REVOLVING CREDIT AND TERM LOAN AGREEMENT
This Revolving Credit and Term Loan Agreement is dated as of April 30,
1997, between KINARK CORPORATION, a Delaware corporation ("Borrower"), and BANK
OF OKLAHOMA, NATIONAL ASSOCIATION, a national banking association ("Bank").
RECITALS
A. Reference is made to the Revolving Credit and Term Loan Agreement
dated as of March 24, 1992, as amended by Amendment One to Revolving Credit
Agreement and Term Loan Agreement dated October 16, 1992, a Second Amendment to
Revolving Credit and Term Loan Agreement dated March 31, 1993, a Third
Amendment to Revolving Credit and Term Loan Agreement dated March 31, 1994, a
Fourth Amendment to Revolving Credit and Term Loan Agreement dated March 31,
1995, and a Fifth Amendment to Revolving Credit and Term Loan Agreement dated
effective April 1, 1996 (as amended, the "Existing Credit Agreement"), pursuant
to which currently exists a $4,250,000 Line of Credit, further evidenced by a
$4,250,000 Line Note, and a $2,925,763.12 Term Loan, further evidenced by a
$2,925,763.12 Term Note.
B. The Borrower has requested Bank to: (i) increase the $4,250,000
Revolving Line of Credit to $8,500,000, (ii) establish a $3,500,000 Term Loan,
and (iii) establish a $1,250,000 Advancing Term Loan; and Bank has agreed to
accommodate the Borrower's request, subject to the terms and conditions set
forth below.
C. This Revolving Credit and Term Loan Agreement shall supercede the
Existing Credit Agreement; provided, however, that the instruments, documents
and agreements described on Schedule "A" hereto shall remain effective, except
to the extent expressly amended hereby.
AGREEMENT
For valuable consideration received, the parties agree to the following:
1. DEFINED TERMS. As used in this Agreement, the following terms have
the following meanings (terms defined in the singular to have the same meaning
when used in the plural and vice versa).
1.1. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with those
applied in the preparation of the financial statements referred to in
Sections 6.9.1 and 6.9.2, and all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
1.2. "Affiliate" means any Person: (i) which directly or indirectly
controls, or is controlled by, or is under common control with, Borrower;
or (ii) which directly or indirectly beneficially owns or holds five
percent (5%) or more of any class of voting stock of Borrower. The term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or
otherwise.
1.3. "Agreement" means this Revolving Credit and Term Loan Agreement,
as amended, supplemented, or modified from time to time.
1.4. "Base Rate" means a fluctuating interest rate per annum as in
effect from time to time, which interest rate per annum shall at all times
be equal to the rate of interest announced publicly from time to time
(whether or not charged in each instance), by Chase Manhattan Bank, N.A.
located at New York, New York ("Rate Bank"), as its base rate or general
reference rate. Should the Rate Bank abolish or abandon the practice of
announcing or publishing a Base Rate, then the Base Rate shall be that
interest rate or other general reference rate then in effect at the Rate
Bank which, from time to time, in the reasonable judgment of Bank, most
effectively approximates the initial definition of the "Base Rate."
1.5 "Borrowing Base" means, at any date of determination thereof,
the sum of (a) eighty percent (80%) of Qualified Receivables at such date,
plus (b) fifty percent (50%) of Qualified Inventory at such date
(increased to eighty percent (80%) as to Qualified Inventory in "pig"
form) valued at the lesser of (i) direct cost, or (ii) current market
value at wholesale; provided, however, that subpart (b) of the Borrowing
Base attributable to Qualified Inventory shall not exceed fifty percent
(50%) of the total Borrowing Base at any given time, as determined by the
most recent Borrowing Base Certificate provided to Bank pursuant to
Section 2.2.
1.6 "Borrowing Base Certificate" means each certificate from
Borrower to Bank relating to the Borrowing Base, substantially in the form
of Schedule "1.6" hereto.
1.7. "Borrower Documents" means (i) Certified Resolutions evidencing
authority for execution of this Agreement and all related instruments,
documents and agreements substantially in the form of Schedule "1.7"
attached hereto; (ii) chattel checks from the States of Delaware,
Oklahoma, and Alabama; and (iii) Certificates of Good Standing from the
States of Delaware, Oklahoma, and Alabama.
1.8. "Xxxxxx Galvanizing Company" means Xxxxxx Galvanizing Company, a
Delaware corporation, with principal offices located at 0000 Xxxxx Xxxx
Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000-0000.
1.9. "Xxxxxx Galvanizing Company Documents" means (i) Certified
Resolutions evidencing authority for execution of any documents required
in connection herewith, substantially in the form of Schedule "1.9"
hereto; (ii) Guaranty Agreement; (iii) Security Agreement; (iv) UCC-1
Financing Statements; (v) chattel checks from Delaware, Colorado,
Kentucky, Missouri, Texas, and Tennessee; and (vi) Certificates of Good
Standing from Delaware, Colorado, Kentucky, Missouri, Texas, and
Tennessee.
1.10. "Business Day" means any day other than a Saturday, Sunday,
or other day on which commercial banks in Oklahoma are authorized or
required to close under the laws of the State of Oklahoma.
1.11. "Capital Lease" means all leases which have been or should
be capitalized on the books of the lessee in accordance with GAAP.
1.12. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations and published interpretations
thereof.
1.13. "Collateral" means all property in which Bank is intended
to have a security interest, as described in Section 3.
1.14. "Commitment" means the Bank's obligation to make loans to
the Borrower pursuant to this Agreement.
1.15. "Commonly Controlled Entity" means an entity, whether or
not incorporated, which is under common control with the Borrower within
the meaning of Section 414(b) or 414(c) of the Code.
1.16. "Conversion Date" shall mean the earlier of (i) the date
upon which the Borrower notifies Bank in writing that no additional
advances shall be requested under Section 2.2 of this Agreement and the
$1,250,000 Advancing Term Note, or (ii) April 30, 1998.
1.17. "Debt" means, including but not limited to: (i)
indebtedness or liability for borrowed money; (ii) obligations evidenced
by bonds, debentures, notes, or other similar instruments; (iii)
obligations for the deferred purchase price of property or services
(including trade obligations); (iv) obligations under letters of credit;
(vii) obligations under acceptance facilities; (viii) all guaranties,
endorsements (other than for collection or deposit in the ordinary course
of business), and other contingent obligations to purchase, to provide
funds for payment, to supply funds to invest in any Person or entity, or
otherwise to assure a creditor against loss; and (ix) obligations secured
by any Liens, whether or not the obligations have been assumed.
1.18. "EBIDTA" shall mean net income, plus (i) interest expense,
(ii) depreciation, depletion, obsolescence and amortization of property,
(iii) capitalized lease expense, and (iv) tax expense, all determined in
accordance with GAAP, and for a particular period.
1.19. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations and published
interpretations thereof.
1.20. "$8,500,000 Revolving Note" shall mean the $8,500,000
Promissory Note in form and content as set forth on Schedule "1.20"
attached hereto.
1.21. "GAAP" means generally accepted accounting principles in
the United States, applied on a consistent basis.
1.22. INTENTIONALLY OMITTED.
1.23. "Guarantors" means, separately and collectively, all of the
Subsidiaries.
1.24. "Guaranty Agreements" means a separate Guaranty Agreement
from each of the Subsidiaries, all of which shall be substantially in form
and content as set forth on Schedule "1.24" hereto.
1.25. "Initial Default" means any of the events specified in
Section 9, whether or not any requirement for the giving of notice, the
lapse of time, or both, or any other condition has been satisfied.
1.26. "Lake River Corporation" means Lake River Corporation, an
Illinois corporation, with principal offices located at 0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000.
1.27. "Lake River Corporation Documents" means (i) Certified
Resolutions evidencing authority for execution of any documents required
in connection herewith, substantially in the form of Schedule "1.27"
hereto; (ii) Guaranty Agreement; (iii) Security Agreement; (iv) UCC-1
Financing Statements; (v) chattel check from Illinois; (vi) Certificate of
Good Standing from Illinois.
1.28. "Letter of Credit" means any letter of credit issued
pursuant to Section 2.3, for which, when issued, a Letter of Credit Fee
shall be paid.
1.29. "Lien" means any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of
the foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in respect of any of
the foregoing.)
1.30. "Loan" means advances under the $8,500,000 Revolving Line
of Credit, the $3,500,000 Term Loan, and the $1,250,000 Advancing Term
Loan.
1.31. "Loan Documents" means this Agreement, the Notes, the
Security Agreements, the Guaranty Agreements, the UCC-1 Financing
Statements and all other instruments, documents or agreements required
under this Agreement.
1.32. "Matured Default" means any of the events specified in
Section 9, provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition has been satisfied.
1.33. "Mortgage Amendments" means the amendments to the
Mortgages, in form and content as set forth on Schedule "1.33" attached
hereto, to be filed against each of the Mortgaged Properties for the
purpose of evidencing the current indebtedness.
1.34. "Mortgages" means the Real Estate Mortgages and Deeds of
Trust described on Schedule "1.34" attached hereto, evidencing a first and
prior lien in favor of Bank as to each of the Mortgaged Properties.
1.35. "Mortgaged Properties" means the six Xxxxxx Galvanizing
Company locations (and related furniture, fixtures and equipment), located
in St. Louis County, Missouri; Davidson County, Tennessee; Tarrant County,
Texas; Xxxxxx County, Texas; Jefferson County, Kentucky; and Xxxxx County,
Colorado, the legal descriptions of which are set forth on Schedule "1.35"
hereto.
1.36. "Mortgage Related Documents" means, with regard to each of
the Mortgaged Properties:
(i) an endorsement to each of the existing six title insurance
policies evidencing a new effective date within twenty (20) days of
closing, which endorsement must not reflect any new exceptions,
except those which are reasonably acceptable to Bank;
(ii) a copy of all environmental reports and all Phase I
environmental audit performed on the Mortgaged Properties, all of
which must evidence express language which permis Bank to rely upon
the contents thereof; and
(iii) evidence (e.g., surveyor's certification or title
insurance endorsement) that none of the Mortgaged Properties are
located within the 100 year flood plain, according to appropriate
FEMA rate maps, except for the Mortgaged Properties located in
(a) Tarrant County, Texas, a portion of which (not including
structural improvements) is within the 100 year flood plain according
to that certain letter from Delta Surveying, Inc. dated April 23,
1997; and (b) Xxxxx County, Colorado, for which no such evidence is
available.
1.37. "Multiemployer Plan" means a Plan described in Section
4001(a)(3) of ERISA.
1.38. "North American Galvanizing Company" means North American
Galvanizing Company, a Delaware corporation, with principal offices
located at 0000 Xxxx 00xx Xxxxxx, Xxxxx, Xxxxxxxx 00000-0000.
1.39. "North American Galvanizing Company Documents" means
(i) Certified Resolutions evidencing authority for execution of any
documents required in connection herewith, substantially in the form of
Schedule "1.39" hereto; (ii) Guaranty Agreement; (iii) Security Agreement;
(iv) UCC-1 Financing Statements; (v) chattel checks from Delaware and
Oklahoma; and (vi) Certificates of Good Standing from Delaware and
Oklahoma.
1.40. "North American Warehousing Company" means North American
Warehousing Company, an Illinois corporation, with principal offices
located at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000.
1.41. "North American Warehousing Company" means (i) Certified
Resolutions evidencing authority for execution of any documents required
in connection herewith, substantially in the form of Schedule "1.41"
hereto; (ii) Guaranty Agreement; (iii) Security Agreement; (iv) UCC-1
Financing Statements; (v) chattel check from Illinois; and
(vi) Certificate of Good Standing from Illinois.
1.42. "Notes" means, separately and collectively, the $8,500,000
Revolving Note, the $3,500,000 Term Note, and the $1,250,000 Advancing
Term Note.
1.43. "Obligations" means the Obligations defined in Section 3.
1.44. "$1,250,000 Advancing Term Note" shall mean the $1,250,000
Promissory Note in form and content as set forth on Schedule "1.44"
attached hereto.
1.45. "Opinion of Borrower's Counsel" means a legal opinion from
each Borrower's legal counsel including, without limitation, the opinions
relating to each Borrower and this loan transaction as set forth on
Schedule "1.45" attached hereto.
1.46. "PBGC" means the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
1.47. "Permitted Liens" means, as to Borrower and all
Subsidiaries:
(1) Liens in favor of the Bank;
(2) Liens for taxes or assessments or other government charges
or levies if not yet due and payable or, if due and payable or, if
they are being contested in good faith by appropriate proceedings and
for which appropriate reserves are maintained;
(3) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' liens, and other similar
Liens, securing obligations incurred in the ordinary course of
business which are not past due for more than thirty (30) days or
which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established;
(4) Liens under workers' compensation, unemployment insurance,
Social Security, or similar legislation;
(5) Liens, deposits, or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of
money), leases (permitted under the terms of this Agreement), public
or statutory obligations, surety, stay, appeal, indemnity,
performance or other similar bonds, or other similar obligations
arising in the ordinary course of business;
(6) The Liens described on Schedule "1.47(6);"
(7) Judgment and other similar Liens arising in connection with
court proceedings, provided the execution or other enforcement of
such Liens is effectively bonded, stayed and the claims secured
thereby are being actively contested in good faith and by appropriate
proceedings;
(8) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere
with the occupation, use and enjoyment by the Borrower of the
property or assets encumbered thereby in the normal course of its
business or materially impair the value of the property subject
thereto; and
(9) Purchase-money Liens on any property hereafter acquired or
the assumption of any lien on property existing at the time of such
acquisition (and not created in contemplation of such acquisition),
or a Lien incurred in connection with any conditional sale or other
title retention agreement or a Capital Lease; provided that:
(a) Any property subject to any of the foregoing is
acquired by the Borrower or any Subsidiary in the ordinary
course of its business; and
(b) Each such Lien shall attach only to the property so
acquired and fixed improvements thereon.
1.48. "Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority, or
other entity of whatever nature.
1.49. "Plan" means any pension plan which is covered by Title IV
of ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is an "employer" as defined in Section 3(5) of ERISA.
1.50. "Principal Office" means the Bank's main office located at
Seven Xxxx Xxxxxx Xxxxxx, Xxxxx, Xxxxxxxx, 00000.
1.51. "Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
1.52. "Qualified Inventory" means the inventory (including
without limitation raw materials such as zinc pigs) of the Subsidiaries,
(i) that is not subject to rapid material decline in value due to economic
or market changes, (ii) that is not subject to rapid physical deteriation
over time, (iii) in which Bank has a first and prior security interest,
subject to no conflicting security interests or claims, and (iv) that is
readily marketable. Bank reserves the right from time to time to
reasonably apply the foregoing criteria.
1.53. "Qualified Receivables" means and includes only accounts
receivable of the Subsidiaries, which meet the following specifications at
the time they came into existence and continue to meet the same until
collected in full.
1.53.1. The account is due and payable. No account shall be
outstanding for more than ninety (90) days from the date of the
applicable invoice (or one hundred twenty (120) days for any Bank
Approved Account Debtor, defined below).
1.53.2. The account arose from a bona fide outright sale of
goods previously made or from the performance of services, but not
from leasing, and the applicable Subsidiary has possession of or has
delivered to Bank shipping and delivery receipts evidencing shipment
of the goods or, if representing services, the services have been
fully performed for the respective account debtor.
1.53.3. The account is not subject to any assignment, claim,
lien or security interest of any character or subject to any
attachment, levy, garnishment or other judicial process, except the
security interest of Bank.
1.53.4. The account is not subject to any claim for credit,
setoff, allowance, adjustment by the account debtor or counterclaim,
and no Subsidiary has received any notice of any such claim for
credit, setoff, allowance, adjustment or counterclaim from or on
behalf of the account debtor.
1.53.5. The account arose in the ordinary course of each
Subsidiary's business and no notice of the bankruptcy, insolvency or
adverse change in the financial condition of the account debtor has
been received by any Subsidiary or Bank.
1.53.6. Bank has not previously notified any Subsidiary that
the account or the account debtor is or has become unsatisfactory,
based upon reasonable credit standards, or the account debtor has
been adjudicated bankrupt or is subject to a similar proceeding.
1.53.7. The account is not evidenced by a judgment, an
instrument or chattel paper.
1.53.8. The account debtor is not a governmental entity or a
foreign (i.e., residing or incorporated in or organized under a
jurisdiction outside the United States) person or company and is not
a parent, subsidiary, officer, employee, director, agent or Affiliate
of any Subsidiary, and the account debtor and any Subsidiary do not
have common shareholders, officers or directors; provided that Bank
specifically excludes any Bank Approved Account Debtor (defined
below) from this subsection.
1.53.9. All receivables of one account debtor shall become
ineligible if more than 5% (or 20% of any Bank Approved Account
Debtor) of such receivables are over ninety (90) days past due from
the date of the invoice.
1.53.10 The account debtor shall not at any time exceed 10%
(or 20% as to any Bank Approved Account Debtor or 15% as to
Reinforcing Services, Inc.) of the total accounts receivable, and it
is agreed that any amount over 10% (or 20% as to any Bank Approved
Account Debtor or 15% as to Reinforcing Services, Inc.) will be
excluded from the Borrowing Base unless specifically waived in
writing in each instance by Bank in its sole discretion.
1.53.11. With regard only to Sections 1.53.1, 1.53.9 and
1.53.10, the term "Bank Approved Account Debtor" means an express
written designation given by Bank in its discretion as to an account
debtor on a semi-annual basis, effective January and July of each
calendar year. Borrower shall submit a proposed list of account
debtors to Bank at least ten (10) days prior to the semi-annual
designation date, which list must be accompanied by such information
relating to the proposed account debtor as Bank may reasonably
require. Bank shall advise Borrower on or before the applicable
semi-annual effective date whether any or all of the proposed account
debtors has been designated as a Bank Approved Account Debtor. Any
such designation shall be effective only for the ensuing six (6)
month period, and any designation by Bank shall have no relevance
with regard to subsequent designations. The initially approved Bank
Approved Account Debtors are described on Schedule "1.53.11" hereto.
1.54. "Reportable Event" means any of the events set forth in
Section 4043 of ERISA.
1.55. "Reinforcing Services, Inc." means Reinforcing Services,
Inc., an Oklahoma corporation with principal offices located at 0000 Xxxx
00xx Xxxxxx, Xxxxx, Xxxxxxxx 00000-0000.
1.56. "Reinforcing Services, Inc. Documents" means (i) Certified
Resolutions evidencing authority for execution of any documents required
in connection herewith, substantially in the form of Schedule "1.56"
hereto; (ii) Guaranty Agreement; (iii) Security Agreement; (iv) UCC-1
Financing Statements; (v) chattel check from Oklahoma; and
(vi) Certificate of Good Standing from Oklahoma.
1.57. "Xxxxxx Galvanizing Company - Kansas City" means Xxxxxx
Galvanizing Company - Kansas City, an Oklahoma corporation, with principal
offices located at 0000 Xxxx 00xx Xxxxxx, Xxxxx, Xxxxxxxx 00000-0000.
1.58. "Xxxxxx Galvanizing Company - Kansas City Documents" means
(i) Certified Resolutions evidencing authority for execution of any
documents required in connection herewith, substantially in the form of
Schedule "1.58" hereto; (ii) Guaranty Agreement; (iii) Security Agreement;
(iv) UCC-1 Financing Statements; (v) chattel checks from Oklahoma and
Missouri; and (vi) Certificates of Good Standing from Oklahoma and
Missouri.
1.59. "Security Agreement" means the Security Agreement in form
and content as set forth on Schedule "1.59" attached hereto.
1.60. "Spin-Galv, Inc." means Spin-Galv, Inc., an Oklahoma
corporation, with principal offices located at 0000 Xxxx 00xx Xxxxxx,
Xxxxx, Xxxxxxxx 00000-0000.
1.61. "Spin-Galv, Inc. Documents" means (i) Certified Resolutions
evidencing authority for execution of any documents required in connection
herewith, substantially in the form of Schedule "1.61" hereto;
(ii) Guaranty Agreement; (iii) Security Agreement; (iv) UCC-1 Financing
Statements; (v) chattel check from Oklahoma; and (vi) Certificate of Good
Standing from Oklahoma.
1.62. "Subsidiaries" means, separately and collectively, Xxxxxx
Galvanizing Company, Lake River Corporation, North American Galvanizing,
North American Warehousing Company, Reinforcing Services, Inc., Xxxxxx
Galvanizing Company - Kansas City, and Spin-Galv, Inc.
1.63. "Termination Date" means two (2) years from the date of
execution hereof.
1.64. "$3,500,000 Term Note" shall mean the $3,500,000 Promissory
Note in form and content as set forth on Schedule "1.64" attached hereto.
1.65. "UCC" shall mean the Uniform Commercial Code of the State
of Oklahoma.
1.66. "UCC-1 Chattel Check" means UCC-1 chattel checks from each
of the Subsidiaries in all locations in which they do business.
1.67. "UCC-1 Financing Statement" means a financing statement
from each of the Subsidiaries, with each substantially in the form as set
forth on Schedule "1.67" attached hereto, which will be filed with the
appropriate office and shall evidence perfection of a first and prior
security interest in the collateral described in the Security Agreements
in favor of Bank, except for the Permitted Liens.
2. AMOUNT AND TERMS OF THE LOANS.
2.1. $3,500,000 Term Loan. Subject to the terms and conditions of
this Agreement, the Bank agrees to loan Borrower $3,500,000, to be further
evidenced by the $3,500,000 Term Note. The purpose of the advance under
the $3,500,000 Term Note is to enable the Borrower to refinance its
existing Debt with Bank under the Existing Credit Agreement and to
refinance existing Debt of certain Subsidiaries to NationsBank, N.A. The
$3,500,000 Term Loan will be payable in monthly installments of prinicpal
and interest based upon a five year amortization, with a balloon payment
due and payable two years from the date hereof, all as more specifically
described in the $3,500,000 Term Note.
2.2. $1,250,000 Advancing Term Loan. Subject to the terms and
conditions of this Agreement, and so long as no Initial Default or Matured
Default has occurred, Bank agrees to loan to Borrower such amounts up to
$1,250,000 as Borrower may request from time to time on or before the
maturity of the $1,250,000 Advancing Term Note for the purpose of
financing capital improvements at Borrower's Nashville, Tennessee, and
Hurst, Texas, facilities, including, but not limited to replacement of a
building, installation of new hoists and installation of a new kettle.
Upon the Conversion Date, the $1,250,000 Advancing Term Loan will be
repaid in monthly installments of principal and interest based upon a
seven (7) year amortization, with a final balloon payment to occur upon
the two year maturity date described in the $1,250,000 Advancing Term
Note. The monthly installments will be based upon the balance of all
advances outstanding on the Conversion Date.
2.2.1. $1,250,000 Advancing Term Loan Unused Portion Fee.
With regard to the $1,250,000 Advancing Term Loan, Borrower shall,
from time to time, pay to Bank an unused portion fee in good funds
equal to one-eighth of one percent per annum on the daily unused
portion of $1,250,000 Advancing Term Loan, as determined by Bank,
subject to manifest error, payable quarterly on the tenth (10th) day
of each quarterly period, commencing the quarter period beginning
July 1, 1997.
2.3. $8,500,000 Revolving Line. Subject to the terms and conditions
of this Agreement, and so long as no Initial Default or Matured Default
has occurred, Bank agrees to loan to Borrower (by advancing funds or
issuing Letters of Credit), such amounts up to $8,500,000 as Borrower may
request from time to time on or before the maturity of the $8,500,000
Revolving Note; provided, that the aggregate outstanding principal amount
of advances (and Letters of Credit) at any time outstanding shall not
exceed the lesser of (i) $8,500,000, or (ii) the Borrowing Base. The
Borrowing Base shall be computed on a monthly basis with information from
the immediately preceding month. Borrower agrees to provide Bank on the
10th day of each month with all Borrowing Base information requested for
the immediately preceding month, including without limitation a Borrowing
Base Certificate. In the event Bank shall make advances or issue Letters
of Credit in excess of the formula set forth above, any such advance
shall, nevertheless, be secured by all Collateral. In the event
outstanding advances with respect to Qualified Receivables or Qualified
Inventory fail to comply with the Borrowing Base formula, by reason of any
accounts receivable or inventory ceasing to be so qualified, for whatever
reason, then Borrower shall immediately notify Bank of such situation and
shall, within five (5) Business Days of the imbalance, either (i) reduce
the amount of the outstanding balances to bring such amounts within the
Borrowing Base formula, or (ii) provide additional Qualified Receivables
or Qualified Inventory, without any additional advance being made by Bank
with respect thereto, necessary to comply with the Borrowing Base formula.
Within the limits set forth in this Section 2.3, Borrower may borrow,
repay and reborrow at any one time and from time to time.
2.3.1. Letter of Credit. A request for Letters of Credit
shall be made at least two (2) Business Days prior to the proposed
issuance date. Borrower shall execute and deliver to Bank such
instruments, documents and agreements customarily required in
connection therewith, and Borrower shall pay to Bank on the issuance
date a Letter of Credit Fee equal to one and one-half percent (1.50%)
per annum of the face amount of the Letter of Credit. The expiration
date of the applicable Letter of Credit shall not exceed the maturity
date of the $8,500,000 Revolving Note, unless cash equivalent
collateral (e.g., certificates of deposit) equal to the applicable
Letter of Credit is pledged to Bank. Any disbursements under the
existing Letters of Credit described on Schedule "2.3.1" hereto,
shall be deemed to have been made hereunder and under the $8,500,000
Revolving Note.
2.3.2. $8,500,000 Line Unused Portion Fee. With regard to
the $8,500,000 Revolving Line of Credit, Borrower shall, from time to
time, pay to Bank an unused portion fee in good funds equal to one-
eighth of one percent per annum on the daily unused portion of
$8,500,000 Revolving Line of Credit, as determined by Bank, subject
to manifest error, payable quarterly on the tenth (10th) day of each
quarterly period, commencing the quarter period beginning July 1,
1997.
2.4. Notice and Manner of Borrowing. The Borrower shall give the
Bank at least one (1) Business Day's notice of any Loans under this
Agreement, specifying the date and amount thereof. Such notice shall be
given in writing (either hand delivered, delivered by mail or overnight
courier, or sent via telefax using telefax number 000-000-0000, Attn:
Xxxxx X. Xxxxxxx), or by telephone (with voice verification by the
appropriate officer). No later than 10:00 a.m. (Tulsa time) on the date
of such Loan and upon fulfillment of the applicable conditions, the Bank
will make such Loan available to the Borrower in immediately available
funds by crediting the amount thereof to the following account with the
Bank: Account styled "Kinark Corporation," No. 207859865.
3. SECURITY. As security for any and all indebtedness, obligations or
liabilities of every kind and description of Borrower to Bank, including,
without limitation, all advances and Loans evidenced by the Notes, and any
other advances or loans made pursuant to this Agreement or any other
instrument, document, agreement executed and/or delivered by Borrower to Bank
in connection herewith, including any extensions, renewals or changes in form
of any of the Notes, and any other obligations or liabilities now existing or
hereafter arising, direct or indirect, absolute or contingent, joint and/or
several, howsoever created or obtained (separately and collectively, the
"Obligations"), Borrower grants or will cause to be granted to Bank the
following liens and security interests ("Collateral") and also agrees as
follows:
3.1. A first and prior security interest (subject to Permitted Liens)
in all accounts inventory, equipment, general intangibles and chattel
paper of all Subsidiaries, whether now owned or hereafter acquired, as
evidenced by a Security Agreement from each of the Subsidiaries.
3.2. A first and prior mortgage lien against the Mortgaged
Properties, as evidenced by the Mortgages and Mortgage Amendments.
3.3. All proceeds and products of the foregoing.
3.4. Borrower also agrees to execute and deliver all financing
statements or other instruments, documents or agreements required by Bank
in order to effectuate the intent of the parties in connection herewith,
including without limitation documents necessary for proper perfection as
deemed necessary and/or advisable by Bank and legal counsel.
4. CONDITIONS PRECEDENT.
4.1. Closing. The closing shall occur when all conditions described
in this Section 4.1 have been satisfied.
4.1.1. Borrower shall execute and/or deliver to Bank the
following:
A. This Agreement;
B. Certificates of Good Standing;
C. $8,500,000 Revolving Line Note;
D. $3,500,000 Term Note;
E. $1,250,000 Advancing Term Note;
F. Opinion of Borrower's Counsel;
G. Borrower Documents;
H. Mortgage Amendments;
I. Mortgage Related Documents;
X. Xxxxxx Galvanizing Company Documents;
K. Lake River Corporation Documents;
L. North American Galvanizing Documents;
M. North American Warehousing Corporation Documents;
N. Reinforcing Services, Inc. Documents;
X. Xxxxxx Galvanizing Company - Kansas City Documents;
P. Spin-Galv, Inc. Documents;
Q. completion of all schedules to this Agreement; and
R. any other instruments, documents or agreements reasonably
requested by Bank in connection herewith.
4.1.2. The following statements shall be true and correct.
A. The representations and warranties contained in this
Agreement and the other Loan Documents shall be true and
correct; and
B. No Initial Default or Matured Default has occurred and is
continuing or will occur as a result of the execution, delivery
and/or performance by Borrower under any of the Loan Documents.
4.1.3. The Bank shall have received such other approvals,
opinions, instruments, documents and/or agreements which it may
reasonably request.
5. REPRESENTATIONS AND WARRANTIES. The Borrower (which term for the
purposes of this Section 5 shall also include the Subsidiaries, separately and
collectively) represents and warrants to the Bank that:
5.1. Incorporation, Good Standing, and Due Qualification. Borrower
is a corporation duly incorporated, validly existing, and in good standing
under the laws of the State in which it is incorporated; has the corporate
power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged; and is duly qualified
as a foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required, except such
jurisdictions where the failure to so qualify would not have a material
adverse effect on the business of the Borrower.
5.2. Corporate Power and Authority. The execution, delivery, and
performance by Borrower of the Loan Documents have been duly authorized by
all necessary corporate action and do not and will not (1) require any
consent or approval of the stockholders which has not been given; (2)
contravene Borrower's certificate of incorporation or bylaws; (3) violate
any provision of any law, rule, regulation (including, without limitation,
Regulations U and X of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination, or
award presently in effect having applicability to Borrower; (4) result in
a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease, or instrument to which Borrower
is a party or by which it or its properties may be bound or affected; (5)
result in, or require, the creation or imposition of any lien, upon or
with respect to any of the properties now owned or hereafter acquired by
Borrower; or (6) cause Borrower to be in default under any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination, or
award or any such indenture, agreement, lease, or instrument.
5.3. Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents to which Borrower is a party, when executed and
delivered under this Agreement, will be, legal, valid, and binding
obligations of Borrower, enforceable against Borrower in accordance with
their respective terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency, and other similar laws
affecting creditors' rights generally.
5.4. Financial Statements. The consolidated and consolidating
financial statements of Borrower and the Subsidiaries for the twelve (12)
months ended December 31, 1998, are complete and correct and fairly
present the financial condition of Borrower and its Subsidiaries at such
dates and the results of the operations of Borrower and its Subsidiaries
for the periods covered by such statements, all in accordance with GAAP
consistently applied (subject to year-end adjustments in the case of the
interim financial statements), and since December 31, 1996, there has been
no material adverse change in the condition (financial or otherwise),
business, or operations of Borrower or its Subsidiaries. There are no
liabilities of Borrower or its Subsidiaries, fixed or contingent, which
are material but not reflected in such financial statements or in the
notes thereto, other than liabilities arising in the ordinary course of
business since December 31, 1996. No information, exhibit, or report
furnished by the Borrower to the Bank in connection with the negotiation
of this Agreement contains any material misstatement of fact or omits to
state a material fact or any fact necessary to make the statement
contained therein no materiall misleading.
5.5. Labor Disputes and Acts of God. Neither the business nor the
properties of Borrower is affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or other casualty (whether or not covered by
insurance), materially adversely affecting such business or the operation
of Borrower.
5.6. Other Agreements. Borrower is not a party to any indenture,
loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction, which
could have a material adverse effect on the business, properties, assets,
operations, or condition, financial or otherwise, of Borrower or the
ability of Borrower to carry out its obligations under the Loan Documents.
Borrower is not in material default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or
conditions contained in any agreement or instrument material to its
business to which it is a party.
5.7. Litigation. Except as set forth in reasonable detail in
Schedule "5.7", there is no pending or threatened action or proceeding
against or affecting Borrower before any court, governmental agency or
arbitrator, which may, in any one case or in the aggregate, materially
adversely affect the financial condition, operations, properties, or
business of Borrower or the ability of Borrower to perform its obligations
under the Loan Documents.
5.8. Ownership and Liens. Borrower has title to, or valid leasehold
interests in, all of its properties and assets, real and personal,
including the properties and assets and leasehold interest reflected in
the financial statements referred to in Section 5.4, and none of the
properties and assets owned by Borrower, and none of its leasehold
interests, are subject to any lien, except the Permitted Liens.
5.9. ERISA. Borrower is in compliance in all material respects with
all applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to any
Plan; no notice of intent to terminate a Plan has been filed, nor has any
Plan been terminated; no circumstances exist which constitute grounds
entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings; neither Borrower nor any Commonly Controlled Entity has
completely or partially withdrawn from a Multiemployer Plan; Borrower and
each Commonly Controlled Entity have met their minimum funding
requirements under ERISA with respect to all of their Plans and the
present value of all vested benefits under each Plan exceeds the fair
market value of all Plan assets allocable to such benefits, as determined
on the most recent valuation date of the Plan and in accordance with the
provisions of ERISA; and neither Borrower nor any Commonly Controlled
Entity has incurred any liability to the PBGC under ERISA.
5.10. Operation of Business. Borrower possesses all licenses,
permits, franchises, patents, copyrights, trademarks, and trade names, or
rights thereto, to conduct its business substantially as now conducted and
as presently proposed to be conducted, and Borrower is not in violation of
any valid rights of others with respect to any of the foregoing.
5.11. Taxes. Borrower has filed all tax returns (federal, state
and local) required to be filed and have paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties.
5.12 Debt. Schedule "5.12" is a complete and correct list of all
credit agreements, indentures, purchase agreements, guaranties, Capital
Leases, and other investments, agreements, and arrangements presently in
effect providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of credit or for
acceptance financing) in respect of which Borrower is in any manner
directly or contingently obligated; and the maximum principal or face
amounts of the debt in question, which are outstanding and which can be
outstanding, are correctly stated, and all liens of any nature given or
agreed to be given as security therefor are correctly described or
indicated in such Schedule. With regard to any guaranty or other
contingent obligation of Borrower, Borrower shall promptly notify Bank in
the event any such obligation becomes non-contingent.
5.13. Environment. Borrower has duly complied with, and its
business, operations, assets, equipment, property, leaseholds, or other
facilities are in compliance with, the provisions of all federal, state,
and local environmental, health and safety laws, codes and ordinances, and
all rules and regulations promulgated thereunder. Borrower has been
issued and will maintain all required federal, state, and local permits,
licenses, certificates and approvals relating to (1) air emissions; (2)
discharges to surface or groundwater; (3) noise emissions; (4) solid or
liquid waste disposal; (5) the use, generation, storage, transportation or
disposal or toxic or hazardous substances or wastes (intended hereby and
hereafter to include any and all such materials listed in any federal,
state, or local law, code or ordinance, and all rules and regulations
promulgated thereunder as hazardous or potentially hazardous); or (6)
other environmental, health or safety matters. Borrower has not received
notice of, nor to its best knowledge knows of or suspects, facts which
might constitute any violations of any federal, state or local
environmental,health, or safety laws, codes or ordinances, and any rules
or regulations promulgated thereunder with respect to its business,
operations, assets, equipment, property, leaseholds, or other facilities.
To Borrower's best knowledge, there has been no material emission, spill,
release, or discharge into or upon (1) the air; (2) soils, or any
improvements located thereon; (3) surface water or groundwater; or (4) the
sewer, septic system or waste treatment, storage or disposal system
servicing the premises, of any toxic or hazardous substances or wastes at
or from the premises, except as expressly permitted by operation of law or
permit to discharge; and accordingly the premises of the Borrower is free
of all such toxic or hazardous substances or wastes, except such toxic or
hazardous substances or wastes which are customarily used in the
Borrower's business. Except as disclosed in writing to Bank, there has
been no complaint, order, directive, claim, citation, or notice by any
governmental authority or any person or entity with respect to (1) air
emissions; (2) spills, releases, or discharges to soils or improvements
located thereon, surface water, groundwater or the sewer, septic system or
waste treatment, storage or disposal systems servicing the premises; (3)
noise emissions; (4) solid or liquid waste disposal; (5) the use,
generation, storage, transportation, or disposal of toxic or hazardous
substances or waste; or (6) other environmental, health, or safety matters
affecting Borrower or its business, operations, assets, equipment,
property, leaseholds, or other facilities. Borrower has no indebtedness,
obligation, or liability, absolute or contingent, matured or not matured,
with respect to the storage, treatment, cleanup or disposal of any solid
wastes, hazardous wastes or other toxic or hazardous substances (including
without limitation any such indebtedness, obligation, or liability with
respect to any current regulation, law, or statute regarding such storage,
treatment, cleanup or disposal).
6. AFFIRMATIVE COVENANTS. So long as any Note shall remain unpaid or
the Bank shall have any Commitment under this Agreement, Borrower (which term
for purposes of this Section 6 shall also include the Subsidiaries, separately
and collectively) will comply with the following:
6.1. Maintenance of Existence. Preserve and maintain its corporate
existence and good standing in the states in which it does business, and
qualify and remain qualified as a foreign corporation in each jurisdiction
in which such qualification is required, except such jurisdictions where
the failure to so qualify would not have a material adverse effect on the
business of the Borrower.
6.2. Maintenance of Records. Keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions.
6.3. Maintenance of Properties. Maintain, keep, and preserve all of
its properties (tangible and intangible) necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear
and tear excepted.
6.4. Lockbox. Borrower and all Subsidiaries shall maintain a lockbox
in Bank pursuant to an agreement in form and substance satisfactory to
Bank which shall provide, in part, that: (a) Borrower shall deposit all
checks and other instruments with respect to its notes, chattel paper or
accounts receivable in the form received by them in the lockbox, (b)
unless otherwise directed by Bank, Borrower shall direct its debtors and
customers to make all payments in respect to their accounts receivable
directly to the lockbox at Bank, (c) Bank shall deposit all items received
by it to accounts designated by the Bank for the Borrower, provided no
Matured Default shall have occurred and be continuing, and (d) if a
Matured Default shall have occurred and be continuing, all such payments
may be applied to the Obligations, at such times and in such order as Bank
may elect.
6.5. Conduct of Business. Continue to engage in an efficient and
economical manner in businesses of the same general type as conducted by
it on the date of this Agreement.
6.6. Maintenance of Insurance. Borrower will keep or cause to be
kept adequately insured by financially sound and reputable insurers its
plant, equipment, motor vehicles, and all other property of a character
usually insured by businesses engaged in the same or similar businesses,
and as reasonably required by Bank. Bank shall be included as a "loss
payee" on all property insurance and an "additional insured" on all
liability insurance policies affecting the Mortgaged Properties.
Certificates evidencing the foregoing shall be delivered to Bank at
closing.
6.7. Compliance with Laws. Comply in all material respects with all
applicable laws, rules, regulations, and orders, such compliance to
include, without limitation, paying before the same become delinquent all
taxes, assessments, and governmental charges imposed upon it or upon its
property, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have
been set aside.
6.9. Right of Inspection. At any reasonable time and from time to
time, and following twenty-four (24) hours prior written notice, permit
the Bank or any agent or representative thereof, to reasonably examine and
make copies of and abstracts from the records and books of account of, and
visit the properties of, Borrower, and to discuss the affairs, finances,
and accounts of Borrower with any of its officers and directors and
Borrower's independent accountants. Bank contemplates conducting at least
semi-annual field audits of the Borrower's property.
6.9. Reporting Requirements. Furnish to Bank:
6.9.1. Quarterly Financial Statements. As soon as available
and in any event within forty-five (45) days after the end of each
fiscal quarter of Borrower, commencing with the quarter ending March
31, 1997, Borrower shall deliver to Bank for Borrower and its
Subsidiaries the consolidated and consolidating interim balance
sheets as of the end of such quarter, statements of income and
retained earnings for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, and
statements of cash flow for the portion of the fiscal year ended with
the last day of such quarter, all in sufficient detail and stating in
comparative form the respective figures for the corresponding date
and period in the previous fiscal year all prepared in accordance
with GAAP consistently applied and certified by the chief financial
officer of Borrower (subject to normal year end audit adjustments).
6.9.2. Annual Financial Statements. As soon as available and
in any event within ninety (90) days after the end of each fiscal
year of Borrower, commencing with the fiscal year ending December 31,
1996, Borrower shall deliver to Bank for Borrower and its
Subsidiaries the consolidated and consolidating balance sheets as of
the end of such fiscal year, statements of income and retained
earnings for such fiscal year, with explanatory footnotes in
sufficient detail acceptable to the Bank, and statements of cash flow
for such fiscal year, with explanatory footnotes in sufficient detail
acceptable to the Bank, and stating in comparative form the
respective figures for the corresponding date and period in the prior
fiscal year and all prepared in accordance with GAAP consistently
applied and as to the consolidated and consolidating statements
accompanied by an unqualified opinion thereon acceptable to the Bank
by independent accountants selected by Borrower and acceptable to the
Bank;
6.9.3. Management Letters. Promptly upon receipt thereof,
copies of any reports submitted to Borrower by independent certified
public accountants in connection with examination of the financial
statements of Borrower or any of its Subsidiaries made by such
accountants;
6.9.4. Certificate of No Default. Within twenty (20)days
after the end of each of the quarters of each fiscal year of Borrower
a certificate of the chief financial officer of Borrower (a)
certifying that, to the best of Borrower's knowledge, no Initial
Default or Matured Default has occurred and is continuing, or if an
Initial Default or Matured Default has occurred and is continuing, a
statement as to the nature thereof and the action which is proposed
to be taken with respect thereto, and (b) with computations
demonstrating compliance with the covenants contained in Section 8;
6.9.5. Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits, and proceedings before any
court or governmental department, commission, board, bureau, agency,
or instrumentality, domestic or foreign, affecting Borrower, which,
if determined adversely to Borrower, could have a material adverse
effect on the financial condition, properties, or operations of
Borrower;
6.9.6. Notice of Initial Defaults and Matured Defaults. As
soon as possible and in any event within five (5) days after the
occurrence of each Initial Default or Matured Default, a written
notice setting forth the details of such Initial Default or Matured
Default and the action which is proposed to be taken by the Borrower
with respect thereto;
6.9.7. ERISA Reports. As soon as possible, and in any event
within thirty (30) days after Borrower knows or has reason to know
that any circumstances exist that constitute grounds entitling the
PBGC to institute proceedings to terminate a Plan subject to ERISA
with respect to Borrower or any commonly controlled Entity, and
promptly but in any event within two (2) Business Days of receipt by
the Borrower or any Commonly Controlled Entity of notice that the
PBGC intends to terminate a Plan or appoint a trustee to administer
the same, and promptly but in any event within five (5) Business Days
of the receipt of notice concerning the imposition of withdrawal
liability with respect to Borrower or any Commonly Controlled Entity,
the Borrower will deliver to the Bank a certificate of the chief
financial officer of the Borrower setting forth all relevant details
and the action which the Borrower proposes to take with respect
thereto;
6.9.8. Reports to Other Creditors. Promptly after the
furnishing thereof, copies of any statement or report furnished to
any other party pursuant to the terms of any indenture, loan, credit,
or similar agreement and not otherwise required to be furnished to
the Bank pursuant to any other clause of this Section 6.;
6.9.9. Proxy Statements, etc. Promptly after the sending or
filing thereof, copies of all proxy statements, financial statements,
and reports which Borrower sends to its stockholders, and copies of
all regular, periodic, and special reports, and all registration
statements which Borrower files with the Securities and Exchange
Commission or any governmental authority which may be substituted
therefor, or with any national securities exchange; and
6.9.10. General Information. Such other information
respecting the condition or operations, financial or otherwise, of
Borrower as the Bank may from time to time reasonably request.
6.10. Environment. Be and remain in material compliance with the
provisions of all federal, state, and local environmental, health and
safety laws, codes and ordinances, and all rules and regulations issued
thereunder; notify the Bank within three (3) business day of any notice of
a hazardous discharge or environmental complaint received from any
governmental agency or any other party; notify the Bank within three (3)
business day of any hazardous discharge from or affecting its premises;
promptly contain and remove the same, in compliance with all applicable
laws; promptly pay any fine or penalty assessed in connection therewith,
except those which are contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside; permit
the Bank to inspect the premises, to conduct tests thereon, and to inspect
all books, correspondence, and records pertaining thereto; and at the
Bank's request, and at Borrower's expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to the
Bank, and such other and further assurances reasonably satisfactory to the
Bank that the condition has been corrected.
6.11. Operating Accounts. Maintain its primary operating
accounts at Bank.
7. NEGATIVE COVENANTS. So long as any Notes shall remain unpaid or the
Bank shall have any Commitment under this Agreement or any letter of credit
issued in connection herewith, Borrower (which term for purposes of this
Section 7 shall include the Subsidiaries, separately and collectively) will
not, without the prior written consent of Bank:
7.1. Negative Pledge. Create, incur, permit or suffer to exist any
Liens upon any of its assets or properties, now owned or hereafter
acquired, except for the Permitted Liens.
7.2. Debt. Create, incur, assume, or suffer to exist any Debt,
except:
(1) Indebtedness arising out of this Agreement;
(2) Purchase money indebtedness not to exceed $500,000 in the
aggregate for any given fiscal year;
(3) Current liabilities for taxes and assessments incurred in
the ordinary course of business;
(4) Indebtedness in respect of current accounts payable or
accrued (other than for borrowed funds or purchase money obligations)
and incurred in the ordinary course of business, provided that all
such liabilities, accounts and claims shall be promptly paid and
discharged when due or in conformity with customary trade terms;
(5) Debt described in Schedule "5.12" but no voluntary
prepayment, renewals, extensions, or refinancings thereof, without
the prior written consent of Bank;
(6) Unsecured non-Bank Debt in addition to the debt described
in Schedule "5.12" not to exceed $500,000 for the Borrower in the
aggregate in any given fiscal year; and
(7) Accounts payable to trade creditors for goods or services
which are not past due more than ninety (90) days from the billing
date, in each case incurred in the ordinary course of business, as
presently conducted, and paid within the specified time, unless
contested in good faith and by appropriate proceedings.
7.3. Mergers, etc. Wind up, liquidate or dissolve itself,
reorganize, merge or consolidate with or into, or convey, sell, assign,
transfer, lease, or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to any Person; except that Borrower may
merge Xxxxxx Galvanizing Company with and into North American Galvanizing
Company without the prior consent of Bank; provided, that evidence of such
merger (e.g., Certificate of Merger filed in the appropriate locations)
must be delivered within ten (10) days of the merger and Borrower agrees
to execute and/or deliver any instruments, documents or agreements
requested by Bank which Bank deems necessary to confirm, ratify and
maintain the security interests and mortgage liens granted to Bank.
7.4. Leases. Without Bank's prior written consent, create, incur,
assume, or suffer to exist, any obligation as lessee for the rental or
hire of any real or personal property, except (1) leases existing on the
date of this Agreement and any extensions or renewals thereof and (2)
leases (other than Capital Leases) which do not in the aggregate require
Borrower to make payments (including taxes, insurance, maintenance, and
similar expenses which the Borrower is required to pay under the terms of
any lease) in any fiscal year of Borrower in excess of Fifty Thousand and
no/100ths Dollars ($50,000). Bank agrees not to unreasonably withhold its
consent and will endeavor to respond within ten (10) days to Borrower's
request therefor.
7.5. Sale and Leaseback. Sell, transfer, or otherwise dispose of any
real or personal property to any Person and thereafter directly or
indirectly lease back the same or similar property.
7.6. Dividends. So long as any Matured Default or Initial Default
exists, declare or pay any dividends; or purchase, redeem, retire, or
otherwise acquire for value any of its capital stock now or hereafter
outstanding; or make any distribution of assets to its stockholders as
such whether in cash, assets, or in obligations of the Borrower; or
allocate or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption, or retirement of any
shares of its capital stock; or make any distribution by reduction of
capital or otherwise in respect of any shares of its capital stock.
7.7. Sale of Assets. Sell, lease, assign, transfer, or otherwise
dispose of, any of its now owned or hereafter acquired assets (including,
without limitation, shares of stock, receivables, and leasehold
interests), except: (1) inventory disposed of or leased in the ordinary
course of business; (2) the sale or other disposition of assets no longer
used or useful in the conduct of its business; and (3) treasury stock.
7.8. Investments. Make any loan or advance to any Person (excluding
any Subsidiary), or purchase or otherwise acquire, any capital stock,
assets, obligations, or other securities of, make any capital contribution
to, or otherwise invest in or acquire any interest in any Person, or
participate as a partner of joint venturer with any other Person, except:
(1) direct obligations of the United States or any agency thereof with
maturities of one year or less from the date of acquisition;
(2) commercial paper of a domestic issuer rated at least "A-1" by Standard
& Poor's Corporation or "P-1" by Xxxxx'x Investors Service, Inc.;
(3) certificates of deposit with maturities of one year or less from the
date of acquisition issued by any commercial bank reasonably acceptable to
Bank; and (4) stock, obligations, or securities received in settlement of
debts (created in the ordinary course of business) owing to a Subsidiary.
7.9. Guaranties, etc. Assume, guaranty, endorse, or otherwise be or
become directly or contingently responsible or liable (including, but not
limited to, an agreement to purchase any obligation, stock, assets, goods,
or services, or to supply or advance any funds, assets, goods, or
services, or an agreement to maintain or cause such Person to maintain a
minimum working capital net worth, or otherwise to assure the creditors of
any Person against loss), for obligations of any Person, except guaranties
by endorsement of negotiable instruments for deposits or collection or
similar transactions in the ordinary course of business.
7.10. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property
or the rendering of any service, with any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of each
Borrower's business and upon fair and reasonable terms no less favorable
to the Borrower than would obtain in a comparable arm's-length transaction
with a Person not an Affiliate.
8. FINANCIAL COVENANTS. So long as any Notes shall remain unpaid or the
Bank shall have any Commitment under this Agreement, Borrower shall comply with
the following on a consolidated basis, calculated quarterly for the preceding
rolling four (4) quarter period, in accordance with GAAP:
8.1. Current Ratio. Maintain at all times a ratio of current assets
to current liabilities (excluding any outstanding balance under the
$8,500,000 Revolving Note) of not less than 1.3 to 1.
8.2. Leverage Ratio. Maintain at all times a ratio of total
liabilities to net worth of not greater than 2.0 to 1.
8.3. Minimum Net Worth. Maintain at all times a minimum net worth
equal to or in excess of $16,000,000.
8.4. Minimum Cash Flow Coverage. Maintain at all times a ratio
("Cash Flow Coverage Ratio") of (i) minimum cash flow (defined as net
income, plus interest, non-cash deferred taxes, depreciation and
amortization) to (ii) debt service (defined as current maturity long-term
debt, including Capital Lease payments, plus interest, but excluding any
advances under the $8,500,000 Revolving Note) in excess of 1.75 to 1.
7.5. Capital Expenditures. Capital expenditures shall be limited to
a minimum of 1 to 1 coverage ratio of (i) EBITDA, divided by
(ii) principal plus interest and cash capital expenditures (excluding
capital expenditures funded under the $1,250,000 Advancing Term Loan).
9. EVENTS OF DEFAULT.
9.1. Events of Default. If any of the following events shall occur:
(1) Borrower should fail to pay the principal of, or interest
on, the Notes, or any amount of a commitment or other fee within five
(5) days as and when due and payable;
(2) Any representation or warranty made or deemed made by
Borrower in this Agreement or any Security Agreement or which is
contained in any certificate, document, opinion, or financial or
other statement furnished at any time under or in connection with any
Loan Document shall prove to have been incorrect, incomplete, or
misleading in any material respect on or as of the date made or
deemed made;
(3) Borrower shall fail to perform or observe any term,
covenant, or agreement contained in this Agreement or any Loan
Document;
(4) Borrower shall (a) fail to pay any indebtedness for
borrowed money (other than the Notes) or any interest or premium
thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise); or (b) fail to
perform or observe any term, covenant, or condition on its part
required to be performed or observed under any agreement or
instrument relating to any such indebtedness, when required to be
performed or observed, if the effect of such failure to perform or
observe is to accelerate, or to permit the acceleration of, after the
giving of any applicable notice or passage of time, or both, the
maturity of such indebtedness, whether or not such failure to perform
or observe shall be waived by the holder of such indebtedness, or any
such indebtedness shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;
(5) Borrower or any Guarantor (a) shall generally not pay, or
shall be unable to pay, or shall admit in writing its inability to
pay its debts as such debts become due; or (b) shall make an
assignment for the benefit of creditors, or petition or apply to any
court of competent jurisdiction for the appointment of a custodian,
receiver, or trustee for it or a substantial part of its assets; or
(c) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; or (d) shall have had any such petition or
application filed or any such proceeding commenced against it in
which an order for relief is entered or an adjudication or
appointment is made, and which remains undismissed for a period of
thirty (30) days or more; or (e) shall take any corporate action
indicating its consent to, approval of, or acquiescence in any such
petition, application, proceeding, or order for relief or the
appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (f) shall suffer such
custodianship, receivership, or trusteeship to continue undischarged
for a period of thirty (30) days or more.
(6) One or more judgments, decrees, or orders for the payment
of money in excess of Fifty Thousand and no/100ths Dollars
($50,000.00) in the aggregate shall be rendered against Borrower, and
such judgments, decrees, or order shall continue unsatisfied and in
effect for a period of twenty (20) consecutive days without being
vacated, discharged, satisfied, or stayed or bonded pending appeal;
(7) The Collateral documents shall at any time after their
execution and delivery and for any reason cease: (a) to create a
valid and perfected first priority security interest in and to the
property purported to be subject to such Collateral documents
(subject to Permitted Liens); or (b) to be in full force and effect
or shall be declared null and void, or the validity or enforceability
thereof shall be contested by Borrower, or Borrower shall deny it has
any further liability or obligation under the Collateral documents,
or Borrower shall fail to perform any of its obligations under the
Collateral documents; or the Guaranty Agreements are declared null
and void, or the validity or enforceability thereof shall be
contested, or liability thereunder is denied;
(8) Any of the following events shall occur or exist with
respect to any Borrower and any Commonly Controlled Entity under
ERISA: any Reportable Event shall occur; complete or partial
withdrawal from any Multiemployer Plans shall occur; any Prohibited
Transaction shall occur; a notice of intent to terminate a Plan shall
be filed, or a Plan shall be terminated; or circumstances shall exist
which constitute grounds entitling the PBGC to institute proceedings
to terminate a Plan, or the PBGC shall institute such proceedings;
and in each case above, such event or condition, together with all
other events or conditions, if any, could subject Borrower to any
tax, penalty, or other liability which in the aggregate may exceed
Fifty Thousand and no/100ths Dollars ($50,000.00); or
(9) If the Bank receives its first notice of a hazardous
discharge or an environmental complaint from a source other than
Borrower, and the Bank does not receive notice (which may be given in
oral form, provided same is followed with all due dispatch by written
notice by Certified Mail, Return Receipt Requested) of such hazardous
discharge or environmental complaint from Borrower within twenty-
four (24) hours of the time the Bank first receives said notice from
a source other than any Borrower; or if any federal, state, or local
agency asserts or creates a Lien upon any or all of the assets,
equipment, property, leaseholds, or other facilities of the Borrower
by reason of the occurrence of a hazardous discharge or an
environmental complaint; or if any federal, state, or local agency
asserts a claim against Borrower and/or its assets, equipment,
property, leaseholds, or other facilities for damages or cleanup
costs relating to a hazardous discharge or an environmental
complaint; provided, however, that such claim shall not constitute a
default if, within five (5) Business Days of the occurrence giving
rise to the claim, (a) the Borrower can demonstrate to the Bank's
satisfaction that the Borrower has commenced and is diligently
pursuing either: (i) a cure or correction of the event which
constitutes the basis for the claim, and continues diligently to
pursue such cure or correction to completion or (ii) proceedings for
an injunction, a restraining order, or other appropriate relief
preventing such agency or agencies from asserting such claim, which
relief is granted within ten (10) Business Days of the occurrence
giving rise to the claim and the injunction, order, or relief is not
thereafter resolved or reversed on appeal; and (b) the Borrower has
posted a bond, letter of credit, or other security satisfactory in
form, substance, and amount to both the Bank and the agency or entity
asserting the claim to secure the proper and complete cure or
correction of the event which constitutes the basis for the claim.
then, and in any such event, the Bank may, following a twenty (20) day written
notice and cure period as to matters set forth under (2), (3), (4), (7), (8)
and (9) under this Section 9.1, (a) declare its obligation to make loans to be
terminated, whereupon the same shall forthwith terminate; and/or (b) declare
the outstanding Notes, all interest thereon, and all other amounts payable
under this Agreement to be forthwith due and payable, whereupon the Notes, all
such interest, and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest, or further notice of any kind,
all of which are hereby expressly waived by the Borrower.
Upon the occurrence and during the continuance of a Matured Default, the
Bank is hereby authorized at any time and from time to time, without further
notice to Borrower (any such notice being expressly waived by the Borrower), to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Bank to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement, the Notes or any other Loan Document, irrespective of whether or not
the Bank shall have made any demand under this Agreement or the Notes or such
other Loan document and although such obligations may be unmatured. Bank
agrees to promptly notify Borrower of any such set-off and application. The
rights of the Bank under this Section are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which the Bank
may have, in this Agreement, any other loan document or at law or equity,
including without limitation the right to accelerate the Notes upon the
occurrence of a Matured Default.
10. MISCELLANEOUS.
10.1.Amendments, etc. No amendment, modification, termination, or
waiver of any provision of any Loan Document to which the Borrower is a
party, nor consent to any departure by the Borrower from any Loan Document
to which it is a party, shall in any event be effective unless the same
shall be in writing and signed by the Bank, and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given.
10.2.Notices, etc. All notices and other communications provided for
under this Agreement and under the other Loan Documents to which the
Borrower is a party shall be in writing (including telegraphic, telex, and
facsimile transmission) and mailed or transmitted or delivered:
If to the Borrower:
Kinark Corporation
0000 Xxxxx Xxxx, #000
Xxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxxxx, Vice President & CFO
Telefax: (000) 000-0000
with a copy to:
Nelson, Mullins, Xxxxx & Scarborough, L.L.P.
000 Xxxxxxxxx Xxxxxx X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxxx
If to Bank:
Bank of Oklahoma, N.A.
P. O. Xxx 0000
Xxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Telefax: 000-000-0000
or at such other address as shall be designated by such party in a written
notice to the other party complying as to delivery with the terms of this
Section 10.2. Except as is otherwise provided in this Agreement, all such
notices and communications shall be effective when deposited in the mails
addressed as aforesaid, except that notices for advances to the Bank pursuant
to the provisions of Section 2.4 shall not be effective until received by the
Bank.
10.3. No Waiver. No failure or delay on the part of the Bank in
exercising any right, power or remedy hereunder 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 hereunder. The rights and
remedies provided herein are cumulative, and are not exclusive of any
other rights, powers, privileges, or remedies, now or hereafter existing,
at law or in equity or otherwise.
10.4. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Borrower and the Bank and their
respective successors and assigns, except that the Borrower may not assign
or transfer any of its rights under any Loan Document to which the
Borrower is a party without the prior written consent of the Bank.
10.5. Costs, Expenses and Taxes. The Borrower agrees to pay on
demand all costs and expenses incurred by the Bank in connection with the
preparation, execution, delivery, filing, and initial administration of
the Loan Documents, including without limitation the fees of Riggs, Abney,
Neal, Turpen, Orbison & Xxxxx, not to exceed $10,000, and of any
amendment, modification, or supplement to the Loan Documents, including,
without limitation, the fees and out-of-pocket expenses of counsel for the
Bank, incurred in connection with advising the Bank as to its rights and
responsibilities hereunder. The Borrower also agrees to pay all such
costs, expenses and fees, including court costs, incurred in connection
with enforcement of the Loan Documents, or any amendment, modification, or
supplement thereto, whether by negotiation, legal proceedings, or
otherwise. In addition, the Borrower shall pay any and all stamp and
other taxes (but not mortgage registration taxes where local law prohibits
Borrower from doing so) and fees payable or determined to be payable in
connection with the execution, delivery, filing, and recording of any of
the Loan Documents and the other documents to be delivered under any such
Loan Documents, and agrees to hold the Bank harmless from and against any
and all liabilities with respect to or resulting from any delay in paying
or omission to pay such taxes and fees. This provision shall survive
termination of this Agreement.
10.6. Integration. This Agreement and the Loan Documents contain
the entire agreement between the parties relating to the subject matter
hereof and supersede all prior and contemporaneous oral statements and
writings with respect thereto.
10.7. Indemnity. The Borrower hereby agrees to defend,
indemnify, and hold the Bank harmless from and against any and all claims,
damages, judgments, penalties, costs, and expenses (including attorney
fees and court costs now or hereafter arising from the aforesaid
enforcement of this clause) arising directly or indirectly from the
activities of the Borrower, its predecessors in interest, or third parties
with whom they have a contractual relationship, or arising directly or
indirectly from the violation of any environmental protection, health or
safety law, whether such claims are asserted by any governmental agency or
any other Person. This indemnity shall survive termination of this
Agreement.
10.8. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of
Oklahoma.
10.9. Severability of Provisions. Any provision of any Loan
Documents which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of such
Loan Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
10.10. Headings. Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of
reference only and shall not constitute a part of the applicable Loan
Documents for any other purpose.
10.11. Jury Trial Waiver. THE BORROWER AND BANK HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER
IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS. BORROWER ALSO SUBMITS
ITSELF AND OTHERWISE CONSENTS TO THE JURISDICTION AND VENUE OF THE TULSA
COUNTY DISTRICT COURT OR FEDERAL DISTRICT COURT (NORTHERN DISTRICT OF
OKLAHOMA), WHICHEVER COURT IS SELECTED BY BANK IN ITS SOLE DISCRETION, AS
TO ANY DISPUTES OR OTHER MATTERS ARISING OUT OF OR IN CONNECTION HEREWITH.
10.12. Conflicts. To the extent any conflict exists under any of
the Loan Documents, this Credit Agreement shall be controlling.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
"Borrower"
KINARK CORPORATION, a Delaware
corporation
By /s/ Xxxx X. Xxxxxxxx
Xxxx X. Xxxxxxxx, Vice President and
Chief Financial Officer
By /s/ Xxxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx, Secretary
"Bank"
BANK OF OKLAHOMA, NATIONA
ASSOCIATION
By /s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx, Vice President
