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CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
XXXXXX INTERNATIONAL, INC.
AND
XXXXX FARGO CREDIT, INC.
AUGUST 13, 2003
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS....................................................................... 1
Section 1.1 Definitions....................................................................... 1
Section 1.2 Other Definitional Terms; Rules of Interpretation................................. 12
ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY........................................... 13
Section 2.1 Revolving Advances................................................................ 13
Section 2.2 Procedures for Requesting Advances................................................ 13
Section 2.3 Increased Costs; Capital Adequacy; Funding Exceptions............................. 14
Section 2.4 Letters of Credit................................................................. 15
Section 2.5 Special Account................................................................... 16
Section 2.6 Payment of Amounts Drawn Under Letters of Credit; Obligation of Reimbursement..... 16
Section 2.7 Obligations Absolute.............................................................. 17
Section 2.8 Interest; Default Interest; Participations; Usury................................. 17
Section 2.9 Fees.............................................................................. 18
Section 2.10 Time for Interest Payments; Payment on Non-Banking Days; Computation of
Interest and Fees................................................................. 20
Section 2.11 Lockbox; Collateral Account; Application of Payments.............................. 21
Section 2.12 Voluntary Prepayment; Reduction of the Maximum Line; Termination of the Credit
Facility by the Borrower.......................................................... 22
Section 2.13 Mandatory Prepayment.............................................................. 22
Section 2.14 Revolving Advances to Pay Obligations............................................. 22
Section 2.15 Use of Proceeds................................................................... 22
Section 2.16 Liability Records................................................................. 22
ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF.............................................. 23
Section 3.1 Grant of Security Interest........................................................ 23
Section 3.2 Notification of Account Debtors and Other Obligors................................ 23
Section 3.3 Assignment of Insurance........................................................... 23
Section 3.4 Occupancy......................................................................... 24
Section 3.5 License........................................................................... 24
Section 3.6 Financing Statement............................................................... 24
Section 3.7 Setoff............................................................................ 25
Section 3.8 Collateral........................................................................ 25
Section 3.9 Eligible Equipment................................................................ 25
ARTICLE IV CONDITIONS OF LENDING............................................................. 25
Section 4.1 Conditions Precedent to the Initial Revolving Advance and Letter of Credit........ 25
Section 4.2 Conditions Precedent to All Advances and Letters of Credit........................ 30
ARTICLE V REPRESENTATIONS AND WARRANTIES.................................................... 30
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TABLE OF CONTENTS
(continued)
PAGE
Section 5.1 Existence and Power; Name; Chief Executive Office; Inventory and Equipment
Locations; Federal Employer Identification Number................................. 30
Section 5.2 Capitalization.................................................................... 30
Section 5.3 Authorization of Borrowing; No Conflict as to Law or Agreements................... 30
Section 5.4 Legal Agreements.................................................................. 31
Section 5.5 Subsidiaries...................................................................... 31
Section 5.6 Financial Condition; No Adverse Change............................................ 31
Section 5.7 Litigation........................................................................ 31
Section 5.8 Regulation U...................................................................... 31
Section 5.9 Taxes............................................................................. 32
Section 5.10 Titles and Liens.................................................................. 32
Section 5.11 Intellectual Property Rights...................................................... 32
Section 5.12 Plans............................................................................. 33
Section 5.13 Default........................................................................... 34
Section 5.14 Environmental Matters............................................................. 34
Section 5.15 Submissions to Lender............................................................. 35
Section 5.16 Financing Statements.............................................................. 35
Section 5.17 Rights to Payment................................................................. 35
Section 5.18 Financial Solvency................................................................ 35
ARTICLE VI COVENANTS......................................................................... 36
Section 6.1 Reporting Requirements............................................................ 36
Section 6.2 Financial Covenants............................................................... 39
Section 6.3 Permitted Liens; Financing Statements............................................. 40
Section 6.4 Indebtedness...................................................................... 41
Section 6.5 Guaranties........................................................................ 41
Section 6.6 Investments and Subsidiaries...................................................... 42
Section 6.7 Dividends and Distributions....................................................... 42
Section 6.8 Salaries.......................................................................... 43
Section 6.9 Books and Records; Inspection and Examination..................................... 43
Section 6.10 Account Verification.............................................................. 43
Section 6.11 Compliance with Laws.............................................................. 43
Section 6.12 Payment of Taxes and Other Claims................................................. 44
Section 6.13 Maintenance of Properties......................................................... 44
Section 6.14 Insurance......................................................................... 44
Section 6.15 Preservation of Existence......................................................... 45
Section 6.16 Delivery of Instruments, etc...................................................... 45
Section 6.17 Sale or Transfer of Assets; Suspension of Business Operations..................... 45
Section 6.18 Consolidation and Merger; Asset Acquisitions...................................... 45
Section 6.19 Sale and Leaseback................................................................ 45
Section 6.20 Restrictions on Nature of Business................................................ 46
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TABLE OF CONTENTS
(continued)
PAGE
Section 6.21 Accounting........................................................................ 46
Section 6.22 Discounts, etc.................................................................... 46
Section 6.23 Plans............................................................................. 46
Section 6.24 Place of Business; Name........................................................... 46
Section 6.25 Constituent Documents............................................................. 46
Section 6.26 Performance by the Lender......................................................... 46
Section 6.27 Transactions with Affiliates...................................................... 47
Section 6.28 Senior Notes...................................................................... 47
ARTICLE VII EVENTS OF DEFAULT, RIGHTS AND REMEDIES............................................ 47
Section 7.1 Events of Default................................................................. 47
Section 7.2 Rights and Remedies............................................................... 50
Section 7.3 Certain Notices................................................................... 51
ARTICLE VIII MISCELLANEOUS..................................................................... 51
Section 8.1 No Waiver; Cumulative Remedies; Compliance with Laws.............................. 51
Section 8.2 Amendments, Etc................................................................... 52
Section 8.3 Addresses for Notices; Requests for Accounting.................................... 52
Section 8.4 Further Documents................................................................. 52
Section 8.5 Costs and Expenses................................................................ 52
Section 8.6 Indemnity......................................................................... 53
Section 8.7 Participants...................................................................... 54
Section 8.8 Execution in Counterparts; Telefacsimile Execution................................ 54
Section 8.9 Retention of Borrower's Records................................................... 54
Section 8.10 Binding Effect; Assignment; Complete Agreement; Exchanging Information............ 54
Section 8.11 Severability of Provisions........................................................ 54
Section 8.12 Headings.......................................................................... 55
Section 8.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.......................... 55
Section 8.14 Co-Borrowers...................................................................... 55
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CREDIT AND SECURITY AGREEMENT
Dated as of August 13, 2003
XXXXXX INTERNATIONAL INC., a Delaware corporation ("Xxxxxx
International"), and the other Persons listed in SCHEDULE 1.1 (BORROWER)
(collectively, together with Xxxxxx International, the "Borrower"), and XXXXX
FARGO CREDIT, INC., a Minnesota corporation (the "Lender"), hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided, the following terms shall have the meanings
assigned to them in this Section or in the Section referenced after such term:
"Accounts" means, with respect to any Person, all of the accounts of
the Person, as such term is defined in the UCC, including each and every
right of the Person to the payment of money, whether such right to payment
now exists or hereafter arises, whether such right to payment arises out
of a sale, lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes or
other liabilities, or otherwise arises under any contract or agreement,
whether such right to payment is created, generated or earned by the
Person or by some other person who subsequently transfers such person's
interest to the Person, whether such right to payment is or is not already
earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all
Liens) which the Person may at any time have by law or agreement against
any account debtor or other obligor obligated to make any such payment or
against any property of such account debtor or other obligor; all
including but not limited to all present and future accounts, contract
rights, loans and obligations receivable, chattel papers, bonds, notes and
other debt instruments, tax refunds and rights to payment in the nature of
general intangibles.
"Advance" means a Revolving Advance.
"Affiliate" or "Affiliates" means, with respect to any Person, any
other Person controlled by, controlling or under common control with the
Borrower, including any Subsidiary of the Person. For purposes of this
definition, "control," when used with respect to any specified Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement.
"Availability" means the difference of (i) the Borrowing Base and
(ii) the sum of (A) the outstanding principal balance of the Revolving
Note and (B) the L/C Amount.
"Banking Day" means a day on which the Federal Reserve Bank of New
York is open for business.
"Base Rate" means the rate of interest publicly announced from time
to time by Xxxxx Fargo Bank National Association at its principal office
in San Francisco as its "prime rate," with the understanding that the
"prime rate" is one of Xxxxx Fargo's base rates (not necessarily the
lowest of such rates) and serves as the basis upon which effective rates
of interest are calculated for loans making reference thereto.
"Book Net Worth" means the aggregate of the common and preferred
stockholders' equity in the Borrower, determined in accordance with GAAP.
"Borrowing Base" means at any time the lesser of:
(a) the Maximum Line; or
(b) the sum of:
(i) 100% of Eligible Cash, plus
(ii) 80% of Eligible Accounts, plus
(iii) 90% of the forced liquidation value, as determined by
the Lender in its sole and absolute discretion, of the Eligible
Equipment, plus
(iv) 70% of the fair market value, as determined by the Lender
in its sole and absolute discretion, of the Eligible Real Estate.
For purposes of this definition the forced liquidation value of the
Eligible Equipment (which the Borrower agrees is not greater than the
Eligible Equipment Value on the date of this Agreement for the Equipment
listed in SCHEDULE 3.9) shall be reduced on the first day of each month by
a level amount necessary to reduce the Eligible Equipment Value to zero in
sixty (60) consecutive months beginning September 1, 2003.
"Capital Expenditures" means for a period, any expenditure of money
during such period for the lease, purchase or construction of assets, or
for improvements or additions thereto, which are capitalized on the
Borrower's balance sheet.
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"Cash" means, when used in connection with any Person, all monetary
and non-monetary items (other than currency of any country of the United
States of America) owned by that Person that are treated as cash in
accordance with GAAP, consistently applied.
"Cash Equivalents" means, when used in connection with any Person,
that Person's investments in:
(a) Government Securities due within one year after the date of the
making of the investment;
(b) readily marketable direct obligations of any State of the United
States of America or any political subdivision of any such State given on
the date of such investment a credit rating of at least Aa by Xxxxx'x
Investors Service, Inc. or AA by Standard & Poor's Rating Group (a
division of XxXxxx-Xxxx, Inc.), in each case due within one year after the
date of the making of the investment;
(c) certificates of deposit issued by, bank deposits in, eurodollar
deposits through, bankers' acceptances of, and reverse repurchase
agreements covering Government Securities executed by, the Lender or any
bank, savings and loan or savings bank doing business in and incorporated
under the laws of the United States of America or any State thereof and
having on the date of such investment combined capital, surplus and
undivided profits of at least $250,000,000.00, in each case due within one
year after the date of the making of the investment;
(d) certificates of deposit issued by, bank deposits in, eurodollar
deposits through, bankers' acceptances of, and reverse repurchase
agreements covering Government Securities executed by, any branch or
office located in the United States of America of a bank incorporated
under the laws of any jurisdiction outside the United States of America
having on the date of such investment combined capital surplus and
undivided profits of at least $500,000,000.00, in each case due within one
year after the date of the making of the investment; and
(e) readily marketable commercial paper of corporations doing
business in and incorporated under the laws of the United States of
America or any State thereof given on the date of such investment the
highest credit rating by Xxxxx'x Investors Service, Inc. and Standard &
Poor's Rating Group (a division of XxXxxx-Xxxx, Inc.), in each case due
within two hundred seventy (270) days after the date of the making of the
investment.
"Cash Equivalent Value" means, with respect to any Cash Equivalents,
the value of the Cash Equivalents, in form and amount as valued by the
Lender.
"Change of Control" means, with respect to any Person, the
occurrence of any of the following events:
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(a) Any Person or "group" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934) is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a Person will be deemed to
have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than five
percent (5%) of the voting power of all classes of voting stock of the
Person; or
(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the board of Directors of the Person
(together with any new Directors whose election to such board of
Directors, or whose nomination for election by the Owners of the Person,
was approved by a vote of 66-2/3% of the Directors then still in office
who were either Directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the board of Directors of the
Person then in office.
"Collateral" means all of the Accounts, chattel paper, deposit
accounts, documents, Equipment, General Intangibles, goods, instruments,
Inventory, Investment Property, letter-of-credit rights, and letters of
credit of the Borrower (or any of them), all sums on deposit in any
Collateral Account, and any items in any Lockbox; together with (i) all
substitutions and replacements for and products of any of the foregoing;
(ii) in the case of all goods, all accessions; (iii) all accessories,
attachments, parts, equipment and repairs now or hereafter attached or
affixed to or used in connection with any goods; (iv) all warehouse
receipts, bills of lading and other documents of title now or hereafter
covering such goods; (v) all collateral subject to the Lien of any
Security Document; (vi) any money, or other assets of the Borrower (or any
of them) that now or hereafter come into the possession, custody, or
control of the Lender; (vii) all sums on deposit in the Special Account;
and (viii) proceeds of any and all of the foregoing.
"Collateral Account" has the meaning given to it in Section 2.11.
"Collateral Pledge Agreement (On-Time)" means the Collateral Pledge
Agreement by On-Time Steel Management Holding, Inc. in favor of the Lender
of even date herewith.
"Collateral Pledge Agreement (Xxxxxx International)" means the
Collateral Pledge Agreement by Xxxxxx International in favor of the Lender
of even date herewith.
"Commitment" means the Lender's commitment to make Advances to, and
to cause the Issuer to issue Letters of Credit for the account of, the
Borrower pursuant to Article II.
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"Constituent Documents" means with respect to any Person, as
applicable, such Person's certificate of incorporation, articles of
incorporation, by-laws, certificate of formation, articles of
organization, limited liability company agreement, management agreement,
operating agreement, shareholder agreement, partnership agreement or
similar document or agreement governing such Person's existence,
organization or management or concerning disposition of ownership
interests of such Person or voting rights among such Person's owners.
"Credit Facility" means the credit facility being made available to
the Borrower by the Lender under Article II.
"Current Maturities of Long Term Debt" means, with respect to any
Person, as of a given date, the amount of the Person's long-term debt and
capitalized leases which became due during the then current fiscal year
period ending on the designated date.
"Debt" of a Person means as of a given date, all items of
indebtedness or liability which in accordance with GAAP would be included
in determining total liabilities as shown on the liabilities side of a
balance sheet for such Person and shall also include the aggregate
payments required to be made by such Person at any time under any lease
that is considered a capitalized lease under GAAP.
"Debt Service Coverage Ratio" means the ratio of (i) the sum of (A)
Funds from Operations and (B) Interest Expense minus (C) unfinanced
Capital Expenditures to (ii) the sum of (A) Current Maturities of Long
Term Debt and (B) Interest Expense.
"Default" means an event that, with giving of notice or passage of
time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the day a
Default or Event of Default occurs and ending on the date the Lender
notifies the Borrower in writing that such Default or Event of Default has
been cured or waived.
"Default Rate" means an annual interest rate equal to three percent
(3%) over the Floating Rate, which interest rate shall change when and as
the Floating Rate changes.
"Director" means, with respect to any Person, a director if the
Person is a corporation, a manager or a Person with similar authority if
the Person is a limited liability company, or a general partner if the
Person is a partnership.
"ERISA" means the Employee Retirement Income Security Act of 1974.
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"ERISA Affiliate", with respect to any Person, means any trade or
business (whether or not incorporated) that is a member of a group which
includes the Person and which is treated as a single employer under
Section 414 of the IRC.
"Eligible Accounts" means all unpaid Accounts of Quincy Joist
arising from the sale or lease of goods or the performance of services,
net of any credits, but excluding any such Accounts having any of the
following characteristics:
(i) That portion of Accounts unpaid 90 days or more after the
invoice date or, if the Lender in its discretion has determined that
a particular dated Account may be eligible, that portion of such
Account which is unpaid more than 30 days past the stated due date
or more than 120 days past the invoice date;
(ii) That portion of Accounts that is disputed or subject to a
claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by Quincy
Joist to the customer, including progress xxxxxxxx, and that portion
of Accounts for which an invoice has not been sent to the applicable
account debtor;
(iv) Accounts constituting (i) proceeds of copyrightable
material unless such copyrightable material shall have been
registered with the United States Copyright Office, or (ii) proceeds
of patentable inventions unless such patentable inventions have been
registered with the United States Patent and Trademark Office;
(v) Accounts owed by any unit of government, whether foreign
or domestic (provided, however, that there shall be included in
Eligible Accounts that portion of Accounts owed by such units of
government for which Quincy Joist has provided evidence satisfactory
to the Lender that (A) the Lender has a first priority perfected
security interest and (B) such Accounts may be enforced by the
Lender directly against such unit of government under all applicable
laws);
(vi) Accounts owed by an account debtor located outside the
United States which are not (A) backed by a bank letter of credit
naming the Lender as beneficiary or assigned to the Lender, in the
Lender's possession or control, and with respect to which a control
agreement concerning the letter-of-credit rights is in effect, and
acceptable to the Lender in all respects, in its sole
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discretion, or (B) covered by a foreign receivables insurance policy
acceptable to the Lender in its sole discretion;
(vii) Accounts owed by an account debtor that is insolvent,
the subject of bankruptcy proceedings or has gone out of business;
(viii) Accounts owed by an Owner, Subsidiary, Affiliate,
Officer or employee of the Borrower or any of its Subsidiaries;
(ix) Accounts not subject to a duly perfected security
interest in the Lender's favor or which are subject to any Lien in
favor of any Person other than the Lender;
(x) That portion of Accounts that has been restructured,
extended, amended or modified;
(xi) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
(xii) Accounts owed by an account debtor, regardless of
whether otherwise eligible, to the extent that the balance of such
Accounts exceeds 15% of the aggregate amount of all Eligible
Accounts;
(xiii) Accounts owed by an account debtor, regardless of
whether otherwise eligible, if 15% or more of the total amount due
under Accounts from such debtor is ineligible under clauses (i),
(ii) or (x) above; and
(xiv) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion.
"Eligible Cash" means cash deposited in an account over which the
Lender has control and is pledged to the Lender and the Cash Equivalent
Value of Cash Equivalents over which the Lender has control and are
pledged to the Lender.
"Eligible Equipment" means all Equipment of the Borrower.
"Eligible Equipment Value" means $ 8,231,000.
"Eligible Real Estate" means the real property more specifically
described in SCHEDULE 1.1 (ELIGIBLE REAL ESTATE).
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"Environmental Law" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the
protection of human health and the environment.
"Equipment" means, with respect to any Person, all of the
Person's equipment, as such term is defined in the UCC, whether now
owned or hereafter acquired, including but not limited to all present
and future machinery, vehicles, furniture, fixtures, manufacturing
equipment, shop equipment, office and recordkeeping equipment, parts,
tools, supplies, and including specifically the goods described in any
equipment schedule or list herewith or hereafter furnished to the
Lender by the Person.
"Event of Default" has the meaning specified in Section 7.1.
"Financial Covenants" means the covenants set forth in Section
6.2.
"Floating Rate" means an annual interest rate equal to the sum
of the Base Rate plus one and fifty hundredths percent (1.50%), which
interest rate shall change when and as the Base Rate changes.
"Funding Date" has the meaning given in Section 2.1.
"Funds From Operations" means, with respect to any Person, for
a given period, the sum for that Person of (i) Net Income, (ii)
depreciation and amortization, (iii) deferred income taxes, and (iv)
other non-cash items, each as determined for such period in accordance
with GAAP.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.6.
"General Intangibles" means, with respect to any Person, all
of the Person's general intangibles, as such term is defined in the
UCC, whether now owned or hereafter acquired, including all present and
future Intellectual Property Rights, customer or supplier lists and
contracts, manuals, operating instructions, permits, franchises, the
right to use the Person's name, and the goodwill of the Person's
business.
"Government Securities" means readily marketable direct full
faith and credit obligations of the United States of America or
obligations unconditionally guaranteed by the full faith and credit of
the United States of America.
"Guarantor(s)" means On-Time Steel Management, Inc., a
Delaware corporation, On-Time Steel Management-Colorado Management
L.L.C., a Delaware limited liability company, On-Time Steel
Management-Northwest Management L.L.C., a Delaware limited liability
company, and any other Person now or hereafter guarantying the
Obligations.
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"Hazardous Substances" means pollutants, contaminants,
hazardous substances, hazardous wastes, petroleum and fractions
thereof, and all other chemicals, wastes, substances and materials
listed in, regulated by or identified in any Environmental Law.
"IRC" means the Internal Revenue Code of 1986.
"Infringe" means when used with respect to Intellectual
Property Rights, any infringement or other violation of Intellectual
Property Rights.
"Intellectual Property Rights" means all actual or prospective
rights arising in connection with any intellectual property or other
proprietary rights, including all rights arising in connection with
copyrights, patents, service marks, trade dress, trade secrets,
trademarks, trade names or mask works.
"Interest Expense" means, with respect to the Borrower, for a
fiscal year-to-date period, the total gross interest expense of the
Borrower on a consolidated basis during such period (excluding interest
income), and shall in any event include (i) interest expensed (whether
or not paid) on all Debt of the Borrower (on a consolidated basis),
(ii) the amortization of debt discounts, (iii) the amortization of all
fees payable in connection with the incurrence of Debt of the Borrower
(on a consolidated basis) to the extent included in interest expense,
and (iv) the portion of any capitalized lease obligation allocable to
interest expense.
"Inventory" means, with respect to any Person, all of the
Person's inventory, as such term is defined in the UCC, whether now
owned or hereafter acquired, whether consisting of whole goods, spare
parts or components, supplies or materials, whether acquired, held or
furnished for sale, for lease or under service contracts or for
manufacture or processing, and wherever located.
"Investment Property" means, with respect to any Person, all
of the Person's investment property, as such term is defined in the
UCC, whether now owned or hereafter acquired, including but not limited
to all securities, security entitlements, securities accounts,
commodity contracts, commodity accounts, stocks, bonds, mutual fund
shares, money market shares and U.S. Government securities.
"Issuer" means the issuer of any Letter of Credit.
"L/C Amount" means the sum of (i) the aggregate face amount of
any issued and outstanding Letters of Credit and (ii) the unpaid amount
of the Obligation of Reimbursement.
"L/C Application" means an application and agreement for
letters of credit in a form acceptable to the Issuer and the Lender.
"Letter of Credit" has the meaning specified in Section 2.4.
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"Licensed Intellectual Property" has the meaning given in
Section 5.11(c).
"Lien" means any security interest, mortgage, deed of trust,
pledge, lien, charge, encumbrance, title retention agreement or
analogous instrument or device, including the interest of each lessor
under any capitalized lease and the interest of any bondsman under any
payment or performance bond, in, of or on any assets or properties of a
Person, whether now owned or hereafter acquired and whether arising by
agreement or operation of law.
"Loan Documents" means this Agreement, the Note, the Security
Documents, any L/C Application and any other documents from time to
time executed in connection with the Credit Facility.
"Lockbox " shall have the meaning given to it in Section 2.11.
"Maturity Date" means the earlier of (i) the third anniversary
of the Funding Date or (ii) July 31, 2006.
"Maximum Line" means $15,000,000 unless said amount is reduced
pursuant to Section 2.12, in which event it means such lower amount.
"Multiemployer Plan" means, with respect to any Person, a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to which
such Person or any ERISA Affiliate contributes or is obligated to
contribute.
"Net Income" (or "Net Loss") means, with respect to any
Person, the fiscal year-to-date after-tax net income (or net loss) from
continuing operations as determined in accordance with GAAP.
"Note" means the Revolving Note.
"Obligation of Reimbursement" has the meaning given in Section
2.6(a).
"Obligations" means the Note, the Obligation of Reimbursement
and each and every other debt, liability and obligation of every type
and description which the Borrower may now or at any time hereafter owe
to the Lender, whether such debt, liability or obligation now exists or
is hereafter created or incurred, whether it arises in a transaction
involving the Lender alone or in a transaction involving other
creditors of the Borrower, and whether it is direct or indirect, due or
to become due, absolute or contingent, primary or secondary, liquidated
or unliquidated, or sole, joint, several or joint and several, and
including all indebtedness of the Borrower arising under any Loan
Document or guaranty between the Borrower and the Lender, whether now
in effect or hereafter entered into.
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"Officer" means with respect to any Person, an officer if the
Person is a corporation, a manager or a Person with similar authority
if the Person is a limited liability company, or a partner if the
Person is a partnership.
"Owned Intellectual Property" has the meaning given in Section
5.11(a).
"Owner" means with respect to any Person, each Person having
legal or beneficial title to an ownership interest in such Person or a
right to acquire such an interest.
"Pension Plan" means, with respect to any Person, a pension
plan (as defined in Section 3(2) of ERISA) maintained for employees of
the Person or any ERISA Affiliate and covered by Title IV of ERISA.
"Permitted Lien" has the meaning given in Section 6.3(a).
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means, with respect to any Person, an employee benefit
plan (as defined in Section 3(3) of ERISA) maintained for employees of
the Person or any ERISA Affiliate.
"Premises" means all premises where the Borrower conducts its
business and has any rights of possession, including the premises
legally described in EXHIBIT C attached hereto.
"Quincy Joist" means Quincy Joist Company, a Delaware
corporation.
"Real Property Security Documents" means the mortgages, deeds
of trust, deeds to secure debt and any other documents delivered to the
Lender from time to time to encumber the Eligible Real Estate and
assign the rents, issues and profits therefrom.
"Reportable Event" means a reportable event (as defined in
Section 4043 of ERISA), other than an event for which the 30-day notice
requirement under ERISA has been waived in regulations issued by the
Pension Benefit Guaranty Corporation.
"Revolving Advance" has the meaning given in Section 2.1.
"Revolving Note" means the Borrower's revolving promissory
note, payable to the order of the Lender in substantially the form of
EXHIBIT A hereto.
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"Security Documents" means this Agreement, the Real Property
Security Documents and any other document delivered to the Lender from
time to time to secure the Obligations.
"Security Interest" has the meaning given in Section 3.1.
"Special Account" means a specified cash collateral account
maintained by a financial institution acceptable to the Lender in
connection with Letters of Credit, as contemplated by Section 2.6.
"Senior Notes" means those 10.5% Senior Notes due 2008 issued
on June 4, 1998 in the original principal amount of $100,000,000.00.
"Subsidiary" means, with respect to any Person, any
corporation of which more than 50% of the outstanding shares of capital
stock having general voting power under ordinary circumstances to elect
a majority of the board of Directors of such corporation, irrespective
of whether or not at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by the Person,
by the Person and one or more other Subsidiaries of the Person, or by
one or more other Subsidiaries of the Person.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrower terminates the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations after an
Event of Default pursuant to Section 7.2.
"UCC" means the Uniform Commercial Code as in effect in the
state designated in Section 8.13 as the state whose laws shall govern
this Agreement, or in any other state whose laws are held to govern
this Agreement or any portion hereof.
"Xxxxx Fargo Bank" means Xxxxx Fargo Bank Arizona, National
Association, unless the context otherwise requires.
Section 1.2 Other Definitional Terms; Rules of Interpretation. The
words "hereof," "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with GAAP. All
terms defined in the UCC and not otherwise defined herein have the meanings
assigned to them in the UCC. References to Articles, Sections, subsections,
Exhibits, Schedules and the like, are to Articles, Sections and subsections of,
or Exhibits or Schedules attached to or a part of, this Agreement unless
otherwise expressly provided. The words "include," "includes" and "including"
shall be deemed to be followed by the phrase "without limitation." Unless the
context in which used herein otherwise clearly requires, "or" has the inclusive
meaning represented by the phrase "and/or." Defined terms include in the
singular number the plural and in the plural number the singular. Reference to
any agreement (including the Loan Documents),
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document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms thereof
(and, if applicable, in accordance with the terms hereof and the other Loan
Documents), except where otherwise explicitly provided, and reference to any
promissory note includes any promissory note which is an extension or renewal
thereof or a substitute or replacement therefor. Reference to any law, rule,
regulation, order, decree, requirement, policy, guideline, directive or
interpretation means as amended, modified, codified, replaced or reenacted, in
whole or in part, and in effect on the determination date, including rules and
regulations promulgated thereunder.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 Revolving Advances. The Lender agrees, on the terms and
subject to the conditions herein set forth, to make advances to the Borrower
from time to time from the date all of the conditions set forth in Section 4.1
are satisfied (the "Funding Date") to the Termination Date (the "Revolving
Advances") in an aggregate principal amount at any time outstanding not to
exceed the Availability. The Lender shall have no obligation to make a Revolving
Advance to the extent the amount of the requested Revolving Advance exceeds
Availability. The Borrower's obligation to pay the Revolving Advances shall be
evidenced by the Revolving Note and shall be secured by the Collateral. Within
the limits set forth in this Section 2.1, the Borrower may borrow, prepay
pursuant to Section 2.12, and reborrow.
Section 2.2 Procedures for Requesting Advances. The Borrower shall
comply with the following procedures in requesting Revolving Advances:
(a) TIME FOR REQUESTS. The Borrower shall request each Advance
not later than 11:00 a.m., Phoenix, Arizona time on the Banking Day
which is the date the Advance is to be made. Each such request shall be
effective upon receipt by the Lender, shall be in writing or by
telephone or telecopy transmission, to be confirmed in writing by the
Borrower if so requested by the Lender, shall be by (i) an Officer of
the Borrower; or (ii) a person designated as the Borrower's agent by an
Officer of the Borrower in a writing delivered to the Lender; or (iii)
a person whom the Lender reasonably believes to be an Officer of the
Borrower or such a designated agent. The Borrower shall repay all
Advances even if the Lender does not receive such confirmation and even
if the person requesting an Advance was not in fact authorized to do
so. Any request for an Advance, whether written or telephonic, shall be
deemed to be a representation by the Borrower that the conditions set
forth in Section 4.2 have been satisfied as of the time of the request.
(b) DISBURSEMENT. Upon fulfillment of the applicable
conditions set forth in Article IV, the Lender shall disburse the
proceeds of the requested Advance by crediting the same to the
Borrower's demand deposit account maintained with Xxxxx Fargo Bank
unless the Lender and the Borrower shall agree in writing to another
manner of disbursement.
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Section 2.3 Increased Costs; Capital Adequacy; Funding Exceptions. If a
Related Lender (as defined below) determines at any time that its Return (as
defined below) has been reduced as a result of any Rule Change, such Lender may
so notify the Borrower and require the Borrower, beginning fifteen (15) days
after such notice, to pay it the amount necessary to restore its Return to what
it would have been had there been no Rule Change. For purposes of this Section
2.3:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital
adequacy, or the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable
agency, whether or not having the force of law, that applies to any
Related Lender (as defined below), including rules requiring financial
institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters
of credit.
(b) "L/C Rule" means any law, rule, regulation, guideline,
directive, requirement or request regarding letters of credit, or the
interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency, whether or not
having the force of law, that applies to any Related Lender, including
those that impose taxes, duties or other similar charges, or mandate
reserves, special deposits or similar requirements against assets of,
deposits with or for the account of, or credit extended by any Related
Lender, on letters of credit.
(c) "Related Lender" includes (but is not limited to) the
Lender, any parent of the Lender, any assignee of any interest of the
Lender hereunder and any participant in the Credit Facility.
(d) "Return," for any period, means the percentage determined
by dividing (i) the sum of interest and ongoing fees earned by the
Related Lender under this Agreement during such period, by (ii) the
average capital such Lender is required to maintain during such period
as a result of its being a party to this Agreement, as determined by
such Lender based upon its total capital requirements and a reasonable
attribution formula that takes account of the Capital Adequacy Rules
and L/C Rules then in effect, costs of issuing or maintaining any
Advance or Letter of Credit and amounts received or receivable under
this Agreement or the Note with respect to any Advance or Letter of
Credit. Return may be calculated for each calendar quarter and for the
shorter period between the end of a calendar quarter and the date of
termination in whole of this Agreement.
(e) "Rule Change" means any change in any Capital Adequacy
Rule or L/C Rule occurring after the date of this Agreement, or any
change in the interpretation or administration thereof by any
governmental or regulatory authority, but the term does not include any
changes that at the Funding Date are scheduled to take place under the
existing Capital Adequacy Rules or L/C Rules
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or any increases in the capital that the Lender is required to maintain
to the extent that the increases are required due to a regulatory
authority's assessment of such Related Lender's financial condition.
The initial notice sent by the Related Lender shall be sent as promptly as
practicable after such Lender learns that its Return has been reduced, shall
include a demand for payment of the amount necessary to restore such Lender's
Return for the quarter in which the notice is sent, and shall state in
reasonable detail the cause for the reduction in its Return and its calculation
of the amount of such reduction. Thereafter, such Related Lender may send a new
notice during each calendar quarter setting forth the calculation of the reduced
Return for that quarter and including a demand for payment of the amount
necessary to restore its Return for that quarter. The Related Lender's
calculation in any such notice shall be conclusive and binding absent
demonstrable error.
Section 2.4 Letters of Credit.
(a) The Lender agrees, on the terms and subject to the
conditions herein set forth, to cause an Issuer to issue, from the
Funding Date to the Termination Date, one or more irrevocable standby
or documentary letters of credit (each, a "Letter of Credit") for the
Borrower's account by guaranteeing payment of the Borrower's
obligations or being a co-applicant. The Lender shall have no
obligation to cause an Issuer to issue any Letter of Credit if the face
amount of the Letter of Credit to be issued would exceed the lesser of:
(i) $11,500,000 less the L/C Amount, or
(ii) Availability.
Furthermore, the Lender shall have no obligation to cause an Issuer to
issue any Letter of Credit unless Eligible Cash is equal to the greater
of (i) $5,000,000 or (ii) 75% of the L/C Amount (after giving effect to
the issuance of the Letter of Credit). Each Letter of Credit, if any,
shall be issued pursuant to a separate L/C Application entered into
between the Borrower and the Lender for the benefit of the Issuer,
completed in a manner satisfactory to the Lender and the Issuer. The
terms and conditions set forth in each such L/C Application shall
supplement the terms and conditions hereof, but if the terms of any
such L/C Application and the terms of this Agreement are inconsistent,
the terms hereof shall control.
(b) No Letter of Credit shall be issued with an expiry date
later than the Termination Date in effect as of the date of issuance.
(c) Any request to cause an Issuer to issue a Letter of Credit
shall be deemed to be a representation by the Borrower that the
conditions set forth in Section 4.2 have been satisfied as of the date
of the request.
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Section 2.5 Special Account. If the Credit Facility is terminated for
any reason while any Letter of Credit is outstanding, the Borrower shall
thereupon pay the Lender in immediately available funds for deposit in the
Special Account an amount equal to the L/C Amount. The Special Account shall be
an interest bearing account maintained for the Lender by any financial
institution acceptable to the Lender. Any interest earned on amounts deposited
in the Special Account shall be credited to the Special Account. The Lender may
apply amounts on deposit in the Special Account at any time or from time to time
to the Obligations in the Lender's sole discretion. The Borrower may not
withdraw any amounts on deposit in the Special Account as long as the Lender
maintains a security interest therein. The Lender agrees to transfer any balance
in the Special Account to the Borrower when the Lender is required to release
its security interest in the Special Account under applicable law.
Section 2.6 Payment of Amounts Drawn Under Letters of Credit;
Obligation of Reimbursement. The Borrower acknowledges that the Lender, as
co-applicant, will be liable to the Issuer for reimbursement of any and all
draws under Letters of Credit and for all other amounts required to be paid
under the applicable L/C Application. Accordingly, the Borrower shall pay to the
Lender any and all amounts required to be paid under the applicable L/C
Application, when and as required to be paid thereby, and the amounts designated
below, when and as designated:
(a) The Borrower shall pay to the Lender on the day a draft is
honored under any Letter of Credit a sum equal to all amounts drawn
under such Letter of Credit plus any and all reasonable charges and
expenses that the Issuer or the Lender may pay or incur relative to
such draw and the applicable L/C Application, plus interest on all such
amounts, charges and expenses as set forth below (the Borrower's
obligation to pay all such amounts is herein referred to as the
"Obligation of Reimbursement").
(b) Whenever a draft is submitted under a Letter of Credit,
the Borrower authorizes the Lender to make a Revolving Advance in the
amount of the Obligation of Reimbursement and to apply the proceeds of
such Revolving Advance thereto. Such Revolving Advance shall be
repayable in accordance with and be treated in all other respects as a
Revolving Advance hereunder.
(c) If a draft is submitted under a Letter of Credit when the
Borrower is unable, because a Default Period exists or for any other
reason, to obtain a Revolving Advance to pay the Obligation of
Reimbursement, the Borrower shall pay to the Lender on demand and in
immediately available funds, the amount of the Obligation of
Reimbursement together with interest, accrued from the date of the
draft until payment in full at the Default Rate. Notwithstanding the
Borrower's inability to obtain a Revolving Advance for any reason, the
Lender is irrevocably authorized, in its sole discretion, to make a
Revolving Advance in an amount sufficient to discharge the Obligation
of Reimbursement and all accrued but unpaid interest thereon.
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(d) The Borrower's obligation to pay any Revolving Advance
made under this Section 2.6 shall be evidenced by the Revolving Note
and shall bear interest as provided in Section 2.8.
Section 2.7 Obligations Absolute. The Borrower's obligations arising
under Section 2.6 shall be absolute, unconditional and irrevocable, and shall be
paid strictly in accordance with the terms of Section 2.7, under all
circumstances whatsoever, including (without limitation) the following
circumstances:
(a) any lack of validity or enforceability of any Letter of
Credit or any other agreement or instrument relating to any Letter of
Credit (collectively the "Related Documents");
(b) any amendment or waiver of or any consent to departure
from all or any of the Related Documents;
(c) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time, against any beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom
any such beneficiary or any such transferee may be acting), or other
person or entity, whether in connection with this Agreement, the
transactions contemplated herein or in the Related Documents or any
unrelated transactions;
(d) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(e) payment by or on behalf of the Issuer under any Letter of
Credit against presentation of a draft or certificate which does not
strictly comply with the terms of such Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
Section 2.8 Interest; Default Interest; Participations; Usury.
(a) NOTE. Except as set forth in subsections (b) and (d), the
outstanding principal balance of the Note shall bear interest at the
Floating Rate.
(b) DEFAULT INTEREST RATE. Upon notice to the Borrower from
the Lender from time to time, the principal of the Advances outstanding
from time to time shall bear interest at the Default Rate, effective as
of the first day of the fiscal month during which any Default Period
begins through the last day of such Default Period. The Lender's
election to charge the Default Rate shall be in its sole discretion and
shall not be a waiver of any of its other rights and remedies. The
Lender's election to charge interest at the Default Rate for less than
the entire
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period during which the Default Rate may be charged shall not be a
waiver of its right to later charge the Default Rate for the entire
such period.
(c) PARTICIPATIONS. If any Person shall acquire a
participation in the Advances or the Obligation of Reimbursement, the
Borrower shall be obligated to the Lender to pay the full amount of all
interest calculated under this Section 2.8(c), along with all other
fees, charges and other amounts due under this Agreement, regardless if
such Person elects to accept interest with respect to its participation
at a lower rate than that calculated under this Section 2.8, or
otherwise elects to accept less than its prorata share of such fees,
charges and other amounts due under this Agreement.
(d) USURY. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law. Notwithstanding anything to the contrary contained in
any Loan Document, all agreements which either now are or which shall
become agreements between the Borrower and the Lender are hereby
limited so that in no contingency or event whatsoever shall the total
liability for payments in the nature of interest, additional interest,
Default Interest, fees payable hereunder, and other charges exceed the
applicable limits imposed by any applicable usury laws. If any payments
in the nature of interest, additional interest, Default Interest, fees
payable hereunder, and other charges made under any Loan Document are
held to be in excess of the limits imposed by any applicable usury
laws, it will be deemed a mutual mistake and any such amount held to be
in excess shall be considered payment of principal hereunder, and the
indebtedness evidenced hereby shall be reduced by such amount (or if
there is no existing indebtedness, refunded to the Borrower) so that
the total liability for payments in the nature of interest, additional
interest and other charges shall not exceed the applicable limits
imposed by any applicable usury laws, in compliance with the desires of
the Borrower and the Lender. All amounts constituting interest will be
spread throughout the full term of the indebtedness evidenced hereby in
determining whether interest exceeds lawful amounts. The Borrower
agrees that the interest rate contracted for herein includes the
interest rate set forth in this Section 2.8 plus any other charges or
fees set forth herein and costs and expenses incident to this
transaction paid by the Borrower to the extent that they are deemed
interest under applicable law. This provision shall never be superseded
or waived and shall control every other provision of the Loan Documents
and all agreements between the Borrower and the Lender, or their
successors and assigns.
Section 2.9 Fees.
(a) ORIGINATION FEE AND ANNUAL COMMITMENT FEE. The Borrower
shall pay the Lender a fully earned and non-refundable origination fee
of $125,000.00, due and payable upon the earliest of (i) the Funding
Date, (ii) August 31, 2003, or (iii) termination (whether voluntary or
involuntary) of the Credit Facility. In addition, the Borrower shall
pay the Lender an annual
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commitment fee of $25,000.00 on the first and second anniversary of the
date of this Agreement, which will be fully earned on the date due and
non-refundable.
(b) AUDIT FEES. The Borrower shall pay the Lender, on demand,
reasonable audit fees in connection with any audits or inspections
conducted by or on behalf of the Lender of any Collateral or the
Borrower's operations or business at the rates established from time to
time by the Lender as its audit fees (which fees are currently $90.00
per day per auditor), together with all actual out-of-pocket costs and
expenses reasonably incurred in conducting any such audit or
inspection.
(c) LETTER OF CREDIT FEES. The Borrower shall pay to the
Lender a fee with respect to each Letter of Credit, if any, accruing on
a daily basis and computed at the annual rate of one and twenty-five
hundredths percent (1.25%), of the aggregate amount that may then be
drawn under it assuming compliance with all conditions for drawing (the
"Aggregate Face Amount"), from and including the date of issuance of
such Letter of Credit until such date as such Letter of Credit shall
terminate by its terms or be returned to the Lender, due and payable
monthly in arrears on the first day of each month and on the
Termination Date; provided, however, that during Default Periods, in
the Lender's sole discretion and without waiving any of its other
rights and remedies, such fee shall increase to four and twenty-five
hundredths percent (4.25%) of the Aggregate Face Amount. The foregoing
fee shall be in addition to any and all fees, commissions and charges
of the Issuer with respect to or in connection with such Letter of
Credit.
(d) LETTER OF CREDIT ADMINISTRATIVE FEES. The Borrower shall
pay to the Lender, on written demand, the administrative fees charged
by the Issuer in connection with the honoring of drafts under any
Letter of Credit, amendments thereto, transfers thereof and all other
activity with respect to the Letters of Credit at the then-current
rates published by the Issuer for such services rendered on behalf of
customers of the Issuer generally.
(e) TERMINATION AND LINE REDUCTION FEES. If the Credit
Facility is terminated (i) by the Lender during a Default Period that
begins before a Maturity Date, (ii) by the Borrower (A) as of a date
other than a Maturity Date or (B) as of a Maturity Date but without the
Lender having received written notice of such termination at least 90
days before such Maturity Date, or if the Borrower reduces the Maximum
Line, the Borrower shall pay to the Lender a fee in an amount equal to
a percentage of the Maximum Line (or the reduction of the Maximum Line,
as the case may be) as follows: (A) three percent (3.00%) if the
termination or reduction occurs on or before the first anniversary of
the Funding Date; (B) two percent (2.00%) if the termination or
reduction occurs after the first anniversary of the Funding Date but on
or before the second anniversary of the Funding Date; and (C) one
percent (1.00%) if the termination or reduction occurs after the second
anniversary of the Funding Date.
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(f) WAIVER OF TERMINATION FEES. The Borrower will not be
required to pay the termination fees otherwise due under subsection (e)
if such termination is made because of refinancing by an affiliate of
the Lender.
(g) UNUSED LINE FEE. For the purposes of this Section 2.9(g),
"Unused Amount" means the Maximum Line reduced by outstanding Revolving
Advances. The Borrower agrees to pay to the Lender an unused line fee
at the rate of six hundred twenty-five thousandths percent (0.625 %)
per annum on the average daily Unused Amount from the date of this
Agreement to and including the Termination Date, due and payable
monthly in arrears on the first Banking Day of the month and on the
Termination Date.
(h) OTHER FEES. The Lender may from time to time charge
additional fees: (i) for Revolving Advances made and Letters of Credit
issued in excess of Availability (which over-advance fees are currently
$500 per day when there is no Default Period and $1,000 per day when a
Default Period exists, and may be charged for each day that the
over-advance exists); (ii) in lieu of imposing interest at the Default
Rate during a Default Period; (iii) for wire transfer fees; and (iv)
for other fees which are customarily charged by the Lender and are
reasonable in amount. Fees charged pursuant to clause (ii) above will
not exceed the Default Rate which could be charged because of the
Default or Event of Default permitting the fees. Neither the charging
nor the payment of over-advance fees shall be deemed to excuse or waive
the Borrower's obligation to comply with provisions of Section 2.13 or
to waive any Default of the Borrower arising from the Borrower's
failure to comply with the provisions of Section 2.13. The Borrower's
request for a Revolving Advance in excess of Availability, the issuance
of a Letter of Credit in excess of Availability or the Borrower's
failure to comply with the provisions of Section 2.13 shall constitute
the Borrower's agreement to pay the over-advance fees described in such
notice
Section 2.10 Time for Interest Payments; Payment on Non-Banking Days;
Computation of Interest and Fees.
(a) TIME FOR INTEREST PAYMENTS. Interest accruing on Advances
shall be due and payable in arrears on the last day of each month and
on the Termination Date.
(b) PAYMENT ON NON-BANKING DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a
Banking Day, such payment may be made on the next succeeding Banking
Day, and such extension of time shall in such case be included in the
computation of interest on the Advances or the fees hereunder, as the
case may be.
(c) COMPUTATION OF INTEREST AND FEES. Interest accruing on the
outstanding principal balance of the Advances and fees hereunder
outstanding
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from time to time shall be computed on the basis of actual number of
days elapsed in a year of 360 days.
Section 2.11 Lockbox; Collateral Account; Application of Payments.
(a) LOCKBOX AND COLLATERAL ACCOUNT.
(i) If an Event of Default occurs and the Lender
requests that they do so, (A) the Borrower shall instruct all
account debtors to pay all its Accounts directly to a lockbox
(the "Lockbox") established with Xxxxx Fargo Bank or another
bank selected by the Lender and reasonably satisfactory to the
Borrower and (B) the Borrower shall execute and deliver to the
Lender a lockbox and collection account agreement in form and
substance satisfactory to the Lender in its sole and absolute
judgment. If, notwithstanding such instructions, the Borrower
receives any payments on their Accounts, the Borrower shall
deposit such payments into the Collateral Account. The
Borrower shall also deposit all other cash proceeds of
Collateral directly to the Collateral Account if received at a
time that the Borrower is required to deposit payments on
their Accounts into the Collateral Account. Until so
deposited, the Borrower shall hold all such payments and cash
proceeds received by it in trust for and as the property of
the Lender and shall not commingle such property with any of
its other funds or property. All deposits in the Collateral
Account shall constitute proceeds of Collateral and shall not
constitute payment of the Obligations.
(ii) All items deposited in the Collateral Account
shall be subject to final payment. If any such item is
returned uncollected, the Borrower will immediately pay the
Lender, or, for items deposited in the Collateral Account, the
bank maintaining such account, the amount of that item, or
such bank at its discretion may charge any uncollected item to
the commercial or other accounts. Borrower shall be liable as
an endorser on all items deposited by it in the Collateral
Account, whether or not in fact endorsed by it.
(b) APPLICATION OF PAYMENTS.
(i) If a Collateral Account has been established and
there are funds in the Collateral Account, the Borrower may,
from time to time, cause funds in the Collateral Account to be
transferred to the Lender's general account for payment of the
Obligations. Except as provided in the preceding sentence,
amounts deposited in the Collateral Account shall not be
subject to
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withdrawal by the Borrower, except after full payment and
discharge of all Obligations and termination of the Credit
Facility.
(ii) All payments to the Lender shall be made in
immediately available funds and shall be applied to the
Obligations upon receipt by the Lender. Funds received from
the Collateral Account shall be deemed to be immediately
available. The Lender may hold all payments not constituting
immediately available funds for three (3) additional days
before applying them to the Obligations.
Section 2.12 Voluntary Prepayment; Reduction of the Maximum Line;
Termination of the Credit Facility by the Borrower. Except as otherwise provided
herein, the Borrower may prepay the Advances in whole at any time or from time
to time in part. The Borrower may terminate the Credit Facility or reduce the
Maximum Line at any time if it (i) gives the Lender at least 30 days' prior
written notice and (ii) pays the Lender termination or Maximum Line reduction
fees in accordance with Section 2.9(e). Any reduction in the Maximum Line must
be in an amount of not less than $500,000.00 or an integral multiple thereof. If
the Borrower reduces the Maximum Line to zero, all Obligations shall be
immediately due and payable. Subject to termination of the Credit Facility and
payment and performance of all Obligations, the Lender shall, at the Borrower's
expense, release or terminate the Security Interest and the Security Documents
to which the Borrower is entitled by law.
Section 2.13 Mandatory Prepayment. Without notice or demand, if the sum
of the outstanding principal balance of the Revolving Advances plus the L/C
Amount shall at any time exceed the Borrowing Base, the Borrower shall (i)
first, immediately prepay the Revolving Advances to the extent necessary to
eliminate such excess; and (ii) if prepayment in full of the Revolving Advances
is insufficient to eliminate such excess, pay to the Lender in immediately
available funds for deposit in the Special Account an amount equal to the
remaining excess. Any payment received by the Lender under this Section 2.13, or
under Section 2.12, may be applied to the Obligations, in such order and in such
amounts as the Lender, in its discretion, may from time to time determine.
Section 2.14 Revolving Advances to Pay Obligations. Notwithstanding
anything in Section 2.1, the Lender may, in its discretion at any time or from
time to time, without the Borrower's request and even if the conditions set
forth in Section 4.2 would not be satisfied, make a Revolving Advance in an
amount equal to the portion of the Obligations from time to time due and
payable.
Section 2.15 Use of Proceeds. The Borrower shall use the proceeds of
Advances and each Letter of Credit for ordinary working capital purposes.
Section 2.16 Liability Records. The Lender may maintain from time to
time, at its discretion, records as to the Obligations. All entries made on any
such record shall be presumed correct until the Borrower establishes the
contrary. Upon the Lender's demand, the Borrower will admit and certify in
writing the exact principal balance of the Obligations that the Borrower
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then asserts to be outstanding. Any billing statement or accounting rendered by
the Lender shall be conclusive and fully binding on the Borrower unless the
Borrower gives the Lender specific written notice of exception within 30 days
after receipt.
ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 Grant of Security Interest. The Borrower hereby pledges,
assigns and grants to the Lender a lien and security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations. Upon request by the Lender, the
Borrower will grant the Lender a security interest in all commercial tort claims
it may have against any Person.
Section 3.2 Notification of Account Debtors and Other Obligors. The
Lender may at any time during a Default Period notify any account debtor or
other person obligated to pay the amount due that such right to payment has been
assigned or transferred to the Lender for security and shall be paid directly to
the Lender. The Borrower will join in giving such notice if the Lender so
requests. At any time after the Borrower or the Lender gives such notice to one
of its account debtors or other obligors, the Lender may, but need not, in the
Lender's name or in the name of the Borrower, (a) demand, xxx for, collect or
receive any money or property at any time payable or receivable on account of,
or securing, any such right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such account
debtor or other obligor; and (b) as the agent and attorney-in-fact of the
Borrower, notify the United States Postal Service to change the address for
delivery of the mail of the Borrower to any address designated by the Lender,
otherwise intercept the mail of the Borrower, and receive, open and dispose of
the Borrower's mail, applying all Collateral as permitted under this Agreement
and holding all other mail for the Borrower's account or forwarding such mail to
the last known address of either the Borrower to whom addressed or Xxxxxx
International.
Section 3.3 Assignment of Insurance. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of the
Borrower with respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and the Borrower hereby directs
the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default Period then exists, the Lender may (but need
not), in the Lender's name or in the Borrower's name, execute and deliver proof
of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.
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Section 3.4 Occupancy.
(a) The Borrower hereby irrevocably grants to the Lender the right
to take exclusive possession of the Premises at any time during a Default
Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good xxxxx xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Credit Facility, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all such
goods to purchasers.
(d) The Lender shall not be obligated to pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises; provided, however, that if the Lender does pay or account for
any rent or other compensation for the possession, occupancy or use of any
of the Premises, the Borrower shall reimburse the Lender promptly for the
full amount thereof. In addition, the Borrower will pay, or reimburse the
Lender for, all taxes, fees, duties, imposts, charges and expenses at any
time incurred by or imposed upon the Lender by reason of the execution,
delivery, existence, recordation, performance or enforcement of this
Agreement or the provisions of this Section 3.4.
Section 3.5 License. Without limiting the generality of any other Security
Document, the Borrower hereby grants to the Lender a non-exclusive, worldwide
and royalty-free license to use or otherwise exploit all Intellectual Property
Rights of the Borrower for the purpose of: (a) completing the manufacture of any
in-process materials during any Default Period so that such materials become
saleable Inventory, all in accordance with the same quality standards previously
adopted by the Borrower for its own manufacturing and subject to the Borrower's
reasonable exercise of quality control; and (b) selling, leasing or otherwise
disposing of any or all Collateral during any Default Period.
Section 3.6 Financing Statement. The Borrower authorizes the Lender to
file from time to time where permitted by law, such financing statements against
collateral described as "all personal property" or describing specific items of
collateral including commercial tort claims as the Lender deems necessary or
useful to perfect the Security Interest. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth: Name and address of each
Debtor:
The names, addresses, federal employer identification numbers and
organizational identification number of each Debtor are set forth in
SCHEDULE 3.6
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Name and address of Secured Party:
Xxxxx Fargo Credit, Inc.
Xxxxx Xxxxx Xxxxx, XXX X0000-000
000 Xxxx Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Federal Employer Identification No. 00-0000000
Section 3.7 Setoff. The Lender may at any time or from time to time, at
its sole discretion and without demand and without notice to anyone, setoff any
liability owed to the Borrower by the Lender, whether or not due, against any
Obligation, whether or not due. In addition, each other Person holding a
participating interest in any Obligations shall have the right to appropriate or
setoff any deposit or other liability then owed by such Person to the Borrower,
whether or not due, and apply the same to the payment of said participating
interest, as fully as if such Person had lent directly to the Borrower the
amount of such participating interest.
Section 3.8 Collateral. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application. The Lender has no obligation to clean-up or otherwise prepare the
Collateral for sale. The Borrower waives any right it may have to require the
Lender to pursue any third person for any of the Obligations.
Section 3.9 Eligible Equipment. The Borrower represents and warrants to
the Lender that the equipment listed on SCHEDULE 3.9 is owned on the date of
this Agreement by the Borrower indicated as the owner on such Schedule.
ARTICLE IV
CONDITIONS OF LENDING
Section 4.1 Conditions Precedent to the Initial Revolving Advance and
Letter of Credit. The Lender's obligation to make the initial Advance hereunder
or to cause any Letters of Credit to be issued shall be subject to the condition
precedent that the Lender shall have received all of the following, each in form
and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
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(c) A true and correct copy of any and all leases pursuant to which
the Borrower is leasing the Premises, together with, if required by the
Lender, a landlord's disclaimer and consent with respect to each such
lease.
(d) If required by the Lender, a true and correct copy of any and
all mortgages pursuant to which the Borrower has mortgaged the Premises,
together with a mortgagee's disclaimer and consent with respect to each
such mortgage.
(e) If required by the Lender, a true and correct copy of any and
all agreements pursuant to which the property of the Borrower is in the
possession of any Person other than the Borrower, together with, in the
case of any goods held by such Person for resale, (i) a consignee's
acknowledgment and waiver of Liens, (ii) UCC financing statements
sufficient to protect the interests of the Borrower and the Lender in such
goods, and (iii) UCC searches showing that no other secured party has
filed a financing statement against such Person and covering property
similar to the property of the Borrower or if there exists any such
secured party, evidence that each such secured party has received notice
from the Borrower and the Lender sufficient to protect the their
respective interests in such goods from any claim by such secured party.
(f) If required by the Lender, an acknowledgment and waiver of Liens
from each warehouse in which the Borrower is storing Inventory.
(g) If required by the Lender, a true and correct copy of any and
all agreements pursuant to which the property of the Borrower is in the
possession of any Person other than the Borrower, together with (i) an
acknowledgment and waiver of Liens from each subcontractor who has
possession of the goods of the Borrower from time to time, (ii) UCC
financing statements sufficient to protect the interests of the Borrower
and the Lender in such goods, and (iii) UCC searches showing that no other
secured party has filed a financing statement covering and covering
property similar to the property of the Borrower other than the Borrower,
or if there exists any such secured party, evidence that each such secured
party has received notice from the Borrower and the Lender sufficient to
protect the interests of the Borrower and the Lender in the such goods
from any claim by such secured party.
(h) Control agreements, properly executed each bank at which the
Borrower maintains deposit accounts.
(i) The Collateral Pledge Agreement (On-Time) pledging the ownership
interests in its Subsidiaries and, as applicable, a separate assignment
and stock power for each such Subsidiary, properly executed by On-Time
Steel Management Holding, Inc.;
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(j) The Collateral Pledge Agreement (Xxxxxx International) pledging
the stock of its Subsidiaries and a separate assignment and stock power
for each such Subsidiary, properly executed by Xxxxxx International;
(k) Evidence that the Senior Notes are subordinated to the
Obligations upon terms and conditions satisfactory to the Lender in its
sole and absolute discretion.
(l) Current searches of appropriate filing offices showing that (i)
no Liens have been filed and remain in effect against the Borrower except
Permitted Liens or Liens held by Persons who have agreed in writing that
upon receipt of proceeds of the initial Advances, they will satisfy,
release or terminate such Liens in a manner satisfactory to the Lender,
and (ii) the Lender has duly filed all financing statements necessary to
perfect the Security Interest, to the extent the Security Interest is
capable of being perfected by filing.
(m) A certificate of the Secretary or Assistant Secretary of the
Borrower certifying that attached to such certificate are (i) the
resolutions of the Directors and, if required, Owners, of the Borrower
authorizing the execution, delivery and performance of the Loan Documents,
(ii) true, correct and complete copies of the Constituent Documents of the
Borrower, and (iii) examples of the signatures of the Officers or agents
authorized to execute and deliver the Loan Documents and other
instruments, agreements and certificates, including Advance requests,
required to be executed by the Borrower on behalf of the Borrower.
(n) A current certificate issued by the Secretary of State of
incorporation of the Borrower, certifying that such Person is in
compliance with all applicable organizational requirements of such State.
(o) Evidence that the Borrower is duly licensed or qualified to
transact business in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary, except where failure to do so would
not have a material adverse effect on the financial condition, properties
or operations of Borrower.
(p) An opinion of counsel to the Borrower, addressed to the Lender.
(q) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(r) A separate guaranty, properly executed by each Guarantor,
pursuant to which each Guarantor unconditionally guarantees the full and
prompt payment of all Obligations.
(s) A certificate of the Secretary or Assistant Secretary or other
appropriate Officer of each Guarantor certifying that attached to such
certificate
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are (i) the resolutions of the Directors and, if required, Owners, of such
Guarantor authorizing the execution, delivery and performance of the
documents which it is required to deliver to the Lender, (ii) true,
correct and complete copies of the Constituent Documents of such
Guarantor, and (iii) examples of the signatures of the Officers or agents
authorized to execute and deliver the documents on behalf of such
Guarantor.
(t) A current certificate issued by the Secretary of State of
organization of each Guarantor that is not an individual, certifying that
such Person is in compliance with all applicable organizational
requirements of such State.
(u) If there are any individual Guarantors, a waiver of interest,
properly executed by the spouse of each individual Guarantor, waiving any
and all interest he or she may have in the assets disclosed to the Lender
in the financial statements of that Guarantor and in any future earnings
or assets acquired by that Guarantor.
(v) Payment of the fees due under Section 2.9, through the date of
the initial Advance or Letter of Credit and expenses incurred by the
Lender through such date and required to be paid by the Borrower under
Section 8.5, including all legal expenses incurred through the date of
this Agreement.
(w) Evidence that, after making the initial Revolving Advance,
satisfying all obligations owed to Xxxxx Fargo Bank, National Association,
satisfying all trade payables of the Borrower and its Subsidiaries older
than 60 days from invoice date, book overdrafts and closing costs,
Availability shall be not less than $5,000,000.00.
(x) as to the Eligible Real Estate:
(i) A Real Property Security Agreement, properly executed by
the Borrower owning the Eligible Real Estate, creating a first and
prior lien upon good and marketable title to the Eligible Real
Estate and first and prior assignment of the rents, issues, profits
and proceeds from the Eligible Real Estate.
(ii) An Environmental Indemnity Agreement.
(iii) A current appraisal of the Eligible Real Estate by an
appraiser acceptable to Lender, reviewed and found to be
satisfactory by Lender and showing a value for the Eligible Real
Estate satisfactory to Lender. Lender may require reappraisals at
Borrower's expense.
(iv) If required by the Lender, a current as-built survey of
the Eligible Real Estate by a licensed surveyor acceptable to Lender
describing the boundaries of the Eligible Real Estate and showing
the
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location of the improvements upon the Eligible Real Estate and all
means of ingress and egress, rights-of-way, easements (each of which
shall be identified by docket and page or recording number where
recorded) and all other customary and relevant information pursuant
to ALTA standards and any title company requirements. All surveys
shall be certified to Lender and the title company issuing the Title
Policy.
(v) An ALTA extended coverage mortgagee's title insurance
policy ALTA Loan Policy - 1992 or similar policy acceptable to
Lender (the "Title Policy"), with such endorsements as Lender may
require, issued by a title insurance company satisfactory to Lender
in an amount satisfactory to the Lender in its sole and absolute
judgment and insuring that the lien of the Real Property Security
Document encumbering the Eligible Real Estate to be a first and
prior lien upon the Eligible Real Estate as security for the Loan,
subject only to such exceptions as Lender may expressly approve in
writing.
(vi) If required by Lender, an environmental questionnaire and
disclosure statement completed and signed by Borrower covering the
current and former condition and uses of the Eligible Real Estate
and adjacent property, and/or, if required by Lender, a current
preliminary environmental assessment (Phase I assessment) of the
Eligible Real Estate and adjacent property, plus any sampling and
analysis (Phase II assessment) or special limited assessment that
Lender may require after review of the Phase I assessment, together
with any other environmental investigations and reports that Lender
may require, all of which shall be by an environmental consulting
firm acceptable to Lender and none of which shall reveal any
existing or potential environmental condition adversely affecting
the use or value of the Eligible Real Estate.
(vii) Evidence whether the Eligible Real Estate, or any part
thereof, lies within a "special flood hazard area" as designated on
maps prepared by the Department of Housing and Urban Development.
(viii) Copies of all lease agreements and license agreements,
if any, affecting the Real Property.
(ix) Copies of any recorded documents pertaining to the
Eligible Real Estate.
(x) Evidence that all taxes and assessments levied against or
affecting the Eligible Real Estate have been paid current, together
with, if required by Lender, a Type B tax service contract for the
Eligible Real Estate.
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(y) Such other documents as the Lender in its sole discretion
may require.
Section 4.2 Conditions Precedent to All Advances and Letters of Credit.
The Lender's obligation to make each Advance and to cause each Letter of Credit
to be issued shall be subject to the further conditions precedent that:
(a) the representations and warranties contained in Article V are
correct on and as of the date of such Advance or issuance of a Letter of
Credit as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from
such Advance or issuance of a Letter of Credit which constitutes a Default
or an Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows, except as
otherwise disclosed in the DISCLOSURE SCHEDULES at the end of this Agreement:
Section 5.1 Existence and Power; Name; Chief Executive Office; Inventory
and Equipment Locations; Federal Employer Identification Number. Each Person
comprising the Borrower is a corporation, duly organized, validly existing and
in good standing under the laws of the State specified in SCHEDULE 1.1
(BORROWER) and is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification
necessary. The Borrower has all requisite power and authority to conduct its
business, to own its properties and to execute and deliver, and to perform all
of its obligations under, the Loan Documents. During its existence, the Borrower
has not done business except under the names set forth in SCHEDULE 5.1. The
chief executive office and principal place of business of each Person comprising
the Borrower is located at the address set forth in SCHEDULE 5.1; all of its
records relating to its business or the Collateral given by it are kept at that
location set forth in SCHEDULE 5.1; and all of its Inventory and Equipment is
located at that location or at one of the other locations listed in SCHEDULE
5.1. The Borrower's federal employer identification number is correctly set
forth in SCHEDULE 3.6.
Section 5.2 Capitalization. SCHEDULE 5.2 constitutes: (a) a correct and
complete list of all Persons holding ownership interests, and/or and having
rights to acquire ownership interests which if fully exercised would cause such
Person to hold ownership interests, in excess of five percent (5%) of all
ownership interests of the Borrower on a fully diluted basis and (b) an
organizational chart showing the ownership structure of all Subsidiaries of the
Borrower.
Section 5.3 Authorization of Borrowing; No Conflict as to Law or
Agreements. The execution, delivery and performance by the Borrower of the Loan
Documents executed by it and
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the borrowings from time to time hereunder have been duly authorized by all
necessary corporate action and do not and will not (i) require any consent or
approval of its Owners; (ii) require any authorization, consent or approval by,
or registration, declaration or filing with, or notice to, any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any third party, except such authorization, consent, approval,
registration, declaration, filing or notice as has been obtained, accomplished
or given prior to the date hereof; (iii) violate any provision of any law, rule
or regulation (including Regulation X of the Board of Governors of the Federal
Reserve System) or of any order, writ, injunction or decree presently in effect
having applicability to the Borrower or of the Borrower's Constituent Documents;
(iv) result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other material agreement, lease or instrument to
which the Borrower is a party or by which it or its properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any Lien
(other than the Security Interest) upon or with respect to any of the properties
now owned or hereafter acquired by the Borrower.
Section 5.4 Legal Agreements. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents executed by it will
constitute the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms.
Section 5.5 Subsidiaries. Except as set forth in the SCHEDULE 5.5 hereto,
the Borrower has no Subsidiaries.
Section 5.6 Financial Condition; No Adverse Change. The Borrower has
furnished to the Lender its audited financial statements for its fiscal year
ended December 31, 2003 and unaudited financial statements for the
fiscal-year-to-date period ended June 30, 2003 and those statements fairly
present the financial condition of the Borrower and its Affiliates, on a
consolidated basis, on the dates thereof and the results of its operations and
cash flows for the periods then ended and were prepared in accordance with
generally accepted accounting principles. Since the date of the most recent
financial statements, there has been no material adverse change in the financial
condition, properties or operations of Borrower or any of its Affiliates.
Section 5.7 Litigation. There are no actions, suits or proceedings pending
or, to the Borrower's knowledge, threatened against or affecting the Borrower or
any of its Subsidiaries or the properties of the Borrower or any of its
Subsidiaries before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or any of its Subsidiaries, would have a material
adverse effect on the financial condition, properties or operations of the
Borrower or any of its Subsidiaries.
Section 5.8 Regulation U. Neither the Borrower nor any of its Subsidiaries
is engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
Advance will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock.
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Section 5.9 Taxes. The Borrower and its Subsidiaries have paid or caused
to be paid to the proper authorities when due all federal, state and local taxes
required to be withheld by each of them. The Borrower and its Subsidiaries have
filed all federal, state and local tax returns which to the knowledge of the
Officers of the Borrower or any Subsidiaries, as the case may be, are required
to be filed, and the Borrower and its Subsidiaries have paid or caused to be
paid to the respective taxing authorities all taxes as shown on said returns or
on any assessment received by any of them to the extent such taxes have become
due.
Section 5.10 Titles and Liens. The Borrower has good and absolute title to
all Collateral given by it free and clear of all Liens other than Permitted
Liens. No financing statement naming the Borrower as debtor is on file in any
office except to perfect only Permitted Liens.
Section 5.11 Intellectual Property Rights.
(a) OWNED INTELLECTUAL PROPERTY. SCHEDULE 5.11 is a complete list of
all patents, applications for patents, trademarks, applications for
trademarks, service marks, applications for service marks, mask works,
trade dress and copyrights for which the Borrower or any of its
Subsidiaries is the registered owner (the "Owned Intellectual Property").
Except as disclosed on SCHEDULE 5.11, (i) each Person identified on
SCHEDULE 5.11 as owning Intellectual Property owns the Owned Intellectual
Property free and clear of all restrictions (including covenants not to
xxx a third party), court orders, injunctions, decrees, writs or Liens,
whether by written agreement or otherwise, (ii) no Person other than the
Person identified on SCHEDULE 5.11 as owning Intellectual Property owns or
has been granted any right in its Owned Intellectual Proper, (iii) all
Owned Intellectual Property is valid, subsisting and enforceable and (iv)
each Person identified on SCHEDULE 5.11 as owning Intellectual Property
has taken all commercially reasonable action necessary to maintain and
protect its Owned Intellectual Property.
(b) AGREEMENTS WITH EMPLOYEES AND CONTRACTORS. Each Person
identified on SCHEDULE 5.11 as owning Intellectual Property has entered
into a legally enforceable agreement with each of its employees and
subcontractors obligating each such Person to assign to it, without any
additional compensation, any Intellectual Property Rights created,
discovered or invented by such Person in the course of such Person's
employment or engagement with it (except to the extent prohibited by law),
and further requiring such Person to cooperate with it, without any
additional compensation, in connection with securing and enforcing any
Intellectual Property Rights therein; provided, however, that the
foregoing shall not apply with respect to employees and subcontractors
whose job descriptions are of the type such that no such assignments are
reasonably foreseeable.
(c) INTELLECTUAL PROPERTY RIGHTS LICENSED FROM OTHERS. SCHEDULE 5.11
is a complete list of all agreements under which the Borrower or any of
its
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Subsidiaries has licensed Intellectual Property Rights from another Person
("Licensed Intellectual Property") other than readily available,
non-negotiated licenses of computer software and other intellectual
property used solely for performing accounting, word processing and
similar administrative tasks ("Off-the-shelf Software") and a summary of
any ongoing payments the licensee is obligated to make with respect
thereto. Except as disclosed on SCHEDULE 5.11 and in written agreements
copies of which have been given to the Lender, the licenses of the
Borrower and its Subsidiaries to use the Licensed Intellectual Property
are free and clear of all restrictions, Liens, court orders, injunctions,
decrees, or writs, whether by written agreement or otherwise. Except as
disclosed on SCHEDULE 5.11, neither the Borrower nor any of its
Subsidiaries is obligated or under any liability whatsoever to make any
payments of a material nature by way of royalties, fees or otherwise to
any owner of, licensor of, or other claimant to, any Intellectual Property
Rights.
(d) OTHER INTELLECTUAL PROPERTY NEEDED FOR BUSINESS. Except for
Off-the-shelf Software and as disclosed on SCHEDULE 5.11, the Owned
Intellectual Property and the Licensed Intellectual Property constitute
all Intellectual Property Rights used or necessary to conduct the
businesses of the Borrower and its Subsidiaries as they presently
conducted or as the Borrower reasonably foresees conducting it.
(e) INFRINGEMENT. Except as disclosed on SCHEDULE 5.11, the Borrower
and its Subsidiaries have no knowledge of, and have not received any
written claim or notice alleging, any Infringement of another Person's
Intellectual Property Rights (including any written claim that the
Borrower or any of its Subsidiaries must license or refrain from using the
Intellectual Property Rights of any third party) nor, to the knowledge of
the Borrower or any of its Subsidiaries, is there any threatened claim or
any reasonable basis for any such claim.
Section 5.12 Plans. Except as disclosed to the Lender in writing prior to
the date hereof, neither the Borrower nor any of its ERISA Affiliate (i)
maintains or has maintained any Pension Plan, (ii) contributes or has
contributed to any Multiemployer Plan or (iii) provides or has provided
post-retirement medical or insurance benefits with respect to employees or
former employees (other than benefits required under Section 601 of ERISA,
Section 4980B of the IRC or applicable state law). Neither the Borrower nor any
of its ERISA Affiliate has received any notice or has any knowledge to the
effect that it is not in full compliance with any of the requirements of ERISA,
the IRC or applicable state law with respect to any Plan. No Reportable Event
exists in connection with any Pension Plan. Each Plan which is intended to
qualify under the IRC is so qualified, and no fact or circumstance exists which
may have an adverse effect on the Plan's tax-qualified status. Neither the
Borrower nor any of its ERISA Affiliate has (i) any accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the IRC) under
any Plan, whether or not waived, (ii) any liability under Section 4201 or 4243
of ERISA for any withdrawal, partial withdrawal, reorganization or other event
under any Multiemployer Plan or (iii) any liability or knowledge of any facts or
circumstances which could result in any liability to the Pension Benefit
Guaranty Corporation, the Internal Revenue Service,
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the Department of Labor or any participant in connection with any Plan (other
than routine claims for benefits under the Plan).
Section 5.13 Default. The Borrower and its Subsidiaries are in compliance
with all provisions of all agreements, instruments, decrees and orders to which
they are parties or by which they or their property is bound or affected, the
breach or default of which could have a material adverse effect on the financial
condition, properties or operations of the Borrower or any of its Subsidiaries.
Section 5.14 Environmental Matters.
(a) To the best of the Borrower's knowledge, there are not present
in, on or under the Premises any Hazardous Substances in such form or
quantity as to create any material liability or obligation for either the
Borrower, any of the Borrower's Subsidiaries or the Lender under common
law of any jurisdiction or under any Environmental Law, and no Hazardous
Substances have ever been stored, buried, spilled, leaked, discharged,
emitted or released in, on or under the Premises in such a way as to
create any such material liability.
(b) To the best knowledge of the Borrower, neither the Borrower nor
any of its Subsidiaries has disposed of Hazardous Substances in such a
manner as to create any material liability under any Environmental Law.
(c) There are not and there never have been any requests, claims,
notices, investigations, demands, administrative proceedings, hearings or
litigation, relating in any way to the Premises, the Borrower or any
Subsidiary of the Borrower, alleging material liability under, violation
of, or noncompliance with any Environmental Law or any license, permit or
other authorization issued pursuant thereto. To the best knowledge of the
Borrower, no such matter is threatened or impending.
(d) To the best knowledge of the Borrower, the businesses of the
Borrower and its Subsidiaries are and have in the past always been
conducted in accordance with all Environmental Laws and all licenses,
permits and other authorizations required pursuant to any Environmental
Law and necessary for the lawful and efficient operation of such
businesses are in the possession of the Person conducting such Business
and are in full force and effect. No permit required under any
Environmental Law is scheduled to expire within 12 months and there is no
threat that any such permit will be withdrawn, terminated, limited or
materially changed.
(e) To the best knowledge of the Borrower, the Premises are not and
never have been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or
any similar federal, state or local list, schedule, log, inventory or
database.
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(f) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or the businesses of
the Borrower and the Subsidiaries of the Persons comprising Borrower.
Section 5.15 Submissions to Lender. All financial and other information
provided to the Lender by or on behalf of the Borrower or any of its
Subsidiaries in connection with the Borrower's request for the credit facilities
contemplated hereby is (i) true and correct in all material respects, (ii) does
not omit any material fact necessary to make such information not misleading
and, (iii) as to projections, valuations or proforma financial statements,
present a good faith opinion as to such projections, valuations and proforma
condition and results.
Section 5.16 Financing Statements. The Borrower has authorized the
filing of financing statements sufficient when filed to perfect the Security
Interest and the other security interests created by the Security Documents.
When such financing statements are filed in the offices noted therein, the
Lender will have a valid and perfected security interest in all Collateral which
is capable of being perfected by filing financing statements. None of the
Collateral is or will become a fixture on real estate, unless a sufficient
fixture filing is in effect with respect thereto.
Section 5.17 Rights to Payment. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral is (or, in the case of all future Collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower's records pertaining thereto as being
obligated to pay such obligation.
Section 5.18 Financial Solvency. Both before and after giving effect to
all of the transactions contemplated in the Loan Documents, neither the Borrower
nor any of its Subsidiaries:
(a) was or will be insolvent, as that term is used and defined
in Section 101(32) of the United States Bankruptcy Code and Section 2
of the Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or about to
engage in a business or a transaction for which any remaining assets of
the Borrower or such Subsidiary are unreasonably small;
(c) by executing, delivering or performing its obligations
under the Loan Documents or other documents to which it is a party or
by taking any action with respect thereto, intends to, nor believes
that it will, incur debts beyond its ability to pay them as they
mature;
(d) by executing, delivering or performing its obligations
under the Loan Documents or other documents to which it is a party or
by taking any action
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with respect thereto, intends to hinder, delay or defraud either its
present or future creditors; and
(e) at this time contemplates filing a petition in bankruptcy
or for an arrangement or reorganization or similar proceeding under any
law any jurisdiction, nor, to the best knowledge of the Borrower, is
the subject of any actual, pending or threatened bankruptcy, insolvency
or similar proceedings under any law of any jurisdiction.
ARTICLE VI
COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 Reporting Requirements. The Borrower will deliver, or cause
to be delivered, to the Lender each of the following, which shall be in form and
detail acceptable to the Lender:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in
any event within 90 days after the end of each fiscal year of the
Borrower, the Borrower will deliver, or cause to be delivered, to the
Lender, the Borrower's audited financial statements with the
unqualified opinion of independent certified public accountants
selected by the Borrower and acceptable to the Lender, which annual
financial statements shall include the Borrower's balance sheet as at
the end of such fiscal year and the related statements of the
Borrower's income, retained earnings and cash flows for the fiscal year
then ended, prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any Subsidiary of the Borrower, all in
reasonable detail and prepared in accordance with GAAP, together with
(i) copies of all management letters prepared by such accountants; (ii)
a report signed by such accountants stating that in making the
investigations necessary for said opinion they obtained no knowledge,
except as specifically stated, of any Default or Event of Default and
all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Borrower is in compliance with
the Financial Covenants; and (iii) a certificate of the Borrower's
chief financial officer stating that such financial statements have
been prepared in accordance with GAAP, fairly represent the Borrower's
financial position and the results of its operations, and whether or
not such officer has knowledge of the occurrence of any Default or
Event of Default and, if so, stating in reasonable detail the facts
with respect thereto.
(b) MONTHLY FINANCIAL STATEMENTS. As soon as available and in
any event within 20 days after the end of each month, the Borrower will
deliver to the Lender an unaudited/internal balance sheet and
statements of income and retained
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earnings of the Borrower as at the end of and for such month and for
the year to date period then ended, prepared, if the Lender so
requests, on a consolidating and consolidated basis to include any
Subsidiary of the Borrower, in reasonable detail and stating in
comparative form the figures for the corresponding date and periods in
the previous year, all prepared in accordance with GAAP, subject to
year-end audit adjustments; and accompanied by a certificate of the
Borrower's chief financial Officer, substantially in the form of
EXHIBIT B hereto stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit adjustments
and fairly represent the Borrower's financial position and the results
of its operations, (ii) whether or not such officer has knowledge of
the occurrence of any Default or Event of Default not theretofore
reported and remedied and, if so, stating in reasonable detail the
facts with respect thereto, and (iii) all relevant facts in reasonable
detail to evidence, and the computations as to, whether or not the
Borrower is in compliance with the Financial Covenants.
(c) COLLATERAL REPORTS. Within 15 days after the end of each
month or more frequently if the Lender so requires, the Borrower will
deliver to the Lender a calculation of the Borrowing Base showing in
reasonable detail the respective amounts of Eligible Cash, Eligible
Accounts and Eligible Equipment as at the end of such month or shorter
time period.
(d) PROJECTIONS. At least 30 days before the beginning of each
fiscal year of the Borrower, the Borrower will deliver to the Lender
the projected balance sheets and income statements for each month of
such year, each in reasonable detail, representing the Borrower's good
faith projections and certified by the Borrower's chief financial
Officer as being the most accurate projections available and identical
to the projections used by the Borrower for internal planning purposes,
together with a statement of underlying assumptions and such supporting
schedules and information as the Lender may in its discretion require.
(e) LITIGATION. Immediately after the commencement thereof,
the Borrower will deliver to the Lender notice in writing of all
litigation and of all proceedings before any governmental or regulatory
agency affecting the Borrower or any of its Subsidiaries (i) of the
type described in Section 5.14(c) or (ii) which seek a monetary
recovery against the Borrower in excess of $250,000.00.
(f) DEFAULTS. As promptly as practicable (but in any event not
later than five business days) after an Officer of the Borrower obtains
knowledge of the occurrence of any Default or Event of Default, the
Borrower will deliver to the Lender notice of such occurrence, together
with a detailed statement by a responsible Officer of the Borrower of
the steps being taken by the Borrower to cure the effect thereof.
(g) PLANS. As soon as possible, and in any event within 30
days after the Borrower knows or has reason to know that any Reportable
Event with respect to any Pension Plan of the Borrower or any of its
Subsidiaries has occurred, the
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Borrower will deliver to the Lender a statement of the Borrower's chief
financial Officer setting forth details as to such Reportable Event and
the action which the Borrower or its Subsidiary proposes to take with
respect thereto, together with a copy of the notice of such Reportable
Event to the Pension Benefit Guaranty Corporation. As soon as possible,
and in any event within 10 days after the Borrower or any Subsidiary
fails to make any quarterly contribution required with respect to any
Pension Plan under Section 412(m) of the IRC, the Borrower will deliver
to the Lender a statement of the Borrower's chief financial Officer
setting forth details as to such failure and the action which the
Borrower or its Subsidiary proposes to take with respect thereto,
together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation. As soon as
possible, and in any event with 10 days after the Borrower knows or has
reason to know that it has or is reasonably expected to have any
liability under Section 4201 or 4243 of ERISA for any withdrawal,
partial withdrawal, reorganization or other event under any
Multiemployer Plan, the Borrower will deliver to the Lender a statement
of the Borrower's chief financial Officer setting forth details as to
such liability and the action which Borrower proposes to take with
respect thereto.
(h) DISPUTES. Promptly upon knowledge thereof, the Borrower
will deliver to the Lender notice of (i) any disputes or claims by the
customers of the Borrower or any of its Subsidiaries exceeding
$250,000.00 individually or $500,000.00 in the aggregate during any
fiscal year; (ii) credit memos; (iii) any goods returned to or
recovered by the Borrower.
(i) OFFICERS AND DIRECTORS. Promptly upon knowledge thereof,
the Borrower will deliver to the Lender notice of any change in the
persons constituting the Borrower's Officers and Directors.
(j) COLLATERAL. Promptly upon knowledge thereof, the Borrower
will deliver to the Lender notice of any loss of or material damage to
any Collateral or of any substantial adverse change in any Collateral
or the prospect of payment thereof.
(k) COMMERCIAL TORT CLAIMS. Promptly upon knowledge thereof,
the Borrower will deliver to the Lender notice of any commercial tort
claims it or any of its Subsidiaries may bring against any Person,
including the name and address of each defendant, a summary of the
facts, an estimate of the damages of the Borrower or its Subsidiary,
copies of any complaint or demand letter submitted by the Borrower or
its Subsidiary, and such other information as the Lender may request.
(l) INTELLECTUAL PROPERTY.
(i) The Borrower will give the Lender 30 days prior
written notice of the intent of it or any of its Subsidiaries
to acquire
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material Intellectual Property Rights; except for transfers
permitted under Section 6.17, the Borrower will give the
Lender 30 days prior written notice of the intent or any of
its Subsidiaries to acquire material Intellectual Property
Rights to dispose of material Intellectual Property Rights;
and upon request, shall provide the Lender with copies of all
applicable documents and agreements.
(ii) Promptly upon knowledge thereof, the Borrower
will deliver to the Lender notice of (A) any Infringement by
others of the Intellectual Property Rights of it or any of its
Subsidiaries to acquire material Intellectual Property Rights,
(B) claims that the Borrower or any of its Subsidiaries is
Infringing another Person's Intellectual Property Rights and
(C) any threatened cancellation, termination or material
limitation of the Intellectual Property Rights of the Borrower
or any of its Subsidiaries.
(iii) Promptly upon receipt, the Borrower will give
the Lender copies of all registrations and filings with
respect to the Intellectual Property Rights of the Borrower or
any of its Subsidiaries.
(m) REPORTS TO OWNERS. The Borrower will promptly file with
the Securities and Exchange Commission copies of all financial
statements, reports and proxy statements which the Borrower has sent to
its Owners and endeavor to deliver them to the Lender.
(n) SEC FILINGS. The Borrower will endeavor to deliver to the
Lender copies of all regular and periodic reports which the Borrower
shall file with the Securities and Exchange Commission or any national
securities exchange.
(o) VIOLATIONS OF LAW. Promptly upon knowledge thereof, the
Borrower will deliver to the Lender notice of the violation of any law,
rule or regulation by the Borrower or any of its Subsidiaries, the
non-compliance with which could materially and adversely affect the
business or financial condition of the Borrower or any of its
Subsidiaries.
(p) OTHER REPORTS. From time to time, with reasonable
promptness, the Borrower will deliver, or cause to be delivered, to the
Lender any and all receivables schedules, collection reports, deposit
records, equipment schedules, copies of invoices to account debtors,
shipment documents and delivery receipts for goods sold, and such other
material, reports, records or information as the Lender may request.
Section 6.2 Financial Covenants.
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(a) MINIMUM DEBT SERVICE COVERAGE RATIO. The Borrower, on a
consolidated basis with its Subsidiaries, will maintain, during each
period described below, its Debt Service Coverage Ratio, determined as
at the end of such period, at not less than the ratio set forth
opposite such period:
Minimum Debt Service Coverage
-----------------------------
Period Ratio
------ -----
1/1/03 through 8/31/03 0.65 to 1.00
1/1/03 through 9/30/03 0.70 to 1.00
1/1/03 through 10/31/03 0.70 to 1.00
1/1/03 through 11/30/03 0.75 to 1.00
1/1/03 through 12/31/03 0.75 to 1.00
(b) MINIMUM BOOK NET WORTH. The Borrower will maintain its
Book Net Worth, determined as at the end of each month through December
31, 2003, at an amount not less than $12,500,000.00.
(c) MINIMUM MONTHLY STOP LOSS. The Borrower will not permit
the Net Loss of Borrower and its Subsidiaries on a consolidated basis
to exceed $500,000.00 in the aggregate in any one month or
$1,000,000.00 in the aggregate during any two consecutive months during
the Borrower's 2003 fiscal year.
(d) CAPITAL EXPENDITURES. The Borrower and its Subsidiaries
will not in the aggregate incur or contract to incur unfinanced Capital
Expenditures of more than $1,500,000.00 in the aggregate during its
2003 fiscal year.
(e) RE-ESTABLISHMENT OF FINANCIAL COVENANTS. On or before
January 15 of each fiscal year, the Borrower and the Lender shall agree
in writing on new covenant levels for Sections 6.2(a) - 6.2(d) for such
fiscal year, unless the Lender agrees in writing that the then existing
covenant levels shall continue for a longer period. The new covenant
levels will be based on the projections for such periods and shall be
no less stringent than the levels in effect immediately prior thereto.
So long as the Lender has acted in good faith in its efforts to
establish new covenant levels, the failure to establish new covenant
levels by each January 15, regardless of the reason, shall be an Event
of Default.
Section 6.3 Permitted Liens; Financing Statements.
(a) Neither the Borrower, any of its any of its Subsidiaries,
nor any of their ERISA Affiliates will create, incur or suffer to exist
any Lien upon or of any of its assets, now owned or hereafter acquired,
to secure any indebtedness; excluding, however, from the operation of
the foregoing, the following (collectively, "Permitted Liens"):
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(i) in the case of any property which is not
Collateral, covenants, restrictions, rights, easements and
minor irregularities in title which do not materially
interfere with the Borrower's business or operations as
presently conducted;
(ii) Liens in existence on the date hereof and listed
in Schedule 6.3 hereto, securing indebtedness for borrowed
money permitted under Section 6.4;
(iii) the Security Interest and Liens created by the
Security Documents; and
(iv) purchase money Liens relating to the acquisition
of machinery and equipment not exceeding the lesser of cost or
fair market value thereof, not exceeding $50,000.00 for any
one purchase or $200,000.00 in the aggregate for the Borrower
and its Subsidiaries during any fiscal year, and so long as no
Default Period is then in existence and none would exist
immediately after such acquisition.
(b) The Borrower will not amend any financing statements in
favor of the Lender except as permitted by law. Any authorization by
the Lender to any Person to amend financing statements in favor of the
Lender shall be in writing.
Section 6.4 Indebtedness. Neither the Borrower nor any of its
Subsidiaries will incur, create, assume or permit to exist any indebtedness or
liability on account of deposits or advances or any indebtedness for borrowed
money or letters of credit issued on behalf of Borrower or any of its
Subsidiaries to, or any other indebtedness or liability evidenced by notes,
bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness in existence on the date hereof and listed in
Schedule 6.4 hereto; and
(c) indebtedness relating to Permitted Liens..
Section 6.5 Guaranties. Neither the Borrower nor any of its
Subsidiaries will permit any of its Subsidiaries to, assume, guarantee, endorse
or otherwise become directly or contingently liable in connection with any
obligations of any other Person, except:
(a) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in SCHEDULE 6.5 hereto.
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Section 6.6 Investments and Subsidiaries. Neither the Borrower nor any
of its Subsidiaries will purchase or hold beneficially any stock or other
securities or evidences of indebtedness of, make or permit to exist any loans or
advances to, or make any investment or acquire any interest whatsoever in, any
other Person, including any partnership or joint venture, except:
(a) investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued
by U.S. corporations rated "A-1" or "A-2" by Standard & Poors
Corporation or "P-1" or "P-2" by Xxxxx'x Investors Service or
certificates of deposit or bankers' acceptances having a maturity of
one year or less issued by members of the Federal Reserve System having
deposits in excess of $100,000,000 (which certificates of deposit or
bankers' acceptances are fully insured by the Federal Deposit Insurance
Corporation);
(b) travel advances or loans to the Officers and employees of
the Borrower and its Subsidiaries not exceeding at any one time $
50,000.00 for the Borrower and its Subsidiaries in the aggregate;
(c) advances in the form of progress payments, prepaid rent
not exceeding two (2) months or security deposits; and
(d) current investments in the Subsidiaries in existence on
the date hereof and listed in SCHEDULE 5.5 hereto.
If the Borrower acquires any new Subsidiary, the Borrower will execute a
Collateral Security Agreement covering such Subsidiary and will cause such
Subsidiary to execute a guaranty of the Obligations in favor of the Lender or,
if the Lender elects, join in this Agreement as a co-borrower.
Section 6.7 Dividends and Distributions. Except as provided in the
following sentence, neither the Borrower nor any of its Subsidiaries will
declare or pay any dividends (other than dividends payable solely in stock of
the Borrower) on any class of its stock or other ownership interests or make any
payment on account of the purchase, redemption or other retirement of any such
stock or other ownership interests or make any distribution in respect thereof,
either directly or indirectly, without the consent of the Lender, which consent
may not be unreasonably withheld. However, the Borrower may purchase, redeem or
otherwise retire the capital stock or other ownership interests of the Borrower,
if at the time of such purchase, redemption or retirement, and after immediately
giving effect thereto, (a) no Default Period exists and (b) purchases and
prepayments of Senior Notes and purchases, redemptions and retirements of the
capital stock or other ownership interests of the Borrower do not exceed
$2,000,000.00 in any fiscal year; provided that purchases, redemptions and
retirements of the capital stock or other ownership interests of the Borrower
shall not be made, directly or indirectly, from the proceeds of a Revolving
Advance or restricted Cash.
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Section 6.8 Salaries. Neither the Borrower nor any of its Subsidiaries
will pay excessive or unreasonable salaries, bonuses, commissions, consultant
fees or other compensation; or, except as required by any employment agreement
listed in SCHEDULE 6.8 or (so long as the stock of Xxxxxx International is
publicly traded) approved by an independent compensation committee of the Board
of Directors of Xxxxxx International, increase the salary, bonus, commissions,
consultant fees or other compensation of any of its Directors, Officers or
consultants, or any member of their families, by more than 20% in any one year,
either individually or for all such persons in the aggregate, or pay any such
increase from any source other than profits earned in the year of payment.
Section 6.9 Books and Records; Inspection and Examination. The Borrower
will keep accurate books of record and account pertaining to the Collateral. The
Borrower and its Subsidiaries will keep accurate books of record and account for
themselves and pertaining to their respective businesses and financial condition
and such other matters as the Lender may from time to time request in which true
and complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all of its company
and financial books and records at all times during ordinary business hours, to
send and discuss with account debtors and other obligors requests for
verification of amounts owed to it, and to discuss its affairs with any of its
Directors, Officers, employees or agents. The Borrower hereby irrevocably
authorizes all accountants and third parties to disclose and deliver to Lender,
at its expense and the expense of the Borrower, all financial information, books
and records, work papers, management reports and other information in their
possession regarding it and its Subsidiaries. The Borrower will permit the
Lender or its employees, accountants, attorneys or agents, to examine and
inspect any Collateral or any of its properties at any time during ordinary
business hours.
Section 6.10 Account Verification. The Lender may at any time and from
time to time send or require the Borrower to send requests for verification of
accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time, after notice to the Borrower,
telephone account debtors and other obligors to verify accounts.
Section 6.11 Compliance with Laws.
(a) The Borrower and its Subsidiaries will (i) comply with the
requirements of applicable laws and regulations, the non-compliance
with which would materially and adversely affect their respective
businesses or financial condition and (ii) use and keep the Collateral
given by it, and require that others use and keep the Collateral given
by it, only for lawful purposes, without violation of any federal,
state or local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
and each of it Subsidiaries will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by any Environmental Laws, and will not
generate, use, transport, treat, store or dispose
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of any Hazardous Substances in such a manner as to create any material
liability or obligation under the common law of any jurisdiction or any
Environmental Law.
Section 6.12 Payment of Taxes and Other Claims. The Borrower and its
Subsidiaries will pay or discharge when due (a) all taxes, assessments and
governmental charges levied or imposed upon it or upon their respective income
or profits, upon any of their respective properties (including the Collateral
given by them) or upon or against the creation, perfection or continuance of the
Security Interest, prior to the date on which penalties attach thereto, (b) all
federal, state and local taxes that they are respectively required to be
withheld by them, and (c) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon any properties of the Borrower
or any of its Subsidiaries; provided that neither the Borrower nor any of its
Subsidiaries shall be required to pay any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which proper reserves have been made.
Section 6.13 Maintenance of Properties.
(a) The Borrower and its Subsidiaries will keep and maintain,
all of their respective property (including the Collateral given by it)
and necessary or useful in their respective businesses in good
condition, repair and working order (normal wear and tear excepted) and
will from time to time replace or repair any worn, defective or broken
parts; provided, however, that nothing in this Section 6.13 shall
prevent the Borrower or any of its Subsidiaries from discontinuing the
operation and maintenance of any of its properties if such
discontinuance is, in such Person's judgment, desirable in the conduct
of such Person's business and not disadvantageous in any material
respect to the Lender. The Borrower and its Subsidiaries will take all
commercially reasonable steps necessary to protect and maintain their
respective Intellectual Property Rights.
(b) The Borrower will defend the Collateral given by it
against all Liens, claims or demands of all other Persons claiming the
Collateral or any interest therein. The Borrower will keep all
Collateral given by it free and clear of all Liens except Permitted
Liens. The Borrower and its Subsidiaries will take all commercially
reasonable steps necessary to prosecute any Person Infringing their
respective Intellectual Property Rights and to defend themselves
against any Person accusing them of Infringing any Person's
Intellectual Property Rights.
Section 6.14 Insurance. The Borrower and its Subsidiaries will obtain
and maintain, insurance with insurers believed by them to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which they operate. Without
limiting the generality of the foregoing, the Borrower will at all times
maintain business interruption insurance including coverage for force majeure;
and the Borrower will at all times keep all tangible Collateral given by it
insured against risks of fire (including so-called extended
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coverage), theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Lender may reasonably request, with
any loss payable to the Lender to the extent of its interest, and all policies
of such insurance shall contain a lender's loss payable endorsement for the
Lender's benefit. All policies of liability insurance required hereunder shall
name the Lender as an additional insured.
Section 6.15 Preservation of Existence. The Borrower and its
Subsidiaries will preserve and maintain their respective existence and their
rights, privileges and franchises necessary or desirable in the normal conduct
of their respective business and shall conduct their respective businesses in an
orderly, efficient and regular manner.
Section 6.16 Delivery of Instruments, etc. Upon request by the Lender,
the Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel paper constituting Collateral given by it, duly endorsed
or assigned by it.
Section 6.17 Sale or Transfer of Assets; Suspension of Business
Operations. Neither the Borrower nor any of its Subsidiaries will sell, lease,
assign, transfer or otherwise dispose of (i) the stock of any Subsidiary of such
Person, (ii) all or a substantial part of its assets, or (iii) any Collateral
given by it or any interest therein (whether in one transaction or in a series
of transactions) to any other Person other than the sale of Inventory in the
ordinary course of business and will not liquidate, dissolve or suspend business
operations. Neither the Borrower nor any of its Subsidiaries will transfer any
part of its ownership interest in any Intellectual Property Rights or permit any
agreement under which it has licensed Licensed Intellectual Property to lapse,
except that such Person may transfer such rights or permit such agreements to
lapse if it shall have reasonably determined that the applicable Intellectual
Property Rights are no longer useful in its business. If the Borrower transfers
any Intellectual Property Rights for value, such Person will pay over the
proceeds to the Lender for application to the Obligations. Neither the Borrower
nor any of its Subsidiaries will and will not permit any of its Subsidiaries to,
license any other Person to use any of such Person's Intellectual Property
Rights, except that the Borrower and its Subsidiaries may grant licenses in the
ordinary course of its business in connection with sales of Inventory or
provision of services to its customers.
Section 6.18 Consolidation and Merger; Asset Acquisitions. Neither the
Borrower nor any of its Subsidiaries will consolidate with or merge into any
other Person, or permit any other Person to merge into it, or acquire (in a
transaction analogous in purpose or effect to a consolidation or merger) all or
substantially all the assets of any other Person.
Section 6.19 Sale and Leaseback. Neither the Borrower nor any of its
Subsidiaries will enter into any arrangement, directly or indirectly, with any
other Person whereby the Borrower or any of its Subsidiaries, as the case may
be, shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Person selling or
transferring the property intends to use for substantially the same purpose or
purposes as the property being sold or transferred.
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Section 6.20 Restrictions on Nature of Business. Neither the Borrower
nor any of its Subsidiaries will engage in any line of business materially
different from that presently engaged in by such Person or purchase, lease or
otherwise acquire assets not related to its business.
Section 6.21 Accounting. Neither the Borrower nor any of its
Subsidiaries will make any material change in accounting principles other than
as required by GAAP. Neither the Borrower nor any of its Subsidiaries will
adopt, permit or consent to any change in such Person's fiscal year.
Section 6.22 Discounts, etc. After notice from the Lender, neither the
Borrower nor any of its Subsidiaries will grant, any discount, credit or
allowance to any customer of the Borrower or the Subsidiary, as the case may be,
or accept any return of goods sold. Neither the Borrower nor any of its
Subsidiaries will modify, amend, subordinate, cancel or terminate, the
obligation of any account debtor or other obligor of the Borrower or the
Subsidiary, as the case may be.
Section 6.23 Plans. Unless disclosed to the Lender pursuant to Section
5.12, neither the Borrower nor any ERISA Affiliate will (i) adopt, create,
assume or become a party to any Pension Plan, (ii) incur any obligation to
contribute to any Multiemployer Plan, (iii) incur any obligation to provide
post-retirement medical or insurance benefits with respect to employees or
former employees (other than benefits required by law) or (iv) amend any Plan in
a manner that would materially increase its funding obligations.
Section 6.24 Place of Business; Name. Neither the Borrower nor any of
its Subsidiaries will transfer its chief executive office or principal place of
business, or move, relocate, close or sell any business location. The Borrower
will not permit any tangible Collateral or any records pertaining to the
Collateral to be located in any state or area in which, in the event of such
location, a financing statement covering such Collateral would be required to
be, but has not in fact been, filed in order to perfect the Security Interest.
The Borrower will not change its name or jurisdiction of organization.
Section 6.25 Constituent Documents. The Borrower will not will amend
its Constituent Documents.
Section 6.26 Performance by the Lender. If the Borrower at any time
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein, and if such failure shall continue for a period
of ten calendar days after the Lender gives the Borrower written notice thereof
(or in the case of the agreements contained in Sections 6.13 and 6.15,
immediately upon the occurrence of such failure, without notice or lapse of
time), the Lender may, but need not, perform or observe such covenant on behalf
and in the name, place and stead of the Borrower (or, at the Lender's option, in
the Lender's name) and may, but need not, take any and all other actions which
the Lender may reasonably deem necessary to cure or correct such failure
(including the payment of taxes, the satisfaction of Liens, the performance of
obligations owed to account debtors or other obligors, the procurement and
maintenance of insurance, the execution of assignments, security agreements and
financing statements, and the endorsement of instruments); and the Borrower
shall thereupon pay to the Lender on demand the amount of all monies expended
and all costs and expenses (including reasonable attorneys' fees and legal
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expenses) incurred by the Lender in connection with or as a result of the
performance or observance of such agreements or the taking of such action by the
Lender, together with interest thereon from the date expended or incurred at the
Default Rate. To facilitate the Lender's performance or observance of such
covenants of the Borrower, the Borrower hereby irrevocably appoints the Lender,
or the Lender's delegate, acting alone, as the Borrower's attorney in fact
(which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of the Borrower any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by the Borrower under this Section 6.26.
Section 6.27 Transactions with Affiliates. Neither the Borrower nor any
of its Subsidiaries will engage in any transaction with any of such Person's
Affiliates, except (a) for reasonable allocations of overhead to such Affiliate;
(b) in the ordinary course of business, pursuant to the reasonable requirements
of such Person's business, upon fair and reasonable terms no less favorable to
such Person than such Person would obtain in a comparable arms' length
transaction, and with the obligations owing to the Affiliate fully subordinated
to the Obligations pursuant to a subordination agreement executed by the
Affiliate and the Lender in form and substance satisfactory to the Lender; and
the transactions described in SCHEDULE 6.27.
Section 6.28 Senior Notes. Without the consent of the Lender, which
consent may not be unreasonably withheld, the Borrower will not purchase or
prepay any of Senior Notes if at the time of such purchase or prepayment, or
after immediately giving effect thereto, any Default Period exists; provided
that purchases and prepayments of Senior Notes and purchases, redemptions and
retirements of the capital stock or other ownership interests of the Borrower
shall not exceed $2,000,000.00 in any fiscal year and shall not be made,
directly or indirectly, from the proceeds of a Revolving Advance or restricted
Cash.
ARTICLE VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 7.1 Events of Default. "Event of Default," wherever used
herein, means any one of the following events:
(a) Default in the payment of any Obligations when they become
due and payable and the continuation of such default for three (3)
Business Days;
(b) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement, except the
covenants and agreements described in Section 7.1(d);
(c) A Change of Control shall occur;
(d) A Default in the performance, or breach of any covenant or
agreement of the Borrower in Section 6.1, 6.9, 6.10 - 6.13 (inclusive),
6.15 or 6.16
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which is not cured within ten (10) days after the Lender gives the
Borrower notice of such default, provided that no notice or cure period
shall be applicable with respect to the third and subsequent defaults
in respect of the same provisions of this Agreement during the same
fiscal year of the Borrower;
(e) The Borrower, any of its Subsidiaries or any Guarantor
shall be or become insolvent, or admit in writing its or his inability
to pay its or his debts as they mature, or make an assignment for the
benefit of creditors; or the Borrower, any of its Subsidiaries or any
Guarantor shall apply for or consent to the appointment of any
receiver, trustee, or similar officer for it or him or for all or any
substantial part of its or his property; or such receiver, trustee or
similar officer shall be appointed without the application or consent
of the Borrower, any of its Subsidiaries or such Guarantor, as the case
may be; or the Borrower, any of its Subsidiaries or any Guarantor shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceeding relating to it or
him under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against the
Borrower, any of its Subsidiaries or any such Guarantor; or any
judgment, writ, warrant of attachment or execution or similar process
shall be issued or levied against a substantial part of the property of
the Borrower, any of its Subsidiaries or any Guarantor;
(f) A petition shall be filed by or against the Borrower, any
of its Subsidiaries or any Guarantor under the United States Bankruptcy
Code naming the Borrower, any of its Subsidiaries or such Guarantor as
debtor; provided, however, that in the case of a filing of a petition
against a Person, if the Person has commenced controverting such
petition within thirty (30) days after the filing of the petition and
is diligently continuing to controvert the petition, the Lender's
remedy shall be limited to ceasing to make Revolving Advances and to
ceasing to cause Letters of Credit to be issued until the earlier (the
"Full Remedies Date") of the date ninety (90) days after the filing of
the petition or the date an order for relief is entered against the
Person;
(g) Any representation or warranty made by the Borrower in
this Agreement, by any Guarantor in any guaranty delivered to the
Lender, or by the Borrower (or any of its Officers) or any Guarantor in
any agreement, certificate, instrument or financial statement or other
statement contemplated by or made or delivered pursuant to or in
connection with this Agreement or any such guaranty shall prove to have
been incorrect in any material respect when deemed to be effective;
(h) The rendering against the Borrower or any of its
Subsidiaries of an arbitration award, final judgment, decree or order
for the payment of money, which when aggregated with all other such
awards, judgments, decrees and orders against the Borrower and its
Subsidiaries, exceeds the sum of $250,000.00 plus any reserves made for
such awards, judgments, decrees and orders, and the
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continuance of such award, judgment, decree or order unsatisfied and in
effect for any period of 30 consecutive days without a stay of
execution;
(i) A material default under any bond, debenture, note or
other evidence of material indebtedness of the Borrower or any of its
Subsidiaries owed to any Person other than the Lender, or under any
indenture or other instrument under which any such evidence of material
indebtedness has been issued or by which it is governed, or under any
material lease or other contract, and the expiration of the applicable
period of grace, if any, specified in such evidence of indebtedness,
indenture, other instrument, lease or contract, provided that only in
the case of a default which does not involve the failure to pay a
monetary obligation or a default which can be cured by the payment of
money alone, the default must also permit acceleration of the
obligations under such agreement or the termination of such agreement;
(j) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Pension Plan
of the Borrower or any of its Subsidiaries or for the appointment by
the appropriate United States District Court of a trustee to administer
any Pension Plan, shall have occurred and be continuing 30 days after
written notice to such effect shall have been given to the Borrower by
the Lender; or a trustee shall have been appointed by an appropriate
United States District Court to administer any Pension Plan of the
Borrower or any of its Subsidiaries; or the Pension Benefit Guaranty
Corporation shall have instituted proceedings to terminate any Pension
Plan of the Borrower or any of its Subsidiaries or to appoint a trustee
to administer any Pension Plan of the Borrower or any of its
Subsidiaries; or the Borrower, any of its Subsidiaries or any of their
ERISA Affiliates shall have filed for a distress termination of any
Pension Plan under Title IV of ERISA; or the Borrower, any of its
Subsidiaries or any of their ERISA Affiliates shall have failed to make
any quarterly contribution required with respect to any Pension Plan
under Section 412(m) of the IRC, which the Lender determines in good
faith may by itself, or in combination with any such failures that the
Lender may determine are likely to occur in the future, result in the
imposition of a Lien on the assets of the Borrower or any of its
Affiliates in favor of the Pension Plan; or any withdrawal, partial
withdrawal, reorganization or other event occurs with respect to a
Multiemployer Plan which results or could reasonably be expected to
result in a material liability of the Borrower or any of its
Subsidiaries to the Multiemployer Plan under Title IV of ERISA.
(k) An event of default shall occur under any Security
Document;
(l) The Borrower or any of its Subsidiaries shall liquidate,
dissolve, terminate or suspend its business operations or otherwise
fail to operate its business in the ordinary course, or sell or attempt
to sell all or substantially all of its assets, without the Lender's
prior written consent;
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(m) Default in the payment of any amount owed by the Borrower
or any of its Subsidiaries to the Lender other than any indebtedness
arising hereunder;
(n) Any Guarantor or person signing a support agreement in
favor of the Lender shall repudiate, purport to revoke or fail to
perform his obligations under his guaranty or support agreement in
favor of the Lender, any individual Guarantor shall die or any other
Guarantor shall cease to exist;
(o) Any event or circumstance with respect to the Borrower or
any of its Subsidiaries shall occur such that the Lender shall believe
in good faith that the prospect of payment of all or any part of the
Obligations or the performance by the Borrower under the Loan Documents
is impaired or any material adverse change in the business or financial
condition of the Borrower (taken as a whole) shall occur; or
(p) Any breach, default or event of default by or attributable
to any Affiliate under any agreement between such Affiliate and the
Lender shall occur.
Section 7.2 Rights and Remedies. During any Default Period, the Lender
may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the
Commitment to be terminated, whereupon the same shall forthwith
terminate;
(b) the Lender may, by notice to the Borrower (the "Actual
Acceleration Notice"), declare the Obligations to be forthwith due and
payable, whereupon all Obligations shall become and be forthwith due
and payable, without demand, presentment, protest, or other notice of
any kind (including, without limitation, notice of dishonor, notice of
default, and notice of intent to accelerate the maturity of the
Obligation), all of which the Borrower waives except for the Actual
Acceleration Notice;
(c) the Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to the
Borrower to the payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including the right to take possession of Collateral, or any evidence
thereof, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which the Borrower hereby
expressly waives) and the right to sell, lease or otherwise dispose of
any or all of the Collateral (with or without giving any warranties as
to the Collateral, title to the Collateral or similar warranties), and,
in connection therewith, the Borrower will on demand assemble the
Collateral given
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by and make it available to the Lender at a place to be designated by
the Lender which is reasonably convenient to both parties;
(e) the Lender may make demand upon the Borrower and,
forthwith upon such demand, the Borrower will pay to the Lender in
immediately available funds for deposit in the Special Account pursuant
to Section 2.5, an amount equal to the aggregate maximum amount
available to be drawn under all Letters of Credit then outstanding,
assuming compliance with all conditions for drawing thereunder;
(f) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(g) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing or anything to the contrary in any of the other
Loan Documents, upon the occurrence of an Event of Default described in
subsections (e) or (f) of Section 7.1, the Obligations shall be immediately due
and payable automatically without presentment, demand, protest or notice of any
kind; provided, however, that in the case of an involuntary petition resulting
in an Event of Default under subsection (f) of Section 7.1, the Obligations
shall be immediately due and payable automatically on the Full Remedies Date
without demand, presentment, protest, or notice of any kind (including, without
limitation, notice of dishonor, notice of default, notice of intent to
accelerate the maturity of the Obligation and actual notice of acceleration),
all of which the Borrower waives without presentment, demand, protest or notice
of any kind. If the Lender sells any of the Collateral on credit, the
Obligations will be reduced only to the extent of payments actually received. If
the purchaser fails to pay for the Collateral, the Lender may resell the
Collateral and shall apply any proceeds actually received to the Obligations.
Section 7.3 Certain Notices. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 8.3) at least ten calendar days before
the date of intended disposition or other action.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 No Waiver; Cumulative Remedies; Compliance with Laws. No
failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law. The Lender may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral
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and such compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral.
Section 8.2 Amendments, Etc. No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure by the
Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle such Person or any other Person to any other or further
notice or demand in similar or other circumstances.
Section 8.3 Addresses for Notices; Requests for Accounting. Except as
otherwise expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below next to its
signature or, as to each party, at such other address or telecopier number as
may hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender. All requests under Section 9-210 of the
UCC (i) shall be made in a writing signed by a person authorized under Section
2.2(b), (ii) shall be personally delivered, sent by registered or certified
mail, return receipt requested, or by overnight courier of national reputation
(iii) shall be deemed to be sent when received by the Lender and (iv) shall
otherwise comply with the requirements of Section 9-210. The Borrower requests
that the Lender respond to all such requests which on their face appear to come
from an authorized individual and releases the Lender from any liability for so
responding. The Borrower shall pay Lender the maximum amount allowed by law for
responding to such requests.
Section 8.4 Further Documents. The Borrower will from time to time execute
and deliver or endorse any and all instruments, documents, conveyances,
assignments, security agreements, financing statements, control agreements and
other agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's rights
under the Loan Documents (but any failure to request or assure that the Borrower
executes, delivers or endorses any such item shall not affect or impair the
validity, sufficiency or enforceability of the Loan Documents and the Security
Interest, regardless of whether any such item was or was not executed, delivered
or endorsed in a similar context or on a prior occasion).
Section 8.5 Costs and Expenses. The Borrower shall pay on demand all costs
and expenses, including reasonable attorneys' fees, incurred by the Lender in
connection with the Obligations, this Agreement, the Loan Documents, any Letter
of Credit and any other document or agreement related hereto or thereto, and the
transactions contemplated hereby, including all
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such costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, amendment, administration, performance, collection and
enforcement of the Obligations and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement of
the Security Interest.
Section 8.6 Indemnity. In addition to the payment of expenses pursuant to
Section 8.5, the Borrower shall indemnify, defend and hold harmless the Lender,
and any of its participants, parent corporations, subsidiary corporations,
affiliated corporations, successor corporations, and all present and future
officers, directors, employees, attorneys and agents of the foregoing (the
"Indemnitees") from and against any of the following (collectively, "Indemnified
Liabilities"):
(i) any and all transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the
execution and delivery of the Loan Documents or the making of the
Advances;
(ii) any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained in Section
5.14 proves to be incorrect in any respect or as a result of any
violation of the covenant contained in Section 6.11(b); and
(iii) except to the extent arising from judgments in favor of
the Borrower against the Lender on account of the Lender's breach of
its obligations under this Agreement, any and all other liabilities,
losses, damages, penalties, judgments, suits, claims, costs and
expenses of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel) in connection with the foregoing
and any other investigative, administrative or judicial proceedings,
whether or not such Indemnitee shall be designated a party thereto,
which may be imposed on, incurred by or asserted against any such
Indemnitee, in any manner related to or arising out of or in
connection with the making of the Advances and the Loan Documents or
the use or intended use of the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 8.6 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
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Section 8.7 Participants. The Lender and its participants, if any, are not
partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the Lender's participants, successors or assigns.
Section 8.8 Execution in Counterparts; Telefacsimile Execution. This
Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
Section 8.9 Retention of Borrower's Records. The Lender shall have no
obligation to maintain any electronic records or any documents, schedules,
invoices, agings, or other papers delivered to the Lender by the Borrower or in
connection with the Loan Documents for more than four months after receipt by
the Lender.
Section 8.10 Binding Effect; Assignment; Complete Agreement; Exchanging
Information. The Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
To the extent permitted by law, the Borrower waives and will not assert against
any assignee any claims, defenses or set-offs which the Borrower could assert
against the Lender. This Agreement shall also bind all Persons who become a
party to this Agreement as a borrower. THIS AGREEMENT, TOGETHER WITH THE LOAN
DOCUMENTS, COMPRISES THE COMPLETE AND INTEGRATED AGREEMENT OF THE PARTIES ON THE
SUBJECT MATTER THEREOF AND SUPERSEDES ALL PRIOR AGREEMENTS, WRITTEN OR ORAL, ON
THE SUBJECT MATTER THEREOF; AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Without limiting the Lender's
right to share information regarding the Borrower and its Affiliates with the
Lender's participants, accountants, lawyers and other advisors, the Lender,
Xxxxx Fargo & Company, and all direct and indirect subsidiaries of Xxxxx Fargo &
Company, may exchange any and all information they may have in their possession
regarding the Borrower and its Affiliates, and the Borrower waives any right of
confidentiality it may have with respect to such exchange of such information.
Section 8.11 Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
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Section 8.12 Headings. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 8.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.
Except as expressly provided in another Loan Document, the Loan Documents shall
be governed by and construed in accordance with the substantive laws (other than
conflict laws) of the State of Arizona. The parties hereto hereby (i) consent to
the personal jurisdiction of the state and federal courts located in the State
of Arizona in connection with any controversy related to this Agreement; (ii)
waive any argument that venue in any such forum is not convenient, (iii) agree
that any litigation initiated by the Lender or the Borrower in connection with
this Agreement or the other Loan Documents may be venued in either the State or
Federal courts located in Maricopa County, Arizona; and (iv) agree that a final
judgment in any such suit, action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
Section 8.14 Co-Borrowers.
(a) All Advances may be made solely to, and all Letters of Credit
may be issued for solely the account of, Xxxxxx International, at the
Lender's election, any other Person comprising the Borrower; and in such
case they shall be deemed received by all Persons comprising the Borrower.
Any payments on the Note received by the Lender shall be credited to the
Note for the benefit of all Persons comprising the Borrower. It is
expressly agreed and understood by each Person comprising the Borrower
that Lender shall have no responsibility to inquire into the
apportionment, allocation or disposition of any Advances made to another
Borrower. Each Person comprising the Borrower hereby irrevocably appoints
Xxxxxx International and each other Borrower as its agent and
attorney-in-fact for all purposes of the Loan Documents, including,
without limitation, the giving and receiving of notices and other
communications, the making of requests for Advances and Letters of Credit,
the execution and delivery of certificates and the receiving and
allocating of Advances from the Lender.
(b) Each Person comprising the Borrower represents and warrants to
Lender that the joint handling of the Loan is jointly desired by all
Persons comprising the Borrower. Each Person comprising the Borrower
expects to derive benefit, directly or indirectly, from the joint
borrowing.
(c) Neither demand on, nor the pursuit of any remedies against, any
Borrower shall be required as a condition precedent to, and neither the
pendency nor the prior termination of any action, suit or proceeding
against any other Borrower (whether for the same or a different remedy)
shall bear on or prejudice the making of a demand on any Borrower by the
Lender and commencement against any other Borrower after such demand, of
any action, suit or proceeding, at law or in equity, for the specific
performance of any covenant or agreement
-55-
contained herein or for the enforcement of any other appropriate legal or
equitable remedy.
(d) Each Person comprising the Borrower agrees to perform the
Obligations of the other Persons comprising the Borrower, whether or not
it is a party to the Loan Document creating the Obligations. Each
Borrower's liability under the Loan Documents is primary, direct,
immediate, joint and several with that of the other Persons comprising the
Borrower. Neither (i) the exercise or the failure to exercise by the
Lender of any rights or remedies conferred on it under the Loan Documents,
hereunder or existing at law or otherwise, or against any security for
performance of the Obligations, (ii) the commencement of an action at law
or the recovery of a judgment at law against any other Borrower or any
surety and the enforcement thereof through levy or execution or otherwise,
(iii) the taking or institution or any other action or proceeding against
any other Borrower or any surety nor (iv) any delay in taking, pursuing or
exercising any of the foregoing actions, rights, powers or remedies (even
though requested by any of the Persons comprising Borrower) by Lender or
anyone acting for the Lender, shall extinguish or affect the obligations
of any of the Persons comprising the Borrower under the Loan Documents.
(e) Each Borrower hereby expressly waives: (i) all diligence in
collection or protection of or realization on the Obligations or any part
thereof, any obligation hereunder, or any security for or guarantee of any
of the foregoing; (ii) any defense based upon a marshaling of assets;
(iii) any defense arising because of the Lender's election under Section
1111(b)(2) of the United States Bankruptcy Code ("Bankruptcy Code") in any
proceeding instituted under the Bankruptcy Code; (iv) any defense based on
post-petition borrowing or the grant of a security interest by any other
Borrower under Section 364 of the Bankruptcy Code; (v) any duty on the
part of the Lender to disclose to any other Person comprising Borrower any
facts Lender may now or hereafter know about any other Person comprising
the Borrower, regardless of whether Lender has reason to believe that any
such facts materially increase the risk beyond that which such Person
intends to assume or has reason to believe that such facts are known such
Person or has a reasonable opportunity to communicate such facts to such
Person, because each Person comprising the Borrower represents and
warrants that it is fully responsible for being and keeping informed of
the financial condition of the other Persons comprising the Borrower and
of all circumstances bearing on the risk of non-payment of any
Obligations; (vi) any and all suretyship defenses and defenses in the
nature thereof under Arizona and/or any other applicable law, including,
without limitation, the benefits of the provisions of Sections 12-1641
through 12-1646, of the Arizona Revised Statutes, Sections 17 and 21,
A.R.C.P., and all other laws of similar import; and (vii) all rights and
defenses arising out of an election of remedies by the Lender, even though
that election of remedies, such as a nonjudicial foreclosure with respect
to security for a guaranteed obligation, has destroyed the Person's rights
of subrogation and reimbursement against the principal by the operation of
law or otherwise.
-56-
(f) Each Person comprising the Borrower agrees that it will not
assert against the Lender any defense of waiver, release, discharge in
bankruptcy, statute of limitations, res judicata, statute of frauds,
anti-deficiency statute, fraud, usury, illegality or unenforceability
which may be available to the other Persons comprising the Borrower with
respect to the Loan Documents (or the Loan), or any set off available to
the other Persons comprising the Borrower against the Lender, whether or
not on account of a related transaction.
(g) The benefits, remedies and rights provided or intended to be
provided hereby for the Lender are in addition to and without prejudice to
any rights, benefits, remedies or security to which the Lender might
otherwise be entitled.
(h) Anything else contained herein to the contrary notwithstanding,
the Lender, from time to time, without notice to any Borrower, may take
all or any of the following actions without in any manner affecting or
impairing the obligations of any other Borrower under the Loan Documents:
(i) obtain a lien on or a security interest in any property to secure any
of the Obligations, either consensually or by operation of law; (ii)
retain or obtain the primary or secondary liability of any Person(s), in
addition to the Persons comprising the Borrower, with respect to any of
the Obligations; (iii) renew, extend or otherwise change the time for
payment or performance of any of the Obligations for any period; (iv)
release or compromise any liability of the other Persons comprising the
Borrower under the Loan Documents or any liability of any nature of any
other person(s) with respect to the Obligations; (v) exchange, enforce,
waive, release and apply any security for the performance of the
Obligations and direct the order or manner of the proceeds of such
security for any of the Obligations, whether or not the Lender shall
proceed against any other Person primarily or secondarily liable on any of
the Obligations; (vi) agree to any amendment (including, without
limitation, any amendment which changes the amount of interest to be paid
under the Loan Documents or extends the period of time during which the
other Persons comprising the Borrower may obtain Advances or Letters of
Credit) to the Loan Documents or any waiver of any provisions of the Loan
Documents and/or exercise the Lender's rights to consent to any action or
non-action of the Lender which may violate the covenants and agreements
contained in the Loan Documents with or without consideration, on such
terms and conditions as may be acceptable to the Lender in Lender's
discretion; or (vii) exercise any of the Lender's rights conferred by the
Loan Documents or by law.
(i) If at any time all or any part of any payment theretofore
applied by the Lender to any of the Obligations is or must be rescinded or
returned by the Lender for any reason whatsoever (including, without
limitation the insolvency, bankruptcy or reorganization of any of the
Persons comprising the Borrower), such Obligations, for purposes of this
Agreement, to the extent that such payment is or must be rescinded or
returned, shall be deemed to have never been performed.
-57-
(j) To the extent not prohibited by law, until the Obligations have
been paid and performed in full and Lender has no further obligation to
extend credit to any Borrower under the Loan Documents, each Person
comprising the Borrower shall have no right of subrogation with respect to
the Obligations or any rights of indemnification, reimbursement or
contribution from any other Person comprising the Borrower or from any
surety with respect to the Obligations regardless of any payment made by
such Person with respect to the Obligations of the other Persons
comprising the Borrower; and such Person hereby unconditionally waives any
such right of subrogation, indemnification, reimbursement or contribution
for such period.
(k) Each Borrower agrees that they shall not have or assert any such
rights against one another or their respective successors and assigns or
any other party (including any surety), either directly or as an attempted
set off to any action commenced against the other Persons comprising the
Borrower or any other Person. Each of the Persons comprising the Borrower
hereby acknowledges and agrees that this waiver is intended to benefit the
other Persons comprising the Borrower and shall not limit or otherwise
affect any of such Persons liabilities under any Loan Document, or the
enforceability hereof or thereof.
(l) The obligations of the Persons comprising the Borrower in this
Agreement are joint and several.
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
[SEE SEPARATE SIGNATURE PAGE]
-58-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
For Each Person Comprising the Borrower XXXXXX INTERNATIONAL, INC., a
Delaware corporation
C/o Schuff International, Inc.
0000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000 By _________________________________
Telecopier: (000) 000-0000 Xxxxx X. Xxxxxx
Attention: Xxxxxxx X. Xxxx Its President
e-mail: xxxx.xxxx@xxxxxx.xxx
By _________________________________
Xxxxxxx X. Xxxx
Its Vice President and CFO
XXXXXX STEEL COMPANY, a
Delaware corporation
By _________________________________
Xxxxx X. Xxxxxx
Its President
By: ________________________________
Xxxxxxx X. Xxxx
Its: Vice President and CFO
XXXXXXXXX STEEL, INC., a California
corporation
By: ________________________________
Xxxxx X. Xxxxxx
Its: Vice President
ADDISON STEEL, INC., a Florida
corporation
By: ________________________________
Xxxxx X. Xxxxxx
Its: Vice President
-59-
QUINCY JOIST COMPANY, a Delaware
corporation
By: ________________________________
Xxxxx X. Xxxxxx
Its: Vice President
SIX INDUSTRIES, INC., a Delaware
corporation
By: ________________________________
Xxxxx X. Xxxxxx
Its: Vice President
ON-TIME STEEL MANAGEMENT
HOLDING, INC., a Delaware corporation
By: ________________________________
Xxxxxxx X. Xxxx
Its: Secretary and Treasurer
Xxxxx Fargo Credit, Inc. XXXXX FARGO CREDIT, INC.
MAC S4101-076
000 Xxxx Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
Telecopier: 000-000-0000 By _________________________________
Attention: Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx
e-mail: xxxxxxxx@xxxxxxxxxx.xxx Its Assistant Vice President
-60-
TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Form of Revolving Note
Exhibit B Compliance Certificate
Exhibit C Premises
Schedule 1.1 List of Persons Comprising Borrower
Schedule 1.1 Eligible Real Estate
Schedule 3.6 Name, Address, Federal Employee Identification Number and
Organizational Numbers of Debtors
Schedule 3.9 Eligible Equipment Value
Schedule 5.1 Trade Names, Chief Executive Office, Principal
Place of Business, and Locations of Collateral
Schedule 5.2 Capitalization and Organizational Chart
Schedule 5.5 Subsidiaries
Schedule 5.11 Intellectual Property Disclosures
Schedule 6.3 Permitted Liens
Schedule 6.4 Indebtedness
Schedule 6.5 Guaranties
Schedule 6.8 Salaries
Schedule 6.27 Transactions with Affiliates
EXHIBIT A to Credit and Security Agreement
REVOLVING NOTE
$15,000,000 Phoenix, Arizona
August 13, 2003
For value received, the undersigned, XXXXXX INTERNATIONAL, INC., a
Delaware corporation (the "Borrower"), hereby promises to pay on the Termination
Date under the Credit Agreement (defined below), to the order of XXXXX FARGO
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office in
Phoenix, Arizona, or at any other place designated at any time by the holder
hereof, in lawful money of the United States of America and in immediately
available funds, the principal sum of FIFTEEN MILLION AND NO/100 DOLLARS
($15,000,000) or, if less, the aggregate unpaid principal amount of all
Revolving Advances made by the Lender to the Borrower under the Credit Agreement
(defined below) together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Credit and Security
Agreement of even date herewith (the "Credit Agreement") by and between the
Lender and the Borrower. The principal hereof and interest accruing thereon
shall be due and payable as provided in the Credit Agreement. This Note may be
prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Revolving Note referred to in the Credit Agreement. This Note is secured, among
other things, pursuant to the Credit Agreement and the Security Documents as
therein defined, and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.
The Borrower shall pay all costs of collection, including reasonable
attorneys' fees and legal expenses if this Note is not paid when due, whether or
not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
XXXXXX INTERNATIONAL, INC., a
Delaware corporation
By
------------------------------------
Xxxxx X. Xxxxxx
Its President
By
------------------------------------
Xxxxxxx X. Xxxx
Its Vice President and CFO
XXXXXX STEEL COMPANY, a
Delaware corporation
By
------------------------------------
Xxxxx X. Xxxxxx
Its President
By:
------------------------------------
Xxxxxxx X. Xxxx
Its: Vice President and CFO
XXXXXXXXX STEEL, INC., a California
corporation
By:
------------------------------------
Xxxxx X. Xxxxxx
Its: Vice President
ADDISON STEEL, INC., a Florida corporation
By:
------------------------------------
Xxxxx X. Xxxxxx
Its: Vice President
QUINCY JOIST COMPANY, a Delaware
corporation
By:
------------------------------------
Xxxxx X. Xxxxxx
Its: Vice President
A-2
SIX INDUSTRIES, INC., a Delaware
corporation
By:
------------------------------------
Xxxxx X. Xxxxxx
Its: Vice President
ON-TIME STEEL MANAGEMENT
HOLDING, INC., a Delaware corporation
By:
------------------------------------
Xxxxxxx X. Xxxx
Its: Secretary and Treasurer
A-3
EXHIBIT B to Credit and Security Agreement
COMPLIANCE CERTIFICATE
To:
----------------------------
Xxxxx Fargo Credit, Inc.
Date: , 200
-------------------- ---
Subject:
----------------------------
Financial Statements
In accordance with our Credit and Security Agreement dated as of August
______, 2003 (the "Credit Agreement"), attached are the financial statements of
Xxxxxx International, Inc. and its Subsidiaries as of and for ________________,
200__ (the "Reporting Date") and the year-to-date period then ended (the
"Current Financials"). All terms used in this certificate have the meanings
given in the Credit Agreement.
I certify that the Current Financials have been prepared in accordance
with GAAP, subject to year-end audit adjustments, and fairly present the
Borrower's financial condition as of the date thereof.
Events of Default. (Check one):
[ ] The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement except as
previously reported in writing to the Lender.
[ ] The undersigned has knowledge of the occurrence of a Default or
Event of Default under the Credit Agreement not previously reported
in writing to the Lender and attached hereto is a statement of the
facts with respect to thereto. The Borrower acknowledges that
pursuant to Section 2.8(b) of the Credit Agreement, the Lender may
impose the Default Rate at any time during the resulting Default
Period to be effective as of any date permitted under the Agreement.
Financial Covenants. I further certify to the Lender as follows:(Check
one):
[ ] The Reporting Date marks the end of one of the Borrower's fiscal
months, but not the end of a fiscal quarter or fiscal year; hence I
am completing all items below except items ___ and __.
[ ] The Reporting Date marks the end of one of the Borrower's fiscal
quarters but not the end of a fiscal year, hence I am completing all
items below except items _ and _ .
[ ] The Reporting Date marks the end of the Borrower's fiscal year,
hence I am completing all paragraphs below all items below.
I further certify to the Lender as follows:
a. Minimum Debt Service Coverage Ratio. Pursuant to Section 6.2(a)
of the Credit Agreement, as of the Reporting Date, the Debt Service
Coverage Ratio of the Borrower and its Subsidiaries on a consolidated
basis was _______, which [ ] satisfies [ ] does not satisfy the
requirement on the Reporting Date that such ratio be not less than ____ to
____.
b. Minimum Book Net Worth. Pursuant to Section 6.2(b) of the Credit
Agreement, as of the Reporting Date, the Borrower's Net Worth was
$____________, which [ ] satisfies [ ] does not satisfy the requirement on
the Reporting Date that such amount be not less than $_______________.
c. Minimum Monthly Stop Loss. Pursuant to Section 6.2(c) of the
Credit Agreement, Net Loss of the Borrower and its Subsidiaries on a
consolidated basis was $ _________ for the month ending on the Reporting
Date and was $ __________ for the two month period ending on the Reporting
Date, which [ ] satisfies [ ] does not satisfy the requirement on the
Reporting Date that such amount be not greater than $_______________ in
the aggregate during any one month and $_______________ in the aggregate
during any two consecutive months.
d. Capital Expenditures. Pursuant to Section 6.2(e) of the Credit
Agreement, for the year-to-date period ending on the Reporting Date, the
Borrower has expended or contracted to expend during the fiscal year ended
______________, 200___, for unfinanced Capital Expenditures,
$__________________ in the aggregate, which [ ] satisfies [ ] does not
satisfy the requirement that such expenditures in such fiscal year not
exceed $ _________ in the aggregate during such year.
[__]. Distributions. As of the Reporting Date, the Borrower [ ] is [
] is not in compliance with Section 6.7 of the Credit Agreement concerning
dividends distributions, purchases, retirements and redemptions.
[__]. Salaries. As of the Reporting Date, the Borrower [ ] is [ ] is
not in compliance with Section 6.8 of the Credit Agreement concerning
salaries and other compensation.
[__]. Transactions With Affiliates. As of the Reporting Date, the
Borrower [ ] is [ ] is not in compliance with Section 6.27 of the Credit
Agreement concerning transactions with Affiliates.
Compliance Certificate B-2
[__]. As of the Reporting Date, the Borrower [ ] is [ ] is not in
compliance with Section 6.28 of the Credit Agreement concerning purchases
and prepayments.
Attached hereto are all relevant facts in reasonable detail to evidence, and the
computations of the financial covenants referred to above. These computations
were made in accordance with GAAP.
----------------------------------------
Chief Financial Officer of Xxxxxx
International, Inc. and authorized agent
of the other Persons comprising the
Borrower
Compliance Certificate B-3
EXHIBIT C to Credit and Security Agreement
PREMISES
The Premises referred to in the Credit and Security Agreement are legally
described as follows:
SIZE OWNED/
LOCATION (SQ. FT.) LEASED PRODUCT/SERVICES
-------- --------- ------ ----------------
Phoenix, Arizona 400,000 Leased (1) Fabrication shop; operations, erection, engineering and detailing
offices.
Gilbert, Arizona 145,000 Leased (2) Fabrication Shop
Phoenix, Arizona 22,000 Leased (3) Executive, finance, administration, estimating and sales offices.
Tustin, California 180 Leased Sales Office
Lockhart, Florida 144,000 Owned Fabrication shop; sales, executive and operations offices; maintenance
yard; steel truss plant
Albany, Georgia 102,000 Owned Fabrication shop; executive, operations and estimating offices
Atlanta, Georgia 3,600 Leased Sales office
Quincy, Florida 140,000 Owned Steel joist and long span truss manufacturing plant
Buckeye, Arizona 100,000 Owned Steel joist and long span truss manufacturing plant
Houston, Texas 43,000 Owned Fabrication shop; sales, estimating, operation and administrative
offices
National City, California 26,000 Owned Fabrication shop; operations, sales, estimating and administrative
offices
Englewood, Colorado 2,934 Leased Operations, sales, estimating and administrative offices
Seattle, Washington 1,300 Leased Operations, sales, estimating ad administrative offices
DISCLOSURE SCHEDULE OF BORROWER
This Disclosure Schedule ("Disclosure Schedule") is being delivered by
Xxxxxx International, Inc., a Delaware corporation ("Xxxxxx International" or
the "Company"), and the other persons listed in Schedule 1.1 (collectively,
together with Xxxxxx International, the "Borrower") to the Loan Agreement (as
hereinafter defined), in connection with the Credit and Security Agreement,
dated as of August 13, 2003, executed by and among the Borrower and Xxxxx Fargo
Credit, Inc. (the "Lender") (with all of the exhibits appended thereto, the
"Loan Agreement"). Unless the context otherwise requires, all capitalized terms
used in this Disclosure Schedule shall have the respective meanings assigned to
them in the Loan Agreement. The representations and warranties of the Borrower
set forth in the Loan Agreement are hereby excepted to the extent set forth
hereafter.
SCHEDULE 1.1 (BORROWER)
1. Xxxxxx International, Inc., a Delaware corporation
2. Xxxxxx Steel Company, a Delaware corporation
3. Xxxxxxxxx Steel, Inc., a California corporation
4. Addison Steel, Inc, a Florida corporation
5. Quincy Joist Company, a Delaware corporation
6. Six Industries, Inc., a Delaware corporation
7. On-Time Steel Management Holding, Inc., a Delaware corporation
SCHEDULE 1.1 (ELIGIBLE REAL ESTATE)
1. 0000 Xxxxxxx Xxxxx, Xxxxxxx, Xxxxx
2. 0000 Xxxx Xxxx, Xxxxxx, Xxxxxxx
3. 0000 Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx
4. 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxx
5. 00000 X. Xxxxxxxx Xxx, Xxxxxxx, Xxxxxxx
6. 0000 Xxxxxx Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxxxx (but not until the
environmental condition of the property is satisfactory to the Lender in
its sole and absolute discretion)
SCHEDULE 3.6 (DEBTOR INFORMATION)
1. Xxxxxx International, Inc., a Delaware corporation
Chief Executive Officer: 0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Principal Place of Business: 0000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Federal Employer Identification Number: 00-0000000
Organizational Identification Number: 3399749
2. Xxxxxx Steel Company, a Delaware corporation
Address: 0000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Federal Employer Identification Number: 00-0000000
Organizational Identification Number: 2748115
3. Xxxxxxxxx Steel, Inc., a California corporation
Address: 0000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Federal Employer Identification Number: 00-0000000
Organizational Identification Number: C0376708
4. Addison Steel, Inc, a Florida corporation
Address: 0000 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Other Inventory and Equipment Location: 0000 Xxxx Xxxx
Xxxxxx, Xxxxxxx
Federal Employer Identification Number: 00-0000000
Organizational Identification Number: 235785
5. Quincy Joist Company, a Delaware corporation
Address: 000 X. Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Other Inventory and Equipment Location 00000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
Federal Employer Identification Number: 00-0000000
Organizational Identification Number: 3567446
6. Six Industries, Inc., a Delaware corporation
Address: 0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Federal Employer Identification Number: 00-0000000
Organizational Identification Number: 3612848
7. On-Time Steel Management Holding, Inc., a Delaware corporation
Address: 0000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Federal Employer Identification Number: 00-0000000
Organizational Identification Number: 3545161
SCHEDULE 3.9 (EQUIPMENT)
This Schedule follows the text of this Disclosure Schedule.
2
SCHEDULE 5.1 (JURISDICTION OF INCORPORATION)
Reference is hereby made to the Schedule 1.1 (Borrower) and Schedule 3.6
(Debtor Information) as set forth in this Disclosure Schedule.
SCHEDULE 5.2 (CAPITALIZATION)
SHARES
SHARES SUBJECT TO
BENEFICIALLY UNEXERCISED PERCENTAGE
NAME & ADDRESS OF BENEFICIAL OWNER (1) OWNED OPTIONS (3) OWNED
-------------------------------------- ----- ----------- -----
Xxxxx X. Xxxxxx and Xxxxx X. Xxxxxx (2), 2,553,000(4) -- 36.5%
Xxxxx X. Xxxxxx and Xxxxx X. Xxxxxx (2), 2,469,200(5) -- 35.5%
Dimensional Fund Advisors
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxxx, XX 00000 402,900(6) -- 5.8%
Xxxx X. Xxxxx (2) 21,132 -- *
Xxxxx Xxxxxxx (2) 3,295 -- *
Xxx X. Xxxxxx (2) 5,000 -- *
Xxxxxx X. Xxxxxx (2) 42,921 10,500 *
X. Xxxxxx Xxxxx (2) 23,684 2,000 *
Xxxxxx XxXxxxxxx (2) 29,212 10,500 *
Xxxxxxx X. Xxxx (2) 3,200 8,000 *
All Directors and Executive Officers as a group (10 persons) 5,128,953 86,200 74.6%
* Represents less than 1% of the Company's outstanding common stock.
(1) This information regarding beneficial ownership of the Company's common
stock by certain beneficial owners and management of the Company is as of
March 31, 2003. A person is deemed to be the beneficial owner of
securities that can be acquired within 60 days from the date set forth
above through the exercise of any option, warrant, or right. Shares of
common stock subject to options, warrants, or rights that are currently
exercisable or exercisable within 60 days are deemed outstanding for the
purpose of computing the percentage of the person holding such options,
warrants, or rights, but are not deemed outstanding for computing the
percentage of any other person. The amounts and percentages are based upon
6,993,564 shares of common stock outstanding as of March 31, 2003. The
persons named in the table, to the Company's knowledge, have sole voting
and sole dispositive power with respect to all shares of common stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes hereunder.
(2) The address of each of the listed stockholders is 0000 Xxxx Xxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxx 00000.
(3) The number of Shares Beneficially Owned include Shares Subject to
Unexercised Options which are exercisable on March 31, 2003, or within 60
days thereafter.
(4) 2,053,000 of these shares are owned by the Xxxxxx Family Trust Under Trust
Agreement dated June 28, 1983, as amended, and 500,000 of these shares are
owned by the Xxxxxx Irrevocable Trust Under Trust Agreement Dated December
31, 1996. Xxxxx X. Xxxxxx and Xxxxx X. Xxxxxx, husband and wife, are
co-trustees of each of the trusts and exercise voting and investment power
over such shares.
(5) 2,269,200 of these shares are owned by the Xxxxx X. Xxxxxx Family Trust
Under Trust Agreement dated March 12, 1992, as amended, and 200,000 of
these shares are owned by the Xxxxx X. Xxxxxx Irrevocable Trust Under
Trust Agreement dated December 31, 1996, as amended. Xxxxx X. Xxxxxx and
Xxxxx Xxxx Xxxxxx, husband and wife, are co-trustees of each of these
trusts and exercise voting and investment power over such shares.
(6) Amount based on last filed Schedule 13G/A effective December 31, 2002.
3
SCHEDULE 5.5 (SUBSIDIARIES)
Subsidiaries of Xxxxxx International, Inc.:
1. Xxxxxx Steel Company
2. Xxxxxxxxx Steel, Inc.
3. Addison Steel, Inc.
4. Quincy Joist Company
5. Six Industries, Inc.
6. On-Time Steel Management Holding, Inc.
Subsidiaries of On-Time Steel Management Holding, Inc.:
A. On-Time Steel Management, Inc.
B. On-Time Steel Management-Northwest, LLC
C. On-Time Steel Management-Colorado, LLC
SCHEDULE 5.7 (LITIGATION)
XXXXXX STEEL V. OC AMERICA/XXXX XXXXX ET. AL. (filed on February 13, 2003),
pending in Xxx Xxxxxx Xxxxxx Xxxxx, Xxxxx xx Xxxxxxxxxx, XX000-000.
XXXXXXXX STEEL ERECTORS, INC. X. XXXXXXX STEEL, INC., (filed on April 16, 2001),
pending in the Xxxxxxx Xxxxx xx Xxxxxx Xxxxxx, Xxxxxxx, XXX-00-0000. -
On October 24, 2002, a union organizer and several employees brought a lawsuit
against the Company's subsidiary, Xxxxxxxxx Steel, in San Diego County Superior
Court, State of California, alleging certain violations of the California wage
and hour laws. The Company denied any knowing violation of the California wage
and hour laws and believed the lawsuit was improperly brought as part of union
organizing efforts by the Ironworkers Local 627, Shopworkers (the "Union"). An
organizing election was held in the fourth quarter of 2002 with the Union
prevailing. Xxxxxxxxx objected to the election because the Union impermissibly
influenced the election by sponsoring and pursuing the wage and labor lawsuit
against Xxxxxxxxx. The Local Region of the NLRB denied Xxxxxxxxx'x objections to
the election in late February 2003. Xxxxxxxxx appealed that decision to the NLRB
in Washington D.C. to pursue a new election. In June 2003, the Union, several
employees and Xxxxxxxxx Steel reached a comprehensive settlement agreement of
all outstanding matters. The settlement resulted in the recognition of the Union
until the end of 2003, with an extension of a collective bargaining agreement
until June 2006 upon approval by the San Diego Superior Court of the settlement
and dismissal of the wage and hour lawsuit. Under the terms of the settlement,
Xxxxxxxxx will pay a class of current and former employees the sum of $120,000.
The settlement is subject to Court approval, which is expected in the fourth
quarter of 2003. The Company believes that this was a satisfactory resolution to
the matter, given the time, expense and distraction of litigation. The Company
has
4
provided an accrual for the $120,000 settlement in the accompanying consolidated
balance sheet and statements of operations.
SCHEDULE 5.11 (INTELLECTUAL PROPERTY RIGHTS)
Application for Service Xxxx Registration: On Time Steel Management and Design
Applicant: Xxxxxx International, Inc.
Serial Number: 76/479144 and 76/479145
Filed December 30, 2002
SCHEDULE 6.3 (PERMITTED LIENS)
Entity Creditor Collateral Jurisdiction Filing Date Filing No.
------ -------- ---------- ------------ ----------- ----------
Xxxxxx
International,
Inc. NA NA NA NA XX
Xxxxxx
Steel
Company AT&T Credit Corporation Equipment Arizona 9/9/97 984041
" Canyon State Oil Company Equipment Arizona 3/9/00 01107474
" Xxxxxx Construction Company Structural Steel Arizona 3/9/00 01107573
" Xxxxxx Construction Company Structural Steel Arizona 4/5/00 01111189
" Galleria Park Partners LLC Structural Steel Arizona 8/3/00 01132550
" Galleria Park Partners LLC Structural Steel Arizona 8/22/00 01134972
" Xxxxxx Construction Company Structural Steel Arizona 9/15/00 01138282
" Bayley Construction Structural Steel Arizona 9/24/00 01140299
" Bayley Construction Structural Steel Arizona 1/25/01 01159445
" Xxxx Dublin Corporate Center Phase II Structural Steel Arizona 2/15/01 01159897
L.P.
5
Entity Creditor Collateral Jurisdiction Filing Date Filing No.
------ -------- ---------- ------------ ----------- ----------
" Xxxxxx Construction Company Structural Steel Arizona 3/5/01 01163771
" PWV Prescott Mall LLC Structural Steel Arizona 5/7/01 01171970
" Champion Development Group c/o Pacific Structural Steel Arizona 8/14/02 200212296712
Development
" Expanets of North America, LLC "Tele-communications product Arizona 9/26/02 200212351641
and services"
On-Time
Steel
Management,
Inc. NA NA NA NA NA
On-Time
Steel
Management
Holding, Inc. BCL Capital Equipment Florida 6/19/00 200000142808
On-Time
Steel
Management -
Colorado,
L.L.C. NA NA NA NA NA
On-Time
Steel
Management -
Northwest
L.L.C. NA NA NA NA NA
Quincy
Joist
Company BCL Capital Equipment Florida 7/14/00 200000161912
Six
Industries,
Inc. XX XX XX XX XX
0
Entity Creditor Collateral Jurisdiction Filing Date Filing No.
------ -------- ---------- ------------ ----------- ----------
Xxxxxxxxx
Steel,
Inc. The Irvine Co. and Xxxxxx Construction Structural Steel California 10/5/98 9828660617
Company
" Citicorp Del Lease, Inc. Forklift California 8/16/99 9924060712
" Citicorp Del Lease, Inc. Forklift California 9/2/99 9925860259
" Sand Canyon/ Structural Steel California 10/29/99 9930860331
Valley Oak Partners L.P.
" The CIT Group/ Equipment Financing, Inc. 2 Forklifts California 7/17/01 0119860547
" Federated Corporation Services, Inc. "Stored Fabricated Materials" California 2/11/02 0204460380
" Allergan Inc. MN-ID "Stored Fabricated Materials" California 2/11/02 0204460382
" Allergan Inc. MN-ID "Stored Fabricated Materials" California 4/25/02 0211660081
" City of Chula Vista "Stored Fabricated Materials" California 9/12/02 0000000000
Addison
Steel,
Inc. IDEC-Nobel Research Center, LLC "Stored Fabricated Material" California 4/1/03 0309360373
* Same Filing - Different Entity
SCHEDULE 6.4 (INDEBTEDNESS)
Indenture, dated June 4, 1998, by and between Xxxxxx International, Inc., and
Xxxxxx Trust Company of California, as trustee, along with 10 1/2% Senior Notes,
due June 1, 2008.
7
SCHEDULE 6.5 (GUARANTIES)
NONE
SCHEDULE 6.8 (SALARIES)
1. Employment Agreement, by and among Addison Steel, Inc., Xxxxxx Steel
Company, and Xxxx X. Xxxxx, dated May 12, 1998, as amended.
2. Employment Agreement, by and among Quincy Joist Company, Xxxxxx Steel
Company, and Xxx Xxxxxxx, dated May 12, 1998, as amended.
SCHEDULE 6.27 (TRANSACTIONS WITH AFFILIATES)
On June 29, 2001, a holding company form of organizational structure was
adopted to provide a framework that generally allows for greater administrative
and operational flexibility. The new structure was consummated by the merger of
Xxxxxx Merger Company into Xxxxxx Steel Company, which was the surviving
corporation. Prior to the merger, Xxxxxx Merger Company was a wholly-owned
subsidiary of Xxxxxx International, Inc., a holding company and initially a
wholly-owned subsidiary of Xxxxxx Steel Company. As a result of the merger,
Xxxxxx Merger Company ceased to exist, and Xxxxxx Steel Company became a
wholly-owned subsidiary of Xxxxxx International, Inc., with all of Xxxxxx Steel
Company's outstanding common stock converted, on a share for share basis, into
common stock of Xxxxxx International, Inc.
Since its inception, the Company has maintained business relationships and
engaged in certain transactions with the affiliated companies and parties
described below. Since the closing of its initial public offering in July 1997,
all transactions between the Company and its affiliated entities, executive
officers, directors, or significant stockholders have been approved by a
majority of the non-employee directors of the Company. The Company also believes
these transactions were on terms that were no less favorable to the Company than
the Company could have obtained from non-affiliated parties.
The Company leases some of its fabrication and office facilities from 19th
Avenue/Xxxxxxxx Limited Partnership, an Arizona limited partnership (the "Xxxxxx
Partnership"). The general and limited partners of the Xxxxxx Partnership are
Xxxxx X. Xxxxxx, Xxxxx X. Xxxxxx, and certain of their family members. Xxxxx X.
Xxxxxx is a co-founder and the Chairman of the Board of Directors of the
Company, and Xxxxx X. Xxxxxx is a Director and the President and Chief Executive
Officer of the Company. Xxxxx X. Xxxxxx and Xxxxx X. Xxxxxx presently are the
beneficial owners of approximately 72% of the issued and outstanding common
stock of the Company.
The Company has three leases with the Xxxxxx Partnership for its
principal fabrication and office facilities, the property and equipment acquired
in the 1997 acquisition of B&K Steel, and additional office facilities adjacent
to the Company's principal office and shop facilities. Each lease has a 20 year
term and is subject to increases every five years based on increases in the
8
Consumer Price Index. The Company's annual rental payments for the three leases
were $1.0 million in 2002. During 2002, the Company amended all three leases.
The annual rent was reduced to $800,000 from $1.1 million. With a 30-day written
notice, the Xxxxxx Partnership may increase the rent to the original amount. The
rent continues to be subject to an increase every 5 years based on increases in
the Consumer Price Index. All other terms and conditions remain unchanged.
* * * * *
No disclosure in this Disclosure Schedule relating to any possible breach
or violation of any agreement, law or regulation shall be construed as an
admission or indication that any such breach or violation exists or has actually
occurred.
Headings have been inserted for convenience of reference only and shall in
no way have the effect of amending or changing the express description of the
corresponding paragraphs as set forth in the Loan Agreement. The Schedule
numbers in this Disclosure Schedule correspond to the section numbers in the
Loan Agreement which are modified by the disclosures; however, any information
disclosed herein under any section number shall be deemed to be disclosed and
incorporated into any other section number under the Loan Agreement where such
disclosure would be reasonably apparent. Furthermore, this Disclosure Schedule
does not purport to disclose any agreements, contracts or instruments that may
be entered into pursuant to the terms of the Loan Agreement.
9
SCHEDULE 3.9
XXXXXX STEEL COMPANY, PHOENIX, ARIZONA
Machinery and Equipment Appraisal Report - See attached.
10
SCHEDULE 3.9
XXXXXX INTERNATIONAL INC. AND XXXXXX STEEL COMPANY, PHOENIX, ARIZONA
Furniture and Equipment Appraisal Report - See attached.
SCHEDULE 3.9
XXXXXX STEEL COMPANY, GILBERT, ARIZONA
Machinery and Equipment and Leasehold Improvements Appraisal Report - See
attached.
SCHEDULE 3.9
QUINCY JOIST COMPANY, BUCKEYE, ARIZONA
Machinery and Equipment Appraisal Report - See attached.
SCHEDULE 3.9
XXXXXXXXX STEEL COMPANY, NATIONAL CITY, CALIFORNIA (SAN DIEGO)
Property and Equipment Appraisal Report - See attached.
SCHEDULE 3.9
ADDISON STEEL COMPANY, ORLANDO, FL
Property and Equipment Appraisal Report - See attached.
SCHEDULE 3.9
QUINCY JOIST COMPANY, QUINCY, FLORIDA
Property and Equipment Appraisal Report - See attached.
SCHEDULE 3.9
SIX INDUSTRIES, INC., HOUSTON, TEXAS
Property and Equipment Appraisal Report - See attached.
SCHEDULE 3.9
ADDISON STEEL COMPANY, ALBANY, GA
Machinery and Equipment Appraisal Report - See attached.
