<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Act of 1934 for the quarterly period ended July 31, 1999.
OR
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities Act of
1934 For the transition period from to
----------------- ------------------
Commission file number 33-92496
--------
GULF STATES STEEL, INC. OF ALABAMA
----------------------------------
(DEBTOR-IN-POSSESSION AS OF JULY 1, 1999)
(Exact name of registrant as specified in its charter)
Alabama 63-1141013
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
174 South 26th Street
Gadsden, Alabama 35904-1935
---------------- --------------
(Address of principal executive offices) (Zip Code)
(256) 543-6100
--------------
(Registrant's telephone number, including area code)
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 periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each class of common stock, as of
the latest practical date:
Common Stock $ .01 par value - 3,610,000 shares as of July 31, 1999
<PAGE>
GULF STATES STEEL, INC. OF ALABAMA
(DEBTOR-IN-POSSESSION)
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Statements of Operations -
For the Three Months Ended July 31, 1999 and 1998;
For the Nine Months Ended July 31, 1999 and 1998..... 1
Balance Sheets -
As of July 31, 1999 and October 31, 1998............. 2
Statements of Cash Flows -
For the Nine Months Ended July 31, 1999 and 1998..... 3
Notes to Financial Statements........................ 4 - 11
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 12 - 16
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings.................................... 17
ITEM 2. Defaults Upon Senior Securities...................... 17
ITEM 3. Exhibits & Reports on Form 8-K....................... 18
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------
GULF STATES STEEL, INC. OF ALABAMA
(DEBTOR-IN-POSSESSION)
Statements of Operations (Unaudited)
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
------------------------------------ -------------------------------------
1999 1998 1999 1998
----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Net sales........................................ $ 82,339 $ 107,356 $ 235,879 $ 314,265
Costs of goods sold, excluding depreciation...... 78,788 92,229 233,535 269,026
Depreciation..................................... 5,253 5,043 15,759 15,129
Selling, general and administrative expenses..... 4,896 4,487 13,596 13,071
---------- ---------- ---------- ----------
Operating profit (loss).......................... (6,598) 5,597 (27,011) 17,039
Other (income) expense:
Interest expense.............................. 4,986 6,868 19,017 20,930
Interest income............................... (18) (90) (19) (93)
---------- ---------- ---------- ----------
4,968 6,778 18,998 20,837
---------- ---------- ---------- ----------
Loss before restructuring items, income taxes,
and extraordinary items: (11,566) (1,181) (46,009) (3,798)
---------- ---------- ---------- ----------
Restructuring items:
Professional fees................................ (1,787) - (3,013) -
---------- ---------- ---------- ----------
Loss before income taxes and extraordinary
items........................................... (13,353) (1,181) (49,022) (3,798)
Income tax benefit............................... - - - -
---------- ---------- ---------- ----------
Loss before extraordinary items.................. (13,353) (1,181) (49,022) (3,798)
Extraordinary charge for debt refinancing........ - - - (1,044)
---------- ---------- ---------- ----------
Net loss......................................... $ (13,353) $ (1,181) $ (49,022) $ (4,842)
========== ========== ========== ==========
Basic earnings per share:
Loss before extraordinary items............... $(3.70) $(.33) $(13.58) $ (1.05)
Extraordinary charge.......................... - - - (.29)
---------- ---------- ---------- ----------
Net loss per share............................... $(3.70) $(.33) $(13.58) $ (1.34)
========== ========== ========== ==========
Common shares
Outstanding................................. 3,610,000 3,610,000 3,610,000 3,610,000
========== ========== ========== ==========
</TABLE>
See accompanying notes
1
<PAGE>
GULF STATES STEEL, INC. OF ALABAMA
(DEBTOR-IN-POSSESSION)
Balance Sheets, (Unadudited)
(dollars in thousands)
<TABLE>
<CAPTION>
July 31, 1999 October 31, 1998
------------------------ ---------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................... $ 5,099 $ 1,990
Accounts receivable, less allowance for doubtful accounts
of $976 in 1999 and $930 in 1998............................. 30,078 25,117
Inventories (Note 3)........................................... 36,093 60,941
Deferred income taxes.......................................... 2,949 2,949
Prepaids and other current assets.............................. 1,742 4,080
-------- --------
Total current assets........................................ 75,961 95,077
Property, plant and equipment, net............................... 196,021 200,702
Deferred charges, less accumulated amortization of $50 in
1999 and $3,965 in 1998........................................ 548 5,122
-------- --------
Total assets................................................ $272,530 $300,901
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES NOT SUBJECT TO COMPROMISE:
CURRENT LIABILITIES:
Accounts payable............................................... $ 10,209 $ 29,832
Accrued payroll and employee benefits.......................... 6,735 5,264
Accrued workers compensation................................... 2,698 2,517
Accrued gainsharing............................................ 2,350 2,425
Accrued interest payable....................................... 308 1,431
Other accrued liabilities...................................... 4,960 6,742
Debtor-in-possession term loan (note 5)........................ 14,570 -
Current portion of long-term debt.............................. - 964
Debtor-in-possession credit facility (note 5).................. 29,143 -
-------- --------
Total current liabilities................................... 70,973 49,175
NONCURRENT LIABILITIES:
Long-term debt................................................. - 230,123
Deferred postretirement health benefits........................ 6,858 4,862
Deferred income taxes.......................................... 2,949 2,949
-------- --------
Total noncurrent liabilities................................ 9,807 237,934
Liabilities subject to compromise (Note 2)....................... 228,046 -
Stockholders' equity (deficit):
Common Stock, par value $.01 per share: 4,000,000 shares
authorized, 3,610,000 shares issued and outstanding as of
July 31, 1999, and October 31, 1988............................. 36 36
Additional paid-in capital....................................... 39,050 39,050
Notes receivable from officers................................... (750) (750)
Accumulated deficit.............................................. (74,632) (24,544)
-------- --------
Total stockholders' equity (deficit)........................ (36,296) 13,792
-------- --------
Total liabilities and stockholders' equity (deficit)........ $272,530 $300,901
======== ========
</TABLE>
See accompanying notes
2
<PAGE>
GULF STATES STEEL, INC. OF ALABAMA
(DEBTOR-IN-POSSESSION)
Statements of Cash Flows (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
July 31, 1999 July 31, 1998
<S> <C> <C>
Operating activities:
Net loss............................................................. $(49,022) $(4,842)
Adjustments to reconcile net loss to net cash provided (used) by
Operating activities:
Depreciation....................................................... 15,759 15,129
Amortization....................................................... 1,046 1,154
Write down of inventories.......................................... 4,339 -
Extraordinary item................................................. - 859
Changes in operating assets and liabilities:
Accounts receivable............................................. (4,961) (294)
Inventories..................................................... 20,509 647
Prepaids and other current assets............................... 2,339 2,618
Accounts payable................................................ (19,623) (277)
Prepetition debt (accounts payable)............................. 19,017 -
Accrued payroll and employee benefits........................... 3,573 2,222
Accrued interest payable........................................ (1,123) 6,542
Prepetition debt (accrued interest payable)..................... 18,240 -
Prepetition debt (real estate and personal property taxes). 1,554
Other accrued liabilities....................................... (1,783) 3,748
Income taxes prepaid and payable................................ - (1)
-------- --------
Net cash provided (used) by operating activities..................... 9,864 27,541
-------- --------
INVESTING ACTIVITIES:
Building and equipment purchases..................................... (10,402) (17,902)
-------- --------
Net cash used in investing activities................................ (10,402) (17,902)
-------- --------
FINANCING ACTIVITIES:
Net borrowings (payments) on revolving credit facilities............. (10,278) 31,457
Prepayment of prior revolving credit facility........................ - (37,393)
Proceeds from issuance of long term-term debt........................ - 735
Proceeds from debtor-in-possession term loan......................... 14,570 -
Net borrowings (payments) on long-term debt.......................... 77 (519)
Increase (reduction) of capitalized lease obligations................ (125) (97)
Debt issuance costs.................................................. (597) (391)
-------- --------
Net cash provided by financing activities............................ 3,647 (6,208)
-------- --------
Net increase (decrease) in cash and cash equivalents................. 3,109 3,431
Cash and cash equivalents at beginning of year....................... 1,990 2,359
-------- --------
Cash and cash equivalents at end of period........................... $ 5,099 $ 5,790
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest........................................................... $ 3,928 $ 14,772
Income taxes....................................................... - 1
Noncash investing and financing activities:
Capital lease obligations.......................................... 676 333
</TABLE>
3
<PAGE>
GULF STATES STEEL, INC. OF ALABAMA
(DEBTOR-IN-POSSESSION)
Notes to Financial Statements (Unaudited)
JULY 31, 1999
NOTE 1 - BASIS OF PRESENTATION AND LIQUIDITY
The accompanying financial statements present the financial position, results
of operations and cash flows of Gulf States Steel, Inc. of Alabama (the
"Company") as of and for the fiscal nine month period ended July 31, 1999 and
1998.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article X of Regulation
S-X. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the period November 1, 1998 to July 31, 1999
are not necessarily indicative of the results that may be expected for the full
fiscal year ending October 31, 1999. The financial results for the fiscal year
ending October 31, 1999 are subject to annual audit. For further information,
refer to the consolidated financial statements of the Company and the notes
thereto included in the Company's Form 10-K for the fiscal year ended
October 31, 1998.
The Company has incurred losses in the current and prior years. During the
third quarter of fiscal 1999, orders, shipments and pricing for the Company's
products continued to be adversely affected by, among other things, increased
foreign steel imports. As a result of such increased imports and their effect
on the domestic steel market, orders, shipments and pricing have decreased
significantly in fiscal 1999 and are expected to remain at low levels throughout
the remainder of the year. Given current market conditions, the level of debt
and associated interest expense, required capital expenditures, and improvements
and the potential realization of loss contingencies, management believes that
the Company will continue to incur losses in fiscal 1999.
The unaudited financial statements have been prepared in accordance with the
American Institute of Certified Public Accountants Statement of Position 90-7,
Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. The
financial statements have been prepared using accounting principles applicable
to a going concern, which assumes continuity of operations, realization of
assets, and settlement of liabilities in the normal course of business. The
Company's recent losses from operations, significant stockholders deficit and
the related Chapter 11 filing raise substantial doubt about the Company's
ability to continue as a going concern. Realization of the carrying amounts of
the Company's and classification of its liabilities is dependent upon, among
other things the ability to comply with debtor-in-possession financing
agreements, confirmation of a plan of reorganization, the ability to achieve
profitable operations, and the ability to generate sufficient cash flow from
operations to meet its obligations.
The accompanying unaudited balance sheet as of July 31, 1999 segregates
liabilities subject to compromise, such as unsecured claims, from liabilities
not subject to compromise and liabilities arising subsequent to filing
bankruptcy. A plan of reorganization could materially change the amounts
currently recorded in the financial statements. The statements that might
result from the outcome of this uncertainty may be materially different than
those presented herein. Reorganization items represent expenses incurred by the
Company as a result of the bankruptcy filing and proceedings, which are required
to be expensed as incurred.
4
<PAGE>
NOTE 2 - VOLUNTARY FILING SEEKING REORGANIZATION UNDER CHAPTER 11 OF THE UNITED
STATES BANKRUPTCY CODE
The Company's operating results for fiscal 1998 and for the first three
fiscal quarters of 1999 were severely affected by, among other things, a
dramatic surge in steel imports beginning in the summer of 1998. As a
consequence of record-high levels of low-priced steel imports and the resultant
deteriorating market conditions, the Company's overall sales prices and
shipments declined thereby causing a decrease in liquidity. Such decreased
liquidity made it impossible for the Company to service its then existing debt
and fund ongoing operations. As a result on July 1, 1999, the Company filed a
voluntary petition seeking reorganization under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for Northern District of Alabama, Eastern Division (the "Bankruptcy Court"). The
Company has implemented a restructuring program to reduce costs, improve
operating efficiencies and increases financial flexibility.
The Company is in possession of its properties and assets and continues to
operate with its existing directors and officers as a debtor-in-possession. As a
debtor-in-possession, the Company is authorized to operate its business, but may
not engage in transactions outside of the normal course of business without
approval, after notice and hearing, of the Bankruptcy Court. Pursuant to the
provisions of the Bankruptcy Code, as of the petition date actions to collect
prepetition indebtedness owed by the Company are stayed and other prepetition
contractual obligations may not be enforced against the Company. In addition,
as a debtor-in-possession, the Company has the right, subject to the Bankruptcy
Court's approval and certain other conditions, to assume or reject any
prepetition executory contracts and unexpired leases. Parties affected by these
rejections may file claims with the Bankruptcy Court in accordance with the
reorganization process. The Company cannot presently determine or reasonably
estimate the ultimate liability that may result from rejecting such contracts or
leases or from the filing of claims and no provisions have been made for these
items. Schedules have been filed by the Company with the Bankruptcy Court
setting forth the assets and liabilities of the debtor as of the filing date as
reflected in the Company's accounting records. Differences between amounts
reflected in such schedules and claims filed by creditors will be investigated
and amicably resolved or adjudicated before the Bankruptcy Court. The
Bankruptcy Court has set November 29, 1999 as the Bar Date. The Bar Date is the
date which all claims must be filed against the Company. The ultimate amount
and settlement terms for such liabilities are subject to a plan of
reorganization, and accordingly, are not presently determinable.
The Bankruptcy Court has approved payment of certain prepetition liabilities
such as employee wages and benefits. Furthermore, the Bankruptcy Court has
allowed for the retention of legal and financial professionals. These items are
recorded as accounts payable and accrued expenses not subject to compromise. As
further described under Note 5 below, on July 20, 1999, the Bankruptcy Court
also approved a $65 million debtor-in-possession credit facility (the " DIP
Credit Facility"), a $17.1 million Term Loan, and a Preferred Supplier
Continuous Credit Program
The Company intends to present a plan of reorganization to the Bankruptcy
Court to reorganize the Company's business and to restructure the Company's
obligations. Under the provisions of the Bankruptcy Code, the Company has the
exclusive right to file such plan at any time during the 120-day period
following July 1, 1999. The exclusive filing time period may be extended by the
Bankruptcy Court. Notwithstanding any such extension, a committee, representing
holders (the "Ad Hoc Noteholders Committee") of the Company's 13 1/2% Series B
First Mortgage Notes due 2003 (the "First Mortgage Notes") has been granted the
right, in exchange for permitting the subordination of the liens securing the
First Mortgage Notes to the liens securing the collateral under the Term Loan,
to file a Chapter 11 plan of reorganization on the earlier of (a) the 305th day
after the Company's Chapter 11 filing, unless the Company has failed to file a
plan a reorganization by the 244th day after its bankruptcy filing, in which
case the Ad Hoc Noteholders Committee may file a petition commencing on the
245th day, or (b) the first to occur of (i) certain financial covenant defaults
or (ii) 30 days after an uncured default under the Term Loan.
5
<PAGE>
Due to the lack of sufficient liquidity, the Company did not make the $12.8
million interest payment due April 15, 1999 on the First Mortgage Notes. The
Company was also unable to cure that default by May 15, 1999, which date
represented the expiration of the 30-day cure period from the original interest
payment due date. The Bankruptcy Code generally prohibits the Company from
making payments on unsecured, pre-petition debt, including the First Mortgage
Notes, except as pursuant to Bankruptcy Court approval. State Street Bank &
Trust Company, as indenture trustee with respect to the First Mortgage Notes,
and the Ad Hoc Noteholders Committee entered a stipulation with the Bankruptcy
Court with respect to the adequate protection of the lien securing the First
Mortgage Notes and the subordination of such liens to the liens securing the
advance under the Term Loan and the Preferred Supplier Continuous Credit
Program.
As a result of the voluntary petition for reorganization under Chapter 11 of
the Bankruptcy Code in the Bankruptcy Court and under the terms of the
bankruptcy case, liabilities in the amount of approximately $228.0 million, as
set forth below, are subject to compromise under a plan of reorganization.
Pursuant to the provisions of the Bankruptcy Code and during the pendency of the
bankruptcy proceeding, actions to enforce or otherwise effect repayment of all
prepetition liabilities, as well as all pending litigation against the Company,
are stayed while the Company continues its business operations as debtors-in-
possession. The ultimate amount and settlement terms for such liabilities are
subject to a plan of reorganization, and accordingly, are not presently
determinable. Liabilities subject to compromise are detailed as follows:
<TABLE>
<CAPTION>
LIABILITIES SUBJECT TO COMPROMISE AMOUNT
--------------------------------- ------
(dollars in thousands)
<S> <C>
Bonds, and Accrued Interest net of Debt
Issuance Cost (First Mortgage Notes) $203,929
Notes Payable (Secured Equipment Notes) 2,800
Vendor Notes Payable (Unsecured) 2,908
Capitalized Lease Obligations (Secured) 746
Real Estate and Personal Property Taxes (Unsecured) 1,554
Accounts Payable (Unsecured) 16,109
--------
Total Liabilities Subject To Compromise $228,046
========
</TABLE>
NOTE 3 INVENTORIES
Inventories are as follows:
<TABLE>
<CAPTION>
July 31, 1999 October 31, 1998
------------- ----------------
(dollars in thousands)
<S> <C> <C>
Raw Materials and Supplies $ 5,180 $15,677
Work-in-Process 8,647 17,821
Finished Products 22,266 27,443
------- -------
Total $36,093 $60,941
======= =======
</TABLE>
6
<PAGE>
The Company's inventories are valued at the lower of cost, as determined by
the first-in first-out (FIFO) method, or market. Cost of Sales in the current
nine month period includes an inventory write-down of approximately $4.3 million
resulting from lower realizable values of certain steel products as a result of
depressed market conditions and physical inventory write downs.
NOTE 4 CONTINGENCIES
The Company is subject to a broad range of federal, state and local
environmental laws and regulations, including those governing discharges to the
air and water, the handling and disposal of solid and/or hazardous wastes, and
the remediation of contamination associated with releases of hazardous
substances. The Company conducts continuous environmental compliance and
monitoring programs and believes that it is currently in substantial compliance
with all known material and applicable environmental regulations, except as
follows:
The predecessor company as further discussed in the Company's 10K (the
"Predecessor") settled with the Alabama Department of Environmental Management
("ADEM") during 1994 for all outstanding air and water violations, and the
Company believes that its facility now operates, as a general matter, in
substantial compliance with existing air emission regulations and its water
discharge permit, subject, however, to the matters set forth below.
During 1992, the U.S. Environmental Protection Agency ("EPA") asserted that a
wastewater ditch system on the Company's property should be remediated and
"closed" under the Resource Conservation and Recovery Act ("RCRA"). As of
October 31, 1994, the Predecessor had remediated a portion of the ditch. The
Predecessor also agreed to a $1.1 million civil penalty, of which $300,000 was
to be offset by future capital expenditures, related to this issue. As of
October 31, 1996, the $800,000 penalty had been paid. Subsequently, the
$300,000 of capital expenditures was not approved by the EPA, and during fiscal
year 1997 the Company made an additional penalty payment of that amount plus
interest. On November 26, 1997, ADEM approved the closure plan for the
wastewater ditch system. The requirements of the closure plan are: (1) sediment
sampling in the ditch system and (2) groundwater monitoring. Sixty-six sediment
samples were taken throughout the system and analyzed in March 1998. Eleven
groundwater-monitoring wells were installed and samples were taken in February
1998. On September 29, 1998, closure certification was granted by ADEM
releasing the Company from providing financial assurance of closure. The EPA
has not yet responded to the closure certification. If clean closure cannot be
achieved, the Company estimates the contingent closure costs will be $1.1
million with post-closure costs of $2.7 million ($90,000 annually for 30 years).
As part of the settlement of this action, the Company is required to perform a
RCRA Facility Investigation of certain solid waste management units at the site.
The Company submitted a workplan for this investigation to EPA on May 26, 1999
and is waiting for the agency comments. The RCRA facility assessment conducted
by EPA identified a total of 41 solid waste management units (SWMUs) and 6 areas
of concern (AOCs) at the Gadsden facility. Of the 41 SWMUs, two are recommended
for confirmatory sampling (CS). Of the 6 AOCs, two are recommended for CS. All
the other SWMUs or AOCs are recommended for no further action (NFA) or are
recommended for action under other regulatory programs.
The Company faces an enforcement action under the Clean Water Act. The U.S.
Department of Justice ("DOJ") notified the Company that it, at the request of
the EPA, was prepared to take "appropriate enforcement action in federal court"
against the Company for alleged violations of its water discharge permit, and
invited the Company to discuss a possible settlement prior to filing suit. The
Company opened discussions with the DOJ in an attempt to settle these claims.
These discussions resulted in substantial agreement as to certain additional
upgrades to the Company's wastewater treatment system, and these upgrades have
now been completed. On August 28, 1997, while negotiations were ongoing with
the DOJ, a 60-day notice of intent to file a citizen suit under the Clean Water
Act was sent by one Johnny Williams, a resident of Rainbow City, Alabama. Prior
to expiration of the 60-day period, the DOJ filed its action under the Clean
Water Act, thus precluding the citizen suit. On October 27, 1997, Mr. Williams
moved to intervene in the government's action, and this intervention was allowed
by the court. On April 21, 1998, a second motion to intervene was filed by L.E.
McGriff and Herbert Patterson, and this motion was also allowed by the court.
Despite the filing of this litigation, the Company and the DOJ continued to
explore a
7
<PAGE>
possible settlement. As a result of these discussions, an agreement in principle
was reached with the EPA and DOJ on September 1, 1998 pursuant to the terms of
which the Company would pay $500,000 as a cash civil penalty and would agree to
implement $4.0 million in facility improvements as Supplemental Environmental
Projects ("SEPs") which offer environmental benefits. On December 27, 1998, DOJ
decided to reduce the SEP expenditures required from $4.0 million to $3,175,000,
which was accepted by the Company, on the condition that additional minor
language modifications be made in the proposed consent decree. On January 4,
1999, however, settlement discussions terminated because DOJ required the
Company to agree to waive certain defenses to any and all future actions of any
nature that the United States might initiate in the future against the Company.
The Company declined to agree to this unconditional waiver. On January 8, 1999,
the United States District Court for the Northern District of Alabama ("district
court") convened a Status Conference, at which time a Pretrial Conference was
set for October 25, 1999. On January 22, 1999, the district court issued a
scheduling order regarding dispositive motions and discovery, which are to be
completed by September 30, 1999. The Clean Water Act provides for civil
penalties of up to $25,000 per day for violations occurring before January 30,
1997 and $27,500 per day for violations occurring on or after January 30, 1997.
DOJ has alleged that over 4,000 potential violations of the Clean Water Act have
occurred. On June 8, 1999, the district court issued an order granting DOJ's
motion for a partial summary judgement holding the Company liable for 1,000
violations of its National Pollution Discharge Elimination System (the "NPDES")
permit from May 1, 1995 to September 1998 comprising 4,290 days of violation.
Almost two-thirds of the exceedances occurred at points internal to the plant.
The district court's opinion provides that "the amount of the penalty for
violations of the effluent limitations on outfalls along the Company's internal
waste streams might be subject to mitigation, given that those outfalls do not
discharge directly into waters of the United States." It is the Company's belief
that if that is true, such discharges are not regulated by the Clean Water Act
and therefore the Company has no liability for those discharges as a matter of
law. In the event a civil penalty is imposed, the Clean Water Act requires the
district court to consider the seriousness of the violations, the economic
benefits (if any) resulting from the violations, any good faith efforts to
comply with the applicable requirements, the economic impact of the penalty on
the Company, and such other matters as the DOJ may require in determining the
amount of the penalty. On December 11, 1998, the Company filed an expedited
petition with the ADEM for a modification of its NPDES permit. If granted, the
Company will be in a position to be in compliance with the Clean Water Act at
all times of the year. ADEM has not yet acted on that petition.
In addition, on February 5, 1998, Mr. Williams instituted an action in the
Circuit Court of Etowah County, individually and as a representative of a
putative class of downstream property owners, seeking unspecified damages and
injunctive relief on a variety of theories for the alleged diminution of
downstream property values and unspecified health hazards as a result of the
Company's wastewater discharges. The Company believes the claims of Mr.
Williams are without merit, and that no class should be certified. On motion of
the Company, this action has been stayed pending possible resolution of the
Clean Water Act enforcement action.
During negotiations with the DOJ over the Clean Water Act matter described
above, the DOJ raised remediation of Black Creek as a possible issue. The EPA
investigated Black Creek and performed sampling in Black Creek and Lake Gadsden.
Sampling results thus far indicate levels of metals, primarily lead and zinc, in
the sediment of Black Creek and in certain locations in Lake Gadsden. The
levels of metals in the sediment generally increase with depth, indicating
historical discharges are a greater contributor to the elevated levels. The EPA
has made no determination of what remediation, if any, will be necessary,
although the EPA indicated that another round of sampling would be performed to
define the scope of the potential remediation. On December 23, 1998, as a
result of a routine file review at the ADEM, the Company was provided with the
initial page of a "Comprehensive Environmental Response Compensation Liability
Act ("CERCLA") Site Investigation Report" prepared for EPA on September 30,
1998, under the supervision of a EPA Task Monitor, together with a November 30,
1998 e-mail message from the EPA Task Monitor addressed to a member of the
public. That e-mail reported that the Gulf States Steel Site Investigation
Report was referred from EPA's Emergency Response and Removal Branch to the EPA
Superfund Remedial Program for evaluation and potential remediation, but
reported that "the time frame for this is uncertain." Since the time that core
samples were taken at Lake Gadsden almost one year ago, EPA has initiated no
further communications with the Company regarding this matter. The Company
8
<PAGE>
was informed that when the EPA's Site Investigation Report was completed, the
Company would have an opportunity to discuss the findings with EPA prior to the
time that EPA made any future decisions regarding this matter. Instead, the
Company learned about these events through the above-referenced file review.
The Company informed the EPA that its contribution, if any, to the sediment
findings is divisible, and that apportioned, rather than joint and several
liability, is appropriate. Additionally, the Company's relative contribution if
any, to the sediment results must be further reduced to the extent that it is
the result of a federally permitted discharge. The combined effect of the
Company's analysis is that any potential liability that is assignable to it is
so small as to be de minimis. Given current information, it is not possible to
predict the scope or cost of any potentially required remediation of Black Creek
and/or Lake Gadsden, nor is it known whether the Company's analysis regarding
its potential liability will be accepted. The Company continues to request
further information about EPA's intentions regarding this issue.
On February 20, 1996, ADEM issued a Notice of Violation ("NOV") to the Company
for continuing violation of opacity limits from the combustion stacks of the
coke ovens, and included in the NOV a requirement that the Company install
continuous opacity monitors in the stacks. The Company appealed this
requirement, and it was subsequently withdrawn by ADEM on the condition that the
Company employ an independent contractor to conduct visible emission readings on
the stacks. The Company complied with this condition. While there has been no
renewed request by ADEM that the Company install opacity monitors, ADEM has, in
subsequent NOV's, identified such monitors as a possible future requirement.
The Company has taken the position in its communications with ADEM that the
installation of such monitors on its existing stacks is not feasible; however,
it is not currently possible to predict whether ADEM will again attempt to
require that continuous opacity monitors be installed in the coke oven
combustion stacks.
On April 22, 1998, the EPA issued a NOV to the Company relating to alleged
violations of the Toxic Substance Control Act ("TSCA") based on an inspection
conducted on May 16, 1996. The conditions cited in the NOV had been promptly
addressed following the May 16, 1996 inspection. On December 31, 1998 the
Company and the EPA reached an administrative settlement of these allegations
for a penalty payment of $31,813 and the voluntary replacement of four PCB
transformers at an estimated total cost of $149,500.
As a result of a September 1997 inspection, ADEM determined that certain
violations of hazardous waste rules had occurred at the Company's facility and
had resulted in the release of hazardous waste from a secondary containment area
on site. The Company is addressing assessment and possible remediation of this
site area with ADEM. In August 1998, ADEM proposed a Consent Order with an
administrative penalty of $80,000. On September 28, 1998, ADEM issued a second
NOV regarding the same issue. These matters have been consolidated. ADEM
issued a draft Administrative Order regarding the consolidated NOV's on May 20,
1999, again proposing a civil penalty of $80,000. The Company has requested a
meeting with ADEM to discuss settlement of this matter.
The solid waste permit for the on-site landfill at the facility expired on
December 31, 1988. On April 1, 1999, ADEM issued the renewed solid waste permit
to the Company.
On April 1, 1999, the Company was identified by the Environmental Protection
Division of the State of Georgia Department of Natural Resources ("EPD") as one
of the parties responsible for the SoGreen Barren Area Site in Tifton, Georgia.
Previously, the Company had responded to EPD that it had no records of any
materials being shipped to the site, and that a review of EPD documents revealed
that the Company was incorrectly identified as a "successor" to Republic Steel
Corporation. EPD nevertheless issued an Administrative Order to the Company.
The Company declined to participate in the Order, and EPD now may seek cost
recovery and punitive damages for expenses it incurs to complete the corrective
action at the site. No appeal was available from the Administrative Order;
however, the Company may petition for a hearing in the event EPD seeks to
recover costs, enforce the Administrative Order, or recover a penalty. It is
unknown at this time whether EPD will take any of these actions. Should EPD
take any such action, the Company will petition for a review, as it believes it
has valid defenses as it is not a successor to Republic Steel Corporation.
9
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On January 27, 1999, the EPA filed an information request with the Company
regarding certain potential violations of the Clean Air Act regarding Prevention
of Significant Deterioration ("PSD") pre-construction review and permitting for
certain boilers (Nos. 1, 2, 3, 4, 5, 7, 8, and 9). The Company responded to the
request on May 6, 1999. The EPA has not yet replied.
The Company's expenditures for environmental capital projects aggregated $1.3
million and $1.8 million for the nine months ended July 31, 1999 and 1998,
respectively. As of July 31, 1999, the Company has accrued $2.1 million for
unresolved environmental matters. Though the Company believes that it has
adequately reserved for the cost of all known environmental conditions in
accordance with generally accepted accounting principles, the relevant agencies
could insist upon different and possibly more costly remedial measures than
those believed by the Company to be adequate or required by existing law. The
ultimate resolution of the above matters may have a material adverse effect on
the Company's financial position, results of operations, and liquidity.
The Company is also involved in litigation arising from its normal operations,
including employee matters, the resolution of which is not expected to have a
significant effect on the Company's financial position, results of operations or
liquidity.
NOTE 5 - DEBTOR-IN-POSSESSION AND OTHER FINANCING ARRANGEMENTS
On July 20, 1999, the Bankruptcy Court granted the Company's motion to
approve a new $65 million DIP Credit Facility. The DIP Credit Facility expires
on the earlier of the consummation of a plan of reorganization or July 6, 2000.
The DIP Credit Facility replaced the Company's previous revolving credit
facility. The DIP Credit Facility is secured by raw material, work-in-process,
finished goods inventory, and the Company's trade accounts receivable. Actual
borrowing availability is subject to a borrowing base calculation and the right
of the lender to establish reserves, which it has done in the amount of $2.5
million. The amount available to the Company under the DIP Credit Facility is
the aggregate of 85% of eligible accounts receivables, and 64% of eligible
inventories (up to an aggregate of $40 million), less reserves on the various
collateral established by the lender. Borrowing availability under the DIP
Credit Facility is also subject to compliance with certain covenants. As of
July 31, 1999, the Company's eligible inventories and accounts receivable
supported access to $48.8 million under the DIP Credit Facility. As of July 31,
1999, the Company had a net availability of $16.8 million under the DIP Credit
Facility. The Company recorded $350,000 for debt issuance cost of the DIP Credit
Facility, which is being amortized over a one-year period.
On July 20, 1999, the Bankruptcy Court also granted the Company's motion to
approve a new debtor-in-possession agreement in the aggregate principal amount
of $17.1 million (the "Term Loan"). The Term Loan is secured by the property,
plant and equipment and certain other collateral of the Company. All loans are
payable one year from the initial advance. Upon entry of the interim bankruptcy
order on July 7, 1999, the Bankruptcy Court approved the advance of $6.4 million
to the Company and $9.0 million was advanced upon entry of the final bankruptcy
order on July 20, 1999, less approximately $800,000 which has been retained by
the lender pending resolution of certain collateral issues. An additional $2.5
million will be advanced after November 1, 1999 upon request of the Company.
Such amounts may be reduced by certain reserves in respect of existing liens on
collateral and are subject to compliance with certain covenants. The Company
recorded $247,000 for debt issuance cost of the Term Loan, which is being
amortized over a one-year period.
On July 20, 1999, the Bankruptcy Court also approved a Preferred Supplier
Continuous Credit Program (the "Program"). The Program provides that (a)
selected suppliers that offer postpetition credit terms at least equal to the
lesser of twice the number of days that are listed as "Current Trade Term Days"
(but not less than 30 days) or 45 days, and (b) any suppliers that have not been
pre-selected that offer postpetition credit terms of at least 45 days, and, in
each case, for a continuous period of at least 6 month, shall be entitled to
liens with superpriority administrative expense status on all postpetition
credit extended to the Company under the Program. Such liens are senior to the
First Mortgage Noteholders' prepetition liens, but subordinate to Bankruptcy
Court approved debtor-in-possession financing, the prepetition revolving credit
facility and certain professional and administrative fees and expenses. In
addition, so long
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as continuous credit is provided, a participant is entitled to a credit
extension fee of up to 50% of the participants prepetition claim, if any,
payable after 6 months over a 30 month period. The maximum amount of
postpetition credit eligible to receive credit extension fees is $15 million and
the Company may pay up to a maximum of $7.5 million in credit extension fees to
selected suppliers that participate in the Program.
NOTE 6 - EXTRAORDINARY ITEM
On November 13, 1997, the Company retired its previous $70 million revolving
credit facility and entered into the prepetition $80 million credit facility
which included a $70 million revolving credit facitliy and a $10 million
equipment financing facility. In connection with this refinancing, the Company
recorded an extraordinary expense of approximately $1.0 million, consisting of a
noncash charge of $800,000 to write-off unamortized debt issuance costs and a
prepayment penalty of $200,000. The income tax benefit relating to this write-
off is reserved by a deferred income tax valuation allowance. The $80 million
prepetition credit facility was replaced by the DIP Credit Facility.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain forward-looking statements as
that term is defined in the Private Securities Litigation Reform Act of 1995.
The words "believe", "expect", "anticipate" and similar expressions identify
forward-looking statements. Such statements are based on management's current
assumptions and expectations and are subject to a number of factors and
uncertainties which could cause actual results or business conditions to differ
materially from those anticipated in the forward-looking statements. There can
be no assurance that actual results will not differ materially from those
described in such statements because of various factors, including, but not
limited to: the size and timing of significant orders, as well as deferral of
orders, over which the Company has little control; the variation in the
Company's sales cycles from customer to customer; increased competition posed by
other steel producers, both domestic and foreign; changes in pricing policies by
the Company and its competitors; the need to secure or build manufacturing
capacity in order to meet demand for the Company's products; the Company's
success in expanding its sales programs and its ability to gain increased market
acceptance for its existing product lines; the continued increase of foreign
steel imports at extremely low prices; the continued access to and adequacy of
the DIP Credit Facility and Term Loan; the gain or loss of significant
customers; the ability to complete the Company's capital investment program and
successfully produce its products; shortages in the availability of raw
materials from the Company's suppliers; fluctuations in the price and
availability of energy; the costs of environmental compliance and the impact of
government regulations; the Company's relationship with its work force; the
restrictive covenants and tests contained in the Company's financing
instruments, which could limit the Company's operating and financial
flexibility; adverse developments arising from the Chapter 11 proceedings; the
Company's ability to successfully reorganize under Chapter 11 of the Bankruptcy
Code, and general economic conditions.
GENERAL
The discussion and analysis below should be read in conjunction with unaudited
financial statements and the accompanying notes included in this Form 10-Q. As
described in Note 2 to the unaudited financial statements, the Company filed a
voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code.
RESULTS OF OPERATIONS
Results of operations for an interim period are not necessarily indicative of
results for the full year.
THREE MONTHS ENDED JULY 31, 1999 COMPARED TO THREE MONTHS ENDED JULY 31, 1998
Net Sales. Net sales decreased 23.3% to $82.3 million for the 1999 period
from $107.4 million for the 1998 period. This decline was the result of a
reduction in the average selling prices of $80 per ton in the third quarter of
fiscal 1999 to $354 per ton compared to $434 per ton in 1998. In addition,
there was a 5.8% decrease in sales volume on shipments of flat rolled products
to 226,888 net tons in the 1999 period compared to 240,644 net tons in the 1998
period. This decline was primarily the result of depressed market conditions
resulting from the sharp increase in foreign steel imports.
Cost of Goods Sold. Cost of goods sold, excluding depreciation, decreased
14.6% to $78.8 million for the 1999 period from $92.2 million for the 1998
period. This decrease is primarily due to lower production volumes in the third
quarter of 1999 compared to the 1998 period. As a percentage of net sales, cost
of goods sold, excluding depreciation, increased to 95.7% from 85.9%. This
increase is due to lower selling prices per ton resulting from the unfavorable
market conditions as well as higher average manufacturing costs per ton
resulting from lower production volumes. Average manufacturing costs for flat
rolled products decreased to $337 per ton in the 1999 period from $368 per ton
in the 1998 period. Depreciation expense increased to $5.3 million in the third
quarter of fiscal 1999 compared to $5.0 million in 1998.
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Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $4.9 million, or 5.9% of sales, in the 1999
period from $4.5 million, or 4.2% of sales in the 1998 period. The increase in
selling, general and administrative expenses as a percentage of sales is due
primarily to a decrease in overall sales on a year-to-year comparable basis.
Operating Profit (Loss). As a result of the changes in net sales, cost of
goods sold, selling and general and administrative expenses, operating profit
decreased $12.2 million from $5.6 million in 1998 to a loss of $6.6 million for
the 1999 period.
Restructuring Expenses. Restructuring expenses for the first three months of
1999 were approximately $1.8 million. Restructuring expenses includes
additional costs incurred for financial and legal advisors and is classified as
professional fees under restructuring items on the Statement of Operations.
Interest Expense. Interest expense, net of interest income, decreased to $5.0
million in the 1999 period from $6.8 million during the comparable period in
1998. This decrease is primarily due to the three months period in 1999
containing only two months of interest expense as the Company discontinued
accruing interest on July 1, 1999 due to the bankruptcy filing. Contractual
interest on those obligations amounts to $7.2 million, which is $2.2 million in
excess of the reported interest expense.
NINE MONTHS ENDED JULY 31, 1999 COMPARED TO NINE MONTHS ENDED JULY 31, 1998
Net Sales. Net sales decreased 24.9% to $235.9 million for the 1999 period
from $314.3 million for the 1998 period. This decline was the result of a
reduction in the average selling prices of $55 per ton in the first nine months
of fiscal 1999 to $373 per ton compared to $428 per ton in 1998. In addition,
there was a 14.7% decrease in sales volume on shipments of flat rolled products
to 616,380 net tons in the 1999 period compared to 722,662 net tons in the 1998
period. This decline was primarily the result of depressed market conditions
resulting from the sharp increase in foreign steel imports.
Cost of Goods Sold. Cost of goods sold, excluding depreciation, decreased
13.2% to $233.5 million for the 1999 period from $269.0 million for the 1998
period. This decrease is primarily due to lower production volumes in the first
nine months of 1999 compared to the 1998 period. As a percentage of net sales,
cost of goods sold, excluding depreciation, increased to 99.0% from 85.6%. This
increase is due to lower selling prices per ton resulting from the unfavorable
market conditions as well as higher average manufacturing costs per ton
resulting from lower production volumes. Average manufacturing costs for flat
rolled products increased to $368 per ton in the 1999 period from $363 per ton
in the 1998 period. Depreciation expense increased to $15.8 million in the
first nine months of fiscal 1999 compared to $15.1 million in 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $13.6 million, or 5.8% of sales, in the
1999 period from $13.1 million, or 4.2% of sales in the 1998 period. The
increase in selling, general and administrative expenses as a percentage of
sales is due primarily to a decrease in overall sales on a year-to-year
comparable basis.
Restructuring Expenses. Restructuring expenses for the first nine months of
1999 were $3.0 million. Restructuring expenses includes additional costs
incurred for financial and legal advisors and is classified as professional fees
under restructuring items on the Statement of Operations.
Operating Profit (Loss). As a result of the changes in net sales, cost of
goods sold, selling and general and administrative expenses, operating profit
decreased $44.0 million from $17.0 million in 1998 to a loss of $27.0 million
for the 1999 period.
Interest Expense. Interest expense, net of interest income, decreased to $19.0
million in the 1999 period from $20.8 million during the comparable period in
1998. This decrease is primarily due to the nine months period in 1999
containing only eight months of interest expense as the Company discontinued
accruing interest on July 1, 1999 due to the bankruptcy filing. Contractual
interest on those obligations amounts to $21.2 million, which is $2.2 million in
excess of the reported interest expense.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operations was $9.9 million during the nine
months ended July 31, 1999, compared to cash provided by operations of $27.5
million for the nine months ended July 31, 1998. The primary reason for this
decrease was the decrease in earnings during the nine months ended July 31, 1999
compared to the nine months ended July 31, 1998, partially offset by decreased
inventory.
The Company's current liquidity requirements include working capital needs,
cash for debt service and capital expenditures. The Company intends to finance
its current operations and investing activities with existing cash balances,
borrowing under the DIP Credit Facility, funds from the Term Loan, and trade
credit including amounts provided under the Program. Although the Company
believes that anticipated cash flows from future operations and borrowings under
the DIP Credit Facility, the Term Loan, and the Program should provide
sufficient liquidity for the Company to meet its debt service requirements,
satisfy covenants under the financing agreements and fund ongoing operations and
capital improvements, there can be no assurance these or other possible sources
of liquidity will be adequate. The Company makes capital expenditures for the
replacement of existing plant and equipment, compliance with environmental
regulations, and the upgrading and improvement of manufacturing facilities. The
Company's capital expenditures for the nine months ended July 31, 1999 were
$10.4 million compared to $17.9 million in the nine months ended July 31, 1998.
For fiscal year 1999, the Company expects capital expenditures, excluding
capitalized interest, to total approximately $4.0 million for environmental
projects and expenditures for the replacements, upgrading and improvement of
facilities and equipment to total approximately $11.7 million. Although the
Company expects to benefit from improved operating performance related to its
capital investments, there can be no assurance that any or all of these
potential cost savings will be realized.
The Company's recent losses from operations, significant stockholders deficit
and the related Chapter 11 filing raise substantial doubt about the Company's
ability to continue as a going concern. Realization of the carrying amounts of
the Company's and classification of its liabilities is dependent upon, among
other things the ability to comply with debtor-in-possession financing
agreements, the ability to achieve profitable operations, and the ability to
generate sufficient cash flow from operations to meet its obligations.
The Company was unable to make its April 15, 1999, interest payment of $12.8
million due on the First Mortgage Notes. The Company was also unable to cure
that default by May 15, 1999, which date represented the expiration of the 30-
day cure period from the original interest payment due date. The Bankruptcy
Code generally prohibits the Company from making payment on prepetition debt,
including the First Mortgage Notes, except pursuant to Bankruptcy Court
approval.
Under the terms of the bankruptcy case, liabilities in the amount of
approximately $228.0 million are subject to compromise under a plan of
reorganization. Pursuant to the provisions of the Bankruptcy Code and during
the pendency of the bankruptcy proceeding, actions to enforce or otherwise
effect repayment of prepetition liabilities, as well as all pending litigation
against the Company, are stayed while the Company continues its business
operations as debtor-in-possession. The ultimate amount and settlement terms for
such liabilities are subject to a plan of reorganization, and accordingly, are
not presently determinable.
On July 20, 1999, the Bankruptcy Court granted the Company's motion to
approve a new $65 million debtor-in-possession credit facility. The DIP Credit
Facility expires on the earlier of the consummation of a plan of reorganization
or July 6, 2000. The DIP Credit Facility replaced the Company's prepetition
revolving credit facility. The DIP Credit Facility is secured by raw
materials, work-in-process, finished goods inventory, and the Company's trade
accounts receivable. Actual borrowing availability is subject to a borrowing
base calculation and the right of the lender to establish reserves, which it has
done in the amount of $2.5 million. The amount available to the Company under
the DIP Credit Facility is the aggregate of 85% of eligible accounts
receivables, and 64% of eligible inventories (up to an aggregate of
14
<PAGE>
$40 million), less reserves on the various collateral established by the lender.
Borrowing availability under the DIP Credit Facility is also subject to
compliance with certain covenants. As of July 31, 1999, the Company's eligible
inventories and accounts receivable supported access to $48.8 million under the
Credit Facility. As of July 31 1999, the Company had a net availability of
$16.8 million under the DIP Credit Facility. The Company recorded $350,000 for
debt issuance cost of the DIP Credit Facility, which is being amortized over a
one-year period.
On July 20, 1999, the Bankruptcy Court also granted the Company's motion to
approve a new debtor-in-possession agreement in the aggregate principal amount
of $17.1 million. The Term Loan is secured by the property, plant and
equipment, and certain other collateral of the Company. All loans are payable
one year from the initial advance. Upon entry of the bankruptcy interim order
on July 7, 1999, the Bankruptcy Court approved the advance of $6.4 million to
the Company and $9.0 million was advanced upon entry of the bankruptcy final
order on July 20, 1999, less approximately $800,000 which has been retained by
the lender pending resolution of certain collateral issues. An additional $2.5
million will be advanced after November 1, 1999 upon request of the Company.
Such amounts may be reduced by certain reserves in respect of existing liens on
collateral and are subject to compliance with certain covenants. The Company
recorded $247,000 for debt issuance cost of the Term Loan, which is being
amortized over a one-year period.
On July 20, 1999, the Bankruptcy Court also approved a Preferred Supplier
Continuous Credit Program. The Program provides that (a) selected suppliers
that offer postpetition credit terms at least equal to the lesser of twice the
number of days that are listed as "current trade term days" (but not less than
30 days) or 45 days, and (b) any suppliers that have not been pre-selected that
offer postpetition credit terms of at least 45 days, and, in each case, for a
continuous period of at least 6 months, shall be entitled to liens with
superpriority administrative expense status on all postpetition credit extended
to the Company under the Program. Such liens are senior to the First Mortgage
Noteholders' prepetition liens, but subordinate to Bankruptcy Court approved
debtor-in-possession financing and certain professional and administrative fees
and expenses. In addition, so long as continuous credit is provided, a
participant is entitled to a credit extension fee of up to 50% of the
participants prepetition claim, if any, payable after 6 months over a 30 month
period. The maximum amount of postpetition credit eligible to receive credit
extension fees is $15 million and the Company may pay up to a maximum of $7.5
million in credit extension fees to selected suppliers that participate in the
Program
Although the Company believes that anticipated cash flows from future
operations and borrowings under the DIP Credit Facility, the Term Loan, and the
Program should provide sufficient liquidity for the Company to meet its debt
service requirements, satisfy covenants under the financing agreements and fund
ongoing operations and capital improvements, there can be no assurance these or
other possible sources or liquidity will be adequate.
Given current market conditions, the levels of debt and associated interest
expense, required capital expenditures and improvements and the potential
realization of loss contingencies, the Company believes that it will continue to
incur losses in fiscal 1999. If the level of foreign imports is not reduced and
if the Company is unable to increase sales and pricing, continue to reduce
costs, implement productivity improvements, comply with the covenant
requirements contained in the Company's financing documents and maintain its
borrowing availability under the DIP Credit Facility and the Term Loan, the
Company may not have sufficient liquidity and capital resources to meet its
projected fiscal year 1999 requirements. As a result, the Company has been
evaluating when it will commence the bosh reline project, discussed under
"Capital Investments" in Item 1, Part I of the Company's Form 10-K for the year
ended October 31, 1998, and is developing a restructuring plan to improve
operating results and to increase its financial flexibility. The evaluation has
determined that certain refractories maintenance techniques may allow the
project to be deferred for at least one more year. This estimate could be
affected by unseen deterioration of the bosh lining. A failure of the blast
furnace would have a material adverse effect on the Company. The Term Loan
covenants do not allow capital expenditures related to steel making activities
including the bosh reline project.
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On April 21, 1995, the Company completed the Acquisition (see the Business
section of Item 1 of Form 10-K for the year ended October 31, 1998) of
substantially all the assets and the assumption of certain liabilities of the
Gadsden, Alabama facilities of Gulf States Steel, Inc. of Alabama (the
"Predecessor of the Company") from the Brenlin Group. In connection with the
Acquisition, GSS Holdings Corp ("GSS Holdings") issued certain promissory notes
to Capital Resource Lenders II, L.P. as a part of a related transaction.
Although the Company has no obligation with respect to the promissory notes, GSS
Holdings is required to make payments thereon in accordance with the respective
terms thereof, for which the source of funds was expected to be dividend
distributions or loans from the Company. The promissory notes require GSS
Holdings to cause the Company to pay dividends to GSS Holdings to the maximum
extent allowed under the terms of the First Mortgage Notes Indenture and
applicable law until the GSS Holdings notes are repaid in full. No dividends
are payable by the Company as of July 31, 1999. In addition, in connection with
the Acquisition, GSS Holdings issued a promissory note to the seller for which
the source of funds for repayment was also expected to be dividend distributions
or loans from the Company. There have been no cash payments required or made on
the seller note through July 31, 1999. As noted above, the Company is
prohibited from making payments with respect to prepetition debt, except
pursuant to Bankruptcy Court approval.
YEAR 2000 ISSUE
The Company has conducted an assessment of its exposure to disruption
associated with the Year 2000 issue. Many of its computer based transactional
business systems are subject to potential failure. The Company believes that it
could be materially affected by such failures. In addition, certain process
control systems are also exposed. The Company is also vulnerable to third-party
failures to correct their systems. In order to assess third-party compliance
and progress on this issue, the Company has canvassed its suppliers. The
Company believes that no material contingencies exist that would require it to
modify its products.
As previously reported in the Company's Form 10-K for the fiscal year ended
October 31, 1998, the Company has recognized the serious nature of its exposure
under the Year 2000 Issue and has developed a modification plan that will
minimize this exposure. It has budgeted approximately $11.7 million (of which
$9.1 million is expected to be capitalized) for the purchase of Year 2000
compliant software and consultant support all of which is expected to be funded
through operating cash flows and borrowing on its DIP Credit Facility. The
primary purchased software is for an enterprise resource planning system which
will provide enhanced productivity and customer service benefits in addition to
mitigating potential consequences of the Year 2000 problem. Through July 31,
1999, the Company has incurred expenditures for software and consultant support
of $11.4 million and has spent another $1.1 million for contractors to rewrite
existing systems. Those activities were initiated in late 1996 for all business
systems. The Company believes that the costs to rewrite existing systems, which
will be expensed as incurred, are not expected to have a material effect on its
results of operations.
The Company implemented the final phase of the Year 2000 project on August 2,
1999, which is prior to any anticipated impact on its operating systems. A team
of information systems personnel has evaluated the progress and has developed
contingency plans that ensure the continued operation of the business. The
Company appointed a task force to further evaluate and develop action plans for
minimizing the impact of the Year 2000 Issue on its process control systems.
The appointed task force has identified a minor system fault that is being
remediated at this time. The Company believes the project will be completed on
time and the risk of loss is minimal.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third-party modification plans
and other factors. There can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties. See also the Company's statements regarding "forward-looking
statements" contained in this Form 10-Q.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
------------------
On July 1, 1999, the Company filed a voluntary petition seeking
reorganization under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for Northern District of Alabama, Eastern
Division. The Company's operating results for fiscal 1998 and for the first
three fiscal quarters of 1999 were severely affected by, among other things, a
dramatic surge in steel imports beginning in the summer of 1998. As a
consequence of record-high levels of low-priced steel imports and the resultant
deteriorating market conditions, the Company's overall price realization and
shipments declined. Decreased liquidity made it impossible for the Company to
service its debt and fund ongoing operations. Therefore, the Company sought
protection under Chapter 11 of the Bankruptcy Code.
ITEM 2. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
The Company did not make its interest payment of approximately $12.8 million
due April 15, 1999 on the Company's First Mortgage Notes, due in 2003. The
Company was also unable to cure that default by May 15, 1999, which date
represented the expiration of the 30-day cure period from the original interest
payment date, which resulted in a default under the terms thereof. As described
above, the Company filed a voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code on July 1, 1999. The Bankruptcy Code generally
prohibits the Company from making payments on unsecured, prepetition debt,
including the First Mortgage Notes, except pursuant to Bankruptcy Court
approval.
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ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) (10.1) Postpetition Loan and Security Agreement dated July 1, 1999, among
Gulf States Steel, Inc. of Alabama, Fleet Capital Corporation, as agent,
and certain financial institutions listed therein
(10.2) Financing Agreement, dated as of July 1, 1999, among Gulf States
Steel, Inc. of Alabama, Ableco Finance LLC, as agent, and certain lenders
listed therein.
(10.3) Final Order Pursuant to 11 U.S.C. (S)(S) 105(a), 364(c)(1), (c)(3)
and (d)(1) (I) Authorizing Debtor to Obtain Trade Credit from Suppliers
Secured by Lien on Debtor's Assets with Administrative Expense Priority,
and (II) Authorizing Debtor to Pay Credit Extension Fees, signed and
dated July 20, 1999, by the United States Bankruptcy Court, Northern
District of Alabama, Eastern Division, In the Matter of Gulf States
Steel, Inc. of Alabama, as debtor, in Bankruptcy Case No. 99-41958-JSS-11,
with accompanying Exhibit of Terms
(27) Financial Data Schedule
(b) (1) Form 8-K was filed on April 19, 1999
(2) Form 8-K was filed on May 28, 1999
(3) Form 8-K was filed on July 15, 1999
(4) Form 8-K was filed on September 10, 1999
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
GULF STATES STEEL, INC. OF ALABAMA
----------------------------------
(registrant)
By: /s/ Robert Schaal
---------------------------------
Robert Schaal
Chairman & Chief Executive Officer
(Principal Executive Officer)
Dated: September 20, 1999 By: /s/ James R. Grimm
---------------------------------
James R. Grimm
Senior Vice President & CFO
(Principal Financial and Accounting Officer)
19
<PAGE>
_________________________________________________________________
GULF STATES STEEL, INC. OF ALABAMA, as Borrower
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
POST-PETITION LOAN AND SECURITY AGREEMENT
Dated: July 1, 1999
$65,000,000.00
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
THE FINANCIAL INSTITUTIONS
PARTY HERETO FROM TIME TO TIME, as Lenders
and
FLEET CAPITAL CORPORATION, as Agent
______________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SECTION 1. CREDIT FACILITIES......................................................................... - 1 -
1.1. DIP Facility........................................................................ - 1 -
------------
1.1.1. Revolver Loans.......................................................... - 1 -
--------------
1.1.2. Out-of-Formula Loans.................................................... - 2 -
--------------------
1.1.3. Professional Expense Advances........................................... - 2 -
-----------------------------
1.1.4. Use of Proceeds......................................................... - 2 -
---------------
1.1.5. Revolver Notes.......................................................... - 3 -
--------------
1.2. LC Facility ........................................................................ - 3 -
-----------
1.2.1. Procurement of Letters of Credit........................................ - 3 -
--------------------------------
1.2.2. Participations.......................................................... - 5 -
--------------
1.2.3. Cash Collateral Account................................................. - 6 -
-----------------------
1.2.4. Indemnifications........................................................ - 7 -
----------------
SECTION 2. INTEREST, FEES AND CHARGES............................................................. - 7 -
2.1. Interest ......................................................................... - 7 -
--------
2.1.1. Rates of Interest....................................................... - 7 -
-----------------
2.1.2. Conversions and Continuations........................................... - 8 -
-----------------------------
2.1.3. Interest Periods........................................................ - 9 -
----------------
2.1.4. Interest Rate Not Ascertainable......................................... - 9 -
-------------------------------
2.1.5. Default Rate of Interest................................................ - 9 -
------------------------
2.2. Fees
----
2.2.1. Commitment Fee.......................................................... - 10 -
--------------
2.2.2. Unused Line Fee......................................................... - 10 -
---------------
2.2.3. LC Facility Fees........................................................ - 10 -
----------------
2.2.4. Termination Fee......................................................... - 10 -
---------------
2.2.5. Audit and Appraisal Fees................................................ - 11 -
------------------------
2.2.6. Collateral Monitoring Fee............................................... - 11 -
-------------------------
2.2.7. General Provisions...................................................... - 11 -
------------------
2.3. Computation of Interest and Fees.................................................... - 11 -
--------------------------------
2.4. Reimbursement of Expenses........................................................... - 11 -
-------------------------
2.5. Bank Charges........................................................................ - 12 -
------------
2.6. Illegality.......................................................................... - 12 -
----------
2.7. Increased Costs..................................................................... - 12 -
---------------
2.8. Capital Adequacy.................................................................... - 13 -
----------------
2.9. Funding Losses...................................................................... - 14 -
--------------
2.10. Maximum Interest.................................................................... - 14 -
----------------
SECTION 3. LOAN ADMINISTRATION....................................................................... - 15 -
3.1. Manner of Borrowing and Funding Revolver Loans...................................... - 15 -
----------------------------------------------
3.1.1. Notice of Borrowing..................................................... - 15 -
-------------------
3.1.2. Fundings by Lenders..................................................... - 16 -
-------------------
3.1.3. Settlement and Settlement Loans......................................... - 17 -
-------------------------------
3.1.4. Disbursement Authorization.............................................. - 18 -
--------------------------
3.2. Defaulting Lender................................................................... - 18 -
-----------------
3.3. Special Provisions Governing LIBOR Loans............................................ - 19 -
----------------------------------------
3.3.1. Number of LIBOR Loans................................................... - 19 -
---------------------
3.3.2. Minimum Amounts......................................................... - 19 -
---------------
3.3.3. LIBOR Lending Office.................................................... - 19 -
--------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.4. All Revolver Loans to Constitute One Obligation..................................... - 19 -
-----------------------------------------------
SECTION 4. PAYMENTS.................................................................................. - 19 -
4.1. General Payment Provisions.......................................................... - 19 -
--------------------------
4.2. Repayment of Revolver Loans......................................................... - 19 -
---------------------------
4.2.1. Payment of Principal.................................................... - 19 -
--------------------
4.2.2. Payment of Interest..................................................... - 20 -
-------------------
4.3. Payment of Other Obligations........................................................ - 21 -
----------------------------
4.4. Marshaling; Payments Set Aside...................................................... - 21 -
------------------------------
4.5. Agent's Allocation of Payments and Collections...................................... - 21 -
----------------------------------------------
4.6. Application of Payments and Collections............................................. - 22 -
---------------------------------------
4.7. Loan Accounts; the Register; Account Stated......................................... - 22 -
-------------------------------------------
4.7.1. Loan Accounts........................................................... - 22 -
-------------
4.7.2. The Register............................................................ - 22 -
-----------
4.7.3. Entries Binding......................................................... - 22 -
---------------
SECTION 5. DIP TERM AND TERMINATION OF COMMITMENTS................................................... - 23 -
5.1. Term of Commitments................................................................. - 23 -
-------------------
5.2. Termination......................................................................... - 23 -
-----------
5.2.1. Termination by Agent.................................................... - 23 -
--------------------
5.2.2. Termination by Borrower................................................. - 23 -
----------------------
5.2.3. Termination Charges..................................................... - 23 -
-------------------
5.2.4. Effect of Termination................................................... - 23 -
---------------------
SECTION 6. COLLATERAL SECURITY....................................................................... - 24 -
6.1. Grant of Security Interest in Collateral............................................ - 24 -
----------------------------------------
6.2. Other Collateral.................................................................... - 25 -
----------------
6.3. Lien on Deposit Accounts............................................................ - 25 -
------------------------
6.4. Lien Perfection; Further Assurances................................................. - 25 -
-----------------------------------
6.5. Liens Under DIP Orders.............................................................. - 25 -
----------------------
6.6. Lien Priority....................................................................... - 25 -
-------------
SECTION 7. COLLATERAL ADMINISTRATION................................................................. - 26 -
7.1. General Provisions.................................................................. - 26 -
------------------
7.1.1. Locations of Collateral................................................. - 26 -
-----------------------
7.1.2. Insurance of Collateral; Insurance and Condemnation Proceeds............ - 26 -
------------------------------------------------------------
7.1.3. Protection of Collateral................................................ - 26 -
------------------------
7.1.4. Defense of Title to Collateral.......................................... - 27 -
------------------------------
7.2. Administration of Accounts.......................................................... - 27 -
--------------------------
7.2.1. Records and Schedules of Accounts....................................... - 27 -
---------------------------------
7.2.2. Collection and Verification of Accounts................................. - 27 -
---------------------------------------
7.2.3. Notice Regarding Disputed Accounts...................................... - 28 -
----------------------------------
7.3. Administration of Inventory......................................................... - 28 -
---------------------------
7.3.1. Records and Reports of Inventory........................................ - 28 -
--------------------------------
7.3.2. Returns of Inventory.................................................... - 28 -
--------------------
7.4. Payment of Charges.................................................................. - 28 -
------------------
7.5. Borrowing Base Certificates......................................................... - 28 -
---------------------------
SECTION 8. REPRESENTATIONS AND WARRANTIES............................................................ - 28 -
8.1. General Representations and Warranties.............................................. - 28 -
--------------------------------------
8.2. Reaffirmation of Representations and Warranties..................................... - 30 -
-----------------------------------------------
</TABLE>
91
<PAGE>
<TABLE>
<S> <C>
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS....................................................... - 31 -
9.1. Affirmative Covenants............................................................... - 31 -
---------------------
9.1.1. Business and Existence.................................................. - 31 -
----------------------
9.1.2. Compliance with Laws.................................................... - 31 -
--------------------
9.1.3. Business Records........................................................ - 31 -
----------------
9.1.4. Visits and Inspections.................................................. - 31 -
----------------------
9.1.5. Further Assurances...................................................... - 31 -
------------------
9.1.6. Compliance With Orders.................................................. - 31 -
----------------------
9.1.7. Financial Statements.................................................... - 31 -
--------------------
9.1.8. Notices................................................................. - 33 -
------
9.1.9. Insurance............................................................... - 33 -
---------
9.1.10. Year 2000 Reporting.................................................... - 33 -
-------------------
9.2. Negative Covenants.................................................................. - 33 -
------------------
9.2.1. Loans................................................................... - 33 -
-----
9.2.2. Limitation on Liens..................................................... - 33 -
-------------------
9.2.3. Disposition of Assets................................................... - 34 -
---------------------
9.2.4. Compromise of Accounts.................................................. - 34 -
----------------------
9.2.5. Payment of Claims....................................................... - 34 -
-----------------
9.2.6. Filing of Motions and Applications...................................... - 34 -
----------------------------------
9.2.7. Modifications to Orders................................................. - 34 -
-----------------------
9.2.8. Fundamental Changes..................................................... - 34 -
-------------------
9.2.9. Restricted Investments.................................................. - 34 -
----------------------
9.2.10. Distributions......................................................... - 34 -
-------------
9.2.11. Permitted Debt......................................................... - 34 -
--------------
9.2.12. Conduct of Business.................................................... - 35 -
-------------------
9.3. Financial Covenants................................................................. - 35 -
-------------------
SECTION 10. CONDITIONS PRECEDENT...................................................................... - 35 -
10.1. Conditions Precedent to Initial Credit Extensions.................................. - 35 -
-------------------------------------------------
10.2. Conditions Precedent to All Credit Extensions...................................... - 36 -
---------------------------------------------
10.3. Limited Waiver of Conditions Precedent............................................. - 37 -
--------------------------------------
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT......................................... - 37 -
11.1. Events of Default.................................................................. - 37 -
-----------------
11.1.1. Payment of Obligations.................................................... - 37 -
----------------------
11.1.2. Misrepresentations........................................................ - 37 -
------------------
11.1.3. Breach of Specific Covenants.............................................. - 37 -
----------------------------
11.1.4. Breach of Other Covenants................................................. - 37 -
-------------------------
11.1.5. Default Under Other DIP Financing Documents.............................. - 38 -
-------------------------------------------
11.1.6. Cross-Defaults............................................................ - 38 -
--------------
11.1.7. Uninsured Losses; Unauthorized Dispositions............................... - 38 -
-------------------------------------------
11.1.8. Certain Bankruptcy Events................................................. - 38 -
-------------------------
11.1.9. Change of Control......................................................... - 39 -
------------------
11.1.10. Judgments................................................................ - 39 -
---------
11.1.11. Failure of DIP Financing Documents....................................... - 39 -
----------------------------------
11.1.12. Material Adverse Effect................................................. - 39 -
-----------------------
11.2. Acceleration of the Obligations................................................... - 39 -
-------------------------------
11.3. Remedies.................................................................... - 39 -
--------
11.4. Setoff...................................................................... - 41 -
------
11.5. Remedies Cumulative; No Waiver.............................................. - 41 -
------------------------------
</TABLE>
92
<PAGE>
<TABLE>
<S> <C>
SECTION 12. AGENT..................................................................................... - 41 -
12.1. Appointment, Authority and Duties of Agent......................................... - 41 -
------------------------------------------
12.2. Agreements Regarding Collateral.................................................... - 43 -
--------------------------------
12.3. Reliance By Agent.................................................................. - 44 -
-----------------
12.4. Action Upon Default................................................................ - 44 -
-------------------
12.5. Ratable Sharing.................................................................... - 45 -
---------------
12.6. Indemnification of Agent........................................................... - 45 -
------------------------
12.7. Limitation on Responsibilities of Agent............................................ - 46 -
----------------------------------------
12.8. Successor Agent and Co-Agents...................................................... - 46 -
-----------------------------
12.9. Consents, Amendments and Waivers................................................... - 47 -
--------------------------------
12.10. Due Diligence and Non-Reliance..................................................... - 49 -
------------------------------
12.11. Representations and Warranties of Lenders......................................... - 49 -
------------------------------------------
12.12. The Required Lenders............................................................... - 49 -
-------------------
12.13. Several Obligations................................................................ - 49 -
-------------------
12.14. Agent in its Individual Capacity................................................... - 50 -
--------------------------------
12.15. No Third Party Beneficiaries....................................................... - 50 -
----------------------------
12.16. Notice of Transfer................................................................. - 50 -
------------------
12.17. Replacement of Certain Lenders..................................................... - 50 -
-------------------------------
12.18. Remittance of Payments and Collections............................................. - 51 -
--------------------------------------
SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS...................................... - 51 -
13.1. Successors and Assigns............................................................. - 51 -
---------------------
13.2. Participations..................................................................... - 51 -
--------------
13.2.1. Permitted Participants; Effect............................................ - 51 -
------------------------------
13.2.2. Voting Rights............................................................. - 52 -
-------------
13.2.3. Benefit of Set-Off........................................................ - 52 -
------------------
13.3. Assignments........................................................................ - 52 -
-----------
13.3.1. Permitted Assignments..................................................... - 52 -
---------------------
13.3.2. Effect; Effective Date.................................................... - 53 -
----------------------
13.3.3. Dissemination of Information.............................................. - 53 -
----------------------------
SECTION 14. MISCELLANEOUS............................................................................. - 53 -
14.1. Power of Attorney.................................................................. - 53 -
-----------------
14.2. General Indemnity.................................................................. - 54 -
-----------------
14.3. Survival of All Indemnities........................................................ - 54 -
---------------------------
14.4. Indulgences Not Waivers............................................................ - 54 -
-----------------------
14.5. Modification of Agreement.......................................................... - 54 -
-------------------------
14.6. Severability....................................................................... - 55 -
-----------
14.7. Cumulative Effect; Conflict of Terms............................................... - 55 -
------------------------------------
14.8. Execution in Counterparts.......................................................... - 55 -
-------------------------
14.9. Agent's or Required Lenders' Consent............................................... - 55 -
------------------------------------
14.10. Notices............................................................................ - 55 -
-------
14.11. Time of Essence.................................................................... - 55 -
---------------
14.12. Entire Agreement; Appendix A, Exhibits and Schedules................................ - 55 -
----------------------------------------------------
14.13. Interpretation..................................................................... - 56 -
--------------
14.14. Obligations of Lenders Several..................................................... - 56 -
14.15. Governing Law...................................................................... - 56 -
-------------
14.16. Waivers by Borrower................................................................ - 56 -
-------------------
14.17. Not an "Alabama" Transaction....................................................... - 56 -
----------------------------
</TABLE>
93
<PAGE>
EXHIBITS
--------
Exhibit A Form of Revolver Note
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Notice of Borrowing
Exhibit D Form of Compliance Certificate
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Notice
Exhibit G Preferred Supplier Continuous Credit Program
SCHEDULES
---------
Schedule 7.1.1 Locations of Collateral
94
<PAGE>
POST-PETITION LOAN AND SECURITY AGREEMENT
This POST-PETITION LOAN AND SECURITY AGREEMENT is made on July 1, 1999,
by and among GULF STATES STEEL, INC. OF ALABAMA, an Alabama corporation and a
Chapter 11 debtor-in-possession ("Borrower"); the financial institutions listed
on the signature pages hereof and their respective successors and assigns which
become "Lenders" as provided herein (such financial institutions and their
respective successors and assigns referred to collectively herein as "Lenders,"
and individually as a "Lender"); and FLEET CAPITAL CORPORATION, a Rhode Island
corporation, in its capacity as collateral and administrative agent for the
Lenders pursuant to Section 12 hereof (together with its successors in such
capacity, "Agent"). Capitalized terms used in this Agreement have the meanings
assigned to them in Appendix A, General Definitions.
R e c i t a l s:
---------------
Agent, Lenders and Borrower are parties to a certain Loan and Security
Agreement dated November 13, 1997 (as amended, the "Pre-Petition Loan
Agreement") pursuant to which Lenders have made loans and extended credit to
Borrower secured by all or substantially all of Borrower's personal property
assets (other than Equipment and Intellectual Property).
Borrower is debtor-in-possession under Chapter 11 of the Bankruptcy Code in
cases pending in the United States Bankruptcy Court for the Northern District of
Alabama, Eastern Division (the "Court"), as Case No. 99-41958-JSS-11 (the
"Chapter 11 Case"), and Borrower has requested that Lenders extend financing to
Borrower in connection with the Chapter 11 Case in accordance with the
provisions of this Agreement.
Lenders are willing to make such loans subject to the terms and conditions
of this Agreement, and subject to the terms and conditions set forth in an order
of the Court approving the proposed financing.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, receipt of which is acknowledged, the parties hereto, intending
to be legally bound hereby, agree as follows:
SECTION 1. CREDIT FACILITIES
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other DIP
Financing Documents, Lenders severally agree to the extent and in the manner
hereinafter set forth to make their respective Pro Rata shares of the
Commitments available to Borrower, in an aggregate amount up to $65,000,000, as
follows:
1.1. DIP Facility.
------------
1.1.1. Revolver Loans. Each Lender agrees, severally to the extent
--------------
of its Commitment and not jointly with the other Lenders, upon the terms and
subject to the conditions set forth herein, to make Revolver Loans to Borrower
on any Business Day during the period from the date hereof through the day
before the Commitment Termination Date, not to exceed in aggregate principal
amount outstanding at any time such Lender's Commitment at such time, which
Revolver Loans may be repaid and reborrowed in accordance with the provisions of
this Agreement; provided, however, that Lenders shall have no obligation to
-------- -------
Borrower whatsoever to make any Revolver Loan if at the time of the proposed
funding
1
<PAGE>
thereof the aggregate principal amount of all of the Revolver Loans and Pending
Revolver Loans then outstanding exceeds, or would exceed after the funding of
such Revolver Loan, the Borrowing Base. Each Borrowing of Revolver Loans shall
be funded by Lenders on a Pro Rata basis in accordance with their respective
Commitments (except for Revolver Loans funded by Fleet as Settlement Loans). The
Revolver Loans shall bear interest as set forth in Section 2.1 hereof. Each
Revolver Loan shall, at the option of Borrower, be made or continued as, or
converted into, part of one or more Borrowings that, unless specifically
provided herein, shall consist entirely of Base Rate Loans or LIBOR Loans.
1.1.2. Out-of-Formula Loans. If the unpaid balance of Revolver Loans
--------------------
outstanding at any time should exceed the Borrowing Base at such time (an "Out-
of-Formula Condition"), such Revolver Loans shall nevertheless constitute
Obligations that are secured by the Collateral and entitled to all of the
benefits of the DIP Financing Documents. In the event that Lenders are willing
in their sole and absolute discretion to make Out-of-Formula Loans, such Out-of-
Formula Loans shall be payable on demand and shall bear interest as provided in
this Agreement for Revolver Loans generally.
1.1.3. Professional Expense Advances. If, on the Commitment
-----------------------------
Termination Date, the amount of accrued and unpaid Professional Expenses
(whether or not such Professional Expenses have been allowed by final order of
the Court on such date) exceeds the balance in the Professional Expense Escrow
on such date, then, notwithstanding any termination of the Commitments, any
Default or Event of Default or non-compliance with any conditions precedent,
Lenders shall, if they receive a request in writing to do so from Borrower
within 45 days after the Commitment Termination Date, fund Revolver Loans in an
aggregate amount equal to the lesser of (i) the excess of the accrued and unpaid
Professional Expenses on the Commitment Termination Date over the balance in the
Professional Expense Escrow on such date or (ii) the amount of the Professional
Expense Reserve on the date of request for funding by Lenders. Promptly after
the Commitment Termination Date, Borrower shall report to Agent and Lenders the
balance on hand in the Professional Expense Escrow as of the Commitment
Termination Date, shall solicit from each Professional Person a statement of all
accrued and unpaid Professional Expenses owing to such Professional Person as of
the Commitment Termination Date and shall report to Agent and Lenders in
writing the amount of Professional Expense Advances, if any, that Lenders are
required to make pursuant to the provisions of this Section 1.1.3. The funding
of such Revolver Loans after the Commitment Termination Date shall not operate
to waive any Default or Event of Default, resurrect any Commitment or otherwise
waive any right or remedy Agent or Lenders may have under any of the DIP
Financing Documents, and all such Professional Expense Advances shall be treated
as Revolver Loans and shall be entitled to all of the benefits and security of
the DIP Financing Documents and the DIP Orders. Balances on hand in the
Professional Expense Escrow shall be disbursed to pay Professional Expenses to
the extent permitted by the DIP Orders or specifically allowed by other orders
of the Court. If any Professional Expenses that accrued prior to the Commitment
Termination Date are paid from the Professional Expense Escrow but are
subsequently disallowed by final order of the Court, any amounts repaid to
Borrower shall be turned over by Borrower to Agent for application to any unpaid
Obligations or Pre-Petition Debt outstanding and the balance, if any, used to
replenish the Professional Expense Escrow.
1.1.4. Use of Proceeds. The proceeds of the Revolver Loans shall be
---------------
used by Borrower during the pendency of the Chapter 11 Case exclusively for one
or more of the following purposes: (i) first, to the payment of the Pre-Petition
Debt from the proceeds of the initial Revolver Loans, to the extent authorized
by the Court; (ii) to pay expenditures described in the Budget during the
Interim Period and, after the Interim Period, to pay any expenses incurred in
the ordinary course of business of Borrower; (iii) to pay fees required to be
paid to the office of the Bankruptcy Administrator; (iv) to pay, or to fund
deposits to the Professional Expense Escrow pursuant to the DIP Orders for the
payment of, Professional Expenses of a Professional Person subject to allowance
by the Court and Borrower's receipt of an itemized billing and expense statement
from such Professional Person; (v) to pay, if and to the extent authorized by
order of the Court, Claims arising prior to the Petition Date for payroll,
payroll taxes and other payroll related items,
2
<PAGE>
insurance and Preferred Supplier Payables pursuant to the Preferred Supplier
Continuous Credit Program, if and to the extent hereafter consented to by Agent
and Lenders and approved by final order of the Court; (vi) to pay any of the
Obligations; (vii) to pay interest accrued with respect to any Debt owing to
Term Lender under any of the Term Lender Documents, but not the principal amount
of any such Debt, unless, immediately after giving effect to such principal
payment, Borrower has Availability of not less than $7,000,000; and (viii) to
pay other expenses authorized by the Court after notice and hearing.
Notwithstanding anything to the contrary contained herein, in no event shall
proceeds of Revolver Loans be used to pay Professional Expenses incurred in
connection with the assertion of or joinder in any claim, counterclaim, action,
contested matter, objection, defense or other proceeding, the purpose of which
is to seek or the result of which would be to obtain any order, judgment,
declaration, or similar relief (a) invalidating, setting aside, avoiding or
subordinating, in whole or in part, any of the Pre-Petition Debt or Obligations
or Liens and security interests in any of the Collateral granted to Agent under
this Agreement or the DIP Orders or under any of the Pre-Petition Loan
Documents; (b) declaring any of the DIP Financing Documents or Pre-Petition Loan
Documents to be invalid, not binding or unenforceable in any respect; (c)
preventing, enjoining, hindering or otherwise delaying Agent's or any Lender's
enforcement of any of the DIP Financing Documents or Pre-Petition Loan Documents
or any realization upon any Collateral (unless such enforcement or realization
is in direct violation of an explicit provision in any of the DIP Orders); (d)
declaring any Liens granted or purported to be granted under any of the DIP
Financing Documents or Pre-Petition Loan Documents to have a priority other than
the priority set forth therein or in the Intercreditor Agreement; or (e)
objecting to the amount or method of calculation by Agent or Lenders of the Pre-
Petition Debt or any of the Obligations or any accounting rendered by Agent or
Lenders with respect to any of those obligations.
1.1.5. Revolver Notes. The Revolver Loans made by each Lender and
--------------
interest accruing thereon shall be evidenced by the records of Agent and such
Lender and by the Revolver Note payable to such Lender (or the assignee of such
Lender), which shall be executed by Borrower, completed in conformity with this
Agreement and delivered to such Lender on the Closing Date. All outstanding
principal amounts and accrued interest under the Revolver Loans shall be due and
payable as set forth in Section 4.2 hereof.
1.2. LC Facility.
-----------
1.2.1. Procurement of Letters of Credit. During the period from the
--------------------------------
date hereof to (but excluding) the 30th day prior to the last day of the DIP
Term, and provided no Default or Event of Default exists, Fleet agrees to
establish the LC Facility pursuant to which Fleet shall procure from Bank one or
more Letters of Credit on Borrower's request therefor from time to time, subject
to the following terms and conditions:
(i) Borrower acknowledges that Bank's willingness to issue any
Letter of Credit is conditioned upon Bank's receipt of (A) the LC Support
duly executed and delivered to Bank by Fleet, (B) an LC Application with
respect to the requested Letter of Credit and (C) such other instruments
and agreements as Bank may customarily require for the issuance of a letter
of credit of equivalent type and amount as the requested Letter of Credit.
Fleet shall have no obligation to execute any LC Support or to join with
Borrower in executing an LC Application unless (x) Fleet receives an LC
Request from Borrower at least 3 Business Days prior to the date on which
Borrower desires to submit such LC Application to Bank and (y) each of the
LC Conditions is satisfied on the date of Fleet's receipt of the LC Request
and at the time of the requested execution of the LC Application. Any
Letter of Credit issued on the Closing Date shall be for an amount in
Dollars that is greater than $250,000. In no event shall Fleet or any
other Lender have any liability or obligation to Borrower or any Subsidiary
for any failure or refusal by Bank to issue, for Bank's delay in issuing,
or for any error of Bank in issuing any Letter of Credit.
3
<PAGE>
(ii) Letters of Credit may be requested by Borrower only if they
are to be used (a) to support obligations of Borrower incurred in the
ordinary course of its business, as presently conducted, on a standby basis
or (b) for such other purposes as Agent and Lenders may approve from time
to time in writing.
(iii) Borrower shall comply with all of the terms and conditions
imposed on Borrower by Bank, whether such terms and conditions are
contained in an LC Application or in any agreement with respect thereto,
and subject to the rights of Bank, each Lender shall have the same rights
and remedies that Bank has under any agreements that Borrower may have with
Bank in addition to any rights and remedies contained in any of the DIP
Financing Documents. Borrower agrees to reimburse Bank for any draw under
any Letter of Credit immediately as hereinafter provided, and to pay Bank
the amount of all other liabilities and obligations payable to Bank under
or in connection with any Letter of Credit immediately when due,
irrespective of any claim, setoff, defense or other right that Borrower may
have at any time against Bank or any other Person. If Fleet shall pay any
amount under a LC Support with respect to any Letter of Credit, then
Borrower shall pay to Lender, in Dollars on the first Business Day
following the date on which payment was made by Lender under such LC
Support (the "Reimbursement Date"), an amount equal to the amount paid by
Lender under such LC Support, together with interest from and after the
date of Lender's payment under such LC Support until payment in full is
made by Borrower at a variable rate per annum in effect from time to time
hereunder for Revolver Loans constituting Base Rate Loans. Until Fleet has
received payment from Borrower in accordance with the foregoing provisions
of this clause (iii), Fleet, in addition to all of its other rights and
remedies under this Agreement, shall be fully subrogated to (A) the rights
and remedies of Bank as issuer of the Letter of Credit under any agreement
with Borrower relating to the issuance of such Letter of Credit, and (B)
the right and remedies of each beneficiary under such Letter of Credit
whose claims against Borrower has been discharged with the proceeds of such
Letter of Credit.
(iv) Borrower assumes all risks of the acts, omissions or misuses
of any Letter of Credit by the beneficiary thereof. The obligations of
Borrower to reimburse Fleet for any payment made by Fleet under the LC
Support shall be absolute, unconditional and irrevocable and shall be paid
without regard to any lack of validity or enforceability of any Letter of
Credit, the existence of any claim, setoff, defense or other right which
Borrower may have at any time against a beneficiary of any Letter of
Credit, or improper honor by Bank of any draw request under a Letter of
Credit. If presentation of a demand, draft, certificate or other document
does not comply with the terms of a Letter of Credit and Borrower contends
that, as a consequence of such noncompliance it has no obligation to
reimburse Bank for any payment made with respect thereto, Borrower shall
nevertheless be obligated to reimburse Fleet for any payment made under the
LC Support with respect to such Letter of Credit, but without waiving any
claim Borrower may have against Bank in connection therewith. All disputes
regarding any Letter of Credit shall be resolved by Borrower directly with
Bank.
(v) No Letter of Credit shall be extended or amended in any
respect that is not solely ministerial, unless all of the LC Conditions are
met as though a new Letter of Credit were being requested and issued.
1.2.2. Participations.
--------------
(i) Immediately upon the issuance by Bank of any Letter of
Credit, each Lender (other than Fleet) shall be deemed to have irrevocably
and unconditionally purchased and received from Fleet, without recourse or
warranty, an undivided interest and participation equal to the Pro Rata
share of such Lender (a "Participating Lender") in all LC Outstandings
arising
4
<PAGE>
in connection with such Letter of Credit and any security therefor or
guaranty pertaining thereto, but in no event greater than an amount which,
when added to such Lender's Pro Rata share of all Revolver Loans and LC
Outstandings then outstanding, exceeds such Lender's Commitment.
(ii) If Fleet makes any payment under an LC Support and
Borrower does not repay or cause to be repaid the amount of such payment on
the Reimbursement Date, Fleet shall promptly notify Agent, which shall
promptly notify each Participating Lender, of such payment and each
Participating Lender shall promptly (and in any event within 1 Business Day
after its receipt of notice from Agent) and unconditionally pay to Agent,
for the account of Fleet, in Dollars in immediately available funds, the
amount of such Participating Lender's Pro Rata share of such payment, and
Agent shall promptly pay such amounts to Fleet. If a Participating Lender
does not make its Pro Rata share of the amount of such payment available to
Agent on a timely basis as herein provided, such Lender agrees to pay to
Agent for the account of Fleet, forthwith on demand, such amount together
with interest thereon at the Federal Funds Rate until paid. The failure of
any Participating Lender to make available to Agent for the account of
Fleet such Participating Lender's Pro Rata share of the LC Outstandings
shall not relieve any other Participating Lender of its obligation
hereunder to make available to Agent its Pro Rata share of the LC
Outstandings, but no Participating Lender shall be responsible for the
failure of any other Participating Lender to make available to Agent its
Pro Rata share of the LC Outstandings on the date such payment is to be
made.
(iii) Whenever Fleet receives a payment on account of the LC
Outstandings, including any interest thereon, as to which Agent has
previously received payments from any Lender for the account of Fleet,
Fleet shall promptly pay to each Participating Lender which has funded its
participating interest therein, in immediately available funds, an amount
equal to such Participating Lender's Pro Rata share thereof.
(iv) The obligation of each Participating Lender to make
payments to Agent for the account of Fleet in connection with Fleet's
payment under a LC Support shall be absolute, unconditional and
irrevocable, not subject to any counterclaim, setoff, qualification or
exception whatsoever (other than for Fleet's gross negligence or willful
misconduct), and shall be made in accordance with the terms and conditions
of this Agreement under all circumstances and irrespective of whether or
not Borrower may assert or have any claim for any lack of validity or
unenforceability of this Agreement or any of the other DIP Financing
Documents; the existence of any Default or Event of Default; any draft,
certificate or other document presented under a Letter of Credit having
been determined to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
or the existence of any setoff or defense any Obligor may have with respect
to any of the Obligations.
(v) Neither Fleet nor any of its officers, directors,
employees or agents shall be liable to any Participating Lenders for any
action taken or omitted to be taken under or in connection with any of the
LC Documents except as a result of actual gross negligence or willful
misconduct on the part of Fleet. Fleet does not assume any responsibility
for any failure or delay in performance or breach by Borrower or any other
Person of any of its obligations under any of the LC Documents. Fleet does
not make to Participating Lenders any express or implied warranty,
representation or guaranty with respect to the Collateral, the LC
Documents, or any Obligor. Fleet shall not be responsible to any
Participating Lender for any recitals, statements, information,
representations or warranties contained in, or for the execution, validity,
genuineness, effectiveness or enforceability of or any of the LC Documents;
the validity, genuineness, enforceability, collectibility, value or
sufficiency of any of the Collateral or the perfection of any Lien therein;
or the assets, liabilities, financial condition, results of operations,
business, creditworthiness or legal status of Borrower or
5
<PAGE>
any other Obligor or any Account Debtor. In connection with its
administration of and enforcement of rights or remedies under any of the LC
Documents, Fleet shall be entitled to act, and shall be fully protected in
acting upon, any certification, notice or other communication in whatever
form believed by Fleet, in good faith, to be genuine and correct and to
have been signed or sent or made by a proper Person. Fleet may consult with
and employ legal counsel, accountants and other experts and to advise it
concerning its rights, powers and privileges under the LC Documents and
shall be entitled to act upon, and shall be fully protected in any action
taken in good faith reliance upon, any advise given by such experts. Fleet
may employ agents and attorneys-in-fact in connection with any matter
relating to the LC Documents and shall not be liable for the negligence,
default or misconduct of any such agents or attorneys-in-fact selected by
Fleet with reasonable care. Fleet shall not have any liability to any
Participating Lender by reason of Fleet's refraining to take any action
under any of the LC Documents without having first received written
instructions from the Required Lenders to take such action.
1.2.3. Cash Collateral Account. If any LC Outstandings, whether or
-----------------------
not then due or payable, shall for any reason be outstanding (i) at any time
when an Event of Default has occurred and is continuing, (ii) on any date that
Availability is less than zero, or (iii) on or at any time after the Commitment
Termination Date, then Borrower shall, on Agent's request, forthwith deposit
with Agent, in cash, an amount equal to the maximum aggregate amount of all LC
Outstandings then outstanding. If Borrower fails to make such deposit on the
first Business Day following Agent's demand therefor, Lenders may (and shall
upon direction of the Required Lenders) advance such amount as Revolver Loans
(whether or not an Out-of-Formula Condition is created thereby). Such cash
(together with any interest accrued thereon) shall be held by Agent in the Cash
Collateral Account and may be invested, in Agent's discretion, in Cash
Equivalents. Borrower hereby pledges to Agent and grants to Agent a security
interest in, for the benefit of Agent in such capacity and for the Pro Rata
benefit of Lenders, all Cash Collateral held in the Cash Collateral Account from
time to time and all proceeds thereof, as security for the payment of all
Obligations, whether or not then due or payable. From time to time after cash is
deposited in the Cash Collateral Account, Agent may apply Cash Collateral then
held in the Cash Collateral Account to the payment of any amounts, in such order
as Agent may elect, as shall be or shall become due and payable by Borrower to
Agent or any Lender with respect to the LC Outstandings which may be then
outstanding. Neither Borrower nor any other Person claiming by, through or under
or on behalf of Borrower shall have any right to withdraw any of the Cash
Collateral held in the Cash Collateral Account, including any accrued interest,
provided that upon termination or expiration of all Letters of Credit and the
payment and satisfaction of all of the LC Outstandings outstanding, any Cash
Collateral remaining in the Cash Collateral Account shall be returned to
Borrower unless an Event of Default then exists (in which event Agent may apply
such Cash Collateral to the payment of any other Obligations outstanding, with
any surplus to be turned over to Borrower).
1.2.4. Indemnifications.
----------------
(i) In addition to any other indemnity that Borrower may
have to Agent or any Lender under any of the other DIP Financing Documents
and without limiting such other indemnification provisions, Borrower hereby
agrees to indemnify and defend each of the Agent Indemnitees and Lender
Indemnitees and to hold each of the Agent Indemnitees and Lender
Indemnitees harmless from and against any and all Claims which any of the
Agent Indemnitees or any of the Lender Indemnitees may (other than as the
actual result of their own gross negligence or willful misconduct) incur or
be subject to as a consequence, directly or indirectly, of (a) the issuance
of, payment or failure to pay or any performance or failure to perform
under any Letter of Credit or LC Support or (b) any suit, investigation or
proceeding as to which Agent or any Lender is or may become a party to as a
consequence, directly or indirectly, of the issuance of any Letter of
Credit or any LC Support or the payment or failure to pay thereunder.
6
<PAGE>
(ii) Each Participating Lender agrees to indemnify and
defend each of the Fleet Indemnitees (to the extent the Fleet Indemnitees
are not reimbursed by Borrower or any other Obligor, but without limiting
the indemnification obligations of Borrower under this Agreement), on a Pro
Rata basis, from and against any and all Claims which may be imposed on,
incurred by or asserted against any of the Fleet Indemnitees in any way
related to or arising out of Fleet's administration or enforcement of
rights or remedies under any of the LC Documents or any of the transactions
contemplated thereby (including costs and expenses that Borrower is
obligated to pay under Section 14.2 hereof), provided that no Participating
Lender shall be liable to any of the Fleet Indemnitees for any of the
foregoing to the extent that they result solely from the willful misconduct
or gross negligence of any Fleet Indemnitees.
SECTION 2. INTEREST, FEES AND CHARGES
2.1. Interest.
--------
2.1.1. Rates of Interest. Borrower agrees to pay interest in
-----------------
respect of all unpaid principal amounts of the Revolver Loans from the
respective dates such principal amounts are advanced until paid (whether at
stated maturity, on acceleration or otherwise) at a rate per annum equal to the
applicable rate indicated below:
(i) for Revolver Loans made or outstanding as Base Rate
Loans, .75% plus the Base Rate in effect from time to time; or
(ii) for Revolver Loans made or outstanding as LIBOR Loans,
3.00% plus the relevant Adjusted LIBOR Rate for the applicable Interest
Period selected by Borrower in conformity with this Agreement.
Upon determining the Adjusted LIBOR Rate for any Interest Period
requested by Borrower, Agent shall promptly notify Borrower thereof by telephone
and, if so requested by Borrower, confirmed in writing. Such determination
shall, absent manifest error, be final, conclusive and binding on all parties
and for all purposes. The applicable rate of interest for all Revolver Loans
bearing interest based upon the Base Rate shall be increased or decreased, as
the case may be, by an amount equal to any increase or decrease in the Base
Rate, with such adjustments to be effective as of the opening of business on the
day that any such change in the Base Rate becomes effective. Interest on each
Revolver Loan shall accrue from and including the date on which such Revolver
Loan is made, converted to a Revolver Loan of another Type or continued as a
LIBOR Loan to (but excluding) the date of any repayment thereof; provided,
--------
however, that, if a Revolver Loan is repaid on the same day made, one day's
- -------
interest shall be paid on such Revolver Loan. The Base Rate on the date hereof
is 8.0 % per annum and, therefore, the rate of interest in effect hereunder on
the date hereof, expressed in simple interest terms, is 8.75 % per annum with
respect to any portion of the Revolver Loans bearing interest as a Base Rate
Loan. From and after the occurrence of an Event of Default, interest shall
accrue hereunder at the Default Rate.
2.1.2. Conversions and Continuations.
-----------------------------
(i) Borrower may on any Business Day, subject to the giving
of a proper Notice of Conversion/Continuation as hereinafter described,
elect (A) to continue all or any part of a LIBOR Loan by selecting a new
Interest Period therefor, to commence on the last day of the immediately
preceding Interest Period, or (B) to convert all or any part of a Revolver
Loan of one Type into a Revolver Loan of another Type; provided, however,
-------- -------
that no outstanding Revolver Loans may be converted into or continued as
LIBOR Loans when any Default or Event of Default
7
<PAGE>
exists. Any conversion of a LIBOR Loan into a Base Rate Loan shall be made
on the last day of the Interest Period for such LIBOR Loan. Any conversion
or continuation made with respect to less than the entire outstanding
balance of the Revolver Loans, must be allocated among Lenders on a Pro
Rata basis, and the Interest Period for Revolver Loans converted into or
continued as LIBOR Loans shall be coterminous for each Lender.
(ii) Whenever Borrower desires to convert or continue
Revolver Loans under Section 2.1.2(i), Borrower shall give Agent written
notice (or telephonic notice promptly confirmed in writing) substantially
in the form of Exhibit B ("Notice of Conversion/Continuation"), signed by
---------
an authorized officer of Borrower, at least 2 Business Days before the
requested conversion or continuation date, in the case of a conversion into
or continuation of LIBOR Loans and on the requested conversion date, in the
case of a conversion into Base Rate Loans. Promptly after receipt of a
Notice of Conversion/Continuation, Agent shall notify each Lender in
writing of the proposed conversion or continuation. Each such Notice of
Conversion/Continuation shall be irrevocable and shall specify the
aggregate principal amount of the Revolver Loans to be converted or
continued, the date of such conversion or continuation (which shall be a
Business Day) and whether the Revolver Loans are being converted into or
continued as LIBOR Loans (and, if so, the duration of the Interest Period
to be applicable thereto) or Base Rate Loans. If, upon the expiration of
any Interest Period in respect of any LIBOR Loans Borrower shall have
failed to deliver the Notice of Conversion/Continuation, Borrower shall be
deemed to have elected to convert such LIBOR Loans to Base Rate Loans.
2.1.3. Interest Periods. In connection with the making or
----------------
continuation of, or conversion into, each Borrowing of LIBOR Loans, Borrower
shall select an interest period (each an "Interest Period") to be applicable to
such LIBOR Loan, which interest period shall commence on the date such LIBOR
Loan is made and shall end on a numerically corresponding day in the first,
second or third month thereafter; provided, however, that:
-------- -------
(i) the initial Interest Period for a LIBOR Loan shall
commence on the date of such Borrowing (including the date of any
conversion from a Revolver Loan of another Type) and each Interest Period
occurring thereafter in respect of such Revolver Loan shall commence on the
date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period in respect of
LIBOR Loans would otherwise expire on a day which is not a Business Day but
is a day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business
Day;
(iii) any Interest Period that begins on a day for which
there is no numerically corresponding day in the calendar month at the end
of such Interest Period shall expire on the last Business Day of such
calendar month;
(iv) no Interest Period with respect to any portion of
principal of a Revolver Loan shall extend beyond a date on which Borrower
is required to make a scheduled payment of such portion of principal;
(v) no Interest Period shall extend beyond the last day of
the DIP Term ; and
(vi) there shall be no more than 5 Interest Periods in
effect at any one time.
8
<PAGE>
2.1.4. Interest Rate Not Ascertainable. If Agent shall determine
-------------------------------
(which determination shall, absent manifest error, be final, conclusive and
binding upon all parties) that on any date for determining the Adjusted LIBOR
Rate for any Interest Period, by reason of any changes arising after the date of
this Agreement affecting the London interbank market or any Lender's or Bank's
position in such market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition of
Adjusted LIBOR Rate, then, and in any such event, Agent shall forthwith give
notice (by telephone confirmed in writing) to Borrower of such determination.
Until Agent notifies Borrower that the circumstances giving rise to the
suspension described herein no longer exist, the obligation of Lenders to make
LIBOR Loans shall be suspended, and such affected Revolver Loans then
outstanding shall, at the end of the then applicable Interest Period or at such
earlier time as may be required by Applicable Law, bear the same interest as
Base Rate Loans.
2.1.5. Default Rate of Interest. Interest shall accrue at the
------------------------
Default Rate (i) with respect to the principal amount of any portion of the
Obligations (and, to the extent permitted by Applicable Law, all past due
interest) that is not paid on the due date thereof (whether due at stated
maturity, on demand, upon acceleration or otherwise) until paid in full, and
(ii) with respect to the principal amount of all of the Obligations (and, to the
extent permitted by Applicable Law, all past due interest) upon the earliest to
occur of (x) Borrower's receipt of notice from Agent of Required Lenders'
election to charge the Default Rate based upon the existence of any Event of
Default (which notice Agent shall send only with the consent or at the direction
of the Required Lenders) or (y) the commencement by or against Borrower of an
Insolvency Proceeding (other than the Chapter 11 Case), whether or not under the
circumstances described in either clause (i) or (ii) hereof Agent or Lenders
elect to accelerate the maturity or demand payment of any of the Obligations.
To the fullest extent permitted by Applicable Law, the Default Rate shall apply
and accrue on any judgment entered with respect to any of the Obligations and to
the unpaid principal amount of the Obligations during any Insolvency Proceeding
of Borrower. Borrower acknowledges that the cost and expense to Agent and each
Lender attendant upon the occurrence of an Event of Default are difficult to
ascertain or estimate and that the Default Rate is a fair and reasonable
estimate to compensate Agent and Lender for such added cost and expense.
2.2. Fees.
----
2.2.1. Commitment Fee. Borrower shall pay to Agent a commitment fee
--------------
of $350,000, which shall be fully earned and, except to the extent otherwise
required by Applicable Law, non-refundable and shall be paid concurrently with
the funding of the initial Revolver Loans hereunder. Agent shall distribute
$175,000 of the commitment fee to Congress and $175,000 of the commitment fee to
Fleet.
2.2.2. Unused Line Fee. Borrower shall pay to Agent, for the Pro
---------------
Rata benefit of Lenders, a fee equal to .375% per annum of the amount by which
the Average Loan Balance for any month (or portion thereof that the agreement is
in effect) is less than $65,000,000, such fee to be paid on the first day of the
following month; but if this Agreement is terminated on a day other than the
first day of a month, then any such fee payable for the month in which
termination shall occur shall be paid on the effective date of such termination.
2.2.3. LC Facility Fees. Borrower shall pay all fees at any time
----------------
payable to Bank for each Letter of Credit, including an issuance charge for each
Letter of Credit in such amount as Bank may customarily charge therefor and a
charge of $100 for each amendment to a Letter of Credit. In no event shall
Fleet be liable to Bank, Borrower or any other Person for any fees payable in
respect of any Letter of Credit by reason of Fleet's joining in any LC
Application or otherwise. Borrower shall also pay to Agent, for the Pro Rata
benefit of Lenders:
9
<PAGE>
(i) for each standby Letter of Credit, a fee equal to 2%
per annum of the face amount of such Letter of Credit, payable on the
issuance of such Letter of Credit, and an additional fee equal to 1% per
annum of the face amount of such Letter of Credit payable upon each renewal
thereof and each extension thereof, all of which fees and charges shall be
deemed fully earned upon issuance, renewal or extension (as the case may
be) of each such Letter of Credit, and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason; and
(ii) for each documentary Letter of Credit, a fee equal to
2% per annum of the face amount of each such Letter of Credit, payable upon
the issuance of such Letter of Credit and an additional fee equal to 1% per
annum of the face amount of such Letter of Credit payable upon each renewal
thereof, and each extension thereof, which fees and charges shall be fully
earned upon issuance, renewal or extension (as the case may be) of each
such Letter of Credit, shall be due and payable on the first Business Day
of each month, and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason.
2.2.4. Termination Fee. A termination fee shall be due and payable
---------------
as set forth in Section 5.2.3 herein.
2.2.5. Audit and Appraisal Fees. Borrower shall be obligated to
------------------------
reimburse Agent and Lenders for all reasonable costs and expenses incurred by
Agent or any Lender in connection with all audits and appraisals of any
Obligor's books and records and such other matters pertaining to any Obligor or
any Collateral as Agent or any such Lender shall deem appropriate. On the
Closing Date, Borrower shall be obligated to pay to Fleet all reasonable out-of-
pocket expenses incurred by Fleet in connection with the audit and appraisal of
Borrower's business and Properties prior to the Closing Date.
2.2.6. Collateral Monitoring Fee. In consideration of the Agent's
-------------------------
role in monitoring Collateral, Borrower shall pay to Agent an annual collateral
monitoring fee of $60,000 per year, which fee shall be payable monthly in
advance in an amount equal to 1/12th of such fee, commencing on the Closing Date
and on the first day of each month thereafter.
2.2.7. General Provisions. All fees shall be fully earned by the
------------------
identified recipient thereof pursuant to the foregoing provisions of this
Agreement on the due date thereof and, except as otherwise set forth herein or
required by Applicable Law, shall not be subject to rebate, refund or proration.
All fees provided for in Section 2.2 are and shall be deemed to be for
compensation for services and are not, and shall not be deemed to be, interest
or any other charge for the use, forbearance or detention of money.
2.3. Computation of Interest and Fees. Interest shall be calculated on a
--------------------------------
daily basis, commencing on the date hereof, and shall be payable monthly, in
arrears, on the first day of each month. All interest, fees and other charges
provided for in this Agreement shall be calculated daily and shall be computed
on the actual number of days elapsed over a year of 360 days. Borrower
acknowledges that the calculation of interest on the basis of a 360-day year, as
opposed to a year of 365 days, results in a higher effective rate of interest
hereunder. For purposes of computing interest hereunder, all Payment Items
received by Agent shall be deemed applied by Agent on account of the Obligations
(subject to final payment of such items) one Business Day after the Agent
receives such items in immediately available funds in the Payment Account, and
Agent shall be deemed to have received such Payment Item on the date specified
in Section 4.6 hereof.
2.4. Reimbursement of Expenses. If, at any time or times regardless of
-------------------------
whether or not an Event of Default then exists, Agent, any Lender or any
Participant incurs legal or accounting expenses or any other out-of-pocket costs
or expenses in connection with (i) the negotiation and preparation of this
Agreement or any of the other DIP Financing Documents, any amendment of or
modification of
10
<PAGE>
this Agreement or any of the other DIP Financing Documents, or any sale or
attempted sale of any interest herein to a Participant; (ii) the administration
of this Agreement or any of the other DIP Financing Documents and the
transactions contemplated hereby and thereby; (iii) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Agent, any Lender, an
Obligor or any other Person) in any way relating to the Collateral, this
Agreement or any of the other DIP Financing Documents or Borrower's affairs;
(iv) any attempt to enforce any rights of Agent, any Lender or any Participant
against Borrower or any other Person which may be obligated to Agent or a Lender
by virtue of this Agreement or any of the other DIP Financing Documents,
including the Account Debtors; or (v) any attempt to inspect, verify, protect,
preserve, restore, collect, sell, liquidate or otherwise dispose of or realize
upon the Collateral; then all such legal and accounting expenses and other out-
of-pocket costs and expenses of Agent or any Lender shall be charged to
Borrower. Without limiting the generality of the foregoing, Borrower shall
promptly reimburse Agent for any Extraordinary Expenses incurred by Agent. All
amounts chargeable to or to be reimbursed by Borrower under this section shall
be Obligations secured by all of the Collateral and shall be payable on demand
to Agent, Lenders or to such Participant, as the case may be.
2.5. Bank Charges. Borrower shall pay to Agent, on demand, any and all
------------
fees, costs or expenses which Agent or any Lender pays to a bank or other
similar institution (including any fees paid by Agent or any Lender to any
Participant) arising out of or in connection with (i) the forwarding to Borrower
or any other Person on behalf of Borrower by Agent or any Lender of proceeds of
Revolver Loans made by Lenders to Borrower pursuant to this Agreement and (ii)
the depositing for collection by Agent or any Lender of any Payment Item
received or delivered to Agent or any Lender on account of the Obligations.
Borrower acknowledges and agrees that Agent may charge such costs, fees and
expenses to Borrower based upon Agent's good faith estimate of such costs, fees
and expenses as they are incurred by Agent or any Lender.
2.6. Illegality. Notwithstanding anything to the contrary contained
----------
elsewhere in this Agreement, if (i) any change in any law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration thereof shall make it unlawful for a Lender to make or maintain a
LIBOR Loan or to give effect to its obligations as contemplated hereby with
respect to a LIBOR Loan or (ii) at any time such Lender determines that the
making or continuance of any LIBOR Loan has become impracticable as a result of
a contingency occurring after the date hereof which adversely affects the London
interbank market or the position of such Lender in such market, then such Lender
shall after such determination give Agent and Borrower notice thereof and may
thereafter (1) declare that LIBOR Loans will not thereafter be made by such
Lender, whereupon any request by Borrower for a LIBOR Loan shall be deemed a
request for a Base Rate Loan unless such Lender's declaration shall be
subsequently withdrawn (which declaration shall be withdrawn promptly after the
cessation of the circumstances described in clause (i) or (ii) above); and (2)
require that all outstanding LIBOR Loans made by such Lender be converted to
Base Rate Loans, under the circumstances of clause (i) or (ii) of this Section
2.6 insofar as such Lender determines the continuance of LIBOR Loans to be
impracticable, in which event all such LIBOR Loans shall be converted
automatically to Base Rate Loans as of the date of Borrower's receipt of the
aforesaid notice from such Lender.
2.7. Increased Costs. If, by reason of (a) the introduction of or any
---------------
change (including any change by way of imposition or increase of Statutory
Reserves or other reserve requirements) in or in the interpretation of any law
or regulation, or (b) the compliance with any guideline or request from any
central bank or other governmental authority or quasi-governmental authority
exercising control over banks or financial institutions generally (whether or
not having the force of law):
(i) any Lender shall be subject after the date hereof, to
any Tax, duty or other charge with respect to any LIBOR Loan or its
obligation to make LIBOR Loans, or a change shall result in the basis of
taxation of payment to any Lender of the principal of or interest on its
11
<PAGE>
LIBOR Loans or its obligation to make LIBOR Loans (except for changes in
the rate of Tax on the overall net income of such Lender imposed by the
jurisdiction in which such Lender's principal executive office is located);
or
(ii) any reserve (including any imposed by the Board of
Governors), special deposits or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender
shall be imposed or deemed applicable or any other condition affecting its
LIBOR Loans or its obligation to make LIBOR Loans shall be imposed on such
Lender or the London interbank market;
and, as a result thereof, there shall be any increase in the cost to such Lender
of agreeing to make or making, funding or maintaining LIBOR Loans (except to the
extent already included in the determination of the applicable Adjusted LIBOR
Rate for LIBOR Loans), or there shall be a reduction in the amount received or
receivable by such Lender, then such Lender shall promptly after determining
such increased costs give Borrower notice thereof, and Borrower shall from time
to time, upon written notice from and demand by such Lender (with a copy of such
notice and demand to Agent), pay to Agent for the account of such Lender, within
5 Business Days after the date specified in such notice and demand, an
additional amount sufficient to indemnify such Lender against such increased
cost. A certificate as to the amount of such increased cost, submitted to
Borrower by such Lender, shall be final, conclusive and binding for all
purposes, absent manifest error.
If any Lender shall advise Agent at any time that, because of the
circumstances described hereinabove in this Section 2.7 or any other
circumstances arising after the date of this Agreement affecting such Lender or
the London interbank market or such Lender's position in such market, the
Adjusted LIBOR Rate, as determined by Agent, will not adequately and fairly
reflect the cost to such Lender of funding LIBOR Loans, then, and in any such
event:
(i) Agent shall forthwith give notice (by telephone
confirmed in writing) to Borrower and Lenders of such advice;
(ii) Borrower's right to request and such Lender's
obligation to make LIBOR Loans shall be immediately suspended and
Borrower's right to continue a LIBOR Loan as such beyond the then
applicable Interest Period shall also be suspended, until each condition
giving rise to such suspension no longer exists; and
(iii) such Lender shall make a Base Rate Loan as part of the
requested Borrowing of LIBOR Loans, which Base Rate Loan shall, for all
purposes, be considered part of such Borrowing.
For purposes of this Section 2.7, all references to a Lender shall be
deemed to include any bank holding company or bank parent of such Lender.
2.8. Capital Adequacy. If any Lender determines that after the date hereof
----------------
(a) the adoption of any Applicable Law regarding capital requirements for banks
or bank holding companies or the subsidiaries thereof, (b) any change in the
interpretation or administration of any such Applicable Law by any governmental
authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or (c) compliance by such Lender or its holding company
with any request or directive of any such governmental authority, central bank
or comparable agency regarding capital adequacy (whether or not having the force
of law), has the effect of reducing the return on such Lender's capital to a
level below that which such Lender could have achieved (taking into
consideration such Lender's and its holding company's policies with respect to
capital adequacy immediately before such adoption, change or compliance and
assuming that such Lender's capital was fully utilized prior to such adoption,
change or compliance) but for
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<PAGE>
such adoption, change or compliance as a consequence of such Lender's commitment
to make the Revolver Loans pursuant hereto by any amount deemed by such Lender
to be material:
(i) Agent shall promptly, after its receipt of a
certificate from such Lender setting forth such Lender's determination of
such occurrence, give notice thereof to Borrower and Lenders; and
(ii) Borrower shall pay to Agent, for the account of such
Lender, as an additional fee from time to time, on demand, such amount as
such Lender certifies to be the amount reasonably calculated to compensate
such Lender for such reduction.
A certificate of such Lender claiming entitlement to compensation as set
forth above will be conclusive in the absence of manifest error. Such
certificate will set forth the nature of the occurrence giving rise to such
compensation, the additional amount or amounts to be paid to such Lender
(including the basis for such Lender's determination of such amount), and the
method by which such amounts were determined. In determining such amount, such
Lender may use any reasonable averaging and attribution method. For purposes of
this Section 2.8 all references to a Lender shall be deemed to include any bank
holding company or bank parent of such Lender.
2.9. Funding Losses. Borrower shall compensate Lenders, upon Agent's
--------------
written request (which request shall set forth the basis for requesting such
amounts and which request shall, absent manifest error, be final, conclusive and
binding upon all of the parties hereto), for all losses, expenses and
liabilities (including any interest paid by a Lender to lenders of funds
borrowed by such Lender to make or carry its LIBOR Loans to the extent not
recovered by such Lender in connection with the re-employment of such funds),
which any Lender may sustain: (i) if for any reason (other than a default by
such Lender) a Borrowing of, or conversion to or continuation of, LIBOR Loans
does not occur on the date specified therefor in a Notice of Borrowing or Notice
of Conversion/ Continuation (whether or not withdrawn), (ii) if any repayment
(including any conversions pursuant to Section 2.1.2 hereof) of any its LIBOR
Loans occurs on a date that is not the last day of an Interest Period applicable
thereto, or (iii) if, for any reason, Borrower defaults in its obligation to
repay LIBOR Loans when required by the terms of this Agreement. For purposes of
this Section 2.9, all references to a Lender shall be deemed to include any bank
holding company or bank parent of such Lender. The calculations of all amounts
payable to a Lender under this Section 2.9 shall be made as though such Lender
had actually funded or committed to fund its LIBOR Loan through the purchase for
an underlying deposit in an amount equal to the amount of such LIBOR Loan and
having a maturity comparable to the relevant Interest Period for such LIBOR
Loan; provided, however, any Lender may fund its LIBOR Loans in any manner it
-------- -------
deems fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this Section 2.9.
2.10. Maximum Interest. Regardless of any provision contained in this
----------------
Agreement or any of the other DIP Financing Documents, in no contingency or
event whatsoever shall the aggregate of all amounts that are contracted for,
charged or received by Agent and Lenders pursuant to the terms of this Agreement
or any of the other DIP Financing Documents and that are deemed interest under
Applicable Law exceed the highest rate permissible under any Applicable Law. No
agreements, conditions, provisions or stipulations contained in this Agreement
or any of the other DIP Financing Documents or the exercise by Agent of the
right to accelerate the payment or the maturity of all or any portion of the
Obligations, or the exercise of any option whatsoever contained in any of the
DIP Financing Documents, or the prepayment by Borrower of any of the
Obligations, or the occurrence of any contingency whatsoever, shall entitle
Agent or any Lender to charge or receive in any event, interest or any charges,
amounts, premiums or fees deemed interest by Applicable Law (such interest,
charges, amounts, premiums and fees referred to herein collectively as
"Interest") in excess of the Maximum Rate and in no event shall Borrower be
obligated to pay Interest exceeding such Maximum Rate, and all agreements,
conditions or stipulations, if any, which may
13
<PAGE>
in any event or contingency whatsoever operate to bind, obligate or compel
Borrower to pay Interest exceeding the Maximum Rate shall be without binding
force or effect, at law or in equity, to the extent only of the excess of
Interest over such Maximum Rate. If any Interest is charged or received in
excess of the Maximum Rate ("Excess"), Borrower acknowledges and stipulates that
any such charge or receipt shall be the result of an accident and bona fide
error, and such Excess, to the extent received, shall be applied first to reduce
the principal Obligations and the balance, if any, returned to Borrower, it
being the intent of the parties hereto not to enter into a usurious or otherwise
illegal relationship. The right to accelerate the maturity of any of the
Obligations does not include the right to accelerate any interest that has not
otherwise accrued on the date of such acceleration, and Agent and Lenders do not
intend to collect any unearned interest in the event of any such acceleration.
Borrower recognizes that, with fluctuations in the rates of interest set forth
in Section 2.1.1 of this Agreement, and the Maximum Rate, such an unintentional
result could inadvertently occur. All monies paid to Agent or any Lender
hereunder or under any of the other DIP Financing Documents, whether at maturity
or by prepayment, shall be subject to any rebate of unearned interest as and to
the extent required by Applicable Law. By the execution of this Agreement,
Borrower covenants that (i) the credit or return of any Excess shall constitute
the acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or
pursue any other remedy, legal or equitable, against Agent or any Lender, based
in whole or in part upon contracting for, charging or receiving any Interest in
excess of the Maximum Rate. For the purpose of determining whether or not any
Excess has been contracted for, charged or received by Agent or any Lender, all
interest at any time contracted for, charged or received from Borrower in
connection with any of the DIP Financing Documents shall, to the extent
permitted by Applicable Law, be amortized, prorated, allocated and spread in
equal parts throughout the full term of the Obligations. Borrower, Agent and
Lenders shall, to the maximum extent permitted under Applicable Law, (i)
characterize any non-principal payment as an expense, fee or premium rather than
as Interest and (ii) exclude voluntary prepayments and the effects thereof. The
provisions of this Section 2.10 shall be deemed to be incorporated into every
DIP Financing Document (whether or not any provision of this Section is referred
to therein). All such DIP Financing Documents and communications relating to any
Interest owed by Borrower, and all figures set forth therein shall, for the sole
purpose of computing the extent of Obligations, be automatically recomputed by
Borrower, and by any court considering the same, to give effect to the
adjustments or credits required by this Section 2.10.
SECTION 3. LOAN ADMINISTRATION
3.1. Manner of Borrowing and Funding Revolver Loans. Borrowings under the
----------------------------------------------
Commitments established pursuant to Section 1 hereof shall be made and funded as
follows:
3.1.1. Notice of Borrowing.
-------------------
(i) Whenever Borrower desires to make a Borrowing under
this Agreement (other than a Borrowing resulting from a conversion or
continuation pursuant to Section 2.1.2), Borrower shall give Agent prior
written notice (or telephonic notice promptly confirmed in writing) of such
Borrowing request (a "Notice of Borrowing"), which shall be in the form of
Exhibit C annexed hereto and signed by an authorized officer of such
---------
Borrower. Such Notice of Borrowing shall be given by Borrower no later
than 2:00 p.m. at the office of Agent designated by Agent from time to time
(a) on the Business Day of the requested funding date of such Borrowing, in
the case of Base Rate Loans, and (b) at least 2 Business Days prior to the
requested funding date of such Borrowing, in the case of LIBOR Loans.
Notices received after 2:00 p.m. shall be deemed received on the next
Business Day. The Revolver Loans made by each Lender on the Closing Date
shall be in excess of $250,000 and shall be made as Base Rate Loans and
thereafter may be made or continued as or converted into Base Rate Loans or
LIBOR Loans. Each Notice of Borrowing (or telephonic notice thereof) shall
be irrevocable and shall specify (a) the principal amount of the Borrowing,
(b) the date of Borrowing (which shall be a Business Day), (c) whether the
14
<PAGE>
Borrowing is to consist of Base Rate Loans or LIBOR Loans, (d) in the case
of LIBOR Loans, the duration of the Interest Period to be applicable
thereto, and (e) the account of Borrower to which the proceeds of such
Borrowing are to be disbursed. Borrower may not request any LIBOR Loans if
a Default or Event of Default exists.
(ii) Unless payment is otherwise timely made by Borrower, the
becoming due of any amount required to be paid under this Agreement or any
of the other DIP Financing Documents as principal, accrued interest, fees
or other charges shall be deemed irrevocably to be a request for Revolver
Loans on the due date of, and in an aggregate amount required to pay, such
principal, accrued interest, fees or other charges, and the proceeds of
such Revolver Loans may be disbursed by way of direct payment of the
relevant Obligation and shall bear interest as Base Rate Loans. Neither
Agent nor any Lender shall have any obligation to Borrower to honor any
deemed request for a Revolver Loan when an Out-of-Formula Condition exists
or would result therefrom, but may do so in their discretion and without
regard to the existence of, and without being deemed to have waived, any
Default or Event of Default.
(iii) As an accommodation to Borrower, Agent and Lenders may
permit telephonic requests for Borrowings and electronic transmittal of
instructions, authorizations, agreements or reports to Agent by Borrower;
provided, however, that Borrower shall confirm each such telephonic request
-------- -------
for a Borrowing of LIBOR Loans by delivery of the required Notice of
Borrowing to Agent by facsimile transmission promptly, but in no event
later than 5:00 p.m. on the same day. Unless Borrower specifically directs
Agent and Lenders in writing not to accept or act upon telephonic or
electronic communications from Borrower, neither Agent nor any Lender shall
have any liability to Borrower for any loss or damage suffered by Borrower
as a result of Agent's or any Lender's honoring of any requests, execution
of any instructions, authorizations or agreements or reliance on any
reports communicated to it telephonically or electronically and purporting
to have been sent to Agent or Lenders by Borrower and neither Agent nor any
Lender shall have any duty to verify the origin of any such communication
or the identity or authority of the Person sending it.
3.1.2. Fundings by Lenders. Subject to its receipt of notice from
-------------------
Agent that Agent has received a Notice of Borrowing as provided in Section 3.1.1
(except in the case of a deemed request by Borrower for a Revolver Loan as
provided in Sections 3.1.1(ii) or 3.1.3(ii) hereof, in which event no Notice of
Borrowing need be submitted), each Lender shall timely honor its Commitment by
funding its Pro Rata share of each Borrowing of Revolver Loans that is properly
requested by Borrower and that Borrower is entitled to receive under this
Agreement. Agent shall endeavor to notify Lenders of each Notice of Borrowing
by 11:00 a.m. on the proposed funding date (in the case of Base Rate Loans) and
Agent shall notify Lenders of each Notice of Borrowing by 3:00 p.m. at least 2
Business Days before the proposed funding date (in the case of LIBOR Loans).
Each Lender shall deposit with Agent an amount equal to its Pro Rata share of
the Borrowing requested by Borrower at Agent's designated bank in immediately
available funds not later than 4:00 p.m. on the date of funding of such
Borrowing, unless Agent's notice to Lenders is received after 11:00 a.m. on the
proposed funding date of a Base Rate Loan, in which event Lenders shall deposit
with Agent their respective Pro Rata shares of the requested Borrowing on or
before 11:00 a.m. of the next Business Day. Subject to its receipt of such
amounts from Lenders, Agent shall, and provided it has not received notice from
a Lender that one or more of the applicable conditions set forth in Section 10
is not satisfied, make the proceeds of the Revolver Loans received by it
available to Borrower by disbursing such proceeds as provided in Section 3.1.4
hereof. Unless Agent shall have been notified in writing by a Lender prior to
the proposed time of funding that such Lender does not intend to deposit with
Agent an amount equal such Lender's Pro Rata share of the requested Borrowing,
Agent may assume that such Lender has deposited or promptly will deposit its
share with Agent and Agent may in its discretion disburse a corresponding amount
to Borrower on the applicable funding date. If a Lender's Pro Rata share of
such Borrowing is not in fact deposited with Agent, then, if Agent has disbursed
to Borrower an amount
15
<PAGE>
corresponding to such share, then such Lender agrees to pay (whether or not any
Default or Event of Default then exists), and, in addition, Borrower agrees to
repay to Agent forthwith on demand such corresponding amount, together with
interest thereon, for each day from the date such amount is disbursed by Agent
to or for the benefit of Borrower until the date such amount is paid or repaid
to Agent, (a) in the case of Borrower, at the interest rate applicable to such
Borrowing and (b) in the case of such Lender, at the Federal Funds Rate. If such
Lender repays to Agent such corresponding amount, such amount so repaid shall
constitute a Revolver Loan, and if both such Lender and Borrower shall have
repaid such corresponding amount, Agent shall promptly return to Borrower such
corresponding amount in same day funds.
3.1.3. Settlement and Settlement Loans.
-------------------------------
(i) In order to facilitate the administration of the
Revolver Loans under this Agreement, Lenders agree (which agreement shall
not be for the benefit of or enforceable by Borrower) that settlement among
them with respect to the Revolver Loans may take place on a periodic basis
on dates determined from time to time by Agent (each a "Settlement Date"),
which may occur before or after the occurrence or during the continuance of
a Default or Event of Default and whether or not all of the conditions set
forth in Section 10 of this Agreement have been met. On each Settlement
Date, payment shall be made by or to each Lender in the manner provided
herein and in accordance with the Settlement Report delivered by Agent to
Lenders with respect to such Settlement Date so that, as of each Settlement
Date and after giving effect to the transaction to take place on such
Settlement Date, each Lender shall hold its Pro Rata share of all Revolver
Loans and participations in LC Outstandings then outstanding. Agent shall
request settlement with the Lenders on a basis not less frequently than
once every 5 Business Days.
(ii) Between Settlement Dates, Agent may request Fleet to
advance, and Fleet may, but shall in no event be obligated to, advance to
Borrower out of Fleet's own funds the entire principal amount of any
Borrowing of Revolver Loans that are Base Rate Loans requested or deemed
requested pursuant to this Agreement (any such Revolver Loan funded
exclusively by Fleet being referred to as a "Settlement Loan"). Each
Settlement Loan shall constitute a Revolver Loan hereunder and shall be
subject to all of the terms, conditions and security applicable to other
Revolver Loans, except that all payments thereon shall be payable to Fleet
solely for its own account. The obligation of Borrower to repay such
Settlement Loans to Fleet shall be evidenced by the records of Fleet and
need not be evidenced by any promissory note. Agent shall not request
Fleet to make any Settlement Loan if (A) Agent shall have received written
notice from any Lender that one or more of the applicable conditions
precedent set forth in Section 10 hereof will not be satisfied on the
requested funding date for the applicable Borrowing or (B) Agent has
knowledge that the requested Borrowing would exceed the amount of
Availability on the funding date. Fleet shall not be required to determine
whether the applicable conditions precedent set forth in Section 10 hereof
have been satisfied or the requested Borrowing would exceed the amount of
Availability on the funding date applicable thereto prior to making, in its
sole discretion, any Settlement Loan. On each Settlement Date, or, if
earlier, upon demand by Agent for payment thereof, the then outstanding
Settlement Loans shall be immediately due and payable. Borrower shall be
deemed to have requested Revolver Loans to be made on each Settlement Date
in the amount of all outstanding Settlement Loans and the proceeds of such
Revolver Loans shall be applied to the repayment of such Settlement Loans.
Agent shall notify Lenders of the outstanding balance of Revolver Loans
prior to 1:00 p.m. on each Settlement Date and each Lender shall deposit
with Agent an amount equal to its Pro Rata share of the amount of Revolver
Loans deemed requested in immediately available funds not later than 4:00
p.m. on such Settlement Date, and without regard to whether any Default or
Event of Default exists, any of the conditions in Section 10 are not
satisfied or the Commitment Termination Date has occurred. If any
Settlement Loan is not repaid on the due date thereof, then on the second
Business Day after
16
<PAGE>
Fleet's request each Lender (other than Fleet) shall purchase a
participating interest in such Settlement Loan in an amount equal to its
Pro Rata share of such Settlement Loan by transferring to Fleet, in
immediately available funds, the amount of such participation. The proceeds
of Settlement Loans may be used solely for purposes for which Revolver
Loans generally may be used in accordance with Section 1.1.4 hereof. If any
amounts received by Fleet in respect of any Settlement Loans are later
required to be returned or repaid by Fleet to Borrower or any other Obligor
or their respective representatives or successors-in-interest, whether by
court order, settlement or otherwise, the other Lenders shall, upon demand
by Fleet with notice to Agent, pay to Agent for the account of Fleet, an
amount equal to each other Lender's Pro Rata share of all such amounts
required to be returned by Fleet.
3.1.4. Disbursement Authorization. Borrower hereby irrevocably
--------------------------
authorizes Agent to disburse the proceeds of each Revolver Loan requested by
Borrower, or deemed to be requested pursuant to Section 3.1.1 or Section
3.1.3(ii), as follows: (i) the proceeds of each Revolver Loan requested under
Section 3.1.1(i) shall be disbursed by Agent in accordance with the terms of the
written disbursement letter from Borrower in the case of the initial Borrowing,
and, in the case of each subsequent Borrowing, by wire transfer to the Funding
Account or such bank account as may be agreed upon by Borrower and Agent from
time to time in writing; and (ii) the proceeds of each Revolver Loan requested
under Section 3.1.1(ii) or Section 3.1.3(ii) shall be disbursed by Agent by way
of direct payment of the relevant interest or other Obligation. Any proceeds
received by Borrower or in payment of any of the Obligations shall be deemed to
have been received by Borrower.
3.2. Defaulting Lender. If any Lender shall, at any time, fail to make any
-----------------
payment to Agent or Fleet that is required hereunder, Agent may, but shall not
be required to, retain payments that would otherwise be made to such defaulting
Lender hereunder and apply such payments to such defaulting Lender's defaulted
obligations hereunder, at such time, and in such order, as Agent may elect in
its sole discretion. With respect to the payment of any funds from Agent to a
Lender or from a Lender to Agent, the party failing to make the full payment
when due pursuant to the terms hereof shall, upon demand by the other party, pay
such amount together with interest on such amount at the Federal Funds Rate.
The failure of any Lender to fund its portion of any Revolver Loan shall not
relieve any other Lender of its obligation, if any, to fund its portion of the
Revolver Loan on the date of Borrowing, but no Lender shall be responsible for
the failure of any other Lender to make any Revolver Loan to be made by such
Lender on the date of any Borrowing. Solely for purposes of voting or
consenting to matters with respect to any of the DIP Financing Documents,
Collateral or any Obligations and determining a defaulting Lender's Pro Rata
share of payments and proceeds of Collateral, a defaulting Lender shall not be
deemed to be a "Lender" and such Lender's Commitment shall be deemed to be zero
(0). The provisions of this Section 3.2 shall be solely for the benefit of
Agent and Lenders and may not be enforced by Borrower.
3.3. Special Provisions Governing LIBOR Loans.
----------------------------------------
3.3.1. Number of LIBOR Loans. In no event may the number of LIBOR
---------------------
Loans outstanding at any time to any Lender exceed 5.
3.3.2. Minimum Amounts. Each election of LIBOR Loans pursuant to
---------------
Section 3.1.1(i), and each continuation of or conversion to LIBOR Loans pursuant
to Section 2.1.2 hereof, shall be in a minimum amount of $1,000,000 and integral
multiples of $250,000 in excess of that amount.
3.3.3. LIBOR Lending Office. Each Lender's initial LIBOR Lending
--------------------
Office is set forth opposite its name on the signature pages hereof. Each
Lender shall have the right at any time and from time to time to designate a
different office of itself or of any Affiliate as such Lender's LIBOR Lending
Office, and to transfer any outstanding LIBOR Loans to such LIBOR Lending
Office. No such designation or transfer shall result in any liability on the
part of Borrower for increased costs or expenses resulting solely
17
<PAGE>
from such designation or transfer. Increased costs or expenses resulting from a
change in Applicable Law occurring subsequent to any such designation or
transfer shall be deemed not to result solely from such designation or transfer.
3.4. All Revolver Loans to Constitute One Obligation. The Revolver Loans
-----------------------------------------------
shall constitute one general Obligation of Borrower and shall be secured by
Agent's Lien upon all of the Collateral; provided, however, that Agent and each
-------- -------
Lender shall be deemed to be a creditor of Borrower and the holder of a separate
claim against Borrower to the extent of any Obligations owed by Borrower to
Agent or such Lender.
SECTION 4. PAYMENTS
4.1. General Payment Provisions. All payments (including all prepayments)
--------------------------
of principal of and interest on the Revolver Loans, LC Outstandings and other
Obligations that are payable to Agent or any Lender shall be made to Agent in
Dollars without any offset or counterclaim and free and clear of (and without
deduction for) any present or future Taxes, and, with respect to payments made
other than by application of balances in the Payment Account, in immediately
available funds not later than 12:00 noon on the due date (and payment made
after such time on the due date to be deemed to have been made on the next
succeeding Business Day). All payments received by Agent shall be distributed
by Agent to Lenders on a Pro Rata basis, subject to the right of offset that
Agent may have as to amounts otherwise to be remitted to a particular Lender by
reason of amounts due Agent from such Lender under any of the DIP Financing
Documents and Agent shall give such Lender concurrent notice therewith.
4.2. Repayment of Revolver Loans.
---------------------------
4.2.1. Payment of Principal. The outstanding principal amounts with
--------------------
respect to the Revolver Loans shall be due and payable as follows:
(i) Any portion of the Revolver Loans consisting of the
principal amount of Base Rate Loans shall be paid by Borrower to Agent, for
the Pro Rata benefit of Lenders (or, in the case of Settlement Loans, for
the sole benefit of Fleet) unless timely converted to a LIBOR Loan in
accordance with this Agreement, immediately upon (a) each receipt by Agent,
any Lender or Borrower of any proceeds of any of the Accounts or Inventory,
to the extent of such proceeds, (b) the Commitment Termination Date, and
(c) in the case of Settlement Loans, the earlier of Fleet's demand for
payment or on each Settlement Date with respect to all Settlement Loans
outstanding on such date.
(ii) Any portion of the Revolver Loans consisting of the
principal amount of LIBOR Loans shall be paid by Borrower to Agent, for the
Pro Rata benefit of Lenders, unless converted to a Base Rate Loan or
continued as a LIBOR Loan in accordance with the terms of this Agreement,
upon (a) the last day of the Interest Period applicable thereto and (b) the
Commitment Termination Date. In no event shall Borrower be authorized to
pay any LIBOR Loan prior to the last day of the Interest Period applicable
thereto unless (x) otherwise agreed in writing by Agent or Borrower is
otherwise expressly authorized or required by any other provision of this
Agreement to pay any LIBOR Loan outstanding on a date other than the last
day of the Interest Period applicable thereto, and (y) Borrower pays to
Agent, for the Pro Rata benefit of Lenders and concurrently with any
prepayment of a LIBOR Loan, the amount due Agent and Lenders under Section
2.9 hereof as a consequence of such prepayment.
(iii) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if an Out-of-Formula Condition shall exist,
Borrower shall, on the sooner to occur
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<PAGE>
of Agent's demand or the first Business Day after Borrower has obtained
knowledge of such Out-of-Formula Condition, repay the outstanding Revolver
Loans that are Base Rate Loans in an amount sufficient to reduce the
aggregate unpaid principal amount of all Revolver Loans by an amount equal
to such excess; and, if such payment of Base Rate Loans is not sufficient
to eliminate the Out-of-Formula Condition, then Borrower shall immediately
either (a) deposit with Agent, for the Pro Rata benefit of Lenders, for
application to any outstanding Revolver Loans bearing interest as LIBOR
Loans as the same become due and payable at the end of the applicable
Interest Periods, cash in an amount sufficient to eliminate such Out-of-
Formula Condition, to be held by Agent pending disbursement of same to
Lenders, but subject to Agent's Lien thereon and rights of offset with
respect thereto, or (b) pay the Revolver Loans outstanding as LIBOR Loans
to the extent necessary to eliminate such Out-of-Formula Condition and also
pay to Agent for the Pro Rata benefit of Lenders any and all amounts
required by Section 2.9 hereof to be paid by reason of the prepayment of a
LIBOR Loan prior to the last day of the Interest Period applicable thereto.
(iv) Notwithstanding anything to the contrary in this
Agreement, all of the Obligations shall be payable on demand under the
circumstances provided in Section 10.3 hereof.
4.2.2. Payment of Interest. Interest accrued on the Revolver Loans
-------------------
shall be due and payable on the first calendar day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month, with respect to any Revolver Loan (whether a Base Rate Loan or
LIBOR Loan). Accrued interest shall also be paid by Borrower on the Commitment
Termination Date. With respect to any Base Rate Loan converted into a LIBOR
Loan pursuant to Section 2.1.2 on a day when interest would not otherwise have
been payable with respect to such Base Rate Loan, accrued interest to the date
of such conversion on the amount of such Base Rate Loan so converted shall be
paid on the conversion date.
4.3. Payment of Other Obligations. Borrower shall pay all costs, fees and
----------------------------
charges pursuant to this Agreement as and when provided in Section 2.2 hereof,
to Agent or to any other Person designated by Agent in writing. The balance of
the Obligations requiring the payment of money, including the LC Outstandings,
shall be payable by Borrower to Agent, for itself and for the Pro Rata benefit
of Lenders, as and when provided in the DIP Financing Documents, or, if no date
of payment is otherwise specified in the DIP Financing Documents, on demand.
4.4. Marshaling; Payments Set Aside. Neither Agent nor any Lender shall be
------------------------------
under any obligation to marshall any assets in favor of any Obligor or against
or in payment of any or all of the Obligations. To the extent that Borrower
makes a payment or payments to Agent or Lenders or any of such Persons receives
payment from the proceeds of any Collateral or exercises its right of setoff,
and such payment or payments or the proceeds of such enforcement or setoff or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party, then to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred. The
provisions of the immediately preceding sentence of this Section 4.4 shall
survive any termination of the Commitments and payment in full of the
Obligations.
4.5. Agent's Allocation of Payments and Collections.
----------------------------------------------
4.5.1. All monies to be applied to the Obligations (rather than any
Pre-Petition Debt at the time outstanding), whether such monies represent
voluntary payments by Obligor or are received pursuant to demand for payment or
realized from any disposition of Collateral, shall be allocated among Agent and
19
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such of the Lenders as are entitled thereto (and, with respect to monies
allocated to Lenders, on a Pro Rata basis unless otherwise provided herein):
(i) first, to Agent to pay principal and accrued interest on any portion of the
Revolver Loans which Agent may have advanced on behalf of any Lender and for
which Agent has not been reimbursed by such Lender or Borrower; (ii) second, to
Fleet to pay the principal and accrued interest on any portion of the Settlement
Loans outstanding, to be shared with Lenders that have acquired a participating
interest in such Settlement Loans; (iii) third, to Fleet to pay all amounts
owing by any Participating Lender to Fleet pursuant to Section 1.2.2(ii) hereof;
(iv) fourth, to Agent to pay the amount of Extraordinary Expenses that have not
been reimbursed to Agent by Obligors or Lenders, together with interest accrued
thereon at the rate applicable to Revolver Loans that are Base Rate Loans; (v)
fifth, to Agent to pay any Indemnified Amount that has not been paid to Agent by
Obligors or Lenders, together with interest accrued thereon at the rate
applicable to Revolver Loans that are Base Rate Loans; (vi) sixth, to Lenders
for any unpaid expenses owed to them by Borrower, any Indemnified Amount that
they have paid to Agent and any Extraordinary Expenses that they have reimbursed
to Agent, to the extent that Lenders have not been reimbursed by Obligors
therefor; (vii) seventh, to Agent and Lenders to pay any fees due and payable to
Agent or Lenders under Section 2.2 hereof; (viii) eighth, to Fleet to pay
principal and interest with respect to LC Outstandings outstanding (or, to the
extent any of the LC Outstandings are contingent and an Event of Default then
exists, to be deposited in the Cash Collateral Account to provide security for
the payment of the LC Outstandings), which payment shall be shared with
Participating Lenders in accordance with Section 1.2.2(iii) hereof; and (ix)
ninth, to Lenders in payment of the unpaid principal and accrued interest in
respect of the Loans and any other Obligations then outstanding to be shared
among Lenders on a Pro Rata basis, or on such other basis as may be agreed upon
in writing by Lenders (which agreement or agreements may be entered into without
notice to or the consent or approval of Borrower). The allocations set forth in
this Section 4.5 are solely to determine the rights and priorities of Agent and
Lenders as among themselves and may be changed by Agent and Lenders without
notice to or the consent or approval of Borrower or any other Person.
4.5.2. Agent shall not be liable for any allocation or distribution
of payments made by it in good faith and, if any such allocation or distribution
is subsequently determined to have been made in error, the sole recourse of any
Lender to whom payment was due but not made shall be to recover from the other
Lenders any payment in excess of the amount to which such other Lenders are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them).
4.6. Application of Payments and Collections. All Payment Items received
---------------------------------------
by Agent by 12:00 noon on any Business Day shall be deemed received on that
Business Day. All payments or other forms of payment received by Agent after
12:00 noon on any Business Day shall be deemed received on the following
Business Day. Except to the extent that the manner of application to the
Obligations of payments or proceeds of Collateral is expressly governed by other
provisions of this Agreement or the DIP Orders, Borrower irrevocably waives the
right to direct the application of any and all payments and collections at any
time or times hereafter received by Agent or any Lender from or on behalf of
Borrower, and Borrower hereby irrevocably agrees that Agent and Lenders shall
have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Agent,
Lenders or any of their agents against the Obligations or Pre-Petition Debt, in
such manner as Agent and Lenders may deem advisable, notwithstanding any entry
by Agent and Lenders upon any of their books and records. If as the result of
collections of Accounts as authorized by Section 7.2.2 a credit balance exists,
such credit balance shall not accrue interest in favor of Borrower, but shall be
available to Borrower at any time or times for so long as no Default or Event of
Default exists.
4.7. Loan Accounts; the Register; Account Stated.
-------------------------------------------
20
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4.7.1. Loan Accounts. Each Lender shall maintain in accordance with
-------------
its usual and customary practices an account or accounts (a "Loan Account")
evidencing the Debt of Borrower to such Lender resulting from each Revolver Loan
owing to such Lender from time to time, including the amount of principal and
interest payable to such Lender from time to time hereunder and under each Note
payable to such Lender.
4.7.2. The Register. Agent shall maintain a register (the
------------
"Register") which shall include a master account and a subsidiary account for
each Lender and in which accounts (taken together) shall be recorded (i) the
date and amount of each Borrowing made hereunder, the Type of each Revolver Loan
comprising such Borrowing and any Interest Period applicable thereto, (ii) the
effective date and amount of each Assignment and Acceptance delivered to and
accepted by it and the parties thereto, (iii) the amount of any principal or
interest due and payable or to become due and payable from Borrower to each
Lender hereunder or under the Notes, and (iv) the amount of any sum received by
Agent from Borrower or any other Obligor and each Lender's share thereof. The
Register shall be available for inspection by Borrower or any Lender at the
offices of Agent at any reasonable time and from time to time upon reasonable
prior notice.
4.7.3. Entries Binding. The entries made in the Register and each
---------------
Loan Account shall constitute rebuttably presumptive evidence of the information
contained therein; provided, however, that if a copy of information contained in
-------- -------
the Register or any Loan Account is provided to any Obligor, or any Obligor
inspects the Register or any Loan Account, at any time or from time to time,
then the information contained in the Register or the Loan Account, as
applicable, shall be conclusive and binding on such Obligor for all purposes
absent manifest error, unless such Obligor notifies Agent in writing within 30
days after such Obligor's receipt of such copy or such Obligor's inspection of
the Register or Loan Account of its intention to dispute the information
contained therein.
SECTION 5. DIP TERM AND TERMINATION OF COMMITMENTS
5.1. Term of Commitments. Subject to each Lender's right to cease making
-------------------
Revolver Loans to Borrower when any Default or Event of Default exists or upon
the Commitment Termination Date, the Commitments shall be in effect for the DIP
Term. The DIP Term may be extended by written agreement among Borrower, Agent
and Lenders without further notice or hearing or order by the Court.
5.2. Termination.
-----------
5.2.1. Termination by Agent. Agent may (and upon the direction of
--------------------
the Required Lenders, shall) terminate the DIP Facility (and Commitments
thereunder) at any time, without notice to Borrower, upon or after the
occurrence of an Event of Default.
5.2.2. Termination by Borrower. Borrower may terminate the DIP
-----------------------
Facility at any time upon 30 days prior written notice to Agent; provided,
--------
however, no such termination by Borrower shall be effective until all of the
- -------
Obligations are paid in full. For purposes hereof, the Obligations shall not be
deemed to have been satisfied until all Obligations for the payment of money
have been paid to Agent in same day funds and all Obligations that are at the
time in question contingent (including any LC Outstandings) have been fully cash
collateralized in favor and to the satisfaction of Agent or Agent has received
as beneficiary a direct pay letter of credit in form and from an issuing bank
acceptable to Agent and providing for direct payment to Agent of all such
contingent Obligations at the time they become fixed. Any notice of termination
given by Borrower shall be irrevocable unless Agent otherwise agrees in writing.
Borrower may elect to terminate the Commitments in their entirety only. No
section of this Agreement, Type of Revolver Loan available hereunder or
Commitment may be terminated by Borrower singly.
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5.2.3. Termination Charges. On the Commitment Termination Date
-------------------
(regardless of the reason for occurrence thereof) and termination of the DIP
Facility in connection therewith, Borrower shall be obligated to pay to Agent,
for the Pro Rata benefit of Lenders (in addition to the then outstanding
principal, accrued interest, fees and other charges owing under the terms of
this Agreement and any of the other DIP Financing Documents) an amount equal to
.5% of the total Commitments in effect immediately prior to the Commitment
Termination Date; provided, however, that, if any of the Obligations are
-------- -------
satisfied with the proceeds of exit financing provided by any Lender in
connection with an Acceptable Plan, each Lender (but only such Lender) so
providing or participating in any such exit financing shall not be entitled to
receive its Pro Rata share of the foregoing fee.
5.2.4. effect of Termination. On the effective date of termination
---------------------
of the Commitments by Agent or by Borrower, all of the Obligations and, to the
extent not theretofore paid in full, all of the Pre-Petition Debt, shall be
immediately due and payable and Lenders shall have no obligation to make any
Revolver Loans to or for the direct or indirect benefit of Borrower or any
Person. All undertakings, agreements, covenants, warranties and representations
of Borrower contained in the DIP Financing Documents shall survive any such
termination and Agent shall retain its Liens in the Collateral and all of its
rights and remedies under the DIP Financing Documents notwithstanding such
termination until Borrower has satisfied the Obligations to Agent and Lenders,
in full. For purposes of this Agreement, the Obligations shall not be deemed to
have been satisfied until all Obligations for the payment of money have been
paid to Agent in same day funds and all Obligations that are at the time in
question contingent (including, all LC Outstandings that exist by virtue of an
outstanding Letter of Credit) have been fully cash collateralized in favor and
to the satisfaction of Agent or Agent has received as beneficiary a direct pay
letter of credit in form and from an issuing bank acceptable to Agent and
providing for direct payment to Agent of all such contingent Obligations at the
time they become fixed (including reimbursement of all sums paid by Agent under
any LC Support). Notwithstanding the payment in full of the Obligations and the
Pre-Petition Debt, Agent shall not be required to terminate its security
interests in any of the Collateral unless, with respect to any loss or damage
Agent may incur as a result of the dishonor or return of any Payment Items
applied to the Obligations or Pre-Petition Debt, Agent shall have received
either (i) a written agreement, executed by Borrower and any Person whose loans
or other advances to Borrower are used in whole or in part to satisfy the
Obligations, indemnifying Agent and Lenders from any such loss or damage; or
(ii) such monetary reserves and Liens on the Collateral for such period of time
as Agent, in its reasonable discretion, may deem necessary to protect Agent and
Lenders from any such loss or damage. The provisions of Section 4.4 and all
obligations of Borrower to indemnify Agent and Lenders pursuant to this
Agreement shall in all events survive any termination of the Commitments.
SECTION 6. COLLATERAL SECURITY
6.1. Grant of Security Interest in Collateral. To secure the prompt
----------------------------------------
payment and performance of all of the Obligations, Borrower hereby grants to
Agent, for the benefit of itself as Agent and for the Pro Rata benefit of
Lenders, a continuing security interest in and Lien upon all of the following
Property and interests in Property of Borrower, whether now owned or existing or
hereafter created, acquired or arising (irrespective of whether the same existed
on or was created or acquired after the Petition Date and wheresoever located):
(i) all Accounts;
(ii) all Inventory;
(iii) all General Intangibles;
(iv) all Instruments;
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(v) all Chattel Paper;
(vi) all Documents;
(vii) all Investment Property;
(viii) all proceeds of Avoidance Claims;
(ix) all monies and other Property of any kind, now or at any
time or times hereafter in the possession or under the control of
Agent or a Lender or a bailee or Affiliate of a Lender, including any
Cash Collateral in the Cash Collateral Account;
(x) all cash and non-cash proceeds of (i) through (ix) above,
including proceeds of and unearned premiums with respect to insurance
policies insuring any of the Collateral; and
(xi) All books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (i) through (x)
above.
6.2. Other Collateral. In addition to the items of Property referred to in
----------------
Section 6.1 above, the Obligations shall also be secured by the Cash Collateral
to the extent provided herein and all of the other items of Property from time
to time described in any of the Security Documents as security for any of the
Obligations.
6.3. Lien on Deposit Accounts. As additional security for the payment and
------------------------
performance of the Obligations, Borrower hereby grants to Agent, for the benefit
of itself as Agent and for the Pro Rata benefit of Lenders, a continuing
security interest in and Lien upon, and hereby collaterally assigns to Agent,
all of Borrower's right, title and interest in and to any deposits or other sums
at any time credited to each such Deposit Account, including any sums in any
blocked account or any special lockbox account and in the accounts in which sums
are deposited and such blocked accounts and special lockbox accounts. In
connection with the foregoing, Borrower hereby authorizes and directs each such
bank or other depository to pay or deliver to Agent upon its written demand
therefor made at any time upon the occurrence and during the continuation of an
Event of Default and without further notice to Borrower (such notice being
hereby expressly waived), all balances in each Deposit Account maintained by
such Borrower with such depository for application to the Obligations then
outstanding, and the rights given Agent in this Section shall be cumulative with
and in addition to Agent's other rights and remedies in regard to the foregoing
Property as proceeds of Collateral. Borrower hereby irrevocably appoints Agent
as Borrower's attorney-in-fact to collect any and all such balances to the
extent any such payment is not made to Agent by such bank or other depository
after demand thereon is made by Agent pursuant hereto.
6.4. Lien Perfection; Further Assurances. Promptly after Agent's request
-----------------------------------
therefor, Borrower shall execute and deliver to Agent such instruments,
assignments or documents as are necessary under the UCC or other Applicable Law
to perfect Agent's Lien in the Collateral, and shall take such other action as
may be requested by Agent to give effect to or carry out the intent and purposes
of this Agreement. Unless prohibited by Applicable Law, Borrower hereby
authorizes Agent to execute and file any such financing statement on Borrower's
behalf. The parties agree that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof.
23
<PAGE>
6.5. Liens Under DIP Orders. The Liens and security interests granted to
----------------------
Agent pursuant to the provisions of this Section 6 and pursuant to any of the
other DIP Financing Documents shall be in addition to all Liens conferred upon
Agent, for itself and for the Pro Rata benefit of Lenders, pursuant to the terms
of the DIP Orders.
6.6. Lien Priority. The Liens and security interests granted to Agent
-------------
pursuant to the provisions of this Section 6 and pursuant to any of the DIP
Financing Documents shall be first priority Liens and security interests in the
Collateral, except as otherwise expressly provided in the Intercreditor
Agreement.
SECTION 7. COLLATERAL ADMINISTRATION
7.1. General Provisions.
------------------
7.1.1. Locations of Collateral. All tangible items of Collateral,
-----------------------
other than Inventory in transit, shall at all times be kept by Borrower at one
or more of the business locations of Borrower described in Schedule 7.1.1 hereof
and shall not be moved therefrom, without the prior written approval of Agent,
except that prior to an Event of Default and acceleration of the maturity of
the Obligations in consequence thereof, Borrower may (i) make sales or other
dispositions of any Collateral to the extent authorized by Section 9.2.3 hereof
and (ii) may move Inventory or any record relating to any Collateral to a
location in the United States other than those described in Schedule 7.1.1, so
long as Borrower has given Agent at least 30 days prior written notice of such
new location and prior to moving any Inventory to such location Borrower has
executed and delivered to Agent UCC-1 financing statements and any other
appropriate documentation to perfect or continue the perfection of Agent's Liens
with respect to such Inventory and all proceeds thereof.
7.1.2. Insurance of Collateral; Insurance and Condemnation Proceeds.
------------------------------------------------------------
Borrower shall maintain and pay for insurance upon all Collateral, wherever
located, covering casualty, hazard, public liability, theft, malicious mischief,
and such other risks in such amounts and with such insurance companies as are
reasonably satisfactory to Agent. All proceeds payable under each such policy
shall be payable to Agent for application to the Obligations. Borrower shall
deliver the originals or certified copies of such policies to Agent with
lender's loss payable endorsements reasonably satisfactory to Agent, naming
Agent as sole loss payee, assignee or additional insured, as appropriate. Each
policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than 30 days prior written notice to Agent in the event of
cancellation of the policy for any reason whatsoever and a clause specifying
that the interest of Agent shall not be impaired or invalidated by any act or
neglect of Borrower or the owner of the Property or by the occupation of the
premises for purposes more hazardous than are permitted by said policy. If
Borrower fails to provide and pay for such insurance, Agent may, at its option,
but shall not be required to, procure the same and charge Borrower therefor.
Borrower agrees to deliver to Agent, promptly as rendered, true copies of all
reports made in any reporting forms to insurance companies. For so long as no
Event of Default exists, Borrower shall have the right to settle, adjust and
compromise any claim with respect to any insurance maintained by Borrower
provided that all proceeds thereof are applied in the manner specified in this
Agreement, and Agent agrees promptly to provide any necessary endorsement to any
checks or drafts issued in payment of any such claim. At any time that an Event
of Default exists, only Agent shall be authorized to settle, adjust and
compromise such claims. Agent shall have all rights and remedies with respect
to such policies of insurance as are provided for in this Agreement and the
other DIP Financing Documents.
7.1.3. Protection of Collateral. All expenses of protecting,
------------------------
storing, warehousing, insuring, handling, maintaining and shipping any
Collateral, all Taxes imposed under any Applicable Law on any of the Collateral
or in respect of the sale thereof, and all other payments required to be made by
Agent to any Person to realize upon any Collateral shall be borne and paid by
Borrower. If Borrower fails to pay promptly
24
<PAGE>
any portion thereof when due, Agent may, at its option, but shall not be
required to, pay the same and charge Borrower therefor. Agent shall not be
liable or responsible in any way for the safekeeping of any of the Collateral or
for any loss or damage thereto (except for reasonable care in the custody
thereof while any Collateral is in Agent's actual possession) or for any
diminution in the value thereof, or for any act or default of any warehouseman,
carrier, forwarding agency, or other Person whomsoever, but the same shall be at
Borrower's sole risk.
7.1.4. Defense of Title to Collateral. Borrower shall at all times
------------------------------
defend its title to the Collateral and Agent's Liens therein against all Persons
and all claims and demands whatsoever.
7.2. Administration of Accounts.
--------------------------
7.2.1. Records and Schedules of Accounts. Borrower shall keep
---------------------------------
accurate and complete records of its Accounts and all payments and collections
thereon and shall submit to Agent on such periodic basis as Agent shall request
a sales and collections report for the preceding period, in form satisfactory to
Agent. On or before the 20th day of each month from and after the date hereof,
Borrower shall deliver to Agent and Lenders, in form acceptable to Agent and
Lenders, a detailed aged trial balance of all Accounts existing as of the last
day of the preceding month, specifying the names, addresses, face value, dates
of invoices and due dates for each Account Debtor obligated on an Account so
listed ("Schedule of Accounts"), and, upon Agent's request therefor, copies of
proof of delivery and the original copy of all documents, including repayment
histories and present status reports relating to the Accounts so scheduled and
such other matters and information relating to the status of then existing
Accounts as Agent shall reasonably request. In addition, if Accounts in an
aggregate face amount in excess of $100,000 cease to be Eligible Accounts in
whole or in part, Borrower shall notify Agent of such occurrence promptly (and
in any event within 2 Business Days) after Borrower's having obtained knowledge
of such occurrence and the Borrowing Base shall thereupon be adjusted to reflect
such occurrence. At the request of Agent made at any time, each Borrower shall
deliver to Agent copies of invoices or invoice registers related to all of its
Accounts.
7.2.2. Collection and Verification of Accounts.
---------------------------------------
(i) To expedite collection, Borrower shall endeavor in the first
instance to make collection of its Accounts for Agent. All remittances received
by Borrower with respect to Accounts shall be held as Agent's Property by
Borrower as trustee of an express trust for Agent's benefit and Borrower shall
immediately deposit same in the Dominion Account. Agent has no duty to protect,
insure, collect or realize upon the Accounts or preserve rights in them. For
the purpose of computing interest hereunder, all Payment Items received by Agent
shall be deemed applied by Agent on account of the Obligations (subject to final
payment of such items) on the first Business Day after receipt by Agent of such
Payment Items in Chicago, Illinois. If requested to do so by Agent, Borrower
shall notify all Account Debtors that all Accounts have been assigned to Agent.
Agent may verify the existence and amount of each Account by seeking
confirmation thereof from each Account Debtor.
(ii) Borrower shall deposit, or cause to be deposited, all proceeds
of the Collateral in kind in a Dominion Account pursuant to a lockbox
arrangement with such banks as may be selected by Borrower and be acceptable to
Agent. Borrower shall issue to any such bank, an irrevocable letter of
instruction directing such banks to deposit all payments or other remittances
received in the lockbox to the Dominion Account for application on account of
the Obligations, as authorized by the DIP Orders. Agent assumes no
responsibility for such lockbox arrangement, including any claim of accord and
satisfaction or release with respect to deposits accepted by any bank
thereunder.
(iii) Whether or not a Default or an Event of Default exists, Agent
shall have the right at any time, in the name of Agent, any designee of Agent or
Borrower, to verify the validity, amount or any other matter relating to
Accounts of Borrower, by mail, telephone, telegraph or otherwise.
25
<PAGE>
Borrower shall cooperate fully with Agent in an effort to facilitate and
promptly conclude any such verification process.
7.2.3. Notice Regarding Disputed Accounts. If any amounts are in
----------------------------------
dispute between Borrower and any Account Debtor, Borrower shall provide Agent
with written notice thereof at the time of the next Borrowing request made by
Borrower, explaining in detail the reason for the dispute, all claims related
thereto and the amount in controversy.
7.3. Administration of Inventory.
---------------------------
7.3.1. Records and Reports of Inventory. Borrower shall keep
--------------------------------
accurate and complete records of its Inventory and shall furnish Agent and
Lenders inventory reports respecting such Inventory in form and detail
satisfactory to Agent and Lenders at such times as Agent and Lenders may
request, including on a daily basis if so requested. Borrower shall conduct a
physical inventory of Borrower's Inventory no less frequently than annually and
shall provide to Agent and Lenders a report based on each such physical
inventory promptly thereafter, together with such supporting information as
Agent shall request.
7.3.2. Returns of Inventory. Borrower shall not return any of its
--------------------
Inventory to a supplier or vendor thereof, or any other Person, whether for
cash, credit against future purchases or then existing payables, or otherwise,
unless (i) such return is in the ordinary course of business of Borrower and
such Person; (ii) no Default or Event of Default exists or would result
therefrom; (iii) the return of such Inventory will not result in an Out-of-
Formula Condition; (iv) Borrower promptly notifies Agent thereof if the
aggregate Value of all Inventory returned in any month exceeds $250,000; (v) any
payments received by Borrower in connection with any such return as promptly
turned over to Agent for application to the Obligations; and (vi) such return is
not made for the purpose of allowing such Person to credit its claim against
Borrower arising prior to the Petition Date.
7.4. Payment of Charges. All amounts chargeable to Borrower under this
------------------
Section 7 hereof shall be Obligations secured by all of the Collateral and shall
be payable on demand.
7.5. Borrowing Base Certificates. On the Closing Date and on or before the
---------------------------
third Business Day of each week after the Closing Date (or with such greater
frequency as Agent may request), Borrower shall deliver to Agent a Borrowing
Base Certificate, prepared as of the close of business of the previous week, and
at such other times as Agent may request. All calculations of Availability in
connection with the preparation of any Borrowing Base Certificate shall
originally be made by Borrower and certified by a Senior Officer to Agent,
provided that Agent shall have the right to review and adjust, in the exercise
of its reasonable credit judgment, any such calculation (i) to reflect its
reasonable estimate of declines in value of any of the Collateral described
therein and (ii) to the extent that such calculation is not in accordance with
this Agreement or does not accurately reflect the amount of the Availability
Reserve.
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1. General Representations and Warranties. To induce Agent and Lenders
--------------------------------------
to enter into this Agreement and to make available the Commitments, Borrower
warrants and represents to Agent and Lenders that:
8.1.1. Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the state of its organization, has the
power to own Properties and to transact the business in which it is presently
engaged or proposed to be engaged and is duly qualified and in good standing in
each jurisdiction in which it presently is, or proposes to be, engaged in
business;
26
<PAGE>
8.1.2. The execution, delivery and performance by Borrower of the DIP
Financing Documents are within Borrower's corporate power, has been duly
authorized by all necessary or proper corporate action and, on the date of
initial funding of Revolver Loans hereunder, will be authorized by the Interim
Financing Order pursuant to Sections 363 and 364 of the Bankruptcy Code; are not
in contravention of any provision of their own organizational documents or
bylaws; will not violate any Applicable Law (following entry of the Interim
Financing Order); will not conflict with any material contract of Borrower; does
not require the consent or approval of any Governmental Authority or any other
Person other than the entry by the Court of the Interim Financing Order and
thereafter the Final Financing Order;
8.1.3. Each of the DIP Financing Documents has been duly executed and
delivered by Borrower and constitutes a legal, valid and binding obligation of
Borrower, enforceable against each Borrower in accordance with its terms;
8.1.4. Upon entry of the Interim Financing Order, and thereafter upon
entry of the Final Financing Order, the security interests granted pursuant to
the DIP Financing Documents constitute valid, enforceable, perfected and first
priority Liens on the Collateral, except to the extent otherwise expressly
provided in the Intercreditor Agreement or the DIP Orders.
8.1.5. Borrower has no office or place of business, nor does Borrower
store any Collateral, at any location other than those identified in Schedule
7.1.1;
8.1.6. All of Borrower's business, operations and Properties are
conducted, maintained and owned in accordance with Applicable Law, including all
Environmental Laws, except to the extent that any such noncompliance could not
reasonably be expected to have a Material Adverse Effect and except as
heretofore described by Borrower in filings with the SEC;
8.1.7. Borrower has obtained and holds in full force and effect all
franchises, licenses, leases, permits, certificates, authorizations and
approvals necessary for the operation of its business as presently and proposed
to be constructed to the extent that the failure to obtain same could not
reasonably be expected to have a Material Adverse Effect;
8.1.8. Since the Petition Date, no event has occurred that has or
could reasonably be expected to have a Material Adverse Effect upon the
business, financial condition or operations of Borrower or any of the
Collateral;
8.1.9. The federal tax identification number of Borrower is as shown
in the Pre-Petition Loan Agreement, and Borrower has filed all federal, state
and local tax returns and other reports that it is required by Applicable Law to
file and has paid, or made for provision of the payment of, all Taxes upon it,
its income and properties as and when such Taxes are due and payable, except to
the extent being Properly Contested;
8.1.10. There are no claims for brokerage commissions, finders' fees
or investment banking fees in connection with the transactions contemplated by
this Agreement or any of the other DIP Financing Documents;
8.1.11. Borrower has, and is in good standing with respect to, all
Governmental Approvals which are necessary to continue to conduct its business
as heretofore or proposed to be conducted by it and to own or lease and to
operate its Properties as now owned or leased by it and which if not obtained
could reasonably be expected to have a Material Adverse Effect;
27
<PAGE>
8.1.12. No Default or Event of Default exists at the time, or would
result from the funding, of any Revolver Loan or other extension of credit
hereunder;
8.1.13. Except as disclosed in the Pre-Petition Loan Agreement,
Borrower has no Plan on the date hereof, and Borrower is in full, substantial
compliance with the requirements of ERISA with respect to each Plan;
8.1.14. Except as described in the Pre-Petition Loan Agreement,
Borrower is not a party to any collective bargaining agreement on the date
hereof, and there are no material grievances, disputes or controversies with any
union or any other organization of Borrower's employees or, to Borrower's
knowledge, any threats of strikes, work stoppages or any asserted pending
demands for collective bargaining by any union or employee representatives;
8.1.15. With respect to each Account of Borrower that is included by
Borrower in its calculation of the Borrowing Base and for so long as it is so
included, such Account is genuine and in all respects what it purports to be and
is not evidenced by a judgment; arises out of a completed sale and delivery of
goods by Borrower in the ordinary course of its business and substantially in
accordance with the terms and conditions of all purchase orders, contracts or
other documents relating thereto and forming a part of the contract between
Borrower and the Account Debtor; is for a liquidated amount maturing, as stated
in the duplicate invoice covering such sale, a copy of which is available to
Agent upon request; such account is absolutely owing to such Borrower and is not
contingent in any respect or for any reason, and the Account is not subject to
any offset, Lien, deduction, defense, dispute, counterclaim or any other adverse
condition, except for disputes resulting in returned goods where the amount in
controversy is deemed by Agent to be immaterial; the contract under which such
Account arose does not condition or restrict Borrower's right to assign to Agent
the right to payment thereunder; Borrower has not made any agreement with any
Account Debtor thereunder for any extension, compromise, settlement or
modification of any such Account or any deduction therefrom, other than
deductions, discounts and allowances that are granted in the ordinary course of
business for prompt payment and are reflected in the calculation of the net
amount of each respective invoice related thereto and reflected in the Schedule
of Accounts submitted to Agent pursuant to this Agreement; to the best of
Borrower's knowledge, such Account Debtor is Solvent; and there are no facts,
events or occurrences that are reasonably likely to impair the validity or
enforceability of any such Accounts or reduce the amount payable thereunder from
the face amount of the invoice with respect thereto.
8.2. Reaffirmation of Representations and Warranties. All of the foregoing
-----------------------------------------------
representations and warranties made by Borrower in this Agreement or in any of
the other DIP Financing Documents shall survive the execution and delivery of
this Agreement and such other DIP Financing Documents, and shall be deemed to
have been remade and reaffirmed on each day that any Obligations are outstanding
or that Borrower requests any funding of a Revolver Loan under the DIP Facility,
except for changes that may occur after the date hereof in the ordinary course
of business as long Agent and Lenders have consented to such changes or such
changes are not violative of any provision of this Agreement.
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS
9.1. Affirmative Covenants. During the term of this Agreement, and
---------------------
thereafter for so long as there are any Obligations to Agent and/or Lenders,
Borrower covenants that it shall:
9.1.1. Business and Existence. Preserve and maintain its separate
----------------------
corporate existence and all rights, privileges, and franchises in connection
therewith, and maintain its qualification and good standing in all states in
which such qualification is necessary to the ownership of its Properties or the
conduct of its businesses.
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9.1.2. Compliance with Laws. Comply with all laws, ordinances,
--------------------
governmental rules and regulations to which it is subject, including the
Bankruptcy Code and all environmental, health, safety, labor and minimum wage
laws, and obtain and keep in force any and all licenses, permits, franchises, or
other Governmental Approvals necessary to the ownership of its Properties or to
the conduct of its businesses as conducted on the Petition Date, to the extent
that the failure to do so could reasonably be expected to have a Material
Adverse Effect.
9.1.3. Business Records. Keep adequate records and books of account
----------------
with respect to its business activities in which proper entries are made in
accordance with GAAP reflecting all financial transactions.
9.1.4. Visits and Inspections. Permit representatives of Agent
----------------------
and/or Lenders, from time to time, as often as may be reasonably requested, but
only during normal business hours, to visit and inspect the Properties of
Borrower, inspect and make extracts from Borrower's books and records, and
discuss with Borrower's officers, its employees and its independent accountants,
Borrower's business, assets, liabilities, financial condition, business
prospects and results of operations.
9.1.5. Further Assurances. At Agent's or any Lender's request,
------------------
promptly execute or cause to be executed and deliver to Agent or such Lender any
and all documents, instruments and agreements deemed necessary by Agent or such
Lender to give effect to or carry out the terms or intent of this Agreement or
any of the DIP Financing Documents.
9.1.6. Compliance With Orders. Comply with each of the provisions of
----------------------
the Interim Financing Order, the Final Financing Order and all other orders
entered by the Court in the Chapter 11 Case.
9.1.7. Financial Statements. Keep adequate records and books of
--------------------
account with respect to its business activity in which proper entries are made
in accordance with GAAP reflecting all of its financial transactions; and cause
to be prepared and to be furnished to Agent and Lenders the following (all to be
prepared in accordance with GAAP applied on a consistent basis, unless
Borrower's certified public accountants concur in any change therein, such
change is disclosed to Agent and Lenders and is consistent with GAAP and, if
required by the Required Lenders, the financial covenants set forth in Section
9.3 are amended in a manner requested by the Required Lenders to take into
account the affects of such change):
(i) As soon as available, and in any event within 100 days after the
close of each Fiscal Year, unqualified (except for a going concern
qualification) audited financial statements of Borrower as of the end of
such Fiscal Year, certified without material qualification by a firm of
independent certified public accountants of recognized national standing
selected by Borrower but reasonably acceptable to Agent and Lenders (except
for a qualification for a change in accounting principles with which such
accountants concur), and setting forth in each case in comparative form the
corresponding figures for the preceding Fiscal Year;
(ii) As soon as available, and in any event within 30 days after the
end of each month hereafter (or 50 days after the end of each month that is
the end of a Fiscal Quarter), including the last month of Borrower's Fiscal
Year, unaudited interim financial statements of Borrower as of the end of
such month and of the portion of Borrower's Fiscal Year then elapsed,
certified by the principal financial officer of Borrower as prepared in
accordance with GAAP and fairly presenting the financial position and
results of operations of Borrower for such month and period subject only to
changes from audit and year-end adjustments and except that such statements
need not contain notes;
29
<PAGE>
(iii) Promptly after the sending or filing thereof, as the case
may be, copies of any 10Qs, 10Ks and any proxy statements, financial
statement or reports which Borrower has made generally available to its
shareholders and copies of any regular, periodic and special reports or
registration statements which Borrower files with the SEC (or any other
Governmental Authority which may be substituted therefor), or any national
securities exchange;
(iv) Promptly after the filing thereof, copies of any annual
report to be filed in accordance with ERISA in connection with each Plan;
and
(v) Such other data and information (financial or otherwise)
as Agent or Lenders, from time to time, may reasonably request, bearing
upon or related to the Collateral or Borrower's financial condition or
results of operations.
Concurrently with the delivery of the financial statements
described in clause (i) of this Section 9.1.7, Borrower shall deliver to Agent
and Lenders a copy of the accountant's letter to Borrower's management that is
prepared in connection with such financial statements and also shall cause to be
prepared and delivered to Agent and Lenders the certificate of the aforesaid
certified public accountants stating to Agent and Lenders that, based upon such
accountants' audit of the financial statements of Borrower performed in
connection with their examination of said financial statements, nothing came to
their attention that caused them to believe the Borrower was not in compliance
with Section 9.3 hereof, or, if they are aware of such noncompliance, specifying
the nature thereof and acknowledging, in a manner satisfactory to Agent and
Lenders that they are aware that Agent and Lenders are relying on such financial
statements in making their decisions with respect to funding of any Revolver
Loans or other extensions of credit hereunder. Concurrently with the delivery of
the financial statements described in clauses (i) and (ii) of this Section
9.1.7, or more frequently if requested by Agent or Lenders during any period
that a Default or Event of Default exists, Borrower shall cause to be prepared
and furnish to Agent and Lenders a Compliance Certificate in the form of Exhibit
D hereto.
9.1.8. Notices. Provide Agent and Lenders with notice of (i)
-------
the termination or breach of any material contract, notice of the occurrence of
any Default or Event of Default, (ii) Borrower's violation (or asserted
violation) of any Applicable Law (including any Environmental Law), (iii)
notices of any claim that Borrower may make under any policy of insurance with
respect to the Collateral, and (iv) any intent to pay the principal amount of
any Debt owing to Term Lender from any proceeds of Revolver Loans (and such
notice shall be accompanied by a certificate from a Senior Officer that,
immediately after giving effect to any such payment, Availability will be not
less than $7,000,000. Borrower shall provide, or shall cause its counsel in the
Chapter 11 Case to provide, Agent's and each Lender's counsel with copies of all
pleadings, motions, reports, applications and other papers filed by Borrower
with the Court as well as copies of all billing and expense statements received
from any Professional Persons.
9.1.9. Insurance. In addition to the insurance required herein
---------
with respect to the Collateral, maintain with financially sound and reputable
insurers, insurance with respect to its Properties and business against such
casualties and contingencies of such type (including product liability, business
interruption, larceny, embezzlement or other criminal misappropriation
insurance) and in such amounts as is customary in the business of Borrower.
9.1.10. Year 2000 Reporting. Ensure that any reprogramming
---------
required to permit the proper functioning, in and following the year 2000, of
Borrower's and its Subsidiaries' (i) computer systems and (ii) Equipment
containing embedded microchips (including systems and Equipment supplied by
others or with which Borrower's and its Subsidiaries' systems interface) and the
testing of all such systems and Equipment, as so reprogrammed, is completed by
November 30, 1999, except insofar as the failure to do so
30
<PAGE>
will not have a Material Adverse Effect, and Borrower will notify Agent and
Lenders promptly upon detecting any failure to achieve year 2000 computer
readiness. In addition, Borrower shall provide Agent and Lenders with such
information about its year 2000 computer readiness (including information as to
contingency plans, budgets and testing results), as Agent or Lenders shall
reasonably request.
9.1.11. Term Lender Fundings. Cause all proceeds (net of amounts used
--------------------
to pay fees and expenses owing to Term Lender) of advances made by Term Lender
at any time to be disbursed directly to Agent for application first to the Pre-
Petition Debt until paid in full and thereafter to the Obligations.
9.2 Negative Covenants. During the term of this Agreement, and thereafter
------------------
for so long as there are any Obligations to Agent and/or any Lender, Borrower
covenants that it will not:
9.2.1. Loans. Make any loans or other advances of money (other than
-----
for salary, travel advances, advances against commissions and other similar
advances in the ordinary course of business) to any Person.
9.2.2. Limitation on Liens. Create or suffer to exist any Lien upon
-------------------
any of its Property, income or profits, whether now owned or hereafter acquired,
except: (i) Liens at any time granted in favor of the Agent or any Lender
pursuant to any of the Pre-Petition Loan Documents or DIP Financing Documents
and other Liens in existence on the Petition Date that were not created or
suffered to exist in violation of the Pre-Petition Loan Documents; (ii) Liens
for Taxes (excluding any Lien imposed pursuant to any of the provisions of
ERISA) not yet due or being Properly Contested, but only if Agent's or Lender's
judgment such Liens do not affect adversely Agent's or Lender's rights or the
priority of Agent's Lien in the Collateral; (iii) Liens securing the claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and other
like Persons for labor, materials, supplies or rentals incurred in the ordinary
course of Borrower's business, but only if the payment thereof is not at the
time required and only if such Liens are junior to the Liens in favor of Agent;
(iv) Liens resulting from deposits made in the ordinary course of business in
connection with workmen's compensation, unemployment insurance, social security
and other like laws; (v) reservations, exceptions, easements, rights of way, and
other similar encumbrances affecting real Property of Borrower that were in
existence on the Petition Date and do not violate any terms of the Pre-Petition
Loan Documents; (vi) Liens in favor of Term Lender, provided that the Liens in
favor of Term Lender with respect to any of the Collateral are at all times
subject to and governed by the Intercreditor Agreement; (vii) Liens granted
pursuant to the Preferred Supplier Continuous Credit Program on any Property of
Borrower consisting of real Property or Equipment or the proceeds thereof;
(viii) Purchase Money Liens securing Permitted Purchase Money Debt; and (ix)
such other Liens as Agent and each Lender may consent to in writing from time to
time, in their sole and absolute discretion.
9.2.3. Disposition of Assets. Sell, lease or otherwise dispose of
---------------------
any of the Collateral, including any disposition of the Collateral as part of a
sale and leaseback transaction, to or in favor of any Person, except (i) sales
of Inventory in the ordinary course of Borrower's business for so long as no
Event of Default exists hereunder, (ii) dispositions consented to in writing by
Agent and Lenders and authorized by the Court after notice and hearing, and
(iii) dispositions in connection with which all of the Pre-Petition Debt (to the
extent not theretofore paid) and all of the Obligations are indefeasibly paid in
full.
9.2.4. Compromise of Accounts. Compromise or settle, or extend the
----------------------
time of payment of, any Account without Agent's prior written consent.
9.2.5. Payment of Claims. Make any payment of principal or interest
-----------------
on account of any Claim against Borrower that arose prior to the Petition Date,
other than the Pre-Petition Debt and other than as authorized by the Court after
notice and a hearing with respect to Claims of employees of Borrower for wages
or salary.
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<PAGE>
9.2.6. Filing of Motions and Applications. Apply to the Court for
----------------------------------
authority to (i) take any action that is prohibited by the terms of any of the
DIP Financing Documents, (ii) refrain from taking any action that is required to
be taken by the terms of any of the DIP Financing Documents or (iii) permit any
Debt or Claim to be pari passu with (other than Debt that is incurred under the
Term Lender Documents and in accordance with the Intercreditor Agreement) or
senior to any of the Obligations.
9.2.7. Modifications to Orders. Consent to any amendment,
-----------------------
supplement or any other modification of any of the terms of the Interim
Financing Order or Final Financing Order.
9.2.8. Fundamental Changes. Enter into any transaction to merge,
-------------------
reorganize, consolidate or amalgamate with any Person or liquidate, wind up or
dissolve itself, except for mergers or consolidations of any Subsidiary with
Borrower.
9.2.9. Restricted Investments. Make or have any Restricted
----------------------
Investment.
9.2.10. Distributions. Make any Distribution.
-------------
9.2.11. Permitted Debt. Incur or suffer to exist any Debt other than
--------------
Claims in existence on the Petition Date; the Obligations; Debt to Term Lender
under the Term Lender Documents; Capitalized Lease Obligations and Permitted
Purchase Money Debt to the extent expenditures in connection therewith are not
in violation of Section 9.3.4 hereof; and Debt (other than Debt for Money
Borrowed, Capitalized Lease Obligations and Permitted Purchase Money Debt)
incurred in the ordinary course of Borrower's business during the Chapter 11
Case, including Debt incurred pursuant to the Preferred Supplier Continuous
Credit Program.
9.2.12. Conduct of Business. Engage in any business other than the
-------------------
business engaged in by it on the Petition Date and any business or activities
that are substantially similar, related or incidental thereto.
9.2.13. Use of Proceeds. Use any proceeds of Revolver Loans for a
---------------
purpose that is not expressly permitted by Section 1.1.4.
9.3 Financial Covenants. For so long as there are any Commitments
-------------------
outstanding and thereafter until payment in full of the Obligation, Borrower
covenants that, unless otherwise consented to by the Required Lenders in
writing, it shall not:
9.3.1. Permit gross revenues from continuing operations to fall
below 90% of the amount forecasted in the Initial Projections or the Subsequent
Projections for any month.
9.3.2. Permit Consolidated EBITDA to fall below 85% of the amount
forecasted in the Initial Projections or Subsequent Projections for any month.
9.3.3. Make or commit or agree to make, or permit any of its
Subsidiaries to make or commit or agree to make, any Capital Expenditures in any
given month on a cumulative basis in excess of the amount set forth in the
Initial Projections or Subsequent Projections.
SECTION 10. CONDITIONS PRECEDENT
10.1. Conditions Precedent to Initial Credit Extensions. Notwithstanding
-------------------------------------------------
any other provision of this Agreement or any of the other DIP Financing
Documents, and without affecting in any manner
32
<PAGE>
the rights of Agent and Lenders under other sections of this Agreement, Lenders
shall not be required to fund any Revolver Loan requested by Borrower, procure
any Letter of Credit or otherwise extend credit to Borrower, unless on or before
July 7, 1999, each of the following conditions has been and continues thereafter
to be satisfied:
10.1.1. All of the DIP Financing Documents shall have been executed
in form and substance satisfactory to Agent and Lenders by each of the
signatories thereto and accepted by Agent and Lenders, and each Obligor shall be
in compliance with all of the terms thereof, and representations and warranties
contained therein shall be true and correct in all material respects;
10.1.2. No Default or Event of Default shall exist at the time of,
and would not result in the funding of, any requested Revolver Loan, and no
event shall have occurred and no condition shall exist since the Petition Date
that has had or could reasonably be expected to have a Material Adverse Effect
on the business, financial conditions or operations of Borrower or the value,
quantity or quality of any Collateral;
10.1.3. Agent shall have determined, and Lenders shall be satisfied
that, immediately after Lenders have made the initial Revolver Loans, Bank has
issued any Letters of Credit to be issued on the Closing Date, Borrower has paid
(or made provision for the payment of) all closing costs incurred in connection
with the Commitments, and Term Lender has funded amounts to be funded by it
under the Term Lender Documents on the Closing Date, the Pre-Petition Debt shall
have been paid in full or to the extent authorized by the Court;
10.1.4. The Interim Financing Order shall have been entered, shall
be in full force and effect and shall not have been vacated, reversed, modified
or stayed in any respect (and, if such Orders are the subject of a pending
appeal, no performance of any obligation of any party shall have been stayed
pending such appeal);
10.1.5. All fees and expenses required to be paid by Borrower
hereunder on the Closing Date shall have been paid in full;
10.1.6. Agent and Lenders shall have received satisfactory proof of
insurance by Borrower, in accordance with the terms of this Agreement, together
with loss payable endorsements on Agent's standard form of loss pay endorsement,
naming Agent as loss payee with respect to each policy and certified copies of
Borrower's liability insurance policies, together with endorsements naming Agent
as an additional insured;
10.1.7. The Intercreditor Agreement shall have been duly executed
and delivered by the parties thereto and acknowledged and consented to by
Borrower;
10.1.8. Agent and Lenders shall have received an opinion letter
from Borrower's counsel, in form and scope satisfactory to Agent and Lenders;
10.1.9. All conditions precedent to funding under the Term Lender
Documents shall have been satisfied, Term Lender shall have agreed to fund,
concurrently with Lender's initial Revolver Loans on the Closing Date, at least
$6,350,000 of the term loans to be funded by it under the Term Lender Documents,
and Borrower shall have authorized and directed Term Lender to disburse the
proceeds of such loan (net of amounts for Term Lender's fees and expenses)
directly to Agent for application to the Pre-Petition Debt.
10.2. Conditions Precedent to All Credit Extensions. Notwithstanding any
---------------------------------------------
other provision of this Agreement or any of the other DIP Financing Documents,
and without affecting in any manner the rights of Agent and Lenders under other
sections of this Agreement, no Lender shall be required to fund
33
<PAGE>
any Revolver Loans, procure any Letters of Credit or otherwise extend any credit
to or for the benefit of Borrower, unless and until each of the following
conditions has been and continues to be satisfied:
10.2.1. No Default or Event of Default exists at the time, or would
result from the funding, of any Revolver Loan or other extension of credit;
10.2.2. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court
or Governmental Authority to enjoin, restrain or prohibit, or to obtain damages
in respect of, or which is related to or arises out of, any of the DIP Financing
Documents or the consummation of any of the transactions contemplated thereby;
10.2.3. Agent shall have received each Borrowing Base Certificate
required by the terms of this Agreement or otherwise requested by Agent;
10.2.4. With respect to the procurement of any Letter of Credit after
the Closing Date, each of the LC Conditions is and remains satisfied; and
10.2.5. No event shall have occurred and no condition shall exist
that could reasonably be expected to have a Material Adverse Effect.
10.3. Limited Waiver of Conditions Precedent. If Lenders shall make any
--------------------------------------
Revolver Loan, procure any Letter of Credit or otherwise extend any credit to
Borrower under this Agreement at a time when any of the foregoing conditions
precedent are not satisfied (regardless of whether the failure of satisfaction
of any of such conditions precedent is known or unknown to Agent or Lender), the
funding of such loans shall not operate as a waiver of the right of Agent and
Lenders to insist upon the satisfaction of all conditions precedent with respect
to each subsequent Borrowing requested by Borrower or a waiver of any Default or
Event of Default as a consequence of the failure of any such conditions to be
satisfied. Without limiting the generality of the foregoing, if Lenders shall
make any Revolver Loan, procure any Letter of Credit or otherwise extend any
credit to Borrower at a time when the condition set forth in Section 10.1.9 is
not satisfied, all Obligations arising from the extension of any such credit
shall be payable on demand by Lenders, and Lenders shall have no obligation to
fund any future request for Revolver Loans or to procure any Letters of Credit.
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1. Events of Default. The occurrence of any one or more of the
-----------------
following events shall constitute an "Event of Default":
11.1.1. Payment of Obligations. Borrower shall fail to pay (a) the
----------------------
principal of or accrued interest with respect to any Revolver Loan or LC
Outstanding on the due date thereof (whether due at stated maturity, on demand,
upon acceleration or otherwise) or (b) any of the other Obligations within 5
days after the due date thereof (whether due at stated maturity, on demand, upon
acceleration or otherwise).
11.1.2. Misrepresentations. Any warranty, representation, or other
------------------
statement made or furnished to Agent or any Lender by or on behalf of Borrower
or in any instrument, certificate or financial statement furnished in compliance
with or in reference to this Agreement or any of the DIP Financing Documents
proves to have been false or misleading in any material respect when made or
furnished.
11.1.3. Breach of Specific Covenants. Borrower shall fail or
----------------------------
neglect to perform, keep or observe any covenant contained in Sections 6.4,
7.1.1, 7.1.2, 7.2.1, 7.2.2(ii), 7.3.1., 7.3.2, 7.5, 9.1.1, 9.1.4, 9.1.5, 9.1.6,
9.1.7, 9.1.9, 9.1.10, 9.1.11, 9.2 or 9.3 hereof on the date that Borrower is
required to perform, keep or observe such covenant.
34
<PAGE>
11.1.4. Breach of Other Covenants. Borrower shall fail or neglect to
-------------------------
perform, keep or observe any covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in Section 11.1 hereof) and
the breach of such other covenant is not cured to Agent's and Lenders'
satisfaction within 15 days after the sooner to occur of any Senior Officer's
receipt of notice of such breach from Agent or any Lender or the date on which
such failure or neglect first becomes known to any Senior Officer; provided,
--------
however, that such notice and opportunity to cure shall not apply in the case of
- -------
any failure to perform, keep or observe any covenant which is not capable of
being cured at all or within such 15-day period or which is a willful and
knowing breach by Borrower or which was the subject of a breach during the prior
6-month period.
11.1.5. Default Under Other DIP Financing Documents. Any event of
-------------------------------------------
default shall occur under, or Borrower shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any of
the other DIP Financing Documents and such default shall continue beyond any
applicable period of grace.
11.1.6. Cross-Defaults. There shall occur any default or event of
--------------
default on the part of Borrower under any agreement, document or instrument,
which is entered into after the Petition Date and which relates to any Debt for
Money Borrowed, including any default by Borrower in the due and punctual
observance and performance of all covenants and duties on its part to be
observed or performed under any of the Term Lender Documents, if as a
consequence of such default or event of default the holder of such Debt shall be
authorized to accelerate the maturity or demand payment thereof.
11.1.7. Uninsured Losses; Unauthorized Dispositions. There shall
-------------------------------------------
occur any material loss, theft, damage or destruction not fully covered by
insurance (as required by this Agreement and subject to such deductibles as
Agent shall have agreed to in writing), or any sale, lease or encumbrance of any
of the Collateral or the making of any levy, seizure, or attachment thereof or
thereon, except as may be specifically permitted by other provisions of this
Agreement.
11.1.8. Certain Bankruptcy Events. Borrower shall fail to comply
-------------------------
with any of the provisions of the DIP Orders; the Final Financing Order is not
entered by the Court on or before July 31, 1999; Term Lender has not funded at
least $15,350,000 of the term loans (less up to $1,500,000 for reserves by Term
Lender against pre-petition Liens affecting collateral security against primary
security for the Debt under the Term Lender Documents) under the Term Lender
Documents on or before the sooner to occur of July 31, 1999, or the fifth
Business Day after entry of the Final Financing Order; a trustee shall be
appointed in the Chapter 11 Case; an examiner shall be appointed in the Chapter
11 Case with enlarged powers (powers beyond those set forth in Section
1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of the
Bankruptcy Code; the Chapter 11 Case shall be dismissed or converted to a case
under Chapter 7; Borrower shall seek confirmation by the Court of any
Reorganization Plan other than an Acceptable Plan or a Confirmation Order shall
be entered with respect to a Reorganization Plan proposed by a Person other than
Borrower if such Reorganization Plan is not an Acceptable Plan; there shall be
filed by Borrower any motion to sell all or a substantial part of the Collateral
on terms that are not acceptable to Lenders in their sole discretion; any
substantial part of Borrower's assets, other than the Collateral, shall be sold
by Borrower and, as a consequence of such sale, Borrower is not able to continue
its business operations in substantially the same manner as was conducted by it
prior to such sale; Borrower shall file any motion to alter, amend, vacate,
supplement, modify, or reconsider, in any respect, either of the DIP Orders or,
without each Lender's prior written consent, either of the DIP Orders is
amended, vacated, stayed, reversed or otherwise modified; the Court shall enter
an order granting to any Person other than Agent or any Lender relief from the
automatic stay to foreclose upon a Lien with respect to any Property of Borrower
that has an aggregate value in excess of $100,000 or any of the Collateral
(without regard to its value); an order shall be entered for the substantive
consolidation of the Estate of Borrower with any other Person;
35
<PAGE>
Borrower shall not have sufficient Availability on any date to pay
administrative costs or expenses incurred by it in the Chapter 11 Case as and
when such expenses are due and payable; Borrower shall file a motion or other
request with the Court seeking authority to use any cash proceeds of the
Collateral or to obtain any financing under Section 364(d) of the Bankruptcy
Code secured by a priming Lien, or Lien of equal priority with Agent's Liens,
upon any Collateral, in each case without Agent's and Lenders' prior written
consent; or Borrower (or any Committee) shall challenge the validity, perfection
or priority of any Liens of Agent securing the Pre-Petition Debt or the validity
or enforceability of any of the Pre-Petition Loan Documents.
11.1.9. Change of Control. Any Person or group of Persons shall
-----------------
acquire for the first time direct or indirect ownership or the power to vote
more than 15% of the issued and outstanding capital stock of Borrower.
11.1.10. Judgments. Any judgment in excess of $500,000 as to any
---------
Claim shall be rendered against Borrower and the enforcement thereof shall not
be stayed by order of the Court.
11.1.11. Failure of DIP Financing Documents. Any covenant, agreement
----------------------------------
or obligation of Borrower contained in or evidenced by any of the DIP Financing
Documents shall cease to be enforceable or shall be determined to be
unenforceable in accordance with its terms; Borrower shall deny or disaffirm its
obligations under any of the DIP Financing Documents or Liens granted in
connection therewith; or the Liens granted in any of the Collateral shall be
determined to be voidable, invalid or subordinated or shall be determined, with
respect to any material part of the Collateral, to be unperfected or not to have
the priority contemplated by this Agreement.
11.1.12. Material Adverse Effect. Any event shall occur or any
-----------------------
condition shall exist that could reasonably be expected to have a Material
Adverse Effect.
11.2 Acceleration of the Obligations. Without in any way limiting the
-------------------------------
right of Agent or any Lender to demand payment of any portion of the Obligations
payable on demand in accordance with this Agreement, upon or at any time after
the occurrence of an Event of Default as above provided, Agent may, in its
discretion (and, upon receipt of written instructions to do so from the Required
Lenders, shall), (i) declare the principal of and any accrued interest on the
Revolver Loans and all other Obligations owing under any of the DIP Financing
Documents to be, whereupon the same shall become, without further notice or
demand (all of which notice and demand Borrower expressly waives), forthwith due
and payable and Borrower shall forthwith pay to Agent the entire principal of
and accrued and unpaid interest on the Revolver Loans and other Obligations plus
reasonable attorneys' fees and expenses if such principal and interest are
collected by or through an attorney-at-law; and (ii) terminate the Commitments.
11.3 Remedies. Upon or at any time after the occurrence of an Event of
--------
Default, but subject at all times to any limitations in the DIP Orders, Agent
may, in its discretion (and, upon receipt of written direction of the Required
Lenders, shall), exercise from time to time all rights and remedies available to
Agent under the Pre-Petition Loan Documents to enforce collection of any Pre-
Petition Debt then outstanding as well as the following rights and remedies to
enforce collection of the Obligations (without prejudice to the rights of Agent
or Lenders to enforce their respective Claims against any or all Obligors):
11.3.1. All of the rights and remedies of a secured party under the
UCC or under other Applicable Law, and all other legal and equitable rights to
which Agent may be entitled under any of the DIP Financing Documents or the DIP
Orders, all of which rights and remedies shall be cumulative and shall be in
addition to any other rights and remedies contained in this Agreement or any of
the other DIP Financing Documents, and none of which shall be exclusive;
11.3.2. All rights of setoff;
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11.3.3. The right to collect Accounts, Chattel Paper, Instruments
and General Intangibles, and all other rights of Borrower to the payment of
money, from any Person obligated therefor;
11.3.4. The right to take immediate possession of all tangible
items of the Collateral and (i) to require Borrower to assemble such Collateral,
at Borrower's expense, and make it available to Agent at a place designated by
Agent that is reasonably convenient to both parties and (ii) to enter any of the
premises of Borrower or wherever any of the Collateral shall be located, and to
keep and store the same on said premises until sold (and if said premises be the
Property of Borrower, Borrower agrees not to charge Agent for storage thereof);
11.3.5. The right to sell or otherwise dispose of all or any
Inventory in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Agent, in
its sole discretion, may deem advisable; Borrower agrees that 7 days written
notice to Borrower of any public or private sale or other disposition of such
Collateral shall be reasonable notice thereof, and such sale shall be at such
locations as Agent may designate in said notice. Agent shall have the right to
conduct such sales on Borrower's premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with Applicable Law;
Agent shall have the right to sell, lease or otherwise dispose of such
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Agent may purchase all or any part of such Collateral at public or, if
permitted by Applicable Law, private sale and, in lieu of actual payment of such
purchase price, may set off the amount of such price against the Obligations;
11.3.6. The right to require Borrower to deposit with Lender funds
equal to the LC Outstandings and, if Borrower fails promptly to make such
deposit, Agent or Lenders may advance such amount as a Revolver Loan (whether or
not an Out-of-Formula Condition exists or is created thereby). Any such deposit
or advance shall be held by Agent as a reserve to fund future payments on any
LC Support. At such time as the LC Support has been paid or terminated and all
Letters of Credit have been drawn upon or expired, any amounts remaining in such
reserve shall be applied against any outstanding Obligations, or, if all
Obligations have been indefeasibly paid in full, returned to Borrower.
Agent is hereby irrevocably granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses and
all franchise agreements shall inure to Agent's and Lenders' benefit. Any
proceeds realized from the sale of any Collateral, to the extent the same are
not applied to the Pre-Petition Debt, may be applied to the Obligations, after
allowing 2 Business Days for collection, to principal, interest, fees and
expenses (including Extraordinary Expenses) in such order and manner as Agent
and Lenders, in their sole discretion, may determine, provided that, as among
Agent and Lenders, all payments and proceeds shall be allocated as provided in
Section 4.6 of this Agreement.
Notwithstanding any other provision contained in this Agreement, if a Major
Default shall exist, and if the Required Lenders shall fail to direct Agent as
to the action to be taken in response thereto within 15 days after Agent's
having obtained actual knowledge of the existence of Major Default, then Agent
shall be authorized to exercise (and shall, if requested to do so by any Lender,
exercise) its remedies under the DIP Financing Documents and to the extent any
Pre-Petitio Debt remains outstanding, the Pre-Petition Loan Documents, in the
manner, and in such order of exercise, as Agent shall deem appropriate in its
reasonable discretion to the end of realizing upon the Collateral and enforcing
collection of the Obligations and any Pre-petition Debt outstanding in a
reasonably diligent manner.
11.4. Setoff. In addition to any Liens granted under any of the DIP
------
Financing Documents and any rights now or hereafter available under Applicable
Law, Agent and each Lender (and each of
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their respective Affiliates) is hereby authorized by Borrower at any time that
an Event of Default exists, without notice to Borrower or any other Person (any
such notice being hereby expressly waived) to set off and to appropriate and to
apply any and all deposits, general or special (including Debt evidenced by
certificates of deposit whether matured or unmatured (but not including trust
accounts)) and any other Debt at any time held or owing by Agent, such Lender or
any of their Affiliates to or for the credit or the account of Borrower against
and on account of the Obligations of Borrower arising under the DIP Financing
Documents to Agent, such Lender or any of their Affiliates, including all
Revolver Loans and LC Outstandings and all claims of any nature or description
arising out of or in connection with this Agreement, irrespective of whether or
not (i) Agent or such Lender shall have made any demand hereunder, (ii) Agent,
at the request or with the consent of the Required Lenders, shall have declared
the principal of and interest on the Revolver Loans and other amounts due
hereunder to be due and payable as permitted by this Agreement and even though
such Obligations may be contingent or unmatured or (iii) the Collateral for the
Obligations is adequate. Notwithstanding the foregoing, each of Agent and
Lenders agree with each other that it shall not, without the express consent of
the Required Lenders, and that it shall (to the extent that it is lawfully
entitled to do so) upon the request of the Required Lenders, exercise its setoff
rights hereunder against any accounts of Borrower now or hereafter maintained
with Agent, such Lender or any Affiliate of any of them, but Borrower shall have
no claim or cause of action against Agent or any Lender for any setoff made
without the consent of the Required Lenders and the validity of any such setoff
shall not be impaired by the absence of such consent. If any party (or its
Affiliate) exercises the right of setoff provided for hereunder, such party
shall be obligated to share any such setoff in the manner and to the extent
required by Section 12.5.
11.5 Remedies Cumulative; No Waiver. All covenants, conditions,
------------------------------
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in any of the other DIP Financing Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule or contained in any other agreement between Agent and
Borrower, concurrently or hereafter entered into shall be deemed cumulative with
and not in derogation or substitution of any of the terms, covenants,
conditions, or agreements of Borrower herein contained. The rights, remedies,
powers and privileges of Agent and Lenders hereunder and under the DIP Financing
Documents shall be in addition to and cumulative with, and not in lieu of, all
of the rights, remedies, powers and privileges of Agent and Lenders under the
Pre-Petition Loan Documents (for so long as any Pre-Petition Debt is
outstanding), provided that the foregoing is not intended to incorporate by
reference any of the Pre-Petition Loan Documents into any of the DIP Financing
Documents. The failure or delay of Agent or any Lender to exercise or enforce
any rights, Liens, powers, or remedies hereunder or under any of the aforesaid
agreements or other documents or security or Collateral shall not operate as a
waiver of such Liens, rights, powers and remedies, but all such Liens, rights,
powers, and remedies shall continue in full force and effect until all
Obligations owing or to become owing from Borrower to Agent and/or Lenders, and
all Pre-Petition Debt, shall have been fully satisfied, and all Liens, rights,
powers, and remedies herein provided for in any of the DIP Financing Documents
are Pre-Petition Loan Documents are cumulative and none are exclusive.
SECTION 12. AGENT
12.1. Appointment, Authority and Duties of Agent.
------------------------------------------
12.1.1. Each Lender hereby irrevocably appoints and designates
Fleet as Agent to act as herein specified. Agent may, and each Lender by its
acceptance of a Note shall be deemed irrevocably to have authorized Agent to,
enter into all DIP Financing Documents to which Agent is to be a party on the
Closing Date and all amendments hereto and all Security Documents thereafter
executed by Borrower, for its benefit and the Pro Rata benefit of Lenders and,
except as otherwise provided in this Section 12, to exercise such rights and
powers under this Agreement and the other DIP Financing Documents as are
specifically delegated to Agent by the terms hereof and thereof, together with
such other rights and
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powers as are reasonably incidental thereto. Each Lender agrees that any action
taken by Agent or the Required Lenders in accordance with the provisions of this
Agreement or the other DIP Financing Documents, and the exercise by Agent or the
Required Lenders of any of the powers set forth herein or therein, together with
such other powers as are reasonably incidental thereto, shall be authorized and
binding upon all Lenders. Without limiting the generality of the foregoing,
Agent shall have the sole and exclusive right and authority to (a) act as the
disbursing and collecting agent for Lenders with respect to all payments and
collections arising in connection with this Agreement and the other DIP
Financing Documents; (b) execute and deliver as Agent each of the DIP Financing
Documents and accept delivery of each such agreement delivered by Borrower or
any other Obligor; (c) act as collateral agent for Lenders for purposes of the
perfection of all security interests and Liens created by this Agreement or the
Security Documents with respect to all material items of the Collateral and,
subject to the direction of the Required Lenders, for all other purposes stated
therein, provided that Agent hereby appoints, authorizes and directs each
--------
Lender to act as a collateral sub-agent for Agent and the other Lenders for
purposes of the perfection of all security interest and Liens with respect to
Borrower's Deposit Account maintained with, and all cash and Cash Equivalents
held by, such Lender; (d) subject to the direction of the Required Lenders, and
except as otherwise expressly provided in this Agreement, manage, supervise or
otherwise deal with the Collateral; and (e) except as may be otherwise
specifically restricted by the terms of this Agreement and subject to the
direction of the Required Lenders, exercise all remedies given to Agent or
Lenders with respect to any of the Collateral under the DIP Financing Documents
relating thereto, Applicable Law or otherwise. The duties of Agent shall be
ministerial and administrative in nature, and Agent shall not have by reason of
this Agreement or any other DIP Financing Document a fiduciary relationship with
any Lender (or any Lender's participants). Subject to the provisions of Section
12.1.6, Agent shall have the right to determine whether any Accounts or
Inventory constitute Eligible Accounts or Eligible Inventory (basing such
determination in each case upon the meanings given to such terms in Appendix A),
or whether to impose, release, increase or decrease any reserve, and to exercise
its own credit judgment in connection therewith, which determinations and
judgments, if exercised in good faith, shall exonerate Agent from any liability
to Lenders or any other Person for any errors in judgment.
12.1.2. Agent (which term, as used in this sentence, shall include
reference to Agent's Affiliates and to the officers, directors, employees and
agents of Agent's Affiliates) shall not: (a) have any duties or
responsibilities except those expressly set forth in this Agreement and the
other DIP Financing Documents or (b) be required to initiate or conduct any
litigation, foreclosure or collection proceedings hereunder or under any of the
other DIP Financing Documents except to the extent directed to do so by the
Required Lenders during the continuance of any Event of Default or as otherwise
provided in Section 11.3.6 in the case of a Major Default.
12.1.3. Agent may perform any of its duties by or through its agents
and employees and 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 with reasonable care. Borrower shall promptly (and in any
event, on demand) reimburse Agent for all reasonable expenses (including all
Extraordinary Expenses) incurred by Agent pursuant to any of the provisions
hereof or of any of the other DIP Financing Documents or in the execution of any
of Agent's duties hereby or thereby created or in the exercise of any right or
power herein or therein imposed or conferred upon it or Lenders (excluding,
however, general overhead expenses), and each Lender agrees promptly to pay to
Agent, on demand, such Lender's Pro Rata share of any such reimbursement for
expenses (including Extraordinary Expenses) that is not timely made by Borrower
to Agent.
12.1.4. The rights, remedies, powers and privileges conferred upon
Agent hereunder and under the other DIP Financing Documents may be exercised by
Agent without the necessity of the joinder of any other parties unless otherwise
required by Applicable Law. If Agent shall request instructions from the
Required Lenders (or all Lenders, if so required by this Agreement) with respect
to any act or action
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(including the failure to act) in connection with this Agreement or any of the
other DIP Financing Documents, Agent shall be entitled to refrain from such act
or taking such action unless and until Agent shall have received instructions
from the Required Lenders (or all Lenders, if so required by this Agreement);
and Agent shall not incur liability to any Person by reason of so refraining.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder or under any of the DIP Financing Documents in accordance with the
instructions of the Required Lenders.
12.1.5. Agent shall promptly, upon receipt thereof, forward to each
Lender copies of any significant written notices, reports, certificates and
other information received by Agent from any Obligor (to the extent such Obligor
is not required by the terms of the DIP Financing Documents to supply such
information directly to Lenders) and copies of the results of any field audits
by Agent with respect to Borrower.
12.1.6. Wherever in this Agreement Agent is given the authority or
discretion to determine whether any Accounts or Inventory constitute Eligible
Accounts or Eligible Inventory, or whether any Availability Reserves are to be
imposed, Agent may exercise such authority and discretion, unless, in any
specified instance, a Lender asserts that any Accounts or Inventory should not
be treated under this Agreement as Eligible Accounts or Eligible Inventory or
that Agent should exercise authority under this Agreement to impose an
Availability Reserve (or reserves in greater amounts). In the event of any such
assertion, Lenders shall endeavor in good faith to resolve any differences
consistent with the provisions of this Agreement; but, if they are unable to do
so, Agent shall be authorized to exclude (and shall exclude) the disputed
Accounts or Inventory from inclusion in the Borrowing Base and shall be
authorized to impose (and, at the request of any Lender, shall impose) each
Availability Reserve that it is entitled to impose under the terms of this
Agreement. Neither Agent nor Lenders need give any notice to Borrower of any
assertion by a Lender pursuant to this Section 12.1.6; but, if the result of any
resolution of such assertion is to exclude any Accounts or Inventory from the
Borrowing Base or to impose any Availability Reserves (or reserves in greater
amounts), neither Agent nor Lenders shall be barred from doing so simply by
reason of prior course of conduct or dealings with Borrower under this
Agreement.
12.2. Agreements Regarding Collateral. Each Lender shall have a Pro Rata
-------------------------------
interest in the security interests and Liens in and to the Collateral and any
other Property granted and assigned to Agent under the DIP Financing Documents.
Lenders hereby irrevocably authorize Agent, at its option and in its discretion,
to release any Lien upon any Collateral (i) upon the termination of the
Commitments and payment or satisfaction of all of the Obligations or (ii)
constituting Property sold or disposed of in accordance with the terms of this
Agreement if Borrower certifies to Agent that the sale disposition is made in
compliance with the terms of this Agreement (and Agent may rely conclusively on
any such certificate, without further inquiry). Agent shall have no obligation
whatsoever to any of the Lenders to assure that any of the Collateral exists or
is owned by Borrower or is cared for, protected or insured or has been
encumbered, or that Agent's Liens have been properly or sufficiently or lawfully
created, perfected, protected or enforced or entitled to any particular priority
or to exercise at all or in any manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights or powers granted or
available to Agent pursuant to this Agreement or any of the other DIP Financing
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, Agent may act (subject to any
specific limitation or requirement set forth in this Agreement) in any manner it
may deem appropriate, in its discretion, given Agent's own interests in the
Collateral in its capacity as one of the Lenders. Each Lender (and each
Eligible Assignee and Participant), by its acceptance of a Note (or a
participation interest in any Obligations), shall be deemed irrevocably to have
authorized Agent to execute, deliver, and perform all of Agent's obligations and
to assert all of Agent's rights and remedies under the Intercreditor Agreement.
If and to the extent that Term Lender timely exercises the Purchase Option under
(and as defined in) the Intercreditor Agreement, each Lender (and each Eligible
Assignee and Participant)
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shall join with Agent in selling the Obligations and DIP Financing Documents to
Term Lender as provided in the Intercreditor Agreement. In no event shall Agent
agree to amend the Intercreditor Agreement, unless and to the extent expressly
consented to in writing by each of the Lenders.
12.3. Reliance By Agent. Agent shall be entitled to rely, and shall be
-----------------
fully protected in so relying, upon any certification, notice or other
communication (including any thereof by telephone, telex, telegram, telecopier
message or cable) believed by it to be genuine and correct and to have been
signed, sent or made 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 Agent. As to any matters not expressly provided for by this
Agreement or any of the other DIP Financing Documents, Agent shall in all cases
be fully protected in acting or refraining from acting hereunder and thereunder
in accordance with the instructions of Lenders, and such instructions of the
Lenders and any action taken or failure to act pursuant thereto shall be binding
upon Lenders.
12.4. Action Upon Default. Agent shall not be deemed to have knowledge of
-------------------
the occurrence of a Default or an Event of Default unless it has received
written notice from a Lender or Borrower specifying the occurrence of such
Default or Event of Default. If Agent shall receive such a notice of the
occurrence of a Default or an Event of Default or shall otherwise acquire actual
knowledge of any Default or Event of Default, Agent shall promptly notify
Lenders in writing and Agent shall take such action and assert such rights under
this Agreement and the other DIP Financing Documents, or shall refrain from
taking such action and asserting such rights, as the Required Lenders shall
direct from time to time or as otherwise required under Section 11.3.6 in the
case of a Major Default. If any Lender shall receive a notice of the occurrence
of a Default or an Event of Default or shall otherwise acquire actual knowledge
of any Default or Event of Default, such Lender shall promptly notify Agent and
the other Lenders in writing. As provided in Section 12.3 hereof, Agent shall
not be subject to any liability by reason of acting or refraining to act
pursuant to any request of the Required Lenders except for its own willful
misconduct or gross negligence. Before directing Agent to take or refrain from
taking any action or asserting any rights under this Agreement and the other DIP
Financing Documents, each Lender shall consult with and seek the advice of (but
without having to obtain the consent of) each other Lender, and promptly after
directing Agent to take or refrain from taking any such action or asserting any
such rights, the Required Lenders will so advise each other Lender of the action
taken or refrained from being taken and, upon request of any Lender, will supply
information concerning actions taken or not taken. In no event shall the
Required Lenders, without the prior written consent of each Lender, direct Agent
to accelerate and demand payment of the Revolver Loans held by one Lender
without accelerating and demanding payment of all other Revolver Loans. Each
Lender agrees that, except as otherwise provided in any of the DIP Financing
Documents, it will not take any legal action or institute any action or
proceeding against any Obligor with respect to any of the Obligations or
Collateral or accelerate or otherwise enforce its portion of the Obligations
unless consented to in writing by Agent and the Required Lenders.
12.5. Ratable Sharing. If any Lender shall obtain any payment or
---------------
reduction (including any amounts received as adequate protection of a bank
account deposit treated as cash collateral under the Bankruptcy Code) of any
Obligation of Borrower hereunder (whether voluntary, involuntary, through the
exercise of any right of set-off or otherwise) in excess of its Pro Rata share
of payments or reductions on account of such Obligations obtained by all of the
Lenders, such Lender shall forthwith (i) notify the other Lenders and Agent of
such receipt and (ii) purchase from the other Lenders such participations in the
affected Obligations as shall be necessary to cause such purchasing Lender to
share the excess payment or reduction, net of costs incurred in connection
therewith, on a Pro Rata basis, provided that if all or any portion of such
excess payment or reduction is thereafter recovered from such purchasing Lender
or additional costs are incurred, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery or such additional costs,
but without interest. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 12.5 may, to the
fullest extent
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permitted by Applicable Law, exercise all of its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Lender were the direct creditor of Borrower in the amount of such participation.
12.6. Indemnification of Agent.
------------------------
12.6.1. Each Lender severally agrees to indemnify and defend the
Agent Indemnitees (to the extent not reimbursed by Borrower under this
Agreement, but without limiting the indemnification obligation of Borrower under
this Agreement), on a Pro Rata basis, and to hold each of the Agent Indemnitees
harmless from and against, any and all Claims which may be imposed on, incurred
by or asserted against any of the Agent Indemnitees in any way related to or
arising out of this Agreement or any of the other DIP Financing Documents or any
other document contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including the costs and expenses
that Borrower is obligated to pay under Section 14.2 hereof or amounts Agent may
be called upon to pay in connection with any lockbox or Dominion Account
arrangement contemplated hereby) or the enforcement of any of the terms hereof
or thereof or of any such other documents, provided that no Lender shall be
liable to any Agent Indemnitee for any of the foregoing to the extent that they
result solely from the willful misconduct or gross negligence of such Agent
Indemnitee or any other Agent Indemnitee.
12.6.2. Without limiting the generality of the foregoing provisions
of this Section 12.6, if Agent should be sued by any receiver, trustee in
bankruptcy, debtor-in-possession or other Person on account of any alleged
preference or fraudulent transfer received or alleged to have been received from
Borrower or any other Obligor as the result of any transaction under the DIP
Financing Documents, then in such event any monies paid by Agent in settlement
or satisfaction of such suit, together with all Extraordinary Expenses incurred
by Agent in the defense of same, shall be promptly reimbursed to Agent by
Lenders to the extent of each Lender's Pro Rata share.
12.6.3. Without limiting the generality of the foregoing provisions
of this Section 12.6, if at any time (whether prior to or after the Commitment
Termination Date) any action or proceeding shall be brought against any of the
Agent Indemnitees by an Obligor or by any other Person claiming by, through or
under an Obligor, to recover damages for any act taken or omitted by Agent under
any of the DIP Financing Documents or in the performance of any rights, powers
or remedies of Agent against Obligor, any Account Debtor, the Collateral or with
respect to any Revolver Loans, or to obtain any other relief of any kind on
account of any transaction involving any Agent Indemnitees under or in relation
to any of the DIP Financing Documents, Lenders agree to indemnify, defend and
hold the Agent Indemnitees harmless with respect thereto and to pay to the Agent
Indemnitees their respective Pro Rata shares of such amount as the Agent
Indemnitees shall be required to pay by reason of a judgment, decree, or other
order entered in such action or proceeding or by reason of any compromise or
settlement agreed to by the Agent Indemnitees, including all interest and costs
assessed against the Agent Indemnitees in defending or compromising such action,
together with attorneys' fees and other legal expenses paid or incurred by the
Agent Indemnitees in connection therewith; provided, however, that no Lender
-------- -------
shall be liable to any Agent Indemnitee for any of the foregoing to the extent
that they arise solely from the willful misconduct or gross negligence of such
Agent Indemnitee or any other Agent Indemnitee. In Agent's discretion, Agent
may also reserve for or satisfy any such judgment, decree or order from proceeds
of Collateral prior to any distributions therefrom to or for the account of
Lenders.
12.7. Limitation on Responsibilities of Agent. Agent shall in all cases
---------------------------------------
be fully justified in failing or refusing to act hereunder unless it shall have
received further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.6 hereof against any and all Claims
which may be incurred by Agent by reason of taking or continuing to take any
such action. Agent shall not be liable to Lenders (or any Lender's
participants) for any action lawfully taken or omitted to be taken under or in
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connection with this Agreement or the other DIP Financing Documents except as a
result of actual gross negligence or willful misconduct on the part of Agent.
Agent does not assume any responsibility for any failure or delay in performance
or breach by any Obligor or any Lender of its obligations under this Agreement
or any of the other DIP Financing Documents. Agent does not make to Lenders, and
no Lender makes to Agent or the other Lenders, any express or implied warranty,
representation or guarantee with respect to the Revolver Loans, the Collateral,
the DIP Financing Documents or any Obligor. Agent shall not be responsible to
Lenders, and no Lender shall be responsible to Agent or the other Lenders, for:
(i) any recitals, statements, information, representations or warranties
contained in any of the DIP Financing Documents or in any certificate or other
document furnished pursuant to the terms hereof; (ii) the execution, validity,
genuineness, effectiveness or enforceability of, any of the DIP Financing
Documents; (iii) the validity, genuineness, enforceability, collectibility,
value, sufficiency or existence of any Collateral, or the perfection or priority
of any Lien therein; or (iv) the assets, liabilities, financial condition,
results of operations, business, creditworthiness or legal status of any Obligor
or any Account Debtor. Agent shall have no obligation to any Lender to ascertain
or inquire into the existence of any Default or Event of Default, the observance
or performance by any Obligor of any of the duties or agreements of such Obligor
under any of the DIP Financing Documents or the satisfaction of any conditions
precedent contained in any of the DIP Financing Documents. Agent may consult
with and employ legal counsel, accountants and other experts and shall be
entitled to act upon, and shall be fully protected in any action taken in good
faith reliance upon, any advice given by such experts.
12.8. Successor Agent and Co-Agents.
-----------------------------
12.8.1. Subject to the appointment and acceptance of a successor
Agent as provided below, Agent may resign at any time by giving written notice
thereof to each Lender and Borrower. Upon any such resignation, the Required
Lenders, after prior consultation with (but without having to obtain consent of)
each Lender, shall have the right to appoint a successor Agent which shall be
(i) a Lender, (ii) a United States based Affiliate of a Lender, or (iii) a
commercial bank that is organized under the laws of the United States or of any
State thereof and has a combined capital surplus of at least $100,000,000 (or an
asset based lending affiliate of any such bank) and is reasonably acceptable to
Borrower (and for purposes hereof, any successor to Fleet shall be deemed
acceptable to Borrower). Upon the acceptance by a successor Agent of an
appointment as an Agent hereunder, such successor Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Agent without further act, deed or conveyance, and the retiring Agent
shall be discharged from its duties and obligations hereunder. If a successor
Agent shall not have been appointed within 30 days after Agent's delivery of
written notice of its resignation, then Agent shall have the right to appoint a
successor Agent from the group of existing Lenders, which successor Agent shall
thereupon become the Agent. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 12 (including the provisions of Section
12.6 hereof) shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent. Notwithstanding
anything to the contrary contained in this Agreement, any successor by merger or
acquisition of the stock or assets of Fleet shall continue to be Agent hereunder
unless such successor shall resign in accordance with the provisions hereof.
12.8.2. It is the purpose of this Agreement that there shall be no
violation of any Applicable Law denying or restricting the right of financial
institutions to transact business as agent in any jurisdiction. It is
recognized that, in case of litigation under any of the DIP Financing Documents,
or in case Agent deems that by reason of present or future laws of any
jurisdiction Agent might be prohibited from exercising any of the powers, rights
or remedies granted to Agent or Lenders hereunder or under any of the DIP
Financing Documents or from holding title to or a Lien upon any Collateral or
from taking any other action which may be necessary hereunder or under any of
the DIP Financing Documents, Agent may appoint an additional Person as a
separate collateral agent or co-collateral agent which is not so prohibited from
taking any of such actions or exercising any of such powers, rights or remedies.
If Agent shall appoint an additional Person as
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a separate collateral agent or co-collateral agent as provided above, each and
every remedy, power, right, claim, demand or cause of action intended by any of
the DIP Financing Documents to be exercised by or vested in or conveyed to Agent
with respect thereto shall be exercisable by and vested in such separate
collateral agent or co-collateral agent, but only to the extent necessary to
enable such separate collateral agent or co-collateral agent to exercise such
powers, rights and remedies, and every covenant and obligation necessary to the
exercise thereof by such separate collateral agent or co-collateral agent shall
run to and be enforceable by either of them. Should any instrument from Lenders
be required by the separate collateral agent or co-collateral agent so appointed
by Agent in order more fully and certainly to vest in and confirm to him or it
such rights, powers, duties and obligations, any and all of such instruments
shall, on request, be executed, acknowledged and delivered by Lenders whether or
not a Default or Event of Default then exists. In case any separate collateral
agent or co-collateral agent, or a successor to either, shall die, become
incapable of acting, resign or be removed, all the estates, properties, rights,
powers, duties and obligations of such separate collateral agent or co-
collateral agent, so far as permitted by Applicable Law, shall vest in and be
exercised by the Agent until the appointment of a new collateral agent or
successor to such separate collateral agent or co-collateral agent.
12.9. Consents, Amendments and Waivers.
--------------------------------
12.9.1. No amendment or modification of any provision of this
Agreement shall be effective without the prior written agreement of the Required
Lenders and Borrower, and no waiver of any Default or Event of Default shall be
effective without the prior written consent of the Required Lenders; provided,
--------
however, that, without the prior consent of all Lenders, no waiver of any
- -------
Default or Event of Default shall be effective if the Default or Event of
Default relates to Borrower's failure to observe or perform any covenant that
may not be amended without the unanimous written consent of Lenders as
hereinafter set forth in this Section 12.9.1. Notwithstanding the immediately
preceding sentence, the written agreement of all Lenders shall be required to
effectuate any amendment, modification or waiver that would (a) alter the
provisions of Sections 2.6, 2.7, 2.8, 2.9, 4.5, 4.6, 5.1, 11.3.6 (the last
paragraph), 12, 14.2 or 14.3, the definitions of "Availability Reserve,"
"Borrowing Base" and the other defined terms used in such definition, "Pro
Rata," "Required Lenders" or any provision of this Agreement obligating Agent to
take certain actions at the direction of the Required Lenders, or any provision
of this Agreement regarding the Pro Rata treatment or obligations of Lenders,
(b) increase or otherwise modify any of the Commitments (other than to reduce
proportionately each Lender's Commitment in connection with any overall
reduction in the amount of the Commitments), (c) alter or amend the rate of
interest payable in respect of the Revolver Loans (except as may be expressly
authorized by the DIP Financing Documents or as may be necessary, in Agent's
judgement, to comply with Applicable Law), (d) waive or agree to defer
collection of any fee, termination charge or other charge provided for under any
of the DIP Financing Documents or the unused line fee in Section 2.2.3 hereof,
(e) subordinate the payment of any of the Obligations to any other Debt or the
priority of any Liens granted to Agent under any of the DIP Financing Documents
to Liens granted to any other Person, except pursuant to the Intercreditor
Agreement and except for Liens granted by an Obligor to financial institutions
with respect to amounts on deposit with such financial institutions to cover
returned items, processing and analysis charges and other charges in the
ordinary course of business that relate to Deposit Accounts with such financial
institutions, (f) alter the time or amount of repayment of any of the
Obligations or waive any Event of Default resulting from nonpayment of the
Obligations on the due date thereof (or within any applicable period of grace),
(g) forgive any of the Obligations, except any portion of the Obligations held
by a Lender who consents in writing to such forgiveness, (h) release any Obligor
from liability for any of the Obligations or (i) release any Collateral, except
as currently provided in this Agreement. In no event shall any amendment to the
provisions of Section 1.2 or Section 3.1.3 be effective without the prior
written consent of Fleet. No Lender shall be authorized to amend or modify any
Note held by it unless such amendment or modification is consented to in writing
by all Lenders; provided, however, that the foregoing shall not be construed to
-------- -------
prohibit an amendment or modification to any provision of this Agreement that
may be effected pursuant to this Section 12.9.1 by agreement of
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Borrower and the Required Lenders even though such an amendment or modification
results in an amendment or modification of the Notes by virtue of the
incorporation by reference in each of the Notes of this Agreement. The making of
any Revolver Loans hereunder by any Lender during the existence of a Default or
Event of Default shall not be deemed to constitute a waiver of such Default or
Event of Default. Any waiver or consent granted by Lenders hereunder shall be
effective only if in writing and then only in the specific instance and for the
specific purpose for which it was given.
12.9.2. In connection with any proposed amendment to any of the
DIP Financing Documents or waiver of any of the terms thereof or any Default or
Event of Default thereunder, Borrower shall not solicit, request or negotiate
for or with respect to any such proposed amendment or waiver of any of the
provisions of this Agreement or any of the other DIP Financing Documents unless
each Lender shall be informed thereof by Borrower or Agent (to the extent known
by Agent) and shall be afforded an opportunity of considering the same and
supplied by Borrower with sufficient information to enable it to make an
informed decision with respect thereto. Borrower shall not, directly or
indirectly, pay or cause to be paid any remuneration or other thing of value,
whether by way of supplemental or additional interest, fee or otherwise, to any
Lender (in its capacity as a Lender hereunder) as consideration for or as an
inducement to the consent to or agreement by such Lender with any waiver or
amendment of any of the terms and provisions of this Agreement or any of the
other DIP Financing Documents unless such remuneration or thing of value is
concurrently paid, on the same terms, on a Pro Rata basis to all Lenders.
12.10. Due Diligence and Non-Reliance. Each Lender hereby acknowledges
------------------------------
and represents that it has, independently and without reliance upon Agent or the
other Lenders, and based upon such documents, information and analyses as it has
deemed appropriate, made its own credit analysis of each Obligor and its own
decision to enter into this Agreement, to fund the Revolver Loans to be made by
it hereunder and to purchase participations in the LC Outstandings pursuant to
Section 1.2.2 hereof, and each Lender has made such inquiries concerning the DIP
Financing Documents, the Collateral and each Obligor as such Lender feels
necessary and appropriate, and has taken such care on its own behalf as would
have been the case had it entered into the other DIP Financing Documents without
the intervention or participation of the other Lenders or Agent. Each Lender
hereby further acknowledges and represents that the other Lenders and Agent have
not made any representations or warranties to it concerning any Obligor, any of
the Collateral or with respect to the legality, validity, sufficiency or
enforceability of any of the DIP Financing Documents. Each Lender also hereby
acknowledges that it will, independently and without reliance upon the other
Lenders or Agent, and based upon such financial statements, documents and
information as it deems appropriate at the time, continue to make and rely upon
its own credit decisions in making Revolver Loans and in taking or refraining to
take any other action under this Agreement or any of the other DIP Financing
Documents. Except for notices, reports and other information expressly required
to be furnished to Lenders by Agent hereunder, Agent shall not have any duty or
responsibility to provide any Lender with any notices, reports or certificates
furnished to Agent by any Obligor or any credit or other information concerning
the affairs, financial condition, business or Properties of any Obligor (or any
of its Affiliates) which may come into possession of Agent or any of Agent's
Affiliates.
12.11. Representations and Warranties of Lenders. By its execution of
-----------------------------------------
this Agreement, each Lender hereby represents and warrants to Borrower and the
other Lenders that it has the power to enter into and perform its obligations
under this Agreement and the other DIP Financing Documents, and that it has
taken all necessary and appropriate action to authorize its execution and
performance of this Agreement and the other DIP Financing Documents will be
binding upon it and the obligations imposed upon it herein or therein will be
enforceable against it in accordance with the respective terms of such
documents.
12.12. The Required Lenders. As to any provisions of this Agreement or
--------------------
the other DIP Financing Documents under which action may or is required to be
taken upon direction or approval of the Required Lenders, the direction or
approval of the Required Lenders shall be binding upon each Lender to
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the same extent and with the same effect as if each Lender had joined therein.
Notwithstanding anything to the contrary contained in this Agreement, Borrower
shall not be deemed to be a beneficiary of, or be entitled to enforce, sue upon
or assert as a defense to any of the Obligations, any provisions of this
Agreement that requires Agent or any Lender to act, or conditions their
authority to act, upon the direction or consent of the Required Lenders; and any
action taken by Agent or any Lender that requires the consent or direction of
the Required Lenders as a condition to taking such action shall, insofar as
Borrower is concerned, be presumed to have been taken with the requisite consent
or direction of the Required Lenders.
12.13. Several Obligations. The obligations and commitments of each
-------------------
Lender under this Agreement and the other DIP Financing Documents are several
and neither Agent nor any Lender shall be responsible for the performance by the
other Lenders of its obligations or commitments hereunder or thereunder.
Notwithstanding any liability of Lenders stated to be joint and several to third
Persons under any of the DIP Financing Documents, such liability shall be
shared, as among Lenders, Pro Rata according to the respective Commitments of
Lenders.
12.14. Agent in its Individual Capacity. With respect to its obligation
--------------------------------
to lend under this Agreement, the Revolver Loans made by it and each Note issued
to it, Agent shall have the same rights and powers hereunder and under the other
DIP Financing Documents as any other Lender or holder of a Note and may exercise
the same as though it were not performing the duties specified herein; and the
terms "Lenders," "Required Lenders," or any similar term shall, unless the
context clearly otherwise indicates, include Agent in its capacity as a Lender.
Agent and its Affiliates may each accept deposits, maintain deposits or credit
balances for, invest in, lend money to, act as trustee under indentures of,
serve as financial advisor to, and generally engage in any kind of business with
Borrower or any other Obligor, or any affiliate of Borrower or any other
Obligor, as if it were any other bank and without any duty to account therefor
to the other Lenders.
12.15. No Third Party Beneficiaries. This Section 12 is not intended to
----------------------------
confer any rights or benefits upon Borrower or any other Person except Lenders
and Agent, and no Person (including Borrower) other than Lenders and Agent shall
have any right to enforce any of the provisions of this Section 12, except as
expressly provided in Section 12.17 hereof. As between Borrower and Agent, any
action that Agent may take or purport to take on behalf of Lenders under any of
the DIP Financing Documents shall be conclusively presumed to have been
authorized and approved by Lenders as herein provided.
12.16. Notice of Transfer. Agent may deem and treat a Lender party to
------------------
this Agreement as the owner of such Lender's portion of the Revolver Loans for
all purposes, unless and until a written notice of the assignment or transfer
thereof executed by such Lender has been received by Agent.
12.17. Replacement of Certain Lenders. If a Lender ("Affected Lender")
------------------------------
shall have (i) failed to fund its Pro Rata share of any Revolver Loan requested
by Borrower which such Lender is obligated to fund under the terms of this
Agreement and which such failure has not been cured, (ii) requested compensation
from Borrower under Section 2.7 to recover increased costs incurred by such
Lender (or its parent or holding company) which are not being incurred generally
by the other Lenders (or their respective parents or holding companies), or
(iii) delivered a notice pursuant to Section 2.6 hereof claiming that such
Lender is unable to extend LIBOR Loans to Borrower for reasons not generally
applicable to the other Lenders, then, in any such case and in addition to any
other rights and remedies that Agent, any other Lender or any Borrower may have
against such Affected Lender, Borrower or Agent may make written demand on such
Affected Lender (with a copy to Agent in the case of a demand by Borrower and a
copy to Borrower in the case of a demand by Agent) for the Affected Lender to
assign, and such Affected Lender shall assign pursuant to one or more duly
executed Assignment and Acceptances within 5 Business Days after the date of
such demand, to one or more Lenders willing to accept such assignment or
assignments, or to one or more Eligible Assignees designated by Agent, all of
such Affected Lender's rights and obligations under this Agreement (including
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its Commitments and all Revolver Loans owing to it) in accordance with Section
13 hereof. Agent is hereby irrevocably authorized to execute one or more
Assignment and Acceptances as attorney-in-fact for any Affected Lender which
fails or refuses to execute and deliver the same within 5 Business Days after
the date of such demand. The Affected Lender shall be entitled to receive, in
cash and concurrently with execution and delivery of each such Assignment and
Acceptance, all amounts owed to the Affected Lender hereunder or under any other
DIP Financing Document, including the aggregate outstanding principal amount of
the Revolver Loans owed to such Lender, together with accrued interest thereon
through the date of such assignment. Upon the replacement of any Affected Lender
pursuant to this Section 12.17, such Affected Lender shall cease to have any
participation in, entitlement to, or other right to share in the Liens of Agent
in any Collateral and such Affected Lender shall have no further liability to
Agent, any Lender or any other Person under any of the DIP Financing Documents
(except as provided in Section 12.6 hereof as to events or transactions which
occur prior to the replacement of such Affected Lender), including any
commitment to make loans or purchase participations in LC Outstandings.
12.18. Remittance of Payments and Collections.
--------------------------------------
12.18.1. All payments by any Lender to Agent shall be made not
later than the time set forth elsewhere in this Agreement on the Business Day
such payment is due; provided, however, that if such payment is due on demand by
-------- -------
Agent and such demand is made on the paying Lender after 11:00 a.m. on such
Business Day, then payment shall be made by 11:00 a.m. on the next Business Day.
Payment by Agent to any Lender shall be made by wire transfer, promptly
following Agent's receipt of funds for the account of such Lender and in the
type of funds received by Agent; provided, however, that if Agent receives such
-------- -------
funds at or prior to 1:00 p.m., Agent shall pay such funds to such Lender by
2:00 p.m. on such Business Day, but if Agent receives such funds after 1:00
p.m., Agent shall pay such funds to such Lender by 2:00 p.m. on the next
Business Day.
12.18.2. With respect to the payment of any funds from Agent to a
Lender or from a Lender to Agent, the party failing to make full payment when
due pursuant to the terms hereof shall, on demand by the other party, pay such
amount together with interest thereon at the Federal Funds Rate. In no event
shall Borrower be entitled to receive any credit for any interest paid by Agent
to any Lender, or by any Lender to Agent, at the Federal Funds Rate as provided
herein.
SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS
13.1. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of Borrower, Agent and Lenders and their respective
successors and assigns (which, in the case of Agent, shall include any successor
Agent appointed pursuant to Section 12.8 hereof), except that (i) Borrower shall
not have the right to assign its rights or delegate performance of any of its
obligations under any of the DIP Financing Documents and (ii) any assignment by
any Lender must be made in compliance with Section 13.3 hereof. Agent may treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until such payee complies with Section 13.3 in the case of an assignment thereof
or, in the case of any other transfer, a written notice of the transfer is filed
with Agent. Any assignee or transferee of a Note agrees by acceptance thereof to
be bound by all the terms and provisions of the DIP Financing Documents. Any
request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the holder of a Note, shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
13.2. Participations.
--------------
13.2.1. Permitted Participants; Effect. Any Lender may, in the
------------------------------
ordinary course of its business and in accordance with Applicable Law, at any
time sell to one or more Persons who constitute
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Eligible Assignees (each a "Participant") participating interest in any of the
Obligations owing to such Lender, any Commitment of such Lender or any other
interest of such Lender under any of the DIP Financing Documents. In the event
of any such sale by a Lender of participating interests to a Participant, such
Lender's obligations under the DIP Financing Documents shall remain unchanged,
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the holder of any Note
for all purposes under the DIP Financing Documents, all amounts payable by
Borrower under this Agreement and any of the Notes shall be determined as if
such Lender had not sold such participating interests, and Borrower and Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under the DIP Financing Documents. If a
Lender sells a participation to a Person other than an Affiliate of such Lender,
then such Lender shall give prompt written notice thereof to Borrower and the
other Lenders.
13.2.2. Voting Rights. Each Lender shall retain the sole right to
-------------
approve, without the consent of any Participant, any amendment, modification or
waiver of any provision of the DIP Financing Documents other than an amendment,
modification or waiver with respect to any Revolver Loans or Commitment in which
such Participant has an interest which forgives principal, interest or fees or
reduces the stated interest rate or the stated rates at which fees are payable
with respect to any such Revolver Loan or Commitment, postpones the Commitment
Termination Date, or any date fixed for any regularly scheduled payment of
interest or fees on such Revolver Loan or Commitment, or releases any Obligor
from liability or releases any substantial portion of any of the Collateral,
other than as authorized this Agreement.
13.2.3. Benefit of Set-Off. Borrower agrees that each Participant
------------------
shall be deemed to have the right of set-off provided in Section 11.4 hereof in
respect of its participating interest in amounts owing under the DIP Financing
Documents to the same extent and subject to the same requirements under this
Agreement (including Section 12.5) as if the amount of its participating
interest were owing directly to it as a Lender under the DIP Financing
Documents, provided that each Lender shall retain the right of set-off provided
in Section 11.4 hereof with respect to the amount of participating interests
sold to each Participant. Lenders agree to share with each Participant, and each
Participant by exercising the right of set-off provided in Section 11.4 agrees
to share with each Lender, any amount received pursuant to the exercise of its
right of set-off, such amounts to be shared in accordance with Section 12.5
hereof as if each Participant were a Lender.
13.3. Assignments.
-----------
13.3.1. Permitted Assignments. Any Lender may, in the ordinary
---------------------
course of its business and in accordance with Applicable Law, at any time assign
to any Eligible Assignee all or any part of its rights and obligations under the
DIP Financing Documents, so long as (i) each assignment is of a constant, and
not a varying, ratable percentage of all of the transferor Lender's rights and
obligations under the DIP Financing Documents with respect to the Revolver Loans
and the LC Outstandings and, in the case of a partial assignment, is in a
minimum principal amount of $5,000,000 and integral multiples of $1,000,000 in
excess of that amount; (ii) except in the case of an assignment in whole of a
Lender's rights and obligations under the DIP Financing Documents or an
assignment by one original signatory to this Agreement to another such
signatory, immediately after giving effect to any assignment, the aggregate
amount of the Commitments retained by the transferor Lender shall in no event be
less than $5,000,000; and (iii) the parties to each such assignment shall
execute and deliver to Agent, for its acceptance and recording, an Assignment
and Acceptance. No assignment shall become effective until such time as notice
thereof is given to Borrower and Agent in substantially the form of Exhibit E
---------
attached hereto. Nothing contained herein shall limit in any way the right of
Lenders to assign all or any portion of the Revolver Loans owing to it to any
Federal Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors and any Operating Circular
issued by such Federal Reserve Bank, provided that any payment in respect of
such assigned Revolver Loans made by Borrower to the assigning Lender in
accordance with
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the terms of this Agreement shall satisfy Borrower's obligations hereunder in
respect of such assigned Revolver Loans to the extent of such payment, but no
such assignment shall release the assigning Lender from its obligations
hereunder. Each assignee shall be deemed to have consented and be subject to,
and to be bound by the terms of, all of the DIP Financing Documents, including
the Intercreditor Agreement.
13.3.2. Effect; Effective Date. Upon delivery to Agent of a notice
----------------------
of assignment substantially in the form attached as Exhibit E hereto, together
---------
with any consents required by Section 13.3.1, such assignment shall become
effective on the effective date specified in such notice of assignment. On and
after the effective date of such assignment, such Eligible Assignee shall for
all purposes be a Lender party to the Agreement and any other DIP Financing
Document executed by the Lenders and shall have all the rights and obligations
of Lenders under the DIP Financing Documents to the same extent as if it were an
original party thereto, and no further consent or action by Borrower, Lenders or
Agent shall be required to release the transferor Lender with respect to the
Commitment (or portion thereof) of such Lender and Obligations assigned to such
Eligible Assignee. Upon the consummation of any assignment to an Eligible
Assignee pursuant to this Section 13.3.2, the transferor Lender, Agent and
Borrower shall make appropriate arrangements so that replacement Notes are
issued to such transferor Lender and new Notes or, as appropriate, replacement
Notes, are issued to such Eligible Assignee, in each case in principal amounts
reflecting their respective Commitments, as adjusted pursuant to such
assignment. The transferring Lender shall continue to be entitled to the
benefits of all indemnities applicable to the period prior to the effective date
of the assignment.
13.3.3. Dissemination of Information. Borrower authorizes each
----------------------------
Lender and Agent to disclose to any Participant, any Eligible Assignee or any
other Person acquiring an interest in the DIP Financing Documents by operation
of law (each a "Transferee"), and any prospective Transferee, any and all
information in Agent's or such Lender's possession concerning Borrower, the
Subsidiaries of Borrower or the Collateral, subject to appropriate
confidentiality undertakings on the part of such Transferee.
SECTION 14. MISCELLANEOUS
14.1. Power of Attorney. Borrower hereby irrevocably designates, makes,
-----------------
constitutes and appoints Agent (and all Persons designated by Agent) as
Borrower's true and lawful attorney (and agent-in-fact) and Agent, or Agent's
designee, may, without notice to Borrower and in either Borrower's or Agent's
name, but at the cost and expense of Borrower:
14.1.1. At such time or times as Agent or said designee, in its
sole discretion, may determine, endorse Borrower's name on any Payment Item or
proceeds of the Collateral which come into the possession of Agent or under
Agent's control.
14.1.2. At such time or times upon or after the occurrence of an
Event of Default as Agent or Agent's designee in its sole discretion may
determine: (i) demand payment of the Accounts from the Account Debtors, enforce
payment of the Accounts by legal proceedings or otherwise, and generally
exercise all of Borrower's rights and remedies with respect to the collection of
the Accounts; (ii) settle, adjust, compromise, discharge or release any of the
Accounts or other Collateral or any legal proceedings brought to collect any of
the Accounts or other Collateral; (iii) sell or assign any of the Accounts and
other Collateral upon such terms, for such amounts and at such time or times as
Agent deems advisable; (iv) take control, in any manner, of any item of payment
or proceeds relating to any Collateral; (v) prepare, file and sign Borrower's
name to a proof of claim in bankruptcy or similar document against any Account
Debtor or to any notice of lien, assignment or satisfaction of Lien or similar
document in connection with any of the Collateral; (vi) receive, open and
dispose of all mail addressed to Borrower and to notify postal authorities to
change the address for delivery thereof to such address as Agent may designate;
(vii) endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Agent on
account of the Obligations; (viii) endorse the name of
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Borrower upon any chattel paper, document, instrument, invoice, freight bill,
bill of lading or similar document or agreement relating to any Accounts or
Inventory of any Obligor and any other Collateral; (ix) use Borrower's
stationery and sign the name of Borrower to verifications of the Accounts and
notices thereof to Account Debtors; (x) use the information recorded on or
contained in any data processing equipment and computer hardware and software
relating to the Accounts, Inventory and any other Collateral; (xi) make and
adjust claims under policies of insurance; and (xii) do all other acts and
things necessary, in Agent's determination, to fulfill Borrower's obligations
under this Agreement.
14.2. General Indemnity. Borrower hereby agrees to indemnify and defend
-----------------
the Indemnitees and to hold the Indemnitees harmless from and against any Claim
ever suffered or incurred by any of the Indemnitees arising out of or related to
this Agreement or any of the other DIP Financing Documents, the performance by
Agent or Lenders of their duties or the exercise of any of their rights or
remedies hereunder, or the result of Borrower's failure to observe, perform or
discharge any of Borrower's duties hereunder. Borrower shall also indemnify and
defend the Indemnitees against and save the Indemnitees harmless from all Claims
of any Person arising out of, related to, or with respect to any transactions
entered into pursuant to this Agreement or Agent's Lien upon the Collateral.
Without limiting the generality of the foregoing, these indemnities shall extend
to any Claims asserted against any of the Indemnitees by any Person under any
Environmental Laws or similar laws by reason of Borrower's or any other Person's
failure to comply with laws applicable to solid or hazardous waste materials or
other toxic substances. Additionally, if any Taxes (excluding Taxes imposed upon
or measured solely by the net income of Agent and Lenders, but including, any
intangibles tax, stamp tax, recording tax or franchise tax) shall be payable by
Agent, Lender or any Obligor on account of the execution or delivery of this
Agreement, or the execution, delivery, issuance or recording of any of the other
DIP Financing Documents, or the creation or repayment of any of the Obligations
hereunder, by reason of any Applicable Law now or hereafter in effect, Borrower
shall pay (or will promptly reimburse Agent and Lenders for the payment of) all
such Taxes, including any interest and penalties thereon, and will indemnify and
hold Indemnitees harmless from and against liability in connection therewith.
The foregoing indemnities shall not apply to protect any of the Indemnitees for
the consequences of their own gross negligence or willful misconduct.
14.3. Survival of All Indemnities. Notwithstanding anything to the
---------------------------
contrary in this Agreement or any of the other DIP Financing Documents, the
obligation of Borrower and each Lender with respect to each indemnity given by
it in this Agreement, whether given by Borrower to Agent Indemnitees, Lender
Indemnitees or Fleet Indemnitees or by any Lender to any Agent Indemnitees or
Fleet Indemnitees, shall survive the payment in full of the Obligations and the
termination of any of the Commitments.
14.4. Indulgences Not Waivers. Agent's or any Lender's failure at any
-----------------------
time or times hereafter, to require strict performance by Borrower of any
provision of this Agreement shall not waive, affect or diminish any right of
Agent or any Lender thereafter to demand strict compliance and performance
therewith.
14.5. Modification of Agreement. This Agreement may not be modified,
-------------------------
altered or amended, except by an agreement in writing signed by Borrower, Agent
and Lenders (or, where otherwise allowed by Section 12 hereof, the Required
Lenders); provided, however, that no consent, written or otherwise, of Borrower
-------- -------
shall be necessary or required in connection with any amendment of any of the
provisions of Section 12 (other than Section 12.17) or any other provision of
this Agreement that affects only the rights, duties and responsibilities of
Lenders and Agent as among themselves so long as no such amendment imposes any
additional obligations on Borrower.
14.6. Severability. Wherever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective only to the
extent of
50
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such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
14.7. Cumulative Effect; Conflict of Terms. To the fullest extent
------------------------------------
permitted by Applicable Law, the provisions of the Other Agreements and the
Security Documents are hereby made cumulative with the provisions of this
Agreement. Except as otherwise provided in any of the other DIP Financing
Documents by specific reference to the applicable provision of this Agreement,
if any provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other DIP Financing Documents,
the provision contained in this Agreement shall govern and control.
14.8. Execution in Counterparts. This Agreement and any amendments hereto
-------------------------
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which counterparts taken together shall
constitute but one and the same instrument.
14.9. Agent's or Required Lenders' Consent. Whenever Agent's, Lenders' or
------------------------------------
Required Lenders' consent is required to be obtained under this Agreement or any
of the other DIP Financing Documents as a condition to any action, inaction,
condition or event, Agent and each Lender shall be authorized to give or
withhold its consent in its sole and absolute discretion and to condition its
consent upon the giving of additional collateral security for the Obligations,
the payment of money or any other matter.
14.10. Notices. All notices, requests and demands to or upon a party
-------
hereto shall be in writing and shall be sent by certified or registered mail,
return receipt requested, personal delivery against receipt or by telecopier or
other facsimile transmission and shall be deemed to have been validly served,
given or delivered when delivered against receipt or 3 Business Days after
deposit in the U.S. mail, certified mail postage prepaid, or, in the case of
facsimile transmission, when received (if on a Business Day and, if not received
on a Business Day, then on the next Business Day after receipt) at the office
where the noticed party's telecopier is located, in each case addressed to the
noticed party at the address shown for such party on the signature page hereof
or, in the case of a Person who becomes a Lender after the date hereof, at the
address shown on the Assignment and Acceptance by which such Person became a
Lender. Any written notice or demand that is not sent in conformity with the
provisions hereof shall nevertheless be effective on the date that such notice
is actually received by the noticed party.
14.11. Time of Essence. Time is of the essence of this Agreement, the
---------------
Other Agreements and the Security Documents.
14.12. Entire Agreement; Appendix A, Exhibits and Schedules. This
----------------------------------------------------
Agreement and the other DIP Financing Documents, together with all other
instruments, agreements and certificates executed by the parties in connection
therewith or with reference thereto, embody the entire understanding and
agreement between the parties hereto and thereto with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings and
inducements, whether express or implied, oral or written. Appendix A, each of
the Exhibits and each of the Schedules attached hereto are incorporated into
this Agreement and by this reference made a part hereof.
14.13. Interpretation. No provision of this Agreement or any of the other
--------------
DIP Financing Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
14.14. Obligations of Lenders Several. The obligations of each Lender
------------------------------
hereunder are several, and no Lender shall be responsible for the obligations or
Commitment of any other Lender. Nothing contained
51
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in this Agreement and no action taken by Lenders pursuant hereto shall be deemed
to constitute the Lenders to be a partnership, association, joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and each Lender shall be entitled, to
the extent not otherwise restricted hereunder, to protect and enforce its rights
arising out of this Agreement and any of the other DIP Financing Documents and
it shall not be necessary for Agent or any other Lender to be joined as an
additional party in any proceeding for such purpose.
14.15. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Georgia.
14.16. Waivers by Borrower. To the fullest extent permitted by Applicable
-------------------
Law, Borrower waives (i) the right to trial by jury (which Agent and each Lender
hereby also waives) in any action, suit, proceeding or counterclaim of any kind
arising out of or related to any of the DIP Financing Documents, the Obligations
or the Collateral; (ii) presentment, demand and protest and notice of
presentment, protest, default, non payment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Agent on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Agent may do in this regard; (iii) notice prior
to taking possession or control of the Collateral or any bond or security which
might be required by any court prior to allowing Agent to exercise any of
Agent's remedies; (iv) the benefit of all valuation, appraisement and exemption
laws; and (v) notice of acceptance hereof. Borrower acknowledges that the
foregoing waivers are a material inducement to Agent's and Lender's entering
into this Agreement and that Agent and Lenders are relying upon the foregoing
waivers in its future dealings with Borrower. Borrower warrants and represents
that it has reviewed the foregoing waivers with its legal counsel and has
knowingly and voluntarily waived its jury trial rights following consultation
with legal counsel. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court in which such litigation is brought.
14.17. Not an "Alabama" Transaction. Borrower, Agent and Lenders
----------------------------
expressly acknowledge and agree that (i) Borrower's obligations hereunder were
not issued in the State of Alabama and none of the DIP Financing Documents were
entered into or delivered in the State of Alabama, and (ii) the transactions
contemplated by this Agreement and the related documents are intended to be
transactions in interstate commerce within the meaning of the Constitution of
the United States of America. If, notwithstanding the foregoing, any court of
competent jurisdiction should reach a contrary conclusion, Borrower hereby
expressly waives, disclaims and agrees not to assert or otherwise seek to invoke
any right, remedy or option under or as a result of any Applicable Law relating
to the transacting of business in Alabama. Each Borrower further acknowledges
and agrees that it cannot require the Agent or any Lender to perform any of its
obligations hereunder in the State of Alabama, other than the obligation to
terminate or release Liens upon the Collateral after indefeasible payment in
full of the Obligations.
IN WITNESS WHEREOF, this Agreement has been duly executed in Atlanta,
Georgia, on the day and year specified at the beginning of this Agreement.
BORROWER:
--------
GULF STATES STEEL, INC. OF ALABAMA
By:___________________________________
Title:_____________________________
Address:
52
<PAGE>
174 South 26th Street
Gadsden, Alabama 35904
Attention: President
Telecopier No.: (205) 543-6218
--------------
LENDERS:
-------
FLEET CAPITAL CORPORATION
Commitment: $32,500,000 By:____________________________________
Title:______________________________
LIBOR Lending Office:
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Attention: Office Head
Telecopier No.: (860) 657-7759
--------------
CONGRESS FINANCIAL CORPORATION
Commitment: $32,500,000 By:____________________________________
Title:______________________________
LIBOR Lending Office:
One Post Office Square
Boston, Massachusetts 02109
Attention: Mr. John Husson
Telecopier No.: (617) 338-1497
--------------
AGENT:
-----
FLEET CAPITAL CORPORATION, as Agent
By:____________________________________
Title:______________________________
Address:
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Attention: Office Head
Telecopier No.: (860) 657-7759
--------------
53
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APPENDIX A
GENERAL DEFINITIONS
When used in the Post-Petition Loan and Security Agreement dated July 1,
1999 (as at any time amended, the "Agreement"), by and among GULF STATES STEEL,
INC. OF ALABAMA ("Borrower"), an Alabama corporation and a Chapter 11 debtor-in-
possession; the various financial institutions listed on the signature pages
thereto and their respective successors and assigns which become "Lenders" as
provided therein (such financial institutions and their respective successors
and assigns referred to collectively herein as "Lenders," and individually as a
"Lender"), and FLEET CAPITAL CORPORATION, in its capacity as Agent for itself
and the Lenders (in such capacity, "Agent"), the following terms shall have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
Acceptable Plan - a Reorganization Plan which provides for payment in
---------------
full of all of the Obligations and any then outstanding Pre-Petition Debt
(including the securing with Cash Collateral of any LC Outstandings) on the
effective date of such Reorganization Plan, provides for an effective date
no later than 45 days after the date of entry of the Confirmation Order
with respect to such Reorganization Plan, and provides for a full and
complete release of any and all Claims that either Borrower or the Estate
might have or assert against Agent or any Lender, or which is otherwise
acceptable to Agent and each Lender, in their sole and absolute discretion.
Account - a right to payment for goods sold or leased or for services
-------
rendered that is not evidenced by an Instrument or Chattel Paper, whether
or not any such right to payment has been earned by performance.
Account Debtor - any Person who is or may become obligated under or on
--------------
account of an Account.
Accounts Formula Amount - on any date of determination thereof, an
-----------------------
amount equal to 85% of the net amount of Eligible Accounts on such date.
As used herein, the phrase "net amount of Eligible Accounts" shall mean the
face amount of such Accounts on any date less any and all returns, rebates,
discounts (which may, at Agent's option, be calculated on shortest terms),
credits, allowances or Taxes (including sales, excise or other taxes) at
any time issued, owing, claimed by Account Debtors, granted, outstanding or
payable in connection with, or any interest accrued on the amount of, such
Accounts at such date.
Adjusted LIBOR Rate - with respect to each Interest Period for a LIBOR
-------------------
Loan, an interest rate per annum (rounded upwards, to the next 1/16th of
1%) equal to the quotient of (a) the LIBOR Rate in effect for such Interest
Period, divided by (b) a percentage (expressed as a decimal) equal to 100%,
minus Statutory Reserves.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
---------
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with, another Person; (ii) which
beneficially owns or holds 10% or more of any class of the Equity Interests
of another Person; or (iii) 10% or more of the Equity Interests of which is
beneficially owned or held by another Person or a Subsidiary of another
Person.
Agent Indemnitees - Agent in its capacity as agent hereunder and all
-----------------
of Agent's officers, directors and agents.
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Agreement - the Post-Petition Loan and Security Agreement referred to
---------
in the first sentence of this Appendix A, all Exhibits and Schedules
thereto and this Appendix A.
Applicable Law - all laws, rules and regulations applicable to the
--------------
Person, conduct, transaction, covenant or DIP Financing Documents in
question, including all applicable common law and equitable principles; all
provisions of all applicable state and federal constitutions, statutes,
rules, regulations and orders of governmental bodies; and orders, judgments
and decrees of all courts and arbitrators.
Assignment and Acceptance - an assignment and acceptance entered into
-------------------------
by a Lender and an Eligible Assignee and accepted by Agent, in the form of
Exhibit D.
---------
Availability - on any date, an amount equal to the difference derived
------------
when the sum of the principal amount of Revolver Loans then outstanding
(including any amounts that Agent or Lenders may have paid for the account
of Borrower pursuant to any of the DIP Financing Documents and that have
not been reimbursed by Borrower and any outstanding Settlement Loans) is
subtracted from the Borrowing Base on such date. If the amount outstanding
is equal to or greater than the Borrowing Base, Availability is 0.
Availability Reserve - on any date of determination thereof, an amount
--------------------
equal to the sum of the following (without duplication): (i) the amount of
the Pre-Petition Debt outstanding as of the opening of business on such
date (excluding the amount of any Pre-Petition Debt to be satisfied on the
Closing Date); (ii) a reserve for general Inventory shrinkage that is
determined by Agent from time to time in its reasonable credit judgment
based upon Borrower's historical losses due to such shrinkage; (iii) any
amount that Borrower is obligated to pay pursuant to the provisions of any
of the DIP Financing Documents that Agent or Lenders elect to pay for the
account of Borrower in accordance with authority contained in any of the
DIP Financing Documents; (iv) all amounts of past due rent or other charges
owing at such time by Borrower to any landlord of any premises where any of
the Collateral is located; (v) the Professional Expense Reserve; (vi) a
reserve in the amount of monthly charges due from time to time to the
Alabama State Docks Department; (vii) the Inventory Reserve; (viii) the LC
Reserve; (ix) such additional reserves as Agent may, in its sole credit
judgment, determine to be appropriate from time to time; and (x) for so
long as any Event of Default exists, such additional reserves as Agent, in
its sole and absolute discretion, may elect to impose from time to time,
without waiving any such Event of Default or Agent's entitlement to
accelerate the maturity of the Obligations as a consequence thereof.
Average Loan Balance - for any period, the amount obtained by adding
--------------------
the unpaid balances of the Obligations and Pre-Petition Debt outstanding at
the end of each day during the period in question and by dividing such sum
by the number of days in such period.
Avoidance Claim - any claim that could be asserted by or on behalf of
---------------
Borrower or the Estate against a Person under 11 U.S.C. (S)(S) 544, 546,
547, 548, 549, 550 or 553.
Bank - Fleet National Bank and its successors and assigns.
----
Bankruptcy Code - title 11 of the United States Code.
---------------
Base Rate - the rate of interest announced or quoted by Bank from time
---------
to time as its prime rate, which rate might not be the lowest rate charged
by Bank; and, if such prime rate for commercial loans is discontinued by
Bank as a standard, a comparable reference rate designated by Bank as a
substitute therefor shall be the Base Rate.
55
<PAGE>
Base Rate Loan - a Revolver Loan, or portion thereof, during any
--------------
period in which it bears interest at a rate based upon the Base Rate.
Board of Governors - the Board of Governors of the Federal Reserve
------------------
Board.
Borrowing - a borrowing consisting of Revolver Loans made on the same
---------
day by Lenders (or by Fleet in the case of a Borrowing funded by Settlement
Loans).
Borrowing Base - on any date of determination thereof, an amount equal
--------------
to the lesser of: (a) the aggregate amount of the Commitments on such date
minus the sum of all Pre-Petition Debt outstanding on such date (excluding
any Pre-Petition Debt to be satisfied on the Closing Date with the proceeds
of Revolver Loans) and LC Outstandings on such date, or (b) an amount equal
to (i) the sum of the Accounts Formula Amount and the Inventory Formula
Amount on such date, minus (ii) the Availability Reserve on such date.
Borrowing Base Certificate - a certificate, in the form requested by
--------------------------
Agent, by which Borrower shall certify to Agent and Lenders, with such
frequency as Agent may request, the amount of the Borrowing Base as of the
date of the certificate and the calculation of such amount.
Budget - that certain cash expense budget prepared by Borrower and
------
attached to the DIP Motion or the Interim Financing Order, as such budget
may be modified or supplemented from time to time with Agent's and each
Lender's written consent.
Business Day - any day excluding Saturday, Sunday and any day which is
------------
a legal holiday under the laws of the State of Georgia or is a day on which
banking institutions located in such state are closed; provided, however,
-------- -------
that when used with reference to a LIBOR Loan (including the making,
continuing, prepaying or repaying of any LIBOR Loan), the term "Business
Day" shall also exclude any day on which banks are not open for dealings in
Dollar deposits on the London interbank market.
Capital Expenditures - expenditures made for the acquisition of any
--------------------
fixed assets or improvements, replacements, substitutions or additions
thereto which have a useful life of more than one year, including the total
principal portion of Capitalized Lease Obligations.
Capitalized Lease Obligation - any Debt represented by obligations
----------------------------
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.
Cash Collateral - cash or Cash Equivalents, and any interest earned
---------------
thereon, that is deposited with Agent in accordance with the Agreement for
the Pro Rata benefit of Lenders as security for the Obligations to the
extent provided in the Agreement.
Cash Collateral Account - a demand deposit, money market or other
-----------------------
account established by Agent at such financial institution as Agent may
select in its discretion, which account shall be in Agent's name and
subject to Agent's Liens for the Pro Rata benefit of Lenders.
Cash Equivalents - (i) marketable direct obligations issued or
----------------
unconditionally guaranteed by the United States government and backed by
the full faith and credit of the United States government having maturities
of not more than 12 months from the date of acquisition; (ii) domestic
certificates of deposit and time deposits having maturities of not more
than 12 months from the date of acquisition, bankers' acceptances having
maturities of not more than 12 months from the date of
56
<PAGE>
acquisition and overnight bank deposits, in each case issued by any
commercial bank organized under the laws of the United States, any state
thereof or the District of Columbia, which at the time of acquisition are
rated A-1 (or better) by Standard & Poor's Corporation or P-1 (or better)
by Moody's Investors Services, Inc., and (unless issued by a Lender) not
subject to offset rights in favor of such bank arising from any banking
relationship with such bank; (iii) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in
clauses (i) and (ii) entered into with any financial institution meeting
the qualifications specified in clause (ii) above; and (iv) commercial
paper having at the time of investment therein or a contractual commitment
to invest therein a rating of A-1 (or better) by Standard & Poor's
Corporation or P-1 (or better) by Moody's Investors Services, Inc., and
having a maturity within 9 months after the date of acquisition thereof.
CERCLA - the Comprehensive Environmental Response Compensation and
------
Liability Act, 42 U.S.C. (S) 9601 et seq. and its implementing regulations.
Chapter 11 Case - as defined in the Recitals hereto.
---------------
Chattel Paper - shall have the meaning ascribed to the term "chattel
-------------
paper" in the UCC.
Claims - any and all claims, demands, liabilities, obligations,
------
losses, damages, penalties, actions, judgments, suits, awards, remedial
response, costs, expenses or disbursements of any kind or nature whatsoever
(including reasonable attorneys', accountants' or consultants' fees and
expenses), whether (in the case of Borrower) arising under or in connection
with the DIP Financing Documents, or the Term Lender Documents, under any
Applicable Law (including any Environmental Law) or otherwise, that may now
or hereafter be suffered or incurred by a Person.
Closing Date - the date on which all of the conditions precedent in
------------
Section 10.1 of the Agreement are satisfied and the initial Revolver Loans
are made under the Agreement.
Collateral - all of the Property and interests in Property of Borrower
----------
that are described in Section 6 of the Agreement, and all other Property
and interests in Property that now or hereafter secure the payment and
performance of any of the Obligations, whether or not such Property or
interest in Property was existing or acquired by Borrower prior to or after
the Petition Date.
Commitment - at any date for any Lender, the obligation of such Lender
----------
to make Revolver Loans and to purchase participations in LC Outstandings
pursuant to the terms and conditions of the Agreement, which shall not
exceed the principal amount set forth opposite such Lender's name under the
heading "Commitment" on the signature pages hereof or the signature page of
the Assignment and Acceptance by which it became a Lender, as modified from
time to time pursuant to the terms of the Agreement or to give effect to
any applicable Assignment and Acceptance; and "Commitments" means the
aggregate principal amount of the Commitments of all Lenders, the maximum
amount of which shall be $65,000,000.
Commitment Termination Date - the date that is the soonest to occur
---------------------------
of: (i) the last day of the DIP Term; (ii) the effective date of any
Acceptable Plan or the date of entry of a Confirmation Order with respect
to any other Reorganization Plan; (iii) the sale of all or substantially
all of the Collateral; (iv) the date Agent terminates the DIP Facility
pursuant to Section 5.2.1 of the Agreement, or (v) the date on which
Borrower elects to terminate the Agreement pursuant to Section 5.2.2 of the
Agreement.
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Committee - a creditors' or equity security holders' committee
---------
appointed in the Chapter 11 Case by the Bankruptcy Administrator or Court.
Confirmation Order - an order entered by the Court confirming a
------------------
Reorganization Plan.
Congress - Congress Financial Corporation, a Delaware corporation.
--------
Consolidated EBITDA - with respect to any Person for any period, the
-------------------
consolidated net income of such Person for such period, plus (i) without
duplication, the sum of the following amounts of such Person and its
Subsidiaries for such period and to the extent deducted in determining
consolidated net income of such Person for such period: (a) Consolidated
Net Interest Expense, (b) income tax expense, (c) depreciation expense, and
(d) amortization expense, and (e)(i) extraordinary or unusual non-cash
losses and other losses from sales of assets other than Inventory sold in
the ordinary course of business less (ii) extraordinary or unusual non-cash
gains and other gains from sales of assets other than Inventory sold in the
ordinary course of business.
Consolidated Net Interest Expense - with respect to any Person for any
---------------------------------
period, gross interest expense of such Person and its Subsidiaries for such
period determined in conformity with GAAP (including interest expense paid
to Affiliates of such Person), less (i) the sum of (a) interest income for
such period and (b) gains for such period on Hedging Agreements (to the
extent not included in interest income above and to the extent not deducted
in the calculation of such gross interest expense), plus (ii) the sum of
(A) losses for such period on Hedging Agreements (to the extent not
included in such gross interest expense) and (B) the upfront costs or fees
for such period associated with Hedging Agreements (to the extent not
included in gross interest expense), each determined on a consolidated
basis and in accordance with GAAP for such Person and its Subsidiaries.
Court - as defined in the Recitals hereto.
-----
Current Assets - at any date, the amount at which all of the current
--------------
assets of a Person would be properly classified as current assets shown on
a balance sheet at such date, in accordance with GAAP, except that amounts
due from Affiliates and investments in Affiliates shall be excluded
therefrom.
Debt - as applied to a Person means, without duplication: (i) all
----
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such
Person as of the date as of which Debt is to be determined, including
Capitalized Lease Obligations; (ii) all obligations of other Persons which
such Person has guaranteed; (iii) all reimbursement obligations in
connection with letters of credit or letter of credit guaranties issued for
the account of such Person; and (iv) in the case of Borrower (without
duplication), the Obligations.
Default - an event or condition the occurrence of which would, with
-------
the lapse of time or the giving of notice, or both, become an Event of
Default.
Default Rate - a variable rate per annum which, on any date, is equal
------------
to the Base Rate in effect on such date plus 2%.
Deposit Account - a demand, time, savings, passbook, money market or
---------------
other depository account, or a certificate of deposit, maintained by
Borrower with any bank, savings and loan association, credit union or other
depository institution.
58
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DIP Facility - the $65,000,000 credit facility established by Agent
------------
and Lenders in favor of Borrower pursuant to Section 1.1 hereof pursuant to
which the Commitments are established.
DIP Financing Documents - the Agreement, the Other Agreements and the
-----------------------
Security Documents and any and all other agreements, instruments and
documents now or hereafter executed by Borrower in favor of Agent and
Lenders with respect to any of the transactions contemplated by the
Agreement.
DIP Motion - the Motion of Borrower for approval of the financing
----------
under the DIP Facility pursuant to the Agreement.
DIP Orders - means the Interim Financing Order and the Final Financing
----------
Order.
DIP Term - a period commencing on the date of entry of the Interim
--------
Financing Order and ending on the last day of the first Loan Year.
Distribution - in respect of any entity, (i) any payment of any
------------
dividends or other distributions on Equity Interests of the entity (except
distributions in such Equity Interests) and (ii) any purchase, redemption
or other acquisition or retirement for value of any Equity Interests of the
entity or any Affiliate of the entity unless made contemporaneously from
the net proceeds of the sale of Equity Interests.
Document - shall have the meaning ascribed to the term "document" in
--------
the UCC.
Dollars and the sign $ - lawful money of the United States of America.
----------------------
Dominion Account - a special account of Agent established by Borrower
----------------
at a bank selected by Borrower, but acceptable to Agent and Lenders in
their discretion, and over which Agent shall have sole and exclusive access
and control for withdrawal purposes.
Eligible Account - an Account arising in the ordinary course of
----------------
Borrower's business from the sale of goods that is payable in Dollars and
which Agent, in its sole credit judgment, deems to be an Eligible Account.
Without limiting the generality of the foregoing, no Account shall be an
Eligible Account (unless otherwise agreed to by Lenders and Agent in their
sole discretion) if: (i) it arises out of a sale made by Borrower to a
Subsidiary or an Affiliate of Borrower or to a Person controlled by an
Affiliate of Borrower; (ii) it is unpaid for more than 60 days after the
original due date shown on the invoice; (iii) it is due or unpaid more than
90 days after the original invoice date; (iv) 25% or more of the Accounts
from the Account Debtor are not deemed Eligible Accounts hereunder; (v) the
total unpaid Accounts of the Account Debtor exceed 15% of the net amount of
all Eligible Accounts or exceeds a credit limit established by Agent for
such Account Debtor, in each case to the extent of such excess; (vi) any
covenant, representation or warranty contained in the Agreement with
respect to such Account has been breached; (vii) the Account Debtor is also
Borrower's creditor or supplier, or the Account Debtor has disputed
liability with respect to such Account, or the Account Debtor has made any
claim with respect to any other Account due from such Account Debtor to
Borrower, or the Account otherwise is or may become subject to any right of
setoff, counterclaim, reserve or chargeback, provided that the Accounts of
such Account Debtor shall be ineligible only to the extent of such offset,
counterclaim, disputed amount, reserve or chargeback; (viii) an Insolvency
Proceeding has been commenced by or against the Account Debtor or the
Account Debtor has failed, suspended business or ceased to be Solvent; (ix)
it arises from a sale to an Account Debtor with its principal office,
assets or place of business outside the United States, unless the sale is
backed by an irrevocable letter of credit that is issued or confirmed by a
59
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bank acceptable to Agent that is in form and substance acceptable to Agent
and payable in the full amount of the Account in freely convertible Dollars
at a place of payment within the United States, and, if requested by Agent,
such letter of credit (or right to payment thereunder) is assigned to
Lender; (x) it arises from a sale to the Account Debtor on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or any other
repurchase or return basis; (xi) the Account Debtor is the United States of
America or any department, agency or instrumentality thereof, unless
Borrower assigns its right to payment of such Account to Lender, in a
manner satisfactory to Agent, so as to comply with the Assignment of Claims
Act of 1940 (31 U.S.C. (S)3727 and 41 U.S.C. (S)15), or is a state, county
or municipality, or a political subdivision or agency thereof and
Applicable Law disallows or restricts an assignment of Accounts on which it
is the Account Debtor; (xii) the Account Debtor is located in New Jersey,
Minnesota or any other state imposing similar conditions on the right of a
creditor to collect accounts receivable unless Borrower has either
qualified to transact business in such state as a foreign entity or filed a
Notice of Business Activities Report or other required report with the
appropriate officials in those states for the then current year; (xiii) the
Account Debtor is located in a state in which such Borrower is deemed to be
doing business under the laws of such state and which denies creditors
access to its courts in the absence of qualification to transact business
in such state or of the filing of any reports with such state, unless
Borrower has qualified as a foreign entity authorized to transact business
in such state or has filed all required reports; (xiv) the Account is
subject to a Lien other than a Permitted Lien; (xv) the goods giving rise
to such Account have not been delivered to and accepted by the Account
Debtor or the Account otherwise does not represent a final sale; (xvi) the
Account is evidenced by Chattel Paper or an Instrument of any kind, or has
been reduced to judgment; (xvii) Borrower has made any agreement with the
Account Debtor for any deduction therefrom, except for discounts or
allowances which are made in the ordinary course of business for prompt
payment and which discounts or allowances are reflected in the calculation
of the face value of each invoice related to such Account; or (xviii)
Borrower has made an agreement with the Account Debtor to extend the time
of payment thereof.
Eligible Assignee - a Lender or a U.S. based Affiliate of a Lender; a
-----------------
commercial bank organized under the laws of the United States or any state
and having total assets in excess of $10 billion or an asset based lending
affiliate of any such bank; a finance company, insurance company, or any
other financial institution that is acceptable to Agent and Lenders and
that, in the ordinary course of business, extends credit of the type
evidenced by the Notes and has total assets in excess of $10 billion; so
long as no Event of Default exists, any other Person approved by Agent,
Lenders and Borrower; and, at any time that an Event of Default exists, any
other Person approved by Agent and Lenders.
Eligible Inventory - such Inventory of Borrower (other than packaging
------------------
materials, labels and supplies) which Agent, in its sole credit judgment,
deems to be Eligible Inventory. Without limiting the generality of the
foregoing, no Inventory shall be Eligible Inventory (except as otherwise
agreed by Agent and Lenders in their sole discretion) unless: (i) it is raw
materials, finished goods or work-in-process that is, in Agent's opinion,
readily marketable in its current form; (ii) it is in good, new and
saleable condition; (iii) it is not slow-moving, obsolete or
unmerchantable; (iv) it meets all standards imposed by any Governmental
Authority; (v) it conforms in all respects to the warranties and
representations set forth in the Agreement; (vi) it is at all times subject
to Agent's duly perfected, first priority security interest and no other
Lien except a Permitted Lien; and (vii) it is in Borrower's possession and
control, situated at a Borrower owned or leased location in compliance with
the Agreement and is not in transit or outside the continental United
States.
Environmental Laws - all federal, state and local laws, rules,
------------------
regulations, ordinances, programs, permits, guidance documents promulgated
by regulatory agencies, orders and consent
60
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decrees relating to human health and safety or the protection or pollution
of the environment, including CERCLA.
Environmental Release - a release as defined in CERCLA or under any
---------------------
applicable Environmental Law.
Equipment - shall have the meaning ascribed to the term "equipment" in
---------
the UCC.
Equity Interest - the interest of a shareholder in a corporation, a
---------------
partner (whether general or limited) in a partnership (whether general,
limited or limited liability), a member in a limited liability company, or
any other Person having any other form of equity security.
ERISA - the Employee Retirement Income Security Act of 1974 and all
-----
rules and regulations from time to time promulgated thereunder.
Estate - the estate created in each of the Chapter 11 Case pursuant to
------
11 U.S.C. (S) 541(a).
Event of Default - as defined in Section 11 of the Agreement.
----------------
Extraordinary Expenses - all costs, expenses, fees, and advances which
----------------------
Agent may suffer or incur, whether prior to or after the occurrence of an
Event of Default, on account of or in connection with (i) the repossession,
storage, repair, appraisal, insuring, completion of the manufacture of,
preparing for sale, advertising for sale, selling, collecting or otherwise
preserving or realizing upon any Collateral; (ii) the defense of Agent's
Lien upon any Collateral or the priority thereof or any adverse claim with
respect to the Revolver Loans, the DIP Financing Documents or the
Collateral asserted by any Person; (iii) the settlement or satisfaction of
any Liens upon any Collateral (whether or not such Liens are Permitted
Liens); (iv) the collection of any of the Obligations; (v) the negotiation,
documentation, and closing of any restructuring or forbearance agreement
with respect to the DIP Financing Documents or Obligations; (vi) amounts
advanced by Agent pursuant to Section 7.1.3 of the Agreement; (vii) the
enforcement of any of the provisions of any of the DIP Financing Documents;
or (viii) any payment under indemnity or other payment agreement provided
by Agent to any financial institution in connection with any Dominion
Account. Such costs, expenses and advances may include transfer fees,
taxes, storage fees, insurance costs, permit fees, utility reservation and
standby fees, legal fees, appraisal fees, brokers' fees and commissions,
auctioneers' fees and commissions, accountants' fees, environmental study
fees, wages and salaries paid to employees of Borrower or independent
contractors in liquidating any Collateral, travel expenses, all other fees
and expenses payable or reimbursable by Borrower under any of the DIP
Financing Documents, and all other fees and expenses associated with the
enforcement of rights or remedies under any of the DIP Financing Documents,
but excluding compensation paid to employees (including inside legal
counsel who are employees) of Agent.
Federal Funds Rate - for any period, a fluctuating interest rate per
------------------
annum equal for each date during such period to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business
Day) in Atlanta, Georgia by the Federal Reserve Bank of Atlanta, or if such
rate is not so published for any day which is a Business Day, the average
of the quotations for such day on such transactions received by Agent from
3 federal funds brokers of recognized standing selected by Agent.
Final Financing Order - an order to be entered by the Court as to
---------------------
which no stay has been entered and which has not been vacated, modified or
overturned; is in form and substance
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substantially similar to the Interim Financing Order and is otherwise
acceptable to Lenders; and authorizes the incurrence by Borrower of post-
petition secured and superpriority indebtedness under the DIP Facility in
accordance with this Agreement and the other DIP Financing Documents.
Fiscal Quarter - each consecutive period of 13 weeks beginning on the
--------------
first day of a Fiscal Year (and, in the case of any Fiscal Year of 53
weeks, the 14-week period occurring at the end thereof).
Fiscal Year - the fiscal year of Borrower and its Subsidiaries for
-----------
accounting and tax purposes, which ends on October 31 of each year.
Fleet - Fleet Capital Corporation, a Rhode Island corporation, and its
-----
successors and assigns.
Fleet Indemnities - Fleet and all of its present and future officers,
-----------------
directors and agents.
Funding Account - an account established by Borrower for receipt of
---------------
proceeds of Revolver Loans or such other account as Borrower may specify in
writing.
GAAP - generally accepted accounting principles in the United States
----
of America in effect from time to time.
General Intangible - shall have the meaning ascribed to the term
------------------
"general intangible" in the UCC, but shall exclude any general intangibles
constituting "Term Loan Lender Exclusive Collateral" under (and as defined
in) the Intercreditor Agreement.
Governmental Approvals - means all authorizations, consents,
----------------------
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all Governmental Authorities.
Governmental Authority - any federal, state, municipal, national or
----------------------
other governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case
whether associated with a state of the United States, the District of
Columbia or a foreign entity or government.
Hedging Agreement - any interest rate, foreign currency, commodity or
-----------------
equity swap, coller, cap, floor or forward rate agreement, or other
agreement or arrangement designed to protect against fluctuations in
interest rates or currency, commodity or equity values (including any
option with respect to any of the foregoing and any combination of the
foregoing agreements or arrangements), and any confirmation executed in
connection with any such agreement or arrangement.
Indemnified Amount - the amount of any loss, cost, expenses or damages
------------------
suffered or incurred by Indemnitees and against which Lenders and/or
Borrower have agreed to indemnify such Indemnitees pursuant to the terms of
the Agreement or any of the other DIP Financing Documents.
Indemnitees - the Agent Indemnitees, the Fleet Indemnitees and the
-----------
Lender Indemnitees.
Indenture - the Indenture dated as of April 21, 1995, between Borrower
---------
and the Indenture Trustee.
Indenture Trustee - State Street Bank and Trust Company, and any other
-----------------
Persons hereafter serving as successor trustee under the Indenture.
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Initial Projections - the projected monthly balance sheets, income
-------------------
statements and statements of cash flow of Borrower for the period from July
1, 1999 through October 31, 2000, and projected annual balance sheets,
income statements and statements of cash flow of Borrower for the Fiscal
Years ending July 1, 1999 through October 31, 2000, in each case as
certified by a Senior Officer to Agent and Lenders.
Insolvency Proceeding - any action, case or proceeding commenced by or
---------------------
against a Person, or any agreement of such Person, for (a) the entry of an
order for relief under any chapter of the Bankruptcy Code or other
insolvency or debt adjustment law (whether state, federal or foreign), (b)
the appointment of a receiver, trustee, liquidator or other custodian for
such Person or any part of its Property, (c) an assignment or trust
mortgage for the benefit of creditors of such Person, or (d) the
liquidation, dissolution or winding up of the affairs of such Person.
Instrument - shall have the meaning ascribed to the term "instrument"
----------
in the UCC.
Intellectual Property - Property constituting under any Applicable Law
---------------------
a patent, patent application, copyright, trademark, service mark, tradename
or mask work, or license or other right to use any of the foregoing.
Intercreditor Agreement - the Intercreditor Agreement to be entered
-----------------------
into between Agent and Term Lender, pursuant to which, among other things,
the respective priorities of the Liens granted by Borrower in favor of Term
Lender and Agent in the Collateral shall be established.
Interim Financing Order - the order entered by the court pursuant to
-----------------------
Section 364(c) and (d) of the Bankruptcy Code and Bankruptcy Rule 4001(c),
authorizing Borrower to incur, during the Interim Period, post-petition
secured and superpriority indebtedness under the DIP Facility in accordance
with the Agreement and affording adequate protection of the Liens in favor
of Agent under the Pre-Petition Loan Documents, to be in form and substance
satisfactory to Agent and Lenders.
Interim Period - the period commencing upon entry of the Interim
--------------
Financing Order and ending on the entry of the Final Financing Order.
Interest Period - shall have the meaning ascribed to it in Section
---------------
2.1.3 of the Agreement.
Inventory - shall have the meaning ascribed to "inventory" in the UCC
---------
and shall include, in the case of Borrower, all goods intended for sale or
lease by Borrower, or for display or demonstration; all work in process;
all raw materials and other materials and supplies of every nature and
description used or which might be used in connection with the manufacture,
printing, packing, shipping, advertising, selling, leasing or furnishing of
such goods or otherwise used or consumed in Borrower's business; and all
Documents evidencing and General Intangibles relating to any of the
foregoing, whether now owned or hereafter acquired by Borrower.
Inventory Formula Amount - on any date of determination thereof, an
------------------------
amount equal to the lesser of (i) $40,000,000 or (ii) 64% of the Value of
Eligible Inventory on such date.
Inventory Reserve - for so long as the percentage rate of advance
-----------------
under the Inventory Formula Amount is greater than 60%, an amount equal to
$2,500,000.
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LC Application - an application by Borrower to Bank, on a form
--------------
approved by Bank, for the issuance of a Letter of Credit, with Fleet as a
co-applicant, that is submitted to Bank at least 5 Business Days prior to
the requested issuance of such Letter of Credit.
LC Conditions - the following conditions, the satisfaction of each of
-------------
which is required before Fleet shall be obligated to join in the execution
of an LC Application in connection with a request to Bank for the issuance
of a Letter of Credit: (i) each of the conditions set forth in Section 10
of the Agreement has been and continues to be satisfied, including the
absence of any Default or Event of Default; (ii) after giving effect to the
issuance of the requested Letter of Credit and all other unissued Letters
of Credit for which an LC Application has been signed by Fleet, the LC
Outstandings would not exceed $2,000,000 and no Out-of-Formula Condition
would exist, and, if no Revolver Loans are outstanding, the LC Outstandings
do not, and would not upon the issuance of the requested Letter of Credit,
exceed the Borrowing Base; (iii) the expiry date of the Letter of Credit
does not extend beyond the earlier to occur of 365 days from the date of
issuance or the 10th Business Day prior to the last Business Day of the DIP
Term; and (iv) the currency in which payment is to be made under the Letter
of Credit is Dollars.
LC Documents - any and all agreements, instruments and documents
------------
(other than an LC Application or an LC Support) required by Bank or other
issuer of a Letter of Credit to be executed by Borrower or any other Person
and delivered to Bank or such issuer for the issuance of a Letter of
Credit.
LC Facility - a subfacility of the $65,000,000 DIP Facility consisting
-----------
of LC Outstandings in an aggregate amount not to exceed $2,000,000.
LC Outstandings - on any date of determination thereof, an amount (in
---------------
Dollars) equal to the sum of (i) all amounts then due and payable by any
Obligor on such date by reason of any payment made on or before such date
by Fleet under any LC Support plus (ii) the aggregate undrawn amount of all
Letters of Credit then outstanding or to be issued by Bank under an LC
Application theretofore submitted to Bank.
LC Request - a request from Borrower to Fleet, in the form required by
----------
Fleet, for Fleet to procure a Letter of Credit for Borrower's account
pursuant to the LC Facility.
LC Reserve - at any date, 100% of all LC Outstandings on such date
----------
arising from standby Letters of Credit and 40% of all LC Outstandings on
such date arising from documentary Letters of Credit, but excluding LC
Outstandings that are fully secured by Cash Collateral.
LC Support - a guaranty or other support agreement from Fleet in favor
----------
of Bank pursuant to which Fleet shall guarantee or otherwise assure the
payment or performance by the parties (other than Fleet) to an LC
Application of such parties' obligations with respect to such Letter of
Credit, including the obligation of such parties to reimburse Bank for any
payment made by Bank under such Letter of Credit.
Lender Indemnitee - a Lender in its capacity as a lender under the
-----------------
Agreement and its present and future officers, directors and agents.
Lenders - Fleet and any other Person who may from time to time become
-------
a "Lender" under the Agreement, and their respective successors and
permitted assigns.
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Letter of Credit - any letter of credit issued by Bank for the account
----------------
of Borrower, whether issued prior to or after the Petition Date.
LIBOR Lending Office - with respect to each Lender, the office
--------------------
designated as a LIBOR Lending Office for such Lender on the signature page
hereof (or on any Assignment and Acceptance, in the case of an assignee)
and such other office of such Lender or any of its Affiliates that is
hereafter designated by written notice to Agent.
LIBOR Loan - a Revolver Loan, or portion thereof, during any period in
----------
which it bears interest at a rate based upon the applicable Adjusted LIBOR
Rate.
LIBOR Rate - with respect to an Interest Period, the rate per annum
----------
determined by Fleet at which deposits of Dollars equal to or comparable to
the amount of the LIBOR Loan to which such Interest Period relates and for
a term comparable to such Interest Period are offered to Bank by prime
banks in the London interbank foreign currency deposits market at
approximately 11:00 a.m., London time, two (2) Business Days prior to the
first day of such Interest Period. Each determination by Fleet of any
LIBOR Rate shall, in the absence of any manifest error, be final,
conclusive and binding.
Lien - any interest in Property securing an obligation owed to, or a
----
claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien"
shall also include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of the
Agreement, Borrower shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
Loan Account - the loan account established by each Lender on its
------------
books pursuant to Section 4.7.1 of the Agreement.
Loan Year - a period commencing each calendar year on the same month
---------
and day as the date of the Agreement and ending on the same month and day
in the immediately succeeding calendar year, with the first such period
(i.e., the first Loan Year) to commence on the date of the Agreement.
---
Major Default - an Event of Default of a type described in Sections
-------------
11.1.1, 11.1.3, 11.1.8 or 11.1.11 of the Agreement.
Material Adverse Effect - the effect of any event or condition which,
-----------------------
alone or when taken together with other events or conditions occurring or
existing concurrently therewith, (i) has a material adverse effect upon the
business, operations, Properties or condition (financial or otherwise) of
any Obligor; (ii) has or may be reasonably expected to have any material
adverse effect whatsoever upon the validity or enforceability of the
Agreement or any of the other DIP Financing Documents; (iii) has any
material adverse effect upon the value of the whole or any material part of
the Collateral, the Liens of Agent with respect to the Collateral or the
priority of any such Liens; (iv) materially impairs the ability of any
Obligor to perform its obligations under the Agreement or any of the other
DIP Financing Documents, including repayment of any of the Obligations when
due; or (v) materially impairs the ability of Agent to enforce or collect
the Obligations or realize upon any of the Collateral in accordance with
the DIP Financing Documents and Applicable Law.
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Maximum Rate - the maximum non-usurious rate of interest permitted by
------------
Applicable Law that at any time, or from time to time, may be contracted
for, taken, reserved, charged or received on the Debt in question or, to
the extent that at any time Applicable Law may thereafter permit a higher
maximum non-usurious rate of interest, then such higher rate.
Notwithstanding any other provision hereof, the Maximum Rate shall be
calculated on a daily basis (computed on the actual number of days elapsed
over a year of 365 or 366 days, as the case may be).
Money Borrowed - means, as applied to any Person, (i) Debt arising
--------------
from the lending of money by any other Person to such Person; (ii) Debt,
whether or not in any such case arising from the lending of money by
another Person to such Person, (A) which is represented by notes payable or
drafts accepted that evidence extensions of credit, (B) which constitutes
obligations evidenced by bonds, debentures, notes or similar instruments,
or (C) upon which interest charges are customarily paid (other than
accounts payable) or that was issued or assumed as full or partial payment
for Property; (iii) Debt that constitutes a Capitalized Lease Obligation;
(iv) reimbursement obligations with respect to letters of credit or
guaranties of letters of credit and (v) Debt of such Person under any
guaranty of obligations that would constitute Debt for Money Borrowed under
clauses (i) through (iii) hereof, if owed directly by such Person.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3)
------------------
of ERISA.
Net Proceeds - proceeds (including cash receivable (when received) by
------------
way of deferred payment) received by Borrower from the sale, lease,
transfer or other disposition of any Property, including insurance proceeds
and awards of compensation received with respect to the destruction or
condemnation of all or part of such Property, net of: (i) the reasonable
and customary costs of such sale, lease, transfer or other disposition; and
(ii) amounts applied to repayment of Debt (other than the Obligations)
secured by a Permitted Lien on the Property disposed of that is senior to
Lender's Liens.
Notes - each Revolver Note and any other promissory note executed by
-----
Borrower at Agent's request to evidence any of the Obligations.
Notice of Borrowing - as defined in Section 3.1.1(i) of the Agreement.
-------------------
Notice of Conversion/Continuation - as defined in Section 2.1.2(ii) of
---------------------------------
the Agreement.
Obligations -all debts, liabilities, obligations, covenants and duties
-----------
now or at any time or times hereafter owing by Borrower to Agent or any
Lender, whether arising pursuant to this Agreement or any of the other DIP
Financing Documents and whether direct or indirect, absolute or contingent,
due or to become due, primary or secondary, or joint or several, including
all Revolver Loans and LC Outstandings and all interest payable in
connection therewith and all other sums chargeable to or payable by
Borrower under any of the DIP Financing Documents, or Applicable Law
Obligor - Borrower and any other Person that is at any time liable for
-------
the payment of the whole or any part of the Obligations.
Other Agreements - the Notes, the Intercreditor Agreement, and any and
----------------
all agreements, instruments and documents (other than the Agreement and the
Security Documents), heretofore, now or hereafter executed by Borrower, any
other Obligor or any other Person and delivered to Agent or any Lender in
respect of the transactions contemplated by the Agreement.
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Out-of-Formula Condition - as defined in Section 1.1.2 of the
------------------------
Agreement.
Out-of-Formula Loan - a Revolver Loan made when an Out-of-Formula
-------------------
Condition exists or the amount of any Revolver Loan which, when funded,
results in an Out-of-Formula Condition.
Participating Lender - as defined in Section 1.2.2(i).
--------------------
Payment Account - an account maintained by Agent (currently at Harris
---------------
Bank & Trust in Chicago, Illinois) to which all monies from time to time
deposited to a Dominion Account shall be transferred and all other payments
shall be sent in immediately available federal funds.
Payment Items - all checks, drafts, or other items of payment payable
-------------
to Borrower, including proceeds of any of the Collateral.
Pending Revolver Loans - at any date, the aggregate principal amount
----------------------
of all Revolver Loans which have been requested in any Notice of Borrowing
received by Agent but which have not theretofore been advanced by Agent or
Lenders.
Permitted Liens - any Lien of a kind specified in Section 9.2.2 of the
---------------
Agreement.
Permitted Purchase Money Debt - Purchase Money Debt of Borrower and
-----------------------------
its Subsidiaries, which is secured by no Lien or only by a Purchase Money
Lien and so long as the aggregate amount of such Purchase Money Debt
incurred after the Petition Date and outstanding at any time does not
exceed $2,000,000. For the purposes of this definition, the principal
amount of any Purchase Money Debt consisting of capitalized leases shall be
computed as a Capitalized Lease Obligation.
Person - an individual, partnership, corporation, limited liability
------
company, limited liability partnership, joint stock company, land trust,
business trust, or unincorporated organization, or a government or agency
or political subdivision thereof.
Petition Date - July 1, 1999.
-------------
Plan - an employee benefit plan now or hereafter maintained for
----
employees of Borrower that is covered by Title IV of ERISA.
Pre-Petition Debt - all indebtedness, liabilities and obligations that
-----------------
are owed by Borrower to Agent or any Lender on the Petition Date and that
arise under any of the Pre-Petition Loan Documents, whether direct or
indirect, absolute or contingent or due or to become due, including all
interest thereon accruing after the Petition Date and all legal fees and
collection expenses heretofore or hereafter incurred in collecting any of
such indebtedness.
Pre-Petition Loan Agreement - as defined in the Recitals to this
---------------------------
Agreement.
Pre-Petition Loan Documents - the Pre-Petition Loan Agreement and all
---------------------------
instruments, agreements, pledges, assignments and other documents executed
in connection therewith or with reference thereto or to evidence or secure
payment of the whole or any part of the Pre-Petition Debt.
Preferred Supplier Continuous Credit Program - the program described
--------------------------------------------
in Exhibit G attached to the Agreement.
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Preferred Supplier Payable - a Debt owed by Borrower on the Petition
--------------------------
Date to a supplier of goods or services to Borrower that agrees to supply
goods or services to Borrower after the Petition Date on credit terms
pursuant to the Preferred Supplier Continuous Credit Program and that are
determined by the Court in a final order to justify Borrower's making
payments to such supplier on account of its pre-petition Debt in amounts
and at such time intervals as are approved in such order.
Pro Rata - a share of or in all Revolver Loans, payments, proceeds,
--------
collections, Collateral and Extraordinary Expenses, which share for any
Lender on any date shall be a percentage arrived at by dividing the amount
of the Commitment of such Lender on such date by the aggregate amount of
the Commitments of all Lenders on such date.
Professional Expense Advances - Revolver Loans made after the
-----------------------------
Commitment Termination Date pursuant to Section 1.1.3 of the Agreement for
the purpose described therein.
Professional Expense Escrow - the escrow to be established by Borrower
---------------------------
pursuant to the DIP Orders for the deposit of Revolver Loan proceeds to be
used for the purpose of paying Professional Expenses.
Professional Expense Reserve - on any date of determination thereof,
----------------------------
an amount equal to the sum of $250,000.
Professional Expenses - the fees and reimbursable expenses of a
---------------------
Professional Person.
Professional Person - a Person who is an attorney, accountant,
-------------------
appraiser, auctioneer or other professional person and who is retained,
with Court approval, by (i) Borrower pursuant to Section 327 of the
Bankruptcy Code, (ii) a Committee pursuant to Section 1103(a) of the Code,
or (iii) the Indenture Trustee if authorized by the DIP Orders or other
order of the Court to receive payments from the Professional Expense
Escrow, or (iv) an unofficial committee of holders of notes issued pursuant
to the Indenture if and for so long as the Indenture Trustee is a member of
such committee.
Properly Contested - in the case of any Debt of Borrower (including
------------------
any Taxes) that is not paid as and when due or payable by reason of
Borrower's bona fide dispute concerning its liability to pay same or
concerning the amount thereof, (i) such Debt and any Liens securing same
are being properly contested in good faith by appropriate proceedings
promptly instituted and diligently conducted; (ii) Borrower has established
appropriate reserves as shall be required in conformity with GAAP, (iii)
the non-payment of such Debt will not have a Material Adverse Effect and
will not result in a forfeiture of any assets of Borrower; (iv) no Lien is
imposed upon any of Borrower's assets with respect to such Debt unless such
Lien is at all times junior and subordinate in priority to the Liens in
favor of Agent (except only with respect to property Taxes that have
priority as a matter of applicable state law) and enforcement of such Lien
is stayed during the period prior to the final resolution or disposition of
such dispute; (v) if the Debt results from or is determined by the entry,
rendition or issuance against Borrower or any of its assets of a judgment,
writ, order or decree, such judgment, writ, order or decree is stayed or
bonded pending a timely appeal or other judicial review; and (vi) if such
contest is abandoned, settled or determined adversely to Borrower, Borrower
forthwith pays such Debt and all penalties and interest in connection
therewith.
Property - any interest in any kind of property or asset, whether
--------
real, personal or mixed, or tangible or intangible.
Purchase Money Debt - means and includes (i) Debt (other than the
-------------------
Obligations) for the payment of all or any part of the purchase price of
any fixed assets, (ii) any Debt (other than
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the Obligations) incurred at the time of or within 10 days prior to or
after the acquisition of any fixed assets for the purpose of financing all
or any part of the purchase price thereof, and (iii) any renewals,
extensions or refinancings thereof, but not any increases in the principal
amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
-------------------
Money Debt, but only if such Lien shall at all times be confined solely to
the fixed assets acquired through the incurrence of the Purchase Money Debt
secured by such Lien and such Lien constitutes a purchase money security
interest under the UCC.
Regulation D - Regulation D of the Board of Governors.
------------
Register - the register maintained by Agent in accordance with Section
--------
4.7.2 of the Agreement.
Reimbursement Date - shall have the meaning ascribed to it in Section
------------------
1.2.1(iii).
Reorganization Plan - a plan of reorganization proposed by Borrower or
-------------------
any other Person (including Agent or any Lender) in the Chapter 11 Case.
Reportable Event - any of the events set forth in Section 4043(b) of
----------------
ERISA.
Required Lenders - at any date of determination thereof, Lenders
----------------
having Commitments representing at least 66-2/3% of the aggregate
Commitments at such time; provided, however, that if any Lender shall be in
-------- -------
breach of any of its obligations hereunder to Borrower or Agent, including
any breach resulting from its failure to honor its Commitment in accordance
with the terms of this Agreement, then, for so long as such breach
continues, the term "Required Lenders" shall mean Lenders (excluding each
Lender that is in breach of its obligations hereunder) having Commitments
representing at least 66-2/3% of the aggregate Commitments at such time;
provided further, however, that if the Commitments have been terminated,
-------- ------- -------
the term "Required Lenders" shall mean Lenders (excluding each Lender that
is in breach of its obligations under the Agreement) holding Revolver Loans
(including, in the case of Fleet, Settlement Loans) representing at least
66-2/3% of the aggregate principal amount of Revolver Loans (including
Settlement Loans) outstanding at such time.
Restricted Investment - any acquisition of Property by Borrower or any
---------------------
of its Subsidiaries in exchange for cash or other Property, whether in the
form of an acquisition of Equity Interests or indebtedness or obligations,
or the purchase or acquisition by Borrower or any of its Subsidiaries of
any other Property, or a loan, advance, capital contribution or
subscription, except acquisitions of the following: (a) fixed assets to be
used in the business of Borrower or any of its Subsidiaries so long as the
acquisition costs thereof constitute Capital Expenditures permitted
hereunder; (b) goods held for sale or lease or to be used in the
manufacture of goods or the provision of services by Borrower or any of its
Subsidiaries in the ordinary course of business; (c) Current Assets arising
from the sale or lease of goods or the rendition of services in the
ordinary course of business of Borrower or any of its Subsidiaries; (d)
investments in Subsidiaries of Borrower to the extent existing on the
Closing Date; and (e) Cash Equivalents.
Revolver Loan - a Revolver Loan made by Lenders as provided in Section
-------------
1.1 of the Agreement or a Settlement Loan funded solely by Fleet.
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<PAGE>
Revolver Note - a Revolver Note to be executed by Borrower in favor of
-------------
each Lender in the form of Exhibit A attached hereto, which shall be in the
---------
face amount of such Lender's Commitment and which shall evidence all
Revolver Loans made by such Lender to Borrower pursuant to the Agreement.
Schedule of Accounts - as defined in Section 7.2.1 of the Agreement.
--------------------
SEC - the Securities Exchange Commission.
---
Security - shall have the same meaning as in Section 2(1) of the
--------
Securities Act of 1933.
Security Documents - any and all other instruments and agreements now
------------------
or at any time hereafter securing the whole or any part of the Obligations.
Senior Officer - the chairman of the board of directors, the president
--------------
or the chief financial officer of, or in-house legal counsel to, Borrower.
Settlement Date - as defined in Section 3.1.3(i) of the Agreement.
---------------
Settlement Loan - as defined in Section 3.1.3(ii) of the Agreement.
---------------
Settlement Report - a report delivered by Agent to Lenders summarizing
-----------------
the amount of the outstanding Revolver Loans as of the Settlement Date and
the calculation of the Borrowing Base as of such Settlement Date.
Solvent - as to any Person, such Person (i) owns Property whose fair
-------
saleable value is greater than the amount required to pay all of such
Person's Debts (including contingent debts), (ii) is able to pay all of its
Debts as such Debts mature, (iii) has capital sufficient to carry on its
business and transactions and all business and transactions in which it is
about to engage; and (iv) is not "insolvent" within the meaning of Section
101(32) of the Bankruptcy Code.
Statutory Reserves - on any date, the percentage (expressed as a
------------------
decimal) established by the Board of Governors which is the then stated
maximum rate for all reserves (including any emergency, supplemental or
other marginal reserve requirements) applicable to any member bank of the
Federal Reserve System in respect to Eurocurrency Liabilities (or any
successor category of liabilities under Regulation D). Such reserve
percentage shall include, without limitation, those imposed pursuant to
said Regulation D. The Statutory Reserve shall be adjusted automatically
on and as of the effective date of any change in such percentage.
Subordinated Debt - Debt of Borrower that is fully and absolutely
-----------------
subordinated in right of payment to the Obligations in a manner
satisfactory to Agent.
Subsequent Projections - projections which update and revise the
----------------------
Initial Projections, in form and substance satisfactory to Agent and
Lenders.
Subsidiary - any Person a majority of the Equity Interests of which is
----------
at the time owned, directly or indirectly, by another Person or by one or
more other Subsidiaries or by such other Person and one or more other
Subsidiaries.
Taxes - any present or future taxes, levies, imposts, duties, fees,
-----
assessments, deductions, withholdings or other charges of whatever nature,
including income, receipts, excise, property, sales, use, transfer,
license, payroll, withholding, social security and franchise taxes now or
hereafter
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<PAGE>
imposed or levied by the United States, or any state, local or foreign
government or by any department, agency or other political subdivision or
taxing authority thereof or therein and all interest, penalties, additions
to tax and similar liabilities with respect thereto, but excluding, in the
case of each Lender, taxes imposed on or measured by the net income or
overall gross receipts of such Lender.
Term Lender - Abelco Finance LL, a Delaware limited liability company,
-----------
and each other Person who may become a lender under the Term Lender
Documents.
Term Lender Documents - all instruments and agreements at any time
---------------------
executed by Borrower in favor or, or entered into by Borrower with, the
Term Lender to evidence or secure the payment of any Debt of Borrower to
Term Lender for Money Borrowed, in accordance with and as approved by order
of the Court.
Transferee - as defined in Section 13.3.3 of the Agreement.
----------
Type - the type of a Revolver Loan, which shall be either a LIBOR Loan
----
or a Base Rate Loan.
UCC - the Uniform Commercial Code (or any successor statute) as
---
adopted and in force in the State of Georgia or, when the laws of any other
state govern the method or manner of the creation or perfection of any
security interest in any of the Collateral, the Uniform Commercial Code (or
any successor statute) of such state.
Value - with reference to the value of Eligible Inventory, value
-----
determined on the basis of the lower of cost or market of such Eligible
Inventory, with the cost thereof calculated on a first-in, first-out basis.
Accounting Terms. Unless otherwise specified herein, all terms of an
----------------
accounting character used in the Agreement shall be interpreted, all accounting
determinations under the Agreement shall be made, and all financial statements
required to be delivered under the Agreement shall be prepared in accordance
with GAAP, applied on a basis consistent with the most recent audited
Consolidated financial statement of Borrower and its Subsidiaries heretofore
delivered to Agent and Lenders and using the same method for inventory valuation
as used in such audited financial statements, except for any change in which
Borrower's independent public accountants concur or as required by GAAP unless
(i) Borrower shall have objected to determining such compliance on such basis at
the time of delivery of such financial statements or (ii) Agent or any Lender
shall so object in writing within 30 days after the 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. In the event of any change
in GAAP that occurs after the date of the Agreement and that is material to
Borrower, Agent and Lenders shall the right to require either that conforming
adjustments be made to any financial covenants set forth in the Agreement, or
the components thereof, that are affected by such change or that Borrower
reports its financial condition based on GAAP as in effect immediately prior to
the occurrence of such change.
Other Terms. All other terms contained in the Agreement shall have,
-----------
when the context so indicates, the meanings provided for by the UCC to the
extent the same are used or defined therein.
Certain Matters of Construction. The terms "herein," "hereof" and
-------------------------------
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. In the computation of periods of time
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<PAGE>
from a specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding." The
section titles, table of contents and list of exhibits appear as a matter of
convenience only and shall not affect the interpretation of the Agreement. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations; to any of the DIP Financing
Documents shall include any and all amendment or modifications thereto and any
and all restatements, extensions or renewals thereof; to any Person shall mean
and include the successors and permitted assigns of such Person; to "including"
and "include" shall be understood to mean "including, without limitation;" to
the time of day shall mean the time of day on the day in question in Atlanta,
Georgia, unless otherwise expressly provided in the Agreement; and to any
Property of Borrower shall mean and include all Property of the Estate. A
Default or an Event of Default shall be deemed to exist at all times during the
period commencing on the date that such Default or Event of Default occurs to
the date on which such Default or Event of Default is waived in writing pursuant
to this Agreement or, in the case of a Default, is cured within any period of
cure expressly provided in this Agreement; and an Event of Default shall
"continue" or be "continuing" until such Event of Default has been waived in
writing by Lenders. Whenever the phrase "to the best of Borrower's knowledge"
or words of similar import relating to the knowledge or the awareness of
Borrower are used herein, such phrase shall mean and refer to (i) the actual
knowledge of a Senior Officer of Borrower or (ii) the knowledge that a Senior
Officer would have obtained if they had engaged in good faith and the diligent
performance of their duties, including the making of such reasonable specific
inquiries as may be necessary of the officers, employees or agents of Borrower
and a good faith attempt to ascertain the existence or accuracy of the matter to
which such phrase relates.
IN WITNESS WHEREOF, this Appendix has been duly executed in Atlanta,
Georgia, on July 1, 1999.
BORROWER:
--------
GULF STATES STEEL, INC. OF ALABAMA
By:____________________________________
Title:________________________________
Address:
174 South 26th Street
Gadsden, Alabama 35904
Attention: President
Telecopier No.: (205) 543-6218
--------------
[Signatures continued on following page]
72
<PAGE>
LENDERS:
-------
FLEET CAPITAL CORPORATION
Commitment: $32,500,000 By:____________________________________
Title:______________________________
LIBOR Lending Office:
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Attention: Office Head
Telecopier No.: (860) 657-7759
--------------
CONGRESS FINANCIAL CORPORATION
Commitment: $32,500,000 By:____________________________________
Title:______________________________
LIBOR Lending Office:
One Post Office Square
Boston, Massachusetts 02109
Attention: Mr. John Husson
Telecopier No.: (617) 338-1497
--------------
AGENT:
-----
FLEET CAPITAL CORPORATION,
as Agent
By:____________________________________
Title:_________________________________
Address:
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Attention: Office Head
Telecopier No.: (860) 657-7759
--------------
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<PAGE>
EXHIBIT A
---------
FORM OF REVOLVER NOTE
U.S. $32,500,000.00 _______, 1999
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, GULF STATES STEEL, INC. OF ALABAMA, an
Alabama corporation ("Borrower"), hereby unconditionally promises to pay to the
order of ____________________________________ (herein, together with any
subsequent holder hereof, called the "Lender") the principal sum of THIRTY-TWO
MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($32,500,000.00) or such lesser
sum as may constitute Lender's Pro Rata share of the outstanding principal
amount of all Revolver Loans pursuant to the terms of the Loan Agreement
referred to below on the date on which such outstanding principal amounts become
due and payable pursuant to Section 4.2 of the Loan Agreement (as defined
below), in strict accordance with the terms thereof. Borrower likewise
unconditionally promises to pay to Lender interest from and after the date
hereof on Lender's Pro Rata share of the outstanding principal amount of
Revolver Loans at such interest rates, payable at such times, and computed in
such manner as are specified in Section 2.1 of the Loan Agreement, in strict
accordance with the terms thereof.
This Revolver Note ("Note") is issued pursuant to, and is one of the
"Revolver Notes" referred to in, the Post-Petition Loan and Security Agreement
dated July 1, 1999 (as the same may be amended from time to time, the "Loan
Agreement"), among Borrower, Fleet Capital Corporation, as agent (in such
capacity, the "Agent") for the financial institutions from time to time parties
thereto as lenders ("Lenders"), and such Lenders, and Lender is and shall be
entitled to all benefits thereof and of all DIP Financing Documents executed and
delivered in connection therewith. The provisions of the Loan Agreement are
incorporated herein by this reference. All capitalized terms used herein,
unless otherwise defined herein, shall have the meanings ascribed to such terms
in the Loan Agreement.
The repayment of the principal balance of this Note is subject to the
provisions of Section 4.2 of the Loan Agreement. The entire unpaid principal
balance and all accrued interest on this Note shall be due and payable
immediately upon the termination of the Commitments as set forth in Section 5.2
of the Loan Agreement.
All payments of principal and interest shall be made in Dollars in
immediately available funds as specified in the Loan Agreement.
Upon or after the occurrence of an Event of Default and for so long as such
Event of Default exists, the principal balance and all accrued interest of this
Note may be declared due and payable in the manner and with the effect provided
in the Loan Agreement, and the unpaid principal balance hereof shall bear
interest at the Default Rate as and when provided in Section 2.1.5 of the Loan
Agreement. Borrower agrees to pay, and save Lender harmless against, any
liability for the payment of, all costs and expenses, including, but not limited
to, reasonable attorneys' fees, arising in connection with the enforcement by
Lender of any of its rights under this Note, the Loan Agreement or any of the
other DIP Financing Documents.
All principal amounts of Revolver Loans made by Lender to Borrower pursuant
to the Loan Agreement, and all accrued and unpaid interest thereon, shall be
deemed outstanding under this Note and shall continue to be owing by Borrower in
accordance with the terms of this Note and the Loan Agreement.
In no contingency or event whatsoever, whether by reason of advancement of
the proceeds hereof or otherwise, shall the amount paid or agreed to be paid to
Lender for the use, forbearance or detention of money advanced hereunder exceed
the highest lawful rate permissible under any law which a court of competent
jurisdiction may deem applicable hereto; and, in the event of any such payment
inadvertently paid by Borrower or inadvertently received by Lender, such excess
sum shall be, at Borrower's option, returned to Borrower forthwith or credited
as a payment of principal, but shall not be applied to the payment of interest.
It is the intent hereof that Borrower not pay or contract to pay, and that
Lender not receive or
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<PAGE>
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by Borrower under Applicable Law.
Time is of the essence of this Note. To the fullest extent permitted by
Applicable Law, Borrower, for itself and its legal representatives, successors
and assigns, expressly waives presentment, demand, protest, notice of dishonor,
notice of non-payment, notice of maturity, notice of protest, presentment for
the purpose of accelerating maturity, diligence in collection, and the benefit
of any exemption or insolvency laws.
Wherever possible each provision of this Note shall be interpreted in such
a manner as to be effective and valid under Applicable Law, but if any provision
of this Note shall be prohibited or invalid under Applicable Law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or remaining provisions of this
Note. No delay or failure on the part of Lender in the exercise of any right or
remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise by Lender of any right or
remedy preclude any other right or remedy. Lender, at its option, may enforce
its rights against any Collateral securing this Note without enforcing its
rights against Borrower, any guarantor of the indebtedness evidenced hereby or
any other property or indebtedness due or to become due to Borrower. Borrower
agrees that, without releasing or impairing Borrower's liability hereunder,
Lender may at any time release, surrender, substitute or exchange any Collateral
securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.
The rights and obligations of Lender and Borrower hereunder shall be
construed in accordance with and governed by the laws (without giving effect to
the conflict of law principles thereof) of the State of Georgia. This Note is
intended to take effect as an instrument under seal under Georgia law.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed and
delivered in Atlanta, Georgia, by its duly authorized officer on the date first
above written.
GULF STATES STEEL, INC. OF ALABAMA
("Borrower")
By: _____________________________________
Title:_______________________________
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<PAGE>
EXHIBIT B
---------
Form of Notice of Conversion/Continuation
-----------------------------------------
Date ______________,______
Fleet Capital Corporation, as Agent
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Attention: Loan Administration Officer
- ---------
Re: Post-Petition Loan and Security Agreement dated July 1, 1999, by and
among Gulf States Steel, Inc. of Alabama, Fleet Capital Corporation,
as agent for certain Lenders from time to time parties thereto, and
such Lenders (as at any time amended, the "Loan Agreement")
Gentlemen:
This Notice of Conversion/Continuation is delivered to you pursuant to
Section 2.1.2 of the Loan Agreement. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings attributable thereto in
the Loan Agreement. Borrower hereby gives notice of its request, as follows:
Check as applicable:
[_] A conversion of Loans from one Type to another, as follows:
(i) The requested date of the proposed conversion is
______________, 19__ (the "Conversion Date");
(ii) The Type of Loans to be converted pursuant hereto are
presently __________________ [select either LIBOR Loans or
Base Rate Loans] in the principal amount of $_____________
outstanding as of the Conversion Date;
(iii) The portion of the aforesaid Loans to be converted on the
Conversion Date is $_____________ (the "Conversion Amount");
(iv) The Conversion Amount is to be converted into a ____________
[select either a LIBOR Loan or a Base Rate Loan] (the
"Converted Loan") on the Conversion Date.
(v) [In the event Borrower selects a LIBOR Loan:] Borrower
hereby requests that the Interest Period for such Converted
Loan be for a duration of _____ [insert length of Interest
Period].
[_] A continuation of LIBOR Loans for new Interest Period, as follows:
(i) The requested date of the proposed continuation is
_______________, 19__ (the "Continuation Date");
(ii) The aggregate amount of the LIBOR Loans subject to such
continuation is $__________________;
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(iii) The duration of the selected Interest Period for the LIBOR
Loans which are the subject of such continuation is:
_____________ [select duration of applicable Interest
Period];
Borrower hereby ratifies and reaffirms all of its liabilities and
obligations under the DIP Financing Documents and certifies that no Default or
Event of Default exists on the date hereof.
Borrower has caused this Notice of Conversion/Continuation to be executed
and delivered by its duly authorized representative, this _______ day of
______________, 19__.
GULF STATES STEEL, INC. OF ALABAMA
By:____________________________________________
Title:______________________________________
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<PAGE>
EXHIBIT C
---------
Form of Notice of Borrowing
---------------------------
Date ______________, ______
Fleet Capital Corporation, as Agent
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Attention: Loan Administration Officer
- ---------
Re: Post-Petition Loan and Security Agreement dated July 1, 1999, by and
among Gulf States Steel, Inc. of Alabama, Fleet Capital Corporation,
as agent for certain Lenders from time to time parties thereto, and
such Lenders (as at any time amended, the "Loan Agreement")
Gentlemen:
This Notice of Borrowing is delivered to you pursuant to Section 3.1.1 of
the Loan Agreement. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings attributable thereto in the Loan Agreement.
Borrower hereby requests a Revolver Loan in the aggregate principal amount of
$______________ to be made on _____________, _____, and to consist of:
Check as applicable: [_] Base Rate Loans in the aggregate principal
amount of $_____________
[_] LIBOR Loans in the aggregate principal amount
of $___________, with Interest Periods as follows:
(i) As to $_____________, an Interest
Period of ______ month(s);
(ii) As to $_____________, an Interest
Period of ______ months;
(iii) As to $_____________, an Interest
Period of ______ months.
Borrower hereby ratifies and reaffirms all of its liabilities and
obligations under the DIP Financing Documents and hereby certifies that no
Default or Event of Default exists on the date hereof.
Borrower has caused this Notice of Borrowing to be executed and delivered
by its duly authorized representative, this ______ day of _____________, _____.
GULF STATES STEEL, INC. OF ALABAMA
By:______________________________________
Title:________________________________
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<PAGE>
EXHIBIT D
---------
COMPLIANCE CERTIFICATE
[Letterhead of Borrower]
__________________, 19__
Fleet Capital Corporation, as Agent
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Attention: Loan Administration Officer
- ---------
The undersigned, the chief financial officer of Gulf States Steel,
Inc. of Alabama, an Alabama corporation ("Borrower"), gives this certificate to
Fleet Capital Corporation ("Agent") in accordance with the requirements of
Section 9.1.7 of that certain Post-Petition Loan and Security Agreement dated
July 1, 1999, among Borrower, Agent and the Lenders referenced therein ("Loan
Agreement"). Capitalized terms used in this Certificate, unless otherwise
defined herein, shall have the meanings ascribed to them in the Loan Agreement.
1. Based upon my review of the balance sheets and statements of
income of Borrower and its Subsidiaries for the [Fiscal Year] [quarterly period]
ending __________________, 19__, copies of which are attached hereto, I hereby
certify that:
(a) Gross revenues for the month ending __________, _____, were at
least ___% of the amount forecasted in the [Initial Projections]
[ Subsequent Projections];
(b) Consolidated EBITDA for the month ending ____________, ______,
was at least ____% of the amount forecasted in the [Initial
Projections] [Subsequent Projections];
(c) Capital Expenditures for the month ending ___________, ____,
totaled $___________;
2. No Default exists on the date hereof, other than:
__________________ ________________________________________________ [if none, so
state]; and
3. No Event of Default exists on the date hereof, other than
__________ ____________________________________________________ [if none, so
state].
4. As of the date hereof, Borrower is current in its payment of all
accrued rent and other charges to Persons who own or lease any premises where
any of the Collateral is located, and there are
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<PAGE>
no pending disputes or claims regarding Borrower's failure to pay or delay in
payment of any such rent or other charges.
Very truly yours,
_______________________________________
Chief Financial Officer
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EXHIBIT E
---------
FORM OF ASSIGNMENT AND ACCEPTANCE
---------------------------------
Dated as of ______, 19__
Reference is made to the Post-Petition Loan and Security Agreement dated
July 1, 1999 (at any time amended, the "Loan Agreement"), among GULF STATES
STEEL, INC. OF ALABAMA, ("Borrower"), FLEET CAPITAL CORPORATION, in its capacity
as agent ("Agent") for the financial institutions from time to time party to the
Loan Agreement ("Lenders"), and Lenders. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Loan
Agreement.
______________________________________ (the "Assignor") and
__________________________-____________ (the "Assignee") agree as follows:
1. Assignor hereby assigns to Assignee and Assignee hereby purchases and
assumes from Assignor (i) a principal amount of $________ of the outstanding
Revolver Loans held by Assignor (which amounts, according to the records of
Agent, represent _______% of the total principal amount of outstanding Revolver
Loans) and (ii) a principal amount of $__________ of Assignor's Commitment
(which amount includes Assignor's outstanding Revolver Loans being assigned to
Assignee pursuant to clause (i) above and which, according to the records of
Agent, represents (____%) of the total Commitments of Lenders under the Loan
Agreement) (the "Assigned Interests"), together with an interest in the DIP
Financing Documents corresponding to the Assigned Interest. This Agreement
shall be effective from the date (the "Assignment Effective Date") on which
Assignor receives both (x) the principal amount of the Assigned Interest in the
Revolver Loans on the Assignment Effective Date, if any, and (y) a copy of this
Agreement duly executed by Assignee. From and after the Assignment Effective
Date, Assignee hereby expressly assumes, and undertakes to perform, all of
Assignor's obligations in respect of Assignor's Commitments to the extent, and
only to the extent, of Assignee's Assigned Interest, and all principal,
interest, fees and other amounts which would otherwise be payable to or for
Assignor's account in respect of the Assigned Interest shall be payable to or
for Assignee's account, to the extent such amounts have accrued subsequent to
the Assignment Effective Date.
2. Assignor (i) represents that as of the date hereof, the aggregate of
its Commitments under the Loan Agreement (without giving effect to assignments
thereof, which have not yet become effective) is $__________, and the
outstanding balance of its Revolver Loans (unreduced by any assignments thereof,
which have not yet become effective) is $__________; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Loan
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement or any other instrument or document
furnished pursuant thereto, other than that Assignor is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim; (iii) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower, the performance or observance by Borrower of any of its obligations
under the Loan Agreement or any of the DIP Financing Documents[; and (iv)
attaches the Notes held by it and requests that Agent exchange such Notes for
new Notes payable to Assignee and the Assignor in the principal amounts set
forth on Schedule A hereto].
----------
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<PAGE>
3. Assignee (i) represents and warrants that it is legally authorized to
enter into this Assignment and Acceptance; (ii) confirms that it has received a
copy of the Loan Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 9.1.7 thereof, and copies of such other
DIP Financing Documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and Acceptance;
(iii) agrees that it shall, independently and without reliance upon the Assignor
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Agreement; (iv) confirms that it is eligible to become an
Assignee; (v) appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers under the Loan Agreement as are delegated to
Agent by the terms thereof, together with such powers as are incidental thereto;
(vi) agrees that it will strictly observe and perform all the obligations that
are required to be performed by it as a "Lender" under the terms of the Loan
Agreement and the other DIP Financing Documents; and (vii) agrees that it will
keep confidential all information with respect to Borrower furnished to it by
Borrower or the Assignor to the extent provided in the Loan Agreement.
4. Assignor acknowledges and agrees that it will not sell or otherwise
dispose of the Assigned Interest or any portion thereof, or grant any
participation therein, in a manner which, or take any action in connection
therewith which, would violate the terms of any of the DIP Financing Documents.
5. This Agreement and all rights and obligations shall be interpreted in
accordance with and governed by the laws of the State of Georgia. If any
provision hereof would be invalid under Applicable Law, then such provision
shall be deemed to be modified to the extent necessary to render it valid while
most nearly preserving its original intent; no provision hereof shall be
affected by another provision's being held invalid.
6. Each notice or other communication hereunder shall be in writing,
shall be sent by messenger, by telecopy or facsimile transmission or by first-
class mail, shall be deemed given when sent and shall be sent as follows:
If to Assignee, to the following address (or to such other address as
Assignee may designate from time to time):
__________________________
__________________________
__________________________
If to Assignor, to the following address (or to such other address as
Assignor may designate from time to time):
__________________________
__________________________
__________________________
__________________________
Payments hereunder shall be made by wire transfer of immediately available
Dollars as follows:
If to Assignee, to the following account (or to such other account as
Assignee may designate from time to time):
__________________________
ABA No.___________________
__________________________
82
<PAGE>
Account No._______________
Reference: ______________________
If to Assignor, to the following account (or to such other account as
Assignor may designate from time to time):
__________________________
__________________________
__________________________
ABA No.___________________
For Account of:___________
Reference: _____________________
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed and delivered by their respective duly authorized
officers, as of the date first above written.
________________________________________
("Assignor")
By: ___________________________________
Title: ________________________________
________________________________________
("Assignee")
By: ____________________________________
Title:___________________________________
83
<PAGE>
EXHIBIT F
---------
FORM OF NOTICE
--------------
Reference is made to (i) the Post-Petition Loan and Security Agreement
dated July 1, 1999 (at any time amended, the "Loan Agreement"), among GULF
STATES STEEL, INC. OF ALABAMA, INC. ("Borrower"), FLEET CAPITAL CORPORATION in
its capacity as agent ("Agent") for the financial institutions from time to time
party to the Loan Agreement ("Lenders"), and Lenders, and (ii) the Assignment
and Acceptance dated as of ____________, 19__ (the "Assignment Agreement")
between __________________ (the "Assignor") and ____________________ (the
"Assignee"). Except as otherwise defined herein, capitalized terms used herein
which are defined in the Loan Agreement are used herein with the respective
meanings specified therein.
The Assignor hereby notifies Borrower and Agent of Assignor's intent to
assign to Assignee pursuant to the Assignment Agreement a principal amount
of$________ of the outstanding Revolver Loans held by Assignor, and (ii)
$___________ of Assignor's Commitment (which amount includes the Assignor's
outstanding Revolver Loans being assigned to Assignee pursuant to clause (i)
above), together with an interest in the DIP Financing Documents corresponding
to the interest in the Revolver Loans and Commitments so assigned. Pursuant to
the Assignment Agreement, Assignee has expressly assumed all of Assignor's
obligations under the Loan Agreement to the extent of the Assigned Interest (as
defined in the Assignment Agreement).
For purposes of the Loan Agreement, Agent shall deem Assignor's share of
the Commitment to be reduced by $_________ and Assignee's share of the
Commitment increased by $_________.
The address of the Assignee to which notices, information and payments are
to be sent under the terms of the Loan Agreement is:
________________________
________________________
________________________
________________________
Assignees LIBOR Lending Office address is as follows:
________________________
________________________
________________________
________________________
This Notice is being delivered to Borrower and Agent pursuant to Section
13.3 of the Loan Agreement. Please acknowledge your receipt of this Notice by
executing and returning to Assignee and Assignor a copy of this Notice.
IN WITNESS WHEREOF, the undersigned have caused the execution of this
Notice, as of _________________, 19__.
84
<PAGE>
________________________________________
("Assignor")
By: __________________________________________
Title: ___________________________________
_________________________________________
("Assignee")
By: __________________________________________
Title: ___________________________________
ACKNOWLEDGED AND AGREED TO
AS OF THE DATE SET FORTH ABOVE:
BORROWER:
- --------
GULF STATES STEEL, INC. OF ALABAMA
By:______________________________
Title:_________________________
FLEET CAPITAL CORPORATION,
as Agent
By:______________________________
Title:_________________________
85
<PAGE>
EXHIBIT G
---------
GULF STATES STEEL, INC. OF ALABAMA
Preferred Supplier Continuous Credit Program
Each supplier listed on the attached schedule who offers Borrower post-petition
credit terms at least equal to the lesser of (i) twice the number of days that
are listed on the schedule as "Current Trade Term Days" (but not less than 30
days) or (ii) 45 days, or any supplier not listed on the attached schedule who
offers Borrower post-petition credit terms of at least 45 days, in all cases for
a continuous period of at least 6 months ("Continuous Credit"), shall receive
the following treatment:
1. Such supplier's post-petition claim for Continuous Credit shall be entitled
to priority administrative expense status subordinate to the claims of DIP
Lenders.
2. Such supplier's post-petition claim for Continuous Credit shall be secured
by a Lien as described below on all of Gulf States' real estate, Equipment
and related intangibles that are subject to Liens in favor of the
Noteholders and shall be senior to the Lien of the Noteholders but junior
to any pre-petition and post-petition Liens of DIP Lenders in the same
property.
3. After 6 months of Continuous Credit, and assuming Continuous Credit
continues to exist at the date each payment is due, payments equal to the
following percentages of the lower of (i) such supplier's pre-petition debt
or (ii) such supplier's cumulative average monthly balance of post-petition
debt, beginning the second month after the supplier enters the Preferred
Supplier Continuous Credit Program.
<TABLE>
<CAPTION>
Maximum
Month Amount Cumulative Amount
----- ------ -----------------
<S> <C> <C>
7-12 1.25% 7.5%
13-18 1.00% 13.5%
19-35 2.00% 47.5%
36 2.50% 50.0%
</TABLE>
4. The maximum aggregate amount of Borrower's pre-petition debt eligible for
payments as described in No. 3 above is $15 million, and the maximum amount
payable with respect to such pre-petition debt is $7.5 million.
5. The balance of such supplier's pre-petition claim (i.e., either 50% of the
pre-petition balance if the supplier participates in the Preferred Supplier
Continuous Credit Program for the entire 36-month period or the remaining
pre-petition balance at the date the supplier ceases to participate in the
Preferred Supplier Continuous Credit Program) shall be entitled to the same
recovery, if any, as subsequently negotiated for all similarly situated
unsecured trade creditors with respect to pre-petition debt.
If a supplier ceases Continuous Credit before 6 months have elapsed, then
measurement of the 6-month period restarts from the time that the supplier next
begins to offer Continuous Credit.
86
<PAGE>
If a supplier ceases Continuous Credit after the payments have begun, as
described in No. 3 above, then the remaining payments shall resume at the option
of Borrower after Continuous Credit resumes for a period of at least 3 months.
During the cessation period, the supplier will not be entitled to status as a
secured creditor.
If a supplier never provides Continuous Credit, then that supplier shall be
entitled to (i) administrative expense claim status as statutorily provided with
respect to post-petition debt and (ii) recovery, if any, as subsequently
negotiated for all similarly situated unsecured trade creditors with respect to
pre-petition debt.
The "DIP Lenders" shall include any party to whom the Debtor becomes indebted
for money borrowed in any amount approved by the Court during Borrower's Chapter
11 Case.
The Lien provided to suppliers of Continuous Credit shall entitle them to
collateral proceeds remaining after enforcement of prior Liens, but shall not
entitle them to any right to accelerate, to commence foreclosure or other
enforcement proceedings, to demand marshaling, to receive adequate protection or
to any other rights or remedies, including, without limitation, to contest,
object to or otherwise dispute the valuation of collateral subject to the Lien
or any other action that the holders of senior Liens may take with respect to
such collateral, it being understood that the Lien provides for and pertains
only to a right of collection of any remaining proceeds of such collateral.
Borrower shall develop such rules and procedures as are necessary to carry out
the provisions of this Continuous Credit arrangement for suppliers.
87
<PAGE>
SCHEDULE 7.1.1
--------------
LOCATIONS OF COLLATERAL
Semi-Finished Steel at Outside Processors:
- -----------------------------------------
Hanna Steel Fairfield, AL
Gadsden, AL
Mi-Tech Steel Decatur, AL
National Material Nashville, TN
Steel Services Macon, GA
Ponce Metals Lenoir City, TN
Tennessee Metals Lavergne, TN
Metal Coaters Marietta, GA
Southeast Metal Processors Winder, GA
Liberty Steel Clinton, TN
Piper Industries Greenville, MS
Voss Clark Jeffersonville, IN
Doublecote Jackson, MS
Gerrard & Co. Florence, AL
Southline Steel Bessemer, AL
Metal Processors of AL Dolomite, AL
All other Real or Personal Property, Plant, Equipment and Inventory:
- -------------------------------------------------------------------
Gulf States Steel, Inc. of Alabama Gadsden, AL
88
<PAGE>
FINANCING AGREEMENT
Dated as of July 1, 1999
by and among
Gulf States Steel, Inc. of Alabama
and the lenders signatory hereto,
and ABLECO FINANCE LLC, as Agent,
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS; CERTAIN TERMS................................................................ 1
SECTION 1.01. Definitions.................................................................... 1
-----------
SECTION 1.02. Terms Generally................................................................ 17
---------------
SECTION 1.03. Accounting and Other Terms..................................................... 17
--------------------------
SECTION 1.04. Time References................................................................ 17
---------------
ARTICLE II THE LOANS................................................................................. 18
SECTION 2.01. Commitments.................................................................... 18
-----------
SECTION 2.02. Making the Loans............................................................... 18
SECTION 2.03. Notes; Repayment of Term Loans and other Obligations........................... 19
----------------------------------------------------
SECTION 2.04. Interest....................................................................... 19
--------
SECTION 2.05. Prepayment of Loans; Term and Termination...................................... 20
-----------------------------------------
SECTION 2.06. Fees........................................................................... 21
----
SECTION 2.07. Securitization................................................................. 22
--------------
ARTICLE III PAYMENTS AND OTHER COMPENSATION........................................................... 23
SECTION 3.01. Payments; Computations and Statements.......................................... 23
-------------------------------------
SECTION 3.02. Payments to Lender Group, Return of Payments................................... 23
--------------------------------------------
SECTION 3.03. Apportionment and Application of Payments...................................... 24
-----------------------------------------
SECTION 3.04. All Loans to Constitute One Obligation......................................... 26
--------------------------------------
SECTION 3.05. Loan Account; Statements of Account............................................ 26
-----------------------------------
ARTICLE IV CONDITIONS TO LOANS........................................................................ 26
SECTION 4.01. Conditions Precedent to Effectiveness of the Initial Loan...................... 26
---------------------------------------------------------
SECTION 4.02. Conditions Precedent to Subsequent Loans....................................... 29
----------------------------------------
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES.................................................................. 30
SECTION 5.01. Representations and Warranties........................................................ 30
------------------------------
ARTICLE VI COVENANTS OF THE BORROWER....................................................................... 36
SECTION 6.01. Affirmative Covenants................................................................. 36
---------------------
SECTION 6.02. Negative Covenants.................................................................... 43
------------------
ARTICLE VII STATUS OF COLLATERAL............................................................................ 49
SECTION 7.01. [intentionally omitted]............................................................... 49
-----------------------
SECTION 7.02. [intentionally omitted]............................................................... 49
-----------------------
SECTION 7.03. Status of Collateral.................................................................. 49
--------------------
SECTION 7.04. Collateral Custodian.................................................................. 49
--------------------
ARTICLE VIII EVENTS OF DEFAULT............................................................................... 50
SECTION 8.01. Events of Default..................................................................... 50
-----------------
ARTICLE IX [RESERVED]...................................................................................... 52
ARTICLE X [RESERVED]...................................................................................... 52
ARTICLE XI MISCELLANEOUS................................................................................... 52
SECTION 11.01. Notices, Etc.......................................................................... 52
------------
SECTION 11.02. Amendments, Etc....................................................................... 53
---------------
SECTION 11.03. No Waiver; Remedies, Etc.............................................................. 54
------------------------
SECTION 11.04. Expenses; Taxes, Attorneys' Fees...................................................... 54
--------------------------------
SECTION 11.05. Right of Set-off, Sharing of Payments, Etc............................................ 55
------------------------------------------
SECTION 11.06. Severability.......................................................................... 56
------------
SECTION 11.07. Assignments and Participations........................................................ 57
------------------------------
SECTION 11.08. Counterparts.......................................................................... 60
------------
SECTION 11.09. GOVERNING LAW......................................................................... 60
-------------
SECTION 11.10. CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE................................. 60
-----------------------------------------------------
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
SECTION 11.11. WAIVER OF JURY TRIAL, ETC............................................................ 61
-------------------------
SECTION 11.12. Consent by the Lender Group.......................................................... 61
---------------------------
SECTION 11.13. No Party Deemed Drafter.............................................................. 61
-----------------------
SECTION 11.14. Reinstatement; Certain Payments...................................................... 62
-------------------------------
SECTION 11.15. Indemnification...................................................................... 62
---------------
SECTION 11.16. Records.............................................................................. 62
-------
SECTION 11.17. Binding Effect....................................................................... 63
--------------
SECTION 11.18. [intentionally omitted].............................................................. 63
-----------------------
SECTION 11.19. Confidentiality...................................................................... 63
---------------
SECTION 11.20. [intentionally omitted].............................................................. 63
-----------------------
SECTION 11.21. Power of Attorney.................................................................... 63
-----------------
SECTION 11.22. Concerning the Collateral and Related Loan Documents................................. 64
----------------------------------------------------
SECTION 11.23. Field Audits and Examination Reports, Confidentiality; Disclaimers by Lenders;
------------------------------------------------------------------------------
Other Reports and Information........................................................ 64
-----------------------------
ARTICLE XII THE AGENT ................................................................................... 66
SECTION 12.01. Appointment Powers and Immunities; Delegation of Duties, Liability of Agent.......... 66
---------------------------------------------------------------------------
SECTION 12.02. Reliance by Agent.................................................................... 67
-----------------
SECTION 12.03. Defaults............................................................................. 68
--------
SECTION 12.04. Rights as a Lender................................................................... 68
------------------
SECTION 12.05. Costs and Expenses; Indemnification.................................................. 69
-----------------------------------
SECTION 12.06. Non-Reliance on Agent and Other Lenders.............................................. 69
---------------------------------------
SECTION 12.07. Failure to Act....................................................................... 70
--------------
SECTION 12.08. Resignation of Agent................................................................. 70
--------------------
SECTION 12.09. Collateral Sub-Agents................................................................ 70
---------------------
SECTION 12.10. Communications by Borrower........................................................... 70
--------------------------
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
SECTION 12.11. Collateral Matters........................................................... 74
------------------
SECTION 12.12. Restrictions on Actions by Agent and the Lenders; Sharing Payments........... 75
------------------------------------------------------------------
SECTION 12.13. Withholding Tax.............................................................. 76
---------------
SECTION 12.14. Several Obligations; No Liability............................................ 77
---------------------------------
</TABLE>
-v-
<PAGE>
FINANCING AGREEMENT
Financing Agreement, dated as of July 1, 1999, by and among Gulf
States Steel, Inc. of Alabama, an Alabama corporation ("Borrower"), each of the
lenders that is a signatory to this Agreement (together with its successors and
permitted assigns, individually, "Lender" and, collectively, "Lenders" or
"Lender Group"), and Ableco Finance LLC, a Delaware limited liability company,
as agent for the Lenders (in such capacity, together with its successors, if
any, "Agent").
RECITALS
The Borrower has asked the Lender Group to extend credit to the
Borrower consisting of (a) a term loan designated as "Term Loan A" in the
principal amount of $15,350,000, and (b) a term loan designated as "Term Loan B"
in the principal amount of $2,500,000. The proceeds of the term loans shall be
used to fund certain capital expenditures and remediation expenses, pay
administrative expenses of Borrower's Chapter 11 Case and provide working
capital. The Lender Group is willing to extend such credit to the Borrower
subject to the terms and conditions hereinafter set forth.
In consideration of the premises and the covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
SECTION 1.01. Definitions. As used in this Agreement, the following
-----------
terms shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such terms:
"Account Receivable" means any and all rights of the Borrower to
------------------
payment for goods sold and services rendered, including accounts, general
intangibles and any and all such rights evidenced by chattel paper, instruments
or documents, whether due or to become due and whether or not earned by
performance, and whether now or hereafter acquired or arising in the future and
any proceeds arising therefrom or relating thereto.
"Action" has the meaning specified therefor in Section 11.12.
------
"Affiliate" means, as to any Person, any other Person that directly or
---------
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (i)
vote 10% or more of the Capital Stock having ordinary voting power for the
election of directors of such Person or (ii) direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
Notwithstanding anything herein to the contrary, in no event shall the Lender
Group or any member thereof be considered an "Affiliate" of Borrower.
<PAGE>
"Agent" means Ableco Finance LLC, a Delaware limited liability
-----
company, solely in its capacity as Agent for the Lenders, and shall include any
successor Agent.
"Agent Account" means an account at a bank designated by Agent from
-------------
time to time as the account into which the Borrower shall make all payments to
Agent for the benefit of the Lender Group, and into which the Lender Group shall
make all payments to Agent, under this Agreement and the other Loan Documents.
Initially, until Agent notifies the Borrower and the Lender Group to the
contrary, the Agent Account shall be that certain deposit account bearing
account number 00102619468 and maintained by Agent with Chase Bank of Texas,
N.A. (ABA No.: 113000609; BNA Wires-Clearing-Asset Backed Securities; OBI: Ref:
Alex Ornstein/Ableco Finance/Gulf States Steel).
"Agent-Related Persons" means Agent and any successor agents thereto,
---------------------
together with their respective Affiliates, and the officers, directors,
employees, counsel, agents, and attorneys-in-fact of such Persons and their
Affiliates.
"Agreement" means this Financing Agreement, together with all Exhibits
---------
and Schedules hereto.
"Assignment and Acceptance" has the meaning specified therefor in
-------------------------
Section 11.07(f).
"Authorized Officer" means the Chairman, Chief Executive Officer or
------------------
Chief Financial Officer of Borrower, or any other officer of Borrower, in each
case designated in writing by Borrower to Agent.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.
---------------
Section 101 et seq.), as amended, and any successor statute.
------
"Bankruptcy Court" means the United States Bankruptcy Court for the
----------------
Northern District of Alabama or such other court having original jurisdiction
over Borrower's Chapter 11 Case.
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States.
"Borrower" has the meaning specified therefor in the preamble hereto,
--------
and includes Borrower as a debtor in possession in the Chapter 11 Case of
Borrower.
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in New York City are authorized or required to
close.
"Capital Expenditures" means, with respect to any Person for any
--------------------
period, the sum of (i) the aggregate of all expenditures by such Person and its
Subsidiaries during such period that in accordance with GAAP are or should be
included in "property, plant and equipment" or similar fixed asset account on
its balance sheet, whether such expenditures are paid in cash or financed and
including all Capitalized Lease Obligations paid or payable during such period,
and (ii) to the extent not covered by clause (i) above, the aggregate of all
expenditures by such
<PAGE>
Person and its Subsidiaries to acquire by purchase or otherwise the business or
fixed assets of, or the Capital Stock of, any other Person.
"Capitalized Lease" means, with respect to any Person, any lease of
-----------------
real or personal property by such Person as lessee which is required under GAAP
to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means, with respect to any Person,
-----------------------------
obligations of such Person and its Subsidiaries under Capitalized Leases, and,
for purposes hereof, the amount of any such obligation shall be the capitalized
amount thereof determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
-------------
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash and Cash Equivalents" means all cash and any presently existing
-------------------------
or hereafter arising deposit account balances, certificates of deposit or other
financial instruments properly classified as cash equivalents under GAAP.
"Chapter 11 Case" means Borrower's chapter 11 case commenced on or
---------------
about July 1, 1999, in the United States Bankruptcy Court for the Northern
District of Alabama.
"Closing Fee" has the meaning specified therefor in Section 2.06(a).
-----------
"Code" means the Internal Revenue Code of 1986, as amended (or any
----
successor statute thereto) and the regulations thereunder.
"Collateral" means all of the property and assets and all interests
----------
therein and proceeds thereof now owned or hereafter acquired by any Person upon
which a Lien is granted or purported to be granted by such Person as security
for all or any part of the Obligations and also includes without limitation all
"property of the estate" in Debtor's Chapter 11 Case, as that term is defined in
Section 541 of the Bankruptcy Code.
"Collections" means all cash, checks, notes, instruments, and other
-----------
items of payment (including insurance and condemnation proceeds, cash proceeds
of sales and other voluntary or involuntary dispositions of property, rental
proceeds, and tax refunds).
"Commitment Fee" has the meaning specified therefor in Section
--------------
2.06(c).
"Commitment" means the Term Loan Commitment or the Total Commitment,
----------
as the context requires.
"Commitment Percentage" means, with respect to any Lender, the ratio
---------------------
of (i) the amount of the Commitment of such Lender to (ii) the aggregate amount
of the Commitments of all of the Lenders.
-3-
<PAGE>
"Consolidated EBITDA" means, for any period, the sum of the
-------------------
consolidated Net Income of the Borrower for such period determined in accordance
with GAAP plus (a) the sum of the following amounts for such period determined
on a consolidated basis in conformity with GAAP to the extent included in the
determination of consolidated Net Income and without duplication: (i)
depreciation expense, (ii) amortization expense, (iii) interest expense, (iv)
income tax expense, (v) losses on the sale of fixed assets outside the ordinary
course of business, (vi) losses arising from extraordinary items, as determined
in accordance with GAAP, (vii) non-cash write-downs of fixed assets, and less
the sum of the following amounts for such period determined on a consolidated
basis in conformity with GAAP to the extent included in the determination of Net
Income without duplication: (b) (i) gains from extraordinary items (ii) gains on
the sale of fixed assets outside of the ordinary course of business, and (iii)
non-cash write-ups of fixed assets to the extent included in the determination
of such consolidated Net Income.
"Contingent Obligation" means, with respect to any Person, any
---------------------
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, (i) the direct or indirect guaranty,
endorsement (other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of a primary obligor, (ii) the obligation to make take-
or-pay or similar payments, if required, regardless of nonperformance by any
other party or parties to an agreement, (iii) any obligation of such Person,
whether or not contingent, (A) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (B) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (C) to
purchase property, assets, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (D) otherwise to assure or
hold harmless the holder of such primary obligation against loss in respect
thereof, provided, however, that the term "Contingent Obligation" shall not
-------- -------
include any products warranties extended in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation with respect to which
such Contingent Obligation is made (or, if less, the maximum amount of such
primary obligation for which such Person may be liable pursuant to the terms of
the instrument evidencing such Contingent Obligation) or, if not stated or
determinable, the maximum reasonably anticipated liability with respect thereto
(assuming such Person is required to perform thereunder), as determined by such
Person in good faith.
"Default" means an event which, with the giving of notice or the lapse
-------
of time or both, would constitute an Event of Default.
"Disposition" means any transaction, or series of related
-----------
transactions, pursuant to which the Borrower sells, assigns, transfers or
otherwise disposes of any property or assets (whether now owned or hereafter
acquired) to any other Person, in each case whether or not the consideration
therefor consists of cash, securities or other assets owned by the acquiring
Person, excluding any sales of Inventory in the ordinary course of business on
---------
ordinary business terms or sales or other dispositions of Permitted Investments.
-4-
<PAGE>
"Dollar," "Dollars" and the symbol "$" each means lawful money of the
------ ------- -
United States of America.
"Effective Date" means: (i) with respect to Term Loan A, the date,
--------------
on or before July 6, 1999, on which all of the conditions precedent set forth in
Section 4.01 are satisfied (or waived by the Lender Group) and the initial Loan
is made; and (ii) with respect to Term Loan B, the date after Term Loan A has
been funded and after November 1, 1999, on which Borrower requests that Term
Loan B be funded and on which all of the conditions precedent set forth in
Section 4.02 are satisfied with respect to Term Loan B (or waived by the Lender
Group).
"Eligible Transferee" means (a) a commercial bank organized under the
-------------------
laws of the United States, or any state thereof, and having total assets in
excess of $100,000,000; (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country, and having total
assets in excess of $100,000,000; provided that such bank is acting through a
branch or agency located in the United States; (c) a finance company, insurance
company or other financial institution or fund that is engaged in making,
purchasing or otherwise investing in commercial loans in the ordinary course of
its business and having total assets in excess of $100,000,000; (d) any
Affiliate (other than individuals) of a pre-existing Lender; (e) so long as no
Event of Default has occurred and is continuing, any other Person approved by
Agent and Borrower; and (f) during the continuation of an Event of Default, any
other Person approved by Agent, provided, however, that in no event shall
-------- -------
"Eligible Transferee" include a manufacturer of steel products in direct
competition with Borrower.
"Employee Plan" means an employee benefit plan (other than a
-------------
Multiemployer Plan) covered by Title IV of ERISA and maintained (or was
maintained at any time during the six (6) calendar years preceding the date of
any borrowing hereunder) for employees of the Borrower or any of its ERISA
Affiliates.
"Environmental Actions" means any complaint, summons, citation,
---------------------
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other communication from any
Governmental Authority involving violations of Environmental Laws or Releases of
Hazardous Materials (i) from any assets, properties or businesses of the
Borrower or any of its Subsidiaries or any predecessor in interest; (ii) from
adjoining properties or businesses; or (iii) onto any facilities which received
Hazardous Materials generated by the Borrower or any of its Subsidiaries or any
predecessor in interest.
"Environmental Laws" means the Comprehensive Environmental Response,
------------------
Compensation and Liability Act (42 U.S.C. (S) 9601, et seq.), the Hazardous
-- ---
Materials Transportation Act (49 U.S.C. (S) 1801, et seq.). the Resource
-- ---
Conservation and Recovery Act (42 U.S.C. (S) 6901, et seq.), the Federal Clean
-- ---
Water Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et
-- --- --
seq.),the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq. and the
- --- -- ---
Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.) as such laws may
-- ---
be amended or otherwise modified from time to time, and any other present or
future federal, state, local or foreign statute, ordinance, rule, regulation,
order, judgment, decree, permit, license or other binding determination of any
Governmental Authority imposing liability or establishing standards of conduct
for protection of the environment.
-5-
<PAGE>
"Environmental Liabilities and Costs" means all liabilities, monetary
-----------------------------------
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts and consultants and costs of
investigations and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any environmental condition or
a Release of Hazardous Materials from or onto (i) any property presently or
formerly owned the Borrower or any of its Subsidiaries or (ii) any facility
which received Hazardous Materials generated by the Borrower or any of its
Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental
------------------
Authority for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" means, with respect to any Person, any trade or
---------------
business (whether or not incorporated) which is a member of a group of which
such Person is a member and which would be deemed to be a "controlled group"
within the meaning of Sections 414(b), (c), (m) and (o) of the Code.
"Event of Default" means any of the events set forth in Section 8.01.
----------------
"Expense Deposit" means the expense deposit in the amount of $150,000
---------------
paid by the Borrower to Agent on or prior to the Effective Date to pay the out-
of-pocket costs and expenses of the Lender Group in connection with the
performance of due diligence, the appraising and securing of Collateral and
other property and assets of the Borrower and the preparation of agreements,
instruments and other documents in connection with the transactions contemplated
hereby and by the other Loan Documents, and otherwise in connection with the
consummation of such transactions.
"Facility" means Borrower's integrated steel mill located on
--------
approximately 800 acres in Gadsden, Alabama, including, without limitation, the
land on which such facility is located, all buildings and other improvements
thereon, and all fixtures, equipment, inventory and other tangible personal
property located at or used in connection with such facility.
"Final Bankruptcy Court Order" means an order of the Bankruptcy Court,
----------------------------
in form and substance satisfactory to Agent, finally confirming all of the
matters dealt with in the Interim Bankruptcy Court Order.
"Final Maturity Date" means the date that is one year after the
-------------------
Effective Date for Term Loan A, or such earlier date on which any Loan shall
become due and payable, in whole or in part, in accordance with the terms of
this Agreement and the other Loan Documents or such earlier date which is the
effective date for a plan of reorganization confirmed in the Chapter 11 Case of
Borrower.
-6-
<PAGE>
"Financial Statements" means (i) the audited balance sheet of the
--------------------
Borrower for the Fiscal Year ended October 31, 1998, and the related statement
of operations, shareholders' equity and cash flows for the Fiscal Year then
ended and (ii) the unaudited balance sheet of the Borrower for the three months
ended April 30, 1999, and the related statement of operations, shareholder's
equity and cash flows for the three months then ended.
"Fiscal Year" means the fiscal year of the Borrower and its
-----------
Subsidiaries ending on October 31st of each year.
"Fleet Loan Facility" means that certain debtor-in-possession credit
-------------------
facility provided by Fleet Capital Corporation to the Borrower pursuant to that
certain Post-Petition Loan and Security Agreement dated as of the date hereof
among the Borrower, the lender parties thereto and Fleet Financial Corporation,
as agent.
"GAAP" means generally accepted accounting principles in effect from
----
time to time in the United States, applied on a consistent basis, provided that
for the purpose of Section 6.03 hereof and the definitions used therein, "GAAP"
shall mean generally accepted accounting principles in effect on the date hereof
and consistent with those used in the preparation of the Financial Statements.
"Governmental Authority" means any nation or government, any Federal,
----------------------
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Hazardous Materials" means (a) any element, compound or chemical that
-------------------
is defined, listed or otherwise classified as a contaminant, pollutant, toxic
pollutant, toxic or hazardous substances, extremely hazardous substance or
chemical, hazardous waste, special waste, or solid waste under Environmental
Laws; (b) petroleum and its refined products; (c) polychlorinated biphenyls; (d)
any substance exhibiting a hazardous waste characteristic, including but not
limited to, corrosivity, ignitability, toxicity or reactivity as well as any
radioactive or explosive materials; and (e) any raw materials, building
components, including but not limited to asbestos-containing materials and
manufactured products containing hazardous substances.
"Indebtedness" means, without duplication, with respect to any Person,
------------
(i) all indebtedness of such Person for borrowed money; (ii) all obligations of
such Person for the deferred purchase price of property or services (other than
trade payables or other account payables incurred in the ordinary course of such
Person's business and not past due for more than 90 days after the date such
payable was due); (iii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments or upon which interest payments
are customarily made; (iv) all obligations and liabilities of such Person
created or arising under any conditional sales or other title retention
agreement with respect to property used and/or acquired by such Person, even
though the rights and remedies of the lessor, seller and/or lender thereunder
are limited to repossession or sale of such property; (v) all Capitalized Lease
Obligations of such Person; (vi) all obligations and liabilities, contingent or
otherwise, of such Person, in respect of
-7-
<PAGE>
letters of credit, acceptances and similar facilities; (vii) all Contingent
Obligations; (viii) liabilities incurred under Title IV of ERISA with respect to
any plan (other than a Multiemployer Plan) covered by Title IV of ERISA and
maintained for employees of such Person or any of its ERISA Affiliates; (ix)
withdrawal liability incurred under ERISA by such Person or any of its ERISA
Affiliates to any Multiemployer Plan; (x) all other items which, in accordance
with GAAP, would be included as liabilities on the liability side of the balance
sheet of such Person; and (xi) all obligations referred to in clauses (i)
through (x) of this definition of another Person secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) a Lien upon property owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness.
The Indebtedness of any Person shall include the Indebtedness of any partnership
of or joint venture in which such Person is a general partner or a joint
venturer.
"Indemnified Matters" has the meaning specified therefor in Section
-------------------
11.15.
"Indemnitees" has the meaning specified therefor in Section 11.15.
-----------
"Initial Projections" has the meaning specified therefor in Section
-------------------
5.01(h).
"Intercreditor Agreement" means the Intercreditor Agreement,
-----------------------
substantially in the form of Exhibit K, between Agent, and Fleet Capital
Corporation, as agent for itself and for the lenders under the Fleet Loan
Facility and acknowledged and agreed to by Borrower.
"Interim Bankruptcy Court Order" means an order of the Bankruptcy
------------------------------
Court substantially in the form of Exhibit L attached hereto.
"Inventory" means all goods and merchandise of the Borrower,
---------
including, without limitation, all raw materials, work-in-process, piece goods,
trim and finished goods, whether now owned or hereafter acquired.
"IRS" means the Internal Revenue Service or any successor federal tax
---
Governmental Authority.
"Lease" means any lease of real property to which the Borrower or any
-----
of its Subsidiaries is a party as lessor or lessee.
"Lender" and "Lenders" have the respective meanings set forth in the
------ -------
preamble to this Agreement, and shall include any other Person made a party to
this Agreement as a "Lender" in accordance with the provisions hereof.
"Lender Group" means, individually and collectively, each of the
------------
individual Lenders and Agent.
"Lender-Related Persons" means, with respect to any Lender, such
----------------------
Lender, together with such Lender's Affiliates, and the officers, directors,
employees, counsel, agents, and attorneys-in-fact of such Lender and such
Lender's Affiliates.
"Liabilities" has the meaning specified therefor in Section 2.07.
-----------
-8-
<PAGE>
"Lien" means any mortgage, deed of trust, pledge, lien (statutory or
----
otherwise), security interest, charge or other encumbrance or security or
preferential arrangement of any nature, including, without limitation, any
conditional sale or title retention arrangement, any Capitalized Lease and any
assignment, deposit arrangement or financing lease intended as, or having the
effect of, security.
"Loans" means all of the Term Loans and other loans and advances of
-----
any kind made by the Lender Group pursuant to the Agreement.
"Loan Account" means an account maintained hereunder by Agent on its
------------
books of account, at Agent's office and with respect to the Borrower, in which
the Borrower will be charged with all Loans made to, and all other Obligations
incurred by, the Borrower.
"Loan Documents" means this Agreement, the Notes, the Security
--------------
Agreements, the Mortgage, the Intercreditor Agreement, and all other agreements,
instruments, and other documents executed and delivered pursuant hereto or
thereto or otherwise evidencing or securing any Loan or other Obligation.
"Loan Servicing Fee" has the meaning specified therefor in Section
------------------
2.06(b).
"Material Adverse Effect" means a material adverse effect on any of
-----------------------
(i) the operations, business, assets, properties, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole,
(ii) the ability of Borrower to perform any of its obligations under any Loan
Document, (iii) the legality, validity or enforceability of this Agreement or
any other Loan Document, (iv) the rights and remedies of the Lender Group under
any Loan Document, or (v) the validity, perfection or priority of a Lien in
favor of the Lender Group on any of the Collateral.
"Material Contract" means, with respect to any Person, each contract
-----------------
or agreement to which such Person or its Subsidiary is a party involving
aggregate consideration payable to or by such Person or such Subsidiary of
$50,000 or more (other than purchase orders in the ordinary course of the
business of such Person and other than contracts that by their terms may be
terminated by such Person or Subsidiary in the ordinary course of its business
upon less than 60 days' notice without penalty or premium) or otherwise material
to the business, operations, condition (financial or otherwise), performance,
prospects or properties of such Person or such Subsidiary.
"Moody's" means Moody's Investors Service, Inc. and any successor
-------
thereto.
"Mortgage" means the Mortgage, Assignment of Leases, Security
--------
Agreement and Fixture Filing, in form and substance satisfactory to Agent, made
by the Borrower in favor of the Lender Group, securing the Obligations and
delivered to Agent pursuant to Article IV.
"Multiemployer Plan" means a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA for which the Borrower or any ERISA Affiliate has
contributed to, or has been obligated to contribute to, at any time during the
preceding six (6) years.
-9-
<PAGE>
"Net Cash Proceeds" means, (i) with respect to any Disposition by any
-----------------
Person, the amount of cash received (directly or indirectly) from time to time
(whether as initial consideration or through the payment of deferred
consideration) by or on behalf of such Person or any of its Subsidiaries or
Affiliates, in connection therewith after deducting therefrom only (A) the
principal amount of any Indebtedness secured by any Lien permitted by Section
6.02(a) on any asset (other than Indebtedness assumed by the purchaser of such
asset) which is required to be, and is, repaid in connection with such
Disposition (other than Indebtedness under this Agreement), (B) reasonable
expenses related thereto reasonably incurred by the Borrower or such Affiliate
in connection therewith, (C) transfer taxes paid by the Borrower or such
Affiliate in connection therewith and (D) net income taxes to be paid in
connection with such Disposition (after taking into account any tax credits or
deductions and any tax sharing arrangements and (ii) with respect to the
issuance or incurrence of any Indebtedness by any Person, or the sale or
issuance by any Person of any shares of its Capital Stock, the aggregate amount
of cash received (directly or indirectly) from time to time (whether as initial
consideration or through the payment of deferred consideration) by or on behalf
of such Person or any of its Subsidiaries or Affiliates in connection therewith
after deducting therefrom only reasonable brokerage commissions, underwriting
fees and discounts, legal fees and similar fees and commissions.
"Net Income" means, with respect to any Person for any period, the net
----------
income (loss) of such Person and its Subsidiaries for such period, determined in
accordance with GAAP, but excluding from the determination of Net Income
(without duplication) (a) any extraordinary or non-recurring gains or losses or
gains or losses from Dispositions, (b) restructuring charges, (c) effects of
discontinued operations and (d) interest income.
"Net Revenues" means, for any period of determination, the aggregate
------------
amount of all revenues of Borrower that would, as determined in accordance with
GAAP, be classified as gross revenues on the consolidated income statement of
Borrower for the relevant accounting period, minus the amount of all sales
-----
credits, discounts, credits as a result of fraud, and any other credits that
would, in accordance with GAAP, be charged against gross revenues for that
accounting period.
"Non-Ordinary Course Proceeds" means, collectively, (a) tax refunds of
----------------------------
Borrower, (b) net cash proceeds of sales or other voluntary or involuntary
dispositions of Equipment or real property of Borrower, (c) net cash proceeds of
sales or other issuances of Capital Stock or Subordinated Indebtedness of
Borrower, (d) net cash proceeds of sales or other voluntary or involuntary
dispositions of other property (other than cash proceeds of sales or other
voluntary or involuntary dispositions of Accounts and Inventory) of Borrower not
in the ordinary course of business, and (e) net cash proceeds of transactions
(other than any sales or other dispositions of property) by Borrower not in the
ordinary course of business.
"Notes" means the Term Notes.
-----
"Notice of Borrowing" has the meaning specified therefor in Section
-------------------
2.02.
"Obligations" means (i) the obligations of the Borrower to pay, as and
-----------
when due and payable (by scheduled maturity, required prepayment, acceleration,
demand or otherwise), all amounts from time to time owing by it in respect of
the Loan Documents, whether for
-10-
<PAGE>
principal, interest, fees, indemnification payments, expense reimbursements or
otherwise, and (ii) the obligations of the Borrower to perform or observe all of
its obligations from time to time existing under the Loan Documents.
"Operating Lease Obligations" means all obligations for the payment of
---------------------------
rent for any real or personal property under leases or agreements to lease,
other than Capitalized Lease Obligations.
"Participant Register" has the meaning specified therefor in Section
--------------------
11.07(d).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
----
thereto.
"Permitted Indebtedness" means:
----------------------
(a) any Indebtedness owing to the Lender Group;
(b) any other Indebtedness listed on Schedule 6.02(b), but not the
extension of maturity, refinancing or modification of the terms thereof;
(c) Indebtedness evidenced by Capitalized Lease Obligations entered
into in order to finance Capital Expenditures made by the Borrower or any of its
Subsidiaries, but only to the extent that the same are not prohibited under the
provisions of Sections 6.02(o), and 6.03(c);
(d) Indebtedness secured by subsection (e) of the definition of
Permitted Liens; and
(e) such other Indebtedness as the Required Lenders may consent to in
writing from time to time (in their sole and absolute discretion).
"Permitted Investments" means (i) marketable direct obligations issued
---------------------
or unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six months from the date of acquisition thereof, (ii)
commercial paper, maturing not more than 270 days after the date of issue rated
P-1 by Moody's or A-1 by Standard & Poor's; (iii) certificates of deposit
maturing not more than 270 days after the date of issue, issued by commercial
banking institutions and money market or demand deposit accounts maintained at
commercial banking institutions, each of which is a member of the Federal
Reserve System and has a combined capital and surplus and undivided profits of
not less than $500,000,000; and (iv) repurchase agreements having maturities of
not more than 90 days from the date of acquisition which are entered into with
major money center banks included in the commercial banking institutions
described in clause (iii) above and which are secured by readily marketable
direct obligations of the Government of the United States of America or any
agency thereof, (v) money market accounts maintained with mutual funds having
assets in excess of $2,500,000,000, and (vi) tax exempt securities rated A or
better by Moody's or A+ or better by Standard & Poor's.
"Permitted Liens" means:
---------------
-11-
<PAGE>
(a) Liens securing the Obligations;
(b) Liens for taxes, assessments and governmental charges the payment
of which is not required under Section 6.01(c);
(c) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and other similar Liens arising (provided they are
subordinate to the Lender Group's Liens on Collateral) in the ordinary course of
business and securing obligations (other than Indebtedness for borrowed money)
that are not overdue by more than 30 days or are being contested in good faith
and by appropriate proceedings promptly initiated and diligently conducted, and
a reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor;
(d) Liens described on Schedule 6.02(a), but not the extension of
coverage thereof to other property or the extension of maturity, refinancing or
other modification of the terms thereof or the increase of the Indebtedness
secured thereby;
(e) (i) purchase money Liens on property acquired or held by the
Borrower or any of its Subsidiaries in the ordinary course of its business to
secure the purchase price of such property or Indebtedness incurred solely for
the purpose of financing the acquisition of such property or (ii) Liens existing
on such property at the time of its acquisition; provided, however, that (A) no
-------- -------
such Lien shall extend to or cover any other property of the Borrower or any of
its Subsidiaries, (B) the principal amount of the Indebtedness secured by any
such Lien shall not exceed the lesser of 80% of the fair market value or the
cost of the property so held or acquired and (C) the aggregate principal amount
of all purchase money Liens on property acquired by the Borrower or any of its
Subsidiaries after date of this Agreement shall not exceed at any one time
outstanding $2,000,000;
(f) deposits and pledges securing (i) obligations incurred in respect
of workers' compensation, unemployment insurance or other forms of governmental
insurance or benefits, (ii) the performance of bids, tenders, leases, contracts
(other than for the payment of money) and statutory obligations or (iii)
obligations on surety or appeal bonds, but only to the extent such deposits or
pledges are incurred or otherwise arise in the ordinary course of business and
secure obligations not past due;
(g) easements, zoning restrictions and similar encumbrances on real
property and minor irregularities in the title thereto that do not (i) secure
obligations for the payment of money or (ii) materially impair the value of such
property or its use by the Borrower or any of its Subsidiaries in the normal
conduct of such Person's business; and
(h) such other Liens as the Required Lenders may consent to in
writing from time to time (in their sole and absolute discretion).
"Person" means an individual, corporation, limited liability company,
------
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or Governmental Authority.
-12-
<PAGE>
"Post-Default Rate" means a rate of interest per annum equal to the
-----------------
rate of interest otherwise in effect from time to time pursuant to the terms of
this Agreement plus 2%.
"Pro Rata Share means:
--------------
(a) with respect to a Lender's obligation to make Term Loan A and
receive payments relative thereto, the percentage obtained by dividing (i) such
Lender's Term Loan A Commitment, as set forth on Schedule C-1, by (ii) the
------------
aggregate Term Loan A Commitments of all Lenders, as set forth on Schedule C- 1.
-------------
(b) with respect to a Lender's obligation to make Term Loan B and
receive payments relative thereto, the percentage obtained by dividing (i) such
Lender's Term Loan B Commitment, as set forth on Schedule C-1, by (ii) the
------------
aggregate Term Loan B Commitments of all Lenders, as set forth on Schedule C-1.;
------------
and
(c) with respect to all other matters (including the indemnification
obligations arising under Section 12.05), the percentage obtained by dividing
(i) such Lender's Total Commitments to make Loans, as set forth on Schedule C-1,
------------
by (ii) the aggregate Total Commitments of all Lenders, as set forth on Schedule
--------
C-1.
- ---
"Rating Agencies" has the meaning specified therefor in Section 2.07.
---------------
"Reference Bank" means The Chase Manhattan Bank, its successors or any
--------------
other money center commercial bank designated by the Lender Group to the
Borrower from time to time.
"Reference Rate" means the rate of interest publicly announced by the
--------------
Reference Bank in New York, New York from time to time as its prime rate or base
rate. The prime rate or base rate is determined from time to time by the
Reference Bank as a means of pricing some loans to its borrowers and neither is
tied to any external rate of interest or index nor necessarily reflects the
lowest rate of interest actually charged by the Reference Bank to any particular
class or category of customers. Each change in the Reference Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Register" has the meaning specified therefor in Section 11.07(c).
--------
"Registered Loan" has the meaning specified therefor in Section
---------------
2.03(c).
"Registered Note" has the meaning specified therefor in Section
---------------
2.03(c).
"Regulation T", "Regulation U", and "Regulation X" mean, respectively,
------------ ------------ ------------
Regulations T, U, and X of the Board or any successor, as the same may be
amended or supplemented from time to time.
"Release" means any spilling, leaking, pumping, pouring, emitting,
-------
emptying, discharging, injecting, escaping, leaching, seeping, migrating,
dumping or disposing of any Hazardous Material (including the abandonment or
discarding of barrels, containers and other
-13-
<PAGE>
closed receptacles containing any Hazardous Material) into the indoor or outdoor
environment, including ambient air, soil, surface or ground water.
"Remedial Action" means all actions taken to (i) clean up, remove,
---------------
remediate, contain, treat, monitor, assess, evaluate or in any other way address
Hazardous Materials in the indoor or outdoor environment; (ii) prevent or
minimize a Release or threatened Release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; (iii) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities; or (iv)
any other actions authorized by 42 U.S.C. 9601.
"Reportable Event" means an event described in Section 4043 of ERISA
----------------
(other than an event not subject to the provision for 30-day notice to the PBGC
under the regulations promulgated under such Section).
"Required Lenders" means, at any time, Lenders whose Pro Rata Shares
----------------
aggregate at least 51% of the Commitments or, if the Commitments shall have been
terminated irrevocably, Lenders holding at least 51% of the Obligations then
outstanding.
"SEC" means the Securities and Exchange Commission or any other
---
similar or successor agency of the Federal government administering the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar Federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time.
"Securitization" has the meaning specified therefor in Section 2.07.
--------------
"Securitization Party" the meaning specified therefor in Section 2.07.
--------------------
"Security Agreement" means the Security Agreement made by the Borrower
------------------
in favor of the Lender Group, substantially in the form of Exhibit D.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
-----------------
division of The McGraw-Hill Companies, Inc. and any successor thereto.
"Subordinated Indebtedness" means either Indebtedness of the Borrower
-------------------------
in favor of a third Person which has been subordinated to all Indebtedness of
the Borrower under the Loan Documents by an order of the Bankruptcy Court, or
Indebtedness, the terms of which are satisfactory to the Lender Group and which
has been expressly subordinated in right of payment to all Indebtedness of the
Borrower under the Loan Documents (i) by the execution and delivery of a
subordination agreement, in form and substance satisfactory to the Required
Lenders, or (ii) otherwise on terms and conditions (including, without
limitation, subordination provisions, payment terms, interest rates, covenants,
remedies, defaults and other material terms) satisfactory to the Lender Group
"Subsidiary" means, with respect to any Person at any date, any
----------
corporation, limited or general partnership, limited liability company, trust,
association or other entity (i) the
-14-
<PAGE>
accounts of which would be consolidated with those of such Person in such
Person's consolidated financial statements if such financial statements were
prepared in accordance with GAAP or (ii) of which more than 50% of (A) the
outstanding Capital Stock having (in the absence of contingencies) ordinary
voting power to elect a majority of the board of directors of such corporation,
(B) the interest in the capital or profits of such partnership or limited
liability company or (C) the beneficial interest in such trust or estate is, at
the time of determination, owned or controlled directly or indirectly through
one or more intermediaries, by such Person.
"Term Loan A" means the Loan described in Section 2.01(a) made by a
-----------
Term Loan A Lender to the Borrower on the Effective Date pursuant to Section
2.01(a).
"Term Loan A Commitment" means, for each Lender, the commitment of
----------------------
such Lender to make Term Loan A, in the principal amount with respect to each
such Lender equal to the amount set forth opposite the name of such Lender under
Term Loan A Commitment on Schedule C-1.
------------
"Term Loan A Lenders" means, individually and collectively, each of
-------------------
the Lenders with a Term Loan A Commitment greater than zero.
"Term Loan B" means the Loan described in Section 2.01(b) made by a
-----------
Term Loan B Lender to the Borrower on the Effective Date pursuant to Section
2.01(b).
"Term Loan B Commitment" means, for each Lender, the commitment of
----------------------
such Lender to make Term Loan B, in the principal amount with respect to each
such Lender equal to the amount set forth opposite the name of such Lender under
Term Loan B Commitment on Schedule C-1.
------------
"Term Loan B Lenders" means, individually and collectively, each of
-------------------
the Lenders with a Term Loan B Commitment greater than zero.
"Term Loans" means, individually and collectively, the Term Loans A
----------
and the Term Loans B.
"Term Note A" means, individually and collectively, the promissory
-----------
notes of the Borrower, substantially in the form of Exhibit B-1, made payable to
the order of each Term Loan A Lender, evidencing the Indebtedness resulting from
the making by such Lender to the Borrower of such Lender's Term Loan A and
delivered to such Lender pursuant to Article IV, as each such promissory note
may be amended, supplemented, restated, modified or extended from time to time,
and any promissory note or notes issued in exchange or replacement therefor.
The term "Term Note A" shall include any Registered Note evidencing a Term Loan
A or portion thereof and delivered pursuant to Section 2.03(c).
"Term Note B" means, individually and collectively, the promissory
-----------
notes of the Borrower, substantially in the form of Exhibit B-2, made payable to
the order of each Term Loan B Lender, evidencing the Indebtedness resulting from
the making by such Lender to the Borrower of such Lender's Term Loan B and
delivered to such Lender pursuant to Article IV, as each such promissory note
may be amended, supplemented, restated, modified or extended from time to time,
and any promissory note or notes issued in exchange or replacement therefor.
The
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<PAGE>
term "Term Note B" shall include any Registered Note evidencing a Term Loan
B or portion thereof and delivered pursuant to Section 2.03(c).
"Term Notes" means, individually and collectively, the Term Notes A
----------
and the Term Notes B.
"Termination Event" means (i) a Reportable Event with respect to any
-----------------
Employee Plan, (ii) any event that causes the Borrower or any of its ERISA
Affiliates to incur liability under Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the
Code, (iii) the filing of a notice of intent to terminate an Employee Plan or
the treatment of an Employee Plan amendment as a termination under Section 4041
of ERISA, (iv) the institution of proceedings by the PBGC to terminate an
Employee Plan, or (v) any other event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Employee Plan.
"Title Insurance Policy" means the mortgagee's loan policy, together
----------------------
with all indorsements made from time to time thereto, issued by or on behalf of
a title insurance company satisfactory in form and substance to Agent, insuring
the Lien created by the Mortgage in an amount and on terms satisfactory to
Agent, delivered to the Lender Group pursuant to Article III hereof .
"Total Commitment" means, for each Lender, the obligation of such
----------------
Lender to fund Loans, with respect to each type of Loan in the amount set forth
opposite the name of such Lender under the Commitment relative to such Loan type
on Schedule C-1, and in an aggregate amount will respect to such Lender equal to
------------
the amount set forth opposite the name of such Lender under Total Commitment on
Schedule C-1.
- ------------
"Triggering Event" means, with respect to the Chapter 11 Case of
----------------
Borrower, (a) the conversion of the Chapter 11 to a Chapter 7 case, (b) the
appointment of a trustee under Section 1104(a) or (c) of the Bankruptcy Code, or
the appointment of an examiner under Section 1104(c) of the Bankruptcy Code with
enlarged powers beyond those set forth in paragraphs (3) and (4) of Section
1106(a) of the Bankruptcy Code, (c) the entry of an order providing for
dismissal of the Chapter 11 case, unless such order provides for the concurrent
payment in full in cash of all of the Obligations, (d) the entry of an order
providing for a superpriority claim of administration that is not expressly
subordinated to those of the Lender Group, except for any such claims granted in
connection with the Fleet Loan Facility, (e) either the Interim Bankruptcy Court
Order or the Final Bankruptcy Court Order is reversed, vacated, modified,
amended or stayed, whether or not sustained on appeal or stayed during any
appeal period, (f) either the Interim Bankruptcy Court Order or the Final
Bankruptcy Court Order or this Agreement shall for any reason cease to be valid
and binding or enforceable against the Borrower, or the Borrower so states in
writing, (g) the Borrower commences or joins in or does not contest in good
faith any legal proceeding (i) to contest in any manner the validity or
enforceability of any provision of either the Interim Bankruptcy Court Order or
the Final Bankruptcy Court Order or this Agreement, or (ii) to assert in any
manner that the Borrower has no further obligation or liability under either the
Interim Bankruptcy Court Order or the Final Bankruptcy Court Order or this
Agreement, (h) the entry of an order confirming any plan of reorganization that
provides for any treatment of the Obligations other than payment in full in cash
on the effective date of such plan,
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<PAGE>
or (i) the entry of an order or orders granting relief from stay to any creditor
(other than the Lender Group) as to any assets of Borrower having aggregate book
values in excess of $100,000, unless approved in writing by Agent, or (j) any
party in interest files any application or motion or other pleading with the
Bankruptcy Court seeking any of the above and such proceeding is not contested
in good faith by Borrower.
"WARN" has the meaning specified therefor in Section 5.01(j).
----
SECTION 1.02. Terms Generally. The definitions of terms herein shall apply
---------------
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise, (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof'" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights. References in this
Agreement to "determination" by the Lender Group or any member thereof include
good faith estimates by the Lender Group or such member thereof (in the case of
quantitative determinations) and good faith beliefs by the Lender Group or such
member thereof (in the case of qualitative determinations).
SECTION 1.03. Accounting and Other Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under GAAP applied on a basis consistent with those used in preparing the
Financial Statements. All terms used in this Agreement which are defined in
Article 8 or Article 9 of the Uniform Commercial Code in effect in the State of
New York on the date hereof and which are not otherwise defined herein shall
have the same meanings herein as set forth therein.
SECTION 1.04. Time References. Unless otherwise indicated herein, all
---------------
references to time of day refer to Eastern standard time or Eastern daylight
saving time, as in effect in New York City on such day. For purposes of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding"; provided, however, that with respect to a computation
-------- -------
of fees or interest payable to the Lender Group, such period shall in any event
consist of at least one full day.
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<PAGE>
ARTICLE II
THE LOANS
SECTION 2.01. Commitments.
-----------
(a) (i) The Term Loan A Lenders agree, ratably in accordance with their
respective Term Loan A Commitments, and on the terms and conditions hereinafter
set forth (including subject to the satisfaction of the applicable conditions
precedent set forth in Article IV hereof), to make term loans (collectively,
----------
"Term Loan A") to the Borrower on or after the Effective Date in an aggregate
-----------
principal amount of $15,350,000, a maximum of $6,350,000 of which will be
disbursed after the entry of the Interim Bankruptcy Court Order and prior to the
entry of the Final Bankruptcy Court Order, in each case, less all fees, costs
and expenses owed by Borrower to the Term Loan A Lenders under this Agreement
including, but not limited to, Lenders' attorneys fees, all mortgage recording
fees or taxes, title insurance policy fees, appraisal fees and fees arising
under section 2.06 of this Agreement, and with respect to the second funding of
Term Loan A, less the amount of any reserve that Agent may determine to be
appropriate, in Agent's sole and absolute discretion, on account of matters
disclosed by the title report relating to Borrower's Facility and matters
disclosed by UCC searches with respect to personal property of Borrower, which
Term Loan A shall be repayable in accordance with the terms hereof and of Term
Note A, shall be secured by all of the Collateral, and shall constitute
Obligations. Any principal amount of Term Loan A which is repaid or prepaid by
the Borrower may not be reborrowed.
(ii) The Term Loan B Lenders agree, ratably in accordance with their
respective Term Loan B Commitments, and on the terms and conditions hereinafter
set forth (including subject to the satisfaction of the applicable conditions
precedent set forth in Article IV hereof), to make term loans (collectively,
"Term Loan B") to the Borrower on the Effective Date applicable to Term Loan B
-----------
in an aggregate principal amount of $2,500,000 less all fees, costs and expenses
owed by Borrower to the Term Loan B Lenders under this Agreement including, but
not limited to, Lenders' attorneys fees, all mortgage recording fees or taxes,
title insurance policy fees, appraisal fees and fees arising under section 2.06
of this Agreement, which Term Loan B shall be repayable in accordance with the
terms hereof and of Term Note B, shall be secured by all of the Collateral, and
shall constitute Obligations. Any principal amount of Term Loan B which is
repaid or prepaid by the Borrower may not be reborrowed.
SECTION 2.02. Making the Loans.
The Borrower shall give Agent prior telephone notice (immediately confirmed
in writing, in substantially the form of Exhibit G hereto (a "Notice of
---------
Borrowing")), not later than 9:00 a.m. (New York City time) five Business Days
- ---------
prior to the date of the proposed Loan. Such Notice of Borrowing shall be
irrevocable and shall specify (i) the principal amount of the proposed Loan,
(ii) the use of the proceeds of such proposed Loan, and (iii) the proposed
borrowing date, which must be a Business Day, and must be on or promptly after
the Effective Date (and after the entry of the Final Bankruptcy Court Order in
the case of the second funding of Term Loan A). Agent may act without liability
upon the basis of written, telecopied or telephonic notice believed by the Agent
in good faith to be from the Borrower (or from any
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<PAGE>
Authorized Officer thereof designated in writing purportedly from the Borrower
to Agent). The Borrower hereby waives the right to dispute Agent's record of the
terms of any such telephonic Notice of Borrowing. Each Notice of Borrowing shall
be irrevocable and binding on the Borrower. Agent on behalf of the Lender Group
will make the proceeds of such Loan available to the Borrower on the day of the
proposed Loan by causing an amount, in immediately available funds, to be
deposited in an account designated by the Borrower to Agent at a commercial bank
reasonably satisfactory to Agent.
SECTION 2.03. Notes; Repayment of Term Loans and other Obligations.
----------------------------------------------------
(a) (i) As to each Term Loan A Lender, the Term Loan A of such Lender
shall be evidenced by a single Term Note A, duly executed on behalf of the
Borrower, dated the Effective Date, and delivered to and made payable to the
order of such Lender in a principal amount equal to the amount of such Lender's
Term Loan A Commitment.
(ii) As to each Term Loan B Lender, the Term Loan B of such Lender
shall be evidenced by a single Term Note B, duly executed on behalf of the
Borrower, dated the Effective Date, and delivered to and made payable to the
order of such Lender in a principal amount equal to the amount of such Lender's
Term Loan B Commitment.
(b) The outstanding principal of each Loan, together with all other
Obligations, shall be due and payable on the Final Maturity Date.
(c) The Borrower agrees to record each Loan on the Register referred to in
Section 11.07(c). Each Loan recorded on the Register (the "Registered Loan")
---------------
may not be evidenced by promissory notes other than the Term Note each of which
is a Registered Note (as defined below). Upon the registration of any Loan, any
promissory note (other than a Registered Note) evidencing the same shall be null
and void and shall be returned to the Borrower. The Borrower agrees, at the
request of any Lender, to execute and deliver to such Lender a promissory note
in registered form to evidence such Registered Loan (i.e. containing the
registered note language set forth in Exhibits B-1 and B-2 hereto) and
registered as provided in Section 11.07(c) (a "Registered Note"), payable to the
---------------
order of such Lender and otherwise duly completed. Once recorded on the
Register, the Loan or Loans evidenced by such Note may not be removed from the
Register so long as it remains outstanding, and a Registered Note may not be
exchanged for a promissory note that is not a Registered Note.
SECTION 2.04. Interest.
--------
(a) Loans. The Term Loans shall bear interest on the principal amount
-----
thereof from time to time outstanding, from the date of such Loan until such
principal amount becomes due, at a rate per annum equal to:
(i) with respect to the Term Loans A, the Reference Rate plus
five percent (5%).
(ii) with respect to the Term Loans B, the Reference Rate plus
eight and one half percent (8.5%), of which three and one half percent (3.5%)
per annum shall be
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<PAGE>
payable "in kind" and added to the outstanding principal balance of Term Loan B,
and shall thereafter accrue interest as principal and shall be payable in the
same manner as principal.
(b) Default Interest. To the extent permitted by law, upon the
----------------
occurrence and during the continuance of an Event of Default, the principal of,
and all accrued and unpaid interest on, all Loans, and all fees, indemnities or
any other Obligations of the Borrower under this Agreement, the Notes and other
Loan Documents shall bear interest, from the date such Event of Default occurred
until such Event of Default is cured or waived in writing in accordance
herewith, at a rate per annum equal at all times to the Post-Default Rate.
(c) Interest Payment. Interest on each Loan shall be payable monthly, in
----------------
arrears, on the first day of each month commencing on August 1, 1999 and at
maturity (whether upon demand, by acceleration or otherwise). Interest at the
Post-Default Rate shall be payable on demand.
SECTION 2.05. Prepayment of Loans; Term and Termination.
-----------------------------------------
(a) Reserved.
--------
(b) Optional Prepayment. The Borrower may, upon at least three Business
-------------------
Days' prior written notice to Agent, prepay the principal of the Term Loans in
whole or in part and ratably in accordance with the applicable Lenders' Pro Rata
Shares as to the Term Loans being prepaid. Any amounts paid or prepaid on the
Term Loans may not be subsequently reborrowed.
(c) Mandatory Prepayment. Dispositions; Casualty Events. Immediately
--------------------
upon any Disposition by the Borrower and/or the receipt of any Non-Ordinary
Course Proceeds by Borrower in excess of $50,000 in the aggregate, the Borrower
shall prepay the outstanding principal of the Term Loans in an amount equal to
100% of the Net Cash Proceeds and Non-Ordinary Course Proceeds received by the
Borrower in connection with such Disposition. Upon the loss, destruction or
taking by condemnation of any Collateral, the Borrower shall prepay the
outstanding principal of the Term Loans in an amount equal to 100% of the
proceeds received by the Borrower in excess of $50,000 in the aggregate in
connection therewith, net of any reasonable expenses incurred in collecting such
net proceeds. Any amounts paid or prepaid on the Term Loans may not be
subsequently reborrowed.
(d) Application of Payments. Each prepayment of principal pursuant to
-----------------------
subsections (b) or (c) above shall be applied first against the remaining
principal of Term Loan A, and second against the remaining principal of Term
Loan B.
(e) Interest and Fees. Any prepayment made pursuant to this Section 2.05
-----------------
shall be accompanied by accrued interest on the principal amount being prepaid
to the date of prepayment, and if such prepayment would reduce the amount of the
outstanding Loans to zero, such prepayment shall be accompanied by the payment
of the fees accrued to such date pursuant to Section 2.06.
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<PAGE>
(f) Cumulative Prepayments. Except as otherwise expressly provided in
----------------------
this Section 2.05, payments with respect to any subsection of this Section 2.05
are in addition to payments made or required to be made under any other
subsection of this Section 2.05.
(g) Term of Agreement. Subject to the right of the Lender Group to cease
-----------------
making Loans to Borrower upon or after the occurrence of any Default or Event of
Default, this Agreement shall be in effect for the period commencing on the
Effective Date and ending on the Final Maturity Date, unless sooner terminated
as provided in Section 2.05(h).
(h) Termination of Agreement by Lender Group. Agent (acting on the
----------------------------------------
written instructions of the Required Lenders) may terminate this Agreement at
any time upon or after the occurrence of an Event of Default without notice to
Borrower. Agent will attempt to provide Borrower with prompt notice of such
termination, however, the failure to provide such notice or to promptly provide
such notice shall in no way alter the effectiveness of such termination.
(i) Effect of Termination. All of the Obligations shall be immediately
---------------------
due and payable upon the termination date stated in any notice of termination of
this Agreement. All undertakings, agreements, covenants, warranties, and
representations of the Borrower contained in the Loan Documents shall survive
any such termination, and, notwithstanding such termination, Agent shall retain
its Liens in the Collateral for the benefit of the Lender Group, and the Lender
Group shall retain all of its rights and remedies under the Loan Documents,
until the Borrower has paid to Agent, for the account of the Lender Group, all
of Borrower's Obligations to the Lender Group, in full, in immediately available
funds, together with the applicable termination charge, if any. Notwithstanding
the payment in full of the Obligations, Agent shall not be required to terminate
its security interests in the Collateral unless, with respect to any loss or
damage the Lender Group may incur as a result of dishonored checks or other
items of payment received by the Lender Group from the Borrower or any Account
Debtor and applied to the Obligations, Agent shall, at its option, (a) have
received a written agreement, executed by the Borrower and by any Person whose
loans or other advances to the Borrower are used in whole or in part to satisfy
the Obligations, indemnifying the Lender Group from any such loss or damage, or
(b) have retained such monetary reserves, and Agent shall have retained such
Liens on the Collateral, for such period of time as Agent, in its reasonable
discretion, may deem necessary to protect the Lender Group from any such loss or
damage.
SECTION 2.06. Fees.
----
(a) Closing Fee. On or prior to the Effective Date applicable to Term
-----------
Loan A, the Borrower shall pay to Agent for the ratable benefit of the Lenders a
non-refundable closing fee (the "Closing Fee") equal to $218,750.00.
-----------
(b) Loan Servicing Fee. From and after the Effective Date and until the
------------------
Final Maturity Date, the Borrower shall pay to Agent for its sole and separate
account a non-refundable loan servicing fee (the "Loan Servicing Fee") equal to
------------------
$10,000 each quarter, payable quarterly in advance, with the first such payment
due and payable on the Effective Date for Term Loan A, and the second such
payment due and payable on October 1, 1999, and thereafter, on the first day of
each January, April, July, and October of each year, and on the date the Loans
shall be paid in full.
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<PAGE>
(c) Commitment Fee. Borrower shall pay to Agent for the ratable benefit
--------------
of the Lenders a non-refundable commitment fee of $131,250, which fee has
heretofore been fully earned by the Lenders upon their issuance of their
commitment to make the Loans provided for hereunder.
(d) Term Loan B Funding Fee. On or prior to the Effective Date
-----------------------
applicable to Term Loan B, Borrower shall pay to the Agent for the ratable
benefit of the Term Loan B Lenders a funding fee in the amount of $100,000 .
(e) Success Fee. Borrower shall pay to the Agent for the ratable benefit
-----------
of the Lenders a success fee upon the payment in full of the Obligations in an
amount equal to: (i) $125,000 if the payment in full of the Obligations occurs
within 120 calendar days after the Effective Date applicable to Term Loan A;
(ii) $250,000 if the payment in full of the Obligations occurs between 121 and
240 calendar days after the Effective Date applicable to Term Loan A; and (iii)
$500,000 if the payment in full of the Obligations occurs later than 241
calendar days after the Effective Date applicable to Term Loan A.
SECTION 2.07. Securitization. The Borrower hereby acknowledges that the
--------------
Lenders and any of their Affiliates may sell or securitize the Loans (a
"Securitization") through the pledge of the Loans as collateral security for
--------------
loans to such Lenders or their Affiliates or through the sale of the Loans or
the issuance of direct or indirect interests in the Loans, which loans to such
Lenders or their Affiliates or direct or indirect interests will be rated by
Moody's, Standard & Poor's or one or more other rating agencies (the "Rating
------
Agencies"). The Borrower shall cooperate with such Lenders and their Affiliates
- --------
to effect the Securitization including, without limitation, by (a) amending this
Agreement and the other Loan Documents, and executing such additional documents,
as reasonably requested by such Lenders, in connection with the Securitization,
provided that (i) any such amendment or additional documentation does not impose
- -------- ----
material additional costs on the Borrower and (ii) any such amendment or
additional documentation does not materially adversely affect the rights, or
materially increase the obligations, of the Borrower under the Loan Documents or
change or affect in a manner adverse to the Borrower the financial terms of the
Loans, (b) providing such information as may be reasonably requested by such
Lenders, in connection with the rating of the Loans or the Securitization, (c)
providing in connection with any rating of the Loans, a certificate (i) agreeing
to indemnify such Lenders and any of their Affiliates, any of the Rating
Agencies, or any party providing credit support or otherwise participating in
the Securitization (collectively, the "Securitization Parties") for any losses,
claims, damages or liabilities (the "Liabilities") to which such Lenders, their
-----------
Affiliates or such Securitization Parties may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Loan Document or in any
writing delivered by or on behalf of the Borrower and its Affiliates to the
Lender Group in connection with any Loan Document or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading and such
indemnity shall survive any transfer by such Lenders or their successors or
assigns of the Loans and (ii) agreeing to reimburse such Lenders and any of
their Affiliates and other Securitization Parties for any legal or other
expenses reasonably incurred by such Persons in connection with defending the
Liabilities; and (d) providing such information regarding and its Subsidiaries
and Affiliates, the
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<PAGE>
Collateral and other property, assets and business of the Borrower (including
appraisals and valuations) as may be reasonably requested by such Lenders or
their successors or assignees.
ARTICLE III
PAYMENTS AND OTHER COMPENSATION
SECTION 3.01. Payments; Computations and Statements. The Borrower will
-------------------------------------
make each payment under this Agreement, the Notes and the other Loan Documents
(whether of principal, interest, fees, expense reimbursements or otherwise) not
later than 11:00 a.m. (New York City time) on the day when due, in lawful money
of the United States of America and in immediately available funds, to Agent for
the benefit of the Lender Group at the Agent Account. All such payments received
by the Agent for the benefit of the Lender Group after 11:00 a.m. (New York City
time) on any Business Day will be credited to the Loan Account on the next
succeeding Business Day. All such payments shall be made by the Borrower to the
Agent without defense, set-off or counterclaim. Whenever any payment to be made
under any such Loan Document shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be. All computations of interest and fees
shall be made by the Lender Group on the basis of a year of 360 days for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or fee is payable. Each
determination by the Lender Group of an interest rate, fees or expense
reimbursement hereunder shall be conclusive and binding for all purposes in the
absence of manifest error.
SECTION 3.02. Payments to Lender Group, Return of Payments.
--------------------------------------------
(a) Each payment received by Agent under this Agreement of any Obligation
for the account of any member of the Lender Group shall be paid by Agent
promptly to such member of the Lender Group, in immediately available funds, to
the account of such member of the Lender Group as specified from time to time by
such member of the Lender Group in a written notice to Agent.
(b) Unless Agent receives notice from the Borrower prior to the date on
which any payment is due to the Lender Group that the Borrower will not make
such payment in full as and when required, Agent may assume that the Borrower
has made such payment in full to Agent on such date in immediately available
funds and Agent may (but shall not be so required), in reliance upon such
assumption, distribute to the applicable members of the Lender Group on such due
date an amount equal to the amount then due such member of the Lender Group. If
and to the extent the Borrower has not made such payment in full to Agent, each
member of the Lender Group shall repay to Agent on demand such amount
distributed to such member of the Lender Group, together with interest thereon
at the Reference Rate for each day from the date such amount is distributed to
such member of the Lender Group until the date repaid by such member of the
Lender Group.
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<PAGE>
SECTION 3.03. Apportionment and Application of Payments. Aggregate
-----------------------------------------
principal payments and interest payments shall be apportioned ratably among the
Lenders (according to their applicable Pro Rata Shares) and payments of the fees
(other than as specifically provided in Section 2.06(d) and other than fees
designated for Agent's sole and separate account) shall, as applicable, be
apportioned ratably among the Lenders. All payments shall be remitted to Agent
and all such payments (except, so long as no Event of Default has occurred and
is continuing, for payments designated in writing by Borrower to Agent as a
prepayment of specific Loans hereunder, which may be so applied) and all
Collections and all proceeds of Collateral received by Agent, shall be applied
as follows:
(a) unless all of the Obligations have become or been declared due and
payable:
(i) all Non-Ordinary Course Proceeds consisting of cash proceeds of
sales or other issuances of the Capital Stock or Subordinated Indebtedness of
the Borrower (to the extent permitted hereunder) shall be applied in the
following order:
first, to pay any fees, or expense reimbursements then due to
Agent from the Borrower until paid in full;
second, to pay any fees or expense reimbursements then due to the
Lenders from the Borrower until paid in full;
third, to pay interest due in respect of all Loans until paid in
full (if such proceeds are insufficient to pay all such interest
in full, then such amount shall be applied pro rata to interest
accrued and unpaid with respect to each of the Loans);
fourth, to pay any other Obligations due to the Lender Group (but
exclusive of principal of the Term Loans);
fifth, if and to the extent the Borrower elects in writing to do
so pursuant to a notice to Agent, to Principal of Term Loan A
until paid in full; and
sixth, if and to the extent the Borrower elects in writing to do
so pursuant to a notice to Agent, to pay or prepay principal of
Term Loan B until paid in full.
(ii) all other Non-Ordinary Course Proceeds shall be applied in the
following order:
first, to pay any fees, or expense reimbursements then due to
Agent from the Borrower until paid in full;
second, to pay any fees or expense reimbursements then due to the
Lenders from the Borrower until paid in full;
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<PAGE>
third, to pay interest due in respect of all Loans until
paid in full (if such proceeds are insufficient to pay all
such interest in full, then such amount shall be applied
pro rata to interest accrued and unpaid with each of the
Loans);
fourth, to pay or prepay principal of Term Loan A until
paid in full;
fifth, to pay or prepay principal of Term Loan B until
paid in full; and
sixth, to pay any other Obligations due to the Lender
Group.
(iii) all other Collections and all other proceeds of Collateral
shall be applied in the following order:
first, to pay any fees, or expense reimbursements then due
to Agent from the Borrower until paid in full;
second, to pay any fees or expense reimbursements then due
to the Lenders from the Borrower until paid in full;
third, to pay interest due in respect of all Loans until
paid in full (if such proceeds are insufficient to pay all
such interest in full, then such amount shall be applied
pro rata to interest accrued and unpaid with respect to
each of the Loans); and
fourth, to pay any other Obligations due to the Lender
Group.
(b) from and after the date that all Obligations have become, or been
declared by the Lender Group, due and payable or that all Obligations and
Collateral have become, or been declared by the Lender Group, in liquidation,
all Collections and all other proceeds of Collateral (irrespective of whether
constituting Non-Ordinary Course Proceeds) shall be applied in the following
order:
first, to pay any fees, or expense reimbursements then due
to Agent from the Borrower until paid in full;
second, to pay any fees or expense reimbursements then due
to the Lenders from the Borrower until paid in full;
third, to pay interest due in respect of all Loans until
paid in full (if such proceeds are insufficient to pay all
such interest in full, then such amount shall be applied
pro rata to interest accrued and unpaid with respect to
each of the Loans);
fourth, to pay or prepay principal of the Term Loans,
ratably until paid in full; and
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<PAGE>
fifth, to pay any other Obligations due to the Lender Group.
SECTION 3.04. All Loans to Constitute One Obligation. The Loans shall
--------------------------------------
constitute one general Obligation of the Borrower, and shall be secured by
Agent's Lien upon all of the Collateral, for the benefit of the Lender Group.
SECTION 3.05. Loan Account; Statements of Account. Agent shall enter all
-----------------------------------
Loans as debits to the Loan Account and also shall record in the Loan Account
all payments made by the Borrower on any Obligations and all proceeds of
Collateral which are finally paid to the Lender Group, and may record therein,
in accordance with its customary practices, other debits and credits, including
interest and all charges and expenses properly chargeable to the Borrower. Agent
will account to the Borrower monthly with a statement of Loans, charges, and
payments made pursuant to this Agreement, and such accounting rendered by Agent
shall be deemed final, binding and conclusive upon the Borrower unless Agent is
notified by the Borrower in writing to the contrary within 30 days of the date
each accounting is mailed to the Borrower. Such notice only shall be deemed an
objection to those items specifically objected to therein.
ARTICLE IV
CONDITIONS TO LOANS
SECTION 4.01. Conditions Precedent to Effectiveness of the Initial Loan.
---------------------------------------------------------
The obligation of the Lender Group to make the initial Loan is subject to the
fulfillment, in a manner satisfactory to Agent, of each of the following
conditions precedent:
(a) Payment of Fees, Etc. The Borrower shall have paid on or before the
--------------------
date of this Agreement all fees, costs, expenses and taxes then payable pursuant
to Sections 2.06 (it being understood that the Expense Deposit will be applied
to reduce the amount of such fees, costs, expenses and taxes).
(b) Representations and Warranties; No Event of Default. The following
---------------------------------------------------
statements shall be true and correct: (i) the representations and warranties
contained in Article V and in each other Loan Document, certificate or other
writing delivered to the Lender Group pursuant hereto or thereto on or prior to
the Effective Date are true and correct on and as of the Effective Date as
though made on and as of such date and (ii) no Default or Event of Default shall
have occurred and be continuing on the Effective Date or would result from this
Agreement or the other Loan Documents becoming effective in accordance with its
or their respective terms, both immediately before and immediately after giving
effect to the initial Loan.
(c) Legality. The making of the initial Loan shall not contravene any law,
--------
rule or regulation applicable to the Lender Group or the Borrower.
(d) Delivery of Documents. Agent shall have received on or before the
---------------------
Effective Date the following, each in form and substance satisfactory to the
Agent and, unless indicated otherwise, dated the Effective Date:
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<PAGE>
(i) (A) with respect to each Term Loan A Lender, the Term Note A
payable to the order of such Lender, duly executed by the Borrower; and (B) with
respect to each Term Loan B Lender, the Term Note B payable to the order of such
Lender, duly executed by the Borrower;
(ii) a copy of the entered Interim Bankruptcy Court Order or the
entered final Bankruptcy Court Order (which must be entered no later than 25
calendar days after entry of the Interim Bankruptcy Court Order), as
appropriate, in form and substance satisfactory to Lenders, with file stamps
indicating that the same has been entered by the clerk of the Bankruptcy Court
in the docket of the Chapter 11 Case of the Borrower;
(iii) the Security Agreement, duly executed by the Borrower;
(iv) the Mortgage, duly executed and acknowledged by Borrower;
(v) evidence of the recording of the Mortgage in such office or
offices as may be necessary or, in the opinion of the Agent, desirable to
perfect each Lien purported to be created thereby or to otherwise protect the
rights of the Lender Group thereunder;
(vi) the Title Insurance Policy evidencing the absence of any liens on
the Borrower's real property subject to the Mortgage that have priority over the
Liens in favor of Lenders under the Mortgage or otherwise;
(vii) the Intercreditor Agreement, duly executed by each of the parties
thereto other than the Lender Group;
(viii) appropriate financing statements on Form UCC-1, duly executed by
the Borrower and in form to be filed in such office or offices as may be
necessary or, in the opinion of Agent, desirable to perfect the security
interests purported to be created by the Security Agreement and the Mortgage;
(ix) copies of all effective financing statements against Borrower,
none of which, except as to Permitted Liens and except as otherwise agreed in
writing by Agent, shall cover any of the Collateral and the results of searches
for any tax Lien and judgment Lien filed against such Person or its property,
which results, except as otherwise agreed to in writing by Agent, shall not show
any such Liens;
(x) a copy of the resolutions of the Borrower, certified as of the
Effective Date by an Authorized Officer thereof, authorizing (A) the borrowings
hereunder and the transactions contemplated by the Loan Documents to which the
Borrower is or will be a party, and (B) the execution, delivery and performance
by the Borrower of each Loan Document and the execution and delivery of the
other documents to be delivered by the Borrower in connection herewith and
therewith;
(xi) a certificate of an Authorized Officer of the Borrower,
certifying the names and true signatures of the representatives of the Borrower
authorized to sign each Loan Document to which the Borrower is or will be a
party and the other documents to be
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<PAGE>
executed and delivered by the Borrower in connection herewith and therewith,
together with evidence of the incumbency of such authorized officers;
(xii) a certificate of the appropriate official(s) of the state of
organization and each state of foreign qualification of the Borrower certifying
as to the subsistence in good standing of, and the payment of taxes by, the
Borrower in such states;
(xiii) a true and complete copy of the charter, certificate of
formation, certificate of limited partnership or other publicly filed
organizational document of the Borrower certified as of a date not more than 30
days prior to the Effective Date by an appropriate official of the state of
organization of the Borrower;
(xiv) a copy of the charter and by-laws, limited liability company
agreement, operating agreement, agreement of limited partnership or other
organizational document of the Borrower, together with all amendments thereto,
certified as of the Effective Date by an Authorized Officer of the Borrower;
(xv) An opinion of Moses & Singer and Lange, Simpson, Robinson &
Somerville LLP, counsel to the Borrower, substantially in the form,
respectively, of Exhibit I and J;
(xvi) a certificate of an Authorized Officer of the Borrower,
certifying as to the matters set forth in subsection (b) of this Section 4.01;
(xvii) a copy of the Financial Statements and a copy of the Initial
Projections in form and substance satisfactory to Lenders;
(xviii) evidence of the insurance coverage required by Section 6.01 and
the terms of the Mortgage and such other insurance coverage with respect to the
business and operations of the Borrower and its Subsidiaries as Agent may
reasonably request, in each case, where requested by Agent, with such
indorsements as to the named insureds or loss payees thereunder as Agent may
request and providing that such policy may be terminated or canceled (by the
insurer or the insured thereunder) only upon 30 days' prior written notice to
the Agent and each such named insured or loss payee, together with evidence of
the payment of all premiums due in respect thereof for such period as Agent may
request;
(xix) a certificate of an Authorized Officer of the Borrower,
certifying the names and true signatures of the persons that are authorized to
provide Notices of Borrowings and all other notices under this Agreement and the
other Loan Documents;
(xx) copies of the Material Contracts as in effect on the Effective
Date, certified as true and correct copies thereof by an Authorized Officer of
the Borrower, together with a certificate of an Authorized Officer of the
Borrower stating that such agreements remain in full force and effect, subject
to any effect caused by the filing of Borrower's Bankruptcy Case, and stating
whether Borrower or any of its Subsidiaries have breached or defaulted in any of
their obligations under such agreements;
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<PAGE>
(xxi) such other agreements, instruments, approvals, opinions and other
documents, each satisfactory to Agent in form and substance, as Agent may
reasonably request.
(e) Material Adverse Change. Agent shall have determined, in its sole
-----------------------
judgment, that no material adverse change shall have occurred in the business,
operations, condition (financial or otherwise), properties or prospects of the
Borrower since April 30, 1999, other than the commencement of Borrower's Chapter
11 Case.
(f) Proceedings, Receipt of Documents. All proceedings in connection with
---------------------------------
the making of the initial Loan and the other transactions contemplated by this
Agreement and the other Loan Documents, and all documents incidental hereto and
thereto, shall be satisfactory to Agent, and its counsel, and such counsel shall
have received all such information and such counterpart originals or certified
or other copies of such documents as Agent, or such counsel, may reasonably
request.
(g) Due Diligence. The Lender Group shall have completed its due
-------------
diligence with respect to the Borrower and its Subsidiaries and the results
thereof shall be acceptable to the Lender Group, in its sole and absolute
discretion. Without limiting the foregoing, the Lender Group shall have received
an appraisal of the Collateral, from such appraisal firm as selected by Agent,
and such appraisal and the results thereof shall be acceptable to Agent, in its
sole and absolute discretion.
SECTION 4.02. Conditions Precedent to Subsequent Loans. The obligation of
----------------------------------------
the Lender Group to make any Loan (subsequent to the initial Loan) is subject to
the fulfillment, in a manner satisfactory to Agent, of each of the following
conditions precedent:
(a) Payment of Fees, Etc. The Borrower shall have paid all fees, costs,
--------------------
expenses and taxes then payable by the Borrower pursuant to this Agreement and
the other Loan Documents, including, without limitation, Section 2.06 hereof.
(b) Representations and Warranties; No Event of Default. The following
---------------------------------------------------
statements shall be true and correct, and the submission by the Borrower to
Agent of a Notice of Borrowing with respect to such Loan, and the Borrower's
acceptance of the proceeds of such Loan, shall each be deemed to be a
representation and warranty by the Borrower on the date of such Loan that: (i)
the representations and warranties contained in Article V and in each other Loan
Document, certificate or other writing delivered to the Lender Group pursuant
hereto or thereto on or prior to the date of such Loan are true and correct on
and as of such date as though made on and as of such date except for those that
specifically relate to an earlier date, (ii) at the time of and after giving
effect to the making of such Loan and the application of proceeds thereof, no
Default or Event of Default has occurred and is continuing or would result from
the making of the Loan to be made on such date and (iii) the conditions set
forth in this Section 4.02 have been satisfied as of the date of such request.
(c) Legality. The making of such Loan shall not contravene any law, rule
--------
or regulation applicable to the Lender Group or the Borrower.
(d) Borrowing Notice. Agent shall have received a Notice of Borrowing
----------------
pursuant to Section 2.02.
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<PAGE>
(e) Delivery of Documents.
---------------------
(i) Agent shall have received such other agreements, instruments,
approvals, opinions and other documents, each in form and substance satisfactory
to Agent, as Agent may reasonably request, including without limitation, (i) a
survey of the Facility, in form and substance satisfactory to Agent, certified
to Agent for the benefit of the Lender Group and to the issuer of the Title
Insurance Policy and (ii) a recorded aircraft chattel mortgage against all
aircraft in which the Borrower has an interest.
(ii) Agent shall have received copies of all Borrower insurance
policies.
(f) Proceedings, Receipt of Documents. All proceedings in connection with
---------------------------------
the making of such Loan and the other transactions contemplated by this
Agreement and the other Loan Documents, and all documents incidental hereto and
thereto, shall be satisfactory to Agent and its counsel, and Agent and such
counsel shall have received all such information and such counterpart originals
or certified or other copies of such documents, in form and substance
satisfactory to Agent, as Agent or such counsel may reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties. The Borrower hereby
------------------------------
represents and warrants to the Lender Group as follows:
(a) Organization, Good Standing, Etc. Each of the Borrower and its
--------------------------------
Subsidiaries (i) is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing under the laws
of the state of its organization, (ii) has all requisite power and authority,
subject to any necessary Bankruptcy Court approval, to conduct its business as
now conducted and as presently contemplated and, in the case of the Borrower, to
make the borrowings hereunder, and to execute and deliver each Loan Document to
which it is a party, and to consummate the transactions contemplated thereby,
and (iii) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary.
(b) Authorization, Etc. The execution, delivery and performance by each
------------------
of the Borrower and its Subsidiaries of each Loan Document to which it is or
will be a party, (i) have been duly authorized by all necessary action, (ii) do
not and will not contravene its charter or by-laws, its limited liability
company or operating agreement or its certificate of partnership or partnership
agreement, as applicable, or any applicable law or any contractual restriction
binding on or otherwise affecting it or any of its properties, (iii) do not and
will not result in or require the creation of any Lien (other than pursuant to
any Loan Document) upon or with respect to any of its properties, and (iv) do
not and will not result in any suspension, revocation, impairment,
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<PAGE>
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to its operations or any of its properties.
(c) Governmental Approvals. Other than the requirement of obtaining
----------------------
Bankruptcy Court approval, no authorization or approval or other action by, and
no notice to or filing with, any Governmental Authority is required in
connection with the due execution, delivery and performance by the Borrower or
any of its Subsidiaries of any Loan Document to which it is or will be a party.
(d) Enforceability of Loan Documents. This Agreement is, and each other
--------------------------------
Loan Document to which the Borrower or any of its Subsidiaries is or will be a
party, when delivered hereunder, will be, a legal, valid and binding obligation
of such Person, enforceable against such Person in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws.
(e) Priority of Liens. Upon the recordation of the Mortgage with the
-----------------
appropriate filing office, filing of UCC-1 forms with an appropriate description
of the Collateral with the Alabama Secretary of State and any required local
authorities, and upon entry of the Interim Bankruptcy Court Order, the Liens in
favor of the Lender Group shall constitute valid, existing first priority (with
the exception of those Liens set forth on Schedule 5.01(e) attached hereto)
Liens upon the Collateral.
(f) Subsidiaries. Schedule 5.01(f) is a complete and correct description
------------
of the name, jurisdiction of incorporation and ownership of the outstanding
Capital Stock of such Subsidiaries of the Borrower in existence on the date
hereof. All of the issued and outstanding shares of Capital Stock of such
Subsidiaries have been validly issued and are fully paid and nonassessable, and
the holders thereof are not entitled to any preemptive, first refusal or other
similar rights. Except as indicated on such Schedule, all such Capital Stock is
owned by the Borrower or one or more of its wholly-owned Subsidiaries, free and
clear of all Liens. There are no outstanding debt or equity securities of the
Borrower or any of its Subsidiaries and no outstanding obligations of the
Borrower or any of its Subsidiaries convertible into or exchangeable for, or
warrants, options or other rights for the purchase or acquisition from the
Borrower or any of its Subsidiaries, or other obligations of any Subsidiary to
issue, directly or indirectly, any shares of Capital Stock of any Subsidiary of
the Borrower.
(g) Litigation. Except as set forth in Schedule 5.01(g), there is no
----------
pending or, to the knowledge of the Borrower, threatened action, suit or
proceeding affecting the Borrower or any of its Subsidiaries before any court or
other Governmental Authority or any arbitrator that (i) if adversely determined,
could have a Material Adverse Effect or (ii) relates to this Agreement, the
Notes or any other Loan Document or any transaction contemplated hereby or
thereby.
(h) Financial Condition.
-------------------
(i) The Financial Statements, copies of which have been delivered
to the Lender Group, fairly present the consolidated financial condition of the
Borrower and its Subsidiaries as at the respective dates thereof and the
consolidated results of operations of the Borrower and its Subsidiaries for the
fiscal periods ended on such respective dates, all in
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<PAGE>
accordance with GAAP, and no event or development has occurred since April 30,
1999, other than the filing of Borrower's Chapter 11 Case and the other matters
specifically disclosed in the Schedules attached to this Agreement, that has had
or could have a Material Adverse Effect.
(ii) The Borrower has heretofore furnished to the Lender Group
(i) projected monthly balance sheets, income statements and statements of cash
flows of the Borrower and its Subsidiaries for the period from November 1, 1998,
through October 31, 2000, and (ii) projected annual balance sheets, income
statements and statements of cash flows of the Borrower and its Subsidiaries for
the Fiscal Years ending in 1999 through 2004 (the "Initial Projections"), which
may be updated from time to time pursuant to Section 6.01(a)(vii) in form and
substance satisfactory to Agent. Such projections, as so updated, are believed
by the Borrower at the time furnished to be reasonable, have been prepared on a
reasonable basis and in good faith by the Borrower, and have been based on
assumptions believed by the Borrower to be reasonable at the time made and upon
the best information then reasonably available to the Borrower, and the Borrower
is not aware of any facts or information that would lead it to believe that such
projections, as so updated, are incorrect or misleading in any material respect.
(i) Compliance with Law, Etc. Except as specifically set forth on
-------------------------
Schedule 5.01(i), neither the Borrower nor any of its Subsidiaries is in
violation of its organizational documents, any law, rule, regulation, judgment
or order of any Governmental Authority applicable to it or any of its property
or assets, or any material term of any agreement or instrument (including,
without limitation, any Material Contract) binding on or otherwise affecting it
or any of its properties, and no default or event of default has occurred and is
continuing thereunder, except to the extent arising solely out of the filing of
Borrower's Chapter 11 Case.
(j) ERISA. Except as set forth on Schedule 5.01(j), (i) each Employee
-----
Plan is in substantial compliance with ERISA and the Code, (ii) no Termination
Event has occurred nor is reasonably expected to occur with respect to any
Employee Plan, (iii) the most recent annual report (Form 5500 Series) with
respect to each Employee Plan, including any required Schedule B (Actuarial
Information) thereto, copies of which have been filed with the Internal Revenue
Service and delivered to the Lender Group, is complete and correct and fairly
presents the funding status of such Employee Plan, and since the date of such
report there has been no material adverse change in such funding status, (iv) no
Employee Plan had an accumulated or waived funding deficiency or permitted
decreases which would create a deficiency in its funding standard account or has
applied for an extension of any amortization period within the meaning of
Section 412 of the Code at any time since June, 1994, and (v) no Lien imposed
under the Code or ERISA exists or is likely to arise on account of any Employee
Plan within the meaning of Section 412 of the Code at any time since June, 1994.
Except as set forth on Schedule 5.01(j), none of the Borrower or any of its
ERISA Affiliates have incurred any withdrawal liability under ERISA with respect
to any Multiemployer Plan, or are aware of any facts indicating that the
Borrower or any of its ERISA Affiliates may in the future incur any such
withdrawal liability. Except as required by Section 4980B of the Code, none of
the Borrower or any of its ERISA Affiliates maintains an employee welfare
benefit plan (as defined in Section 3(l) of ERISA) which provides health or
welfare benefits (through the purchase of insurance or otherwise) for any
retired or former employee of the Borrower or any of its ERISA Affiliates or
coverage after a participant's termination of employment. None of the Borrower
or any of its ERISA Affiliates
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<PAGE>
has incurred any liability or obligation under the Worker Adjustment and
Retraining Notification Act ("WARN") or similar state law, which remains unpaid
----
or unsatisfied.
(k) Taxes, Etc. All Federal, state and local tax returns and other
-----------
reports required by applicable law to be filed by the Borrower and each of its
Subsidiaries have been filed, or extensions have been obtained, and all taxes,
assessments and other governmental charges imposed upon the Borrower or any of
its Subsidiaries or any property of the Borrower or any of its Subsidiaries and
which have become due and payable on or prior to the date hereof have been paid,
except to the extent contested in good faith by proper proceedings which stay
the imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for the
payment thereof.
(l) Regulation U. Neither the Borrower nor any of its Subsidiaries is nor
------------
will be engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations T, U or
X), and no proceeds of any Loan will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock.
(m) Nature of Business. Neither the Borrower nor any of its Subsidiaries
------------------
is engaged in any business other than the production of steel and steel products
and steel plant byproducts.
(n) Adverse Agreements, Etc. Other than as set forth on Schedule 5.01(n),
------------------------
neither the Borrower nor any of its Subsidiaries is a party to any agreement or
instrument, or subject to any charter, limited liability company agreement,
partnership agreement or other corporate, partnership or limited liability
company restriction or any judgment, order, regulation, ruling or other
requirement of a court or other Governmental Authority, which has, or in the
future could have, a Material Adverse Effect.
(o) Permits, Etc. Each of the Borrower and its Subsidiaries has, and is
-------------
in material compliance with, all permits, licenses, authorizations, approvals,
entitlements and accreditations required for such Person lawfully to own, lease,
manage or operate, or to acquire, each business currently owned, leased, managed
or operated, or to be acquired, by such Person. No condition exists or event has
occurred which, in itself or with the giving of notice or lapse of time or both,
would result in the suspension, revocation, impairment, forfeiture or non-
renewal of any such permit, license, authorization, approval, entitlement or
accreditation, and there is no claim that any thereof is not in full force and
effect.
(p) Properties. Each of the Borrower and its Subsidiaries has good and
----------
marketable title to, or valid leasehold interests in, all property and assets
material to its business, free and clear of all Liens except Permitted Liens.
The properties are in good working order and condition, ordinary wear and tear
excepted.
(q) Full Disclosure. The Borrower has disclosed to the Lender Group all
---------------
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that non-
compliance with the requirements of the same, individually or in the aggregate,
could result in a Material Adverse Effect. None of the
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<PAGE>
other reports, financial statements, certificates or other information furnished
by or on behalf of the Borrower to the Lender Group in connection with the
negotiation of this Agreement or delivered hereunder (as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which it was made,
not misleading; provided that, with respect to projected financial information,
--------
the Borrower represents only that such information was prepared in good faith
based upon assumptions believed to be reasonable at the time. There is no
contingent liability or fact that may have a Material Adverse Effect which has
not been set forth in a footnote included in the Financial Statements or a
schedule hereto. The schedules attached hereto are true, accurate and complete
in all material respects and, without limiting the foregoing, the Borrower
further represents that all information set forth on schedules 6.02(a) and
6.02(b) accurately indicates whether the property subject to such liens is
included in Lender's appraisal previously delivered to Borrower.
(r) Year 2000. Any reprogramming required to permit the proper
---------
functioning, in and following the year 2000, of (i) the Borrower's computer
systems and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which the Borrower's systems interface) and
the testing of all such systems and equipment, as so reprogrammed, will be
completed by November 30, 1999. The cost to the Borrower of such reprogramming
and testing and of the reasonably foreseeable consequences of year 2000 to the
Borrower (including, without limitation, reprogramming errors and the failure of
others' systems or equipment) will not result in a Default or a Material Adverse
Effect. Except for such of the reprogramming referred to in the preceding
sentence as may be necessary, the computer and management information systems of
the Borrower and its Subsidiaries are and, with ordinary course upgrading and
maintenance, will continue for the term of this Agreement to be, sufficient to
permit the Borrower and its Subsidiaries to conduct its business without
Material Adverse Effect.
(s) Operating Lease Obligations. On the Effective Date, neither the
---------------------------
Borrower nor any of its Subsidiaries has any obligations as lessee for the
payment of rent for any real or personal property other than the Operating Lease
Obligations set forth on Schedule 5.01(s).
(t) Environmental Matters. Except as set forth on Schedule 5.01 (t), (i)
---------------------
the operations of each of the Borrower and its Subsidiaries are in compliance
with Environmental Laws; (ii) there has been no Release at any of the properties
owned or operated by the Borrower or its Subsidiaries or a predecessor in
interest, or at any disposal or treatment facility which received Hazardous
Materials generated by the Borrower or its Subsidiaries or any predecessor in
interest which could have a Material Adverse Effect; (iii) no Environmental
Action has been asserted against the Borrower or its Subsidiaries or any
predecessor in interest nor does the Borrower or any of its Subsidiaries have
knowledge or notice of any threatened or pending Environmental Action against
the Borrower or its Subsidiaries or any predecessor in interest which could have
a Material Adverse Effect; and (iv) no Environmental Actions have been asserted
against any facilities that may have received Hazardous Materials generated by
the Borrower or its Subsidiaries or any predecessor in interest which could have
a Material Adverse Effect.
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<PAGE>
(u) Insurance. Each of the Borrower and its Subsidiaries keeps its
---------
property adequately insured and maintains (i) insurance to such extent and
against such risks, including fire, as is customary with companies in the same
or similar businesses, (ii) workmen's compensation insurance in the amount
required by applicable law, (iii) public liability insurance, which shall
include product liability insurance, in the amount customary with companies in
the same or similar business against claims for personal injury or death on
properties owned, occupied or controlled by it, and (iv) such other insurance as
may be required by law or as may be reasonably required by Agent (including,
without limitation, against larceny, embezzlement or other criminal
misappropriation). Schedule 5.01(u) sets forth a list of all insurance
maintained by the Borrower and its Subsidiaries on the Effective Date.
(v) Use of Proceeds. The proceeds of the Loans shall be used solely for
---------------
payment of transactional costs, expenses, and fees incurred in connection with
this Agreement and the other Loan Documents, and for Borrower's general
corporate purposes in a manner consistent with the provisions of this Agreement.
(w) Absence of Default. Borrower is not in default under this Agreement
------------------
and there is no event which, with the giving of notice or the passage of time,
or both, would constitute and Event of Default hereunder.
(x) [intentionally omitted].
(y) Intellectual Property. Except as set forth on Schedule 5.01(y), each
---------------------
of the Borrower and its Subsidiaries owns or licenses or otherwise has the right
to use all licenses, permits, patents, patent applications, trademarks,
trademark applications, service marks, tradenames, copyrights, copyright
applications, franchises, authorizations and other intellectual property rights
that are necessary for the operations of its businesses, without infringement
upon or conflict with the rights of any other Person with respect thereto,
except for such infringements and conflicts which, individually or in the
aggregate, could not have a Material Adverse Effect. Set forth on Schedule
5.01(y) is a complete and accurate list as of the Effective Date of all such
material licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, tradenames, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights of the
Borrower and its Subsidiaries. No slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Borrower or its Subsidiaries infringes upon
or conflicts with any rights owned by any other Person, and no claim or
litigation regarding any of the foregoing is pending or threatened, except for
such infringements and conflicts which could not have, individually or in the
aggregate, a Material Adverse Effect. To the best knowledge of the Borrower, no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or proposed, which, individually or in
the aggregate, could have a Material Adverse Effect.
(z) Material Contracts. Set forth on Schedule 5.01(z) is a complete and
------------------
accurate list as of the Effective Date of all Material Contracts of the Borrower
and its Subsidiaries, showing the parties and subject matter thereof and
amendments and modifications thereto. Except to the extent arising out of the
filing of Borrower's Chapter 11 Case, each such Material Contract (i) is in full
force and effect and, to the best knowledge of the Borrower, is binding
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upon and enforceable against all other parties thereto in accordance with its
terms, (ii) has not been otherwise amended or modified, and (iii) is not in
default due to the action of the Borrower or its Subsidiaries or, to the best
knowledge of the Borrower, any other party thereto.
(aa) Holding Company and Investment Company Acts. Neither the Borrower nor
-------------------------------------------
any of its Subsidiaries is (i) a "holding company" or a "subsidiary company" of
a "holding company" or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended, or (ii)
an "investment company" or an "affiliated person" or "promoter" of, or
"principal underwriter" of or for, an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended.
(bb) Employee and Labor Matters. (i) There is (A) no unfair labor practice
--------------------------
complaint pending or, to the best knowledge of the Borrower, threatened against
the Borrower or any of its Subsidiaries before any Governmental Authority and no
grievance or arbitration proceeding pending or threatened against the Borrower
or any of its Subsidiaries which arises out of or under any collective
bargaining agreement, and (B) no strike, labor dispute, slowdown, stoppage or
similar action or grievance pending or threatened against the Borrower or any of
its Subsidiaries.
ARTICLE VI
COVENANTS OF THE BORROWER
SECTION 6.01. Affirmative Covenants. So long as any principal of or
---------------------
interest on any Loan or any other Obligations (whether or not due) shall remain
unpaid or the Lenders shall have any Commitment hereunder, the Borrower will,
unless the Lender Group shall otherwise consent in writing:
(a) Reporting Requirements. Furnish to Agent:
----------------------
(i) as soon as available and in any event within 45 days after
the end of each fiscal quarter of the Borrower and its Subsidiaries,
consolidated balance sheets, consolidated statements of operations and retained
earnings and consolidated statements of cash flows of the Borrower and its
Subsidiaries as at the end of such quarter, and for the period commencing at the
end of the immediately preceding Fiscal Year and ending with the end of such
quarter, setting forth in each case in comparative form the figures for the
corresponding date or period of the immediately preceding Fiscal Year, all in
reasonable detail and certified by an Authorized Officer as fairly presenting,
in all material respects, the financial position of the Borrower and its
Subsidiaries as of the end of such quarter and the results of operations and
cash flows of the Borrower and its Subsidiaries for such quarter, in accordance
with GAAP applied in a manner consistent with that of the most recent audited
financial statements of the Borrower and its Subsidiaries furnished to the
Lender Group, subject to normal year-end adjustments;
(ii) as soon as practicable and in any event within ninety (90)
days after the close of each Fiscal Year of the Borrower, a consolidated
statement of operations and cash flows of the Borrower for such Fiscal Year and
a balance sheet of the Borrower as of the
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<PAGE>
close of such Fiscal Year, and notes to each, all in reasonable detail, setting
forth in comparative form the corresponding figures for the preceding Fiscal
Year, which consolidated statements and balance sheet shall be audited and
accompanied by an opinion of independent certified public accountants of
recognized national standing selected by the Borrower and reasonably
satisfactory to the Lender. The opinion of such accountants (the "Accountant's
Opinion") shall contain a written statement of such accountants substantially to
the effect that (i) such accountants examined such statements and balance sheet
in accordance with GAAP and accordingly made such tests of accounting records
and such other auditing procedures as such accountants considered necessary in
the circumstances and (ii) in the opinion of such accountants such statements
and balance sheet present fairly, in all material respects, the financial
position of the Borrower as of the end of such Fiscal Year and the results of
its operations and the changes in its financial position for such Fiscal Year,
in conformity with GAAP (except for changes in application in which such
accountants concur). A copy of the Accountant's Opinion shall be delivered to
the Lender and signed by such independent public accountants. Each set of
statements and balance sheets delivered pursuant to this section shall be
accompanied by a report dated the date of such statements and balance sheet by
the accountants who certified or reported on such statements and balance sheet
stating in substance that they have reviewed this Agreement and that in making
the examination necessary for their certification of such statements and balance
sheet they did not become aware of any breach of the financial covenants set
forth in Section 6.03 of this Agreement or any other breach of this Agreement or
Event of Default, or if they did become so aware, such certificate or report
shall state the nature and period of existence thereof, if determinable;
(iii) as soon as available, and in any event within 30 days of the
end of each fiscal month of the Borrower and its Subsidiaries internally
prepared consolidated balance sheets, consolidated statements of operations and
consolidated statements of cash flows for such fiscal month of the Borrower and
its Subsidiaries for such fiscal month and for the period from the beginning of
such Fiscal Year to the end of such fiscal month, all in reasonable detail and
certified by an Authorized Officer as fairly presenting, in all material
respects, the financial position of the Borrower and its Subsidiaries as of the
end of such fiscal month and the results of operations and cash flows of the
Borrower and its Subsidiaries for such fiscal month, in accordance with GAAP
applied in a manner consistent with that of the most recent audited financial
statements furnished to the Lender Group, subject to normal year-end
adjustments;
(iv) simultaneously with the delivery of the financial statements
of the Borrower required by clauses (i), (ii) and (iii) of this Section 6.01(a),
a certificate of an Authorized Officer (A) stating that such Authorized Officer
has reviewed the provisions of this Agreement and the other Loan Documents and
has made or caused to be made under his or her supervision a review of the
condition and operations of the Borrower and its Subsidiaries during the period
covered by such financial statements with a view to determining whether the
Borrower and its Subsidiaries were in compliance with all of the provisions of
such Loan Documents at the times such compliance is required by the Loan
Documents, and that such review has not disclosed, and such Authorized Officer
has no knowledge of, the existence during such period of an Event of Default or
Default or, if an Event of Default or Default existed, describing the nature and
period of existence thereof and the action which the Borrower and its
Subsidiaries propose to take or have taken with respect thereto and (B)
attaching a schedule showing the calculations specified in Section 6.03;
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<PAGE>
(v) [intentionally omitted];
(vi) Borrowing Base Certificates and all other financial
information and reports provided to Fleet Capital Corporation in connection with
the Fleet Loan Facility as and when provided;
(vii) (A) on or before December 5th of each year, financial
projections supplementing and superseding the financial projections for such
period referred to in Section 5.01(h)(ii), prepared on a monthly basis and
otherwise in form and substance satisfactory to Agent, for the immediately
succeeding Fiscal Year for the Borrower and its Subsidiaries and (B) on or
before the last day of the month preceding the first month of each fiscal
quarter, financial projections for the remaining quarters in the Fiscal Year
supplementing and superseding the financial projections for such period referred
to in Section 5.01(h)(ii), prepared on a monthly basis and otherwise in form and
substance satisfactory to Agent, for each remaining quarterly period in such
Fiscal Year, all such financial projections to be reasonable, to be prepared on
a reasonable basis and in good faith, and to be based on assumptions believed by
the Borrower to be reasonable at the time made and from the best information
then available to the Borrower;
(viii) promptly after submission to any Government Authority, all
documents and information furnished to such Government Authority in connection
with any investigation of the Borrower or any of its Subsidiaries other than
routine inquiries by such Governmental Authority;
(ix) as soon as possible, and in any event within three days
after the occurrence of an Event of Default or Default or the occurrence of any
event or development that could have a Material Adverse Effect, the written
statement of an Authorized Officer setting forth the details of such Event of
Default, Default, other event or Material Adverse Effect and the action which
the Borrower and its Subsidiaries propose to take with respect thereto;
(x) (A) as soon as possible and in any event (1) within 10 days
after the Borrower or any ERISA Affiliate thereof knows or has reason to know
that any Termination Event described in clause (i) of the definition of
Termination Event with respect to any Employee Plan has occurred, (2) within 10
days after the Borrower or any ERISA Affiliate thereof knows or has reason to
know that any other Termination Event with respect to any Employee Plan has
occurred, or (3) within 10 days after the Borrower or any ERISA Affiliate
thereof knows or has reason to know that an accumulated funding deficiency has
been incurred or an application has been made to the Secretary of the Treasury
for a waiver or modification of the minimum funding standard (including
installment payments) or an extension of any amortization period under Section
412 of the Code with respect to an Employee Plan, a statement of an Authorized
Officer setting forth the details of such occurrence and the action, if any,
which the Borrower or such ERISA Affiliate propose to take with respect thereto,
(B) promptly and in any event within three days after receipt thereof by the
Borrower or any ERISA Affiliate thereof from the PBGC, copies of each notice
received by the Borrower or any ERISA Affiliate thereof of the PBGC's intention
to terminate any Plan or to have a trustee appointed to administer any Plan, (C)
promptly and in any event within 10 days after the filing thereof with the
Internal Revenue Service if requested by Agent, copies of each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) with respect to
each Employee Plan and Multiemployer Plan,
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<PAGE>
(D) promptly and in any event within 10 days after the Borrower or any ERISA
Affiliate thereof knows or has reason to know that a required installment within
the meaning of Section 412 of the Code has not been made when due with respect
to an Employee Plan, (E) promptly and in any event within three days after
receipt thereof by the Borrower or any ERISA Affiliate thereof from a sponsor of
a Multiemployer Plan or from the PBGC, a copy of each notice received by the
Borrower or any ERISA Affiliate thereof concerning the imposition or amount of
withdrawal liability under Section 4202 of ERISA or indicating that such
Multiemployer Plan may enter reorganization status under Section 4241 of ERISA,
and (F) promptly and in any event within 10 days after the Borrower or any ERISA
Affiliate thereof send notice of a plant closing or mass layoff (as defined in
WARN) to employees, copies of each such notice sent by the Borrower or any ERISA
Affiliate thereof,
(xi) promptly after the commencement thereof but in any event not
later than 5 days after service of process with respect thereto on, or the
obtaining of knowledge thereof by, the Borrower or any Subsidiary, notice of
each action, suit or proceeding before any court or other Governmental Authority
or other regulatory body or any arbitrator which, if adversely determined, could
have a Material Adverse Effect;
(xii) as soon as possible and in any event within 10 days after
execution, receipt or delivery thereof, copies of any material notices that the
Borrower executes or receives from or sends in connection with any Material
Contract or any material governmental permit or license;
(xiii) promptly after the sending or filing thereof, copies of all
statements, reports and other information the Borrower or any of its
Subsidiaries sends to any holders of its Indebtedness or its securities or files
with the SEC or any national (domestic or foreign) securities exchange;
(xiv) promptly upon receipt thereof, copies of all financial
reports (including, without limitation, management letters), if any, submitted
to the Borrower or any of its Subsidiaries by its auditors in connection with
any annual or interim audit of the books thereof; and
(xv) promptly upon request, such other information concerning the
condition or operations, financial or otherwise, of the Borrower or any of its
Affiliates as Agent may from time to time may reasonably request.
(b) Collections. Promptly deposit with Agent all Collections constituting
-----------
proceeds of Collateral in which Lenders have a Lien with priority over any Lien
in favor of Fleet Capital Corporation as agent under the Fleet Loan Facility,
and promptly deposit all other Collections with Fleet Capital Corporation (or
into a lockbox controlled by Fleet Capital Corporation pursuant to the terms of
the Fleet Loan Facility) for so long as the Fleet Loan Facility may be
outstanding, and thereafter, promptly deposit all Collections with Agent.
(c) Compliance with Laws, Etc. Except as to those matters set forth on
-------------------------
Schedule 6.01(c), comply, and cause each of its Subsidiaries to comply, in all
material respects with all applicable laws, rules, regulations and orders
(including, without limitation, all Environmental
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<PAGE>
Laws), such compliance to include, without limitation, (i) paying before the
same become delinquent all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any of its properties, and
(ii) paying all lawful claims which if unpaid might become a Lien or charge upon
any of its properties, except to the extent contested in good faith by proper
proceedings which stay the imposition of any penalty, fine or Lien resulting
from the non-payment thereof and with respect to which adequate reserves have
been set aside for the payment thereof.
(d) Preservation of Existence, Etc. Maintain and preserve, and cause each
------------------------------
of its Subsidiaries to maintain and preserve, its existence, rights and
privileges, and become or remain duly qualified and in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary.
(e) Keeping of Records and Books of Account. Keep, and cause each of its
---------------------------------------
Subsidiaries to keep, adequate records and books of account, with complete
entries made in accordance with GAAP.
(f) Inspection Rights. Permit, and cause each of its Subsidiaries to
-----------------
permit, Agent, or any agents or representatives thereof at any time and from
time to time during normal business hours, at the expense of the Borrower, to
examine and make copies of and abstracts from their records and books of
account, to visit and inspect their properties, to verify materials, leases,
notes, accounts receivable, deposit accounts and other assets of the Borrower
and its Subsidiaries, to conduct audits, physical counts, valuations,
appraisals, environmental assessments or examinations and to discuss their
affairs, finances and accounts with any of the directors, officers, managerial
employees, independent accountants or other representatives thereof. The
Borrower agrees to pay the reasonable cost of such audit, appraisal, assessment
or examination.
(g) Maintenance of Properties, Etc. Maintain and preserve, and cause each
------------------------------
of its Subsidiaries to maintain and preserve, all of their properties which are
necessary or useful in the proper conduct of their business in good working
order and condition, ordinary wear and tear excepted, and comply, and cause each
of its Subsidiaries to comply, at all times with the provisions of all leases to
which each of them is a party as lessee or under which each of them occupies
property, so as to prevent any loss or forfeiture thereof or thereunder.
(h) Maintenance of Insurance. Maintain, and cause each of its
------------------------
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to
their properties (including all real properties leased or owned by them) and
business, in such amounts and covering such risks as is required by any
Governmental Authority having jurisdiction with respect thereto or as is carried
generally in accordance with sound business practice by companies in similar
businesses similarly situated and in any event in amount, adequacy and scope
reasonably satisfactory to Agent. All policies covering the Collateral are to be
made payable to Agent for the benefit of the Lender Group, as its interests may
appear, in case of loss, under a standard non-contributory "lender" or "secured
party" clause and are to contain such other provisions as the Agent may require
to fully protect
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<PAGE>
the Lender Group's interest in the Collateral and to any payments to be made
under such policies. All certificates of insurance are to be delivered to Agent
and the policies are to be premium prepaid, with the loss payable and additional
insured endorsement in favor of Agent for the benefit of the Lender Group and
such other Persons as the Agent may designate for time to time, and shall
provide for not less than 30 days' prior written notice to Agent of the exercise
of any right of cancellation. If the Borrower or any of its Subsidiaries fails
to maintain such insurance, the Lender Group may arrange for such insurance, but
at the Borrower's expense and without any responsibility on the Lender Group's
part for obtaining the insurance, the solvency of the insurance companies, the
adequacy of the coverage, or the collection of claims. Upon the occurrence of an
Event of Default, Agent for the benefit of the Lender Group shall have the sole
right, in the name of the Lender Group and the Borrower and its Subsidiaries, to
file claims under any insurance policies, to receive, receipt and give
acquittance for any payments that may be payable thereunder, and to execute any
and all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
(i) Obtaining of Permits, Etc. Obtain, maintain and preserve, and cause
-------------------------
each of its Subsidiaries to obtain, maintain and preserve, all permits,
licenses, authorizations, approvals, entitlements and accreditations which are
necessary or useful in the proper conduct of its business and become or remain,
and cause each of its Subsidiaries to become or remain, duly qualified and in
good standing in each jurisdiction in which the character of the properties
owned or leased by it or in which the transaction of its business makes such
qualification necessary.
(j) Environmental. Except as to those matters set forth on Schedule
-------------
6.01(j): (i) Keep any property either owned or operated by it or any of its
Subsidiaries free of any Environmental Liens; (ii) comply, and cause it
Subsidiaries to comply, in all material respects with Environmental Laws and
provide to Agent documentation of such compliance which Agent reasonably
requests; (iii) immediately notify Agent of any Release of a Hazardous Material
in excess of any reportable quantity from or onto property owned or operated by
the Borrower or any of its Subsidiaries and take any Remedial Actions required
to abate said Release; (iv) promptly provide Agent with written notice within 3
days of the receipt of any of the following: (A) notice that an Environmental
Lien has been filed against any property of the Borrower or any of its
Subsidiaries; (B) commencement of any Environmental Action or notice that an
Environmental Action will be filed against the Borrower or any of its
Subsidiaries; and (C) notice of a violation, citation or other administrative
order which could have a Material Adverse Effect and (v) defend, indemnify and
hold harmless the Lender Group and its transferees, and their respective
employees, agents, officers and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs or expenses
(including, without limitation, attorney and consultant fees, investigation and
laboratory fees, court costs and litigation expenses) arising out of (A) the
presence, disposal, Release or threatened Release of any Hazardous Materials on
any property at any time owned or occupied by the Borrower or any of its
Subsidiaries (or its respective predecessors in interest or title) or at any
disposal facility which received hazardous materials generated by the Borrower
or any predecessor in Interest, (B) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or related to such
Hazardous Materials, (C) any investigation, lawsuit brought or threatened,
settlement reached or government order relating to such Hazardous Materials, (D)
any violation of any Environmental Law and/or (E) any Environmental Action.
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(k) Further Assurances. Take such action and execute, acknowledge and
------------------
deliver, and cause each of its Subsidiaries to take such action and execute,
acknowledge and deliver, at its sole cost and expense, such agreements,
instruments or other documents as the Lender Group may require from time to time
in order (i) to carry out more effectively the purposes of this Agreement and
the other Loan Documents, (ii) to subject to valid and perfected first priority
Liens any of the Collateral or any other property of the Borrower and its
Subsidiaries, (iii) to establish and maintain the validity and effectiveness of
any of the Loan Documents and the validity, perfection and priority of the Liens
intended to be created thereby, and (iv) to better assure, convey, grant,
assign, transfer and confirm unto the Lender Group the rights now or hereafter
intended to be granted to the Lender Group under this Agreement or any other
Loan Document.
(l) Change in Collateral; Collateral Records. (i) Give Agent not less than
----------------------------------------
30 days' prior written notice of any change in the location of any Collateral,
other than to locations set forth on Schedule 6.01(1) and with respect to which
the Lender Group has filed financing statements and otherwise fully perfected
its Liens thereon, (ii) advise Agent promptly, in sufficient detail, of any
material adverse change relating to the type, quantity or quality of the
Collateral or the Lien granted thereon and (iii) execute and deliver, and cause
each of its Subsidiaries to execute and deliver, to Agent for the benefit of the
Lender Group from time to time, solely for the Lender Group's convenience in
maintaining a record of Collateral, such written statements and schedules as
Agent may reasonably require, designating, identifying or describing the
Collateral.
(m) Subordination. Cause all Indebtedness and other obligations now or
-------------
hereafter owed by the Borrower or any subsidiary to any of its Affiliates, to be
subordinated in right of payment and security to the Indebtedness and other
Obligations owing to the Lender Group in accordance with a subordination
agreement in form and substance satisfactory to Agent.
(n) Fiscal Year. Cause the Fiscal Year of the Borrower and its
-----------
Subsidiaries to end on October 31st of each calendar year unless the Lender
Group consents to a change in such Fiscal Year (and appropriate related changes
to this Agreement).
(o) Bankruptcy Pleadings. Provide Lenders and counsel for agent with any
--------------------
and all notices, motions, applications or other pleadings filed with the
Bankruptcy Court in Borrower's Chapter 11 Case or distributed to any official
committee appointed therein, together with all information provided to the
Bankruptcy Administrator, including without limitation, all monthly and
quarterly operating statements as and when delivered to the Bankruptcy
Administrator.
(p) Oxygen Generation Contract. On or before August 20, 1999, provide
--------------------------
Lenders with an assignment of Borrower's rights under any and all contracts
relating to the generation of oxygen for use at Borrower's Facility, in form and
content satisfactory to Agent, together with such waivers, estoppel certificates
and agreements regarding the ability of Lenders to cure any defaults in such
contract and to cause such contract to be assigned to a third party purchaser of
the Facility as Agent may request.
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<PAGE>
(q) Rail Spur Contract. On or before September 31, 1999, provide Lenders
------------------
with an assignment of Borrower's rights under that certain contract with CSX
Corporation relating to the rail spur facilities located on the premises of
Borrower's Facility, in form and content satisfactory to Agent, together with
such waivers, estoppel certificates and agreements regarding the ability of
Lenders to cure any defaults in such contract and to cause such contract to be
assigned to a third party purchaser of the Facility as Agent may request,
provided, that the Lenders may consent to the extension of the deadline (which
- --------
consent shall not be unreasonably withheld provided that Borrower has used its
best efforts to obtain the consent required under this section).
(r) Minimum Reserve. The Inventory Reserve as that term is defined in the
---------------
Fleet Loan Facility shall not be less $2,500,000.
SECTION 6.02. Negative Covenants. So long as any principal of or interest
------------------
on any Loan or any other Obligation (whether or not due) shall remain unpaid or
the Lenders shall have any Commitment hereunder, the Borrower shall not, unless
the Lender Group shall otherwise consent in writing:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any
----------
of its Subsidiaries to create, incur, assume or suffer to exist, any Lien upon
or with respect to any of its property, whether now owned or hereafter acquired,
to file or suffer to exist under the Uniform Commercial Code or any similar law
or statute of any jurisdiction, a financing statement (or the equivalent
thereof) that names the Borrower or any of its Subsidiaries as debtor, to sign
or suffer to exist any security agreement authorizing any secured party
thereunder to file such financing statement (or the equivalent thereof), to sell
any of its property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets (including sales
of accounts receivable) with recourse to the Borrower or any of its Subsidiaries
or assign or otherwise transfer, or permit any of its Subsidiaries to assign or
otherwise transfer, any account or other right to receive income, other than
Permitted Liens.
(b) Indebtedness. Create, incur, assume, guarantee or suffer to exist, or
------------
otherwise become or remain liable with respect to, or permit any of its
Subsidiaries to create, incur, assume, guarantee or suffer to exist or otherwise
become or remain liable with respect to, any Indebtedness other than Permitted
Indebtedness and other than Indebtedness constituting prepetition claims in
Borrower's Bankruptcy Case.
(c) Fundamental Changes. Wind-up, liquidate or dissolve itself (or permit
-------------------
or suffer any thereof) or merge, consolidate or amalgamate with any Person,
convey, sell, lease or sublease, transfer or otherwise dispose of, whether in
one transaction or a series of related transactions, all or any part of its
business, property or assets, whether now owned or hereafter acquired, or (agree
to do any of the foregoing) or purchase or otherwise acquire, whether in one
transaction or a series of related transactions, all or substantially all of the
assets of any Person (or any division thereof) (or agree to do any of the
foregoing), or permit any of its Subsidiaries to do any of the foregoing;
provided, however, that any of the Borrower and its Subsidiaries may (A) sell
- -------- -------
Inventory in the ordinary course of business, (B) dispose of obsolete or worn-
out equipment in the ordinary course of business, and (C) sell or otherwise
dispose of other property or assets for cash in an aggregate amount not less
than the fair market value of such property or
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assets, provided that the Net Cash Proceeds of such Dispositions do not exceed
--------
$250,000 in the aggregate in any twelve-month period, without regard to any Net
Cash Proceeds received by Borrower upon the disposition of the aircraft owned by
the Borrower, and are paid to the Lender Group pursuant to the terms of Section
2.05(c).
(d) Change in Nature of Business. Make, or permit any of its Subsidiaries
----------------------------
to make, any change in the nature of its business as carried on at the date
hereof.
(e) Loans, Advances, Investments, Etc. Make or commit or agree to make
---------------------------------
any loan, advance guarantee of obligations, other extension of credit or capital
contributions to, or hold or invest in or commit or agree to hold or invest in,
or purchase or otherwise acquire or commit or agree to purchase or otherwise
acquire any shares of the Capital Stock, bonds, notes, debentures or other
securities of, or make or commit or agree to make any other investment in, any
other Person, or purchase or own any futures contract or otherwise become liable
for the purchase or sale of currency or other commodities at a future date in
the nature of a futures contract, or permit any of its Subsidiaries to do any of
the foregoing, except for: (i) investments existing on the date hereof, as set
forth on Schedule 6.02(e) hereto, but not any increase in the amount thereof as
set forth in such Schedule or any other modification of the terms thereof, (ii)
temporary loans and advances by the Borrower to its Subsidiaries and by such
Subsidiaries to the Borrower, made in the ordinary course of business and not
exceeding in the aggregate for all such Persons at any one time outstanding
$10,000, (iii) Permitted Investments, (iv) loans to vendors made in the ordinary
course of its business, not to exceed at any one time outstanding an aggregate
of $25,000 for all such loans.
(f) Lease Obligations. Create, incur or suffer to exist, or permit any of
-----------------
its Subsidiaries to create, incur or suffer to exist, any obligations as lessee
(i) for the payment of rent for any real or personal property in connection with
any sale and leaseback transaction, or (ii) for the payment of rent for any real
or personal property under leases or agreements to lease other than (A)
Capitalized Lease Obligations which would not cause the aggregate amount of all
obligations under Capitalized Leases entered into after the Effective Date owing
by the Borrower and its Subsidiaries in any Fiscal Year to exceed the amounts
set forth in subsection (h) of this Section 6.02, and (B) Operating Lease
Obligations which would not cause the aggregate amount of all Operating Lease
Obligations owing by the Borrower and its Subsidiaries in any Fiscal Year to
exceed $1,500,000.
(g) [intentionally omitted].
(h) Restricted Payments. (i) Declare or pay any dividend or other
-------------------
distribution, direct or indirect, on account of any Capital Stock of the
Borrower or any of its Subsidiaries, now or hereafter outstanding, (ii) make any
repurchase, redemption, retirement, defeasance, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any Capital
Stock of the Borrower or any direct or indirect parent of the Borrower, now or
hereafter outstanding, (iii) make any payment to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights for the purchase
or acquisition of shares of any class of Capital Stock of the Borrower, now or
hereafter outstanding, (iv) return any of capital to any shareholders or other
equity holders of the Borrower or any of its Subsidiaries, or make any other
distribution of property, assets, shares of Capital Stock, warrants, rights,
options, obligations or
-44-
<PAGE>
securities thereto as such or (v) pay any management fees or any other fees or
expenses (including the reimbursement thereof by the Borrower or any of its
Subsidiaries) pursuant to any management, consulting or other services agreement
to any of the shareholders or other equity holders of the Borrower or any of its
Subsidiaries or other Affiliates, or to any other Subsidiaries or Affiliates or
the Borrower.
(i) Federal Reserve Regulations. Permit any Loan or the proceeds of any
---------------------------
Loan under this Agreement to be used for any purpose that would cause such Loans
to be margin loans under the provisions of Regulation T, U or X of the Board.
(j) Transactions with Affiliates. Enter into, renew, extend or be a party
----------------------------
to, or permit any of its Subsidiaries to enter into, renew, extend or be a party
to any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease, transfer or exchange of property or
assets of any kind or the rendering of services of any kind) with any of its
Affiliates, except in the ordinary course of business in a manner and to an
extent consistent with past practice and necessary or desirable for the prudent
operation of its business, for fair consideration and on terms no less favorable
to the Borrower or such Subsidiary than would be obtainable in a comparable
arm's length transaction with a Person that is not an Affiliate thereof.
(k) Limitations on Dividends and Other Payment Restrictions Affecting
-----------------------------------------------------------------
Subsidiaries. Create or otherwise cause, incur, assume, suffer or permit to
- ------------
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any of its Subsidiaries (i) to pay dividends or to make any
other distribution on any shares of Capital Stock of such Subsidiary owned by
the Borrower or any of its Subsidiaries, (ii) to pay or prepay or to subordinate
any Indebtedness owed to the Borrower or any of its Subsidiaries, (iii) to make
loans or advances to the Borrower or any of its Subsidiaries or (iv) to transfer
any of its property or assets to the Borrower or any of its Subsidiaries, or
permit any of its Subsidiaries to do any of the foregoing; provided, however,
that nothing in any of clauses (i) through (iv) of this Section 6.02(k) shall
prohibit or restrict:
(A) this Agreement and the other Loan Documents;
(B) any agreements in effect on the date of this Agreement and
described on Schedule 6.02(k);
(C) any applicable law, rule or regulation (including, without
limitation, applicable currency control laws and applicable state corporate
statutes restricting the payment of dividends in certain circumstances);
(D) in the case of clause (iv) any agreement setting forth
customary restrictions on the subletting, assignment or transfer of any
property or asset that is a lease, license, conveyance or contract of
similar property or assets; or
(E) in the case of clause (iv) any holder of a Permitted Lien
from restricting on customary terms the transfer of any property or assets
subject thereto.
(l) Limitation on Issuance of Capital Stock.
---------------------------------------
-45-
<PAGE>
(i) Issue or sell or enter into any agreement or
arrangement for the issuance and sale of any shares of its Capital Stock, any
securities convertible into or exchangeable for its Capital Stock or any
warrants, options or other rights for the purchase or acquisition of any of its
Capital Stock, other than proposing or accepting a plan or reorganization in
Borrower's Bankruptcy Case which plan proposes to pay the Obligations in full on
or prior to the effective date thereof.
(ii) Permit any of its Subsidiaries to issue or sell or
enter into any agreement or arrangement for the issuance and sale of any shares
of its Capital Stock, any securities convertible into or exchangeable for its
Capital Stock or any warrants, other than proposing or accepting a plan or
reorganization in Borrower's Bankruptcy Case which plan proposes to pay the
Obligations in full on or prior to the effective date thereof.
(m) Modifications of Indebtedness, Organizational Documents and
-----------------------------------------------------------
Certain Other Agreements; Etc. (i) Amend, modify or otherwise change (or
- -----------------------------
permit the amendment, modification or other change in any manner of) any of the
provisions of any Indebtedness of the Borrower or any of its Subsidiaries or of
any instrument or agreement (including, without limitation, any purchase
agreement, indenture, loan agreement or security agreement) relating to any such
Indebtedness if such amendment, modification or change would shorten the final
maturity or average life to maturity of, or require any payment to be made
earlier than the date originally scheduled on, such Indebtedness, would increase
the interest rate applicable to such Indebtedness, or would change the
subordination provision, if any, of such Indebtedness, or would otherwise be
adverse to the issuer of such Indebtedness in any respect, (ii) except for the
Obligations and except as provided in the Intercreditor Agreement, make any
voluntary or optional payment, prepayment, redemption or other acquisition for
value of any Indebtedness of the Borrower or any of its Subsidiaries (including,
without limitation, by way of depositing money or securities with the trustee
therefor before the date required for the purpose of paying any portion of such
Indebtedness when due), or refund, refinance, replace or exchange any other
Indebtedness for any such Indebtedness, or make any prepayment, redemption or
repurchase of any outstanding Indebtedness as a result of any asset sale, change
of control, issuance and sale of debt or equity securities or similar event, or
give any notice with respect to any of the foregoing, or (iii) amend, modify or
otherwise change its certificate of incorporation or bylaws (or other similar
organizational documents), including, without limitation, by the filing or
modification of any certificate of designation, or any agreement or arrangement
entered into by it, with respect to any of its Capital Stock (including any
shareholders' agreement), or enter into any new agreement with respect to any of
its Capital Stock except any such amendments, modifications or changes or any
such new agreements or arrangements pursuant to this clause (iii) that either
individually or in the aggregate, could have a Material Adverse Effect.
(n) Investment Company Act of 1940. Engage in any business, enter
------------------------------
into any transaction, use any securities or take any other action or permit any
of its Subsidiaries to do any of the foregoing, that would cause it or any of
its Subsidiaries to become subject to the registration requirements of the
Investment Company Act of 1940, as amended, by virtue of being an "investment
company" or a company "controlled" by an "investment company" not entitled to an
exemption within the meaning of such Act.
-46-
<PAGE>
(o) Restrictions on Expenditures on Hot End of Borrower's Mill.
----------------------------------------------------------
Without the prior written consent of the Lender Group, reline the blast furnace
or make any expenditures other than routine maintenance expenditures on the hot
end of the Facility, including without limitation the blast furnace, continuous
caster and the coke ovens.
(p) Environmental. Permit the use, handling, generation, storage,
-------------
treatment, release or disposal of Hazardous Materials at any property owned or
leased by the Borrower or any of its Subsidiaries except in compliance with
Environmental Laws and so long as such use, handling, generation, storage,
treatment, release or disposal of Hazardous Materials does not result in a
Material Adverse Effect.
(q) Certain Agreements. Agree to any material amendment or other
-------------------
material change to or material waiver of any of its rights under or in
connection with any Material Contract or any material governmental permit or
license other than such amendment, change or waiver made in the ordinary course
of business.
SECTION 6.03. Financial Covenants. So long as any principal of or
-------------------
interest on any Loan or any other Obligation (whether or not due) shall remain
unpaid or the Lenders shall have any Commitment hereunder, the Borrower shall
not, unless the Lender Group shall otherwise consent in writing:
(a) Net Revenues. Permit Net Revenues from operations to fall below
------------
the amount shown below for the period corresponding thereto:
- --------------------------------------------------------------------------------
For the month of Minimum Net Revenues
================================================================================
June 1999 $24,235,000
- --------------------------------------------------------------------------------
July 1999 $25,560,000
- --------------------------------------------------------------------------------
August 1999 $26,190,000
- --------------------------------------------------------------------------------
September 1999 $26,340,000
- --------------------------------------------------------------------------------
October 1999 $26,775,000
- --------------------------------------------------------------------------------
November 1999 $28,280,000
- --------------------------------------------------------------------------------
December 1999 $27,220,000
- --------------------------------------------------------------------------------
January 2000 $29,620,000
- --------------------------------------------------------------------------------
February 2000 $28,765,000
- --------------------------------------------------------------------------------
March 2000 $30,640,000
- --------------------------------------------------------------------------------
April 2000 $30,995,000
- --------------------------------------------------------------------------------
May 2000 $32,380,000
- --------------------------------------------------------------------------------
June 2000 $31,790,000
- --------------------------------------------------------------------------------
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<PAGE>
(b) Minimum Consolidated EBITDA. Permit Consolidated EBITDA to be
---------------------------
less than the amount shown below for the each period corresponding thereto:
- --------------------------------------------------------------------------------
For the period of Minimum Consolidated EBITDA
================================================================================
November 1, 1998 to June 30, 1999 -$16,875,000
- --------------------------------------------------------------------------------
November 1, 1998 to July 31, 1999 -$18,370,000
- --------------------------------------------------------------------------------
November 1, 1998 to August 31, 1999 -$19,530,000
- --------------------------------------------------------------------------------
November 1, 1998 to September 30, 1999 -$20,480,000
- --------------------------------------------------------------------------------
November 1, 1998 to October 31, 1999 -$21,170,000
- --------------------------------------------------------------------------------
December 1, 1998 to November 30, 1999 -$21,405,000
- --------------------------------------------------------------------------------
January 1, 1999 to December 31, 1999 -$20,310,000
- --------------------------------------------------------------------------------
February 1, 1999 to January 31, 2000 -$19,580,000
- --------------------------------------------------------------------------------
March 1, 1999 to February 29, 2000 -$13,245,000
- --------------------------------------------------------------------------------
April 1, 1999 to March 31, 2000 -$8,010,000
- --------------------------------------------------------------------------------
May 1, 1999 to April 30, 2000 -$2,500,000
- --------------------------------------------------------------------------------
June 1, 1999 to May 31, 2000 -$120,000
- --------------------------------------------------------------------------------
July 1, 1999 to June 30, 2000 $5,550,000
- --------------------------------------------------------------------------------
(c) Capital Expenditures. Permit Capital Expenditures to exceed the
--------------------
amount shown below for the period corresponding thereto, provided that Borrower
may carry forward the amount by which the monthly limit exceeds Capital
Expenditures in any given month:
- --------------------------------------------------------------------------------
For the month of Maximum Capital Expenditures
================================================================================
June 1999 $ 905,000
- --------------------------------------------------------------------------------
July 1999 $1,680,000
- --------------------------------------------------------------------------------
August 1999 $ 875,000
- --------------------------------------------------------------------------------
September 1999 $1,005,000
- --------------------------------------------------------------------------------
October 1999 $1,030,000
- --------------------------------------------------------------------------------
November 1999 $ 975,000
- --------------------------------------------------------------------------------
December 1999 $ 980,000
- --------------------------------------------------------------------------------
January 2000 $ 980,000
- --------------------------------------------------------------------------------
February 2000 $ 985,000
- --------------------------------------------------------------------------------
March 2000 $ 985,000
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<PAGE>
- --------------------------------------------------------------------------------
For the month of Maximum Capital Expenditures
- --------------------------------------------------------------------------------
April 2000 $ 980,000
- --------------------------------------------------------------------------------
May 2000 $ 975,000
- --------------------------------------------------------------------------------
June 2000 $ 965,000
- --------------------------------------------------------------------------------
(d) Minimum Liquidity. Permit the sum of unrestricted Cash plus Cash
-----------------
Equivalents plus availability under the Fleet Loan Facility for Borrower to
request and to actually receive revolving advances, at any time to be less than
the amounts Borrower has paid in the aggregate on pre-petition claims to trade
creditors.
ARTICLE VII
STATUS OF COLLATERAL
SECTION 7.01. [intentionally omitted].
SECTION 7.02. [intentionally omitted].
SECTION 7.03. Status of Collateral. With respect to Collateral of
--------------------
the Borrower or any Subsidiary at the time the Collateral becomes subject to the
Lender Group's Lien, the Borrower covenants, represents and warrants: (a) the
Borrower shall be the sole owner, free and clear of all Liens except in the
favor of Agent for the benefit of the Lender Group or otherwise permitted
hereunder, and fully authorized to sell, transfer, pledge and/or grant a
security interest in each and every item of said Collateral; (b) the Borrower
and its Subsidiaries shall maintain books and records pertaining to said
Collateral in such detail, form and scope as Agent shall reasonably require; (c)
the Borrower will, immediately upon learning thereof, report to Agent any
material loss or destruction of, or substantial damage to, any of the
Collateral, and any other matters affecting the value, enforceability or
collectibility of any of the Collateral; (d) the Borrower is not and shall not
be entitled to pledge the Lender Group's credit on any purchases or for any
purpose whatsoever.
SECTION 7.04. Collateral Custodian. Upon the occurrence and during
--------------------
the continuance of any Default or Event of Default, the Lender Group may at any
time and from time to time employ and maintain on the premises of the Borrower a
custodian selected by Agent who shall have full authority to do all acts
necessary to protect the Lender Group's interests. The Borrower hereby agrees
to, and to cause its Subsidiaries to, cooperate with any such custodian and to
do whatever Agent may reasonably request to preserve the Collateral. All costs
and expenses incurred by the Lender Group by reason of the employment of the
custodian shall be the responsibility of the Borrower.
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<PAGE>
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. If any of the following Events of
-----------------
Default shall occur and be continuing:
(a) Borrower fails to pay any principal of any Loan when due (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise),
or the Borrower fails to pay any interest on any Loan, or any fee, indemnity or
other amount payable under this Agreement or any other Loan Document;
(b) Any representation or warranty made or deemed made by or on
behalf of the Borrower or any Subsidiary of the Borrower or by any officer of
the foregoing under or in connection with any Loan Document or under or in
connection with any report, certificate, or other document delivered to the
Lender Group pursuant to any Loan Document shall have been incorrect in any
material respect when made or deemed made;
(c) the Borrower fails to perform or comply with any covenant or
agreement contained in Article VI or any other term, covenant or agreement
contained in any Loan Document to be performed or observed by Borrower (other
than as specifically addressed in Section 8.01(d) hereof);
(d) the Borrower shall fail to perform or observe the covenants
contained in Sections 6.01(a)(i), 6.01(a)(ii), 6.01(a)(iii), 6.01(a)(iv),
6.01(a)(xiv), 6.01(a)(xv) and 6.01(i), and such default shall continue
unremedied for 5 Business Days after the earlier of the date a senior officer of
Borrower becomes aware of such failure and the date written notice of such
default shall have been given by Agent on behalf of the Lender Group to the
Borrower;
(e) Borrower defaults on any material obligations under the Fleet
Loan Facility;
(f) [intentionally omitted];
(g) [intentionally omitted];
(h) any provision of any Loan Document shall at any time for any
reason (other than pursuant to the express terms thereof) cease to be valid and
binding on or enforceable against the Borrower or any of its Subsidiaries, or
the validity or enforceability thereof shall be contested by any party thereto,
or a proceeding shall be commenced by the Borrower or any of its Subsidiaries or
any Governmental Authority having jurisdiction over any of them, seeking to
establish the invalidity or unenforceability thereof, or the Borrower or any of
its Subsidiaries shall deny in writing that it has any liability or obligation
purported to be created under any Loan Document;
(i) the Security Agreement, the Mortgage or any other security
document, after delivery thereof pursuant hereto, shall for any reason fail or
cease to create a valid and perfected and, except to the extent permitted by the
terms hereof or thereof, Lien in favor of the Lender Group on any Collateral
purported to be covered thereby;
-50-
<PAGE>
(j) a Triggering Event occurs;
(k) the Borrower or any of its Subsidiaries or any of their ERISA
Affiliates shall have made a complete or partial withdrawal from a Multiemployer
Plan, and, as a result of such complete or partial withdrawal, the Borrower or
any of its Subsidiaries or such ERISA Affiliate incurs a withdrawal liability in
an annual amount exceeding $10,000; or a Multiemployer Plan enters
reorganization status under Section 4241 of ERISA, and, as a result thereof, the
Borrower's or such Subsidiary's, or such ERISA Affiliate's annual contribution
requirement with respect to such Multiemployer Plan increases in an annual
amount exceeding $10,000;
(l) any Termination Event with respect to any Employee Plan shall
have occurred, and, 30 days after notice thereof shall have been given to the
Borrower by Agent on behalf of the Lender Group, (i) such Termination Event (if
correctable) shall not have been corrected, and (ii) the then current value of
such Employee Plan's vested benefits exceeds the then current value of assets
allocable to such benefits in such Employee Plan by more than $50,000 (or, in
the case of a Termination Event involving liability under Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971
or 4975 of the Code, the liability is in excess of such amount);
(m) [intentionally omitted]; or
(n) an event or development occurs which has a Material Adverse
Effect,
then, and in any such event, the Lender Group may, by notice to the Borrower,
and except to the extent that any of the following is expressly prohibited by
the Interim Bankruptcy Court Order or the Final Bankruptcy Court Order, (i)
terminate the Commitments, whereupon the Commitments shall terminate
immediately, (ii) declare all Loans then outstanding to be due and payable,
whereupon the aggregate principal of such Loans, all accrued and unpaid interest
thereon, all fees and all other amounts payable under this Agreement shall
become due and payable immediately, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower and (iii) exercise any and all of its other rights and remedies under
applicable law, hereunder and under the other Loan Documents.
-51-
<PAGE>
ARTICLE IX
[RESERVED]
ARTICLE X
[RESERVED]
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall be in writing and shall be mailed, telecopied or
delivered:
if to the Borrower, at the following address:
Gulf States Steel, Inc. of Alabama
174 South 26th Street
Gadsden, Alabama 35904
Attention: James Grimm
Telephone: (256) 543-6201
Telecopier: (256) 543-6204
with a copies to:
Lange, Simpson, Robinson & Somerville
1700 First Alabama Bank Building
Birmingham, Alabama 35203-3217
Attention: Richard P. Carmody, Esq.
Telephone: (205) 250-5000
Telecopier: (205) 250-5034
Moses & Singer, LLP
1301 Avenue of the Americas
New York, New York 10019-6076
Attention: Alan Kolad, Esq.
Telephone: (212) 554-7800
Facsimile: (212) 554-7700
-52-
<PAGE>
if to Agent or to Agent on behalf of the Lenders, at the following address:
Ableco Finance LLC
950 Third Avenue
New York, New York 10022
Attention: Mr. Kevin Genda
Telephone: (212) 891-2120
Telecopier: (212) 758-5305
with a copy to:
Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, California 90071
Attention: John Francis Hilson, Esq.
Telephone: (213) 489-4060
Telecopier: (213) 745-3345
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 11.01. All such notices and other communications shall be
effective, (i) if mailed, when received or five days after deposited in the
mails, whichever occurs first, (ii) if telecopied, when transmitted and
confirmation received, or (iii) if delivered, upon delivery, except that notices
to Agent pursuant to Article II shall not be effective until received by Agent.
SECTION 11.02. Amendments, Etc. No amendment or waiver of any
----------------
provision of this Agreement, any Note, or any other Loan Document, and no
consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Required Lenders
(or by Agent, in each case, at the written request of the Required Lenders), and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no such
-------- -------
waiver, amendment, or consent shall, unless in writing and signed by Borrower,
all the Lenders, and Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Lenders (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein
on any Loan, or any fees or other amounts payable hereunder or under any other
Loan Document, or forgive, compromise, or cancel any of the Obligations;
-53-
<PAGE>
(d) change the percentage of the Commitments that is required for the
Lenders or any of them to take any action hereunder;
(e) amend this Section or any provision of the Agreement providing
for consent or other action by all Lenders;
(f) release Collateral other than as permitted by Section 12.11, or
subordinate any security interests or liens of Agent for the benefit of the
Lender Group;
(g) change the definition of "Required Lenders";
(h) release Borrower from any Obligation for the payment of money, or
agree to subordinate any of the Obligations in right of payment to any other
Indebtedness;
(i) amend the provisions of Section 3.03;
(j) [intentionally omitted];
(k) permit the sale of all or substantially all of the Capital Stock
of Borrower or any of its Subsidiaries;
(l) amend any of the provisions of Article XII;
and, provided further, however, that no amendment, waiver or consent
-------- ------- -------
shall, unless in writing and signed by Agent, affect the rights or duties of
Agent under this Agreement or any other Loan Document. The foregoing
notwithstanding, any amendment, modification, waiver, consent, termination, or
release of or with respect to any provision of this Agreement or any other Loan
Document that relates only to the relationship of the Lender Group among
themselves, and that does not affect the rights or obligations of Borrower,
shall not require consent by or the agreement of Borrower.
SECTION 11.03. No Waiver; Remedies, Etc. No failure on the part of the
-------------------------
Lender Group to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Lender Group provided herein and in the other Loan Documents
are cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by law. The rights of the Lender Group under any Loan Document
against any party thereto are not conditional or contingent on any attempt by
the Lender Group to exercise any of their rights under any other Loan Document
against such party or against any other Person.
SECTION 11.04. Expenses; Taxes, Attorneys' Fees. The Borrower will
--------------------------------
pay on demand, all reasonable costs and expenses incurred by or on behalf of the
Lender Group, regardless of whether the transactions contemplated hereby are
consummated, including, without limitation, reasonable fees, costs, client
charges and expenses of the several counsel (including in-house counsel) for the
several members of the Lender Group, accounting, due diligence, periodic field
audits, physical counts, valuations, fees of Rating Agencies
-54-
<PAGE>
associated with the rating of the Loans, investigations, monitoring of assets,
appraisals of Collateral, environmental assessments, miscellaneous
disbursements, examination, travel, lodging and meals, arising from or relating
to: (a) the negotiation, preparation, execution, delivery, performance and
administration of this Agreement and the other Loan Documents, (including,
without limitation, the preparation of any additional Loan Documents, pursuant
to Section 6.01(k) or the review of any of the agreements, instruments and
documents referred to in this Agreement), (b) any requested amendments, waivers
or consents to this Agreement or the other Loan Documents whether or not such
documents become effective or are given, (c) the preservation and protection of
any of the Lender Group's rights under this Agreement or the other Loan
Documents, (d) the defense of any claim or action asserted or brought against
the Lender Group by any Person that arises from or relates to this Agreement,
any other Loan Document, the Lender Group's claims against the Borrower, or any
and all matters in connection therewith, (e) the commencement or defense of, or
intervention in, any court proceeding arising from or related to this Agreement
or any other Loan Document, (f) the filing of any petition, complaint, answer,
motion or other pleading by the Lender Group, or the taking of any action in
respect of the Collateral or other security, in connection with this Agreement
or any other Loan Document, (g) the protection, collection, lease, sale, taking
possession of or liquidation of, any Collateral or other security in connection
with this Agreement or any other Loan Document, (h) any attempt to enforce any
Lien or security interest in any Collateral or other security in connection with
this Agreement or any other Loan Document, (i) any attempt to collect from the
Borrower, (j) the receipt by the Lender Group of any advice from its
professionals with respect to any of the foregoing, (k) all liabilities and
costs arising from or in connection with the past, present or future operations
of the Borrower and/or its Subsidiaries involving any damage to real or personal
property or natural resources or harm or injury alleged to have resulted from
any Release of Hazardous Materials on, upon or into such property, (1) any
Environmental Liabilities and Costs incurred in connection with the
investigation, removal, cleanup and/or remediation of any Hazardous Materials
present or arising out of the operations of any facility of the Borrower and its
Subsidiaries, or (m) any Environmental Liabilities and Costs incurred in
connection with any Environmental Lien. Without limitation of the foregoing or
any other provision of any Loan Document: (x) the Borrower agrees to pay all
stamp, document, transfer, recording or filing taxes or fees and similar
impositions now or hereafter determined by the Lender Group to be payable in
connection with this Agreement or any other Loan Document, and the Borrower
agrees to save the Lender Group harmless from and against any and all present or
future claims, liabilities or losses with respect to or resulting from any
omission to pay or delay in paying any such taxes, fees or impositions, (y) the
Borrower agrees to pay all broker fees that may become due in connection with
the transactions contemplated by this Agreement, other than broker fees incurred
by the Lender Group, and (z) if the Borrower fails to perform any covenant or
agreement contained herein or in any other Loan Document, the Lender Group may
itself perform or cause performance of such covenant or agreement, and the
expenses of the Lender Group incurred in connection therewith shall be
reimbursed on demand by the Borrower.
SECTION 11.05. Right of Set-off, Sharing of Payments, Etc.
-------------------------------------------
(a) Upon the occurrence and during the continuance of any Event of
Default and in addition to (and without limitation of) any right of set-off,
banker's lien, or counterclaim any Lender may otherwise have, each Lender (at
its option but only with the prior written consent of all Lenders) may, and is
hereby authorized by Borrower to, at any time and from time to time,
-55-
<PAGE>
without notice to the Borrower (any such notice being expressly waived by the
Borrower) and to the fullest extent permitted by law, set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any and all obligations of either
now or hereafter existing under any Loan Document, irrespective of whether or
not the Lender Group shall have made any demand hereunder or thereunder and
although such obligations may be contingent or unmatured. Upon the occurrence
and during the continuance of any Event of Default, the Lender Group may, and is
hereby authorized to, at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower) and to the
fullest extent permitted by law, set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Lender Group to or for the credit or the
account of the Borrower against any and all obligations of either now or
hereafter existing under any Loan Document, irrespective of whether or not the
Lender Group shall have made any demand hereunder or thereunder and although
such obligations may be contingent or unmatured. The Lender Group agrees to
notify the Borrower and Agent promptly after any such set-off and application
made by the Lender Group provided that the failure to give such notice to
Borrower shall not affect the validity of such set-off and application.
(b) If any Lender shall obtain from the Borrower payment of any Obligation
through the exercise of any right of set-off, banker's lien, or counterclaim or
similar right or otherwise (other than from Agent as provided in this
Agreement), and, as a result of such payment, such Lender shall have received a
greater amount of the Obligations than the amount allocable to such Lender
hereunder, Agent and the other members of the Lender Group (including such
Lender) shall promptly make such adjustments from time to time as shall be
equitable, to the end that the Lender Group 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) in accordance with Section 3.03.
To such end the Lender Group shall make appropriate adjustments among themselves
if such payment is rescinded or must otherwise be restored.
(c) Nothing contained in this Section 11.05 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 Borrower. 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 11.05 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 Lenders entitled under this Section 11.05 to share
in the benefits of any recovery on such secured claim.
SECTION 11.06. Severability. Any provision of this Agreement, which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
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SECTION 11.07. Assignments and Participations. Notwithstanding anything to
------------------------------
the contrary in this Section 11.07: (i) under no circumstances may any Lender
pledge, assign or transfer any of its rights hereunder, or under the Notes, to
any Person that is a producer of steel products that directly competes with
Borrower.
(a) This Agreement and the Notes shall be binding upon and inure to the
benefit of the Borrower and the Lender Group and their respective successors and
assigns; provided , however, that (i) the Borrower may not assign or transfer
--------
any of its rights hereunder, or under the Notes, without the prior written
consent of the Lender Group and any such assignment without the Lender Group's
prior written consent shall be null and void, and (ii) subject to compliance
with subsection (f) below, any member of the Lender Group may pledge, assign or
transfer any of its rights hereunder, or under the Notes, to any Person without
notice to or the prior written consent of the Borrower. Except as provided in
this Section 11.07, this Agreement shall not inure to the benefit of any party
other than the Borrower and the Lender Group.
(b) Subject to the other provisions of this Section 11.07, any member of
the Lender Group may at any time sell, assign or participate to an Affiliate of
such member of the Lender Group or any other Person its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitments, the Loans made by it, and the Notes held by it) without notice to
or the consent of the Borrower. The Borrower shall execute and deliver such
Notes and any amendment or other modification restatement of this Agreement or
any Loan Document as may be requested by such member of the Lender Group to
reflect any such sale or assignment.
(c) the Borrower shall maintain, or cause to be maintained, a register (the
"Register") on which it enters the name of each Lender as the registered owner
of the Loans held by such Lender. A Registered Loan (and the Registered Note,
if any, evidencing the same) may be assigned or sold in whole or in part only by
registration of such assignment or sale on the Register (and each Registered
Note shall expressly so provide). Any assignment or sale of all or part of such
Registered Loan (and the Registered Note, if any, evidencing the same) may be
effected only by registration of such assignment or sale on the Register,
together with the surrender of the Registered Note, if any, evidencing the same
duly endorsed by (or accompanied by a written instrument of assignment or sale
duly executed by) the holder of such Registered Note, whereupon, at the request
of the designated assignee(s) or transferee(s), one or more new Registered Notes
in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or sale
of any Registered Loan (and the Registered Note, if any evidencing the same),
the Borrower shall treat the Person in whose name such Loan (and the Registered
Note, if any, evidencing the same) is registered as the owner thereof for the
purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary.
(d) In the event that any Lender sells participations in the Registered
Loan, such Lender shall maintain a register on which it enters the name of all
participants in the Registered Loans held by it (the "Participant Register"). A
--------------------
Registered Loan (and the Registered Note, if any, evidencing the same) may be
participated in whole or in part only by registration of such participation on
the Participant Register (and each Registered Note shall expressly so provide).
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Any participation of such Registered Loan (and the Registered Note, if any,
evidencing the same) may be effected only by the registration of such
participation on the Participant Register.
(e) Any foreign Person who purchases or is assigned or participates in any
portion of such Loan shall provide the Borrower and Agent (in the case of a
purchase or assignment) or the applicable Lender (in the case of a
participation) with a completed Internal Revenue Service Form W-8 (Certificate
of Foreign Status) or a substantially similar form for such purchaser,
participant or any other affiliate who is a holder of beneficial interests in
the Loan.
(f) Any Lender may, with the written consent of Agent (which consent shall
not be unreasonably withheld nor shall it be required in respect to an
assignment of the Term Loans), assign and delegate to one or more assignees
(provided that no written consent of Agent shall be required in connection with
any assignment and delegation by a Lender to an Eligible Transferee) (each an
"Assignee") all, or any part of all, of the Obligations, the Commitments and the
other rights and obligations of such Lender hereunder and under the other Loan
Documents, in a minimum amount of $500,000 (provided that no such minimum amount
shall be required in the case of an Assignee that is an Affiliate of the
assigning Lender); provided, however, that Borrower, and Agent may continue to
-------- -------
deal solely and directly with such Lender in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to Borrower, and Agent by such Lender and the
Assignee; (ii) such Lender and its Assignee shall have delivered to Borrower and
Agent an assignment and acceptance agreement, in form and substance satisfactory
to Agent ("Assignment and Acceptance"); and (iii) the assignor Lender or
Assignee has paid to Agent for Agent's sole and separate account a processing
fee in the amount of $2,500. Anything contained herein to the contrary
notwithstanding, the consent of Agent shall not be required if such assignment
is in connection with any merger, consolidation, sale, transfer, or other
disposition of all or any substantial portion of the business or loan portfolio
of such Lender.
(g) From and after the date that Agent notifies the assignor Lender that it
has received an executed Assignment and Acceptance and payment of the above
referenced processing fee, (i) the Assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, shall have the rights and
obligations of a Lender under the Loan Documents, and (ii) the assignor Lender
shall, to the extent that rights and obligations hereunder and under the other
Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights (except with respect to Section 11.15) and be
released from its obligations under this Agreement (except with respect to
Section 12.05) (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement and the other Loan Documents, such Lender shall cease to be a party
hereto and thereto), and such assignment shall effect a novation among Borrower,
the assignor Lender, and the Assignee.
(h) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the Assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (1) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with
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respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document furnished pursuant hereto; (2) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower or the performance or observance by Borrower of
any of its obligations under this Agreement or any other Loan Document furnished
pursuant hereto; (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (4) such Assignee will, independently and without
reliance upon Agent, such assigning Lender, or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (5) such Assignee appoints and authorizes each of Agent to take
such action as Agent (as the case may be) on its behalf and to exercise such
powers under this Agreement as are delegated to Agent (as the case may be) by
the terms hereof, together with such powers as are reasonably incidental
thereto; and (6) such Assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.
(i) Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitments allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
--- -----
(j) Subject to Section 11.07(d), any Lender may at any time, with the
written consent of Agent, sell to one or more commercial banks, financial
institutions, or other Persons (a "Participant") participating interests in the
Obligations, the Commitments, and the other rights and interests of that Lender
(the "originating Lender") hereunder and under the other Loan Documents
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); provided, however, that (i) the originating Lender's obligations
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under this Agreement shall remain unchanged, (ii) the originating Lender shall
remain solely responsible for the performance of such obligations, (iii)
Borrower and Agent shall continue to deal solely and directly with the
originating Lender in connection with the originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the sole and exclusive right to approve any amendment to, or any consent or
waiver with respect to, this Agreement or any other Loan Document, except to the
extent such amendment to, or consent or waiver with respect to, this Agreement
or of any other Loan Document would (A) extend the final maturity date of the
Obligations hereunder in which such Participant is participating; (B) reduce the
interest rate applicable to the Obligations hereunder in which such Participant
is participating; (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating; (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender; or (E) change
the amount or due dates of scheduled principal repayments or prepayments or
premiums; (v) all amounts payable by Borrower hereunder shall be determined as
if such Lender had not sold such participation; and
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(vi) any such participation shall be in a minimum amount of $500,000. The rights
of any Participant only shall be derivative through the originating Lender with
whom such Participant participates and no Participant shall have any direct
rights as to the other Lenders, Agent, Borrower, the Collections, the
Collateral, or otherwise in respect of the Obligations. No Participant shall
have the right to participate directly in the making of decisions by the Lender
Group among themselves.
(k) In connection with any such assignment or participation or proposed
assignment or participation, a Lender may disclose all documents and information
which it now or hereafter may have relating to Borrower or Borrower's business;
provided in each case that such assignee or participant (or prospective assignee
or participant) shall agree to maintain the confidentiality of such information
pursuant to Section 11.19(e).
(l) Any other provision in this Agreement notwithstanding, any Lender may
at any time create a security interest in, or pledge, all or any portion of its
rights under and interest in this Agreement in favor of any Federal Reserve Bank
in accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR (S)203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
(m) Notwithstanding anything in this Section 11.07 to the contrary, no
Lender may assign or participate to Borrower or any of its Affiliates or
Subsidiaries, if any, any interest in any Obligation or Commitment (or any
related rights, remedies, powers or privileges) without the prior written
consent of each Lender and Agent.
SECTION 11.08. Counterparts. This Agreement may be executed in any number
------------
of counterparts and by different parties hereto in separate counterparts, each
of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
-------------
DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE
OF NEW YORK.
SECTION 11.10. CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE.
-----------------------------------------------------
EXCEPT TO THE EXTENT THAT THE BANKRUPTCY COURT HAS SOLE AND EXCLUSIVE
JURISDICTION OVER SUCH MATTERS, ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, THE BORROWER HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
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PREPAID, TO BORROWER AT ITS ADDRESS FOR NOTICES AS SET FORTH IN SECTION 11.01,
SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE LENDER GROUP TO SERVICE OF PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION. THE BORROWER HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY
CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE
EXTENT THAT THE BORROWER HAVE OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 11.11. WAIVER OF JURY TRIAL, ETC. THE BORROWER AND THE LENDER GROUP
-------------------------
HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, THE NOTES OR OTHER LOAN
DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR
OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION
THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE BORROWER CERTIFIES THAT
NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER GROUP HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER GROUP WOULD NOT, IN THE
EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING
WAIVERS. THE BORROWER HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDER GROUP'S ENTERING INTO THIS AGREEMENT.
SECTION 11.12. Consent by the Lender Group. Except as otherwise expressly
---------------------------
set forth herein to the contrary, if the consent, approval, satisfaction,
determination, judgment, acceptance or similar action (an "Action") of the
------
Lender Group shall be permitted or required pursuant to any provision hereof or
any provision of any other agreement to which the Borrower are parties and to
which the Lender Group has succeeded thereto, such Action shall be required to
be in writing and may be withheld or denied by the Lender Group with or without
any reason, and without being subject to question or challenge on the grounds
that such Action was not taken in good faith.
SECTION 11.13. No Party Deemed Drafter. Each of the parties hereto agrees
-----------------------
that no party hereto shall be deemed to be the drafter of this Agreement.
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SECTION 11.14. Reinstatement; Certain Payments. If any claim is ever made
-------------------------------
upon the Lender Group for repayment or recovery of any amount or amounts
received by the Lender Group in payment or on account of any of the Obligations,
the Lender Group shall give prompt notice of such claim to the Borrower, and if
the Lender Group repays all or part of such amount by reason of (i) any
judgment, decree or order of any court or administrative body having
jurisdiction over the Lender Group or any of its property, or (ii) any good
faith settlement or compromise of any such claim effected by the Lender Group
with any such claimant, then and in such event the Borrower agrees that (A) any
such judgment, decree, order, settlement or compromise shall be binding upon it
notwithstanding the cancellation of any Note or other instrument evidencing the
Obligations or the other Loan Documents or the termination of this Agreement or
the other Loan Documents, and (B) it shall be and remain liable to the Lender
Group hereunder for the amount so repaid or recovered to the same extent as if
such amount had never originally been received by the Lender Group.
SECTION 11.15. Indemnification. In addition to the Borrower's other
---------------
Obligations under this Agreement, the Borrower agrees to defend, protect,
indemnify and hold harmless the Lender Group, the Agent-Related Persons, the
Lender-Related Persons, any Securitization Party and all of their respective
officers, directors, employees, attorneys, consultants and agents (collectively
called the "Indemnitees") from and against any and all losses, damages,
-----------
liabilities, obligations, penalties, fees, reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees, costs and expenses)
incurred by such Indemnitees, whether prior to or from and after the Effective
Date, whether direct, indirect or consequential, as a result of or arising from
or relating to or in connection with any of the following: (i) the negotiation,
preparation, execution or performance or enforcement of this Agreement, any
other Loan Document or of any other document executed in connection with the
transactions contemplated by this Agreement, (ii) the Lender Group's furnishing
of funds to the Borrower under this Agreement, including, without limitation,
the management of any such Loans, (iii) any matter relating to the financing
transactions contemplated by this Agreement or the other Loan Documents or by
any document executed in connection with the transactions contemplated by this
Agreement or the other Loan Documents, or (iv) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto (collectively, the "Indemnified Matters");
-------------------
provided, however, that the Borrower shall not have any obligation to any
- -------- -------
Indemnitee under this Section 11.15 for any Indemnified Matter caused by the
gross negligence or willful misconduct of such Indemnitee, as determined by a
final judgment of a court of competent jurisdiction. Such indemnification for
all of the foregoing losses, damages, fees, costs and expenses of the
Indemnitees are chargeable against the Loan Account. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this Section 11.15
may be unenforceable because it is violative of any law or public policy, the
Borrower shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law, to the payment and satisfaction of all Indemnified
Matters incurred by the Indemnitees. This Indemnity shall survive the repayment
of the Obligations and the discharge of the Liens granted under the Loan
Documents.
SECTION 11.16. Records. The unpaid principal of and interest on the Notes,
-------
the interest rate or rates applicable to such unpaid principal and interest, the
duration of such applicability, the amount of the Commitments, and the accrued
and unpaid fees payable pursuant to Section 2.06 hereof, including, without
limitation, the Closing Fee, Loan Servicing Fee, the
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Term Loan B Funding Fee, the Success Fee and Commitment Fee, shall at all times
be ascertained from the records of the Lender Group, which shall be conclusive
and binding absent manifest error.
SECTION 11.17. Binding Effect. This Agreement shall become effective when
--------------
it shall have been executed by the Borrower and the Lender Group and when the
conditions precedent set forth in Section 4.01 hereof have been satisfied or
waived in writing by the Lender Group, and thereafter shall be binding upon and
inure to the benefit of the Borrower and the Lender Group, and their respective
successors and assigns, except that the Borrower shall not have the right to
assign their rights hereunder or any interest herein without the prior written
consent of the Lender Group, and any assignment by the Lender Group shall be
governed by Section 11.07 hereof.
SECTION 11.18. [intentionally omitted]
SECTION 11.19. Confidentiality. Each member of the Lender Group 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 its customary procedures for handling confidential information
of this nature and in accordance with safe and sound practices of comparable
commercial finance companies, any non-public information supplied to it by the
Borrower pursuant to this Agreement or the other Loan Documents which is
identified by the Borrower as being confidential at the time the same is
delivered to such Person (and which at the time is not, and does not thereafter
become, publicly available or available to such Person from another source not
known to be subject to a confidentiality obligation to such Person not to
disclose such information), provided that nothing herein shall limit the
--------
disclosure of any such information (a) to the extent required by statute, rule,
regulation or judicial process, (b) to any other member of the Lender Group, to
counsel for such member of the Lender Group, or to counsel for any other member
of the Lender Group, (c) to examiners, auditors, accountants or Securitization
Parties, (d) in connection with any litigation to which the Lender Group is a
party or (e) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) first agrees, in writing, to be bound by confidentiality provisions
similar in substance to this Section 11.19. The Lender Group agrees that, upon
receipt of a request or identification of the requirement for disclosure
pursuant to clause (d) hereof, it will make reasonable efforts to keep the
Borrower informed of such request or identification; provided that the Borrower
--------
acknowledges that the Lender Group may make disclosure as required or requested
by any Governmental Authority or representative thereof and that the Lender
Group may be subject to review by Securitization Parties or other regulatory
agencies and may be required to provide to, or otherwise make available for
review by, the representatives of such parties or agencies any such non-public
information.]
SECTION 11.20. [intentionally omitted].
SECTION 11.21. Power of Attorney. Borrower hereby irrevocably designates,
-----------------
makes, constitutes, and appoints Agent (and all Persons designated by Agent) as
Borrower's true and lawful attorney (and agent-in-fact), and Agent, or Agent's
agent, may, without notice to Borrower and in either Borrower's or Agent's name,
but at the cost and expense of Borrower:
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(a) At such time or times upon or after the occurrence of a Default or an
Event of Default as Agent or said agent (including Agent), in its sole
discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders, or any other evidence of payment or proceeds
of the Collateral which come into the possession of the Lender Group or under
the Lender Group's control and shall deposit such item of payment into the
Agent's Account or credit the amount thereof (in accordance with the provisions
of this Agreement) to the Obligations.
(b) At such time or times upon or after the occurrence of an Event of
Default as Agent or its agent, in its sole discretion, may determine: (i) demand
payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts,
(ii) settle, adjust, compromise, discharge, or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral, (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts, and at such time or times as Agent
deems advisable, (iv) take control, in any manner, of any item of payment or
proceeds relating to any Collateral, (v) prepare, file, and sign Borrower's name
to a proof of claim in bankruptcy or similar document against any Account
Debtor, or to any notice of lien, assignment, or satisfaction of lien or similar
document in connection with any of the Collateral, (vi) receive, open and
dispose of all mail addressed to Borrower, and notify postal authorities to
change the address for delivery thereof to such address as Agent may designate,
(vii) endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral, and deposit the same to the account of Agent on
account of the Obligations, (viii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document, or agreement relating to the Accounts, Inventory and any other
Collateral, (ix) use Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors, (x) use
the information recorded on or contained in any data processing equipment,
computer hardware, and software relating to the Accounts, Inventory, Equipment,
and any other Collateral, (xi) make and adjust claims under policies of
insurance, and (xii) do all other acts and things necessary, in Agent's
determination, to fulfill Borrower's obligations under this Agreement.
SECTION 11.22. Concerning the Collateral and Related Loan Documents. Each
----------------------------------------------------
Lender authorizes and directs Agent to enter into this Agreement and the other
Loan Documents relating to the Collateral, for the benefit of the Lenders. Each
Lender agrees that any action taken by Agent or Required Lenders, as applicable,
in accordance with the terms of this Agreement or the other Loan Documents
relating to the Collateral and the exercise by Agent or Required Lenders, as
applicable, of their respective powers set forth therein or herein, together
with such other powers that are reasonably incidental thereto, shall be binding
upon all of the Lenders.
SECTION 11.23. Field Audits and Examination Reports, Confidentiality;
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Disclaimers by Lenders; Other Reports and Information. By signing this
- -----------------------------------------------------
Agreement, each Lender:
(a) is deemed to have requested that Agent, as the case may be, furnish
such Lender, promptly after it becomes available, a copy of each field audit or
examination report
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(each a "Report" and collectively, "Reports") prepared by Agent, and Agent shall
so furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that neither Ableco Finance LLC nor
Agent (i) makes any representation or warranty as to the accuracy of any Report,
or (ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Agent or other party performing
any audit or examination will inspect only specific information regarding
Borrower and will rely significantly upon Borrower's books and records, as well
as on representations of Borrower's personnel;
(d) agrees to keep all Reports and other material, non-public information
regarding Borrower and its Subsidiaries and their operations, assets, and
existing and contemplated business plans in a confidential manner; it being
understood and agreed by Borrower that in any event such Lender may make
disclosures (a) to counsel for and other advisors, accountants, and auditors to
such Lender, (b) reasonably required by any bona fide potential or actual
---------
Assignee, transferee, or Participant in connection with any contemplated or
actual assignment or transfer by such Lender of an interest herein or any
participation interest in such Lender's rights hereunder, (c) of information
that has become public by disclosures made by Persons other than such Lender,
its Affiliates, assignees, transferees, or participants, or (d) to the extent
required by any court, governmental or administrative agency, pursuant to any
subpoena or other legal process, or by any law, statute, regulation, or court
order; provided, however , that, unless prohibited by applicable law, statute,
-------- -------
regulation, or court order, such Lender shall notify Borrower of any request by
any court, governmental or administrative agency, or pursuant to any subpoena or
other legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold Agent and any such other Lender
preparing a Report harmless from any action the indemnifying Lender may take or
conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
Lender has made or may make to Borrower, or the indemnifying Lender's
participation in, or the indemnifying Lender's purchase of, a loan or loans of
Borrower; and (ii) to pay and protect, and indemnify, defend and hold Agent and
any such other Lender preparing a Report harmless from and against, the claims,
actions, proceedings, damages, costs, expenses and other amounts (including
reasonable attorneys fees) incurred by Agent and any such other Lender preparing
a Report as the direct or indirect result of any third parties who might obtain
all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) Any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower to Agent that has not been contemporaneously
provided by Borrower to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender promptly upon receipt thereof from
Borrower; (y) To the extent that Agent is entitled, under any provision of the
Loan Documents, to request additional reports or information from Borrower, any
Lender may, from time to time, reasonably request Agent to exercise such right
as specified in such Lender's
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notice to Agent, whereupon Agent promptly shall request of Borrower the
additional reports or information specified by such Lender, and, upon receipt
thereof from Borrower, Agent promptly shall provide a copy of same to such
Lender; and (z) Any time that Agent renders to Borrower a statement regarding
the Loan Account, Agent shall send a copy of such statement to each Lender and
Agent.
ARTICLE XII
THE AGENT
SECTION 12.01. Appointment Powers and Immunities; Delegation of
------------------------------------------------
Duties, Liability of Agent.
- --------------------------
(a) Each member of the Lender Group hereby designates and appoints
Agent as its Agent under this Agreement and the other Loan Documents. Each
member of the Lender Group hereby irrevocably authorizes Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Agent agrees to
act as such on the express conditions contained in this Article XII. The
-----------
provisions of this Article XII are solely for the benefit of the Agent and the
-----------
Lenders. Borrower shall have no rights as a third party beneficiary of any of
the provisions contained herein; provided, however, that certain of the
-------- -------
provisions of Section 12.13 hereof also shall be for the benefit of Borrower.
-------------
Any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document notwithstanding, Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall Agent have
or be deemed to have any fiduciary relationship with any other member of the
Lender Group, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word "Agent" is for convenience only and that Agent
is merely the representative of the other members of the Lender Group, and has
only the contractual duties set forth in this Agreement and the other Loan
Documents. Except as expressly otherwise provided in this Agreement, Agent shall
have and may use its sole discretion with respect to exercising or refraining
from exercising any discretionary rights or taking or refraining from taking any
actions which Agent is expressly entitled to take or assert under or pursuant to
this Agreement and the other Loan Documents. No member of the Lender Group shall
have any right of action whatsoever against Agent as a result of Agent acting or
refraining from acting hereunder pursuant to such discretion and any action
taken or failure to act pursuant to such discretion shall be binding on the
Lender Group. Without limiting the generality of the foregoing, or of any other
provision of the Loan Documents that provides rights or powers to Agent, each of
the members of the Lender Group agree that, as long as this Agreement remains in
effect: (i) (A) Agent shall have the right to maintain, in accordance with its
customary business practices, ledgers and records reflecting the status of the
Obligations, the Term Loans, the Collections, and related matters, and (B) Agent
shall have the right to maintain, in accordance with its customary business
practices, ledgers and records reflecting the status of the Collateral and
related matters; (ii) Agent shall have the right to execute or file any and all
financing or similar statements or notices, amendments, renewals,
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supplements, documents, instruments, proofs of claim, notices and other written
agreements with respect to the Loan Documents; (iii) Agent shall have the right
to exclusively receive, apply, and distribute the Collections as provided in the
Loan Documents; (iv) Agent shall have the right to open and maintain such bank
accounts and lock boxes as Agent deems necessary and appropriate in accordance
with the Loan Documents for the foregoing purposes with respect to the
Collections and, on behalf of Agent, the Collateral; (v) (A) Agent shall have
the right to perform, exercise, and enforce any and all other rights and
remedies of the Lender Group with respect to Borrower, the Obligations, the
Collections, or otherwise related to any of same as provided in the Loan
Documents, and (B) Agent shall have the right to perform, exercise, and enforce
any and all other rights and remedies of the Lender Group with respect to
Borrower, the Obligations, the Collateral, or otherwise related to any of same
as provided in the Loan Documents; and (vi) Agent shall have the right to incur
and pay such fees, charges, and expenses under the Loan Documents as Agent
reasonably may deem necessary or appropriate for the performance and fulfillment
of its functions and powers pursuant to the Loan Documents. Agent may deem and
treat the payee of any Obligation as the holder thereof for all purposes of the
Loan Documents unless and until a notice of the assignment or transfer of such
Obligation shall have been filed with Agent. Each member of the Lender Group
further consents to (y) the execution, delivery, and performance by Agent of
each Loan Document entered into by Agent on behalf of the Lender Group as
contemplated by this Agreement, and (z) the terms of such Loan Documents.
(b) Except as otherwise provided in this section, Agent may execute
any of its duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects as long as such selection was made in compliance with this
section and without gross negligence or willful misconduct.
(c) None of the Agent-Related Persons shall (i) be liable for any
action taken or omitted to be taken by any of them under or in connection with
this Agreement or any other Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct), or (ii) be
responsible in any manner to any members of the Lender Group for any recital,
statement, representation or warranty made by Borrower or any Subsidiary or
Affiliate of Borrower, or any officer or director thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any member
of the Lender Group to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of Borrower or any of Borrower's Subsidiaries or Affiliates.
SECTION 12.02. Reliance by Agent. Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by
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the proper Person, and upon advice and statements of legal counsel (including
counsel to Borrower or counsel to any member of the Lender Group), independent
accountants and other experts selected by Agent. Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any other Loan
Document unless it first shall receive such advice or concurrence of the Lenders
as it deems appropriate and until such instructions are received, Agent shall
act, or refrain from acting, as it deems advisable. If Agent so requests, it
first shall be indemnified to its reasonable satisfaction by the Lender Group
against any and all liability and expense that may be incurred by it by reason
of taking or continuing to take any such action. Agent in all cases shall be
fully protected in acting, or in refraining from acting, under this Agreement or
any other Loan Document in accordance with a request or consent of the Lender
Group and such request and any action taken or failure to act pursuant thereto
shall be binding upon all members of the Lender Group.
SECTION 12.03. Defaults. Agent shall not be deemed to have knowledge
--------
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of principal, interest, fees, and expenses
required to be paid to Agent for the account of the Lender Group, except with
respect to Events of Default of which Agent has actual knowledge, and unless
Agent shall have received written notice from a Lender or Borrower referring to
this Agreement, describing such Default or Event of Default, and stating that
such notice is a "Notice of Default." Agent promptly will notify the Lender
Group of its receipt of any such notice or of any Event of Default of which
Agent has actual knowledge. If any Lender obtains actual knowledge of any Event
of Default, such Lender promptly shall notify the other Lenders and Agent of
such Event of Default. Each Lender shall be solely responsible for giving any
notices to its Participants, if any. Subject to Sections 12.02 and 12.07, Agent
shall take such action with respect to such Default or Event of Default as may
be requested by the Required Lenders in accordance with Article VIII; provided,
--------
however, that unless and until Agent has received any such request, Agent may
- -------
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable.
SECTION 12.04. Rights as a Lender.
------------------
(a) With respect to its Commitments and the Loans made by it, Agent
(and any successor acting as Agent, if any, as permitted by Section 12.08(a)
hereof) in its capacity as a Lender under the Loan Documents shall have the same
rights, privileges and powers under the Loan Documents as any other Lender and
may exercise the same as though it were not acting as Agent, and the term
"Lender" or "Lenders" shall, unless the context otherwise indicates, include
Agent in its individual capacity. Agent (and any successor acting as Agent) and
its affiliates may (without having to account for the same to any member of the
Lender Group) accept deposits from, lend money to, make investments in and
generally engage in any kind of banking, trust or other business with Borrower
(and any of its Subsidiaries or Affiliates) as if it were not acting as Agent
(and its successors) and its affiliates may accept fees and other consideration
from Borrower for services in connection with this Agreement or otherwise
without having to account for the same to the Lender Group.
(b) With respect to its Commitments and the Loans made by it, Ableco
Finance LLC (and any successor acting as Agent, if any, as permitted by Section
12.08(b) hereof) in its
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capacity as a Lender under the Loan Documents shall have the same rights,
privileges and powers under the Loan Documents as any other Lender and may
exercise the same as though it were not acting as Agent, and the term "Lender"
or "Lenders" shall, unless the context otherwise indicates, include Agent in its
individual capacity. Ableco Finance LLC (and any successor acting as Agent) and
its affiliates may (without having to account for the same to any member of the
Lender Group) accept deposits from, lend money to, make investments in and
generally engage in any kind of banking, trust or other business with Borrower
(and any of its Subsidiaries or Affiliates) as if it were not acting as Agent,
and Ableco Finance LLC and its affiliates may accept fees and other
consideration from Borrower for services in connection with this Agreement or
otherwise without having to account for the same to the Lender Group.
SECTION 12.05. Costs and Expenses; Indemnification. Agent may incur
-----------------------------------
and pay fees, costs, and expenses under the Loan Documents to the extent Agent
deems reasonably necessary or appropriate for the performance and fulfillment of
its functions, powers, and obligations pursuant to the Loan Documents, including
without limiting the generality of the foregoing, court costs, reasonable
attorneys fees and expenses, costs of collection by outside collection agencies
and auctioneer fees and costs of security guards or insurance premiums paid to
maintain the Collateral, whether or not Borrower is obligated to reimburse the
Lender Group for such expenses pursuant to the Loan Agreement or otherwise. Each
Lender hereby agrees that it is and shall be obligated to pay to or reimburse
Agent for the amount of such Lender's Pro Rata Share thereof (in accordance with
its Total Commitments). Whether or not the transactions contemplated hereby are
consummated, the Lenders shall indemnify upon demand the Agent-Related Persons
(without limiting the obligation of Borrower to do so), according to their Pro
Rata Shares (in accordance with their respective Total Commitments), from and
against any and all Indemnified Liabilities (including without limitation
Indemnified Liabilities arising under any Environmental Law as provided in
Section 11.15); provided, however, that no Lender shall be liable for the
-------- -------
payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse
Agent, as the case may be, upon demand for such Lender's ratable share of any
costs or out-of-pocket expenses (including attorneys fees and expenses) incurred
by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein. The undertaking in this
section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.
SECTION 12.06. Non-Reliance on Agent and Other Lenders. Each Lender
---------------------------------------
acknowledges that none of the Agent-Related Persons has made any representation
or warranty to it, and that no act by Agent hereinafter taken, including any
review of the affairs or Property of Borrower and its Subsidiaries or
Affiliates, shall be deemed to constitute any representation or warranty by
Agent-Related Person to any Lender. Each Lender represents to Agent that it has,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
Property, financial and other condition and creditworthiness of Borrower and any
other Person (other than the Lender Group) party to a Loan Document, and all
applicable bank regulatory laws relating to the transactions
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contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to Borrower. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports and other documents
expressly herein required to be furnished to the Lender Group by Agent, no Agent
shall have any duty or responsibility to provide any member of the Lender Group
with any credit or other information concerning the business, prospects,
operations, Property, financial and other condition or creditworthiness of
Borrower and any other Person party to a Loan Document that may come into the
possession of any of the Agent-Related Persons.
SECTION 12.07. Failure to Act. Except for action expressly required of
--------------
Agent under the Loan Documents, Agent shall in all cases be fully justified in
failing or refusing to act under any Loan Document unless it shall receive
further assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 12.05 against any and all liability and expense that
may be incurred by it by reason of taking or continuing to take any such action.
SECTION 12.08. Resignation of Agent.
--------------------
(a) Subject to the appointment and acceptance of a successor Agent as
provided below, Agent may resign at any time by notice to the Lender Group and
Borrower. Upon any such resignation, Required Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been appointed by
Required Lenders and have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation, then the retiring Agent may,
on behalf of Lenders, appoint a successor Agent. Upon the acceptance of any
appointment as Agent by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, remedies, powers, privileges,
duties and obligations of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations, under the Loan Documents. After any
retiring Agent's resignation as Agent, the provisions of this Article XII shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Agent.
SECTION 12.09. Collateral Sub-Agents. Each member of the Lender Group
---------------------
by its execution and delivery of this Agreement (or any joinder hereto or any
Assignment and Acceptance hereunder) agrees that, in the event it shall hold any
monies or other investments on account of Borrower, such monies or other
investments shall be held in the name and under the control of such member of
the Lender Group, and such member of the Lender Group shall hold such monies or
other investments as a collateral sub-agent for Agent under this Agreement and
the other Loan Documents. Borrower by its execution and delivery of this
Agreement hereby consents to the foregoing.
SECTION 12.10. Communications by Borrower. Except as otherwise
--------------------------
provided in this Agreement, Borrower's communications with respect to the Loan
Documents
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shall be with Agent, as the case may be, and Borrower shall not be under any
obligation to communicate directly with the Lenders.
SECTION 12.11. Collateral Matters.
------------------
(a) The Lenders hereby irrevocably authorize Agent, at its option and
in its sole discretion, to release any Lien on any Collateral (i) upon the
termination of the Commitments and payment and satisfaction in full by Borrower
of all Obligations; (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrower
certifies in writing to Agent that the sale or disposition is permitted under
this Agreement or the other Loan Documents (and Agent may rely conclusively on
any such certificate, without further inquiry); (iii) constituting property in
which Borrower owned no interest at the time the security interest was granted
or at any time thereafter; (iv) constituting property leased to Borrower under a
lease that has expired or is terminated in a transaction permitted under this
Agreement, or (v) which, in the aggregate with all other dispositions of
Equipment, has a fair market value or book value, whichever is less, of $500,000
or less. Except as provided above or expressly provided in any other Loan
Document, Agent will not execute and deliver a release of any Lien on any
Collateral without the prior written authorization of all of the Lenders. Upon
request by Agent or Borrower at any time, Agent and the Lenders will confirm in
writing Agent's authority to release any such Liens on particular types or items
of Collateral pursuant to this Section 12.11; provided, however, that (1) Agent
-------- -------
shall not be required to execute any document necessary to evidence such release
on terms that, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Lien without
recourse, representation, or warranty, and (2) such release shall not in any
manner discharge, affect, or impair the Obligations or any Liens (other than
those expressly being released) upon (or obligations of Borrower in respect of)
all interests retained by Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any other member of
the Lender Group to assure that the Collateral exists or is owned by Borrower or
is cared for, protected, or insured or has been encumbered, or that the Agent's
Liens have been properly or sufficiently or lawfully created, perfected,
protected, or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent's own interest in the Collateral in its capacity as
one of the Lenders and that Agent shall have no other duty or liability
whatsoever to any other member of the Lender Group as to any of the foregoing,
except as otherwise provided herein.
SECTION 12.12. Restrictions on Actions by Agent and the Lenders;
------------------------------------------------
Sharing Payments.
- ----------------
(a) Agent and each of the Lenders agrees that it shall not, without
the express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request
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of Agent, set off against the Obligations, any amounts owing by such member of
the Lender Group to Borrower or any accounts of Borrower now or hereafter
maintained with such member of the Lender Group. Agent and each of the Lenders
further agrees that it shall not, unless specifically requested to do so by
Agent, take or cause to be taken any action, including, the commencement of any
legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce
any security interest in, any of the Collateral the purpose of which is, or
could be, to give such member of the Lender group any preference or priority
against the other members of the Lender group with respect to the Collateral.
(b) Subject to Section 12.04, if, at any time or times any Lender
shall receive (i) by payment, foreclosure, setoff or otherwise, any proceeds of
Collateral or any payments with respect to the Obligations arising under, or
relating to, this Agreement or the other Loan Documents, except for any such
proceeds or payments received by such Lender from Agent pursuant to the terms of
this Agreement, or (ii) payments from Agent in excess of such Lender's ratable
portion of all such distributions by Agent, such Lender promptly shall turn the
same over to Agent, in kind, and with such endorsements as may be required to
negotiate the same to Agent, or in same day funds, as applicable, for the
account of the Lender Group and for apportionment and application to the
Obligations in accordance with Section 3.03 hereof.
SECTION 12.13. Withholding Tax.
---------------
(a) If any Lender is a "foreign corporation, partnership or trust"
within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Agent and Borrower, to deliver to Agent and
Borrower:
(i) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS Forms
1001 and W-8 before the payment of any interest in the first calendar year and
before the payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Lender and in each succeeding
taxable year of such Lender during which interest may be paid under this
Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the IRC
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Lender
sells, assigns, grants a
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participation in, or otherwise transfers all or part of the Obligations of
Borrower to such Lender, such Lender agrees to notify Agent of the percentage
amount in which it is no longer the beneficial owner of Obligations of Borrower
to such Lender. To the extent of such percentage amount, Agent will treat such
Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States withholding
tax by filing IRS Form 4224 with Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of Borrower to such
Lender, such Lender agrees to undertake sole responsibility for complying with
the withholding tax requirements imposed by Sections 1441 and 1442 of the IRC.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by clause (a) of
this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify Agent fully for all amounts paid, directly
or indirectly, by Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
Agent under this Section, together with all costs and expenses (including
attorneys fees and expenses). The obligation of the Lenders under this Section
shall survive the payment of all Obligations and the resignation or replacement
of Agent.
SECTION 12.14. Several Obligations; No Liability. Notwithstanding that
---------------------------------
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of an Agent in its capacity as such, and not by or in favor
of the Lenders, any and all obligations on the part of Agent (if any) to make
any credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any member of the Lender
Group any interest in, or subject any member of the Lender Group to any
liability for, or in respect of, the business, assets, profits, losses, or
liabilities of any other member of the Lender Group. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no member of the
Lender Group shall have any obligation, duty, or liability to any Participant of
any other Lender. Except as provided in Section 12.05, no Agent or any Lender
shall have any liability for the acts of the other Agent or any other Lender. No
Lender shall be responsible to Borrower or any other Person for any failure by
any other Lender to fulfill its obligations to make credit available hereunder,
nor to advance for it or on its behalf in connection with its Commitment, nor to
take any other action on its behalf hereunder or in connection with the
financing contemplated herein.
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[Remainder of page left intentionally blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
---------
GULF STATES STEEL, INC. OF ALABAMA
By:_______________________________
Name
Title:
AGENT:
-----
ABLECO FINANCE LLC, as Agent
By:_________________________________
Name:
Title:
S-1
<PAGE>
LENDERS:
-------
ABLECO FINANCE LLC
By:__________________________________
Name:
Title:
S-2
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
----------------------------------------------
Schedule B
Actuarial Information
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
----------------------------------------------
Schedule 5.01(f)
Subsidiaries
-ii-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
----------------------------------------------
Schedule 5.01(g)
Litigation
-iii-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
----------------------------------------------
Schedule 5.01(l)
Compliance with Law, Etc.
-iv-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 5.01(j)
ERISA
-v-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 5.01(n)
Adverse Agreements, Etc.
-iv-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 5.01(s)
Operating Lease Obligations
-vii-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 5.01(t)
Environmental Matters
-viii-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 5.01(u)
Insurance
-ix-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 5.01(w)
Bank Accounts
-x-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
----------------------------------------------
Schedule 5.01(x)
Real Property
-xi-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 5.01(x)
Real Property
-xii-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 5.01(y)
Intellectual Property
-xiii-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 5.01(z)
Material Contracts
-xiv-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 5.01(h)
Inventory
-xv-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 6.01(e)
Collateral Locations
-xvi-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 6.01(j)
Environmental
-xvii-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 6.01(l)
Change in Collateral; Collateral Records
-xviii-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 6.02(a)
Existing Liens
-xix-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 6.02(b)
Existing Indebtedness
-xx-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 6.02(c)
Compliance with Law, Etc.
-xxi-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 6.02(e)
Loans, Advances, Investments, Etc.
-xxii-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule 6.02(k)
Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries
-xxiii-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
----------------------------------------------
Schedule C-1
Lender's Term Loan A Commitments
-xxiv-
<PAGE>
GULF STATES STEEL, INC. AND ABLECO FINANCE LLC
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Schedule C-1
Lender's Term Loan B Commitments
-xxv-
<PAGE>
EXHIBITS
--------
Exhibit B Form of Term Note
Exhibit B-1 Term Note A
Exhibit B-2 Term Note B
Exhibit D Form of Security Agreement (Borrower)
Exhibit G Form of notice of Borrowing
Exhibit I Form of Opinion of Counsel
Exhibit J Form of Opinion of Local Counsel
Exhibit K Form of Intercreditor [and Subordination] Agreement
Exhibit L Form of Interim Bankruptcy Court Order
-xxvi-
<PAGE>
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF ALABAMA
EASTERN DIVISION
IN THE MATTER OF: ) BANKRUPTCY CASE NO.
)
GULF STATES STEEL, INC. ) 99-41958-JSS-11
OF ALABAMA, )
)
DEBTOR. ) CHAPTER 11
FINAL ORDER PURSUANT TO 11 U.S.C. (S)(S) 105(a), 364(c)(1), (c)(3) AND (d)(1)
(I) AUTHORIZING DEBTOR TO OBTAIN TRADE CREDIT FROM SUPPLIERS SECURED BY LIEN ON
DEBTOR'S ASSETS WITH ADMINISTRATIVE EXPENSE PRIORITY, AND (II) AUTHORIZING
DEBTOR TO PAY CREDIT EXTENSION FEES
Upon consideration of the motion, dated June 30, 1999 (the "Motion"), of
Gulf States Steel, Inc. of Alabama ("GSS" or the "Debtor"), the above-captioned
debtor, as debtor-in-possession, seeking, among other things, (i) pursuant to
sections 105(a), 364(c)(1), (c)(3) and (d)(1) of title 11 of the United States
Code (the "Bankruptcy Code") and Rule 4001 of the Federal Rules of Bankruptcy
Procedure (the "Bankruptcy Rules"), authorization for GSS to obtain from
suppliers who provide continuous postpetition trade credit terms of at least (a)
twice the number of days that are listed on Exhibit A to the Motion as "Current
Trade Term Days" next to such supplier's name (but in no case, less than 30
days), or (b) 45 days (whether or not such supplier is listed on Exhibit A to
the Motion), in each case for a period of at least 6 months ("Continuous
Credit"), secured by a collection lien (the "Trade Collection Lien") on the
Noteholders' Collateral/1/, junior to that of any Court approved DIP Lenders and
certain carve-outs for professional fees and expenses, but senior to the
Noteholders' prepetition liens, with superpriority administrative expense status
on all such postpetition credit extended to the Debtor,
_____________________
/1/ All capitalized terms not otherwise defined herein shall have the meaning
ascribed to therein the Motion.
<PAGE>
subordinate to all administrative claims granted under Bankruptcy Code (S)
364(c)(1), subject to certain carve-outs in accordance with the terms and
conditions set forth in the Preferred Supplier Continuous Credit Program (the
"Program") described in the Motion, (ii) authorizing the Debtor to pay credit
extrension fees not to exceed $7.5 million in the aggregate in accordance with
the terms and conditions set forth in the Program; and the Court having entered
an interim order dated July 7, 1999 following an interim hearing held on July 2,
1999 and July 6, 1999 granting the relief requested in the Motion, scheduling a
hearing to consider the final authorization of the relief requested in the
motion (the "Final Hearing"), and approving the form and manner of notice of the
Final Hearing; and the Court having considered the Motion and the Exhibits
attached thereto, including the Program; and due and proper notice of the Motion
and the Final Hearing having been given, and no other notice being necessary;
and it appearing that the requested relief is in the best interest of GSS, its
creditors and estate, and necessary to ensure the continued and successful
reorganization or orderly liquidation of GSS; and upon the Final Hearing with
respect to the relief sought held on July 20, 1999; and after due deliberation
and good and sufficient cause appearing therefor;
IT IS HEREBY FOUND AND DETERMINED:
A. Substantially all of the Debtor's assets are encumbered by liens
securing the claims of the holders of GSS's 13 1/2% First Mortgage Note (the
"Notes") and claims of the Pre-Petition Revolving Credit Lenders, under a
revolving line of credit (the "Fleet Revolver"). The Fleet Revolver is secured
by, among other things, GSS's inventory, accounts and certain intangibles and
the Notes are secured by, among other things, the Debtor's real estate and
equipment (the "Noteholder Collateral");
-2-
<PAGE>
B. GSS does not have sufficient available sources of working capital
and financing needed to purchase goods and services on a cash basis, even under
the proposed debtor-in-possession credit facilities of which the Debtor seeks
approval from the Court simultaneously herewith. GSS does not believe it can be
successful in obtaining open account credit from its vendors on more favorable
terms than under the Program and will be unable to obtain sufficient unsecured
trade credit under sections 503(b)(1) of the Bankruptcy Code as an
administrative expense without additional financial accommodations. GSS believes
that additional trade credit will be unavailable to GSS without it (i) granting
its suppliers who provide Continuous Credit the Trade Collection Lien for all of
their postpetition claims under the Program on all of the Noteholders'
Collateral, junior to that of any Court approved DIP lenders and certain
carveouts for professional fees and expenses but senior to the Noteholders'
prepetition liens and security interests, and (ii) paying credit extension fees
to certain suppliers who provide it with Continuous Credit;
C. The relief sought is required to avoid immediate and irreparable
harm to the Debtor's estate;
D. The ability of GSS to finance its operations and the availability
to it of sufficient working capital through the incurrence of trade credit on
Continuous Credit terms and other financial accommodations appears to be in the
best interest of GSS and its creditors and estate;
E. The Program is the result of good faith negotiations and arms-
length bargaining between GSS and certain of its suppliers, and any credit
extended to GSS by suppliers, including the interim extensions of credit, shall
be deemed to have
-3-
<PAGE>
been extended and made in good faith, within the meaning of section 364(e) of
the Bankruptcy Code.
F. The committee of Noteholders supports and has consented to the
Program, and the Indenture Trustee with respect to the Notes has no objection to
the Program, pursuant to a stipulation between the Debtor and the Noteholder
Committee with respect to Adequate Protection (the "Adequate Protection
Stipulation") dated June 30, 1999.
G. The interests of the Indenture Trustee with respect to the Notes
and of all other holders of liens against the collateral subject to the security
interest of the Noteholders is adequately protected (i) in that the financing to
be provided under the Program will enable the Debtor to remain in continuous
operation and will preserve the value of the Noteholders' collateral that would
otherwise be reduced substantially in the event the Debtor ceased operations due
to a lack of working capital; and (ii) pursuant to the terms of the Adequate
Protection Stipulation.
H. Good and sufficient notice of the Motion and of the Debtor's
request for approval of the Program as described in the Motion and incorporated
herein by reference, and the Final Hearing thereon has been provided in
accordance with Bankruptcy Rule 4001, which notice is sufficient for all
purposes under the Bankruptcy Code, including without limitation, sections
102(1) and 364 of the Bankruptcy Code, and the applicable Bankruptcy Rules, and
any requirement for other and further notice is hereby dispensed with and
waived.
ACCORDINGLY, IT IS THIS 20/th/ DAY OF JULY, 1999, HEREBY ORDERED, as
follows:
-4-
<PAGE>
1. The relief sought in the Motion is hereby GRANTED.
2. GSS is authorized to obtain postpetition trade credit (the
"Emergency Trade Credit") pursuant to the terms of the Preferred Supplier
Continuous Credit Program, a copy of which is attached hereto as Exhibit A;
provided that the Debtor shall not obtain more than $15 million of Emergency
Trade Credit under the Program.
3. GSS is authorized to do all acts and execute all documents
necessary or useful to implement the Program.
4. In exchange for extending Emergency Trade Credit, each of the
suppliers who provides Continuous Credit is hereby granted, with respect to all
such supplier's postpetition debt under the Program, the Trade Collection Lien
on all of the Noteholders' Collateral, junior to any liens securing Court
approved debtor in possession financing and to the carve-out for professional
fees and expenses, but senior to the Noteholders' prepetition liens and security
interests; provided that such post-petition lien shall have the following terms:
a. The Trade Collection Lien granted to suppliers hereunder
shall entitle such suppliers to the proceeds remaining after
enforcement of all prior liens but in no event shall entitle
them to any rights to accelerate, to commence foreclosure
proceedings, to demand marshalling, or to receive adequate
protection, or to any other rights or remedies including,
without limitation, to contest, object to or otherwise
dispute the valuation of collateral subject to the Trade
Collection Lien, or any other action that holders of senior
liens may take with respect to such collateral, it being
understood that the Trade Collection Lien provides for and
pertains only to a right of collection of any remaining
proceeds of such collateral;
b. The lien and security interest granted in favor of the
suppliers described herein shall be deemed valid, binding,
enforceable and perfected upon entry of this Order;
-5-
<PAGE>
c. Suppliers shall not be required to file, and are prohibited
from filing, any financing statements, mortgages, notices of
liens or similar instruments in any jurisdiction or filing
office, and need not take possession of any item of
collateral securing the indebtedness hereby approved or any
other action in order to validate or perfect the liens and
security interests granted by or pursuant to this Order or
pursuant to the Preferred Supplier Continuous Credit Program
and are prohibited from taking such actions;
d. To the extent that any applicable nonbankruptcy law otherwise
would restrict the granting, scope, enforceability,
attachment, or perfection of the security interests and liens
authorized or created hereby, or otherwise would impose
filing or registration requirements with respect thereto,
such law hereby is preempted to the maximum extent permitted
by the United States Constitution, the Bankruptcy Code,
otherwise applicable federal law, and the judicial power of
the Bankruptcy Court.
5. In exchange for extending the Emergency Trade Credit, suppliers
who provide Continuous Credit are also granted an allowed, superpriority
administrative expense claim pursuant to section 364(c)(1) of the Bankruptcy
Code in the amount of any Emergency Trade Credit actually extended by such
supplier to GSS, which claim shall have priority over any and all administrative
expenses of the kind specified in sections 105, 503(b), 507(a) or 507(b) of the
Bankruptcy Code, subject and subordinate, however, to (a) (i) superpriority
administrative expenses owed with respect to any Court-approved postpetition
financing (collectively, the "DIP Lenders Exception"); (ii) superpriority claims
under Section 507(b) of the Bankruptcy Code to the Pre-Petition Revolving Credit
Lenders for any lack of adequate protection of their interest in any property of
the Debtor's estate (the "Prepetition Revolving Credit Lenders Exception");
(iii) administrative expenses for fees and expenses owed to professionals
("Professionals") in this case, in each case to the extent that their payment is
authorized pursuant to an Order of this Court (collectively, the "Professional
Fees Exception"), and (iv) fees of the
-6-
<PAGE>
Bankruptcy Administrator (the "Bankruptcy Administrator") in the Chapter 11 case
of the Debtor payable pursuant to 28 U.S.C. Section 1930(a)(6) (the "Bankruptcy
Administrator's Fees Exception"), which such administrative claims shall rank
ahead of and shall be entitled in the event of a liquidation of GSS to payment
prior to payment of the administrative claims of suppliers, and (b) any payments
actually made in the ordinary course of business or administrative claims (other
than any such claims that have been disallowed) owed by GSS not relating to fees
or expenses of any DIP Lenders, Professionals or the Bankruptcy Administrator,
including, without limitation, expenses and fees referred to in Sections 503(b),
365(d)(3), and 365(d)(10) of the Bankruptcy Code (the "Ordinary Administrative
Claims Exception").
6. The Professional Fees Exception and the Ordinary Administrative
Claims Exception relate only to the administrative priority of the suppliers'
administrative claim, and do not, except as otherwise provided herein, affect,
diminish or prime the priority of the Trade Collection Lien on the Debtor's real
and personal assets, which shall not be subject to surcharge; except that GSS
------
may make payments under the DIP Lenders Exception, the Professional Fees
Exception, the Prepetition Revolving Credit Lenders Exception, the Bankruptcy
Administrator's Fees Exception, if any, or the Ordinary Administrative Claims
Exception, and such payments may be made from cash or cash equivalents of GSS
notwithstanding the existence of any lien and security interest of the suppliers
therein, if any, and the suppliers authorize the making of such payments in such
circumstances free of their administrative claim and/or lien and security
interest, if any.
-7-
<PAGE>
7. The Debtor is authorized to pay the credit extension fee payments
as provided in the Program; provided, however, that the maximum amount eligible
-------- ------
to receive a credit extension fee hereunder does not exceed $15 million in the
aggregate and that the maximum amount payable as a credit extension fee does not
exceed $7.5 million in the aggregate; and further provided that all such credit
----------------
extension fees under the Program shall be suspended during the continuance of
any event of default under any DIP financing agreement.
8. The Clerk of this Court is hereby directed to forthwith enter
this Order on the docket of this Court maintained with regard to the Chapter 11
case.
Dated: Anniston, Alabama
July 20, 1 999
______________________________
UNITED STATES BANKRUPTCY JUDGE
-8-
<PAGE>
GULF STATES STEEL, INC. OF ALABAMA
Preferred Supplier Continuous Credit Program
Each supplier listed on the attached schedule who offers the Debtor post-
petition credit terms at least equal to the lesser of (i) twice the number of
days that are listed on the schedule as "Current Trade Term Days," (but not less
than 30 days) or (ii) 45 days, or any supplier not listed on the attached
schedule who offers the Debtor post-petition credit terms of at least 45 days,
in all cases for a continuous period of at least 6 months ("Continuous Credit"),
shall receive the following treatment:
1. Such supplier's post-petition claim for Continuous Credit shall be entitled
to priority administrative expense status subordinate to all claims of DIP
lenders granted under Bankruptcy Code (S) 364 (c)(1).
2. Such supplier's post-petition claim for Continuous Credit shall be secured
by a collection lien as described below on all of Gulf States' assets that
are subject to the pre-petition security interest of the indenture trustee
with respect to Gulf States' 13 1/2% First Mortgage Notes and shall be
senior to such lien but shall be subordinate and junior to all liens of any
entities having claims for money borrowed under Bankruptcy Code (S)
364(d)(1).
3. After 6 months of Continuous Credit, and assuming Continuous Credit
continues to exist at the date each payment is due, payments equal to the
following percentages of the lower of (i) such supplier's pre-petition debt
or (ii) such supplier's cumulative average monthly balance of post-petition
debt, beginning the second month after the supplier enters the Preferred
Supplier Continuous Credit Program.
Maximum
Month Amount Cumulative Amount
------ ------ -----------------
7-12 1.25% 7.5%
13-18 1.00% 13.5%
19-35 2.00% 47.5%
36 2.50% 50.0%
4. The maximum aggregate amount of the debtor's pre-petition debt eligible for
payments as described in number 3 above is $15 million and the maximum
amount payable with respect to such pre-petition debt is $7.5 million.
5. The balance of such supplier's pre-petition claim (i.e., either 50% of the
pre-petition balance if the supplier participates in the Preferred Supplier
Continuous Credit Program for the entire 36 month period or the remaining
pre-petition balance at the date the supplier ceases to participate in the
Preferred Supplier Continuous Credit Program) shall be entitled to the same
recovery, if any, as subsequently negotiated for all similarly situated
unsecured trade creditors with respect to pre-petition debt.
<PAGE>
If a supplier ceases Continuous Credit before 6 months have elapsed, then
measurement of the 6 month period restarts from the time that the supplier next
begins to offer Continuous Credit.
If a supplier ceases Continuous Credit after the payments have begun as
described in Number 3 above, then the remaining payments shall resume at the
option of the Debtor after Continuous Credit resumes for a period of at least 3
months. During the cessation period, the supplier will not be entitled to
status as a secured creditor.
If a supplier never provides Continuous Credit, then that supplier shall be
entitled to (i) administrative expense claim status as statutorily provided with
respect to post-petition debt and, (ii) recovery, if any, as subsequently
negotiated for all similarly situated unsecured trade creditors with respect to
pre-petition debt.
The "DIP Lenders" shall include any party to whom the Debtor becomes indebted
for money borrowed in any amount approved by the Court during the Debtor's
Chapter 11 case.
The collection lien provided to suppliers of Continuous Credit under the Program
shall entitle them to any collateral proceeds remaining after enforcement of
prior liens, but shall not entitle them to any right to accelerate, to commence
foreclosure or other enforcement proceedings, to demand marshalling, to receive
adequate protection or to any other rights or remedies, including, without
limitation to contest, object to or otherwise dispute the valuation of
collateral subject to the collection lien or any other action that holders of
senior liens may take with respect to such collateral, it being understood that
the collection lien provides for and pertains only to a right of collection of
any remaining proceeds of such collateral.
The Debtor shall develop such rules and procedures as are necessary to carry out
the provisions of this Continuous Credit arrangement for suppliers.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GULF STATES
STEEL, INC. OF ALABAMA'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED JULY 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> MAY-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 5,099
<SECURITIES> 0
<RECEIVABLES> 31,054
<ALLOWANCES> (976)
<INVENTORY> 36,093
<CURRENT-ASSETS> 75,961
<PP&E> 272,878
<DEPRECIATION> 76,856
<TOTAL-ASSETS> 272,530
<CURRENT-LIABILITIES> 308,826
<BONDS> 0
0
0
<COMMON> 36
<OTHER-SE> (36,332)
<TOTAL-LIABILITY-AND-EQUITY> 272,530
<SALES> 82,339
<TOTAL-REVENUES> 82,339
<CGS> 78,778
<TOTAL-COSTS> 84,041
<OTHER-EXPENSES> 6,683
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,968
<INCOME-PRETAX> (13,353)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,353)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,353)
<EPS-BASIC> (3.70)
<EPS-DILUTED> (3.70)
</TABLE>
