NS Group, Inc. Form 10-Q March 31, 2002 Exhibit 4.1
FINANCING AND SECURITY AGREEMENT
--------------------------------
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS AGENT AND LENDER)
AND
NEWPORT STEEL CORPORATION
AND
XXXXXX STEEL CORPORATION
(AS BORROWERS)
DATED: MARCH 29, 2002
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TABLE OF CONTENTS
SECTION 1. Definitions............................................................................1
SECTION 2. Conditions Precedent..................................................................15
2.1 Conditions to Closing.................................................................15
2.2 Conditions to Initial Funding.........................................................18
2.3 Conditions to Each Extension of Credit................................................18
SECTION 3. Revolving Loans.......................................................................19
3.1 Procedures for Revolving Loans........................................................19
3.2 Further Assurances Regarding Collateral...............................................20
3.3 Representations and Warranties of the Companies Regarding Accounts and Inventory......20
3.4 Cash Management.......................................................................21
3.5 Agreements Regarding Accounts and Inventory...........................................22
3.6 Revolving Loan Account; Related Matters...............................................22
3.7 Revolving Loan Account Statements.....................................................26
3.8 Overadvance of Revolving Loans........................................................26
SECTION 4. Intentionally Omitted.................................................................26
SECTION 5. Letters of Credit.....................................................................26
5.1 Amount and Terms of Letters of Credit.................................................26
5.2 Letter of Credit Guaranties...........................................................27
5.3 Indemnification.......................................................................27
5.4 Agent and Lenders Not Responsible.....................................................27
5.5 Actions of Agent, Lenders and Issuing Banks Binding...................................27
5.6 Compliance With Laws..................................................................28
5.7 Agent's Rights Following Payments Under Letter of Credit Guaranties...................28
SECTION 6. Collateral............................................................................29
6.1 Grant of Security Interest............................................................29
6.2 Attachment of Security Interests......................................................29
6.3 Presentation of Collateral; Proceeds of Collateral; License of Inventory..............29
6.4 Permitted Acquisition.................................................................30
6.5 Continuance of Agent's Rights and Security Interests..................................31
6.6 Agent's Rights Not Limited............................................................31
6.7 Security for Obligations..............................................................31
6.8 General Intangibles...................................................................31
SECTION 7. Representations, Warranties and Covenants.............................................32
7.1 Representations and Warranties of the Companies.......................................32
7.2 Inspection of Books and Records and Collateral........................................33
7.3 Additional Documentation..............................................................33
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7.4 Compliance with Laws; UCC Authorization...............................................34
7.5 Insurance.............................................................................34
7.6 Taxes.................................................................................35
7.7 Compliance with Laws..................................................................35
7.8 Financial Statements..................................................................36
7.9 Negative Covenants....................................................................37
7.10 Additional Negative Covenants.........................................................38
7.11 Environmental Expenditures and Liabilities............................................38
7.12 Indemnification.......................................................................39
7.13 Transactions with Affiliates..........................................................39
7.14 Syndication by Agent..................................................................40
7.15 Rights to General Intangibles.........................................................40
7.16 Notice of Defaults and Events of Default..............................................40
7.17 Rights of First Refusal of Agent and Lenders..........................................40
7.18 Subsidiaries..........................................................................41
7.19 Trident and Xxxxxxx...................................................................41
SECTION 8. Interest, Fees and Expenses...........................................................42
8.1 Interest..............................................................................42
8.2 Intentionally Omitted.................................................................42
8.3 Letter of Credit Guaranty Fee.........................................................42
8.4 Fees and Expenses of Issuing Banks....................................................42
8.5 Out-of-Pocket Expenses and Documentation Fee..........................................42
8.6 Line of Credit Fee....................................................................42
8.7 Loan Facility Fee.....................................................................43
8.8 Administrative Management Fee.........................................................43
8.9 Additional Fees and Expenses..........................................................43
8.10 Agent's Right to Change the Revolving Loan Account....................................43
8.11 Reduction of Return...................................................................43
8.12 Taxes.................................................................................44
8.13 LIBOR Loans...........................................................................45
8.14 Interest on LIBOR Loans...............................................................46
8.15 Calculation of Interest on LIBOR Loans................................................46
8.16 Inability to Ascertain LIBOR..........................................................47
8.17 Payment of LIBOR Loans................................................................47
8.18 Illegality............................................................................47
8.19 Indemnification.......................................................................47
8.20 Regulatory Changes....................................................................48
8.21 Definition of Lender..................................................................49
SECTION 9. Powers of Agent.......................................................................49
SECTION 10. Events of Default and Remedies........................................................49
10.1 Events of Default.....................................................................49
10.2 Remedies upon a Default or an Event of Default........................................52
10.3 Additional Remedies upon an Event of Default..........................................52
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SECTION 11. Termination...........................................................................53
SECTION 12. Miscellaneous.........................................................................54
12.1 Waivers; Remedies Cumulative..........................................................54
12.2 Entire Agreement......................................................................54
12.3 Maximum Interest and Fees.............................................................54
12.4 Provisions Severable..................................................................55
12.5 Trial by Jury; Service of Process.....................................................55
12.6 Notices...............................................................................55
12.7 Governing Law.........................................................................56
SECTION 13. Agreements Relating to Lenders........................................................56
13.1 Disbursements of Loans and Advances...................................................56
13.2 Remittances on Settlement Dates.......................................................57
13.3 Account Statements....................................................................57
13.4 Interest and Fees.....................................................................57
13.5 Participations........................................................................57
13.6 Obligations Several...................................................................57
13.7 Litigation............................................................................57
13.8 Right of Set-Off......................................................................58
13.9 Assignments...........................................................................58
SECTION 14. Agency................................................................................59
14.1 Appointment of Agent..................................................................59
14.2 Delegation of Duties..................................................................59
14.3 Liability of Agent....................................................................59
14.4 Reliance by Agent.....................................................................59
14.5 Notice of Defaults and Events of Default..............................................60
14.6 Credit Decisions......................................................................60
14.7 Indemnification by Lenders............................................................60
14.8 Agent as a Lender.....................................................................61
14.9 Successor Agent.......................................................................61
14.10 Consent of Lenders Required...........................................................61
14.11 Deemed Consent by Lenders.............................................................62
14.12 Intentionally Omitted.................................................................62
14.13 Payment Set Aside.....................................................................63
14.14 Confidentiality.......................................................................63
14.15 Captions and Headings.................................................................63
EXHIBITS
Exhibit A - Form of Assignment and Transfer Agreement
Exhibit B - Form of Intercreditor Agreement
Exhibit C - Form of Revolving Loan Promissory Note
SCHEDULES
Schedule 1 - Permitted Liens
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Schedule 2.1 - Bailee Locations
Schedule 7.1 - Collateral and Company Information
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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, with
offices located at 00 Xxxxx XxXxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxxx 00000
(hereinafter "CIT"), and CIT as agent for the lenders (the "Agent"), and any
other party which now or hereafter becomes a lender hereunder pursuant to
Section 13 hereof (individually a "Lender" and collectively the "Lenders") are
pleased to confirm the terms and conditions under which the Agent shall make
revolving loans and other financial accommodations to NEWPORT STEEL CORPORATION,
a Kentucky corporation with a principal place of business at 000 Xxxx Xxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (herein "Newport"), and KOPPEL STEEL
CORPORATION, a Pennsylvania corporation with a principal place of business at
Sixth and Xxxxx, Xxxxxx, Xxxxxxxxxxxx 00000 (herein "Koppel", and individually a
"Company" and collectively, Newport and Koppel, the "Companies").
SECTION 1. DEFINITIONS.
The following terms shall have the respective meanings provided for in
the UCC (as defined below): "Account Debtor", "Chattel Paper", "Deposit
Account", "Documents", "Electronic Chattel Paper", "Goods", "Instruments",
"Investment Property", "Letter of Credit", "Letter-of-Credit Rights", "Payment
Intangibles", "Proceeds", "Record", "Software", "Supporting Obligations" and
"Tangible Chattel Paper". The following terms, as used herein, have the meanings
set forth below:
ACCOUNT(S) shall mean all of the following now existing and future
assets of each of the Companies which arise from or in connection with the sale
or lease of Goods or Inventory or the rendition of any service, whether in the
ordinary course of business or otherwise (including sales of Inventory to
affiliates or sales of Inventory in bulk): (a) accounts (as defined in the UCC)
(whether or not specifically listed on schedules furnished to the Agent),
including, without limitation, all accounts and all other receivables arising
under any of the Companies' trade names or styles, or through any of the
Companies' divisions or between a Company and any affiliate thereof; (b) any and
all Instruments (including those evidencing indebtedness among the Companies
and/or their respective subsidiaries and affiliates thereof but excluding the
Intercompany Notes (as defined in Senior Note Indenture), Documents, Chattel
Paper (including Electronic Chattel Paper), contract rights; (c) unpaid seller's
or lessor's rights (including rescission, replevin, reclamation, repossession
and stoppage in transit) relating to the foregoing or arising therefrom; (d)
rights to any goods represented by any of the foregoing, including rights to
returned, reclaimed or repossessed goods; (e) reserves and credit balances
arising in connection with or pursuant hereto; (f) guarantees, Supporting
Obligations, Payment Intangibles and Letter of Credit Rights; (g) insurance
policies or rights relating to any of the foregoing; (h) General Intangibles
pertaining to any and all of the foregoing (including all rights to payment,
including those arising in connection with bank and non-bank credit cards), and
including books and records and any electronic media and Software thereto; (i)
notes, deposits or property of Account Debtors securing the obligations of any
such Account Debtors to the Companies or any one of them; and (j) cash and
non-cash Proceeds of any and all of the foregoing.
ADMINISTRATIVE MANAGEMENT FEE shall mean an amount equal to $50,000 per
annum, payable to the Agent for its own account, exclusively in accordance with
Section 8.8 of this Financing Agreement, to cover the costs of the Agent
(excluding Out-of-Pocket Expenses and auditor fees) in connection with the
routine administration, record keeping, analysis and evaluation of the
Collateral.
ANNIVERSARY DATE shall mean the date occurring twelve (12) months from
the Closing Date and the same date in every year thereafter.
ASSIGNMENT AND TRANSFER AGREEMENT shall mean the Assignment and
Transfer Agreement in the form of Exhibit A hereto.
AVAILABILITY shall mean the amount by which (a) the lesser of (i) the
Revolving Line of Credit or (ii) the Borrowing Base of the Companies, exceeds
(b) the sum, without duplication, of (i) the outstanding aggregate amount of all
Obligations (including, without limitation, all Letter of Credit Guaranties),
PLUS (ii) the un-drawn face amount of all Letters of Credit outstanding for the
benefit of the Companies PLUS (iii) the amount of the Availability Reserve.
AVAILABILITY RESERVE shall mean, as to any Company, the sum of: (a) (i)
three (3) months rental payments or similar charges, PLUS (ii) three (3) months
estimated payments PLUS any other fees or charges owing by such Company to any
applicable landlord, warehousemen or third party processor (as determined by the
Agent in its reasonable business judgment), for any of such Company's leased
premises or other Collateral locations for which such Company has not delivered
to the Agent a waiver in form and substance reasonably satisfactory to the Agent
which provides, among other things, that the liens or security interests of such
landlord, warehouseman, bailee or third party processor, howsoever arising, are
subordinated to the liens and security interests of Agent hereunder, PROVIDED,
however, that any of the foregoing amounts shall be adjusted from time to time
hereafter upon (x) delivery to the Agent of any such acceptable waiver, (y) the
opening or closing of a Collateral location and/or (z) any change in the amount
of rental, storage or processor payments or similar charges; and (b) any reserve
which the Agent may reasonably require from time to time pursuant to this
Financing Agreement, including without limitation, for Letters of Credit
pursuant to Paragraph 5.1 of Section 5 hereof and Letter of Credit Guaranties
pursuant to Paragraph 5.2 of Section 5 hereof; and c) such other reserves with
respect to the Collateral (or Inventory no longer constituting Collateral by
reason of title thereto being transferred by a Company to an affiliate thereof
that is not a Company, notwithstanding any repayments made with respect to such
transfer) that the Agent deems necessary in its commercially reasonable
judgment, including, without limitation, reserves for anticipated declines in
the market value of Inventory and projected Out-of-Pocket Expenses and other
costs associated with the preservation, protection, processing, completion,
assembly and sale of the Collateral and the enforcement of the Agent's and the
Lenders' other rights with respect the Collateral.
BORROWING BASE shall mean, the sum of (a) eighty five percent (85.0%)
of the Companies' aggregate outstanding Eligible Accounts Receivable, PLUS (b)
the lesser of (i) sixty percent (60%) of the aggregate value of the Companies'
Eligible Inventory consisting of raw materials which include purchased steel
scrap, coils, blooms, rolled bars, billets, and rounds together with the
Companies' finished goods consisting of all prime pipe and tube products, in
each case valued at the lower of cost or market, on a first in, first out basis,
or (ii) the Inventory Loan Cap, LESS (c) a reserve against Availability equal to
$20,000,000 and, without duplication, any Availability Reserves.
BUSINESS DAY shall mean any day on which the Agent and JPMorgan Chase
Bank are open for business.
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CAPITAL EXPENDITURES shall mean, for any period, the aggregate
expenditures of the Companies, or any of them, during such period on account of,
property, plant, equipment or similar fixed assets that, in conformity with
GAAP, are required to be reflected in the Consolidating Balance Sheet of the
Companies.
CAPITAL LEASE shall mean any lease of property (whether real, personal
or mixed) which, in conformity with GAAP, is accounted for as a capital lease or
a Capital Expenditure in the Consolidating Balance Sheet of the Companies.
CASH MANAGEMENT SYSTEM shall mean a cash receipts and disbursement
system reasonably acceptable to and for the benefit of Agent, including, without
limitation, Depository Accounts, lockboxes, blocked accounts, account control
agreements, bank agency agreements and other mechanisms or agreements reasonably
required by Agent for purposes of controlling, monitoring, collecting and
realizing upon Proceeds of Accounts and Proceeds of other Collateral and to
perfect Agent's security interests in and liens thereupon, all as more
specifically contemplated under subsection 3.4 hereof.
CHASE BANK RATE shall mean the rate of interest per annum announced by
XX Xxxxxx Xxxxx & Co. from time to time as its prime rate in effect at its
principal office in New York City. (The prime rate is not intended to be the
lowest rate of interest charged by JPMorgan Chase Bank to its borrowers).
CHASE BANK RATE LOANS shall mean any loans or advances pursuant to this
Financing Agreement made or maintained at a rate of interest based upon the
Chase Bank Rate.
CLOSING DATE shall mean the date that this Financing Agreement has been
duly executed by the parties hereto and delivered to the Agent and that the
conditions precedent to closing set forth in Section 2.1 hereof have been fully
satisfied or waived by Agent, in writing.
COLLATERAL shall mean all present and future Accounts, Inventory,
Documents of Title relating to any Inventory, Depository Accounts, General
Intangibles related to any of the foregoing, Proceeds with respect to any of the
foregoing (including, without limitation, any Investment Property purchased or
acquired with Proceeds of Collateral) and Other Collateral of each of the
Companies. Notwithstanding the foregoing or any provision of the definitions of
"Accounts", "Inventory" or "General Intangibles", Collateral shall not include
Equipment, Real Estate or any general intangibles (as defined in the UCC) not
included in the definition of "General Intangibles" hereunder, or the Proceeds
of any of the foregoing.
COLLECTION DAY(S) shall mean one (1) Business Day to provide for the
deposit, clearance and collection of checks or other instruments representing
the Proceeds of Collateral, the amount of which has been credited to the
Companies' Revolving Loan Account, and for which interest may be charged on the
aggregate amount of such deposits, at the rate provided for in Paragraph 8.1 of
Section 8 of this Financing Agreement.
COMMITMENT shall mean each Lender's commitment in accordance with this
Financing Agreement to make Revolving Loans (the "Revolving Credit Commitment"),
in the amount of their
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respective pro rata share set forth in the schedules prepared by the Agent or
the Assignment and Transfer Agreement executed by each such Lender.
COMMITMENT FEE shall mean an amount equal to $50,000.
CONSOLIDATED BALANCE SHEET shall mean a consolidated or compiled, as
applicable, balance sheet for the Parent, the Companies and the consolidated
subsidiaries of each such Person, eliminating all inter-company transactions and
prepared in accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet
plus individual balance sheets for the Parent, the Companies and the
subsidiaries of each, showing all eliminations of inter-company transactions,
including a balance sheet for each of the Companies exclusively, all prepared in
accordance with GAAP.
CONTROL means the manner in which "control" is achieved under the UCC
with respect to a particular item of Collateral consisting of a Deposit Account,
Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights.
COPYRIGHTS shall mean all of each of the Companies' present and
hereafter acquired copyrights, copyright registrations, recordings,
applications, designs, styles, licenses, marks, prints and labels bearing any of
the foregoing, goodwill, any and all general intangibles, intellectual property
and rights pertaining thereto, and all cash and non-cash Proceeds thereof.
CREDIT EXPOSURE shall mean the sum, at any given time, of the average
daily outstanding Revolving Loan balance PLUS the face amount of all outstanding
un-drawn Letters of Credit PLUS, without duplication, the amount of any
outstanding Letter of Credit Guaranties.
DEFAULT shall mean any event specified in Section 10 hereof, whether or
not any requirement for the giving of notice, the lapse of time, or both, or any
other condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal
to two percent (2%) greater than the interest rate accruing on the Obligations
pursuant to Section 8.1 and 8.14 hereof, which the Agent and the Lenders shall
be entitled to charge the Companies in the manner set forth in Section 10.2 of
this Financing Agreement.
DEPOSITORY ACCOUNTS shall mean the collection accounts, which are
subject to the Agent's instructions, as specified in Paragraph 3.4 of Section 3
of this Financing Agreement.
DOCUMENTATION FEE shall mean the Agent's standard fees relating to any
and all modifications, waivers, releases, amendments or additional collateral
with respect to this Financing Agreement, the Collateral and/or the Obligations.
DOCUMENTS OF TITLE shall mean all of each of the Companies' present and
future Documents, and any and all warehouse receipts, bills of lading, shipping
documents, chattel paper, instruments and similar documents, all whether
negotiable or not and all goods and Inventory relating thereto and all cash and
non-cash Proceeds of the foregoing.
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EARLY TERMINATION DATE shall mean the date on which the Companies or
any one of them terminates this Financing Agreement or the Revolving Line of
Credit which date is prior to the Maturity Date. Notice of termination, as
aforesaid, by any one Company shall be deemed to be notice by the Companies for
purposes hereof.
EARLY TERMINATION FEE shall: (a) mean the fee the Agent on behalf of
the Lenders is entitled to charge the Companies in the event the Companies or
any one of them terminates the Revolving Line of Credit or this Financing
Agreement on or on a date prior to the third Anniversary Date; and (b) be
determined by multiplying the Revolving Line of Credit by (x) one percent (1.0%)
if the Early Termination Date occurs on or before the first Anniversary Date,
(y) one half percent (0.5%) if the Early Termination Date occurs after the First
Anniversary Date but on or before the second Anniversary Date; and (z) one
quarter percent (0.25%) if the Early Termination Date occurs after the second
Anniversary Date but on or prior to the third Anniversary Date.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean, as to any Company, the gross
amount of such Company's Accounts arising in the ordinary course of such
Company's business that are subject to a valid, exclusive, first priority and
fully perfected security interest in favor of the Agent, on behalf of the
Lenders, which conform to the warranties contained in subsection 3.3 hereof and
which, at all times, continue to be acceptable to the Agent in the exercise of
its reasonable business judgment, less, without duplication, the sum of: (a) any
returns, discounts, claims, credits and allowances of any nature (whether
issued, owing, granted, claimed or outstanding), and (b) reserves for any such
Accounts that arise from or are subject to or include: (i) sales to the United
States of America, any state or other governmental entity or to any agency,
department or division thereof, except for any such sales as to which such
Company has complied with the Assignment of Claims Act of 1940 or any other
applicable statute, rules or regulation, to the Agent's satisfaction in the
exercise of its reasonable business judgment; (ii) foreign sales, other than
sales which otherwise comply with all of the other criteria for eligibility
hereunder and are (x) secured by letters of credit (in form and substance
satisfactory to the Agent) issued or confirmed by, and payable at, banks having
a place of business in the United States of America, or (y) to customers
residing in Canada (provided that Agent has, at all relevant times, a first
priority perfected security interest in such Accounts, as aforesaid); (iii)
Accounts that remain unpaid more than ninety (90) days from invoice date; (iv)
contra accounts; (v) sales to Parent, any other Company, any subsidiary, or to
any company affiliated with the Companies or Parent in any way; (vi) xxxx and
hold (deferred shipment) or consignment sales; (vii) sales to any customer which
is: (A) insolvent, (B) the debtor in any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceedings under any federal or state
law, (C) negotiating, or has called a meeting of its creditors for purposes of
negotiating, a compromise of its debts, or (D) financially unacceptable to the
Agent in its reasonable discretion or has a credit rating unacceptable to the
Agent; (viii) all sales to any customer if fifty percent (50%) or more of the
aggregate dollar amount of all outstanding invoices to such customer are unpaid
more than ninety (90) days from invoice date; (ix) pre-billed receivables and
receivables arising from progress billing; (x) an amount representing,
historically, returns, discounts, claims, credits, allowances and applicable
terms; (xi) sales not payable in United States currency; and (xii) any other
reasons deemed necessary by the Agent in its reasonable judgment, including
without limitation those which are customary either in the commercial finance
industry or in the lending practices of the Agent and/or the Lenders.
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ELIGIBLE INVENTORY shall mean, as to any Company, the gross amount of
such Company's Inventory that is subject to a valid, exclusive, first priority
and fully perfected security interest in favor of the Agent on behalf of the
Lenders (including, notwithstanding the foregoing, any so-called "xxxx and hold"
inventory stored on such Company's premises), and which conforms to the
warranties contained in subsection 3.3 hereof and which, at all times, continues
to be acceptable to the Agent in the exercise of its reasonable business
judgment, less, without duplication, any (a) work-in-process, (b) supplies
(other than raw materials), (c) Inventory not present in the United States of
America or Canada, (d) Inventory returned or rejected by any of the Company's
customers (other than goods that are undamaged and re-salable in the normal
course of business) and goods to be returned to a Company's suppliers, (e)
Inventory in transit to third parties (other than a Company's agents or
warehouses), or in the possession of a warehouseman, bailee, third party
processor, or other third party, unless such warehouseman, bailee or third party
has executed a notice of security interest agreement (in form and substance
satisfactory to the Agent) and the Agent shall have a first priority perfected
security interest in such Inventory, and (f) less, without duplication, any
reserves required by the Agent in its reasonable discretion, including without
limitation for special order goods, discontinued, slow-moving and obsolete
Inventory, market value declines, consignment sales, shrinkage and any
applicable customs, freight, duties and Taxes.
EQUIPMENT shall mean all present and hereafter acquired equipment (as
defined in the UCC) including, without limitation, all machinery, equipment,
furnishings and fixtures, and all additions, substitutions and replacements
thereof, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto and all Proceeds
thereof of whatever sort.
ERISA shall mean the Employee Retirement Income Security Act or 1974,
as amended from time to time and the rules and regulations promulgated
thereunder from time to time.
ERLANGER shall mean Erlanger Tubular Corporation, an Oklahoma
corporation and a wholly owned subsidiary of Parent.
EUROCURRENCY RESERVE REQUIREMENTS for any day, as applied to a LIBOR
Loan, shall mean the aggregate (without duplication) of the maximum rates of
reserve requirements (expressed as a decimal fraction) in effect with respect to
the Agent and/or any present or future Lender on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves under
Regulation D or any other applicable regulations of the Board of Governors of
the Federal Reserve System or other governmental authority having jurisdiction
with respect thereto, as now and from time to time in effect, dealing with
reserve requirements prescribed for Eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by the
Agent and/or any such Lenders (such rate to be adjusted to the nearest one
sixteenth of one percent (1/16 of 1%) or, if there is not a nearest one
sixteenth of one percent (1/16 of 1%), to the next higher one sixteenth of one
percent (1/16 of 1%)).
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10
of this Financing Agreement.
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FINANCING AGREEMENT refers to this Financing and Security Agreement
dated as of March 29, 2002 by and among the Companies, the Agent and the
Lenders.
FISCAL QUARTER shall mean, with respect to the Companies, each three
(3) month period ending on March 31, June 30, September 30 and December 31 of
each Fiscal Year.
FISCAL YEAR shall mean each twelve (12) month period commencing on
January 1 of each year and ending on the following December 31.
GAAP shall mean generally accepted accounting principles in the United
States of America as in effect from time to time and for the period as to which
such accounting principles are to apply, provided that in the event the
Companies modify their accounting principles and procedures as applied as of the
Closing Date, the Companies shall provide to the Agent and the Lenders such
statements of reconciliation as shall be in form and substance acceptable to the
Agent.
GENERAL INTANGIBLES shall mean and include, as to each Company, that
portion of such Company's general intangibles (as defined in the UCC) and all
present and future right, title and interest therein and thereto whether now
owned or hereafter acquired, and consisting of (a) choses in action and causes
of action relating to or arising in connection with any Collateral, (b) all
customer lists, distribution agreements, supply agreements, tax refunds, and tax
refund claims, together with all monies and claims for monies now or hereafter
due and payable in connection with any of the foregoing or otherwise, (c)
Software to the extent relating to or used in connection with any Collateral,
(d) claims under any guarantees relating in any manner to the Collateral, (e)
Chattel Paper or security interests or other security held by or granted to a
Company to secure payment of any of the Accounts, (f) rights of indemnification
(as the same may relate to any Collateral), (g) licenses, permits and
franchises, to the extent (i) used or useful in finishing, processing, selling
or otherwise realizing upon any Collateral and (ii) not in contravention of
those certain Negative Pledge Agreements each dated as of July 28, 1995 by and
between the Trustee and each of the Companies, as applicable, and (h) all cash
and non-cash Proceeds thereof.
GUARANTIES shall mean any guaranty documents executed and delivered by
the Guarantors guaranteeing the Obligations.
GUARANTORS shall mean, (A) as of the date hereof, (i) Parent, (ii)
Erlanger, and (iii) NK Management, and (B) at all times hereafter, the Persons
listed in clause A of this definition and any other subsidiary of a Company or
of any Guarantor that becomes a "Guarantor" pursuant to the provisions of
subsection 6.4 hereof.
INDEBTEDNESS shall mean, without duplication, all liabilities,
contingent or otherwise, which are any of the following: (a) obligations in
respect of borrowed money or for the deferred purchase price of property,
services or assets, other than Inventory, or (b) lease obligations which, in
accordance with GAAP, have been, or which should be capitalized.
INSURANCE PROCEEDS shall mean proceeds or payments from an insurance
carrier with respect to any loss, casualty or damage to Collateral.
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INTERCREDITOR AGREEMENT shall mean the agreement of even date herewith
(in form and substance satisfactory to the Agent) among the Companies, the
Senior Note Indenture Trustee and the Agent, as amended, supplemented or
modified from time to time.
INTEREST PERIOD shall mean:
(a) with respect to any initial request by any of the
Companies for a LIBOR Loan, a one month, two month or three month
period commencing on the borrowing or conversion date with respect to a
LIBOR Loan and ending one, two or three months thereafter, as
applicable; and
(b) thereafter with respect to any continuation of, or
conversion to, a LIBOR Loan, at the option of any of the Companies, any
one month, two month or three month period commencing on the last day
of the immediately preceding Interest Period applicable to such LIBOR
Loan and ending one, two or three months thereafter, as applicable;
PROVIDED THAT, the foregoing provisions relating to Interest Periods are subject
to the following:
(i) if any Interest Period would otherwise end on a day which
is not a Working Day, that Interest Period shall be extended to the
next succeeding Working Day, unless the result of such extension would
extend such payment into another calendar month in which event such
Interest Period shall end on the immediately preceding Working Day;
(ii) any Interest Period that begins on the last Working Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month, at the end of such Interest
Period) shall end on the last Working Day of a calendar month; and
(iii) for purposes of determining the availability of Interest
Periods, such Interest Periods shall be deemed available if (x)
JPMorgan Chase Bank quotes an applicable rate or the Agent determines
LIBOR, as provided in the definition of LIBOR, (y) the LIBOR determined
by JPMorgan Chase Bank or the Agent will adequately and fairly reflect
the cost of maintaining or funding its loans bearing interest at LIBOR,
for such Interest Period, and (z) such Interest Period will end on or
before the Maturity Date. If a requested Interest Period shall be
unavailable in accordance with the foregoing sentence, the Companies
shall continue to pay interest on the Obligations at the applicable per
annum rate based upon the Chase Bank Rate.
INTEREST RATE MARGIN shall mean the applicable percent per annum set
forth on the table below corresponding to the then applicable Credit Exposure of
the Companies.
8
====================================================== ========================== ==========================
AVERAGE CREDIT EXPOSURE CHASE RATE MARGIN LIBOR MARGIN
====================================================== ========================== ==========================
$0.00 to $15,000,000 0.50% 2.00%
------------------------------------------------------ -------------------------- --------------------------
$15,000,001 to $30,000,000 0.50% 2.25%
------------------------------------------------------ -------------------------- --------------------------
$30,000,001 to $40,000,000 0.75% 2.50%
------------------------------------------------------ -------------------------- --------------------------
$40,000,001 to $50,000,000 1.25% 2.75%
====================================================== ========================== ==========================
INVENTORY shall mean all of each of the Companies' present and
hereafter acquired inventory (as defined in the UCC), including, without
limitation, all now owned or hereafter acquired merchandise, inventory, Goods
and other personal property, wherever located, and which are to be furnished
under any contract of service or held for sale or lease in the ordinary course
of a Company's business, all raw materials, work in process, finished goods and
materials and supplies of any kind, nature or description which are or might be
used or consumed in such Person's business or used in selling or furnishing such
Goods, merchandise or other personal property, and all Documents of Title or
other documents representing them, and all additions, substitutions,
replacements and Proceeds thereof, in whatever form and wherever located.
INVENTORY LOAN CAP shall mean the amount of $30,000,000.
ISSUING BANK shall mean the bank issuing Letters of Credit for or on
behalf of the Companies.
LETTERS OF CREDIT shall mean all letters of credit issued with the
assistance of the Agent in accordance with Section 5 hereof by the Issuing Bank
for or on behalf of a Company.
LETTER OF CREDIT GUARANTY shall mean the guaranty delivered by the
Agent, on behalf of the Lenders, to the Issuing Bank of any Company's
reimbursement obligations under the Issuing Bank's reimbursement agreement,
application for Letter of Credit or other like document.
LETTER OF CREDIT GUARANTY FEE shall mean the fee charged to the
Companies under Paragraph 8.3 of Section 8 of this Financing Agreement for: a)
issuing a Letter of Credit Guaranty, and/or b) otherwise aiding the Companies,
or any one of them, in obtaining Letters of Credit, all pursuant to Section 5
hereof.
LETTER OF CREDIT SUB-LINE shall mean the commitment of the Agent to
assist the Companies in obtaining Letters of Credit, pursuant to Section 5
hereof (including the making of any Letter of Credit Guaranties), in an
aggregate amount of $7,500,000.
LIBOR shall mean, at any time of determination, and subject to
availability, for each applicable Interest Period, a variable rate of interest
equal to: (a) at the Agent's election (i) the applicable LIBOR quoted to the
Agent by JPMorgan Chase Bank (or any successor thereof), or (ii) the rate of
interest determined by the Agent at which deposits in U.S. dollars are offered
for the
9
relevant Interest Period based on information presented on Telerate Systems at
Page 3750 as of 11:00 A.M. (London time) on the day which is two (2) Business
Days prior to the first day of such Interest Period, PROVIDED THAT, if at least
two such offered rates appear on the Telerate System at Page 3750 in respect of
such Interest Period, the arithmetic mean of all such rates (as determined by
the Agent) will be the rate used; divided by (b) a number equal to 1.0 minus the
aggregate (but without duplication) of the rates (expressed as a decimal
fraction) of Eurocurrency Reserve Requirements in effect on the day which is two
(2) Business Days prior to the beginning of such Interest Period.
LIBOR LENDING OFFICE with respect to the Agent, shall mean the office
of JPMorgan Chase Bank, or any successor thereof, maintained at 000 Xxxx Xxxxxx,
Xxx Xxxx, XX 00000.
LIBOR LOAN shall mean any loans made pursuant to this Financing
Agreement which are made or maintained at a rate of interest based upon LIBOR.
LINE OF CREDIT FEE shall: (a) mean the fee due the Agent for the
ratable benefit of the Lenders at the end of each month for the Revolving Line
of Credit, and (b) be determined by multiplying the difference between (i) the
Revolving Line of Credit, and (ii) the sum, for said month, of (x) the average
daily balance of Revolving Loans plus (y) the average daily balance of Letters
of Credit outstanding for said month, by three hundred seventy five hundredths
percent (0.375%) per annum for the number of days in said month.
LOAN DOCUMENTS shall mean this Financing Agreement, the Promissory
Notes, the Guaranties, the other closing documents and any other ancillary loan
and security agreements executed from time to time in connection with this
Financing Agreement and any Guaranty, all as may be renewed, amended, extended,
increased or supplemented from time to time.
LOAN FACILITY FEE shall mean the fee payable to the Agent and the
Lenders (as applicable) in accordance with, and pursuant to, the provisions of
Paragraph 8.7 of Section 8 of this Financing Agreement.
MATURITY DATE shall mean April 1, 2007.
NK MANAGEMENT shall mean Northern Kentucky Management, Inc., a Kentucky
corporation and a wholly owned subsidiary of Parent.
OBLIGATIONS shall mean all loans, advances and extensions of credit
made or to be made by the Agent and/or the Lenders to the Companies, or any one
of them, or to others for the Companies' account (including, without limitation,
all Revolving Loans, Letter of Credit Guaranties; any and all indebtedness and
obligations which may at any time be owing by the Companies or any one of them
to the Agent and/or the Lenders pursuant to or in connection with the Loan
Documents, howsoever arising, whether now in existence or incurred by the
Companies or any one of them from time to time hereafter; whether principal,
interest, fees, costs, expenses or otherwise; whether secured by pledge, lien
upon or security interest in any of the Companies' Collateral, assets or
property or the assets or property of any other person, firm, entity or
corporation; whether such indebtedness is absolute or contingent, joint or
several, matured or unmatured, direct or indirect and whether the Companies are
liable to the Agent and/or the Lenders for such indebtedness as principal,
surety, endorser, guarantor
10
or otherwise. Obligations shall also include indebtedness owing to the Agent
and/or the Lenders by the Companies or any one of them under any Loan Document
or under any other agreement or arrangement now or hereafter entered into
between the Companies and the Agent and/or the Lenders in connection with the
transactions contemplated under the Loan Documents; indebtedness or obligations
incurred by, or imposed on, the Agent and/or the Lenders as a result of
environmental claims arising out of any of the Companies' operations, premises
or waste disposal practices or sites in accordance with subsection 7.7 hereof;
the Companies' liability to the Agent and/or the Lenders arising in connection
with the Loan Documents or the transactions contemplated thereunder (i) as maker
or endorser of any promissory note or other instrument for the payment of money
or (ii) under any instrument of guaranty or indemnity, or arising under any
guaranty, endorsement or undertaking which the Agent and/or the Lenders may make
or issue to others for the Companies' account, including any Letter of Credit
Guaranty or other accommodation extended by CIT with respect to applications for
Letters of Credit, the Agent and/or the Lender's acceptance of drafts or the
Agent and/or the Lender's endorsement of notes or other instruments for the
Companies' account and benefit.
OPERATING LEASES shall mean all leases of property (whether real,
personal or mixed) other than Capital Leases.
OTHER COLLATERAL shall mean all of each of the Companies' now owned and
hereafter acquired lockbox, blocked account and any other deposit accounts
maintained with any bank or financial institutions into which the Proceeds of
Collateral are or may be deposited; all cash and other monies and property
constituting Proceeds of Collateral, whether or not in the possession or control
of the Agent and/or any of the Lenders; all books, records, ledger cards, disks
and related data processing Software at any time evidencing or containing
information relating to any of the Collateral described herein or otherwise
necessary or helpful in the collection thereof or realization thereon; and all
cash and non-cash Proceeds of the foregoing.
OUT-OF-POCKET EXPENSES shall mean all of the Agent's (and the Lenders
upon the occurrence of an Event of Default which is not waived by the Required
Lenders) present and future expenses incurred relative to this Financing
Agreement or any other Loan Documents, whether incurred heretofore or hereafter,
which expenses shall include, without being limited to: the cost of record
searches, all costs and expenses incurred by the Agent in opening bank accounts,
depositing checks, receiving and transferring funds, and wire transfer charges,
any charges imposed on the Agent due to returned items and "insufficient funds"
of deposited checks and the Agent's standard fees relating thereto, any amounts
paid by, incurred by or charged to, the Agent and/or the Lenders by the Issuing
Bank under a Letter of Credit Guaranty or a Company's reimbursement agreement,
application for Letters of Credit or other like document which pertain either
directly or indirectly to such Letters of Credit, and the Agent's standard fees
relating to the Letters of Credit and any drafts thereunder, travel, lodging and
similar expenses of the Agent's personnel in connection with inspecting and
monitoring the Collateral from time to time hereunder, any applicable counsel
fees and disbursements, fees and taxes relative to the filing of financing
statements, all expenses, costs and fees set forth in Paragraph 10.3 of Section
10 of this Financing Agreement.
OVERADVANCES shall mean the amount by which (a) the sum of all
outstanding Revolving Loans, Letters of Credit and advances made hereunder
exceed (b) the Borrowing Base.
11
PARENT shall mean NS Group, Inc., a Kentucky corporation with its
principal place of business at 000 X. Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx, 00000.
PATENTS shall mean all of each of the Companies' present and hereafter
acquired patents, patent applications, registrations, any reissues or renewals
thereof, licenses, any inventions and improvements claimed thereunder, and all
general intangible, intellectual property and patent rights with respect thereto
of the Companies or any one of them, and all income, royalties, cash and
non-cash Proceeds thereof.
PERMITTED ENCUMBRANCES shall mean: (a) liens expressly permitted, or
consented to in writing by the Agent and/or the Required Lenders; (b) liens of
local or state authorities for franchise or other like Taxes, not yet due (or
which are being contested in good faith, by appropriate proceedings or other
appropriate actions which are sufficient to prevent imminent foreclosure of such
liens) and with respect to which adequate reserves are being maintained in
accordance with GAAP; (c) statutory liens of landlords and liens of carriers,
warehousemen, bailees, mechanics, materialmen and other like liens imposed by
law, created in the ordinary course of business and for amounts not yet due (or
which are being contested in good faith, by appropriate proceedings or other
appropriate actions which are sufficient to prevent imminent foreclosure of such
liens) and with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with GAAP; (d) deposits made (and
the liens thereon) in the ordinary course of business (including, without
limitation, security deposits for leases, indemnity bonds, surety bonds and
appeal bonds) in connection with workers' compensation, unemployment insurance
and other types of social security benefits or to secure the performance of
tenders, bids, contracts (other than for the repayment or guarantee of borrowed
money or purchase money obligations), statutory obligations and other similar
obligations arising as a result of progress payments under government contracts;
(e) easements (including, without limitation, reciprocal easement agreements and
utility agreements), encroachments, minor defects or irregularities in title,
variation and other restrictions, charges or encumbrances (whether or not
recorded) affecting the Real Estate, if applicable, and which in the aggregate
(A) do not materially interfere with the occupation, use or enjoyment by any
Person of its business or property so encumbered and (B) do not materially and
adversely affect the value of such Real Estate; and (f) liens granted the Agent
by the Companies, the Guarantors or any one of them; (g) liens of judgment
creditors provided such liens do not exceed, in the aggregate, at any time,
$50,000.00 (other than liens bonded, insured or stayed to the reasonable
satisfaction of the Agent or with respect to which adequate reserves have been
set aside in accordance with GAAP); (h) liens in favor of the Senior Note
Indenture Trustee to the extent permitted under the Intercreditor Agreement; (i)
Purchase Money Liens; (j) to the extent not included above, liens on assets not
constituting Collateral and securing Permitted Indebtedness hereunder; (k) liens
in existence on the Closing Date as identified on Schedule 1; and (l) any
extension, renewal or replacement of any of the foregoing, to the extent
securing Permitted Indebtedness.
PERMITTED INDEBTEDNESS shall mean: (a) current Indebtedness maturing in
less than one year and incurred in the ordinary course of business for raw
materials, supplies, Equipment, services, Taxes or labor; (b) the Indebtedness
secured by Purchase Money Liens; (c) Senior Note Debt (or guaranties thereof, as
the context requires); (d) Indebtedness arising under the Letters of Credit and
this Financing Agreement; (e) deferred Taxes and other expenses incurred in the
ordinary course of business; (f) Indebtedness (including, without limitation,
Indebtedness pursuant to Capital Leases)
12
incurred to finance permitted Capital Expenditures; (g) Indebtedness issued
pursuant to interest rate protection agreements; (h) Indebtedness incurred in
connection with Acquisitions permitted pursuant to the provisions of this
Financing Agreement; (i) Indebtedness in an aggregate principal amount not to
exceed $100,000,000 that is either unsecured or is secured by property of the
Companies other than Collateral, PROVIDED that the holder of any such secured
Indebtedness of $10,000,000 or more shall have executed and delivered to Agent
an intercreditor agreement acceptable to Agent in its commercially reasonable
discretion; (j) other Indebtedness existing on the date of execution of this
Financing Agreement and listed in the most recent financial statement delivered
to the Agent and the Lenders or otherwise disclosed to the Agent and the Lenders
in writing prior to the Closing Date; (k) the Intercompany Notes (as defined in
the Senior Note Indenture and subject in all regards to an intercreditor
agreement in substantially the form of Exhibit B hereof) and guaranties thereof
as required pursuant to the Senior Note Indenture, and (l) any extension,
renewal or replacement of any of the foregoing, PROVIDED however, that any such
extension, renewal or replacement shall not increase the original principal
amount of such Indebtedness, encumber any additional assets or property of
either Company or any Loan Party, or contain terms materially more burdensome to
the obligor than those contained in the original Indebtedness being replaced,
renewed or extended.
PERSON means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, entity, party or government (whether national,
federal, state, county, city, municipal or otherwise, including without
limitation, any instrumentality, division, agency, body or department thereof).
PROMISSORY NOTE(S) shall mean the notes, in the form of Exhibit C
attached hereto, delivered by one or both Companies to the Agent to evidence the
Revolving Loans pursuant to, and repayable in accordance with, the provisions of
Section 4 of this Financing Agreement.
PURCHASE MONEY LIENS shall mean liens on any item of Equipment acquired
after the date of this Financing Agreement provided that (a) each such lien
shall attach only to the property to be acquired, and (b) the debt incurred in
connection with such acquisitions shall not exceed, in the aggregate, the
permitted amount of Capital Expenditures in any Fiscal Year.
REAL ESTATE shall mean each of the Companies' fee and/or leasehold
interests in real property.
REQUIRED LENDERS shall mean (a) at all times while there are (2) two or
fewer Lenders hereunder, all of the Lenders, and (b) at all times while there
are three (3) or more Lenders hereunder, those Lenders holding at least sixty
six and two thirds percent (66.67%) of the total commitments under the Revolving
Line of Credit (or sixty six and two thirds percent (66.67%) of the outstanding
principal balance of all loans and Letters of Credit, in the event that the
commitments of the Lenders hereunder have terminated).
REVOLVING LINE OF CREDIT shall mean the aggregate commitment of the
Lenders to make loans and advances pursuant to Section 3 of this Financing
Agreement and issue Letter of Credit Guaranties pursuant to Section 5 hereof to
the Companies, in the aggregate amount of $50,000,000.
13
REVOLVING LOAN ACCOUNT shall mean the account on the Agent's books, in
the Companies' collective name, in which the Companies will be charged with all
applicable Obligations under this Financing Agreement, and as more particularly
described in Section 3.6(b) hereof.
REVOLVING LOANS shall mean the loans and advances made, from time to
time, to or for the account of each of the Companies by the Agent on behalf of
the Lenders pursuant to Section 3 of this Financing Agreement.
SENIOR NOTE DEBT shall mean the Indebtedness of Parent, subject of the
Intercreditor Agreement, in the original principal amount of $131,096,000 and
the 13-1/2% Senior Secured Notes due 2003 evidencing such Indebtedness and
issued pursuant to the Senior Note Indenture.
SENIOR NOTE INDENTURE shall mean that certain Indenture dated as of
July 28, 1995 by and among Parent and the Senior Note Indenture Trustee and
pursuant to which the Senior Note Debt was issued, as the same is in effect as
of the Closing Date or as may thereafter be amended, restated or supplemented in
accordance with the terms of the Intercreditor Agreement.
SENIOR NOTE INDENTURE TRUSTEE shall mean The Huntington National Bank
and any successor or assigns thereof in accordance with the terms of the Senior
Note Indenture.
SETTLEMENT DATE shall mean the date, weekly, and more frequently, at
the discretion of the Agent, upon the occurrence of an Event of Default or a
continuing decline or increase of the Revolving Loans that the Agent and the
Lenders shall settle amongst themselves so that (x) the Agent shall not have, as
the Agent, any money at risk and (y) on such Settlement Date the Lenders shall
have a pro rata amount of all outstanding Revolving Loans and Letters of Credit,
provided that each Settlement Date for a Lender shall be a Business Day on which
such Lender and its bank are open for business.
TAXES shall mean all federal, state, municipal and other governmental
taxes, levies, charges, claims and assessments which are or may be due by the
Companies with respect to their business, operations, Collateral or otherwise.
TOTAL ASSETS shall mean total assets determined in accordance with
GAAP, on a basis consistent with the latest audited financial statements of
Parent.
TOTAL LIABILITIES shall mean total liabilities determined in accordance
with GAAP, on a basis consistent with the latest audited financial statements of
Parent.
TRADEMARKS shall mean all of each of the Companies' present and
hereafter acquired trademarks, trademark registrations, recordings,
applications, tradenames, trade styles, service marks, prints and labels (on
which any of the foregoing may appear), licenses, reissues, renewals, and any
other intellectual property and trademark rights pertaining to any of the
foregoing, together with the goodwill associated therewith, and all cash and
non-cash Proceeds thereof.
UCC shall mean the Uniform Commercial Code as the same may be amended
and in effect from time to time in the state of Illinois.
14
WORKING DAY shall mean any Business Day on which dealings in foreign
currencies and exchanges between banks may be transacted.
SECTION 2. CONDITIONS PRECEDENT.
2.1 CONDITIONS TO CLOSING. The effectiveness of this Financing
Agreement is subject to the satisfaction of, extension of or waiver in writing
of, on or prior to, the Closing Date, the following conditions precedent:
(a) LIEN SEARCHES - the Agent shall have received tax, judgment and
Uniform Commercial Code searches satisfactory to the Agent for all
locations presently occupied or used by each of the Companies.
(b) CASUALTY INSURANCE - Each of the Companies shall have delivered
to the Agent evidence satisfactory to the Agent that casualty insurance
policies listing the Agent as additional insured, loss payee or
mortgagee, as the case may be, are in full force and effect, all as set
forth in Paragraph 7.5 of Section 7 of this Financing Agreement.
(c) UCC FILINGS - Any financing statements required to be filed in
order to create, in favor of the Agent, on behalf of the Lenders, a
first perfected security interest in the Collateral, subject only to
the Permitted Encumbrances, shall have been properly filed in each
office in each jurisdiction required in order to create in favor of the
Agent for the benefit of the Lenders a perfected lien on the
Collateral. The Agent shall have received acknowledgment copies of all
such filings (or, in lieu thereof, the Agent shall have received other
evidence satisfactory to the Agent that all such filings have been
made) and the Agent shall have received evidence that all necessary
filing fees and all taxes or other expenses related to such filings
have been paid in full.
(d) BOARD RESOLUTIONS - The Agent shall have received a copy of the
resolutions of the Board of Directors of each of the Companies and the
Guarantors (as the case may be) authorizing the execution, delivery and
performance of (i) this Financing Agreement, (ii) the Guaranties, and
(iii) any related agreements, in each case certified by the Secretary
or Assistant Secretary of each of the Companies and the Guarantors (as
the case may be) as of the date hereof, together with a certificate of
the Secretary or Assistant Secretary of the Companies and the
Guarantors (as the case may be) as to the incumbency and signature of
the officers of each of the Companies and/or the Guarantors executing
such Loan Documents and any certificate or other documents to be
delivered by them pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
(e) CORPORATE ORGANIZATION - The Agent shall have received (i) a
copy of the Certificate of Incorporation of each of the Companies and
the Guarantors certified by the Secretary of State of the states of
their incorporation, and (ii) a copy of the By-Laws of each of the
Companies certified by the respective Secretary or Assistant Secretary
thereof, all as amended through the date hereof.
15
(f) OFFICER'S CERTIFICATE - The Agent shall have received an
executed Officer's Certificate of each of the Companies, satisfactory
in form and substance to the Agent, certifying that (i) the
representations and warranties contained herein are true and correct in
all material respects on and as of the Closing Date; (ii) each of the
Companies are in compliance with all of the terms and provisions set
forth herein; and (iii) no Default or Event of Default has occurred.
(g) OPINIONS - Counsel for the Companies and the Guarantors shall
have delivered to the Agent on behalf of the Lenders opinions
satisfactory to the Agent opining, inter alia, that, subject to the (i)
filing, priority and remedies provisions of the Uniform Commercial
Code, (ii) the provisions of the Bankruptcy Code, insolvency statutes
or other like laws, (iii) the equity powers of a court of law and (iv)
such other matters as may be agreed upon with the Agent: (x) this
Financing Agreement, the Guaranties and all other Loan Documents of
each of the Companies and the Guarantors are (A) valid, binding and
enforceable according to their terms, (B) are duly authorized, executed
and delivered, and (C) do not violate any terms, provisions,
representations or covenants in the charter or by-laws of each of the
Companies or the Guarantors or, to the best knowledge of such counsel,
of any loan agreement, mortgage, deed of trust, note, security or
pledge agreement, indenture or other contract to which the Companies,
or any one of them, or the Guarantors are signatories or by which the
Companies, or any one of them, or the Guarantors or their assets are
bound.
(h) ABSENCE OF DEFAULT - No Default or Event of Default shall have
occurred that has not been cured or waived by Agent and no material
adverse change shall have occurred in the financial condition,
business, prospects, profits, operations or assets of the Companies or
of any one of them, of Parent, or of the Guarantors (taken as a whole).
(i) LEGAL RESTRAINTS/LITIGATION - As of the Closing Date, there
shall be no: (x) litigation, investigation or proceeding (judicial or
administrative) pending or threatened against the Companies or any one
of them, Parent or the Guarantors or their assets, by any agency,
division or department of any county, city, state or federal government
arising out of this Financing Agreement; (y) injunction, writ or
restraining order restraining or prohibiting the financing arrangements
contemplated under this Financing Agreement; or (z) suit, action,
investigation or proceeding (judicial or administrative) pending
against the Companies or any one of them or the Guarantors or their
assets, which could reasonably be expected to have a material adverse
effect on the Collateral or the business, operation, assets or
financial condition of the Companies or any one of them and/or of the
Guarantors (taken as a whole).
(j) GUARANTIES - The Guarantors shall have executed and delivered
to the Agent guaranties and security agreements, in form acceptable to
the Agent, guaranteeing all present and future Obligations of the
Companies and securing such guaranty obligations.
(k) INTERCREDITOR AGREEMENT - The Senior Note Indenture Trustee
shall have executed and delivered to the Agent on behalf of the Lenders
an Intercreditor Agreement (or an amendment and/or reaffirmation of any
existing Intercreditor Agreement, in form and substance satisfactory to
the Agent).
16
(l) CASH BUDGET PROJECTIONS - The Agent shall have received,
reviewed and been satisfied with a twelve (12) month cash budget
projection prepared by each of the Companies on the form provided by
the Agent.
(m) FEES - The Loan Facility Fee, the Administrative Management
Fee, Agent's audit fees incurred to date and Agent's legal fees shall
have been paid by the Companies.
(n) ADDITIONAL DOCUMENTS - Each of the Companies shall have
executed and delivered to the Agent all Loan Documents necessary to
consummate the lending arrangement contemplated between the Companies,
the Agent and the Lenders.
(o) EXISTING REVOLVING CREDIT AGREEMENT - The Parent's existing
credit agreement with Bank of America shall be: (i) terminated; (ii)
all loans and obligations of the Companies and/or the Guarantors
thereunder shall be paid or satisfied in full, including through
utilization of the proceeds of the initial Revolving Loans to be made
under this Financing Agreement except to the extent of those existing
letters of credit issued thereunder and identified to Agent in writing,
and which shall continue to remain outstanding in accordance with their
terms and have been cash-collateralized in a manner reasonably
acceptable to Agent; and (iii) all liens or security interests in favor
of the Bank of America on the Collateral and otherwise in connection
therewith shall be terminated and/or released upon such payment.
(p) EXAMINATION & VERIFICATION The Agent and each of the Lenders
shall have completed, to their respective satisfaction, an examination
and verification of the Accounts, Inventory, financial statements,
books and records of each of the Companies which examination shall
indicate that the Companies shall have an aggregate opening
Availability of at least $25,000,000 (considering, without duplication,
the $20,000,000 reserve established in clause (c) of the definition of
"Borrowing Base"), as evidenced by a Borrowing Base certificate
delivered by the Companies to the Agent as of the Closing Date. It is
understood that such requirement contemplates that all debts and
obligations are current, and that all payables are being handled in the
normal course of the Companies' business and consistent with their past
practice.
(q) BAILEE LETTERS - Each of the Companies shall have delivered to
Agent bailee, consignee, processor's and warehousemen consent and
waiver letters for those bailees, processors and/or warehousemen
identified on Schedule 2.1 hereof, each in form and substance
acceptable to Agent.
Upon the execution of this Financing Agreement and the initial
disbursement of loans hereunder, all of the above Conditions Precedent shall
have been deemed satisfied except as otherwise set forth hereinabove or as the
Companies and the Agent shall otherwise agree in writing.
2.2 CONDITIONS TO INITIAL FUNDING. The obligation of the Agent and the
Lenders to make the initial loans hereunder is subject to the prior satisfaction
of, extension of or waiver in writing of the following conditions precedent,
which conditions shall, in any event, be fully satisfied
17
on or prior to the applicable date, if any, indicated below for each such item
(each an "Initial Funding Condition Deadline") unless waived or extended in
writing by Agent and Lenders:
(a) DISBURSEMENT AUTHORIZATION - The Companies shall have delivered
to the Agent all information necessary for the Agent and the Lenders to
issue wire transfer instructions on behalf of each of the Companies for
the initial and subsequent loans and/or advances to be made under this
Financing Agreement including, but not limited to, disbursement
authorizations in form acceptable to the Agent.
(b) INVENTORY APPRAISAL The Companies shall have obtained and
delivered to Agent (or Agent may obtain, at the Companies' expense)
Inventory appraisal reports in form and substance and from appraisers
satisfactory to Agent.
(c) CASH MANAGEMENT SYSTEM The Cash Management System shall be
implemented in full force and effect on or before August 1, 2002.
Failure to satisfy any of the foregoing conditions by the applicable
Initial Funding Condition Deadline shall, at the option of Agent and Lenders,
constitute an Event of Default hereunder.
2.3 CONDITIONS TO EACH EXTENSION OF CREDIT. Subject to the terms of
this Financing Agreement, including without limitation the Agent's rights
pursuant to subsection 10.2 of Section 10 hereof, the agreement of the Agent on
behalf of the Lenders to make any extension of credit requested to be made by it
to any of the Companies on any date (including without limitation, the initial
extension of credit) is subject to the satisfaction of the following conditions
precedent:
(a) REPRESENTATIONS AND WARRANTIES - Each of the representations
and warranties made by each of the Companies in this Financing
Agreement or any other Loan Document shall be true and correct in all
material respects on and as of such date as if made on and as of such
date except to the extent that a representation or warranty relates
only to a specific date in which case it shall be true and correct in
all material respects as of such date only.
(b) NO DEFAULT - No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extension
of credit requested to be made on such date.
(c) BORROWING BASE - Except as may be otherwise agreed to from time
to time by the Agent and the Companies in writing, the Companies shall
deliver to Agent, promptly upon Agent's request during any time in
which the Companies' additional Availability hereunder is less than
$5,000,000 and in any event, no less frequently than monthly together
with the financial statements required pursuant to clause (c) of
subsection 7.8 hereof, an acceptable Borrowing Base certificate
demonstrating the Companies' compliance with the relevant provisions of
this Financing Agreement and the definition of Borrowing Base .
Each borrowing by a Company hereunder shall constitute a representation
and warranty by the Companies as of the date of such loan or advance that each
of the representations, warranties and covenants contained in the Financing
Agreement have been satisfied and are true and correct in all
18
material respects, except as the Companies and the Agent and/or the Required
Lenders shall otherwise agree herein or in a separate writing.
SECTION 3. REVOLVING LOANS.
3.1 PROCEDURES FOR REVOLVING LOANS.
(a) The Agent and the Lenders agree, subject to the terms and
conditions of this Financing Agreement, from time to time from the
Closing Date to the Maturity Date, and within (x) Availability and (y)
the Revolving Line of Credit, to make loans and advances to each
Company on a revolving basis (i.e. subject to the limitations set forth
herein, each of the Companies may borrow, repay and re-borrow Revolving
Loans). Such loans and advances shall be in amounts not to exceed the
Borrowing Base. All requests for loans and advances must be received by
an officer of the Agent no later than (i) 11:00 a.m., Chicago time, of
the Business Day on which any such Chase Bank Rate Loans and advances
are required or (ii) three Business Days prior to any requested LIBOR
Loan.
(b) (i) Whenever a Company desires the Agent, on behalf of the
Lenders, to make a Revolving Loan pursuant to this Section 3, it shall cause
Parent to give the Agent notice in writing or irrevocable telephonic notice
confirmed promptly in writing, in accordance with subsection 3.6 hereof,
specifying (A) the amount to be borrowed, and (B) the requested borrowing date
(which shall be a business day and shall be prior to the Maturity Date, and if
applicable, any Early Termination Date, or prior to any effective termination
date of this Financing Agreement, all as further set forth herein), and (C)
specify whether the requested Revolving Loan shall bear interest at the Chase
Bank Rate or at the LIBOR, as further set forth herein. The procedure for
Revolving Loans to be made on a requested borrowing date may be such other
procedure as is mutually satisfactory to the Companies, the Agent and/or the
Lenders.
(ii) Subject to subsection 14.10 hereof, should the Agent, on
behalf of the Lenders, for any reason honor requests for Overadvances, such
Overadvance shall be made in the Agent's sole discretion, subject to any
additional terms the Agent and/or the Required Lenders deem necessary. Requests
for loans and advances shall be made solely by Parent or the Companies in
accordance with subsection 3.6 hereof and shall be directed to the Agent.
(c) The Agent shall on any Settlement Date, and upon notice given
by the Agent no later than 2:00 p.m. Chicago time, request each Lender to make,
and each Lender hereby agrees to make, a Revolving Loan in an amount equal to
such Lender's Revolving Credit Commitment percentage (calculated with respect to
the aggregate Revolving Credit Commitments then outstanding) of the aggregate
amount of the Revolving Loans made by the Agent from the preceding Settlement
Date to the date of such notice. Each Lender's obligation to make the Revolving
Loans referred to in subsection (a) and to make the settlements pursuant to this
subsection (c) shall be absolute and unconditional and shall not be affected by
any circumstance, including without limitation (i) any set-off, counterclaim,
recoupment, defense or other right which any such Lender or any of the Companies
may have against the Agent, the (other) Companies, any other Lender or any other
person for any reason whatsoever; (ii) the occurrence or continuance of a
Default or an Event of Default; (iii) any adverse change in the condition
(financial or otherwise) of the Companies or any
19
one of them; (iv) any breach of this Financing Agreement or any other loan
document by the Companies or any one of them or any other Lender; or (v) any
other circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing. Without limiting the liability and obligation of each Lender
to make such advances, the Companies authorize the Agent to charge the
Companies' Revolving Loan Account with the Agent to the extent amounts received
from the Lenders are not sufficient to repay in full the amount of any such
deficiency.
(d) The Companies' Revolving Loan Obligations hereunder shall be
evidenced by the Promissory Note in the form of Exhibit C attached hereto.
3.2 FURTHER ASSURANCES REGARDING COLLATERAL. In furtherance of the
continuing assignment and security interest in each of the Companies' Accounts
and Inventory, each of the Companies will execute and deliver to the Agent in
such form and manner as the Agent may reasonably require, solely for the Agent's
convenience in maintaining records of Collateral, such confirmatory schedules of
Accounts and Inventory as the Agent may reasonably request, including, without
limitation, monthly schedules of Accounts and monthly schedules of Inventory,
all in form and substance satisfactory to the Agent (including, without
limitation, detailed information relating to any Accounts and Inventory arising
under or subject to a xxxx and hold or deferred shipment transaction), and, upon
the occurrence and continuance of a Default or an Event of Default, such other
appropriate reports designating, identifying and describing the Accounts and
Inventory as the Agent may request. In addition, upon the Agent's reasonable
request, each of the Companies shall provide the Agent with copies of agreements
with, or purchase orders from, such Companies' customers, and copies of invoices
to customers, proof of shipment or delivery, access to their computers,
electronic media and software programs associated therewith (including any
electronic records, contracts and signatures) and such other documentation and
information relating to said Accounts and other Collateral as the Agent may
reasonably require. Failure to provide the Agent with any of the foregoing shall
in no way affect, diminish, modify or otherwise limit the security interests
granted herein.
3.3 REPRESENTATIONS AND WARRANTIES OF THE COMPANIES REGARDING ACCOUNTS
AND INVENTORY. Each of the Companies hereby represents and warrants that: each
Account is based on an actual and bona fide sale and delivery of Inventory or
rendition of services to their respective customers, any other Account is bona
fide, made by the Companies in the ordinary course of their business; the
Inventory being sold, and the Account created, are the exclusive property of the
Companies and are not and shall not be subject to any lien, consignment
arrangement, encumbrance, security interest or financing statement whatsoever,
other than the Permitted Encumbrances; the invoices evidencing such Account are
in the name of a Company; and such Company's customers have accepted the
Inventory or services, owe and are obligated to pay the full amounts stated in
the invoices according to their terms, without dispute, offset, defense,
counterclaim or contra, except for disputes and other matters arising in the
ordinary course of business with respect to which such Company has complied with
the notification requirements of Paragraph 3.5 of this Section 3. The Companies
confirm to the Agent that any and all Taxes or fees relating to their business,
their sales, the Accounts or Inventory relating thereto, are their sole
responsibility and that same will be paid by the Companies when due, subject to
Paragraph 7.6 of Section 7 of this Financing Agreement, and that none of said
Taxes or fees represent a lien on or claim against the Accounts, except to the
extent the same constitute a Permitted Encumbrance. Each of the Companies hereby
further represents and
20
warrants that, except as it may otherwise report in writing to the Agent
pursuant to Paragraph 3.5 hereof from time to time: (i) Such Company shall not
acquire any inventory on a consignment basis; (ii) Such Company shall not
co-mingle its Inventory with any of its customers or any other person, including
pursuant to any xxxx and hold sale or otherwise; and (iii) The Inventory of each
Company is marketable to its customers in the ordinary course of business. Each
of the Companies also warrant and represent that they are duly and validly
existing corporations and are qualified in all states where the failure to so
qualify would have a material adverse effect on their business or their ability
to enforce collection of Accounts due from customers residing in that state. The
Companies agree to maintain such books and records regarding Accounts and
Inventory as the Agent may reasonably require and agree that the books and
records of the Companies will reflect the Agent's interest in the Accounts and
Inventory. All of the books and records of the Companies will be available to
the Agent at normal business hours, including any records handled or maintained
for the Companies or any one of them by any other company or entity.
3.4 CASH MANAGEMENT. Until the Agent has advised the Companies in
writing to the contrary after the occurrence of an Event of Default that has not
otherwise been waived, the Companies, at their expense, will enforce, collect
and receive all amounts owing on their respective Accounts in the ordinary
course of their business and any proceeds they so receive shall be subject to
the terms hereof, and held on behalf of and in trust for the Agent on behalf of
the Lenders. Such privilege shall terminate at the election of the Agent, upon
the occurrence of an Event of Default, and until such Event of Default is waived
in writing by the Required Lenders. On or before the earlier to occur of (1) two
weeks prior to the date of the requested initial loan disbursements hereunder,
and (2) the 90th day following the Closing Date, the Companies shall have
implemented a Cash Management System whereby any and all checks, cash, credit
card sales and receipts, notes or other instruments or property received by a
Company with respect to any Collateral, including Accounts, shall be held by
such Company in trust for the Agent, on behalf of the Lenders, separate from
such Company's own or the Companies' property and funds, and promptly turned
over to the Agent with proper assignments or endorsements by deposit to the
Depository Accounts. Each of the Companies shall: (i) indicate on all of their
invoices that funds should be delivered to and deposited in a Depository
Account; (ii) direct all of their Account Debtors to deposit any and all
Proceeds of Collateral into the Depository Accounts; (iii) irrevocably authorize
and direct any banks which maintain or hold either of the Companies' initial
receipt of cash, checks and other items that constitute Collateral or Proceeds
of Collateral to promptly wire transfer all available funds to a Depository
Account; and (iv) advise all such banks of the Agent's security interest in such
funds and take such other actions as may be requested by Agent to obtain Control
over any such funds or account(s). The Companies shall provide the Agent with
prior written notice of any and all deposit accounts opened or to be opened
subsequent to the Closing Date. All amounts received by the Agent in payment of
Accounts will be credited to the Revolving Loan Account when the Agent is
advised by its bank of its receipt of "collected funds" at the Agent's bank
account in New York City on the Business Day of such advice if advised no later
than 11:00 a.m. Chicago time or on the next succeeding Business Day if so
advised after 11:00 a.m. Chicago time. The Companies' Revolving Loan Account
will be charged monthly with the cost associated with one (1) Collection Day,
provided, however, that if no Revolving Loan or advance under the Revolving Line
of Credit has been made by Agent at any time during the preceding 30 day period,
then no charge will be assessed or imposed by Agent for such
21
month. No checks, drafts or other instrument received by the Agent shall
constitute final payment to the Agent and/or the Lenders unless and until such
instruments have actually been collected.
3.5 AGREEMENTS REGARDING ACCOUNTS AND INVENTORY. The Companies agree to
notify the Agent: (a) of any matters affecting the value, enforceability or
collectibility of any Account and of all customer disputes, offsets, defenses,
counterclaims, returns, rejections and all reclaimed or repossessed merchandise
or goods, and of any adverse effect in the value of their Inventory, in their
monthly collateral reports provided to the Agent hereunder, in such detail and
format as the Agent may reasonably require from time to time and (b) promptly of
any such matters which are material, as a whole, to the Accounts and/or the
Inventory. The Companies agree to issue credit memoranda promptly (with
duplicates to the Agent upon request after the occurrence of an Event of Default
that has not otherwise been waived) upon accepting returns or granting
allowances. Upon the occurrence of an Event of Default (which is not waived in
writing by the Required Lenders) and on written notice from the Agent, the
Companies agree that all returned, reclaimed or repossessed merchandise or goods
shall be set aside by the Companies, marked with the Agent's name (as secured
party) and held by the Companies for the Agent's account.
3.6 REVOLVING LOAN ACCOUNT; RELATED MATTERS. The Agent shall maintain a
Revolving Loan Account on its books in accordance with the terms of subsection
3.6(b) below, in which the Companies will be charged with all loans and advances
made by the Agent to either Company or for its account, and with any other
Obligations, including any and all costs, expenses and reasonable attorney's
fees which the Agent may incur in connection with the exercise by or for the
Agent of any of the rights or powers herein conferred upon the Agent, or in the
prosecution or defense of any action or proceeding to enforce or protect any
rights of the Agent in connection with this Financing Agreement, the other Loan
Documents or the Collateral assigned hereunder, or any Obligations owing by such
Company. The Companies will be credited with all amounts received by the Agent
and/or the Lenders from the Companies or from others for the Companies' account,
including, as above set forth, all amounts received by the Agent in payment of
Accounts, and such amounts will be applied to payment of the Obligations as set
forth herein. In no event shall prior recourse to any Accounts or other security
granted to or by the Companies be a prerequisite to the Agent's right to demand
payment of any Obligation. Further, it is understood that the Agent and/or the
Lenders shall have no obligation whatsoever to perform in any respect any of the
Companies' contracts or obligations relating to the Accounts.
(b) In order to utilize the collective borrowing powers of the
Companies in the most efficient and economical manner, and in order to
facilitate the handling of the accounts of the Companies on the Agent's books,
the Companies have requested, and the Agent has agreed to handle accounts of the
Companies on the Agent's books on a combined basis, all in accordance with the
following provisions:
(i) In lieu of maintaining separate accounts on the Agent's
books in the name of each of the Companies, the Agent shall
maintain one account under the name: "NS Group for the benefit of
Newport Steel Corporation and Xxxxxx Steel Corporation" (herein the
"Revolving Loan Account"). Loans and advances made by the Agent to
either of the Companies will be charged to the Revolving Loan
Account indicated above, on behalf of one or the other Company, as
designated by Parent,
22
along with any charges and expenses under this Financing Agreement.
The Revolving Loan Account will be credited, with all amounts
received by the Agent from either of the Companies or from others
for their account including all amounts received by the Agent in
payment of Accounts collaterally assigned to the Agent as provided
in this Financing Agreement;
(ii) Each month the Agent will render to Parent on behalf of
the Companies one extract of the Revolving Loan Account, which
shall be deemed to be an account stated as to each of the Companies
and which will be deemed correct and accepted by all of the
Companies unless the Agent receives a written statement of
exceptions from them within forty five (45) days after such extract
has been rendered by the Agent. It is expressly understood and
agreed by each of the Companies that the Agent shall have no
obligation to account separately to any of the Companies;
(iii) Requests for loans and advances may be made by Parent as
agent for the Companies and on behalf of and for the account of one
or the other Company, and the Agent is hereby authorized and
directed to accept, honor and rely on such instructions and
requests, subject to the limitations and provisions set forth in
this Financing Agreement. Each of the Companies shall be jointly
and severally liable hereunder and under each of the other Loan
Documents with respect to all Obligations, regardless of which of
the Companies actually receives the proceeds of the Loans or the
benefit of any other extensions of credit hereunder, or the manner
in which Parent, the Companies, the Agent or the Lenders account
therefor in their respective books and records. It is expressly
understood and agreed by each of the Companies that the Agent shall
have no responsibility to inquire into the correctness of the
apportionment, allocation, or disposition of (x) any loans and
advances made to any of the Companies or (y) any of the Agent's
expenses and charges relating thereto. All loans and advances shall
be made for the Revolving Loan Account;
(iv) All Accounts assigned to the Agent for the benefit of the
Lenders by any of the Companies and any other collateral security
now or hereafter given to the Agent and/or the Lenders by any of
the Companies (be it Accounts or otherwise), shall secure all
Revolving Loans and other advances made by the Agent and/or the
Lenders to any of the Companies, and shall be deemed to be pledged
to the Agent as security for any and all other Obligations of the
Companies to the Agent and/or the Lenders as set forth under this
Financing Agreement, the Guaranties, or any other Loan Documents
between the Agent and/or the Lenders and any of the Companies;
(v) It is understood that the handling of the accounts of the
Companies in a combined fashion, as more fully set forth herein, is
done solely as an accommodation to the Companies and at their
request, and that the Agent shall incur no liability to the
Companies as a result hereof. To induce the Agent and the Lenders
to do so, and in consideration thereof, each of the Companies
hereby agrees to indemnify the Agent and the Lenders and hold the
Agent and the Lenders harmless against any and all liability,
expense, loss or claim of damage or injury, made against the Agent
and/or the Lenders by any of the Companies or by any third party
23
whosoever, arising from or incurred solely by reason of (1) the
method of handling the accounts of the Companies as herein
provided, (2) the Agent relying on any instructions of any of the
Companies, or (3) any other action taken by the Agent in accordance
with this subparagraph (b) of Paragraph 3.6 of Section 3 of this
Financing Agreement; and
(vi) The foregoing request was made because the Companies
require financing on a basis permitting the availability of credit
from time to time to each of the Companies as required for the
continued successful operation of each of the Companies.
(c) Notwithstanding the foregoing, (i) each Company's obligations
and liabilities with respect to proceeds of Revolving Loans which it receives or
Letters of Credit or Letter of Credit Guaranties issued for its account, and
related fees, costs and expenses, and (ii) each Company's obligations and
liabilities arising as a result of the joint and several liability of the
Companies hereunder with respect to proceeds of Revolving Loans received by, or
Letters of Credit or Letter of Credit Guaranties issued for the account of the
other Company, together with the related fees, costs and expenses, shall be
separate and distinct obligations, all of which are and shall be primary
obligations of such Company. If and to the extent that any Revolving Loan
proceeds are used or made available by Parent to any Person other than a Company
or for any purpose other than directly on behalf of a Company, then, in such
event, such Revolving Loan proceeds shall constitute a loan (an "Intercompany
Loan") by the Companies to and for the benefit of Parent, evidenced either (A)
by a promissory note made by Parent payable to the Companies, subordinated to
the Senior Note Debt to the extent expressly required under the Senior Note
Indenture and otherwise having terms reasonably satisfactory to Agent, the sole
originally executed counterpart of which shall be pledged and delivered to
Agent, for the benefit of Agent and Lenders, as security for the Obligations, or
(B) an intercompany account receivable recorded on the books and records of the
Companies and Parent, and pledged to Agent for the benefit of Agent and Lenders
as security for the Obligations and subordinated to the Senior Note Debt to the
extent expressly required by the Senior Note Indenture. Notwithstanding the
foregoing to the contrary, any such Intercompany Loan may be set off against and
deemed a repayment of any amounts owing by such Company to Parent, as and to the
extent such amounts are reflected in the books and records of Parent maintained
in the ordinary course of business consistent with past practice, so long as any
such payment is duly and properly noted in such books and records.
(d) Neither the joint and several liability of, nor the liens
granted to the Agent under the Loan Documents by, any of the Companies shall be
impaired or released by (A) the failure of the Agent or any Lender, any
successors or assigns thereof, or any holder of any Note or any of the
Obligations to assert any claim or demand or to exercise or enforce any right,
power or remedy against any Company, any subsidiary of any Company, any other
Person, the Collateral or otherwise; (B) any extension or renewal for any period
(whether or not longer than the original period) or exchange of any of the
Obligations or the release or compromise of any obligation of any nature of any
Person with
24
respect thereto; (C) the surrender, release or exchange of all or any part of
any property (including without limitation the Collateral) securing payment,
performance and/or observance of any of the Obligations or the compromise or
extension or renewal for any period (whether or not longer than the original
period) of any obligations of any nature of any Person with respect to any such
property; (D) any action or inaction on the part of the Agent or any Lender, or
any other event or condition with respect to the other Company, including any
such action or inaction or other event or condition, which might otherwise
constitute a defense available to, or a discharge of, such other Company, or a
guarantor or surety of or for any or all of the Obligations; and (E) any other
act, matter or thing (other than payment or performance of the Obligations)
which would or might, in the absence of this provision, operate to release,
discharge or otherwise prejudicially affect the obligations of such or the other
Company. Without limiting the generality of the foregoing in any manner, all
representations and warranties of the Companies contained herein are made
jointly and severally. For purposes of the agreements, representations,
warranties and covenants contained in this Financing Agreement and in the other
Loan Documents, the knowledge of one Company shall be imputed to Parent and the
other Company, and any consent by Parent shall constitute the consent of and
shall bind each of the Companies.
(e) Each of the Companies expects to derive benefit, directly or
indirectly, from such availability since the successful operation of each of the
Companies will be facilitated by the efficiencies achieved by integrated
financial management as aforesaid. In addition, the Companies have informed the
Agent that:
(A) Parent, in order to increase the efficiency and productivity of
each of the other Companies, has centralized in itself a cash
management system which entails, in part, central disbursement and
operating accounts in which it provides the working capital needs
of each of the other Companies; and
(B) Since the Companies are engaged in operations that benefit from
financing on an integrated basis and since each Company expects to
benefit from the continued successful performance of such
integrated financial management and in order to best utilize the
collective borrowing powers of each Company in the most effective
and cost efficient manner and to avoid adverse effects on the
financial management of each Company and the existing back-office
practices of the Companies, each Company has requested that all
Revolving Loans and advances be disbursed solely upon the request
of Parent and to bank accounts managed solely by Parent and that
Parent will manage for the benefit of each Company the expenditure
and usage of such funds.
3.7 REVOLVING LOAN ACCOUNT STATEMENTS. After the end of each month, the
Agent shall promptly send the Companies a statement showing the accounting for
the charges, loans, advances and other transactions occurring between the Agent
and each of the Companies during that month. The monthly statements shall be
deemed correct and binding upon each of the Companies and shall constitute an
account stated between the Companies and the Agent unless the Agent receives a
written statement of the exceptions within forty five (45) days of the date of
the monthly statement.
3.8 OVERADVANCE OF REVOLVING LOANS. In the event that any requested
advance exceeds Availability or that (a) the sum of (i) the outstanding
principal balance of Revolving Loans and (ii) outstanding balance of Letters of
Credit exceeds (b)(x) the Borrowing Base or (y) the
25
Revolving Line of Credit, any such nonconsensual Overadvance shall be
immediately due and payable to the Agent on behalf of the Lenders.
SECTION 4. INTENTIONALLY OMITTED.
SECTION 5. LETTERS OF CREDIT.
In order to assist the Companies, or any one of them, in establishing
or opening Letters of Credit with an Issuing Bank, the Companies have requested
the Agent, on behalf of the Lenders, to join in the applications for such
Letters of Credit, and/or guarantee payment or performance of such Letters of
Credit and any drafts or acceptances thereunder through the issuance of the
Letter of Credit Guaranties, thereby lending the Agent's credit to the Companies
and the Agent has agreed to do so. These arrangements shall be handled by the
Agent subject to the terms and conditions set forth below.
5.1 AMOUNT AND TERMS OF LETTERS OF CREDIT. Within the Revolving Line of
Credit and Availability, the Agent on behalf of the Lenders shall assist each of
the Companies in obtaining Letter(s) of Credit in an amount not to exceed the
outstanding amount of the Letter of Credit Sub-Line. The Agent's assistance for
amounts in excess of the limitation set forth herein shall at all times and in
all respects be in the Agent's sole discretion. It is understood that the term,
form and purpose of each Letter of Credit and all documentation in connection
therewith (including any Letter of Credit Guaranty), and any amendments,
modifications or extensions thereof, must be mutually acceptable to the Agent,
the Issuing Bank and the Companies, provided that Letters of Credit (or Letter
of Credit Guaranties) shall not be used for the purchase of domestic Inventory
or to secure present or future debt owed to domestic Inventory suppliers. Any
and all outstanding Letters of Credit (including, without duplication, any
Letter of Credit Guaranties) issued hereunder for any Company shall be reserved
dollar for dollar (to the extent of any un-drawn liability thereunder or in
connection therewith) from Availability as part of the Availability Reserve.
Agent and Lenders hereby acknowledge and agree that Letters of Credit may be
issued by a Company to or on behalf of Parent as the beneficiary thereof to be
used by Parent in connection with any legitimate business purpose of Parent in
the ordinary course of its business, including, without limitation, obtaining or
maintaining Workmen's Compensation insurance, PROVIDED that Parent execute and
deliver to the Companies a reimbursement agreement and an indemnification
agreement subordinated to the Senior Note Debt to the extent expressly required
by the terms of the Senior Note Indenture, and otherwise reasonably acceptable
to Agent with respect to each such Letter of Credit.
5.2 LETTER OF CREDIT GUARANTIES. The Agent shall have the right,
without notice to any of the Companies, to charge the Companies' Revolving Loan
Account with the amount of any and all indebtedness, liability or obligation of
any kind incurred by the Agent and/or the Lenders under a Letter of Credit
Guaranty at the earlier of (a) payment by the Agent under such Letter of Credit
Guaranty; or (b) the occurrence of an Event of Default which has not been waived
in writing by the Required Lenders. Any amount charged to the Companies'
Revolving Loan Account shall be deemed a Revolving Loan hereunder and shall
incur interest at the rate provided in Paragraph 8.1 of Section 8 of this
Financing Agreement.
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5.3 INDEMNIFICATION. Each of the Companies jointly and severally
unconditionally indemnifies the Agent and the Lenders and holds the Agent and
the Lenders harmless from any and all loss, claim or liability incurred by the
Agent arising from any transactions or occurrences relating to Letters of Credit
established or opened for, or any Letter of Credit Guaranties issued on behalf
of any Company's account, the collateral relating thereto and any drafts or
acceptances thereunder, and all Obligations thereunder, including any such loss
or claim due to any errors, omissions, negligence, misconduct or action taken by
any Issuing Bank, other than for any such loss, claim or liability arising out
of the gross negligence or willful misconduct by the Agent and/or the Lenders.
This indemnity shall survive termination of this Financing Agreement. The
Companies agree that any charges incurred by the Agent for any of the Companies'
account by the Issuing Bank shall be conclusive on each of the Companies absent
manifest error and may be charged to the Companies' Revolving Loan Account.
5.4 AGENT AND LENDERS NOT RESPONSIBLE. The Agent and/or the Lenders
shall not be responsible for: (a) the existence, character, quality, quantity,
condition, packing, value or delivery of the goods purporting to be represented
by any documents; (b) any difference or variation in the character, quality,
quantity, condition, packing, value or delivery of the goods from that expressed
in the documents; (c) the validity, sufficiency or genuineness of any documents
or of any endorsements thereon, even if such documents should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged; (d) the
time, place, manner or order in which shipment is made; (e) partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; (f) any deviation from
instructions; (g) delay, default, or fraud by the shipper and/or anyone else in
connection with the goods or the shipping thereof; or (h) any breach of contract
between the shipper or vendors and the Companies.
5.5 ACTIONS OF AGENT, LENDERS AND ISSUING BANKS BINDING. The Companies
agree that any action taken by the Agent and/or the Lenders, if taken in good
faith, or any action taken by any Issuing Bank, under or in connection with the
Letters of Credit, the Letter of Credit Guaranties, the drafts or acceptances,
or the Collateral, shall be binding on each of the Companies and shall not put
the Agent and/or the Lenders in any resulting liability to the Companies. In
furtherance thereof, the Agent shall have the full right and authority to: (a)
clear and resolve any questions of non-compliance of documents; (b) give any
instructions as to acceptance or rejection of any documents or goods; (c)
execute any and all steamship or airways guaranties (and applications therefor),
indemnities or delivery orders; (d) grant any extensions of the maturity of,
time of payment for, or time of presentation of, any drafts, acceptances, or
documents; and (e) agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letters of Credit, drafts, acceptances or Letter of Credit
Guaranties; all in the Agent's sole name. The Issuing Bank shall be entitled to
comply with and honor any and all such documents or instruments executed by or
received solely from the Agent, all without any notice to or any consent from
the Companies or any one of them. Notwithstanding any prior course of conduct or
dealing with respect to the foregoing including amendments and non-compliance
with documents and/or any of the Company's instructions with respect thereto,
the Agent may exercise its rights hereunder in its sole and reasonable business
judgment. In addition, without the Agent's express consent and endorsement in
writing, the Companies agree: (a) not to execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders; to grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances
27
or documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; and (b) after the
occurrence of an Event of Default which is not waived by the Agent, not to (i)
clear and resolve any questions of non-compliance of documents, or (ii) give any
instructions as to acceptances or rejection of any documents or goods.
5.6 COMPLIANCE WITH LAWS. The Companies agree that: (a) any necessary
import, export or other licenses or certificates for the import or handling of
the Collateral will have been promptly procured; (b) all foreign and domestic
governmental laws and regulations in regard to the shipment and importation of
the Collateral, or the financing thereof will have been promptly and fully
complied with; and (c) any certificates in that regard that the Agent may at any
time request will be promptly furnished. In connection herewith, the Companies
warrant and represent that all shipments made under any such Letters of Credit
are in accordance with the laws and regulations of the countries in which the
shipments originate and terminate, and are not prohibited by any such laws and
regulations. Each of the Companies assumes all risk, liability and
responsibility for, and agrees to pay and discharge, all present and future
local, state, federal or foreign Taxes, duties, or levies. Any embargo,
restriction, laws, customs or regulations of any country, state, city, or other
political subdivision, where the Collateral is or may be located, or wherein
payments are to be made, or wherein drafts may be drawn, negotiated, accepted,
or paid, shall be solely the Companies' risk, liability and responsibility.
5.7 AGENT'S RIGHTS FOLLOWING PAYMENTS UNDER LETTER OF CREDIT
GUARANTIES. Upon any payments made to the Issuing Bank under a Letter of Credit
Guaranty, the Agent on behalf of the Lenders shall acquire by subrogation, any
rights, remedies, duties or obligations granted or undertaken by the Companies
or any one of them to the Issuing Bank in any application for Letters of Credit,
any standing agreement relating to Letters of Credit or otherwise, all of which
shall be deemed to have been granted to the Agent on behalf of the Lenders and
apply in all respects to the Agent and shall be in addition to any rights,
remedies, duties or obligations contained herein.
SECTION 6. COLLATERAL.
6.1 GRANT OF SECURITY INTEREST. As security for the prompt payment in
full of all Obligations, each of the Companies hereby pledges and grants to the
Agent on behalf of the Lenders a continuing general lien upon, and security
interest in, all of their respective:
(a) Accounts;
(b) Inventory;
(c) Depository Accounts; and
(d) General Intangibles relating to, arising from or otherwise
used or usable in connection with any Accounts or Inventory,
including, without limitation, all Payment Intangibles.
6.2 ATTACHMENT OF SECURITY INTERESTS. The security interests granted
hereunder extends and attaches to:
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(a) All Collateral which is owned by any of the Companies or in
which the Companies have any interest, whether held by the Companies or others
for their account (including, without limitation, all Investment Property
constituting or acquired with Proceeds of any Collateral); and
(b) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Agent or the Companies from the
Companies' customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by the Companies, or to the sale, promotion
or shipment thereof.
6.3 PRESENTATION OF COLLATERAL; PROCEEDS OF COLLATERAL; LICENSE OF
INVENTORY. Each of the Companies agrees to safeguard, protect and hold all
Inventory for the Agent's account and make no disposition thereof except in the
ordinary course of its business, or as herein otherwise expressly provided. Each
of the Companies represents and warrants that Inventory will be sold and shipped
by such Company to its customers only in the ordinary course of such Company's
business, and then only on open account and on terms currently being extended by
such Company to its customers or as is otherwise usual, customary and consistent
with the past practice of such Company with respect to its customers generally,
PROVIDED that, absent the prior written consent of the Agent, the Companies
shall not sell Inventory on a consignment basis. Upon the sale, exchange, or
other disposition of Inventory, as herein provided, the security interest in the
Inventory provided for herein shall, without break in continuity and without
further formality or act, continue in, and attach to, all Proceeds, including
any instruments for the payment of money, Accounts, documents of title, shipping
documents, chattel paper and all other cash and non-cash Proceeds of such sale,
exchange or disposition. As to any such sale, exchange or other disposition, the
Agent shall have all of the rights of an unpaid seller, including stoppage in
transit, replevin, rescission and reclamation, exercisable upon the occurrence
and during the continuance of a material Default or an Event of Default. The
Companies hereby agree to immediately forward any and all Proceeds of Collateral
to a Depository Account, and to hold any such Proceeds (including any notes and
instruments), in trust for the Agent on behalf of the Lenders pending delivery
to the Agent. Irrespective of the Agent's perfection status in any and all of
the General Intangibles, including, without limitation, any licenses and permits
with respect thereto, to the extent permitted under each such applicable license
or assignment agreement, each Company hereby irrevocably grants the Agent a
royalty free license to sell, or otherwise dispose of or transfer, in accordance
with Paragraph 10.3 of Section 10 of this Financing Agreement, and the
applicable terms hereof, any of the Inventory upon the occurrence of an Event of
Default which has not been waived in writing by the Agent.
6.4 PERMITTED ACQUISITION. Neither Company shall nor shall any
Guarantor (collectively, the "Loan Parties" and individually a "Loan Party")
acquire another Person or substantially all of the assets of another Person or
make an Investment in another Person (any of the foregoing, an "Acquisition")
except in accordance with and subject to the provisions of this subsection 6.4
and provided that such Loan Party satisfy the following minimum requirements
(unless waived or otherwise permitted by Agent):
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(a) The Agent shall receive not less than fifteen (15) Business
Days' prior written notice of such Acquisition, which notice shall
include a reasonably detailed description of the proposed terms of such
Acquisition and identify the anticipated closing date thereof;
(b) No Event of Default shall exist prior to or after giving effect
to such Acquisition and the incurrence of any Revolving Loans or other
Indebtedness in connection therewith;
(c) Such Loan Party shall cause the Person acquired in any such
Acquisition (the "Target") to guarantee the Obligations by executing
and delivering a guaranty substantially in the form and substance as
the Guaranties delivered by the Guarantors on the Closing Date;
(d) Such Target shall grant to Agent a first priority perfected
security interest in its accounts receivable and inventory as security
for the obligations of such Target under its guaranty of the
Obligations, PROVIDED, however, if Agent and/or Lenders (i) do not
provide working capital or other financing to fund the operations or
business activities of any Target pursuant to subsection 7.17 hereof
and such financing is otherwise provided by another financial
institution in accordance with the terms of subsection 7.17, or (ii)
such Target was acquired in connection with a stock acquisition and its
accounts receivable and inventory are already subject to security
interests in favor of a financial institution which provides working
capital or other financing to fund the operations or business
activities of such Target, then such Target shall not be required to
grant security interests in its accounts receivable or inventory to
Agent as aforesaid; and
(e) Agent and Lenders shall be granted (and by this provision are
hereby granted) a right of first refusal (subject to and in accordance
with the provision of subsection 7.17 hereof) to provide any working
capital or other financing to fund the operations or business
activities of any Target. Subject to the provisions of subsection 7.17,
if Agent and/or Lenders do not, and another financial institution
(hereinafter, a "Bank") does provide said financing on terms and
conditions no less favorable to such Target than those offered by Agent
and/or Lenders, then Agent shall, if applicable, release its liens on
such Target's accounts receivable and inventory if and to the extent
required by a Bank in connection with securing the financing provided
by it, provided, however that, in any event, such Target shall remain a
"Guarantor" with respect to the Obligations.
For purposes of this subsection 6.4, "Investment" means any direct or
indirect purchase or other acquisition by a Loan Party of any beneficial
interest in, including stock, partnership interest or other equity securities
of, or ownership interest in, any other Person such that, after giving effect
thereto, such Loan Party is able to control the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise.
6.5 CONTINUANCE OF AGENT'S RIGHTS AND SECURITY INTERESTS. The rights
and security interests granted to the Agent and the Lenders hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the Revolving Loan Account maintained in
the Companies' name on the books of the Agent may from time to time be
temporarily in a credit position, until the final payment in full to the Agent
of all Obligations and the
30
termination of this Financing Agreement. Any delay, or omission by the Agent to
exercise any right hereunder shall not be deemed a waiver thereof, or be deemed
a waiver of any other right, unless such waiver shall be in writing and signed
by the Agent. A waiver on any one occasion shall not be construed as a bar to,
or waiver of, any right or remedy on any future occasion.
6.6 AGENT'S RIGHTS NOT LIMITED. Notwithstanding the Agent's security
interest in the Collateral and to the extent that the Obligations are now or
hereafter secured by any assets or property other than the Collateral or by the
guarantee, endorsement, assets or property of any other person, the Agent shall
have the right in its sole discretion to determine which rights, liens, security
interests or remedies the Agent shall at any time pursue, foreclose upon,
relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of the Agent's
and/or the Lenders' rights hereunder.
6.7 SECURITY FOR OBLIGATIONS. Any balances to the credit of the
Companies, or any one of them, and any other property or assets of the
Companies, or any one of them, in the possession or control of the Agent and/or
the Lenders may be held by the Agent as security for any Obligations (if and to
the extent any Loans are then outstanding or any Obligations are then due and
owing) and applied in whole or partial satisfaction of such Obligations when
due. The liens and security interests granted herein, and any other lien or
security interest the Agent and/or the Lenders may have in any other assets of
the Companies, shall secure payment and performance of all now existing and
future Obligations. The Agent may in its discretion charge any or all of the
Obligations to the Revolving Loan Account when due.
6.8 GENERAL INTANGIBLES. Each of the Companies possess all general
intangibles (as defined in the UCC and including, without limitation, all
General Intangibles) and rights thereto necessary to conduct its business as
conducted as of the Closing Date and each Company shall maintain its rights in,
and the value of, such general intangibles as are necessary or desirable to the
continued successful conduct of such Company's business in the ordinary course,
including, without limitation, by making timely payment with respect to any
applicable licensed rights. The Companies shall deliver to the Agent, and/or
shall cause the appropriate party to deliver to the Agent, from time to time
such pledge or security agreements with respect to General Intangibles (now or
hereafter acquired) of the Companies and their subsidiaries as the Agent shall
require to obtain valid first liens thereon. The Companies shall provide timely
notice to the Agent of any additional Patents, Trademarks, trade names, service
marks, Copyrights, brand names, logos and other trade designations acquired or
applied for subsequent to the Closing Date. Parent, on behalf of itself and each
of its subsidiaries, and each of the Companies hereby irrevocably grants to
Agent a royalty-free, non-exclusive license in all General Intangibles and in
all (i) Trademarks, tradenames, corporate names, business names, logos and any
other designs or sources of business identities used or useful in finishing,
processing, selling or otherwise realizing upon any Collateral, (ii) all
Patents, together with any improvements on said Patents, utility models,
industrial models, and designs used or useful in finishing, processing, selling
or otherwise realizing upon any Collateral, (iii) Copyrights relating to or used
or useful in selling, marketing or otherwise realizing upon any Collateral, (iv)
franchises used or useful in finishing, processing, selling or otherwise
realizing upon any Collateral, (v) trade secrets, to the extent used or useful
in finishing, processing, selling or otherwise realizing upon any Collateral,
and (vi) all other proprietary and intellectual property rights of the Companies
(all the of the foregoing being referred to hereinafter as the "Intellectual
Property") for the sole purpose, upon
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the occurrence of an Event of Default, of (i) advertising for sale and selling
or transferring any Inventory bearing any of the Intellectual Property, and (ii)
making, assembling, preparing for sale or completing, or causing others to do
so, any applicable raw materials or Inventory utilizing or bearing any of the
Intellectual Property, including use of the Equipment and Real Estate for the
purpose of completing the manufacture of unfinished goods, raw materials or
work-in-process comprising Inventory to the extent each such Company is
permitted to do so under applicable license and/or assignment agreements and in
accordance with applicable law, and applying the proceeds thereof to the
Obligations hereunder, all as further set forth in this Financing Agreement and
irrespective of the Agent's lien and perfection in any General Intangibles or
Intellectual Property.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
7.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANIES. Each of the
Companies hereby warrants, represents and covenants that: (a) the fair value of
its Total Assets exceeds the book value of its Total Liabilities; (b) each
Company is generally able to pay its debts as they become due and payable; and
(c) neither Company has unreasonably small capital to carry on its business as
it is currently conducted absent extraordinary and unforeseen circumstances. The
Companies further warrant and represent that: (i) Schedule 7.1 hereto correctly
and completely sets forth each of the Companies' (A) chief executive office, (B)
Collateral locations, (C) tradenames, (D) states of incorporation (together with
such Person's organizational identification number, if applicable), and (E) all
the other information listed on said Schedule 7.1; (ii) except for the Permitted
Encumbrances, after filing of financing statements in the applicable filing
clerks' offices at the locations set forth in Schedule 7.1, this Financing
Agreement creates a valid, perfected and first priority security interest in the
Collateral and the security interests granted herein constitute and shall at all
times constitute the first and only liens on the Collateral; (iii) except for
the Permitted Encumbrances, the Companies are, or will be, at the time
additional Collateral is acquired by them, the absolute owner of the Collateral
with full right to pledge, sell, consign, transfer and create a security
interest therein, free and clear of any and all claims or liens in favor of
others; (iv) no other Person has Control over or of any Collateral; (v) the
Companies will, at their expense, forever warrant and, at the Agent's request,
defend the same from any and all claims and demands of any other person other
than a holder of a Permitted Encumbrance; (vi) the Companies, or any one of
them, will not grant, create or permit to exist, any lien upon, or security
interest in, the Collateral, or any Proceeds thereof, in favor of any other
Person other than the holders of the Permitted Encumbrances; and (vii) the
Equipment does not comprise a part of any Company's Inventory; (viii) the
Equipment is and will only be used by the Companies in their business and will
not be held for sale or lease, or removed from their premises, or otherwise
disposed of by the Companies except as otherwise expressly permitted under
subsection 7.9(c) hereof. The Companies shall, upon the request of Agent, notify
any such warehouse, bailee, agent or processor of the security interests of
Agent, shall instruct such Person to hold all such Collateral for Agent's
account subject to Agent's instructions and shall obtain an acknowledgement from
such Person that such Person holds the Collateral for Agent's benefit.
7.2 INSPECTION OF BOOKS AND RECORDS AND COLLATERAL. Each of the
Companies agrees to maintain books and records pertaining to the Collateral in
accordance with GAAP and in such additional detail, form and scope as the Agent
shall reasonably require. The Companies agree that the Agent or its agents, any
of the Lenders who may wish to accompany the Agent at their own cost and
expense, may enter upon the Companies' premises at any time during normal
business hours,
32
and from time to time in its reasonable business judgment, for the purpose of
inspecting the Collateral and any and all records pertaining thereto. The
Companies agree to afford the Agent thirty (30) days prior written notice of any
change in the location of any material Collateral, other than to locations, that
as of the Closing Date, are known to the Agent and at which the Agent has filed
financing statements or has otherwise fully perfected its liens thereon
(including, without limitation, having obtained consent and waiver letters from
bailees with respect to such Collateral). Each of the Companies is also to
advise the Agent promptly, in sufficient detail, of any material adverse change
relating to the type, quantity or quality of the Collateral or to the security
interests granted to the Agent therein.
7.3 ADDITIONAL DOCUMENTATION. Each of the Companies agrees to execute
and deliver to the Agent, from time to time (but not more frequently than
monthly absent the occurrence and continuance of a Default or an Event of
Default), solely for the Agent's convenience in maintaining a record of the
Collateral, such written statements, and schedules as the Agent may reasonably
require, designating, identifying or describing the Collateral. Any failure,
however, to promptly give the Agent such statements, or schedules shall not
affect, diminish, modify or otherwise limit the Agent's and/or the Lenders'
security interests in the Collateral. In addition to the foregoing, Agent may
require the Companies to obtain and deliver to Agent (or Agent may obtain, at
the Companies' expense) Inventory appraisal reports in form and substance and
from appraisers satisfactory to Agent at any time during which Availability is
less than or equal to $5,000,000, PROVIDED, however, that absent the occurrence
and continuance of a Default or an Event of Default (in which instances the
limitations set forth herein shall not apply), Agent may obtain or require such
reports no more frequently than twice during each calendar year.
7.4 COMPLIANCE WITH LAWS; UCC AUTHORIZATION. Each of the Companies
agrees to comply with the requirements of all state and federal laws in order to
grant to the Agent valid and perfected first security interests in the
Collateral, subject only to the Permitted Encumbrances. The Agent is hereby
authorized by the Companies to file (including pursuant to the applicable terms
of the UCC) from time to time any financing statements, continuations or
amendments covering the Collateral. The Companies hereby consent to and ratify
any and all execution and/or filing of financing statements on or prior to the
Closing Date by the Agent. The Companies agree to do whatever the Agent may
reasonably request, from time to time, by way of: (a) filing notices of liens,
financing statements, amendments, renewals and continuations thereof; (b)
cooperating with the Agent's agents and employees; (c) keeping Collateral
records; (d) transferring Proceeds of Collateral to the Agent's possession; and
(e) performing such further acts as the Agent and/or the Lenders may reasonably
require in order to effect the purposes of this Financing Agreement.
7.5 INSURANCE.
(a) Each of the Companies agrees to maintain insurance on its Real
Estate, Equipment and Inventory under such policies of insurance, with
such insurance companies, in such reasonable amounts and covering such
insurable risks as are at all times reasonably satisfactory to the
Agent. All policies covering Inventory are, subject to the rights of
any holders of Permitted Encumbrances holding claims senior to the
Agent, to be made payable to the Agent on behalf of the Lenders, in
case of loss, under a standard non-contributory "mortgagee", "lender"
or "secured party" clause and are to contain such other provisions as
33
the Agent may require to fully protect the Agent's interest in the
Inventory and to any payments to be made under such policies. All
original policies or true copies thereof are to be delivered to the
Agent, premium prepaid, with the loss payable endorsement in the
Agent's favor, and shall provide for not less than thirty (30) days
prior written notice to the Agent of the exercise of any right of
cancellation. At the Companies' request, or if the Companies fail to
maintain such insurance, the Agent may arrange for such insurance, but
at the Companies' expense and without any responsibility on the Agent's
part for: (i) obtaining the insurance; (ii) the solvency of the
insurance companies; (iii) the adequacy of the coverage; or (iv) the
collection of claims. Upon the occurrence of an Event of Default which
is not waived in writing by the Required Lenders, the Agent shall,
subject to the rights of any holders of Permitted Encumbrances holding
claims senior to the Agent, have the sole right and at its option, in
the name of the Agent or the Companies or any of them, to file claims
under any insurance policies with respect to the Collateral, to
receive, receipt and give acquittance for any payments that may be
payable thereunder, and to execute any and all endorsements, receipts,
releases, assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies.
(b) In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to the Companies' or a Company's Inventory shall
first reduce such Company's Revolving Loans. Upon the occurrence of an Event of
Default, such Insurance Proceeds may be applied to the Obligations in such order
as the Agent may elect;
(c) In the event the Companies or any one of them fails to provide
the Agent with timely evidence, acceptable to the Agent, of its maintenance of
insurance coverage required pursuant to subparagraph 7.5(a) above, the Agent may
purchase, at the Companies' expense, insurance to protect the Agent's interests
in the Collateral. The insurance acquired by the Agent may, but need not,
protect the Companies' interest in the Collateral, and therefore such insurance
may not pay claims which the Companies may have with respect to the Collateral
or pay any claim which may be made against the Companies in connection with the
Collateral. In the event the Agent purchases, obtains or acquires insurance
covering all or any portion of the Collateral, the Companies shall be
responsible for all of the applicable costs of such insurance, including
premiums, interest (at the applicable Chase Bank Rate for Revolving Loans set
forth in subsection 8.1 of Section 8 hereof), fees and any other charges with
respect thereto, until the effective date of the cancellation or the expiration
of such insurance. The Agent may charge all of such premiums, fees, costs,
interest and other charges to the Companies' Revolving Loan Account. Each of the
Companies hereby acknowledges that the costs of the premiums of any insurance
acquired by the Agent may exceed the costs of insurance which the Companies may
be able to purchase on their own. In the event that the Agent purchases such
insurance, the Agent will notify the Companies or the applicable Company of said
purchase within thirty (30) days of the date of such purchase. If, within thirty
(30) days after the date of such notice, the Companies provide the Agent with
proof that the Companies had the insurance coverage required pursuant to 7.5(a)
above (in form and substance satisfactory to the Agent) as of the date on which
the Agent purchased insurance and the Companies continued at all times to have
such insurance, then the Agent agrees to cancel the insurance purchased by the
Agent and credit the Companies' Revolving Loan Account with the amount of all
costs, interest and other charges associated with any insurance purchased by the
Agent, including with any amounts
34
previously charged to the Revolving Loan Account.
7.6 TAXES. Each of the Companies agrees to pay, when due, all Taxes,
including sales taxes, assessments, claims and other charges lawfully levied or
assessed upon the Companies or the Collateral unless such Taxes are being
diligently contested in good faith by the applicable Companies by appropriate
proceedings and adequate reserves are established in accordance with GAAP.
Notwithstanding the foregoing, if any lien shall be filed or claimed thereunder:
(a) for Taxes due the United States of America, or (b) which could reasonably be
expected to create a valid obligation having priority over the rights granted to
the Agent herein, such lien shall not be deemed to be a Permitted Encumbrance
hereunder and the Companies shall immediately pay such tax and remove the lien
of record. If the Companies or any one of them fails to do so promptly, then at
the Agent's election, the Agent may (i) create an Availability Reserve in such
amount as it may deem appropriate in its reasonable business judgment, or (ii)
upon the occurrence of a Default or Event of Default (that has not otherwise
been waived by Required Lenders), imminent risk of seizure, filing of any
priority lien, forfeiture, or sale of the Collateral, pay Taxes on the
Companies' behalf, and the amount thereof shall be an Obligation secured hereby
and due on demand.
7.7 COMPLIANCE WITH LAWS. Each of the Companies: (a) agrees to comply
with all acts, rules, regulations and orders of any legislative, administrative
or judicial body or official, which the failure to comply with would have a
material and adverse impact on the Collateral, or any material part thereof, or
on the business or operations of the Companies or any one of them, provided that
the Companies may contest any acts, rules, regulations, orders and directions of
such bodies or officials in any reasonable manner which will not, in the Agent's
reasonable opinion, materially and adversely affect the Agent's and/or the
Lenders' rights or priority in the Collateral; (b) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the Collateral, the
ownership and/or use of their real property and operation of their business,
which the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the business of
the Companies or any one of them; and (c) shall not be deemed to have breached
any provision of this Paragraph 7.7 if (i) the failure to comply with the
requirements of this Paragraph 7.7 resulted from good faith error or innocent
omission, (ii) the Companies promptly commence and diligently pursue a cure of
such breach, and (iii) such failure is cured within (30) days following the
Companies' receipt of notice of such failure, or if such cannot in good faith be
cured within thirty (30) days, then such breach is cured within a reasonable
time frame based upon the extent and nature of the breach and the necessary
remediation, and in conformity with any applicable consent order, consensual
agreement and applicable law.
7.8 FINANCIAL STATEMENTS. Until termination of this Financing Agreement
and payment and satisfaction of all Obligations due hereunder, the Companies
agree that, unless the Agent shall have otherwise consented in writing, each of
the Companies will furnish to the Agent and each Lender: (a) within one hundred
five (105) days after the end of each Fiscal Year of each of the Companies, an
audited Consolidated Balance Sheet, with a Consolidating Balance Sheet attached
thereto, as at the close of such year, and statements of profit and loss, cash
flow and reconciliation of surplus of Parent, the Companies and their
subsidiaries for such year, audited by independent public accountants selected
by the Companies and satisfactory to the Agent; (b) within sixty (60) days after
the end of each Fiscal Quarter a Consolidated Balance Sheet and Consolidating
Balance Sheet as at
35
the end of such period and statements of profit and loss, cash flow and surplus
of Parent, the Companies and their subsidiaries, certified by an authorized
financial or accounting officer of the Companies; (c) within thirty (30) days
after the end of each month a Consolidated Balance Sheet as at the end of such
period and statements of profit and loss, cash flow and surplus of the Companies
and all subsidiaries for such period, certified by an authorized financial or
accounting officer of the Companies; and (d) from time to time, such further
information regarding the business affairs and financial condition of the
Parent, the Companies and/or any subsidiaries thereof as the Agent may
reasonably request, including, without limitation (i) the accountant's
management practice letter and (ii) annual cash flow projections in form
satisfactory to the Agent. Each financial statement which the Companies are
required to submit hereunder must be accompanied by an officer's certificate,
signed by the President, Vice President, Controller, or Treasurer, pursuant to
which any one such officer must certify that: (x) the financial statement(s)
fairly and accurately represent(s) each of the Companies' financial condition at
the end of the particular accounting period, as well as the Companies' operating
results during such accounting period, subject to year-end audit adjustments;
and (y) during the particular accounting period: (A) there has been no Default
or Event of Default under this Financing Agreement, PROVIDED, HOWEVER, that if
any such officer has knowledge that any such Default or Event of Default, has
occurred during such period, the existence of and a detailed description of same
shall be set forth in such officer's certificate; (B) the Companies have not
received any notice of cancellation with respect to their property insurance
policies; and (C) the Companies have not received any notice that could
reasonably be likely to result in a material adverse effect on the value of the
Collateral taken as a whole.
7.9 NEGATIVE COVENANTS. Until termination of the Financing Agreement
and payment and satisfaction of all Obligations hereunder, each of the Companies
agrees that, without the prior written consent of the Agent, except as otherwise
herein provided, the Companies or any one of them will not and will not permit
any of their respective subsidiaries to:
(a) Mortgage, assign, pledge, transfer or otherwise permit any
lien, charge, security interest, encumbrance or judgment, (whether as a
result of a purchase money or title retention transaction, or other
security interest, or otherwise) to exist on any of the Companies'
Collateral or any other assets, whether now owned or hereafter
acquired, except for the Permitted Encumbrances;
(b) Incur or create any Indebtedness (including contingent
obligations for or on behalf of any affiliates) other than (i)
Permitted Indebtedness and (ii) Indebtedness consisting of intercompany
loans and contingent obligations in favor of and between the Companies
and/or between a Company and a Guarantor;
(c) Except as otherwise specifically permitted by this Financing
Agreement (including subsection 7.13 hereof), sell, lease, assign,
transfer or otherwise dispose of (i) Collateral, or (ii) either all,
substantially all or any substantial part of a Company's assets which
do not constitute Collateral, PROVIDED, however, that with respect to
any proposed disposition or transfer of a substantial part of a
Company's assets as aforesaid, (1) Agent shall be given reasonable
prior written notice thereof, and (2) Agent's written consent thereto
shall not be unreasonably withheld if, in the reasonable commercial
discretion of Agent, such disposition or transfer could not reasonably
be expected to adversely impact or affect the
36
value of any Collateral, the ability of Agent to liquidate, market,
sell, process or finish any Collateral, or Agent's liens on any
Collateral;
(d) Merge, consolidate or otherwise modify their respective
corporate names, principal places of business, legal nature,
organizational or governance structure (other than the identity or
composition of its officers, directors, managers and other employees)
or existence (or suffer or permit any of the foregoing), or
re-incorporate or re-organize, or enter into or engage in any operation
or activity materially different from that presently being conducted by
the Companies or any one of them, except that (A) the Companies may
change their corporate names or principal places of business, or (B) a
Company or a Guarantor may merge with and into any other Company (with
such Company being the survivor of such merger), PROVIDED that: (i) in
any such instance under (A) or (B) above the Companies shall give the
Agent thirty (30) days prior written notice thereof and (ii) the
Companies shall execute and deliver, prior to or simultaneously with
any such action, any and all documents and agreements requested by the
Agent to confirm the continuation and preservation of all security
interests and liens granted to the Agent hereunder;
(e) Assume, guarantee, endorse or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except (i) for
Permitted Indebtedness or (ii) by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business;
(f) Directly or indirectly declare, order, pay, make or set apart
any sum for any Restricted Payment (as defined below), except that
wholly-owned subsidiaries of a Company may make Restricted Payments to
such Company and a Company may make Restricted Payments to a Guarantor
or to any affiliate of such Company which was acquired pursuant to an
Acquisition in accordance with the terms hereof. For purposes hereof
"Restricted Payment" means: (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock or
other equity security of, or ownership interest in, a Company now or
hereafter outstanding, except a dividend payable solely in shares of
that class of stock to the holders of that class; (ii) any redemption,
conversion, exchange, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any
shares of any class of stock or other equity security of, or ownership
interest in, a Company now or hereafter outstanding; (iii) any payment
or prepayment of interest on, principal of, premium, if any,
redemption, conversion, exchange, purchase, retirement, defeasance,
sinking fund or similar payment with respect to, any Indebtedness
subordinated to the Obligations; and (iv) any payment made to retire,
or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock or other equity
security of, or ownership interest in, either Company now or hereafter
outstanding; or
(g) Pay any management, consulting or other similar fees to any
person, corporation or other entity affiliated with the Companies,
other than (i) as otherwise permitted under subsection 7.13 hereof, or
(ii) with respect to the payment of operating expenses incurred by NS
Group, Inc. which are not specifically allocable to one of its
subsidiaries, but which are, instead, allocated pro rata based on sales
of its subsidiaries and billed to such subsidiary on a monthly basis
consistent with historical practice.
37
7.10 ADDITIONAL NEGATIVE COVENANTS. Until termination of the Financing
Agreement and payment and satisfaction in full of all Obligations hereunder, the
Companies, on a consolidated basis, shall not, without the prior written consent
of the Agent:
(i) enter into any Operating Lease if after giving effect
thereto the aggregate obligations with respect to Operating Leases
of the Companies during any Fiscal Year would exceed $10,000,000;
or
(ii) contract for, purchase, make expenditures for, lease
pursuant to a Capital Lease or otherwise incur obligations with
respect to Capital Expenditures (whether subject to a security
interest or otherwise) during any Fiscal Year of the Companies in
an aggregate amount exceeding $20,000,000.
7.11 ENVIRONMENTAL EXPENDITURES AND LIABILITIES. Each of the Companies
agrees to advise the Agent in writing of: (a) all expenditures (actual or
anticipated) in excess of $1,000,000 from the budgeted amount therefor in any
Fiscal Year for (x) environmental clean-up, (y) environmental compliance or (z)
environmental testing and the impact of said expenses on each of the Companies'
working capital; and (b) any notices either of the Companies receives from any
local, state or federal authority advising the Companies of any environmental
liability (real or potential) stemming from any of the Companies' operations,
their premises, their waste disposal practices, or waste disposal sites used by
any of the Companies, that relate to any circumstance or condition that could
reasonably be expected to result in a material adverse effect on the operations,
business, assets, prospects or finances of such Company, and to provide the
Agent with copies of all such notices if so required.
7.12 INDEMNIFICATION. Each of the Companies hereby agrees to indemnify
and hold harmless the Agent and its officers, directors, employees, attorneys
and agents (each an "Indemnified Party") from, and holds each of them harmless
against, any and all losses, liabilities, obligations, claims, actions, damages,
costs and expenses (including attorney's fees) and any payments made by the
Agent pursuant to any indemnity provided by the Agent with respect to or to
which any Indemnified Party could be subject insofar as such losses,
liabilities, obligations, claims, actions, damages, costs, fees or expenses with
respect to the Loan Documents, including without limitation those which may
arise from or relate to: (a) the Depository Accounts, the lockbox and/or any
other depository account and/or the agreements executed in connection therewith;
and (b) any and all claims or expenses asserted against the Agent as a result of
any environmental pollution, hazardous material or environmental clean-up
relating to the Real Estate or the Collateral; or any claim or expense which
results from any of the Companies' operations (including, but not limited to,
any of the Companies' off-site disposal practices) and use of the Real Estate,
which the Agent may sustain or incur (other than solely as a result of the
actions of the Agent (or the Lenders or anyone acting on their behalf) on the
Companies' premises which are determined to constitute gross negligence or
willful misconduct by a court of competent jurisdiction), all whether through
the alleged or actual negligence of such person or otherwise, except and to the
extent that the same results solely from the gross negligence or willful
misconduct of such Indemnified Party as finally determined by a court of
competent jurisdiction. The Companies hereby agree that this indemnity shall
survive termination of this Financing Agreement, as well as payments of
Obligations which may be due hereunder. The Agent may, in its sole business
judgment, establish such Availability Reserves with respect thereto as
38
it may deem advisable under the circumstances and, upon any termination hereof,
hold such reserves as cash reserves for any such contingent liabilities.
7.13 TRANSACTIONS WITH AFFILIATES. Without the prior written consent of
the Agent and except as expressly permitted under subsection 7.9 above, the
Companies agree that they will not enter into any transaction, including,
without limitation, any purchase, sale, lease, loan or exchange of property with
the Parent or any subsidiary or affiliate of the Companies or Parent, PROVIDED
that, except as otherwise expressly prohibited in this Financing Agreement (i)
the Companies or any one of them may enter into transactions in the ordinary
course of their business and pursuant to the reasonable requirements of any such
Company, and upon standard terms and conditions and fair and reasonable terms,
no less favorable to such Company than such Company could obtain in a comparable
arms length transaction with an unrelated third party, (ii) any Loan Party may
transfer Equipment to any other Loan Party, (iii) Loan Parties may convey or
transfer title to Inventory to any other Loan Party so long as (A) Agent is
given no less than 15 days prior written notice of such conveyance or transfer
and the reasons therefor (if such transfer is to a Loan Party other than a
Company), (B) Agent's first priority, perfected lien on the subject Inventory is
retained, (C) such Loan Party promptly execute and deliver to Agent such
additional documents or instruments as Agent shall request for purposes of
maintaining or preserving its first priority, perfected security interests in
the affected Collateral or otherwise facilitating its administration and
monitoring of the Collateral, and (D) the Companies shall concurrently with or
prior to such transfer repay the existing Obligations by wire transfer of
immediately available funds in an amount equal to the lesser of the fair market
value or the book value of such transferred Collateral (if such transfer is to a
Loan Party other than a Company), and (iv) any Loan Party may make Intercompany
Loans and may establish intercompany accounts which are maintained or generated
in the ordinary course of business consistent with the past practices of the
Loan Parties and not otherwise prohibited hereunder.
7.14 SYNDICATION BY AGENT. Each of the Companies, Agent and Lenders
hereby acknowledge and agree that Agent may continue in its efforts to syndicate
this credit facility and designate additional financial institutions to be
joined as signatories hereto and to become Lenders hereunder. Each of the
Companies agrees that it will use commercially reasonable efforts to and shall
cause each of the Guarantors to, actively assist and cooperate with Agent in any
manner reasonably requested by Agent to effect the sale of an assignment
permitted hereunder, including without limitation (i) assistance in the
preparation of appropriate disclosure documents or placement memoranda, (ii)
providing and causing their respective agents and advisors to provide such
information as Agent reasonably deems necessary to complete the syndication, and
(iii) making officers and management employees available from time to time to
participate in and to make presentations to prospective Lenders.
7.15 RIGHTS TO GENERAL INTANGIBLES. Each Company shall use its
commercially reasonable efforts to obtain any consents, waivers or agreements
necessary to enable Agent to exercise remedies hereunder and under the other
Loan Documents with respect to any of such Company's rights under any General
Intangibles, including its rights as a licensee of Software.
7.16 NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. Promptly, but in any
event within five Business Days after a Company Obtained Knowledge (as defined
below) thereof, the Companies shall notify Agent in writing, with sufficient
detail and specificity as to the nature thereof, of the
39
occurrence of (a) any Event of Default or Default, (b) any default by any
Company or by any Guarantor under any agreement, instrument or document, the
result of which would be to allow the holder thereof to accelerate Indebtedness
or impose liabilities (whether direct, indirect, contingent or otherwise) on
such Company or Guarantor in an amount exceeding $5,000,000, or (c) any other
circumstance, development, occurrence or condition that could reasonably be
expected to materially adversely effect the business, operations, financial
condition, prospects or assets of either Company or any Guarantor, or the
validity, enforceability, priority or perfection of the liens and security
interests of Agent in the Collateral. For purposes of this paragraph, a Company
shall be deemed to have "Obtained Knowledge" of any fact, event, development,
occurrence, condition or circumstance when any officer or executive of such
Company actually knew thereof, should have known thereof, or otherwise may have
knowledge thereof constructively imputed to him or her under any cognizable
legal theory or standard, whether based on tort, statute or otherwise.
7.17 RIGHTS OF FIRST REFUSAL OF AGENT AND LENDERS. Agent and Lenders,
jointly, shall have and the Companies and Parent do hereby grant to Agent and to
Lenders a right of first refusal with respect to any working capital loans or
asset based revolver financing now or hereafter sought by any Guarantor (such a
Guarantor, for purposes of this subsection, a "Potential Borrower"). If such
Potential Borrower receives a bona fide proposal or a commitment (each a "New
Financing Proposal") from a financial institution for working capital financing
as aforesaid, which such Potential Borrower desires to accept, it shall first
provide the Agent a copy of such New Financing Proposal, and Lenders shall have
the right to provide such financing to the Potential Borrower on substantially
the same terms and conditions set forth therein. The Potential Borrower and the
Lenders (through the Agent, if applicable) shall negotiate the terms of such
financing in good faith. If the Lenders desire to provide such financing, then
they shall issue a commitment to provide such financing to the Potential
Borrower within fifteen (15) days following Agent's receipt of such proposal or
commitment (such period, the "Exercise Period"). Failure of the Lenders to
respond within the Exercise Period shall automatically be deemed a waiver of
their respective rights to provide such financing, without further action of the
parties, and said Potential Borrower may proceed with the financing transaction
with the other financial institution(s) in substantial accord with the terms of
the applicable New Financing Proposal (including a closing of the subject
financing within the periods prescribed within such New Financing Proposal, and
in any event within 90 days of the expiration of the Exercise Period). The
failure to close a financing transaction pursuant to and substantially in
accordance with the terms of a New Financing Proposal within 90 days of the
expiration of the Exercise Period, or any change in a material terms of any New
Financing Proposal, in either case, shall be deemed to constitute a new New
Financing Proposal and shall give rise to a new right of first refusal by the
Lenders hereunder with respect thereto. Upon request from the Potential
Borrower, Agent, on behalf of the Lenders, will provide written confirmation of
their waiver of the right to provide such financing
Agent shall immediately supply each Lender with a copy of any New
Financing Proposal received by it from the Potential Borrower. If any Lender
declines to provide its pro rata share of the commitments with respect to such
New Financing Proposal, such pro rata share of the declining lender will be
offered to the remaining Lenders on a pro rata basis, seriatim.
7.18 SUBSIDIARIES. The Companies hereby represent and warrant to Agent
and Lenders that as of the Closing Date Parent has no subsidiaries other than
Erlanger, NK Management and the
40
Companies and that none of the Guarantors (other than Parent) or the Companies
has any subsidiaries. The Companies covenant to Agent to promptly notify Agent
of the creation or acquisition of any new subsidiary by any Loan Party.
7.19 TRIDENT AND XXXXXXX. The Companies hereby represent and warrant to
Agent that as of the Closing Date neither Trident Steel Corporation ("Trident")
nor Xxxxx X. Xxxxxxxx ("Xxxxxxx") has or, to their knowledge, claims to have any
interest, including any security interest, any equipment, inventory, goods,
supplies or other personal property of the Companies, that neither Company is or
is acting as an agent on behalf of either Xxxxxxx or Trident, and that Trident
has no offices at and is not otherwise located at Newport's offices at Xxxxxx,
Kentucky, notwithstanding the address appearing on any UCC financing statement
identifying Trident as debtor, to the contrary.
SECTION 8. INTEREST, FEES AND EXPENSES.
8.1 INTEREST.
(a) Interest on the Revolving Loans shall be payable (i) monthly on
the first day of each month at the Chase Bank Rate with respect to
Revolving Loans bearing interest at the Chase Bank Rate, and (ii) at
the end of each Interest Period at the LIBOR with respect to Revolving
Loans bearing interest at the LIBOR, such interest rate selection to be
at the Companies' option in accordance with the terms of this Section
8. Chase Bank Rate Loans shall be an amount equal to the Chase Bank
Rate plus the Interest Rate Margin per annum on the average of the net
balances owing by each of the Companies to the Agent in the Revolving
Loan Account at the close of each day during such month. In the event
of any change in said Chase Bank Rate, the rate hereunder for Chase
Bank Rate Loans shall change, as of the date of such change, and
continue to carry the applicable Interest Rate Margin. The rate
hereunder for Chase Bank Rate Loans shall be calculated based on a
360-day year. The Agent shall be entitled to charge each such
Companies' Revolving Loan Account at the rate provided for herein when
due until all Obligations have been paid in full.
(b) Upon and after the occurrence of an Event of Default and the
giving of any required notice by the Agent in accordance with the provisions of
Section 10, Paragraph 10.2 hereof, all Obligations shall bear interest at the
Default Rate of Interest.
8.2 INTENTIONALLY OMITTED.
8.3 LETTER OF CREDIT GUARANTY FEE. In consideration of the Letter of
Credit Guaranty of the Agent, the Companies shall pay the Agent the Letter of
Credit Guaranty Fee which shall be an amount equal to (a) one and three quarter
percent (1.75%) on the face amount of each documentary Letter of Credit payable
upon issuance thereof and (b) one and three quarter percent (1.75%) per annum,
payable monthly, on the face amount of each standby Letter of Credit less the
amount of any and all amounts previously drawn under such standby Letter of
Credit.
8.4 FEES AND EXPENSES OF ISSUING BANKS. Any and all charges, fees,
commissions, costs and expenses charged to the Agent for the Companies' account
by any Issuing Bank in connection with, or arising out of, Letters of Credit or
out of transactions relating thereto will be
41
charged to the Revolving Loan Account in full when charged to, or paid by the
Agent, or as may be due upon any termination of this Financing Agreement hereof,
and when made by any such Issuing Bank shall be conclusive on the Agent.
8.5 OUT-OF-POCKET EXPENSES AND DOCUMENTATION FEE. Each of the Companies
shall reimburse or pay the Agent, as the case may be, for: (a) all Out-of-Pocket
Expenses and (b) any applicable Documentation Fee.
8.6 LINE OF CREDIT FEE. On the first day of each month, commencing on
April 1, 2002, the Companies shall pay to the Agent the Line of Credit Fee and,
if applicable, interest at the rate set forth in Section 8.1 on the Collection
Days for the immediately preceding month.
8.7 LOAN FACILITY FEE. To induce the Agent to enter into this Financing
Agreement and to extend to the Companies the Revolving Loans, and Letter of
Credit Guaranties, the Companies shall pay to the Agent a Loan Facility Fee in
the amount of $375,000.00 (which amount includes the Documentation Fee in
subparagraph (a) of the definition thereof) payable upon execution of this
Financing Agreement. The Commitment Fee (as defined in and paid by the Companies
pursuant to that certain commitment letter dated June 13, 2001 by Agent to the
Companies, and subject to the terms contained therein), shall be credited toward
the Loan Facility Fee upon consummation of this financing transaction on the
Closing Date.
8.8 ADMINISTRATIVE MANAGEMENT FEE. On the Closing Date and each
Anniversary Date thereafter, the Companies shall pay to the Agent the
Administrative Management Fee, which shall be deemed fully earned when paid
provided that if the Companies terminate this Financing Agreement effective on
an Anniversary Date, then the Administrative Management Fee shall not be payable
on such Anniversary Date.
8.9 ADDITIONAL FEES AND EXPENSES. The Companies shall pay the Agent's
standard charges and fees for the Agent's personnel used by the Agent in
connection with reviewing the books and records of the Companies and verifying,
testing, protecting, safeguarding, preserving or disposing of all or any part of
the Collateral for up to two times in any calendar year (provided, however, that
after the occurrence and during the continuance of a Default or if an Event of
Default exists there shall be no limit on the number and nature of such reviews
and inspections that Agent may conduct at Companies' expense as aforesaid); all
such charges and fees shall be in addition to the Administrative Management Fee
and any Out-of-Pocket Expenses.
8.10 AGENT'S RIGHT TO CHANGE THE REVOLVING LOAN ACCOUNT. Each of the
Companies hereby authorizes the Agent to charge the Revolving Loan Account with
the amount of all their Obligations due hereunder as such payments become due.
The Companies hereby confirm and agree that they shall promptly pay any
Obligations that are then due and payable to the Agent upon its request
therefor. Each of the Companies confirms that (i) its liability for any and all
of the fee obligations (including without limitation, those set forth in 8.6
through 8.9 above) and Out-of-Pocket Expenses, set forth in this Financing
Agreement and in any of the other Loan Documents is joint and several, (ii) the
Companies, as between themselves, shall determine how to pro-rate any such
payments due hereunder, and (iii) for ease of administration, the Agent may
42
charge the Revolving Loan Account with the amount of any such fee payments and
any such charges which the Agent may so make to the Companies' Revolving Loan
Account as herein provided will be made as an accommodation to the Companies and
solely at the Agent's discretion.
8.11 REDUCTION OF RETURN. In the event that the Agent or any Lender
hereunder (or any financial institution which may from time to time become a
Lender hereunder) shall have determined in the exercise of its reasonable
business judgment that, subsequent to the Closing Date, any change in applicable
law, rule, regulation or guideline regarding capital adequacy, or any change in
the interpretation or administration thereof, or compliance by the Agent or such
Lender with any new request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
Agent's or such Lender's capital as a consequence of its obligations hereunder
to a level below that which the Agent or such Lender could have achieved but for
such adoption, change or compliance (taking into consideration the Agent or such
Lender's policies with respect to capital adequacy) by an amount reasonably
deemed by the Agent or such Lender to be material, then, from time to time, the
Companies shall pay no later than five (5) Business Days following demand to the
Agent or such Lender such additional amount or amounts as will compensate the
Agent's or such Lender's for such reduction. In determining such amount or
amounts, the Agent or such Lender may use any reasonable averaging or
attribution methods. The protection of this Paragraph 8.11 shall be available to
the Agent or such Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition. A
certificate of the Agent or such Lender setting forth such amount or amounts as
shall be necessary to compensate the Agent or such Lender with respect to this
Section 8 and the calculation thereof when delivered to the Companies shall be
conclusive on the Companies absent manifest error. Notwithstanding anything in
this paragraph to the contrary, in the event the Agent or such Lender has
exercised its rights pursuant to this paragraph, and subsequent thereto
determines that the additional amounts paid by the Companies in whole or in part
exceed the amount which the Agent or such Lender actually required to be made
whole, the excess, if any, shall be returned to the Companies by the Agent or
such Lender, as applicable.
If the Companies receive a statement of amounts due pursuant to this
subsection 8.11 (or pursuant to subsection 8.12 below from a Lender (any such
Lender, a "Subject Lender"), so long as (i) no Default or Event of Default shall
have occurred and be continuing and the Companies have obtained a commitment
from another Lender reasonably acceptable to Agent to purchase, at par, the
Subject Lender's Loans and assume the Subject Lender's Commitments and all other
obligations of the Subject Lender hereunder, (ii) such Lender is not an Issuing
Bank with respect to any Letters of Credit outstanding (unless all such Letters
of Credit are terminated or arrangements acceptable to such Issuing Bank (such
as a "back-to-back" letters of credit) are made) and (iii), if applicable, the
Subject Lender is unwilling to withdraw the notice delivered to the Companies
hereunder (or under subsection 8.12, as applicable) upon 10 Business Days prior
written notice to the Subject Lender and Agent, the Companies may require the
Subject Lender to assign all of its Loans and Commitments to such other Lender,
Lenders or other Persons pursuant to the provisions of subsection 13.9 below;
PROVIDED that, prior to or concurrently with such replacement, (1) the Subject
Lender shall have received payment in full of all principal, interest, fees and
other amounts due and owing hereunder or under any Loan Document through such
date of replacement and a release from its obligations under the Loan Documents,
(2) the processing and recording fee required to be paid by subsection 13.9
shall have been paid to Agent, and (3) all of the requirements for such
assignment contained in
43
subsection 13.9, including, without limitation, the consent of Agent (if
required, provided that the consent of Agent, shall not be unreasonably
withheld) and the receipt by Agent of an executed Assignment and Transfer
Agreement and other supporting documents, have been fulfilled.
8.12 TAXES. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by the Agent or such Lender with any request
or directive (whether or not having the force of law) from any central bank or
other financial, monetary or other authority, shall:
(a) subject the Agent or such Lender to any tax of any kind
whatsoever with respect to this Financing Agreement or change the basis
of taxation of payments to the Agent or such Lender of principal, fees,
interest or any other amount payable hereunder or under any other
documents (except for changes in the rate of tax on the overall net
income of the Agent or such Lender by the federal government or the
jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other
credit extended by the Agent or such Lender by reason of or in respect
to this Financing Agreement and the Loan Documents, including (without
limitation) pursuant to Regulation D of the Board of Governors of the
Federal Reserve System; or
(c) impose on the Agent or such Lender any other condition with
respect to this Financing Agreement or any other document, and the
result of any of the foregoing is to increase the cost to the Agent or
such Lender of making, renewing or maintaining its loans hereunder by
an amount that the Agent or such Lender deems to be material in the
exercise of its reasonable business judgment or to reduce the amount of
any payment (whether of principal, interest or otherwise) in respect of
any of the loans by an amount that the Agent or such Lender deems to be
material in the exercise of its reasonable business judgment, then, in
any case the Companies shall pay the Agent or such Lender, within five
(5) Business Days following its demand, such additional cost or such
reduction, as the case may be. The Agent or such Lender shall certify
the amount of such additional cost or reduced amount to the Companies
and the calculation thereof and such certification shall be conclusive
upon the Companies absent manifest error. Notwithstanding anything in
this paragraph to the contrary, in the event the Agent or such Lender
has exercised its rights pursuant to this paragraph, and subsequent
thereto determine that the additional amounts paid by the Companies in
whole or in part exceed the amount which the Agent or such Lender
actually required pursuant hereto, the excess, if any, shall be
returned to the Companies by the Agent or such Lender.
8.13 LIBOR LOANS. The Companies may request LIBOR Loans on the
following terms and conditions:
(a) The Companies may elect, subsequent to three (3) days from the
Closing Date and from time to time thereafter (i) to request any loan
made hereunder to be a LIBOR Loan as of the date of such loan or (ii)
to convert Chase Bank Rate Loans to LIBOR Loans, and
44
may elect from time to time to convert LIBOR Loans to Chase Bank Rate
Loans by giving the Agent at least three (3) Business Days' prior
irrevocable notice of such election, PROVIDED that any such conversion
of LIBOR Loans to Chase Bank Rate Loans shall only be made, subject to
the second following sentence, on the last day of an Interest Period
with respect thereto. Should the Companies elect to convert Chase Bank
Rate Loans to LIBOR Loans, it shall give the Agent at least three
Business Days' prior irrevocable notice of such election. All or any
part of outstanding Chase Bank Rate Loans then outstanding with respect
to Revolving Loans may be converted to LIBOR Loans as provided herein,
PROVIDED that partial conversions shall be in multiples in an aggregate
principal amount of $1,000,000 or more. The aggregate amount of all
such LIBOR Loans shall not exceed an amount equal to $30,000,000 at any
one time outstanding.
(b) Any LIBOR Loans may be continued as such upon the expiration
of an Interest Period, PROVIDED the Companies so notify the Agent, at
least three (3) Business Days' prior to the expiration of said Interest
Period, and PROVIDED FURTHER that no LIBOR Loan may be continued as
such upon the occurrence of any material Default or Event of Default
that has not otherwise been waived by Required Lenders under this
Financing Agreement, but shall be automatically converted to a Chase
Bank Rate Loan on the last day of the Interest Period during which
occurred such Default or Event of Default. Absent such notification of
continuation, LIBOR Loans shall convert to Chase Bank Rate Loans on the
last day of the applicable Interest Period. Each notice of election,
conversion or continuation furnished by the Companies pursuant hereto
shall specify whether such election, conversion or continuation is for
a one, two, or three month period. Notwithstanding anything to the
contrary contained herein, the Agent (or any Lender, if applicable)
shall not be required to purchase United States Dollar deposits in the
London interbank market or from any other applicable LIBOR Rate market
or source or otherwise "match fund" to fund LIBOR Loans, but any and
all provisions hereof relating to LIBOR Loans shall be deemed to apply
as if the Agent (and any Lender, if applicable) had purchased such
deposits to fund any LIBOR Loans.
(c) The Companies may request a LIBOR Loan, convert any Chase Bank
Rate Loan or continue any LIBOR Loan provided that (i) no material
Default or Event of Default has occurred and is continuing hereunder or
which has not been waived in writing by the Required Lenders, and (ii)
no LIBOR Loan shall be made with an Interest Period that ends
subsequent to the Maturity Date or any applicable Early Termination
Date.
8.14 INTEREST ON LIBOR LOANS. (a) The LIBOR Loans shall bear interest
for each Interest Period with respect thereto on the unpaid principal amount
thereof at a rate per annum equal to the LIBOR determined for each Interest
Period in accordance with the terms hereof plus the applicable Interest Rate
Margin.
(b) If all or a portion of the outstanding principal amount of the
Obligations shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such outstanding amount, to the extent it is a LIBOR
Loan, shall be converted to a Chase Bank Rate Loan at the end of the last
Interest Period therefor.
45
(c) The Companies may not have more than five (5) Revolving Loans
which are LIBOR Loans outstanding at any given time.
8.15 CALCULATION OF INTEREST ON LIBOR LOANS. (a) Interest in respect of
the LIBOR Loans shall be calculated on the basis of a 360 day year and shall be
payable as of the end of each Interest Period.
(b) the Agent shall, at the request of the Companies, deliver to
the Companies a statement showing the quotations given by JPMorgan Chase Bank
and the computations used in determining any interest rate pursuant to Paragraph
8.14 of Section 8 hereof.
8.16 INABILITY TO ASCERTAIN LIBOR. As further set forth in subsection
8.12 above, in the event that the Agent (or any financial institution which may
become a Lender hereunder) shall have determined in the exercise of its
reasonable business judgment (which determination shall be conclusive and
binding upon the Companies absent manifest error) that by reason of
circumstances affecting the interbank LIBOR market, adequate and reasonable
means do not exist for ascertaining LIBOR applicable for any Interest Period
with respect to; (a) a proposed loan that the Companies have requested be made
as a LIBOR Loan; (b) a LIBOR Loan that will result from the requested conversion
of a Chase Bank Rate Loan into a LIBOR Loan; or (c) the continuation of LIBOR
Loans beyond the expiration of the then current Interest Period with respect
thereto, the Agent shall forthwith give written notice of such determination to
the Companies at least one day prior to, as the case may be, the requested
borrowing date for such LIBOR Loan, the conversion date of such Chase Bank Rate
Loan or the last day of such Interest Period. If such notice is given (i) any
requested LIBOR Loan shall be made as a Chase Bank Rate Loan, (ii) any Chase
Bank Rate Loan that was to have been converted to a LIBOR Loan shall be
continued as a Chase Bank Rate Loan, and (iii) any outstanding LIBOR Loan shall
be converted, on the last day of then current Interest Period with respect
thereto, to a Chase Bank Rate Loan. Until such notice has been withdrawn by the
Agent, no further LIBOR Loan shall be made nor shall the Companies have the
right to convert a Chase Bank Rate Loan to a LIBOR Loan.
8.17 PAYMENT OF LIBOR LOANS. If any payment on a LIBOR Loan becomes due
and payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day or Working Day unless the result of
such extension would be to extend such payment into another calendar month in
which event such payment shall be made on the immediately preceding Business Day
or Working Day.
8.18 ILLEGALITY. Notwithstanding any other provisions herein, if any
law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful for the Agent to
make or maintain LIBOR Loans as contemplated herein, the then outstanding LIBOR
Loans, if any, shall be converted automatically to Chase Bank Rate Loans as of
the end of the applicable Interest Period, or within such earlier period as
required by law. The Companies hereby agree promptly to pay the Agent, upon
demand, any additional amounts necessary to compensate the Agent for any costs
incurred by the Agent in making any conversion in accordance with this Section 8
including, but not limited to, any interest or fees payable by the Agent to
lenders of funds obtained by the Agent in order to make or maintain LIBOR Loans
hereunder.
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8.19 INDEMNIFICATION. The Companies agree to indemnify and to hold the
Agent (and each Lender) harmless from any loss or expense which the Agent or
such Lender may sustain or incur as a consequence of: (a) Default by the
Companies in payment of the principal amount of or interest on any LIBOR Loans,
as and when the same shall be due and payable in accordance with the terms of
this Financing Agreement, including, but not limited to, any such loss or
expense arising from interest or fees payable by the Agent or such Lender to
lenders of funds obtained by either of them in order to maintain the LIBOR Loans
hereunder; (b) default by the Companies in making a borrowing or conversion
after the Companies have given a notice in accordance with Paragraph 8.13 of
Section 8 hereof; (c) any prepayment of LIBOR Loans on a day which is not the
last day of the Interest Period applicable thereto, including, without
limitation, prepayments arising as a result of the application of the Proceeds
of Collateral to the Revolving Loans; and (d) default by the Companies in making
any prepayment after the Companies have given notice to the Agent thereof. The
determination by the Agent of the amount of any such loss or expense, when set
forth in a written notice to the Companies, containing the Agent's calculations
thereof in reasonable detail, shall be conclusive on the Companies in the
absence of manifest error. Calculation of all amounts payable under this
paragraph with regard to LIBOR Loans shall be made as though the Agent had
actually funded the LIBOR Loans through the purchase of deposits in the relevant
market and currency, as the case may be, bearing interest at the rate applicable
to such LIBOR Loans in an amount equal to the amount of the LIBOR Loans and
having a maturity comparable to the relevant interest period; PROVIDED, HOWEVER,
that the Agent may fund each of the LIBOR Loans in any manner the Agent sees fit
and the foregoing assumption shall be used only for calculation of amounts
payable under this paragraph. In addition, notwithstanding anything to the
contrary contained herein, the Agent shall apply all Proceeds of Collateral and
all other amounts received by it from or on behalf of the Companies (i)
initially to the Chase Bank Rate Loans and (ii) subsequently to LIBOR Loans;
PROVIDED, HOWEVER, (x) upon the occurrence of an Event of Default or (y) in the
event the aggregate amount of outstanding LIBOR Rate Loans exceeds Availability
or the applicable maximum levels set forth therefor, the Agent may apply all
such amounts received by it to the payment of Obligations in such manner and in
such order as the Agent may elect in its reasonable business judgment. In the
event that any such amounts are applied to Revolving Loans which are LIBOR
Loans, such application shall be treated as a prepayment of such loans and the
Agent shall be entitled to indemnification hereunder. This covenant shall
survive termination of this Financing Agreement and payment of the outstanding
Obligations.
8.20 REGULATORY CHANGES. Notwithstanding anything to the contrary in
this Financing Agreement, in the event that, by reason of any Regulatory Change
(for purposes hereof "Regulatory Change" shall mean, with respect to the Agent,
any change after the date of this Financing Agreement in United States federal,
state or foreign law or regulations (including, without limitation, Regulation
D) or the adoption or making after such date of any interpretation, directive or
request applying to a class of banks including the Agent of or under any United
States federal, state or foreign law or regulations (whether or not having the
force of law and whether or not failure to comply therewith would be unlawful),
the Agent either (a) incurs any material additional costs based on or measured
by the excess above a specified level of the amount of a category of deposits or
other liabilities of such bank which includes deposits by reference to which the
interest rate on LIBOR Loans is determined as provided in this Financing
Agreement or a category of extensions of credit or other assets of the Agent
which includes LIBOR Loans, or (b) becomes subject to any material
47
restrictions on the amount of such a category of liabilities or assets which it
may hold, then, if the Agent so elects by notice to the Companies, the
obligation of the Agent to make or continue, or to convert Chase Bank Rate Loans
into LIBOR Loans hereunder shall be suspended until such Regulatory Change
ceases to be in effect.
8.21 DEFINITION OF LENDER. For purposes of this Financing Agreement and
Section 8 thereof, any reference to a Lender shall include any financial
institution which may become a Lender subsequent to the Closing Date.
SECTION 9. POWERS OF AGENT.
Each Company hereby constitutes the Agent, or any person or agent the
Agent may designate, as its attorney-in-fact, at the Companies' cost and
expense, to exercise all of the following powers, which being coupled with an
interest, shall be irrevocable until all Obligations to the Agent have been paid
in full:
(a) To receive, take, endorse, sign, assign and deliver, all
in the name of the Agent or the Companies or any one of them, any and
all checks, notes, drafts, and other documents or instruments relating
to the Collateral;
(b) To receive, open and dispose of all mail addressed to the
Companies or any one of them and to notify postal authorities to change
the address for delivery thereof to such address as the Agent may
designate;
(c) To request from customers indebted on Accounts at any
time, in the name of the Agent information concerning the amounts owing
on the Accounts;
(d) To request from customers indebted on Accounts at any
time, in the name of the Companies or any one of them, in the name of
certified public accountant designated by the Agent or in the name of
the Agent's designee, information concerning the amounts owing on the
Accounts;
(e) To transmit to customers indebted on Accounts notice of
the Agent's interest therein and to notify customers indebted on
Accounts to make payment directly to the Agent for the Companies'
account; and
(f) To take or bring, in the name of the Agent or the
Companies or any one of them, all steps, actions, suits or proceedings
deemed by the Agent necessary or desirable to enforce or effect
collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (b), (c), (e) and (f) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived in writing by the Agent.
48
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
10.1 EVENTS OF DEFAULT. Notwithstanding anything herein to the
contrary, the Agent may terminate this Financing Agreement immediately upon the
occurrence of any of the following Events of Default that is not waived in
writing by Agent or Required Lenders:
(a) cessation of the business of any Company or the calling of a
meeting of the creditors of any Company for purposes of compromising
the debts and obligations of such Company;
(b) the failure of any Company to generally meet its debts as they
mature;
(c) (i) the commencement by any Company of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law; (ii) the commencement
against any Company, of any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceeding under any federal or
state law by creditors of such Company, which proceeding shall not have
been controverted within fifteen (15) days or shall not have been
dismissed and vacated within forty five (45) days of commencement, or
any of the actions sought in any such proceeding shall occur or the
Company shall take action to authorize or effect any of the actions in
any such proceeding; or (iii) the commencement (x) by Parent or any
Company's subsidiaries, or any one of them, of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar
proceeding under any applicable state law, or (y) against Parent or any
Company's subsidiaries, or any one of them, of any involuntary
bankruptcy, insolvency, arrangement, reorganization, receivership or
similar proceeding under applicable law, which proceeding shall not
have been controverted within fifteen (15) days and shall not have been
dismissed or vacated within forty five (45) days of commencement, or
any of the actions sought in any such proceeding shall occur or any
Company's subsidiaries, or any one of them, shall take action to
authorize or effect any of the actions in any such proceeding;
(d) other than as set forth in sub-paragraph (e) below, any breach
by any Company of any warranty or representation in any material
respect, or of any covenant contained herein or in any other written
agreement between such Company and the Agent, provided that such
Default by such Company of any of the warranties, representations or
covenants referred in this clause (d) shall not be deemed to be an
Event of Default unless and until such Default shall remain unremedied
to the Agent's satisfaction for a period of thirty (30) days from the
earlier of (i) the date notice is given by Agent to the Companies of
such breach and (ii) the date on which the Companies knew or should
reasonably have known of such breach;
(e) breach by any Company of any warranty, representation or
covenant of Paragraphs 3.3 (other than the fourth sentence of Paragraph
3.3) and 3.4 of Section 3 hereof; Paragraph 6.3 of Section 6 hereof;
Paragraphs 7.1, 7.5, 7.6, 7.8 through 7.14 and 7.17 hereof;
(f) failure of the Companies or any one of them to pay any of the
Obligations within five (5) Business Days of the due date thereof,
provided that nothing contained herein
49
shall prohibit the Agent from charging such amounts to the Revolving
Loan Account on the due date thereof;
(g) the Companies or any one of them shall (i) engage in any
non-exempt "prohibited transaction" as defined in ERISA, (ii) have any
"accumulated funding deficiency" as defined in ERISA, (iii) have any
"reportable event" as defined in ERISA, for which notice has not been
waived, (iv) terminate any "defined benefit plan", as defined in ERISA,
Section 3(35) or (v) be engaged in any proceeding in which the Pension
Benefit Guaranty Corporation shall seek appointment, or is appointed,
as trustee or administrator of any "plan", as defined in ERISA, and
with respect to this sub-paragraph (h) such event or condition (x)
remains uncured for a period of thirty (30) days from date of
occurrence and (y) could, in the reasonable opinion of the Agent,
subject any of the Companies to any tax, penalty or other liability
material to the business, operations or financial condition of any such
Company;
(h) without the prior written consent of the Agent and, except as
permitted in the Intercreditor Agreement, the Senior Note Debt shall be
amended or modified in any manner;
(i) the occurrence of any default or event of default (after
giving effect to any applicable grace or cure periods) under any
instrument or agreement evidencing (x) Senior Note Debt or (y) any
other Indebtedness of the Companies or any one of them having a
principal amount, singly or together with any other Indebtedness, in
excess of $5,000,000;
(j) any Guarantor becomes insolvent or generally fails to pay or
admits in writing its inability to pay debts as they become due, if a
petition under Title 11 of the United States Code or any similar law or
regulation is filed by or against any such Guarantor (which proceeding
shall not have been controverted within fifteen (15) days and shall not
have been dismissed or vacated within forty five (45) days of
commencement), if any Guarantor shall make an assignment for the
benefit of creditors, if any case or proceeding is filed by or against
such Guarantor for its dissolution or liquidation, the revocation,
termination, or cancellation of any Guaranty without the written
consent of Agent, or if any Guarantor contests the validity,
enforceability of any Guaranty;
(k) Parent ceases to beneficially and of record own and control,
directly or indirectly, free and clear of all liens other than liens in
favor of Agent, all of the issued and outstanding shares of each class
of capital stock or other equity securities of each Company entitled
(without regard to the occurrence of any contingency) to vote for the
election of a majority of the members of the boards of directors of
such Company; or
(l) any Guarantor shall, without the prior written consent of
Agent (A) merge (except that a Guarantor may merge with and into a
Company provided that such Company is the survivor of such merger), (B)
consolidate (C) otherwise modify (i) its legal existence (in a manner
which could reasonably be expected to have a material adverse effect on
the Collateral or otherwise impair, jeopardize, prejudice or compromise
the rights, interests and claims of Agent or any Lender under any Loan
Document), or (ii) its capital structure (except in connection with
issuances, repurchases or other changes in Parent's publicly traded
50
securities or any options or warrants relating thereto, or as otherwise
not prohibited by the express terms of this Financing Agreement) or (D)
enter into or engage, directly or indirectly, in any operation or
activity materially different from that presently being conducted by
such Person as of the date hereof.
10.2 REMEDIES UPON A DEFAULT OR AN EVENT OF DEFAULT. Upon the
occurrence of a Default and/or an Event of Default, the Agent in its sole
discretion may, or upon the written direction of the Required Lenders the Agent
shall, declare that, all loans, advances and extensions of credit provided for
in Sections 3, 4 and 5 of this Financing Agreement shall be thereafter in the
Agent's or the Required Lenders' sole discretion, and the obligation of the
Agent and/or the Lenders to make Revolving Loans and open Letters of Credit and
provide Letter of Credit Guaranties shall cease unless such Default or Event of
Default is waived in writing by the Required Lenders or cured to the Agent's or
the Required Lenders' satisfaction in the exercise of the Agent's and the
Lenders' reasonable judgment. Upon the occurrence of an Event of Default, the
Agent in its sole discretion may, or upon the written direction of the Required
Lenders the Agent shall, declare that: (a) all Obligations shall become
immediately due and payable; (b) the Agent may charge the Companies the Default
Rate of Interest on all then outstanding or thereafter incurred Obligations in
lieu of the interest provided for in Section 8 of this Financing Agreement,
provided that, with respect to this clause "(b)" the Agent has given the
Companies written notice of the Event of Default, provided further however, that
no notice is required if the Event of Default is the Event listed in Paragraph
10.1(c) of this Section 10; and (c) the Agent may immediately terminate this
Financing Agreement upon notice to the Companies, provided, however, that upon
the occurrence of an Event of Default listed in Paragraph 10.1(c) of this
Section 10, this Financing Agreement shall automatically terminate and all
Obligations shall become due and payable, without any action, declaration,
notice or demand by the Agent. The exercise of any option is not exclusive of
any other option, which may be exercised at any time by the Agent.
10.3 ADDITIONAL REMEDIES UPON AN EVENT OF DEFAULT. Immediately upon the
occurrence of any Event of Default, the Agent may, to the extent permitted by
law: (a) remove from any premises where same may be located any and all books
and records, computers, electronic media and software programs associated with
any Collateral (including any electronic records, contracts and signatures
pertaining thereto), documents, instruments, files and records, and any
receptacles or cabinets containing same, relating to the Accounts, or the Agent
may use, at the Companies' expense, such of the Companies' personnel, supplies
or space at the Companies' places of business or otherwise, as may be necessary
to properly administer and control the Accounts or the handling of collections
and realizations thereon; (b) bring suit, in the name of the Companies or the
Agent, and generally shall have all other rights respecting said Accounts,
including without limitation the right to: accelerate or extend the time of
payment, settle, compromise, release in whole or in part any amounts owing on
any Accounts and issue credits in the name of the Companies or the Agent; (c)
sell, assign and deliver the Collateral and any returned, reclaimed or
repossessed Inventory, with or without advertisement, at public or private sale,
for cash, on credit or otherwise, at the Agent's sole option and discretion, and
the Agent may bid or become a purchaser at any such sale, free from any right of
redemption, which right is hereby expressly waived by the Companies; (d)
foreclose the security interests in the Collateral created herein or by the Loan
Documents by any available judicial procedure, or to take possession of any or
all of the Collateral, including any Inventory and/or Other Collateral without
judicial process, and to enter any premises where any Inventory and/or Other
51
Collateral may be located for the purpose of taking possession of or removing
the same; and (e) exercise any other rights and remedies provided in law, in
equity, by contract or otherwise. The Agent shall have the right, without notice
or advertisement, to sell, lease, or otherwise dispose of all or any part of the
Collateral, whether in its then condition or after further preparation or
processing, in the name of the Companies or the Agent, or in the name of such
other party as the Agent may designate, either at public or private sale or at
any broker's board, in lots or in bulk, for cash or for credit, with or without
warranties or representations (including but not limited to warranties of title,
possession, quiet enjoyment and the like), and upon such other terms and
conditions as the Agent in its sole discretion may deem advisable, and the Agent
shall have the right to purchase at any such sale. If any Inventory shall
require rebuilding, repairing, maintenance, processing or preparation, the Agent
shall have the right, at its option, to do such of the aforesaid as is
necessary, for the purpose of putting the Inventory in such saleable form as the
Agent shall deem appropriate and any such costs shall be deemed an Obligation
hereunder. Any action taken by CIT pursuant to this paragraph shall not effect
commercial reasonableness of the sale. The Companies agree, at the request of
the Agent, to assemble the Inventory and to make it available to the Agent at
premises of the Companies or elsewhere and to make available to the Agent the
premises and facilities of the Companies for the purpose of the Agent's taking
possession of, removing or putting the Inventory in saleable form. If notice of
intended disposition of any Collateral is required by law, it is agreed that ten
(10) days notice shall constitute reasonable notification and full compliance
with the law. The net cash proceeds resulting from the Agent's exercise of any
of the foregoing rights, (after deducting all charges, costs and expenses,
including reasonable attorneys' fees) shall be applied by the Agent to the
payment of the Obligations, whether due or to become due, in such order as the
Agent may elect, and the Companies shall remain liable to the Agent for any
deficiencies, and the Agent in turn agrees to remit to the Companies or their
successors or assigns, any surplus resulting therefrom.
The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of any
other rights, all of which shall be cumulative. The Companies hereby indemnify
the Agent and hold the Agent harmless from any and all costs, expenses, claims,
liabilities, Out-of-Pocket Expenses or otherwise, incurred or imposed on the
Agent by reason of the exercise of any of its rights, remedies and interests
hereunder, including, without limitation, from any sale or transfer of
Collateral, preserving, maintaining or securing the Collateral, defending its
interests in Collateral (including pursuant to any claims brought by the
Companies, the Companies as debtors-in-possession, any secured or unsecured
creditors of the Companies, any trustee or receiver in bankruptcy, or
otherwise), and the Companies hereby agree to so indemnify and hold the Agent
harmless, absent the Agent's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction. The foregoing indemnification
shall survive termination of this Financing Agreement until such time as all
Obligations (including the foregoing) have been finally and indefeasibly paid in
full. In furtherance thereof, the Agent may establish such reserves for
Obligations hereunder (including any contingent Obligations) as it may deem
advisable in its reasonable business judgment.
SECTION 11. TERMINATION.
This Agreement shall terminate and all Obligations shall become
immediately due and payable on the Maturity Date. Notwithstanding the foregoing
the Agent may terminate the Financing Agreement immediately upon the occurrence
of an Event of Default, provided, however, that if the
52
Event of Default is an event listed in Paragraph 10.1(c) of Section 10 of this
Financing Agreement, this Financing Agreement shall terminate in accordance with
subsection 10.2 hereof. The Companies may terminate this Financing Agreement at
any time upon thirty (30) days' prior written notice to the Agent, provided that
the Companies pay to the Agent an Early Termination Fee on the effective date of
the termination pursuant to such notice. The Companies may rescind and cancel
any such notice of termination at any time prior to the expiration of the
applicable 30 day notice period, provided that such cancellation shall be
irrevocable and that any subsequent notice of termination given by the Companies
pursuant to this Section 11 shall be subject to a new 30 day prior written
notice requirement. Notwithstanding the foregoing, the Early Termination Fee
shall not be payable in the event that the Companies terminate this Financing
Agreement as a result of the financial impact of subsections 8.11, 8.12 or 8.18
hereof, provided that any replacement financing does not contain provisions that
are the same or similar to said subsection 8.11, 8.12 or 8.18, as applicable,
and provided further that neither Agent nor the Companies (exercising their good
faith commercially reasonably efforts) have been able to obtain a replacement
Lender in accordance with subsection 8.11 hereof. Notice of termination, as
aforesaid, by any one Company shall be deemed to be notice by the Companies for
purposes hereof. All Obligations shall become due and payable as of any
termination hereunder or under Section 10 hereof and, pending a final
accounting, the Agent may withhold any balances in the Companies' account
(unless supplied with an indemnity satisfactory to the Agent) to cover all of
the Obligations, whether absolute or contingent, including, but not limited to,
cash reserves for any contingent Obligations, including an amount of 110% of the
undrawn face amount of any outstanding Letters of Credit with an expiry date on,
or within thirty (30) days of the effective date of termination of this
Financing Agreement. All of the Agent's rights, liens and security interests
shall continue after any termination until all Obligations have been paid and
satisfied in full.
SECTION 12. MISCELLANEOUS.
12.1 WAIVERS; REMEDIES CUMULATIVE. Except as otherwise expressly set
forth herein, the Companies hereby waive diligence, notice of intent to
accelerate, notice of acceleration, demand, presentment and protest and any
notices thereof as well as notice of nonpayment. No delay or omission of the
Agent or the Companies to exercise any right or remedy hereunder, whether before
or after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by the Agent of any right or remedy precludes any
other or further exercise thereof, or precludes any other right or remedy.
12.2 ENTIRE AGREEMENT. This Financing Agreement and the Loan Documents
executed and delivered in connection therewith constitute the entire agreement
between the Companies and the Agent; supersede any prior agreements; can be
changed only by a writing signed by both the Companies and the Agent; and shall
bind and benefit the Companies and the Agent and their respective successors and
assigns.
12.3 MAXIMUM INTEREST AND FEES. In no event shall the Companies, upon
demand by the Agent for payment of any Indebtedness relating hereto, by
acceleration of the maturity thereof, or otherwise, be obligated to pay interest
and fees in excess of the amount permitted by law. Regardless of any provision
herein or in any agreement made in connection herewith, the Agent shall
53
never be entitled to receive, charge or apply, as interest on any indebtedness
relating hereto, any amount in excess of the maximum amount of interest
permissible under applicable law. If the Agent ever receives, collects or
applies any such excess, it shall be deemed a partial repayment of principal and
treated as such; and if principal is paid in full, any remaining excess shall be
refunded to the Companies. This paragraph shall control every other provision
hereof, the Loan Documents and of any other agreement made in connection
herewith.
12.4 PROVISIONS SEVERABLE. If any provision hereof or of any other
agreement made in connection herewith is held to be illegal or unenforceable,
such provision shall be fully severable, and the remaining provisions of the
applicable agreement shall remain in full force and effect and shall not be
affected by such provision's severance. Furthermore, in lieu of any such
provision, there shall be added automatically as a part of the applicable
agreement a legal and enforceable provision as similar in terms to the severed
provision as may be possible.
12.5 TRIAL BY JURY; SERVICE OF PROCESS. EACH OF THE COMPANIES, THE
LENDERS AND THE AGENT EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF THE LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREUNDER. EACH OF THE COMPANIES HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED. IN NO EVENT WILL THE AGENT BE LIABLE
FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
12.6 NOTICES. Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing (provided that, any
electronic communications from any of the Companies with respect to any request,
transmission, document, electronic signature, electronic mail or facsimile
transmission shall be deemed binding on the Companies for purposes of this
Financing Agreement, provided further that any such transmission shall not
relieve the Companies from any other obligation hereunder to communicate further
in writing), and shall be deemed to have been validly served, given or delivered
when hand delivered or sent by facsimile, or three days after deposit in the
United States mail, with proper first class postage prepaid and addressed to the
party to be notified or to such other address as any party hereto may designate
for itself by like notice, as follows:
(A) if to the Agent, at:
The CIT Group/Business Credit, Inc.
00 Xxxxx XxXxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attn: Regional Credit Manager
Fax No.: (000)000-0000
54
(B) if to either or both of the Companies at:
c/o NS Group, Inc.
000 X. Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Treasurer
Fax No.: (000)000-0000
With a courtesy copy of any material notice to the Companies' counsel at:
Xxxxx Xxxx, LLP
One Metropolitan Square
000 X. Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Fax No. (000) 000-0000
(C) if to any other Lender hereunder, at the address set forth therefor
in the applicable Assignment and Assumption Agreement provided, however, that
the failure of the Agent to provide the Companies' counsel with a copy of such
notice shall not invalidate any notice given to the Companies and shall not give
the Companies any rights, claims or defenses due to the failure of the Agent to
provide such additional notice.
12.7 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS FINANCING AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD FOR ITS CONFLICTS OF LAWS
PRINCIPLES AND EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN
EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
SECTION 13. AGREEMENTS RELATING TO LENDERS.
13.1 DISBURSEMENTS OF LOANS AND ADVANCES. (a) The Agent, for the
account of the Lenders, shall disburse all loans and advances to the Companies
and shall handle all collections of Collateral and repayment of Obligations. It
is understood that for purposes of advances to the Companies and for purposes of
this Section 13 the Agent is using the funds of the Agent.
(b) Unless the Agent shall have been notified in writing by any Lender
prior to any advance to the Companies that such Lender will not make the amount
which would constitute its share of the borrowing on such date available to the
Agent, the Agent may assume that such Lender shall make such amount available to
the Agent on a Settlement Date, and the Agent may, in reliance upon such
assumption, make available to the Companies a corresponding amount. A
certificate of the Agent submitted to any Lender with respect to any amount
owing under this subsection shall be conclusive, absent manifest error. If such
Lender's share of such borrowing is not in fact made available to the Agent by
such Lender on the Settlement Date, the Agent shall be entitled to recover such
amount with interest thereon at the rate per annum applicable to Revolving Loans
hereunder, on
55
demand, from the Companies without prejudice to any rights which the Agent may
have against such Lender hereunder. Nothing contained in this subsection shall
relieve any Lender which has failed to make available its ratable portion of any
borrowing hereunder from its obligation to do so in accordance with the terms
hereof. Nothing contained herein shall be deemed to obligate the Agent to make
available to the Companies the full amount of a requested advance when the Agent
has any notice (written or otherwise) that any of the Lenders will not advance
its ratable portion thereof.
13.2 REMITTANCES ON SETTLEMENT DATES. On each Settlement Date, the
Agent and the Lenders shall each remit to the other, in immediately available
funds, all amounts necessary so as to ensure that, as of such Settlement Date,
the Lenders shall have their proportionate share of all outstanding Obligations.
13.3 ACCOUNT STATEMENTS. The Agent shall forward to each Lender, at the
end of each month, a copy of the account statement rendered by the Agent to the
Companies.
13.4 INTEREST AND FEES. The Agent shall, after receipt of any interest
and fees earned under this Financing Agreement, promptly remit to the Lenders
(a) their pro rata portion of all fees in accordance with that certain Fee
Letter of even date herewith by and among Agent and Lenders; and (b) interest
computed at the rate and as provided for in Section 8 of this Financing
Agreement on all outstanding amounts advanced by the Lenders on each Settlement
Date, prior to adjustment, that are subsequent to the last remittance by the
Agent to the Lenders of the Companies' interest.
13.5 PARTICIPATIONS. (a) The Companies acknowledge that the Lenders
with the prior written consent of the Agent may sell participation in the loans
and extensions of credit made and to be made to the Companies hereunder. The
Companies further acknowledge that in doing so, the Lenders may grant to such
participants certain rights which would require the participant's consent to
certain waivers, amendments and other actions with respect to the provisions of
this Financing Agreement, provided that the consent of any such participant
shall not be required except for matters requiring the consent of all Lenders
hereunder as set forth in Section 14, Paragraph 14.10 hereof.
(b) The Companies authorize each Lender to disclose to any participant
or purchasing lender (each, a "TRANSFEREE") and any prospective Transferee any
and all financial information in such Lender's possession concerning the
Companies and their affiliates which has been delivered to such Lender by or on
behalf of the Companies pursuant to this Financing Agreement or which has been
delivered to such Lender by or on behalf of the Companies in connection with
such Lender's credit evaluation of the Companies and their affiliates prior to
entering into this Financing Agreement, provided that such Transferee agrees to
hold such information in confidence in accordance with subsection 14.14 of
Section 14 hereof.
13.6 OBLIGATIONS SEVERAL. The Companies hereby agree that each Lender
is solely responsible for its portion of the Revolving Line of Credit and that
neither the Agent nor any Lender shall be responsible for, nor assume any
obligations for the failure of any Lender to make available its portion of the
Revolving Line of Credit. Further, should any Lender refuse to make available
its portion of the Revolving Line of Credit, then the other Lender may, but
without obligation to do so, increase, unilaterally, its portion of the
Revolving Line of Credit in which event the Companies are so obligated to that
other Lender.
56
13.7 LITIGATION. In the event that the Agent, the Lenders or any one of
them is sued or threatened with suit by the Companies or any one of them, or by
any receiver, trustee, creditor or any committee of creditors on account of any
preference, voidable transfer or lender liability issue, alleged to have
occurred or been received as a result of, or during the transactions
contemplated under this Financing Agreement, then in such event any money paid
in satisfaction or compromise of such suit, action, claim or demand and any
expenses, costs and attorneys' fees paid or incurred in connection therewith,
whether by the Agent, the Lenders or any one of them, shall be shared
proportionately by the Lenders. In addition, any costs, expenses, fees or
disbursements incurred by outside agencies or attorneys retained by the Agent to
effect collection or enforcement of any rights in the Collateral, including
enforcing, preserving or maintaining rights under this Financing Agreement shall
be shared proportionately between and among the Lenders to the extent not
reimbursed by the Companies or from the Proceeds of Collateral. The provisions
of this paragraph shall not apply to any suits, actions, proceedings or claims
that (a) predate the date of this Financing Agreement or (b) are based on
transactions, actions or omissions that predate the date of this Financing
Agreement.
13.8 RIGHT OF SET-OFF. Each of the Lenders agrees with each other
Lender that any money or assets of the Companies held or received by such
Lender, no matter how or when received, shall be applied to the reduction of the
Obligations (to the extent permitted hereunder) after (a) the occurrence of an
Event of Default and (b) the election by the Required Lenders to accelerate the
Obligations. In addition, the Companies authorize, and the Lenders shall have
the right, without notice, upon the occurrence of an Event of Default, to
set-off and apply against any and all property held by, or in the possession of
such Lender, the Obligations then due and payable to such Lenders. Any Lender
exercising a right to set off shall purchase for cash (and the other Lenders
shall sell) interests in each of such other Lender's pro rata share of the
Obligations as would be necessary to cause all Lenders to share the amount so
set off with each other Lender in accordance with their respective pro rata
share of the aggregate Commitments. The Companies agree, to the fullest extent
permitted by law, that any Lender may exercise its right to set off with respect
to amounts in excess of its pro rata share of the Obligations and upon doing so
shall deliver such amount so set off to the Agent for the benefit of all Lenders
in accordance with their pro rata shares.
13.9 ASSIGNMENTS. The Agent, in its capacity as a Lender, shall have
the right at any time to assign to one or more commercial banks, commercial
finance lenders or other financial institutions all or a portion of its rights
and obligations under this Financing Agreement (including, without limitation,
its obligations under the Revolving Line of Credit, the Revolving Loans and its
rights and obligations with respect to Letters of Credit). Upon execution of an
Assignment and Transfer Agreement, (a) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such assignment, have the rights and obligations of
the Agent (as Lender) as the case may be hereunder and (b) the Agent shall, to
the extent that rights and obligations hereunder have been assigned by it
pursuant to such assignment, relinquish its rights and be released from its
obligations under this Financing Agreement. The Companies shall, if necessary,
execute any documents reasonably required to effectuate the assignments. No
other Lender may assign its interest in the loans and advances and extensions of
credit hereunder without the prior written consent of the Agent. In the event
that the Agent consents to any such assignment by any other Lenders (i) the
amount being assigned shall in no event be less than the lesser of (x)
$5,000,000 or (y) the entire interest of such Lender hereunder, (ii) such
57
assignment shall be of a pro-rata portion of all of such assigning Lender's
loans and commitments hereunder and (iii) the parties to such assignment shall
execute and deliver to the Agent an Assignment and Transfer Agreement, and, at
the Agent's election, a processing and recording fee of $1,000 payable by the
Companies to the Agent for its own account.
SECTION 14. AGENCY.
14.1 APPOINTMENT OF AGENT. Each Lender hereby irrevocably designates
and appoints CIT as the Agent for the Lenders under this Financing Agreement and
any ancillary loan documents and irrevocably authorizes CIT as the Agent for
such Lender, to take such action on its behalf under the provisions of this
Financing Agreement and all ancillary documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of this
Financing Agreement and all ancillary documents together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Financing Agreement, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Financing Agreement and the ancillary documents or otherwise exist against the
Agent.
14.2 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Financing Agreement and all ancillary documents by or through agents
or attorneys-in-fact and shall be entitled to the advice of counsel concerning
all matters pertaining to such duties.
14.3 LIABILITY OF AGENT. Neither the Agent nor any of its officers,
directors, employees, agents, or attorneys-in-fact shall be (i) liable to any
Lender for any action lawfully taken or omitted to be taken by it or such person
under or in connection with this Financing Agreement and all ancillary documents
(except for its or such person's own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Companies or any officer
thereof contained in this Financing Agreement and all ancillary documents or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Financing
Agreement and all ancillary documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Financing Agreement and all
ancillary documents or for any failure of the Companies to perform their
obligations thereunder. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Financing Agreement and all
ancillary documents or to inspect the properties, books or records of the
Companies.
14.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order 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,
without limitation, counsel to the Companies), independent accountants and other
experts selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Financing Agreement and all ancillary
documents unless it shall first receive such advice or concurrence of the
Lenders, or the
58
Required Lenders, as the case may be, as it deems appropriate or it shall first
be indemnified to its satisfaction by the 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. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Financing Agreement and all ancillary
documents in accordance with a request of the Lenders, or the Required Lenders,
as the case may be, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders.
14.5 NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. The Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Agent has received written notice from a Lender or
the Companies describing such Default or Event of Default. In the event that the
Agent receives such a notice, the Agent shall promptly give notice thereof to
the Lenders. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Lenders, or Required
Lenders, as the case may be; PROVIDED that unless and until the Agent shall have
received such direction, the Agent may in the interim (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable and in the best
interests of the Lenders. In the event the Agent in its sole discretion, or at
the request of the Required Lenders, continues to make Revolving Loans and
advances under this Financing Agreement upon the occurrence of a Default or
Event of Default, any such Revolving Loans and advances may be in such amounts
(subject to Paragraph 14.10 hereof) and on such additional terms and conditions
as the Agent or the Required Lenders may deem appropriate.
14.6 CREDIT DECISIONS. Each Lender expressly acknowledges that neither
the Agent nor any of its officers, directors, employees, agents or
attorneys-in-fact has made any representations or warranties to it and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Companies shall be deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Companies and made its
own decision to enter into this Financing Agreement. Each Lender also represents
that it will, independently and without reliance upon 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 analysis, appraisals and decisions
in taking or not taking action under the Financing Agreement and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition or creditworthiness of the
Companies. The Agent, however, shall provide the Lenders with copies of all
financial statements, projections and business plans which come into the
possession of the Agent or any of its officers, employees, agents or
attorneys-in-fact.
14.7 INDEMNIFICATION BY LENDERS. (a) The Lenders agree to indemnify the
Agent in its capacity as such (to the extent not reimbursed by the Companies and
without limiting the obligation of the Companies to do so), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (including, without
limitation, all Out-of-Pocket Expenses) of any kind whatsoever (including
negligence on the part of the Agent) which may at any time be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Financing Agreement or any ancillary documents or any documents
59
contemplated by or referred to herein or the transactions contemplated hereby or
any action taken or omitted by the Agent under or in connection with any of the
foregoing; PROVIDED that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
Agent's gross negligence or willful misconduct. The agreements in this paragraph
shall survive the payment of the Obligations.
(b) The Agent will use its reasonable business judgment in handling the
collection of the Accounts, enforcement of its rights hereunder and realization
upon the Collateral but shall not be liable to the Lenders for any action taken
or omitted to be taken in good faith or on the written advice of counsel. The
Lenders expressly release the Agent from any and all liability and
responsibility (express or implied), for any loss, depreciation of or delay in
collecting or failing to realize on any Collateral, the Obligations or any
guaranties therefor and for any mistake, omission or error in judgment in
passing upon or accepting any Collateral or in making (or in failing to make)
examinations or audits or for granting indulgences or extensions to the
Companies, any Account Debtor or any guarantor, other than resulting from the
Agent's gross negligence or willful misconduct.
14.8 AGENT AS A LENDER. The Agent may make loans to, and generally
engage in any kind of business with the Companies as though the Agent were not
the Agent hereunder. With respect to its loans made or renewed by it or loan
obligations hereunder as Lender, the Agent shall have the same rights and
powers, duties and liabilities under this Financing Agreement as any Lender and
may exercise the same as though it was not the Agent and the terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
14.9 SUCCESSOR AGENT. The Agent may resign as the Agent upon 30 days'
notice to the Lenders and to the Companies and such resignation shall be
effective upon the appointment of a successor "Agent". If the Agent shall resign
as "Agent" hereunder, then the Lenders shall appoint a successor "Agent" for the
Lenders whereupon such successor agent shall succeed to the rights, powers and
duties of the Agent and the term "Agent" shall mean such successor agent
effective upon its appointment, and the former Agent's rights, powers and duties
as "Agent" shall be terminated, without any other or further act or deed on the
part of such former Agent or any of the parties to this Financing Agreement.
After any retiring Agent's resignation hereunder as the Agent the provisions of
this Section 14 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was the Agent. Notwithstanding the provisions of this
Financing Agreement to the contrary and provided no Event of Default then
exists, the Companies may terminate this Financing Agreement without payment of
any Early Termination Fee at any time within the one year period following
receipt by the Companies of the notice of resignation provided by Agent pursuant
to this subsection 14.9.
14.10 CONSENT OF LENDERS REQUIRED. Notwithstanding anything contained
in this Financing Agreement to the contrary, the Agent will not, without the
prior written consent of all Lenders: (a) amend the Financing Agreement to (i)
increase the Revolving Line of Credit; (ii) reduce the interest rates; (iii)
reduce or waive (x) any fees in which the Lenders share hereunder, or (y) the
repayment of any Obligations due the Lenders; (iv) extend the maturity of the
Obligations; or (v) alter or amend (x) this Paragraph 14.10 or (y) the
definitions of Eligible Accounts Receivable,
60
Eligible Inventory, Inventory Loan Cap, Collateral or Required Lenders, or (vi)
increase the advance percentages against Eligible Accounts Receivable or
Eligible Inventory or alter or amend the Agent's criteria for determining
compliance with such definitions of Eligible Accounts Receivable and/or Eligible
Inventory if the effect thereof is to increase Availability; (b) except as
otherwise required in this Financing Agreement, release any guaranty or
Collateral in excess of $500,000 during any year, or (c) knowingly make any
Revolving Loan or assist in opening any Letter of Credit hereunder if after
giving effect thereto the total of Revolving Loans and Letters of Credit
hereunder for the Company would exceed one hundred and ten percent (110%) of the
maximum amount available under this Financing Agreement (the portion in excess
of 100% of such maximum available amount shall be referred to herein as the
"Agent Permitted Overadvances"), provided that the Agent shall not be entitled
to continue to knowingly make such Agent Permitted Overadvances for a period in
excess of ninety (90) days without the Lenders' consent, and provided further
that the foregoing limitations shall not prohibit or restrict advances by the
Agent to preserve and protect Collateral. Subject to the provisions of Section
12, Paragraph 12.2 and the provisions of this Paragraph 14.10 of Section 14 of
this Financing Agreement, in all other respects the Agent is authorized by each
of the Lenders to take such actions or fail to take such actions under this
Financing Agreement if the Agent, in its reasonable discretion, deems such to be
advisable and in the best interest of the Lenders. Notwithstanding any provision
to the contrary contained in this Financing Agreement (including the provisions
of Section 12, Paragraph 12.2 and Section 14, Paragraph 14.10 hereof) the Agent
is authorized to take such actions or fail to take such actions in connection
with (a) the exercise of (i) any and all rights and remedies under this
Financing Agreement (including but not limited to the exercise of rights and
remedies under Section 10, Paragraph 10.2 of this Financing Agreement) and (ii)
its discretion in (x) determining compliance with the eligibility requirements
of Eligible Accounts Receivable and/or Eligible Inventory and establishing
reserves against Availability in connection therewith and/or (y) the making of
Agent Permitted Overadvances, and/or (b) the release of Collateral not to exceed
$250,000 in the aggregate during any Fiscal Year, and/or (c) curing any
ambiguity, defect or inconsistency in the terms of this Financing Agreement;
provided that the Agent, in its reasonable discretion, deems such to be
advisable and in the best interests of the Lenders. In the event the Agent
terminates this Financing Agreement pursuant to the written instructions of the
Required Lenders, the Agent will cease making any loans or advances upon the
effective date of termination except for any loans or advances which the Agent
deems, in its sole discretion, to be reasonably required to maintain, protect or
realize upon the Collateral.
14.11 DEEMED CONSENT BY LENDERS. In the event any Lender's consent is
required pursuant to the provisions of this Financing Agreement and such Lender
does not respond to any request by the Agent for such consent within 10 days
after such request is made to such Lender, such failure to respond shall be
deemed a consent. In addition, in the event that any Lender declines to give its
consent to any such request, it is hereby mutually agreed that the Agent and/or
any other Lender shall have the right (but not the obligation) to purchase such
Lender's share of the Loans for the full amount thereof together with accrued
interest thereon to the date of such purchase and any such Lender shall sell its
share of Loans as aforesaid.
14.12 [INTENTIONALLY OMITTED]
14.13 PAYMENT SET ASIDE. If the Agent is required at any time to return
to the Companies or to a trustee, receiver, liquidator, custodian or other
similar official any portion of the payments
61
made by the Companies to the Agent as result of a bankruptcy or similar
proceeding with respect to the Companies, any guarantor or any other person or
entity or otherwise, then each Lender shall, on demand of the Agent, forthwith
return to the Agent its ratable share of any such payments made to such Lender
by the Agent, together with its ratable share of interest and/or penalties, if
any, payable by the Lenders; this provision shall survive the termination of
this Financing Agreement.
14.14 CONFIDENTIALITY. The Agent and the Lenders will maintain the
confidentiality of any Confidential Information received by them, in accordance
with commercially reasonable procedures adopted by the Agent and the Lenders in
good faith to protect confidential information of third parties delivered to
them, provided that Agent or any such Lenders may disclose such information: (i)
to their respective directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the Loans), (ii) to their respective financial advisors and
other professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this subsection 14.14,
(iii) to any applicable bank regulatory and auditor personnel, (iv) in
connection with the examination of the Agent or such Lender by a governmental
authority, (v) pursuant to subpeona or other legal process, or otherwise to
comply with any applicable law, rule, regulation or order; (vi) to Agent's or a
Lender's independent auditors; (vii) to any other Lender; (viii) in connection
with any litigation to which the Agent or a Lender is a party; (ix) if an Event
of Default has occurred and is continuing, to the extent the Agent may
reasonably determine such delivery and disclosure to be necessary or appropriate
in the enforcement or for the protection of the rights and remedies under this
Financing Agreement; and (x) in connection with efforts to further syndicate the
Loans pursuant to subsection 7.14 hereof or otherwise sell assignments or
participations of the Loans and commitments hereunder (so long as the recipient
thereof has agreed to be bound by the provisions of this subsection 14.14). For
the purposes of this subsection 14.14, "Confidential Information" means all
financial projections and all other information delivered to the Agent or any
Lender by or on behalf of the Companies or any Guarantor in connection with the
transactions contemplated by or otherwise pursuant to this Financing Agreement
that is proprietary in nature and that is clearly marked or labeled or otherwise
adequately identified as being confidential information of the Companies or any
Guarantor, provided that such term does not include information that (a) was
publicly known or otherwise known to the Agent or the Lenders prior to the time
of such disclosure, (b) subsequently becomes publicly known through no act or
omission by the Agent or the Lenders or any person acting on their behalf, (c)
otherwise becomes known to the Agent or the Lenders other than through
disclosure by Parent, a Company or any Guarantor or (d) constitutes financial
statements delivered pursuant to this Financing Agreement that are otherwise
publicly available. Each Lender becoming a Lender subsequent to the initial
execution and delivery of this Financing Agreement, by its execution and
delivery of an Assignment and Transfer Agreement, will be deemed to have agreed
to be bound by, and to be entitled to the benefits of, this Section 14.14.
14.15 CAPTIONS AND HEADINGS. Captions and section headings are for
convenience of reference only and shall not affect the meaning or interpretation
of this Financing Agreement.
BALANCE OF PAGE INTENTIONALLY LEFT BLANK
- SIGNATURE PAGE FOLLOWS -
62
IN WITNESS WHEREOF, the parties hereto have caused this Financing and
Security Agreement to be effective, executed, accepted and delivered at Chicago,
Illinois, by their proper and duly authorized officers as of the date set forth
above.
BORROWERS:
----------
NEWPORT STEEL CORPORATION, a Kentucky corporation KOPPEL STEEL CORPORATION, a Pennsylvania corporation
By: /s/ Xxxxxx X. Xxxxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxxx
Title: Treasurer Title: Treasurer
AGENT AND LENDERS:
------------------
THE CIT GROUP/BUSINESS CREDIT, INC., as Agent and a
Lender
By: /s/ Xxxxx Xxxxxxxxxxxx
Title: Vice President
NS GROUP, INC., a Kentucky corporation,
solely with respect to subsections 6.8,
6.14 and 7.17 hereof
By: /s/ Xxxxxx X. Xxxxxxxxxx
Its: Treasurer
EXHIBIT B
---------
REVOLVING CREDIT NOTE
Dated as of _________, 2002
$50,000,000
FOR VALUE RECEIVED, the undersigned, NEWPORT STEEL CORPORATION, a
Kentucky corporation with a principal place of business at 000 Xxxx Xxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (herein "Newport"), and KOPPEL STEEL
CORPORATION, a Pennsylvania corporation with a principal place of business at
Sixth and Xxxxx, Xxxxxx, Xxxxxxxxxxxx 00000 (herein "Koppel", and individually a
"Company" and collectively, Newport and Koppel, the "Companies"), hereby,
jointly and severally, absolutely and unconditionally promise to pay to the
order of THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation,
(hereinafter "CIT") with offices located at 00 X. XxXxxxx Xx., Xxxxxxx, XX
00000, and CIT as agent for the Lenders (the "Agent"), and any other party which
now or hereafter becomes a lender hereunder pursuant to Section 13 hereof
(individually a "Lender" and collectively the "Lenders"), in lawful money of the
United States of America and in immediately available funds, the principal
amount of Fifty Million Dollars ($50,000,000.00), or such other principal amount
advanced pursuant to Section 3, subsection 3.1 and Section 5, subsection 5.1 of
the Financing Agreement (as herein defined), such Revolving Loan advances shall
be repaid on a daily basis as a result of the application of the proceeds of
collections of the Accounts and the making of additional Revolving Loans as
described in Section 3. Subject to the terms of the Financing Agreement, the
Revolving Loans may be borrowed, repaid and reborrowed by the Companies. A final
balloon payment in an amount equal to the outstanding aggregate balance of
principal and interest remaining unpaid, if any, under this Note as shown on the
books and records of the Agent shall be due and payable on the termination of
the Financing Agreement, as set forth in Section 11 thereof.
The Companies, jointly and severally, further absolutely and
unconditionally promise to pay to the order of the Agent at said office,
interest, in like money, on the unpaid principal amount owing hereunder from
time to time from the date hereof on the dates and at the rates specified in
Section 8, of the Financing Agreement.
If any payment on this Note becomes due and payable on a day other than
a business day, the maturity thereof shall be extended to the next succeeding
business day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.\
This Note is one of the Promissory Notes referred to in the Financing
and Security Agreement, dated as of the date hereof, as the same may be amended
and restated and in effect from time to time, among the Companies, the Agent,
and the Lenders thereto from time to time (the "Financing Agreement"), and is
subject to, and entitled to, all of the terms, provisions and benefits thereof
and is subject to optional and mandatory prepayment, in whole or in part, as
provided therein. All capitalized terms used herein shall have the meaning
provided therefor in the Financing Agreement, unless otherwise defined herein.
B-1
The date and amount of the advance(s) made hereunder may be recorded on
the grid page or pages which are attached hereto and hereby made part of this
Note or the separate ledgers maintained by the Agent. The aggregate unpaid
principal amount of all advances made pursuant hereto may be set forth in the
balance column on said grid page or such ledgers maintained by the Agent. All
such advances, whether or not so recorded, shall be due as part of this Note.
The Companies confirm that any amount received by or paid to the Agent
in connection with the Financing Agreement and/or any balances standing to its
credit on any of its or their accounts on the Agent's books under the Financing
Agreement may in accordance with the terms of the Financing Agreement be applied
in reduction of this Note, but no balance or amounts shall be deemed to effect
payment in whole or in part of this Note unless the Agent shall have actually
charged such account or accounts for the purposes of such reduction or payment
of this Note.
Upon the occurrence of any one or more of the Events of Default
specified in the Financing Agreement or upon termination of the Financing
Agreement, all amounts then remaining unpaid on this Note may become, or be
declared to be, immediately due and payable as provided in the Financing
Agreement.
Attest: NEWPORT STEEL CORPORATION, a Kentucky
corporation
By:
-------------------------- --------------------------
Secretary Title:
Attest: KOPPEL STEEL CORPORATION, a Pennsylvania
corporation
By:
-------------------------- --------------------------
Secretary Title:
B-2
SCHEDULE TO GRID
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