1
FIRST AMENDED AND RESTATED
BUSINESS LOAN AGREEMENT
This Agreement dated as of June 26, 1996, is between Bank of
America National Trust and Savings Association (the "Bank") and Reliance Steel
& Aluminum Co. (the "Borrower").
1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
1.1 Line of Credit Amount.
(a) During the availability period described below,
the Bank will provide a line of credit ("Facility No. 1") to the
Borrower. The amount of the line of credit (the "Facility No. 1
Commitment") is One Hundred Million Dollars ($100,000,000).
(b) This is a revolving line of credit. During
the availability period, the Borrower may prepay principal amounts and
reborrow them.
(c) The Borrower agrees not to permit the
outstanding principal balance of the line of credit to exceed the
Facility No. 1 Commitment.
1.2 Availability Period. The line of credit is available
between the date of this Agreement and July 31, 1999 (the "Expiration Date")
unless the Borrower is in default.
1.3 Interest Rate.
(a) Unless the Borrower elects an optional interest
rate as described below, the interest rate is the Bank's Reference
Rate.
(b) The Reference Rate is the rate of interest
publicly announced from time to time by the Bank in San Francisco,
California, as its Reference Rate. The Reference Rate is set by the
Bank based on various factors, including the Bank's costs and desired
return, general economic conditions and other factors, and is used as
a reference point for pricing some loans. The Bank may price loans to
its customers at, above, or below the Reference Rate. Any change in
the Reference Rate shall take effect at the opening of business on the
day specified in the public announcement of a change in the Bank's
Reference Rate.
1.4 Repayment Terms.
(a) The Borrower will pay interest on August 1,
1996, and then monthly thereafter until payment in full of any
principal outstanding under this line of credit.
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(b) The Borrower will repay in full all principal
and any unpaid interest or other charges outstanding under this line
of credit no later than the Expiration Date.
1.5 Optional Interest Rates. Instead of the interest
rate based on the Bank's Reference Rate, the Borrower may elect the optional
interest rates listed below for this Facility No. 1 during interest periods
agreed to by the Bank and the Borrower. The optional interest rates shall be
subject to the terms and conditions described later in this Agreement. Any
principal amount bearing interest at an optional rate under this Agreement is
referred to as a "Portion." The following optional interest rates are
available:
(a) LIBOR Rate plus .50 percentage points.
(b) the Cayman Rate plus .50 percentage points.
2. FACILITY NO. 2: LETTERS OF CREDIT AMOUNT AND TERMS
2.1 Letters of Credit. At the request of the Borrower,
between the date of this Agreement and the Expiration Date, the Bank will
issue:
(a) commercial letters of credit with a maximum
maturity of 365 days but not to extend more than 180 days beyond the
Expiration Date. Each commercial letter of credit will require drafts
payable at sight or up to 30 days after sight.
(b) standby letters of credit with a maximum
maturity of 365 days but not to extend more than 180 days beyond the
Expiration Date. The standby letters of credit may include a
provision providing that the maturity date will be automatically
extended each year for an additional year unless the Bank gives
written notice to the contrary.
(c) The following letters of credit are outstanding
from the Bank for the account of the Borrower:
Letter of Credit Number Amount
----------------------- ------
LASB# 214833 $ 375,000.00
LASB# 216483 188,570.90
LASB# 216484 1,300,000.00
LASB# 217917 1,464,000.00
LASB# 217918 714,000.00
As of the date of this Agreement, these letters of credit shall be
deemed to be outstanding under this Agreement, and shall be subject to
all the terms and conditions stated in this Agreement.
2.2 Amount. The amount of the letters of credit outstanding
at any one time (including the drawn and unreimbursed
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amounts of the letters of credit) may not exceed Ten Million Dollars
($10,000,000); provided, however, that if Metal Center Inc. should be merged
into the Borrower, then that certain standby letter of credit # LASB 216449
shall be deemed to be outstanding under this Agreement and the amount of
letters of credit outstanding at any one time (including the drawn and
unreimbursed amounts of letters of credit) may not exceed Thirteen Million Six
Hundred Fifty Thousand Dollars ($13,650,000).
2.3 Other Terms. The Borrower agrees:
(a) if there is a default under this Agreement, to
immediately prepay and make the Bank whole for any outstanding letters
of credit.
(b) the issuance of any letter of credit and any
amendment to a letter of credit is subject to the Bank's written
approval and must be in form and content satisfactory to the Bank and
in favor of a beneficiary acceptable to the Bank.
(c) to sign the Bank's form Application and
Agreement for Commercial Letter of Credit or Application and Agreement
for Standby Letter of Credit.
(d) to pay any issuance and/or other fees that the
Bank notifies the Borrower will be charged for issuing and processing
letters of credit for the Borrower.
(e) to allow the Bank to automatically charge its
checking account for applicable fees, discounts, and other charges.
(f) to pay the Bank a non-refundable fee equal to
7/8% per annum of the outstanding undrawn amount of each standby
letter of credit, payable annually in advance, calculated on the basis
of the face amount outstanding on the day the fee is calculated. If
there is a default under this Agreement, at the Bank's option, the
amount of the fee shall be increased to 2% per annum, effective
starting on the day the Bank provides notice of the increase to the
Borrower.
3. OPTIONAL INTEREST RATES
3.1 Optional Rates. Each optional interest rate is a
rate per year. Interest will be paid on the last day of each interest period,
and, if the interest period is longer than 90 days, then on the first day of
each month during the interest period. At the end of any interest period, the
interest rate will revert to the rate based on the Reference Rate, unless the
Borrower has designated another optional interest rate for the Portion. No
Portion will be converted to a different interest rate during the applicable
interest period. Upon the occurrence of an event of default under this
Agreement, the Bank may
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terminate the availability of optional interest rates for interest periods
commencing after the default occurs.
3.2 LIBOR Rate. The election of LIBOR Rates shall be
subject to the following terms and requirements:
(a) The interest period during which the LIBOR Rate
will be in effect will be one, two, or three weeks, or one, two,
three, four, five, six, seven, eight, nine, ten, eleven, or twelve
months. The first day of the interest period must be a day other than
a Saturday or a Sunday on which the Bank is open for business in
California, New York and London and dealing in offshore dollars (a
"LIBOR Banking Day"). The last day of the interest period and the
actual number of days during the interest period will be determined by
the Bank using the practices of the London inter-bank market.
(b) Each LIBOR Rate portion will be for an amount
not less than Five Hundred Thousand Dollars ($500,000) for interest
periods of one month or longer. For shorter maturities, each Libor
Rate portion will be for an amount which, when multiplied by the
number of days in the applicable interest period, is not less than
fifteen million (15,000,000) dollar-days.
(c) The "LIBOR Rate" means the interest rate
determined by the following formula, rounded upward to the nearest
1/100 of one percent. (All amounts in the calculation will be
determined by the Bank as of the first day of the interest period.)
LIBOR Rate = London Inter-Bank Offered Rate
----------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank Offered Rate" means
the interest rate at which the Bank's London Branch, London,
Great Britain, would offer U.S. dollar deposits for the
applicable interest period to other major banks in the London
inter-bank market at approximately 11:00 a.m. London time two
(2) London Banking Days before the commencement of the
interest period. A "London Banking Day" is a day on which the
Bank's London Branch is open for business and dealing in
offshore dollars.
(ii) "Reserve Percentage" means the total of
the maximum reserve percentages for determining the reserves
to be maintained by member banks of the Federal Reserve System
for Eurocurrency Liabilities, as defined in Federal Reserve
Board Regulation D, rounded upward to the nearest 1/100 of one
percent. The percentage will be expressed as a decimal, and
will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
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(d) The Borrower shall irrevocably request a LIBOR
Rate Portion no later than 12:00 noon San Francisco time on the LIBOR
Banking Day preceding the day on which the London Inter-Bank Offered
Rate will be set, as specified above.
(e) The Borrower may not elect an interest period
for a LIBOR Rate which is scheduled to end more than six months after
the Expiration Date.
(f) Any Portion of the principal balance already
bearing interest at the LIBOR Rate will not be converted to a
different rate during its interest period.
(g) Each prepayment of a LIBOR Rate Portion, whether
voluntary, by reason of acceleration or otherwise, will be accompanied
by the amount of accrued interest on the amount prepaid and a
prepayment fee as described below. A "prepayment" is a payment of an
amount on a date earlier than the scheduled payment date for such
amount as required by this Agreement. The prepayment fee shall be
equal to the amount (if any) by which:
(i) the additional interest which would have
been payable during the interest period on the amount prepaid
had it not been prepaid, exceeds
(ii) the interest which would have been
recoverable by the Bank by placing the amount prepaid on
deposit in the domestic certificate of deposit market, the
eurodollar deposit market, or other appropriate money market
selected by the Bank, for a period starting on the date on
which it was prepaid and ending on the last day of the
interest period for such Portion (or the scheduled payment
date for the amount prepaid, if earlier).
(h) The Bank will have no obligation to accept an
election for a LIBOR Rate Portion if any of the following described
events has occurred and is continuing:
(i) Dollar deposits in the principal amount,
and for periods equal to the interest period, of a LIBOR Rate
Portion are not available in the London inter-bank market; or
(ii) the LIBOR Rate does not accurately
reflect the cost of a LIBOR Rate Portion.
3.3 Cayman Rate. The election of Cayman Rates shall be
subject to the following terms and requirements:
(a) The interest period during which the Cayman Rate
will be in effect will be one year or less. The last day of the
interest period will be determined by the Bank
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using the practices of the offshore dollar inter-bank market.
(b) Each Cayman Rate Portion will be for an amount
not less than Five Hundred Thousand Dollars ($500,000) for interest
periods of 30 days or longer. For shorter maturities, each Cayman
Rate Portion will be for an amount which, when multiplied by the
number of days in the applicable interest period, is not less than
fifteen million (15,000,000) dollar-days.
(c) The Borrower may not elect an interest period
for a Cayman Rate which is scheduled to end more than 180 days after
the Expiration Date.
(d) The "Cayman Rate" means the interest rate
determined by the following formula, rounded upward to the nearest
1/100 of one percent. (All amounts in the calculation will be
determined by the Bank as of the first day of the interest period.)
Cayman Rate = Cayman Base Rate
--------------------------
(1.00 - Reserve Percentage)
Where,
(i) "Cayman Base Rate" means the interest
rate at which the Bank's Grand Cayman Branch, Grand Cayman,
British West Indies, would offer U.S. dollar deposits for the
applicable interest period to other major banks in the
offshore dollar inter-bank market.
(ii) "Reserve Percentage" means the total of
the maximum reserve percentages for determining the reserves
to be maintained by member banks of the Federal Reserve System
for Eurocurrency Liabilities, as defined in Federal Reserve
Board Regulation D, rounded upward to the nearest 1/100 of one
percent. The percentage will be expressed as a decimal, and
will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
(e) Each prepayment of a Cayman Rate Portion,
whether voluntary, by reason of acceleration or otherwise, will be
accompanied by the amount of accrued interest on the amount prepaid,
and a prepayment fee as described below. A "prepayment" is a payment
of an amount on a date earlier than the scheduled payment date for
such amount as required by this Agreement. The prepayment fee shall
be equal to the amount (if any) by which:
(i) the additional interest which would have
been payable during the interest period on the amount prepaid
had it not been prepaid, exceeds
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(ii) the interest which would have been
recoverable by the Bank by placing the amount prepaid on
deposit in the domestic certificate of deposit market, the
eurodollar deposit market, or other appropriate money market
selected by the Bank for a period starting on the date on
which it was prepaid and ending on the last day of the
interest period for such Portion (or the scheduled payment
date for the amount prepaid, if earlier).
(f) The Bank will have no obligation to accept an
election for a Cayman Rate Portion if any of the following described
events has occurred and is continuing:
(i) Dollar deposits in the principal amount,
and for periods equal to the interest period, of a Cayman Rate
Portion are not available in the offshore Dollar inter-bank
market; or
(ii) the Cayman Rate does not accurately
reflect the cost of a Cayman Rate Portion.
4. FEES, EXPENSES AND COSTS
4.1 Fees.
(a) Unused commitment fee. The Borrower agrees to
pay a fee on any difference between the Facility No. 1 Commitment and
the amount of credit it actually uses under Facility No. 1, determined
by the weighted average credit outstanding during the specified
period. The fee will be calculated at three sixteenths (3/16%) of one
percent per year.
This fee is due in arrears on September 30, 1996 and on the last day
of each following quarter until the Expiration Date.
(b) Waiver Fee. If the Bank, at its discretion,
agrees to waive or amend any terms of this Agreement, then the
Borrower will pay the Bank a Two Thousand Five Hundred Dollar ($2,500)
fee for each waiver or amendment. Nothing in this paragraph shall
imply that the Bank is obligated to agree to any waiver or amendment
requested by the Borrower. The Bank may impose additional
requirements as a condition to any waiver or amendment.
4.2 Expenses. The Borrower agrees to immediately repay the
Bank for reasonable expenses that include, but are not limited to, filing,
recording and search fees, appraisal fees, title report fees, documentation
fees.
4.3 Reimbursement Costs. The Borrower agrees to reimburse
the Bank for any reasonable expenses it incurs in the preparation of this
Agreement and any agreement or instrument
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required by this Agreement in excess of those fees and costs listed above.
Expenses include, but are not limited to, reasonable attorneys' fees, including
any allocated costs of the Bank's in-house counsel.
5. DISBURSEMENTS, PAYMENTS AND COSTS
5.1 Requests for Credit. Each request for an extension of
credit will be made in writing in a manner acceptable to the Bank, or by
another means acceptable to the Bank.
5.2 Disbursements and Payments. Each disbursement by the
Bank and each payment by the Borrower will be:
(a) made at the Bank's branch (or other location)
selected by the Bank from time to time;
(b) made for the account of the Bank's branch
selected by the Bank from time to time;
(c) made in immediately available funds, or such
other type of funds selected by the Bank;
(d) evidenced by records kept by the Bank. In
addition, the Bank may, at its discretion, require the Borrower to
sign one or more promissory notes.
5.3 Telephone and Telefax Authorization.
(a) The Bank may honor telephone or telefax
instructions for advances or repayments or for the designation of
optional interest rates and telefax requests for the issuance of
letters of credit given by any one of the individuals authorized to
sign loan agreements on behalf of the Borrower, or any other
individual designated by any one of such authorized signers.
(b) Advances will be deposited in and repayments
will be withdrawn from the Borrower's account number 14594-06400
entitled "Reliance Consolidated", or such other of the Borrower's
accounts with the Bank as designated in writing by the Borrower.
(c) The Borrower will provide written confirmation
to the Bank of any telephone or telefax instructions within 5 days.
If there is a discrepancy and the Bank has already acted on the
instructions, the telephone or telefax instructions will prevail over
the written confirmation.
(d) The Borrower indemnifies and excuses the Bank
(including its officers, employees, and agents) from all liability,
loss, and costs in connection with any act resulting from telephone or
telefax instructions it
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reasonably believes are made by any individual authorized by the
Borrower to give such instructions. This indemnity and excuse will
survive this Agreement's termination.
5.4 Direct Debit (Pre-Billing).
(a) The Borrower agrees that the Bank will debit the
Borrower's deposit account number 14594-06400 entitled "Reliance
Consolidated", or such other of the Borrower's accounts with the Bank
as designated in writing by the Borrower (the "Designated Account") on
the date each payment of principal and interest and any fees from the
Borrower becomes due (the "Due Date"). If the Due Date is not a
banking day, the Designated Account will be debited on the next
banking day.
(b) Approximately 5 days prior to each Due Date,
the Bank will mail to the Borrower a statement of the amounts that
will be due on that Due Date (the "Billed Amount"). The calculation
will be made on the assumption that no new extensions of credit or
payments will be made between the date of the billing statement and
the Due Date, and that there will be no changes in the applicable
interest rate.
(c) The Bank will debit the Designated Account
for the Billed Amount, regardless of the actual amount due on that
date (the "Accrued Amount"). If the Billed Amount debited to the
Designated Account differs from the Accrued Amount, the discrepancy
will be treated as follows:
(i) If the Billed Amount is less than the
Accrued Amount, the Billed Amount for the following Due Date
will be increased by the amount of the discrepancy. The
Borrower will not be in default by reason of any such
discrepancy.
(ii) If the Billed Amount is more than the
Accrued Amount, the Billed Amount for the following Due Date
will be decreased by the amount of the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without
compounding. The Bank will not pay the Borrower interest on any
overpayment.
(d) The Borrower will maintain sufficient funds
in the Designated Account to cover each debit. If there are
insufficient funds in the Designated Account on the date the Bank
enters any debit authorized by this Agreement, the debit will be
reversed.
5.5 Banking Days. Unless otherwise provided in this
Agreement, a banking day is a day other than a Saturday or a Sunday on which
the Bank is open for business in California. For
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amounts bearing interest at an offshore rate (if any), a banking day is a day
other than a Saturday or a Sunday on which the Bank is open for business in
California and dealing in offshore dollars. All payments and disbursements
which would be due on a day which is not a banking day will be due on the next
banking day. All payments received on a day which is not a banking day will be
applied to the credit on the next banking day.
5.6 Taxes.
If any payments to the Bank under this Agreement are made from
outside the United States, the Borrower will not deduct any foreign taxes from
any payments it makes to the Bank. If any such taxes are imposed on any
payments made by the Borrower (including payments under this paragraph), the
Borrower will pay the taxes and will also pay to the Bank, at the time interest
is paid, any additional amount which the Bank specifies as necessary to
preserve the after-tax yield the Bank would have received if such taxes had not
been imposed. The Borrower will confirm that it has paid the taxes by giving
the Bank official tax receipts (or notarized copies) within 30 days after the
due date.
5.7 Additional Costs. The Borrower will pay the Bank, on
demand, for the Bank's costs or losses arising from any statute or regulation,
or any request or requirement of a regulatory agency which is applicable to all
national banks or a class of all national banks. The costs and losses will be
allocated to the loan in a manner determined by the Bank, using any reasonable
method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's
assets and commitments for credit.
5.8 Interest Calculation. All interest at rates related to
the LIBOR Rate or the Cayman Rate will be computed on the basis of a 360-day
year and the actual number of days elapsed, which results in more interest than
if a 365-day year is used. All interest at the rate related to the Reference
Rate and all fees will be computed on the basis of a 365-day year and the
actual number of days elapsed.
5.9 Default Rate. Upon the occurrence and during the
continuation of any default under this Agreement, principal amounts outstanding
under this Agreement will at the option of the Bank bear interest at a rate
which is one (1.0) percentage point higher than the rate of interest otherwise
provided under this Agreement. This will not constitute a waiver of any
default. Installments of principal which are not paid when due under this
Agreement shall continue to bear interest until paid. Any interest, fees or
costs which are not paid when due shall bear interest at the Bank's Reference
Rate plus one (1.0) percentage point. This may result in compounding of
interest.
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6. CONDITIONS
The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement:
6.1 Authorizations. Evidence that the execution, delivery
and performance by the Borrower (and any guarantor) of this Agreement and any
instrument or agreement required under this Agreement have been duly
authorized.
6.2 Governing Documents. A copy of the Borrower's articles
of incorporation.
6.3 Insurance. Evidence of insurance coverage, as required
in the "Covenants" section of this Agreement.
6.4 Guaranties. Guaranties signed by Valex Corp., CCC Steel,
Inc., and MetalCenter, Inc., each in the amount of One Hundred Fifteen Million
Dollars ($115,000,000).
6.5 Good Standing. Certificates of good standing for the
Borrower from its state of formation and from any other state in which the
Borrower is required to qualify to conduct its business.
6.6 Payment of Fees. Payment of all accrued and unpaid
expenses incurred by the Bank as required by the paragraph entitled
"Reimbursement Costs."
6.7 Other Items. Any other items that the Bank reasonably
requires.
7. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is
repaid in full, the Borrower makes the following representations and
warranties. Each request for an extension of credit constitutes a renewed
representation:
7.1 Organization of Borrower. The Borrower is a corporation
duly formed and existing under the laws of the state where organized.
7.2 Authorization. This Agreement, and any instrument or
agreement required hereunder, are within the Borrower's powers, have been duly
authorized, and do not conflict with any of its organizational papers.
7.3 Enforceable Agreement. This Agreement is a legal, valid
and binding agreement of the Borrower, enforceable against the Borrower in
accordance with its terms, and any instrument or agreement required hereunder,
when executed and delivered, will be similarly legal, valid, binding and
enforceable.
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7.4 Good Standing. In each state in which the Borrower does
business, it is properly licensed, in good standing, and, where required, in
compliance with fictitious name statutes.
7.5 No Conflicts. This Agreement does not conflict with any
law, agreement, or obligation by which the Borrower is bound.
7.6 Financial Information. All financial and other
information that has been or will be supplied to the Bank, including the
Borrower's financial statement dated as of March 31, 1996, is:
(a) sufficiently complete to give the Bank accurate
knowledge of the Borrower's (and any guarantor's) financial condition.
(b) in compliance with all government regulations
that apply.
Since the date of the financial statement specified above, there has been no
material adverse change in the assets or financial condition of the Borrower
(or any guarantor).
7.7 Lawsuits. There is no lawsuit, tax claim or other
dispute pending or threatened against the Borrower which, if lost, would impair
the Borrower's financial condition or ability to repay the loan, except as have
been disclosed in writing to the Bank.
7.8 Permits, Franchises. The Borrower possesses all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade name rights, patent rights and fictitious name rights necessary
to enable it to conduct the business in which it is now engaged.
7.9 Other Obligations. The Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation, except as have
been disclosed in writing to the Bank.
7.10 Income Tax Returns. The Borrower has no knowledge of
any pending assessments or adjustments of its income tax for any year, except
as have been disclosed in writing to the Bank.
7.11 No Event of Default. There is no event which is, or
with notice or lapse of time or both would be, a default under this Agreement.
7.12 ERISA Plans.
(a) The Borrower has fulfilled its obligations,
if any, under the minimum funding standards of ERISA and the
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Code with respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the
Code, and has not incurred any liability with respect to any Plan
under Title IV of ERISA.
(b) No reportable event has occurred under
Section 4043(b) of ERISA for which the PBGC requires 30 day notice.
(c) No action by the Borrower to terminate or
withdraw from any Plan has been taken and no notice of intent to
terminate a Plan has been filed under Section 4041 of ERISA.
(d) No proceeding has been commenced with respect
to a Plan under Section 4042 of ERISA, and no event has occurred or
condition exists which might constitute grounds for the commencement
of such a proceeding.
(e) The following terms have the meanings indicated
for purposes of this Agreement:
(i) "Code" means the Internal Revenue
Code of 1986, as amended from time to time.
(ii) "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended from time
to time.
(iii) "PBGC" means the Pension Benefit
Guaranty Corporation established pursuant to Subtitle A of
Title IV of ERISA.
(iv) "Plan" means any employee pension
benefit plan maintained or contributed to by the Borrower and
insured by the Pension Benefit Guaranty Corporation under
Title IV of ERISA.
7.13 Location of Borrower. The Borrower's place of business
(or, if the Borrower has more than one place of business, its chief executive
office) is located at the address listed under the Borrower's signature on this
Agreement.
8. COVENANTS
The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
8.1 Use of Proceeds. To use the proceeds of the credit
only for working capital purposes and acquisitions.
8.2 Financial Information. To provide the following
financial information and statements in form and content acceptable to the
Bank, and such additional information as requested by the Bank from time to
time:
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(a) Within 100 days of the Borrower's fiscal year
end, the Borrower's annual financial statements. These financial
statements must be audited (with an unqualified opinion except as to
changes in accounting principles in which the auditors concur) by a
certified public accountant acceptable to the Bank. The statements
shall be prepared on a consolidated basis.
(b) Within 60 days of the period's end, the
Borrower's quarterly financial statements. These financial statements
may be Borrower prepared. The statements shall be prepared on a
consolidated basis.
(c) Copies of the Borrower's federal income tax
return, within 30 days of filing, and, if requested by the Bank,
copies of any extensions of the filing date.
(d) Within the period(s) provided in (a) and (b)
above, a compliance certificate of the Borrower signed by an
authorized financial officer of the Borrower setting forth (i) the
information and computations (in sufficient detail) to establish that
the Borrower is in compliance with all financial covenants at the end
of the period covered by the financial statements then being furnished
and (ii) whether there existed as of the date of such financial
statements and whether there exists as of the date of the certificate,
any default under this Agreement and, if any such default exists,
specifying the nature thereof and the action the Borrower is taking
and proposes to take with respect thereto.
(e) Within sixty (60) days of the date of this
Agreement, a completed Bank form Environmental Questionnaire and
Disclosure Statement.
8.3 Current Ratio. To maintain on a consolidated basis a
ratio of current assets to current liabilities of at least 1.9:1.0.
8.4 Total Liabilities to Net Worth. To maintain on a
consolidated basis a ratio of total liabilities not subordinated to net worth
not exceeding 1.25:1.0.
"Total liabilities not subordinated" means the sum of current liabilities plus
long term liabilities, excluding liabilities subordinated to the Borrower's
obligations to the Bank in a manner acceptable to the Bank, using the Bank's
standard form.
8.5 Fixed Charge Coverage Ratio. To maintain on a
consolidated basis a Fixed Charge Coverage Ratio of at least 1.75:1.0.
"Fixed Charge Coverage Ratio" means the ratio of the sum of net income plus
income taxes, plus interest expense, lease expense, and rent expense plus
depreciation and amortization to the sum of interest expense, lease expense,
rent expense, and the greater of
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the current portion of long term debt or Five Million Dollars ($5,000,000).
This ratio will be calculated at the end of each fiscal quarter, using the
results of that quarter and each of the 3 immediately preceding quarters. The
current portion of long term liabilities will be measured as of the last day of
the preceding fiscal year.
8.6 Positive Liquidity Formula. To maintain at all times
total liquidity in an amount greater than Zero Dollars ($0), calculated as
follows:
(a) The sum of (i) eighty percent (80%) of the
Borrower's accounts receivable that have not been outstanding more
than 90 days from their due dates, (ii) sixty percent (60%) of the sum
of Borrower's inventory plus fifty percent (50%) of LIFO or FIFO
reserves minus accounts payable, and (iii) thirty-five percent (35%)
of the Borrower's net fixed assets;
minus
(b) The Borrower's total interest bearing debt.
8.7 Other Debts. Not to have outstanding or incur any direct
or contingent liabilities (other than those to the Bank), or become liable for
the liabilities of others without the Bank's written consent. This does not
prohibit:
(a) Acquiring goods, supplies, or merchandise on
normal trade credit.
(b) Endorsing negotiable instruments received in
the usual course of business.
(c) Obtaining surety bonds in the usual course of
business.
(d) Liabilities and lines of credit and leases in
existence on the date of this Agreement disclosed in writing to the
Bank in the Borrower's financial statement dated March 31, 1996.
(e) Additional operating lease obligations for
the acquisition of fixed or capital assets.
8.8 Other Liens. Not to create, assume, or allow any
security interest or lien (including judicial liens) on property the Borrower
now or later owns, except:
(a) Deeds of trust and security agreements in
favor of the Bank.
(b) Liens for taxes not yet due.
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16
(c) Liens outstanding on the date of this
Agreement disclosed in writing to the Bank.
(d) Liens in connection with workers'
compensation, unemployment insurance or social security obligations.
(e) Mechanics', workmen's, materialmen's
landlords', carriers', or other like liens arising in the ordinary and
normal course of business with respect to obligations which are not
due or which are being contested in good faith.
(f) Conditional sale or other title retention
agreements or liens to secure all or any portion of the purchase price
of any fixed assets acquired for use in the ordinary course of
business, provided that the aggregate obligations of such nature
immediately following the imposition of any such purchase money lien
shall not exceed 10% of the Borrower's Tangible Net Worth. "Tangible
Net Worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization
expense, treasury stock, unamortized debt discount and expense,
deferred research and development costs, deferred marketing expenses,
and other like intangibles, less total liabilities, including but not
limited to accrued and deferred income taxes, and any reserves against
assets.
8.9 Dividends. Not to declare or pay any dividends on any of
its shares, except:
(a) dividends payable in its capital stock;
(b) from earnings available for dividends and earned
during the immediately preceding fiscal year, and in any event, not in
excess of One Million Five Hundred Thousand Dollars ($1,500,000) plus
twenty-five percent (25%) of net income accrued since December 31,
1990 in any one fiscal year;
8.10 Notices to Bank. To promptly notify the Bank in writing
of:
(a) any lawsuit over One Million Dollars
($1,000,000) against the Borrower (or any guarantor).
(b) any substantial dispute between the Borrower (or
any guarantor) and any government authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's
(or any guarantor's) financial condition or operations.
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(e) any change in the Borrower's name, legal
structure, place of business, or chief executive office if the
Borrower has more than one place of business.
8.11 Books and Records. To maintain adequate books and
records.
8.12 Audits. To allow the Bank and its agents to inspect the
Borrower's properties and examine, audit and make copies of books and records
at any reasonable time. If any of the Borrower's properties, books or records
are in the possession of a third party, the Borrower authorizes that third
party to permit the Bank or its agents to have access to perform inspections or
audits and to respond to the Bank's requests for information concerning such
properties, books and records.
8.13 Compliance with Laws. To comply with the laws
(including any fictitious name statute), regulations, and orders of any
government body with authority over the Borrower's business.
8.14 Preservation of Rights. To maintain and preserve all
rights, privileges, and franchises the Borrower now has.
8.15 Maintenance of Properties. To make any repairs,
renewals, or replacements to keep the Borrower's properties in good working
condition.
8.16 Cooperation. To take any action reasonably requested by
the Bank to carry out the intent of this Agreement.
8.17 Insurance.
(a) General Business Insurance. To maintain
insurance as is usual for the business it is in.
(b) Evidence of Insurance. Upon the request of the
Bank, to deliver to the Bank a copy of each insurance policy, or, if
permitted by the Bank, a certificate of insurance listing all
insurance in force.
8.18 Additional Negative Covenants. Not to, without the
Bank's written consent:
(a) engage in any business activities substantially
different from the Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, or other
combination, or become a partner in a partnership, a member of a joint
venture, or a member of a limited liability company.
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18
(d) sell, lease, transfer or dispose of all or a
substantial part of the Borrower's business or the Borrower's assets
except in the ordinary course of the Borrower's business.
(e) sell, assign, lease, transfer or otherwise
dispose of any assets for less than fair market value, or enter into
any agreement to do so.
(f) sell, lease or otherwise dispose of any assets
or enter into any sale and leaseback agreement covering any of its
fixed or capital assets in excess of an aggregate for all such sales,
leases, and sales and leasebacks in any one year equal to ten percent
(10%) of the Borrower's then current Tangible Net Worth as defined in
Paragraph 8.8(f) herein.
(g) voluntarily suspend its business for more than 2
days in any 365 day period.
8.19 Acquisitions. Without the Bank's prior written consent,
not acquire or purchase all or substantially all of the assets or business of
any other person, firm, corporation, or any division thereof, or acquire or
purchase securities; provided, however, that this Paragraph shall not prohibit:
(a) the acquisition or purchase of obligations
issued or guarantied by the United States;
(b) the acquisition or purchase of short term
marketable securities that do not constitute more than five percent
(5%) of the capital stock, partnership interests, membership
interests, or equity of any person, firm, or corporation;
(c) the acquisition or purchase of assets, business,
or securities of a person, firm, or corporation if (i) such
acquisition or purchase has been approved by the board of directors or
similar governing body of the person, firm, or corporation whose
assets, business, or securities are to be acquired or purchased, (ii)
the total consideration to be paid for any such acquisition or
purchase does not, when added to the total consideration previously
paid for any other such acquisitions or purchases in any fiscal year
(excluding the acquisition of CCC Steel, Inc.), exceed twenty-five
percent (25%) of the Borrower's Tangible Net Worth as defined in
Paragraph 8.8(f), and (iii) immediately after such acquisition or
purchase, the Borrower would be in compliance with the terms and
conditions of this Agreement.
8.20 ERISA Plans. To give prompt written notice to the Bank
of:
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(a) The occurrence of any reportable event under
Section 4043(b) of ERISA for which the PBGC requires 30 day notice.
(b) Any action by the Borrower to terminate or
withdraw from a Plan or the filing of any notice of intent to
terminate under Section 4041 of ERISA.
(c) Any notice of noncompliance made with respect
to a Plan under Section 4041(b) of ERISA.
(d) The commencement of any proceeding with
respect to a Plan under Section 4042 of ERISA.
9. HAZARDOUS WASTE INDEMNIFICATION
The Borrower will indemnify and hold harmless the Bank from
any loss or liability directly or indirectly arising out of the use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence of a hazardous substance. This indemnity will
apply whether the hazardous substance is on, under or about the Borrower's
property or operations or property leased to the Borrower. The indemnity
includes but is not limited to attorneys' fees (including the reasonable
estimate of the allocated cost of in-house counsel and staff). The indemnity
extends to the Bank, its parent, subsidiaries and all of their directors,
officers, employees, agents, successors, attorneys and assigns. For these
purposes, the term "hazardous substances" means any substance which is or
becomes designated as "hazardous" or "toxic" under any federal, state or local
law. This indemnity will survive repayment of the Borrower's obligations to
the Bank.
10. DEFAULT
If any of the following events occurs, the Bank may do one or
more of the following: declare the Borrower in default, stop making any
additional credit available to the Borrower, and require the Borrower to repay
its entire debt immediately and without prior notice. If an event of default
occurs under the paragraph entitled "Bankruptcy," below, with respect to the
Borrower, then the entire debt outstanding under this Agreement will
automatically be due immediately.
10.1 Failure to Pay. The Borrower fails to make a payment
under this Agreement when due.
10.2 False Information. The Borrower (or any guarantor) has
given the Bank false or misleading information or representations.
10.3 Bankruptcy. The Borrower (or any guarantor) files a
bankruptcy petition, a bankruptcy petition is filed against the Borrower (or
any guarantor) or the Borrower (or any
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guarantor) makes a general assignment for the benefit of creditors.
10.4 Receivers. A receiver or similar official is appointed
for the Borrower's (or any guarantor's) business, or the business is
terminated.
10.5 Judgments. Any judgments or arbitration awards are
entered against the Borrower (or any guarantor), or the Borrower (or any
guarantor) enters into any settlement agreements with respect to any litigation
or arbitration, in an aggregate amount of One Million Dollars ($1,000,000) or
more in excess of any insurance coverage.
10.6 Government Action. Any government authority takes
action that the Bank believes materially adversely affects the Borrower's (or
any guarantor's) financial condition or ability to repay.
10.7 Cross-default. Any default occurs under any agreement
in connection with any credit the Borrower (or any guarantor) has obtained from
anyone else or which the Borrower (or any guarantor) has guaranteed if the
default consists of failing to make a payment when due or gives the other
lender the right to accelerate the obligation.
10.8 Default under Related Documents. Any guaranty,
subordination agreement, security agreement, deed of trust, or other document
required by this Agreement is violated or no longer in effect.
10.9 Other Bank Agreements. The Borrower (or any guarantor)
fails to meet the conditions of, or fails to perform any obligation under any
other agreement the Borrower (or any guarantor) has with the Bank or any
affiliate of the Bank. If, in the Bank's opinion, the breach is capable of
being remedied, the breach will not be considered an event of default under
this Agreement for a period of thirty (30) days after the date on which the
Bank gives written notice of the breach to the Borrower; provided, however,
that the Bank will not be obligated to extend any additional credit to the
Borrower during that period.
10.10 ERISA Plans. The occurrence of any one or more of the
following events with respect to the Borrower, provided such event or events
could reasonably be expected, in the judgment of the Bank, to subject the
Borrower to any tax, penalty or liability (or any combination of the foregoing)
which, in the aggregate, could have a material adverse effect on the financial
condition of the Borrower with respect to a Plan:
(a) A reportable event shall occur with respect
to a Plan which is, in the reasonable judgment of the Bank likely to
result in the termination of such Plan for purposes of Title IV of
ERISA.
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(b) Any Plan termination (or commencement of
proceedings to terminate a Plan) or the Borrower's full or partial
withdrawal from a Plan.
10.11 Other Breach Under Agreement. The Borrower fails to
meet the conditions of, or fails to perform any obligation under, any term of
this Agreement not specifically referred to in this Article. If, in the Bank's
opinion, the breach is capable of being remedied, the breach will not be
considered an event of default under this Agreement for a period of thirty (30)
days after the date on which the Bank gives written notice of the breach to the
Borrower; provided, however, that the Bank will not be obligated to extend any
additional credit to the Borrower during that period.
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
11.1 GAAP. Except as otherwise stated in this Agreement, all
financial information provided to the Bank and all financial covenants will be
made under generally accepted accounting principles, consistently applied.
11.2 California Law. This Agreement is governed by
California law.
11.3 Successors and Assigns. This Agreement is binding on
the Borrower's and the Bank's successors and assignees. The Borrower agrees
that it may not assign this Agreement without the Bank's prior consent. The
Bank may sell participations in or assign this loan, and may exchange financial
information about the Borrower with actual or potential participants or
assignees; provided that such actual or potential participants or assignees
shall agree to treat all financial information exchanged as confidential. If a
participation is sold or the loan is assigned, the purchaser will have the
right of set-off against the Borrower.
11.4 Arbitration.
(a) This paragraph concerns the resolution of any
controversies or claims between the Borrower and the Bank, including
but not limited to those that arise from:
(i) This Agreement (including any renewals,
extensions or modifications of this Agreement);
(ii) Any document, agreement or procedure
related to or delivered in connection with this
Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from
any business conducted between the Borrower and the
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Bank, including claims for injury to persons, property or
business interests (torts).
(b) At the request of the Borrower or the Bank, any
such controversies or claims will be settled by arbitration in
accordance with the United States Arbitration Act. The United States
Arbitration Act will apply even though this Agreement provides that it
is governed by California law.
(c) Arbitration proceedings will be administered by
the American Arbitration Association and will be subject to its
commercial rules of arbitration.
(d) For purposes of the application of the statute
of limitations, the filing of an arbitration pursuant to this
paragraph is the equivalent of the filing of a lawsuit, and any claim
or controversy which may be arbitrated under this paragraph is subject
to any applicable statute of limitations. The arbitrators will have
the authority to decide whether any such claim or controversy is
barred by the statute of limitations and, if so, to dismiss the
arbitration on that basis.
(e) If there is a dispute as to whether an issue is
arbitrable, the arbitrators will have the authority to resolve any
such dispute.
(f) The decision that results from an arbitration
proceeding may be submitted to any authorized court of law to be
confirmed and enforced.
(g) The procedure described above will not apply if
the controversy or claim, at the time of the proposed submission to
arbitration, arises from or relates to an obligation to the Bank
secured by real property located in California. In this case, both
the Borrower and the Bank must consent to submission of the claim or
controversy to arbitration. If both parties do not consent to
arbitration, the controversy or claim will be settled as follows:
(i) The Borrower and the Bank will designate
a referee (or a panel of referees) selected under the auspices
of the American Arbitration Association in the same manner as
arbitrators are selected in Association-sponsored proceedings;
(ii) The designated referee (or the panel of
referees) will be appointed by a court as provided in
California Code of Civil Procedure Section 638 and the
following related sections;
(iii) The referee (or the presiding referee
of the panel) will be an active attorney or a retired judge;
and
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(iv) The award that results from the
decision of the referee (or the panel) will be entered as a
judgment in the court that appointed the referee, in
accordance with the provisions of California Code of Civil
Procedure Sections 644 and 645.
(h) This provision does not limit the right of the
Borrower or the Bank to:
(i) exercise self-help remedies such as
setoff;
(ii) foreclose against or sell any real
or personal property collateral; or
(iii) act in a court of law, before, during
or after the arbitration proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary
remedies.
(i) The pursuit of or a successful action for
interim, additional or supplementary remedies, or the filing of a
court action, does not constitute a waiver of the right of the
Borrower or the Bank, including the suing party, to submit the
controversy or claim to arbitration if the other party contests the
lawsuit. However, if the controversy or claim arises from or relates
to an obligation to the Bank which is secured by real property located
in California at the time of the proposed submission to arbitration,
this right is limited according to the provision above requiring the
consent of both the Borrower and the Bank to seek resolution through
arbitration.
(j) If the Bank forecloses against any real property
securing this Agreement, the Bank has the option to exercise the power
of sale under the deed of trust or mortgage, or to proceed by judicial
foreclosure.
11.5 Severability; Waivers. If any part of this Agreement is
not enforceable, the rest of the Agreement may be enforced. The Bank retains
all rights, even if it makes a loan after default. If the Bank waives a
default, it may enforce a later default. Any consent or waiver under this
Agreement must be in writing.
11.6 Administration Costs. The Borrower shall pay the Bank
for all reasonable costs incurred by the Bank in connection with administering
this Agreement.
11.7 Attorneys' Fees. The Borrower shall reimburse the Bank
for any reasonable costs and attorneys' fees incurred by the Bank in connection
with the enforcement or preservation of any rights or remedies under this
Agreement and any other
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documents executed in connection with this Agreement, and including any
amendment, waiver, "workout" or restructuring under this Agreement. In the
event of a lawsuit or arbitration proceeding, the prevailing party is entitled
to recover costs and reasonable attorneys' fees incurred in connection with the
lawsuit or arbitration proceeding, as determined by the court or arbitrator.
In the event that any case is commenced by or against the Borrower under the
Bankruptcy Code (Title 11, United States Code) or any similar or successor
statute, the Bank is entitled to recover costs and reasonable attorneys' fees
incurred by the Bank related to the preservation, protection, or enforcement of
any rights of the Bank in such a case. As used in this paragraph, "attorneys'
fees" includes the allocated costs of the Bank's in-house counsel.
11.8 One Agreement. This Agreement and any related security
or other agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and
agreements between the Bank and the Borrower concerning this credit;
(b) replace any prior oral or written agreements
between the Bank and the Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as
the final, complete and exclusive statement of the terms agreed to by
them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
11.9 Indemnification. The Borrower will indemnify and hold
the Bank harmless from any loss, liability, damages, judgments, and costs of
any kind relating to or arising directly or indirectly out of (a) this
Agreement or any document required hereunder, (b) any credit extended or
committed by the Bank to the Borrower hereunder, and (c) any litigation or
proceeding related to or arising out of this Agreement, any such document, or
any such credit. This indemnity includes but is not limited to attorneys' fees
(including the allocated cost of in-house counsel). This indemnity extends to
the Bank, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys, and assigns. This indemnity will
survive repayment of the Borrower's obligations to the Bank. All sums due to
the Bank hereunder shall be obligations of the Borrower, due and payable
immediately without demand.
11.10 Notices. All notices required under this Agreement
shall be personally delivered or sent by first class mail, postage prepaid, to
the addresses on the signature page of this Agreement, or to such other
addresses as the Bank and the Borrower may specify from time to time in
writing.
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11.11 Headings. Article and paragraph headings are for
reference only and shall not affect the interpretation or meaning of any
provisions of this Agreement.
11.12 Counterparts. This Agreement may be executed in as
many counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
11.13 Prior Agreement Superseded. This Agreement supersedes
the Business Loan Agreement entered into as of June 30, 1993 between the Bank
and the Borrower, and any credit outstanding thereunder shall be deemed to be
outstanding under this Agreement.
This Agreement is executed as of the date stated at the top of the first page.
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION RELIANCE STEEL & ALUMINUM CO.
By /s/ Donald G. Farris By /s/ David H. Hannah
- ------------------------ ---------------------------
Title Vice President Title President
- ------------------------ -------------------------
By /s/ Steven S. Weis
---------------------------
Title Chief Financial Officer
------------------------
Address where notices to Address where notices to
the Bank are to be sent: the Borrower are to be sent:
Bank of America National Trust Reliance Steel & Aluminum Co.
and Savings Association 2550 E. 25th Street
Los Angeles Regional Commercial Los Angeles, California
90058
Banking Office #1459
525 South Flower Street, Mezzanine
Los Angeles, California 90071
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