Exhibit 10.3
[5/14/98]
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and among
LODESTAR ENERGY, INC.
as Borrower
LODESTAR HOLDINGS, INC.
as Guarantor
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as Lenders
CONGRESS FINANCIAL CORPORATION
as Agent
THE CIT GROUP/BUSINESS CREDIT, INC.
as Co-Agent
Dated: May 15, 1998
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 2. ACKNOWLEDGMENT AND RESTATEMENT. . . . . . . . . . . . . . . . . . 21
2.1 Existing Obligations. . . . . . . . . . . . . . . . . . . . . . . 21
2.2 Acknowledgment of Security Interests. . . . . . . . . . . . . . . 21
2.3 Existing Agreement. . . . . . . . . . . . . . . . . . . . . . . . 21
2.4 Restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.5 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3. CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1 Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . 22
3.2 Letter of Credit Accommodations . . . . . . . . . . . . . . . . . 23
3.3 Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.4 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.5 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . 29
3.6 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.7 Closing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.8 Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.9 Unused Line Fee . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.10 Authorization to Make Loans . . . . . . . . . . . . . . . . . . . 31
3.11 Settlement Procedures . . . . . . . . . . . . . . . . . . . . . . 31
3.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4. CONDITIONS PRECEDENT TO LOANS AND
OTHER FINANCIAL ACCOMMODATIONS . . . . . . . . . . . . . . . 33
4.1 Conditions Precedent to Initial Loans and Letter
of Credit Accommodations. . . . . . . . . . . . . . . . . . . . 33
4.2 Conditions Precedent to All Loans and Letter of
Credit Accommodations . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5. COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 39
6.1 Organization and Qualification. . . . . . . . . . . . . . . . . . 39
6.2 Corporate Power and Authority . . . . . . . . . . . . . . . . . . 39
6.3 Issuance of Senior Notes; Disposition of Proceeds . . . . . . . . 39
(i)
Page
6.4 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.5 Compliance with Other Agreements and Applicable Law . . . . . . . 42
6.6 Governmental Approval . . . . . . . . . . . . . . . . . . . . . . 43
6.7 Chief Executive Office; Collateral Locations. . . . . . . . . . . 43
6.8 Priority of Liens/Title to Properties . . . . . . . . . . . . . . 43
6.9 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.10 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 44
6.12 Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.13 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . 45
6.14 Environmental Compliance. . . . . . . . . . . . . . . . . . . . . 46
6.15 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.16 Investment Company. . . . . . . . . . . . . . . . . . . . . . . . 47
6.17 Regulation U; Securities Exchange Act of 1934 . . . . . . . . . . 47
6.18 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . 47
6.19 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 47
6.20 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.21 Labor Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.22 Corporate Name; Prior Transactions. . . . . . . . . . . . . . . . 48
SECTION 7. ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . 49
7.1 Tradenames. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.2 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.3 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.4 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . 55
7.5 Loans, Investments, Guarantees, Etc.. . . . . . . . . . . . . . . 57
7.6 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . 59
7.7 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . 59
7.8 Maintenance of Existence. . . . . . . . . . . . . . . . . . . . . 62
7.9 Sale and Leasebacks . . . . . . . . . . . . . . . . . . . . . . . 62
7.10 Consolidated Net Worth. . . . . . . . . . . . . . . . . . . . . . 62
7.11 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . 62
7.12 Sale of Assets, Consolidation, Merger, Dissolution, Etc.. . . . . 63
7.13 Compliance with Laws, Regulations, Etc. . . . . . . . . . . . . . 63
7.14 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . 64
7.15 Properties in Good Condition. . . . . . . . . . . . . . . . . . . 65
7.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
7.17 Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7.18 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . 66
(ii)
Page
7.19 Additional Bank Accounts. . . . . . . . . . . . . . . . . . . . . 67
7.20 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . 67
7.21 Financial Statements and Other Information. . . . . . . . . . . . 67
7.23 After Acquired Real Property. . . . . . . . . . . . . . . . . . . 70
7.24 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8. EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . 71
8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 71
8.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9. COLLECTION AND ADMINISTRATION . . . . . . . . . . . . . . . . . . 76
9.1 Collections; Management of Collateral . . . . . . . . . . . . . . 76
9.2 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
9.3 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . 78
9.4 Borrower's Loan Account . . . . . . . . . . . . . . . . . . . . . 79
9.5 Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
9.6 Right of Inspection; Access . . . . . . . . . . . . . . . . . . . 80
9.7 Accounts Documentation. . . . . . . . . . . . . . . . . . . . . . 80
9.8 Specific Powers . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10. EFFECTIVE DATE; TERMINATION; COSTS. . . . . . . . . . . . . . . 81
10.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.2 Expenses and Additional Fees. . . . . . . . . . . . . . . . . . . 83
10.3 Survival of Agreement . . . . . . . . . . . . . . . . . . . . . . 84
10.4 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . 84
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
10.6 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 85
10.7 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.8 Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . . . 85
10.9 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.10 Participant's Security Interests. . . . . . . . . . . . . . . . . 86
10.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW. . . . . . . . . . . . . . . . . . 86
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver . . . . . . . . . . . . . . . . . . . . . . . 86
11.2 Waiver of Notices . . . . . . . . . . . . . . . . . . . . . . . . 87
11.3 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . 88
(iii)
Page
11.4 Waiver of Counterclaims . . . . . . . . . . . . . . . . . . . . . 89
11.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.6 Assignments; Participations.. . . . . . . . . . . . . . . . . . . 90
11.7 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 92
SECTION 12. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
12.1 Appointment.. . . . . . . . . . . . . . . . . . . . . . . . . . . 92
12.2 Nature of Duties. . . . . . . . . . . . . . . . . . . . . . . . . 93
12.3 Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . . 94
12.4 Rights, Exculpation, Etc. . . . . . . . . . . . . . . . . . . . . 94
12.5 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
12.6 Notice of Event of Default. . . . . . . . . . . . . . . . . . . . 95
12.7 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . 95
12.8 Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . 96
12.9 Congress in its Individual Capacity . . . . . . . . . . . . . . . 96
12.10 Successor Agent.. . . . . . . . . . . . . . . . . . . . . . . . . 97
12.11 Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . . . 97
12.12 Collateral Matters. . . . . . . . . . . . . . . . . . . . . . . . 98
12.13 Agency for Perfection . . . . . . . . . . . . . . . . . . . . . .100
12.14 Additional Loans. . . . . . . . . . . . . . . . . . . . . . . . .100
12.15 Concerning the Collateral and the Related
Financing Agreements. . . . . . . . . . . . . . . . . . . . . .101
12.16 Field Audit and Examination Reports; Disclaimer by Lenders. . . .101
(iv)
EXHIBITS AND SCHEDULES
Exhibit A Form of Assignment and Acceptance
Schedule 1.40 List of Existing Bonds
Schedule 1.41 List of Existing Letters of Credit
Schedule 1.68 List of Congress Mortgages
Schedule 6.1(a) Jurisdictions of Qualification
Schedule 6.1(b) Subsidiaries
Schedule 6.3 Senior Note Agreements
Schedule 6.5(a) Existing Defaults
Schedule 6.5(c) Permits and Missing Permits
Schedule 6.7 Chief Executive Office and Locations of Collateral
Schedule 6.8 Existing Liens
Schedule 6.9 Tax Returns
Schedule 6.10 Pending Litigation
Schedule 6.13 Pension Plans
Schedule 6.14 Environmental Matters
Schedule 6.15 Bank Accounts
Schedule 6.21 Collective Bargaining Agreements
Schedule 6.22 Corporate Name; Tradenames; Prior Transactions
(v)
Schedule 6.23 Material Contracts
Schedule 7.3 Existing Indebtedness
(vi)
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
---------------------------
AGREEMENT dated May 15, 1998 is entered into by and among Lodestar Energy,
Inc., formerly known as Costain Coal, Inc., a Delaware corporation ("Borrower"
as hereinafter further defined), Lodestar Holdings, Inc., formerly known as
Rencoal, Inc., a Delaware corporation ("Guarantor" as hereinafter further
defined), the financial institutions from time to time parties hereto as
lenders, whether by execution of this Agreement or an Assignment and Acceptance
(individually, a "Lender" and collectively, the "Lenders" as hereinafter further
defined), Congress Financial Corporation, a Delaware corporation (as successor
by merger to Congress Financial Corporation, a California corporation), in its
capacity as administrative agent and collateral agent for the Lenders (in such
capacity, the "Agent") and The CIT Group/Business Credit, Inc., a New York
corporation, in its capacity as co-agent for the Lenders (in such capacity, the
"Co-Agent").
W I T N E S S E T H:
WHEREAS, Agent, Co-Agent, Lenders, Borrower and Guarantor have heretofore
entered into certain financing arrangements as set forth in the Existing
Agreement (as hereinafter defined) pursuant to which Lenders or Agent on behalf
of Lenders have made loans and advances and provided other financial
accommodations to Borrower;
WHEREAS, Borrower and Guarantor have requested that Lenders and Agent
extend, modify and restate the existing financing arrangements with Borrower;
WHEREAS, Agent and Lenders are willing to extend, modify and restate the
existing financing arrangements, subject to the terms and conditions contained
herein and in the other Financing Agreements (as defined below);
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement and the other Financing Agreements, the
following terms shall have the respective meanings given to them below:
1.1 "ACCOUNT DEBTOR" shall mean each debtor or obligor in any way obligated
on or in connection with any Account.
1.2 "ACCOUNTS" shall mean all present and future accounts, contract rights,
general intangibles, chattel paper, documents and instruments, as such terms are
defined in the UCC,
including, without limitation, all obligations for the payment of money arising
out of the sale, lease or other disposition of goods or other property or
rendition of services.
1.3 "AFFILIATE" shall mean, with respect to a specified Person, a
partnership, corporation or any other person which directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with such Person, and without limiting the generality of the
foregoing, includes (a) any Person which beneficially owns or holds five (5%)
percent or more of any class of voting securities of such Person or other equity
interests in such Person, (b) any Person of which such Person beneficially owns
or holds five (5%) percent or more of any class of voting securities or in which
such Person beneficially owns or holds five (5%) percent or more of the equity
interests and (c) any director, officer or employee of such Person. For the
purposes of this definition, the term "control" (including with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
1.4 "ASSET SALE" shall mean any direct or indirect sale, issuance,
conveyance, transfer, lease, assignment or other transfer for value by Borrower,
Guarantor or any of its Subsidiaries to any person, in one transaction or a
series of related transactions, of (a) any Capital Stock of any Subsidiary;
(b)all or substantially all of the properties and assets of any division or line
of business of Guarantor or any Subsidiary; or (c) any other properties or
assets of Guarantor or any Subsidiary, other than in the ordinary course of
business, in excess of $1,000,000. For purposes of this definition, the term
"Asset Sale" shall not include (i) any sale, issuance, conveyance, transfer,
lease or other disposition of properties or assets that is consummated in
accordance with the provisions of Article Five of the Senior Note Indenture (as
in effect on the date hereof) and (ii) the sale of inventory in the ordinary
course of business.
1.5 "ASSIGNMENT AND ACCEPTANCE" shall mean an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto (with blanks
appropriately completed) delivered to the Agent in connection with an assignment
of a Lender's interest hereunder in accordance with the provisions of Section
11.6 below.
1.6 "BLOCKED ACCOUNTS" shall have the meaning set forth in Section 9.1
hereof.
1.7 "BOARD" shall mean the Board of Governors of the Federal Reserve System
or any successor thereto.
1.8 "BONDING COMPANIES" shall mean, individually and collectively, the
USF&G Companies, Frontier, any Person who may at any time hereafter provide
Bonds for the benefit of Borrower or its Subsidiaries and their respective
successors and assigns; PROVIDED, THAT, as to any such Person (other than the
USF&G Companies, Frontier and their respective successors and assigns),
(a)Borrower shall give Agent prior written notice of the intention of
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Borrower to enter into such arrangements with such other Person and (b) the
Indebtedness of Borrower or any of its Affiliates to such other Person shall be
permitted under Section 7.3(i) hereof.
1.9 "BONDS" shall mean reclamation, workers' compensation, lease payment,
coal supply, supersedeas or other bonds at any time issued by any of the Bonding
Companies for the benefit of Borrower or any of its Subsidiaries in the ordinary
course of the business of Borrower or any of its Subsidiaries consistent with
current practices in effect on the date hereof including, but not limited to,
the Existing Bonds.
1.10 "BORROWER" shall mean Lodestar Energy, Inc., formerly known as Costain
Coal Inc., a Delaware corporation and its successors and assigns.
1.11 "BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York or the Commonwealth of Pennsylvania, and a day
on which the Lenders and Agent are open for the transaction of business.
1.12 "CAPITAL EXPENDITURES" shall mean all expenditures by any Person for
any fixed or capital assets (including, but not limited to, tooling) or
improvements, or for replacements, substitutions or additions thereto, which
have a useful life of more than one (1) year, including, but not limited to, the
direct or indirect acquisition of such assets by way of offset items or
otherwise and shall include payments in respect of Capitalized Lease Obligations
that have not otherwise been included in the profit and loss statement of such
Person in accordance with the GAAP; PROVIDED, THAT, as to Borrower and its
Subsidiaries, Capital Expenditures shall not include expenditures made pursuant
to replacement and maintenance programs incurred in the ordinary course of
business and properly charged to current operations in accordance with GAAP (but
only to the extent such expenditures are included in the profit and loss
statement of Borrower as an expense for the then current period).
1.13 "CAPITALIZED LEASE OBLIGATIONS" shall mean any obligation to pay rent
or other amounts under a lease of (or other agreement conveying the right to
use) any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP, and, for
the purposes of this Agreement, the amount of such obligation at any date shall
be the capitalized amount thereof at such date, determined in accordance with
GAAP.
1.14 "CAPITAL STOCK" shall mean any and all shares, interests,
participations, or other equivalents (however designated) of corporate stock,
partnership interests or limited liability company interests and any options or
warrants with respect to any of the foregoing.
1.15 "CASH EQUIVALENTS" shall mean (a) marketable direct obligations issued
by, 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 two
-3-
(2) years from the date of acquisition thereof;(b) marketable direct obligations
issued by any State of the United States of America or any political subdivision
of any such State or any public instrumentality thereof maturing within two (2)
years from the date of acquisition thereof and, at the time of acquisition,
having one of the two highest ratings obtainable from either Standard & Poor's
Ratings Services, a division of The McGraw Hill Companies, Inc. ("S&P") or
Moody's Investors Service, Inc. ("Moody's");(c) commercial paper maturing no
more than two (2) years from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's;(d) certificates of deposit or bankers' acceptances maturing within two
(2) years from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any State thereof or
the District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than
$500,000,000;(e) repurchase obligations with a term of not more than seven (7)
days for underlying securities of the types described in clause (a) above
entered into with any bank meeting the qualifications specified in clause (d)
above; and (f) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (a) through (e)
above.
1.16 "CIT" shall mean The CIT Group/Business Credit, Inc., a New York
corporation, in its individual capacity, and its successors and assigns.
1.17 "COAL RESERVES" shall mean demonstrated recoverable reserves of coal
which are owned by Borrower or leased by Borrower on terms acceptable to Agent,
that have at least a moderate degree of geological assurance and are within
three-quarters (3/4) mile of a valid point of measurement or point of
observation supporting such measurements.
1.18 "COLLATERAL ACCESS AGREEMENT" shall mean an agreement in writing, in
form and substance satisfactory to Agent, from any lessor of premises to
Borrower, or any other person to whom any Inventory is consigned or who has
custody, control or possession of any Inventory or Equipment or is otherwise the
owner or operator of any premises on which any Inventory or Equipment is located
or which is adjacent to any Equipment which is a vessel, pursuant to which such
lessor, consignee or other person, INTER ALIA, acknowledges the first priority
security interest of Agent (for itself and the ratable benefit of Lenders) in
such Inventory or Equipment, agrees to waive any and all claims such lessor,
consignee or other person may, at any time, have against such Inventory or
Equipment, whether for processing, storage or otherwise, and agrees to permit
Agent access to, and the right to remain on, the premises of such lessor,
consignee or other person so as to exercise Agent's rights and remedies and
otherwise deal with the Collateral.
1.19 "CODE" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.20 "COLLATERAL" shall have the meaning set forth in Section 5 hereof.
-4-
1.21 "COMMITMENT" shall have the meaning set forth in Section 3.4 hereof.
1.22 "COMMITMENT PERCENTAGE" shall mean, as to each Lender, the percentage
of the Maximum Credit provided for hereunder represented by such Lender's
Commitment. The Commitment Percentage of each Lender signing this Agreement is
set forth on the signature pages hereto below each Lender's respective
signature.
1.23 "CONGRESS" shall mean Congress Financial Corporation, a Delaware
corporation, in its individual capacity, and its successors and assigns.
1.24 "CONSOLIDATED NET INCOME" shall mean, with respect to any Person for
any period, the net income (or loss) of such Person and its Subsidiaries, on a
consolidated basis for such period determined in accordance with GAAP; PROVIDED,
THAT,(a) the net income of any Person in which such Person or any Subsidiary of
such person has an ownership interest with a third party (other than a person
that meets the definition of a Wholly-Owned Subsidiary) shall be included only
to the extent of the amount that has actually been received by such Person or
its Wholly-Owned Subsidiaries in the form of dividends or other distributions
during such period (subject to, in the case of any dividend or distribution
received by a Wholly-Owned Subsidiary of such person, the restrictions set forth
in clause (b) below) and (b)the net income of any Subsidiary of such Person that
is subject to any restriction or limitation on the payment of dividends or the
making of other distributions shall be excluded to the extent of such
restriction or limitation; PROVIDED, THAT, there shall also be excluded (i) the
net income (or loss) of any Person (acquired in a pooling of interests
transaction) accrued prior to the date it becomes a Subsidiary of such Person or
is merged into or consolidated with such person or any Subsidiary of such
Person,(ii) any gain (or loss) (and related tax effects) resulting from an Asset
Sale by such Person or any of its Subsidiaries,(iii) any extraordinary, unusual
or nonrecurring gains or losses (and related tax effects) in accordance with
GAAP and (iv) any compensation-related expenses arising as a result of the
application of the net proceeds from the issuance of the Senior Notes. For
purposes of Section 7.7(b) hereof, the amortization of deferred financing costs
of Borrower relating to the issuance of the note payable by Borrower to
Guarantor pursuant to the loan on the date hereof by Guarantor to Borrower with
the proceeds from the issuance of the Senior Notes shall be excluded from this
definition of "Consolidated Net Income."
1.25 "CONSOLIDATED NET WORTH" shall mean, as to any Person at any time, in
accordance with GAAP, consistently applied, on a consolidated basis for such
Person and its Subsidiaries, the amount equal to the difference between:
(a) the aggregate net book value of all assets of such Person and its
Subsidiaries, calculating the book value of inventory for this purpose on a
first-in-first-out basis, after deducting from such book values all appropriate
reserves in accordance with GAAP consistently applied (including all reserves
for doubtful receivables, obsolescence, depreciation and amortization) and
(b) the total aggregate Indebtedness and other liabilities of such Person and
its Subsidiaries, including accruals for taxes, workmen's compensation liability
and other proper accruals (other than contingent liabilities which would not be
included in the balance sheet under GAAP) of such Person and its Subsidiaries.
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1.26 "CREDIT FACILITY" shall mean, collectively, the Revolving Credit
Facility and the Letter of Credit Facility provided for hereunder and under the
other Financing Agreements.
1.27 "ELIGIBLE ACCOUNTS" shall mean Accounts created by Borrower arising
out of the sale of goods or rendition of services by Borrower, which are and at
all times shall continue to be acceptable to Agent in all respects. Standards
of eligibility may be fixed and revised from time to time solely by Agent in its
exclusive judgment. In determining eligibility, Agent may, but need not, rely
on agings, reports and schedules of Accounts furnished to Agent by Borrower, but
reliance by Agent thereon from time to time shall not be deemed to limit Agent's
right to revise standards of eligibility at any time as to both present and
future Accounts. In general, an Account shall not be deemed eligible unless:
(a) the Account Debtor on such Account is and at all times continues to be
acceptable to Agent; (b) such Account complies in all respects with the
representations, covenants and warranties set forth herein and in the other
Financing Agreements; (c) no more than sixty (60) days have elapsed since the
original due date of such Account up to one hundred twenty (120) days after the
original invoice date of such Account; (d) if the goods giving rise to such
Account have not been shipped and delivered to the Account Debtor, Agent shall
have received a written agreement, in form and substance satisfactory to Agent,
evidencing the Account Debtor's unconditional obligation to take and pay for
such goods; and (e) the chief executive office of the Account Debtor with
respect to such Account is located in the United States of America or Canada;
PROVIDED, THAT, (i) with respect to such Accounts where the chief executive
office of the Account Debtor is located in Canada, at any time promptly upon
Agent's request, Borrower shall have executed and delivered, or caused to be
executed and delivered, such agreements, documents and instruments as may be
required by Agent to perfect the security interests of Agent in the Accounts
owing by an Account Debtor with its chief executive office in Canada in
accordance with the applicable laws of the Province of Canada in which such
chief executive office is located and taken or caused to be taken such other
further actions as Agent may request to enable Agent as secured party with
respect thereto to collect such Accounts under the applicable laws of the
Province of Canada and (ii) at Agent's option, if the chief executive office of
the Account Debtor with respect to such Accounts is located other than in the
United States of America or Canada, then Agent may deem such Accounts to be
Eligible Accounts if: (A) such Account is payable only in the United States of
America and in U.S. Dollars and (B) either (a) the Account Debtor has delivered
to Borrower an irrevocable letter of credit issued or confirmed by a bank
satisfactory to Agent, the original of such letter of credit has been delivered
to Agent or Agent's agent and the issuer thereof notified of the pledge or
assignment of the proceeds of such letter of credit to Agent, or (b) such
Account is subject to credit insurance payable to Agent issued by an insurer and
on terms and in an amount acceptable to Agent, or (c) such Account is otherwise
acceptable in all respects to Agent subject to such lending formula with respect
thereto as Agent may determine). Any Accounts which Agent determines to be
ineligible or unacceptable for purposes of the Lending Formulas (as hereinafter
defined) at any time shall nevertheless be and remain at all times part of the
Collateral.
1.28 "ELIGIBLE COAL INVENTORY" shall mean Inventory consisting of coal
which has been extracted from the Real Property, is in a coal stockpile and
constitutes finished goods
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held for sale in the ordinary course of the business of Borrower or is Unwashed
Coal, in each case to the extent acceptable to Agent in all respects. Standards
of eligibility may be fixed and revised from time to time solely by Agent in its
exclusive judgment. In determining eligibility Agent may, but need not, rely on
reports and schedules of such Inventory furnished to Agent by Borrower, but
reliance thereon by Agent from time to time shall not be deemed to limit Agent's
right to revise standards of eligibility at any time. In general, except in
Agent's discretion, Eligible Coal Inventory shall not include: (a)bill and hold
goods;(b) such Inventory which is not subject to the first priority perfected
security interest of Agent (for itself and the ratable benefit of Lenders);
(c) except as Agent may otherwise determine in its discretion, such Inventory at
the premises of third parties or Inventory purchased or sold on consignment;
PROVIDED, THAT, any such Inventory which would otherwise be deemed Eligible Coal
Inventory at locations which are not owned and operated by Borrower may
nevertheless be considered Eligible Coal Inventory: (i) if Agent shall have
received a Collateral Access Agreement in writing, in form and substance
satisfactory to Agent, from the holder of such Inventory or the owner and/or
operator of such location, as the case may be, and (ii) in addition to the
agreement described above, if the Inventory is delivered to the holder, owner
and/or operator on consignment and if required by Agent: (A) the holder, owner
and/or operator, lessor and/or mortgagee executes appropriate UCC-1 financing
statements in favor of Borrower, which are duly assigned to Agent and (B) any
lender to the holder, owner and/or operator with any interest in Inventory is
properly notified of the first priority lien on such Inventory of Agent;(d) coal
which has been uncovered but not removed from the pit or ground;(e) coal which
has not been mined in accordance with all applicable laws or at any mine or site
which is not being operated in accordance with and as required by any agreement
with a Governmental Authority, any Permits or otherwise in accordance with all
applicable laws; and (f) Inventory subject to a security interest or lien in
favor of any person other than Agent and the Bonding Companies to the extent
permitted in this Agreement. Any Inventory which Agent determines to be
ineligible or unacceptable for purposes of the Lending Formulas at any time
shall nevertheless be and remain at all times part of the Collateral.
1.29 "ELIGIBLE EQUIPMENT" shall mean Equipment owned by Borrower, which is
in good order, repair, running and marketable condition and acceptable to Agent
in all respects. In general, Eligible Equipment shall not include:
(a) Equipment at premises other than those owned and controlled by Borrower,
except if (i) Agent shall have received a Collateral Access Agreement, in form
and substance satisfactory to Agent, from the person in possession of such
Equipment and/or the owner or operator of such premises or if Agent shall not
have received such Collateral Access Agreement, then Agent shall have
established such reserves with respect to the obligations of Borrower to the
person in possession of such Equipment and/or the owner or operator of such
premises as Agent determines, EXCEPT THAT, upon Borrower's request, Agent shall
not establish such reserves, but such Equipment shall not be deemed Eligible
Equipment or (ii) such Equipment constitutes a vessel located in waters adjacent
to premises owned and controlled by Borrower or adjacent to premises leased by
Borrower (but in the case of premises leased by Borrower only so long as Agent
has received a Collateral Access Agreement, in form and substance satisfactory
to Agent, from the owner or operator of such leased premises or if Agent shall
not have received such
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Collateral Access Agreement, then Agent shall have established such reserves
with respect to the obligations of Borrower to the person in possession of such
Equipment and/or the owner or operator of such premises as Agent determines,
EXCEPT THAT, upon Borrower's request, Agent shall not establish such reserves,
but such Equipment shall not be deemed Eligible Equipment or); (b) Equipment
subject to a security interest or lien in favor of any person other than Agent
and the Bonding Companies to the extent permitted under this Agreement;
(c) Equipment which is not located in the continental United States of America
or as to Equipment consisting of vessels, the inland waters of the continental
United States of America; (d) Equipment which is not subject to the first
priority, valid and perfected security interest of Agent (for itself and the
ratable benefit of Lenders); or (e) worn-out, obsolete, damaged or defective
Equipment or Equipment not used or usable in the ordinary course of Borrower's
business as presently conducted. General criteria for Eligible Equipment may be
established and revised from time to time by Agent in good faith. Any Equipment
which is not Eligible Equipment shall nevertheless be part of the Collateral.
1.30 "ELIGIBLE INVENTORY" shall mean Eligible Coal Inventory and Eligible
Stores Inventory.
1.31 "ELIGIBLE STORES INVENTORY" shall mean Inventory consisting of Stores
Inventory, which is acceptable to Agent in all respects. Standards of
eligibility may be fixed and revised from time to time solely by Agent in its
exclusive judgment. In determining eligibility, Agent may, but need not, rely
on reports and schedules of such Inventory furnished to Agent by Borrower, but
reliance thereon by Agent from time to time shall not be deemed to limit Agent's
right to revise standards of eligibility at any time. In general, except in
Agent's discretion, Eligible Stores Inventory shall not include: (a) packaging
and shipping materials; (b) bill and hold goods; (c) such Inventory which is not
subject to the first priority perfected security interest of Agent (for itself
and the ratable benefit of Lenders); (d) except as Agent may otherwise determine
in its discretion, such Inventory at the premises of third parties or Inventory
purchased or sold on consignment; PROVIDED, THAT, any such Inventory which would
otherwise be deemed Eligible Inventory at locations which are not owned and
operated by Borrower may nevertheless be considered Eligible Stores Inventory:
(i) if Agent shall have received a Collateral Access Agreement, in form and
substance satisfactory to Agent, from the holder of such Inventory or the owner
and/or operator of such location, as the case may be, and (ii) in addition to
the Collateral Access Agreement described above, if the Inventory is delivered
to the holder, owner and/or operator on consignment and if required by Agent:
(A) the holder, owner and/or operator, lessor and/or mortgagee executes
appropriate UCC-1 financing statements in favor of Borrower, which are duly
assigned to Agent and (B) any lender to holder, owner and/or operator with any
interest in Inventory is properly notified of the first priority lien on such
Inventory of Agent; (e)Inventory subject to a security interest or lien in favor
of any person other than Agent and the Bonding Companies to the extent permitted
in this Agreement;(f) unserviceable or obsolete Inventory; (g) damaged and/or
defective Inventory; and (h) Inventory for which no perpetual inventory records
satisfactory to Agent are maintained. Any Inventory which Agent determines to
be ineligible or unacceptable for purposes of the
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Lending Formulas at any time shall nevertheless be and remain at all times part
of the Collateral.
1.32 "ENVIRONMENTAL LAWS" shall mean all Federal, State and local laws,
rules, regulations, ordinances, and consent decrees relating to health, safety,
hazardous substances, pollution and environmental matters, as now or at any time
hereafter in effect, applicable to the business and facilities of Borrower and
its Subsidiaries (whether or not owned by it or any of them), including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contamination, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes or relating to or imposing liability or
standards of conduct concerning mining or reclamation of mined land. Such laws
and regulations include, but are not limited to, the Resource Conservation and
Recovery Act of 1976, as amended; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; the Superfund Amendments and
Reauthorization Act; the Water Pollution Control Act of 1972; the Solid Waste
Disposal Act; the Insecticide, Fungicide and Rodenticide Act; the Mine Safety
and Health Act of 1977; the Surface Mining Control and Reclamation Act of 1977;
the Safe Drinking Water Act of 1974; the Toxic Substances Control Act, as
amended; the Clean Water Act, as amended; the Clean Air Act, as amended; the
Hazardous Materials Transportation Act, as amended; U.S. Department of
Transportation and Environmental Protection Agency regulations; and applicable
state counterparts to any of such laws and any common law or equitable doctrine
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Materials.
1.33 "EQUIPMENT" shall mean all of Borrower's now owned and hereafter
acquired equipment and fixtures, of every kind and description, wherever
located, including, without limitation, any and all machinery used in connection
with the manufacture, sale, exchange or lease of goods or rendition of services,
machinery, tooling, tools, telephone equipment, computers, computer hardware and
related computer equipment and accessories (including software and records),
vehicles, dies, jigs, furniture, trade fixtures and fixtures, all attachments,
components, parts, accessions and property now or hereafter affixed thereto,
installed thereon or used in connection therewith, and all additions to and
substitutions and replacements thereof and all existing and future leasehold
interests in equipment and fixtures, wherever located, whether now owned or
hereafter acquired and all licenses and other rights of Borrower relating
thereto, whether in the possession and control of Borrower or in the possession
and control of a third person for the account of Borrower and all claims to the
proceeds of insurance thereon and all maintenance and warranty records relating
thereto.
1.34 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended,
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modified, recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
1.35 "ERISA AFFILIATE" shall mean any (a) corporation which is a member of
the same controlled group of corporations (within the meaning of section 414(b)
of the Code) as Borrower,(b) partnership or other trade or business (whether or
not incorporated) which is under common control (within the meaning of Section
414(c) of the Code) with Borrower, and (c) member of the same affiliated service
group (within the meaning of Section 414(m) of the Code) as Borrower.
1.36 "EVENT OF DEFAULT" shall have the meaning set forth in Section 8.1
hereof.
1.37 "EXCESS LETTER OF CREDIT AVAILABILITY" shall mean at any time the
amount, as determined by Agent, calculated at such time, equal to:
(a) the Letter of Credit Availability, MINUS
(b) the amount of all then outstanding and unpaid Obligations
arising pursuant to the then outstanding Tranche B Letter of Credit
Accommodations.
1.38 "EXCESS REVOLVING CREDIT AVAILABILITY" shall mean at any time the
amount, as determined by Agent, calculated at such time, equal to:
(a) the Revolving Credit Availability, MINUS
(b) the sum of:(i) the amount of all then outstanding and unpaid
Obligations arising pursuant to the then outstanding Loans and Tranche A Letter
of Credit Accommodations plus (ii) the aggregate amount of (A) all then
outstanding and unpaid trade payables of Borrower which are outstanding and
unpaid more than sixty (60) days past due as of such time and (B) the book
overdraft of Borrower.
1.39 "EXISTING AGREEMENT" shall mean the Loan and Security Agreement, dated
March 14, 1997, by and among Agent, Co-Agent, Lenders, Borrower and Guarantor.
1.40 "EXISTING BONDS" shall mean, collectively, the Bonds issued on or
before the date hereof by the USF&G Bonding Companies under or pursuant to the
USF&G Bonding Agreements or by Frontier, in each case for the benefit of or in
connection with the business of Borrower or its Subsidiaries set forth on
Schedule 1.40 hereto, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.41 "EXISTING LETTERS OF CREDIT" shall mean, collectively, Letter of
Credit Accommodations arranged for by Agent for the benefit of Borrower or its
Subsidiaries under the Existing Agreement set forth on Schedule 1.41 hereto, as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
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1.42 "FINANCING AGREEMENTS" shall mean, collectively, this Agreement,
together with all other agreements, documents and instruments now or at any time
hereafter executed and/or delivered by Borrower or any other person, with, to or
in favor of Agent or any Lender in connection herewith or related hereto, as
this Agreement and such other agreements, documents or instruments now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.43 "FRONTIER" shall mean Frontier Insurance Company, a New York
corporation, and its successors and assigns.
1.44 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination except that for purposes of
Section 7.10, GAAP shall be determined on the basis of such principles in effect
on the date hereof and consistent with those used in the preparation of the
financial statements delivered to Agent and Lenders prior to the date hereof.
1.45 "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.46 "GUARANTOR" shall mean Lodestar Holdings, Inc., formerly known as
Rencoal, Inc., a Delaware corporation, and its successors and assigns.
1.47 "HARVARD" shall mean the President and Fellows of Harvard College, and
their successors and assigns.
1.48 "HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous
substances or materials and wastes including without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyl, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials, or wastes
that are or became regulated under any Environmental Laws (including, without
limitation, any that are or become classified as hazardous or toxic under any
Environmental Laws.) In the event that any of the applicable Environmental Laws
are amended so as to broaden the meaning of any of the above-referenced terms,
such broader meaning shall apply subsequent to the effective date of such
amendment.
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1.49 "INDEBTEDNESS" shall mean, with respect to any Person, any liability
(a) in respect of borrowed money (whether or not the recourse of the lender is
to the whole of the assets of such Person or only to a portion thereof) or
evidenced by bonds, notes, indentures or similar instruments; (b) representing
the balance deferred and unpaid of the purchase price of any property or
services (EXCEPT any such balance that constitutes an account payable to a trade
creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed
by such Person in the ordinary course of business of such Person in connection
with obtaining goods, materials or services); (c) all Capitalized Lease
Obligations; (d) any contractual obligations, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, endorsed (other than for
collection or deposit in the ordinary course of business), co-made or discounted
or sold with recourse by such Person, or in respect of which such Person is
otherwise directly or indirectly liable, including contractual obligations
(contingent or otherwise) arising through any agreement to purchase, repurchase,
or otherwise acquire such indebtedness, obligation or liability or any security
therefor, or to provide funds for the payment or discharge thereof (whether in
the form of loans, advances, stock purchases, capital contributions or
otherwise), or to maintain solvency, assets, level of income, or other financial
condition, or to make payment other than for value received; (e) all obligations
with respect to redeemable stock and redemption or repurchase obligations under
any Capital Stock or other equity securities issued by such Person; (f) all
reimbursement obligations and other liabilities, contingent or otherwise, of
such Person with respect to bonds (including, without limitation, the Bonds),
letters of credit, banker's acceptances or similar documents or instruments
issued for such Person's account; (g) all indebtedness of such Person in respect
of indebtedness of another Person for borrowed money or indebtedness of another
Person otherwise described in this definition which is secured by any security
interest in, or mortgage or lien upon the interest in any asset of such Person,
whether or not such obligations, liabilities or indebtedness are assumed by or
are a personal liability of such Person, all as of such time; and (h) all
obligations, liabilities and indebtedness of such Person (marked to market)
constituting Interest Rate Protection Obligations or in respect of foreign
exchange agreements.
1.50 "INITIAL PURCHASERS" shall mean, collectively, BT Alex. Brown
Incorporated and Donaldson Lufkin & Jenrette Securities Corporation and their
respective successors and assigns.
1.51 "INTEREST RATE" shall mean a rate of three-quarters (3/4%) percent per
annum above the Prime Rate; PROVIDED, THAT, Agent may, at its option, and upon
the written direction of the Majority Lenders shall, increase such rate to a
rate of two and three-quarters (2 3/4%) percent per annum above the Prime Rate
at any time without notice,(a) for the period on and after (i) the date of
termination or non-renewal hereof until such time as all Obligations are
indefeasibly paid in full (notwithstanding entry of any judgment against
Borrower), or (ii) the date of any Event of Default, and for so long as such
Event of Default exists or is continuing, as determined by Agent and (b) on the
Loans at any time outstanding in excess of the Revolving Credit Availability
(whether or not such excess(es) arise or are
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made with or without Agent's knowledge or consent and whether made before or
after an Event of Default).
1.52 "INTEREST RATE PROTECTION OBLIGATIONS" shall mean the obligations of
any Person pursuant to any arrangement with any other Person whereby, directly
or indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
1.53 "INVENTORY" shall mean all of Borrower's now owned and hereafter
acquired inventory, wherever located, including, without limitation, all raw
materials, work-in-process, and finished and semi-finished inventory of any
kind, nature or description, wherever located, including, without limitation,
(a) all minerals in whatever form, and including, without limitation, coal, fly
ash, bottom ash or other ash, methane, sulfur, sulfur dioxide, and other
by-products resulting from the processing of the coal mined by Borrower and
other minerals and chemicals resulting from the mining or processing of coal;
(b) cast iron fittings, paint, belts and hoses, bolts and nuts, wire and wire
products, welding supplies, tools, steel, rope, timber, railroad, spikes,
railroad car parts and railroad crane parts, baghouse parts, pump parts,
compressor parts, electrical parts, bearings, drills, bits and accessories and
other parts and supplies; (c) all wrapping, packaging, advertising and shipping
materials; and (d) any other personal property held for sale, exchange or lease
or furnished or to be furnished or used or consumed in the business or in
connection with the manufacturing, packaging, shipping, advertising, selling or
furnishing of such goods, inventory, merchandise and other personal property,
and all names or marks affixed to or to be affixed thereto for purposes of
selling same by the seller, manufacturer, lessor or licensor thereof and all
right, title and interest therein and thereto.
1.54 "LENDERS" shall mean the financial institutions who are signatories
hereto as lenders and other persons made a party to this Agreement as lenders in
accordance with Section 11.6 hereof, and their respective successors and
assigns.
1.55 "LENDING FORMULAS" shall mean the percentages set forth in Section 3.1
hereof with respect to Eligible Accounts and Eligible Inventory.
1.56 "LETTER OF CREDIT ACCOMMODATIONS" shall mean with respect to the
Credit Facility, the letters of credit or other guaranties which are from time
to time either (a) issued or opened by Agent for the account of Borrower or any
Obligor or (b) with respect to which Agent or any Lender has agreed to indemnify
the issuer or guaranteed to the issuer the performance by Borrower of its
obligations to such issuer (including, without limitation, the Existing Letters
of Credit).
1.57 "LETTER OF CREDIT AVAILABILITY" shall mean, at any time, the lesser
of:
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(a) the amount equal to the sum of: (i) sixty (60%) percent of the
orderly liquidation value of Eligible Equipment as set forth in the most recent
acceptable appraisal of the Equipment received by Agent in form, scope and
methodology reasonably acceptable to Agent and by an appraiser reasonably
acceptable to Agent and addressed to Agent and on which Agent is expressly
permitted to rely, plus (ii) the lesser of (A) twenty-five (25%) percent of the
mid-point of the range of the distressed sale values of the Coal Reserves of
Borrower as set forth in the most recent acceptable appraisal of the Coal
Reserves received by Agent in form, scope and methodology reasonably acceptable
to Agent and by an appraiser reasonably acceptable to Agent and addressed to
Agent and on which Agent is expressly permitted to rely or (B) $3,500,000 or
(b) the Letter of Credit Facility Limit;
PROVIDED, THAT, the Letter of Credit Availability shall be reduced each month
commencing June 1, 1998 by the Special Availability Reserve to the extent
provided in Section 3.3 hereof and by any other reserves at any time and from
time to time allocated by Agent to the Letter of Credit Facility. The term
"Letter of Credit Availability" is used herein to mean the amount of Tranche B
Letter of Credit Accommodations available without any reduction for the amount
of Tranche B Letter of Credit Accommodations then outstanding.
1.58 "LETTER OF CREDIT FACILITY" shall mean the Tranche B Letter of Credit
Accommodations provided for hereunder and under the other Financing Agreements.
1.59 "LETTER OF CREDIT FACILITY LIMIT" shall mean $30,000,000.
1.60 "LETTER OF CREDIT NOTES" shall mean the promissory notes issued by
Borrower in favor of each Lender evidencing the Obligations of Borrower to each
Lender with respect to the Tranche B Letter of Credit Accommodations made by or
on behalf of Lenders pursuant to the Letter of Credit Facility, with each Note
being in a principal amount of up to the respective Lender's maximum Pro Rata
Share of the Tranche B Letter of Credit Accommodations.
1.61 "LOANS" shall mean the loans made to or for the benefit of Borrower by
Lenders or, at Agent's option, by Agent for the ratable account of Lenders, on a
revolving basis pursuant to the Revolving Credit Facility (involving advances,
repayments and readvances) as set forth in Section 3.1 hereof.
1.62 "MAJORITY LENDERS" shall mean, as of any date of determination
thereof, Lenders holding more than fifty (50%) percent of the aggregate
outstanding principal amount of Loans and outstanding Letter of Credit
Accommodations, or, if there are no Loans or Letter of Credit Accommodations
outstanding, then such term shall mean Lenders having aggregate Commitment
Percentages of more than fifty (50%) percent.
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1.63 "MANAGEMENT AGREEMENT" shall mean the Management Agreement, dated
March 14, 1997, between Borrower and Renco Group, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.64 "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the condition (financial or otherwise), business, performance, operations or
properties of Borrower or Guarantor; (b) the legality, validity or
enforceability of this Agreement or any of the other Financing Agreements;
(c) the legality, validity, enforceability, perfection or priority of the
security interests and liens of Agent or any Lender upon the Collateral or any
other property which is security for the Obligations; (d) the Collateral or any
other property which is security for the Obligations, or the value of the
Collateral or such other property; (e) the ability of Borrower to repay the
Obligations or of Borrower or any Obligor to perform its obligations under this
Agreement or any of the other Financing Agreements; or (f) the ability of Agent
or any Lender to enforce the Obligations or realize upon the Collateral or
otherwise with respect to the rights and remedies of Agent or any Lender under
this Agreement or any of the other Financing Agreements.
1.65 "MATERIAL CONTRACT" shall mean any contract or other arrangements
(other than the Financing Agreements), whether written or oral, to which
Borrower or its Subsidiaries is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto could be reasonably
expected to have a Material Adverse Effect.
1.66 "MAXIMUM CREDIT" shall mean $120,000,000.
1.67 "MORTGAGES" shall mean, individually and collectively, the deeds of
trust, mortgages and other security agreements with respect to the Real Property
listed on Schedule 1.68 hereto, as the same now exist or may hereinafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.68 "NET AMOUNT OF ELIGIBLE ACCOUNTS" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) rebates, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.69 "NET CASH PROCEEDS" shall mean (a) proceeds received by Borrower in
cash or Cash Equivalents from the sale, assignment or other disposition of any
of its assets or property (other than sales of Inventory in the ordinary course
of business), net of payments of Indebtedness secured by such assets or
properties (including any fees or prepayment premises required to be paid as a
result of such sale, assignment or other disposition) and the reasonable cash
costs of sale, assignment or other disposition, PROVIDED, THAT, evidence of such
costs is provided to Agent;(b) proceeds of insurance in cash or Cash Equivalents
on account of the loss of or damage to any such assets or property, and payments
of compensation in cash or Cash Equivalents for any such assets or property
taken by condemnation or eminent domain; and (c)proceeds received after the date
hereof by Borrower or any of its Subsidiaries in cash or Cash Equivalents from
(i) the issuance of any Capital Stock by
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Borrower or any of its Subsidiaries or any other additions to the equity of
Borrower or any of its Subsidiaries (other than retained earnings) or any
contributions to capital of Borrower or any of its Subsidiaries or (ii) issuance
of any Indebtedness by Borrower or any of its Subsidiaries, in each case net of
reasonable underwriting discounts and commissions and reasonable costs incurred
in connection with such transaction; PROVIDED, THAT, evidence of such costs
satisfactory to Agent is provided to Agent upon Agent's request.
1.70 "NOTES" shall mean, collectively, the Revolving Credit Notes and the
Letter of Credit Notes.
1.71 "OBLIGATIONS" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower and/or any Obligor to Agent or
any Lender and/or its affiliates, including principal, interest, charges, fees,
costs and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, arising under or in connection with this Agreement, any
of the other Financing Agreements or by operation of law in connection
therewith, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement, after the
commencement of any case with respect to Borrower or any Obligor under the
United States Bankruptcy Code or any similar statute (including the payment of
interest and other amounts which would accrue and become due but for the
commencement of such case, whether or not such amounts are allowed or allowable
in whole or in part in such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated or secured.
1.72 "OBLIGOR" shall mean any guarantor, endorser, acceptor, surety, or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.73 "PARTICIPANT" shall mean any financial institution that acquires and
holds participation in the interest of any Lender in any of the Loans and Letter
of Credit Accommodations in conformity with the provisions of Section 11.6 of
this Agreement governing participations.
1.74 "PAYMENT ACCOUNT" shall have the meaning set forth in Section 9.1
hereof.
1.75 "PERMITS" shall have the meaning set forth in Section 6.5 hereof.
1.76 "PERSON" or "PERSON" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Code), limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
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1.77 "PRIME RATE" shall mean the rate from time to time publicly announced
by CoreStates Bank, N.A., or its successors as its prime rate, whether or not
such announced rate is the best rate available at such bank, calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed, which
rate shall increase or decrease by an amount equal to each increase or decrease
effective on the first day of the month after any change in such prime rate
based on the prime rate in effect on the last day of the month in which any such
change occurs.
1.78 "PRO RATA SHARE" shall mean, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Commitment and the denominator of which shall be the aggregate amount
of all of the Lenders' Commitments, as adjusted from time to time in accordance
with the provisions of Section 11.6 hereof, PROVIDED, THAT, if the Commitments
have been terminated, the numerator shall be the unpaid amount of such Lender's
Loans and its interest in the Letter of Credit Accommodations and the
denominator shall be the aggregate amount of all unpaid Loans and Letter of
Credit Accommodations.
1.79 "PROVISION FOR TAXES" shall mean an amount equal to all taxes imposed
on or measured by net income, whether federal, state or local, and whether
foreign or domestic, that are paid or payable by any Person and its Subsidiaries
in respect of such fiscal year on a consolidated basis in accordance with GAAP.
1.80 "REAL PROPERTY" shall mean all now owned or hereafter acquired real
property of Borrower, including leasehold interests, together with all
buildings, structures, fixtures and other improvements relating thereto, and all
metals and minerals which are in, under, upon, or to be produced from such real
property to the extent of the rights of Borrower to the same, including all coal
(but only to the extent such metals and minerals have not been extracted from
the real property), wherever located, including, without limitation, the real
property and related assets of Borrower more particularly described in the
Mortgages.
1.81 "RECORDS" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.82 "REGISTER" shall have the meaning set forth in Section 11.6 hereof.
1.83 "RENCO GROUP" shall mean The Renco Group, Inc., a New York
corporation, and its successors and assigns.
1.84 "REVOLVING CREDIT AVAILABILITY" shall mean, at any time, the lesser of
(a) the amount of the Loans which would be available to Borrower as of such time
calculated based
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on the product of the applicable Lending Formulas multiplied by the Net Amount
of Eligible Accounts and the Value of Eligible Inventory, as the case may be, as
determined by Agent, and subject to the applicable sublimits established by
Agent hereunder or (b) the Revolving Credit Facility Limit, PROVIDED, THAT, the
Revolving Credit Availability shall be reduced by the Special Availability
Reserve to the extent provided in Section 3.3 hereof and by any other reserves
at any time from time to time allocated by Agent to the Revolving Credit
Facility. The term "Revolving Credit Availability" is used herein to mean the
amount of Loans available without any reduction for the amount of Loans or
Tranche A Letter of Credit Accommodations then outstanding.
1.85 "REVOLVING CREDIT FACILITY" shall mean the Loans and Tranche A Letter
of Credit Accommodations provided for hereunder and under the other Financing
Agreements.
1.86 "REVOLVING CREDIT FACILITY LIMIT" shall mean $90,000,000.
1.87 "REVOLVING CREDIT NOTES" shall mean the promissory notes issued by
Borrower in favor of each Lender evidencing the Obligations of Borrower to each
Lender with respect to the Loans made by or on behalf of Lenders pursuant to the
Revolving Credit Facility, with each Note being in a principal amount of up to
the respective Lender's maximum Pro Rata Share of the Loans and the Tranche A
Letter of Credit Accommodations.
1.88 "SENIOR NOTE AGREEMENTS" shall mean, individually and collectively,
each and all of the following (as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced):
(a) the Senior Notes; (b) the Senior Note Indenture (and including the Senior
Note Guarantee); (c) the Purchase Agreement, dated May 15, 1998, by and among
the Initial Purchasers, Guarantor, Borrower, Eastern Resources, Inc. and
Industrial Fuels Minerals Company with respect to the purchase from Guarantor of
all of the Senior Notes; and (d) the Senior Note Registration Agreement.
1.89 "SENIOR NOTE GUARANTEE" shall mean, individually and collectively, the
guarantee set forth in Section 11.01 of the Senior Note Indenture by Borrower,
Eastern Resources, Inc. and Industrial Fuels Minerals Company in favor of the
holders of the Senior Notes with respect to the Indebtedness of Guarantor
evidenced by the Senior Notes, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.90 "SENIOR NOTE INDENTURE" shall mean the Indenture, dated of even date
herewith, by and among Guarantor, Borrower, Eastern Resources, Inc., Industrial
Fuels Minerals Company and the Senior Note Trustee with respect to the Senior
Notes, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.91 "SENIOR NOTE REGISTRATION AGREEMENT" shall mean the Registration
Rights Agreement, dated as of May 15, 1998, by and among Guarantor, the Initial
Purchasers, Borrower, Eastern Resources, Inc. and Industrial Fuels Minerals
Company, as the same now
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exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.92 "SENIOR NOTES" shall mean, individually and collectively, each and all
of the following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced): (a) the 11 1/2% Senior
Notes due 2005, Series A (the "Series A Notes") issued by Guarantor on the date
hereof pursuant to the Senior Note Indenture in the original principal amount of
$150,000,000 and (b) the 11 1/2% Senior Notes due 2005, Series B (the "Series B
Notes") issued by Guarantor after the date hereof which have terms identical to
the terms of the Series A Notes and are offered to the holders of the Series A
Notes pursuant to a registration statement to be filed by Guarantor with the
Securities and Exchange Commission in exchange for the Series A Notes held by
such person.
1.93 "SENIOR NOTE TRUSTEE" shall mean State Street Bank and Trust Company,
and its successors and assigns, and any replacement or other trustee under the
Senior Note Indenture.
1.94 "SPECIAL AVAILABILITY RESERVE" shall have the meaning set forth in
Section 3.3 hereof.
1.95 "STORES INVENTORY" shall mean Inventory consisting of cast iron
fittings, paint, belts and hoses, bolts and nuts, wire and wire products,
welding supplies, tools, steel, rope, timber, railroad spikes, railroad car
parts and railroad crane parts, baghouse parts, pump parts, compressor parts,
electrical parts, bearings, drills, bits and accessories and other parts and
supplies.
1.96 "STORES INVENTORY SUBLIMIT" shall mean the amount equal to $5,000,000.
1.97"SUBSIDIARY" or "SUBSIDIARY" shall mean any corporation, association or
organization, active or inactive, as to which more than fifty (50%) percent of
the outstanding voting stock or shares or interests shall now or hereafter be
owned or controlled, directly or indirectly, by Borrower, any subsidiary of
Borrower, or any subsidiary of such subsidiary.
1.98"TOTAL AVAILABILITY" shall mean, at any time, the sum of (a) the
Revolving Credit Availability as of such time plus (b) the Letter of Credit
Availability as of such time.
1.99"TRADENAME" shall have the meaning set forth in Section 7.1 hereof.
1.100"TRANCHE A LETTER OF CREDIT ACCOMMODATIONS" shall mean Letter of
Credit Accommodations designated by Borrower at the time of the issuance thereof
as allocated to the Revolving Credit Facility, subject to and in accordance with
the terms hereof.
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1.101"TRANCHE B LETTER OF CREDIT ACCOMMODATIONS" shall mean Letter of
Credit Accommodations designated by Borrower at the time of the issuance thereof
as allocated to the Letter of Credit Facility, subject to and in accordance with
the terms hereof.
1.102"UNWASHED COAL" shall mean coal which has been extracted from the Real
Property and is at the appropriate processing site, which only requires being
washed with liquid solutions before it constitutes finished goods held for sale
in the ordinary course of the business of Borrower.
1.103"USF&G BONDING AGREEMENTS" shall mean, collectively, the Master Surety
Agreement, General Contract of Indemnity, Collateral Trust Agreement, Schedule A
to the Collateral Trust Agreement and Annual Premium Agreement, dated March 14,
1997, by and among Van-American, the USF&G Bonding Companies, Borrower,
Guarantor and the Subsidiaries of Borrower, and all agreements, documents and
instruments at any time executed and/or delivered by Borrower, Guarantor or any
other Person with, to or in favor of Van-American and/or any of the USF&G
Bonding Companies in connection therewith, as all of the foregoing now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.104"USF&G BONDING COMPANIES" shall mean, individually and collectively,
United States Fidelity and Guaranty Company, a Maryland corporation, Fidelity
and Guaranty Insurance Company, a Maryland corporation and Guaranty and
Insurance Underwriters, Inc., a Maryland corporation and any and all affiliated,
associated and subsidiary companies thereof, and their respective successors and
assigns.
1.105"VALUE" or "VALUE" shall mean, as determined by Agent, with respect to
the Inventory, the lower of (a) cost computed on a first-in-first-out basis in
accordance with GAAP or (b) market value, as determined by Agent.
1.106"VAN-AMERICAN" shall mean Van-American Insurance Agency, Inc., a
Kentucky corporation, in its capacity as service manager on behalf of the USF&G
Bonding Companies (and not in its individual capacity) and any successor or
replacement service manager on behalf of the USF&G Bonding Companies under the
USF&G Bonding Agreements.
1.107 "WHOLLY-OWNED SUBSIDIARY" shall mean any Subsidiary of such Person to
the extent all of the Capital Stock or other ownership interests in such
Subsidiary (other than (a) directors' qualifying shares and (b) an immaterial
interest owned by other Persons solely to comply with applicable law) is owned
directly or indirectly by such Person or a Wholly-Owned Subsidiary of such
Person.
1.108 TERMS. All accounting terms used in this Agreement which are not
specifically defined herein shall be construed in accordance with GAAP
consistently applied, except as otherwise stated herein.
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1.109 OTHER DEFINED TERMS The words "hereof", "herein", "hereunder", "this
Agreement" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.110 UNIFORM COMMERCIAL CODE DEFINITIONS. All terms used herein which are
not specifically defined herein which are defined or used in the Uniform
Commercial Code as in effect in the State of New York (the "UCC") shall have the
meanings as defined or used in the UCC.
1.111 INTERPRETATION. For purposes of this Agreement, unless the context
otherwise requires, all other terms hereinbefore or hereinafter defined,
including but not limited to those terms defined in the recitals hereto, shall
have the meanings herein assigned to such terms. All references to Borrower and
other Persons pursuant to the definitions set forth in the recitals hereto or
otherwise herein shall include their respective successors and assigns. All
references to any term in the plural shall include the singular and all
references to any term in the singular shall include the plural. The words
"ratable" or "ratably" or words of similar import when used in this agreement
shall refer to a sharing or allocation based on the respective Pro Rata Shares
of Lenders.
SECTION 2. ACKNOWLEDGMENT AND RESTATEMENT
2.1 EXISTING OBLIGATIONS. Borrower and Guarantor each hereby
acknowledges, confirms and agrees that Borrower is indebted to Agent and Lenders
for loans and advances to Borrower under the Existing Agreement, as of the close
of business on May 13, 1998, in the aggregate principal amount of $30,190,755.56
and the aggregate amount of $22,017,208.00 in respect of Letter of Credit
Accommodations (as defined in the Existing Agreement), together with all
interest accrued and accruing thereon (to the extent applicable), and all fees,
costs, expenses and other charges relating thereto, all of which are
unconditionally owing by Borrower to Agent and Lenders, without offset, defense
or counterclaim of any kind, nature or description whatsoever.
2.2 ACKNOWLEDGMENT OF SECURITY INTERESTS.
(a) Borrower and Guarantor each hereby acknowledges, confirms and
agrees that Agent, for itself and the ratable benefit of Lenders, has and shall
continue to have a security interest in and lien upon the Collateral heretofore
granted to Agent pursuant to the Existing Agreement to secure the Obligations,
as well as any Collateral granted under this Agreement or under any of the other
Financing Agreements or otherwise granted to or held by Agent or any Lender.
(b) The liens and security interests of Agent, for itself and the
ratable benefit of Lenders, in the Collateral shall be deemed to be continuously
granted and perfected from the
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earliest date of the granting and perfection of such liens and security
interests, whether under the Existing Agreement, this Agreement or any of the
other Financing Agreements.
2.3 EXISTING AGREEMENT. Borrower and Guarantor each hereby acknowledges,
confirms and agrees that: (a) the Existing Agreement has been duly executed and
delivered by Borrower and Guarantor and is in full force and effect as of the
date hereof and (b) the agreements and obligations of Borrower and Guarantor
contained in the Existing Agreement constitute the legal, valid and binding
obligations of Borrower and Guarantor enforceable against it in accordance with
their respective terms and Borrower and Guarantor each has no valid defense to
the enforcement of such obligations and (c) Agent and Lenders are entitled to
all of the rights and remedies provided for in the Existing Agreement.
2.4 RESTATEMENT.
(a) Except as otherwise stated in Section 2.2 hereof and this
Section 2.4, as of the date hereof, the terms, conditions, agreements,
covenants, representations and warranties set forth in the Existing Agreement
are hereby amended and restated in their entirety, and as so amended and
restated, replaced and superseded, by the terms, conditions, agreements,
covenants, representations and warranties set forth in this Agreement and the
other Financing Agreements, EXCEPT that nothing herein or in the other Financing
Agreements shall impair or adversely affect the continuation of the liability of
Borrower or Guarantor for the Obligations heretofore granted, pledged and/or
assigned to Agent or any Lender. The amendment and restatement contained herein
shall not, in any manner, be construed to constitute payment of, or impair,
limit, cancel or extinguish, or constitute a novation in respect of, the
Indebtedness and other obligations and liabilities of Borrower or Guarantor
evidenced by or arising under the Existing Agreement, and the liens and security
interests securing such Indebtedness and other obligations and liabilities,
which shall not in any manner be impaired, limited, terminated, waived or
released.
(b) The principal amount of the Loans and Letters of Credit
Accommodations outstanding as of the date hereof under the Existing Agreement
shall be allocated to the Loans and Letter of Credit Accommodations hereunder in
such manner and in such amounts as Agent shall determine.
2.5 RELEASE. Borrower and Guarantor each for itself and its successors and
assigns does hereby remise, release, discharge and hold Agent and each Lender,
its officers, directors, agents and employees and their respective predecessors,
successors and assigns harmless from all claims, demands, debts, sums of money,
accounts, damages, judgments, financial obligations, actions, causes of action,
suits at law or in equity, of any kind or nature whatsoever, whether or not now
existing or known, which Borrower, Guarantor or their respective successors or
assigns has had or may now or hereafter claim to have against Agent or any
Lender or its officers, directors, agents and employees and their respective
predecessors, successors and assigns in any way arising from or connected with
the Existing Agreement or the arrangements set forth therein or transactions
thereunder up to and including the date hereof.
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SECTION 3. CREDIT FACILITY
3.1 REVOLVING CREDIT FACILITY.
(a) Subject to and upon the terms and conditions contained herein,
each of the Lenders severally (and not jointly) agrees to fund its Pro Rata
Share of the Loans to Borrower from time to time under the Revolving Credit
Facility in amounts requested by Borrower, up to the amount at any one time
outstanding equal to the sum of:
(i) ninety (90%) percent of the Net Amount of Eligible Accounts,
plus
(ii) the lesser of:
(A) the sum of (1) sixty (60%) percent of the Value of
Eligible Coal Inventory plus (2) the lesser of: twenty-five
(25%) percent of the Value of Eligible Stores Inventory or
the Stores Inventory Sublimit, or
(B) $25,000,000.
(b) The Loans shall be (i) evidenced by the Revolving Credit
Notes duly executed and delivered by Borrower to each Lender,(ii) repaid,
together with interest and other amounts, in accordance with this Agreement, the
Revolving Credit Notes and the other Financing Agreements, and (iii) secured by
all of the Collateral. A Revolving Credit Note for each Lender, duly
authorized, executed and delivered by Borrower, shall be delivered by Borrower
to Agent on the date of the execution and delivery of this Agreement.
(c) Agent may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower,(i) reduce the Lending Formula
with respect to Eligible Accounts to the extent that Agent determines that: (A)
the dilution with respect to the Accounts for any period (based on the ratio of
(1) the aggregate amount of reductions in Accounts other than as a result of
payments in cash to (2) the aggregate amount of total sales) has increased in
any respect or may be reasonably anticipated to increase in any respect above
historical levels, or (B) the general creditworthiness of account debtors has
declined or (ii) reduce any of the Lending Formulas with respect to Eligible
Inventory to the extent that Agent determines that: (A) the number of days of
the turnover of the Inventory for any period has changed in any material respect
or (B) the liquidation value of the Eligible Inventory, or any category thereof,
has decreased, or (C) the nature and quality of the Inventory has deteriorated.
In determining whether to reduce any of the Lending Formulas, Agent may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing reserves as
provided in Section 3.3. Borrower may from time to time borrow, repay and
reborrow Loans in accordance with the terms hereof.
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(d) Except in Agent's discretion with the consent of all of the
Lenders, notwithstanding anything to the contrary contained in Section 3.1(a)
above, but subject to Section 3.5(a) below, (i) the aggregate outstanding
principal amount of the Loans based on Eligible Inventory consisting of Unwashed
Coal shall not exceed $3,500,000 at any time outstanding,(ii) the aggregate
outstanding principal amount of the Loans and the Tranche A Letter of Credit
Accommodations shall not exceed the Revolving Credit Facility Limit and
(iii) the aggregate outstanding principal amount of the Loans and the Letter of
Credit Accommodations shall not exceed the Maximum Credit.
3.2 LETTER OF CREDIT ACCOMMODATIONS.
(a) Subject to and upon the terms and conditions contained
herein, at the request of Borrower, pursuant to the Credit Facility, Agent
agrees, for the ratable risk of each Lender according to its Pro Rata Share, to
provide or arrange for Letter of Credit Accommodations to be issued for the
account of Borrower containing terms and conditions acceptable to Agent and the
issuer thereof. Upon each request for any Letter of Credit Accommodation,
Borrower shall specify to Agent whether the Letter of Credit Accommodation
requested will be a Tranche A Letter of Credit Accommodation or a Tranche B
Letter of Credit Accommodation and subject to Sections 3.2(d) and 3.2(e) below,
such Letter of Credit Accommodations shall be deemed either a Tranche A Letter
of Credit Accommodation or a Tranche B Letter of Credit Accommodation as
Borrower has specified in such request. Any payments made by Agent or Lenders
to any issuer and/or related parties in connection with any of the Letter of
Credit Accommodations (whether Tranche A Letter of Credit Accommodations or
Tranche B Letter of Credit Accommodations) shall constitute Loans.
(b) The Obligations arising pursuant to the Tranche B Letter of
Credit Accommodations shall be (i) evidenced by the Letter of Credit Notes duly
executed and delivered by Borrower to each Lender, (ii) repaid, together with
interest and other amounts, in accordance with this Agreement, the Letter of
Credit Notes and the other Financing Agreements, and (iii) secured by all of the
Collateral. A Letter of Credit Note for each Lender, duly authorized, executed
and delivered by Borrower, shall be delivered by Borrower to Agent on the date
of the execution and delivery of this Agreement.
(c) In addition to any customary charges, fees or expenses
charged by any bank or issuer in connection with the Letter of Credit
Accommodations, Borrower shall pay to Agent, for the ratable benefit of Lenders,
a letter of credit fee at a rate equal to one and one-half (1 1/2%) percent per
annum on the daily outstanding balance of the Letter of Credit Accommodations
for the immediately preceding month (or part thereof), payable in arrears as of
the first day of each succeeding month, except that Agent may, and upon the
written direction of the Majority Lenders shall, require Borrower to pay to
Agent, for the ratable benefit of Lenders, such letter of credit fee, without
notice, at a rate equal to three and one-half (3 1/2%) percent per annum on such
daily outstanding balance for:(i) the period on and after the date of
termination or non-renewal hereof until such time as all Obligations are
indefeasibly paid in full (notwithstanding entry of a judgment against Borrower)
and (ii) the
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period from and after the date of the occurrence of an Event of Default for so
long as such Event of Default is continuing, as determined by Agent. Such
letter of credit fee shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed and the obligation of Borrower to pay
such fee shall survive the termination or non-renewal of this Agreement.
(d) No Tranche A Letter of Credit Accommodations shall be
available unless on the date of the proposed issuance of such Tranche A Letter
of Credit Accommodations, the Excess Revolving Credit Availability (without
regard to the trade payables and book overdraft described in Section 1.38(b)(ii)
hereof) is equal to or greater than one hundred (100%) percent of the face
amount thereof and all other commitments and obligations made or incurred by
Agent or any Lender with respect thereto. Effective on the issuance of each
Tranche A Letter of Credit Accommodation and for so long as such Letter of
Credit Accommodation is outstanding, the amount of Loans and Tranche A Letter of
Credit Accommodations which might otherwise be available to Borrower under the
Revolving Credit Facility shall be reduced by such amount. No Tranche B Letter
of Credit Accommodations shall be available unless on the date of the proposed
issuance of such Tranche B Letter of Credit Accommodations, the Excess Letter of
Credit Availability is equal to or greater than one hundred (100%) percent of
the face amount thereof and all other commitments and obligations made or
incurred by Agent or any Lender with respect thereto. Effective on the issuance
of each Tranche B Letter of Credit Accommodation and for so long as such Letter
of Credit Accommodation is outstanding, the amount of Tranche B Letter of Credit
Accommodations which might otherwise be available to Borrower under the Letter
of Credit Facility shall be reduced by such amount.
(e)(i) In the event that on the date that any reduction in the
Letter of Credit Availability becomes effective (whether pursuant to Section
3.2(g), Section 3.3 below or otherwise) the then outstanding amount of the
Tranche B Letter of Credit Accommodations exceed the Letter of Credit
Availability as so reduced, the amount of such Tranche B Letter of Credit
Accommodations equal to the difference between the Letter of Credit Availability
as so reduced and the Tranche B Letter of Credit Accommodations then outstanding
shall, effective as of such date and thereafter, be deemed to constitute Tranche
A Letter of Credit Accommodations (such that as of the effective date of such
reduction in the Letter of Credit Availability, a portion of such Letter of
Credit Accommodations may thereafter be deemed Tranche A Letter of Credit
Accommodations and a portion may be deemed Tranche B Letter of Credit
Accommodations), PROVIDED, THAT, each of the following conditions is satisfied:
(A) after giving effect thereto, there shall be Excess Revolving Credit
Availability (without regard to the trade payables and book overdraft described
in Section 1.38(b)(ii) hereof) and (B) no Event of Default or act, condition or
event which with notice or passage of time or both would constitute an Event of
Default shall exist or have occurred. If such conditions are not satisfied,
upon Agent's request, Borrower shall furnish cash collateral to Agent (for
itself and the ratable benefit of Lenders) in the amount by which the then
outstanding Tranche B Letter of Credit Accommodations exceed the Letter of
Credit Availability.
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(ii) In the event that at any time thereafter the Letter of
Credit Availability shall be greater than the Tranche B Letter of Credit
Accommodations then outstanding, subject to the proviso in Section 3.3(b)(ii)
below, Agent may, at its option, or Borrower may, at its option, specify in
writing to Agent that any Tranche A Letter of Credit Accommodations then
outstanding shall be deemed Tranche B Letter of Credit Accommodations up to the
amount of the Excess Letter of Credit Availability at such time, PROVIDED, THAT,
each of the following conditions is satisfied: (A) after giving effect thereto,
there shall be Excess Letter of Credit Availability and (B) no Event of Default
or act, condition or event which with notice or passage of time or both would
constitute an Event of Default shall exist or have occurred.
(iii) To the extent that a Tranche B Letter of Credit
Accommodation (or any portion thereof) may for any reason subsequently be deemed
to be a Tranche A Letter of Credit Accommodation, the amount of the Loans and
Tranche A Letter of Credit Accommodations otherwise available hereunder shall be
reduced by the amount of such Letter of Credit Accommodation and related amounts
as provided in Section 3.2(d) above.
(f) Except in Agent's discretion, with the consent of all of the
Lenders, the aggregate amount of all outstanding Tranche B Letter of Credit
Accommodations and all other commitments and obligations made or incurred by
Agent and Lenders in connection therewith shall not at any time exceed the
Letter of Credit Availability. At any time an Event of Default exists or has
occurred and is continuing, the Agent may, and upon the written direction of the
Majority Lenders shall, require Borrower to either furnish cash collateral to
secure the reimbursement obligations to the issuer in connection with any or all
Letter of Credit Accommodations or furnish cash collateral to Agent, for itself
and the ratable benefit of Lenders, for the Letter of Credit Accommodations, and
in either case, the Letter of Credit Accommodations otherwise available to
Borrower shall not be reduced as provided in Section 3.2(d) to the extent of
such cash collateral.
(g) For purposes of determining the Letter of Credit Availability as
of the date hereof, (i) the distressed sale value of the Coal Reserves shall be
based on the report prepared by Marshall Miller & Associates for Borrower dated
November 8, 1996, PROVIDED, THAT, Borrower shall cause an appraisal of the Coal
Reserves, in form, scope and methodology acceptable to Agent and by an appraiser
acceptable to Agent and addressed to Agent and on which Agent and Lenders are
expressly permitted to rely, to be delivered to Agent and Lenders thirty (30)
days after the date hereof, and (ii) the orderly liquidation value of the
Eligible Equipment shall be based on the report prepared by MB Valuation
Services, Inc. dated October 5, 1996, PROVIDED, THAT, Borrower shall cause an
appraisal of the Eligible Equipment, in form, scope and methodology acceptable
to Agent and addressed to Lender and on which Agent and Lenders are expressly
permitted to rely, to be delivered to Agent and Lenders within thirty (30) days
after the date hereof. The Letter of Credit Availability shall then be
recalculated by Agent based on such updated appraisals of the Eligible Equipment
and the Coal Reserves. To the extent that as a result of such recalculation of
the Letter of Credit Availability or any recalculation thereafter based on any
other appraisal, the aggregate amount of the then outstanding Tranche B Letter
of Credit Accommodations
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exceed the Letter of Credit Availability, such Tranche B Letter of Credit
Accommodations shall, effective as of such date, be deemed to constitute Tranche
A Letter of Credit Accommodations as provided in Section 3.2(e) above.
(h) Borrower shall indemnify and hold Agent and Lenders harmless from
and against any and all losses, claims, damages, liabilities, costs and expenses
which Agent or any Lender may suffer or incur in connection with any Letter of
Credit Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation except resulting from the gross negligence
or wilful misconduct of Agent or any Lender as determined pursuant to a final
non-appealable order of a court of competent jurisdiction. Borrower assumes all
risks with respect to the acts or omissions of the drawer under or beneficiary
of any Letter of Credit Accommodation and for such purposes the drawer or
beneficiary shall be deemed Borrower's agent. Borrower assumes all risks for,
and agrees to pay, all foreign, Federal, State and local taxes, duties and
levies relating to any goods subject to any Letter of Credit Accommodations or
any documents, drafts or acceptances thereunder except resulting from the gross
negligence or wilful misconduct of Agent or any Lender as determined pursuant to
a final non-appealable order of a court of competent jurisdiction. Borrower
hereby releases and holds Agent and Lenders harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by Borrower, by any issuer
or correspondent or otherwise with respect to or relating to any Letter of
Credit Accommodation except resulting from the gross negligence or wilful
misconduct of Agent or any Lender as determined pursuant to a final
non-appealable order of a court of competent jurisdiction. The provisions of
this Section 3.2(h) shall survive the payment of Obligations and the termination
or non-renewal of this Agreement.
(i) Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of Agent or any Lender in
any manner. Agent and Lenders shall have no liability of any kind with respect
to any Letter of Credit Accommodation provided by an issuer other than Agent,
unless Agent has duly executed and delivered to such issuer the application or a
guarantee or indemnification in writing with respect to such Letter of Credit
Accommodation. Borrower shall be bound by any interpretation made in good faith
by Agent, or any other issuer or correspondent under or in connection with any
Letter of Credit Accommodation or any documents, drafts or acceptances
thereunder, notwithstanding that such interpretation may be inconsistent with
any instructions of Borrower. Agent shall have the sole and exclusive right and
authority to, and Borrower shall not, at any time an Event of Default exists or
has occurred and is continuing, (i) approve or resolve any questions of
non-compliance of documents,(ii) give any instructions as to acceptance or
rejection of any documents or goods or (iii) execute any and all applications
for steamship or airway guaranties, indemnities or delivery orders. At all
times, Borrower shall not, without the prior written consent of Agent, grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances, or documents or agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letter of Credit
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Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Agent may take such actions either in its
own name or in Borrower's name.
(j) Any rights, remedies, duties or obligations granted or undertaken
by Borrower to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Agent and Lenders. Any rights,
remedies, duties or obligations undertaken by Agent or any Lender to any issuer
or correspondent in any application for any Letter of Credit Accommodation, or
any other agreement by Agent or any Lender in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Agent or the applicable Lender(s)
and to apply in all respects to Borrower.
3.3 RESERVES.
(a) Without limiting any other rights and remedies of Agent or
Lenders hereunder or under the other Financing Agreements, all Loans and Letter
of Credit Accommodations otherwise available to Borrower shall be subject to
Agent's continuing right in its discretion, to establish a reserve reducing the
amounts of Loans and Letter of Credit Accommodations otherwise available to
Borrower and to increase and decrease such reserve from time to time, if and to
the extent that, in Agent's judgment, such reserve is necessary to protect Agent
and/or Lenders against possible nonpayment for any reason by Account Debtors or
possible nonpayment of any of the Obligations, or in respect of any state of
facts which does or would, with notice or passage of time or both, constitute an
Event of Default hereunder or for any other reason.
(b) Without limiting any other rights of Agent under this Agreement
with respect to the establishment of reserves or otherwise, and in addition to
any other reserves at any time established by Agent, Agent shall, effective on
June 1, 1998 establish a reserve reducing the amount of the Letter of Credit
Availability in the amount of $350,000, which reserve shall thereafter increase
effective on the first day of each month by an amount equal to $350,000 (such
reserve being referred to herein as the "Special Availability Reserve"),
PROVIDED, THAT if after giving effect to the Special Availability Reserve or any
increase in such reserve (whether as of the first day of any month pursuant to
this Section 3.3(b) or otherwise), the aggregate amount of the outstanding
Tranche B Letter of Credit Accommodations would be greater than the Letter of
Credit Availability as so reduced, then effective as of such date (i) the Letter
of Credit Availability shall instead be reduced by a portion of the Special
Availability Reserve in the amount by which the Letter of Credit Availability
immediately prior to giving effect to the Special Availability Reserve or such
increase thereof, as the case may be, exceeds the aggregate amount of the then
outstanding Tranche B Letter of Credit Accommodations, (ii) the Revolving Credit
Availability shall be reduced by a portion of the Special Availability Reserve
in the amount equal to (A) the amount of the Special Availability Reserve or
such increase thereof, as the case may be,
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minus (B) the amount of the reduction in the Letter of Credit Availability
pursuant to Section 3.3(b)(i) above, PROVIDED, THAT, if at any time thereafter,
the Letter of Credit Availability shall exceed the then outstanding Tranche B
Letter of Credit Accommodations, Agent may, at its option, or Borrower may, at
its option, specify in writing to Agent that any portion of the Special
Availability Reserve then in effect be deemed to reduce the Letter of Credit
Availability (rather than the Revolving Credit Availability) up to the amount of
the Excess Letter of Credit Availability at such time, PROVIDED, THAT, each of
the following conditions is satisfied: (A) after giving effect thereto, there
shall be Excess Letter of Credit Availability and (B) no Event of Default or
act, condition or event which with notice or passage of time or both would
constitute an Event of Default shall exist or have occurred, and (iii) so long
as there is no Excess Letter of Credit Availability, each increase in the amount
of the Special Availability Reserve thereafter, whether as of the first day of
any month pursuant to this Section 3.3(b), Section 3.2(g) hereof or otherwise,
shall reduce the amount of the Revolving Credit Availability.
(c) Borrower may, at its option, from time to time hereafter deliver,
or cause to be delivered, to Agent and Lenders, at Borrower's cost and expense,
an appraisal of the Eligible Equipment and the Coal Reserves in form, scope and
methodology acceptable to Agent, by an appraiser acceptable to Agent and
addressed to Agent and on which Agent and Lenders are expressly permitted to
rely, together with such evidence that such Equipment constitutes Eligible
Equipment as Agent may request. The Letter of Credit Availability shall be
recalculated based on the results of such appraisals and the Special
Availability shall, effective on the first day of the month after the date of
the receipt of the appraisals, be released and reduced to zero (0) until the
first day of the next month and on the first day of the next month the Special
Availability Reserve shall be $350,000 and shall increase thereafter as of the
first day of each month as provided above. After each such adjustment to the
Special Availability Reserve, it shall thereafter continue to increase as of the
first day of each month as provided above.
(d) Notwithstanding anything to the contrary set forth above, in no
event shall the Special Availability Reserve be reduced or released as set forth
herein if on the date such reduction or release would otherwise occur an Event
of Default, or act, condition or event which with notice or passage of time or
both would constitute an Event of Default shall exist or have occurred.
3.4 COMMITMENTS. The Commitments of the Lenders shall be the respective
maximum amounts set forth below each Lender's signature on the signature pages
hereto, as the same may from time to time be amended with the written
acknowledgment of the Agent in connection with the Assignment and Acceptance
executed and delivered to evidence permitted assignments by any Lender as
provided in Section 11.6 hereof.
3.5 MANDATORY PREPAYMENTS.
(a) In the event that the outstanding aggregate amount of the Loans
and the Tranche A Letter of Credit Accommodations exceeds the Revolving Credit
Availability, or
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the aggregate outstanding amount of the Tranche B Letter of Credit
Accommodations exceed the Letter of Credit Availability, or the aggregate amount
of the Loans and the Letter of Credit Accommodations outstanding at any time
shall exceed the Maximum Credit, such event shall not limit, waive or otherwise
affect any rights of Agent and Lenders in that circumstance or on any future
occasions and Borrower shall, upon demand by Agent, which may be made at any
time or from time to time, immediately repay to Agent, for the ratable benefit
of Lenders, the entire amount of any such excess(es) for which payment is
demanded or in the case of Letter of Credit Accommodations, provide cash
collateral to Agent (for itself and the ratable benefit of Lenders) in such
amount.
(b) Immediately after the receipt by Borrower or any of its
Subsidiaries of any Net Cash Proceeds on account of (i) the sale, assignment or
other disposition of assets of Borrower or any of its Subsidiaries (other than
(A) sales of Inventory in the ordinary course of Borrower's and its
Subsidiaries' business, or (B) so long as no Event of Default exists or has
occurred, sales of worn-out or obsolete Equipment to the extent permitted under
Section 7.12 in the aggregate amount of up to $250,000 for all such sales of
such Equipment), or (ii) the loss of or damage to all or any portion of the
assets of Borrower or any of its Subsidiaries, Borrower shall absolutely and
unconditionally, without notice or demand, make a payment to Agent for the
ratable benefit of Lenders as a mandatory prepayment of the then outstanding
principal amount of the Loans, in an amount equal to one hundred (100%) percent
of all such Net Cash Proceeds, PROVIDED, THAT, Borrower or such Subsidiary shall
not be required to make such mandatory prepayment with the proceeds of sales of
worn-out or obsolete Equipment as provided in clause (i) above prior to an Event
of Default, so long as all of such proceeds are used within ninety (90) days
after the date of receipt thereof to purchase new Equipment free and clear of
any security interest, lien, claim or other encumbrance.
(c) Subject to Section 10.1(e) hereof, all such payments in respect
of the Loans pursuant to this Section 3.5 shall be without premium or penalty.
All interest accrued on the principal amount of the Loans paid pursuant to this
Section 3.5 shall be paid, or may be charged by Agent to the loan account(s) of
Borrower, at Agent's option, on the date of such payment.
3.6 INTEREST.
(a) Interest on all of the Loans and other non-contingent Obligations
shall be payable by Borrower to Agent for the ratable benefit of Lenders at the
Interest Rate.
(b) In no event shall the Interest Rate and other charges hereunder
exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that a court determines that Agent or Lenders have received interest and
other charges hereunder in excess of the highest rate applicable hereto, such
excess shall be deemed received on account of, and shall automatically be
applied to reduce, the Obligations other than interest in the inverse order of
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maturity, and the provisions hereof shall be deemed amended to provide for the
highest permissible rate.
(c) Subject to the foregoing, all interest charges hereunder or in
connection herewith shall be (i) computed as provided herein and in the other
Financing Agreements and (ii) paid monthly to Agent on the first day of each
calendar month, or, at Agent's option, charged to Borrower's account(s)
maintained by Agent as of the first day of each calendar month and deemed paid
by the first amounts subsequently credited thereto.
(d) Without limiting the continuing right of Agent and Lenders to
demand payment of the Loans and other Obligations, or any portion thereof, in
accordance with the terms of this Agreement, or any of the other Financing
Agreements, all interest accruing hereunder on and after the date of any Event
of Default or termination or nonrenewal hereof, shall be payable on demand.
3.7 CLOSING FEE. Borrower shall pay to Agent for the ratable benefit of
Lenders, based on their Pro Rata Shares, a fee of $600,000, which closing fee is
fully earned and payable on the date hereof.
3.8 SERVICING FEE. Borrower shall pay monthly to Agent, for its own
account, a servicing fee in an amount equal to $12,500 for each month or part
thereof during the term of the Credit Facility and for so long thereafter as any
of the Obligations are outstanding, which fee shall be fully earned as of and
payable in advance on the date hereof and on the first day of each month
hereafter.
3.9 UNUSED LINE FEE. Borrower shall pay to Agent, for the ratable benefit
of Lenders, based on their Pro Rata Shares, an unused line fee at a rate equal
to one-quarter of one (1/4%) percent per annum calculated upon the amount (if
any) by which (a) the Maximum Credit exceeds (b) the average aggregate daily
principal balance of the Loans and Letter of Credit Accommodations outstanding
during the immediately preceding month (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each month in arrears.
3.10 AUTHORIZATION TO MAKE LOANS. Agent is authorized to make the Loans
and provide the Letter of Credit Accommodations for the account and risk of
Lenders based upon telephonic or other instructions received from anyone
purporting to be an officer of Borrower or other authorized person or, at the
discretion of Agent, if such Loans are necessary to satisfy any Obligations.
All requests for Loans or Letter of Credit Accommodations hereunder shall
specify the date on which the requested Loan is to be made or Letter of Credit
Accommodation established (which day shall be a Business Day) and the amount of
the requested Loan and Letter of Credit Accommodation. Requests received after
11:00 a.m. New York City time on any day shall be deemed to have been made as of
the opening of business on the immediately following Business Day. All Loans
and Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made
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to, and at the request of and for the benefit of, Borrower when deposited to the
credit of Borrower or otherwise disbursed or established in accordance with the
instructions of Borrower or in accordance with the terms and conditions of this
Agreement.
3.11 SETTLEMENT PROCEDURES.
(a) Notwithstanding any other provision of this Agreement, and in
order to administer the Credit Facility in an efficient manner and to reduce the
number of fund transfers between Lenders and Agent, Borrower, Lenders and Agent
agree that Agent may (but shall not be obligated to), and Borrower and Lenders
hereby irrevocably authorize the Agent to, fund, on behalf of the Lenders, Loans
pursuant to Section 3.1, subject to the procedures for settlement set forth in
this Section 3.11; PROVIDED, THAT,(i) other than to fund Loans to make payments
to the issuer of any of the Letter of Credit Accommodations or for costs and
expenses as provided for herein, Agent shall in no event fund such Loans if the
Agent shall have received written notice from the Majority Lenders on the
Business Day prior to the day of the proposed Loan that one or more of the
conditions precedent contained in Section 4 will not be satisfied on the day of
the proposed Loan, and (ii) Agent shall not otherwise be required to determine
that, or take notice whether, the conditions precedent in Section 4 have been
satisfied.
(b) With respect to all periods for which the Agent has funded Loans
pursuant to Section 3.11(a) above, the amount of each Lender's Pro Rata Share in
the outstanding Loans and Letter of Credit Accommodations shall be computed
weekly, and shall be adjusted upward or downward on the basis of the amount of
the outstanding Loans as of the close of business on the Business Day
immediately preceding the date of each settlement computation; PROVIDED, THAT,
Agent retains the absolute right at any time or from time to time to make the
above described adjustments at intervals more frequent than weekly. Agent shall
deliver to each of Lenders after the end of each week, or such lesser period or
periods as Agent shall determine, a summary statement of the amount of
outstanding Loans for such period (such week or lesser period or periods being
hereinafter referred to as a "Settlement Period"). If the summary statement is
sent by Agent and received by a Lender prior to 12:00 noon (New York City time)
then such Lender shall make the settlement transfer described in this Section by
no later than 2:00 p.m. (New York City time) on the day such summary statement
was sent, and if such summary statement is sent by Agent and received by a
Lender after 12:00 noon (New York City time), such Lender shall make such
settlement transfer by no later than 2:00 p.m. (New York City time) on the next
Business Day following the date of the receipt of such summary statement. If,
as of the end of any Settlement Period, the amount of a Lender's Pro Rata Share
of the outstanding Loans is more than such Lender's Pro Rata Share of the
outstanding Loans as of the end of the previous Settlement Period, then such
Lender shall forthwith (but in no event later than the time set forth in the
preceding sentence) transfer to Agent by wire transfer in immediately available
funds the amount of the increase. If the amount of a Lender's Pro Rata Share of
the outstanding Loans in any Settlement Period is less than the amount of such
Lender's Pro Rata Share of the outstanding Loans for the previous Settlement
Period, Agent shall forthwith transfer to such Lender by wire transfer in
immediately available funds the amount of the decrease. The obligation of each
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of the Lenders to transfer such funds and effect such settlement shall be
irrevocable and unconditional and without recourse to or warranty by Agent.
Each of Agent and Lenders agrees to mark its books and records at the end of
each Settlement Period to show at all times the dollar amount of its Pro Rata
Share of the outstanding Loans and Letter of Credit Accommodations. Each Lender
shall only be entitled to receive interest on its Pro Rata Share of the Loans
which have been funded by such Lender.
(c) To the extent that Agent has made any such amounts available and
the settlement described above shall not yet have occurred, upon repayment of
any Loans by Borrower, Agent may apply such amounts repaid directly to any
amounts made available by Agent pursuant to this Section 3.11. In lieu of
weekly or more frequent settlements, Agent may at any time require each Lender
to provide Agent with immediately available funds representing its Pro Rata
Share of each Loan, prior to Agent's disbursement of such Loan to or for the
benefit of Borrower. In such event, all Loans under this Agreement shall be
made by the Lenders simultaneously and proportionately to their Pro Rata Shares.
No Lender shall be responsible for any default by any other Lender in the other
Lender's obligation to make a Loan requested hereunder nor shall the Commitment
of any Lender be increased or decreased as a result of the default by any other
Lender in the other Lender's obligation to make a Loan requested hereunder.
(d) If Agent is not funding a particular Loan pursuant to Section
3.11(a) above on any day, Agent may assume that each Lender will make available
to Agent such Lender's Pro Rata Share of the Loan requested or otherwise made on
such day and Agent may, in its discretion, but shall not be obligated to, cause
a corresponding amount to be made available to Borrower on such day. If Agent
makes such corresponding amount available to a Borrower and such corresponding
amount is not in fact made available to Agent by such Lender, Agent shall be
entitled to recover such corresponding amount on demand from such Lender
together with interest thereon for each day from the date such payment was due
until the date such amount is paid to Agent at the Interest Rate. During the
period in which such Lender has not paid such corresponding amount to Agent,
notwithstanding anything to the contrary contained in this Agreement or any of
the other Financing Agreements, the amount so advanced by Agent to Borrower
shall, for all purposes hereof, be a Loan made by Agent for its own account.
Upon any such failure by a Lender to pay Agent, Agent shall promptly thereafter
notify Borrower of such failure and the Borrower shall immediately pay such
corresponding amount to Agent for its own account.
(e) Nothing in this Section 3.11 or otherwise in this Agreement or
the other Financing Agreements shall be deemed to require Agent to advance funds
on behalf of any Lender or to relieve any Lender from its obligation to fulfill
its Commitment hereunder or to prejudice any rights that Agent or Borrower may
have against any Lender as a result of any default by such Lender hereunder.
3.12 USE OF PROCEEDS. All Loans and Letter of Credit Accommodations made
or provided by Agent on behalf of Lenders or made or provided by Lenders to or
for the account of Borrower pursuant to this Agreement and the other Financing
Agreements shall be
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used by Borrower for general operating and working capital purposes of Borrower
and such other purposes as permitted by the terms hereof.
SECTION 4. CONDITIONS PRECEDENT TO LOANS AND
OTHER FINANCIAL ACCOMMODATIONS
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS. Each of the following is a condition precedent to the initial
Loans and Letter of Credit Accommodations pursuant to this Agreement and the
other Financing Agreements which shall be satisfied in a manner acceptable to
Agent and each Lender (any of which may be waived, in whole or in part, only by
Agent and all of Lenders in writing):
(a) Agent shall have received evidence, in form and substance
satisfactory to Agent, that the arrangements of Borrower with Van-American and
the USF&G Bonding Companies to provide Bonds for the business of Borrower are in
full force and effect and adequate for the continuing operation of the business
of Borrower and its Subsidiaries;
(b) Agent shall have received, in form and substance satisfactory to
Agent, a consolidated pro-forma balance sheet of Guarantor and its Subsidiaries
reflecting the initial transactions contemplated hereunder, including, but not
limited to, the transactions contemplated by the Senior Note Agreements, the
Loans and Letter of Credit Accommodations made or provided by Agent on behalf of
Lenders to Borrower which are outstanding on the date hereof and the use of the
proceeds of the Loans as provided herein, accompanied by a certificate dated of
even date herewith of the chief financial officer of Guarantor acceptable to
Agent stating that such pro-forma balance sheet represents the reasonable, good
faith opinion of such officer as to the subject matter thereof as of the date of
such certificate;
(c) Agent shall have received, in form and substance satisfactory to
Agent, evidence that: (i) the Senior Notes, the other Senior Note Agreements
and all agreements, documents and instruments relating thereto have been duly
authorized, executed and delivered by the parties thereto in accordance with
their terms, (ii) Guarantor has received from or on behalf of the holders of the
Senior Notes cash or other immediately available funds in the aggregate amount
of approximately $145,875,000 constituting the proceeds from the issuance of the
Senior Notes after the underwriters' commission and other costs, fees and
expenses payable in connection with the issuance of the Senior Notes and
(iii) Borrower has received a loan from Guarantor in the amount of $150,000,000
with the proceeds from the issuance of the Senior Notes of which Borrower has
received $145,875,000 in cash or other immediately available funds, with the
balance applied to the underwriters' commission and other costs, fees and
expenses payable in connection with the issuance of the Senior Notes and the
other transactions contemplated hereunder;
(d) Agent shall have received, in form and substance satisfactory to
Agent, all other consents, waivers, acknowledgments, releases, terminations and
other agreements and
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documents from third persons which Agent may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements; PROVIDED, THAT, the foregoing shall not include
the consents of lessors of Real Property to the Mortgages;
(e) Borrower shall have established a lockbox and the Blocked
Accounts for its collections and the transfer thereof to Agent, which shall be
in form and substance satisfactory to Agent, in accordance with Section 9.1
hereof;
(f) Agent shall have received evidence of insurance and loss payee
endorsements required under this Agreement and under the other Financing
Agreements, in form and substance satisfactory to Agent, and certificates of
insurance policies and/or endorsements naming Agent as loss payee, all at
Borrower's cost and expense;
(g) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Agent has a valid perfected first priority security
interest in all of the Collateral;
(h) Agent shall have received and reviewed UCC search results for all
jurisdictions in which assets of Borrower are located in the United States,
which search results shall be in form and substance satisfactory to Agent;
(i) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Borrower has available to it approximately
$46,200,000 from the proceeds of the loan on the date hereof by Guarantor to
Borrower with proceeds from the issuance of the Senior Notes to be used to
purchase certain Equipment of Borrower currently leased by Borrower;
(j) Agent shall have received (i) evidence, in form and substance
satisfactory to Agent, that all Indebtedness and other obligations and
liabilities of Guarantor, Borrower and its Subsidiaries to Harvard have been
paid and satisfied in full with a portion of the proceeds of the loan by
Guarantor to Borrower on the date hereof with a portion of the proceeds from the
issuance of the Senior Notes and that Guarantor, Borrower and its Subsidiaries
have been released by Harvard from all such Indebtedness, and other obligations
and liabilities, and (ii) all releases, terminations and such other documents as
Agent may request to evidence and effectuate the termination by Harvard of its
financing arrangements with Borrower, in form and substance satisfactory to
Agent, and the termination and release by Harvard of any interest in and to any
assets and properties of Borrower and each Obligor, duly authorized, executed
and delivered by Harvard, including, but not limited to, (A) UCC termination
statements for all UCC financing statements previously filed by it, as secured
party and Borrower or any Obligor, as debtor and (B) satisfactions and
discharges of any mortgages, deeds of trust or deeds to secure debt by Borrower
or any Obligor in favor of Harvard, in form acceptable for recording in the
appropriate government office;
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(k) Agent shall have received evidence, in form and substance
satisfactory to Agent, that all Indebtedness and other obligations and
liabilities of Guarantor and Borrower to Renco Group outstanding as of the date
hereof (including (i) the Indebtedness of Guarantor to Renco Group arising
pursuant to the loan by Renco Group to Guarantor on March 14, 1997 in the amount
of $2,000,000 and all interest thereon, (ii) the Indebtedness of Borrower to
Renco Group arising pursuant to the loan by Renco Group to Borrower in the
amount of $3,000,000 evidenced by the Unsecured Promissory Note, dated October
31, 1997, issued by Borrower payable to Renco Group and (iii) all outstanding
and unpaid management fees payable by Borrower or Guarantor to Renco Group) have
been paid and satisfied in full with a portion of the proceeds from the issuance
of the Senior Notes, PROVIDED, THAT, the total amount of all such payments shall
not exceed $5,800,000;
(l) the Excess Availability, as determined by Agent, as of the date
hereof, shall be not less than $20,000,000 after giving effect to the initial
Loans and Letter of Credit Accommodations outstanding as of the date hereof;
(m) Agent shall have received, in form and substance satisfactory to
Agent, an opinion letter of counsel to Borrower with respect to the Senior Note
Agreements, the transactions contemplated therein, the Financing Agreements and
such other matters as Agent or its counsel may request;
(n) this Agreement, the other Financing Agreements and all
instruments and documents hereunder and thereunder shall have been duly
authorized, executed and delivered to Agent, in form and substance satisfactory
to Agent.
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT ACCOMMODATIONS.
Each of the following is an additional condition precedent to the Loans and
Letter of Credit Accommodations to Borrower, including the initial Loans and
Letter of Credit Accommodations and any future Loans and Letter of Credit
Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all respects with the
same effect as though such representations and warranties had been made on and
as of the date of the making of each such Loan or providing each such Letter of
Credit Accommodation and after giving effect thereto, except to the extent that
such representation and warranties expressly relate solely to an earlier date
(in which case such representations and warranties shall have been true and
accurate on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any Governmental
Authority shall, and Agent shall not have received any notice that any action,
suit, investigation, litigation or proceeding is pending or threatened in any
court or before any arbitrator or Governmental Authority which (i) purports to
enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans or
(B) the consummation of the transactions contemplated pursuant to the terms
hereof or the other Financing Agreements or (ii) has or could reasonably be
expected to have a Material Adverse Effect; and
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(c) no Event of Default and no act, condition or event which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. COLLATERAL
5.1 As collateral security for the prompt performance, observance and
payment in full of all of the Obligations, Borrower hereby grants, pledges and
assigns to Agent for itself and the ratable benefit of Lenders, and confirms,
reaffirms and restates its prior grant to Agent for itself and the ratable
benefit of Lenders of, continuing security interests in and liens upon, and
rights of setoff against, all of the following now owned and hereafter acquired
or existing assets and properties of Borrower (which assets and properties,
together with all other collateral security for the Obligations granted to or
otherwise held or acquired by Agent or any Lender are referred to herein as the
"Collateral"):
(a) (i)all Accounts;(ii) all monies, securities and other property
and the proceeds thereof, now or hereafter held or received by, or in transit
to, Agent or any Lender or Participant from or for Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise and all of
Borrower's deposits (general or special), balances, sums and credits with Agent
or any Lender or Participant at any time existing; (iii) all right, title and
interest, and all enforcement and other rights, remedies, and security and
liens, in, to and in respect of the Accounts and other Collateral, including,
without limitation, rights of stoppage in transit, replevin, repossession,
sequestration and reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, guaranties or other contracts of suretyship with
respect to the Accounts, deposits or other security for the obligation of any
Account Debtor, credit and other insurance;(iv) all right, title and interest
in, to and in respect of all goods relating to Accounts, including, without
limitation, all goods described in invoices, documents, contracts or instruments
with respect to, or otherwise representing or evidencing, any Account or other
Collateral, including, without limitation, all returned, reclaimed or
repossessed goods;(v) all deposit accounts; (vi) all securities and other
investment property; and (vii) all other general intangibles of every kind and
description, including, without limitation, (A) the interests of Borrower in any
surety, insurance or bonds, letters of credit or other guaranties, (B)
tradenames and trademarks and the goodwill of the business symbolized thereby,
(C) patents, (D) copyrights, (E) licenses, (F) claims and other choses in
action, and (G) Federal, State, local and foreign tax refund claims of all
kinds;
(b) all Inventory;
(c) all Equipment;
(d) all Real Property;
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(e) all present and future books and records relating to any of the
above, including, without limitation, all ledgers, books of account, records,
tapes, cards, computer programs, computer disks or tape files, computer
printouts, computer runs, computer data and other computer prepared information
in the possession or control of Borrower, any computer service bureau or other
third person; and
(f) all products and proceeds of the foregoing, in any form,
including, without limitation, any insurance proceeds and any claims against
third persons for loss or damage to or destruction of any or all of the
foregoing.
5.2 Notwithstanding anything to the contrary set forth in Section 5.1
above, the types or items of Collateral described in such Section shall not
include any rights or interests of Borrower as lessee of or tenant under any
leasehold interests of Borrower in coal mines or concentrations of coal, if,
under the terms of the lease giving rise to such leasehold interest, the valid
grant of a mortgage, security interest or lien therein to Agent is prohibited
(or the consent of the other party to the grant of a mortgage, security interest
or lien therein to Agent is required) and such prohibition has not been or is
not waived or the consent of the other party to such lease has not been or is
not otherwise obtained or under applicable law such prohibition cannot be
waived. With respect to those leasehold interests of Borrower or any Obligor as
lessee of or tenant under coal mines or concentrations of coal for which the
lease thereof to Borrower or such Obligor is not recorded in the appropriate
real estate records, the representations and warranties with respect to the
perfection of the mortgage, security interest and lien of Agent set forth in
Section 6.8 hereof shall not apply, so long as Borrower shall use its best
efforts after the date hereof to have the leases or acceptable memoranda thereof
recorded in the appropriate real estate records (without the payment of
compensation to the lessor under such lease for its consent to such recording),
other than such leases which by their terms prohibit the grant of a mortgage,
security interest or lien therein to Agent or require the consent of the other
party to such grant. As to such leases or memoranda thereof which may be
recorded after the date hereof, without limiting any of the other rights of
Agent or Lenders hereunder, Borrower shall, at its expense, promptly execute and
deliver to Agent, and cause its Subsidiaries to execute and deliver to Agent,
such amendments to the Mortgages or additional agreements, in form and substance
satisfactory to Agent, as Agent may request. Borrower will pay any taxes, fees
and other charges for recording any of such amendments to the Mortgages or
additional agreements.
5.3 Notwithstanding anything to the contrary set forth in Section 5.1, the
types or items of Collateral described in such Section shall not include any
rights or interests of Borrower in and to unearned premiums or returned premiums
payable as a result of the cancellation of policies to the extent such premiums
have been financed as permitted under Section 7.4 hereof, if under the terms of
the arrangements with A.I. Credit Corp. (or such other lender acceptable to
Agent providing loans or other financial accommodations to finance its insurance
premiums), the grant of a security interest or lien therein to Agent is
prohibited and such prohibition is not waived or the consent of A.I. Credit
Corp. (or such other lender) has not been or is not otherwise obtained.
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5.4 Notwithstanding anything to the contrary contained in Section 5.1
above, the types or items of Collateral described in such Section shall not
include any Equipment which is, or at the time of Borrower's acquisition thereof
shall be, subject to a purchase money mortgage or other purchase money lien or
security interest (including capitalized or finance leases) permitted under
Section 7.4 hereof if: (a) the valid grant of a security interest or lien to
Agent in such item of Equipment is prohibited by the terms of the agreement
between Borrower and the holder of such purchase money mortgage or other
purchase money lien or security interest and such prohibition has not been or is
not waived, or the consent of the holder of the purchase money mortgage or other
purchase money lien or security interest has not been or is not otherwise
obtained and (b) the purchase money mortgage or other purchase money lien or
security interest on such item of Equipment is or shall become valid and
perfected.
SECTION 6. REPRESENTATIONS AND WARRANTIES
Borrower and Guarantor hereby jointly and severally represent and warrant
to Agent and Lenders as follows (and as to Guarantor, only to the extent
applicable to Guarantor as set forth herein), which representations and
warranties are continuing and shall survive the execution and delivery hereof,
and the truth and accuracy of each, together with the representations and
warranties in the other Financing Agreements, being a continuing condition of
each Loan and Letter of Credit Accommodations:
6.1 ORGANIZATION AND QUALIFICATION.
(a) Each of Borrower, Guarantor and the Subsidiaries of Borrower is a
duly organized and validly existing corporation in good standing under the laws
of its state or jurisdiction of incorporation, with perpetual corporate
existence, and has the corporate power and authority to own its properties and
to transact the business in which it is engaged or presently proposes to engage.
Each of Borrower, Guarantor and the Subsidiaries of Borrower has qualified to do
business as a foreign corporation in the states and other jurisdictions listed
on Schedule 6.1(a) hereto, which constitute all states or other jurisdictions
where the nature of its business or the ownership or use of property requires
such qualification.
(b) Borrower and Guarantor do not have any Subsidiaries as of the
date hereof, except as set forth on Schedule 6.1(b) hereto.
6.2 CORPORATE POWER AND AUTHORITY. Borrower has the corporate power and
authority to borrow and each of Borrower, Guarantor and the Subsidiaries of
Borrower has the corporate power and authority to execute, deliver and carry out
the terms and provisions of this Agreement and the other Financing Agreements
and all other agreements, instruments and documents delivered by Borrower,
Guarantor and the Subsidiaries of Borrower pursuant hereto and thereto
applicable to it, and each of Borrower, Guarantor and the Subsidiaries of
Borrower has taken or caused to be taken all necessary corporate action to
authorize the
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execution, delivery and performance of this Agreement, the other Financing
Agreements and the other agreements relating hereto or thereto to which it is a
party, the present and future borrowings by Borrower hereunder and thereunder
and the execution, delivery and performance of the instruments and documents
delivered and to be delivered by it pursuant hereto and thereto. This Agreement
and the other Financing Agreements to which it is a party constitute and will
constitute legal, valid and binding obligations of Borrower and Guarantor,
enforceable in accordance with their respective terms.
6.3 ISSUANCE OF SENIOR NOTES; DISPOSITION OF PROCEEDS.
(a) The Senior Notes have been duly authorized, issued and delivered
by Guarantor and all agreements, documents and instruments related thereto,
including, but not limited to, the Senior Note Indenture, have been duly
authorized, executed and delivered and the transactions contemplated thereunder
performed in accordance with their terms by the respective parties thereto in
all respects, including the fulfillment (not merely the waiver) of all
conditions precedent set forth therein. All actions and proceedings required by
the Senior Note Agreements and the agreements, documents and instruments related
thereto and applicable law or regulation have been taken and the transactions
required thereunder have been duly and validly taken and consummated. Neither
the execution and delivery of the Senior Notes, any of the other Senior Note
Agreements or any of the instruments and documents to be delivered pursuant
thereto, nor the consummation of the transactions therein contemplated, nor
compliance with the provisions therein contemplated, has violated or will
violate any law or regulation or any order or decree of any court or other
Governmental Authority in any respect or does or will conflict with or result in
the breach of, or constitute a default in any respect under, any indenture,
mortgage, deed of trust, agreement or instrument to which Guarantor, Borrower or
its Subsidiaries is a party or may be bound, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the property of
Guarantor, Borrower or its Subsidiaries (except as specifically contemplated
hereunder or under the other Financing Agreements) or violate any provision of
the Certificate of Incorporation or Bylaws of Guarantor, Borrower or its
Subsidiaries.
(b) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the issuance of
the Senior Notes and the transactions described therein and in the other Senior
Notes Agreements and to the best of Borrower's knowledge, no governmental or
other action or proceeding has been threatened or commenced, seeking any
injunction, restraining order or other order which seeks to void or otherwise
modify the issuance of the Senior Notes or any of the other Senior Note
Agreements.
(c) Guarantor has used the proceeds from the issuance of the Senior
Notes to make an unsecured loan on the date hereof to Borrower in the amount of
$150,000,000 of which Borrower has received cash or other immediately available
funds in the amount of $145,875,000 on the date hereof, after deduction of
$6,300,000 for deferred debt issuance costs and financing fees and the accrual
of $2,175,000 for financing fees in connection with the issuance of the Senior
Notes and the other transactions contemplated hereunder.
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(d) Borrower has used a portion of the proceeds of such loan from
Guarantor on the date hereof as follows: (i) approximately $30,190,755.56 has
been used to repay the principal amount of the Obligations outstanding under the
Existing Agreement, (ii) approximately $4,830,338 has been used to repay all of
the Indebtedness of Borrower and Guarantor to Harvard outstanding as of the date
hereof (other than contingent interest payable on May 31, 1998) of which
$4,500,000 is for principal, (iii) approximately $3,000,000 has been used to
repay all Indebtedness of Borrower to Renco Group arising pursuant to the loan
by Renco Group to Borrower evidenced by the Unsecured Promissory Note, dated
October 31, 1997, issued by Borrower payable to Renco Group, (iv) approximately
$700,000 has been used to pay all outstanding and unpaid management fees due to
Renco Group as of the date hereof pursuant to the Management Agreement,
(v) approximately $2,782,000 has been used to make certain contractual payments
to certain executives of Borrower required under the terms of the net worth
appreciation agreements of Borrower with such executives, (vi) approximately
$6,300,000 has been or will be used to pay fees and expenses related to the
issuance of the Senior Notes and the financing arrangements provided for herein
(of which $2,175,000 has been accrued for such fees and expenses),
(vii) approximately $27,818,000 has been used to pay a dividend to Guarantor,
and (viii) approximately $2,100,000 has been used to repay all Indebtedness of
Borrower to Guarantor arising pursuant to the loan by Guarantor to Borrower on
March 14, 1997 in the original principal amount of $2,000,000. Guarantor has
used the proceeds of the repayment of such loan referred to in clause (viii) to
repay on the date hereof all Indebtedness of Guarantor to Renco Group arising
pursuant to the loan by Renco Group to Guarantor on March 14, 1997 in the
original principal amount of $2,000,000 (and including all interest thereon).
(e) In addition, Borrower shall, after the date hereof, use certain
proceeds from such loan by Guarantor to Borrower on the date hereof as follows:
(i) approximately $46,200,000 shall be used to purchase certain Equipment
currently financed pursuant to leases and (ii) approximately $9,438,600 shall be
used to buy out certain long-term royalty agreements with third parties.
(f) Borrower has delivered, or caused to be delivered, to Agent,
true, correct and complete copies of the Senior Note Agreements. Set forth in
Schedule 6.3 hereto is a correct and complete list of the Senior Note Agreements
and all other agreements, documents and instruments existing as of the date
hereof by Borrower and its Affiliates in connection therewith.
6.4 CAPITALIZATION.
(a) All of the issued and outstanding shares of Capital Stock of
Borrower are directly and beneficially owned and held by Guarantor and have been
duly authorized and are fully paid and nonassessable, free and clear of all
claims, liens, pledges and encumbrances of any kind. All of the issued and
outstanding shares of Capital Stock of Guarantor are directly and beneficially
owned and held by Renco Group and have been duly authorized and are fully paid
and non-assessable, free and clear of all claims, liens, pledges and
encumbrances of any kind.
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(b) After the creation of the Obligations, the issuance of the Senior
Notes, the security interests of Agent for itself and the ratable benefit of
Lenders and the other transactions contemplated hereunder, Borrower shall
continue to be able to pay its debts as they mature and has (and has reason to
believe it will continue to have) sufficient capital (and not unreasonably small
capital) to carry on its business and all businesses in which it is about to
engage. The assets and properties of Borrower at a fair valuation and at their
present fair salable value are, and will be, greater than the Indebtedness and
other liabilities of Borrower, and including subordinated and contingent
liabilities computed in the amount which, to the best of Borrower's knowledge,
represents an amount which can reasonably be expected to become an actual or
matured liability. Borrower has sufficient capital to carry on all businesses
and transactions in which it now engages or proposes to engage in, is solvent
and will, in the reasonable, good faith determination of Borrower as of the date
hereof, continue to be solvent after the creation of the Obligations and the
security interests in favor of Agent for itself and the ratable benefit of
Lenders, and is able to pay its debts as they mature.
6.5 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAW.
(a) Each of Borrower, Guarantor and the Subsidiaries of Borrower is
not in default under, in violation of or in contravention of, in any respect,
any indenture, mortgage, deed of trust, deed to secure debt, agreement or
instrument to which it is a party or by which it or any of its assets or
properties may be or are bound, in each case where such default, violation or
contravention has or would have a Material Adverse Effect, except as described
on Schedule 6.5(a) hereto.
(b) Neither the execution and delivery of this Agreement, the other
Financing Agreements, or any of the instruments and documents to be delivered
pursuant hereto or thereto, nor the consummation of the transactions herein or
therein contemplated, nor compliance with the provisions hereof or thereof, has
violated any law or regulation or any order or decree of any court or
Governmental Authority in any respect or does or will conflict with or result in
the breach of, or constitute a default in any respect under, any indenture,
mortgage, deed of trust, agreement or instrument to which Borrower, Guarantor or
any of the Subsidiaries of Borrower is a party or may be bound, which in any
case has or would have a Material Adverse Effect, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the property of
Borrower, Guarantor or any of the Subsidiaries of Borrower (except as
specifically contemplated hereunder or under the other Financing Agreements) or
violate any provision of the Certificate of Incorporation or By-Laws of
Borrower, Guarantor or any of the Subsidiaries of Borrower.
(c) Borrower has obtained all material permits, licenses, approvals,
consents, certificates, orders or authorizations of any Governmental Authority
required for the lawful conduct of its business and is in compliance in all
material respects with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority (including, but not limited
to, the Kentucky Natural Resources and Environmental Protection Cabinet, West
Virginia Department of Environmental Protection, Kentucky Department for Surface
Mining Reclamation and Enforcement, West Virginia Department of Surface Mining
and
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Reclamation, Federal Mine Safety and Health Administration, Federal Office of
Surface Mining and Reclamation, and the Federal Environmental Protection Agency)
relating to its business (including, without limitation, those set forth in or
promulgated pursuant to ERISA, the Occupational Safety and Health Act of 1970,
as amended, the Surface Mining Control and Reclamation Act of 1977, the Mine
Safety and Health Act of 1977, the Fair Labor Standards Act of 1938, as amended,
the Code, and the Environmental Laws). Schedule 6.5(c) hereto sets forth all
material permits, licenses, approvals, consents, certificates, orders or
authorizations (collectively, "Permits") issued or held by Borrower as of the
date hereof by any Federal, State or local Governmental Authority. The Permits
constitute all permits, licenses, approvals, consents, certificates, orders or
authorizations necessary for Borrower to own and operate its business as
presently conducted or proposed to be conducted where the failure to have such
Permits would have a Material Adverse Effect. Except as described on Schedule
6.5(c) hereto, all of the Permits are valid and subsisting and in full force and
effect and there are no actions, claims or proceedings pending or threatened
that seek the revocation, cancellation, suspension or modification of any of the
Permits.
6.6 GOVERNMENTAL APPROVAL. No consent, approval or other action of, or
filing with, or notice to any Governmental Authority is required in connection
with the execution, delivery and performance of this Agreement, the other
Financing Agreements or any of the instruments or documents to be delivered
pursuant hereto or thereto, except for the filing of UCC financing statements
and the recording of the Mortgages (or as applicable, amendments thereto).
6.7 CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS.
(a) The address of the principal place of business and chief
executive office of Borrower is as set forth on Schedule 6.7 hereto, which
address is the mailing address for such principal place of business and chief
executive office. The books and records relating to the Accounts of Borrower
are located at such address. The Collateral is located only at the locations
set forth on Schedule 6.7.
(b) Borrower may open any new location within the continental United
States provided it (i) gives Agent thirty (30) days prior written notice of the
intended opening of any such new location and (ii) executes and delivers, or
causes to be executed and delivered, to Agent such agreements, documents, and
instruments consistent with the other then existing Financing Agreements to the
extent applicable or otherwise as Agent may deem reasonably necessary or
desirable to protect its interests in the Collateral to be located in such
location, including, without limitation, UCC financing statements and agreements
from appropriate Persons acknowledging the liens of Agent on the Collateral to
be located in such location, waiving any lien or claim by such Person to the
Collateral and permitting Agent access to the premises to exercise its rights
and remedies and otherwise deal with the Collateral.
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6.8 PRIORITY OF LIENS/TITLE TO PROPERTIES.
(a) The security interests and liens granted to Agent for itself and
the ratable benefit of Lenders under this Agreement and the other Financing
Agreements constitute valid and perfected liens and security interests in and
upon the Collateral subject only to the liens indicated on Schedule 6.8 hereto
and the liens permitted under Section 7.4 hereof.
(b) Each of Borrower, Guarantor and the Subsidiaries of Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except (i) those directly in favor of or assigned to Agent and such others
as are specifically permitted under the provisions of this Agreement as listed
on Schedule 6.8 hereto or under Section 7.4 hereof and the other Financing
Agreements and (ii) any lien, mortgage, encumbrance or other defect in its title
to any leasehold interest in Real Property as a result of a lien, mortgage,
encumbrance or other defect in the title of the lessor with respect to such
leasehold interest, PROVIDED, THAT,(A) Borrower, Guarantor and the Subsidiaries
of Borrower do not have any notice of any such lien, mortgage, encumbrance or
other defect,(B) Borrower has conducted a limited investigation with respect to
title thereof in accordance with its customary practice and (C) has verified the
title of the lessors at such time as Borrower prepares to mine any such Real
Property. Each of Borrower, Guarantor and the Subsidiaries of Borrower has
peaceful and undisturbed possession of all Real Property and Equipment and such
other assets as may be necessary for its business as presently conducted or
proposed to be conducted and under all leases, licenses and easements necessary
for the operation of its properties and business. None of such leases, licenses
and easements contain any unusual or burdensome provisions which might
materially affect or impair the operations of such properties and business and
all such leases, licenses and easements are valid and subsisting and in full
force and effect.
6.9 TAX RETURNS. Except as set forth on Schedule 6.9, each of Borrower,
Guarantor and the Subsidiaries of Borrower has filed, or caused to be filed all
Federal, State, county, local, foreign and other tax returns, reports and
declarations which are required to be filed by it and as to which an extension
has not been granted and has paid or caused to be paid all taxes shown to be due
and payable on said returns and reports or in any assessment received by it, to
the extent that such taxes have become due and payable, except taxes the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to Borrower, Guarantor or such Subsidiary of
Borrower and with respect to which adequate reserves have been set aside on its
books. Adequate provision has been made for the payment of all accrued and
unpaid Federal, State, county, local, foreign and other taxes whether or not yet
due and payable and whether or not disputed.
6.10 LITIGATION. Except as set forth on Schedules 6.9, 6.10 and 6.14
hereto, there is no present investigation by any Governmental Authority pending
or, to the best of the knowledge of Borrower or Guarantor, threatened against or
affecting Borrower, Guarantor or the Subsidiaries of Borrower or their
respective properties or business and there is no present action, suit,
proceeding or claim by any Person pending or, to the best of the knowledge of
Borrower or Guarantor, threatened against Borrower, Guarantor or the
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Subsidiaries of Borrower or its or their assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, the other Financing
Agreements, or other instruments, agreements or documents delivered in
connection herewith or therewith, which if adversely determined with respect to
it, would have a Material Adverse Effect.
6.11 INTELLECTUAL PROPERTY. Each of Borrower, Guarantor and the
Subsidiaries of Borrower owns or licenses all patents, trademarks, servicemarks,
logos, tradenames, trade secrets, know-how, copyrights, or licenses and other
rights with respect to any of foregoing, which are necessary for the operation
of its business as presently conducted or proposed to be conducted. No
trademark, servicemark, logo or similar item at any time used by Borrower,
Guarantor or the Subsidiaries of Borrower which is owned by another person or
owned by Borrower, Guarantor or the Subsidiaries of Borrower subject to any
security interest, lien, collateral assignment, pledge or other encumbrance in
favor of any person other than Agent is affixed to any Eligible Inventory. To
the best of the knowledge of Borrower or Guarantor, no product, process, method,
substance, part or other material presently contemplated to be sold by or
employed by Borrower infringes any patent, trademark, servicemark, tradename,
copyright, license or other right owned by any other Person and no claim or
litigation is pending or threatened against or affecting Borrower contesting its
right to sell or use any such product, process, method, substance, part or other
material.
6.12 ACCOUNTS. Each Eligible Account represents a valid and legally
enforceable indebtedness based upon an actual and bona fide sale and delivery of
goods or rendition of services in the ordinary course of the businesses of
Borrower which has been finally accepted by the Account Debtor and for which the
Account Debtor is unconditionally liable to make payment of the amount stated in
each invoice, document or instrument evidencing the Eligible Account in
accordance with the terms thereof, without offset, defense or counterclaim. All
statements made and all unpaid balances appearing in the invoices, documents and
instruments evidencing each Eligible Account are true and correct and are in all
respects what they purport to be and all signatures and endorsements that appear
thereon are genuine and all signatories and endorsers have full capacity to
contract and each Account Debtor is solvent and financially able to pay in full
the Eligible Account when it matures. None of the transactions underlying or
giving rise to any Account violates any Federal, State or foreign laws or
regulations, and all documents relating to the Accounts are legally sufficient
under such laws or regulations and shall be legally enforceable in accordance
with their terms and all recording, filing and other requirements of giving
public notice under any applicable law have been duly complied with.
6.13 EMPLOYEE BENEFITS.
(a) Each of Borrower, Guarantor and the Subsidiaries of Borrower has
not engaged in any transaction in connection with which Borrower, Guarantor and
the Subsidiaries of Borrower or any of its or their ERISA Affiliates, could be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code.
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(b) No liability to the Pension Benefit Guaranty Corporation (other
than liability for premiums in the ordinary course of the business of Borrower)
has been or is expected by Borrower or Guarantor to be incurred with respect to
any employee pension benefit plan of Borrower, Guarantor and their Subsidiaries
or any of its or their ERISA Affiliates. There has been no reportable event
(within the meaning of Section 4043(b) of ERISA) or any other event or condition
with respect to any employee pension benefit plan of Borrower, Guarantor and the
Subsidiaries of Borrower or any of its or their ERISA Affiliates which presents
a risk of termination of any such plan by the Pension Benefit Guaranty
Corporation.
(c) Full payment has been made of all amounts which Borrower,
Guarantor and the Subsidiaries of Borrower or any of its or their ERISA
Affiliates is required under Section 302 of ERISA and Section 412 of the Code to
have paid under the terms of each employee pension benefit plan as contributions
to such plan as of the last day of the most recent fiscal year of such plan
ended prior to the date hereof, except as set forth on Schedule 6.13 hereto, and
no accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, exists with respect to any
employee pension benefit plan.
(d) The current value of all vested accrued benefits under all
employee pension benefit plans maintained by Borrower, Guarantor or the
Subsidiaries of Borrower that are subject to Title IV of ERISA does not exceed
the current value of the assets of such plans allocable to such vested accrued
benefits, except as set forth on Schedule 6.13 hereto. The terms "current
value" and "accrued benefit" have the meanings specified in Section
4062(b)(1)(A) and Section 3 of ERISA, respectively.
(e) Neither Borrower, Guarantor and the Subsidiaries of Borrower nor
any of its or their ERISA Affiliates is or has ever been obligated to contribute
to any "multi-employer plan" (as such term is defined in Section 4001(a)(3) of
ERISA) that is subject to Title IV of ERISA, except as set forth on Schedule
6.13 hereto.
6.14 ENVIRONMENTAL COMPLIANCE.
(a) Except as set forth on Schedule 6.14 hereto, neither Borrower nor
its Subsidiaries have generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates any applicable Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder in any material respect and the
operations of Borrower and its Subsidiaries comply in all material respects with
all Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder.
(b) Except as set forth on Schedule 6.14 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any Governmental Authority or any other person nor is any pending or,
to the best of Borrower's knowledge, threatened, with respect to any
noncompliance with or violation of the
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requirements of any Environmental Law by Borrower or any of its Subsidiaries in
any material respect or the release, spill or discharge, threatened or actual,
of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacturer, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
Borrower or its Subsidiaries or their businesses, operations or assets or any
properties at which Borrower or its Subsidiaries transported, stored or disposed
of any Hazardous Materials in any material respect.
(c) Except as set forth on Schedule 6.14 hereto, neither Borrower nor
its Subsidiaries have any material liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Except as set forth on Schedule 6.14, Borrower and its
Subsidiaries have all material licenses, certificates, approvals and other
Permits required to be obtained or filed in connection with the operations of
Borrower and its Subsidiaries under any Environmental Law and all of such
licenses, permits, certificates, approvals and other Permits are valid and in
full force and effect.
6.15 BANK ACCOUNTS. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower or its Subsidiaries maintained
at any bank or other financial institution are set forth on Schedule 6.15
hereto, subject to the right of Borrower to establish new accounts in accordance
with Section 7.19 below.
6.16 INVESTMENT COMPANY. Borrower, Guarantor and their Subsidiaries are
not an "investment company", or an "affiliated person" or "promoter" or
"principal underwriter", as such terms are defined in the Investment Company Act
of 1940, as amended. The making of the Loans by Agent on behalf of Lenders or
by Lenders, the application of the proceeds and the repayment thereof by
Borrower and the performance of the transactions contemplated herein will not
violate any provision of the Investment Company Act of 1940, as amended, or any
rule, regulation or order issued pursuant thereto.
6.17 REGULATION U; SECURITIES EXCHANGE ACT OF 1934. Borrower does not own
any "margin stock" as such term is defined in Regulation U, as amended of the
Board. The proceeds of the borrowings made pursuant to this Agreement and the
other Financing Agreements will be used by Borrower only for the purposes
contemplated hereunder. None of the proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin stock or for
the purpose of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry any margin stock or for any other purpose which
might cause any of the Loans to be considered a "purpose credit" within the
meaning of Regulation U of the Board, as amended. Borrower will not take, nor
will Borrower permit any agent acting in its behalf to take, any action which
might cause this Agreement or the other Financing Agreements, or instruments
delivered pursuant hereto or thereto, to violate
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any regulation of the Board or to violate the Securities Exchange Act of 1934 or
any state or other securities laws, in each case as in effect on the date hereof
or as amended hereafter.
6.18 NO MATERIAL ADVERSE CHANGE. There has been no material adverse change
in the business, assets, condition (financial or otherwise) or results of
operations of Borrower, Guarantor and the Subsidiaries of Borrower (taken as a
whole) since the date of the most recent financial statements with respect
thereto submitted to Agent or field examination with respect thereto conducted
by Agent.
6.19 FINANCIAL STATEMENTS.
(a) None of the financial statements, reports and other information
furnished or to be furnished by Borrower or Guarantor to Agent or any Lender
with respect to Guarantor and its Subsidiaries contain, as of their respective
dates, any untrue statement of material fact or (taken as a whole) omit to state
any material fact necessary to make the information therein not misleading.
Such financial statements and reports were and will be prepared in accordance
with GAAP consistently applied, and shall fairly present the consolidated and
consolidating financial condition and results of operations of the applicable
Persons, as of the dates and for the periods indicated thereon.
(b) The unaudited Pro Forma Consolidated Balance Sheet of Guarantor
and Borrower as of January 31, 1998 furnished by Guarantor and Borrower to Agent
and Lenders taken as a whole represent the reasonable, good faith opinion of
Guarantor, Borrower and their management as to the subject matter thereof and
has been prepared in accordance with applicable guidelines of the American
Institute of Certified Public Accountants.
6.20 DISCLOSURE.
(a) The information contained in the representations and warranties
of Borrower and Guarantor set forth in this Agreement, the other Financing
Agreements, or in any other instrument, document, list, certificate, statement,
schedule or exhibit heretofore delivered or to be delivered to Agent or any
Lender, as contemplated in this Agreement or in the other Financing Agreements,
does not contain and will not contain any untrue statement of a material fact
and (taken as a whole) does not omit and will not omit to state a material fact
necessary in order to make the information contained herein or therein not
misleading.
(b) After giving effect to the transactions contemplated by this
Agreement, the other Financing Agreements, and the other instruments or
documents delivered in connection herewith and therewith, there does not exist
and there has not occurred any act, condition or event which constitutes an
Event of Default or which, with notice or passage of time or both would
constitute an Event of Default.
6.21 LABOR DISPUTES. There is no collective bargaining agreement or other
labor contract covering employees of Borrower or its Subsidiaries, except as set
forth on Schedule 6.21 hereto. There is no pending or threatened strike, work
stoppage, material unfair labor
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practice claims, or other material labor dispute against or affecting Borrower
or its Subsidiaries or their respective employees, except as set forth on
Schedule 6.21 hereto.
6.22 CORPORATE NAME; PRIOR TRANSACTIONS. Borrower has not, during the past
five years, been known by or used any other corporate or fictitious name or been
a party to any merger or consolidation, or acquired all or substantially all of
the assets of any Person, or acquired any of its property or assets out of the
ordinary course of business, except as set forth on Schedule 6.22 hereto.
6.23 MATERIAL CONTRACTS. All of the Material Contracts of Borrower and its
Subsidiaries are set forth on Schedule 6.23 hereto. Borrower has delivered
true, correct and complete copies of such Material Contracts to Lender on or
before the date hereof. Borrower is not in breach of or in default under any
Material Contract, except as set forth on Schedule 6.5(a) hereto.
SECTION 7. ADDITIONAL COVENANTS
In addition to the covenants set forth in the other Financing Agreements,
each of Borrower and Guarantor hereby jointly and severally covenants to and
agrees with Agent and Lenders that Borrower and Guarantor (to the extent
applicable to Guarantor as set forth herein) shall comply with the following
covenants applicable to it, or cause the same to be complied with, unless Agent
shall otherwise consent in writing:
7.1 TRADENAMES. Some of Borrower's invoices may from time to time be
rendered to customers under the tradenames listed on Schedule 6.22 hereto
(which, together with any new tradenames used after the date hereof are referred
to collectively as the "Tradenames" and individually, as a "Tradename"). As to
the Tradenames used by it, and the related Accounts:
(a) Each Tradename is a tradename (and not an independent corporation
or other legal entity) by which Borrower may identify and sell or lease certain
of its goods or services and conduct a portion of its business.
(b) All Accounts and proceeds thereof (including any returned
merchandise) which arise from the sale or lease of goods or rendition of
services invoiced under the Tradename shall be owned solely by Borrower and
shall be subject to the security interests of Lender and other terms of this
Agreement and the other Financing Agreements.
(c) All assignments or confirmatory schedules of Accounts delivered
to Lender by Borrower, whether in the name of any of the Tradenames or of
Borrower, shall be executed by Borrower as owner of such assigned Accounts.
(d) New Tradenames may be used by Borrower, but only if (i) Lender is
given at least thirty (30) days prior written notice of the intended use of any
new Tradename and
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(ii) such supplemental financing statements or similar instruments as Lender may
request shall be executed and delivered to Lender by Borrower for filing or
recording by Lender prior to the use of such new Tradename.
7.2 SUBSIDIARIES. Borrower shall not form or acquire any Subsidiaries
without the prior written consent of Agent. In the event Agent so consents,
promptly upon such formation or acquisition, (a) such Subsidiary shall be
subject to the terms of this Agreement and bound by the terms and conditions
hereof applicable to the Subsidiaries of Borrower; (b) Borrower shall cause any
such Subsidiary to execute and deliver to Agent, in form and substance
satisfactory to Agent and its counsel: (i) an absolute and unconditional
guarantee of payment of any and all present and future Obligations of Borrower
to Agent and Lenders containing terms substantially similar to those guarantees
entered into by the existing Subsidiaries of Borrower in favor of Agent and
Lenders as of the date hereof, (ii) a security agreement granting to Agent for
itself and the ratable benefit of Lenders a first security interest and lien
(except as otherwise consented to in writing by Agent) upon all of the assets of
such Subsidiary containing terms substantially similar to the security
agreements entered into by the existing Subsidiaries of Borrower in favor of
Agent and Lenders as of the date hereof, (iii) related Uniform Commercial Code
Financing Statements, and (iv) such other agreements, documents and instruments
as Agent may require, including, but not limited to, supplements and amendments
hereto and other loan agreements or instruments evidencing Indebtedness of such
new Subsidiary to Agent and Lenders; and (c) promptly upon Agent's request:
(i) Borrower shall execute and deliver to Agent, in form and substance
satisfactory to Agent, a pledge and security agreement granting to Agent for
itself and the ratable benefit of Lenders a first pledge of and lien on all of
the issued and outstanding shares of Capital Stock of such Subsidiary and
(ii) Borrower shall deliver the original stock certificates evidencing such
shares of Capital Stock together with stock powers with respect thereto duly
executed in blank, and (iii) the amount of the investment by Borrower in the
Capital Stock of such Subsidiary and any other amounts paid by Borrower to such
Subsidiary shall not exceed the amount permitted under Section 7.5 hereof.
7.3 INDEBTEDNESS. Borrower shall not, and shall not permit any Subsidiary
to, create, incur, assume or permit to exist, contingently or otherwise, any
Indebtedness, except:
(a) the Obligations;
(b) Indebtedness consisting of unsecured current liabilities incurred
in the ordinary course of its business;
(c) Indebtedness incurred in the ordinary course of its business
secured only by liens permitted under Section 7.4(c) hereof;
(d) Indebtedness of Borrower or its Subsidiaries to the extent
permitted under Section 7.4(d) hereof;
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(e) contingent Indebtedness permitted under Section 7.5 hereof
(including contingent Indebtedness arising under the Senior Note Guarantee to
the extent permitted under Section 7.5 hereof);
(f) Indebtedness incurred in the ordinary course of business
consisting of unsecured non-current accruals and deferred liabilities relating
to deferred compensation and taxes, environmental liabilities, post-employment
benefits for health care, pensions, life insurance and long term disability
benefits and similar items;
(g) Indebtedness of Borrower and its Subsidiaries to the USF&G
Bonding Companies under the USF&G Bonding Agreements (as in effect on the date
hereof or as amended, restated or replaced with the prior written consent of
Agent, except to the extent such consent is not required pursuant to Section
7.3(g)(ii)(A) below); PROVIDED, THAT, (i) Borrower may only make payments in
accordance with the terms of the agreement or instrument evidencing or giving
rise to such Indebtedness as in effect on the date hereof, (ii) Borrower shall
not, directly, or indirectly, (A) amend, modify, alter or change the terms of
such Indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof, EXCEPT, THAT, Borrower may, after prior written
notice to Agent, amend, modify, alter or change the terms thereof so long as
such Indebtedness and any agreement, document or instrument related thereto
shall not at any time include terms or conditions which in any manner adversely
affect or restrict or limit Agent or any Lender or any rights of Agent or any
Lender or the rights of Borrower and its Subsidiaries with respect to the
financing arrangements provided for herein, as determined in good faith by Agent
or include terms and conditions which are more restrictive or burdensome than
the terms or conditions of the most restrictive or burdensome of any other
material Indebtedness of Borrower as in effect on the date hereof or (B) at any
time on or after an Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of Default, shall
exist or have occurred and be continuing, redeem, retire, defease, purchase or
otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose, and (iii) Borrower and its Subsidiaries shall furnish
to Agent all notices or demands in connection with such Indebtedness either
received by Borrower or its Subsidiaries or on its or their behalf, promptly
after the receipt thereof, or sent by Borrower or its Subsidiaries or on its or
their behalf, concurrently with the sending thereof, as the case may be;
(h) Indebtedness of Borrower and its Subsidiaries to Frontier under
the General Agreement of Indemnity, dated May 4, 1998, by and among Frontier,
Borrower and its Subsidiaries (as in effect on the date hereof or as amended,
restated or replaced with the prior written consent of Agent, except to the
extent such consent is not required pursuant to Section 7.3(h)(ii)(A) below);
PROVIDED, THAT, (i) Borrower may only make payments in accordance with the terms
of the agreement or instrument evidencing or giving rise to such Indebtedness as
in effect on the date hereof, (ii) Borrower shall not, directly, or indirectly,
(A) amend, modify, alter or change the terms of such Indebtedness or any
agreement, document or instrument related thereto as in effect on the date
hereof, EXCEPT, THAT, Borrower may, after prior written notice to Agent, amend,
modify, alter or change the terms thereof so
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long as such Indebtedness and any agreement, document or instrument related
thereto shall not at any time include terms or conditions which in any manner
adversely affect or restrict or limit Agent or any Lender or any rights of Agent
or any Lender or the rights of Borrower and its Subsidiaries with respect to the
financing arrangements provided for herein, as determined in good faith by Agent
or include terms and conditions which are more restrictive or burdensome than
the terms or conditions of the most restrictive or burdensome of any other
Indebtedness of Borrower as in effect on the date hereof or (B) at any time on
or after an Event of Default, or act, condition or event which with notice or
passage of time or both would constitute an Event of Default, shall exist or
have occurred and be continuing, redeem, retire, defease, purchase or otherwise
acquire such Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose,(iii) all of the Indebtedness of Borrower and its Subsidiaries
to Frontier is and shall at all times be unsecured, EXCEPT THAT Borrower may
grant security interests to Frontier on certain assets and properties of
Borrower and its Subsidiaries to secure such Indebtedness, PROVIDED, THAT, as of
or prior to such grant of security interest, each of the following conditions is
satisfied: (A) Agent shall have received not less than ten (10) Business Days'
prior written notice of the intention of Borrower to grant such security
interests, together with such information with respect thereto as Agent may
request,(B) Agent shall have received, in form and substance satisfactory to
Agent and Co-Agent, an intercreditor agreement between Frontier and Agent (as
acknowledged and agreed to by Borrower and its Subsidiaries) providing for,
INTER ALIA, the subordination by Frontier of any security interests, liens or
other interests or claims of Frontier in and to any assets and properties of
Borrower or its Subsidiaries to the security interests in and liens upon such
assets and properties in favor of Agent (for itself and the ratable benefit of
Lenders), as duly authorized, executed and delivered by Frontier, Borrower and
its Subsidiaries, and (C) the security agreement or other agreements with
respect thereto by Borrower or its Subsidiaries shall be in form and substance
satisfactory to Agent, and (iv) Borrower and its Subsidiaries shall furnish to
Agent all notices or demands in connection with such Indebtedness either
received by Borrower or its Subsidiaries or on its or their behalf, promptly
after the receipt thereof, or sent by Borrower or its Subsidiaries or on its or
their behalf, concurrently with the sending thereof, as the case may be;
(i) Indebtedness of Borrower and its Subsidiaries arising after the
date hereof to any of the Bonding Companies (other than the USF&G Bonding
Companies and Frontier); PROVIDED, THAT each of the following conditions is
satisfied: (i) Agent shall have received not less than ten (10) Business Days'
prior written notice of the intention to incur such Indebtedness, which notice
shall be set forth in reasonable detail satisfactory to Agent, the person to
whom such Indebtedness will be owed with respect thereto and such other
information with respect thereto as Agent may reasonably request,(ii) Agent
shall have received true, correct and complete copies of all agreements,
documents and instruments evidencing or otherwise related to such Indebtedness,
as duly authorized, executed and delivered by the parties thereto,(iii) such
Indebtedness shall be incurred by Borrower at commercially reasonably rates and
terms in a BONA FIDE arm's length transaction,(iv) such Indebtedness shall not
at any time include terms and conditions which in any manner adversely affect or
restrict or limit Agent or any Lender or any rights of Agent or any Lender or
the rights of Borrower and its Subsidiaries with respect to the financing
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arrangements provided for herein as determined in good faith by Agent or which
are more restrictive or burdensome than the terms or conditions of the most
restrictive or burdensome of any other material Indebtedness of Borrower as in
effect on the date hereof,(v) if such Indebtedness is to be secured, (A) Agent
shall have received, in form and substance satisfactory to Agent and Co-Agent,
an intercreditor agreement between such person and Agent (as acknowledged and
agreed to by Borrower and its Subsidiaries) providing for, INTER ALIA, the
subordination by such person of any security interests, liens or other interests
or claims of such person in and to any assets and properties of Borrower or its
Subsidiaries to the security interests in and liens upon such assets and
properties in favor of Agent (for itself and the ratable benefit of Lenders), as
duly authorized, executed and delivered by such person, Borrower and its
Subsidiaries and (B) the security agreement or other agreement with respect
thereto by Borrower and its Subsidiaries shall be in form and substance
satisfactory to Agent, (vi) Borrower shall not, directly or indirectly,(A)
amend, modify, alter or change the terms of the agreements with respect to such
Indebtedness EXCEPT, THAT, Borrower may, after prior written notice to Agent,
amend, modify, alter or change terms thereof so long as after giving effect
thereto, Borrower and its Subsidiaries are in compliance with Section 7.3(i)(iv)
above, or (B) at any time on or after an Event of Default, or act, condition or
event which with notice or passage of time or both would constitute an Event of
Default, shall exist or have occurred and be continuing, redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invent any sums for such purpose, and (vii) Borrower and
its Subsidiaries shall furnish to Agent all notices or demands in connection
with such Indebtedness either received by Borrower or its Subsidiaries or on its
or their behalf promptly after the receipt thereof, or sent by Borrower or its
Subsidiaries or on its or their behalf, concurrently with the sending thereof,
as the case may be;
(j) Indebtedness of Borrower to Guarantor arising pursuant to the
loan by Guarantor to Borrower on the date hereof with the proceeds from the
issuance of the Senior Notes; PROVIDED, THAT, (i) such Indebtedness is, and
shall at all times remain, unsecured,(ii) the terms and conditions of such
Indebtedness shall be acceptable in all respects to Agent, (iii) such
Indebtedness shall not exceed $150,000,000 (less the aggregate amount of all
repayments or repurchases of principal in respect thereof) plus interest thereon
at the rate applicable as in effect on the date hereof, (iv) such Indebtedness
is, in all respects, subject to, and subordinate in right of payment to, the
right of Agent and Lenders to receive the prior indefeasible payment and
satisfaction in full of all of the Obligations, (v) Agent shall have received,
in form and substance satisfactory to Agent, a subordination agreement providing
for, INTER ALIA, the terms of the subordination in right of payment of such
Indebtedness of Borrower to the prior indefeasible payment and satisfaction in
full of the Obligations, duly authorized, executed and delivered by Borrower and
Guarantor, (vi) Borrower shall not, directly or indirectly, make any payments in
respect of such Indebtedness, including, but not limited to, any prepayments or
other non-mandatory payments, EXCEPT, THAT, Borrower may make regularly
scheduled semi-annual payments of interest in respect of such Indebtedness,
PROVIDED, THAT, (A) the proceeds of each such payment by Borrower to Guarantor
shall be used to make substantially contemporaneous payments then due by
Guarantor to the holders of the Senior Notes in accordance with the terms of the
Senior Notes (as in effect on the date hereof) and (B) as of the date of each
such
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payment and after giving effect thereto, no Event of Default or act, condition
or event which with notice or passage of time or both would constitute an Event
of Default shall exist or have occurred and be continuing, (vii)Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change any terms of
such Indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof, EXCEPT, THAT, Borrower may, after prior written
notice to Agent, amend, modify, alter or change the terms thereof so as to
extend the maturity thereof or defer the timing of any payments in respect
thereof, or to forgive or cancel any portion of such Indebtedness (other than
pursuant to payments thereof), or to reduce the interest rate or any fees in
connection therewith or to make any covenants contained therein less restrictive
or burdensome as to Borrower or (B) redeem, retire, defease, purchase or
otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose except to the extent permitted under Section
7.7(b)(iv) hereof, and (viii) Borrower shall furnish to Agent all notices or
demands in connection with such Indebtedness either received by Borrower or on
its behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be;
(k) Indebtedness of Borrower to A.I. Credit Corp. (or another lender
acceptable to Agent providing loans or other financial accommodations to
Borrower to finance its insurance premiums) in respect of unearned premiums
payable on certain insurance policies maintained by Borrower pursuant to the
terms of the Premium Finance Agreement, Disclosure Statement and Security
Agreement between Borrower and A.I. Credit Corp. (or any other similar type of
agreement with substantially similar terms between Borrower and another lender
acceptable to Agent providing loans or other financial accommodations to
Borrower to finance its insurance premiums), PROVIDED, THAT, (i) in no event
shall the total amount of such Indebtedness outstanding at any time exceed
$3,000,000, (ii) Agent shall have received true, correct and complete copies of
all agreements, documents and instruments evidencing or otherwise related to
such Indebtedness, as duly authorized, executed and delivered by the parties
thereto, (iii) Borrower shall not, directly or indirectly,(A) amend, modify,
alter or change the terms of the agreements with respect to such Indebtedness;
EXCEPT, THAT, Borrower may, after prior written notice to Agent, amend, modify,
alter or change the terms thereof so as to extend the maturity thereof or defer
the timing of any payments in respect thereof, or to forgive or cancel any
portion of such Indebtedness (other than pursuant to payments thereof), or to
reduce the interest rate or any fees in connection therewith, or to make any
covenants contained therein less restrictive or burdensome as to Borrower or
otherwise more favorable to Borrower, or (B) redeem, retire, defease, purchase
or otherwise acquire such Indebtedness, or set aside or otherwise deposit or
invest any sums for such purpose and (iv) Borrower shall furnish to Agent all
notices or demands in connection with such Indebtedness either received by
Borrower or on its behalf after the receipt thereof, or sent by Borrower or on
its behalf, concurrently with the sending thereof, as the case may be;
(l) Indebtedness of Borrower in respect of Interest Rate Protection
Obligations incurred in the ordinary course of business;
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(m) unsecured Indebtedness of Borrower to any Subsidiaries arising
after the date hereof pursuant to loans by such Subsidiaries to Borrower,
PROVIDED, THAT,(i) such Indebtedness is subject to, and subordinate in right of
payment to, the right of Agent and Lenders to receive the prior indefeasible
payment and satisfaction in full of all of the Obligations on terms and
conditions acceptable to Agent,(ii) Agent shall have received, in form and
substance satisfactory to Agent, a subordination agreement providing for, INTER
ALIA, the terms of the subordination in right of payment of such Indebtedness of
Borrower to the prior indefeasible payment and satisfaction in full of all of
the Obligations, duly authorized, executed and delivered by such Subsidiaries
and Borrower,(iii) Borrower shall not, directly or indirectly make, or be
required to make, any payments in respect of such Indebtedness so long as any of
the Obligations are outstanding and unpaid and this Agreement has not been
terminated,(iv) Borrower shall not, directly or indirectly, (A) amend, modify,
alter or change any terms of such Indebtedness or any agreement, document or
instrument related thereto, or (B) redeem, retire, defease, purchase or
otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose, and (v) Borrower shall furnish to Agent all notices,
demands or other materials in connection with such Indebtedness either received
by Borrower or on its behalf, promptly after receipt thereof, or sent by
Borrower or on its behalf, concurrently with the sending thereof, as the case
may be;
(n) unsecured Indebtedness of Subsidiaries of Borrower to Borrower
arising after the date hereof pursuant to loans by Borrower to such Subsidiaries
to the extent such loans by Borrower are permitted under Section 7.5 below,
PROVIDED, THAT, such Indebtedness shall not be evidenced by any promissory note
or other instrument, unless the original of such note or other instrument is
pledged and delivered to Agent (with such endorsement thereof as Agent may
require);
(o) unsecured Indebtedness of Subsidiaries of Borrower to other
Subsidiaries of Borrower arising after the date hereof pursuant to loans by such
Subsidiaries to such other Subsidiaries, PROVIDED, THAT, such Indebtedness shall
not be evidenced by any promissory note or other instrument, unless the original
of such note or other instrument is pledged and delivered to Agent (with such
endorsement thereof as Agent may require);
(p) Indebtedness of Borrower existing on the date hereof which is
described on Schedule 7.3 hereto; PROVIDED, THAT: (i)Borrower may only make
regularly scheduled payments of principal and interest as set forth on Schedule
7.3, except as otherwise permitted in Section 7.3(p)(ii) below,(ii) Borrower
shall not, directly or indirectly, (A) make any prepayments or other
nonmandatory payments in respect of such Indebtedness (except that Borrower may
make prepayments with proceeds from the loan by Guarantor to Borrower on the
date hereof with proceeds from the issuance of the Senior Notes in connection
with the purchase of certain Equipment currently financed pursuant to leases or
to buy certain long-term royalty agreements with third parties as set forth in
Section 6.3(e) hereof or to prepay certain other Indebtedness as provided in
Section 6.3(d) hereof), or (B) amend, modify, alter or change the terms of the
agreements with respect to such Indebtedness or otherwise, EXCEPT, THAT,
Borrower may, after prior written notice to Agent, amend, modify, alter or
change the terms thereof so as to extend the maturity thereof or defer the
timing of any
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payments in respect thereof, or to forgive or cancel any portion of such
Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or to make any covenants
contained therein less restrictive or burdensome as to Borrower or Guarantor, or
(C) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose (except as
otherwise permitted hereunder), and (iii) Borrower shall furnish to Agent all
notices, demands or other materials in connection with such Indebtedness either
received by Borrower or on its behalf, promptly after the receipt thereof or
sent by Borrower or on its behalf concurrently with the sending thereof, as the
case may be.
7.4 LIMITATION ON LIENS. Borrower and Guarantor shall not, and shall not
permit any Subsidiary of Borrower to, create or suffer to exist any mortgage,
pledge, security interest, lien or encumbrance of any nature whatsoever on any
of its or their assets or properties (including, without limitation, the
Collateral) or defect in title or restriction upon the use of their personal
properties, in each case, whether now owned or hereafter acquired, except:
(a) the security interests in and liens upon the Collateral in favor
of Agent and Lenders;
(b) the security interests in and liens upon the Collateral granted by
Borrower, Guarantor and certain of the Subsidiaries of Borrower to the USF&G
Bonding Companies pursuant to the USF&G Bonding Agreements (as in effect on the
date hereof) to secure the Indebtedness of Borrower, Guarantor and certain of
the Subsidiaries of Borrower to the USF&G Bonding Companies permitted under
Section 7.3(g) hereof, which security interests and liens are, in all respects,
subject and subordinate in priority to the security interests and liens of Agent
and Lenders as set forth in the Intercreditor Agreement, dated March 14, 1997,
by and among Agent, Lenders, Harvard, Van-American and the USF&G Bonding
Companies, as acknowledged and agreed to by Borrower, Guarantor and certain of
the Subsidiaries of Borrower (which Intercreditor Agreement is in full force and
effect as of the date hereof);
(c) tax, mechanics, materialmen, warehousemen and other like
statutory liens arising in the ordinary course of Borrower's or any of its
Subsidiaries' or Guarantor's respective businesses to the extent (i) such liens
secure Indebtedness which is not overdue or (ii) until foreclosure or similar
proceedings shall have been commenced, such liens secure Indebtedness relating
to claims or liabilities which are (A) fully insured and being defended at the
sole cost and expense and the sole risk of the insurer or (B) being contested in
good faith by appropriate proceedings diligently pursued and available to
Borrower or its Subsidiaries prior to the commencement of foreclosure or other
similar proceedings and are adequately escrowed for or reserved against in
Agent's judgment;
(d) purchase money mortgages or other purchase money liens or
security interests upon any specific fixed assets hereafter acquired or liens or
security interests existing on any such future fixed assets at the time of
acquisition thereof and including in any
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event any leases with respect to Capitalized Lease Obligations; PROVIDED, THAT:
(i) the aggregate amount of all Indebtedness secured by such purchase money
mortgages or other liens or security interests arising after the date hereof
shall not exceed $20,000,000 outstanding at any time, (ii) no such purchase
money lien or security interest (or lease with respect to Capitalized Lease
Obligations, as the case may be) covering specific future fixed assets or as
refinanced shall extend to or cover any other property other than the specific
fixed assets so acquired, or acquired subject to such lien or security interest
(or lease) and the proceeds thereof,(iii) such lien or security interest only
secures the obligation to pay the purchase price of such specific fixed assets
(or the Capitalized Lease Obligations, as the case may be),(iv) the principal
amount secured thereby shall not exceed one hundred (100%) percent of the cost
of the fixed assets so acquired (or leased), and (v) at the time of the granting
of such mortgage, lien or security interest, no Event of Default, or act,
condition or event which with notice or passage of time or both would constitute
an Event of Default, shall exist or have occurred and be continuing;
(e) liens and security interests of A.I. Credit Corp. (or another
lender acceptable to Agent providing loans or other financial accommodations to
Borrower to finance its insurance premiums) on the insurance policies maintained
by Borrower and unearned premiums with respect thereto, PROVIDED, THAT,
(i) Agent shall have received a list and description, in form and substance
satisfactory to Agent, of the insurance policies subject to such liens and
security interests and (ii) Agent shall have received evidence, in form and
substance satisfactory to Agent, that A.I. Credit (or such other lender) does
not have any security interest or other interest or claim in or to any assets of
Borrower other than claims to unearned or returned premiums payable as a result
of the cancellation of such policies;
(f) liens and security interests in favor of any of the Bonding
Companies (other than the USF&G Bonding Companies) arising after the date hereof
to secure Indebtedness permitted under Section 7.3(h) hereof if such security
interests and liens are granted to Frontier or to secure Indebtedness permitted
under Section 7.3(i) if such security interests and liens are granted to any of
the other Bonding Companies, PROVIDED, THAT, (i) such security interests and
liens are permitted under Sections 7.3(h) and 7.3(i) hereof, respectively and
(ii) such security interests and liens are, in all respects, subject and
subordinate to the security interests and liens of Agent and Lenders pursuant to
an intercreditor agreement by and between Agent and Frontier or such other of
the Bonding Companies, as the case may be, as acknowledged and agreed to by
Borrower, Guarantor and their Subsidiaries, which intercreditor agreement shall
be in form and substance satisfactory to Agent and duly authorized, executed and
delivered by Frontier or such other Bonding Companies, as the case may be, and
Borrower, Guarantor and their Subsidiaries; and
(g) the liens, encumbrances or security interests listed on Schedule
6.8 hereto or with respect to the Real Property as permitted under the
Mortgages, PROVIDED, THAT, such liens, encumbrances or security interests with
respect to the Real Property:(i) do not interfere with the use of the Real
Property or the ordinary conduct of the businesses of Borrower or its
Subsidiaries as presently conducted or proposed to be conducted thereon and (ii)
do not impair the value of the affected property.
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7.5 LOANS, INVESTMENTS, GUARANTEES, ETC. Borrower shall not, and shall
not permit any Subsidiary to, directly or indirectly, make any loans or advance
money or property to any Person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all
or a substantial part of the assets or property of any Person, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly)
the Indebtedness, performance, obligations or dividends of any Person or agree
to do any of the foregoing, EXCEPT:
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in Cash Equivalents which shall be pledged and
delivered to Agent upon Agent's request;
(c) equity investments of Borrower in its existing Subsidiaries and
any Subsidiaries formed or acquired after the date hereof to the extent
permitted under and in accordance with Section 7.2 hereof, PROVIDED, THAT,
(1) as of the date of such investment and after giving effect thereto, no Event
of Default, or act, condition or event which with notice or passage of time or
both would constitute an Event of Default shall exist or have occurred and
(2) in no event shall the total amount of any capital contributions or other
amounts paid by Borrower to or for the acquisition of any such Subsidiaries
formed or acquired after the date hereof exceed $500,000 in the aggregate and
(3) such Subsidiary has executed and delivered a guarantee of the Obligations in
favor of Agent and Lenders and such other agreements as are required under
Section 7.2 hereof;
(d) guarantees by any wholly-owned Subsidiary of Borrower of the
Obligations in favor of Agent and Lenders;
(e) loans by Subsidiaries of Borrower to Borrower or other
wholly-owned Subsidiaries of Borrower after the date hereof to the extent the
Indebtedness of Borrower to such Subsidiaries or of such Subsidiaries to other
Subsidiaries arising pursuant to such loans is permitted under Section 7.3
hereof;
(f) loans by Borrower to wholly-owned Subsidiaries of Borrower after
the date hereof, PROVIDED, THAT, (1) as of the date of each such loan and after
giving effect thereto, no Event of Default, or act, condition or event which
with notice or passage of time or both would constitute an Event of Default
shall exist or have occurred and (2) in no event shall the total amount of all
such loans exceed $250,000 in the aggregate;
(g) loans, payments, dividends, investments or distributions of any
kind by Borrower to Guarantor and Renco Group or by Guarantor to Renco Group to
the extent permitted under Section 7.7 hereof;
(h) the Senior Note Guarantee by Borrower, Eastern Resources, Inc.
and Industrial Fuels Minerals Company (as in effect on the date hereof) with
respect to the
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Indebtedness of Guarantor evidenced by the Senior Notes to the extent such
Indebtedness of Guarantor is permitted under Section 7.22 hereof, PROVIDED,
THAT, (i) Borrower and such Subsidiaries shall not, directly or indirectly,
(A) amend, modify, alter or change the terms of the Senior Note Guarantee or any
of the other Senior Note Agreements, EXCEPT, THAT, Borrower may, after prior
written notice to Agent, amend, modify, alter or change the terms thereof so as
to extend the maturity thereof or defer the timing of any payments in respect
thereof, or to forgive or cancel any portion of such Indebtedness (other than
pursuant to payments thereof), or to reduce the interest rate or any fees in
connection therewith, or to make any covenants contained therein less
restrictive or burdensome as to Borrower or Guarantor or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, except to the extent
Guarantor is permitted to repay the Indebtedness evidenced by the Senior Notes
under Section 7.3(m) hereof and (ii) Borrower shall furnish to Agent all
notices, demands or other materials in connection with such Indebtedness either
received by Borrower or on its behalf, promptly after the receipt thereof, or
sent by Borrower or on its behalf, concurrently with the sending thereof, as the
case may be;
(i) the contingent Indebtedness of Borrower and its Subsidiaries to
the USF&G Bonding Companies to the extent permitted under Section 7.3(g) hereof;
(j) the contingent Indebtedness of Borrower and its Subsidiaries to
Frontier to the extent permitted under Section 7.3(h) hereof;
(k) the contingent Indebtedness of Borrower and its Subsidiaries to
any of the Bonding Companies (other than the USF&G Bonding Companies and
Frontier) to the extent permitted under Section 7.3(i) hereof;
(l) unsecured contingent obligations of Borrower pursuant to
performance, surety, worker's compensation, insurance and appeal bonds (other
than the Bonds) incurred in the ordinary course of business of Borrower
consistent with the current practices of Borrower as of the date hereof which
shall in no event exceed more than $5,000,000 at any time outstanding;
(m) secured purchase money financing provided by Borrower to Cardinal
River Resources, Inc. and No. 1 Contractors, Inc. in connection with the sale by
Borrower to them of certain parts Inventory and Equipment, PROVIDED, THAT,
(i) Agent shall have received not less than ten (10) Business Days prior written
notice of the sale and financing and such other information with respect thereto
as Agent may request,(ii) the aggregate amount of the deferred portion of the
purchase price shall not exceed $500,000,(iii) the value of such Inventory and
Equipment does not exceed $500,000 in the aggregate and (iv) all of the proceeds
of such sale are applied to the obligations of Borrower to Cardinal River
Resources, Inc. and No. 1 Contractors, Inc. for mine operating services provided
by them to Borrower in the ordinary course of business on commercially
reasonable prices and terms; and
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(n) guarantees by Borrower or any wholly-owned Subsidiary of Borrower
to the extent otherwise permitted hereunder.
7.6 TRANSACTIONS WITH AFFILIATES. Borrower shall not, and shall not
permit any Subsidiary of Borrower to, directly or indirectly, purchase, acquire
or lease any property from, or sell, transfer or lease any property to, any
shareholder, officer, director, agent, employee or other Affiliate of Borrower
or Guarantor (and in any event from or to Renco Group and any Affiliate of Renco
Group) EXCEPT (a) on prices and on terms no less favorable than would have been
obtained in an arm's length transaction with a non-affiliated person, and (b)
payments by Borrower to Guarantor or Renco Group, as the case may be, to the
extent permitted under Section 7.7 hereof.
7.7 RESTRICTED PAYMENTS.
(a) Except as set forth in Section 7.7(b) below, Borrower shall not,
directly or indirectly,(i) declare or pay any cash dividends or dividends
payable in property other than stock on account of any shares of any class of
Capital Stock of Borrower now or hereafter outstanding, or set apart any sums
for such purpose, or redeem, retire, defease, purchase or otherwise acquire any
shares of any class of Capital Stock of Borrower (or set aside or otherwise
deposit or invest any sums for such purpose) for any consideration other than
stock or apply or set apart any sums, or make any other distribution (by
reduction of capital or otherwise) in respect of any such shares or agree to do
any of the foregoing, (ii) pay to any shareholder, officer, director, agent,
employee or other Affiliate of Borrower (and in any event including Guarantor,
Renco Group and any Affiliate of Renco Group) any management, consulting or
other fees or any amount for any management assistance or services rendered by
such persons to Borrower or (iii) make any payments in respect of Indebtedness
owing to any shareholder, officer, director or other Affiliate of Borrower (and
in any event including Guarantor, Renco Group and any Affiliate of Renco Group).
(b) Notwithstanding anything to the contrary contained in Section 7.5
or Section 7.7(a) above:
(i) Borrower may pay a dividend to Guarantor on the date hereof
in the amount of $27,818,000 with the proceeds of the loan by Guarantor to
Borrower on the date hereof made by Guarantor to Borrower with the proceeds from
the issuance of the Senior Notes;
(ii) Borrower may make payments to Renco Group in respect of the
monthly management fee owed by Borrower to Renco Group under the terms of the
Management Agreement (as in effect on the date hereof); PROVIDED, THAT,(A) the
aggregate amount of all such payments by Borrower in any fiscal year shall not
exceed $1,200,000 and (B) as of the date of each such payment and after giving
effect thereto, no Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of Default, shall
exist or have occurred and be continuing,
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(iii) Borrower may pay dividends on account of any shares of
Capital Stock of Borrower now outstanding, make any loans or advance money or
property to Renco Group or Guarantor or make any payments in respect of any
Indebtedness owing by Borrower to Guarantor (whether arising pursuant to
payments made by Guarantor on behalf of Borrower or otherwise); PROVIDED, THAT,
in each case as to any of the foregoing, each of the following conditions is
satisfied as determined by Agent:
(A) no Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of Default shall
exist or have occurred and be continuing at the time of or after giving effect
to any such payments,
(B) any dividends or other distributions shall be out of funds
legally available therefor,
(C) as of the date of any such payments and after giving effect
thereto, the aggregate amount of all such payments made subsequent to the date
hereof shall not exceed the amount equal to fifty (50%) percent of the
cumulative Consolidated Net Income of Borrower (or if cumulative Consolidated
Net Income shall be a loss, minus one hundred (100%) percent of such loss)
earned subsequent to the date hereof and prior to the date the payment occurs
(treating such period as a single accounting period),
(D) as of the date of such payment the daily average of the
Excess Availability for the immediately preceding thirty (30) consecutive day
period shall be not less than, and after giving effect to each such payment,
Excess Availability shall be not less than, $5,000,000,
(iv) Borrower may make regularly scheduled semi-annual payments of
interest on the loan made by Guarantor to Borrower on the date hereof with the
proceeds from the issuance of the Senior Notes to the extent permitted under
Section 7.3(j) hereof;
(v) Borrower may make payments to Renco Group to reimburse Renco
Group for (A) insurance premium payments previously paid or then payable by
Renco Group on behalf of Borrower or Guarantor and (B) payments in respect of
the Bonds;
(vi) Borrower may make payments to Renco Group on the date hereof
in an amount not to exceed $700,000 in respect of the outstanding and unpaid
management fees owing by Borrower to Renco Group as of the date hereof under the
Management Agreement with the proceeds received by Borrower from the loan by
Guarantor to Borrower on the date hereof with the proceeds received by Guarantor
from the issuance of the Senior Notes;
(vii) Borrower may make a payment to Renco Group on the date hereof
to repay all of the Indebtedness of Borrower to Renco Group arising pursuant to
the loan made by Renco Group to Borrower in the amount of $3,000,000 evidenced
by the Unsecured Promissory Note, dated October 31, 1997, issued by Borrower
payable to Renco Group, PROVIDED, THAT, (A) such payment shall satisfy all of
such Indebtedness, (B) such payment
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shall not exceed $3,000,000, and (C) such payment shall be made by Borrower with
the proceeds received by Borrower from the loan by Guarantor to Borrower on the
date hereof with the proceeds received by Guarantor from the issuance of the
Senior Notes;
(viii)Borrower may make a payment to Guarantor on the date hereof
to repay all of the Indebtedness of Borrower to Guarantor arising pursuant to
the loan made by Guarantor in the amount of $2,000,000 on March 14, 1997,
PROVIDED, THAT, (A) such payment shall satisfy all of such Indebtedness,
(B) such payment shall not exceed $2,100,000 and (C) such payment shall be made
with the proceeds received by Borrower from the loan by Guarantor on the date
hereof with the proceeds received by Guarantor from the issuance of the Senior
Notes;
(ix) Borrower may make payments to Guarantor or to Renco Group on
behalf of Guarantor, itself and its Subsidiaries pursuant to the tax sharing
arrangement between Guarantor, Borrower and its Subsidiaries and Renco Group (as
in effect on the date hereof); PROVIDED, THAT, (A) Borrower, Guarantor and their
Subsidiaries are included in the consolidated federal income tax return filed by
Renco Group as to which Borrower is making such payments, (B) the payments in
any year shall not exceed the federal income tax liability that Borrower would
have been liable for if Borrower had filed its tax returns on a stand-alone
basis except that Borrower will not have the benefit of any of its tax loss
carry forwards and any intercompany items shall, for tax liability purposes, be
recorded on a cash basis rather than on an accrual basis, (C) such payments
shall be made by Borrower no earlier than five (5) days prior to the date on
which Renco Group is required to make its payments to the Internal Revenue
Service, and (D) in the event that Borrower also joins with Renco Group in
filing any combined or consolidated (or similar) state or local income tax
returns, then the making of payments to Renco Group shall be allowed in a manner
as similar as possible to that provided herein with respect to federal income
taxes.
7.8 MAINTENANCE OF EXISTENCE. Each of Borrower and Guarantor shall, and
shall cause each Subsidiary of Borrower to, at all times preserve, renew and
keep in full, force and effect their corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
licenses, trademarks, tradenames, approvals, authorizations, leases, contracts
and Permits necessary to carry on the business as presently or proposed to be
conducted.
7.9 SALE AND LEASEBACKS. Each of Borrower and Guarantor shall not, and
shall not permit any Subsidiary of Borrower to, enter into any arrangement,
directly or indirectly, with any person whereby Borrower or Guarantor, as the
case may be, shall sell or transfer any property, real or personal, used or
useful in its business, whether now owned or hereafter acquired, and thereafter
rent or lease such property which it intends to use for substantially the same
purpose or purposes as the property being sold or transferred.
7.10 CONSOLIDATED NET WORTH. Borrower shall, at all times, maintain a
Consolidated Net Worth of not less than the respective amounts set forth below
for the period indicated:
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Period Amount
------ ------
(a) From the date hereof through ($30,000,000)
and including October 30, 1998
(b) On and after October 31, 1998 ($35,000,000)
through and including October 30,
1999
(c) On and after October 31, 1999 ($42,000,000)
through and including October 30,
2000
(d) On and after October 31, 2000 ($43,600,000)
and all times thereafter
The parentheticals above indicate that the number is negative.
7.11 CAPITAL EXPENDITURES. Borrower shall not, and shall not permit any
Subsidiary to, directly or indirectly, make, whether through purchase, capital
leases or otherwise, Capital Expenditures on a non-cumulative basis (such that
expenditures not made in any one fiscal year may not be made in any following
fiscal year), in excess of $20,000,000, in the fiscal year of Borrower, EXCEPT
THAT (a) to the extent Borrower and its Subsidiaries make Capital Expenditures
in any one fiscal year in amounts less than the applicable amount set forth
herein, Borrower may make additional Capital Expenditures in the next
consecutive fiscal year in amounts up to the difference between the applicable
amount set forth herein and the Capital Expenditures actually made in the
immediately preceding fiscal year and (b) such limitation shall not apply to the
Capital Expenditures by Borrower of approximately $46,200,000 with the proceeds
from the loan received by Borrower on the date hereof from Guarantor with the
proceeds received by Guarantor from the issuance of the Senior Notes to purchase
certain Equipment currently financed pursuant to leases.
7.12 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC. Borrower
shall not, and shall not permit any Subsidiary to, directly or indirectly, (a)
merge into or with or consolidate with any other Person or permit any other
Person to merge into or with or consolidate with it, or (b) sell, assign, lease,
transfer, abandon or otherwise dispose of any Capital Stock or Indebtedness to
any other Person or any of its properties or assets to any other Person (except
for (i) sales or other dispositions by Borrower or its Subsidiaries of assets in
the ordinary course of the business of Borrower or such Subsidiary which consist
of Equipment; PROVIDED, THAT, as to each and all such sales, (A) the total fair
market value of the assets sold in any one such transaction or series of related
transactions shall not exceed $500,000 and the total fair market value of the
assets sold in all such transactions shall not exceed $1,000,000 in any twelve
(12) consecutive month period, (B) Agent shall have received not less than ten
(10) Business Days prior written notice of such sale, which notice
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shall set forth in reasonable detail satisfactory to Agent, the parties to such
sale or other disposition, the assets to be sold or otherwise disposed of, the
purchase price and the manner of payment thereof and such other information with
respect thereto as Agent may reasonably request, (C) as of the date of such sale
or other disposition and after giving effect thereto, no Event of Default, or
act, condition or event which with notice or passage of time would constitute an
Event of Default shall exist or have occurred, and (D) upon Agent's request, any
and all proceeds payable or delivered to Borrower in respect of such sale or
other disposition shall be paid or delivered, or caused to be paid or delivered,
to Agent for application to the Obligations in such order and manner as Agent
may determine,(ii) sales of Inventory in the ordinary course of business, and
(iii) the disposition of worn-out or obsolete Equipment or Equipment no longer
used or useful in the business of Borrower or its Subsidiaries), or (c) wind up,
liquidate or dissolve or (d) agree to do any of the foregoing.
7.13 COMPLIANCE WITH LAWS, REGULATIONS, ETC.
(a) Borrower and Guarantor shall, and shall cause each Subsidiary of
Borrower to, at all times comply in all material respects with all applicable
provisions of laws, rules, regulations, licenses, approvals, orders and other
Permits and duly observe all requirements, of any foreign, Federal, State or
local Governmental Authority, including, without limitation, ERISA, the Code,
the Occupational Safety and Health Act of 1970, as amended, the Surface Mining
Control and Reclamation Act of 1977, the Mine Safety Health Act of 1977, the
Fair Labor Standards Act of 1938, as amended, and the rules and regulations
thereunder and all statutes, rules, regulations, orders, permits and
stipulations relating to environmental pollution and employee health and safety,
including, without limitation, all of the Environmental Laws.
(b) Borrower and Guarantor shall, and shall cause each Subsidiary of
Borrower to, take prompt and appropriate action to respond to any material
noncompliance with any of the Environmental Laws and shall regularly report to
Agent with regard to such response as to any such noncompliance which has or
could have a Material Adverse Effect. If Borrower or Guarantor receive any
notice of (i) the happening of any event involving the use, spill, discharge or
cleanup of any Hazardous Material which has or would have a Material Adverse
Effect or (ii) any complaint, order, citation or notice with regard to air
emissions, water discharges, noise emissions or any other environmental, health
or safety matter affecting Borrower from any Person, including, but not limited
to, the United States Environmental Protection Agency or any state or local
environmental agency or authority, which has or could have a Material Adverse
Effect, then Borrower shall give within three (3) Business Days both oral and
written notice of same to Agent and Lenders. Without limiting the generality of
the foregoing, whenever there is noncompliance, or any condition which requires
any action by or on behalf of Borrower or Guarantor in order to avoid any
noncompliance, with any Environmental Law, in either case which has or could
have a Material Adverse Effect, Borrower shall, at the reasonable request of
Agent or any Lender and Borrower's expense: (A) cause an independent
environmental engineer reasonably acceptable to Agent to conduct such tests of
the site where Borrower's noncompliance or alleged noncompliance with
Environmental Laws has occurred as to such non-compliance and
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prepare and deliver to Agent and Lenders a report as to such non-compliance
setting forth the results of such tests, a proposed plan for responding to any
environmental problems described therein, and an estimate of the costs thereof
and (B) provide to Agent and Lenders a supplemental report of such engineer
whenever the scope of such non-compliance, or Borrower's response thereto or the
estimated costs thereof, shall change in any material respect.
7.14 PAYMENT OF TAXES AND CLAIMS. Borrower and Guarantor shall, and shall
cause each Subsidiary of Borrower to, duly pay and discharge all taxes,
assessments, contributions and governmental charges upon or against it or them
or its or their properties or assets, except for taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to Borrower or Guarantor prior to the date on which penalties attach
thereto. Borrower and Guarantor shall be liable for any tax or penalty imposed
upon any transaction under this Agreement or any of the other Financing
Agreements or giving rise to the Accounts or any other Collateral or which
Agent, or subject to Section 12.11 below any Lender may be required to withhold
or pay for any reason, and each of Borrower and Guarantor agrees to indemnify
and hold Agent, and any Lender harmless with respect thereto, and to repay to
Lender on demand the amount thereof, and until paid by Borrower such amount
shall be added and deemed part of the Loans, PROVIDED, THAT, nothing contained
herein shall be construed to require Borrower or Guarantor to pay any income tax
attributable to the income of Agent or any Lender from any amounts charged or
paid hereunder to Lender.
7.15 PROPERTIES IN GOOD CONDITION.
(a) Borrower shall keep its properties, and shall cause its
Subsidiaries to keep their properties, in good repair, working order and
condition (reasonable wear and tear excepted) and, from time to time, make and
cause its Subsidiaries to make all needful and proper repairs, renewals,
replacements, additions and improvements thereto, so that the business carried
on may be properly and advantageously conducted at all times in accordance with
prudent business management. The Inventory shall only be used in Borrower's
business and not for personal, family, household or farming use.
(b) All of the Inventory is and will be held for sale or lease, or to
be furnished in connection with the rendition of services, in the ordinary
course of Borrower's business, and is and will be fit for such purposes.
Borrower shall keep the Inventory in good and marketable condition, at its own
expense. Borrower will not acquire or accept any Inventory on consignment or
approval, except if such Inventory is at all times clearly identified on the
books and records of Borrower as Inventory held on consignment or approval and
such Inventory is separately reported to Agent and not included in the Inventory
of Borrower as reported to Agent in a manner satisfactory to Agent. Borrower
agrees that all Inventory will be mined and produced in accordance with all
applicable laws, including the Surface Mining Control and Reclamation Act of
1977, the Mine Safety and Health Act of 1977, the Federal Fair Labor Standards
Act of 1938, as amended, and all rules, regulations, and orders thereunder.
Borrower shall conduct a physical count of the Inventory at least once per
fiscal
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year, and at any time on or after an Event of Default and so long as the same is
continuing, at such other times as Agent reasonably requests, and in each case
shall promptly supply Agent and Lenders with a copy of such count accompanied by
a report of the Value of such Inventory. Borrower shall not, without Agent's
prior written consent, sell any Inventory on a bill-and-hold (except if reported
to Agent as bill-and-hold goods), guaranteed sale, sale and return, sale on
approval, or other repurchase or return basis.
7.16 INSURANCE. Borrower shall at all times maintain with financially
sound and reputable insurers, insurance with respect to the Collateral against
loss or damage of the kind and in the amounts customarily insured against by
corporations of established reputation engaged in the same or similar businesses
and similarly situated and Borrower shall maintain public liability insurance
against claims for personal injury, death or property damage occurring upon, in,
about or in connection with the use of any properties owned, occupied or
controlled by Borrower and occurring in connection with the use (or otherwise)
of any products manufactured or sold by Borrower, and workmen's compensation
insurance (except as to workmen's compensation insurance to the extent Borrower
is self-insured with respect thereto). Said policies of insurance shall be
satisfactory to Agent as to form, amount and insurer. Borrower shall furnish
certificates, policies or endorsements to Agent as proof of such insurance, and,
if Borrower fails to do so, Agent is authorized, but not required, to obtain
such insurance at the expense of Borrower. All policies shall provide for at
least thirty (30) days prior written notice to Agent of any cancellation or
reduction of coverage and that Agent may act as attorney for Borrower in
obtaining, and at any time on or after the occurrence of an Event of Default,
adjusting, settling, amending and canceling such insurance. Borrower shall
obtain noncontributory lender's loss payable endorsements to all insurance
policies in form and substance reasonably satisfactory to Agent specifying that
the proceeds of such insurance shall be payable to Agent as its interests may
appear and further specifying that Agent shall be paid regardless of any act or
omission by Borrower. At its option, Agent may, and upon the direction of the
Majority Lenders shall, apply any insurance proceeds received by Agent at any
time to the cost of replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as Agent
may determine or as directed by the Majority Lenders or Agent may hold such
insurance proceeds as cash collateral for the Obligations as Agent may determine
or as directed by the Majority Lenders.
7.17 APPRAISALS. Upon the request of Agent or the Majority Lenders,
Borrower shall, at Borrower's expense, no more than once in any six (6) month
period, but at any time or times as Agent or the Majority Lenders may request on
or after an Event of Default, deliver, or cause to be delivered, to Agent and
Lenders written reports or appraisals of any or all of the Collateral in form,
scope and methodology, and by an appraiser acceptable to Agent. Such reports or
appraisals shall list all items and categories thereof, describing the condition
of same and setting forth the lower of cost (calculated on a first-in-first-out
basis) or fair market value, in such form as is satisfactory to Agent.
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7.18 COMPLIANCE WITH ERISA.
(a) Borrower and Guarantor shall not with respect to all "employee
pension benefit plans" maintained by Borrower, Guarantor or any of their ERISA
Affiliates: (i) terminate any of such employee pension benefit plans so as to
incur any liability to the Pension Benefit Guaranty Corporation established
pursuant to ERISA,(ii) allow or suffer to exist any prohibited transaction
involving any of such employee pension benefit plans or any trust created
thereunder which would subject Borrower, Guarantor or such ERISA Affiliate to a
tax or penalty or other liability on prohibited transactions imposed under
Section 4975 of the Code or ERISA,(iii) fail to pay to any such employee pension
benefit plan any contribution which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such plan,(iv) allow or suffer to
exist any accumulated funding deficiency, whether or not waived, with respect to
any such employee pension benefit plan,(v) allow or suffer to exist any
occurrence of a reportable event or any other event or condition which presents
a material risk of termination by the Pension Benefit Guaranty Corporation of
any such employee pension benefit plan that is a Single Employer Plan, which
termination could result in any liability to the Pension Benefit Guaranty
Corporation or (vi) incur any withdrawal liability with respect to any
multi-employer pension plan, except as set forth on Schedule 6.13 hereto.
(b) As used in this Section 7.18, the term "employee pension benefit
plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
Section 4975 of the Code and ERISA.
7.19 ADDITIONAL BANK ACCOUNTS. Borrower shall not, and shall not permit
any Subsidiary to, directly or indirectly, open, establish or maintain any
deposit account, investment account or any other account with any bank or other
financial institution, other than the Blocked Accounts and the accounts set
forth in Schedule 6.15 hereto, except: (a) as to any new or additional Blocked
Accounts and other such new or additional accounts which contain any Collateral
or proceeds thereof, with the prior written consent of Agent and subject to such
conditions thereto as Agent may establish and (b) as to any accounts used by
Borrower or its Subsidiaries to make payments of payroll, taxes or other
obligations to third parties, after prior written notice to Agent.
7.20 NOTICE OF DEFAULT. Promptly upon becoming aware of the existence of
any condition or event which constitutes an Event of Default or any condition or
event which, with the passage of time or notice or both would constitute such an
Event of Default, pursuant to the provisions of this Agreement or the other
Financing Agreements, Borrower shall give Agent written notice thereof
specifying the nature of such condition or event.
7.21 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) Borrower and Guarantor shall promptly furnish to Agent and
Lenders all such financial and other information as Agent or any Lender shall
reasonably request relating
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to the Collateral and the assets, businesses and operations of Borrower and
Guarantor, and notify the auditors and accountants of Borrower and Guarantor
that Agent and Lenders are authorized to obtain such information directly from
them. Without limiting the foregoing, Borrower and Guarantor shall furnish to
Agent and Lenders, in such detail as Agent or any Lender shall request, the
following:
(i) As soon as available, but in any event not later than ninety
(90) days after the close of each fiscal year, audited consolidated balance
sheet, consolidated statement of operations and consolidated statement of cash
flows for Guarantor and its Subsidiaries for such fiscal year, and the
accompanying notes thereto, and unaudited consolidating balance sheets,
statements of operations and statements of cash flows for Guarantor and its
Subsidiaries for such fiscal year, and the accompanying notes thereto, setting
forth in each case in comparative form figures for the previous fiscal year, all
in reasonable detail, fairly presenting the financial position and the results
of operations of Guarantor and its Subsidiaries as at the date thereof and for
the fiscal year then ended, and prepared in accordance with GAAP consistently
applied. Such audited consolidated statements of Guarantor and its Subsidiaries
shall be examined in accordance with generally accepted auditing standards by
and accompanied by a report thereon unqualified as to scope of independent
certified public accountants selected by Borrower and satisfactory to Lender.
(ii) As soon as available, but in any event not later than
forty-five (45) days after the close of each fiscal quarter other than the
fourth quarter of a fiscal year (which shall be delivered within ninety (90)
days), consolidated and consolidating unaudited balance sheets of Guarantor and
its Subsidiaries as at the end of such quarter, and consolidated and
consolidating unaudited statements of operations and statements of cash flow for
Guarantor and its Subsidiaries for such quarter and for the period from the
beginning of the fiscal year to the end of such quarter, together with the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and results of operation of Guarantor and its Subsidiaries as
at the date thereof and for such periods, prepared in accordance with GAAP
consistently applied (subject to normal year-end adjustments). Such statements
shall be certified to be correct by the chief financial officer of Guarantor,
subject to normal year-end adjustments.
(iii) As soon as available, but in any event not later than thirty
(30) days after the end of each month, consolidated and consolidating unaudited
balance sheets of Guarantor and its Subsidiaries as at the end of such month,
and consolidated and consolidating unaudited statements of operations for
Guarantor and its Subsidiaries for such month and for the period from the
beginning of the fiscal year to the end of such month, all in reasonable detail,
fairly presenting the financial position and results of operation of Guarantor
and its Subsidiaries as at the date thereof and for such periods, and prepared
in accordance with GAAP consistently applied (except that such interim financial
statements shall not include accompanying notes and shall be subject to normal
year-end adjustments). Such statements shall be certified to be correct by the
chief financial officer of Guarantor, subject to normal year-end adjustments.
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(iv) With each of the audited financial statements delivered
pursuant to Section 7.21(a)(i) above, a certificate of the independent certified
public accountants that examined such statements to the effect that they have
reviewed and are familiar with the Financing Agreements and that, in examining
such financial statements, they did not become aware of any fact or condition
which then constituted an Event of Default, except for those, if any, described
in reasonable detail in such certificate.
(v) Simultaneously with the delivery of each of the annual
audited and quarterly unaudited financial statements as set forth herein, Agent
and Lenders shall receive a certificate of the chief financial officer of
Guarantor (A) stating that, except as explained in reasonable detail in such
certificate, (1) all of the representations, warranties and covenants of
Borrower and Guarantor contained in this Agreement and the other Financing
Agreements are correct and complete as at the date of such certificate and (2)
no Event of Default then exists or existed during the period covered by such
financial statements, and (B) describing and analyzing in reasonable detail all
material trends, changes and developments in each and all financial statements.
If such certificate discloses that a representation or warranty is not correct
or complete, or that a covenant has not been complied with, or that an Event of
Default existed or exists, such certificate shall set forth what action Borrower
and Guarantor have taken or propose to take with respect thereto.
(vi) No sooner than ninety (90) days prior to, and no less than,
fifteen (15) days after the beginning of each fiscal year of Borrower, projected
balance sheets, statements of income and expense, and statements of cash flow
for Guarantor and its Subsidiaries as at the end of and for each month of such
fiscal year.
(vii) Promptly after delivery thereof, copies of any management
letters and reports by such independent certified public accountants to
Guarantor and its Subsidiaries.
(viii) Monthly accounts receivable agings and inventory reports
(including, without limitation, Inventory consisting of work-in-process) and
such schedules of Accounts and Inventory, together with any further financial
and other information regarding the Collateral, as Agent or any Lender may
request from time to time.
(b) Borrower and Guarantor shall promptly notify Agent in writing of
any loss, damage, investigation, action, suit, proceeding or claim relating to
the Collateral or which might result in any material adverse change in its
business, properties, assets, goodwill or condition, financial or otherwise.
(c) Borrower and Guarantor shall promptly notify Agent of any of the
following events: (i) any Material Contract of Borrower or any of its
Subsidiaries is terminated or any new Material Contract is entered into (in
which event such Borrower shall provide Agent with a copy of such Material
Contract); or (ii) any of the material terms (other than price) upon which
material suppliers of Borrower or any of its Subsidiaries do business with
Borrower or Subsidiary are changed or amended in any manner adverse to such
Borrower or Subsidiary in any material respect; or (iii) any notification of
violation of any law or
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regulation shall have been received by Borrower or any of its Subsidiaries from
any Governmental Authority the results of which are reasonably likely to have a
Material Adverse Effect.
(d) Borrower and Guarantor shall promptly provide Agent and Lenders
such budgets, forecasts, projections and other information respecting the
business operations and financial or other condition of Guarantor and its
Subsidiaries, as Agent or any Lender may, from time to time, reasonably request.
(e) Agent and Lenders are hereby authorized to deliver a copy of any
financial statement or any other information relating to the business,
operations or financial condition of Guarantor or its Subsidiaries, which may be
furnished to it hereunder or otherwise, to any regulatory body or agency or
other Governmental Authority having jurisdiction over Agent or Lenders or upon
notice to Borrower (to the extent permitted under applicable law), to any court
or to any other Person which shall, or shall have any right or obligation to,
succeed to all or any part of Agent or any Lender's interests in any of the
Loans, this Agreement, the other Financing Agreements or the Collateral,
including, without limitation, any assignee pursuant to Section 11.6 hereof or
any Participant who shall have agreed to treat such information as confidential
to the extent provided in Section 10.7 hereof.
(f) Each of Borrower and Guarantor hereby irrevocably authorizes and
directs all accountants, auditors or other third parties to deliver to Agent
upon Agent's reasonable request, at Borrower's expense, copies of the financial
statements, and other accounting records relating to Guarantor and its
Subsidiaries of any nature in their possession and to disclose to Agent and any
Lender any information they may have regarding the business affairs and
financial condition of Guarantor and its Subsidiaries.
7.22 SENIOR NOTE AGREEMENTS. With respect to the Indebtedness of Guarantor
to the holders of the Senior Notes evidenced by or arising under the Senior
Notes:(a) such Indebtedness shall not exceed the principal amount of
$150,000,000, as reduced by payments of principal in respect thereof, plus
interest thereon at the rate provided for in the Senior Notes as in effect on
the date hereof; (b) Guarantor shall only make regularly scheduled payments of
principal and interest or other mandatory payments in respect of such
Indebtedness in accordance with the terms of the Senior Notes as in effect on
the date of the issuance thereof, EXCEPT THAT Guarantor may prepay, in whole or
in part, the Senior Notes as in effect on the date of the issuance thereof, so
long as (i) Guarantor provides Agent with two (2) Business Days' prior written
notice of the intention of Guarantor to make any such prepayment, (ii) as of the
date of such prepayment and after giving effect thereto, no Obligations (other
than pursuant to Letter of Credit Accommodations and the costs, expenses and
other charges relating thereto) shall be outstanding, (iii) after giving effect
to such prepayment, there shall be Excess Availability of not less than
$10,000,000, and (iv) no Event of Default or act, condition or event which with
notice or passage of time or both would constitute an Event of Default, shall
exist or have occurred and is continuing; (c) Guarantor and Borrower shall not,
directly or indirectly (i) amend, modify, alter or change the terms of the
Senior Note Agreements or any agreements, documents or
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instruments executed and/or delivered in connection therewith as in effect on
the original date of the execution and delivery thereof or (ii) redeem, retire,
defease, purchase or otherwise deposit or invest any sums for such purpose,
EXCEPT for (A) prepayments permitted under Section 7.22(b) above, (B) mandatory
repurchases of Senior Notes required in accordance with the terms of the Senior
Note Indenture (as in effect on the date hereof) in connection with (1) the
sales of certain assets of Borrower and its Subsidiaries (other than the
Collateral) and (2) changes in control of Borrower and (3) the exchange of the
Senior Notes consisting of the Series A Notes for the Series B Notes;(d)
Guarantor and Borrower shall furnish to Agent copies of all notices, demands or
other materials either received from the Senior Note Trustee or any of the
holders of the Senior Notes, or on its or their behalf, promptly after receipt
thereof, or sent by Guarantor or any of its Affiliates, or on its or their
behalf, to the Senior Note Trustee or any other representative of the holders of
the Senior Notes, concurrently with the sending thereof, as the case may be;
(e) such Indebtedness is, and shall at all times be, unsecured; and (f)
Guarantor shall use the proceeds from the issuance of the Senior Notes on the
date hereof to make a loan to Borrower in the amount of $150,000,000, to the
extent the Indebtedness of Borrower to Guarantor arising pursuant to such loan
is permitted under Section 7.3 hereof.
7.23 AFTER ACQUIRED REAL PROPERTY. If Borrower or any of its Subsidiaries
hereafter acquires any Real Property, fixtures or any other property that is of
the kind or nature described in the Mortgages and such Real Property, fixtures
or other property at any one location has a fair market value in an amount equal
to or greater than $500,000 (or if an Event of Default, or act, condition or
event which with notice or passage of time or both would constitute an event
which with notice or passage of time or both would constitute an Event of
Default exists, then regardless of the fair market value of such assets), or
without limiting any other rights of Agent or Lenders, or duties or obligations
of Borrower, upon Agent's request, Borrower shall, or shall cause its
Subsidiary, to execute and deliver to Agent a mortgage, deed of trust or deed to
secure debt, as Agent may determine, in form and substance substantially similar
to the Mortgages and as to any provisions relating to specific state laws
satisfactory to Agent and in form appropriate for recording in the real estate
records of the jurisdiction in which such Real Property or other property is
located granting to Agent a first lien, mortgage and security interest in such
Real Property (except as Borrower would otherwise be permitted to incur
hereunder or under the Mortgages or as otherwise consented to in writing by
Agent or as otherwise permitted herein) and such other agreements, documents and
instruments as Agent may require in connection therewith.
7.24 FURTHER ASSURANCES. Each of Borrower and Guarantor has executed or
will contemporaneously herewith execute and deliver to Agent such of the other
Financing Agreements to which it is a party and financing statements pursuant to
the UCC, in form and substance satisfactory to Agent. Each of Borrower and
Guarantor shall, at its expense, at any time or times duly execute and deliver,
or shall cause to be duly executed and delivered, such further agreements,
instruments and documents, including, without limitation, additional security
agreements, collateral assignments, UCC financing statements or amendments or
continuations thereof, certificates of title with respect to motor vehicles and
applications for notation of the liens of Agent thereon, landlord's or
mortgagee's waivers of liens and
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consents to the exercise by Agent of all the rights and remedies hereunder,
under any of the other Financing Agreements or applicable law with respect to
the Collateral, and do or cause to be done such further acts as may be necessary
or proper in Agent's opinion to evidence, perfect, maintain and enforce the
security interest and the priority thereof in the Collateral and to otherwise
effectuate the provisions or purposes of this Agreement or any of the other
Financing Agreements. Where permitted by law, Borrower and Guarantor hereby
authorize Agent to execute and file one or more UCC financing statements signed
only by Agent. Upon the request of Agent, at any time and from time to time,
each of Borrower and Guarantor shall, at its cost and expense, do, make,
execute, deliver and record, register or file, financing statements, mortgages,
deeds of trust, deeds to secure debt, and other instruments, acts, pledges,
assignments and transfers (or cause the same to be done) and will deliver to
Agent such instruments evidencing items of Collateral as may be requested by
Agent.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES
8.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an "Event of Default" hereunder:
(a) Borrower shall be in default in the payment of any of the
Obligations when due, which default shall continue for three (3) days; or
(b) Borrower, Guarantor or any Obligor shall fail to observe or
perform any covenants or agreements contained in this Agreement, the other
Financing Agreements or in any other document or instrument referred to herein
or therein other than as described in Section 8.1(a) above and such failure
shall continue for fifteen (15) days, PROVIDED, THAT, such fifteen (15) day
period shall not apply in the case of:(i) any failure to observe any such
covenant or agreement which is not capable of being cured at all or within such
fifteen (15) day period or which has been the subject of a prior failure within
a six (6) month period or (ii) an intentional breach by Borrower, Guarantor or
its or their management of any such covenant or agreement, or (iii)the failure
to observe or perform any of the covenants or agreements contained in Section
7.16 or Section 7.23 of this Agreement or any covenants or agreements covering
substantially the same matter as such sections in any of the other Financing
Agreements; or
(c) any present or future representation, warranty or statement of
fact when made by or on behalf of Borrower, Guarantor or any Obligor to Agent or
any Lender is false or misleading in any material respect; or
(d) a judgment is rendered against Borrower or any Obligor in excess
of $1,000,000 in any one case or in excess of $2,500,000 in the aggregate and
the same shall remain undischarged for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed except if it is a judgment
for which Borrower or such Obligor is
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fully insured and with respect to which the insurer has admitted in writing its
liability for the full amount thereof and so long as execution is at all times
effectively stayed; or
(e) Borrower or any Obligor shall be generally unable to pay its
debts as they mature, suspend or discontinue doing business for any reason,
become insolvent, call a meeting of creditors or have a creditors' committee
appointed, make a general assignment for the benefit of creditors, shall admit
in writing its inability to pay its debts as they become due or shall commence
any action or proceeding for the appointment of any trustee, receiver, custodian
or liquidator of Borrower or such Obligor or all or any part of their respective
properties or assets; or
(f) Borrower or any Obligor shall commence any action or proceeding
for relief under the Bankruptcy Code or any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
Bankruptcy Code or any other present or future statute, law or regulation or
shall take any corporate action to authorize any of such actions or proceedings;
or
(g) Borrower or any Obligor shall have commenced against it any
action or proceeding for relief under the Bankruptcy Code or any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the Bankruptcy Code or any other present or future statute, law or
regulation, or any action or proceeding for the appointment of any trustee,
receiver, custodian or liquidator of any of Borrower or such Obligor or all or
any part of their respective properties or assets, which is not dismissed within
forty-five (45) days of its commencement, or Borrower or such Obligor shall file
any answer admitting or not contesting the allegations of a petition filed
against it in any such proceeding or by any act or omission indicates its
consent to, acquiescence in or approval of, any such action or proceeding or if
the relief requested is granted sooner; or
(h) Borrower or any Obligor shall default in the payment of any
amounts at any time due on any Indebtedness for borrowed money, Capitalized
Lease Obligations or any contingent Indebtedness in connection with any
guarantee, letter of credit, indemnity or similar type of instrument at any time
owing to any Person other than Lender, in each case to the extent in excess of
$2,500,000, including, but not limited to, Indebtedness evidenced by or arising
under the Senior Notes or the other Senior Note Agreements or Indebtedness to
Van-American and the USF&G Bonding Companies or Indebtedness to Frontier or in
the performance of any other terms or covenants or any evidence of the same or
any agreement relating thereto or securing same (including, but not limited to,
any of the Senior Note Agreements, the USF&G Bonding Agreements or any
agreements with Frontier or any of the other Bonding Companies) and which
causes, or permits the holders of such Indebtedness to cause, such Indebtedness
to become due prior to its maturity, and which default continues for more than
the applicable cure period, if any, with respect thereto, but in no event more
than thirty (30) days after the occurrence of any such default; or
(i) there is any change in the ultimate control of Borrower or
Guarantor or the majority ownership of Borrower or Guarantor; or
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(j) the occurrence of any default or event of default under any of
the other Financing Agreements.
8.2 REMEDIES.
(a) Without limiting Agent's or any Lender's rights to demand payment
sooner as provided in this Agreement, upon or at any time after the occurrence
or existence of any one or more of such Events of Default, upon termination of
this Agreement or the other Financing Agreements, or if this Agreement and the
other Financing Agreements are not renewed, in addition to any other rights
Agent or any Lender may have under the Financing Agreements or otherwise:
(i) subject to Section 8.2(b) below, Agent may, and upon the
direction of the Majority Lenders shall, declare the Commitments of each Lender
terminated, whereupon the Commitment of each Lender will terminate immediately
(such that no more Loans shall be made or Letter of Credit Accommodations
provided hereunder), without presentment for payment, demand, notice of dishonor
or notice of protest or any other or further notice, all of which are hereby
expressly waived by Borrower; or
(ii) subject to Section 8.2(b) below, Agent may, and upon the
direction of the Majority Lenders shall, declare any or all of the Obligations
to be immediately due and payable, together with interest at the highest rate of
interest hereunder until fully and indefeasibly paid, without presentment for
payment, demand, notice of dishonor or protest or any or other further notice,
all of which are hereby expressly waived by Borrower (PROVIDED, THAT, upon the
occurrence of any Events of Default described in Sections 8.1(f) or 8.1(g), all
Obligations shall automatically become immediately due and payable); and
(iii) each Participant, to the fullest extent permitted by
applicable law, shall have the right to (A) set off against the Obligations any
and all deposits (whether general or special, time or demand, provisional or
final), credits, balances, accounts, monies or other assets which are the
property of Borrower and held by such Participant or owed by such Participant
to Borrower and (B) remit the same to Agent for application to the Obligations;
(iv) without further notice to Borrower, Agent and any Lender may
appropriate, set off and apply to the payment of any or all of the Obligations,
any or all Collateral, in such manner as Agent shall determine, enforce payment
of any Collateral, settle, compromise or release in whole or in part, any
amounts owing on the Collateral, make allowances and adjustments with respect
thereto, issue credits in Agent's or Borrower's name, sell, assign and deliver
the Collateral (or any part thereof), at public or private sale, at broker's
board, for cash, upon credit or otherwise, at Agent's option and discretion, and
Agent may bid or become purchaser at any such sale, if public, free from any
right of redemption which is hereby expressly waived;
(v) without limiting the generality of the foregoing, Agent and
Lenders are hereby authorized at any time and from time to time, to set off and
apply any and all
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deposits (general or special, time or demand, provisional or final) at any time
held and other Indebtedness at any time owing by Agent or any Lender to or for
the credit or the account of Borrower against any and all of the Obligations,
whether or not then due and payable;
(vi) Agent shall have the right, without notice to Borrower
(except as otherwise expressly provided herein), at any time and from time to
time in its discretion, with or without judicial process or the aid or
assistance of others and without cost to Agent or Lenders (A) to enter upon any
premises on or in which any of the Inventory may be located and, without
resistance or interference by Borrower, take possession of the Inventory, (B) to
complete processing, manufacturing and repair of all or any portion of the
Inventory, (C) to sell, foreclose or otherwise dispose of any part or all of the
Inventory on or in any premises of Borrower or premises of any other party,
(D) to require Borrower, at its expense, to assemble and make available to Agent
any part or all of the Inventory at any reasonable place and time designated by
Agent, and (E) to remove any or all of the Inventory from any premises on or in
which the same may be located, for the purpose of effecting the sale,
foreclosure or other disposition thereof or for any other purpose.
(b) Notwithstanding anything to the contrary in this Section 8.2, but
subject to Section 12.5 and the other provisions of Section 12 hereof, so long
as the Commitment Percentage of Congress shall be fifty (50%) percent, in the
event Agent or the Majority Lenders do not exercise the rights set forth in
Section 8.2(a)(i) or Section 8.2(a)(ii) above within forty-five (45) days after
the date of any written notice from CIT to Agent of an Event of Default (which
Event of Default is not thereafter waived or cured), CIT may direct, and upon
such direction Agent shall, exercise the remedies set forth in Section 8.2(a)(i)
or 8.2(a)(ii) as CIT may specify.
(c) Agent and Lenders shall have all of the rights and remedies of a
secured party under the UCC or applicable law of any State in which any
Collateral may be situated, in addition to all of the rights and remedies set
forth in this Agreement and the other Financing Agreements, and in any
instrument or document referred to herein or therein, and/or under any other
applicable law relating to this Agreement, the other Financing Agreements, the
Obligations or the Collateral.
(d) Each of Borrower and Guarantor agrees that the giving of ten (10)
days notice to Borrower by Agent at Borrower's address set forth below,
designating the place and time of any public sale or of the time after which any
private sale or other intended disposition of the Collateral is to be made,
shall be deemed to be reasonable notice thereof and Borrower waives any other
notice with respect thereto.
(e) The Net Cash Proceeds resulting from the exercise of any of the
foregoing rights or remedies shall be applied by Agent to the payment of the
Obligations in such order as Agent may elect, and Borrower shall remain liable
to Agent and Lenders for any deficiency. Without limiting the generality of the
foregoing, if Agent or any Lender enters into any credit transaction, directly
or indirectly, in connection with the disposition of any Collateral, it shall
have the option, at any time, in its discretion, to reduce the Obligations by
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the principal amount of such credit transaction or to defer the reduction
thereof until actual receipt by Agent or such Lender of cash or other
immediately available funds in connection therewith.
(f) In the event Agent institutes an action to recover any Collateral
or seeks recovery of any Collateral by way of prejudgment remedy or otherwise,
Borrower and Guarantor hereby irrevocably waive (i) the posting of any bond,
surety or security with respect thereto which might otherwise be required,(ii)
any demand for possession prior to the commencement of any suit or action to
recover the Collateral, and (iii) any requirement that Agent retain possession
and not dispose of any Collateral until after trial or final judgment.
(g) Agent may, at its option, cure any default by Borrower under any
agreement with any Person, which constitutes, or with notice or passage of time
or both would constitute, an Event of Default hereunder or under any of the
other Financing Agreements, or pay or bond on appeal any judgment entered
against Borrower (irrespective of the amount of said judgment or the time
elapsed since entry thereof), and charge Borrower's account(s) therefor, such
amounts to be repayable by Borrower on demand, together with interest thereon at
the highest rate of interest payable hereunder; PROVIDED, HOWEVER, Agent shall
be under no obligation to effect such cure, payment or bonding and shall not, by
making any payment for Borrower's account(s), be deemed to have assumed any
obligation or liability of Borrower.
(h) The enumeration of the foregoing rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies Agent or any Lender may
have under the UCC or other applicable law. Agent shall have the right to
determine which rights and remedies, and in which order any of the same, are to
be exercised, and to determine which Collateral is to be proceeded against and
in which order, and the exercise of any right or remedy shall not preclude the
exercise of any others, all of which shall be cumulative.
(i) No act, failure or delay by Agent or any Lender shall constitute
a waiver of any of the rights and remedies of Agent and Lenders. No single or
partial waiver by Agent or Lenders of any provision of this Agreement or any of
the other Financing Agreements, or breach or default thereunder, or of any right
or remedy which Agent and Lenders may have shall operate as a waiver of any
other provision, breach, default, right or remedy or of the same provision,
breach, default, right or remedy on a future occasion.
(j) Borrower waives presentment, notice of dishonor, protest and
notice of protest of all instruments included in or evidencing any of the
Obligations or the Collateral and any and all notices or demands whatsoever
(except as expressly provided herein). Agent may, at all times, proceed
directly against Borrower to enforce payment of the Obligations and shall not be
required to take any action of any kind to preserve, collect or protect any
rights in the Collateral.
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SECTION 9. COLLECTION AND ADMINISTRATION
9.1 COLLECTIONS; MANAGEMENT OF COLLATERAL.
(a) Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Agent may reasonably specify, with such banks as are reasonably
acceptable to Agent into which Borrower shall promptly deposit and direct its
Account Debtors to directly remit all payments on Accounts and all payments
constituting proceeds of Inventory or other Collateral in the identical form in
which such payments are made, whether by cash, check or other manner. The banks
at which the Blocked Accounts are established shall enter into an agreement, in
form and substance reasonably satisfactory to Agent, providing that all items
received or deposited in the Blocked Accounts are the property of Agent and
Lenders according to their interests hereunder, that the depository bank has no
lien upon, or right to setoff against, the Blocked Accounts, the items received
for deposit therein, or the funds from time to time on deposit therein and that
the depository bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, all funds received or deposited into the Blocked
Accounts to such bank account of Agent as Agent may from time to time designate
for such purpose ("Payment Account"). Borrower agrees that all payments made to
such Blocked Accounts or other funds received and collected by Agent, whether on
the Accounts or as proceeds of Inventory, Equipment or other Collateral or
otherwise shall be the property of Agent and Lenders according to their
interests hereunder.
(b) For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) Business Day following the date of
receipt of immediately available funds by Agent in the Payment Account (the
"Collection Period"). For purposes of calculating the amount of the Loans
available to Borrower, such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Agent in the
Payment Account, if such payments are received within sufficient time (in
accordance with Agent's usual and customary practices as in effect from time to
time) to credit Borrower's loan account on such day, and if not, then on the
next Business Day. The economic benefit of the Collection Period shall be for
Agent's sole account. To the extent Agent may hold cash collateral to secure
all of the Obligations on terms and conditions determined by Agent, so long as
no Event of Default shall exist or have occurred and be continuing, Borrower
shall receive a credit to its loan account maintained by Agent on the funds held
by Lender at a rate equal to three (3%) percent per annum less than the Prime
Rate. Such credit shall be applied to the loan account of Borrower as of the
first day of each month.
(c) Borrower and all of its subsidiaries, shareholders, directors,
employees, agents and other Affiliates shall, acting as trustee for Agent,
receive, as the property of Agent and Lenders according to their interests
hereunder, any monies, checks, notes, drafts or any other payment relating to
and/or proceeds of Accounts or other Collateral which come into their possession
or under their control and immediately upon receipt thereof, shall deposit or
cause the same to be deposited in the Blocked Accounts, or remit the same or
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cause the same to be remitted, in kind, to Agent. In no event shall the same be
commingled with Borrower's own funds. Borrower agrees to reimburse Agent and
Lenders on demand for any amounts owed or paid to any bank at which a Blocked
Account is established or any other bank or person involved in the transfer of
funds to or from the Blocked Accounts arising out of Agent's or Lenders'
payments to or indemnification of such bank or person. The obligation of
Borrower to reimburse Agent or Lenders for such amounts pursuant to this Section
9.1 shall survive the termination or non-renewal of this Agreement.
9.2 PAYMENTS.
(a) All Obligations shall be payable to the Payment Account as
designated under Section 9.1 or such other place as Agent may designate from
time to time. The Obligations shall be payable upon the effective date of
termination or non-renewal or maturity of the Credit Facility, or earlier upon
an Event of Default, or otherwise as provided elsewhere herein or in the other
Financing Agreements. Agent may apply payments received or collected from
Borrower or for the account of Borrower (including, without limitation, the
monetary proceeds of collections or of realization upon any Collateral) to such
of the Obligations in respect of the Loans, whether or not then due, and to such
other Obligations then due, in each case in such order and manner as Agent
determines. Agent shall have the continuing and exclusive right to apply and
reverse and reapply any and all such proceeds and payments to any portion of the
Obligations. Upon the request of Agent, Borrower shall execute and deliver to
Agent one or more promissory notes, in form and substance satisfactory to Agent,
to evidence further the Loans, or any portion thereof.
(b) Except as otherwise provided in this Section 9.2(b), aggregate
principal and interest payments shall be apportioned among all outstanding Loans
to which such payments relate and payments of the fees required to be paid by
Borrower to Agent for the account of the Lenders hereunder shall, as applicable,
be apportioned ratably among the Lenders, in each case according to their Pro
Rata Shares. All payments shall be remitted to Agent. Agent shall promptly
distribute to each Lender at its primary address set forth on the appropriate
signature page hereof, or at such other address as such Lender may designate in
writing to Agent, such funds as it may be entitled to receive. The foregoing
apportionment of payments is solely for the purpose of determining the
obligations of Borrower hereunder and, notwithstanding such apportionment, any
Lender may on its books and records allocate payments received by it in a manner
different from that contemplated hereby. No such different allocation shall
alter the rights and obligations of Borrower or Guarantor under this Agreement
determined in accordance with the apportionments contemplated by this Section
9.2(b).
(c) If after receipt of any payment of, or proceeds applied to the
payment of, all or any part of the Obligations, Agent or any Lender is for any
reason required to surrender such payment or proceeds to any Person, because
such payment or proceeds is invalidated, declared fraudulent, set aside,
determined to be void or voidable as a preference, or a diversion of trust
funds, or for any other reason, then the Obligations or any part thereof
intended to be satisfied shall be revived and continue and this Agreement shall
continue in
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full force as if such payment or proceeds had not been received by Agent or such
Lender and Borrower shall be liable to pay to Agent or such Lender, and hereby
does indemnify Agent and Lenders and hold them harmless for the amount of such
payment or proceeds surrendered. The provisions of this Section 9.2(c) shall be
and remain effective notwithstanding any contrary action which may have been
taken by Agent or any Lender in reliance upon such payment or proceeds, and any
such contrary action so taken shall be without prejudice to the rights of Agent
and Lenders under this Agreement and shall be deemed to have been conditioned
upon such payment or proceeds having become final and irrevocable. The
provisions of this Section 9.2(c) shall survive the termination of this
Agreement and the other Financing Agreements.
(d) At Agent's option, all principal, interest, fees, commissions,
costs, expenses, or other charges hereunder, under the other Financing
Agreements or in connection herewith or therewith, and any and all Loans, may be
charged directly to any account(s) of Borrower maintained by Agent.
(e) Borrower shall make all payments in respect of the Obligations
free and clear of, and without deduction or withholding for or on account of,
any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees,
deductions, withholdings, restrictions or conditions of any kind or nature
whatsoever.
9.3 SHARING OF PAYMENTS, ETC.
(a) Borrower agrees that, in addition to (and without limitation of)
any right of setoff, banker's lien or counterclaim Agent or any Lender may
otherwise have, each Lender shall be entitled, at its option, to offset balances
held by it for the account of Borrower at any of its offices, in dollars or in
any other currency, against any principal of or interest on any Loans owed to
such Lender or any other amount payable to such Lender hereunder, that is not
paid when due (regardless of whether such balances are then due to Borrower), in
which case it shall promptly notify Borrower and Agent thereof; PROVIDED, THAT,
such Lender's failure to give such notice shall not affect the validity thereof.
(b) If any Lender (including Agent) shall obtain from Borrower
payment of any principal of or interest on any Loan owing to it or payment of
any other amount under this Agreement or any other Financing Agreement through
the exercise of any right of setoff, banker's lien or counterclaim or similar
right or otherwise (other than from Agent as provided herein), and, as a result
of such payment, such Lender shall have received more of its Pro Rata Share of
the principal of or interest on the Loans or such other amounts then due
hereunder by Borrower to such Lender than the percentage thereof received by any
other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the
amount of such excess and simultaneously purchase from such other Lenders a
participation in the Loans or such other amounts, respectively, owing to such
other Lenders (or in interest due thereon, as the case may be) in such amounts,
and make such other adjustments from time to time as shall be equitable, to the
end that all Lenders shall share the benefit of such excess payment (net of any
expenses that may be incurred by such Lender in obtaining or preserving such
excess
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payment) in accordance with their respective Pro Rata Shares. Amounts received
by Agent under this Section 9.3 shall be treated as payments received from
Borrower under Section 9.2 hereof. To such end all Lenders shall make
appropriate adjustments among themselves (by the resale of participation sold or
otherwise) if such payment is rescinded or must otherwise be restored.
(c) Borrower agrees that any Lender so purchasing such a
participation (or direct interest) may exercise, in a manner consistent with
this Section 9.3, all rights of setoff, banker's lien, counterclaim or similar
rights with respect to such participation as fully as if such Lender were a
direct holder of Loans or other amounts (as the case may be) owing to such
Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of Borrower. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section 9.3 applies, such Lender shall, to the extent practicable,
assign such rights to Agent for the benefit of Lenders and, in any event,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of Lenders entitled under this Section 9.3 to share in the benefits
of any recovery on such secured claim.
9.4 BORROWER'S LOAN ACCOUNT. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral,(b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Agent's customary practices as in effect from time to
time. All Collateral or other collateral security held by or granted to Agent
or Lenders by Borrower or any third persons shall be security for the payment
and performance of any and all Obligations of Borrower to Agent and Lenders
(including, but not limited to, the Loans), notwithstanding the maintenance of
separate accounts for Borrower or third persons or the existence of any notes.
9.5 STATEMENTS. Agent shall render to Borrower each month a statement
setting forth the balance in Borrower's loan account(s) maintained by Agent for
Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Agent but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Agent receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Agent.
Until such time as Agent shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing by Borrower to Agent and Lenders.
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9.6 RIGHT OF INSPECTION; ACCESS. Agent, Lenders and their representatives
shall, at all reasonable times and upon reasonable prior written notice prior to
an Event of Default and at any time and without notice at any time on or after
an Event of Default, have free access to and right of inspection of the
Collateral and have full access to and the right to examine and make copies of
the books and records of Borrower to confirm and verify all Accounts, to perform
general audits and to do whatever else Agent or any Lender deems necessary to
protect the interests of Agent and Lenders. Agent may at any time remove from
the premises of Borrower or require Borrower or any accountants and auditors
employed by Borrower to deliver any books and records and Agent and Lenders may,
without cost or expense to any of them, use such of Borrower's personnel,
supplies, computer equipment and space at its places of business as may be
reasonably necessary for the handling of collections.
9.7 ACCOUNTS DOCUMENTATION. Borrower shall maintain its shipping forms,
invoices and other related documents in a form reasonably satisfactory to Agent
and Borrower shall maintain its books, records and accounts in accordance with
GAAP consistently applied. Borrower shall keep and maintain, at its cost and
expense, satisfactory and complete books and records of all Accounts, all
payments received or credits granted thereon, and all other dealings therewith.
At such times as Agent may reasonably request, Borrower shall deliver to Agent,
all original documents evidencing the sale and delivery of goods or the
performance of services which created any Accounts, including, but not limited
to, all contracts, orders, invoices, bills of lading, warehouse receipts,
delivery tickets and shipping receipts, together with schedules describing the
Accounts and/or written confirmatory assignments to Agent of each Account, in
form and substance satisfactory to Agent and duly executed by Borrower, together
with such other information as Agent may request. In no event shall the making
or the failure to make or the content of any schedule or assignment or
Borrower's failure to comply with the provisions hereof be deemed or construed
as a waiver, limitation or modification of the security interest in, lien upon
and assignment of the Collateral or the representations, warranties or covenants
under this Agreement or the other Financing Agreements. Any documents,
schedules, invoices or other papers delivered to Agent or any Lender, pursuant
to this Section or otherwise, may be destroyed or otherwise disposed of by it
one (1) year after the same are delivered, unless Borrower make written request
therefor and pay all expenses attendant to their return, in which event Agent or
such Lender shall return same when its actual or anticipated need therefor has
ceased.
9.8 SPECIFIC POWERS. Borrower hereby constitutes Agent and its designees,
as Borrower's attorney-in-fact, with power of substitution, at the cost and
expense of Borrower, to exercise at any time all or any of the following powers
which appointment, being coupled with an interest, shall be irrevocable until
all Obligations have been indefeasibly paid in full: (a) to receive, take,
endorse, assign, deliver, accept and deposit, in the name of Agent or Borrower,
any and all checks, notes, drafts, remittances and other instruments and
documents or chattel paper relating to the Collateral; (b) on or after the
occurrence of an Event of Default, or an act, condition or event which with
notice, passage of time or both would constitute an Event of Default, to
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
designates; (c) to transmit to Account Debtors notice of Agent's interest
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therein and to request from such Account Debtors at any time, in the name of
Agent or Borrower or that of Agent's designee, information concerning the
Collateral and the amounts owing thereon; (d) on or after the occurrence of an
Event of Default, or an act, condition or event which with notice, passage of
time or both would constitute an Event of Default, to notify Account Debtors to
make payment directly to Agent; (e) on or after the occurrence of an Event of
Default, or an act, condition or event which with notice, passage of time or
both would constitute an Event of Default, to take or bring, in the name of
Agent or Borrower, all steps, actions, suits or proceedings deemed by Agent
necessary or desirable to effect collection of the Collateral; and (f) to
execute in Borrower's name and on its behalf any UCC financing statements or
amendments thereto. Borrower hereby releases Agent and its officers, employees
and designees, from any liability arising from any act or acts under this
Agreement or in furtherance thereof, whether of omission or commission, and
whether based upon any error of judgment or mistake of law or fact, except for
acts of gross negligence or wilful misconduct of Agent as determined pursuant to
a final non-appealable order of a court of competent jurisdiction.
SECTION 10. EFFECTIVE DATE; TERMINATION; COSTS
10.1 TERM.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date hereof and shall continue in full force and effect for
a term ending on the date three (3) years from the date hereof (the "Renewal
Date") and from year to year thereafter, unless sooner terminated pursuant to
the terms hereof; PROVIDED, THAT, Agent, any Lender (as to such Lender), or
Borrower may terminate this Agreement and the other Financing Agreements
effective on the Renewal Date or on the anniversary of the Renewal Date in any
subsequent year by giving to the other parties hereto at least sixty (60) days
prior written notice, PROVIDED, THAT, in the event any one Lender shall send a
notice of its intention to terminate this Agreement as to such Lender, any of
the other Lenders may upon receipt of such notice purchase the Commitment of the
Lender sending such notice of termination. Upon the exercise of the option to
purchase such Commitment by any Lender and upon payment in full to the
terminating Lender of the amounts owing to it by the purchasing Lender in
accordance with Section 11.6, the Lender sending such notice of termination
shall assign its rights and obligations under this Agreement and the other
Financing Agreements to the Lender exercising such option in accordance with
Section 11.6 hereof. This Agreement and all other Financing Agreements must be
terminated simultaneously.
(b) In addition, Agent may, and upon the direction of the Majority
Lenders shall, terminate this Agreement and the other Financing Agreements, or
terminate only the provisions of this Agreement as to future Loans and Letter of
Credit Accommodations, immediately at any time upon the occurrence of an Event
of Default or an act, condition or event which with notice or passage of time or
both would constitute an Event of Default.
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(c) Upon the effective date of termination or nonrenewal of the
Financing Agreements, Borrower shall pay to Agent for the account of Lenders in
full, all outstanding and unpaid Obligations (including, but not limited to, the
Loans and all interest, fees (including the early termination fees provided
herein, if applicable), charges, expenses and other amounts provided for
hereunder, under the other Financing Agreements or otherwise) and shall furnish
cash collateral to Agent in such amounts as Agent determines are reasonably
necessary to secure Agent and Lenders from loss, cost, damage or expense,
including reasonable attorneys' fees and legal expenses, in connection with any
contingent Obligations, including Letter of Credit Accommodations and any checks
or other payments provisionally credited to the Obligations and/or as to which
Agent or any Lender has not yet received final and indefeasible payment. Such
payments in respect of the Obligations and cash collateral shall be remitted by
wire transfer in Federal funds to such bank account of Agent, as Agent may, in
its discretion, designate in writing to Borrower for such purpose. Interest at
the Interest Rate shall be due until and including the next Business Day, if the
amounts so paid by Borrower to the bank account designated by Agent are received
in such bank account later than 12:00 noon, New York, New York time.
(d) No termination of the Financing Agreements or the Commitments
shall relieve or discharge either of Borrower or Guarantor of its duties,
obligations and covenants under the Financing Agreements until all Obligations
have been fully indefeasibly discharged and paid, and the continuing security
interests of Agent in the Collateral shall remain in effect until all such
Obligations have been fully and indefeasibly discharged and paid.
(e) If this Agreement terminates upon the occurrence of an Event of
Default or at the request of Borrower prior to the Renewal Date, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of the lost
profits of Agent and Lenders as a result thereof, Borrower hereby agrees to pay
to Agent for the ratable benefit of Lenders, upon the effective date of such
termination, an early termination fee in an amount equal to:
(i) three (3%) percent of the Maximum Credit, if such
termination is effective on or prior to the first
anniversary of this Agreement; or
(ii) two (2%) percent of the Maximum Credit, if such termination
is effective after the first anniversary of this Agreement
but on or prior to the second anniversary of this Agreement;
or
(iii) one (1%) percent of the Maximum Credit, if such termination
is effective after the second anniversary of this Agreement
but prior to the third anniversary of this Agreement.
Such early termination fee shall be presumed to be the amount of damages
sustained by said early termination and Borrower agrees that it is reasonable
under the circumstances currently existing. The early termination fee provided
for in this Section 10.1 shall be deemed included in the Obligations.
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10.2 EXPENSES AND ADDITIONAL FEES.
(a) Borrower shall pay to Agent on demand all reasonable costs and
expenses that Agent or any Lender may pay or incur in connection with the
negotiation, preparation, consummation, administration, enforcement, and
termination of this Agreement and the other Financing Agreements, including,
without limitation: (i) reasonable attorneys' and paralegals' fees and
disbursements of counsel to Agent, Lenders and any Participant (including
allocated costs of in-house counsel);(ii) costs and expenses (including
reasonable attorneys' and paralegals' fees and disbursements, and allocated
costs of in-house counsel) for any amendment, supplement, waiver, consent, or
subsequent closing in connection with the Financing Agreements and the
transactions contemplated thereby;(iii) costs and expenses of lien and title
searches and title insurance;(iv) taxes, fees and other charges for recording
any agreements or documents with the Office of Patents and Trademarks, the
Copyright Office or any other governmental authority, and the filing of UCC
financing statements and continuations, and other actions to perfect, protect,
and continue the security interests and liens of Lender in the Collateral;(v)
sums paid or incurred to pay any amount or take any action required of Borrower
under the Financing Agreements that Borrower fails to pay or take; (vi) costs of
appraisals, environmental audits, inspections, and verifications of the
Collateral, including, without limitation, travel, lodging, and meals for
inspections of the Collateral and Borrower's operations by Agent, any Lender,
Participants or their agents, plus a charge of $600 per person per day for the
field examiners of Agent, any Lender and any Participant;(vii) costs and
expenses of forwarding loan proceeds, collecting checks and other items of
payment, and establishing and maintaining payment accounts and lock boxes;(viii)
costs and expenses of preserving and protecting the Collateral; and (ix) costs
and expenses (including reasonable attorneys' and paralegals' fees and
disbursements and allocated costs of in-house counsel) paid or incurred to
obtain payment of the Obligations, enforce the security interests and liens of
Agent, sell or otherwise realize upon the Collateral, and otherwise enforce the
provisions of this Agreement and the other Financing Agreements, or to defend
any claims made or threatened against Agent or any Lender arising out of the
transactions contemplated hereby (including, without limitation, preparations
for and consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Financing Agreements regarding
costs and expenses to be paid by Borrower.
(b) Borrower shall pay to Agent all of its customary charges and fees
in connection with (i) any payment, claim or refund relating to the dishonor of
any checks or other items of Borrower or Account Debtors, and (ii) wire
transfers to Borrower.
(c) All sums provided for in this Section 10.2 shall be part of the
Obligations, shall be payable on demand, and shall accrue interest after demand
for payment thereof at the applicable rate of interest then payable hereunder.
Agent is hereby irrevocably authorized to charge any amounts payable hereunder
directly to any of the account(s) maintained by Agent with respect to Borrower.
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10.3 SURVIVAL OF AGREEMENT. All agreements, representations and warranties
contained herein or made in writing by the parties hereto in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement, the other Financing Agreements and the consummation of the
transactions contemplated herein or therein regardless of any investigation made
by or on behalf of Agent or any Lender.
10.4 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise, and no delay
in exercising on the part of Agent or any Lender any right, power or privilege
under this Agreement or under any of the other Financing Agreements or other
documents referred to herein or therein shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or thereunder preclude any other or further exercise thereof or the exercise of
any other right, power and privilege. No notice to or demand on Borrower or
Guarantor not required hereunder or any of the other Financing Agreements shall
entitle Borrower or Guarantor to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of Agent or
any Lender to any other or further action in any circumstances without notice or
demand. The rights and remedies of Agent and Lenders under this Agreement, the
other Financing Agreements and any other present and future agreements between
Agent and/or Lenders and Borrower or Agent and/or Lenders and Guarantor are
cumulative and not exclusive of any rights or remedies provided by law or under
any of the Financing Agreements or such other agreements and all such rights and
remedies may be exercised successively or concurrently.
10.5 NOTICES. All notices, requests and demands hereunder shall be in
writing and (a) made to the applicable party at its address set forth on the
signature page hereof, or to such other address as either party may designate by
written notice to the other in accordance with this provision, and (b) deemed to
have been given or made: if delivered in person, immediately upon delivery; if
by telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, ten (10) days after
mailing.
10.6 ENTIRE AGREEMENT. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represent the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior and contemporaneous agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, offers and contracts concerning the subject matter hereof and
thereof, whether oral or written.
10.7 CONFIDENTIALITY.
(a) Agent and each Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrower pursuant
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to this Agreement which is clearly and conspicuously marked as confidential at
the time such information is furnished by Borrower to Agent and Lenders,
PROVIDED, THAT, nothing contained herein shall limit the disclosure of any such
information: (i) to the extent required by statute, rule, regulation, subpoena
or court order,(ii) to bank examiners and other regulators, auditors and/or
accountants,(iii) in connection with any litigation to which Agent or any Lender
is a party,(iv) to any Affiliate of Agent or any Lender,(v) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) shall have first agreed in
writing to treat such information as confidential in accordance with this
Section 10.7, or (vi) to counsel for Agent or any Lender or any participant or
assignee (or prospective participant or assignee).
(b) In no event shall this Section 10.7 or any other provision
of this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrower or any
third party without breach of this Section 10.7 or otherwise becomes generally
available to the public other than as a result of a disclosure in violation
hereof,(ii) to apply to or restrict disclosure of information that was or
becomes available to Agent or any Lender on a non-confidential basis from a
person other than Borrower,(iii) require Agent or any Lender to return any
materials furnished by Borrower to Agent or such Lender or (iv) prevent Agent or
any Lender from responding to routine informational requests in accordance with
the CODE OF ETHICS FOR THE EXCHANGE OF CREDIT INFORMATION promulgated by The
Robert Morris Associates or other applicable industry standards relating to the
exchange of credit information. The obligations of Agent and Lenders under this
Section 10.7 shall supersede and replace the obligations of Agent and Lenders
under any confidentiality letter signed prior to the date hereof.
10.8 PARTIAL INVALIDITY. If any provision of this Agreement or the
other Financing Agreements is held to be invalid or unenforceable, such
invalidity or unenforceability shall not invalidate this Agreement or the other
Financing Agreements as a whole but this Agreement or the particular Financing
Agreement, as the case may be, shall be construed as though it did not contain
the particular provision or provisions held to be invalid or unenforceable and
the rights and obligations of the parties shall be construed and enforced only
to such extent as shall be permitted by law.
10.9 HEADINGS. The headings used herein are for convenience only and do
not constitute matters to be considered in interpreting this Agreement.
10.10 PARTICIPANT'S SECURITY INTERESTS. If a Participant shall at any
time participate with any Lender in the Loans and Letter of Credit
Accommodations, Borrower hereby grants to such Participant and such Participant
shall have and is hereby given, a continuing lien on and security interest in
any money, securities and other property of Borrower in the custody or
possession of the Participant, including the right of setoff, to the extent of
the Participant's participation in the Obligations, and such Participant shall
be deemed to have the same right of setoff to the extent of its participation in
the Obligations, as it would have if it were a direct Lender.
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10.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by Agent, Lenders, Borrower and Guarantor in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL
WAIVER.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements (other than the Mortgages to the
extent otherwise specifically provided therein) and any dispute arising out of
the relationship between the parties hereto, whether in contract, tort, equity
or otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).
(b) Borrower, Agent and Lenders irrevocably consent and submit
to the non-exclusive jurisdiction of the Supreme Court of the State of New York
in New York County and the United States District Court for the Southern
District of New York and waive any objection based on venue or FORUM NON
CONVENIENS with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above. Agent shall have the right to bring any action or proceeding
against Borrower or its property in the courts of any other jurisdiction which
Agent deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
registered mail, postage prepaid, directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be completed ten
(10) days after the same shall have been so deposited in the U.S. mails,
registered mail, postage prepaid, or, at Agent's option, by service upon
Borrower in any other manner provided under the rules of any of the foregoing
courts. Within thirty (30) days after such service, Borrower shall appear in
answer to such process, failing which Borrower shall be deemed in default and
judgment may be entered by Agent against Borrower for the amount of the claim
and other relief requested.
(d) BORROWER, AGENT AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER
THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF
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THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER, AGENT
AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT
BORROWER OR AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Neither Agent nor any Lender shall have any liability to
Borrower or Guarantor (whether in tort, contract, equity or otherwise) for
losses suffered by Borrower or Guarantor in connection with, arising out of, or
in any way related to the transactions or relationships contemplated by this
Agreement, or any act, omission or event occurring in connection herewith,
unless it is determined by a final and non-appealable judgment by a court of
competent jurisdiction that the losses were the result of such party's own acts
or omissions constituting gross negligence or willful misconduct. In any such
litigation, Agent and each of Lenders shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 WAIVER OF NOTICES. Borrower and Guarantor hereby expressly waive
demand, presentment, protest and notice of protest and notice of dishonor with
respect to any and all instruments and commercial paper, included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on Borrower or Guarantor which
Agent may elect to give shall entitle Borrower or Guarantor to any other or
further notice or demand in the same, similar or other circumstances. Without
limiting the generality of the foregoing, Borrower and Guarantor waive (a)
notice prior to Agent's taking possession or control of any 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, including the issuance of an
immediate writ of possession and (b) the benefit of all valuation, appraisement
and exemption laws.
11.3 AMENDMENTS AND WAIVERS.
(a) No amendment or modification of any provision of this Agreement
or of any of the other Financing Agreements shall be effective without the
written agreement of the Majority Lenders and Borrower and no termination or
waiver of any provision of this Agreement or of any of the Financing Agreements,
or consent to any departure by Borrower therefrom, shall in any event be
effective without the written concurrence of the Majority Lenders, which the
Majority Lenders shall have the right to grant or withhold at their discretion;
EXCEPT THAT any amendment, modification, or waiver (i) of any provision of
Section 3 hereof, which amendment, modification or waiver increases the
Commitment of
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any Lender, reduces the principal of, or interest on, the Loans or the Letter of
Credit Accommodations, reduces the amount of any fee payable for the account of
any Lender, or postpones or extends any date fixed for any payment of principal
of, or interest or fees on the Loans or Letter of Credit Accommodations payable
to any Lender, (ii) that increases the aggregate amount of the Commitments of
the Lenders, (iii) that increases the advance percentages for Eligible Accounts
or Eligible Inventory provided for in Section 3.1(a) hereof or the amount set
forth in Section 3.1(a)(ii)(B),(iv) that increases the limit on Letter of Credit
Accommodations set forth in Section 3.3(d) hereof or that increases the Maximum
Credit,(v) of the definitions of "Renewal Date", "Majority Lenders" or "Pro Rata
Shares", (vi) of the definitions of "Eligible Accounts" or "Eligible Inventory"
if the effect of such amendment, modification or waiver is to increase the
amount of the Loans and/or Letter of Credit Accommodations available to Borrower
under the Lending Formulas, (vii) of any provision of this Agreement or any of
the Financing Agreements that would permit security interests in or liens upon
on the Collateral (or release any Collateral) (except as set forth in Section
12.12 hereof or except as otherwise permitted herein) or release any guarantee
of the Obligations, (viii) that amends the terms of the Intercreditor Agreement
by and among Van-American, the USF&G Bonding Companies, Harvard, Agent and
Lenders, as acknowledged and agreed to by Borrower, Guarantor and certain of the
Subsidiaries of Borrower or any other intercreditor agreement entered into by
Agent on behalf of Lenders after the date hereof with any of the other Bonding
Companies, or (ix) of the provisions contained in this Section 11.3, shall be
effective only if evidenced by a writing signed by or on behalf of (A) any
Lender affected thereby in the case of the amendments, modifications or waivers
described in clause (i) above or (B) all Lenders in the case of the amendments
to definitions or waivers described in clauses (ii) through (ix) above. No
amendment, modification, termination or waiver of any provision of Section 11 or
any other provision referring to Agent shall be effective without the written
concurrence of Agent. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given. No
notice to or demand on Borrower in any case shall entitle Borrower to any other
or further notice or demand in similar or other circumstances. Any amendment,
modification, waiver or consent effected in accordance with this Section 11.3
shall be binding on each Lender, each future Lender, and, if signed by Borrower,
on the Borrower.
(b) Notwithstanding anything to the contrary contained in Section
11.3(a), in the event that Borrower requests that this Agreement or any other
Financing Agreements be amended or otherwise modified in a manner which would
require the unanimous consent of all of the Lenders and such amendment or other
modification is agreed to by the Majority Lenders, then, with the consent of
Borrower and the Majority Lenders, Borrower and the Majority Lenders may amend
this Agreement without the consent of the Lender or Lenders which did not agree
to such amendment or other modification (collectively, the "Minority Lenders")
to provide for (i) the termination of the Commitment of each of the Minority
Lenders,(ii) the addition to this Agreement of one or more other Lenders, or an
increase in the Commitment of one or more of the Majority Lenders, so that the
Commitments, after giving effect to such amendment, shall be in the same
aggregate amount as the Commitments immediately before giving effect to such
amendment,(iii) if any Loans are outstanding at the time of such amendment, the
making of such additional Loans by such new Lenders or
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Majority Lenders, as the case may be, as may be necessary to repay in full the
outstanding Loans of the Minority Lenders immediately before giving effect to
such amendment and (iv)the payment of all interest, fees and other Obligations
payable or accrued in favor of the Minority Lenders and such other modifications
to this Agreement as Borrower and the Majority Lenders may determine to be
appropriate.
(c) Agent and Lenders shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of the rights,
powers and/or remedies of Agent or Lenders unless such waiver shall be in
writing and signed as provided in Section 11.3(a) above. Any such waiver shall
be enforceable only to the extent specifically set forth therein. Neither this
Agreement nor any provision hereof shall be amended, modified, waived or
discharged orally or by course of conduct, but only by a written agreement
approved as required under this Section 11.3. A waiver by Agent or Lenders of
any right, power and/or remedy on any one occasion shall not be construed as a
bar to or waiver of any such right, power and/or remedy which Agent or any
Lender would otherwise have on any future occasion, whether similar in kind or
otherwise.
11.4 WAIVER OF COUNTERCLAIMS. Each of Borrower and Guarantor waives all
rights to interpose any claims, deductions, setoffs or counterclaims of any
nature (other than compulsory counterclaims) in any action or proceeding with
respect to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.
11.5 INDEMNIFICATION. Each of Borrower and Guarantor shall indemnify and
hold Agent, Lenders and their respective officers, directors, agents, employees
and counsel, harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses imposed on, incurred by or asserted against any
of them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
other Financing Agreements, or any undertaking or proceeding related to any of
the transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including, without limitation, amounts paid in
settlement, court costs, and the fees and expenses of counsel except to the
extent resulting directly from the gross negligence or wilful misconduct of
Agent or Lenders as determined pursuant to a final non-appealable order of a
court of competent jurisdiction, PROVIDED, THAT, such gross negligence or wilful
misconduct of any one Lender shall not affect the obligations of Borrower and
Guarantor hereunder as to Agent or any other Lender. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this Section may be
unenforceable because it violates any law or public policy, Borrower and
Guarantor shall pay the maximum portion which it is permitted to pay under
applicable law to Agent and/or the affected Lender(s) in satisfaction of
indemnified matters under this Section. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
11.6 ASSIGNMENTS; PARTICIPATIONS.
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(a) Each Lender may with the written consent of the Agent, which
consent shall not be unreasonably withheld, and after prior notice to Borrower,
assign to one or more commercial banks or other financial institutions a portion
of its rights and obligations under this Agreement (including, without
limitation, a portion of its Commitment, the Loans owing to it and its rights
and obligations as a Lender with respect to the Letter of Credit Accommodations)
and the other Financing Agreements; PROVIDED, THAT, (i) each such assignment
shall be in a principal amount of not less than $10,000,000 and in multiples of
$1,000,000 in excess thereof (or the remainder of such Lender's Commitment),
(ii) the parties to each such assignment shall execute and deliver to Agent, for
its acceptance and recording in the Register an Assignment and Acceptance and
(iii) Agent's consent shall not be required for any such assignment by CIT.
(b) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance,
(i) the assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of Credit Accommodations) of a Lender hereunder and thereunder and
(ii) the assigning Lender shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement.
(c) By execution and delivering an Assignment and Acceptance, the
assignor and assignee thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any of the other
Financing Agreements or the execution, legality, enforceability, genuineness,
sufficiency or value of this Agreement or any of the other Financing Agreements
furnished pursuant hereto, (ii) the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrower, Guarantor or any of their Subsidiaries or the performance or
observance by Borrower or Guarantor of any of the Obligations; (iii) such
assignee confirms that it has received a copy of this Agreement and the other
Financing Agreements, together with such other documents and information it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance, (iv) such assignee will, independently and
without reliance upon the assigning Lender, the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Financing Agreements, (v) such assignee
appoints and authorizes Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement and the other Financing Agreements as
are delegated to Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto, and (vi) such assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of this Agreement and the other Financing Agreements are required to
be performed by it as a
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Lender. Agent and Lenders may furnish any information concerning Borrower,
Guarantor or their Subsidiaries in the possession of Agent or any from time to
time to assignees and Participants.
(d) Agent shall maintain at its address referred to on the
signature page hereto, a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
Lenders and the Commitment of each Lender from time to time (the "Register").
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and Borrower, Guarantor, Agent and Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
Borrower, Guarantor and any Lender at any reasonable time and from time to time
upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee Lender, together with the Revolving Credit Note
and the Letter of Credit Note subject to such assignment, Agent shall, if such
Assignment and Acceptance has been completed and is in substantially the form of
Exhibit A hereto, (i) accept such Assignment and Acceptance, (ii) give prompt
notice thereof to Borrower and Guarantor and (iii) record the information
contained therein in the Register. Within five (5) Business Days after its
receipt of such notice, Borrower, at its expense, shall execute and deliver to
Agent in exchange for the surrendered Notes, new Notes to the order of such
assignee Lender in an aggregate principal amount equal to the Commitment assumed
by it pursuant to such Assignment and Acceptance, and new Notes to the order of
the assigning Lender in an aggregate principal amount equal to the Commitment
retained by it hereunder, in each case prepared by or on behalf of the Agent.
Such new Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note, shall be dated the date of Agent's
acceptance of such assignment and acceptance and shall otherwise be in
substantially the form of the Notes as in effect on the date hereof.
(f) Each Lender may, after prior notice to Borrower, sell
participations to one or more banks or other entities in or to all or a portion
of its rights and obligations under this Agreement and the other Financing
Agreements (including, without limitation, all or a portion of its Commitments
and the Loans owing to it and its participation in the Letter of Credit
Accommodations); PROVIDED, THAT, (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitment hereunder) and the
other Financing Agreements shall remain unchanged, and (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, and Borrower, Guarantor, Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Financing
Agreements. Each Lender shall inform Agent of the persons who have purchased
such participations and upon Borrower's request, Agent shall inform Borrower of
the names of the persons who as of the date of such request have purchased
participations in the Loans.
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11.7 SUCCESSORS AND ASSIGNS. This Agreement, the other Financing
Agreements and any other document referred to herein or therein shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors and assigns, except that Borrower and Guarantor may
not assign their rights under this Agreement, the other Financing Agreements and
any other document referred to herein or therein without the prior written
consent of Agent.
SECTION 12. THE AGENT
12.1 APPOINTMENT.
(a) Each Lender hereby irrevocably appoints and authorizes Agent
(i) to receive on behalf of each Lender any payment of principal of or interest
on the Notes outstanding hereunder and all other amounts accrued hereunder for
the account of the Lenders and paid to Agent, and, subject to Section 3.11 of
this Agreement, to distribute promptly to each Lender its Pro Rata Share of all
payments so received, (ii) to distribute to each Lender copies of all material
notices and agreements received by the Agent and not required to be delivered to
each Lender pursuant to the terms of this Agreement, PROVIDED, THAT, the Agent
shall not have any liability to Lenders for the Agent's failure to distribute
any such notice or agreements to Lenders and (iii) subject to Section 11.3 of
this Agreement, to take such action as Agent deems appropriate on its behalf to
administer the Loans, Letter of Credit Accommodations and this Agreement and the
other Financing Agreements and to exercise such other powers delegated to Agent
by the terms hereof and the other Financing Agreements (including, without
limitation, the power to give or to refuse to give notices, waivers, consents,
approvals and instructions and the power to make or to refuse to make
determinations and calculations) together with such powers as are reasonably
incidental thereto to carry out the purposes hereof and thereof. As to any
matters not expressly provided for by this Agreement and the other Financing
Agreements (including, without limitation, enforcement or collection of the
Notes), Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders, and such instructions of the Majority Lenders shall be
binding upon all Lenders; PROVIDED, THAT, Agent shall not be required to take
any action which, in the reasonable opinion of the Agent, exposes the Agent or
liability or which is contrary to this Agreement, any of the other Financing
Agreements or applicable law. The provisions of this Section 12 are solely for
the benefit of Agent and Lenders. Borrower and Guarantor shall not have any
rights as a third party beneficiary of any of the provisions contained in this
Section 12. Notwithstanding anything to the contrary contained in Section 11.3
hereof, no amendments to this Section 12 shall require the written agreement of
Borrower or Guarantor. The identification of CIT as co-agent hereunder shall
not create any rights in favor of it in such capacity, nor subject it to any
duties or obligations in such capacity.
(b) Without limiting the generality of the foregoing, or of any
other provision of this Agreement or the other Financing Agreements that
provides rights or powers to Agent,
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Lenders agree that Agent shall have the right to exercise the following powers
as long as this Agreement remains in effect: (i) maintain, in accordance with
its customary business practices, ledgers and records reflecting the status of
the Loans, the Letter of Credit Accommodations, the Collateral, and related
matters; (ii) execute and/or file any and all financing or similar statements or
notices, amendments, renewals, supplements, documents, instruments, proofs of
claim, notices and other written agreements with respect to this Agreement and
the other Financing Agreements; (iii) make Loans for itself or on behalf of
Lenders as provided herein; (iv) exclusively receive, apply and distribute
proceeds of the Collateral as provided herein; (v) open and maintain such bank
accounts and lock boxes as Agent deems necessary and appropriate in accordance
with this Agreement and the other Financing Agreements for the foregoing
purposes and with respect to the Collateral and proceeds thereof; (vi) perform,
exercise and enforce any and all other rights and remedies of the Lenders with
respect to Borrower, Guarantor, the Loans and the Collateral, or otherwise
related to any of same as provided herein and in the other Financing Agreements;
and (vii) incur and pay such costs and expenses as Agent may deem necessary or
appropriate for the performance and fulfillment of its functions and powers
pursuant to this Agreement and the other Financing Agreements.
12.2 NATURE OF DUTIES. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement or in the other Financing
Agreements. The duties of Agent shall be mechanical and administrative in
nature. Agent shall not have by reason of this Agreement or any of the other
Financing Agreements a fiduciary relationship in respect of any Lender. Nothing
in this Agreement or any of the other Financing Agreements, express or implied,
is intended to or shall be construed to impose upon Agent any obligations in
respect of this Agreement or any of the other Financing Agreements except as
expressly set forth herein or therein. Each Lender shall make its own
independent investigation of the financial condition and affairs of Borrower,
Guarantor and any other Obligor in connection with the making and the
continuance of the Loans hereunder and the issuance of the Letter of Credit
Accommodations and shall make its own appraisal of the creditworthiness of
Borrower, Guarantor and any other Obligor and the value of the Collateral, and
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the date hereof or at any
time or times hereafter, PROVIDED, THAT, upon the reasonable request of a
Lender, Agent shall provide to such Lender any documents or reports delivered to
Agent by Borrower pursuant to the terms of this Agreement or any of the other
Financing Agreements. If Agent seeks the consent or approval of the Majority
Lenders to the taking or refraining from taking any action hereunder, Agent
shall send notice thereof to each Lender. Agent shall promptly notify each
Lender any time that the Majority Lenders have instructed Agent to act or
refrain from acting pursuant hereto.
12.3 DELEGATION OF DUTIES. Except as otherwise provided in this section,
Agent may execute any of its duties under this Agreement or any of the other
Financing Agreements 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
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selection was made in compliance with this Section and without gross negligence
or willful misconduct.
12.4 RIGHTS, EXCULPATION, ETC. Agent and its directors, officers, agents
or employees shall not be liable for any action taken or omitted to be taken by
it or them under or in connection with this Agreement or any of the other
Financing Agreements, except for their own gross negligence or willful
misconduct as determined by a final non-appealable order of a court of competent
jurisdiction. Without limiting the generality of the foregoing, Agent (a) may
treat the payee of any Note as the holder thereof until Agent receives written
notice of the assignment or transfer thereof, pursuant to Section 11.13 hereof,
signed by such payee and in form satisfactory to the Agent; (b) may consult with
legal counsel (including, without limitation, counsel to Agent or counsel to
Borrower or Guarantor), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, certificates,
warranties or representations made in or in connection with this Agreement or
any of the other Financing Agreements; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or any of the other Financing Agreements;
(e) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or any
of the other Financing Agreements on the part of any Person, the existence or
possible existence of any Event of Default, or act, condition or event which
with notice or passage of time or both would constitute an Event of Default, or
to inspect the Collateral or other property (including, without limitation, the
books and records) of any Person; (f) shall not be responsible to any Lender for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or any of the other Financing Agreements or any other
instrument or document furnished pursuant hereto or thereto; and (g) shall not
be deemed to have made any representation or warranty regarding the existence,
value or collectibility of the Collateral, the existence, priority or perfection
of the security interest in, or mortgage or lien upon, any of the Collateral, or
the Loans available to Borrower or any certificate prepared by Borrower or
Guarantor in connection therewith, nor shall Agent be responsible or liable to
the Lenders for any failure to monitor or maintain availability of Loans
hereunder or any portion of the Collateral. Agent shall not be liable for any
apportionment or distribution of payments made by it in good faith pursuant to
Section 9.2, and if any such apportionment 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 other Lenders any payment
in excess of the amount which they are determined to be entitled. Agent may at
any time request instructions from the Lenders with respect to any actions or
approvals which by the terms of this Agreement or of any of the other Financing
Agreements Agent is permitted or required to take or to grant, and if such
instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval hereunder or under
any of the other Financing Agreements until it shall have received such
instructions from the Majority Lenders. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against
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Agent as a result of Agent acting or refraining from acting under this Agreement
or any of the other Financing Agreements in accordance with the instructions of
the Majority Lenders.
12.5 RELIANCE. 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 the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be full justified in failing or refusing to take any action
under this Agreement or any of the other Financing Agreements unless it shall
first 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 so long as it is not grossly negligent or guilty
of wilful misconduct. If Agent so requests, it shall first be indemnified to
its reasonable satisfaction by Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any of the other Financing Agreements in
accordance with a request or consent of the Lenders and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of the
Lenders.
12.6 NOTICE OF EVENT OF DEFAULT. Agent shall not be deemed to have
knowledge or notice of the occurrence of any 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 Lenders and with respect to
Events of Default of which Agent has actual knowledge, unless Agent shall have
received written notice from a Lender or Borrower referring to this Agreement,
describing such Event of Default, and stating that such notice is a "notice of
default." Agent promptly will notify the Lenders of its receipt of any such
notice or of any Event of Default of which Agent has, or is deemed to have,
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.
12.7 CREDIT DECISION. Each Lender acknowledges that the Agent has not made
any representation or warranty to it, and that no act by Agent hereinafter
taken, including any review of the affairs of Borrower and its Subsidiaries or
Affiliates, shall be deemed to constitute any representation or warranty by
Agent to any Lender. Each Lender represents to Agent that it has, independently
and without reliance upon Agent 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, financing and other condition and
creditworthiness of Borrower and any other Person (other than any Lender) party
to any of the other Financing Agreements, and all applicable bank regulatory
laws relating to the transactions 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 Agent and based
on such documents and information as it shall deem
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appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and any of the
other Financing Agreements, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financing and other condition and creditworthiness of Borrower and any other
Person (other than any Lender) party to this Agreement or any of the other
Financing Agreements. Except for notices, reports and other documents expressly
herein required to be furnished to the Lenders by Agent, Agent shall not have
any duty or responsibility to provide any Lender 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 this Agreement or any of the other Financing Agreements that may come into
the possession of Agent.
12.8 INDEMNIFICATION. To the extent that Agent is not reimbursed and
indemnified by Borrower, the Lenders will reimburse and indemnify the Agent for
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any of
the other Financing Agreements or any action taken or omitted by Agent under
this Agreement or any of the other Financing Agreements, in proportion to each
Lender's Pro Rata Share, PROVIDED, THAT, no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or disbursements for which there has
been a final non-appealable order of a court of competent jurisdiction that such
resulted from Agent's gross negligence or willful misconduct. The obligations
of the Lenders under this Section 12.8 shall survive the payment in full of the
Obligations and the termination or non-renewal of this Agreement.
12.9 CONGRESS IN ITS INDIVIDUAL CAPACITY. With respect to its Pro Rata
Share of the Commitments hereunder, the Loans made by it and the Notes issued to
or held by it, Congress shall have and may exercise the same rights and powers
hereunder and is subject to the same obligations and liabilities as and to the
extent set forth herein as any other Lender or holder of a Note. The terms
"Lenders" or "Majority Lenders" or any similar terms shall, unless the context
clearly otherwise indicates, include Congress in its individual capacity as a
Lender or one of the Majority Lenders. Congress and its Affiliates may accept
deposits from, lend money to, and generally engage in any kind of banking, trust
or other business with Guarantor, Borrower or any of its or their Subsidiaries
or Affiliates as if it were not acting as Agent pursuant hereto without any duty
to account to Lenders.
12.10 SUCCESSOR AGENT.
(a) Agent may resign from the performance of all its functions and
duties hereunder and under the other Financing Agreements at any time by giving
at least thirty (30) Business Days' prior written notice to Borrower and each
Lender. Such resignation shall take effect upon the acceptance by a successor
Agent of appointment pursuant to Sections 12.10(b) and 12.10(c) below or as
otherwise provided below.
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(b) Upon any such notice of resignation, the Majority Lenders
shall appoint a successor Agent. If the successor Agent is not selected from
one of the Lenders, the successor Agent must be reasonably satisfactory to
Borrower. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement and the other Financing Agreements. After any Agent's
resignation hereunder as the Agent, the provisions of this Section 12 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement and the other Financing Agreements.
(c) If a successor Agent shall not have been so appointed within
such thirty (30) Business Day period, the retiring Agent, with the consent of
Borrower, shall then appoint a successor Agent who shall serve as Agent until
such time, if any, as the Majority Lenders, with the consent of the Borrower,
appoint a successor Agent as provided above.
12.11 WITHHOLDING TAX.
(a) If any Lender is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, 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 Code
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees to promptly 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,
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grants a 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 Section 1441 and 1442 of the Code.
(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 subsection (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 Internal Revenue Service or any other Governmental
Authority of the United States of America 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
obligations of the Lenders under this subsection shall survive the payment of
all Obligations and the resignation or replacement of Agent.
12.12 COLLATERAL MATTERS.
(a) Agent may from time to time, at any time on or after an Event
of Default and for so long as the same is continuing, make such disbursements
and advances ("Agent Advances") which Agent, in its sole discretion, deems
necessary or desirable either (i) to preserve or protect the Collateral or any
portion thereof,(ii) to enhance the likelihood or maximize the amount of
repayment by Borrower of the Loans and other Obligations or (iii) to pay any
other amount chargeable to Borrower pursuant to the terms of this Agreement,
including, without limitation, costs, fees and expenses as described in Section
10.2 and payments to any issuer of Letter of Credit Accommodations, PROVIDED,
THAT, in no event shall the sum of the amount of the Agent Advances made for the
purposes set forth in Section 12.12(a)(ii) at any time outstanding plus the
amount of the then outstanding additional Loans and Letter of Credit
Accommodations in excess of the Total Availability provided for in Section 12.14
below, exceed $3,500,000. Agent Advances shall be repayable on demand and be
secured by the Collateral. Agent Advances shall not constitute Loans but shall
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otherwise constitute Obligations hereunder. Agent shall notify each Lender and
Borrower in writing of each such Agent Advance, which notice shall include a
description of the purpose of such Agent Advance. Without limitation of its
obligations pursuant to Section 12.5, each Lender agrees that it shall make
available to Agent, upon Agent's demand, in immediately available funds, the
amount equal to such Lender's Pro Rata Share of each such Agent Advance. If
such funds are not made available to Agent by such Lender, Agent shall be
entitled to recover such funds, on demand from such Lender together with
interest thereon, for each day from the date such payment was due until the date
such amount is paid to Agent, at the Interest Rate.
(b) Lenders hereby irrevocably authorize Agent, at its option and
in its discretion to release any security interest in, mortgage or lien upon,
any of the Collateral upon termination of the Commitments and payment and
satisfaction of all of the Obligations and delivery of cash collateral as
provided in Section 10.1 above; or constituting property being sold or disposed
of if Borrower certifies to Agent that the sale or disposition is made in
compliance with Section 7.13 hereof (and Agent may rely conclusively on any such
certificate, without further inquiry); or constituting property in which
Borrower owned no interest at the time the security interest, mortgage or lien
was granted or at any time thereafter; or if approved, authorized or ratified in
writing by the Majority Lenders. Except as provided above, Agent will not
release any security interest in, mortgage or lien upon, any of the Collateral
without the prior written authorization of the Majority Lenders; PROVIDED, THAT,
Agent may not release such security interests in, mortgage or lien upon, any of
the Collateral having a value in excess of $1,000,000, without the prior written
authorization of all of the Lenders. Upon request by Agent at any time, the
Lenders will confirm in writing Agent's authority to release particularly types
or items of Collateral pursuant to this Section 12.12.
(c) Without any manner limiting Agent's authority to act without
any specific or further authorization or consent by the Majority Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section 12.12. So long as no
Event of Default is then continuing, upon receipt by Agent of confirmation from
the Majority Lenders of its authority to release any particular item or types of
Collateral, and upon at least five (5) Business Day's prior written request by
Borrower, Agent shall (and is hereby irrevocably authorized by Lenders to)
execute such documents as may be necessary to evidence the release of the
security interest, mortgage or liens granted to Agent for the benefit of the
Lenders upon such Collateral; PROVIDED, THAT, (i) Agent shall not be required to
execute any such document on terms which, in Agent's opinion, would expose Agent
to liability or create any obligations or entail any consequence other than the
release of such security interest, mortgage or liens without recourse or
warranty and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any security interest, mortgage or lien upon (or
obligations of Borrower in respect of) the Collateral retained by Borrower.
(d) Agent shall have no obligation whatsoever to any Lender to
assure that the Collateral exists or is owned by Borrower, Guarantor or any
Obligor (as the case may be) or
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is cared for, protected or insured or has been encumbered or that the security
interest, mortgage or lien granted to Agent pursuant to any of the Financing
Agreements has been properly or sufficiently or lawfully created, perfected,
protected or enforced or is entitled to any particular priority, or to exercise
at all or in 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 in this Section 12 or in any of the other
Financing Agreements, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, Agent may act in any
manner it may deem appropriate, in its sole discretion, given Agent's own
interest in the Collateral as one of the Lenders and that Agent shall have no
duty or liability whatsoever to any other Lender.
12.13 AGENCY FOR PERFECTION. Agent and each Lender hereby appoints each
other Lender as agent for the purpose of perfecting the security interests in
and liens upon the Collateral of Agent for itself and the ratable benefit of
Lenders in assets which, in accordance with Article 9 of the UCC can be
perfected only by possession. Should any Lender obtain possession of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
request therefor shall deliver such Collateral to Agent or in accordance with
Agent's instructions.
12.14 ADDITIONAL LOANS. Agent shall not make any Loans or provide any
Letter of Credit Accommodations on behalf of Lenders intentionally and with
actual knowledge that such Loans or Letter of Credit Accommodations would cause
the aggregate amount of the total outstanding Loans and Letter of Credit
Accommodations to exceed the Total Availability, without the prior consent of
all of the Lenders, EXCEPT, THAT, Agent may make Loans in connection with any
Letter of Credit Accommodations in such circumstances and Agent may make such
additional Loans or provide such additional Letter of Credit Accommodations on
behalf of Lenders intentionally and with actual knowledge that such Loans or
Letter of Credit Accommodations will cause the total outstanding Loans and
Letter of Credit Accommodations to exceed the Total Availability as Agent may
deem necessary or advisable in its discretion, PROVIDED, THAT: (a) the total
principal amount of the additional Loans or additional Letter of Credit
Accommodations which Agent may make after obtaining such actual knowledge that
the aggregate principal amount of the Loans equals or exceeds the Total
Availability shall not exceed ten (10%) percent of the Total Availability at the
time, but in no event shall such additional Loans or additional Letter of Credit
Accommodations exceed $3,500,000 in the aggregate outstanding at any time, and
(b) without the consent of all of the Lenders, Agent shall not make any such
additional Loans or Letter of Credit Accommodations more than ninety (90) days
from the date of the first such additional Loans or Letter of Credit
Accommodations each time Agent shall make or provide the same, PROVIDED, THAT,
at any time within any such ninety (90) day period commencing on the date of the
first such additional Loans or Letter of Credit Accommodations, the Loans or
Letter of Credit Accommodations do not exceed the Total Availability for thirty
(30) days then such ninety (90) day period shall cease and recommence upon the
next time that Agent may make such additional Loans or provide such additional
Letter of Credit Accommodations. Each Lender shall be obligated to pay Agent
the amount of its Pro Rata Share of any such
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additional Loans or Letter of Credit Accommodations provided that Agent is
acting in accordance with the terms of this Section 12.14.
12.15 CONCERNING THE COLLATERAL AND THE RELATED FINANCING AGREEMENTS. Each
Lender authorizes and directs Agent to enter into this Agreement and the other
Financing Agreements relating to the Collateral, for the ratable benefit of
Lenders and Agent. Each Lender agrees that any action taken by Agent or
Majority Lenders in accordance with the terms of this Agreement or the other
Financing Agreements relating to the Collateral, and the exercise by the Agent
or Majority Lenders 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.
12.16 FIELD AUDIT AND EXAMINATION REPORTS; DISCLAIMER BY LENDERS. By
signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish Lender,
promptly after it becomes available, a copy of each field audit or examination
report (each a "Report" and collectively, "Reports") prepared by Agent;
(b) expressly agrees and acknowledges that Agent (i) does not
make any representation or warranty as to the accuracy of any Report, or (ii)
shall not be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that 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; and
(d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 10.7 hereof, and not to
distribute or use any Report in any other manner.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Agent, Lenders, Borrower and Guarantor have caused
these presents to be duly executed as of the day and year first above written.
AGENT BORROWER
CONGRESS FINANCIAL CORPORATION, LODESTAR ENERGY, INC. (formerly
as Agent known as Costain Coal, Inc.)
By: /s/ Andrew W. Robin By: /s/ Michael E. Donohue
----------------------------- -----------------------------
Title: SVP Title: CFO
-------------------------- --------------------------
ADDRESS: CHIEF EXECUTIVE OFFICE:
1133 Avenue of the Americas 333 West Vine Street
New York, New York 10036 Suite 1700
Lexington, Kentucky 40507
GUARANTOR
LODESTAR HOLDINGS, INC.
(formerly known as Rencoal, Inc.)
By: /s/ Michael E. Donohue
-----------------------------
Title: CFO
--------------------------
CHIEF EXECUTIVE OFFICE:
30 Rockefeller Plaza
New York, New York 10112
LENDERS
CONGRESS FINANCIAL CORPORATION THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Andrew W. Robin By: /s/ Allison Friedman
----------------------------- -----------------------------
Title: SVP Title: Assistant Secretary
-------------------------- --------------------------
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[SIGNATURE PAGE CONTINUED]
ADDRESS: ADDRESS:
1133 Avenue of the Americas 1211 Avenue of the Americas
New York, New York 10036 New York, New York 10036
COMMITMENT: COMMITMENT:
$60,000,000 $60,000,000
COMMITMENT PERCENTAGE: COMMITMENT PERCENTAGE:
50% 50%
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EXHIBIT A
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and Acceptance")
dated as of _____________, 199_ [2000] is made between _________________________
(the "Assignor") and ____________________ (the "Assignee").
W I T N E S S E T H:
WHEREAS, Lodestar Energy, Inc. ("Borrower") has entered into financing
arrangements with Congress Financial Corporation in its capacity as Agent
pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf
of the financial institutions from time to time parties thereto as lenders (in
such capacity, "Agent") and the financial institutions which are from time to
time parties to the Loan Agreement as lenders (individually, a "Lender", and
collectively, "Lenders") pursuant to which Lenders may make, and Agent on behalf
of Lenders may make, loans and advances and provide other financial
accommodations to Borrower as set forth in the Amended and Restated Loan and
Security Agreement, dated May ___, 1998, by and among Borrower, Lodestar
Holdings, Inc., Agent and Lenders (as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, the
"Loan Agreement");
WHEREAS, pursuant to the Loan Agreement, Assignor has undertaken to make
Loans and participate in Letter of Credit Accommodations to Borrower in an
aggregate amount not to exceed $____________ (the "Commitment"); and
WHEREAS, the Assignor desires to assign to Assignee [part of the] [all]
rights and obligations of Assignor under the Loan Agreement in respect of its
Commitment, together with a corresponding portion of each of its outstanding
Loans and interest in Letter of Credit Accommodations on the terms and subject
to the conditions set forth herein and the Assignee wishes to accept assignment
of such rights and to assume such obligations from the Assignor on such terms
and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
(e) ASSIGNMENT AND ASSUMPTION
A-1
(1) Subject to the terms and conditions of this Assignment and
Acceptance, Assignor hereby sells, transfers and assigns to Assignee, and
Assignee hereby purchases, assumes and undertakes from Assignor, without
recourse and without representation or warranty (except as provided in this
Assignment and Acceptance) an undivided interest in all of Assignor's rights and
obligations under and pursuant to the Loan Agreement and the other Financing
Agreements in an amount representing ________ (__%) percent of the total
Commitments of all Lenders under the Loan Agreement ("Assignee's Percentage"),
including, without limitation, (a) all amounts advanced and to be advanced or
participated in by the Assignor pursuant to the Commitment up to the Assignee's
Percentage and (b) related rights, benefits, obligations, liabilities and
indemnities of Assignor under or in connection with the Loan Agreement and the
other Financing Agreements;
(2) On and after the Effective Date (as defined in Section 4
hereof), Assignee shall be a party as a Lender to the Loan Agreement and succeed
to all of the rights and be obligated to perform all of the obligations of a
Lender under the Loan Agreement, including the requirements concerning
confidentiality and the payment of the indemnification, with a Commitment in the
amount set forth below. Assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Loan Agreement are
required to be performed by it as a Lender. It is the intent of the parties
hereto that the Commitment of the Assignor shall, as of the Effective Date, be
reduced by an amount equal to the amount of Assignee's Commitment set forth
below and Assignor shall relinquish its rights and be released from its
obligations under the Loan Agreement to the extent such obligations have been
assumed by the Assignee.
(3) After giving effect to the assignment and assumption set
forth herein, on the Effective Date Assignee's Commitment shall be $__________
and Assignee's Commitment Percentage shall be _________ (___%) percent.
(4) After giving effect to the assignment and assumption set
forth herein, on the Effective Date, Assignor's Commitment shall be $__________
and Assignor's Commitment Percentage shall be _________ (___%) percent.
(f) PAYMENTS. As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $__________,
representing Assignee's Pro Rata Share of the principal amount of all Loans.
(g) INDEPENDENT CREDIT DECISION. The Assignee (a) acknowledges that it
has received a copy of the Credit Agreement and the Schedules and Exhibits
thereto, together with copies of the most recent financial statements of
Borrower and its Subsidiaries, and such other documents and information as it
has deemed appropriate to make its own credit and legal analysis and decision to
enter into this Assignment and Acceptances and (b) agrees that it will,
independently and without reliance upon the Assignor, the Agent or any other
Lender and based on such documents and information as it shall deem appropriate
at the time,
A-2
continue to make its own credit and legal decisions in taking or not taking
action under the Loan Agreement and the other Financing Agreements.
(h) EFFECTIVE DATE; NOTICES.
(1) As between the Assignor and Assignee, the effective date for
this Assignment and Acceptance shall be ___________, 199_ (the "Effective
Date"); PROVIDED THAT the following conditions precedent have been satisfied on
or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee;
(ii) the consent of the Agent required for an effective
assignment of the Commitment by Assignor to Assignee shall have been duly
obtained and shall be in full force and effect as of the Effective Date;
(iii) 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; and
(iv) Assignee shall pay to the Assignor all amounts due to the
Assignor under this Assignment and Acceptance.
(2) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to Borrower and Agent for acknowledgement
by the Agent, a Notice of Assignment in the form attached hereto as Schedule 1.
(i) WITHHOLDING TAX. Assignee (a) represents and warrants that under
applicable law and treaties no tax will be required to be withheld by the Lender
with respect to any payments to be made to Assignor hereunder, (b) agrees to
furnish (if it is organized under the laws of any jurisdiction other than the
United States or any State thereof) to the Agent and the Borrower prior to the
time that the Agent or Borrower is required to make any payment of principal,
interest or fees hereunder, duplicate executed originals of either U.S. Internal
Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein
the Assignee claims entitlement to the benefits of a tax treaty that provides
for a complete exemption from U.S. federal income withholding tax on all
payments hereunder) and agrees to provide new Forms 4224 or 1001 upon the
expiration of any previously delivered form or comparable statements in
accordance with applicable U.S. law and regulations and amendments thereto, duly
executed and completed by the Assignee, and (c) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.
(j) REPRESENTATIONS AND WARRANTIES.
(1) The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of
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any security interest or lien or other adverse claim; (ii) it is duly organized
and existing and it has the full power and authority to take, and has taken, all
action necessary to execute and deliver this Assignment and Acceptance and any
other documents required or permitted to be executed or delivered by it in
connection with this Assignment and Acceptance and to fulfil its obligations
hereunder, (iii) no notices to, or consents, authorizations or approvals of, any
Person are required (other than any already given or obtained) for its due
execution, delivery and performance of this Assignment and Acceptance, and apart
from any agreements or undertakings or filings required by the Credit Agreement,
no further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; and (iv) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes the legal,
valid an binding obligation of Assignor, enforceable against the Assignor in
accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles.
(2) Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representation made
in or in connection with the Loan Agreement or the other Financing Agreements or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Agreement or the other Financing Agreements or any other
instrument or document furnished pursuant thereto. Assignor makes no
representation or warranty in connection with, and assumes no responsibility
with respect to, the solvency, financial condition or statements of Borrower or
any Obligor, or the performance or observance by Borrower or any Obligor, of any
of its respective obligations under the Loan Agreement or the other Financing
Agreements or any other instrument or document furnished in connection
therewith.
(3) Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and all
action necessary to execute and deliver this Assignment and Acceptance and any
other documents required or permitted to be executed or delivered by it in
connection with this Assignment and Acceptance, and to fulfill its obligations
hereunder; (ii) no notices to, or consents, authorizations or approvals of, any
Person are required (other than any already given or obtained) for its due
execution, delivery and performance of this Assignment and Acceptance; and apart
from any agreements or undertakings or filings required by the Loan Agreement,
no further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; and (iii) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignee, enforceable against the Assignee
in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles.
(k) FURTHER ASSURANCES. Assignor and Assignee each hereby agree to
execute and deliver such other instruments, and take such other action, as
either party may reasonably request in connection with the transactions
contemplated by this Assignment and Acceptance, including the delivery of any
notices or other documents or instruments to the Borrower or
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the Agent, which may be required in connection with the assignment and
assumption contemplated hereby.
(l) MISCELLANEOUS.
(1) Any amendment or waiver of any provision of this Assignment
and Acceptance shall be in writing and signed by the parties hereto. No failure
to delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other or further breach thereof.
(2) All payments made hereunder shall be made without any
set-off or counterclaim.
(3) Assignor and Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(4) This Assignment and Acceptance may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
(5) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. The Assignor and
the Assignee each irrevocably submits to the non-exclusive jurisdiction of any
State or Federal court sitting in New York, New York over any suit, action or
proceeding arising out of or relating to this Assignment and Acceptance and
irrevocably agrees that all claims in respect of such action or proceeding may
be hard and determined in such New York State or Federal court. Each party to
this Assignment and Acceptance hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.
(6) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
[REMAINDER OF PAGE INTENTIONALLY OMITTED]
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IN WITNESS WHEREOF, the Assignor and Assignee have caused this Assignment
and Acceptance to be executed and delivered by their duly authorized officers as
of the date first above written.
[ASSIGNOR]
By:
----------------------------------
Title:
-------------------------------
Address:
-----------------------------
-----------------------------
[ASSIGNEE]
By:
----------------------------------
Title:
-------------------------------
Address:
-----------------------------
-----------------------------
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SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
____________, 19__[2000]
- ------------------------------
- ------------------------------
- ------------------------------
Attn.:
------------------------
Ladies and Gentlemen:
Lodestar Energy, Inc. (together with its successors and assigns,
"Borrower") has entered into financing arrangements with Congress Financial
Corporation (Southwest) in its capacity as agent pursuant to the Loan Agreement
(as hereinafter defined) acting for and on behalf of the financial institutions
which are parties thereto as lenders (together with its successors and assigns
in such capacity, "Agent"), and the financial institutions which are parties to
the Loan Agreement as lenders (together with their successors and assigns,
collectively, "Lenders") as set forth in the Loan and Security Agreement, dated
May __, 1998, by and among Borrower, Agent and Lenders (as the same now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced, the "Loan Agreement") and the other agreements, documents and
instruments referred to therein or at any time executed and/or delivered in
connection therewith or related thereto (all of the foregoing, together with the
Loan Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the "Financing Agreements"). All capitalized terms used
herein shall have the meaning assigned thereto in the Loan Agreement, unless
otherwise defined herein.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________________ (the "Assignor") to
___________________________ (the "Assignee") of _________ (__%) percent of the
right, title and interest of Assignor in and to the Loan Agreement (including,
without limitation, the right, title and interest of Assignor in and to the
Commitments of Assignor, each of the outstanding Loans made by Assignor and the
Assignor's participation in each of the Letter of Credit Accommodations pursuant
to the Assignment and Acceptance Agreement attached hereto (the "Assignment and
Acceptance"). We understand and agree that the Assignor's Commitment, as of
______________, ____, is $___________ and the aggregate amount of its
outstanding Loan is $____________.
2. Assignee agrees that, upon receiving the consent of each Agent to such
assignment, Assignee will be bound by the terms of the Loan Agreement as fully
and to the same extent as if the Assignee were the Lender originally holding
such interest under the Loan Agreement.
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3. The following administrative details apply to Assignee:
(A) Notice address:
Assignee name:
------------------------------
Address:
------------------------------
------------------------------
Attention:
------------------------------
Telephone:
------------------------------
Telecopier:
------------------------------
(B) Payment instructions:
Account No.:
------------------------------
At:
------------------------------
------------------------------
------------------------------
Reference:
------------------------------
Attention:
------------------------------
4. You are entitled to rely upon the representations, warranties and
covenants of each of Assignor and Assignee contained in the Assignment and
Acceptance.
IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of
Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
------------------------------
Title:
---------------------------
[NAME OF ASSIGNEE]
By:
------------------------------
Title:
---------------------------
[SIGNATURES CONTINUED ON THE NEXT PAGE]
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[SIGNATURE CONTINUED FROM THE PREVIOUS PAGE]
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
CONGRESS FINANCIAL CORPORATION,
as Agent
By:
------------------------------
Title:
---------------------------
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