARE FEET STATUS
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Louisville, Kentucky Administrative offices 7,500 Leased
Lewisport, Kentucky Rolling mill 1,700,000 Owned
Uhrichsville, Ohio Rolling mill 220,000 Owned
Carson, California Rolling mill 103,000 Owned
Bedford, Ohio Painting facility 103,000 Leased
Torrance, California Painting facility 60,000 Leased
Long Beach, California Alflex admininistrative 210,000 Leased
offices, fabricating
facility and warehouse
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ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to non-environmental legal proceedings
and administrative actions all of which are of an ordinary routine nature
incidental to the business. In the opinion of management such proceedings and
actions should not, individually or in the aggregate, have a material adverse
effect on the Company's consolidated financial condition, results of operations
or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during
the fourth quarter ended December 31, 1996.
ITEM E.O. EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of the Company as of March 11, 1997
were:
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NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C>
Mark V. Kaminski 41 President, Chief Executive Officer and Director
Robert D. Lloyd 62 Executive Vice President and Chief Operating Officer Alflex
Roderick Macdonald 49 Executive Vice President Corporate Systems
Donald L. Marsh, Jr. 50 Executive Vice President, Chief Financial Officer and
Secretary
Fred N. Mudge 63 Executive Vice President and Chief Operating Officer
Commonwealth Aluminum
Scott T. Davis 40 Vice President Operations, Continuous Cast
Andrew G. Kopelwitz 49 Vice President Operations, Lewisport
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C>
James K. O'Donnell 52 Vice President Engineering and Technology
Stanley W. Platek 58 Vice President Research and Development
Rick L. Richards 41 Vice President Planning and Projects
Daniel L. Smith 50 Vice President Information Technology
William G. Toler 40 Vice President Finance and Administration
John J. Wasz 36 Vice President Materials
</TABLE>
Mr. Kaminski joined the Company in 1987 as Marketing Manager.
In 1989 he was promoted to Vice President of Operations and in 1991 he became
President and Chief Executive Officer.
Mr. Lloyd joined the Company in September 1996. From 1991 to
1996 he served as President and Chief Executive Officer of Alflex and as a
member of the Board of Directors of CasTech. From 1984 to 1991 he held the
position of Vice President Western Operations of Triangle Wire and Cable.
Mr. Macdonald was employed by the Company in January 1994.
From 1966 until 1993, Mr. Macdonald was an Officer in the British Army (Royal
Engineers). He retired from the British Army as a Brigadier General.
Mr. Marsh joined the Company in March 1996. Prior to that time
he was Senior Vice President of Castle Energy Corporation.
Mr. Mudge was elected to his present position in September
1996. From 1995 until that time he was Secretary of the Commonwealth of Kentucky
Transportion Cabinet, and for the preceding 10 years was President and Chief
Executive Officer of Logan Aluminum Inc.
Mr. Davis joined the Company in 1989. From 1989 until 1992 he
was the Operations Manager of Casting. From 1992 to 1994 he was Production
Planning Manager. He was promoted to Vice President Operations, Lewisport in
July 1994, and to his present position in February 1997.
Mr. Kopelwitz joined the Company in February 1997. Prior to
that time, he was General Manager of CasTech's Uhrichsville operations.
Mr. O'Donnell was employed by the Company in 1978. From 1985
to June 1992 he was the Manager of Engineering Planning. He was promoted to his
present position in 1992.
Mr. Platek joined the Company in February 1997. Prior to that
time he was Vice President Research and Development of CasTech Aluminum Group
Inc.
Mr. Richards joined the Company in 1991. From 1991 to 1993 he
was Operations Manager of Cold Rolling. From 1994 to 1996 he was Manager of
Process Analysis and Safety Systems. He was promoted to his present position in
October 1996.
Mr. Smith joined the Company in July 1995. From 1989 until
1995, Mr. Smith headed the consultancy firm, Organization Resource Group, which
provided organizational design and staff development services.
12
<PAGE> 13
Mr. Toler joined the Company in 1980. From 1988 to 1991 he was
Controller. From 1991 to 1995 he served as Manager of Business Analysis. He was
Acting Chief Financial Officer from October 1995 to February 1996. He was
promoted to Vice President Materials in Februaury 1996, and to his present
position in March 1997.
Mr. Wasz has been with the Company since 1985. From 1988 to
1991 he was Regional Manager. From 1991 to 1993 he served as Distribution
Marketing Manager. He was promoted to Vice President Marketing and Sales in
December 1993, and to his present position in March 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the Nasdaq National
Market under the symbol CALC. On February 19, 1997, there were 154 holders of
record of the Company's Common Stock. The Company estimates that there were a
total of 4,400 stockholders on that date, including beneficial owners. Since
becoming publicly owned in March 1995, the Company has paid quarterly cash
dividends on its Common Stock of $0.05 per share.
The following table sets out the high and low bid prices for
the Common Stock for each quarterly period since the Company became publicly
owned, as quoted in the Nasdaq National Market:
<TABLE>
<CAPTION>
1996 HIGH LOW
---- ---- ---
<S> <C> <C>
First Quarter $18.88 $15.38
Second Quarter 18.50 15.50
Third Quarter 17.63 13.63
Fourth Quarter 17.75 14.13
1995
March 10 - March 31 $14.25 $14.00
Second Quarter 19.75 14.00
Third Quarter 24.94 17.13
Fourth Quarter 19.75 15.25
</TABLE>
13
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated statement
of operations, operating and balance sheet data for the years indicated. The
financial information is derived from the audited consolidated financial
statements of the Company for such years. This information should be read in
conjunction with, and is qualified by reference to, the consolidated financial
statements of the Company and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this report.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF OPERATIONS DATA:
Net sales $ 739,218 $ 671,501 $ 496,529 $ 413,036 $ 400,314
Cost of goods sold 689,906 606,751 455,123 407,561 379,654
-------------------------------------------------------------
Gross profit 49,312 64,750 41,406 5,475 20,660
Selling, general and administrative expenses 30,050 22,510 21,144 21,462 15,835
-------------------------------------------------------------
Operating income (loss) 19,262 42,240 20,262 (15,987) 4,825
Halco income -- 1,636 2,635 4,504 2,337
Other income (expense), net 76 2,670 (44) 111 937
Interest expense, net (9,875) (3,473) (62) (164) (122)
-------------------------------------------------------------
Income (loss) before income taxes,
extraordinary loss and cumulative effect of
change in accounting principle 9,463 43,073 22,791 (11,536) 7,977
Provision (benefit) for income taxes (5,293) 9,286 700 42 207
-------------------------------------------------------------
Income (loss) before extraordinary loss
and cumulative effect of change in
accounting principle 14,756 33,787 22,091 (11,578) 7,770
Extraordinary loss, net of income tax benefit (1,355) -- -- -- --
-------------------------------------------------------------
Income (loss) before cumulative effect of change
in accounting principle 13,401 33,787 22,091 (11,578) 7,770
Cumulative effect of change in accounting principle -- -- -- (66,415) --
-------------------------------------------------------------
Net income (loss) $ 13,401 $ 33,787 $ 22,091 $ (77,993) $ 7,770
=============================================================
PER SHARE DATA:
Income before extraordinary loss $ 1.44 $ 3.32
Extraordinary loss (0.13) --
----------------------
Net income $ 1.31 $ 3.32
======================
Dividends paid $ 0.20 $ 0.15
======================
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Depreciation and amortization $ 22,452 $ 18,600 $ 17,397 $ 16,538 $ 16,061
Capital expenditures $ 14,841 $ 15,153 $ 19,662 $ 12,092 $ 16,647
Net pounds shipped 712,480 587,932 568,970 511,887 458,505
BALANCE SHEET DATA:
Working capital (deficit) $ 207,061 $ 153,292 $ 134,026 $ (15,197) $ (20,300)
Total assets 794,582 420,684 439,454 357,557 357,103
Total debt 342,250 48,375 125,000 125,000
Total stockholders' equity 227,223 213,063 242,690 93,824 171,540
</TABLE>
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following is a discussion of the consolidated financial
condition and results of operations of the Company for each of the years in the
three-year period ended December 31, 1996, and certain factors that may affect
the Company's prospective financial condition. This section should be read in
conjunction with the consolidated financial statements of the Company for the
year ended December 31, 1996 and the notes thereto. The statements included in
this discussion and analysis of consolidated financial condition and results of
operations which are not historical facts are forward-looking statements. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 and involve risks and
uncertainties that could render them materially different, including, but not
limited to, the effect of global economic conditions, the impact of competitive
products and pricing, product development and commercialization, availability
and cost of critical raw materials, the rate of technological change, product
demand and market acceptance risks, capacity and supply constraints or
difficulties and other risks as detailed in the Company's various Securities and
Exchange Commission filings.
Overview
- --------
Trends in the demand for aluminum sheet products in the United
States and in the prices of aluminum primary metal and scrap affect the business
of the Company. The Company's operating results also are affected by factors
specific to the Company, such as the margins between selling prices for its
aluminum sheet and its cost of metal ("material margins") and its unit cost of
converting metal into aluminum sheet products ("conversion cost"). A Company
objective is to increase value by increasing its share of markets for higher
margin products.
Although the demand for aluminum sheet products is cyclical,
over the longer term demand has continued to increase, reflecting general
population and economic growth and the advantages of aluminum's light weight,
high degree of formability, resistance to corrosion, recyclability and abundant
supply.
The price of aluminum metal affects the price of the Company's
products and in the longer term can have an effect on the competitive position
of aluminum in relation to alternative materials. The price of primary metal is
determined largely by worldwide supply and demand conditions and is highly
cyclical. For example, during the past 10 years the average annual cash price
per pound of aluminum for transactions on the London Metals Exchange peaked at
$1.17 in 1988, declined to $0.52 in 1993, rose to $0.82 in 1995 and declined to
$0.68 in 1996. The price of primary aluminum in world markets greatly influences
the price of aluminum scrap, the Company's principal raw material. Significant
movements in the price of primary aluminum can affect the Company's margins
because aluminum sheet prices do not move simultaneously nor necessarily to the
same degree as the primary markets. The Company seeks to manage its material
margins by focusing on higher margin products and by accessing the scrap and
primary metal markets in the most cost-effective manner, including the use of
futures contracts to hedge anticipated raw material requirements and firm-priced
sales orders.
The Company's material margins declined in the early 1990s,
principally due to excess capacity in the industry and reduced demand as a
result of recessionary economic conditions which caused aluminum sheet prices to
decrease faster than raw material prices. Margins increased during 1994 and 1995
due to a change in product mix to higher margin products and increased demand.
During 1996 margins declined to the lowest level since 1993 as distributors and
end-users reduced inventory levels and activity in some end-use markets
declined. The Company believes that this inventory reduction is largely
completed.
During the past five years the Company has lowered its unit
conversion costs by increasing production throughput and by reducing costs
generally through improved employee productivity, higher machine utilization
rates and greater manufacturing efficiency. The Company believes its conversion
costs to be among the lowest in the industry.
15
<PAGE> 16
Shipments of electrical conduit and cable continued to
increase during 1996 as demand in the construction, renovation and remodeling
markets remained strong. Margins improved during the year as aluminum and copper
prices declined substantially. The Company believes that shipments should
continue to increase in 1997 due to penetration of Do-It-Yourself markets and
further development of the market for Alflex's pre-fabricated wiring systems.
On September 20, 1996, the Company acquired CasTech Aluminum
Group Inc., ("CasTech") in a transaction accounted for under the purchase method
of accounting at an aggregate cost (including fees and expenses) estimated at
$283 million. CasTech was the nation's leading manufacturer of continuous cast
aluminum sheet and a leading manufacturer of electrical flexible conduit and
prewired armored cable. Concurrently with the acquisition, the Company prepaid
its existing indebtedness and that of CasTech. The acquisition and prepayments
were financed with a new $325 million senior secured bank credit facility and
the proceeds from the issue and sale of $125 million principal amount of 10.75%
Senior Subordinated Notes Due 2006.
Results of Operations for 1996, 1995 and 1994
- ---------------------------------------------
NET SALES. Net sales for 1996 increased 10.1% to $739.2
million from $671.5 million in 1995. The acquisition of CasTech accounted for
about $109.5 million of 1996 net sales. Average selling prices for aluminum
sheet products decreased 13.2% to $0.99 per pound from $1.14 per pound in 1995.
This decline reflected lower metal costs, with the average London Metals
Exchange traded cash settlement price for primary aluminum declining to $0.68
per pound in 1996 from $0.82 per pound in 1995, and competitive pressures as
demand weakened. Despite these competitive pressures, unit sales increased 21.2%
to 712.5 million pounds as the result of the Company increasing its market
share.
In 1995 net sales grew 35.2% as the Company expanded its
production capacity and market share, the average selling price of the Company's
aluminum sheet products increased 31.0%, and unit sales increased 3.3% to 588
million pounds.
GROSS PROFIT. Gross profit declined 23.8% (to 6.7% of net
sales) in 1996 after a 56.4% increase (to 9.6% of net sales) in 1995. The 1996
decrease was primarily a result of a reduction in the material margin to
approximately $0.30 per pound from $0.36 in 1995. This is in contrast to a 1995
increase of $0.04 from the $0.32 level in 1994. The decline in metal margin
offset the benefits of increased unit sales volume and lower conversion costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general
and administrative expenses increased 33.5% in 1996, primarily due to the
CasTech acquisition, staffing changes and the cost of professional services. The
1995 figure was up 6.5% over 1994, primarily due to additional compensation
charges.
OPERATING INCOME. Operating income declined by 54.4% in 1996
to $19.3 million, compared with a 1995 increase of 108.5% to $42.2 million, in
each case reflecting the factors mentioned above.
HALCO INCOME. Prior to March 1995, the Company had an interest
in Halco (Mining) Inc., and received dividends and income from bauxite sales
amounting to $1.6 million in 1995 and $2.6 million in 1994. This investment was
distributed to the Company's prior owner in March 1995 in a transaction
associated with the disposition of the owner's interest in the Company.
OTHER INCOME (EXPENSE), NET. Other income in 1995 included
$2.6 million resulting from the favorable settlement of a dispute with the
Kentucky Revenue Cabinet over energy taxes.
INTEREST EXPENSE. The increase in interest charges in 1996 is
due primarily to charges incurred in respect to the borrowings made to finance
the CasTech acquisition. Interest expense in 1995 includes interest charges in
respect to a $50 million term loan borrowed in March of 1995 to fund a
distribution of that amount to the former owner in a transaction associated with
the initial public offering
16
<PAGE> 17
of the Common Stock of the Company and borrowings for working capital purposes
under the Company's revolving credit facility. In 1994 the Company was financed
primarily by a $125 million interest-free advance from the former owner, which
was converted to equity in December 1994.
PROVISION (BENEFIT) FOR INCOME TAX. Income tax provisions
(benefits) in 1996, 1995 and 1994 reflect the use of the Company's net operating
loss carryforwards ("NOLs") to offset taxable income for federal income tax
purposes. At December 31, 1996, the Company had remaining available NOLs of
approximately $127 million. These NOLs will expire in various amounts through
2008. The amount of taxable income that can be offset by NOLs arising prior to
the initial public offering of the Company in March 1995 is subject to an annual
limitation of approximately $9.6 million plus certain gains included in taxable
income which are attributable to the Company prior to the initial public
offering.
The Company recognized a net income tax benefit in 1996 of
$5.3 million as a result of revisions to prior year tax estimates and
adjustments to the estimated utilization of NOLs.
NET INCOME. Net income for 1996 decreased 60.3% to $13.4
million, after a 52.9% increase in 1995 over 1994, in each case reflecting the
factors described above for each year.
Liquidity and Capital Resources
- -------------------------------
The Company's sources of liquidity are cash flows from
operations and borrowings under its $225 million revolving credit facility. The
Company believes that these sources will be sufficient to fund its working
capital requirements, capital expenditures, debt service and dividend payments
for at least the next 24 months.
The Company's cash flows from operations in 1996, 1995 and
1994 were $42.0 million, $20.2 million and $10.5 million, respectively. The
increase in cash flow from operations in 1996 was due primarily to an increase
in working capital which more than offset a reduction in operating earnings
while the increase in 1995 was due to increased operating earnings. Working
capital increased to $207.1 million at December 31, 1996 from $153.3 million at
December 31, 1995, principally as a result of the CasTech acquisition. The
increase in 1995 reflected the increased working capital requirements associated
with increased metal prices and growth in the Company's business.
Borrowing under the Company's revolving credit facility is
based upon the sum of stated percentages of its eligible accounts receivable and
eligible inventory. Availability is also subject to satisfaction of certain
covenants and other requirements. At December 31, 1996, the full amount was
available, and $118.5 million was outstanding. The maximum amount outstanding at
any time since the facility was established on September 20, 1996, was $185.0
million. The facility expires on September 1, 2001.
The term loan is to be repaid over five years and the Company
is required to make prepayments from excess cash flow (as defined) and net
proceeds from asset sales and issuance of debt or equity. On December 31, 1996
$98.8 million of this loan remained outstanding. Repayments in 1997 are
expected to total $6.3 million.
Capital expenditures were $14.8 million plus the cost of the
CasTech acquisition, $15.2 million and $19.7 million in 1996, 1995 and 1994,
respectively, and are estimated to be about $28 million in 1997, all generally
related to upgrading the Company's manufacturing and other facilities and
meeting environmental requirements.
The indicated annual rate of dividends being paid on the
Company's Common Stock is $0.20 per share, or an annual total of about $2
million.
17
<PAGE> 18
Financial Instruments
- ---------------------
Market and credit risk is managed by the Company through an
active risk management program. This program focuses on inventory, purchase
commitments and committed and anticipated sales. The Company utilizes futures
contracts and options to protect against exposures to price risk in the aluminum
market. The Company is exposed to losses in the event of non-performance by the
counterparties to these agreements; however, the Company does not anticipate
non-performance by the counterparties. Prior to conducting business with a
potential customer, credit checks are performed on the customer to determine
creditworthiness and assess credit risk. In addition, an indirect credit
exposure review is performed on all customers. Trading partners (brokers) are
evaluated for creditworthiness and risk assessment prior to initiating trading
activities with the brokers. However, the Company does not require collateral to
support broker transactions. In addition, all brokers trading on the London
Metal Exchange with United States clients are regulated by the Commodities
Trading and Futures Commission, which requires the brokers to be fully insured
against unrealized losses owed to clients. At December 31, 1996, credit lines
totaling $53 million were available at various brokerages used by the Company.
Gains, losses and premiums on futures contracts and options
which effectively hedge exposures are deferred and included in income as a
component of the underlying sales transaction. The Company had deferred realized
gains of $0.4 million and $0.2 million as of December 31, 1996 and 1995,
respectively on closed futures contracts and options which are recorded as a
reduction of the carrying value of inventory.
At December 31, 1996, the Company held purchase and sales
commitments through 1997 totaling $52 million and $217 million, respectively. At
December 31, 1996 and 1995, the Company's position with respect to aluminum
futures and options was as follows (in millions):
<TABLE>
<CAPTION>
Market Unrealized
Value Gain
----- ----
<S> <C> <C>
December 31, 1996 $57.9 $2.2
December 31, 1995 69.5 0.4
</TABLE>
Unrealized gains and losses are recorded in the consolidated
balance sheet as due from or to broker and deferred gain or loss. The unrealized
gain of $2.2 million at December 31, 1996 consists of unrealized gains due from
brokers of $4.5 million and unrealized losses due to brokers of $2.3 million.
Futures contracts and options are valued at the closing price on the last
business day of the year.
The Company uses interest rate swap agreements to manage
interest rate risk on its floating rate debt portfolio. At December 31, 1996 the
Company had interest rate swap contracts with a notional amount of approximately
$100 million. The counterparties to interest rate contracts are major commercial
banks and management believes that losses related to credit risk are remote.
Recently Issued Accounting Pronouncements
- -----------------------------------------
During 1997 the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" and has
elected the disclosure method of reporting.
18
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
-----------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants 20
Audited Consolidated Financial Statements
Balance Sheet as of December 31, 1996 and 1995 21
Statement of Operations for the three years
ended December 31, 1996 22
Statement of Changes in Stockholders' Equity for the three years
ended December 31, 1996 23
Statement of Cash Flows for the three years
ended December 31, 1996 24
Notes to Consolidated Financial Statements 25 thru 36
</TABLE>
19
<PAGE> 20
COMMONWEALTH ALUMINUM CORPORATION
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
Commonwealth Aluminum Corporation
We have audited the accompanying consolidated balance sheet of
Commonwealth Aluminum Corporation and Subsidiaries as of December 31, 1996 and
1995 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1996. We have also audited the financial statement schedule listed as item 14 of
this Form 10-K. These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
accounting standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentations. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Commonwealth Aluminum Corporation and Subsidiaries at December 31, 1996 and
1995, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles. Also, in our opinion the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Louisville, Kentucky
February 11, 1997
20
<PAGE> 21
COMMONWEALTH ALUMINUM CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,944 $ 2,665
Accounts receivable, net 146,091 92,355
Inventories 173,911 125,683
Prepayments and other current assets 10,056 6,472
--------- ---------
Total current assets 332,002 227,175
Property, plant and equipment, net 274,095 189,562
Goodwill, net 175,146 --
Other noncurrent assets 13,339 3,947
--------- ---------
Total assets $ 794,582 $ 420,684
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ -- $ 4,000
Current portion of long-term debt 6,250 10,504
Accounts payable 82,340 44,284
Accrued liabilities 34,195 14,655
Other current liabilities 2,156 440
--------- ---------
Total current liabilities 124,941 73,883
Long-term debt 336,000 33,871
Other long-term liabilities 14,584 3,492
Accrued pension benefits 10,610 18,480
Accrued postretirement benefits 81,224 77,895
--------- ---------
Total liabilities 567,359 207,621
--------- ---------
Commitments and contingencies -- --
Stockholders' equity:
Common stock, $0.01 par value, 50,000 shares authorized,
10,197 and 10,190 shares outstanding at
December 31, 1996 and 1995, respectively 102 102
Additional paid-in capital 301,289 301,114
Accumulated deficit (72,188) (83,549)
Unearned compensation (1,980) (2,335)
Minimum pension adjustment -- (2,269)
--------- ---------
Total stockholders' equity 227,223 213,063
--------- ---------
Total liabilities and stockholders' equity $ 794,582 $ 420,684
========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
21
<PAGE> 22
COMMONWEALTH ALUMINUM CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 739,218 $ 671,501 $ 496,529
Cost of goods sold 689,906 606,751 455,123
--------- --------- ---------
Gross profit 49,312 64,750 41,406
Selling, general and administrative expenses 30,050 22,510 21,144
--------- --------- ---------
Operating income 19,262 42,240 20,262
Halco income -- 1,636 2,635
Other income (expense), net 76 2,670 (44)
Interest expense, net (9,875) (3,473) (62)
--------- --------- ---------
Income before income taxes and extraordinary loss 9,463 43,073 22,791
Provision (benefit) for income taxes (5,293) 9,286 700
--------- --------- ---------
Income before extraordinary loss 14,756 33,787 22,091
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $0.1 million (1,355) -- --
--------- --------- ---------
Net income $ 13,401 $ 33,787 $ 22,091
========= ========= =========
Per share data:
Income before extraordinary loss $ 1.44 $ 3.32
Extraordinary loss (0.13) --
--------- ---------
Net income $ 1.31 $ 3.32
========= =========
Weighted average shares outstanding 10,197 10,191
========= =========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
22
<PAGE> 23
COMMONWEALTH ALUMINUM CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
ADDITIONAL MINIMUM TOTAL
COMMON PAID-IN ACCUMLATED UNEARNED PENSION STOCKHOLDERS'
STOCK CAPITAL DEFICIT COMPENSATION ADJUSTMENT EQUITY
------ ----------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1993 $ -- $ 233,498 $ (137,899) $ -- (1,775) $ 93,824
Minimum pension adjustment -- -- -- -- 1,775 1,775
Capital contribution -- 125,000 -- -- -- 125,000
Net income -- -- 22,091 -- -- 22,091
------ ----------- ----------- --------- --------- -----------
Balance December 31, 1994 -- 358,498 (115,808) -- -- 242,690
Minimum pension adjustment -- -- -- -- (2,269) (2,269)
Capital transactions associated
with Initial Public Offering 100 (60,116) -- -- -- (60,016)
Issuance of 202,500 shares of
restricted stock 2 2,895 -- (2,897) -- --
Forfeiture of 12,500 shares of
restricted stock -- (163) -- 163 -- --
Compensation expense -- -- -- 399 -- 399
Cash dividends, $0.15 per share -- -- (1,528) -- -- (1,528)
Net income -- -- 33,787 -- -- 33,787
------ ----------- ----------- --------- --------- -----------
Balance December 31, 1995 102 301,114 (83,549) (2,335) (2,269) 213,063
Issuance of 25,000 shares of
restricted stock -- 420 -- (420) -- --
Forfeiture of 17,500 shares
of restricted stock -- (245) -- 245 -- --
Compensation expense -- -- -- 530 -- 530
Cash dividends, $0.20 per share -- -- (2,040) -- -- (2,040)
Minimum pension adjustment -- -- -- -- 2,269 2,269
Net income -- -- 13,401 -- -- 13,401
------ ----------- ----------- --------- --------- -----------
Balance December 31, 1996 $ 102 $ 301,289 $ (72,188) $ (1,980) $ -- $ 227,223
====== =========== =========== ========= ========= ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
23
<PAGE> 24
COMMONWEALTH ALUMINUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,401 $ 33,787 $ 22,091
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 22,452 18,600 17,397
Extraordinary loss 1,505 -- --
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net 12,636 6,608 (38,574)
(Increase) in inventories (1,563) (22,880) (21,734)
(Decrease) increase in prepayments and
other current assets 7,819 (1,816) 247
(Increase) decrease in other assets (1,425) (3,642) 1,700
(Decrease) increase in accounts payable (3,248) (13,075) 24,112
(Decrease) increase in accrued liabilities (1,972) (251) 3,992
(Decrease) increase in other liabilities (7,570) 2,836 1,288
--------- -------- --------
Net cash provided by operating activities 42,035 20,167 10,519
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business (net of cash of $1,505) (280,921) -- --
Debt issuance costs (9,921) -- --
Additions to property, plant and equipment (14,841) (15,153) (19,662)
Disposals of property, plant and equipment 314 304 1,409
--------- -------- --------
Net cash used in investing activities (305,369) (14,849) (18,253)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on common stock (2,040) (1,528) --
Proceeds from short-term borrowings 21,000 25,000 --
Repayments of short-term borrowings (25,000) (21,000) --
Proceeds from long-term debt 343,500 50,000 --
Repayments of long-term debt (74,847) (5,625) --
Payment to prior sole shareholder -- (50,000) --
Miscellaneous receipts from prior sole shareholder -- 500 --
--------- -------- --------
Net cash provided by (used in) financing activities 262,613 (2,653) --
--------- -------- --------
(Decrease) increase in cash and cash equivalents (721) 2,665 (7,734)
Cash and cash equivalents, beginning of year 2,665 -- 7,734
--------- -------- --------
Cash and cash equivalents, end of year $ 1,944 $ 2,665 $ --
========= ======== ========
Supplemental disclosures:
Interest paid $ 3,571 $ 3,532 $ 61
Income taxes paid 1,558 9,955 334
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
24
<PAGE> 25
COMMONWEALTH ALUMINUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Commonwealth Aluminum Corporation (the "Company") operates principally in the
United States in one business segment. The Company manufactures aluminum sheet
and flexible electrical conduit and cable products made principally from
recycled aluminum scrap and primary aluminum. As further discussed in Note 2, on
September 20, 1996 the Company purchased all of the outstanding stock of CasTech
Aluminum Group Inc., ("CasTech"), a leading manufacturer of continuous cast
aluminum sheet and electrical flexible conduit and cable.
The Company's prior sole shareholder completed on March 17, 1995, an initial
public offering of 8,750,000 shares of common stock at an initial offering price
of $14.00 per share and sold its remaining 1,250,000 shares later in 1995 on the
open market. The Company received no proceeds from these transactions.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions have
been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include demand deposits with banks and highly liquid
investments with original maturities of three months or less. The carrying
amount of cash and cash equivalents approximates fair value.
CONCENTRATIONS OF CREDIT RISK
Futures contracts, options, cash investments and accounts receivable potentially
subject the Company to concentrations of credit risk. The Company places its
cash investments with high credit quality institutions. At times, such cash
investments may be in excess of the Federal Deposit Insurance Corporation
insurance limit. Credit risk with respect to accounts receivable exists related
to concentrations of sales to aluminum distributors, who in turn resell the
Company's aluminum products to end-use markets, including the consumer durables,
building and construction and transportation markets. Concentration of credit
risk with respect to accounts receivable from the sale of electrical products is
limited due to the large customer base, and its dispersion across many different
geographical areas. During 1996, 1995 and 1994, sales to one major customer
amounted to 11.0%, 12.5% and 12.6%, respectively, of the Company's revenues. The
Company performs ongoing credit evaluations of its customers' financial
condition but does not require collateral to support customer receivables.
ACCOUNTS RECEIVABLE
The accounts receivable are net of an allowance for uncollectible accounts of
$1.8 million and $0.8 million at December 31, 1996 and 1995.
INVENTORIES
Inventories are stated at the lower of cost or market. The methods of accounting
for inventories are described in Note 3.
25
<PAGE> 26
LONG-LIVED ASSETS
Property, plant and equipment are carried at cost and are being depreciated on a
straight-line basis over the estimated useful lives of the assets which
generally range from 15 to 33 years for buildings and improvements and from 5 to
20 years for machinery and equipment. Repair and maintenance costs are charged
against income while renewals and betterments are capitalized. Retirements,
sales and disposals of assets are recorded by removing the cost and accumulated
depreciation from the accounts with any resulting gain or loss reflected in
income.
Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized on a straight-line basis over forty years. Accumulated
amortization was $1.2 million at December 31, 1996.
In the event that facts and circumstances indicate that the carrying amount of
an asset or group of assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset would be compared to the
asset's carrying amount to determine if a write-down to market value or
discounted cash flow value is required.
FINANCIAL INSTRUMENTS
The Company enters into futures contracts and options to manage price exposure
from committed and certain anticipated sales. Gains, losses and premiums on
these instruments which effectively hedge exposures are deferred and included in
income or expense as a component of the underlying sales transaction.
The Company also uses futures contracts to manage risks associated with its
natural gas requirements and interest rate swaps to manage interest rate risk.
INCOME TAXES
The Company accounts for income taxes using the liability method, whereby
deferred income taxes reflect the tax effect of temporary differences between
the carrying amount of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. In valuing deferred tax assets,
the Company uses judgment in determining if it is more likely than not that some
portion or all of a deferred tax asset will not be realized and the amount of
the required valuation allowance.
REVENUE RECOGNITION
The Company recognizes revenue upon passage of title to the customer, which in
most cases coincides with shipment.
NET INCOME PER COMMON SHARE
Net income per common share is determined based on net income and the weighted
average number of common and common equivalent shares (stock options)
outstanding during the period. Primary and fully diluted net income per share
are the same. Weighted average shares outstanding were 10,197,000 and 10,191,000
for the years ending December 31, 1996 and 1995. Net income per common share for
1994 has not been presented due to the significant change in the number of
shares outstanding after the initial public offering.
STOCK-BASED COMPENSATION
During October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." The Company adopted this
standard during 1996, electing to continue accounting for its employee stock
options under the provisions of APB Opinion 25, "Accounting for Stock Issued to
Employees", accompanied by a disclosure, if considered material, of the
pro-forma effects on net income and net income per share had the expense
provisions of the new accounting principles been applied.
SELF INSURANCE
The Company is substantially self-insured for losses related to workers'
compensation and health claims. Losses are accrued based upon the Company's
estimates of the aggregate liability for claims
26
<PAGE> 27
incurred based on Company experience and certain actuarial assumptions followed
in the insurance industry.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION
Environmental expenditures relating to current operations are expensed or
capitalized as appropriate. Expenditures relating to existing conditions caused
by past operations, which do not contribute to current or future revenues, are
expensed. Costs to prepare environmental site evaluations and feasibility
studies are accrued when the Company commits to perform them. Liabilities for
remediation costs and post-remediation monitoring are recorded when they are
probable and reasonably estimable, generally the earlier of completion of
feasibilty studies or the Company's commitment to a plan of action. The
assessment of this liability is calculated based on existing technology,
considers funds available in the settlement trust discussed in Note 10, does not
reflect any offset for possible recoveries from insurance companies and is not
discounted.
2. ACQUISITION
On September 20, 1996, the Company acquired all of the outstanding stock of
CasTech for a purchase price of approximately $283 million, including
transaction expenses. The cost of the acquisition was financed with the proceeds
of a new credit agreement and the sale of $125 million of 10.75% senior
subordinated notes due 2006. The Company assumed liabilities of $107 million and
received identifiable tangible assets of $214 million in the transaction. The
excess of the purchase price over the acquired net assets of $176 million has
been recorded as goodwill and is being amortized over 40 years. The acquisition
has been recorded under the purchase method of accounting, with the operating
results of CasTech included in the Company's consolidated financial statements
since the date of acquisition.
Included in the liabilities assumed in the transaction described above were
environmental remediation liabilities of $14.2 million and severance costs of
$11.7 million. The severance liabilities are related to the involuntary
termination of certain employees of CasTech's corporate office located in Akron,
Ohio which will be closed in March 1997. As of December 31, 1996, $5.1 million
of the severance liabilities had been paid.
The following unaudited pro forma results of operations assume the acquisition
occurred as of January 1, 1995 (in thousands except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995
---------------------- ---------- ----------
<S> <C> <C>
Net sales $1,023,598 $1,071,950
Net income 249 34,635
Net income per share 0.02 3.40
</TABLE>
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the acquisition been consummated
as of January 1, 1995, nor are they necessarily indicative of future operating
results.
3. INVENTORIES
The Company uses the first-in, first-out (FIFO) and the last-in, first-out
(LIFO) methods for valuing its inventories. Inventories at December 31 consist
of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Raw materials $ 32,124 $ 26,441
Work in process 79,539 55,585
Finished goods 46,959 32,676
Expendable parts and supplies 15,338 10,981
-------- --------
173,960 $125,683
LIFO reserve (49) --
-------- --------
$173,911 $125,683
======== ========
</TABLE>
27
<PAGE> 28
Inventories of approximately $38 million, included in the above totals at
December 31, 1996, are accounted for under the LIFO method of accounting.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and the related accumulated depreciation at
December 31 consist of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Land and improvements $ 17,300 $ 11,634
Buildings and improvements 63,125 41,823
Machinery and equipment 398,789 261,252
Construction in progress 16,219 11,981
-------- --------
495,433 326,690
Less accumulated depreciation 221,338 137,128
-------- --------
Net property, plant and equipment $274,095 $189,562
======== ========
</TABLE>
Depreciation expense was $20.0 million, $17.9 million and $17.4 million for the
years ended 1996, 1995 and 1994, respectively.
5. FINANCIAL INSTRUMENTS
Market and credit risk is managed by the Company through an active risk
management program. This program focuses on inventory, purchase commitments and
committed and anticipated sales. The Company utilizes futures contracts and
options to protect against exposures to price risk in the aluminum market. The
Company is exposed to losses in the event of non-performance by the
counterparties to these agreements; however, the Company does not anticipate
non-performance by the counterparties. Prior to conducting business with a
potential customer, credit checks are performed on the customer to determine
creditworthiness and assess credit risk. In addition, an indirect credit
exposure review is performed on all customers. Trading partners (brokers) are
evaluated for creditworthiness and risk assessment prior to initiating trading
activities with the brokers, however, the Company does not require collateral to
support broker transactions. All brokers trading on the London Metal Exchange
with U.S. clients are regulated by the Commodities Trading and Futures
Commission, which requires the brokers to be fully insured against unrealized
losses owed to clients. At December 31, 1996, credit lines totaling $53 million
were available at various brokerages used by the Company.
Gains, losses and premiums on futures contracts and options which effectively
hedge exposures are deferred and included in income as a component of the
underlying sales transaction. The Company had deferred realized gains of $0.4
million and $0.2 million as of December 31, 1996 and 1995, respectively on
closed futures contracts and options which are recorded as a reduction of the
carrying value of inventory.
At December 31, 1996, the Company held purchase and sales commitments through
1997 totaling $52 million and $217 million, respectively. At December 31, 1996
and 1995, the Company's position with respect to aluminum futures contracts and
options was as follows (in millions):
<TABLE>
<CAPTION>
MARKET UNREALIZED
VALUE GAIN
<S> <C> <C>
December 31, 1996 $57.9 $ 2.2
December 31, 1995 69.5 0.4
</TABLE>
28
<PAGE> 29
Unrealized gains and losses are recorded in the consolidated balance sheets as
due from or to broker and deferred gain or loss. The unrealized gain of $2.2
million at December 31, 1996 consists of unrealized gains due from broker of
$4.5 million and unrealized losses due to broker of $2.3 million. Futures
contracts and options are valued at the closing price on the last business day
of the year.
6. FINANCING ARRANGEMENTS
Debt financing of the Company as of December 31 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1995
-------- ----
<S> <C> <C>
Senior subordinated notes $125,000 $ --
Term loan payable 98,750 44,375
Revolving credit facility 118,500 4,000
-------- --------
342,250 48,375
Less current maturities 6,250 14,504
-------- --------
$336,000 $ 33,871
======== ========
</TABLE>
In connection with the acquisition of CasTech, the Company refinanced its
outstanding borrowings of $33 million and entered into a new credit agreement
with a syndicate of banks led by National Westminster Bank. The new agreement
includes a $100 million term loan and a $225 million revolving credit facility.
In addition, the Company issued $125 million of 10.75% senior subordinated notes
due 2006. In connection with the refinancing, the Company incurred an
extraordinary loss on early extinguishment of debt of $1.5 million (or $1.4
million after tax).
The credit agreement is collateralized by a pledge of all of the outstanding
stock of the Company's subsidiaries and substantially all of the Company's
assets.
The term loan is repayable over five-years in quarterly installments. The
Company is required to make prepayments in the event of certain transactions as
defined in the agreement.
The Company's ability to borrow under the revolving credit facility is based on
percentages of its eligible accounts receivable and eligible inventory. Up to
$30 million of the revolving credit facility is available for standby and
commercial letters of credit. The revolving credit facility commitment
terminates on September 1, 2001.
Borrowings under the new credit agreement bear interest at a variable base rate
per annum plus up to an additional 2.25% depending on the results of a quarterly
financial test as defined in the agreement. In addition, the Company must pay to
the lenders under the credit agreement, a quarterly commitment fee ranging from
0.175% to 0.50% on the unused portion of the revolving credit facility. The
interest rate on the term loan was 6.88% at December 31, 1996. The blended
interest rate on outstanding borrowings under the revolving credit facility was
approximately 6.95% at December 31, 1996.
The Company uses interest rate swaps to effectively convert a portion of its
variable rate debt to fixed rates. At December 31, 1996, the Company had swap
agreements in place covering approximately $100 million of its variable rate
debt. The fixed rates range from 5.8% to 7.0%. The counterparties to interest
rate contracts are major commercial banks and management believes that losses
related to credit risk are remote.
The Company must pay a commission of up to 2.25% per annum on the carrying
amount of each outstanding letter of credit. At December 31, 1996, no letters of
credit were outstanding under the revolving credit facility.
The credit agreement includes covenants which, among others, relate to leverage,
earnings, interest coverage and payment of dividends.
29
<PAGE> 30
At December 31, 1996, the interest rates on all amounts outstanding under the
term loan and revolving credit facility are scheduled to adjust in three months
or less. Accordingly, the carrying value of the term loan and revolving credit
facility approximates fair value at December 31, 1996. Based on estimated market
values at December 31, 1996, the fair value of the senior subordinated notes was
approximately $129 million.
Future aggregate maturities of long-term debt at December 31, 1996 are as
follows (in thousands):
<TABLE>
<S> <C>
1997 $ 6,250
1998 12,500
1999 22,500
2000 31,250
2001 144,750
Thereafter 125,000
--------
Total $342,250
========
</TABLE>
7. PENSION PLANS
The Company has two defined benefit pension plans covering certain salaried and
hourly employees. The plan benefits are based primarily on years of service and
employees' compensation during the last five years of employment for salaried
employees and stated amounts based on job grade and years of service prior to
retirement for the hourly employees. The plans' assets consist primarily of
equity securities, guaranteed investment contracts and fixed income pooled
accounts.
The funded status of the plans as of December 31 is as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 64,276 $ 66,453
Nonvested benefit obligation 4,471 1,195
--------- ---------
Accumulated benefit obligation $ 68,747 $ 67,648
--------- ---------
Projected benefit obligation $ 76,727 $ 75,578
Plan assets at fair value 64,083 51,834
--------- ---------
Projected benefit obligation in excess of plan assets (12,644) (23,744)
Unrecognized net asset (1,000) (1,231)
Unrecognized prior service cost 3,017 1,947
Unrecognized net gain 3,012 9,092
Adjustment required to recognize minimum liability (2,995) (4,544)
--------- ---------
Accrued pension cost $ (10,610) $ (18,480)
========= =========
</TABLE>
Reflected in the Company's consolidated balance sheet is an additional minimum
liability relative to its underfunded plan in the amount of $3.0 million and
$4.5 million at December 31, 1996 and 1995, respectively. A corresponding amount
is recorded as an intangible asset to the extent it does not exceed unrecognized
prior service cost, while the excess in 1995 was charged to stockholders'
equity.
The projected benefit obligation was determined using a weighted average
discount rate of 7.75%, 7.00% and 8.50% for 1996, 1995 and 1994, respectively.
The weighted average rate of future compensation increases was 3% for 1996 and
4.5% for 1995 and 1994. The expected rate of return on plan assets was 9.25% for
1996 and 8.00% for 1995 and 1994.
30
<PAGE> 31
The components of net pension expense for the years ended December 31 are as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Benefit cost for service during the year $2,378 $1,583 $1,984
Interest cost on projected benefit obligation 5,514 4,787 4,593
Actual return on plan assets (5,699) (6,584) (1,353)
Net amortization and deferral 1,102 2,846 (2,284)
------ ------ ------
Net pension expense $3,295 $2,632 $2,940
====== ====== ======
</TABLE>
The Company's policy for these plans is to make contributions equal to or
greater than the requirements prescribed by the Employee Retirement Income
Security Act of 1974.
The Company also contributes to a union sponsored defined benefit multi-employer
pension plan for certain of its hourly employees. The Employee Retirement Income
Security Act of 1974, as amended by the Multi-Employers Pension Plan Amendment
Act of 1980, imposes certain liabilities upon employers who are contributors to
multi-employer plans in the event of the employers' withdrawal from such a plan
or upon a termination of such a plan. Management does not intend to take any
action that would subject the Company to any such liabilities.
In addition to the defined benefit plans described above, the Company also
sponsors defined contribution plans covering substantially all employees. In two
of the plans, the Company matches 25% to 50% of a participant's voluntary
contributions (depending on the respective plant's annual earnings performance)
up to a maximum of 6% of a participant's compensation. In the remaining two
plans, contributions are at the discretion of the Board of Directors and cannot
exceed 15% of the participants' annual wages. The Company's expense for the
plans was approximately $1.3 million, $1.5 million and $0.5 million for 1996,
1995 and 1994, respectively.
8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides postretirement health care and life insurance benefits to
certain employees. The Company accrues the cost of postretirement benefits
within the employees' active service periods. Effective January 1, 1994, the
Company limited the extent of its liability for future increases in medical
costs. When the average annual per retiree claim cost exceeds two times the 1993
per retiree claim cost, the employer contribution will be increased each year
only for general inflation, regardless of the actual increase in the cost of
providing medical benefits. Based on current medical trend assumptions, per
retiree medical claims are expected to reach two times the 1993 level in the
year 2000.
The financial status of the plan as of December 31, 1996 and 1995 is as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit
obligation:
Retirees $24,437 $23,457
Fully eligible, active plan participants 3,051 3,067
Other active participants 33,756 31,791
------- -------
61,244 58,315
Unrecognized prior service cost 6,492 7,562
Unrecognized net gain 13,488 12,018
------- -------
Accrued postretirement benefits $81,224 $77,895
======= =======
</TABLE>
31
<PAGE> 32
The components of net periodic postretirement benefit expense for the years
ended December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost for benefits earned $1,890 $1,708 $1,993
Interest cost on accumulated postretirement benefit obligations 4,390 4,184 3,794
Net amortization and deferral (1,451) (1,725) (1,290)
------- ------- -------
Net periodic postretirement benefit expense $4,829 $4,167 $4,497
====== ====== ======
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation ("APBO") was 7.75% for 1996, 7.00% for 1995 and 8.50% for 1994. The
assumed health care cost trend rate used in measuring the APBO was 9.5%
declining by 1.0% per year to an ultimate rate of 4.5% in 2001. If the health
care cost trend rate assumptions were increased by 1%, the APBO as of December
31, 1996 and the combined service and interest cost components of postretirement
benefit expense for the year then ended would be increased by approximately $9.1
million and $1.0 million, respectively.
9. INCOME TAXES
The provision for income taxes at December 31 consists of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $(6,079) $8,845 $650
State and Local 786 441 50
------- ------ ----
(5,293) 9,286 700
Deferred:
Federal
State and Local -- -- --
-- -- --
------- ------ ----
$(5,293) $9,286 $700
======= ====== ====
</TABLE>
Deferred tax assets and liabilities at December 31 are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Inventory -- $ 6,890 -- $15,024
Property, plant and equipment -- 57,208 -- 35,322
Accrued and other liabilities $ 12,308 -- $ 5,723 --
Accrued pension costs 3,046 -- 5,156 --
Accrued postretirement costs 32,489 -- 28,821 --
Net operating loss carryforwards 50,941 -- 54,652 --
AMT credit carryforwards 7,494 -- 1,493 --
Other 1,143 -- 336
-------- ------- -------- -------
Totals $107,421 $64,098 $ 96,181 $50,346
-------- ------- -------- -------
Net deferred tax asset 43,223 -- $45,835 --
Valuation allowance (43,223) (45,835) --
-------- ------- -------- -------
Net deferred taxes $ -- $ -- $ -- $ --
======== ======= ======= =======
</TABLE>
The Company has determined that at December 31, 1996 and 1995, its ability to
realize future benefits of net deferred tax assets does not meet the "more
likely than not" criteria in SFAS No.109, "Accounting for Income Taxes".
The deferred tax assets and liabilities were computed at a 40% tax rate for 1996
versus a 37% tax rate for 1995. The increase in the tax rates is attributable to
the anticipated increase (as a result of the CasTech acquisition) in the number
of states in which the company will be required to file tax returns in the
future. The change in tax rates had no effect on the 1996 income tax benefit as
the net deferred tax asset is fully offset by a valuation allowance.
32
<PAGE> 33
At December 31, 1996, the Company had net operating loss carryforwards for
federal tax purposes of approximately $127 million, which expire in various
amounts through 2008 and approximately $7.5 million in alternative minimum tax
credit carryforwards which do not expire. As a result of the initial public
offering during 1995, the Company experienced an "ownership change" within the
meaning of Section 382 of the Internal Revenue Code. Consequently, the Company
is subject to an annual limitation on the amount of net operating loss
carryforwards that can be used to offset taxable income. The annual limitation
is $9.6 million plus certain gains included in taxable income which are
attributable to the Company prior to the ownership change.
Reconciliation of the federal statutory rate and the effective income tax rate
is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
Dividends received deduction -- (0.5) (0.8)
Non-taxable property distribution -- 24.2 --
Utilization of net operating loss carryforwards (73.4) (38.6) (33.5)
Adjustment of prior year accrual (40.7) -- --
State income taxes 5.9 -- --
Alternative minimum tax 8.0 -- --
Other items (0.1) 1.5 2.3
----- ----- -----
Effective income tax rate (65.3)% 21.6% 3.0%
===== ===== =====
</TABLE>
10. CONTINGENCIES
The Company's operations are subject to increasingly stringent environmental
laws and regulations governing air emissions, wastewater discharges, the
handling and remediation of hazardous substances and wastes and employee health
and safety. These laws can impose joint and several liability for releases or
threatened releases of hazardous substances upon statutorily defined parties,
including the Company, regardless of fault or the lawfulness of the original
activity or disposal. The Company believes it is currently in material
compliance with applicable environmental laws and regulations.
Future regulations, under the Clean Air Act and otherwise, are expected to
impose stricter emission requirements on the aluminum industry. While the
Company believes that current pollution control measures at most of the emission
sources at its facilities will meet these anticipated future requirements,
additional measures at some sources at its Lewisport, Kentucky ("Lewisport")
rolling mill will be required.
The Company has been named as a potentially responsible party at four federal
superfund sites which were acquired in the CasTech acquisition and is conducting
remedial investigations at two of the sites for past waste disposal activity
associated with closed recycling facilities. A trust fund exists to fund the
activity at one of the sites undergoing remediation and was established through
contributions from two other parties in exchange for indemnification from
further liability. The Company is reimbursed from the fund as approved
remediation expenditures are incurred at the site. The balance remaining in the
trust fund at December 31, 1996 was approximately $4.3 million. The Company
anticipates that the assets of the trust fund plus the future trust earnings
will not be sufficient to satisfy the required remediation and associated costs.
The estimated trust deficiency has been considered in the Company's aggregate
environmental contingency accrual.
At the two other federal superfund sites, the Company is a minor contributor and
expects to resolve its liability for a nominal amount. The Company is under
orders by agencies in three states for environmental remediation at plants, one
of which is currently operating and two of which have been closed. Based on
currently available information, the Company estimaties the range of possible
losses with respect to these matters is between $12 million and $16 million.
The Company acquired Lewisport and an aluminum smelter at Goldendale, Washington
("Goldendale"), from Lockheed Martin in 1985. In connection with the
transaction, Lockheed Martin indemnified the
33
<PAGE> 34
Company against expenses relating to environmental matters arising during the
period of Lockheed Martin's ownership of those facilities.
The Company has been named as a potentially responsible party at three
third-party disposal sites relating to Lockheed Martin operations, for which
Lockheed Martin has assumed responsibility.
Environmental sampling at Lewisport has disclosed the presence of various
contaminants, including polychlorinated biphenyls (PCBs), in a closed Company
landfill. The Company has not yet determined the extent of the contamination or
the nature and extent of remedial measures that may be required. Accordingly,
the Company cannot at present estimate the cost of any remediation that may be
necessary. Management believes the contamination occurred at the facility when
it was owned by Lockheed Martin and continues to be covered by the Lockheed
Martin indemnification, which Lockheed Martin disputes.
The aluminum smelter at Goldendale was operated by Lockheed Martin until 1985
and by the Company from 1985 to 1987 when it was sold to Columbia Aluminum
Corporation ("Columbia"). Past aluminum smelting activities at Goldendale have
resulted in environmental contamination and regulatory involvement. A 1993
Settlement Agreement among the Company, Lockheed Martin and Columbia allocates
responsibility for future remediation at 11 sites at the Goldendale smelter. If
remediation is required, estimates by outside consultants of the probable
aggregate cost to the Company for these sites range from $1.3 million to $7.2
million. The apportionment of responsibility for other sites at Goldendale is
left to alternative dispute resolution procedures if and when these locations
become the subject of remedial requirements. The apportionment of responsibility
for other sites at Goldendale is left to alternative dispute resolution
procedures if and when these locations become the subject of remedial
requirements. The parties have reserved their right with respect to all other
potential environmental issues at Goldendale, including the Company's rights
under the Lockheed Martin indemnity.
The Company's aggregate loss contingency accrual for environmental matters was
$15.2 million and $1.2 million at December 31, 1996 and 1995, respectively. Of
the total accrual, $3.6 million and $1.2 million is included in "accrued
liabilities" in the Company's consolidated balance sheets at December 31, 1996
and 1995, respectively, and $11.6 million is included in "other long-term
liabilities" at December 31, 1996.
While the Company believes the overall accrual is adequate to cover all
environmental loss contingencies that the Company has determined to be probable
and reasonably estimable, it is not possible to predict the amount or timing of
cost for future environmental matters which may subsequently be determined.
Although the outcome of any such matters, to the extent they exceed any
applicable accrual, could have a material adverse effect on the Company's
consolidated results of operations for the applicable period, the Company
believes that such outcome will not have a material adverse effect on the
Company's consolidated financial condition, results of operations or cash flows.
The Company has incurred and will continue to incur capital and operating
expenditures for matters relating to environmental control and monitoring.
Capital expenditures of the Company for environmental control and monitoring for
1996, 1995 and 1994 were $2.3 million and $0.6 million, respectively. All other
environmental expenditures of the Company, including remediation expenditures,
for 1996, 1995 and 1994 were $1.5 million, $1.9 million and $2.0 million,
respectively.
The Company is also a party to various non-environmental legal proceedings and
administrative actions, all arising from the ordinary course of business.
Although it is impossible to predict the outcome of any legal proceeding, the
Company believes that any liability that may finally be determined with respect
to such legal proceedings should not have a material effect on the Company's
consolidated financial position, results of operations or cash flows, although
resolution in any year or quarter could be material to the consolidated results
of operations for that period.
11. STOCK INCENTIVES
The Company has a stock incentive plan covering certain officers, key employees
and directors. The plan provides for the grant of options to purchase common
stock or the award of shares of restricted
34
<PAGE> 35
common stock. The total number of shares which may be subject to options or
issued as restricted stock under the plan is 600,000.
Plan activity is summarized below:
<TABLE>
<CAPTION>
RESTRICTED
OPTIONS STOCK
------- ----------
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE SHARES
--------- -------------- --------
<S> <C> <C> <C>
Outstanding December 31, 1994 -- -- --
Granted 72,500 $14.00 202,500
Exercised -- -- --
Forfeited (3,000) $14.00 (12,500)
------- -------
Outstanding December 31, 1995 69,500 $14.00 190,000
Granted 130,500 $16.71 25,000
Exercised -- -- --
Forfeited (4,000) $14.00 (17,500)
------- -------
Outstanding December 31, 1996 196,000 $15.80 197,500
======= =======
</TABLE>
The options are issued at the fair value of the underlying stock on the date of
grant and become exercisable three years from the grant date for employees and
one year from the grant date for non-employee directors. The options expire ten
years after the date of grant. The restricted stock, principally issued in
connection with the initial public offering, vests five years from the date of
award. At December 31, 1996, options for 5,500 shares were exercisable. The fair
value of options was $3.95 and $3.44 as of December 31, 1996 and 1995. Fair
value estimates were determined using the Black-Scholes valuation method, an
expected term of ten years, a 6.5% risk-free interest rate, expected turnover of
5% and stock price volatility of 15%.
As permitted by SFAS No. 123, the Company follows the provisions of APB Opinion
25 and related Interpretations in accounting for its stock option grants.
Compensation cost has not been recognized for options issued under the plan. If
compensation cost had been determined based on the fair value of the awards at
the grant date consistent with the provisions of SFAS No. 123 there would not
have been a material impact on the reported amount of the Company's net income
and net income per share.
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
All amounts are in thousands except net income per share.
<TABLE>
<CAPTION>
QUARTER ENDED,
1996 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR
- ---- ------- ------- -------- ------- ----
<S> <C> <C> <C> <C> <C>
Net sales $167,544 $159,672 $170,052 $241,950 $739,218
Gross profit 9,811 8,870 10,570 20,061 49,312
Income before extraordinary loss 2,393 2,102 4,634 5,627 14,756
Net income 2,393 2,102 3,279 5,627 13,401
Income per share before extraordinary loss 0.23 0.21 0.45 0.55 1.44
Net income per share 0.23 0.21 0.32 0.55 1.31
1995
Net sales $173,907 $192,229 $160,264 $145,101 $671,501
Gross profit 17,590 20,724 16,429 10,007 64,750
Net income 8,662 12,917 7,646 4,562 33,787
Net income per share 0.85 1.27 0.75 0.45 3.32
</TABLE>
Fourth quarter 1996 net income includes a $1.1 million increase in pre-tax
income as a result of adjustments to certain compensation related expenses. In
addition, the Company recognized an income
35
<PAGE> 36
tax benefit of $5.0 million as a result of revisions to prior year tax estimates
and adjustments to the estimated utilization of net operating loss
carryforwards.
The Company recorded a $1.9 million increase in inventory and pre-tax income as
a result of the annual physical inventory taken during the fourth quarter of
1995.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 401 (other than paragraph (b)
thereof) and Item 405 of Regulation S-K may be found under the caption Election
of Directors of the Company's Proxy Statement dated March 14 ,1997 for the
Annual Meeting of Stockholders to be held on April 17, 1997 (the "Proxy
Statement") and is incorporated herein by reference. The information required by
Item 401(b) of Regulation S-K may be found under Item E.O. above.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 402 of Regulation S-K may be
found under the caption Executive Compensation in the Proxy Statement and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 403 of Regulation S-K may be
found under the caption Beneficial Ownership of Common Stock in the Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 404 of Regulation S-K may be
found under the caption Election of Directors--Compensation and other
Transactions with Directors; Management Development and Compensation Committee
Interlocks and Insider Participation in the Proxy Statement and is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements and Schedule
The financial statements of the Company as set forth under Item 8 are
filed as part of this report.
Supplemental Schedule II - Valuation and Qualifying Accounts is filed
on page 39 of this report.
Financial statement schedules other than listed above have been omitted
since they are either not required or not applicable or the information is
otherwise included.
The report of the independent accountants with respect to the
above-listed financial statements and schedule appears on page 20 of this
report.
36
<PAGE> 37
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter
ended December 31, 1996.
(c) Exhibits
3.1 Restated Certificate of Incorporation, effective
December 5, 1995 (incorporated by reference to
Exhibit 3.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).
3.2 By-laws (incorporated by reference to Exhibit 3.3 to
the Company's Registration Statement No. 33-87294 on
Form S-1).
3.3 Stockholder Protection Rights Agreement, dated as of
March 6, 1996, including forms of Rights Certificate,
Election to Exercise and Certificate of Designation
and Terms of Participating Preferred Stock of the
Company (incorporated by reference to Exhibits (1),
(2) and (3) to the Company's Registration Statement
No. 0-25642 on Form 8-A).
10.1 Executive Incentive Compensation Plan, as amended
December 4, 1995 (incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).
10.2 Long-term Executive Incentive Compensation Plan
(incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement No. 33-87294 on Form
S-1).
10.3 Salaried Employees Pension Plan (incorporated by
reference to Exhibit 10.4 to the Company's
Registration Statement No. 33-87294 on Form S-1).
10.4 Salaried Employees Performance Sharing Plan
(incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement No. 33-87294 on Form
S-1).
10.5 1995 Stock Incentive Plan as amended and restated
October 21, 1996 (incorporated by reference to
Exhibit 99.1 to the Company's Registration Statement
No. 333-19383 on Form S-8)
10.6 Form of Severance Agreements between the Company and
Mark V. Kaminski, Scott T. Davis, Roderick Macdonald,
Donald L. Marsh, Jr., James K. O'Donnell, Daniel L.
Smith, William G. Toler and John J. Wasz
(incorporated by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.7 Deferred Compensation Plan (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996).
10.8 Amended and Restated Credit Agreement among the
Company, subsidiaries of the Company, the several
lenders from time to time parties thereto, and
National Westminster Bank PLC, as agent, dated as of
November 29, 1996.
10.9 Amended and Restated Pledge and Security Agreement
entered into by the Company and its subsidiaries,
collectively, in favor of National Westminster Bank
PLC, as agent, dated November 29, 1996.
37
<PAGE> 38
10.10 Non-exclusive License Agreement between Hazelett
Strip-Casting Corporation and Barmet of Kentucky,
Inc. dated as of June 2, 1982 (incorporated by
reference to Exhibit 10.07 to the CasTech Aluminum
Group Inc. Registration Statement No. 33-77116 on
Form S-1).
10.11 Agreement between Hazelett Strip-Casting Corporation,
Barmet of Kentucky, Inc. and Barmet Aluminum
Corporation, dated as of November 29, 1984
(incorporated by reference to Exhibit 10.08 to the
CasTech Aluminum Group Inc. Registration Statement
No. 33-77116 on Form S-1).
10.12 Supply agreement between Barmet Aluminum Corporation
and IMCO, dated as of March 2, 1992 (incorporated by
reference to Exhibit 10.09 to the CasTech Aluminum
Group Inc. Registration Statement No. 33-77116 on
Form S-1).
10.13 Lease of 2630 El Presidio Street, Long Beach,
California by Alflex Corporation from Brian L.
Harvey, expiring October 31, 2004.
10.14 Industrial Real Estate Lease of 2303 Jefferson
Street, Torrance, California, by Barmet Aluminum
Corporation from Cypress Land Company, expiring April
30, 1999 (incorporated by reference to Exhibit 10.16
to the CasTech Aluminum Group Inc. Registration
Statement No. 33-77116 on Form S-1).
10.15 Indenture dated as of September 20, 1996 between the
Company, the Subsidiary Guarantors named therein and
Harris Trust and Savings Bank, Trustee (incorporated
by reference to Exhibit 4.2 to the Company's
Registration Statement No.
333-13661 on Form S-4).
10.16 First Supplemental Indenture, dated as of November
12, 1996, to Indenture dated as of September 20,
1996.
11 Computation of Net Income Per Share.
21 Subsidiaries.
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule.
38
<PAGE> 39
SUPPLEMENTAL SCHEDULE II
Commonwealth Aluminum Corporation
Valuation and Qualifying Accounts
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
Additions
----------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions of Period
----------- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for uncollectible accounts
December 31, 1996 $ 788 $ 100 $1,290 (a) $ 375 $1,803
December 31, 1995 780 89 - 81 788
December 31, 1994 1,275 271 - 766 780
Allowance for obsolete stores inventory
December 31, 1996 $ 1,000 $ - $ - $ - $1,000
December 31, 1995 1,000 - - - 1,000
December 31, 1994 1,000 - - - 1,000
<FN>
Note (a) - relates to the acquisition of CasTech.
</TABLE>
39
<PAGE> 40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized on
March 26, 1997.
COMMONWEALTH ALUMINUM CORPORATION
By /s/ Mark V. Kaminski
_________________________________
Mark V. Kaminski, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Paul E. Lego
_____________________________ Chairman of the Board March 31, 1997
Paul E. Lego
/s/ Mark V. Kaminski
_____________________________ President, Chief Executive Officer and
Mark V. Kaminski Director March 26, 1997
/s/ Catherine G. Burke
_____________________________ Director March 26, 1997
Catherine G. Burke
/s/ C. Frederick Fetterolf
_____________________________ Director March 31, 1997
C. Frederick Fetterolf
/s/ John E. Merow
_____________________________ Director March 26, 1997
John E. Merow
/s/ Victor Torasso
_____________________________ Director March 26, 1997
Victor Torasso
/s/ Donald L. Marsh, Jr.
_____________________________ Executive Vice President, Chief Financial March 26, 1997
Donald L. Marsh, Jr. Officer and Secretary (Principal financial and
accounting officer)
/s/ John F. Barron
_____________________________ Corporate Controller March 26, 1997
John F. Barron
</TABLE>
40
<PAGE> 41
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1 Restated Certificate of Incorporation, effective
December 5, 1995 (incorporated by reference to
Exhibit 3.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).
3.2 By-laws (incorporated by reference to Exhibit 3.3 to
the Company's Registration Statement No. 33-87294 on
Form S-1).
3.3 Stockholder Protection Rights Agreement, dated as of
March 6, 1996, including forms of Rights Certificate,
Election to Exercise and Certificate of Designation
and Terms of Participating Preferred Stock of the
Company (incorporated by reference to Exhibits (1),
(2) and (3) to the Company's Registration Statement
No. 0-25642 on Form 8-A).
10.1 Executive Incentive Compensation Plan, as amended
December 4, 1995 (incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).
10.2 Long-term Executive Incentive Compensation Plan
(incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement No. 33-87294 on Form
S-1).
10.3 Salaried Employees Pension Plan (incorporated by
reference to Exhibit 10.4 to the Company's
Registration Statement No. 33-87294 on Form S-1).
10.4 Salaried Employees Performance Sharing Plan
(incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement No. 33-87294 on Form
S-1).
10.5 1995 Stock Incentive Plan as amended and restated
October 21, 1996 (incorporated by reference to
Exhibit 99.1 to the Company's Registration Statement
No. 333-19383 on Form S-8)
10.6 Form of Severance Agreements between the Company and
Mark V. Kaminski, Scott T. Davis, Roderick Macdonald,
Donald L. Marsh, Jr., James K. O'Donnell, Daniel L.
Smith, William G. Toler and John J. Wasz
(incorporated by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.7 Deferred Compensation Plan (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996).
10.8 Amended and Restated Credit Agreement among the
Company, subsidiaries of the Company, the several
lenders from time to time parties thereto, and
National Westminster Bank PLC, as agent, dated as of
November 29, 1996.
10.9 Amended and Restated Pledge and Security Agreement
entered into by the Company and its subsidiaries,
collectively, in favor of National Westminster Bank
PLC, as agent, dated November 29, 1996.
</TABLE>
41
<PAGE> 42
<TABLE>
<S> <C>
10.10 Non-exclusive License Agreement between Hazelett
Strip-Casting Corporation and Barmet of Kentucky,
Inc. dated as of June 2, 1982 (incorporated by
reference to Exhibit 10.07 to the CasTech Aluminum
Group Inc. Registration Statement No. 33-77116 on
Form S-1).
10.11 Agreement between Hazelett Strip-Casting Corporation,
Barmet of Kentucky, Inc., and Barmet Aluminum
Corporation, dated as of November 29, 1984
(incorporated by reference to Exhibit 10.08 to the
CasTech Aluminum Group Inc. Registration Statement
No. 33-77116 on Form S-1).
10.12 Supply agreement between Barmet Aluminum Corporation
and IMCO, dated as of March 2, 1992 (incorporated by
reference to Exhibit 10.09 to the CasTech Aluminum
Group Inc. Registration Statement No. 33-77116 on
Form S-1).
10.13 Lease of 2630 El Presidio Street, Long Beach,
California by Alflex Corporation from Brian L.
Harvey, expiring October 31, 2004.
10.14 Industrial Real Estate Lease of 2303 Jefferson
Street, Torrance, California, by Barmet Aluminum
Corporation from Cypress Land Company, expiring April
30, 1999 (incorporated by reference to Exhibit 10.16
to the CasTech Aluminum Group Inc. Registration
Statement No. 33-77116 on Form S-1).
10.15 Indenture dated as of September 20, 1996 between the
Company, the Subsidiary Guarantors named therein and
Harris Trust and Savings Bank, Trustee (incorporated
by reference to Exhibit 4.2 to the Company's
Registration Statement No. 333-13661 on Form S-4).
10.16 First Supplemental Indenture, dated as of November
12, 1996, to Indenture dated as of September 20,
1996.
11 Computation of Net Income Per Share.
21 Subsidiaries.
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule.
</TABLE>
42
<PAGE> 1
Exhibit 10.8
[CONFORMED COPY]
444444444444444444444444444444444444444
COMMONWEALTH ALUMINUM CORPORATION,
COMMONWEALTH INDUSTRIES, INC.,
COMMONWEALTH ALUMINUM LEWISPORT, INC.,
ALFLEX CORPORATION
and
BARMET ALUMINUM CORPORATION
-----------------------------
$325,000,000
-----------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of November 29, 1996
-----------------------------
NATIONAL WESTMINSTER BANK PLC,
as Administrative Agent
444444444444444444444444444444444444444
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience of reference only.
Page
----
Section 1. Definitions and Accounting Matters........................... 2
1.01 Certain Defined Terms........................................... 2
1.02 Accounting Terms and Determinations............................. 40
1.03 Types of Loans.................................................. 41
Section 2. Commitments, Loans, Notes and Prepayments.................... 41
2.01 Loans........................................................... 41
2.02 Borrowings...................................................... 44
2.03 Letters of Credit............................................... 45
2.04 Changes of Commitments.......................................... 51
2.05 Certain Fees.................................................... 51
2.06 Lending Offices................................................. 52
2.07 Several Obligations; Remedies Independent....................... 52
2.08 Notes........................................................... 52
2.09 Optional Prepayments and Conversions or
Continuations of Loans.......................................... 53
2.10 Mandatory Prepayments and Reductions of
Commitments..................................................... 54
2.11 Reserved Commitments, Etc....................................... 58
Section 3. Payments of Principal and Interest........................... 59
3.01 Repayment of Loans.............................................. 59
3.02 Interest........................................................ 60
Section 4. Payments; Pro Rata Treatment; Computations; Etc.............. 61
4.01 Payments........................................................ 61
4.02 Pro Rata Treatment.............................................. 62
4.03 Computations.................................................... 63
4.04 Minimum Amounts................................................. 63
4.05 Certain Notices................................................. 64
4.06 Non-Receipt of Funds by the Administrative Agent................ 65
4.07 Sharing of Payments, Etc........................................ 66
(1)
<PAGE> 3
Page
----
Section 5. Yield Protection, Etc........................................ 68
5.01 Additional Costs................................................ 68
5.02 Limitation on Types of Loans.................................... 70
5.03 Illegality...................................................... 70
5.04 Treatment of Affected Loans..................................... 71
5.05 Compensation.................................................... 72
5.06 Additional Costs in Respect of Letters of Credit................ 73
5.07 U.S. Taxes...................................................... 73
5.08 Replacement of Lenders.......................................... 75
Section 6. Guarantee.................................................... 76
6.01 The Guarantee................................................... 76
6.02 Obligations Unconditional....................................... 77
6.03 Reinstatement................................................... 78
6.04 Subrogation..................................................... 79
6.05 Remedies........................................................ 79
6.06 Continuing Guarantee............................................ 79
6.07 Rights of Contribution.......................................... 79
6.08 Limitation on Guarantee Obligations............................. 81
Section 7. Conditions Precedent......................................... 81
7.01 Initial Loans................................................... 81
7.02 Conditions to Effectiveness..................................... 81
7.03 Initial and Subsequent Extensions of Credit..................... 84
7.04 Certain Determinations.......................................... 85
Section 8. Representations and Warranties............................... 85
8.01 Corporate Existence............................................. 85
8.02 Financial Condition............................................. 85
8.03 Litigation...................................................... 87
8.04 No Breach....................................................... 87
8.05 Action.......................................................... 87
8.06 Approvals....................................................... 87
8.07 Use of Credit................................................... 88
8.08 ERISA........................................................... 88
8.09 Taxes........................................................... 88
8.10 Investment Company Act.......................................... 89
8.11 Public Utility Holding Company Act.............................. 89
8.12 Material Agreements and Liens................................... 89
8.13 Environmental Matters........................................... 89
(2)
<PAGE> 4
Page
----
8.14 Capitalization.................................................. 92
8.15 Subsidiaries, Etc............................................... 93
8.16 Title to Assets................................................. 94
8.17 True and Complete Disclosure.................................... 94
8.18 Real Property................................................... 95
8.19 Security Documents.............................................. 95
Section 9. Covenants of the Obligors.................................... 95
9.01 Financial Statements, Etc....................................... 95
9.02 Litigation...................................................... 100
9.03 Existence, Etc.................................................. 100
9.04 Insurance....................................................... 101
9.05 Prohibition of Fundamental Changes.............................. 104
9.06 Limitation on Liens............................................. 106
9.07 Indebtedness.................................................... 107
9.08 Investments..................................................... 108
9.09 Dividend Payments............................................... 109
9.10 Certain Financial Covenants..................................... 111
9.11 Capital Expenditures............................................ 117
9.12 Interest Rate Protection Agreements............................. 117
9.13 Subordinated Indebtedness....................................... 117
9.14 Lines of Business............................................... 118
9.15 Transactions with Affiliates.................................... 118
9.16 Use of Proceeds................................................. 118
9.17 Certain Obligations Respecting Subsidiaries..................... 119
9.18 Modifications of Certain Documents.............................. 120
9.19 Commodity Hedging Activities.................................... 120
9.20 After-Acquired Real Estate...................................... 120
9.21 Activities of the Parent and Holdings. ......................... 121
Section 10. Events of Default........................................... 121
Section 11. The Administrative Agent.................................... 126
11.01 Appointment, Powers and Immunities............................. 126
11.02 Reliance by Administrative Agent............................... 127
11.03 Defaults....................................................... 127
11.04 Rights as a Lender............................................. 128
11.05 Indemnification................................................ 128
11.06 Non-Reliance on Administrative Agent and Other
Lenders........................................................ 128
<PAGE> 5
Page
----
11.07 Failure to Act................................................. 129
11.08 Resignation or Removal of Administrative Agent................. 129
11.09 Consents under Other Credit Documents.......................... 130
11.10 Collateral Sub-Agents.......................................... 130
Section 12. Miscellaneous............................................... 131
12.01 Waiver......................................................... 131
12.02 Notices........................................................ 131
12.03 Expenses, Etc.................................................. 131
12.04 Amendments, Etc................................................ 133
12.05 Successors and Assigns......................................... 134
12.06 Assignments and Participations................................. 134
12.07 Survival....................................................... 137
12.08 Captions....................................................... 137
12.09 Counterparts................................................... 137
12.10 Governing Law; Submission to Jurisdiction...................... 137
12.11 Waiver of Jury Trial........................................... 138
12.12 Treatment of Certain Information;
Confidentiality................................................ 138
(4)
<PAGE> 6
SCHEDULES
---------
SCHEDULE I - Lenders and Commitments
SCHEDULE II - Litigation
SCHEDULE III - Conflicts
SCHEDULE IV - Governmental Approvals, Etc.
SCHEDULE V - Material Agreement and Liens
SCHEDULE VI - Certain Environmental Matters
SCHEDULE VII - Capitalization and Equity Rights relating to the Parent
SCHEDULE VIII - Capitalization and Equity Rights relating to Holdings
SCHEDULE IX - Capitalization and Equity Rights relating to CALI
SCHEDULE X - Capitalization and Equity Rights relating to Alflex
SCHEDULE XI - Capitalization and Equity Rights relating to Barmet
SCHEDULE XII - Subsidiaries and Investments
SCHEDULE XIII - Title to Properties
SCHEDULE XIV - Real Estate
SCHEDULE XV - Conditions Precedent to Original Credit Agreement
EXHIBITS
--------
EXHIBIT A-1 - Form of Term Loan Note
EXHIBIT A-2 - Form of Revolving Credit Note
EXHIBIT A-3 - Form of Swingline Note
EXHIBIT B - Form of Borrowing Base Certificate
EXHIBIT C - Form of Pledge and Security Agreement
EXHIBIT D - Form of Confidentiality Agreement
(5)
<PAGE> 7
AMENDED AND RESTATED CREDIT AGREEMENT (this "AGREEMENT") dated as of
November 29, 1996, between:
(1) COMMONWEALTH ALUMINUM CORPORATION, a corporation duly organized
and validly existing under the laws of the State of Delaware (the
"PARENT");
(2) COMMONWEALTH INDUSTRIES, INC., a corporation duly organized and
validly existing under the laws of the State of Delaware ("HOLDINGS");
(3) COMMONWEALTH ALUMINUM LEWISPORT, INC., a corporation duly
organized and validly existing under the laws of the State of Delaware
("CALI");
(4) ALFLEX CORPORATION (formerly named CasTech Aluminum Group Inc.), a
corporation duly organized and validly existing under the laws of the State
of Delaware ("ALFLEX");
(5) BARMET ALUMINUM CORPORATION, a corporation duly organized and
validly existing under the laws of the State of Ohio ("BARMET");
(6) each of the Subsidiaries of the Parent identified under the
caption "SUBSIDIARY GUARANTORS" on the signature pages hereto and each
Subsidiary of the Parent that becomes a "Subsidiary Guarantor" after the
date hereof pursuant to Section 9.17(a) hereof (each, a "SUBSIDIARY
GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS");
(7) each of the lenders that is a signatory hereto identified under
the caption "LENDERS" on the signature pages hereto and each lender that
becomes a "Lender" after the date hereof pursuant to Section 12.06(b)
hereof (individually, a "LENDER" and, collectively, the "LENDERS"); and
(8) NATIONAL WESTMINSTER BANK PLC, as administrative agent for the
Lenders (in such capacity, together with its successors in such capacity,
the "ADMINISTRATIVE AGENT").
Credit Agreement
----------------
<PAGE> 8
-2-
PRELIMINARY STATEMENTS:
Terms used in these Preliminary Statements and not otherwise defined shall
have the meanings assigned to such terms in Section 1.01 of this Agreement.
(1) The Obligors, the Existing Lenders and the Administrative Agent are
parties to a Credit Agreement dated as of September 20, 1996 (as heretofore
modified and supplemented and in effect on the date of this Agreement, the
"ORIGINAL CREDIT AGREEMENT") providing, subject to the terms and conditions
thereof, for the making of revolving extensions of credit and term loans to the
Borrowers. The parties hereto now wish to amend the Original Credit Agreement in
certain respects and to add the New Lenders as parties thereto and, in that
connection, wish to amend and restate the Original Credit Agreement in its
entirety, it being the intention of the parties hereto that the loans
outstanding under the Original Credit Agreement on the Restatement Effective
Date shall continue and remain outstanding and not be repaid on the Restatement
Effective Date, but shall be assigned and reallocated among the Lenders as
provided in Section 2.01 hereof.
(2) Each of the Obligors expects to derive benefit, directly or indirectly,
from the credit extended to the Borrowers hereunder, both in its separate
capacity and as a member of the Commonwealth Group, since the successful
operation of each of such Obligors will be dependent on the continued successful
performance of the functions of such Commonwealth Group as a whole.
Accordingly, the parties hereto hereby agree that the Original Credit
Agreement shall, as of the date hereof (but subject to the satisfaction of the
conditions precedent specified in Section 7.02 hereof), be amended and restated
in its entirety as follows:
Credit Agreement
----------------
<PAGE> 9
-3-
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 CERTAIN DEFINED TERMS. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the correlative meanings
when used in the plural and vice versa):
"ACQUISITION" shall mean (a) the purchase by the Parent (either directly or
indirectly) of the Old CasTech Shares for cash pursuant to the Tender Offer
Documents, (b) the Merger and (c) the purchase of options in respect of the Old
CasTech Shares as contemplated by the Merger Agreement.
"ACQUISITION DOCUMENTS" shall mean the Tender Offer Documents, the Merger
Agreement, the certificate of merger with respect to the Merger and any other
document or information sent by the Parent or Old CasTech to the stockholders of
Old CasTech or filed with the Commission in connection with the Acquisition.
"ADMINISTRATIVE AGENT" shall have the meaning assigned to such term in the
recital of parties to this Agreement.
"ADMINISTRATIVE QUESTIONNAIRE" shall mean an administrative questionnaire
in a form supplied by the Administrative Agent.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
directly or indirectly controlled by or under direct or indirect common control
with the Parent. As used in this definition, "CONTROL" (including, with its
correlative meanings, "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH") shall mean possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise), PROVIDED that, in any event, any Person that owns directly or
indirectly securities
Credit Agreement
----------------
<PAGE> 10
-4-
having 10% or more of the voting power for the election of directors or other
governing body of a corporation or 10% or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to control such corporation or other Person.
Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely by
reason of his or her being a director, officer or employee of the Parent or any
of its Subsidiaries and (b) none of the Wholly Owned Subsidiaries of the Parent
shall be Affiliates.
"ALFLEX" shall have the meaning assigned to such term in the recital of
parties to this Agreement.
"ALUMINUM BUSINESS" shall mean the business of developing, manufacturing,
producing, marketing, transporting and selling aluminum, aluminum products and
electrical wiring products (including, without limitation, flexible conduit and
pre-wired armored cable) and any other business incidental thereto.
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each Type
of Loan, the lending office of such Lender (or of an affiliate of such Lender)
designated for such Type of Loan in the Administrative Questionnaire of such
Lender or such other lending office of such Lender (or of an affiliate of such
Lender) as such Lender may from time to time specify to the Administrative Agent
and the Parent as the office by which its Loans of such Type are to be made and
maintained.
"APPLICABLE LETTER OF CREDIT PERCENTAGE" shall mean, at any time, the
Applicable Margin in effect at such time with respect to Term Loans that are
Eurodollar Loans.
"APPLICABLE MARGIN" shall mean, at any time, for each Type of Loans set
forth below, the percentage set forth below such Type opposite the Applicable
Pricing Level in effect at such time:
Credit Agreement
----------------
<PAGE> 11
-5-
<TABLE>
<CAPTION>
===========================================================================
APPLICABLE
PRICING LEVEL BASE RATE LOANS EURODOLLAR LOANS
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
1 0.00% 0.50%
- ---------------------------------------------------------------------------
2 0.00% 0.75%
- ---------------------------------------------------------------------------
3 0.00% 1.00%
- ---------------------------------------------------------------------------
4 0.00% 1.25%
- ---------------------------------------------------------------------------
5 0.25% 1.50%
- ---------------------------------------------------------------------------
6 0.50% 1.75%
- ---------------------------------------------------------------------------
7 0.75% 2.00%
- ---------------------------------------------------------------------------
8 1.00% 2.25%
===========================================================================
</TABLE>
The Applicable Margin for Swingline Loans at any time shall be the Applicable
Margin in effect for Revolving Credit Loans that are Base Rate Loans at such
time.
"APPLICABLE NON-UTILIZATION FEE PERCENTAGE" shall mean, at any time, the
percentage set forth in the schedule below opposite the Applicable Pricing Level
in effect at such time:
Credit Agreement
----------------
<PAGE> 12
-6-
<TABLE>
<CAPTION>
===========================================================================
APPLICABLE APPLICABLE NON-UTILIZATION
PRICING LEVEL FEE PERCENTAGE
- ---------------------------------------------------------------------------
<S> <C> <C>
1 0.175%
- ---------------------------------------------------------------------------
2 0.200%
- ---------------------------------------------------------------------------
3 0.250%
- ---------------------------------------------------------------------------
4 0.250%
- ---------------------------------------------------------------------------
5 0.375%
- ---------------------------------------------------------------------------
6 0.375%
- ---------------------------------------------------------------------------
7 0.375%
- ---------------------------------------------------------------------------
8 0.500%
===========================================================================
</TABLE>
The "APPLICABLE PRICING LEVEL" in effect at any time shall be deemed to be
the level specified in the schedule below opposite the Senior Indebtedness to
EBITDA Ratio in effect as at the close of business on the Original Closing Date
(PROVIDED that if the Senior Indebtedness to EBITDA Ratio as at the last day of
any fiscal quarter of the Parent ending on or after September 30, 1996 shall
fall within any of the ranges set forth in the schedule below then, subject to
the delivery to the Administrative Agent of a certificate of a Responsible
Officer of the Parent demonstrating such fact prior to the end of the next
succeeding fiscal quarter, the Applicable Pricing Level shall be changed to the
Applicable Pricing Level set forth opposite such range in such schedule during
the period commencing on the Quarterly Date on or immediately following the date
of receipt of such certificate to but not including the next succeeding
Quarterly Date thereafter):
Credit Agreement
----------------
<PAGE> 13
-7-
<TABLE>
<CAPTION>
===========================================================================
APPLICABLE
PRICING LEVEL SENIOR INDEBTEDNESS TO EBITDA RATIO
- ---------------------------------------------------------------------------
<S> <C> <C>
1 Less than 1.00 to 1.00
- ---------------------------------------------------------------------------
2 Greater than or equal to 1.00 to 1.00
and less than 2.00 to 1.00
- ---------------------------------------------------------------------------
3 Greater than or equal to 2.00 to 1.00
and less than 2.50 to 1.00
- ---------------------------------------------------------------------------
4 Greater than or equal to 2.50 to 1.00
and less than 3.00 to 1.00
- ---------------------------------------------------------------------------
5 Greater than or equal to 3.00 to 1.00
and less than 3.50 to 1.00
- ---------------------------------------------------------------------------
6 Greater than or equal to 3.50 to 1.00
and less than 4.00 to 1.00
- ---------------------------------------------------------------------------
7 Greater than or equal to 4.00 to 1.00
and less than 4.25 to 1.00
- ---------------------------------------------------------------------------
8 Greater than or equal to 4.25 to 1.00
- ---------------------------------------------------------------------------
</TABLE>
Credit Agreement
----------------
<PAGE> 14
-8-
"APPROVED ACCOUNT DEBTOR" shall mean each of Reynolds Aluminum Corporation
and Stolle Corporation (formerly known as Alcoa Building Products) so long as
the senior unsecured, non-credit enhanced debt securities of Reynolds Aluminum
Corporation or Stolle Corporation, as the case may be, are rated Baa3 or better
by Moody's and BBB- or better by Standard & Poor's.
"AVAILABLE COMMITMENTS" shall have the meaning assigned to such term in
Section 2.11 hereof.
"BANKRUPTCY CODE" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"BARMET" shall have the meaning assigned to such term in the recital of
parties to this Agreement.
"BASE RATE" shall mean, for any day, a rate per annum equal to the higher
of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the Prime Rate
for such day. Each change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"BASE RATE LOANS" shall mean Loans that bear interest at rates based upon
the Base Rate.
"BASIC DOCUMENTS" shall mean, collectively, the Credit Documents and the
Acquisition Documents.
"BASLE ACCORD" shall mean the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as amended, modified and
supplemented and in effect from time to time or any replacement thereof.
Credit Agreement
----------------
<PAGE> 15
-9-
"BORROWER" shall mean Alflex and each Revolving Credit Borrower. When
reference is made in this Agreement or in any other Credit Document to the
"relevant" Borrower in connection with any Facility, such reference shall be
deemed to refer, in the case of the Term Loan Facility, to Alflex and, in the
case of the Revolving Credit Facility, to each of CALI, Alflex and Barmet.
"BORROWING BASE" shall mean, as at any date, the sum of:
(a) 85% of the aggregate amount of Eligible Receivables of the
Borrowing Base Group at said date PLUS
(b) 50% of the aggregate value of Eligible Inventory (other than
Eligible Product-in-Process and Special Inventory) of the Borrowing Base
Group at said date PLUS
(c) 35% of the aggregate value of Eligible Product-in-Process of the
Borrowing Base Group at said date PLUS
(d) 20% of the aggregate value of Special Inventory MINUS
(e) an amount equal to two times the average aggregate monthly
Processing Fees payable by Members of the Borrowing Base Group during the
period of two fiscal quarters of the Parent most recently ended on or
before said date PLUS
(f) the aggregate amount of cover for Letter of Credit Liabilities
held by the Administrative Agent in the Collateral Account as contemplated
in Section 2.10(i) hereof;
PROVIDED that not more than 50% of the Borrowing Base shall be composed of
Eligible Inventory, Eligible Product-in-Process and Special Inventory (x) at any
time prior to the Trigger Date or (y) at any time thereafter, when less than
$75,000,000 in the
Credit Agreement
----------------
<PAGE> 16
-10-
aggregate is outstanding under Permitted Receivables Financings. The "VALUE" of
Eligible Inventory and Special Inventory shall be determined at the lower of
cost or market in accordance with GAAP, except that:
(i) initially, cost shall be determined for each Member of the
Borrowing Base Group in the manner described in the audited financial
statements referred to in Section 8.02 hereof relating to such Member; and
(ii) from and after receipt by the Administrative Agent of a notice
from the Parent to such effect, cost shall be determined on a
last-in-first-out basis.
"BORROWING BASE CERTIFICATE" shall mean a certificate of a Responsible
Officer of the Parent, substantially in the form of Exhibit B hereto and
appropriately completed.
"BORROWING BASE GROUP" shall mean, collectively, the Parent, Holdings,
CALI, Alflex, Barmet and the Subsidiary Guarantors. A "MEMBER" of the Borrowing
Base Group shall mean, individually, the Parent and each such Subsidiary.
"BUSINESS DAY" shall mean any day (a) on which commercial banks are not
authorized or required to close in New York City and (b) if such day relates to
a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by a Borrower with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, that is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"CALCULATION PERIOD" shall mean, at any date, the period of four
consecutive fiscal quarters of the Parent ending on or most recently ended prior
to such date (or, at any date on or prior to September 30, 1997, the period
consisting of the
Credit Agreement
----------------
<PAGE> 17
-11-
fiscal quarters of the Parent that have ended after October 1, 1996).
"CALI" shall have the meaning assigned to such term in the recital of
parties to this Agreement.
"CAPITAL EXPENDITURES" shall mean, for any period, expenditures (including,
without limitation, the aggregate amount of Capital Lease Obligations paid or
payable during such period) made by the Parent or any of its Subsidiaries to
acquire or construct fixed assets, plant and equipment (including renewals,
improvements and replacements, but excluding repairs) during such period
computed in accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"CAPITAL STOCK" shall mean, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's capital stock or other ownership
interests, including, without limitation, all common stock and all preferred
stock.
"CASUALTY EVENT" shall mean, with respect to any Property of any Person,
any loss of or damage to, or any condemnation or other taking of, such Property
for which such Person or any of its Subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.
Credit Agreement
----------------
<PAGE> 18
-12-
"CHANGE OF CONTROL" shall mean:
(a) that any "person" or "group" (as such terms are used for purposes
of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable,
except that for purposes of this paragraph (b) such person or group shall
be deemed to have "beneficial ownership" of all shares that such person or
group has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), is or becomes the
"beneficial owner" (as such term is used in Rule 13d-3 promulgated pursuant
to the Exchange Act), directly or indirectly, of more than 25% of the
aggregate voting power of all Voting Stock of the Parent; or
(b) that individuals who on the date hereof constituted the Board of
Directors of the Parent (together with any new directors whose election by
such Board or whose nomination for election by the stockholders of the
Parent was approved by a majority of the directors then still in office who
were either directors on the date hereof or whose election or nomination
for election was previously so approved) cease for any reason to constitute
a majority of the Board of Directors of the Parent; or
(c) that the Parent shall be required pursuant to the provisions of
the Senior Subordinated Debt Documents (or any other agreement or
instrument relating to or providing for any other Subordinated
Indebtedness) to redeem or repurchase, or make an offer to redeem or
repurchase, all or any portion of the Senior Subordinated Debt (or such
Subordinated Indebtedness, as the case may be) as a result of a change of
control (however defined).
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
Credit Agreement
----------------
<PAGE> 19
-13-
"COLLATERAL ACCOUNT" shall have the meaning assigned to such term in
Section 4.01 of the Pledge and Security Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission, or any
regulatory body that succeeds to the functions thereof.
"COMMITMENTS" shall mean the Term Loan Commitments and the Revolving Credit
Commitments. Where the context requires, the term "Commitments" shall include
reference to the Swingline Commitment.
"COMMITMENT TERMINATION DATE" shall mean the Quarterly Date falling on or
nearest to September 1, 2001.
"COMMODITY HEDGE AGREEMENTS" shall have the meaning assigned to such term
in Section 9.19 hereof.
"COMMONWEALTH GROUP" shall mean the Parent and each of its Subsidiaries,
and a "Member" of the Commonwealth Group shall mean, individually, the Parent
and each of its Subsidiaries.
"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the continuation
pursuant to Section 2.09 hereof of a Eurodollar Loan from one Interest Period to
the next Interest Period.
"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.09 hereof of one Type of Loans into another Type of Loans,
which may be accompanied by the transfer by a Lender (at its sole discretion) of
a Loan from one Applicable Lending Office to another.
"CREDIT DOCUMENTS" shall mean, collectively, this Agreement, the Notes, the
Letter of Credit Documents and the Security Documents.
Credit Agreement
----------------
<PAGE> 20
-14-
"DEBT ISSUANCE" shall mean any incurrence or other issuance of Indebtedness
by the Parent or any of its Subsidiaries after the date hereof, other than any
Specified Debt Issuance.
"DEFAULT" shall mean an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"DELIVERY DATE" shall mean the date following the end of a fiscal quarter
of the Parent on which the Lenders receive the Parent's financial statements
pursuant to Section 9.01(a) hereof for such fiscal quarter.
"DISPOSITION" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Parent or any of its Subsidiaries to any other Person excluding (a) any sale,
assignment, transfer or other disposition of any Property sold or disposed of in
the ordinary course of business and on ordinary business terms and (b)
Receivables Sales.
"DIVIDEND PAYMENT" shall mean dividends (in cash, Property or obligations)
on, or other payments or distributions on account of, or the setting apart of
money for a sinking or other analogous fund for, or the purchase, redemption,
retirement or other acquisition of, any shares of any class of stock of the
Parent or any of its Subsidiaries or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market or equity value of the Parent or any of its Subsidiaries), but excluding
dividends payable solely in shares of Capital Stock of the Parent (or in
options, warrants and other rights to acquire such shares of Capital Stock).
"DOLLARS" and "$" shall mean lawful money of the United States of America.
Credit Agreement
----------------
<PAGE> 21
-15-
"EBITDA" shall mean, for any period, the sum, for the Parent and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) net income for such period PLUS (b)
the amount of Total Interest Expense for such period PLUS (c) income and other
taxes paid during such period PLUS (d) depreciation and amortization for such
period PLUS (e) extraordinary losses for such period MINUS (f) extraordinary
gains for such period, MINUS (g) interest received during such period, PLUS (h)
with respect to periods ending on or prior to the first anniversary of the
Original Closing Date, Extraordinary Rationalization Costs paid during such
period up to but not exceeding $15,000,000 in the aggregate. Notwithstanding the
foregoing, (i) EBITDA for the three-month period ended December 31, 1995 shall
be deemed to be $18,900,000, (ii) EBITDA for the three-month period ended March
31, 1996 shall be deemed to be $16,200,000, (iii) EBITDA for the three-month
period ended June 30, 1996 shall be deemed to be $17,400,000 and (iv) EBITDA for
the three-month period ended September 30, 1996 shall be deemed to be
$20,000,000.
"ELIGIBLE INVENTORY" of the Borrowing Base Group shall mean, as at any
date, the sum of the following (determined without duplication):
(a) all Inventory (i) that is owned by (and in the possession or under
the control of) any Member of the Borrowing Base Group as at such date,
(ii) that is located in a jurisdiction in the United States of America,
(iii) as to which appropriate Uniform Commercial Code financing statements
have been filed naming the relevant Member of the Borrowing Base Group as
"debtor" and the Administrative Agent as "secured party", (iv) that is in
good condition, (v) that meets all standards imposed by any governmental
agency or department or division thereof having regulatory authority over
such Inventory, its use or sale and (vi) that is either currently usable or
currently saleable in the normal course of the Borrowing Base Group's
business without any notice to, or consent of, any governmental agency or
Credit Agreement
----------------
<PAGE> 22
-16-
department or division thereof (excluding however, except to the extent
that the Majority Lenders otherwise agree with respect to any specific
customer or Processor, any such Inventory that has been shipped to a
customer of the Borrowing Base Group, including Processors, even if on a
consignment or "sale or return" basis), PLUS
(b) all Inventory being processed by Processors on behalf of a Member
of the Borrowing Base Group as at such date, but only to the extent that
the relevant Member of the Borrowing Base Group shall have filed an
appropriate Uniform Commercial Code financing statement in the respective
jurisdiction in which such Inventory is located naming the respective
Processor as "debtor", such Member as "secured party" and the
Administrative Agent as "assignee" and delivered to the Administrative
Agent an opinion of counsel satisfactory to the Administrative Agent to the
effect that (i) to the extent such arrangement constitutes a consignment or
security interest under applicable law, the relevant Member of the
Borrowing Base Group has a valid perfected first priority security interest
in such Inventory, (ii) by virtue of the Pledge and Security Agreement,
such security interest has been validly assigned to the Administrative
Agent and (iii) accordingly the Administrative Agent has a valid and
perfected security interest in such Inventory under the Pledge and Security
Agreement,
PROVIDED that the Majority Lenders (through the Administrative Agent) may at any
time exclude from Eligible Inventory any type of Inventory that the Majority
Lenders (in their sole discretion) determine to be unmarketable.
"ELIGIBLE PRODUCT-IN-PROCESS" of the Borrowing Base Group shall mean
work-in-process (excluding ingots) net of progress billings, if any (as such
items are classified on the consolidated balance sheet of such Person in
accordance with GAAP and consistent with past practice).
Credit Agreement
----------------
<PAGE> 23
-17-
"ELIGIBLE RECEIVABLES" of the Borrowing Base Group shall mean, as at any
date, the aggregate amount of all Receivables at such date payable to Members
thereof other than the following (determined without duplication):
(a) any Receivable not payable in Dollars;
(b) any Receivable that, at the date of issuance of the invoice
therefor, was payable more than 60 days (or, in the case of an Extended
Payment Receivable, 90 days) after shipment of the related Inventory
(PROVIDED that the aggregate amount of Extended Payment Receivables
included in "Eligible Receivables" that are payable more than 60 days after
shipment of the related Inventory shall not at any time exceed
$15,000,000);
(c) any Receivable owing from a Subsidiary or Affiliate of a Member of
the Borrowing Base Group;
(d) any Receivable owing from an account debtor whose principal place
of business is located outside of the United States of America and Canada;
(e) any Receivable owing from an account debtor that the Majority
Lenders (through the Administrative Agent) have notified the Parent does
not have a satisfactory credit standing (as reasonably determined by the
Majority Lenders);
(f) any Receivable that is more than 60 days past due;
(g) all Receivables of any account debtor if more than 25% of the
aggregate amount of the Receivables owing from such account debtor shall at
the time be more than 30 days past due;
(h) all Receivables owing from any account debtor (other than an
Approved Account Debtor) to the extent the Receivables owing from such
account debtor and its
Credit Agreement
----------------
<PAGE> 24
-18-
Affiliates at the time exceed 5% of all Receivables then payable to the
Members of the Borrowing Base Group;
(i) any Receivable which has been subject, for 60 days or more, to any
claim on the part of the respective account debtor disputing liability
under such Receivable in whole or in part (but only to the extent the
amount of such Receivable in dispute exceeds $50,000);
(j) any Receivable evidenced by an Instrument (as defined in the
Pledge and Security Agreement) not in the possession of the Administrative
Agent;
(k) any Receivable representing an obligation for goods sold on
consignment, approval or a sale-or-return basis or subject to any other
repurchase or return arrangement; and
(l) any Receivable sold under a Permitted Receivables Financing.
"EMPLOYEE STOCK REPURCHASES" shall mean Dividend Payments constituting the
purchase, redemption, retirement or other acquisition of shares of Capital Stock
of the Parent, of options on any such shares or related stock appreciation
rights or similar securities, held by officers, directors or employees or former
directors, officers or employees (or their transferees, estates or beneficiaries
under their estates), upon death, disability, retirement, severance or
termination of employment or service or pursuant to any agreement under which
such shares of Capital Stock or related rights were issued.
"ENVIRONMENTAL CLAIM" shall mean, with respect to any Person, any written
notice, claim, demand or other communication (collectively, a "claim") by any
other Person alleging or asserting such Person's liability for investigatory
costs, cleanup costs, governmental response costs, damages to natural resources
or other Property, personal injuries, fines or
Credit Agreement
----------------
<PAGE> 25
-19-
penalties arising out of, based on or resulting from (i) the presence, or
Release into the environment, of any Hazardous Material at any location, whether
or not owned by such Person, or (ii) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law. The term
"Environmental Claim" shall include, without limitation, any claim by any
governmental authority for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and any
claim by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"ENVIRONMENTAL LAWS" shall mean any and all present and future Federal,
state, local and foreign laws, rules or regulations, and any orders or decrees,
in each case as now or hereafter in effect, relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the environment,
including, without limitation, ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or toxic or hazardous substances
or wastes.
"EQUITY ISSUANCE" shall mean (a) any issuance or sale by the Parent or any
of its Subsidiaries after the Original Closing Date of (i) any of its Capital
Stock, (ii) any warrants or options exercisable in respect of its Capital Stock
(other than any warrants or options issued to directors, officers or employees
of the Parent or any of its Subsidiaries pursuant to employee benefit or other
compensation-related plans established in the ordinary course of business and
any Capital Stock of the Parent or such Subsidiary issued upon the exercise of
such warrants or options) or (iii) any other security or instrument
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representing an equity interest (or the right to obtain any equity interest) in
the Parent or any of its Subsidiaries or (b) the receipt by the Parent or any of
its Subsidiaries after the Original Closing Date of any capital contribution
(whether or not evidenced by any equity security issued by the recipient of such
contribution); PROVIDED that Equity Issuance shall not include (x) any such
issuance or sale by any Subsidiary of the Parent to the Parent or any Wholly
Owned Subsidiary of the Parent or (y) any capital contribution by the Parent or
any Wholly Owned Subsidiary of the Parent to any Subsidiary of the Parent.
"EQUITY RIGHTS" shall mean, with respect to any Person, any subscriptions,
options, warrants, commitments, preemptive rights or agreements of any kind
(including, without limitation, any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or securities convertible
into, any additional shares of Capital Stock of any class, or partnership or
other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" shall mean any corporation or trade or business that is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which the Parent is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the Parent
is a member.
"EURODOLLAR BASE RATE" shall mean, with respect to any Eurodollar Loan for
any Interest Period therefor:
(a) the rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) reported on the date two Business
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Days prior to the first day of such Interest Period on Telerate Access
Service Page 3750 (British Bankers Association Settlement Rate) as the
London Interbank Offered Rate for Dollar deposits having a term comparable
to such Interest Period and in an amount of $1,000,000 or more; or
(b) if said Page shall cease to be publicly available or if the
information contained on said Page, in the sole judgment of the
Administrative Agent, shall cease to accurately reflect such London
Interbank Offered Rate, the Eurodollar Base Rate shall mean the arithmetic
mean (rounded upwards, if necessary, to the nearest 1/16 of 1%), as
determined by the Administrative Agent, of the rates per annum quoted by
the respective Reference Lenders at approximately 11:00 a.m. London time
(or as soon thereafter as practicable) on the date two Business Days prior
to the first day of such Interest Period for the offering by the respective
Reference Lenders to leading banks in the London interbank market of Dollar
deposits having a term comparable to such Interest Period and in an amount
comparable to the principal amount of the Eurodollar Loan to be made by the
respective Reference Lenders for such Interest Period (and, if any
Reference Lender is not participating in any Eurodollar Loans during any
Interest Period therefor, the Eurodollar Base Rate for such Loans for such
Interest Period shall be determined by reference to the amount of such
Loans that such Reference Lender would have made or had outstanding had it
been participating in such Loan during such Interest Period).
"EURODOLLAR LOANS" shall mean Loans that bear interest at rates based on
rates referred to in the definition of "Eurodollar Base Rate" in this Section
1.01.
"EURODOLLAR RATE" shall mean, for any Eurodollar Loan for any Interest
Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Administrative Agent to be equal to the
Eurodollar Base Rate
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for such Loan for such Interest Period divided by 1 minus the Reserve
Requirement (if any) for such Loan for such Interest Period.
"EVENTS OF DEFAULT" shall have the meaning assigned to such term in Section
10 hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"EXISTING LENDERS" shall mean each of the Lenders identified under the
caption "Existing Lenders" on the signature pages hereto.
"EXISTING REVOLVING CREDIT LOANS" means "Post-Merger Revolving Credit
Loans" under and as defined in the Original Credit Agreement outstanding on the
Restatement Effective Date.
"EXISTING TERM LOANS" means "Post-Merger Tranche A Term Loans" under and as
defined in the Original Credit Agreement outstanding on the Restatement
Effective Date.
"EXTENDED PAYMENT RECEIVABLE" shall mean any Receivable having normal trade
terms of more than 60 days and less than or equal to 90 days.
"EXTRAORDINARY RATIONALIZATION COSTS" shall mean rationalization costs
associated with the Acquisition incurred by the Parent and its Subsidiaries, as
determined by the Parent reasonably and in good faith.
"FACILITY" shall mean each of the Term Loan Facility and the Revolving
Credit Facility. Where the context requires, the term "Facility" shall include
reference to the Swingline Facility.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of
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1%) 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 on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, PROVIDED that (a) if the day for
which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day and (b) if such
rate is not so published for any Business Day, the Federal Funds Rate for such
Business Day shall be the average rate charged to NatWest on such Business Day
on such transactions as determined by the Administrative Agent.
"FIXED CHARGES RATIO" shall mean, as at any date, the ratio of (a) (i)
EBITDA for the then-current Calculation Period MINUS (ii) taxes paid during such
period to (b) the sum of (i) Total Interest Expense for such period PLUS (ii)
all regularly scheduled payments of principal of Senior Indebtedness (including,
without limitation, the principal component of any payments in respect of
Capital Lease Obligations) made during such period.
"GAAP" shall mean generally accepted accounting principles applied on a
basis consistent with those that, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.
"GENERAL GUARANTEED OBLIGATIONS" shall have the meaning assigned to such
term in Section 6.01(a) hereof.
"GUARANTEE" shall mean a guarantee, an endorsement, a contingent agreement
to purchase or to furnish funds for the payment or maintenance of, or otherwise
to be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other
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distributions upon the stock or equity interests of any Person, or an agreement
to purchase, sell or lease (as lessee or lessor) Property, products, materials,
supplies or services primarily for the purpose of enabling a debtor to make
payment of such debtor's obligations or an agreement to assure a creditor
against loss, and including, without limitation, causing a bank or other
financial institution to issue a letter of credit or other similar instrument
for the benefit of another Person, but excluding endorsements for collection or
deposit in the ordinary course of business. The terms "GUARANTEE" and
"GUARANTEED" used as a verb shall have a correlative meaning.
"GUARANTEED OBLIGATIONS" shall have the meaning assigned to such term in
Section 6.01(b) hereof.
"GUARANTORS" shall mean (a) with respect to the General Guaranteed
Obligations, the Parent, Holdings, CALI, Alflex, Barmet and the Subsidiary
Guarantors and (b) with respect to the Joint Obligations, the Revolving Credit
Borrowers.
"HAZARDOUS MATERIAL" shall mean, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or other
materials or substances that are now or hereafter become defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (c) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited, limited
or regulated under any Environmental Law.
"HOLDINGS" shall have the meaning assigned to such term in the recital of
parties to this Agreement.
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"IMCO RECYCLING" shall mean IMCO Recycling Inc., a Delaware corporation.
"IMCO SUPPLY AGREEMENT" shall mean the Supply Agreement dated as of March
24, 1992 by and between Barmet and IMCO Recycling, as the same may be modified
and supplemented and in effect from time to time.
"IMMATERIAL SUBSIDIARY" shall mean, as at any date:
(a) Commonal Corp., PROVIDED that Commonal Corp. shall cease to be an
"Immaterial Subsidiary" if at any time it shall have (i) at least 5% of the
total consolidated assets of the Parent and its Subsidiaries (determined as
of the last day of the fiscal year of the Parent ending on or most recently
ended prior to such date) or (ii) at least 5% of the consolidated revenues
of the Parent and its Subsidiaries for the fiscal year of the Parent ending
on or most recently ended prior to such date);
(b) each other Subsidiary of the Parent that, as at the end of and for
the quarterly accounting period ending on or most recently ended prior to
such date, shall have less than $500,000 in assets and less than $500,000
in gross revenues; and
(c) any Subsidiary described in Section 9.08(h) hereof.
"INDEBTEDNESS" shall mean, for any Person (without duplication):
(a) obligations created, issued or incurred by such Person for
borrowed money (whether by loan, the issuance and sale of debt securities
or the sale of Property to another Person subject to an understanding or
agreement, contingent or otherwise, to repurchase such Property from such
Person);
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(b) obligations of such Person to pay the deferred purchase or
acquisition price of Property or services, other than trade accounts
payable (other than for borrowed money) arising, and accrued liabilities
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered;
(c) Indebtedness of others secured by a Lien on the Property of such
Person, whether or not the respective indebtedness so secured has been
assumed by such Person;
(d) obligations of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial
institutions for account of such Person;
(e) Capital Lease Obligations of such Person; and
(f) Indebtedness of others Guaranteed by such Person.
"INFORMATION MEMORANDUM" shall mean the Confidential Information Memorandum
dated September, 1996 with respect to the credit facilities provided under this
Agreement.
"INTEREST PERIOD" shall mean, with respect to any Eurodollar Loan, each
period commencing on the date such Eurodollar Loan is made or Converted from a
Base Rate Loan or (in the event of a Continuation) the last day of the next
preceding Interest Period for such Loan and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as the relevant Borrower may select as provided in Section 4.05
hereof, except that each Interest Period that commences on the last Business Day
of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Business Day of the appropriate subsequent calendar month.
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Notwithstanding the foregoing:
(i) no Interest Period for any Term Loan may commence before and end
after any Principal Payment Date unless, after giving effect thereto, the
aggregate principal amount of the Term Loans having Interest Periods that
end after such Principal Payment Date shall be equal to or less than the
aggregate principal amount of the Term Loans scheduled to be outstanding
after giving effect to the payments of principal required to be made on
such Principal Payment Date;
(ii) if any Interest Period for any Loan under the Revolving Credit
Facility would otherwise end after the Commitment Termination Date, such
Interest Period shall end on the Commitment Termination Date;
(iii) each Interest Period that would otherwise end on a day that is
not a Business Day shall end on the next succeeding Business Day (or, if
such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and
(iv) notwithstanding clause (i) and (ii) above, no Interest Period
shall have a duration of less than one month and, if the Interest Period
for any Eurodollar Loan would otherwise be a shorter period, such Loan
shall not be available hereunder for such period.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
"INVENTORY" shall mean all readily marketable materials, including raw
materials, of a type manufactured or
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consumed by the Members of the Borrowing Base Group in the ordinary course of
business as presently conducted (including ingots but excluding, in any event,
all work-in-process).
"INVESTMENT" shall mean, for any Person: (a) the acquisition (whether for
cash, Property, services or securities or otherwise) of Capital Stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of any other Person or any agreement to make any such acquisition (including,
without limitation, any "short sale" or any sale of any securities at a time
when such securities are not owned by the Person entering into such sale); (b)
the making of any deposit with, or advance, loan or other extension of credit
to, any other Person (including the purchase of Property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such Property to such Person), but excluding any such advance, loan or extension
of credit having a term not exceeding 90 days arising in connection with the
sale of inventory or supplies by such Person in the ordinary course of business;
(c) the entering into of any Guarantee of, or other contingent obligation with
respect to, Indebtedness or other liability of any other Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person; (d) the entering into of any Interest Rate Protection Agreement; or (e)
the entering into of any Commodity Hedge Agreement.
"ISSUING BANK" shall mean NatWest and each other Lender requested by the
Parent and approved by the Administrative Agent to be an "Issuing Bank"
hereunder, as the issuers of Letters of Credit under Section 2.03 hereof,
together with their respective successors and assigns in such capacity.
"JOINT OBLIGATIONS" shall have the meaning assigned to such term in Section
6.01(b) hereof.
"LENDER" shall have the meaning assigned to such term in the recital of
parties to this Agreement. When reference is made in this Agreement or any other
Credit Document to any
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"relevant" Lender in connection with any Facility, such reference shall be
deemed to refer to a Lender that has a Commitment, outstanding Loans or
outstanding Notes under such Facility.
"LETTER OF CREDIT DOCUMENTS" shall mean, with respect to any Letter of
Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to such
Letter of Credit or (b) any collateral security for any of such obligations,
each as the same may be modified and supplemented and in effect from time to
time.
"LETTER OF CREDIT INTEREST" shall mean, for each Revolving Credit Lender,
such Lender's participation interest (or, in the case of the relevant Issuing
Bank, such Issuing Bank's retained interest) in an Issuing Bank's liability
under Letters of Credit issued by such Issuing Bank and such Lender's rights and
interests in Reimbursement Obligations and fees, interest and other amounts
payable in connection with Letters of Credit and Reimbursement Obligations.
"LETTER OF CREDIT LIABILITY" shall mean, without duplication, at any time
and in respect of any Letter of Credit, the sum of (a) the undrawn face amount
of such Letter of Credit PLUS (b) the aggregate unpaid principal amount of all
Reimbursement Obligations at such time due and payable in respect of all
drawings made under such Letter of Credit. For purposes of this Agreement, a
Revolving Credit Lender (other than the Issuing Bank that issued the relevant
Letter of Credit) shall be deemed to hold a Letter of Credit Liability in an
amount equal to its participation interest in the related Letter of Credit under
Section 2.03 hereof, and such Issuing Bank shall be deemed to hold a Letter of
Credit Liability in an amount equal to its retained interest in the related
Letter of Credit after giving effect to the acquisition by the Revolving Credit
Lenders other
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than such Issuing Bank of their participation interests under said Section 2.03.
"LETTERS OF CREDIT" shall have the meaning assigned to such term in
Section 2.03(a) hereof.
"LIEN" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Credit Documents, a
Person shall be deemed to own subject to a Lien any Property that it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
(other than an operating lease) relating to such Property.
"LOANS" shall mean each of the Term Loans and the Revolving Credit Loans.
Where the context requires, the term "Loans" shall include reference to
Swingline Loans.
"MAJORITY LENDERS" shall mean Lenders holding at least 51% of the sum of
(i) the aggregate unused Commitments, (ii) the aggregate unpaid principal amount
of the Loans and (iii) the aggregate amount of all Letter of Credit Liabilities.
"MAJORITY REVOLVING CREDIT LENDERS" shall mean Revolving Credit Lenders
having at least 51% of the aggregate amount of the Revolving Credit Commitments
or, if the Revolving Credit Commitments shall have terminated, Lenders holding
at least 51% of the sum of (a) the aggregate unpaid principal amount of the
Revolving Credit Loans plus (b) the aggregate amount of all Letter of Credit
Liabilities.
"MAJORITY TERM LOAN LENDERS" shall mean Term Loan Lenders holding at least
51% of the aggregate Term Loan Commitments (or, if the Term Loan Commitments
have been terminated, Lenders holding at least 51% of the aggregate unpaid
principal amount of the Term Loans).
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"MARGIN STOCK" shall mean "margin stock" within the meaning of Regulations
G, T, U and X.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a) the
business, properties, assets, operations, conditions (financial or otherwise),
or prospects of the Parent and its Subsidiaries taken as a whole, (b) the
ability of any Obligor to perform its obligations under any of the Basic
Documents to which it is a party, (c) the validity or enforceability of any of
the Basic Documents, (d) the rights and remedies of the Lenders and the
Administrative Agent under any of the Credit Documents or (e) the timely payment
of the principal of or interest on the Loans or the Reimbursement Obligations or
other amounts payable in connection therewith.
"MERGER" shall mean the merger of New CALC with and into Old CasTech in
accordance with the terms of the Merger Agreement, with Old CasTech being the
surviving corporation.
"MERGER AGREEMENT" shall mean the Agreement and Plan of Merger dated as of
August 19, 1996 among Old CasTech, the Parent and New CALC, as the same shall,
subject to Section 9.18 hereof, be modified and supplemented and in effect from
time to time.
"MOODY'S" shall mean Moody's Investors Service, Inc., or any successor
thereto.
"MORTGAGES" shall mean, collectively, one or more Instruments of Mortgage,
Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
executed by one or more Obligors pursuant to Section 7.01(m) and 7.03(d) of the
Original Credit Agreement or Section 9.17(a) or 9.20 hereof, in each case
substantially in the form of Exhibit F-1 or F-2 to the Original Credit
Agreement, as the case may be, and covering the respective Properties and
leasehold interest identified in Schedules I and II thereto, as said Instruments
of Mortgage, Deed of Trust,
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Assignment of Rents, Security Agreement and Fixture Filing shall be modified and
supplemented and in effect from time to time.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions are being made by the Parent or
any ERISA Affiliate and that is covered by Title IV of ERISA.
"NATWEST" shall mean National Westminster Bank Plc.
"NET AVAILABLE PROCEEDS" shall mean:
(i) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition;
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Parent and its Subsidiaries in respect of such Casualty Event net of
(A) reasonable expenses incurred by the Parent and its Subsidiaries in
connection therewith and (B) contractually required repayments of
Indebtedness to the extent secured by a Lien on such Property and any
income and transfer taxes payable by the Parent or any of its Subsidiaries
in respect of such Casualty Event;
(iii) in the case of any Equity Issuance or Debt Issuance, the
aggregate amount of all cash received by the Parent and its Subsidiaries in
respect thereof net of reasonable expenses incurred by the Parent and its
Subsidiaries in connection therewith; and
(iv) in the case of any Receivables Sale, the aggregate amount of all
cash received by the Parent and its Subsidiaries in connection with such
Receivables Sale net of reasonable expenses incurred by the Parent and its
Subsidiaries in connection therewith.
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"NET CASH PAYMENTS" shall mean, with respect to any Disposition, the
aggregate amount of all cash payments (including, without limitation, all cash
payments received by way of deferred payment pursuant to a note or installment
receivable or otherwise, but only as and when received) received by the Parent
and its Subsidiaries directly or indirectly in connection with such Disposition;
PROVIDED that (a) Net Cash Payments shall be net of (i) the amount of any legal,
title and recording tax expenses, commissions and other fees and expenses paid
or payable by the Parent and its Subsidiaries in connection with such
Disposition and (ii) any Federal, state and local income or other taxes
estimated to be payable by the Parent and its Subsidiaries as a result of such
Disposition (but only to the extent that such estimated taxes are in fact paid
to the relevant Federal, state or local governmental authority within six months
of the date of such Disposition) and (b) Net Cash Payments shall be net of any
repayments by the Parent or any of its Subsidiaries of Indebtedness to the
extent that (i) such Indebtedness is secured by a Lien on the Property that is
the subject of such Disposition and (ii) the transferee of (or holder of a Lien
on) such Property requires that such Indebtedness be repaid as a condition to
the purchase of such Property.
"NEW CALC" shall mean CALC Corporation, a Delaware corporation and a
predecessor of Alflex.
"NEW LENDERS" shall mean each of the Lenders identified under the caption
"New Lenders" on the signature pages hereto.
"NON-UTILIZATION FEES" shall have the meaning assigned to such term in
Section 2.05(a) hereof.
"NOTES" shall mean each of the Term Loan Notes and the Revolving Credit
Notes. Where the context requires, the term "Notes" shall include reference to
the Swingline Note.
"OBLIGORS" shall mean, collectively, the Borrowers and the Guarantors.
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"OFFER TO PURCHASE" shall mean the Offer to Purchase dated August 22, 1996,
issued by New CALC in connection with the Acquisition, as the same shall,
subject to Section 9.18 hereof, be modified and supplemented and in effect from
time to time.
"OLD CASTECH" shall be a reference to Alflex with respect to periods prior
to the Merger.
"OLD CASTECH SHARE" shall mean a share of common stock, par value $0.01 per
share, of Old CasTech.
"ORIGINAL CLOSING DATE" shall mean September 20, 1996, being the date on
which the initial loans were made under the Original Credit Agreement and the
date on which the Merger became effective in accordance with the terms of the
Merger Agreement.
"ORIGINAL CREDIT AGREEMENT" shall have the meaning assigned to such term in
the Preliminary Statements to this Agreement.
"OTHER EVENT OF DEFAULT" shall mean an Event of Default other than under
Section 10(a) or 9.10 hereof.
"PARENT" shall have the meaning assigned to such term in the recital of
parties to this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED INVESTMENTS" shall mean:
(a) direct obligations of the United States of America, or of any
agency thereof, or obligations guaranteed as to principal and interest by
the United States of America, or of any agency thereof, in either case
maturing not more than 90 days from the date of acquisition thereof;
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(b) time deposits or certificates of deposit issued by any bank or
trust company organized under the laws of the United States of America or
any state thereof whose outstanding senior long-term debt securities are
rated either A- or better by Standard & Poor's or A3 or better by Moody's,
maturing not more than 90 days from the date of acquisition thereof;
(c) commercial paper rated A-1 or better or P-1 by Standard & Poor's
or Moody's, respectively, maturing not more than 90 days from the date of
acquisition thereof;
(d) repurchase obligations with a term of not more than 30 days for
underlying securities of the types specified in paragraph (a) of this
definition with any bank or trust company meeting the qualifications
specified in paragraph (b) of this definition; and
(e) Investments in money market mutual funds substantially all of the
assets of which are cash or Permitted Investments specified in paragraphs
(a) through (d) of this definition;
in each case so long as the same (i) provide for the payment of principal and
interest (and not principal alone or interest alone) and (ii) are not subject to
any contingency regarding the payment of principal or interest.
"PERMITTED RECEIVABLES FINANCING" shall mean a transaction or series of
transactions (including amendments, supplements, extensions, renewals,
replacements, refinancings or modifications thereof) pursuant to which a
Securitization Subsidiary purchases Receivables and Related Assets from the
Parent or any of its Subsidiaries and finances such Receivables and Related
Assets through the issuance of Indebtedness or equity interests or through the
sale of the Receivables and Related Assets or a fractional undivided interest in
the Receivables and
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Related Assets; PROVIDED that (a) the Board of Directors of the Parent shall
have determined in good faith that such Permitted Receivables Financing is
economically fair and reasonable to the Parent and such Securitization
Subsidiary, (b) all sales of Receivables and Related Assets to or by such
Securitization Subsidiary are made at fair market value (as determined in good
faith by the Board of Directors of the Parent), (c) the interest rate applicable
to such financing shall be a market rate of interest as of the time such
financing is entered into, (d) the covenants, termination events and other
provisions thereof shall be market terms (as determined in good faith by the
Board of Directors of the Parent), (e) no portion of the Indebtedness of a
Securitization Subsidiary is Guaranteed by or is recourse to the Parent or any
of its other Subsidiaries (other than recourse for customary representations,
warranties, covenants and indemnities, none of which shall related to the
collectibility of the Receivables and Related Assets) and (f) neither the Parent
nor any of its other Subsidiaries has any obligation to maintain or preserve
such Securitization Subsidiary's financial condition.
"PERMITTED REINVESTMENT CAPITAL EXPENDITURES" shall mean Capital
Expenditures made with the Net Available Proceeds of Casualty Events and
Dispositions that the Parent or any of its Subsidiaries is reinvesting in
replacement assets in accordance with Sections 2.10 and 9.05(c) hereof.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"PLACEMENT AGREEMENT" shall mean the Placement Agreement dated as of
September 20, 1996 pursuant to which the purchasers of the Senior Subordinated
Debt have agreed to purchase and re-offer the same.
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"PLAN" shall mean an employee benefit or other plan established or
maintained by the Parent or any ERISA Affiliate and that is covered by Title IV
of ERISA, other than a Multiemployer Plan.
"PLEDGE AND SECURITY AGREEMENT" shall mean an Amended and Restated Pledge
and Security Agreement substantially in the form of Exhibit C hereto between the
Obligors and the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"POST-DEFAULT RATE" shall mean a rate per annum equal to 2.0% PLUS the Base
Rate as in effect from time to time plus the Applicable Margin for Base Rate
Loans, PROVIDED that the "Post-Default Rate" with respect to principal of a
Eurodollar Loan shall be 2.0% PLUS the interest rate for such Loan as provided
in Section 3.02(b) hereof.
"PRIME RATE" shall mean, at any time, the Bank Prime Loan rate then most
recently published by the Board of Governors of the Federal Reserve System in
Federal Reserve Statistical Release H.15(519) entitled "Selected Interest
Rates", or any successor publication.
"PRINCIPAL PAYMENT DATES" shall mean the Quarterly Dates falling on or
nearest to March 1, June 1, September 1 and December 1 of each year, commencing
with December 1, 1996 through and including September 1, 2001.
"PROCESSING FEES" shall mean commissions and processing fees payable to
bailees, warehousemen, terminal operators, Processors and other third parties
holding Inventory of Members of the Borrowing Base Group, but excluding, in any
event, fees payable to IMCO Recycling under the IMCO Supply Agreement.
"PROCESSOR" shall mean a third party (including, without limitation, IMCO
Recycling) that processes Inventory of one or more Members of the Borrowing Base
Group.
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"PROPERTY" shall mean any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"QUARTERLY DATES" shall mean the first Business Day of March, June,
September and December in each year, the first of which shall be the first such
day after the date of the Original Credit Agreement.
"QUARTERLY FINANCIAL STATEMENTS" shall mean the financial statements
furnished to the Lenders under Section 9.01(a) hereof (and, prior to the
delivery of the first financial statements under said Section 9.01(a), the
quarterly financial statements of the Parent as at June 30, 1996 referred to in
Section 8.02(a) hereof).
"RECAPTURE DATE" shall mean the last day of each Recapture Period.
"RECAPTURE PERIOD" shall mean:
(a) the period commencing on the Original Closing Date and ending on
the last day of the calendar month following the first date on which the
Parent and/or any of its Subsidiaries receives Net Cash Payments which,
together with all Net Cash Payments received by the Parent and its
Subsidiaries on and after the Original Closing Date, equal or exceed in the
aggregate $1,000,000; and
(b) thereafter, each period commencing on the date immediately
following the last day of the immediately preceding Recapture Period and
ending on the last day of the calendar month following the first date on
which the Parent and/or any of its Subsidiaries receives Net Cash Payments
which, together with all Net Cash Payments received by the Parent and its
Subsidiaries on and after the date immediately following the last day of
the immediately
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preceding Recapture Period, equal or exceed in the aggregate $1,000,000.
"RECEIVABLES" of any Member of the Borrowing Base Group shall mean, as at
any date, the unpaid portion of the obligation, as stated on the respective
invoice, of a customer of such Member in respect of Inventory sold and shipped
by such Member to such customer, net of any credits, rebates or offsets owed to
such customer and also net of any commissions payable to third parties (and for
purposes hereof, a credit or rebate paid by check or draft of such Member or any
of its Subsidiaries shall be deemed to be outstanding until such check or draft
shall have been debited to the account of such Person on which such check or
draft was drawn).
"RECEIVABLES AND RELATED ASSETS" shall mean accounts receivable and
instruments, chattel paper, obligations, general intangibles and other similar
assets, in each case relating to such receivables, including interests in
merchandise or goods, the sale or lease of which gave rise to such receivable,
related contractual rights, guarantees, insurance proceeds, collections, other
related assets and proceeds of all of the foregoing.
"RECEIVABLES SALE" shall mean any sale, transfer or other disposition of
Receivables and Related Assets by the Parent or any of its Subsidiaries, but
excluding sales or transfers of Receivables and Related Assets for purposes of
collection in the ordinary course of business and consistent with past practice.
"REFERENCE LENDERS" shall mean NatWest and such other Lender or Lenders as
the Administrative Agent and the Parent shall agree (or their respective
Applicable Lending Offices, as the case may be).
"REGULATION A", "REGULATION D", "REGULATION G", "REGULATION T", "REGULATION
U" and "REGULATION X" shall mean, respectively, Regulations A, D, G, T, U and X
of the Board of Governors of the Federal Reserve System (or any successor), as
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the same may be modified and supplemented and in effect from time to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
after the date hereof in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Lender of or under any Federal, state or foreign law or
regulations (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"REIMBURSEMENT OBLIGATION" shall mean, at any time, the obligations of the
Revolving Credit Borrowers then outstanding, or that may thereafter arise in
respect of all Letters of Credit then outstanding, to reimburse amounts paid by
an Issuing Bank in respect of any drawings under a Letter of Credit issued by
such Issuing Bank.
"RELEASE" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment, including, without limitation, the movement of Hazardous
Materials through ambient air, soil, surface water, ground water, wetlands, land
or subsurface strata.
"RELEVANT PARTIES" shall have the meaning assigned to such term in Section
10(b) hereof.
"RESERVED COMMITMENTS" shall have the meaning assigned to such term in
Section 2.11(a) hereof.
"RESERVE REQUIREMENT" shall mean, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained
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during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion Dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loans.
"RESPONSIBLE OFFICER" shall mean, with respect to any Person, the
Treasurer, Chief Financial Officer and Controller of such Person and such other
officers of the relevant Person as the Administrative Agent may agree.
"RESTATEMENT EFFECTIVE DATE" shall mean the date on which the conditions to
effectiveness set forth in Section 7.02 hereof shall have been satisfied or
waived.
"REVOLVING CREDIT BORROWER" shall mean each of CALI, Alflex and Barmet.
"REVOLVING CREDIT BORROWING PERIOD" shall mean the period from and
including the Restatement Effective Date to but not including the Commitment
Termination Date.
"REVOLVING CREDIT COMMITMENT" shall mean, as to each Revolving Credit
Lender, the obligation of such Lender to make Revolving Credit Loans, and to
issue or participate in Letters of Credit pursuant to Section 2.03 hereof, in an
aggregate principal or face amount at any one time outstanding up to but not
exceeding the amount set opposite the name of such Lender on Schedule I hereto
under the caption "Revolving Credit Commitment" or, in the case of a Person that
becomes a Revolving Credit Lender pursuant to an assignment permitted under
Section 12.06(b)
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hereof, as specified in the respective instrument of assignment pursuant to
which such assignment is effected (as the same may be reduced from time to time
pursuant to Section 2.04 or 2.10 hereof). The original aggregate principal
amount of the Revolving Credit Commitments is $225,000,000.
"REVOLVING CREDIT COMMITMENT PERCENTAGE" shall mean, with respect to any
Revolving Credit Lender, the ratio of (a) the amount of the Revolving Credit
Commitment of such Lender to (b) the aggregate amount of the Revolving Credit
Commitments of all of the Lenders.
"REVOLVING CREDIT FACILITY" shall mean the revolving credit facility
provided hereunder in respect of the Revolving Credit Commitments.
"REVOLVING CREDIT LENDERS" shall mean (a) on the date hereof, the Lenders
having Revolving Credit Commitments on Schedule I hereto and (b) thereafter, the
Lenders from time to time holding Revolving Credit Loans or and Revolving Credit
Commitments after giving effect to any assignments thereof permitted by Section
12.06(b) hereof.
"REVOLVING CREDIT LOANS" shall mean the loans provided for by Section
2.01(b) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"REVOLVING CREDIT NOTES" shall mean the promissory notes under the
Revolving Credit Facility provided for by Section 2.08(a) hereof and all
promissory notes delivered in substitution or exchange therefor, in each case as
the same shall be modified and supplemented and in effect from time to time.
"SECURITIZATION SUBSIDIARY" shall mean a Subsidiary of the Parent (all of
the outstanding Capital Stock of which, other than DE MINIMIS preferred stock
and director's qualifying shares, if any, is owned, directly or indirectly, by
the Parent) or another special purpose vehicle that is established for the
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limited purpose of acquiring and financing Receivables and Related Assets of the
Parent and/or any of its Subsidiaries and engaging in activities ancillary
thereto.
"SECURITY DOCUMENTS" shall mean, collectively, the Pledge and Security
Agreement, the Mortgages and all Uniform Commercial Code financing statements
required thereby to be filed with respect to the security interests in personal
Property and fixtures created pursuant thereto.
"SENIOR INDEBTEDNESS" shall mean all Indebtedness of the Parent and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) other than Subordinated Indebtedness.
"SENIOR INDEBTEDNESS TO EBITDA RATIO" shall mean:
(a) for determinations prior to September 30, 1996, the ratio of (i)
Senior Indebtedness outstanding at the close of business on the Original
Closing Date to (ii) $79,900,000; and
(b) for determinations on and after September 30, 1996, the ratio of
(i) Senior Indebtedness outstanding as at the last day of any fiscal
quarter of the Parent ending on or most recently ended prior to such day to
(ii) TTM EBITDA as at such day.
"SENIOR INTEREST COVERAGE RATIO" shall mean, at any date, the ratio of (a)
EBITDA for the then-current Calculation Period to (b) Senior Interest Expense
for such period.
"SENIOR INTEREST EXPENSE" shall mean, for any period, the sum, for the
Parent and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of all interest in respect of Specified
Senior Bank Debt accrued during such period (whether or not actually paid during
such period).
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"SENIOR LEVERAGE RATIO" shall mean, as at any date, the ratio of (a)
Specified Senior Bank Debt as at such date to (b) EBITDA for the period of four
consecutive fiscal quarters of the Parent ending on or most recently ended prior
to such date for which Quarterly Financial Statements have been delivered.
"SENIOR SUBORDINATED DEBT" shall mean the Indebtedness of the Parent in
respect of the 10-3/4% Senior Subordinated Notes of the Parent due October 1,
2006 issued under the Senior Subordinated Debt Indenture.
"SENIOR SUBORDINATED DEBT DOCUMENTS" shall mean the Placement Agreement,
the Senior Subordinated Debt Indenture, the securities or other instruments
evidencing the Senior Subordinated Debt and all other documents, instruments and
agreements executed and delivered in connection with the original issuance of
the Senior Subordinated Debt, in each case, as the same shall, subject to
Section 9.18 hereof, be modified and supplemented and in effect from time to
time.
"SENIOR SUBORDINATED DEBT INDENTURE" shall mean the Indenture dated as of
September 20, 1996 between the Parent, each of the subsidiary guarantors party
thereto and Harris Trust and Savings Bank, as Trustee, as supplemented by a
First Supplemental Indenture thereto dated as of November 12, 1996 in
substantially the form delivered to the Lenders prior to the date hereof and as
the same shall, subject to Section 9.18 hereof, be further modified and
supplemented and in effect from time to time.
"SIGNING DATE" shall mean the earliest date as of which each of the
intended parties hereto shall have executed and delivered counterparts hereof.
"SPECIAL INVENTORY" of the Borrowing Base Group shall mean, as at any date,
all Inventory (other than Eligible Inventory) of Alflex constituting finished
goods being held by third parties on consignment on behalf of Members of the
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Borrowing Base Group in the ordinary course of business as at such date, but
only to the extent that the relevant Member of the Borrowing Base Group shall
have filed an appropriate Uniform Commercial Code financing statement in the
respective jurisdiction in which such Inventory is located naming the respective
Processor or other third party as "debtor", such Member as "secured party" and
the Administrative Agent as "assignee"; PROVIDED that the Majority Lenders
(through the Administrative Agent) may at any time exclude from Special
Inventory any type of Inventory that the Majority Lenders (in their sole
discretion) determine to be unmarketable.
"SPECIFIED DEBT ISSUANCE" shall mean any incurrence or issuance of
Indebtedness under Section 9.07 hereof other than under paragraph (g) thereof
(except to the extent such Indebtedness constitutes Capital Lease Obligations
and other Indebtedness secured by Liens permitted under Section 9.06(i) or
9.06(j) hereof).
"SPECIFIED EVENT OF DEFAULT PERIOD" shall mean:
(a) any period during which an Event of Default has occurred and is
continuing under Section 10(a) hereof;
(b) any period during which an Event of Default has occurred and is
continuing under Section 9.10 hereof; and
(c) the period specified below relating to any Other Event of Default
that continues unremedied for a period of 30 or more days after notice
thereof to the Parent by the Administrative Agent or any Lender (through
the Administrative Agent). For purposes of this paragraph (c), the
"Specified Event of Default Period" relating to any Other Event of Default
shall be the period:
(i) commencing on the earlier of (x) the date on which the Parent
first obtains knowledge of the occurrence of such Other Event of
Default and (y) the
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date on which notice of such Other Event of Default is delivered to
the Parent by the Administrative Agent or any Lender (through the
Administrative Agent) and
(ii) ending on the date on which such Other Event of Default is
cured or waived.
"SPECIFIED SENIOR BANK DEBT" shall mean all Indebtedness of the Parent and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) in respect of Loans and Letters of Credit.
"STANDARD & POOR'S" shall mean Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, Inc., or any successor thereto.
"STOCK REPURCHASES" shall mean Dividend Payments constituting the purchase,
redemption, retirement or other acquisition of shares of any class of Capital
Stock of the Parent, but excluding Employee Stock Repurchases.
"SUBORDINATED INDEBTEDNESS" shall mean, collectively, (a) Senior
Subordinated Debt and (b) other Indebtedness (i) for which the Parent is
directly and primarily liable, (ii) in respect of which none of its Subsidiaries
is contingently or otherwise obligated and (iii) that is subordinated to the
obligations of the Obligors hereunder on terms, and pursuant to documentation
containing other terms (including interest, amortization, covenants and events
of default), no less favorable to the Lenders than the terms set forth in the
Senior Subordinated Debt Documents or otherwise in form and substance
satisfactory to the Majority Lenders.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
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functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"SUBSIDIARY GUARANTORS" shall have the meaning assigned to such term in the
recital of parties to this Agreement.
"SWINGLINE COMMITMENT" shall mean the obligation of the Swingline Lender to
make Swingline Loans in an aggregate principal at any one time outstanding up to
but not exceeding $20,000,000.
"SWINGLINE FACILITY" shall mean the swingline facility provided hereunder
in respect of the Swingline Commitments.
"SWINGLINE LENDER" shall mean NatWest in its capacity as lender under the
Swingline Facility, together with its successors in such capacity.
"SWINGLINE LOANS" shall have the meaning assigned to such term in Section
2.01(c) hereof.
"SWINGLINE NOTE" shall mean a promissory note provided for by Section
2.08(a) hereof and any promissory note delivered in substitution or exchange
therefor, in each case as the same shall be modified and supplemented and in
effect from time to time.
"TENDER OFFER" shall mean the offer by New CALC to purchase for cash all of
the Old CasTech Shares pursuant to the Tender Offer Documents.
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"TENDER OFFER DOCUMENTS" shall mean the Offer to Purchase, the Schedule
14D-1 filed by New CALC with respect to the Offer to Purchase, and all
amendments, exhibits and schedules thereto and related documents distributed to
the shareholders of Old CasTech or filed with the Commission in connection with
the Acquisition.
"TERM LOAN COMMITMENT" shall mean, as to each Term Loan Lender, the
obligation of such Lender to make a single Term Loan in an aggregate principal
amount up to but not exceeding the amount set opposite the name of such Lender
on Schedule I hereto under the caption "Term Loan Commitment" or, in the case of
a Person that becomes a Term Loan Lender pursuant to an assignment permitted
under Section 12.06(b) hereof, as specified in the respective instrument of
assignment pursuant to which such assignment is effected (as the same may be
reduced from time to time pursuant to Section 2.04 or 2.10 hereof). The original
aggregate principal amount of the Term Loan Commitments is $100,000,000.
"TERM LOAN FACILITY" shall mean the term loan facility provided hereunder
in respect of the Term Loan Commitments.
"TERM LOAN LENDERS" shall mean (a) on the date hereof, the Lenders having
Term Loan Commitments on Schedule I hereto and (b) thereafter, the Lenders from
time to time holding Term Loans and Term Loan Commitments after giving effect to
any assignments thereof permitted by Section 12.06(b) hereof.
"TERM LOAN NOTES" shall mean the promissory notes under the Term Loan
Facility provided for by Section 2.08(a) hereof and all promissory notes
delivered in substitution or exchange therefor, in each case as the same shall
be modified and supplemented and in effect from time to time.
"TERM LOANS" shall mean the loans provided for by Section 2.01(a) hereof,
which may be Base Rate Loans and/or Eurodollar Loans.
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"TOTAL INDEBTEDNESS" shall mean, as at any date, the sum, for the Parent
and its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all Indebtedness and (b) all other
liabilities that should be classified as indebtedness on the Parent's
consolidated balance sheet.
"TOTAL INTEREST COVERAGE RATIO" shall mean, at any date, the ratio of (a)
EBITDA for the then-current Calculation Period to (b) Total Interest Expense for
such period.
"TOTAL INTEREST EXPENSE" shall mean, for any period, the sum, for the
Parent and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness (including, without limitation, the interest component
of any payments in respect of Capital Lease Obligations) accrued or capitalized
during such period (whether or not actually paid during such period) PLUS (b)
the net amount payable (or MINUS the net amount receivable) under Interest Rate
Protection Agreements during such period (whether or not actually paid or
received during such period).
"TOTAL LEVERAGE RATIO" shall mean, as at any date of determination, the
ratio of (a) Total Indebtedness as at such date to (b) EBITDA for the period of
four consecutive fiscal quarters of the Parent ending on or most recently ended
prior to such date for which Quarterly Financial Statements have been delivered.
"TRIGGER DATE" shall mean the earlier date as of which:
(a) (i) the ratio of (x) Total Indebtedness as at such date to (y) TTM
EBITDA as at such date shall be less than 3.00 to 1.00, and (ii) the ratio
of (x) TTM EBITDA as at such date to (y) TTM Total Interest Expense as at
such date shall be greater than 3.00 to 1.00; or
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(b) the senior unsecured, non-credit enhanced debt securities of the
Parent shall be rated Baa3 or better by Moody's and BBB- or better by
Standard & Poor's.
"TTM EBITDA" shall mean, as at any date, EBITDA for the twelve-month period
ending on such date (if such date is the last day of a calendar month) or on the
last day of the calendar month most recently ended prior to such date.
"TTM TOTAL INTEREST EXPENSE" shall mean, as at any date, Total Interest
Expense for the twelve-month period ending on such date (if such date is the
last day of a calendar month) or on the last day of the calendar month most
recently ended prior to such date.
"TYPE" shall have the meaning assigned to such term in Section 1.03 hereof.
"VOTING STOCK" shall mean, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"WHOLLY OWNED SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are directly or indirectly owned or controlled by
such Person or one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
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1.02 ACCOUNTING TERMS AND DETERMINATIONS.
(a) Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall (unless otherwise disclosed to the Lenders in writing at the
time of delivery thereof in the manner described in paragraph (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Lenders hereunder (which, prior to the delivery of
the first financial statements under Section 9.01 hereof, shall mean the audited
financial statements as at December 31, 1995 referred to in Section 8.02
hereof). All calculations made for the purposes of determining compliance with
this Agreement shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest annual or quarterly
financial statements furnished to the Lenders pursuant to Section 9.01 hereof
(or, prior to the delivery of the first financial statements under Section 9.01
hereof, used in the preparation of the audited financial statements as at
December 31, 1995 referred to in Section 8.02 hereof) unless (i) the Parent
shall have objected to determining such compliance on such basis at the time of
delivery of such financial statements or (ii) the Majority Lenders shall so
object in writing within 30 days after delivery of such financial statements, in
either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 9.01 hereof,
shall mean the audited financial statements referred to in Section 8.02 hereof).
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(b) The Parent shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 9.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
paragraph (a) above and (ii) reasonable estimates of the difference between such
statements arising as a consequence thereof.
(c) On the date hereof, (i) the last day of the fiscal year of Alflex and
each of its Subsidiaries is March 31, and the last days of the first three
fiscal quarters in each of their fiscal years is June 30, September 30 and
December 31, and (ii) the last day of the fiscal year of the Parent and each of
its Subsidiaries (other than Alflex and Alflex's Subsidiaries) is December 31,
and the last days of the first three fiscal quarters in each of their fiscal
years is March 31, June 30 and September 30. To enable the ready and consistent
determination of compliance with the covenants set forth in Section 9 hereof,
(x) as promptly as practicable following the Restatement Effective Date, the
Parent will cause Alflex and each of Alflex's Subsidiaries to change the last
day of their fiscal year to December 31, and to change the last days of the
first three fiscal quarters in each of their fiscal years to March 31, June 30
and September 30, respectively; and (y) except as provided in the preceding
paragraph (x), neither the Parent nor any of its Subsidiaries will change the
last day of its fiscal year or the last days of the first three fiscal quarters
in each of its fiscal years.
1.03 TYPES OF LOANS. Loans hereunder are distinguished by "Type". The
"Type" of a Loan refers to whether such Loan is a Base Rate Loan or a Eurodollar
Loan, each of which constitutes a Type.
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Section 2. COMMITMENTS, LOANS, NOTES AND PREPAYMENTS.
2.01 LOANS.
(a) TERM LOANS.
(i) On the Restatement Effective Date, the Existing Term Loans held by
the Existing Lenders under the Original Credit Agreement shall
automatically, and without any action on the part of any Person, be
designated as Term Loans owing by Alflex hereunder and each of the New
Lenders that is a Term Loan Lender (and each Existing Lender, if any, whose
relative proportion of Term Loans hereunder is increasing over the
proportion of Existing Term Loans held by it under the Original Credit
Agreement) shall, by assignments from the Existing Lenders (which shall be
deemed to occur automatically on the Restatement Effective Date), acquire a
portion of the Term Loans of the Existing Lenders in such amounts (and the
Lenders shall, through the Administrative Agent, make such additional
adjustments among themselves as shall be necessary) so that after giving
effect to such assignments and adjustments, the Lenders shall hold the Term
Loans hereunder ratably in accordance with their respective Term Loan
Commitments.
(ii) On the Restatement Effective Date all Interest Periods under the
Original Credit Agreement in respect of the Existing Term Loans shall
automatically be terminated, and, from and after the Restatement Effective
Date, Alflex may Convert Term Loans of one Type into Term Loans of another
Type (as provided in Section 2.09 hereof) or Continue Term Loans of one
Type as Term Loans of the same Type (as provided in Section 2.09 hereof).
(b) REVOLVING CREDIT LOANS.
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(i) On the Restatement Effective Date, the Existing Revolving Credit
Loans held by the Existing Lenders under the Original Credit Agreement
shall automatically, and without any action on the part of any Person, be
designated as Revolving Credit Loans hereunder and each of the New Lenders
that is a Revolving Credit Lender (and each Existing Lender, if any, whose
relative proportion of Revolving Credit Commitments hereunder is increasing
over the proportion of Existing Revolving Credit Loans held by it under the
Original Credit Agreement) shall, by assignments from the Existing Lenders
(which shall be deemed to occur automatically on the Restatement Effective
Date), acquire a portion of the Revolving Credit Loans of the Existing
Lenders in such amounts (and the Revolving Credit Lenders shall, through
the Administrative Agent, make such additional adjustments among themselves
as shall be necessary) so that after giving effect to such assignments and
adjustments, the Revolving Credit Lenders shall hold the Revolving Credit
Loans hereunder ratably in accordance with their respective Revolving
Credit Commitments.
(ii) In addition to the Revolving Credit Loans provided for under
Section 2.01(b)(i) hereof, each Revolving Credit Lender severally agrees,
on the terms and conditions of this Agreement, to make loans to each of
CALI, Alflex and Barmet in Dollars during the Revolving Credit Borrowing
Period in an aggregate principal amount at any one time outstanding (as to
all such Borrowers) up to but not exceeding the amount of the Revolving
Credit Commitment of such Lender as in effect from time to time, PROVIDED
that in no event shall the sum of (x) the aggregate principal amount of all
Revolving Credit Loans (including all Swingline Loans), together with the
aggregate amount of all Letter of Credit Liabilities PLUS (y) the aggregate
amount of the Reserved Commitments exceed the aggregate amount of the
Revolving Credit Commitments as in effect from time to time.
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(iii) On the Restatement Effective Date, all "Interest
Periods" under the Original Credit Agreement in respect of the Existing
Revolving Credit Loans shall automatically be terminated, and, subject
to the terms and conditions of this
Agreement, during the Revolving Credit Borrowing Period the Revolving
Credit Borrowers may borrow, repay and reborrow the amount of the
Revolving Credit Commitments by means of Base Rate Loans and Eurodollar
Loans and may Convert Revolving Credit Loans of one Type into Revolving
Credit Loans of another Type (as provided in Section 2.09 hereof) or
Continue Revolving Credit Loans of one Type as Revolving Credit Loans
of the same Type (as provided in Section 2.09 hereof).
(c) SWINGLINE LOANS. Subject to the terms and conditions of this Agreement,
in addition to the Revolving Credit Loans provided for in Section 2.01(b)
hereof, the Swingline Lender agrees to make loans ("SWINGLINE LOANS") to the
Revolving Credit Borrowers during the Revolving Credit Borrowing Period. During
the Revolving Credit Borrowing Period, the Revolving Credit Borrowers may
borrow, repay and reborrow Swingline Loans, PROVIDED that the sum of (x) the
aggregate principal amount of all Revolving Credit Loans (including all
Swingline Loans), together with the aggregate amount of all Letter of Credit
Liabilities PLUS (y) the Reserved Commitments, shall not at any time exceed the
aggregate amount of the Revolving Credit Commitments nor shall the aggregate
principal amount of all Swingline Loans exceed $20,000,000. All Swingline Loans
shall be made only as Base Rate Loans and may not be made as or Converted into
Eurodollar Loans.
Upon demand by the Swingline Lender through the Administrative Agent, each
other Lender having a Revolving Credit Commitment shall purchase from the
Swingline Lender, and the Swingline Lender shall sell and assign to each other
such Lender, such other Lender's Revolving Credit Commitment Percentage of each
outstanding Swingline Loan (and related claims for accrued and unpaid interest
thereon) made by such Swingline Lender, by
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making available for the account of its Applicable Lending Office to the
Administrative Agent for the account of such Swingline Lender by deposit to the
Administrative Agent's Account, in same day funds, an amount equal to the sum of
(x) the portion of the outstanding principal amount of such Swingline Loans to
be purchased by such Lender PLUS (y) interest accrued and unpaid to and as of
such date on such portion of the outstanding principal amount of such Swingline
Loans. Each Lender's obligations to make such payments to the Administrative
Agent for account of the Swingline Lender under this paragraph, and the
Swingline Lender's right to receive the same, shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the failure of any other Lender to make its
payment under this paragraph, the financial condition of any Obligor, the
existence of any Default, the failure of any of the conditions set forth in
Section 7 hereof to be satisfied, or the termination of all or any of the
Commitments. Each such payment to the Swingline Lender shall be made without any
offset, abatement, withholding or reduction whatsoever. Each Lender agrees to
purchase its Revolving Credit Commitment Percentage of such outstanding
Swingline Loans on (x) the Business Day on which demand therefor is made by such
Swingline Lender, PROVIDED that notice of such demand is given not later than
12:00 noon New York City time on such Business Day or (y) the first Business Day
next succeeding such demand if notice of such demand is given after such time.
Upon any such assignment by the Swingline Lender to any other Lender of a
portion of the Swingline Lender's Swingline Loans, the Swingline Lender
represents and warrants to such other Lender that the Swingline Lender is the
legal and beneficial owner of such interest being assigned by it, but makes no
other representation or warranty and assumes no responsibility with respect to
such Swingline Loan. If and to the extent that any Lender shall not have so made
the amount of such Swingline Loan available to the Administrative Agent, such
Lender agrees to pay to the Administrative Agent for the account of the
Swingline Lender forthwith on demand such amount together with interest thereon,
for each day from the date of demand by the Swingline
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Lender until the date such amount is paid to the Administrative Agent, at the
Federal Funds Rate.
(d) LIMIT ON EURODOLLAR LOANS. No more than eight separate Interest Periods
in respect of Eurodollar Loans under any Facility from each Lender may be
outstanding at any one time.
2.02 BORROWINGS. Each Borrower shall give the Administrative Agent (or, in
the case of Swingline Loans, shall give the Swingline Lender) notice of each
borrowing by it hereunder as provided in Section 4.05 hereof. Not later than
1:00 p.m. New York time on the date specified for each borrowing hereunder, each
Lender shall make available the amount of the Loan or Loans to be made by it on
such date to the Administrative Agent, at an account specified by the
Administrative Agent, in immediately available funds, for account of the
relevant Borrower. The amount so received by the Administrative Agent shall,
subject to the terms and conditions of this Agreement, promptly be made
available to the relevant Borrower by depositing the same, in immediately
available funds, in an account of such Borrower designated by such Borrower.
2.03 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, the Revolving
Credit Commitments may be utilized, upon the request of the relevant Revolving
Credit Borrower, in addition to the Revolving Credit Loans to such Borrower
provided for by Section 2.01 hereof, by the issuance by the Issuing Banks of
letters of credit (collectively, "LETTERS OF CREDIT") for account of such
Borrower or any of its Subsidiaries (as specified by such Borrower), PROVIDED
that in no event shall:
(i) the sum of (x) the aggregate amount of all Letter of Credit
Liabilities, together with the aggregate principal amount of the Revolving
Credit Loans (including all Swingline Loans) PLUS (y) the Reserved
Commitments, exceed
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the aggregate amount of the Revolving Credit Commitments as in effect from
time to time;
(ii) the outstanding aggregate amount of all Letter of Credit
Liabilities exceed $30,000,000; and
(iii) the expiration date of any Letter of Credit extend beyond the
earlier of the date five Business Days prior to the Commitment Termination
Date and the date twelve months following the issuance of such Letter of
Credit.
In addition, on the Restatement Effective Date, all "Letters of Credit"
outstanding under the Original Credit Agreement on the Restatement Effective
Date shall automatically, without any action on the part of any Person, become
Letters of Credit outstanding hereunder.
(b) The following additional provisions shall apply to Letters of Credit:
(i) The relevant Revolving Credit Borrower shall give the
Administrative Agent at least three Business Days' irrevocable prior notice
(effective upon receipt) specifying the Business Day (which shall be no
later than 30 days preceding the Commitment Termination Date) each Letter
of Credit is to be issued, the Issuing Bank to issue the same and the
account party or parties therefor and describing in reasonable detail the
proposed terms of such Letter of Credit (including the beneficiary thereof)
and the nature of the transactions or obligations proposed to be supported
thereby (including whether such Letter of Credit is to be a commercial
letter of credit or a standby letter of credit). Upon receipt of any such
notice, the Administrative Agent shall advise the relevant Issuing Bank of
the contents thereof.
(ii) On each day during the period commencing with the issuance by an
Issuing Bank of any Letter of Credit and
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until such Letter of Credit shall have expired or been terminated, the
Revolving Credit Commitment of each Lender shall be deemed to be utilized
for all purposes of this Agreement in an amount equal to such Lender's
Revolving Credit Commitment Percentage of the then undrawn face amount of
such Letter of Credit. Each Revolving Credit Lender (other than the
relevant Issuing Bank) agrees that, upon the issuance of any Letter of
Credit hereunder, it shall automatically acquire a participation in such
Issuing Bank's liability under such Letter of Credit in an amount equal to
such Lender's Revolving Credit Commitment Percentage of such liability, and
each Revolving Credit Lender (other than such Issuing Bank) thereby shall
absolutely, unconditionally and irrevocably assume, as primary obligor and
not as surety, and shall be unconditionally obligated to such Issuing Bank
to pay and discharge when due, its Revolving Credit Commitment Percentage
of such Issuing Bank's liability under such Letter of Credit.
(iii) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the relevant Issuing Bank
shall promptly notify the relevant Borrower (through the Administrative
Agent) of the amount to be paid by such Issuing Bank as a result of such
demand and the date on which payment is to be made by such Issuing Bank to
such beneficiary in respect of such demand. Notwithstanding the identity of
the account party of any Letter of Credit, the relevant Borrower hereby
unconditionally agrees to pay and reimburse the Administrative Agent for
account of such Issuing Bank for the amount of each demand for payment
under such Letter of Credit that is in substantial compliance with the
provisions of such Letter of Credit at or prior to the date on which
payment is to be made by such Issuing Bank to the beneficiary thereunder,
without presentment, demand, protest or other formalities of any kind.
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(iv) Forthwith upon its receipt of a notice referred to in paragraph
(iii) of this Section 2.03(b), the relevant Borrower shall advise the
Administrative Agent whether or not such Borrower intends to borrow
hereunder to finance its obligation to reimburse the relevant Issuing Bank
for the amount of the related demand for payment and, if it does, submit a
notice of such borrowing as provided in Section 4.05 hereof.
(v) Each Revolving Credit Lender (other than the relevant Issuing
Bank) shall pay to the Administrative Agent for account of such Issuing
Bank at an account specified by the Administrative Agent in Dollars and in
immediately available funds, the amount of such Lender's Revolving Credit
Commitment Percentage of any payment under a Letter of Credit upon notice
by such Issuing Bank (through the Administrative Agent) to such Revolving
Credit Lender requesting such payment and specifying such amount. Each such
Revolving Credit Lender's obligation to make such payment to the
Administrative Agent for account of such Issuing Bank under this paragraph
(v), and such Issuing Bank's right to receive the same, shall be absolute
and unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the failure of any other Revolving Credit
Lender to make its payment under this paragraph (v), the financial
condition of the relevant Borrower (or any other account party or Obligor),
the existence of any Default or the termination of any of the Commitments.
Each such payment to an Issuing Bank shall be made without any offset,
abatement, withholding or reduction whatsoever. If any Revolving Credit
Lender shall default in its obligation to make any such payment to the
Administrative Agent for account of such Issuing Bank, for so long as such
default shall continue the Administrative Agent may at the request of such
Issuing Bank withhold from any payments received by the Administrative
Agent under this Agreement or any Note for account of such Revolving Credit
Lender the amount so in default and, to the extent so
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withheld, pay the same to such Issuing Bank in satisfaction of such
defaulted obligation.
(vi) Upon the making of each payment by a Revolving Credit Lender to
an Issuing Bank pursuant to paragraph (v) above in respect of any Letter of
Credit, such Lender shall, automatically and without any further action on
the part of the Administrative Agent, such Issuing Bank or such Lender,
acquire (x) a participation in an amount equal to such payment in the
Reimbursement Obligation owing to such Issuing Bank by the relevant
Borrower hereunder and under the Letter of Credit Documents relating to
such Letter of Credit and (y) a participation in a percentage equal to such
Lender's Revolving Credit Commitment Percentage in any interest or other
amounts payable by the relevant Borrower hereunder and under such Letter of
Credit Documents in respect of such Reimbursement Obligation (other than
the commissions, charges, costs and expenses payable to such Issuing Bank
pursuant to paragraph (vii) of this Section 2.03(b)). Upon receipt by an
Issuing Bank from or for account of the relevant Borrower of any payment in
respect of any Reimbursement Obligation or any such interest or other
amount (including by way of setoff or application of proceeds of any
collateral security) such Issuing Bank shall promptly pay to the
Administrative Agent for account of each Revolving Credit Lender entitled
thereto, such Revolving Credit Lender's Revolving Credit Commitment
Percentage of such payment, each such payment by such Issuing Bank to be
made in the same money and funds in which received by such Issuing Bank. In
the event any payment received by an Issuing Bank and so paid to the
relevant Revolving Credit Lenders hereunder is rescinded or must otherwise
be returned by such Issuing Bank, each Revolving Credit Lender shall, upon
the request of such Issuing Bank (through the Administrative Agent), repay
to such Issuing Bank (through the Administrative Agent) the amount of such
payment paid to such Lender, with interest at the rate specified in
paragraph (x) of this Section 2.03(b).
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(vii) The Revolving Credit Borrowers shall pay to the Administrative
Agent for account of each Revolving Credit Lender (ratably in accordance
with their respective Revolving Credit Commitment Percentages) a letter of
credit fee in respect of each Letter of Credit in an amount equal to the
Applicable Letter of Credit Percentage per annum of the daily average
undrawn face amount of such Letter of Credit for the period from and
including the date of issuance of such Letter of Credit (x) in the case of
a Letter of Credit that expires in accordance with its terms, to and
including such expiration date and (y) in the case of a Letter of Credit
that is drawn in full or is otherwise terminated other than on the stated
expiration date of such Letter of Credit, to but excluding the date such
Letter of Credit is drawn in full or is terminated (such fee to be
non-refundable, to be paid in arrears on each Quarterly Date and on the
Commitment Termination Date and to be calculated for any day after giving
effect to any payments made under such Letter of Credit on such day). In
addition, the Revolving Credit Borrowers shall pay to the Administrative
Agent for account of each Issuing Bank a fronting fee in respect of each
Letter of Credit issued by such Issuing Bank in an amount equal to 0.25%
per annum of the daily average undrawn face amount of such Letter of Credit
for the period from and including the date of issuance of such Letter of
Credit (x) in the case of a Letter of Credit that expires in accordance
with its terms, to and including such expiration date and (y) in the case
of a Letter of Credit that is drawn in full or is otherwise terminated
other than on the stated expiration date of such Letter of Credit, to but
excluding the date such Letter of Credit is drawn in full or is terminated
(such fee to be non-refundable, to be paid in arrears on each Quarterly
Date and on the Commitment Termination Date and to be calculated for any
day after giving effect to any payments made under such Letter of Credit on
such day) plus all commissions, charges, costs and expenses in the amounts
customarily charged by such Issuing
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Bank from time to time in like circumstances with respect to the issuance
of each Letter of Credit and drawings and other transactions relating
thereto.
(viii) Promptly following the end of each calendar month, each Issuing
Bank shall deliver (through the Administrative Agent) to each Revolving
Credit Lender and each Revolving Credit Borrower a notice describing the
aggregate amount of all Letters of Credit outstanding at the end of such
month. Upon the request of any Revolving Credit Lender from time to time,
each Issuing Bank shall deliver any other information reasonably requested
by such Lender with respect to each Letter of Credit then outstanding.
(ix) The issuance by an Issuing Bank of a Letter of Credit shall, in
addition to the conditions precedent set forth in Section 7 hereof, be
subject to the conditions precedent that (x) such Letter of Credit shall be
in such form, contain such terms and support such transactions as shall be
satisfactory to such Issuing Bank consistent with its then current
practices and procedures with respect to letters of credit of the same type
and (y) the relevant Revolving Credit Borrower shall have executed and
delivered such applications, agreements and other instruments relating to
such Letter of Credit as such Issuing Bank shall have reasonably requested
consistent with its then current practices and procedures with respect to
letters of credit of the same type, PROVIDED that in the event of any
conflict between any such application, agreement or other instrument and
the provisions of this Agreement or any Security Document, the provisions
of this Agreement and the Security Documents shall control.
(x) To the extent that any Lender shall fail to pay any amount
required to be paid pursuant to paragraph (v) or (vi) of this Section
2.03(b) on the due date therefor, such Lender shall pay interest to the
relevant Issuing Bank (through the Administrative Agent) on such amount
from and
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including such due date to but excluding the date such payment is made at a
rate per annum equal to the Federal Funds Rate, PROVIDED that if such
Lender shall fail to make such payment to such Issuing Bank within three
Business Days of such due date, then, retroactively to the due date, such
Lender shall be obligated to pay interest on such amount at the
Post-Default Rate.
(xi) The issuance by an Issuing Bank of any modification or supplement
to any Letter of Credit hereunder shall be subject to the same conditions
applicable under this Section 2.03 to the issuance of new Letters of
Credit, and no such modification or supplement shall be issued hereunder
unless either (x) the respective Letter of Credit affected thereby would
have complied with such conditions had it originally been issued hereunder
in such modified or supplemented form or (y) each Revolving Credit Lender
shall have consented thereto.
Each Revolving Credit Borrower hereby indemnifies and holds harmless each
Revolving Credit Lender and the Administrative Agent from and against any and
all claims and damages, losses, liabilities, costs or expenses that such Lender
or the Administrative Agent may incur (or that may be claimed against such
Lender or the Administrative Agent by any Person whatsoever) by reason of or in
connection with the execution and delivery or transfer of or payment or refusal
to pay by an Issuing Bank under any Letter of Credit issued by such Issuing
Bank; PROVIDED that such Borrower shall not be required to indemnify any Lender
or the Administrative Agent for any claims, damages, losses, liabilities, costs
or expenses to the extent, but only to the extent, caused by (x) the willful
misconduct or gross negligence of such Issuing Bank in determining whether a
request presented under any Letter of Credit complied with the terms of such
Letter of Credit or (y) in the case of such Issuing Bank, such Lender's failure
to pay under any Letter of Credit after the presentation to it of a request
strictly complying with the terms and conditions of such Letter of Credit.
Nothing in this
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Section 2.03 is intended to limit the other obligations of any
Borrower, any Lender or the Administrative Agent under this Agreement.
2.04 CHANGES OF COMMITMENTS.
(a) EXPIRATION OF COMMITMENTS. Any portion of the Term Loan Commitments not
utilized on the Restatement Effective Date shall terminate automatically at the
close of business on the Restatement Effective Date. The Revolving Credit
Commitments shall be automatically reduced to zero on the Commitment Termination
Date.
(b) REDUCTIONS OF COMMITMENTS. Each Borrower shall have the right at any
time or from time to time (i) to reduce the aggregate unused amount of the
Commitments under its Facilities (for which purpose use of Revolving Credit
Commitments shall be deemed to include the aggregate amount of Swingline Loans
and Letter of Credit Liabilities) and (ii) in the case of the Revolving Credit
Borrowers, so long as no Loans (including all Swingline Loans) or Letter of
Credit Liabilities are outstanding, to terminate the Revolving Credit
Commitments; PROVIDED that (x) the relevant Borrower shall give notice of each
such termination or reduction as provided in Section 4.05 hereof and (y) each
partial reduction shall be in an aggregate amount at least equal to $5,000,000
(or a larger multiple of $1,000,000).
(c) GENERAL. The Commitments under any Facility once terminated or reduced
may not be reinstated.
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2.05 CERTAIN FEES.
(a) The Revolving Credit Borrowers shall pay to the Administrative Agent
for account of each Lender a fee ("NON-UTILIZATION FEES") on the daily average
unused amount of such Lender's Revolving Credit Commitment (for which purpose
(i) the Reserved Commitments shall be deemed not to constitute usage of such
Lender's Revolving Credit Commitment and (ii) the aggregate amount of any Letter
of Credit Liabilities shall be deemed to be a pro rata (based on the Revolving
Credit Commitments) use of each Lender's Revolving Credit Commitment), for the
period from and including the Signing Date to but not including the earlier of
the date such Revolving Credit Commitment is terminated and the Commitment
Termination Date, at a rate per annum equal to the Applicable Non-Utilization
Fee Percentage in effect from time to time.
(b) Accrued Non-Utilization Fee shall be payable on each Quarterly Date and
on the earlier of the date the Revolving Credit Commitments are terminated and
the Commitment Termination Date.
(c) Notwithstanding anything to the contrary contained herein or in the
Original Credit Agreement, the accrued fees payable under Section 2.05 of the
Original Credit Agreement shall be payable on the Restatement Effective Date.
2.06 LENDING OFFICES. The Loans of each Type made by each Lender shall be
made and maintained at such Lender's Applicable Lending Office for Loans of such
Type.
2.07 SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The
failure of any Lender to make any Loan to be made by it on the
date specified therefor shall not relieve any other Lender of its
obligation to make its Loan on such date, but neither any Lender
nor the Administrative Agent shall be responsible for the failure
of any other Lender to make a Loan to be made by such other
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Lender, and (except as otherwise provided in Section 4.06 hereof) no Lender
shall have any obligation to the Administrative Agent or any other Lender for
the failure by such Lender to make any Loan required to be made by such Lender.
The amounts payable by each Borrower at any time hereunder and under the Notes
to each Lender shall be a separate and independent debt and each Lender shall be
entitled to protect and enforce its rights arising out of this Agreement and the
Notes, and it shall not be necessary for any other Lender or the Administrative
Agent to consent to, or be joined as an additional party in, any proceedings for
such purposes.
2.08 NOTES.
(a) PROMISSORY NOTES. The Loans made by each Lender under each Facility
shall be evidenced by a single promissory note of each relevant Borrower
substantially in the form of the Exhibit hereto identified below opposite the
name of such Facility:
<TABLE>
<CAPTION>
Facility Exhibit
-------- -------
<S> <C>
Term Loan Facility Exhibit A-1
Revolving Credit Facility Exhibit A-2
Swingline Facility Exhibit A-3
</TABLE>
Each Note shall be dated the Restatement Effective Date, payable to such Lender
in a principal amount equal to the amount of its Commitment under the relevant
Facility as in effect on the Restatement Effective Date and otherwise duly
completed. The Swingline Note evidencing the Swingline Loans made by the
Swingline Lender shall be dated the Restatement Effective Date, payable to the
Swingline Lender in a principal amount equal to $20,000,000 and otherwise duly
completed.
(b) RECORDATION OF LOANS, ETC. The date, amount, Type, interest rate and
duration of Interest Period (if applicable) of each Loan under each Facility
made by each Lender
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to the relevant Borrower, and each payment made on account of the principal
thereof, shall be recorded by such Lender on its books and, prior to any
transfer of the Note evidencing the Loans under such Facility held by it,
endorsed by such Lender on the schedule attached to such Note or any
continuation thereof; PROVIDED that the failure of such Lender to make any such
recordation or endorsement shall not affect the obligations of the relevant
Borrower to make a payment when due of any amount owing hereunder or under such
Note in respect of such Loans.
(c) SUBSTITUTION, EXCHANGE, SUBDIVISION, ETC. No Lender shall be entitled
to have its Notes substituted or exchanged for any reason, or subdivided for
promissory notes of lesser denominations, except in connection with a permitted
assignment of all or any portion of such Lender's relevant Commitments, Loans
and Notes pursuant to Section 12.06 hereof (and, if requested by any Lender,
each Borrower agrees to so exchange any Note).
2.09 OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF LOANS.
Subject to Section 4.04 hereof, each Borrower shall have the right to prepay
Loans, to Convert Loans of one Type under one Facility into Loans of another
Type under the same Facility or to Continue Loans of one Type under one Facility
as Loans of the same Type under the same Facility, at any time or from time to
time, PROVIDED that:
(a) such Borrower shall give the Administrative Agent (or, in the case
of Swingline Loans, shall give the Swingline Lender) notice of each such
prepayment, Conversion or Continuation as provided in Section 4.05 hereof
(and, upon the date specified in any such notice of prepayment, the amount
to be prepaid shall become due and payable hereunder);
(b) any such prepayment or Conversion of a Eurodollar Loan other than
on the last day of an Interest Period therefor shall be accompanied by, and
subject to, the
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payment of any amount payable under Section 5.05 hereof in respect of such
prepayment or Conversion;
(c) prepayments of Loans under the Term Loan Facility shall be applied
FIRST in the direct order of maturity of the installments of such Loans
falling due within one year from the date of prepayment and THEN ratably to
the remaining installments of such Loans; and
(d) any Conversion or Continuation of Eurodollar Loans shall be
subject to the provisions of Section 2.01(d) hereof.
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 10 hereof, in the event that any Event of Default
shall have occurred and be continuing, the Administrative Agent may (and at the
request of the Majority Lenders shall) suspend the right of the Borrowers to
Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar
Loan, in which event all Loans shall be Converted (on the last day(s) of the
respective Interest Periods therefor) or Continued, as the case may be, as Base
Rate Loans.
2.10 MANDATORY PREPAYMENTS AND REDUCTIONS OF COMMITMENTS.
(a) BORROWING BASE. The Revolving Credit Borrowers shall from time to time
prepay the Loans (and/or provide cover for Letter of Credit Liabilities as
specified in paragraph (i) below) under the Revolving Credit Facility, in each
case in such amounts as shall be necessary so that at all times the aggregate
outstanding amount of the Revolving Credit Loans (including all Swingline Loans)
together with the outstanding Letter of Credit Liabilities shall not exceed the
Borrowing Base, such amount to be applied, FIRST, to Loans outstanding under the
Revolving Credit Facility and, SECOND, as cover for outstanding Letter of Credit
Liabilities.
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(b) SALE OF ASSETS. Without limiting the obligation of the Borrowers to
obtain the consent of the Majority Lenders pursuant to Section 9.05 hereof to
any Disposition not otherwise permitted hereunder, no later than five Business
Days after each Recapture Date the Parent shall deliver to the Administrative
Agent a certificate of a Responsible Officer of the Parent in form and detail
reasonably satisfactory to the Administrative Agent of the amount of Net
Available Proceeds for the Recapture Period ending on such Recapture Date and,
on the date five Business Days after such Recapture Date the Borrowers shall
prepay the Loans (and/or provide cover for Letter of Credit Liabilities as
specified in paragraph (i) below), and the Commitments shall be subject to
automatic reduction, in an aggregate amount equal to 100% (or, from and after
the Trigger Date, 75%) of the Net Available Proceeds of Dispositions for such
Recapture Period, such prepayment and reduction to be effected in each case in
the manner, order and to the extent specified in paragraph (h) below.
Notwithstanding the foregoing, the Borrowers shall not be required to make
a prepayment pursuant to this paragraph (b) with respect to the Net Available
Proceeds of any Disposition in the event that the Borrowers advise the
Administrative Agent at the time the Net Available Proceeds from such
Disposition are received that they intend to reinvest such Net Available
Proceeds in replacement assets pursuant to a transaction permitted hereunder, so
long as:
(x) such Net Available Proceeds are held by the Administrative Agent
in the Collateral Account pending such reinvestment, in which event the
Administrative Agent need not release such Net Available Proceeds except
upon presentation of evidence satisfactory to it that such Net Available
Proceeds are to be so reinvested in compliance with the provisions of this
Agreement,
(y) the Net Available Proceeds from any Disposition are in fact so
reinvested within twelve months of such
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Disposition (it being understood that, in the event Net Available Proceeds
from more than one Disposition are paid into the Collateral Account as
provided in clause (x) above, such Net Available Proceeds shall be deemed
to be released in the same order in which such Dispositions occurred and,
accordingly, any such Net Available Proceeds so held for more than twelve
months shall be forthwith applied to the prepayment of Loans and reductions
of Commitments as provided above), and
(z) the aggregate amount of Net Available Proceeds (together with
investment earnings thereon) so held at any time by the Administrative
Agent pending reinvestment as contemplated by this sentence shall not at
any time exceed $10,000,000 or such greater amount as the Majority Lenders
may otherwise agree.
As contemplated by Section 4.01 of the Pledge and Security Agreement, nothing in
this Section 2.10(b) shall be deemed to obligate the Administrative Agent to
release any of such proceeds from the Collateral Account to the Borrowers upon
the occurrence and during the continuance of any Event of Default.
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(c) CASUALTY EVENTS. Upon the date twelve months following the receipt by
the Parent or any of its Subsidiaries (the date of such receipt being the
"RECEIPT DATE") of the proceeds of insurance, condemnation award or other
compensation in respect of any Casualty Event affecting any Property of the
Parent or any of its Subsidiaries, the Parent shall cause the Borrowers to
prepay the Loans (and/or provide cover for Letter of Credit Liabilities as
specified in paragraph (i) below), and the Commitments shall be subject to
automatic reduction, in an aggregate amount, if any, equal to 100% (or, from and
after the Trigger Date, 75%) of the Net Available Proceeds of such Casualty
Event to the extent that all or substantially all of such Net Available Proceeds
have not theretofore been applied to the repair or replacement of such Property,
such prepayment and reduction to be effected in each case in the manner and to
the extent specified in paragraph (h) below. Notwithstanding the foregoing:
(i) the Parent shall cause such prepayment and reduction to occur (x)
upon the date 30 days after the Receipt Date (if the Parent or such
Subsidiary shall not theretofore have determined to repair or replace the
Property affected by such Casualty Event) and (y) upon the date 90 days
after the Receipt Date (if the Parent or such Subsidiary shall not
theretofore have commenced the repair or replacement of such Property); and
(ii) in the event that a Casualty Event shall occur with respect to
Property covered by any Mortgage, the Parent shall cause the Borrowers to
prepay the Loans (and/or provide cover for Letter of Credit Liabilities as
specified in paragraph (i) below), and the Commitments shall be subject to
automatic reduction, on the dates, and in the amounts of the required
prepayments, specified in such Mortgage.
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Nothing in this paragraph (c) shall be deemed to limit any obligation of the
Parent or any of its Subsidiaries pursuant to any of the Security Documents to
remit to a collateral or similar account (including, without limitation, the
Collateral Account) maintained by the Administrative Agent pursuant to any of
the Security Documents the proceeds of insurance, condemnation award or other
compensation received in respect of any Casualty Event.
(d) DEBT ISSUANCE. Upon any Debt Issuance occurring prior to the Trigger
Date, the Parent shall cause the Borrowers to prepay the Loans (and/or provide
cover for Letter of Credit Liabilities as specified in paragraph (i) below), and
the Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 100% of the Net Available Proceeds thereof, such prepayment and
reduction to be effected in each case in the manner and to the extent specified
in paragraph (h) below.
(e) EQUITY ISSUANCE. Upon any Equity Issuance occurring prior to the
Trigger Date, the Parent shall cause the Borrowers to prepay the Loans (and/or
provide cover for Letter of Credit Liabilities as specified in paragraph (i)
below), and the Commitments shall be subject to automatic reduction, in an
aggregate amount equal to 75% of the Net Available Proceeds thereof, such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in paragraph (h) below.
(f) CHANGE OF CONTROL. If any Change of Control shall occur, then,
concurrently with such Change of Control, the Borrowers shall prepay the Loans
in full and the Commitments shall be automatically reduced to zero.
(g) RECEIVABLES SALES. Without limiting the obligation of the Borrowers to
obtain the consent of the Majority Lenders pursuant to Section 9.05 hereof to
any Receivables Sale not otherwise permitted hereunder, upon any Receivables
Sale the Parent shall cause the Borrowers to prepay the Loans (and/or
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provide cover for Letter of Credit Liabilities as specified in paragraph (i)
below) in an aggregate amount equal to 100% of the Net Available Proceeds
thereof (as to each such Receivables Sale, the "PREPAYMENT AMOUNT"). Each such
prepayment pursuant to this Section 2.10(g) shall be applied FIRST to the
prepayment of outstanding Swingline Loans, SECOND to the prepayment of Revolving
Credit Loans, THIRD to provide cover for Letter of Credit Liabilities as
specified in paragraph (i) below and FOURTH to the prepayment of outstanding
Term Loans.
(h) APPLICATION. Prepayments and reductions of Commitments described in the
above paragraphs of this Section 2.10 (other than in paragraphs (a) and (g)
above) shall be effected as follows:
(i) FIRST, the amount of the prepayment specified in such paragraphs
shall be applied to the Term Loans then outstanding (to the installments
thereof in inverse order of maturity); and
(ii) SECOND, the Revolving Credit Commitments shall be automatically
reduced in an amount equal to any excess over the amount referred to in the
foregoing clause (i) (and to the extent that, after giving effect to such
reduction, the sum of (I) the aggregate principal amount of Loans
(including all Swingline Loans), together with the aggregate amount of all
Letter of Credit Liabilities, under the Revolving Credit Facility PLUS (II)
the aggregate amount of the Reserved Commitments would exceed the Revolving
Credit Commitments, the Revolving Credit Borrowers shall, first, prepay
Swingline Loans, second, prepay the other Revolving Credit Loans, and,
third, provide cover for Letter of Credit Liabilities as specified in
paragraph (i) below, in an aggregate amount equal to such excess).
(i) COVER FOR LETTER OF CREDIT LIABILITIES. In the event that a Revolving
Credit Borrower shall be required pursuant to this Section 2.10 to provide cover
for Letter of Credit
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Liabilities, such Borrower shall effect the same by paying to the Administrative
Agent immediately available funds in an amount equal to the required amount,
which funds shall be retained by the Administrative Agent in the Collateral
Account (as provided therein as collateral security in the first instance for
such Letter of Credit Liabilities) until such time as the Letters of Credit
shall have been terminated and all of the Letter of Credit Liabilities paid in
full.
2.11 RESERVED COMMITMENTS, ETC.
(a) If the Borrowers shall at any time prepay Revolving Credit Loans with
Net Available Proceeds of any Receivables Sale in accordance with Section
2.10(g) hereof, then an amount of Revolving Credit Commitments equal to the
amount of such prepayment shall be reserved and shall not, except as provided in
paragraph (b) below, be available for borrowings or reborrowings of Revolving
Credit Loans under Section 2.01(b) hereof. The Revolving Credit Commitments at
any time so reserved are herein called the "RESERVED COMMITMENTS"; the Revolving
Credit Commitments not constituting Reserved Commitments are herein called the
"AVAILABLE COMMITMENTS".
(b) The Parent may from time to time deliver to the Administrative Agent a
request (an "AVAILABILITY INCREASE REQUEST") to reduce the aggregate amount of
the Reserved Commitments (and, thereby, to increase the aggregate amount of the
Available Commitments). Each Availability Increase Request shall state the
aggregate amount of the proposed reduction in the Reserved Commitments and the
date on which such reduction is to become effective (which date shall be a
Business Day no earlier than the date three Business Days following the delivery
of such Availability Increase Request), and shall be accompanied by a
certificate of a Responsible Officer of the Parent in form and detail
satisfactory to the Administrative Agent demonstrating that the amount of the
Reserved Commitments (after giving effect to the reduction thereof requested in
such Availability Increase Request) shall be not less than the aggregate amount
then
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outstanding under all Permitted Receivable Financings. On the effective date
specified in each Availability Increase Request, the amount of the Reserved
Commitments shall be reduced automatically by the amount specified in such
Availability Increase Request.
(c) Notwithstanding anything in this Agreement to the contrary, reductions
of the Revolving Credit Commitments hereunder (including, without limitation,
reductions under Sections 2.04(b) and 2.10 hereof) shall be applied FIRST to the
Reserved Commitments and THEN to the Available Commitments.
Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01 REPAYMENT OF LOANS.
(a) TERM LOANS. Alflex hereby promises to pay to the Administrative Agent
for account of each Lender the entire outstanding principal amount of such
Lender's Term Loans in 20 installments payable on the Principal Payment Dates as
follows:
<TABLE>
<CAPTION>
Principal Payment Date
Falling on or Nearest To Amount of Installment
------------------------ ---------------------
<S> <C>
December 1, 1996 $1,250,000.00
March 1, 1997 $1,250,000.00
June 1, 1997 $1,250,000.00
September 1, 1997 $1,250,000.00
December 1, 1997 $2,500,000.00
March 1, 1998 $2,500,000.00
June 1, 1998 $2,500,000.00
September 1, 1998 $2,500,000.00
December 1, 1998 $5,000,000.00
March 1, 1999 $5,000,000.00
June 1, 1999 $5,000,000.00
September 1, 1999 $5,000,000.00
December 1, 1999 $7,500,000.00
</TABLE>
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<TABLE>
<S> <C>
March 1, 2000 $7,500,000.00
June 1, 2000 $7,500,000.00
September 1, 2000 $7,500,000.00
December 1, 2000 $8,750,000.00
March 1, 2001 $8,750,000.00
June 1, 2001 $8,750,000.00
September 1, 2001 $8,750,000.00
</TABLE>
(b) REVOLVING CREDIT FACILITY. Each Revolving Credit Borrower hereby
jointly and severally promises to pay to the Administrative Agent for account of
each Lender the entire outstanding principal amount of such Lender's Revolving
Credit Loans, and each such Loan shall mature, on the Commitment Termination
Date.
(c) SWINGLINE LOANS. The Revolving Credit Borrowers hereby jointly and
severally promise to pay to the Administrative Agent for account of the
Swingline Lender (or each other Lender holding a Swingline Loan) the entire
outstanding principal amount of the Swingline Loans, and each such Loan shall
mature, on the Commitment Termination Date.
3.02 INTEREST. Each Borrower hereby promises to pay to the Administrative
Agent for account of each Lender interest on the unpaid principal amount of each
Loan (including each Swingline Loan) made by such Lender to such Borrower for
the period from and including the date of such Loan to but excluding the date
such Loan shall be paid in full, at the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) PLUS the Applicable Margin and
(b) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan for
such Interest Period PLUS the Applicable Margin.
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Notwithstanding the foregoing, each Borrower hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable
Post-Default Rate:
(x) on any principal of any Loan made by such Lender to such Borrower,
on any Reimbursement Obligation of such Borrower held by such Lender and on
any other amount payable by such Borrower hereunder or under the Notes held
by such Lender to or for account of such Lender, that shall not be paid in
full when due (whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise), for the period from and including the due date
thereof to but excluding the date the same is paid in full; and
(y) during any Specified Event of Default Period.
Accrued interest on each Loan shall be payable (i) in the case of a Base Rate
Loan and a Swingline Loan, quarterly on the Quarterly Dates, (ii) in the case of
a Eurodollar Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three months, at three-month intervals following
the first day of such Interest Period, and (iii) in the case of any Loan (other
than a Swingline Loan), upon the payment or prepayment thereof or the Conversion
of such Loan to a Loan of another Type (but only on the principal amount so
paid, prepaid or Converted), except that interest payable at the Post-Default
Rate shall be payable from time to time on demand. Promptly after the
determination of any interest rate provided for herein or any change therein,
the Administrative Agent shall give notice thereof to the Lenders to which such
interest is payable and to the Borrowers.
Notwithstanding anything to the contrary contained herein or in the
Original Credit Agreement, accrued interest payable under Section 3.02 of the
Original Credit Agreement with respect to any of the "Loans" outstanding
thereunder shall be paid on the Restatement Effective Date.
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Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
4.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Borrowers under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Obligors under any
other Credit Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Administrative Agent at an
account specified by the Administrative Agent, not later than 1:00 p.m. New York
time on the date on which such payment shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day).
(b) Any Lender for whose account any such payment by a Borrower is to be
made may (but shall not be obligated to) debit the amount of any such payment
that is not made by such time to any ordinary deposit account of such Borrower
with such Lender (with notice to such Borrower and the Administrative Agent),
PROVIDED that such Lender's failure to give such notice shall not affect the
validity thereof.
(c) Each Borrower shall, at the time of making each payment under this
Agreement or any Note for account of any Lender, specify to the Administrative
Agent (which shall so notify the intended recipient(s) thereof) the Loans,
Reimbursement Obligations or other amounts payable by such Borrower hereunder to
which such payment is to be applied (and in the event that such Borrower fails
to so specify, or if an Event of Default has occurred and is continuing, the
Administrative Agent may distribute such payment to the Lenders for application
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in such manner as it or the Majority Lenders, subject to Section 4.02 hereof,
may determine to be appropriate).
(d) Except to the extent otherwise provided in the last sentence of Section
2.03(b)(v) hereof, each payment received by the Administrative Agent under this
Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in immediately available funds,
for account of such Lender's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
(e) If the due date of any payment under this Agreement or any Note would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
4.02 PRO RATA TREATMENT. Except to the extent otherwise provided herein:
(a) each borrowing of Loans under a particular Facility from the Lenders under
Section 2.01 hereof shall be made from the relevant Lenders, each payment of
Non-Utilization Fee under Section 2.05 hereof in respect of the Revolving Credit
Commitments shall be made for account of the relevant Revolving Credit Lenders,
and each termination or reduction of the amount of the Commitments under a
particular Facility under Section 2.04 hereof shall be applied to the respective
Commitments under such Facility of the relevant Lenders, pro rata according to
the amounts of their respective Commitments under such Facility; (b) except as
otherwise provided in Section 5.04 hereof, Eurodollar Loans under any Facility
having the same Interest Period shall be allocated pro rata among the relevant
Lenders according to the amounts of their respective Commitments under such
Facility (in the case of the making of Loans) or their respective Loans under
such Facility (in the case of Conversions and Continuations of Loans); (c) each
payment or prepayment of principal of Loans under a particular Facility by a
Borrower shall be made for account of the relevant Lenders pro rata in
accordance with the respective unpaid principal amounts
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of the Loans under such Facility held by them; and (d) each payment of interest
on Loans under a particular Facility by the relevant Borrower shall be made for
account of the relevant Lenders pro rata in accordance with the amounts of
interest on such Loans then due and payable to the respective Lenders.
Notwithstanding the foregoing, borrowings, payments and prepayments of Swingline
Loans shall be made without regard to the foregoing provisions of this Section
4.02.
4.03 COMPUTATIONS. Interest on Eurodollar Loans, Non-Utilization Fees and
letter of credit fees shall be computed on the basis of a year of 360 days and
actual days elapsed (including the first day but, except as otherwise provided
in Section 2.03(b)(vii) hereof excluding the last day) occurring in the period
for which payable, and interest on Base Rate Loans and Reimbursement Obligations
shall be computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which payable. Notwithstanding the foregoing, for
each day that the Base Rate is calculated by reference to the Federal Funds
Rate, interest on Base Rate Loans and Reimbursement Obligations shall be
computed on the basis of a year of 360 days and actual days elapsed.
4.04 MINIMUM AMOUNTS. Except for Conversions made pursuant to Section 5.04
hereof, each borrowing and Conversion of principal of Loans (other than
Swingline Loans) shall be in an aggregate amount at least equal to $5,000,000 or
a larger multiple of $1,000,000 (borrowings or Conversions of or into Loans of
different Types or, in the case of Eurodollar Loans, having different Interest
Periods at the same time hereunder to be deemed separate borrowings and
Conversions for purposes of the foregoing, one for each Type or Interest
Period), PROVIDED that the aggregate principal amount of Eurodollar Loans having
the same Interest Period shall be in an amount at least equal to $5,000,000 or a
larger multiple of $1,000,000 and, if any Eurodollar Loans would otherwise be in
a lesser principal amount for any period, such Loans shall be borrowed as Base
Rate Loans
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during such period. Except for mandatory prepayments made pursuant to Section
2.10 hereof and prepayments made pursuant to Section 5.04 hereof, each partial
prepayment of principal of Loans (other than Swingline Loans) shall be in an
aggregate amount at least equal to $500,000 or a larger multiple of $500,000
(prepayments of Loans of different Types or, in the case of Eurodollar Loans,
having different Interest Periods at the same time hereunder to be deemed
separate prepayments for purposes of the foregoing, one for each Type or
Interest Period). Each borrowing of Swingline Loans shall be in an aggregate
amount at least equal to $100,000 or in multiples of $50,000 in excess thereof
and each partial prepayment of Swingline Loans shall be in an aggregate amount
at least equal to $50,000 or in multiples of $50,000 in excess thereof.
4.05 CERTAIN NOTICES. Notices by a Borrower to the Administrative Agent of
terminations or reductions of the Commitments, of borrowings, Conversions,
Continuations and optional prepayments of Loans, of Types of Loans and of the
duration of Interest Periods shall be irrevocable and shall be effective only if
received by the Administrative Agent not later than 12:00 noon New York time on
the number of Business Days prior to the date of the relevant termination,
reduction, borrowing, Conversion, Continuation or prepayment or the first day of
such Interest Period specified below:
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<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
------ ----------
<S> <C>
Termination or reduction
of Commitments 3
Borrowing or prepayment
of Swingline Loans same day
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans
(other than Swingline Loans) 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
</TABLE>
Each such notice of termination or reduction shall specify the amount and the
Facility under which the Commitments are to be terminated or reduced. Each such
notice of borrowing, Conversion, Continuation or optional prepayment shall
specify the Facility of Loans to be borrowed, Converted, Continued or prepaid
and the amount (subject to Section 4.04 hereof) and Type of each Loan to be
borrowed, Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate. The Administrative Agent shall promptly
notify the Lenders of the contents of each such notice. In the event that a
Borrower fails to select the Type of Loan, or the duration of any Interest
Period for any Eurodollar Loan, within the time period and otherwise as provided
in this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if
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outstanding as a Base Rate Loan) will remain as, or (if not then outstanding)
will be made as, a Base Rate Loan.
4.06 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless the
Administrative Agent shall have been notified by a Lender or a Borrower (the
"PAYOR") prior to the date on which the Payor is to make payment to the
Administrative Agent of (in the case of a Lender) the proceeds of a Loan
required to be made by such Lender hereunder or (in the case of a Borrower) a
payment to the Administrative Agent for account of one or more of the Lenders
hereunder (such payment being herein called the "REQUIRED PAYMENT"), which
notice shall be effective upon receipt, that the Payor does not intend to make
the Required Payment to the Administrative Agent, the Administrative Agent may
assume that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient(s) on such date; and, if the Payor has not in fact made
the Required Payment to the Administrative Agent, the recipient(s) of such
payment shall, on demand, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date (the "ADVANCE DATE") such amount was so made
available by the Administrative Agent until the date the Administrative Agent
recovers such amount at a rate per annum equal to the Federal Funds Rate for
such day and, if such recipient(s) shall fail promptly to make such payment, the
Administrative Agent shall be entitled to recover such amount, on demand, from
the Payor, together with interest as aforesaid, PROVIDED that if neither the
recipient(s) nor the Payor shall return the Required Payment to the
Administrative Agent within three Business Days of the Advance Date, then,
retroactively to the Advance Date, the Payor and the recipient(s) shall each be
obligated to pay interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made by a
Borrower to the Lenders, such Borrower and the recipient(s) shall each be
obligated retroactively to
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the Advance Date to pay interest in respect of the Required Payment at the
Post-Default Rate (without duplication of the obligation of the Borrowers
under Section 3.02 hereof to pay interest on the Required Payment at the
Post-Default Rate), it being understood that the return by the recipient(s)
of the Required Payment to the Administrative Agent shall not limit such
obligation of such Borrower under said Section 3.02 to pay interest at the
Post-Default Rate in respect of the Required Payment and
(ii) if the Required Payment shall represent proceeds of a Loan to be
made by the Lenders to a Borrower, the Payor and such Borrower shall each
be obligated retroactively to the Advance Date to pay interest in respect
of the Required Payment pursuant to whichever of the rates specified in
Section 3.02 hereof is applicable to the Type of such Loan, it being
understood that the return by a Borrower of the Required Payment to the
Administrative Agent shall not limit any claim such Borrower may have
against the Payor in respect of such Required Payment.
4.07 SHARING OF PAYMENTS, ETC.
(a) Each Obligor agrees that, in addition to (and without limitation of)
any right of set-off, banker's lien or counterclaim a Lender may otherwise have,
each Lender shall be entitled, at its option (to the fullest extent permitted by
law), to set off and apply any deposit (general or special, time or demand,
provisional or final), or other indebtedness, held by it for the credit or
account of such Obligor at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans,
Reimbursement Obligations or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such deposit or other
indebtedness are then due to such Obligor), in which case it shall promptly
notify such Obligor and the Administrative Agent thereof, PROVIDED that such
Lender's failure to give such notice shall not affect the validity thereof.
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(b) If any Lender shall obtain from any Obligor payment of any principal of
or interest on any Loan under any Facility or Letter of Credit Liability owing
to it or payment of any other amount under this Agreement or any other Credit
Document through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater percentage of the principal of or interest on the Loans
under such Facility or Letter of Credit Liabilities or such other amounts then
due hereunder or thereunder by such Obligor to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans under such Facility or Letter of Credit Liabilities or
such other amounts, respectively, owing to such other Lenders (or in interest
due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all the
Lenders shall share the benefit of such excess payment (net of any expenses that
may be incurred by such Lender in obtaining or preserving such excess payment)
pro rata in accordance with the unpaid principal of and/or interest on the Loans
under such Facility or Letter of Credit Liabilities or such other amounts,
respectively, owing to each of the Lenders. To such end all the Lenders shall
make appropriate adjustments among themselves (by the resale of participations
sold or otherwise) if such payment is rescinded or must otherwise be restored.
(c) Each Obligor agrees that any Lender so purchasing such a participation
(or direct interest) may exercise all rights of set-off, banker's lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.
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(d) Nothing contained herein shall require any Lender to exercise any such
right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of any Obligor. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Section 5. YIELD PROTECTION, ETC.
5.01 ADDITIONAL COSTS.
(a) Each Borrower shall pay directly to each Lender from time to time such
amounts as such Lender may determine to be necessary to compensate such Lender
for any costs that such Lender determines are attributable to its making or
maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Loans or such obligation, resulting from any
Regulatory Change that:
(i) shall subject any Lender (or its Applicable Lending Office for any
of such Loans) to any tax, duty or other charge in respect of such Loans or
its Notes or changes the basis of taxation of any amounts payable to such
Lender under this Agreement or its Notes in respect of any of such Loans
(excluding changes in the rate of tax on the overall net income of such
Lender or of such Applicable Lending Office by the jurisdiction in which
such Lender has its principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement
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utilized in the determination of the Eurodollar Rate for such Loan)
relating to any extensions of credit or other assets of, or any deposits
with or other liabilities of, such Lender (including, without limitation,
any of such Loans or any deposits referred to in the definition of
"Eurodollar Base Rate" in Section 1.01 hereof), or any commitment of such
Lender (including, without limitation, the Commitments of such Lender
hereunder); or
(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from a Borrower under this Section 5.01(a),
such Borrower may, by notice to such Lender through the Parent (with a copy to
the Administrative Agent), suspend the obligation of such Lender thereafter to
make or Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar
Loans, until the Regulatory Change giving rise to such request ceases to be in
effect (in which case the provisions of Section 5.04 hereof shall be
applicable), PROVIDED that such suspension shall not affect the right of such
Lender to receive the compensation so requested.
(b) Without limiting the effect of the foregoing provisions of this Section
5.01 (but without duplication), each Borrower shall pay directly to each Lender
from time to time on request such amounts as such Lender may determine to be
necessary to compensate such Lender (or, without duplication, the bank holding
company of which such Lender is a subsidiary) for any costs that it determines
are attributable to the maintenance by such Lender (or any Applicable Lending
Office or such bank holding company), pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) of any court or
governmental or monetary authority (i) following any Regulatory Change or (ii)
implementing any risk-based capital guideline or other requirement (whether or
not
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having the force of law and whether or not the failure to comply therewith would
be unlawful) hereafter issued by any government or governmental or supervisory
authority implementing at the national level the Basle Accord, of capital in
respect of its Commitments or Loans (such compensation to include, without
limitation, an amount equal to any reduction of the rate of return on assets or
equity of such Lender (or any Applicable Lending Office or such bank holding
company) to a level below that which such Lender (or any Applicable Lending
Office or such bank holding company) could have achieved but for such law,
regulation, interpretation, directive or request).
(c) Each Lender shall notify the Borrowers of any event occurring after the
date hereof entitling such Lender to compensation under paragraph (a) or (b) of
this Section 5.01 as promptly as practicable, but in any event within 180 days,
after such Lender obtains actual knowledge thereof; PROVIDED that (i) if any
Lender fails to give such notice within 180 days after it obtains actual
knowledge of such an event, such Lender shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 180 days prior to the date that such Lender
does give such notice and (ii) each Lender will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, except that such Lender shall have no obligation to designate an
Applicable Lending Office located in the United States of America. Each Lender
will furnish to the relevant Borrower a certificate setting forth in reasonable
detail the basis and amount of each request by such Lender for compensation
under paragraph (a) or (b) of this Section 5.01. Determinations and allocations
by any Lender for purposes of this Section 5.01 of the effect of any Regulatory
Change pursuant to paragraph (a) of this Section 5.01, or of the effect of
capital maintained pursuant to paragraph (b) of this Section 5.01, on its costs
or
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rate of return of maintaining Loans or its obligation to make Loans, or on
amounts receivable by it in respect of Loans, and of the amounts required to
compensate such Lender under this Section 5.01, shall be conclusive, PROVIDED
that such determinations and allocations are made on a reasonable basis and
consistent with the methodology generally applied by such Lender.
5.02 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period:
(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(b) if the related Loans are Revolving Credit Loans, the Majority
Revolving Credit Lenders, or if the related Loans are Term Loans, the
Majority Term Loan Lenders, determine, which determination shall be
conclusive, and notify the Administrative Agent that the relevant rates of
interest referred to in the definition of "Eurodollar Base Rate" in Section
1.01 hereof upon the basis of which the rate of interest for Eurodollar
Loans for such Interest Period is to be determined are not likely
adequately to cover the cost to such Lenders of making or maintaining
Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give each Borrower and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and each
Borrower shall, on the last day(s) of the then current Interest
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Period(s) for the outstanding Eurodollar Loans, either prepay such Loans or
Convert such Loans into Base Rate Loans in accordance with Section 2.09 hereof.
5.03 ILLEGALITY. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender or its Applicable Lending
Office to honor its obligation to make or maintain Eurodollar Loans hereunder
(and, in the sole opinion of such Lender, the designation of a different
Applicable Lending Office would either not avoid such unlawfulness or would be
disadvantageous to such Lender), then such Lender shall promptly notify each
Borrower thereof (with a copy to the Administrative Agent) and such Lender's
obligation to make or Continue, or to Convert Loans of any other Type into,
Eurodollar Loans shall be suspended until such time as such Lender may again
make and maintain Eurodollar Loans (in which case the provisions of Section 5.04
hereof shall be applicable).
5.04 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to make
Eurodollar Loans or to Continue, or to Convert Base Rate Loans into, Eurodollar
Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof, such Lender's
Eurodollar Loans shall be automatically Converted into Base Rate Loans on the
last day(s) of the then current Interest Period(s) for Eurodollar Loans (or, in
the case of a Conversion resulting from a circumstance described in Section 5.03
hereof, on such earlier date as such Lender may specify to the Borrowers with a
copy to the Administrative Agent) and, unless and until such Lender gives notice
as provided below that the circumstances specified in Section 5.01 or 5.03
hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Eurodollar Loans shall be applied instead to
its Base Rate Loans; and
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(b) all Loans that would otherwise be made or Continued by such Lender
as Eurodollar Loans shall be made or Continued instead as Base Rate Loans,
and all Base Rate Loans of such Lender that would otherwise be Converted
into Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Borrowers with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans under the same
Facility made by other Lenders are outstanding, such Lender's Base Rate Loans
under such Facility shall be automatically Converted, on the first day(s) of the
next succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the
extent necessary so that, after giving effect thereto, all Base Rate and
Eurodollar Loans under such Facility are allocated among the Lenders ratably (as
to principal amounts, Types and Interest Periods) in accordance with their
respective Commitments under such Facility.
5.05 COMPENSATION. Each Borrower shall pay to the Administrative Agent for
account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense (excluding lost profit) that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by such Lender for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10 hereof) on
a date other than the last day of the Interest Period for such Loan; or
(b) any failure by such Borrower for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 7 hereof to be
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satisfied) to borrow a Eurodollar Loan from such Lender on the date for
such borrowing specified in the relevant notice of borrowing given pursuant
to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest (but excluding the
Applicable Margin) for such Loan provided for herein OVER (ii) the amount of
interest that otherwise would have accrued on such principal amount at a rate
per annum equal to the interest component of the amount such Lender would have
bid in the London interbank market for Dollar deposits of leading banks in
amounts comparable to such principal amount and with maturities comparable to
such period (as reasonably determined by such Lender).
Without limiting the foregoing and notwithstanding anything to the contrary
contained herein or in the Original Credit Agreement, on the Restatement
Effective Date the Borrowers shall pay to the Administrative Agent for account
of the Existing Lenders such amounts (if any) that would be payable under
Section 5.05 of the Original Credit Agreement assuming any "Eurodollar Loans"
outstanding thereunder had been paid in full on the Restatement Effective Date.
5.06 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. Without limiting the
obligations of the Borrowers under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore or hereafter issued by any government
or governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed,
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modified or deemed applicable any tax, reserve, special deposit, capital
adequacy or similar requirement against or with respect to or measured by
reference to Letters of Credit issued or to be issued hereunder and the result
shall be to increase the cost to any Lender or Lenders of issuing (or purchasing
participations in) or maintaining its obligation hereunder to issue (or purchase
participations in) any Letter of Credit hereunder or reduce any amount
receivable by any Lender hereunder in respect of any Letter of Credit (which
increases in cost, or reductions in amount receivable, shall be the result of
such Lender's or Lenders' reasonable allocation of the aggregate of such
increases or reductions resulting from such event), then, upon demand by such
Lender or Lenders (through the Administrative Agent), the Borrowers shall pay
immediately to the Administrative Agent for account of such Lender or Lenders,
from time to time as specified by such Lender or Lenders (through the
Administrative Agent), such additional amounts as shall be sufficient to
compensate such Lender or Lenders (through the Administrative Agent) for such
increased costs or reductions in amount. A statement as to such increased costs
or reductions in amount incurred by any such Lender or Lenders, submitted by
such Lender or Lenders to the Borrowers shall be conclusive in the absence of
manifest error as to the amount thereof.
5.07 U.S. TAXES.
(a) Each Borrower agrees to pay to each Lender that is not a U.S. Person
such additional amounts as are necessary in order that the net payment of any
amount due to such non-U.S. Person hereunder after deduction for or withholding
in respect of any U.S. Taxes imposed with respect to such payment (or in lieu
thereof, payment of such U.S. Taxes by such non-U.S. Person), will not be less
than the amount stated herein to be then due and payable, PROVIDED that the
foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to any Lender hereunder unless such Lender is, on
the date hereof (or on the date it becomes a
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Lender hereunder as provided in Section 12.06(b) hereof) and on the date of
any change in the Applicable Lending Office of such Lender, either entitled
to submit a Form 1001 (relating to such Lender and entitling it to a
complete exemption from withholding on all interest to be received by it
hereunder in respect of the Loans) or Form 4224 (relating to all interest
to be received by such Lender hereunder in respect of the Loans),
(ii) to any U.S. Taxes to the extent imposed by reason of the failure
by such non-U.S. Person to comply with applicable certification,
information, documentation or other reporting requirements concerning the
nationality, residence, identity or connections with the United States of
America of such non-U.S. Person (including the filing of Form 1001 or 4224,
as appropriate) if such compliance is required by statute or regulation of
the United States of America as a precondition to reduction of or relief or
exemption from such U.S. Taxes, or
(iii) to any tax assessment or other governmental charge which is
payable otherwise than by withholding or deduction from payments due such
non-U.S. Person hereunder.
For the purposes of this Section 5.07(a), (A) "U.S. PERSON" shall mean a
citizen, national or resident of the United States of America, a corporation,
partnership or other entity created or organized in or under any laws of the
United States of America or any State thereof, or any estate or trust that is
subject to U.S. Federal income taxation regardless of the source of its income,
(B) "U.S. TAXES" shall mean any present or future tax, assessment or other
charge or levy imposed by or on behalf of the United States of America or any
taxing authority thereof or therein, (C) "FORM 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America and (D) "FORM 4224" shall mean Form
4224 (Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in
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the United States) of the Department of the Treasury of the United States of
America (or in relation to either such Form such successor and related forms as
may from time to time be adopted by the relevant taxing authorities of the
United States of America to document a claim to which such Form relates). Each
of the Forms referred to in the foregoing clauses (C) and (D) shall include such
successor and related forms as may from time to time be adopted by the relevant
taxing authorities of the United States of America to document a claim to which
such Form relates.
(b) Within 30 days after paying any amount to the Administrative Agent or
any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the
Borrowers shall deliver to the Administrative Agent for delivery to such
non-U.S. Person evidence satisfactory to such Person of such deduction,
withholding or payment (as the case may be).
5.08 REPLACEMENT OF LENDERS. If any Lender defaults in its obligations to
make Loans pursuant to Section 2.01 hereof or to fund unreimbursed drawings
under Section 2.03 hereof or requests compensation pursuant to Section 5.01 or
5.06 hereof (any such Lender so defaulting or so requesting such compensation
being herein called a "REQUESTING LENDER"), the Parent, upon three Business Days
notice, may require that such Requesting Lender transfer and assign all of its
right, title and interest under this Agreement and such Requesting Lender's
Notes, if any, to any bank or other financial institution (a "PROPOSED LENDER")
identified by the Parent that is satisfactory to the Administrative Agent and
the Issuing Banks (and, upon request of the Parent, the Administrative Agent
agrees to use reasonable efforts to assist the Parent in identifying Proposed
Lenders for this purpose) (a) if such Proposed Lender agrees to assume all of
the obligations of such Requesting Lender hereunder, and to purchase all of such
Requesting Lender's Loans hereunder for consideration equal to the aggregate
outstanding principal amount of such Requesting Lender's Loans, together with
interest thereon
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to the date of such purchase, and satisfactory arrangements are made for payment
to such Requesting Lender of all other amounts payable hereunder to such
Requesting Lender on or prior to the date of such transfer (including any fees
accrued hereunder and all amounts payable under Section 5 hereof, including all
amounts payable under Section 5.05 hereof as if all of such Requesting Lender's
Loans were being prepaid in full on such date) and (b) if such Requesting Lender
has requested compensation pursuant to Section 5.01 or 5.06 hereof, such
Proposed Lender's aggregate requested compensation, if any, pursuant to said
Section 5.01 or 5.06 with respect to such Requesting Lender's Loans is lower
than that of the Requesting Lender. Subject to the provisions of Section
12.06(b) hereof, such Proposed Lender shall be a "Lender" for all purposes
hereunder. Without prejudice to the survival of any other agreement of the
Obligors hereunder the agreements of the Borrowers contained in Sections 5 and
12.03 hereof (without duplication of any payments made to such Requesting Lender
by the Parent or the Proposed Lender) shall survive for the benefit of such
Requesting Lender under this Section 5.08 with respect to the time prior to such
replacement.
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Section 6. GUARANTEE.
6.01 THE GUARANTEE.
(a) The Guarantors hereby jointly and severally guarantee to each Lender
and the Administrative Agent and their respective successors and assigns the
prompt payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the principal of and interest on the Loans made by the Lenders to,
and the Notes held by each Lender of, the Borrowers and all other amounts from
time to time owing to the Lenders or the Administrative Agent by the Borrowers
under this Agreement and under the Notes and by any Obligor under any of the
other Credit Documents, and all obligations of the Parent or any of its
Subsidiaries to any Lender in respect of any Interest Rate Protection Agreement,
in each case strictly in accordance with the terms thereof (such obligations
being herein collectively called the "GENERAL GUARANTEED OBLIGATIONS"). The
Guarantors hereby further jointly and severally agree that if any Borrower shall
fail to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the General Guaranteed Obligations, the Guarantors will
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the General
Guaranteed Obligations, the same will be promptly paid in full when due (whether
at extended maturity, by acceleration or otherwise) in accordance with the terms
of such extension or renewal.
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(b) Without limiting the generality of Section 6.01(a) hereof, each
Revolving Credit Borrower hereby guarantees to each Revolving Credit Lender and
the Administrative Agent and their respective successors and assigns the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the principal of and interest on the Loans made by such Lenders
to, and the Notes held by each Lender of, the other Revolving Credit Borrowers
and all other amounts from time to time owing to the Lenders or the
Administrative Agent by such Borrowers under the Revolving Credit Facility under
this Agreement and under the Notes and by any Obligor under any of the other
Credit Documents, and all obligations of such Borrowers or any of their
respective Subsidiaries to any Lender in respect of any Interest Rate Protection
Agreement, in each case strictly in accordance with the terms thereof (such
obligations being herein collectively called the "JOINT OBLIGATIONS" and,
collectively with the General Guaranteed Obligations, the "GUARANTEED
OBLIGATIONS"). The Revolving Credit Borrowers hereby further jointly and
severally agree that if any other Revolving Credit Borrower shall fail to pay in
full when due (whether at stated maturity, by acceleration or otherwise) any of
the Joint Obligations, the other Revolving Credit Borrowers will promptly pay
the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Joint Obligations, the
same will be promptly paid in full when due (whether at extended maturity, by
acceleration or otherwise) in accordance with the terms of such extension or
renewal.
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6.02 OBLIGATIONS UNCONDITIONAL.
(a) The obligations of the Guarantors under Section 6.01(a) hereof are
absolute and unconditional, joint and several, irrespective of the value,
genuineness, validity, regularity or enforceability of the obligations of the
Borrowers under this Agreement, the Notes or any other agreement or instrument
referred to herein or therein, or any substitution, release or exchange of any
other guarantee of or security for any of the Guaranteed Obligations, and, to
the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 6.02(a) that the obligations of the Guarantors hereunder shall be
absolute and unconditional, joint and several, under any and all circumstances.
(b) The obligations of the Revolving Credit Borrowers under Section 6.01(b)
hereof are absolute and unconditional, joint and several, irrespective of the
value, genuineness, validity, regularity or enforceability of the obligations of
the other Revolving Credit Borrowers under this Agreement, the Notes or any
other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Joint Obligations, and, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 6.02(b) that the obligations of each
Revolving Credit Borrower shall be absolute and unconditional, joint and
several, under any and all circumstances.
(c) Without limiting the generality of the foregoing, it is agreed that the
occurrence of any one or more of the following shall not alter or impair the
liability of the
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Guarantors hereunder which shall remain absolute and unconditional as described
above:
(i) at any time or from time to time, without notice to the
Guarantors, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement
or the Notes or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of, the
Administrative Agent or any Lender or Lenders as security for any of the
Guaranteed Obligations shall fail to be perfected.
The Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Administrative
Agent or any Lender exhaust any right, power or remedy or proceed against any
Borrower under this Agreement or the Notes or any other agreement or instrument
referred to herein or therein, or against any other Person under any other
guarantee of, or security for, any of the Guaranteed Obligations.
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6.03 REINSTATEMENT. The obligations of the Guarantors under this Section 6
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the relevant Borrower in respect of the relevant
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of such Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise and the Guarantors jointly and
severally agree that they will indemnify the Administrative Agent and each
Lender on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Administrative Agent or such Lender
in connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
6.04 SUBROGATION. The Guarantors hereby jointly and severally agree that
until the payment and satisfaction in full of all Guaranteed Obligations and the
expiration and termination of the Commitments of the Lenders under this
Agreement they shall not exercise any right or remedy arising by reason of any
performance by them of their guarantee in Section 6.01 hereof, whether by
subrogation or otherwise, against the Borrowers or any other guarantor of any of
the Guaranteed Obligations or any security for any of the Guaranteed
Obligations.
6.05 REMEDIES. The Guarantors jointly and severally agree that, as between
the Guarantors and the Lenders, the obligations of the relevant Borrower under
this Agreement and the Notes may be declared to be forthwith due and payable as
provided in Section 10 hereof (and shall be deemed to have become automatically
due and payable in the circumstances provided in said Section 10) for purposes
of Section 6.01 hereof notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically due
and payable) as against such Borrower and that, in the event of such declaration
(or such obligations being
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deemed to have become automatically due and payable),
such obligations (whether or not due and payable by such Borrower) shall
forthwith become due and payable by the Guarantors for purposes of said Section
6.01.
6.06 CONTINUING GUARANTEE. The guarantee in this Section 6 is a continuing
guarantee, and shall apply to all Guaranteed Obligations whenever arising.
6.07 RIGHTS OF CONTRIBUTION.
(a) Each Relevant Obligor hereby agrees, as between themselves, that if any
Relevant Obligor shall become an Excess Funding Guarantor (as defined below) by
reason of the payment by such Relevant Obligor of any Guaranteed Obligations,
each other Relevant Obligor shall, on demand of such Excess Funding Guarantor
(but subject to the next sentence), pay to such Excess Funding Guarantor an
amount equal to such Relevant Obligor's Pro Rata Share (as defined below and
determined, for this purpose, without reference to the Properties, debts and
liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined
in paragraph (b) below) in respect of such Guaranteed Obligations. The payment
obligation of a Relevant Obligor to any Excess Funding Guarantor under this
Section 6.07 shall be subordinate and subject in right of payment to the prior
payment in full of the obligations of such Relevant Obligor under the other
provisions of this Section 6 and such Excess Funding Guarantor shall not
exercise any right or remedy with respect to such excess until payment and
satisfaction in full of all of such obligations.
(b) For purposes of this Section 6.07: (i) "RELEVANT OBLIGOR" shall mean
each Borrower and each of the Subsidiary Guarantors; (ii) "EXCESS FUNDING
GUARANTOR" shall mean, in respect of any Guaranteed Obligations, a Relevant
Obligor that has paid an amount in excess of its Pro Rata Share of such
Guaranteed Obligations; (iii) "EXCESS PAYMENT" shall mean, in respect of any
Guaranteed Obligations, the amount paid by an
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Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed
Obligations; (iv) "PRO RATA SHARE" shall mean, for any Relevant Obligor, the
ratio (expressed as a percentage) of the amount of such Relevant Obligor's Net
Assets to the amount of the aggregate Net Assets of all of the Relevant
Obligors, in each case determined as of (A)(x) with respect to any Relevant
Obligor that was a party to the Original Credit Agreement on the Original
Closing Date, the Original Closing Date or (y) with respect to any other
Relevant Obligor, the date such Relevant Obligor becomes a Relevant Obligor
hereunder or (B) the date any demand is made hereunder in respect of the
Guaranteed Obligations, whichever date results in the higher amount (the
"DETERMINATION DATE"); and (v) "NET ASSETS" of any Relevant Obligor shall mean
the amount by which the aggregate present fair saleable value of all assets of
such Relevant Obligor (excluding any shares of stock of any other Relevant
Obligor) exceeds the amount of all the debts and liabilities of such Relevant
Obligor (including contingent, subordinated, unmatured and unliquidated
liabilities, but excluding (x) the obligations of such Relevant Obligor under
this Section 6, assuming the full utilization of permitted borrowings under this
Agreement and after giving effect, on a PRO FORMA basis (but without
duplication), to all such obligations of such Relevant Obligor to be incurred or
assumed as of the Original Closing Date and (y) the obligations of such Relevant
Obligor in respect of its guarantee of the Senior Subordinated Debt, assuming
all such obligations are in existence as of the date hereof and after giving
effect to all such obligations which shall become effective as of the Original
Closing Date).
6.08 LIMITATION ON GUARANTEE OBLIGATIONS. Notwithstanding any other
provision of this Agreement to the contrary, in any action or proceeding
involving any state corporate law or any state or Federal bankruptcy,
insolvency, reorganization or other law affecting the rights of creditors
generally, if the obligations of any Relevant Obligor hereunder would otherwise
be held or determined to be void, invalid or unenforceable on account of the
amount of its liability under this Section 6, then notwithstanding any other
provision of this
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Agreement to the contrary, the amount of such liability shall, without any
further action by such Relevant Obligor or any other Person, be automatically
limited and reduced to the highest amount that is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.
Section 7. CONDITIONS PRECEDENT.
7.01 INITIAL LOANS. Attached as Schedule XV hereto is a list of documents
delivered in connection with the making of the initial loans on the Original
Closing Date.
7.02 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement (and
the amendment and restatement of the Original Credit Agreement to be effected
hereby), and the obligation of any Lender to extend credit hereunder on the
Restatement Effective Date, are subject to the receipt by the Administrative
Agent of the following documents, each of which shall be satisfactory to the
Administrative Agent (and to the extent specified below, to each Lender or the
Majority Lenders) in form and substance:
(a) CORPORATE DOCUMENTS. The following documents, each certified as
indicated below:
(i) for each Obligor (other than Holdings), a certification to the
effect that none of the charter documents, by-laws, resolutions or other
documents relating to such Obligor delivered pursuant to Section 7.01(a) of
the Original Credit Agreement has been modified since delivery thereof to
the Administrative Agent on the Original Closing Date (or, to the extent
that any thereof have been modified, a copy of such modification certified
(in the case of a modification of a charter document) by the appropriate
Secretary of State or (in the case of a modification of
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any such other document) by the Secretary or an Assistant Secretary of such
Obligor;
(ii) for Holdings:
(X) a copy of the charter, as amended and in effect, of Holdings
certified as of a date reasonably close to the Restatement Effective
Date by the appropriate Secretary of State and a certificate from such
Secretary of State dated as of a date reasonably close to the
Restatement Effective Date as to the good standing of and charter
documents filed by Holdings;
(Y) a certificate of the Secretary or an Assistant Secretary of
Holdings, dated the Restatement Effective Date and certifying (A) that
attached thereto is a true and complete copy of the by-laws of
Holdings as amended and in effect at all times from the date on which
the resolutions referred to in clause (B) were adopted to and
including the date of such certificate, (B) that attached thereto is a
true and complete copy of resolutions duly adopted by the board of
directors of Holdings authorizing the execution, delivery and
performance of such of the Loan Documents to which Holdings is or is
intended to be a party and the incurrence of liability hereunder, and
that such resolutions have not been modified, rescinded or amended and
are in full force and effect, (C) that the charter of Holdings has not
been amended since the date of the certification thereto furnished
pursuant to clause (i) above, and (D) as to the incumbency and
specimen signature of each officer of Holdings executing such of the
Loan Documents to which Holdings is intended to be a party and each
other document to be delivered by Holdings from time to time in
connection therewith (and the
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Administrative Agent and each Lender may conclusively rely on such
certificate until it receives notice in writing from Holdings; and
(Z) a certificate of another officer of such Obligor, dated the
Restatement Effective Date, as to the incumbency and specimen
signature of the Secretary or Assistant Secretary, as the case may be,
of such Obligor; and
(iii) for each Obligor, such other proof of corporate or other
authority, charter documents, good standing certificates and evidence of
incumbency as the Administrative Agent may reasonably request.
(b) OFFICER'S CERTIFICATE. A certificate of a senior officer of the Parent,
dated the Restatement Effective Date, to the effect set forth in the first
sentence of Section 7.03 hereof.
(c) NOTES. The Notes, duly completed and executed for each Lender.
(d) OPINIONS OF SPECIAL NEW YORK COUNSEL TO THE OBLIGORS. Opinions, dated
the Restatement Effective Date, of Sullivan & Cromwell, special New York counsel
to certain of the Obligors, and such other counsel satisfactory to the
Administrative Agent, each in substantially the form delivered pursuant to
Section 7.01(d) of the Original Credit Agreement, with such changes thereto as
the Administrative Agent may reasonably request (and each Obligor hereby
instructs such counsel to deliver such opinions to the Lenders and the
Administrative Agent).
(e) OPINION OF SPECIAL NEW YORK COUNSEL TO NATWEST. An opinion, dated the
Restatement Effective Date, of Milbank, Tweed, Hadley & McCloy, special New York
counsel to NatWest, in substantially the form delivered pursuant to Section
7.01(f) of the Original Credit Agreement, with such
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changes thereto as the Administrative Agent may reasonably request (and
NatWest hereby instructs such counsel to deliver such opinion to the
Lenders and the Administrative Agent).
(f) AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT. An Amended and
Restated Pledge and Security Agreement, in substantially the form attached
as Exhibit C hereto, duly executed and delivered by the Obligors and the
Administrative Agent. In addition, the Obligors shall have taken such other
action as the Administrative Agent shall have requested in order to perfect
the security interests created pursuant to the Security Documents to the
extent such actions have not already been taken pursuant to the Original
Credit Agreement.
(g) OTHER DOCUMENTS. Such other documents as the Administrative Agent
or any Lender or special New York counsel to the Administrative Agent may
reasonably request.
The effectiveness of this Agreement (the amendment and restatement of the
Original Credit Agreement contemplated hereby) and the obligation of any Lender
to make its initial extension of credit hereunder is also subject to the payment
or delivery by the Parent of such fees and other consideration as the Parent
shall have agreed to pay or deliver to any Lender or an affiliate thereof or the
Administrative Agent in connection herewith, including, without limitation, the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New
York counsel to NatWest, in connection with the negotiation, preparation,
execution and delivery of this Agreement and the Notes and the other Credit
Documents and the making of the extensions of credit hereunder (to the extent
that statements for such fees and expenses have been delivered to the Parent).
7.03 INITIAL AND SUBSEQUENT EXTENSIONS OF CREDIT. The
obligation of the Lenders to make any Loan or otherwise extend
any credit to either Obligor upon the occasion of each borrowing
or other extension of credit hereunder (and the amendment and
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restatement of the Original Credit Agreement to be effected hereby) is subject
to the further conditions precedent that, both immediately prior to the making
of such Loan or other extension of credit (and such amendment and restatement)
and also after giving effect thereto and to the intended use thereof:
(a) no Default shall have occurred and be continuing;
(b) the representations and warranties made by each Obligor in Section
8 hereof and in each other Basic Document to which such Obligor is a party,
shall be true and complete in all material respects on and as of the date
of the making of such Loan or other extension of credit (and after giving
effect thereto) with the same force and effect as if made on and as of such
date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date); and
(c) to the extent there are Loans outstanding under the Revolving
Credit Facility, the aggregate principal amount of such Loans together with
the aggregate amount of all Letter of Credit Liabilities shall not exceed
the Borrowing Base reflected on the most recent Borrowing Base Certificate
delivered pursuant to Section 7.04(c) of the Original Credit Agreement or
Section 9.01(f) hereof.
Each notice of borrowing or request for the issuance of a Letter of Credit by a
Borrower hereunder shall constitute a certification by such Borrower to the
effect set forth in the preceding sentence (both as of the date of such notice
or request and, unless such Borrower otherwise notifies the Administrative Agent
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
7.04 CERTAIN DETERMINATIONS. For purposes of determining compliance with
the conditions specified in Section 7.02 hereof, each Lender shall be deemed to
be consented to, approved or accepted or to be satisfied with each document or
other matter required thereunder to be consented to or approved
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by or acceptable or satisfactory to the Lenders unless an officer of the
Administrative Agent responsible for the transactions contemplated by the Credit
Documents shall have received notice from such Lender prior to the Restatement
Effective Date specifying its objection thereto, and such Lender shall not have
made available to the Administrative Agent such Lender's ratable portion of the
Loans to be made by it on such date.
Section 8. REPRESENTATIONS AND WARRANTIES. Each Obligor represents and
warrants to the Administrative Agent and the Lenders that:
8.01 CORPORATE EXISTENCE. Each Obligor and its Subsidiaries: (a) is a
corporation, partnership or other entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization; (b) has
all requisite corporate or other power, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its assets and
carry on its business as now being or as proposed to be conducted except where
the failure to have the same could not reasonably be expected to have a Material
Adverse Effect; and (c) is qualified to do business and is in good standing as a
foreign entity in all jurisdictions in which the nature of the business
conducted by it requires such qualification except where failure so to qualify
could not reasonably be expected (either individually or in the aggregate) to
have a Material Adverse Effect.
8.02 FINANCIAL CONDITION. The Parent has heretofore furnished to each of
the Lenders the following:
(a) consolidated and consolidating balance sheets of the Parent and
its Subsidiaries as at December 31, 1995 and the related consolidated and
consolidating statements of income, retained earnings and cash flows of the
Parent and its Subsidiaries for the fiscal year ended on said date, with
the opinion thereon (in the case of said consolidated balance sheet and
statements) of Coopers & Lybrand L.L.P.,
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and the unaudited consolidated and consolidating balance sheets of the
Parent and its Subsidiaries as at June 30, 1996 and the related
consolidated and consolidating statements of income, retained earnings and
cash flows of the Parent and its Subsidiaries for the six-month period
ended on such date; and
(b) consolidated and consolidating balance sheets of Alflex and its
Subsidiaries as at March 31, 1996 and the related consolidated and
consolidating statements of income, retained earnings and cash flows of
Alflex and its Subsidiaries for the fiscal year ended on said date, with
the opinion thereon (in the case of said consolidated balance sheet and
statements) of Ernst & Young L.L.P., and the unaudited consolidated and
consolidating balance sheets of Alflex and its Subsidiaries as at June 30,
1996 and the related consolidated and consolidating statements of income,
retained earnings and cash flows of Alflex and its Subsidiaries for the
three-month period ended on such date.
All such financial statements fairly present, in all material respects, the
consolidated financial condition of the Parent and its Subsidiaries and Alflex
and its Subsidiaries, as the case may be, and (in the case of said consolidating
financial statements) the respective unconsolidated financial condition of the
Parent and its Subsidiaries and Alflex and its Subsidiaries, as the case may be,
as at said dates and the consolidated and unconsolidated results of their
respective operations for the fiscal years and periods ended on said dates
(subject, in the case of such financial statements as at June 30, 1996, to
normal year-end audit adjustments), all in accordance with generally accepted
accounting principles and practices applied on a consistent basis. Except as
otherwise disclosed to the Administrative Agent or the Lenders in writing prior
to the date hereof, none of the Parent nor any of its Subsidiaries has on the
date hereof any material contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
said balance sheets as at said
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dates. Since December 31, 1995 (in the case of
the Parent and its Subsidiaries (other than Alflex and its Subsidiaries)) or
March 31, 1996 (in the case of Alflex and its Subsidiaries):
(i) there has been no material adverse change in the business,
properties, assets, operations, conditions (financial or otherwise), or
prospects of Alflex and its Subsidiaries, taken as a whole; and
(ii) other than the Merger, there has been no material adverse change
in the business, properties, assets, operations, conditions (financial or
otherwise), or prospects of the Parent and its Subsidiaries (including
CALI, but excluding Alflex and its Subsidiaries) taken as a whole.
8.03 LITIGATION. Except as disclosed in Schedule II hereto, there are no
legal or arbitral proceedings, or any proceedings by or before any governmental
or regulatory authority or agency, now pending or (to the knowledge of any
Obligor) threatened against any Obligor or any of its Subsidiaries that could
reasonably be expected (either individually or in the aggregate) to have a
Material Adverse Effect.
8.04 NO BREACH. Except as disclosed in Schedule III hereto, none of the
execution and delivery of this Agreement and the Notes and the other Basic
Documents, the consummation of the transactions herein and therein contemplated
or compliance with the terms and provisions hereof and thereof will conflict
with or result in a breach of, or require any consent under, the charter or
by-laws of any Obligor or any of its Subsidiaries, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any material agreement or instrument to
which it or any of its Subsidiaries is a party or by which any of them or any of
their Property is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument, or (except for the Liens created
pursuant to the Security Documents) result in the creation or imposition of any
Lien upon any
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Property of any Obligor or any of its Subsidiaries pursuant to the terms of any
such agreement or instrument.
8.05 ACTION. Each Obligor and each of its Subsidiaries has all necessary
corporate power, authority and legal right to execute, deliver and perform its
obligations under each of the Basic Documents to which it is a party; the
execution, delivery and performance by each Obligor of each of the Basic
Documents to which it is a party have been duly authorized by all necessary
corporate action on its part; and this Agreement has been duly and validly
executed and delivered by each Obligor and constitutes, and each of the Notes
and the other Basic Documents to which it is a party when executed and delivered
by such Obligor (in the case of the Notes, for value) will constitute, its
legal, valid and binding obligation, enforceable against each Obligor in
accordance with its terms.
8.06 APPROVALS. Except for filings and recordings in respect of the Liens
created pursuant to the Security Documents and the other filings and recordings
identified on Schedule IV hereto, no authorizations, approvals or consents of,
and no filings or registrations with, any governmental or regulatory authority
or agency, or any securities exchange, are necessary for the execution, delivery
or performance by any Obligor of this Agreement or any of the other Basic
Documents to which it is a party or for the legality, validity or enforceability
hereof or thereof.
8.07 USE OF CREDIT. No Obligor nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose, whether immediate, incidental or ultimate, of buying or
carrying Margin Stock. After applying the proceeds of each Loan, not more than
25% of the value of the assets of any Obligor and such Obligor's Subsidiaries
(as determined in good faith by such Obligor) will consist of or be represented
by Margin Stock. Neither the making of any of the Loans nor issuance of the
Letters of Credit nor the use of the proceeds thereof will
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violate or be inconsistent with the provisions of Regulations G, U or X.
8.08 ERISA. Each Plan, and, to the knowledge of the Parent, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, except where
such non-compliance thereof could not reasonably be expected to lead to a
material liability, and no event or condition has occurred and is continuing as
to which any Obligor (or, prior to the Merger, CasTech) would be under an
obligation to furnish a report to the Lenders under Section 9.01(e) hereof,
unless such event or condition could not reasonably be expected to lead to a
material liability.
8.09 TAXES.
(a) The Parent and its Subsidiaries are members of an affiliated group of
corporations filing consolidated returns for Federal income tax purposes, of
which the Parent is the "common parent" (within the meaning of Section 1504 of
the Code) of such group.
(b) The Parent and its Subsidiaries have filed all Federal income tax
returns and all other material tax returns that are required to be filed by them
and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by them or any of their respective Subsidiaries, subject to
any extensions granted so long as no penalty shall be due in relation thereto.
The charges, accruals and reserves on the books of the Parent and its
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Parent, adequate. Neither the Parent nor any of its Subsidiaries
has given or been requested to give a waiver of the statute of limitations
relating to the payment of any Federal, state, local and foreign taxes or other
impositions.
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8.10 INVESTMENT COMPANY ACT. Neither the Parent nor any of its Subsidiaries
is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
8.11 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Parent nor any of its
Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
8.12 MATERIAL AGREEMENTS AND LIENS.
(a) Part A of Schedule V hereto is a complete and correct list of each
credit agreement, loan agreement, indenture, purchase agreement, guarantee,
letter of credit or other arrangement providing for or otherwise relating to any
Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or guarantee by, the Parent and its Subsidiaries outstanding on the
date hereof, or that (after giving effect to the transactions contemplated to
occur on or before the Restatement Effective Date) will be outstanding on the
Restatement Effective Date, and the aggregate principal or face amount
outstanding or that may become outstanding under each such arrangement is
correctly described in Part A of said Schedule V.
(b) Part B of Schedule V hereto is a complete and correct list of each Lien
securing Indebtedness of any Person outstanding on the date hereof, or that
(after giving effect to the transactions contemplated to occur on or before the
Restatement Effective Date) will be outstanding on the Restatement Effective
Date, covering any Property of the Parent or any of its Subsidiaries, and the
aggregate Indebtedness secured (or that may be secured) by each such Lien and
the Property covered by each such Lien is correctly described in Part B of said
Schedule V.
8.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule VI hereto or as
could not reasonably be expected (either
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individually or in the aggregate) to have a Material Adverse Effect:
(a) Each of the Parent and its Subsidiaries has obtained all
environmental, health and safety permits, licenses and other authorizations
required under all Environmental Laws to carry on its business as being
conducted, and each of such permits, licenses and authorizations is in full
force and effect and each of the Parent and its Subsidiaries is in
compliance with the terms and conditions thereof, and is also in compliance
with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained
in any applicable Environmental Law or in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder.
(b) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and, to the Parent's or any of its Subsidiaries'
knowledge, no investigation or review is pending or threatened by any
governmental or other entity with respect to any alleged failure by the
Parent or any of its Subsidiaries to have any environmental, health or
safety permit, license or other authorization required under any
Environmental Law in connection with the conduct of the business of the
Parent or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation, discharge or disposal, or
any Release of any Hazardous Materials generated by the Parent or any of
its Subsidiaries.
(c) Neither the Parent nor any of its Subsidiaries owns, operates or
leases a treatment, storage or disposal facility requiring a permit under
the Resource Conservation and Recovery Act of 1976, as amended; and
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(i) no polychlorinated biphenyls (PCB's) are or have been present
at any site or facility now or previously owned, operated or leased by
the Parent or any of its Subsidiaries;
(ii) no Hazardous Materials have been Released at, on or under
any site or facility now or previously owned, operated or leased by
the Parent or any of its Subsidiaries in a reportable quantity
established by statute, ordinance, rule, regulation or order; and
(iii) no Hazardous Materials have been otherwise Released at, on
or under any site or facility now or previously owned, operated or
leased by the Parent or any of its Subsidiaries.
(d) Neither the Parent nor any of its Subsidiaries has transported or
arranged for the transportation of any Hazardous Material to any location
that is listed on the National Priorities List ("NPL") under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), listed for possible inclusion on the NPL by
the Environmental Protection Agency in the Comprehensive Environmental
Response and Liability Information System, as provided for by 40 C.F.R. '
300.5 ("CERCLIS"), or on any similar state or local list or that is the
subject of Federal, state or local enforcement actions or other
investigations that could reasonably be expected to lead to Environmental
Claims against the Parent or any of its Subsidiaries.
(e) No Hazardous Material generated by the Parent or any of its
Subsidiaries has been recycled, treated, stored, disposed of or Released by
the Parent or any of its Subsidiaries in violation of Environmental Law or
that could reasonably be expected to give rise to liability under
Environmental Law.
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(f) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Parent or any of its
Subsidiaries and no site or facility now or previously owned, operated or
leased by the Parent or any of its Subsidiaries is listed or proposed for
listing on the NPL, CERCLIS or any similar state list of sites requiring
investigation or clean-up.
(g) No Liens have arisen under or pursuant to any Environmental Laws
on any site or facility owned, operated or leased by the Parent or any of
its Subsidiaries, and no government action has been taken or is known by
the Parent or any such Subsidiary to be in process that could reasonably be
expected to subject any such site or facility to such Liens and neither the
Parent nor any of its Subsidiaries would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any site or
facility owned by it in any deed to the real property on which such site or
facility is located.
(h) The Parent and its Subsidiaries have made available to the
Administrative Agent certain environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or that are in the possession
of the Parent or any of its Subsidiaries with respect to all matters
relating to facts, circumstances or conditions at or affecting any site or
facility now or previously owned, operated or leased by the Parent or any
of its Subsidiaries and that, to the Parent's knowledge, could reasonably
be expected (either individually or in the aggregate) to have resulted in a
Material Adverse Effect.
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8.14 CAPITALIZATION.
(a) Part A of Schedule VII hereto correctly sets forth the authorized
Capital Stock of the Parent on the date hereof. All of the issued and
outstanding shares of each class of Capital Stock of the Parent on the date
hereof are duly and validly issued, fully paid and nonassessable. On the date
hereof, except as disclosed in Part B of said Schedule VII, (x) there are no
outstanding Equity Rights with respect to the Parent and there are no
outstanding obligations of the Parent or any or any of its Subsidiaries to
repurchase, redeem, or otherwise acquire any shares of Capital Stock of the
Parent, and (y) are there no outstanding obligations of the Parent or any of its
Subsidiaries to make payments to any Person, such as "phantom stock" payments,
where the amount thereof is calculated with reference to the fair market value
or equity value of the Parent or any of its Subsidiaries.
(b) Part A of Schedule VIII hereto correctly sets forth the authorized
Capital Stock of Holdings on the date hereof. All of the issued and outstanding
shares of each class of Capital Stock of Holdings on the date hereof are duly
and validly issued, fully paid and nonassessable. On the date hereof all of such
issued and outstanding shares of Capital Stock are owned beneficially and of
record by the Parent. On the date hereof, except as disclosed in Part B of said
Schedule VIII, there are no outstanding Equity Rights with respect to Holdings
and there are no outstanding obligations of the Parent or any or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of Capital
Stock of Holdings.
(c) Part A of Schedule IX hereto correctly sets forth the authorized
Capital Stock of CALI on the date hereof. All of the issued and outstanding
shares of each class of Capital Stock of CALI on the date hereof are duly and
validly issued, fully paid and nonassessable. On the date hereof all of such
issued and outstanding shares of Capital Stock are owned beneficially and of
record by Holdings. On the date hereof, except as
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disclosed in Part B of said Schedule IX, there are no outstanding Equity Rights
with respect to CALI and there are no outstanding obligations of the Parent or
any or any of its Subsidiaries to repurchase, redeem, or otherwise acquire any
shares of Capital Stock of CALI.
(d) Part A of Schedule X hereto correctly sets forth the authorized Capital
Stock of Alflex on the date hereof. All of the issued and outstanding shares of
each class of Capital Stock of Alflex are fully paid and nonassessable. On the
date hereof all of such issued and outstanding shares of Capital Stock are owned
beneficially and of record by Holdings. On the date hereof, except as disclosed
in Part B of said Schedule X, (x) there are no outstanding Equity Rights with
respect to the Alflex and there are no outstanding obligations of the Parent or
any of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares
of Capital Stock of Alflex and (y) are there no outstanding obligations of the
Parent or any of its Subsidiaries to make payments to any Person, such as
"phantom stock" payments, where the amount thereof is calculated with reference
to the fair market value or equity value of Alflex or any of its Subsidiaries
(other than rights arising under Section 262 of the Delaware General Corporation
Law in connection with the Acquisition).
(e) Part A of Schedule XI hereto correctly sets forth the authorized
Capital Stock of Barmet on the date hereof. All of the issued and outstanding
shares of each class of Capital Stock of Barmet are fully paid and
nonassessable. On the date hereof all of such issued and outstanding shares of
Capital Stock are owned beneficially and of record by Alflex. On the date
hereof, except as disclosed in Part B of said Schedule XI, (x) there are no
outstanding Equity Rights with respect to the Barmet and there are no
outstanding obligations of the Parent or any of its Subsidiaries to repurchase,
redeem, or otherwise acquire any shares of Capital Stock of Barmet and (y) are
there no outstanding obligations of the Parent or any of its Subsidiaries to
make payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with
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reference to the fair market value or equity value of Barmet or any of its
Subsidiaries.
8.15 SUBSIDIARIES, ETC.
(a) Set forth in Part A of Schedule XII hereto is a complete and correct
list of all of the Subsidiaries of the Parent on the date hereof, together with,
for each such Subsidiary, (i) the jurisdiction of organization of such
Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and
(iii) the nature of the ownership interests held by each such Person and the
percentage of ownership of such Subsidiary represented by such ownership
interests. Except as disclosed in Part A of said Schedule XII, as of the date
hereof, (x) each of the Parent and its Subsidiaries owns, free and clear of
Liens (other than Liens created pursuant to the Security Documents), and has the
unencumbered right to vote, all outstanding ownership interests in each Person
shown to be held by it in Part A of said Schedule XII, (y) all of the issued and
outstanding Capital Stock of each such Person organized as a corporation is
validly issued, fully paid and nonassessable and (z) there are no outstanding
Equity Rights with respect to such Person.
(b) Set forth in Part B of Schedule XII hereto is a complete and correct
list of all Investments (other than Investments disclosed in Part A of said
Schedule XII) held by the Parent or any of its Subsidiaries on the date hereof
and, for each such Investment, (x) the identity of the Person or Persons holding
such Investment and (y) the nature of such Investment. Except as disclosed in
Part B of said Schedule XII, each of the Parent and its Subsidiaries owns, free
and clear of all Liens (other than Liens created pursuant to the Security
Documents), all such Investments.
(c) None of the Subsidiaries of the Parent is, on the date hereof, subject
to any indenture, agreement, instrument or other arrangement of the type
described in Section 9.17(c) hereof.
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8.16 TITLE TO ASSETS. Except as disclosed in Schedule XIII hereto, each of
the Parent and its Subsidiaries owns and has on the date hereof good and
marketable title (subject only to Liens permitted by Section 9.06 hereof) to the
Properties shown to be owned in the most recent financial statements referred to
in Section 8.02 hereof (other than Properties disposed of in the ordinary course
of business or otherwise permitted to be disposed of pursuant to Section 9.05
hereof). Each of the Parent and its Subsidiaries owns and has on the date hereof
good and marketable title to, or (in the case of any real property leases), a
valid and subsisting leasehold estate in and to, and enjoys on the date hereof
peaceful and undisturbed possession of, all Properties (subject only to Liens
permitted by Section 9.06 hereof) that are necessary for the operation and
conduct of its businesses.
8.17 TRUE AND COMPLETE DISCLOSURE. The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of the
Obligors to the Administrative Agent or any Lender in connection with the
negotiation, preparation or delivery of this Agreement and the other Credit
Documents or included herein or therein or delivered pursuant hereto or thereto,
when taken as a whole (together with the Information Memorandum) do not contain
any untrue statement of material fact or omit to state any material fact
necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. All written
information furnished after the date hereof by the Parent and its Subsidiaries
to the Administrative Agent and the Lenders in connection with this Agreement
and the other Credit Documents and the transactions contemplated hereby and
thereby will be true, complete and accurate in every material respect, or (in
the case of projections) based on reasonable estimates, on the date as of which
such information is stated or certified. There is no fact known to any Obligor
that could reasonably be expected (either individually or in the aggregate) to
have a Material Adverse Effect that has not been disclosed herein, in the other
Credit Documents or in a report, financial statement, exhibit,
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schedule, disclosure letter or other writing furnished to the Lenders for use in
connection with the transactions contemplated hereby or thereby.
8.18 REAL PROPERTY. Set forth on Schedule XIV hereto is a list, as of the
date hereof, of all of the real property interests held by the Parent and its
Subsidiaries, indicating in each case whether the respective Property is owned
or leased, the identity of the owner or lessee and the location of the
respective Property.
8.19 SECURITY DOCUMENTS. The Security Documents create, as security for the
obligations purported to be secured thereby, a valid and enforceable perfected
security interest in and Lien on all of the Properties to be covered thereby in
favor of the Administrative Agent, superior to and prior to the right of all
third Persons and subject to no other Liens (other than Liens permitted under
Section 9.06 hereof).
Section 9. COVENANTS OF THE OBLIGORS. Each Obligor covenants and agrees
with the Lenders and the Administrative Agent that, so long as any Commitment,
Loan or Letter of Credit Liability is outstanding and until payment in full of
all amounts payable by the Borrowers hereunder:
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9.01 FINANCIAL STATEMENTS, ETC. The Parent (for itself and on behalf of
each other Obligor) shall deliver to each of the Lenders:
(a) as soon as available and in any event within 45 days after the end
of each quarterly fiscal period of each fiscal year of the Parent,
consolidated and consolidating statements of income, retained earnings and
cash flows of the Parent and its Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated and consolidating balance sheets of
the Parent and its Subsidiaries as at the end of such period, setting forth
in each case in comparative form the corresponding consolidated and
consolidating figures for the corresponding periods in the preceding fiscal
year (PROVIDED that, until four full fiscal quarters of the Parent have
elapsed since the Original Closing Date, such corresponding figures shall
be the pro forma consolidated figures furnished to the Administrative Agent
prior to the Original Closing Date), accompanied by a certificate of a
Responsible Officer of the Parent, which certificate shall state that said
consolidated financial statements fairly present in all material respects
the consolidated financial condition and results of operations of the
Parent and its Subsidiaries, and said consolidating financial statements
fairly present in all material respects the respective individual
unconsolidated financial condition and results of operations of the Parent
and of each of its Subsidiaries, in each case in accordance with generally
accepted accounting principles, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 90 days after the end
of each fiscal year of the Parent, consolidated and consolidating
statements of income, retained earnings and cash flows of the Parent and
its Subsidiaries for such fiscal year and the related
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consolidated and consolidating balance sheets of the Parent and its
Subsidiaries as at the end of such fiscal year, setting forth in each case
in comparative form the corresponding consolidated and consolidating
figures for the preceding fiscal year (PROVIDED that, until a full fiscal
year of the Parent has elapsed since the Original Closing Date, such
corresponding figures shall be the pro forma consolidated figures furnished
to the Administrative Agent prior to the Original Closing Date), and
accompanied (i) in the case of said consolidated statements and balance
sheet of the Parent, by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that
said consolidated financial statements fairly present in all material
respects the consolidated financial condition and results of operations of
the Parent and its Subsidiaries as at the end of, and for, such fiscal year
in accordance with generally accepted accounting principles, and a
statement of such accountants to the effect that, in making the examination
necessary for their opinion, nothing came to their attention that caused
them to believe that the Parent was not in compliance with Sections
9.07(g), 9.09, 9.10 and 9.11 hereof, insofar as such Sections relate to
accounting matters, and (ii) in the case of said consolidating statements
and balance sheets, by a certificate of a senior financial officer of the
Parent, which certificate shall state that said consolidating financial
statements fairly present in all material respects the respective
individual unconsolidated financial condition and results of operations of
the Parent and of each of its Subsidiaries, in each case in accordance with
generally accepted accounting principles, consistently applied, as at the
end of, and for, such fiscal year;
(c) promptly upon their becoming available, copies of all registration
statements and regular periodic reports, if any, that the Parent or any of
its Subsidiaries shall have filed with the Commission (or any governmental
agency substituted therefor) or any national securities exchange;
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(d) promptly upon the mailing thereof to the shareholders of the
Parent generally or to holders of Subordinated Indebtedness or Senior
Subordinated Debt generally, copies of all financial statements, reports
and proxy statements so mailed;
(e) as soon as possible, and in any event within 15 days after any
Obligor knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred
or exists, a statement signed by a Responsible Officer of the Parent
setting forth details respecting such event or condition and the action, if
any, that the Parent or its ERISA Affiliate proposes to take with respect
thereto (and a copy of any report or notice required to be filed with or
given to the PBGC by the Parent or an ERISA Affiliate with respect to such
event or condition):
(i) any reportable event, as defined in Section 4043(c) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to
which the PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event (PROVIDED that a failure to meet the minimum funding
standard of Section 412 of the Code or Section 302 of ERISA,
including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the
Code); and any request for a waiver under Section 412(d) of the Code
for any Plan;
(ii) the distribution under Section 4041(c)(1)(A) of ERISA of a
notice of intent to terminate any Plan or any action taken by any
Obligor or an ERISA Affiliate to terminate any Plan;
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(iii) the institution by the PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan, or the receipt by any Obligor or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by the PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan
by any Obligor or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt
by any Obligor or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section
4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against any Obligor or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if any Obligor or an ERISA Affiliate fails to timely provide
security to the Plan in accordance with the provisions of said
Sections;
(f) as soon as available and in any event within 15 Business Days
after the end of each monthly accounting period (ending on the last day of
each calendar month), a Borrowing Base Certificate of the Parent as at the
last day of such accounting period;
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(g) periodically at the request of the Administrative Agent or the
Majority Lenders, a report of an independent collateral auditor (which may
be, or be affiliated with, one of the Lenders) selected by the
Administrative Agent and reasonably acceptable to the Parent with respect
to the Receivables and Inventory components included in the Borrowing Base
as at the end of any monthly accounting period, which report shall indicate
that, based upon a review by such auditors of the Receivables (including,
without limitation, verification with respect to the amount, aging,
identity and credit of the respective account debtors and the billing
practices of the Parent and its Subsidiaries) and Inventory (including,
without limitation, verification as to the value, location and respective
types), the information set forth in the Borrowing Base Certificate
delivered by the Parent as at the end of such accounting period is accurate
and complete in all material respects and in addition, as soon as available
and in any event within 45 days after the end of each fiscal year of the
Parent, a like report of independent public accountants of recognized
national standing with respect to the Receivables and Inventory components
included in the Borrowing Base as at the end of such fiscal year;
(h) promptly after any Responsible Officer of any Obligor knows or has
reason to believe that any Default has occurred, a notice of such Default
describing the same in reasonable detail and, together with such notice or
as soon thereafter as possible, a description of the action that the
Obligors have taken or propose to take with respect thereto; and
(i) from time to time such other information regarding the financial
condition, operations, business or prospects of the Parent or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Administrative Agent may reasonably request.
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The Parent will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, (i) a certificate
of a Responsible Officer of the Parent (x) to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and is continuing,
describing the same in reasonable detail and describing the action that the
Obligors have has taken or propose to take with respect thereto) and (y) setting
forth in reasonable detail the computations necessary to determine whether the
Obligors are in compliance with Sections 9.07(g), 9.08(i), 9.09, 9.10 and 9.11
hereof as of the end of the respective quarterly fiscal period or fiscal year
and (ii) the certificate referred to in the definition of "Applicable Pricing
Level" in Section 1.01 hereof setting forth in reasonable detail the computation
of the Senior Indebtedness to EBITDA Ratio as at the end of the respective
quarterly fiscal period.
9.02 LITIGATION. The Parent (for itself and on behalf of each other
Obligor) will promptly give to each Lender notice of all legal or arbitral
proceedings, and of all proceedings by or before any governmental or regulatory
authority or agency, and any material development in respect of such legal or
other proceedings, affecting the Parent or any of its Subsidiaries, except
proceedings that could not reasonably be expected (either individually or in the
aggregate) to have a Material Adverse Effect. Without limiting the generality of
the foregoing, the Parent will give to each Lender notice of the assertion of
any Environmental Claim by any Person against, or with respect to the activities
of, the Parent or any of its Subsidiaries and notice of any alleged violation of
or non-compliance with any Environmental Laws or any permits, licenses or
authorizations, other than any Environmental Claim or alleged violation that
could not reasonably be expected (either individually or in the aggregate) to
have a Material Adverse Effect.
9.03 EXISTENCE, ETC. The Parent will, and will cause each of its
Subsidiaries to:
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(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (PROVIDED that nothing in this
Section 9.03 shall prohibit any transaction expressly permitted under
Section 9.05 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could reasonably be expected (either
individually or in the aggregate) to have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Administrative Agent,
during normal business hours, to examine, copy and make extracts from its
books and records, to inspect any of its Properties, and to discuss its
business and affairs with its officers, all to the extent reasonably
requested by such Lender or the Administrative Agent (as the case may be).
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9.04 INSURANCE. The Parent will, and will cause each of its Subsidiaries
to, maintain insurance with financially sound and reputable insurance companies,
and with respect to Property and risks of a character usually maintained by
corporations engaged in the same or similar business similarly situated, against
loss, damage and liability of the kinds and in the amounts customarily
maintained by such corporations.
The Parent will in any event maintain (with respect to itself and each of
its Subsidiaries):
(1) CASUALTY INSURANCE -- insurance against loss or damage covering
all of the tangible real and personal Property and improvements of the
Parent and each of its Subsidiaries by reason of any Peril (as defined
below) in such amounts (subject to such deductibles as shall be
satisfactory to the Majority Lenders) as shall be reasonable and customary
and sufficient to avoid the insured named therein from becoming a
co-insurer of any loss under such policy but in any event in an amount (i)
in the case of fixed assets and equipment (other than vehicles), at least
equal to 100% of the actual replacement cost of such assets (including,
without limitation, foundation, footings and excavation costs), subject to
deductibles as aforesaid and (ii) in the case of inventory, not less than
the fair market value thereof, subject to deductibles as aforesaid.
(2) AUTOMOBILE LIABILITY INSURANCE FOR BODILY INJURY AND PROPERTY
DAMAGE -- insurance against liability for bodily injury and property damage
in respect of all vehicles (whether owned, hired or rented by the Parent or
any of its Subsidiaries) at any time located at, or used in connection
with, its Properties or operations in such amounts as are then customary
for vehicles used in connection with similar Properties and businesses, but
in any event to the extent required by applicable law.
(3) COMPREHENSIVE GENERAL LIABILITY INSURANCE --insurance against
claims for bodily injury, death or
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Property damage occurring on, in or about the Properties (and adjoining
streets, sidewalks and waterways) of the Parent and its Subsidiaries, in
such amounts as are then customary for Property similar in use in the
jurisdictions where such Properties are located.
(4) WORKERS' COMPENSATION INSURANCE -- workers' compensation insurance
or a qualified self-insurance program (including, without limitation,
Employers' Liability Insurance) to the extent required by applicable law.
(5) PRODUCT LIABILITY INSURANCE -- insurance against claims for bodily
injury, death or Property damage resulting from the use of products sold by
the Parent or any of its Subsidiaries in such amounts as are then
customarily maintained by responsible persons engaged in businesses similar
to that of the Parent and its Subsidiaries.
(6) BUSINESS INTERRUPTION INSURANCE -- insurance against loss of
operating income by reason of any Peril in such amounts as are consistent
with the coverages in place on the date hereof.
(7) OTHER INSURANCE -- such other insurance, including, without
limitation, War-Risk Insurance when and to the extent obtainable from the
United States Government, in each case as generally carried by owners of
similar Properties in the jurisdictions where such Properties are located,
in such amounts and against such risks as are then customary for Property
similar in use.
Such insurance shall be written by financially responsible companies selected by
the Parent and having an A. M. Best rating of "A-" or better and being in a
financial size category of XI or larger (or, with respect to companies providing
insurance on the date hereof, a financial size category of IX or larger), or by
other companies acceptable to the Majority Lenders, and (other than workers'
compensation) shall name the Administrative Agent as loss payee (to the extent
covering risk of loss or damage to
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tangible property) and as an additional named insured as its interests may
appear (to the extent covering any other risk). Each policy referred to in this
Section 9.04 shall provide that it will not be canceled or reduced, or allowed
to lapse without renewal, except after not less than 30 days' notice to the
Administrative Agent and shall also provide that the interests of the
Administrative Agent and the Lenders shall not be invalidated by any act or
negligence of the Parent or any Person having an interest in any Property
covered by the Mortgage nor by occupancy or use of any such Property for
purposes more hazardous than permitted by such policy nor by any foreclosure or
other proceedings relating to such Property. The Parent will advise the
Administrative Agent promptly of any policy cancellation, reduction or
amendment.
On or before the Restatement Effective Date, the Parent will deliver to the
Administrative Agent certificates of insurance satisfactory to the
Administrative Agent evidencing the existence of all insurance required to be
maintained by the Parent hereunder setting forth the respective coverages,
limits of liability, carrier, policy number and period of coverage and showing
that such insurance will remain in effect through the March 31 falling after the
date hereof, subject only to the payment of premiums as they become due (and
attaching original copies of any policies with respect to casualty insurance).
Thereafter, on each March 31 and October 31 in each year (commencing with the
first March 31 after the date hereof), the Parent will deliver to the
Administrative Agent certificates of insurance evidencing that all insurance
required to be maintained by the Parent hereunder will be in effect through the
following October 31 or March 31, as the case may be, subject only to the
payment of premiums as they become due. In addition, the Parent will not modify
any of the provisions of any policy with respect to casualty insurance without
delivering the original copy of the endorsement reflecting such modification to
the Administrative Agent accompanied by a written report of any firm of
independent insurance brokers of nationally recognized standing satisfactory to
the Administrative Agent, stating that, in their opinion, such policy (as so
modified) adequately protects the interests of the
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Lenders and the Administrative Agent, is in compliance with the provisions of
this Section 9.04, and is comparable in all respects with insurance carried by
responsible owners and operators of Properties similar to those covered by the
Mortgages. The Parent will not obtain or carry separate insurance concurrent in
form or contributing in the event of loss with that required by this Section
9.04 unless the Administrative Agent is the named insured thereunder, with loss
payable as provided herein. The Parent will immediately notify the
Administrative Agent whenever any such separate insurance is obtained and shall
deliver to the Administrative Agent the certificates evidencing the same.
Without limiting the obligations of the Parent under the foregoing
provisions of this Section 9.04, in the event the Parent shall fail to maintain
in full force and effect insurance as required by the foregoing provisions of
this Section 9.04, then the Administrative Agent may, but shall have no
obligation so to do, procure insurance covering the interests of the Lenders and
the Administrative Agent in such amounts and against such risks as the
Administrative Agent (or the Majority Lenders) shall deem appropriate, and the
Parent shall reimburse the Administrative Agent in respect of any premiums paid
by the Administrative Agent in respect thereof.
For purposes hereof, the term "PERIL" shall mean, collectively, fire,
lightning, windstorm, hail, explosion, riot and civil commotion, vandalism and
malicious mischief, damage from aircraft, vehicles and smoke and all other
perils covered by the "all-risk" endorsement then in use in the jurisdictions
where the Properties of the Parent and its Subsidiaries are located.
Notwithstanding the foregoing, the Parent and each of its Subsidiaries may carry
a portion of the insurance required hereunder through self-insurance
arrangements with a Subsidiary described in Section 9.08(h) hereof, PROVIDED
that such self-insurance is maintained only in amounts and in a manner that is
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prudent and consistent with current market practices for such insurance coverage
of corporations engaged in the same or similar business similarly situated.
9.05 PROHIBITION OF FUNDAMENTAL CHANGES.
(a) The Parent will not, nor will it permit any of its Subsidiaries to,
enter into any transaction of merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution)
other than the Merger.
(b) The Parent will not, nor will it permit any of its Subsidiaries to,
acquire any business or Property from, or Capital Stock of, or be a party to any
acquisition of, any Person except for (i) purchases of inventory and other
Property to be sold or used in the ordinary course of business, (ii) Investments
permitted under Section 9.08 hereof, (iii) Capital Expenditures permitted under
Section 9.11 hereof and (iv) Permitted Reinvestment Capital Expenditures.
(c) The Parent will not, nor will it permit any of its Subsidiaries to,
convey, sell, lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, any part of its business or Property, whether now owned
or hereafter acquired, including, without limitation, Receivables and leasehold
interests, but excluding:
(i) obsolete or worn-out Property, tools or equipment no longer used
or useful in its business so long as the amount thereof sold in any single
fiscal year by the Parent and its Subsidiaries shall not have a fair market
value in excess of $750,000; and
(ii) any inventory or other Property sold or disposed of in the
ordinary course of business and on ordinary business terms;
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(iii) (x) Receivables Sales pursuant to Permitted Receivables
Financings and (y) sales or transfers of Receivables and Related Assets for
purposes of collection in the ordinary course of business and consistent
with past practices; and
(iv) other sales of Property for fair market value (as reasonably
determined by the Parent) for cash in an aggregate amount not exceeding
$2,000,000 in any fiscal year of the Parent, so long as the Net Available
Proceeds thereof are reinvested in replacement assets as provided in
Section 2.10(b) hereof.
(d) Notwithstanding the foregoing provisions of this Section 9.05:
(i) any Subsidiary of the Parent may be merged or consolidated with or
into: (x) the Parent if the Parent shall be the continuing or surviving
corporation or (y) any other such Subsidiary; PROVIDED that (1) if any such
transaction shall be between a Subsidiary and a Wholly Owned Subsidiary,
the Wholly Owned Subsidiary shall be the continuing or surviving
corporation and (2) that if any such transaction shall be between a
Subsidiary Guarantor and a Subsidiary not a Subsidiary Guarantor, and such
Subsidiary Guarantor is not the continuing or surviving corporation, then
the continuing or surviving corporation shall have assumed all of the
obligations of such Subsidiary Guarantor hereunder and under the other
Credit Documents in a manner satisfactory to the Administrative Agent; and
(ii) any Subsidiary of the Parent may sell, lease, transfer or
otherwise dispose of any or all of its Property (upon voluntary liquidation
or otherwise) to the Parent or a Wholly Owned Subsidiary of the Parent;
PROVIDED that if any such sale is by a Subsidiary Guarantor to a Subsidiary
of the Parent not a Subsidiary Guarantor, then such Subsidiary shall have
assumed all of the obligations of such Subsidiary
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Guarantor hereunder and under the other Credit Documents in a manner
satisfactory to the Administrative Agent.
9.06 LIMITATION ON LIENS. The Parent will not, nor will it permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any
of its Property, whether now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the Original Closing Date and listed in Part
B of Schedule V hereto;
(c) Liens imposed by any governmental authority for taxes, assessments
or charges not yet due or that are being contested in good faith and by
appropriate proceedings if, unless the amount thereof is not material with
respect to it or its financial condition, adequate reserves with respect
thereto are maintained on the books of the Parent or the affected
Subsidiaries, as the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business that are not
overdue for a period of more than 30 days or that are being contested in
good faith and by appropriate proceedings and Liens securing judgments but
only to the extent for an amount and for a period not resulting in an Event
of Default under Section 10(h) hereof;
(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases, statutory obligations, surety and appeal
bonds, performance bonds and
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other obligations of a like nature incurred in the ordinary course of
business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially interfere with the ordinary conduct of the business of the
Parent or any of its Subsidiaries;
(h) Liens on Property of any corporation that becomes a Subsidiary of
the Parent after the Original Closing Date, PROVIDED that such Liens are in
existence at the time such corporation becomes a Subsidiary of the Parent
and were not created in anticipation thereof;
(i) Liens upon real and/or tangible personal Property acquired after
the Original Closing Date (by purchase, construction or otherwise) by the
Parent or any of its Subsidiaries, each of which Liens either (A) existed
on such Property before the time of its acquisition and was not created in
anticipation thereof or (B) was created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the
cost (including the cost of construction) of such Property; PROVIDED that
(i) no such Lien shall extend to or cover any Property of the Parent or
such Subsidiary other than the Property so acquired and improvements
thereon and (ii) the principal amount of Indebtedness secured by any such
Lien shall at no time exceed 80% of the fair market value (as determined in
good faith by a Responsible Officer of the Parent) of such Property at the
time it was acquired (by purchase, construction or otherwise);
(j) additional Liens upon real and/or personal Property created after
the Original Closing Date, PROVIDED that the aggregate Indebtedness secured
thereby and incurred
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on and after the Original Closing Date shall not exceed (i) at any time
prior to the Trigger Date, $1,000,000 in the aggregate at any one time
outstanding and (ii) at any time on or after the Trigger Date, $5,000,000
in the aggregate at any one time outstanding; and
(k) Liens upon Receivables and Related Assets to secure obligations
under Permitted Receivables Financings.
9.07 INDEBTEDNESS. The Parent will not, nor will it permit any of its
Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding on the Original Closing Date and listed
in Part A of Schedule V hereto;
(c) (i) Indebtedness of the Parent in respect of the Senior
Subordinated Debt in an aggregate original principal amount not exceeding
$125,000,000, and (ii) subordinated Guarantees of such Indebtedness by
Subsidiaries of the Parent pursuant to the Senior Subordinated Debt
Documents;
(d) Indebtedness of Subsidiaries of the Parent to the Parent or to
other Subsidiaries of the Parent (other than a Subsidiary described in
Section 9.08(h) hereof);
(e) Indebtedness in an aggregate amount not exceeding $7,000,000 owing
by the Parent and/or certain of its Subsidiaries to Lockheed Martin
Corporation pursuant to agreements relating to the reimbursement for
certain environmental costs;
(f) obligations of the Parent and its Subsidiaries under Permitted
Receivables Financings;
(g) additional Indebtedness of Subsidiaries of the Parent incurred
after the Original Closing Date (including,
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without limitation, Capital Lease Obligations and other Indebtedness
secured by Liens permitted under Section 9.06(i) or 9.06(j) hereof) up to
but not exceeding (i) at any time prior to the Trigger Date, $1,000,000 in
the aggregate at any one time outstanding and (ii) at any time on or after
the Trigger Date, $5,000,000 in the aggregate at any one time outstanding;
and
(h) obligations in respect of Interest Rate Protection Agreements and
Commodity Hedge Agreements (to the extent the same constitute Indebtedness)
permitted under Section 9.08(e) hereof.
9.08 INVESTMENTS. The Parent will not, nor will it permit any of its
Subsidiaries to, make or permit to remain outstanding any Investments except:
(a) Investments outstanding on the Original Closing Date and
identified in Part B of Schedule XI hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Parent and Holdings in the Borrowers;
(e) (i) over-the-counter Interest Rate Protection Agreements with one
or more of the Lenders (and/or with a bank or other financial institution
having capital, surplus and undivided profits of at least $500,000,000) as
to an aggregate notional principal amount not at any time exceeding
$150,000,000; and (ii) Commodity Hedge Agreements to the extent permitted
under Section 9.19 hereof;
(f) loans or advances made to employees of the Parent or any of its
Subsidiaries in the ordinary course of business and in furtherance of the
Parent's business in an
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aggregate amount not exceeding $4,000,000 at any time outstanding;
(g) in the event the Parent or any of its Subsidiaries maintains any
unfunded deferred compensation plan (within the meaning of Title I of
ERISA), to the extent benefits under such plan are defined by reference to
specific investments, whether at the participant's or the beneficiaries'
election or otherwise, any Investment in such a specific investment;
(h) Investments not to exceed $3,000,000 in the aggregate in one or
more Subsidiaries of the Parent organized solely for the purpose of
permitting the Parent and its Subsidiaries to self-insure in a usual and
customary manner consistent with current market practices for
self-insurance programs of corporations engaged in the same or similar
business similarly situated;
(i) additional Investments up to but not exceeding $5,000,000 in the
aggregate; and
(j) Investments constituting capitalization of Securitization
Subsidiaries consistent with normal practice for transactions of such type.
9.09 DIVIDEND PAYMENTS. The Parent will not, nor will it permit any of its
Subsidiaries to, declare or make any Dividend Payment at any time; PROVIDED that
the Parent may:
(a) declare and make Dividend Payments in cash, subject to the
satisfaction of each of the following conditions on the date of such
Dividend Payment and after giving effect thereto:
(i) no Default shall have occurred and be continuing;
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(ii) the aggregate amount of Dividend Payments made in the form
of cash dividends on the Capital Stock of the Parent during the
then-current fiscal quarter of the Parent shall not exceed $600,000;
and
(iii) the Parent shall have delivered to each Lender, at least 10
Business Days (but not more than 20 Business Days) prior to the date
of the proposed Dividend Payment, a certificate of a Responsible
Officer of the Parent setting forth computations in reasonable detail
demonstrating satisfaction of the foregoing conditions as at the date
of such certificate;
(b) make Stock Repurchases in cash, subject to the satisfaction of
each of the following conditions on the date of such Stock Repurchase and
after giving effect thereto:
(i) no Default shall have occurred and be continuing;
(ii) at any time prior to the Trigger Date, the aggregate amount
of Stock Repurchases made in any twelve-month period shall not exceed
$3,000,000; and
(iii) at any time from and after the Trigger Date, the aggregate
amount of Stock Repurchases made in any twelve-month period shall not
exceed $8,000,000; and
(c) make Employee Stock Repurchases in cash, subject to the
satisfaction of each of the following conditions on the date of such
Employee Stock Repurchase and after giving effect thereto:
(i) no Default shall have occurred and be continuing; and
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(ii) the aggregate amount of all Employee Stock Repurchases made
after the date hereof shall not exceed $6,000,000.
This Section 9.09 shall in any event not prohibit: (x) the payment of any
dividend by the Parent within 60 days after the date of declaration thereof if,
at such date of declaration, such payment would comply with the foregoing
paragraph; (y) the redemption of any Stock Purchase Rights issued under the
Stockholder Protection Rights Agreement; and (z) the payment of dividends by any
Subsidiary of the Parent to the Parent or to any other Subsidiary of the Parent.
9.10 CERTAIN FINANCIAL COVENANTS.
(a) LEVERAGE RATIOS.
(i) The Parent will not permit the Senior Leverage Ratio to
exceed the following respective ratios at any time during the
following respective periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From and including the first
Delivery Date after the date
hereof through but excluding
the first Delivery Date after
December 31, 1996 3.70 to 1.00
From and including the first
Delivery Date after December
31, 1996 through but
excluding the first Delivery
Date after
March 31, 1997 3.50 to 1.00
</TABLE>
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<TABLE>
<S> <C>
From and including the first
Delivery Date after March 31,
1997 through but excluding
the first Delivery Date after
June 30, 1997 3.00 to 1.00
From and including the first
Delivery Date after June 30,
1997 through but excluding
the first Delivery Date after
September 30, 1997 2.80 to 1.00
From and including the first
Delivery Date after September
30, 1997 through but
excluding the first Delivery
Date after
December 31, 1997 2.70 to 1.00
From and including the first
Delivery Date after December
31, 1997 through but
excluding the first Delivery
Date after
March 31, 1998 2.50 to 1.00
From and including the first
Delivery Date after March 31,
1998 through but excluding
the first Delivery Date after
June 30, 1998 2.40 to 1.00
</TABLE>
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<TABLE>
<S> <C>
From and including the first
Delivery Date after June 30,
1998 through but excluding
the first Delivery Date after
September 30, 1998 2.30 to 1.00
From and after the first
Delivery Date after
September 30, 1998 2.20 to 1.00
</TABLE>
(ii) The Parent will not permit the Total Leverage Ratio to
exceed the following respective ratios at any time during the
following respective periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From and including the first
Delivery Date after the date
hereof through but excluding
the first Delivery Date after
December 31, 1996 5.50 to 1.00
From and including the first
Delivery Date after December
31, 1996 through but
excluding the first Delivery
Date after
March 31, 1997 5.20 to 1.00
From and including the first
Delivery Date after March 31,
1997 through but excluding
the first Delivery Date after
June 30, 1997 4.40 to 1.00
</TABLE>
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<TABLE>
<S> <C>
From and including the first
Delivery Date after June 30,
1997 through but excluding
the first Delivery Date after
September 30, 1997 4.20 to 1.00
From and including the first
Delivery Date after September
30, 1997 through but
excluding the first Delivery
Date after
December 31, 1997 4.00 to 1.00
From and including the first
Delivery Date after December
31, 1997 through but
excluding the first Delivery
Date after
March 31, 1998 3.80 to 1.00
From and including the first
Delivery Date after March 31,
1998 through but excluding
the first Delivery Date after
June 30, 1998 3.60 to 1.00
From and including the first
Delivery Date after June 30,
1998 through but excluding
the first Delivery Date after
September 30, 1998 3.40 to 1.00
</TABLE>
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<TABLE>
<S> <C>
From and including the first
Delivery Date after September
30, 1998 through but
excluding the first Delivery
Date after
December 31, 1998 3.30 to 1.00
From and after the first
Delivery Date after
December 31, 1998 3.30 to 1.00
</TABLE>
(b) INTEREST COVERAGE RATIOS.
(i) The Parent will not permit the Senior Interest Coverage Ratio
to be less than the following respective ratios at any time during the
following respective periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the date hereof
through December 31, 1996 3.80 to 1.00
From January 1, 1997
through March 31, 1997 3.80 to 1.00
From April 1, 1997
through June 30, 1997 4.50 to 1.00
From July 1, 1997
through September 30, 1997 4.80 to 1.00
From October 1, 1997
through December 31, 1997 4.90 to 1.00
From January 1, 1998
through March 31, 1998 5.00 to 1.00
</TABLE>
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<TABLE>
<S> <C>
From April 1, 1998
through June 30, 1998 5.30 to 1.00
From July 1, 1998
through September 30, 1998 5.60 to 1.00
From October 1, 1998
through December 31, 1998 5.80 to 1.00
From January 1, 1999
and at all times thereafter 5.80 to 1.00
</TABLE>
(ii) The Parent will not permit the Total Interest Coverage Ratio
to be less than the following respective ratios at any time during the
following respective periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the date hereof
through December 31, 1996 2.20 to 1.00
From January 1, 1997
through March 31, 1997 2.20 to 1.00
From April 1, 1997
through June 30, 1997 2.60 to 1.00
From July 1, 1997
through September 30, 1997 2.80 to 1.00
From October 1, 1997
through December 31, 1997 2.80 to 1.00
From January 1, 1998
through March 31, 1998 2.90 to 1.00
From April 1, 1998
</TABLE>
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<TABLE>
<S> <C>
through June 30, 1998 3.00 to 1.00
From July 1, 1998
through September 30, 1998 3.20 to 1.00
From October 1, 1998
through December 31, 1998 3.30 to 1.00
From January 1, 1999
and at all times thereafter 3.30 to 1.00
</TABLE>
(c) MINIMUM TTM EBITDA. The Parent will not permit TTM EBITDA as at
any day during the following respective periods to be less than the
following respective amounts:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
From the date hereof
through December 31, 1996 $ 70,000,000
From January 1, 1997
through March 31, 1997 $ 75,000,000
From April 1, 1997
through June 30, 1997 $ 80,000,000
From July 1, 1997
through September 30, 1997 $ 85,000,000
From October 1, 1997
through December 31, 1997 $ 90,000,000
From January 1, 1998
and at all times thereafter $100,000,000
</TABLE>
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(d) FIXED CHARGES RATIO. The Parent will not permit the Fixed Charges
Ratio to be less than the following respective ratios at any time during
the following respective periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the date hereof
through December 31, 1996 1.70 to 1.00
From January 1, 1997
through March 31, 1997 1.80 to 1.00
From April 1, 1997
through June 30, 1997 1.80 to 1.00
From July 1, 1997
through September 30, 1997 1.80 to 1.00
From October 1, 1997
through December 31, 1997 1.80 to 1.00
From January 1, 1998
and at all times thereafter 1.90 to 1.00
</TABLE>
9.11 CAPITAL EXPENDITURES. The Parent will not permit the aggregate amount
of Capital Expenditures (other than Permitted Reinvestment Capital Expenditures)
by the Parent and its Subsidiaries to exceed the following respective amounts
for the following respective periods:
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<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
From the date hereof
through December 31, 1996 $ 8,000,000
Each fiscal year of the Parent
ending thereafter $38,000,000
</TABLE>
If the aggregate amount of Capital Expenditures for any period set forth in the
schedule above shall be less than the amount set forth opposite such period in
the schedule above, then the shortfall shall be added to the amount of Capital
Expenditures permitted for the immediately succeeding (but not any other) period
and, for purposes hereof, the amount of Capital Expenditures made during any
period shall be deemed to have been made first from the permitted amount for
such period set forth in the schedule above and last from the amount of any
carryover from any previous period.
9.12 INTEREST RATE PROTECTION AGREEMENTS. The Parent will within 90 days of
the Original Closing Date enter into, and thereafter maintain in full force and
effect, one or more over-the-counter Interest Rate Protection Agreements with
one or more of the Lenders (and/or with a bank or other financial institution
having capital, surplus and undivided profits of at least $500,000,000), that
effectively enables the Borrowers (in a manner satisfactory to the
Administrative Agent) to protect itself against three-month London interbank
offered rates exceeding 8% per annum as to a notional principal amount at least
equal to $95,000,000 initially (which amount may be subject to amortization) for
a period of at least 3 years measured from the Original Closing Date.
9.13 SUBORDINATED INDEBTEDNESS. The Parent will not, nor will it permit any
of its Subsidiaries to, purchase, redeem, retire or otherwise acquire for value,
or set apart any money for a sinking, defeasance or other analogous fund for the
purchase, redemption, retirement or other acquisition of, or make any voluntary
payment or prepayment of the principal of or interest
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on, or any other amount owing in respect of, any Subordinated Indebtedness,
except for regularly scheduled payments or prepayments of principal and interest
in respect thereof required pursuant to the instruments evidencing such
Subordinated Indebtedness and not prohibited by the subordination provisions
thereof.
9.14 LINES OF BUSINESS. The Parent will not, nor will it permit any of its
Subsidiaries to, engage to any substantial extent in any line or lines of
business activity other than the Aluminum Business.
9.15 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by this
Agreement, the Parent will not, nor will it permit any of its Subsidiaries to,
directly or indirectly:
(a) make any Investment in an Affiliate;
(b) transfer, sell, lease, assign or otherwise dispose of any Property
to an Affiliate;
(c) merge into or consolidate with or purchase or acquire Property
from an Affiliate; or
(d) enter into any other transaction directly or indirectly with or
for the benefit of an Affiliate (including, without limitation, Guarantees
and assumptions of obligations of an Affiliate);
PROVIDED that (i) any Affiliate who is an individual may serve as a director,
officer or employee of the Parent or any of its Subsidiaries and receive
reasonable compensation for his or her services in such capacity, (ii) the
Parent and its Subsidiaries may enter into transactions (other than extensions
of credit by the Parent or any of its Subsidiaries to an Affiliate) providing
for the leasing of Property, the rendering or receipt of services or the
purchase or sale of inventory and other Property in the ordinary course of
business if the monetary or business
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consideration arising therefrom would be substantially as advantageous to the
Parent and its Subsidiaries as the monetary or business consideration that would
obtain in a comparable transaction with a Person not an Affiliate and (iii)
transactions in connection with a Permitted Receivables Financing are not
prohibited by this Section 9.15.
9.16 USE OF PROCEEDS. On the Restatement Effective Date, the Term Loans and
Revolving Credit Loans will be used as provided in Section 2.01 hereof. The
Borrowers will use the proceeds of the Revolving Credit Loans, after the
Restatement Effective Date, to finance the ongoing working capital requirements
and other general corporate purposes of the Borrowers and their respective
Subsidiaries. The Borrowers will use the proceeds of the Loans in compliance
with all applicable legal and regulatory requirements, including, without
limitation, Regulations G, T, U and X and the Securities Act of 1933 and the
Securities Exchange Act of 1934 and the regulations thereunder; PROVIDED that
neither the Administrative Agent nor any Lender shall have any responsibility as
to the use of any of such proceeds.
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9.17 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES.
(a) SUBSIDIARY GUARANTORS. In the event that the Parent or any of its
Subsidiaries shall form or acquire any new Subsidiary (other than a
Securitization Subsidiary) that the Parent or the respective Subsidiary
anticipates will not be an Immaterial Subsidiary (or, in the event that any
Immaterial Subsidiary (other than a Securitization Subsidiary) shall cease to be
an Immaterial Subsidiary), the Parent will cause such new Subsidiary (or such
Immaterial Subsidiary that ceases to be an Immaterial Subsidiary) to become a
"Subsidiary Guarantor" and/or a "Guarantor" (and, thereby, an "Obligor")
hereunder, and to pledge and grant a security interest in its Property pursuant
to the Security Documents to the Administrative Agent for the benefit of the
Lenders, pursuant to a written instrument in form and substance satisfactory to
the Administrative Agent and to deliver such proof of corporate action,
incumbency of officers, opinions of counsel and other documents as is consistent
with those delivered by each "Obligor" pursuant to the Original Closing Date or
as the Administrative Agent shall have requested.
(b) OWNERSHIP OF SUBSIDIARIES. The Parent will, and will cause each of its
Subsidiaries to, take such action from time to time as shall be necessary to
ensure that each of its Subsidiaries is a Wholly Owned Subsidiary. In the event
that any additional shares of stock shall be issued by any Subsidiary, the
respective Obligor agrees forthwith to deliver to the Administrative Agent
pursuant to the Security Documents the certificates evidencing such shares of
stock, accompanied by undated stock powers executed in blank and to take such
other action as the Administrative Agent shall request to perfect the security
interest created therein pursuant to the Security Documents.
(c) CERTAIN RESTRICTIONS. Other than pursuant to the Senior Subordinated
Debt Documents or in connection with transactions related to a Permitted
Receivables Financing, the Obligors will not permit any of their respective
Subsidiaries to
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enter into, after the date hereof, any indenture, agreement, instrument or other
arrangement that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon, the incurrence or payment of Indebtedness, the granting of Liens, the
declaration or payment of dividends, the making of loans, advances or
Investments or the sale, assignment, transfer or other disposition of Property.
9.18 MODIFICATIONS OF CERTAIN DOCUMENTS.
(a) No Obligor will consent to any modification, supplement or waiver of
any of the provisions of the Acquisition Documents, the Senior Subordinated Debt
Documents, any other documents providing for or relating to Subordinated
Indebtedness, or terminate the Merger Agreement, without the prior approval of
the Majority Lenders.
(b) No Obligor will take any action to modify or supplement its articles of
incorporation or the articles of incorporation of any of its Subsidiaries, other
than modifications that do not adversely affect the interests of the Lenders,
without the prior approval of the Majority Lenders.
9.19 COMMODITY HEDGING ACTIVITIES. The Parent shall not, and shall not
permit any of its Subsidiaries to, enter into any commodity futures contract,
commodity option or other similar agreement or arrangement (collectively,
"COMMODITY HEDGE AGREEMENTS"), except the Parent and its Subsidiaries may enter
into Hedge Agreements designed to protect the Parent and its Subsidiaries
against fluctuations in the price of aluminum and commodities used in the
Aluminum Business and prices associated with customer forward sales contracts
and purchase commitments, so long as the same (a) is consistent with the
relevant Obligor's past practice or then-current industry practice in the
markets in which such Obligor operates and (b) is in accordance with the
Parent's "Price Risk Program: Briefing Summary", as the same may be amended from
time to time.
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9.20 AFTER-ACQUIRED REAL ESTATE. If any Obligor or any of its Subsidiaries
shall acquire any real property, or shall lease any real property that is
material to the operation of its business, after the Original Closing Date,
other than any real property encumbered by Liens permitted by Section 9.06(i)
hereof, such Obligor or such Subsidiary, as the case may be, shall promptly
execute a Mortgage covering such real property, together with such surveys,
title insurance policies and endorsements, certificates of occupancy and such
other agreements, estoppels and consents (including agreements with lessors) as
the Administrative Agent may request, and shall deliver opinions of local
counsel and other documents as is consistent with those delivered with respect
to each Mortgage pursuant to Section 7.01(m) of the Original Credit Agreement
upon the Original Closing Date or as the Administrative Agent shall have
requested.
9.21 ACTIVITIES OF THE PARENT AND HOLDINGS.
(a) The Parent (i) will at all times own, beneficially and of record, all
of the issued and outstanding Capital Stock of Holdings (PROVIDED that this
Section 9.21(a)(i) shall not prohibit any transaction expressly permitted under
Section 9.05 hereof), (ii) will own no other Property (other than cash and
Permitted Investments, other Property incidental to its business as a holding
company and Capital Stock of its Subsidiaries), (iii) will have no Indebtedness
(other than Indebtedness hereunder and Indebtedness in respect of Subordinated
Indebtedness permitted under Section 9.07 hereof), (iv) will have no operations
other than DE MINIMIS operations incidental to its business as a holding company
and (v) in furtherance of the foregoing will not make any expenditures or incur
any liabilities other than those consistent with and reasonably necessary in the
conduct of the business of the Parent as contemplated by this Section 9.21(a).
(b) Holdings (i) will at all times own, beneficially and of record, all of
the issued and outstanding Capital Stock of each of CALI and Alflex (PROVIDED
that this Section 9.21(b)(i)
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shall not prohibit any transaction expressly permitted under Section 9.05
hereof), (ii) will own no other Property (other than cash and Permitted
Investments, other Property incidental to its business as a holding company and
Capital Stock of its Subsidiaries), (iii) will have no Indebtedness (other than
Indebtedness hereunder and Indebtedness in respect of Subordinated Indebtedness
permitted under Section 9.07 hereof), (iv) will have no operations other than DE
MINIMIS operations incidental to its business as a holding company and (v) in
furtherance of the foregoing will not make any expenditures or incur any
liabilities other than those consistent with and reasonably necessary in the
conduct of the business of Holdings as contemplated by this Section 9.21(b).
Section 10. EVENTS OF DEFAULT. If one or more of the following events
(herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) Any Obligor shall: (i) default in the payment of any principal of
any Loan or any Reimbursement Obligation when due (whether at stated
maturity or at mandatory or optional prepayment); or (ii) default in the
payment of any interest on any Loan, any fee or any other amount payable by
it hereunder or under any other Credit Document when due and such default
shall have continued unremedied for three or more days; or
(b) The Parent or any of its Subsidiaries (herein collectively called
the "RELEVANT PARTIES") shall default in the payment when due of any
principal of or interest on any of its other Indebtedness having a
principal amount in of $1,000,000 or more individually or $2,000,000 or
more for all Relevant Parties and their Subsidiaries in the aggregate; or
any event specified in any note, agreement, indenture or other document
evidencing or relating to any such Indebtedness shall occur if the effect
of such event is to cause, or (with the giving of any notice or the lapse
of time or both) to permit the holder or holders of such Indebtedness (or a
trustee or agent on behalf of such holder
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or holders) to cause, such Indebtedness to become due, or to be prepaid in
full (whether by redemption, purchase, offer to purchase or otherwise),
prior to its stated maturity or to have the interest rate thereon reset to
a level so that securities evidencing such Indebtedness trade at a level
specified in relation to the par value thereof; or any Relevant Party shall
default in the payment when due of any individual amount of $1,000,000 or
more (or of amounts aggregating $2,000,000 or more) under any Interest Rate
Protection Agreement; or any event specified in any Interest Rate
Protection Agreement shall occur if the effect of such event is to cause,
or (with the giving of any notice or the lapse of time or both) to permit,
any individual termination or liquidation payment in an amount of
$1,000,000 or more (or any termination or liquidation payments aggregating
$2,000,000 or more) to become due; or
(c) Any representation, warranty or certification made or deemed made
herein or in any other Basic Document (or in any modification or supplement
hereto or thereto) by any Obligor party thereto, or any certificate
furnished to any Lender or the Administrative Agent pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading
as of the time made or furnished in any material respect; or
(d) The Parent or any of the other Obligors (as applicable) shall
default in the performance of any of its obligations under any of Sections
9.01(f), 9.01(h), 9.05, 9.06, 9.07, 9.08, 9.09, 9.10, 9.11, 9.13, 9.15,
9.17(b), 9.18, 9.20 or 9.21 hereof or any Obligor shall default in the
performance of any of its obligations under Section 4.02 or 5.02 of the
Pledge and Security Agreement, or any provisions of any Mortgage; or any
Obligor shall default in the performance of any of its other obligations in
this Agreement or any other Credit Document and such default shall continue
unremedied for a period of thirty or more days after notice thereof to the
Parent by the
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Administrative Agent or any Lender (through the Administrative Agent); or
(e) Any Relevant Party shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) Any Relevant Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, examiner or liquidator of itself or of all or a substantial part
of its Property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or readjustment of debts, (v)
fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
Bankruptcy Code or (vi) take any corporate action for the purpose of
effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the affected Relevant Party, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its debts,
(ii) the appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of such Relevant Party or of all or any substantial
part of its Property or (iii) similar relief in respect of such Relevant
Party under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding or
case shall continue undismissed, or an order, judgment or decree approving
or ordering any of the foregoing shall be entered and continue unstayed and
in effect, for a period of 60 or more days; or an order for
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relief against any Relevant Party shall be entered in an involuntary case
under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money of $250,000
or more in the aggregate (exclusive of judgment amounts fully covered by
insurance where the insurer has admitted liability in respect of such
judgment) or of $500,000 or more in the aggregate (regardless of insurance
coverage) shall be rendered by one or more courts, administrative tribunals
or other bodies having jurisdiction against any Relevant Party and the same
shall not be paid discharged (or provision shall not be made for such
payment or discharge), or a stay of execution thereof shall not be
procured, within 30 days from the date of entry thereof and such Relevant
Party shall not, within said period of 30 days, or such longer period
during which execution of the same shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal; or
(i) An event or condition specified in Section 9.01(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions specified in said Section 9.01(e), any Obligor or any ERISA
Affiliate shall incur or in the opinion of the Majority Lenders shall be
reasonably likely to incur a liability to a Plan, a Multiemployer Plan or
the PBGC (or any combination of the foregoing) that, in the reasonable
determination of the Majority Lenders, could reasonably be expected (either
individually or in the aggregate) to have a Material Adverse Effect; or
(j) There shall have been asserted against the Parent or any of its
Subsidiaries, or any predecessor in interest thereof, an Environmental
Claim that, in the judgment of the Majority Lenders is reasonably likely to
be determined adversely to the Parent or any of its Subsidiaries, and the
amount thereof (either individually or in the aggregate) is reasonably
likely to have a Material Adverse Effect (insofar
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as such amount is payable by the Parent or any of its Subsidiaries, but
after deducting any portion thereof that is reasonably expected to be paid
by other creditworthy Persons jointly and severally liable therefor or the
amount of funded reserves which have been established that do not cause, or
are not reasonably likely to cause, a breach of any other provision of this
Agreement); or
(k) The Liens created by the Security Documents shall at any time not
(other than by reason of the action or inaction by the Administrative
Agent) constitute a valid and perfected Lien on the collateral intended to
be covered thereby (to the extent perfection by filing, registration,
recordation or possession is required herein or therein) in favor of the
Administrative Agent, free and clear of all other Liens (other than Liens
permitted under Section 9.06 hereof or under the respective Security
Documents), or, except for expiration in accordance with its terms, any of
the Security Documents shall for whatever reason be terminated or cease to
be in full force and effect, or the enforceability thereof shall be
contested by any Obligor;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 10 with respect to any Obligor, the
Administrative Agent may, by notice to the Parent, terminate the Commitments
(including the Swingline Commitment) and/or declare the principal amount then
outstanding of, and the accrued interest on, the Loans (including all Swingline
Loans), the Reimbursement Obligations and all other amounts payable by the
Obligors hereunder and under the Notes and the other Credit Documents
(including, without limitation, any amounts payable under Section 5.05 or 5.06
hereof) to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each
Obligor; and (2) in the case of the occurrence of an Event of Default referred
to in clause (f) or (g) of this Section 10 with respect to any Obligor, the
Commitments (including the Swingline Commitment) shall
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automatically be terminated and the principal amount then outstanding of, and
the accrued interest on, the Loans (including all Swingline Loans), the
Reimbursement Obligations and all other amounts payable by the Obligors
hereunder and under the Notes and the other Credit Documents (including, without
limitation, any amounts payable under Section 5.05 or 5.06 hereof) shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by each Obligor.
In addition, upon the occurrence and during the continuance of any Event of
Default (if the Administrative Agent has declared the principal amount then
outstanding of, and accrued interest on, the Revolving Credit Loans and all
other amounts payable by the Obligors hereunder and under the Notes to be due
and payable), each Revolving Credit Borrower agrees that it shall, if requested
by the Administrative Agent or the Majority Revolving Credit Lenders through the
Administrative Agent (and, in the case of any Event of Default referred to in
clause (f) or (g) of this Section 10 with respect to such Borrower, forthwith,
without any demand or the taking of any other action by the Administrative Agent
or such Lenders) provide cover for the Letter of Credit Liabilities under such
Borrower's Revolving Credit Facility by paying to the Administrative Agent
immediately available funds in an amount equal to the then aggregate undrawn
face amount of all Letters of Credit under such Facility, which funds shall be
held by the Administrative Agent in the Collateral Account as collateral
security in the first instance for the Letter of Credit Liabilities under such
Facility and be subject to withdrawal only as therein provided.
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Section 11. THE ADMINISTRATIVE AGENT.
11.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby appoints and
authorizes the Administrative Agent to act as its agent hereunder and under the
other Credit Documents with such powers as are specifically delegated to the
Administrative Agent by the terms of this Agreement and of the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent (which term as used in this sentence and in Section
11.05 and the first sentence of Section 11.06 hereof shall include reference to
its affiliates and its own and its affiliates' officers, directors, employees
and agents):
(a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the other Credit Documents, and shall
not by reason of this Agreement or any other Credit Document be a trustee
for any Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in
any other Credit Document, or in any certificate or other document referred
to or provided for in, or received by any of them under, this Agreement or
any other Credit Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, any Note or
any other Credit Document or any other document referred to or provided for
herein or therein or for any failure by the Parent or any other Person to
perform any of its obligations hereunder or thereunder;
(c) shall not, except to the extent expressly instructed by the
Majority Lenders with respect to collateral security under the Security
Documents, be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Credit Document; and
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(d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other Credit Document or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or
willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee of a Note as the holder thereof for all purposes hereof
unless and until a notice of the assignment or transfer thereof shall have been
filed with the Administrative Agent, together with the consent of the Parent to
such assignment or transfer (to the extent required by Section 12.06(b) hereof).
11.02 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be
entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telegram or
cable) reasonably believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by the Administrative Agent. As to any matters not expressly provided
for by this Agreement or any other Credit Document, the Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Majority
Lenders or, if provided herein, in accordance with the instructions given by all
of the Lenders as is required in such circumstance, and such instructions of
such Lenders and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders.
11.03 DEFAULTS. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender
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or the Parent specifying such Default and stating that such notice is a "Notice
of Default". In the event that the Administrative Agent receives such a notice
of the occurrence of a Default, the Administrative Agent shall give prompt
notice thereof to the Lenders. The Administrative Agent shall (subject to
Section 11.07 hereof) take such action with respect to such Default as shall be
directed by the Majority Lenders, PROVIDED that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interest of the Lenders except to the extent that this Agreement
expressly requires that such action be taken, or not be taken, only with the
consent or upon the authorization of the Majority Lenders or all of the Lenders.
11.04 RIGHTS AS A LENDER. With respect to its Commitments and the Loans
made by it, NatWest (and any successor acting as Administrative Agent) in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
the Administrative Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. NatWest (and any successor acting as Administrative Agent) and its
affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Obligors (and any of their
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and NatWest (and any such successor) and its affiliates may accept fees
and other consideration from the Obligors for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
11.05 INDEMNIFICATION. The Lenders agree to indemnify the Administrative
Agent (to the extent not reimbursed under Section 12.03 hereof, but without
limiting the obligations of the Parent under said Section 12.03) ratably in
accordance with the
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aggregate principal amount of the Loans and Reimbursement Obligations held by
the Lenders (or, if no Loans or Reimbursement Obligations are at the time
outstanding, ratably in accordance with their respective Notes), for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Administrative Agent (including
by any Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Credit Document or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses that the Borrowers are obligated to pay under Section 12.03
hereof, but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents, PROVIDED that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
11.06 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each Lender
agrees that it has, independently and without reliance on the Administrative
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Parent and its
Subsidiaries and made its own decision to enter into this Agreement and that it
will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or under any other Credit
Document. The Administrative Agent shall not be required to keep itself informed
as to the performance or observance by any Obligor of this Agreement or any of
the other Credit Documents or any other document referred to or provided for
herein or therein or to inspect the Properties or books of the Parent or any of
its Subsidiaries. Except for notices,
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reports and other documents and information expressly required to be furnished
to the Lenders by the Administrative Agent hereunder or under the Security
Documents, the Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition or business of the Parent or any of its Subsidiaries (or any
of their affiliates) that may come into the possession of the Administrative
Agent or any of its affiliates.
11.07 FAILURE TO ACT. Except for action expressly required of the
Administrative Agent hereunder and under the other Credit Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 11.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
11.08 RESIGNATION OR REMOVAL OF ADMINISTRATIVE AGENT. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Parent and the Borrowers, and the Administrative Agent
may be removed at any time with or without cause by the Majority Lenders. Upon
any such resignation or removal, the Majority Lenders shall have the right to
appoint a successor Administrative Agent. If no successor Administrative Agent
shall have been so appointed by the Majority Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent's giving
of notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, that shall be a bank that
has an office in New York, New York with a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested
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with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation or removal hereunder as Administrative Agent, the provisions
of this Section 11 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 the
Administrative Agent.
11.09 CONSENTS UNDER OTHER CREDIT DOCUMENTS. Except as otherwise provided
in Section 12.04 hereof with respect to this Agreement, the Administrative Agent
may, with the prior consent of the Majority Lenders (but not otherwise), consent
to any modification, supplement or waiver under any of the Credit Documents,
PROVIDED that, without the prior consent of each Lender, the Administrative
Agent shall not (except as provided herein or in the Security Documents) release
any collateral or otherwise terminate any Lien under any Security Document
providing for collateral security, agree to additional obligations being secured
by such collateral security (unless the Lien for such additional obligations
shall be junior to the Lien in favor of the other obligations secured by such
Security Document, in which event the Administrative Agent may consent to such
junior Lien provided that it obtains the consent of the Majority Lenders
thereto), alter the relative priorities of the obligations entitled to the
benefits of the Liens created under the Security Documents or release any
guarantor under any Security Document from its guarantee obligations thereunder,
except that no such consent shall be required, and the Administrative Agent is
hereby authorized, to release any Lien covering Property (and to release any
such guarantor) that is the subject of either a disposition of Property
permitted hereunder (including, without limitation, dispositions of Receivables
and Related Assets pursuant to Permitted Receivables Financings) or a
disposition to which the Majority Lenders have consented.
11.10 COLLATERAL SUB-AGENTS. Each Lender by its execution and delivery of
this Agreement agrees, as contemplated by Section 4.03 of the Pledge and
Security Agreement, that, in
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the event it shall hold any Permitted Investments referred to therein, such
Permitted Investments shall be held in the name and under the control of such
Lender, and such Lender shall hold such Permitted Investments as a collateral
sub-agent for the Administrative Agent thereunder. The Obligors by their
execution and delivery of this Agreement hereby consent to the foregoing.
Section 12. MISCELLANEOUS.
12.01 WAIVER. No failure on the part of the Administrative Agent or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
12.02 NOTICES. All notices, requests and other communications provided for
herein and under the Security Documents (including, without limitation, any
modifications of, or waivers, requests or consents under, this Agreement) shall
be given or made in writing (including, without limitation, by telecopy)
delivered to the intended recipient:
(a) in the case of each of the Obligors, at the "Address for Notices"
specified below the name of the Parent on the signature pages hereof;
(b) in the case of the Administrative Agent, at the "Address for
Notices" specified below the name of the Administrative Agent on the
signature pages hereof; and
(c) in the case of any Lender, at its address (or telecopy number) set
forth in its Administrative Questionnaire;
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or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when transmitted
by telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
12.03 EXPENSES, ETC. The Parent and the Borrowers agree jointly and
severally to pay or reimburse each of the Lenders and the Administrative Agent
for: (a) all reasonable out-of-pocket costs and expenses of the Administrative
Agent (including, without limitation, the reasonable fees and expenses of
Milbank, Tweed, Hadley & McCloy, special New York counsel to NatWest) in
connection with (i) the negotiation, preparation, execution and delivery of this
Agreement and the other Credit Documents and the extension of credit hereunder
and (ii) the negotiation or preparation of any modification, supplement or
waiver of any of the terms of this Agreement or any of the other Credit
Documents (whether or not consummated); (b) all reasonable out-of-pocket costs
and expenses of the Lenders and the Administrative Agent (including, without
limitation, the reasonable fees and expenses of legal counsel) in connection
with (i) any Default and any enforcement or collection proceedings resulting
therefrom, including, without limitation, all manner of participation in or
other involvement with (x) bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings, (y) judicial or regulatory proceedings
and (z) workout, restructuring or other negotiations or proceedings (whether or
not the workout, restructuring or transaction contemplated thereby is
consummated) and (ii) the enforcement of this Section 12.03; (c) all transfer,
stamp, documentary or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of this Agreement or any of the
other Credit Documents or any other document referred to herein or therein and
all costs, expenses, taxes, assessments and other charges incurred in connection
with any filing, registration, recording or perfection of any security interest
contemplated by
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any Security Document or any other document referred to therein; and (d) all
costs, expenses and other charges in respect of title insurance procured with
respect to the Liens created pursuant to the Mortgages.
The Parent and the Borrowers hereby agree jointly and severally to
indemnify the Administrative Agent and each Lender and their respective
directors, officers, employees, attorneys and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages or expenses
incurred by any of them (including, without limitation, any and all losses,
liabilities, claims, damages or expenses incurred by the Administrative Agent to
any Lender, whether or not the Administrative Agent or any Lender is a party
thereto) arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to the extensions of credit hereunder or any actual or
proposed use by the Obligors of any of its Subsidiaries of the proceeds of any
of the extensions of credit hereunder, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified or such
Person's directors, officers, employees, attorneys or agents). Without limiting
the generality of the foregoing, the Parent and the Borrowers jointly and
severally will indemnify the Administrative Agent and each Lender from, and hold
the Administrative Agent and each Lender harmless against, any losses,
liabilities, claims, damages or expenses described in the preceding sentence
(including any Lien filed against any Property covered by the Mortgages or any
part of the Mortgage Estate thereunder in favor of any governmental entity, but
excluding, as provided in the preceding sentence, any loss, liability, claim,
damage or expense incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified) arising under any Environmental Law
as a result of the past, present or future operations of the Parent or any of
its Subsidiaries (or any predecessor in interest
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to the Parent or any of its Subsidiaries), or the past, present or future
condition of any site or facility owned, operated or leased at any time by the
Parent or any of its Subsidiaries (or any such predecessor in interest), or any
Release or threatened Release of any Hazardous Materials at or from any such
site or facility, excluding any such Release or threatened Release that shall
occur during any period when the Administrative Agent or any Lender shall be in
possession of any such site or facility following the exercise by the
Administrative Agent or any Lender of any of its rights and remedies hereunder
or under any of the Security Documents, but including any such Release or
threatened Release occurring during such period that is a continuation of
conditions previously in existence, or of practices employed by the Parent and
its Subsidiaries, at such site or facility.
12.04 AMENDMENTS, ETC. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be modified or supplemented only
after written notice to all Lenders and by an instrument in writing signed by
the Parent, the Borrowers and the Majority Lenders, or by the Parent, the
Borrowers and the Administrative Agent acting with the consent of the Majority
Lenders, and any provision of this Agreement may be waived after written notice
to all Lenders by the Majority Lenders or by the Administrative Agent acting
with the consent of the Majority Lenders; PROVIDED that:
(a) no modification, supplement or waiver shall, unless by an
instrument signed by all of the Lenders or by the Administrative Agent
acting with the consent of all of the Lenders: (i) increase, or extend the
term of any of the Commitments, or extend the time or waive any requirement
for the scheduled reduction or termination of any of the Commitments, (ii)
extend the date fixed for the scheduled payment of principal of or interest
on any Loan, the Reimbursement Obligations or any fee hereunder, (iii)
reduce the amount of any such payment of principal, (iv) reduce the rate at
which interest is payable thereon or any fee is payable hereunder, (v)
alter the rights or obligations of the Borrowers to prepay Loans, (vi)
alter the manner in
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which payments or prepayments of principal, interest or other amounts
hereunder shall be applied as between the Lenders or Types or Facilities of
Loans, (vii) alter the terms of this Section 12.04, (viii) modify the
definition of the term "Majority Lenders", "Majority Revolving Credit
Lenders" or "Majority Term Loan Lenders" or modify in any other manner the
number or percentage of the Lenders required to make any determinations or
waive any rights hereunder or to modify any provision hereof, (ix) release
any Guarantor from any of its guarantee obligations under Section 6 hereof,
or (x) waive any of the conditions precedent set forth in Section 7.02
hereof;
(b) any modification, supplement or waiver of Section 2.01(c) hereof
shall require the consent of the Swingline Lender;
(c) any modification or supplement of Section 11 hereof, or of any of
the rights or duties of the Administrative Agent hereunder, shall require
the consent of the Administrative Agent; and
(d) any modification or supplement of Section 6 hereof shall require
the consent of each Guarantor.
12.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
12.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) No Obligor may assign any of its rights or obligations hereunder or
under the Notes without the prior consent of all of the Lenders and the
Administrative Agent.
(b) Each Lender may assign any of its Loans, its Notes, its Commitments,
and, if such Lender is a Revolving Credit Lender, its Letter of Credit Interest
(but only with the consent of the Administrative Agent, the Parent and (in the
case of a
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Revolving Credit Commitment or a Letter of Credit Interest) the Issuing Banks,
such consents not to be unreasonably withheld); PROVIDED that
(i) no such consent by the Parent, the Administrative Agent or the
Issuing Banks shall be required in the case of any assignment to another
Lender;
(ii) except to the extent the Parent and the Administrative Agent
shall otherwise consent, any such partial assignment (other than to another
Lender) shall be in an amount at least equal to $5,000,000;
(iii) each such assignment by a Lender of its Loans, Note, Commitment
or Letter of Credit Interest under the Revolving Credit Facility shall be
made in such manner so that the same portion of its Loans, Note, Commitment
and Letter of Credit Interest under the Revolving Credit Facility are
assigned to the respective assignee; and
(iv) each such assignment by a Lender of its Loans or Commitment under
the Term Loan Facility shall be made in such manner so that the same
portion of its Term Loans and Term Loan Commitment are assigned to the
respective assignee.
Upon execution and delivery by the assignee to the Parent, the Administrative
Agent and the Issuing Banks of an instrument in writing pursuant to which such
assignee agrees to become a "Lender" hereunder (if not already a Lender) having
the Commitment(s), Loans, and, if applicable, Letter of Credit Interest
specified in such instrument, and upon consent thereto by the Parent, the
Administrative Agent and the Issuing Banks to the extent required above, the
assignee shall have, to the extent of such assignment (unless provided in such
assignment with the consent of the Parent, the Administrative Agent and the
Issuing Banks), the obligations, rights and benefits of a Lender hereunder
holding the Commitment(s), Loans and, if applicable, Letter of Credit Interest
(or portions thereof) assigned to it
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(in addition to the Commitment(s), Loans and Letter of Credit Interest, if any,
theretofore held by such assignee) and the assigning Lender shall, to the extent
of such assignment, be released from the Commitment(s) (or portion(s) thereof)
so assigned. Upon each such assignment (but excluding, in any event, the
assignments contemplated in Section 2.01(c) hereof) the assigning Lender shall
pay the Administrative Agent an assignment fee of $3,500.
(c) A Lender may sell or agree to sell to one or more other Persons (each a
"PARTICIPANT") a participation in all or any part of any Loans or Letter of
Credit Interest held by it, or in its Commitments, PROVIDED that such
Participant shall not have any rights or obligations under this Agreement or any
Note or any other Credit Document (the Participant's rights against such Lender
in respect of such participation to be those set forth in the agreements
executed by such Lender in favor of the Participant). All amounts payable by the
Borrowers to any Lender under Section 5 hereof in respect of Loans, Letter of
Credit Interest held by it, and its Commitments, shall be determined as if such
Lender had not sold or agreed to sell any participations in such Loans, Letter
of Credit Interest and Commitments, and as if such Lender were funding each of
such Loan, Letter of Credit Interest and Commitments in the same way that it is
funding the portion of such Loan, Letter of Credit Interest and Commitments in
which no participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Credit Document except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term of such Lender's related
Commitment, (ii) extend the scheduled date fixed for the payment of principal of
or interest on the related Loan or Loans, Reimbursement Obligations or any
portion of any fee hereunder payable to the Participant, (iii) reduce the amount
of any such payment of principal, (iv) reduce the rate at which interest is
payable thereon, or any fee hereunder payable to the Participant, to a level
below the rate at which the Participant is entitled to receive such interest or
fee or (v) consent to any
Credit Agreement
----------------
<PAGE> 182
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modification, supplement or waiver hereof or of any of the other Credit
Documents to the extent that the same, under Section 11.09 or 12.04 hereof,
requires the consent of each Lender.
(d) In addition to the assignments and participations permitted under the
foregoing provisions of this Section 12.06, any Lender may (without notice to
the Parent, the Administrative Agent, the Issuing Banks or any other Lender and
without payment of any fee) assign and pledge all or any portion of its Loans
and its Notes to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank, and
such Loans and Notes shall be fully transferrable as provided therein. No such
assignment shall release the assigning Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the Parent or any of
its Subsidiaries in the possession of such Lender from time to time to assignees
and participants (including prospective assignees and participants), subject,
however, to the provisions of Section 12.12(b) hereof.
(f) Anything in this Section 12.06 to the contrary notwithstanding, no
Lender may assign or participate any interest in any Loan or Reimbursement
Obligation held by it hereunder to the Parent or any of its Affiliates or
Subsidiaries without the prior consent of each Lender.
12.07 SURVIVAL. The obligations of the Obligors under Sections 5.01, 5.05,
5.06, 5.07 and 12.03 hereof, the obligations of each Guarantor under Section
6.03 hereof, and the obligations of the Lenders under Section 11.05 hereof,
shall survive the repayment of the Loans and Reimbursement Obligations and the
termination of the Commitments and, in the case of any Lender that may assign
any interest in its Commitments, Loans or Letter of Credit Interest hereunder,
shall survive the making of such assignment, notwithstanding that such assigning
Lender may cease to be a "Lender" hereunder. In addition, each representation
and warranty made, or deemed to be made by a notice of any extension
Credit Agreement
----------------
<PAGE> 183
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of credit (whether by means of a Loan or a Letter of Credit), herein or
pursuant hereto shall survive the making of such representation and warranty,
and no Lender shall be deemed to have waived, by reason of making any extension
of credit hereunder (whether by means of a Loan or a Letter of Credit), any
Default that may arise by reason of such representation or warranty proving to
have been false or misleading, notwithstanding that such Lender or the
Administrative Agent may have had notice or knowledge or reason to believe that
such representation or warranty was false or misleading at the time such
extension of credit was made.
12.08 CAPTIONS. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
12.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.10 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and the
Notes shall be governed by, and construed in accordance with, the law of the
State of New York. Each Obligor hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
the Supreme Court of the State of New York sitting in New York County (including
its Appellate Division), and of any other appellate court in the State of New
York, for the purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. Each Obligor hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
Credit Agreement
----------------
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12.11 WAIVER OF JURY TRIAL. EACH OF THE OBLIGORS, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
12.12 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.
(a) Each Obligor acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to the Parent
or one or more of its Subsidiaries (in connection with this Agreement or
otherwise) by any Lender or by one or more subsidiaries or affiliates of such
Lender and each of the Obligors hereby authorizes each Lender to share any
information delivered to such Lender by such Obligor and its Subsidiaries
pursuant to this Agreement, or in connection with the decision of such Lender to
enter into this Agreement, with any such subsidiary or affiliate, it being
understood that any such subsidiary or affiliate receiving such information
shall be bound by the provisions of paragraph (b) below as if it were a Lender
hereunder. Such authorization shall survive the repayment of the Loans and
Reimbursement Obligations and the termination of the Commitments.
(b) Each Lender and the Administrative Agent agrees (on behalf of itself
and each of its affiliates, directors, officers, employees and representatives)
to use reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of the same nature
and in accordance with safe and sound banking practices, any non-public
information supplied to it by any of the Obligors pursuant to this Agreement
that is identified by such Person as being confidential at the time the same is
delivered to the Lenders or the Administrative Agent, PROVIDED that nothing
herein shall limit the disclosure of any such information (i) after such
information shall have become public (other than through a violation of this
Section 12.12), (ii) to
Credit Agreement
----------------
<PAGE> 185
- 179 -
the extent required by statute, rule, regulation or judicial process, (iii) to
counsel for any of the Lenders or the Administrative Agent, (iv) to bank
examiners (or any other regulatory authority having jurisdiction over any Lender
or the Administrative Agent), or to auditors or accountants, (v) to the
Administrative Agent or any other Lender, (vi) in connection with any litigation
to which any one or more of the Lenders or the Administrative Agent is a party,
or in connection with the enforcement of rights or remedies hereunder or under
any other Credit Document, (vii) to a subsidiary or affiliate of such Lender as
provided in paragraph (a) above or (viii) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) first executes and delivers to the
respective Lender a Confidentiality Agreement substantially in the form of
Exhibit D hereto (or executes and delivers to such Lender an acknowledgement to
the effect that it is bound by the provisions of this Section 12.12(b), which
acknowledgement may be included as part of the respective assignment or
participation agreement pursuant to which such assignee or participant acquires
an interest in the Loans or Letter of Credit Interest hereunder); PROVIDED,
FURTHER, that in no event shall any Lender or the Administrative Agent be
obligated or required to return any materials furnished by any of the Obligors
or any of their respective Subsidiaries. The obligations of each Lender under
this Section 12.12 shall supersede and replace the obligations of such Lender
under the confidentiality letter in respect of this financing signed and
delivered by such Lender to the Company prior to the date hereof; in addition,
the obligations of any assignee that has executed a Confidentiality Agreement in
the form of Exhibit D hereto shall be superseded by this Section 12.12 upon the
date upon which such assignee becomes a Lender hereunder pursuant to Section
12.06(b) hereof.
Credit Agreement
----------------
<PAGE> 186
- 180 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
THE PARENT
----------
COMMONWEALTH ALUMINUM CORPORATION
By /s/ Donald Marsh, Jr.
--------------------------------
Title: Executive Vice President
Address for Notices:
Commonwealth Aluminum Corporation
1200 Meidinger Tower
Louisville, Kentucky 40202
Attention: President
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Erik Lindauer, Esq.
Credit Agreement
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<PAGE> 187
- 181 -
HOLDINGS
--------
COMMONWEALTH INDUSTRIES, INC.
By /s/ Donald Marsh, Jr.
--------------------------------
Title: Executive Vice President
THE BORROWERS
-------------
COMMONWEALTH ALUMINUM LEWISPORT,
INC.
By /s/ Donald Marsh, Jr.
--------------------------------
Title: Executive Vice President
ALFLEX CORPORATION
By /s/ Donald Marsh, Jr.
--------------------------------
Title: Executive Vice President
BARMET ALUMINUM CORPORATION
By /s/ Donald Marsh, Jr.
--------------------------------
Title: Executive Vice President
Credit Agreement
----------------
<PAGE> 188
- 182 -
SUBSIDIARY GUARANTOR
--------------------
COMMONWEALTH ALUMINUM SALES
CORPORATION
By /s/ Donald Marsh, Jr.
--------------------------------
Title: Executive Vice President
Credit Agreement
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<PAGE> 189
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LENDERS
-------
Existing Lenders
----------------
NATIONAL WESTMINSTER BANK PLC
By /s/ Ronan Agnew
--------------------------------
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By /s/ Lawrence W. Jacobs
--------------------------------
Title: Vice President
BANK OF MONTREAL
By /s/ Joanna S. Bellocq
--------------------------------
Title: Director
MELLON BANK, N.A.
By /s/ Dwayne R. Finney
--------------------------------
Title: Assistant Vice President
NBD BANK, N.A.
Credit Agreement
----------------
<PAGE> 190
- 184 -
By /s/ Randall K. Stephens
--------------------------------
Title: First Vice President
New Lenders
-----------
ABN AMRO BANK N.V.
By /s/ Kathryn C. Toth
--------------------------------
Title: Group Vice President
By /s/ Shirley K. Kersten
--------------------------------
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By /s/ F. C. H. Ashby
--------------------------------
Title: Senior Manager Loan
Operations
CAISSE NATIONALE DE CRIDIT AGRICOLE
By /s/ David Bouhl
--------------------------------
Title: F.V.P. Head of Croporate
Banking Chicago
Credit Agreement
----------------
<PAGE> 191
- 185 -
THE FUJI BANK, LIMITED
CHICAGO BRANCH
By /s/ Peter L. Chinnici
------------------------------
Title: Joint General Manager
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH
By /s/ Noboru Kobayashi
------------------------------
Title: Deputy General Manager
CREDITANSTALT BANKVEREIN
By /s/ Catherine K. MacDonald
------------------------------
Title: Senior Associate
By /s/ Richard P. Buckanavage
------------------------------
Title: Vice President
THE INDUSTRIAL BANK
OF JAPAN, LIMITED
By /s/ Robert W. Ramage, Jr.
------------------------------
Title: Senior Vice President
Credit Agreement
----------------
<PAGE> 192
- 186 -
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By /s/ Patricia Loret De Mola
-----------------------------
Title: Senior Vice President
NATIONAL CITY BANK OF KENTUCKY
By /s/ Tom Gurbach
-----------------------------
Title: Vice President
SOCIETE GENERALE
By /s/ Steven R. Fercho
-----------------------------
Title: Vice President
THE YASUDA TRUST AND
BANKING CO., LTD.
By /s/ Makoto Tagawa
-----------------------------
Title: Deputy General Manager
Credit Agreement
----------------
<PAGE> 193
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FIFTH THIRD BANK OF KENTUCKY, INC.
By /s/ Tim Kerr
----------------------------------
Title: Assistant Vice President
Credit Agreement
----------------
<PAGE> 194
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THE ADMINISTRATIVE AGENT
------------------------
NATIONAL WESTMINSTER BANK PLC,
as Administrative Agent
By /s/ Ronan Agnew
-----------------------------
Title: Vice President
Address for Notices:
National Westminster Bank Plc
175 Water Street
New York, New York
Attention: Ronan Agnew
Credit Agreement
----------------
<PAGE> 1
Exhibit 10.9
------------
[EXECUTION COUNTERPART]
AMENDED AND RESTATED
PLEDGE AND SECURITY AGREEMENT
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT dated as of November 29,
1996 between:
(1) COMMONWEALTH ALUMINUM CORPORATION, a corporation duly organized
and validly existing under the laws of the State of Delaware (the
"PARENT");
(2) COMMONWEALTH INDUSTRIES, INC., a corporation duly organized and
validly existing under the laws of the State of Delaware ("HOLDINGS");
(3) COMMONWEALTH ALUMINUM LEWISPORT, INC., a corporation duly
organized and validly existing under the laws of the State of Delaware
("CALI");
(4) ALFLEX CORPORATION (formerly named CasTech Aluminum Group Inc.), a
corporation duly organized and validly existing under the laws of the State
of Delaware ("ALFLEX");
(5) BARMET ALUMINUM CORPORATION, a corporation duly organized and
validly existing under the laws of the State of Ohio ("BARMET");
(6) each of the subsidiaries of the Parent identified under the
caption "SUBSIDIARY GUARANTORS" on the signature page hereof (individually
a "SUBSIDIARY GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS"
and, together with the Parent, Holdings, CALI, Alflex and Barmet, the
"SECURING PARTIES"); and
(7) NATIONAL WESTMINSTER BANK, PLC, as agent for the lenders or other
financial institutions or entities party,
Amended and Restated
Pledge and Security Agreement
-----------------------------
<PAGE> 2
-2-
as lenders, to the Credit Agreement referred to below (in such capacity,
together with its successors in such capacity, the "ADMINISTRATIVE AGENT").
The Parent, CALI, Alflex, Barmet, the Subsidiary Guarantors, certain
lenders and the Administrative Agent entered into a Credit Agreement dated as of
September 20, 1996 (as in effect on the date hereof, the "EXISTING CREDIT
AGREEMENT"), providing for extensions of credit to be made to the Borrowers in
an aggregate principal amount not exceeding $425,000,000. In connection with the
execution and delivery of the Existing Credit Agreement:
(a) the Parent, CALI, certain other of the Securing Parties and the
Administrative Agent entered into a Pledge and Security Agreement dated as
of September 20, 1996 (as in effect on the date hereof, the "EXISTING
COMMONWEALTH PLEDGE AND SECURITY AGREEMENT") pursuant to which said
Securing Parties granted to the Administrative Agent a security interest in
all of the Collateral (as defined therein) as collateral security for the
Secured Obligations (as so defined); and
(b) Alflex, Barmet and the Administrative Agent entered into a Pledge
and Security Agreement dated as of September 20, 1996 (as in effect on the
date hereof, the "EXISTING CASTECH PLEDGE AND SECURITY AGREEMENT" and,
collectively with the Existing Commonwealth Pledge and Security Agreement,
the "EXISTING PLEDGE AND SECURITY AGREEMENTS") pursuant to which said
Securing Parties granted to the Administrative Agent a security interest in
all of the Collateral (as defined therein) as collateral security for the
Secured Obligations (as so defined).
Concurrently with the execution and delivery of this Amended and Restated
Pledge and Security Agreement, the Securing Parties, certain lenders
(collectively, the "LENDERS") and the Administrative Agent are amending and
restating the Existing Credit Agreement pursuant to an Amended and Restated
Credit Agreement dated as of November 29, 1996 (the Existing Credit
Amended and Restated
Pledge and Security Agreement
-----------------------------
<PAGE> 3
-3-
Agreement as amended and restated and as further modified and supplemented and
in effect from time to time being hereinafter called the "CREDIT AGREEMENT"),
providing, subject to the terms and conditions thereof, for the renewal of the
Borrowers' indebtedness under the Existing Credit Agreement and for additional
extensions of credit to the Borrowers in an aggregate principal amount
(including the indebtedness under the Existing Credit Agreement) not exceeding
$325,000,000. In addition, one or more of the Obligors (as defined in the Credit
Agreement) may from time to time be obligated to one or more of the Lenders
under one or more Interest Rate Protection Agreements (as so defined) (such
obligations being herein referred to as the "INTEREST RATE OBLIGATIONS").
To induce the Lenders to amend and restate the Existing Credit Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Securing Parties and the Administrative Agent
have agreed that the Existing Pledge and Security Agreements shall be hereby
combined, amended and restated as follows:
Section 1. DEFINITIONS. Terms defined in the Credit Agreement are used
herein as defined therein. In addition, as used herein:
"ACCOUNTS" shall have the meaning ascribed thereto in Section 3(d) hereof.
"COLLATERAL" shall have the meaning ascribed thereto in Section 3 hereof.
"COLLATERAL ACCOUNT" shall have the meaning ascribed thereto in Section
4.01 hereof.
"COPYRIGHT COLLATERAL" shall mean all Copyrights, whether now owned or
hereafter acquired by any Securing Party, including each Copyright identified in
Annex 2 hereto.
Amended and Restated
Pledge and Security Agreement
-----------------------------
<PAGE> 4
-4-
"COPYRIGHTS" shall mean all copyrights, copyright registrations and
applications for copyright registrations, including, without limitation, all
renewals and extensions thereof, the right to recover for all past, present and
future infringements thereof, and all other rights of any kind whatsoever
accruing thereunder or pertaining thereto.
"DOCUMENTS" shall have the meaning ascribed thereto in Section 3(j) hereof.
"EQUIPMENT" shall have the meaning ascribed thereto in Section 3(h) hereof.
"INSTRUMENTS" shall have the meaning ascribed thereto in Section 3(e)
hereof.
"INTELLECTUAL PROPERTY" shall mean, collectively, all Copyright Collateral,
all Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information, know-how and
trade secrets; (b) all licenses or user or other agreements granted to any
Securing Party with respect to any of the foregoing, in each case whether now or
hereafter owned or used including, without limitation, the licenses or other
agreements with respect to the Copyright Collateral, the Patent Collateral or
the Trademark Collateral, listed in Annex 5 hereto; (c) all information,
customer lists, identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys, engineering
reports, test reports, manuals, materials standards, processing standards,
performance standards, catalogs, computer and automatic machinery software and
programs; (d) all field repair data, sales data and other information relating
to sales or service of products now or hereafter manufactured; (e) all
accounting information and all media in which or on which any information or
knowledge or data or records may be recorded or stored and all computer programs
used for the compilation or printout of such information, knowledge, records or
data; and (f) all licenses, consents, permits,
Amended and Restated
Pledge and Security Agreement
-----------------------------
<PAGE> 5
-5-
variances, certifications and approvals of governmental agencies now or
hereafter held by any Securing Party.
"INVENTORY" shall have the meaning ascribed thereto in Section 3(f) hereof.
"ISSUERS" shall mean, collectively, the respective corporations identified
beneath the names of the Securing Parties on Annex 1 hereto under the caption
"Issuer" and each other Subsidiary of the Parent that is formed or acquired
after the date hereof (other than, in each case, Subsidiaries of the Parent that
are not required to become Subsidiary Guarantors pursuant to Section 9.17(a) of
the Credit Agreement).
"MOTOR VEHICLES" shall mean motor vehicles, tractors, trailers and other
like property, whether or not the title thereto is governed by a certificate of
title or ownership.
"PATENT COLLATERAL" shall mean all Patents, whether now owned or hereafter
acquired by any Securing Party, including each Patent identified in Annex 3
hereto.
"PATENTS" shall mean all patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties, damages and
payments now or hereafter due and/or payable under and with respect thereto,
including, without limitation, damages and payments for past or future
infringements thereof, the right to sue for past, present and future
infringements thereof, and all rights corresponding thereto throughout the
world.
"PLEDGED STOCK" shall have the meaning ascribed thereto in Section 3(a)
hereof.
"SECURED OBLIGATIONS" shall mean, collectively, (a) the principal of and
interest on the Loans made by the Lenders
Amended and Restated
Pledge and Security Agreement
-----------------------------
<PAGE> 6
-6-
to, and the Note(s) held by each Lender of, the Borrowers, and all other amounts
from time to time owing to the Lenders or the Administrative Agent by the
Obligors under the Credit Documents (including, without limitation, all
Reimbursement Obligations and Guaranteed Obligations and interest thereon owing
by the Obligors), (b) all Interest Rate Obligations owing by the Obligors to the
Lenders and (c) all obligations of the Securing Parties to the Lenders and the
Administrative Agent hereunder.
"STOCK COLLATERAL" shall mean, collectively, the Collateral described in
clauses (a) through (c) of Section 3 hereof and the proceeds of and to any such
property and, to the extent related to any such property or such proceeds, all
books, correspondence, credit files, records, invoices and other papers.
"TRADEMARK COLLATERAL" shall mean all Trademarks, whether now owned or
hereafter acquired by any Securing Party, including each Trademark identified in
Annex 4 hereto. Notwithstanding the foregoing, the Trademark Collateral does not
and shall not include any Trademark that would be rendered invalid, abandoned,
void or unenforceable by reason of its being included as part of the Trademark
Collateral.
"TRADEMARKS" shall mean all trade names, trademarks and service marks,
logos, trademark and service mark registrations, and applications for trademark
and service mark registrations, including, without limitation, all renewals of
trademark and service mark registrations, all rights corresponding thereto
throughout the world, the right to recover for all past, present and future
infringements thereof, all other rights of any kind whatsoever accruing
thereunder or pertaining thereto, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized by, each
such trade name, trademark and service mark.
Amended and Restated
Pledge and Security Agreement
-----------------------------
<PAGE> 7
-7-
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect from time to time in the State of New York.
Section 2. REPRESENTATIONS AND WARRANTIES. Each Securing Party represents
and warrants to the Lenders and the Administrative Agent that:
(a) Such Securing Party is the sole beneficial owner of the Collateral
in which it purports to grant a security interest pursuant to Section 3
hereof and no Lien exists or will exist upon such Collateral at any time
(and no right or option to acquire the same exists in favor of any other
Person), except for Liens permitted under Section 9.06 of the Credit
Agreement and except for the pledge and security interest in favor of the
Administrative Agent for the benefit of the Lenders created or provided for
herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of such Collateral
(other than as expressly contemplated herein or therein and Intellectual
Property registered or otherwise located outside of the United States of
America).
(b) The Pledged Stock represented by the certificates identified under
the name of such Securing Party in Annex 1 hereto is, and all other Pledged
Stock in which such Securing Party shall hereafter grant a security
interest pursuant to Section 3 hereof will be, duly authorized, validly
existing, fully paid and non-assessable and none of such Pledged Stock is
or will be subject to any contractual restriction, or any restriction under
the charter or by-laws of the respective Issuer of such Pledged Stock, upon
the transfer of such Pledged Stock (except for any such restriction
contained herein or in the Credit Agreement).
(c) The Pledged Stock represented by the certificates identified under
the name of such Securing Party in Annex 1 hereto constitutes all of the
issued and outstanding shares of capital stock of any class of the Issuers
beneficially owned by such Securing Party on the date hereof (whether or
Amended and Restated
Pledge and Security Agreement
-----------------------------
<PAGE> 8
-8-
not registered in the name of such Securing Party) and said Annex 1
correctly identifies, as at the date hereof, the respective Issuers of such
Pledged Stock, the respective class and par value of the shares comprising
such Pledged Stock and the respective number of shares (and registered
owners thereof) represented by each such certificate.
(d) Annexes 2, 3 and 4 hereto, respectively, set forth under the name
of such Securing Party a complete and correct list of all Copyrights,
Patents and Trademarks owned by such Securing Party on the date hereof;
except pursuant to licenses and other user agreements entered into by such
Securing Party in the ordinary course of business, that are listed in Annex
5 hereto, such Securing Party owns and possesses the right to use, and has
done nothing to authorize or enable any other Person to use, any Copyright,
Patent or Trademark listed in said Annexes 2, 3 and 4, and all
registrations listed in said Annexes 2, 3 and 4 are valid and in full force
and effect; except as may be set forth in said Annex 5, such Securing Party
owns and possesses the right to use all Copyrights, Patents and Trademarks.
(e) Annex 5 hereto sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property on
the date hereof.
(f) To such Securing Party's knowledge, (i) except as set forth in
Annex 5 hereto, there is no violation by others of any right of such
Securing Party with respect to any Copyright, Patent or Trademark listed in
Annexes 2, 3 and 4 hereto, respectively, under the name of such Securing
Party and (ii) such Securing Party is not infringing in any respect upon
any Copyright, Patent or Trademark of any other Person; and no proceedings
have been instituted or are pending against such Securing Party or, to such
Securing Party's knowledge, threatened, and no claim against such Securing
Party has been received by such Securing Party, alleging any such
violation, except as may be set forth in said Annex 5.
Amended and Restated
Pledge and Security Agreement
-----------------------------
<PAGE> 9
-9-
(g) Such Securing Party does not own any Trademarks registered in the
United States of America to which the last sentence of the definition of
Trademark Collateral applies.
(h) Any goods now or hereafter produced by such Securing Party or any
of its Subsidiaries included in the Collateral have been and will be
produced in compliance with the requirements of the Fair Labor Standards
Act, as amended.
Section 3. COLLATERAL. Each Securing Party hereby confirms to the
Administrative Agent and each Lender the pledge and grant to the Administrative
Agent (for the benefit of each Lender) under the Existing Pledge and Security
Agreements of a security interest in, and as collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations, each Securing Party hereby pledges and
grants to the Administrative Agent, for the benefit of the Lenders as
hereinafter provided, a security interest in all of such Securing Party's right,
title and interest in the following property, whether now owned by such Securing
Party or hereafter acquired and whether now existing or hereafter coming into
existence (all being collectively referred to herein as "COLLATERAL"):
(a) the shares of Capital Stock of the Issuers represented by the
certificates identified in Annex 1 hereto under the name of such Securing
Party and all other shares of Capital Stock of whatever class of the
Issuers, now or hereafter owned by such Securing Party, in each case
together with the certificates evidencing the same (collectively, the
"PLEDGED STOCK");
(b) all shares, securities, moneys or property representing a dividend
on any of the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the Pledged Stock, or resulting from a
split-up, revision, reclassification or other like change of the Pledged
Stock or otherwise received in exchange therefor,
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and any subscription warrants, rights or options issued to the holders of,
or otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of such Securing Party under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which an Issuer is not the
surviving corporation, all shares of each class of the Capital Stock of the
successor corporation (unless such successor corporation is such Securing
Party itself) formed by or resulting from such consolidation or merger (the
Pledged Stock, together with all other certificates, shares, securities,
properties or moneys as may from time to time be pledged hereunder pursuant
to clause (a) or (b) above and this clause (c) being herein collectively
called the "STOCK COLLATERAL");
(d) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of such Securing Party constituting any right to
the payment of money, including (but not limited to) all moneys due and to
become due to such Securing Party in respect of any loans or advances or
for Inventory or Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to such Securing Party under any
guarantee (including a letter of credit) of the purchase price of Inventory
or Equipment sold by such Securing Party and all tax refunds (such
accounts, general intangibles and moneys due and to become due being herein
called collectively "ACCOUNTS");
(e) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of such Securing Party evidencing,
representing, arising from or existing in respect of, relating to, securing
or otherwise supporting the payment of, any of the Accounts, including (but
not limited to) promissory notes, drafts, bills of exchange and trade
acceptances (herein collectively called "INSTRUMENTS");
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(f) all inventory (as defined in the Uniform Commercial Code) of such
Securing Party, including Motor Vehicles held by such Securing Party for
lease (including lease to Subsidiaries of the Securing Parties), fuel,
tires and other spare parts, all goods obtained by such Securing Party in
exchange for such inventory, and any products made or processed from such
inventory including all substances, if any, commingled therewith or added
thereto (herein collectively called "INVENTORY");
(g) all Intellectual Property and all other accounts or general
intangibles not constituting Intellectual Property or Accounts;
(h) all equipment (as defined in the Uniform Commercial Code) of such
Securing Party, including all Motor Vehicles (herein collectively called
"EQUIPMENT");
(i) each contract and other agreement of such Securing Party relating
to the sale or other disposition of Inventory or Equipment;
(j) all documents of title (as defined in the Uniform Commercial Code)
or other receipts of such Securing Party covering, evidencing or
representing Inventory or Equipment (herein collectively called
"DOCUMENTS");
(k) all rights, claims and benefits of such Securing Party against any
Person arising out of, relating to or in connection with Inventory or
Equipment purchased by such Securing Party, including, without limitation,
any such rights, claims or benefits against any Person storing or
transporting such Inventory or Equipment;
(l) the balance from time to time in the Collateral Account;
(m) all other tangible and intangible personal property and fixtures
of such Securing Party, including,
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without limitation, all proceeds, products, offspring, accessions, rents,
profits, income, benefits, substitutions and replacements of and to any of
the property of such Securing Party described in the preceding clauses of
this Section 3 (including, without limitation, any proceeds of insurance
thereon and all causes of action, claims and warranties now or hereafter
held by any Securing Party in respect of any of the items listed above)
and, to the extent related to any property described in said clauses or
such proceeds, products and accessions, all books, correspondence, credit
files, records, invoices and other papers, including without limitation all
tapes, cards, computer runs and other papers and documents in the
possession or under the control of such Securing Party or any computer
bureau or service company from time to time acting for such Securing Party.
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Section 4. CASH PROCEEDS OF COLLATERAL.
4.01 COLLATERAL ACCOUNT. There is hereby established with the
Administrative Agent a cash collateral account (the "COLLATERAL ACCOUNT") in the
name and under the sole dominion and control of the Administrative Agent into
which there shall be deposited from time to time the cash proceeds of any of the
Collateral (including proceeds of insurance thereon) required to be delivered to
the Administrative Agent pursuant hereto and into which the Securing Parties may
from time to time deposit any additional amounts that any of them wishes to
pledge to the Administrative Agent for the benefit of the Lenders as additional
collateral security hereunder or that, as provided in Sections 2.10 and 10 of
the Credit Agreement, they are required to pledge as additional collateral
security hereunder. The balance from time to time in the Collateral Account
shall constitute part of the Collateral hereunder and shall not constitute
payment of the Secured Obligations until applied as hereinafter provided. Except
as expressly provided in the next sentence, the Administrative Agent shall remit
the collected balance outstanding to the credit of the Collateral Account to or
upon the order of the respective Securing Party as such Securing Party through
the Parent shall from time to time instruct. However, at any time following the
occurrence and during the continuance of an Event of Default, the Administrative
Agent may (and, if instructed by the Lenders as specified in Section 11.03 of
the Credit Agreement, shall) in its (or their) discretion apply or cause to be
applied (subject to collection) the balance from time to time outstanding to the
credit of the Collateral Account to the payment of the Secured Obligations in
the manner specified in Section 5.09 hereof. The balance from time to time in
the Collateral Account shall be subject to withdrawal only as provided herein.
4.02 PROCEEDS OF ACCOUNTS. At any time after the occurrence and during the
continuance of an Event of Default, each Securing Party shall, upon the request
of the Administrative Agent, instruct all account debtors and other Persons
obligated in respect of all Accounts to make all payments in respect of the
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Accounts either (a) directly to the Administrative Agent (by instructing that
such payments be remitted to a post office box which shall be in the name and
under the control of the Administrative Agent) or (b) to one or more other banks
in the United States of America (by instructing that such payments be remitted
to a post office box which shall be in the name and under the control of the
Administrative Agent) under arrangements, in form and substance satisfactory to
the Administrative Agent pursuant to which such Securing Party shall have
irrevocably instructed such other bank (and such other bank shall have agreed)
to remit all proceeds of such payments directly to the Administrative Agent for
deposit into the Collateral Account. All payments made to the Administrative
Agent, as provided in the preceding sentence, shall be immediately deposited in
the Collateral Account. In addition to the foregoing, each Securing Party agrees
that, at any time after the occurrence and during the continuance of an Event of
Default, if the proceeds of any Collateral hereunder (including the payments
made in respect of Accounts) shall be received by it, such Securing Party shall,
upon the request of the Administrative Agent, as promptly as possible deposit
such proceeds into the Collateral Account. Until so deposited, all such proceeds
shall be held in trust by such Securing Party for and as the property of the
Administrative Agent and shall not be commingled with any other funds or
property of such Securing Party.
4.03 INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. Amounts on deposit in the
Collateral Account shall be invested from time to time in such Permitted
Investments as the respective Securing Party (or, after the occurrence and
during the continuance of a Default, the Administrative Agent) shall determine,
which Permitted Investments shall be held in the name and be under the control
of the Administrative Agent, PROVIDED that (a) at any time after the occurrence
and during the continuance of an Event of Default, the Administrative Agent may
(and, if instructed by the Lenders as specified in Section 11.03 of the Credit
Agreement, shall) in its (or their) discretion at any time and from time to time
elect to liquidate any such Permitted Investments and to apply or cause to be
applied the proceeds thereof to the payment of the Secured Obligations in the
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manner specified in Section 5.09 hereof and (b) if requested by the respective
Securing Party through the Borrowers, such Permitted Investments may be held in
the name and under the control of one or more of the Lenders (and in that
connection each Lender, pursuant to Section 11.10 of the Credit Agreement) has
agreed that such Permitted Investments shall be held by such Lender as a
collateral sub-agent for the Administrative Agent hereunder).
4.04 COVER FOR LETTER OF CREDIT LIABILITIES. Amounts deposited into the
Collateral Account as cover for Letter of Credit Liabilities pursuant to Section
2.10 or Section 10 of the Credit Agreement shall be held by the Administrative
Agent in a separate sub-account (designated "LETTER OF CREDIT LIABILITIES
SUB-ACCOUNT") and all amounts held in such sub-account shall constitute
collateral security FIRST for the Letter of Credit Liabilities outstanding from
time to time and SECOND as collateral security for the other Secured Obligations
hereunder.
Section 5. FURTHER ASSURANCES; REMEDIES. In furtherance of the grant of the
pledge and security interest pursuant to Section 3 hereof, the Securing Parties
hereby jointly and severally agree with each Lender and the Administrative Agent
as follows:
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5.01 DELIVERY AND OTHER PERFECTION. Each Securing Party shall:
(a) if any of the shares, securities, moneys or property required to
be pledged by such Securing Party under clauses (a), (b) and (c) of Section
3 hereof are received by such Securing Party, forthwith either (i) transfer
and deliver to the Administrative Agent such shares or securities so
received by such Securing Party (together with the certificates for any
such shares and securities duly endorsed in blank or accompanied by undated
stock powers duly executed in blank), all of which thereafter shall be held
by the Administrative Agent, pursuant to the terms of this Agreement, as
part of the Collateral or (ii) take such other action as the Administrative
Agent shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, moneys or property in said clauses
(a), (b) and (c);
(b) deliver and pledge to the Administrative Agent any and all
Instruments, endorsed and/or accompanied by such instruments of assignment
and transfer in such form and substance as the Administrative Agent may
request; PROVIDED that so long as no Default shall have occurred and be
continuing, such Securing Party may retain for collection in the ordinary
course any Instruments received by such Securing Party in the ordinary
course of business and the Administrative Agent shall, promptly upon
request of such Securing Party through the Borrowers, make appropriate
arrangements for making any Instrument pledged by such Securing Party
available to such Securing Party for purposes of presentation, collection
or renewal (any such arrangement to be effected, to the extent deemed
appropriate by the Administrative Agent, against trust receipt or like
document);
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the
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judgment of the Administrative Agent) to create, preserve, perfect or
validate the security interest granted pursuant hereto or to enable the
Administrative Agent to exercise and enforce its rights hereunder with
respect to such pledge and security interest, including, without
limitation, causing any or all of the Stock Collateral to be transferred of
record into the name of the Administrative Agent or its nominee (and the
Administrative Agent agrees that if any Stock Collateral is transferred
into its name or the name of its nominee, the Administrative Agent will
thereafter promptly give to the respective Securing Party copies of any
notices and communications received by it with respect to the Stock
Collateral pledged by such Securing Party hereunder), PROVIDED that notices
to account debtors in respect of any Accounts or Instruments shall be
subject to the provisions of clause (i) below;
(d) without limiting the obligations of such Securing Party under
Section 5.04(c) hereof, upon the acquisition after the date hereof by such
Securing Party of any Equipment covered by a certificate of title or
ownership, at the request of the Administrative Agent, cause the
Administrative Agent to be listed as the lienholder on such certificate of
title and within 120 days such request deliver evidence of the same to the
Administrative Agent;
(e) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
(f) furnish to the Administrative Agent from time to time (but, unless
a Default shall have occurred and be continuing, no more frequently than
quarterly) statements and schedules further identifying and describing the
Copyright Collateral, the Patent Collateral and the Trademark Collateral,
respectively, and such other reports in connection with the Copyright
Collateral, the Patent Collateral and the Trademark Collateral, as the
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Administrative Agent may reasonably request, all in reasonable detail;
(g) (i) within 15 days after the date hereof, deliver to the
Administrative Agent amendments to Annexes 2, 3, 4 and 5 hereto such that
said Annexes 2, 3 and 4, respectively, set forth under the name of each
Securing Party a complete and correct list of all Copyrights, Patents and
Trademarks owned by such Securing Party on the date hereof and said Annex 5
sets forth a complete and correct list of all licenses and other user
agreements included in the Intellectual Property on the date hereof; and
(ii) promptly upon request of the Administrative Agent, following receipt
by the Administrative Agent of any statements, schedules or reports
pursuant to clause (f) above, modify this Agreement by amending Annexes 2,
3 and/or 4 hereto, as the case may be, to include any Copyright, Patent or
Trademark that becomes part of the Collateral under this Agreement;
(h) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect and
make abstracts from its books and records pertaining to the Collateral, and
permit representatives of the Administrative Agent to be present at such
Securing Party's place of business to receive copies of all communications
and remittances relating to the Collateral, and forward copies of any
notices or communications received by such Securing Party with respect to
the Collateral, all in such manner as the Administrative Agent may require;
(i) upon the occurrence and during the continuance of any Event of
Default, upon request of the Administrative Agent, promptly notify (and
such Securing Party hereby authorizes the Administrative Agent so to
notify) each account debtor in respect of any Accounts or Instruments that
such Collateral has been assigned to the Administrative Agent hereunder,
and that any payments due or to become due
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in respect of such Collateral are to be made directly to the Administrative
Agent; and
(j) promptly after such Securing Party shall acquire or form any
Subsidiary (other than a Subsidiary that is not required to become a
Subsidiary Guarantor pursuant to Section 9.17(a) of the Credit Agreement),
deliver to the Administrative Agent an amendment to Annex 1 hereto, such
that after giving effect to such acquisition or formation, the
representations set forth in Sections 2(b) and (c) hereof (assuming that
each reference to "the date hereof" therein referred to the date of such
acquisition or formation) shall be true and complete as of such date.
5.02 OTHER FINANCING STATEMENTS AND LIENS. Except as otherwise permitted
under Section 9.06 of the Credit Agreement, without the prior written consent of
the Administrative Agent (granted with the authorization of the Lenders as
specified in Section 11.09 of the Credit Agreement), no Securing Party shall
file or suffer to be on file, or authorize or permit to be filed or to be on
file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Administrative Agent is not named as the
sole secured party for the benefit of the Lenders.
5.03 PRESERVATION OF RIGHTS. The Administrative Agent shall not be required
to take steps necessary to preserve any rights against prior parties to any of
the Collateral.
5.04 SPECIAL PROVISIONS RELATING TO CERTAIN COLLATERAL.
(a) STOCK COLLATERAL.
(1) The Securing Parties will cause the Stock Collateral to constitute at
all times 100% of the total number of shares of each class of Capital Stock of
each Issuer then outstanding.
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(2) So long as no Event of Default shall have occurred and be continuing,
the Securing Parties shall have the right to exercise all voting, consensual and
other powers of ownership pertaining to the Stock Collateral for all purposes
not inconsistent with the terms of this Agreement, the Credit Agreement, the
Notes or any other instrument or agreement referred to herein or therein,
PROVIDED that the Securing Parties jointly and severally agree that they will
not vote the Stock Collateral in any manner that is inconsistent with the terms
of this Agreement, the Credit Agreement, the Notes or any such other instrument
or agreement; and the Administrative Agent shall execute and deliver to the
Securing Parties or cause to be executed and delivered to the Securing Parties
all such proxies, powers of attorney, dividend and other orders, and all such
instruments, without recourse, as the Securing Parties may reasonably request
for the purpose of enabling the Securing Parties to exercise the rights and
powers that they are entitled to exercise pursuant to this Section 5.04(a)(2).
(3) Unless and until an Event of Default has occurred and is continuing,
the Securing Parties shall be entitled to receive and retain any dividends on
the Stock Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as such Event
of Default shall continue, and whether or not the Administrative Agent or any
Lender exercises any available right to declare any Secured Obligation due and
payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement, the Credit Agreement, the Notes or any
other agreement relating to such Secured Obligation, all dividends and other
distributions on the Stock Collateral shall be paid directly to the
Administrative Agent and retained by it in the Collateral Account as part of the
Stock Collateral, subject to the terms of this Agreement, and, if the
Administrative Agent shall so request in writing, the Securing Parties jointly
and severally agree to execute and deliver to the Administrative Agent
appropriate additional dividend, distribution and other orders and documents to
that end, PROVIDED that if such Event of Default is cured, any such
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dividend or distribution theretofore paid to the Administrative Agent shall,
upon request of the Securing Parties (except to the extent theretofore applied
to the Secured Obligations), be returned by the Administrative Agent to the
Securing Parties.
(b) INTELLECTUAL PROPERTY.
(1) For the purpose of enabling the Administrative Agent to exercise rights
and remedies under Section 5.05 hereof at such time as the Administrative Agent
shall be lawfully entitled to exercise such rights and remedies, and for no
other purpose, each Securing Party hereby grants to the Administrative Agent, to
the extent assignable, an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to such Securing Party) to use,
assign, license or sublicense any of the Intellectual Property now owned or
hereafter acquired by such Securing Party, wherever the same may be located,
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for
the compilation or printout thereof.
(2) Notwithstanding anything contained herein to the contrary, but subject
to the provisions of Section 9.05(c) of the Credit Agreement that limit the
right of the Securing Parties to dispose of their property, so long as no Event
of Default shall have occurred and be continuing, the Securing Parties will be
permitted to exploit, use, enjoy, protect, license, sublicense, assign, sell,
dispose of or take other actions with respect to the Intellectual Property in
the ordinary course of the business of the Securing Parties. In furtherance of
the foregoing, unless an Event of Default shall have occurred and be continuing
the Administrative Agent shall from time to time, upon the request of the
respective Securing Party through the Parent, execute and deliver any
instruments, certificates or other documents, in the form so requested, that
such Securing Party through the Parent shall have certified are appropriate (in
their judgment) to allow them to take any action permitted above (including
relinquishment of the license provided pursuant to clause (1) immediately above
as to any specific Intellectual Property). Further, upon the
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payment in full of all of the Secured Obligations and cancellation or
termination of the Commitments and Letter of Credit Liabilities or earlier
expiration of this Agreement or release of the Collateral, the Administrative
Agent shall grant back to the Securing Parties the license granted pursuant to
clause (1) immediately above. The exercise of rights and remedies under Section
5.05 hereof by the Administrative Agent shall not terminate the rights of the
holders of any licenses or sublicenses theretofore granted by the Securing
Parties in accordance with the first sentence of this clause (2).
(c) MOTOR VEHICLES. Each Securing Party shall, upon the request of the
Administrative Agent, deliver to the Administrative Agent originals of the
certificates of title or ownership for the Motor Vehicles owned by it with the
Administrative Agent listed as lienholder and take such other action as the
Administrative Agent shall deem appropriate to perfect the security interest
created hereunder in all such Motor Vehicles.
5.05 EVENTS OF DEFAULT, ETC. During the period during which an Event of
Default shall have occurred and be continuing:
(a) each Securing Party shall, at the request of the Administrative
Agent, assemble the Collateral owned by it at such place or places,
reasonably convenient to both the Administrative Agent and such Securing
Party, designated in its request;
(b) the Administrative Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, any of the Collateral;
(c) the Administrative Agent shall have all of the rights and remedies
with respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the jurisdiction
where the rights and remedies are asserted) and such additional rights
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and remedies to which a secured party is entitled under the laws in effect
in any jurisdiction where any rights and remedies hereunder may be
asserted, including, without limitation, the right, to the maximum extent
permitted by law, to exercise all voting, consensual and other powers of
ownership pertaining to the Collateral as if the Administrative Agent were
the sole and absolute owner thereof (and each Securing Party agrees to take
all such action as may be appropriate to give effect to such right);
(d) the Administrative Agent in its discretion may, in its name or in
the name of the Securing Parties or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on account
of or in exchange for any of the Collateral, but shall be under no
obligation to do so; and
(e) the Administrative Agent may, upon ten business days' prior
written notice to the Securing Parties of the time and place, with respect
to the Collateral or any part thereof that shall then be or shall
thereafter come into the possession, custody or control of the
Administrative Agent, the Lenders or any of their respective agents, sell,
lease, assign or otherwise dispose of all or any part of such Collateral,
at such place or places as the Administrative Agent deems best, and for
cash or for credit or for future delivery (without thereby assuming any
credit risk), at public or private sale, without demand of performance or
notice of intention to effect any such disposition or of the time or place
thereof (except such notice as is required above or by applicable statute
and cannot be waived), and the Administrative Agent or any Lender or anyone
else may be the purchaser, lessee, assignee or recipient of any or all of
the Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of the Securing
Parties, any such demand, notice and right or equity being hereby expressly
waived and released. In the event of any
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sale, assignment, or other disposition of any of the Trademark Collateral,
the goodwill connected with and symbolized by the Trademark Collateral
subject to such disposition shall be included, and the Securing Parties
shall supply to the Administrative Agent or its designee, for inclusion in
such sale, assignment or other disposition, all Intellectual Property
relating to such Trademark Collateral. The Administrative Agent may,
without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05, including by virtue of the exercise of the license granted to the
Administrative Agent in Section 5.04(b) hereof, shall be applied in accordance
with Section 5.09 hereof.
The Securing Parties recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Administrative Agent may be compelled, with respect to any
sale of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Securing Parties acknowledge that any such private sales may be at prices and on
terms less favorable to the Administrative Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agree that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Administrative Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective Issuer or
issuer thereof to register it for public sale.
5.06 DEFICIENCY. If the proceeds of sale, collection or other realization
of or upon the Collateral pursuant to
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Section 5.05 hereof are insufficient to cover the costs and expenses of such
realization and the payment in full of the Secured Obligations, the Securing
Parties shall remain liable for any deficiency.
5.07 REMOVALS, ETC. Without at least 30 days' prior written notice to the
Administrative Agent, no Securing Party shall (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its principal
place of business at any place, or permit any Inventory or Equipment to be
located anywhere, other than at the address indicated beneath the signature of
the Parent to the Credit Agreement or at one of the locations identified in
Annex 6 hereto under its name or in transit from one of such locations to
another or (ii) change its name, or the name under which it does business, from
the name shown on the signature pages hereto.
5.08 PRIVATE SALE. The Administrative Agent and the Lenders shall incur no
liability as a result of the sale of the Collateral, or any part thereof, at any
private sale pursuant to Section 5.05 hereof conducted in a commercially
reasonable manner. Each Securing Party hereby waives any claims against the
Administrative Agent or any Lender arising by reason of the fact that the price
at which the Collateral may have been sold at such a private sale was less than
the price that might have been obtained at a public sale or was less than the
aggregate amount of the Secured Obligations.
5.09 APPLICATION OF PROCEEDS. Except as otherwise herein expressly provided
and except as provided below in this Section 5.09, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Administrative Agent
under Section 4 hereof or this Section 5, shall be applied by the Administrative
Agent:
FIRST, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Administrative Agent and the fees and expenses of its
agents and counsel, and all
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expenses incurred and advances made by the Administrative Agent in
connection therewith;
NEXT, to the payment in full of the Secured Obligations, in each case
equally and ratably in accordance with the respective amounts thereof then
due and owing or as the Lenders holding the same may otherwise agree; and
FINALLY, to the payment to the respective Securing Party, or their
respective successors or assigns, or as a court of competent jurisdiction
may direct, of any surplus then remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.04 hereof shall be applied FIRST to the Letter of Credit
Liabilities outstanding from time to time and SECOND to the other Secured
Obligations in the manner provided above in this Section 5.09.
As used in this Section 5, "PROCEEDS" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Securing Parties or any issuer of or
obligor on any of the Collateral.
5.10 ATTORNEY-IN-FACT. Without limiting any rights or powers granted by
this Agreement to the Administrative Agent while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default the Administrative Agent is hereby appointed the
attorney-in-fact of each Securing Party for the purpose of carrying out the
provisions of this Agreement (including, without limitation, this Section 5) and
taking any action and executing any instruments that the Administrative Agent
may deem necessary or advisable to accomplish the purposes hereof, which
appointment as attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, so long as the Administrative
Agent shall be entitled under this Section 5 to
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make collections in respect of the Collateral, the Administrative Agent shall
have the right and power to receive, endorse and collect all checks made payable
to the order of any Securing Party representing any dividend, payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
5.11 PERFECTION. Prior to or concurrently with the execution and delivery
of this Agreement, each Securing Party shall (i) file such financing statements
and other documents in such offices as the Administrative Agent may request to
perfect the security interests granted by Section 3 hereof, (ii) to the extent
requested by the Administrative Agent, cause the Administrative Agent to be
listed as the lienholder on all certificates of title or ownership relating to
Motor Vehicles owned by such Securing Party and (iii) deliver to the
Administrative Agent all certificates identified in Annex 1 hereto, accompanied
by undated stock powers duly executed in blank.
5.12 TERMINATION. When all Secured Obligations shall have been paid in full
and the Commitments of the Lenders under the Credit Agreement and all Letter of
Credit Liabilities shall have expired or been terminated, this Agreement shall
terminate, and the Administrative Agent shall forthwith cause to be assigned,
transferred and delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Collateral and money received in
respect thereof, to or on the order of the respective Securing Party and to be
released and canceled all licenses and rights referred to in Section 5.04(b)
hereof. The Administrative Agent shall also execute and deliver to the
respective Securing Party upon such termination such Uniform Commercial Code
termination statements, certificates for terminating the Liens on the Motor
Vehicles and such other documentation as shall be reasonably requested by the
respective Securing Party to effect the termination and release of the Liens on
the Collateral.
5.13 FURTHER ASSURANCES. Each Securing Party agrees that, from time to time
upon the written request of the
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Administrative Agent, such Securing Party will execute and deliver such further
documents and do such other acts and things as the Administrative Agent may
reasonably request in order fully to effect the purposes of this Agreement.
5.14 RELEASE OF MOTOR VEHICLES. So long as no Default shall have occurred
and be continuing, upon the request of any Securing Party, the Administrative
Agent shall execute and deliver to such Securing Party such instruments as such
Securing Party shall reasonably request to remove the notation of the
Administrative Agent as lienholder on any certificate of title for any Motor
Vehicle; PROVIDED that any such instruments shall be delivered, and the release
effective, only upon receipt by the Administrative Agent of a certificate from
such Securing Party stating that the Motor Vehicle the lien on which is to be
released is to be sold or has suffered a casualty loss (with title thereto
passing to the casualty insurance company therefor in settlement of the claim
for such loss).
Section 6. MISCELLANEOUS.
6.01 NO WAIVER. No failure on the part of the Administrative Agent or any
Lender to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Administrative Agent or
any Lender of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided by
law.
6.02 NOTICES. All notices, requests, consents and demands hereunder shall
be in writing and telecopied or delivered to the intended recipient at its
"Address for Notices" specified pursuant to Section 12.02 of the Credit
Agreement and shall be deemed to have been given at the times specified in said
Section 12.02.
6.03 EXPENSES. The Securing Parties jointly and severally agree to
reimburse each of the Lenders and the
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Administrative Agent for all reasonable costs and expenses of the Lenders and
the Administrative Agent (including, without limitation, the reasonable fees and
expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (w)
performance by the Administrative Agent of any obligations of the Securing
Parties in respect of the Collateral that the Securing Parties have failed or
refused to perform, (x) bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings, or any actual or attempted sale, or any
exchange, enforcement, collection, compromise or settlement in respect of any of
the Collateral, and for the care of the Collateral and defending or asserting
rights and claims of the Administrative Agent in respect thereof, by litigation
or otherwise, including expenses of insurance, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or proceedings
(whether or not the workout, restructuring or transaction contemplated thereby
is consummated) and (ii) the enforcement of this Section 6.03, and all such
costs and expenses shall be Secured Obligations entitled to the benefits of the
collateral security provided pursuant to Section 3 hereof.
6.04 AMENDMENTS, ETC. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by each Securing Party
and the Administrative Agent (with the consent of the Lenders as specified in
Section 11.09 of the Credit Agreement). Any such amendment or waiver shall be
binding upon the Administrative Agent and each Lender, each holder of any of the
Secured Obligations and each Securing Party.
6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of each Securing Party,
the Administrative Agent, the Lenders and each holder of any of the Secured
Obligations (PROVIDED, however, that no Securing Party shall assign or transfer
its rights hereunder without the prior written consent of the Administrative
Agent).
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6.06 CAPTIONS. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
6.07 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.08 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York.
6.09 AGENTS AND ATTORNEYS-IN-FACT. The Administrative Agent may employ
agents and attorneys-in-fact in connection herewith and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith.
6.10 SEVERABILITY. If any provision hereof is invalid and unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Administrative Agent and the
Lenders in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge and Security
Agreement to be duly executed and delivered as of the day and year first above
written.
COMMONWEALTH ALUMINUM CORPORATION
By _________________________
Title:
COMMONWEALTH INDUSTRIES, INC.
By _________________________
Title:
COMMONWEALTH ALUMINUM LEWISPORT, INC.
By _________________________
Title:
CASTECH ALUMINUM GROUP INC.
By _________________________
Title:
BARMET ALUMINUM CORPORATION
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By _________________________
Title:
SUBSIDIARY GUARANTORS
---------------------
COMMONWEALTH ALUMINUM SALES
CORPORATION
By _________________________
Title:
NATIONAL WESTMINSTER BANK, PLC,
as Administrative Agent
By _________________________
Title:
Amended and Restated
Pledge and Security Agreement
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<PAGE> 1
Exhibit 10.13
LEASE OF 2630 EL PRESIDIO STREET, LONG BEACH, CALIFORNIA
LANDLORD: BRIAN L. HARVEY
TENANT: ALFLEX CORPORATION
ARTICLE ONE: BASIC TERMS
This article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Leased referred to in this Article One explain and define the Basic Terms and
are to be read in conjunction with the Basic Terms.
Section 1.01. Date of Lease: October 31, 1986.
Section 1.02. Landlord: BRIAN L. HARVEY, an individual ("Landlord").
Address of Landlord: 423 Dellaggio Terrace, Los Angeles, California 90049.
Section 1.03. Tenant: ALFLEX CORPORATION, a California corporation
("Tenant").
Address of Tenant: 2630 El Presidio Street, Long Beach, California.
Section 1.04. Property: That certain real property located in the City of
Carson, State of California and described on Exhibit "A" attached hereto and
made a part hereof, together with the one building located thereon containing
120,000 square feet of office, manufacturing, and warehouse facilities, and all
other improvements located thereon. Such real property, building and
improvements are collectively herein referred to as the "Property." The Property
is commonly known as 2630 El Presidio Street, Long Beach, California.
Section 1.05. Lease Term: Ten (10) years beginning on the date hereof
<PAGE> 2
and ending on October 31, 1996, subject to extension in accordance with the
provisions of Article 3; unless sooner terminated in accordance with the
provisions of this lease ("Lease Term").
Section 1.06. Permitted Uses: All lawful purposes consistent with the
provisions of Article 6.
Section 1.07. Rent and Other Charges Payable by Tenant:
(a) BASE RENT: Four Hundred Thirty-Two Thousand Dollars ($432,000.00) per
year during each year of the Lease Term, subject to increase as hereinafter
provided, payable in equal consecutive monthly installments as set forth in
Article 4. Base Rent shall be increased on each anniversary of the Commencement
Date (as hereinafter defined), in accordance with the increase in the United
States Department of Labor, Bureau of Labor Statistics, Consumer Price Index for
Urban Wage Earners and Clerical Workers (All Items for the Los Angeles-Long
Beach Statistical Area on the basis of 1967 = 100 {the "Index}), as provided in
Section 4.02; provided, however, that the minimum and maximum increase in Base
Rent for the month immediately prior to the month in which each increase takes
affect shall be four percent (4%) and eight percent (8%) respectively. Such
monthly rent described in this Section 1.07(a) including cumulative increase is
hereinafter referred to as the "Base Rent."
(b) OTHER PAYMENTS: It is the intention of Landlord and Tenant that the
Base Rent provided herein shall be absolutely net to Landlord so the this Lease
shall yield net to Landlord during the Lease Term the Base Rent as provided for
herein. Therefore, except as otherwise specifically set forth in this Lease,
Tenant shall pay all costs, charges and expenses of every kind and nature
whatsoever relating to the Property which may arise from and after the date
hereof, or become due with respect to any period from and after the date hereof
and, during the Lease Term including those costs, charges and expenses which,
except for the execution and delivery of this Lease would or could have
<PAGE> 3
been payable by Landlord. Tenant hereby agrees to hold Landlord harmless from
and against any and all claims, losses, costs, liabilities, damages or expenses,
including reasonable attorney's fees, resulting from Tenant's failure to pay all
such costs, charges and expenses. Nothing herein shall require Tenant to pay any
interest or principal payments under any mortgage or trust deed placed by the
Landlord on the Property.
ARTICLE TWO: LEASE TERM
Section 2.01. Lease of Property for Lease Term. Landlord leases the
Property to Tenant and Tenant leases the Property from landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and shall
begin and end on the dates specified in Section 1.05 above, unless the beginning
or end of the Lease Term is changed under any provision of the Lease. The
"Commencement Date" shall be the date specified in Section 1.05 above for the
beginning of the Lease Term, unless advanced or delayed under any provision of
this Lease.
Section 2.02. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for an indemnity Landlord against all damages incurred by Lanlord from any delay
by Tenant in vacating the Property. If Tenant does not vacate the Property upon
the expiration or earlier termination to the Lease and Landlord thereafter
accepts rent from Tenant, Tenant's occupancy of the Property shall be a
"month-to-month" tenancy, subject to all of the terms of this Lease applicable
to a month-to-month tenancy, except that the Base Rent then in effect shall be
increased by twenty-five percent (25%).
ARTICLE THREE: EXTENSION OF LEASE TERM
Section 3.01. Options to Extend Lease Term. Landlord hereby grants to
<PAGE> 4
Tenant two (2) options (each such option being hereinafter referred to
individually as an "Option" and collectively as th "Options") to extend the
Lease Term for additional terms of five (5) years each (each such extension
being hereinafter reffered to individually as an "Extension" and collectively as
the "Extensions"), on the same terms and conditions as set forth in this Lease,
but at an increased rent as set forth below. Each Option shall be exercised only
by notice from Tenant delivered to landlord at least six (6) months before the
expiration of the Lease Term or the preceding Extension of the Lease Term,
respectively. If Tenant fails to deliver to Landlord notice of the exercise of
an Option within the prescribed time, such Option and any succeeding Options
shall lapse, and there shall be no further right to extend the Lease Term. Each
option shall be exercisable by Tenant on the express conditions that (I) at the
time of the exercise, and immediatley prior to the commencement of such
Extension, Tenant shall not be in default under any of the provisions of this
Lease, and (ii) Tenant has not been ten (10) or more days late in the payment of
Base Rent more than a total three (3) times during the Lease Term and all
preceding Extensions.
Section 3.02. Personal Option. The Options are personal to the Tenant. If
Tenant subleases any portion of the Property or assigns or otherwise transfers
any interest under the Lease prior to the exercise of an Option (whether with or
without Landlord's consent), such Option and succeding Options shall lapse,
except that Tenant may transfer the Options to an affiliate (as defined in
Section 10.02) with Landlord's prior written consent, which consent shall not
unreasonably withhol. If Tenant subleases any portion of the Property or assigns
or otherwise transfers interest of Tenant under this Lease after the exercise of
an Option but prior to the commencement of the respective Extension (whether
with or without Landlord's consent), such Option and any succeding Options shall
lapse and the Lease Term shall expire as such Option were not exercised. If
Tenant subleases any portion of the Property or assigns or otherwise transfers
interest of Tenant under this Lease
<PAGE> 5
in accordance with the provisions of Article 10 after the exercise of an Option
and after the commencement of the Extension related to such Option, then the
term of this Lease shall expire upon the expiration of the Extension during
which such sublease or transfer occurred and only the succeding Option shall
lapse.
Section 3.03. Rent During Extensions.
(a) Fair Rental Value. The Base Rent shall be increased on the first day of
the first (1st) month during each of the Extensions of the Lease Term to the
greater of (I) the then full rental value of the Property or (ii) the Base Rent
for the month immediatley preceding the commencement of the applicable Extension
increased by four percent (4%). "Fair rental value" shall be determined by the
agreement of the parties not later than 90 days prior to the commencement of an
Extension. In the event that the parties fail to agree on the fair rental value
of the Property within the time limits set forth in the preceding sentence, the
parties shall appoint a real estate broker or appraiser to determine the fair
rental value of the Property and the determination of such broker or appraiser
shall be binding. If prior to the date which is ninety (90) days prior to the
commencement of an Extension, the parties fail to agree both on the fair rental
value of the Property and on a broker or appraiser to determine such fair rental
value, the fair rental value of the Property shall be determined by appraisal as
follows:
(i) Prior to the date which is ninety (90) days prior to the
commencement of an Extension, Landlord and Tenant shall each appoint and
pay for one appraiser who is a Member of the American Institute of
Appraisers. Within eighty (80) days prior to commencement of an Extension,
the selected two appraisers shall agree on and appoint a third appraiser
who shall also be a Member of the American Institute of Appraisers. The
cost of such third appraiser shall be borne equally by Landlord and
Tenant. Such three appraisersshall hereinafter be referred
<PAGE> 6
to as the "Appraisers." The Appraisers shall determine the fair rental
value of the Property. The appraisal determined by a majority of the
Appraisers shall be deemed the fair rental value of the Property for
purposes of this Section 3.03, and shall be binding upon Landlord and
Tenant. The decision of the Appraisers shall be rendered in writing to both
Landlord and Tenant not later than forty-five (45) days prior to the
commencement of an Extension. In the event that a majority of the
Appraisers are unable to agree on the fair rental value of the Property
within the aforesaid time limit, such fair rental value shall be determined
by a single arbitrator, selected by the American Arbitration Association,
in accordance with the rules of the American Arbitration Association. The
arbitration proceeding shall be held in Los Angeles, California, and the
cost of such arbitration proceeding shall be borne equally by landlord and
Tenant.
(ii) The Appraisers or the arbitrator, as the case may be, shall
determine the fair rental value of the Property in accordance with the
following standard. The fair rental value of the Property shall be not less
than the maximum rent for comparably sized and improved properties located
in the immediate vicinity of the Property, which are leased on a "net"
basis for a term which is the same as, or as close as possible in length
to, the lease Term ("Similar Properties"). If there or no Similar
Properties having a lease term of 20 years or 10 years with two 5 year
renewal options, the Appraisers or the arbitrator, as the case may be,
shall use Similar Properties having a term which starts at approximately
the time of the appraisal and which extends for a period equal to the
remaining portion of the Lease Term.
(b) Supplemental Increases. The Base Rent shall be further increased on the
first day of each anniversary of an Extension during each of the Extensions of
the Lease Term (the "Extension Rental Adjustment Date") by
<PAGE> 7
reference to the Index defined in Section 1.07(a) of this Lease or the
substitute Index described in Section 4.02 of this Lease, as follows: The Base
Rent in effect immediately prior to the applicable Extension Rental Adjustment
Date (the "Comparison Base Rent") shall be increased by the percentage that the
index has increased from the month in which the payment of the Comparison Base
Rent commenced through the month in which the applicable Extension Rental
Adjustment Date occurs. The minimum and maximum percentage increase in Base Rent
on each Extension Rental Adjustment Date shall be the minimum and maximum set
forth in Section 1.07(a) of this Lease.
ARTICLE FOUR: BASE RENT
Section 4.01. Time and manner of Payment. Upon execution of this Lease,
Tenant shall pay landlord the Base Rent in the amount of Thirty-Six Thousand
Dollars ($36,000) for the first month of the Lease Term. On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
landlord the Base Rent (subject to increase in accordance with the provisions of
Section 1.07 and this Article 4), in advance, without offset, deduction or prior
demand. The Base Rent shall be payable at Landlord's address or at such other
place as landlord may designate in writing.
Section 4.02. Cost of Living Increase. The Base Rent shall be increased at
the time specified in Paragraph 1.07(a) above, (I) in proportion to the increase
in the index which has occurred between the first month of the Lease Term and
the month in which the rent is to be increased and (ii) subject to the minimum
and maximum increases set forth in Paragraph 1.07(a). Landlord shall notify
Tenant of each increase by delivering a written statement setting forth the
Index for the first month of the Lease Term, the Index for the month in which
the Base Rent is to be increased, the percentage increase between those two
Indices, and the new amount of the Base Rent. The Base Rent shall
<PAGE> 8
not be reduced from the last previous adjusted Base Rent by reason of any
decrease in the Index. Tenant shall pay the new Base Rent from its effective
date until the next periodic increase. Landlord's notice may be given after the
effective date of the increase since the Index for the appropriate month may be
unavailable on the effective date. In such event, Tenant shall pay landlord the
necessary rental adjustment for the months lapsed between the effective date of
the increase and Landlord's notice of such increase within ten (10) days after
Landlord's notice. If the format or components of the Index are materially
changed after the Date of Lease, Landlord shall substitute an index which is
published by the Bureau of Labor Statistics or similar agency and which is most
nearly equivalent to the Index in effect on the date of this Lease. Landlord
shall notify Tenant of the substituted index, which shall be used to calculate
the increase in the Base Rent unless Tenant objects in writing within fifteen
(15) days after receipt of Landlord's notice. If Tenant objects, the substitute
Index shall be determined in accordance with the rules and regulations of the
American Arbitration Association. The cost of such arbitration shall be borne
equally be Landlord and Tenant.
Section 4.03. Termination; Advance Payments. Upon termination of this Lease
under Article Eight (Damage or Destruction), Article Nine (Condemnation) or any
other termination not resulting from Tenant's default, and after Tenant has
vacated the Property in the manner required by this Lease, an equitable
adjustment shall be made concerning advance rent, Any other advance payments
made by Tenant to Landlord, and accrued real property taxes, and landlord shall
refund the unused portion of the security deposit, if any, to Tenant or Tenant's
successor.
ARTICLE 5: OTHER CHARGES PAYABLE BY TENANT
Section 5.01. Additional Rent. All charges payable by Tenant under
<PAGE> 9
this Lease other than Base Rent are called "Additional Rent." Unless this Lease
provides otherwise, all Additional Rent shall be paid with the next monthly
installment of Base Rent. The term "rent" shall mean Base Rent and Additional
Rent.
Section 5.02. Real Property Taxes.
(a) Payment of Taxes. Tenant shall pay all real property taxes on the
Property during the Lease Term. Subject to Section 5.06 below, such payment
shall be made at least ten (10) days prior to the delinquency date of the taxes.
Tenant shall promptly furnish Landlord with satisfactory evidence that the real
property taxes have been paid. Landlord shall reimburse or credit (as Landlord
shall deem appropriate) Tenant for and real property taxes paid by Tenant
covering any period of time prior to or after the Lease Term. If Tenant fails to
pay the real property taxes when due, Landlord may pay the taxes and Tenant
shall reimburse Landlord for the amount of such tax payment as Additional Rent.
Landlord shall furnish to Tenant copies of all tax bills received by Landlord
promptly upon landlord's receipt thereof.
(b) Definition of "Real Property Tax." "Real Property Tax" means: (I) any
fee, license fee, license tax, business license fee, commercial rental tax,
levy, charge, assessment, penalty or tax of any kind now or hereafter imposed by
any taxing authority against the Property; (ii) any tax or charge for fire
protection, streets, sidewalks, road maintenance, refuse or other services
provided to the Property by any governmental agency; (iii) any tax imposed upon
the creation of the tenancy established by this Lease, or based upon a
re-assessment of the Property due to a change in ownership or transfer of all or
part of Landlord's interest in the Property; and (iv) any charge or fee
replacing any tax previously included within the definition of real property
tax. Notwithstanding the foregoing, the term "Real property tax" shall not
include (a) Landlord's federal or state income, franchise, inheritance, estate,
gift or succession taxes which may be payable by Landlord
<PAGE> 10
or Landlord's legal representatives, successors or assigns, or (b) any sum that
might become due on account of Landlord's ownership of property other than the
Property, notwithstanding that same may become a lien on, or collectible out of,
the Property.
(c) Personal Property Taxes.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the
Property.
(ii) If any of Tenant's personal property is taxed with the Property,
Tenant shall pay Landlord the taxes for the personal property within
fifteen (15) days after Tenant receives a written statement from Landlord
for such personal property taxes.
(d) Tenant's Right to Contest Taxes. Tenant may attempt to have the
assessed valuation of the Property reduced or may initiate proceedings to
contest the real property taxes. If requested by Tenant, landlord shall join in
the proceedings brought by Tenants. However, Tenant shall pay all costs of the
proceedings, including any costs or fees incurred by landlord. Upon the final
determination of any proceeding or contest, Tenant shall immediately pay the
real property taxes du, together with all costs, charges, interest and penalties
incidental to proceedings. If Tenant does not pay the real property taxes when
due and contests such taxes, Tenant shall not be in default under this Lease for
nonpayment of such taxes if Tenant deposits funds with Landlord, opens and
interest bearing account reasonably acceptable to Landlord in the joint names of
Landlord and Tenant, or pays all sums claimed to be due, into a court depository
at the Superior Court of the State of California, in Los Angeles, California.
The amount of such deposit shall be sufficient to pay the real property taxes
plus a reasonable estimate of the interest, costs, charges and penalties which
may accrue if Tenant's action is unsuccessful,
<PAGE> 11
less any applicable tax impounds previously paid by Tenant to Landlord, if any.
The deposit shall be applied to the real property taxes due, as determined at
such proceedings. The real property taxes shall be paid under protest from such
deposit if such payment under protest is necessary to prevent the Property from
being sold under a "tax sale" or similar enforcement proceeding. Tenant shall be
entitled to the benefit of any reduction in real property taxes resulting from a
challenge by Tenant.
Section 5.03. Utilities. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property.
Section 5.04
(a) Casualty Insurance. During the Lease Term, Tenant, at its sole cost and
expense, shall keep the Property insured against loss or damage by fire,
lightening, wind storm, hail, explosions, vandalism, riot and civil commotion,
aircraft and vehicles and smoke, such other casualties as are presently included
in the form of casualty insurance endorsement commonly known as "extended
coverage endorsement" and such other perils Landlord shall deem necessary, in an
amount not less than the full replacement value from time to time during the
Lease Term of the property without deductions for physical depreciation.
Landlord and Tenant agree that at the date of this Lease the full replacement
value of the property is $3,000,000.00. Such policy of casualty insurance shall
contain an Inflation Guard endorsement.
(b) Liability Insurance. During the lease Term, Tenant, at its sole cost
and expense, shall maintain a policy of comprehensive public liability insurance
insuring Landlord and Tenant against liability arising out of the ownership,
use, occupancy or maintenance of the Property. The initial amount of such
insurance shall be at least $15,000,000, and shall be subject to
<PAGE> 12
periodic increase based upon inflation, increased liability awards,
recommendation of professional insurance advisers, and other relevant factors.
However, the amount of such insurance shall not limit Tenant's liability nor
relieve Tenant of any obligation hereunder. The policy shall contain
cross-liability endorsements, if applicable, and shall insure Tenant's
performance of the indemnity provisions of Section 6.04. Tenant shall, at
Tenant's expense, maintain such other liability insurance as Tenant deems
necessary to protect Tenant.
(c) Other Insurance. In addition to the insurance required pursuant to
Sections 5.04(a) and 5.04(b), Tenant shall, at all time during the Lease Term,
maintain the following policies of insurance at Tenant's sole cost and expense:
(I) insurance coverage insuring the Property against damaged caused by
earthquakes and floods, (ii) boiler, machinery and plate glass insurance, (iii)
a rental income insurance policy payable to Landlord for twenty-four (24)
months' coverage for Basic Rent, and Estimated Additional Rent (including, but
not limited to, estimated real property taxes and insurance premiums), which
insurance shall pay rent for any reason or in the event rent is partially or
totally abated or reduced in accordance with the terms of this Lease. Tenant
shall, at Tenant's expense, also maintain such primary or additional insurance
on its fixtures, equipment and building improvements as Tenant deems necessary
to protect its interest.
(d) Insurance Policies; Action of Tenant. All insurance shall be maintained
with companies holding a "General Policyholder's Rating" of A or better, as set
forth in the most current issue of "Best's Insurance Guide." All policies of
insurance required under this lease ("Insurance Policies") shall name as an
additional insured, and be payable to, Landlord and if requested by Landlord the
holder of any mortgage, trust, deed or similar security instrument relating to
the Property, as such respective interests may appear. Any losses under the
Insurance Policies shall be adjusted with the
<PAGE> 13
insurance companies by Tenant, subject to approval by Landlord, which approval
shall be unreasonably withheld. Tenant shall provide Landlord with certificates
acceptable to Landlord of insurance issued by each of the insurance companies
issuing any of the Insurance Policies required pursuant to this Lease and said
certificates shall provide, in addition to setting forth the named insureds and
said payee, that the insurance issued thereunder shall not be altered or
cancelled until after thirty (30) days' notice to Landlord. Reasonably
satisfactory written evidence of insurance coverage for the issuers shall be
furnished to Landlord not fewer than fifteen (15) days prior to the effective
date of any new or substituted coverage. All of the Insurance Policies shall be
primary, non-contributing, and shall contain cross-liability coverage or a
cross-liability endorsement. Tenant shall not do or permit to be done anything
which invalidates any such insurance policies.
(e) Waiver of Right of Recovery. Landlord and Tenant each waives any and
all rights to recover against the other, or against the officers, employees,
agents, representatives, customers, or business visitors of such other party for
damage to such waiving party or loss of its property or the property of others
under its control arising from any cause insured against under the Insurance
Policies required pursuant to the terms of this Lease, provided such waiver is
permitted by the insurance companies which shall have issued the Insurance
Policies. In the event that an insurance company shall require payment of an
additional charge as a condition of its consent to such waiver, the party which
would benefit from such waiver shall pay such additional charge. If such party
refuses to pay such charge, the provisions of this Section 5.04(e) shall be
applicable only to the extent permitted by the insurance companies which issued
the Insurance Policies.
Section 5.05. Interest on Past Due Obligations. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest from the eleventh
(11th) day after such amount was due at a rate equal to the greater
<PAGE> 14
of twelve percent (12%) or five percent over the "prime rate" announced by Bank
of America at its offices in San Francisco, California. The payment of interest
on such amounts shall not excuse or cure any default by Tenant under this Lease.
If the interest rate specified in this Lease is higher than the rate permitted
by law, the interest rate is hereby decreased to the maximum legal interest rate
permitted by law.
Section 5.06. Impounds for Insurance Premiums and Real Property Taxes. If
requested by any ground lessor or lender to whom Landlord has granted a security
interest in the Property, or if Tenant is more than ten (10) days late in the
payment of rent more than three (3) times in any consecutive twelve (12) month
period, or after a single failure by Tenant to pay any real property taxes when
due, Tenant shall pay to Landlord a sum equal to one-twelfth (1/12) of the
annual real property taxes and the insurance premiums payable by Tenant under
this Lease, together with each payment of Base Rent. Such payments shall be held
by Landlord in an interest bearing impound account. The amount of real property
taxes and insurance premiums when unknown shall be reasonably estimated by the
Landlord. Funds in the impound account shall be applied by Landlord to the
payment of real property taxes and insurance premium when due. Any deficiency of
funds in the impound account shall be paid by Tenant to Landlord upon written
request. If Tenant defaults under this Lease, Landlord may apply any funds in
the impound account to any obligations which are due under this Lease.
ARTICLE SIX: USE OF PROPERTY
Section 6.01. Permitted Uses. Tenant may use the Property only for the
Permitted Uses set forth in 1.06 above.
Section 6.02. Manner of Use. Tenant shall not cause or permit the Property
to be used in any way which constitutes a violation of any law,
<PAGE> 15
ordinance, governmental regulation or order, or the Certificate of Occupancy
issued for the Property , nor shall Tenant commit waste with respect to the
Property. Tenant shall obtain and pay for all permits, including a Certificate
of Occupancy, required for Tenant's occupancy of the Property and shall promptly
take all substantial and non-substantial actions necessary to comply with all
applicable statutes, ordinances, rules, regulation, orders and requirements
regulating the use by Tenant of the Property, including, but not limited to, the
Occupational Safety and Health Act.
Section 6.03. Signs and Auctions. Tenant shall not place any signs on the
property without Landlord's prior written consent, other than signs bearing
Tenants's name and business, which signs shall be in accordance with all
applicable laws, regulations and ordinances. Tenant shall not conduct or permit
any auctions or sheriff's sales at the Property.
Section 6.04. Indemnity. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all claims, losses, costs, liabilities or
expenses arising from (a) the use of the Property by Tenant and its employees,
agents, licensees and [invitees?], and the use of the Property by trespassers;
(b) the conduct of the Tenant's business or anything else done or permitted by
Tenant to be done in or about the Property; ( c) any breach or default in the
performance of Tenant's obligations under this Lease; (d) any misrepresentation
or breach of warranty by Tenant under this Lease; or (e) other acts or omissions
of Tenant. Tenant shall defend Landlord against claims, losses, costs,
liabilities and expenses at Tenant's expense with counsel reasonably acceptable
to Landlord or, at Landlord's election, Tenant shall reimburse Landlord for any
reasonable legal fees or costs incurred by Landlord in connection with any such
claims. Landlord will provide Tenant with reasonable evidence of such fees,
costs, and expenses. As a material part of the consideration to Landlord, Tenant
hereby assumes all risk of damage to property or injury to persons in or about
the Property arising from
<PAGE> 16
any cause, and Tenant hereby waives all claims in respect thereof against
Landlord, except for any claim arising out of Landlord's gross negligence or
willful misconduct.
Section 6.05. Landlord's Access. Landlord or its agents may enter the
property at all reasonable times upon reasonable prior notice to Tenant (except
in case of emergency) the show the Property to potential buyers, investors or
tenants or other parties, or for any other purpose Landlord deems necessary.
Landlord shall give Tenant prior notice of such entry, except in the case of
emergency. Landlord may place customary "For Sale" or "For Lease" signs on the
Property at any time during the last year of the Lease Term (or the last year of
the initial portion thereof, or of any Extension, as the case may be.)
Section 6.06. Quiet Possession. If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and shall have, hold and enjoy
quiet and undisturbed possession of the Property for the full Lease Term,
subject to the Provisions of this Lease.
ARTICLE SEVEN: CONDITIONS OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 7.01. Existing Conditions. Tenant accepts the Property in its
condition as of the execution of the Lease, subject to all recorded matters,
laws, ordinances, and governmental regulations and orders. Tenant acknowledges
that neither Landlord nor any agent of Landlord has made any representation as
to the condition of the Property or the suitability of the property for Tenant's
intended use.
Section 7.02. Exemption of Landlord from Liability. Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, supplies, merchandise, or other property of Tenant,
<PAGE> 17
Tenant's employees, invitees, customers or any other person in or about the
Property wether such damage or injury is caused by or results from (a) fire,
steam, electricity, water, gas or rain; (b) the breakage, leakage, other defects
of pipes, sprinklers, wires appliances, plumbing, air conditioning or lighting
fixtures or any other cause; ( c) conditions arising in or about the Property,
or from other sources or places, or (d) any act or omission of any other person.
Landlord shall not be liable for any such damage or injury even though the cause
of such damage or injury, or the means of repairing such damage or injury, are
not accessible to Tenant. The provisions of this Section 7.02 do not, however,
exempt Landlord from liability for Landlord's gross negligence or willful
misconduct.
<PAGE> 18
fire, steam, electricity, water, gas or rain; (b) the breakage, leakage,
other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures or any other cause; (c) conditions
arising in or about the Property, or from other sources or places, or
(d) any act or omission of any other person. Landlord shall not be
liable for any such damage or injury even though the cause of such
damage or injury, or the means of repairing such damage or injury, are
not accessible to Tenant. The provisions of this Section 7.02 do not,
however, exempt Landlord from liability for Landlord's gross negligence
or willful misconduct.
Section 7.03. Tenant's Obligations.
(a) Tenant shall keep the Property (including all structural,
nonstructural, interior, exterior, and landscaped areas, portions,
systems and equipment) in good order, condition and repair during the
Lease Term, ordinary wear and tear excepted. Tenant shall promptly
replace any portion of the Property or system or equipment in the
Property which cannot be fully repaired, regardless of whether the
benefit of such replacement extends beyond the Lease Term. If Tenant
shall fail to perform its maintenance obligations under this Lease,
Landlord shall have the right, upon notice of Tenant, to undertake such
maintenance (including, but not limited to, preventive maintenance) at
Tenant's expense. It is the intention of Landlord and Tenant that, at
all times during the Lease Term, Tenant shall maintain the Property in
an attractive and fully operative condition.
(b) All of Tenant's obligations to maintain and repair shall be
accomplished at Tenant's sole expense. If Tenant fails to maintain and
repair the Property, Landlord may, on thirty (30) days' prior notice
(except that no notice shall be required in case of emergency) enter the
Property and perform such repair and maintenance on behalf of Tenant. In
such case, Tenant shall reimburse Landlord for all costs so incurred
immediately upon demand. Landlord shall provide Tenant with reasonable
evidence of the costs so incurred.
Section 7.04. Landlord's Obligations. Subject to the provisions of
Article Eight (Damage or Destruction) and Article Nine (Condemnation),
Landlord shall have absolutely no responsibility to repair, maintain or
replace any portion of the Property at any time. Tenant waives the
benefit of any present or future law which might give Tenant the right
to repair the Property at Landlord's expense or to terminate the Lease
due to the condition of the Property.
Section 7.05. Alterations, Additions and Improvements.
(a) Tenant shall not make any alterations, additions, or
improvements to the Property without Landlord's prior written consent in
each instance, except for non-structural alterations which do not exceed
Fifty Thousand Dollars ($50,000) in each instance. At Landlord's
request, Tenant shall provide demolition and/or lien and completion
bonds in form and amount satisfactory to Landlord. Tenant shall promptly
remove any alterations, additions, or improvements constructed in
violation of this Paragraph 7.05(a) upon Landlord's written request. All
alterations, additions, or improvements constructed in violation of this
Paragraph 6.05(a) upon Landlord's written request. All alterations,
additions, and improvements shall be accomplished in a good and
workmanlike manner, in conformity with all applicable laws and
regulations, and by a contractor approved by Landlord, which approval
shall not be unreasonably withheld. Upon completion of any such work,
Tenant shall provide Landlord with
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"as built" plans, copies of all construction contracts, and proof of
payment for all labor and materials.
(b) Tenant shall pay when due all claims for labor and material
ordered by Tenant and furnished to the Property or shall post a bond for
the benefit of Landlord (but at Tenant's expense) insuring against
collection of sums due under such claims out of the Property. Tenant
shall give Landlord at least thirty (30) days' prior notice of the
commencement of any work on the Property. Landlord may elect to record
and post notices of non-responsibility on the Property.
Section 7.06. Condition upon Termination. Upon the termination of
this Lease, Tenant shall surrender the Property to Landlord, broom clean
and in the same condition as received except for ordinary wear and tear
which Tenant was not otherwise obligated to remedy under any provision
of this Lease. However, Tenant shall not be obligated to repair any
damage which Landlord is required to repair under Article Eight (Damage
or Destruction). In addition, Tenant shall restore the Property to its
prior condition, all at Tenant's expense, subject to Tenant's right to
remove any and all machinery and equipment from the Property. All
alterations, additions and improvements not removed by Tenant shall
become Landlord's property and shall be surrendered to Landlord upon the
termination of this Lease. Tenant shall repair, at Tenant's expense, any
damage to the Property caused by the removal of any machinery and
equipment. In no event, however, shall Tenant remove fixtures and any
portions of building systems.
ARTICLE EIGHT: DAMAGE OR DESTRUCTION
Section 8.01. Partial Damage to Property. Tenant shall notify
Landlord in writing immediately upon the occurrence of any damage to the
Property. If the Property is only partially damaged and if the proceeds
received by Landlord from the Insurance Policies are sufficient to pay
for the necessary repairs, this Lease shall remain in effect and
Landlord shall repair the damage as soon as reasonably possible. To the
extent that funds are made available to Landlord by Tenant, Landlord
shall assist Tenant in repairing any damage to Tenant's fixtures,
equipment, or improvements. If the insurance proceeds received by
Landlord are not sufficient to pay the entire cost of repair, or if the
cause of the damage is not covered by the Insurance Policies, Landlord
may elect either to (a) repair the damage as soon as reasonably
possible, in which case this Lease shall remain in full force and
effect, or (b) terminate this Lease as of the date the damage occurred.
Landlord shall notify Tenant within sixty (60) days after receipt of
notice of the occurrence of the damage, whether Landlord elects to
repair the damage or terminate the Lease. If Landlord elects to repair
the damage, Tenant shall pay Landlord the "deductible amount" (if any)
under the Insurance Policies, and, if the damage was due to an act or
omission of Tenant, the difference between the actual cost of repair and
any insurance proceeds received by Landlord. If Landlord elects to
terminate this Lease, Tenant may elect to continue this Lease in full
force and effect, in which case Tenant shall repair any damage to the
Property; provided, however, that Landlord makes insurance proceeds
available to Tenant for such repairs. Tenant shall give Landlord notice
of such election within ten (10) days after receiving Landlord's
termination notice. If the damage to the Property occurs during the last
one (1) year of the Lease Term or any Extension, Landlord may elect to
terminate this Lease as of the date the damage occurred, regardless of
the sufficiency of any insurance proceeds. In such event, Landlord shall
not be obligated to
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repair or restore the Property and Tenant shall have no right to
continue this Lease. Landlord shall notify Tenant of its election within
sixty (60) days after receipt of notice of the occurrence of the damage.
Section 8.02. Total or Substantial Destruction. If the Property is
totally or substantially destroyed by any cause whatsoever, this Lease
shall terminate as of the date the destruction occurred regardless of
whether Landlord receives any insurance proceeds. However, unless the
damage occurs within the last two (2) years of the Lease Term, if the
Property can be rebuilt within one (1) year after the date of
destruction, Landlord may elect to rebuild the Property at Landlord's
own expense, in which case, this Lease shall remain in full force and
effect. Landlord shall notify Tenant of such election within thirty (30)
days after the occurrence of total or substantial destruction. If the
destruction was caused by an act or omission of Tenant, Tenant shall pay
Landlord the difference between the actual cost of rebuilding and any
insurance proceeds received by Landlord.
Section 8.03. Temporary Induction of Rent. If the Property is
destroyed or damaged and Landlord or Tenant repairs or restores the
Property pursuant to the provisions of this Article Eight, any rent
payable during the period of such damage, repair and/or restoration
shall be reduced according to the degree, if any, to which Tenant's use
of the Property is impaired. However, the reduction shall not exceed the
sum of one year's payment of Base Rent, insurance premiums and real
property taxes. Except for such possible reduction in Base Rent,
Insurance premiums and real property taxes, Tenant shall not be entitled
to any compensation, reduction, or reimbursement from Landlord as a
result of any damage, destruction, repair, or restoration of or to the
Property.
Section 8.04. Waiver. Tenant waives the protection of any statute,
code or judicial decision which grants a tenant the right to terminate a
lease in the event of the substantial destruction of leased property.
Tenant agrees that the provisions of Section 8.02 above shall govern the
rights and obligations of Landlord and Tenant in the event of any
substantial or total destruction of the Property.
ARTICLE NINE: CONDEMNATION
If all or any portion of the Property is taken under the power of
eminent domain or sold under the threat of that power (all of which are
called "Condemnation"), this Lease shall terminate as to the part taken
or sold on the date the condemning authority takes actual possession. If
such portion of the Property is taken as shall prevent Tenant from using
the remaining property for an aluminum rolling mill, either Landlord or
Tenant may terminate this Lease as of the date the condemning authority
takes possession, by delivering notice to the other within ten (10) days
after receipt of written notice of such taking (or in the absence of
such notice, within ten (10) days after the condemning authority takes
possession). If neither Landlord nor Tenant terminates this Lease, this
Lease shall remain in effect as to the portion of the Property not taken
except that the Base Rent shall be reduced in proportion to the
reduction in the floor area of the Property. Any Condemnation award or
payment shall be distributed in the following order (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust
encumbering the Property, the amount of its interest in the Property;
(b) second, to Tenant, only the amount of any award specifically
designated for loss of or damage to Tenant's trade fixtures or removable
personal property; and (c)
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third, to Landlord, the remainder of such award, whether as compensation
for reduction in the value of the leasehold, the taking of the fee, or
otherwise. If this lease is not terminated, Landlord shall repair any
damage to the Property caused by the Condemnation, provided that
Landlord shall not be obligated to repair any damage for which Tenant
has been reimbursed by the condemning authority. If the severance
damages received by Landlord are not sufficient to pay for such repair,
Landlord shall have the right to either terminate this Lease or make
such repair at Landlord's expense.
ARTICLE TEN: ASSIGNMENT AND SUBLETTING
Section 10.01. Landlord's Consent Required. No portion of the
Property or of Tenant's interest in this lease may be acquired by any
other person or entity, whether by assignment, mortgage, sublease,
transfer, operation of law, or act of Tenant, without Landlord's prior
written consent in each instance, except as provided in Section 10.02
below. Landlord shall grant or withhold its consent as provided in
Section 10.04 below. Any attempted transfer without consent shall be
void and shall constitute a non-curable breach of this Lease. If Tenant
is a partnership, any cumulative transfer of more than 20% of the
partnership interests shall require Landlord's consent. If Tenant is a
corporation, any action or series of actions resulting in any change in
a controlling interest of the voting stock of the corporation shall
require the Landlord's consent.
Section 10.02. Tenant Affiliate. Tenant may assign this Lease or
sublease the Property, with Landlord's prior written consent, to any
corporation which controls, is controlled by or is under common control
with Tenant, or to any corporation resulting from the merger of or
consolidation with Tenant ("Tenant's Affiliate"). In such case, the
Tenant's Affiliate shall assume in writing all of Tenant's obligations
under this Lease and shall deliver such assumption to Landlord prior to
this simultaneously with the granting by Landlord of its consent, if
such consent is granted.
Section 10.03. No Release of Tenant. No transfer permitted by this
Article Ten, whether with or without Landlord's consent, shall release
Tenant or change Tenant's primary liability to pay the rent and to
perform all other obligations of Tenant under this Lease. Landlord's
acceptance of rent from any other person is not a waiver of any
obligations of Tenant under this lease. Landlord's acceptance of rent
from any other person is not a waiver of any provision of this Article
Ten. Consent to the transfer is not a consent to any subsequent
transfer. If Tenant's transferee defaults under this lease, Landlord may
proceed directly against Tenant without pursuing remedies at the
transferee. Landlord may consent to subsequent assignment or
modifications of this Lease by Tenant's transferee, without notifying
Tenant or obtaining its consent. Such action shall not relieve Tenant's
liability under this Lease.
Section 10.04. Landlord's Election. Tenant's request for consent
to any transfer described in Sections 10.02 and 10.03 above shall be
accompanied by a written statement setting forth the details of the
proposed transfer, including the name, business and financial condition
of the prospective transferee, financial details of the proposed
transfer (e.g., the term of and rent and security deposit payable under
any assignment or sublease), and any other information Landlord deems
relevant. Landlord shall have the right (a) to withhold consent, in
which event this Lease shall continue in full force and effect; (b) to
grant consent (subject to such conditions as Landlord shall deem
necessary or appropriate); or (c) if the transfer is a sublease
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<PAGE> 22
of (i) taking possession of the Property and recovering from Tenant the
amount specified in this Paragraph 11.03(a), or (ii) proceeding under
Paragraph 11.03(b);
(b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Property. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder;
(c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state in which the Property is
located.
Section 11.04. Cumulative Remedies. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE TWELVE: PROTECTION OF LEESEE
Section 12.01. Subordination and Non-Disturbance. Landlord shall have the
right to subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
removals, modifications, consolidations replacements or extensions hereof
whenever made or recorded. However, Tenant's right to quiet possession of the
Property during the Lease Term shall not be disturbed if Tenant pays the rent
and performs all of Tenant's obligations under this Lease and is not otherwise
in default. Landlord shall use commercially reasonable efforts to obtain a
non-disturbance agreement embodying the provisions of the immediately preceding
sentence from all current and future holders of trust deeds affecting the
Property ("Mortgagees") provided, however, that Landlord shall not be required
to pay any sum demanded by any Mortgagee as consideration for such
non-disturbance agreement. If any ground lessor, beneficiary or mortgagee elects
to have this Lease prior to the lien of its ground lease, deed of trust or
mortgage and gives written notice thereof to Tenant, this Lease shall be deemed
prior to such ground lease, deed of trust or mortgage whether this Lease is
dated prior or subsequent to the date of said ground lease, of trust or mortgage
or the date of recording thereof.
Section 12.02. Attornment. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under the deed of trust, mortgagee,
or purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest. Landlord shall not assert any claim against Tenant for
any sums due under this Lease paid by Tenant to a third party after receipt by
Tenant of notice in writing from Landlord directing Tenant to pay any such sums
to such third party, and before Tenant receives notice from Landlord revoking
such direction.
Section 12.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such
attornment or subordination or agreement to do so. If Tenant fails to do so
within twenty (20) days after written request, Tenant hereby makes, constitutes
and irrevocably appoints Landlord, or any transferee or successor of Landlord,
the attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
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<PAGE> 23
Section 12.04. Estoppel Certificates.
(a) Upon Landlord's written request, Tenant shall execute,
acknowledge and deliver to Landlord a written statement certifying:
(i) that none of the terms or provisions of this Lease have
been changed (or if they have been changed, stating how they have been
changed); (ii) that this Lease has not been cancelled or terminated (or
if Tenant believes it has been cancelled or terminated, so stating);
(iii) the last date of payment of the Base Rent and other charges and
the time period covered by such payment; and (iv) that Landlord is not
in default under this Lease (or, if Landlord is claimed to be in
default, stating why). Tenant shall deliver such statement to Landlord
within fifteen (15) days after Landlord's request. Persons to whom such
statement is delivered, may rely conclusively upon such statement as
true and correct.
(b) If Tenant does not deliver such statement to Landlord
within such fifteen (15) day period, Landlord, and any prospective
purchaser or encumbrancer, may conclusively presume and rely upon the
following facts: (i) that the terms and provisions of this Lease have
not been changed except as otherwise represented by Landlord; (ii)
that this Lease has not been cancelled or terminated except as
otherwise represented by Landlord; (iii) that not more than one
month's Base Rent or other charges have been paid in advance; and
(iv) that Landlord is not in default under the Lease. In such event,
Tenant shall be estopped from denying the truth of such facts.
Section 12.05. Tenant's Financial Condition. Within ten (10) days after
written request from Landlord, Tenant shall deliver to Landlord such financial
statements as are reasonably required by Landlord to verify the net worth of
Tenant, or assignee, subtenant, or guarantor of Tenant. In addition, Tenant
shall deliver to any lender designated by Landlord any financial statements
required by such lender to facilitate the financing or refinancing of the
Property. Tenant represents and warrants the Landlord that (a) each such
financial statement is a true and accurate statement as of the date of such
statement and (b) at all times after the date of any such statement during the
Term or any extension thereof, Tenant's net worth, as stated therein,
shall not be reduced below a point which Landlord reasonably believes impairs
Tenant's ability to perform his obligations under this Lease. All financial
statements shall be confidential and shall be used only for the purposes set
forth herein.
ARTICLE THIRTEEN: LEGAL COSTS
Section 13.01. Legal Proceedings. Tenant shall reimburse Landlord, upon
demand, for any costs or expenses incurred by Landlord in connection with any
breach or default of Tenant under this Lease, whether or not suit is commenced
or judgment entered. Such costs shall include legal fees and costs incurred for
the negotiation of a settlement, enforcement of rights or otherwise.
Furthermore, if any action for breach of or to enforce the provisions of this
Lease is commenced, the court in such action shall award to the party in whose
favor a judgment is entered, a reasonable sum as attorneys' fees and costs.
Such attorneys' fees and costs shall be paid by the leasing party in such
action. Tenant shall also indemnify Landlord against and hold Landlord harmless
from all costs, expenses, demands and liability incurred by Landlord if
Landlord becomes or is such a party to any claim or action (a) instituted by
Tenant, or by any
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third party against Tenant, or by or against any person holding any interest
under or using the Property by license of or agreement with Tenant; (b) for
foreclosure of any lien for labor or material furnished to or for tenant or
such other person; (c) otherwise arising out of or resulting from any act or
transaction of tenant or such other person; or (d) necessary to protect
Landlord's interest under this Lease in a bankruptcy proceeding, or other
proceeding under Title 11 of the United States Code, as amended. Tenant shall
defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election tenant
shall reimburse Landlord for any legal fees or costs incurred by Landlord in
any such claim or action.
Section 13.02. Landlord's Consent. Tenant shall pay Landlord's
reasonable attorneys' fees incurred in connection with Tenant's request for
Landlord's consent under Article Ten (Assignment and Subletting), or in
connection with any other act which tenant proposes to do and which requires
Landlord's consent. Landlord shall provide Tenant with reasonable evidence of
such costs and expenses.
ARTICLE FOURTEEN: MISCELLANEOUS PROVISIONS
Section 14.01. Non-Discrimination. Landlord and tenant mutually agree,
and it is a condition to the continuance of this Lease, that there will be no
discrimination against, or segregation of, any person or group of persons on
the basis of race, color, sex, creed, national origin or ancestry in the
leasing, subleasing, transferring, occupancy, tenure or use of the Property or
any portion thereof.
Section 14.02. Landlord's Liability; Certain Duties.
(a) As used in this Lease, the term "Landlord" means the current owner
or owners of the fee title to the Properties, the leasehold estate under a
ground lease of the Property at the time in question. Each Landlord is obligated
to perform the obligations of Landlord under this Lease only during the time
such Landlord owns such interest or title. Any Landlord who transfers its title
or interest is relieved of all liability with respect to the obligations of
Landlord under this Lease to be performed on or after the date of transfer, but
shall remain liable with respect to obligations of Landlord to have been
performed after the date of this Lease and prior to the date of the transfer.
However, each Landlord shall deliver to its transferee all funds previously
paid by Tenant if such funds have not yet been applied under the terms of this
Lease.
(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any ground
lessor, mortgagee or beneficiaries of any deed of trust encumbering the
Property whose name and title have been furnished to Tenant in writing.
Landlord shall be in default under this Lease unless Landlord (or such ground
lessor, mortgagee or beneficiary) fails to cure such non-performance within
thirty (30) days after receipt of Tenant's notice. However, if such
non-performance reasonably requires more than thirty (30) days to cure,
Landlord shall not be in default if such cure is commenced within such thirty
(30) day period and thereafter is diligently pursued to completion. If Tenant
reasonably believes that the conduct of its business on the Property is
materially adversely affected by such non-performance by Landlord, Tenant shall
have the right to cure such non-performance following the expiration of five
(5) days after notice to Landlord of Tenant's intention to cure Landlord's
non-performance.
18
<PAGE> 25
Section 14.03. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
Section 14.04. Interpretation. The captions of the Articles or
Sections of this Lease are to assist the parties in reading this Lease and are
not a part of the terms or provisions of this Lease. Whenever required by the
context of this Lease, the singular shall include the plural and the plural
shall include the singular. The masculine, feminine and neuter genders shall
each include the other. In any provision relating to the conduct, acts or
omissions of Tenant and Landlord, the terms "Tenant" and "Landlord" shall
include, as the case may be, Tenant's and Landlord's agents, employees,
contractors, invitees, successors or others using the Property with Tenant's or
Landlord's expressed or implied permission.
Section 14.05. Incorporation of Prior Agreements; Modifications. This
Lease is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 14.06. Notices. All notices required or permitted under this
Lease shall be in writing and shall be personally delivered, sent by overnight
delivery service, or sent by certified mail, return receipt requested, postage
prepaid. Notices to Tenant shall be delivered to the address specified in
Section 1.03 above, except that upon Tenant's taking possession of the
Property, the Property shall be Tenant's address for notice purposes. Notices
to Landlord shall be delivered to the address specified in Section 1.02 above.
All notices shall be effective upon delivery (as evidenced by receipt), if
personally delivered or delivered by overnight delivery service, and three (3)
days after deposit in the U.S. mails, if mailed. Either party may change its
notice address upon written notice to the other party. Copies of all notices
addressed to Landlord shall be sent to:
Richard M. Harvey, Esq.
Mitchell, Silberberg & Knapp
11377 West Olympic Boulevard
Los Angeles, CA 90964
Copies of all notices addressed to Tenant shall be sent to:
Robert M. Hirsh, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1205 Avenue of the Americas
New York, NY 10419
and to:
Jeffrey J. Keenan
AEA Investors Inc.
640 Fifth Avenue
New York, NY 10919
Section 14.07. Waivers. All waivers must be in writing and signed by
the waiving party. Landlord's failure to enforce any provision of this Lease or
its acceptance of rent shall not be a waiver and shall not prevent Landlord
from enforcing that provision or any other provision of this Lease in the
future. No
19
<PAGE> 26
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
Section 14.08. No Recordation. Tenant shall not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that a "Short Form" memorandum of this Lease executed by both parties be
recorded.
Section 14.09. Binding Effect; Choice of Law. This lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor, unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the State of California shall govern this
Lease.
Section 14.10. Corporate Authority; Partnership Authority. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person signing this Lease for Tenant represents and warrants that he is a
genuine partner of the partnership, that he has full authority to sign for the
partnership and that this Lease binds the partnership and all general partners
of the partnership. Tenant shall give written notice to Landlord of any general
partner's withdrawal or addition. Within thirty (30) days after this Lease is
signed, Tenant shall deliver to Landlord a copy of Tenant's recorded statement
of partnership or certificate of limited partnership.
Section 14.12 Force Majeure. If either Landlord or Tenant cannot perform
any of its obligations due to events beyond Landlord's or Tenant's (as the case
may be) control, the time provided for performing such obligations shall be
extended by a period of time equal to the duration of such events. Events beyond
the parties' control include, but are not limited to, acts of God, war, civil
commotion, labor disputes, strikes, fire, flood or other casualty, shortages of
labor or material, government regulation or restrictions and weather conditions.
ARTICLE FIFTEEN: BROKERS
Landlord and Tenant each represents and warrants to the other that it has not
dealt with any broker or other person who might be entitled to any commission,
finder's fee or other similar payment (collectively, "Commission") in connection
with the transactions contemplated by this Lease. Each of Landlord and Tenant
shall indemnify the other from any claim by any person
20
<PAGE> 27
alleging a right to receive a Commission in connection with the
transactions contemplated by this Lease which arises out of the acts of the
indemnifying party.
Landlord and Tenant have signed this Lease at a place and on the dates
specified adjacent to their signatures below.
Signed on November 1, 1986 BRIAN L KARVEY, an individual
at New York, New York
/s/ Brian L. Karvey
-----------------------------
By: Brian L. Karvey
"LANDLORD"
Signed on November 1, 1986 ALFLEK CORPORATION,
at New York, New York a California Corporation
By: /s/ Jeffrey J. Keenan
-------------------------
Its: VP
--------------------
By: /s/ Brian L. Karvey
-------------------------
(Corporate Seal) Its: President
--------------------
"TENANT"
21
<PAGE> 28
EXHIBIT A
PARCEL 12 OF PARCEL MAP NO. 3344, IN THE CITY OF CARSON, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AND KNOWN ON MAP FILES IN ROOM 41 PACK 56 OF PARCEL MAPS IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM THAT PORTION OF SAID LAND LYING WITH THE LINES OF THE LAND
DESCRIBED IN DEED RECORDED BOOK SUCH PAGE 106 OFFICIAL RECORDS. ALL OIL, GAS AND
OTHER HYDROCARBON AND OTHER MINERALS IN AND UNDER SAID REAL PROPERTY, TOGETHER
WITH THE SOLE AND EXCLUSIVE RIGHT AS HEREINAFTER LIMITED, TO DRILL, REDRILL,
DEEPEN, COMPLETE AND MAINTAIN WELLS AND WELL HOLES UNDER, THROUGH AND BEYOND AND
TO DRILL FOR, PRODUCE, EXTRACT, TAKE, AND REMOVE OIL, GAS AND OTHER HYDROCARBONS
AND OTHER MINERALS FROM AND BEYOND SAID REAL PROPERTY, PROVIDED, HOWEVER, THE
FOREGOING RIGHTS AND THE EXERCISE THEREOF ARE AND SHALL BE SUBJECT TO THE
FOLLOWING LIMITATIONS. TO WIT:
NEITHER THE GRANTORS NOR ANYONE CLAIMING UNDER OR THROUGH THE GRANTORS SHALL
HAVE OR EXERCISE ANY RIGHT OF ENTRY UPON, THROUGH OR BEYOND SAID REAL PROPERTY
EXCEPT BENEATH A DEPTH OF 800 FEET BELOW THE XXXX SURFACE OF SAID REAL PROPERTY,
NOR TO IN ANY WAYS AFFECT THE SURFACE USE OF SAID REAL PROPERTY, AS RESERVED IN
DEED RECORDED OCTOBER 14, 1987 AS INSTRUMENT NO. 1760, 1762, 1763 AND 1767.
<PAGE> 1
Exhibit 10.16
CONFORMED COPY
FIRST SUPPLEMENTAL INDENTURE, dated as of November 12, 1996, to the
Indenture, dated as of September 20, 1996 (the "Indenture"), between
Commonwealth Aluminum Corporation, a Delaware corporation (the "Company"), each
of the Subsidiary Guarantors (as defined therein) and Harris Trust and Savings
Bank, as Trustee (the "Trustee").
RECITALS:
The original parties to the Indenture were the Company, the Trustee, and
Commonwealth Aluminum Lewisport, Inc., Commonwealth Aluminum Sales Corporation,
CALC Corporation, CasTech Aluminum Group Inc. and Barmet Aluminum Corporation as
Subsidiary Guarantors. Prior to the date hereof, CALC Corporation was merged
into CasTech Aluminum Group Inc. and CasTech Aluminum Group Inc. changed its
name to Alflex Corporation.
The Company has duly organized Commonwealth Industries, Inc., a Delaware
corporation ("CII"), as a Restricted Subsidiary, and it is proposed that CII
become an additional Subsidiary Guarantor, as permitted by Section 901(7) of the
Indenture.
The Company, each of the Subsidiary Guarantors and CII have been authorized
by Board Resolutions to enter into this supplemental indenture.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises it is mutually agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions
<PAGE> 2
For all purposes of this supplemental indenture, unless the context
otherwise requires, the terms used herein shall have the same meanings as in the
Indenture.
ARTICLE TWO
Subsidiary Guarantor
CII is hereby subjected to the provisions (including the representations
and warranties) of the
-2-
<PAGE> 3
Indenture as a Subsidiary Guarantor, all as contemplated by Section 1303 of the
Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this supplemental
indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
COMMONWEALTH ALUMINUM CORPORATION
COMMONWEALTH ALUMINUM LEWISPORT, INC.
COMMONWEALTH ALUMINUM SALES CORPORATION
ALFLEX CORPORATION
BARMET ALUMINUM CORPORATION
COMMONWEALTH INDUSTRIES, INC.
By /s/ Mark V. Kaminski
----------------------------
Mark V. Kaminski, President
Attest:
/s/ D.L. Marsh Jr.
- ----------------------------
Executive Vice President & Secretary
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By /s/ J. Bartolini
----------------------------
J. Bartolini, Vice President
-3-
<PAGE> 4
Attest:
Signature illegible
- ----------------------------
-4-
<PAGE> 5
COMMONWEALTH OF KENTUCKY)
ss.:
COUNTY OF JEFFERSON )
On the 22 day of November, 1996, before me personally came Mark V.
-----
Kaminski, to me known, who, being by me duly sworn, did depose and say that he
is President of each of Commonwealth Aluminum Corporation, Commonwealth Aluminum
Lewisport, Inc., Commonwealth Aluminum Sales Corporation, Alflex Corporation,
Barmet Aluminum Corporation and Commonwealth Industries, Inc., corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporations; that the seals affixed to said instrument are such
corporate seals; that they were so affixed by authority of the Boards of
Directors of said corporations, and that he signed his name thereto by like
authority.
/s/ Katherine M. Leonard
----------------------------
STATE OF ILLINOIS)
ss.:
COUNTY OF COOK )
On the 26th day of November, 1996, before me personally came
------
J. Bartolini , to me known, who, being by me duly sworn, did depose and
- ----------------------
say that she is a Vice President of Harris Trust and Savings
----------------------------------
Bank, one of the corporations described in and which executed the foregoing
instrument; that she knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by authority
of the Board of Directors of said corporation, and that she signed her name
thereto by like authority.
-5-
<PAGE> 6
/s/ Marianne Cody
----------------------------
-6-
<PAGE> 1
Exhibit 11
Commonwealth Aluminum Corporation
Computation of Net Income Per Share (a)
(in thousands except per share data)
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995
- ----------------------- ---------- ---------
<S> <C> <C>
Weighted average shares of common stock outstanding (b) 10,197 10,191
========= =========
Income before extraordinary loss $ 14,756 $ 33,787
Extraordinary loss on early extinguishment of debt,
net of income tax benefit (1,355) -
--------- ---------
Net income $ 13,401 $ 33,787
========= =========
Per share data:
Income before extraordinary loss $ 1.44 $ 3.32
Extraordinary loss (0.13) -
--------- ---------
Net income $ 1.31 $ 3.32
========= =========
<FN>
Notes: (a) Net income per share for 1994 has not been presented due to the
significant change in the number of shares outstanding after the
initial public offering.
(b) Common equivalent shares relating to stock options are not material.
</TABLE>
<PAGE> 1
EXHIBIT 21
----------
Direct and Indirect Subsidiaries of Commonwealth Aluminum Corporation
---------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
---- ----------------------
<S> <C>
Commonwealth Industries, Inc. (1) Delaware
Commonwealth Aluminum Lewisport, Inc. (1) Delaware
Commonwealth Aluminum Sales Corporation (3) Delaware
Commonal Corporation (1) Barbados
Alflex Corporation (1) Delaware
Barmet Aluminum Corporation (2) Ohio
<FN>
-------------------------------------------------------------------
(1) Subsidiary of Commonwealth Aluminum Corporation
(2) Subsidiary of Alflex Corporation
(3) Subsidiary of Commonwealth Aluminum Lewisport, Inc.
</TABLE>
44
<PAGE> 1
EXHIBIT 23
----------
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statements of
Commonwealth Aluminum Corporation and Subsidiaries on Forms S-8 (File No's.
333-19383, 33-91364 and 33-90292) of our report dated February 11, 1997, on our
audits of the consolidated financial statements and financial statement schedule
of Commonwealth Aluminum Corporation and Subsidiaries as of December 31, 1996
and 1995, and for the years ended Decemebr 31, 1996, 1995 and 1994, which report
is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Louisville, Kentucky
March 26, 1997
45
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,944
<SECURITIES> 0
<RECEIVABLES> 147,894
<ALLOWANCES> 1,803
<INVENTORY> 173,911
<CURRENT-ASSETS> 332,002
<PP&E> 495,433
<DEPRECIATION> 221,338
<TOTAL-ASSETS> 794,582
<CURRENT-LIABILITIES> 124,941
<BONDS> 336,000
<COMMON> 102
0
0
<OTHER-SE> 227,121
<TOTAL-LIABILITY-AND-EQUITY> 794,582
<SALES> 739,218
<TOTAL-REVENUES> 739,218
<CGS> 689,906
<TOTAL-COSTS> 689,906
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 9,875
<INCOME-PRETAX> 9,463
<INCOME-TAX> (5,293)
<INCOME-CONTINUING> 14,756
<DISCONTINUED> 0
<EXTRAORDINARY> (1,355)
<CHANGES> 0
<NET-INCOME> 13,401
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
