-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KD6n4whjog8WykmVI3PmgNNczfP1xVogcf5X9YcNAC8EzUuRFnppZwbEwPjnGWGf MM3VWGgn5ZNzzI05sXZ3VA== 0000950150-97-001470.txt : 19971027 0000950150-97-001470.hdr.sgml : 19971027 ACCESSION NUMBER: 0000950150-97-001470 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971024 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RELIANCE STEEL & ALUMINUM CO CENTRAL INDEX KEY: 0000861884 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-METALS SERVICE CENTERS & OFFICES [5051] IRS NUMBER: 951142616 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13122 FILM NUMBER: 97699983 BUSINESS ADDRESS: STREET 1: 2550 EAST 25TH ST CITY: LOS ANGELES STATE: CA ZIP: 90058 BUSINESS PHONE: 2135822272 MAIL ADDRESS: STREET 1: 2550 E. 25TH STREET CITY: LOS ANGELES STATE: CA ZIP: 90058 10-Q 1 FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 ------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ...................to................... Commission file number: 001-13122 RELIANCE STEEL & ALUMINUM CO. ------------------------------------------------------ (Exact name of registrant as specified in its charter) California 95-1142616 ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2550 East 25th Street Los Angeles, California 90058 (213) 582-2272 ------------------------------------------------------------- (Address of principal executive offices and telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] As of September 30, 1997, 15,209,858 shares of the registrant's common stock, no par value, were outstanding. 2 INDEX PART I -- FINANCIAL INFORMATION................................................ 1 Consolidated Balance Sheets............................................... 1 Consolidated Statements of Income (Unaudited)............................. 2 Consolidated Statements of Cash Flows (Unaudited)......................... 4 Notes to Consolidated Financial Statements (Unaudited).................... 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................... 8 PART II -- OTHER INFORMATION................................................... 13 SIGNATURES..................................................................... 14
3 PART I -- FINANCIAL INFORMATION RELIANCE STEEL & ALUMINUM CO. Consolidated Balance Sheets (In thousands except share amounts)
SEPTEMBER 30, DECEMBER 31, 1997 1996 -------------------------- (unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 3,529 $ 815 Accounts receivable, less allowance for doubtful accounts of $4,020 at September 1997 and $2,899 at December 1996 123,911 73,092 Inventories 140,089 122,778 Prepaid expenses and other current assets 1,528 6,700 Deferred income taxes 7,975 7,515 ---------------------- Total current assets 277,032 210,900 Property, plant and equipment, at cost: Land 25,745 21,054 Buildings 89,474 80,687 Machinery and equipment 100,153 88,551 Allowances for depreciation (63,189) (56,678) ---------------------- 152,183 133,614 Investment in 50%-owned company 28,803 28,958 Intangibles 47,215 17,704 ---------------------- Total assets $ 505,233 $ 391,176 ====================== Liabilities and shareholders' equity Current liabilities: Accounts payable and accrued expenses $ 86,513 $ 59,367 Wages and related accruals 5,765 4,636 Income taxes payable (781) 90 Deferred income taxes 7,864 7,587 Current maturities of long-term debt 100 2,455 ---------------------- Total current liabilities 99,461 74,135 Long-term debt 179,350 107,450 Deferred income taxes 17,169 16,949 Shareholders' equity: Preferred stock, no par value: Authorized shares - 5,000,000 None issued or outstanding -- -- Common stock, no par value: Authorized shares - 20,000,000 Issued and outstanding shares - 15,209,858 at September 1997 and 15,489,431 at December 1996, stated capital 61,898 61,131 Retained earnings 147,355 131,511 ---------------------- Total shareholders' equity 209,253 192,642 ---------------------- Total liabilities and shareholders' equity $ 505,233 $ 391,176 ======================
See Notes to Consolidated Financial Statements. NOTE: The Balance Sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 1. 4 RELIANCE STEEL & ALUMINUM CO. Consolidated Statements of Income (Unaudited) (In thousands except share and per share amounts)
THREE MONTHS ENDED SEPTEMBER 30, -------------------------- 1997 1996 -------------------------- Net sales $ 254,236 $ 153,395 Gain on sale of real estate -- -- Other income 671 354 -------------------------- 254,907 153,749 Costs and expenses: Cost of sales 197,718 115,767 Warehouse, delivery, selling, administrative and general 37,386 24,387 Depreciation and amortization 3,330 2,064 Interest 3,009 737 -------------------------- 241,443 142,955 Income before equity in earnings of 50%-owned company and income taxes 13,464 10,794 Equity in earnings of 50%-owned company 1,002 1,052 -------------------------- Income before income taxes 14,466 11,846 Income taxes: Federal 4,948 3,772 State 1,103 1,101 -------------------------- 6,051 4,873 -------------------------- Net income $ 8,415 $ 6,973 ========================== Earnings per share $ .55 $ .45 ========================== Weighted average shares outstanding 15,346,000 15,696,000 ==========================
2. 5 RELIANCE STEEL & ALUMINUM CO. Consolidated Statements of Income (Unaudited) (In thousands except share and per share amounts)
NINE MONTHS ENDED SEPTEMBER 30, -------------------------- 1997 1996 -------------------------- Net sales $ 699,651 $ 475,657 Gain on sale of real estate 1,008 1,519 Other income 1,670 2,249 -------------------------- 702,329 479,425 Costs and expenses: Cost of sales 541,094 361,858 Warehouse, delivery, selling, administrative and general 107,907 74,976 Depreciation and amortization 9,277 5,773 Interest 7,807 2,045 -------------------------- 666,085 444,652 Income before equity in earnings of 50%-owned company and income taxes 36,244 34,773 Equity in earnings of 50%-owned company 3,675 3,532 -------------------------- Income before income taxes 39,919 38,305 Income taxes: Federal 13,093 12,160 State 3,114 3,562 -------------------------- 16,207 15,722 -------------------------- Net income $ 23,712 $ 22,583 ========================== Earnings per share $ 1.54 $ 1.44 ========================== Weighted average shares outstanding 15,403,000 15,669,000 ==========================
3. 6 RELIANCE STEEL & ALUMINUM CO. Consolidated Statements of Cash Flows (Unaudited) (In Thousands)
NINE MONTHS ENDED SEPTEMBER 30, ---------------------- 1997 1996 ---------------------- OPERATING ACTIVITIES Net income $ 23,712 $ 22,583 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,277 5,773 Deferred income taxes (110) -- (Gain)/loss on sales of machinery and equipment (362) -- Deferred gain on sale of real estate (1,008) (1,266) Equity in earnings of 50%-owned company (3,345) (3,532) Changes in operating assets and liabilities: Accounts receivable (32,045) 6,560 Inventories 345 2,037 Prepaid expenses and other assets 2,267 4,654 Income taxes (1,146) (3,973) Accounts payable and accrued expenses 11,051 (5,026) ---------------------- Net cash provided by operating activities 8,636 27,810 ---------------------- INVESTMENT ACTIVITIES Purchases of property, plant and equipment (19,159) (16,082) Proceeds from sales of property and equipment 1,816 997 Acquisitions of metals service centers (44,466) (24,974) Dividends received from 50%-owned company 3,500 1,203 ---------------------- Net cash used in investing activities (58,309) (38,856) ---------------------- FINANCING ACTIVITIES Proceeds from borrowings 225,000 33,000 Principal payments on long-term debt and short-term borrowings (165,510) (36,518) Dividends paid (1,948) (1,536) Issuance of common stock 1,037 786 Repurchase of common stock (7,435) -- Exercise of stock options 1,243 -- ---------------------- Net cash provided by financing activities 52,387 4,268 ---------------------- Increase (decrease) in cash 2,714 (15,314) Cash and cash equivalents at beginning of period 815 18,012 ---------------------- Cash and cash equivalents at end of period $ 3,529 $ 2,698 ====================== SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES: Interest paid during the period $ 7,407 $ 1,819 Income taxes paid during the period 15,564 18,980
4. 7 RELIANCE STEEL & ALUMINUM CO. Notes to Consolidated Financial Statements (Unaudited) September 30, 1997 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for fair presentation, with respect to the interim financial statements have been included. The results of operations for the three month and nine month periods ended September 30, 1997 are not necessarily indicative of the results for the full year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 1996, included in the Reliance Steel & Aluminum Co. Form 10-K. 2. ACQUISITIONS On April 2, 1997, the Company completed the purchase of AMI Metals, Inc. ("AMI"), for $38,500,000. AMI was a privately-held metals service center company headquartered in Brentwood, Tennessee, with additional locations in Fontana, California; Wichita, Kansas; Fort Worth, Texas; Kent, Washington; and Swedesboro, New Jersey. AMI is operating as a wholly-owned subsidiary of the Company. This acquisition was funded with borrowings under the Company's revolving line of credit. For the fiscal year ended February 28, 1997, AMI's net sales were approximately $77,000,000. On April 30, 1997, the Company purchased Amalco Metals, Inc. ("Amalco"). Amalco was a privately-held metals service center located in Union City, California. This acquisition was funded with borrowings under the Company's revolving line of credit. For the fiscal year ended April 30, 1997, Amalco's net sales were approximately $25,000,000. It is expected that the business of Amalco will be combined with the Company's existing metals service center in Santa Clara, California. The combined operation will be housed in a new, larger, state-of-the-art facility in Union City, California, which is scheduled to be completed early in 1998. The purchases of AMI and Amalco were accounted for by the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based on the estimated fair values at the date of the acquisition. 3. STOCK SPLIT On May 28, 1997, the Board of Directors declared a three-for-two stock split in the form of a 50% stock dividend on the Company's Common Stock, payable June 27, 1997 to shareholders of record June 6, 1997. All share and per share data, as appropriate, reflect this split. 4. SHAREHOLDERS' EQUITY In December 1994, the Board of Directors approved a Stock Repurchase Plan, authorizing the Company to purchase up to 750,000 shares (increased to 1,500,000 shares in February 1995) of its Common Stock from time to time in the open market or in privately-negotiated transactions. Repurchased shares are redeemed and treated as authorized but unissued shares. As of September 30, 1997, the Company had repurchased a total of 1,351,500 shares of its 5. 8 RELIANCE STEEL & ALUMINUM CO. Notes to Consolidated Financial Statements (Unaudited) - (continued) Common Stock under the Stock Repurchase Plan, at an average cost of $11.37 per share. Of these shares, 373,800 shares were repurchased by the Company during the nine month period ended September 30, 1997 at an average cost of $19.88 per share. No shares were repurchased during the three months ended September 30, 1997. In March 1997, 22,177 shares of Common Stock were issued to division managers and officers of the Company under the 1996 Key Man Incentive Plan. Earnings per share are computed using the weighted average number of shares of common stock and common stock equivalents attributable to stock options, which are not material, outstanding during each period. Common stock equivalents were calculated using the treasury stock method. 5. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued Statement No. 128 ("FAS 128"), Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The calculation of fully diluted earnings per share under FAS 128 is not deemed to have a significant impact on primary earnings per share for the nine month and three month periods ended September 30, 1997 and 1996. 6. LONG-TERM DEBT Long-term debt consists of the following (in thousands):
SEPTEMBER 30, DECEMBER 31, 1997 1996 --------------------------- (unaudited) (audited) Revolving line of credit ($125,000 limit), due July 31, 1999, interest at variable rates, payable monthly $ 36,000 $ 39,000 Senior unsecured notes due January 2, 2004 to January 2, 2009, average interest rate 7.22% 75,000 -- Senior unsecured notes due January 2, 2002 to January 2, 2008, average interest rate 7.02% 65,000 -- Promissory notes, paid January 2, 1997 -- 65,000 Variable Rate Demand Industrial Development Revenue Bonds, Series 1989 A, due July 1, 2014, with interest payable quarterly 3,450 3,550 9% Senior Notes, paid March 1, 1997 -- 1,800 Revolving line of credit ($10,000 limit), paid February 28, 1997 -- 555 --------------------------- 179,450 109,905 Less current portion (100) (2,455) --------------------------- $ 179,350 $ 107,450 ===========================
6. 9 In October 1997, the Company entered into a credit agreement with six banks. This syndicated credit facility replaced the Company's existing revolving line of credit, increasing the Company's borrowing limit to $200,000,000. Prior to the syndicated line of credit, the Company's borrowing limit with one lender had been increased to $125,000,000 during March 1997. In September 1997 and November 1996, the Company entered into agreements with insurance companies for private placements of debt in the aggregate amounts of $65,000,000 and $75,000,000, respectively. The proceeds of the debt funded in September 1997 were used to refinance the borrowings under the Company's revolving credit facility made to fund the acquisitions of AMI and Amalco and borrowings for general working capital purposes. The proceeds of the debt funded in January 1997 were used to pay off $65,000,000 of promissory notes issued for the acquisition of Siskin, with the balance of $10,000,000 applied to reduce borrowings under the Company's revolving line of credit. The Company's long-term loan agreements include certain restrictions on the amount of corporate borrowings, cash dividends, and acquisition of the Company's Common Stock, among other things. In addition, the agreements require the maintenance of certain financial ratios. 7. EMPLOYEE BENEFITS The Company had a noncontributory defined benefit pension plan covering salaried and certain hourly employees of the Company. Benefits are based upon the employees' earnings. On July 5, 1996, benefits under the pension plan were frozen, as the Company elected to replace the pension plan with a 401(k) plan. The Board of Directors of the Company approved the termination of the pension plan in February 1997. Distributions from the pension plan commenced in July 1997, with the final distribution made October 7, 1997. 8. SUBSEQUENT EVENTS On October 1, 1997, the Company acquired 100% of the outstanding shares of Service Steel Aerospace Corp. ("SSA"), which is a metals service center with facilities located in Tacoma, Washington; North Canton, Ohio; and Long Beach, California. SSA specializes in stainless and alloy specialty steels for the aerospace industry. SSA's net sales for the twelve months ended December 31, 1996 were approximately $43,000,000. The Company paid $26,000,000 in cash, which was funded by borrowings under the Company's existing revolving line of credit. On October 8, 1997, the Company announced that it has agreed in principle to acquire all of the outstanding capital stock of Phoenix Metals Company ("Phoenix"), subject to negotiation of a definitive agreement and successful completion of due diligence. Phoenix operates metals service centers specializing in non-ferrous products in Birmingham, Alabama; Atlanta, Georgia; Charlotte, North Carolina; and Tampa, Florida. For the twelve months ended February 28, 1997, Phoenix's net sales were approximately $112,000,000. On October 10, 1997, the Company filed a registration statement with the Securities and Exchange Commission relating to a proposed offering of up to 3,795,000 shares of the Company's Common Stock, including 200,000 shares to be sold by certain shareholders and up to 495,000 shares that may be purchased by the underwriters to cover over-allotments, if any. The net proceeds to the Company will be used to pay down debt incurred in connection with recent acquisitions, to fund potential acquisitions and capital expenditures and for working capital and general corporate purposes. 7. 10 RELIANCE STEEL & ALUMINUM CO. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth certain income statement data for the Company's metals service centers and Valex Corp. for the three month and nine month periods ended September 30, 1997 and September 30, 1996 (dollars are shown in thousands and certain amounts may not calculate due to rounding):
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ------------------------------------------- ----------------------------------------- 1997 1996 1997 1996 ------------------------------------------- ----------------------------------------- % OF % OF % OF % OF NET SALES: $ NET SALES $ NET SALES $ NET SALES $ NET SALES ------------------------------------------------------------------------------------- Metals service centers ... $245,176 96.4% $146,074 95.2% $671,667 96.0% $437,812 92.0% Valex Corp. .............. 9,060 3.6 7,321 4.8 27,984 4.0 37,845 8.0 ------------------------------------------------------------------------------------- Total sales ........ 254,236 100.0 153,395 100.0 699,651 100.0 475,657 100.0 GROSS PROFIT: Metals service centers ... 53,761 21.1 35,969 23.4 149,802 21.4 100,177 21.1 Valex Corp. .............. 2,757 1.1 1,659 1.1 8,755 1.3 13,622 2.9 ------------------------------------------------------------------------------------- Total gross profit ..... 56,518 22.2 37,628 24.5 158,557 22.7 113,799 23.9 OPERATING EXPENSES: Metals service centers ... 38,947 15.3 24,816 16.2 111,237 15.9 73,248 15.4 Valex Corp. .............. 1,770 .7 1,635 1.1 5,947 .8 7,501 1.6 ------------------------------------------------------------------------------------- Total operating expenses 40,717 16.0 26,451 17.2 117,183 16.7 80,749 17.0 INCOME FROM OPERATIONS: Metals service centers ... 14,814 5.8 11,153 7.3 38,565 5.5 26,929 5.7 Valex Corp. .............. 987 .4 24 .0 2,808 .4 6,121 1.3 ------------------------------------------------------------------------------------- Total operating income . $ 15,801 6.2% $ 11,177 7.3% $ 41,373 5.9% $ 33,050 6.9% ===================================================================================== FIFO INCOME FROM OPERATIONS ..... $ 16,412 6.5% $ 9,027 5.9% $ 44,223 6.3% $ 30,900 6.5% =====================================================================================
Substantially all inventories for the Company's metals service centers have been stated on the last-in, first-out ("LIFO") method. The Company uses the LIFO method of inventory valuation for these inventories because it results in a better matching of costs and revenues. Under the LIFO method, the effect of suppliers' price increases or decreases is reflected directly in the cost of goods sold. During periods of increasing prices of metals, which the Company is currently experiencing, LIFO accounting will cause reported income to be lower than would otherwise result from the use of the first-in, first-out ("FIFO") method of inventory valuation. As AMI Metals, Inc. ("AMI") purchases the majority of its inventory for specific customer orders, the FIFO method is used because it more appropriately matches revenues and costs. The table above includes income from operations and the discussions which follow include analysis as if the Company used the FIFO method. This information is for supplementary purposes only in order to facilitate a comparison of the Company's results of operations with those of other similar companies who use the FIFO method. Inventories for Valex Corp. have been stated on the FIFO method. THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996 (DOLLAR AMOUNTS IN THOUSANDS OTHER THAN SHARE AND PER SHARE AMOUNTS) Consolidated net sales increased $100,841, or 65.7%, for the three months ended September 30, 1997 compared to the same period of 1996. The increase in metals service centers' net sales of $99,102, or 67.8%, was primarily due to the inclusion of sales from CCC Steel, Inc. ("CCC Steel"), which was acquired on April 3, 1996; from Siskin Steel & Supply Company, Inc. ("Siskin"), which was acquired on October 1, 1996; from AMI Metals, Inc. ("AMI"), which was acquired April 2, 1997; and from Amalco Metals, Inc. ("Amalco"), which was acquired April 30, 1997. The sales increase reflects an increase of 60.3% in tons sold and an increase in the average sales price per ton of 5.7% for the three months ended September 30, 1997 compared to the corresponding period of 1996. The increase in tons sold was primarily due to the inclusion of the net sales of CCC Steel, Siskin, AMI and Amalco ("the Acquisitions"). Excluding the effect of the Acquisitions, metals service centers reported an 11.2% increase in tons 8. 11 sold in the three months ended September 30, 1997 as compared to the same period of 1996. The average selling prices increased for the 1997 period primarily as a result of changes in product mix due to the inclusion of sales from AMI and Amalco, whose products generally have higher selling prices than most other products sold by the Company. Excluding the Acquisitions, the average selling price per ton increased by 2.1% for the 1997 period compared to the 1996 period for the metals service centers primarily in response to changes in product mix and increasing selling prices for certain of the Company's products. Net sales of Valex increased to $9,060 in the three months ended September 30, 1997, compared to $7,321 in the same period of 1996. The increase in Valex's sales is due to a slight improvement in the semiconductor manufacturing industry as compared to the same period of 1996 when a general slowdown in the construction activities of the semiconductor manufacturing industry occurred. Total gross profit increased $18,890, or 50.2%, in the three month period ended September 30, 1997 compared to the same period of 1996. Expressed as a percentage of sales, gross profit decreased from 24.5% in 1996 to 22.2% in 1997. The decrease was primarily due to the impact of LIFO. For the 1997 period, the LIFO reserve increased $611 due to increases in the costs of certain of the Company's raw materials, while the LIFO reserve decreased during the 1996 period, increasing gross margin during that period by $2,150. The 1997 increase in the LIFO reserve was mainly due to firming prices of the Company's products in 1997 compared to 1996, with increased prices in certain products, especially heat treated aluminum and certain carbon products. On a FIFO basis, gross profit for the metals service centers decreased to 22.2% of sales for the three months ended September 30, 1997, from 23.2% for the same period of 1996. Valex's gross profit of $2,757 for the 1997 period increased 66.2% from the same period of 1996 with Valex's margin increasing from 22.7% to 30.4%. This increase was due to cost reductions and fixed costs being spread over a larger sales volume during the 1997 period. Warehouse, delivery, selling and general and administrative ("G&A") expenses increased $13,000, or 53.3%, in the 1997 period compared to the 1996 period and amounted to 14.7% and 15.9% of sales in each respective period. The dollar increase in expenses reflects the increase in sales volume for the 1997 period, which includes the sales and related expenses of Siskin, AMI and Amalco. The decrease in expenses as a percentage of sales is a result of fixed costs being spread over a larger sales volume during the 1997 period. Depreciation and amortization expense increased 61.3% during the three months ended September 30, 1997 compared to the corresponding period of 1996. This increase is primarily due to the inclusion of depreciation expense related to the assets of Siskin, AMI and Amalco, along with the amortization of goodwill resulting from the acquisitions of Siskin, AMI and Amalco. Interest expense increased by $2,272 due to increased borrowings during the three months ended September 30, 1997 as compared to the corresponding period of 1996 to fund the acquisitions of Siskin, AMI and Amalco. The effective income tax rate increased to 40.6% in 1997, from 39.9% in 1996. This increase is primarily due to increased amortization of goodwill related to the Acquisitions and stock option exercises under FAS 123. Income taxes were recorded at a rate of 41.8% in the three months ended September 30, 1997, to adjust the year to date amount to the 40.6% rate expected for the year. NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1996 (DOLLAR AMOUNTS IN THOUSANDS OTHER THAN SHARE AND PER SHARE AMOUNTS) Consolidated net sales increased $223,994, or 47.1%, compared to the first nine months of 1996. The increase in metals service centers' net sales of $233,855, or 53.4%, was due primarily to the inclusion of sales from the Acquisitions. The sales increase reflects an increase of 69.4% in tons sold which was offset by a decrease in the average sales price per ton of 8.5% for the first nine months of 1997 compared to the corresponding period of 1996. The increase in tons sold was primarily due to the inclusion of the sales of the Acquisitions; however, excluding the 9. 12 sales of the Acquisitions, metals service centers reported a 9.2% increase in tons sold in the first nine months of 1997 as compared to the same period of 1996. The average selling price has decreased in response to changes in product mix, with CCC Steel and Siskin adding sales of carbon steel products which typically have lower selling prices than most of the Company's other products, which was offset in 1997 by adding AMI and Amalco's sales of high end aluminum products, which generally have higher selling prices than most of the Company's other products. Excluding sales of the Acquisitions, the average selling price decreased by 2.1% in the 1997 period compared to 1996, primarily due to lower selling prices for common alloy aluminum and stainless steel products during the 1997 period. Net sales of Valex decreased to $27,984 in the first nine months of 1997, compared to $37,845 in the same period of 1996. The decrease in Valex's sales is due to the slowdown in the construction activities of the semiconductor manufacturing industry which began in the second half of 1996. Signs of a slight improvement in the semiconductor manufacturing industry have been seen during 1997, as compared to the second half of 1996. Included in other income for the first nine months of 1997 is a net gain of $1,008 realized on the sale of real property at the Santa Clara, California location. Included in the first nine months of 1996 is a net gain of $1,519 realized on the sale of real property near Los Angeles. Total gross profit increased $44,758, or 39.3%, in the first nine months of 1997 compared to the first nine months of 1996. Expressed as a percentage of sales, gross profit decreased from 23.9% in 1996 to 22.7% in 1997. The decrease was primarily due to declining margins for Valex and the change in LIFO. The LIFO reserve increased $2,850 during the first nine months of 1997 due to increased costs and quantities of certain of the Company's raw materials for 1997, especially heat treated aluminum products. During the 1996 period, LIFO had the reverse effect, decreasing by $2,150. This resulted in additional costs in the 1997 period and increased margin in the 1996 period. On a FIFO basis, gross profit for the metals service centers remained relatively constant at 22.7% of sales for the first nine months of 1997, and 22.4% for the first nine months of 1996. Valex's gross profit of $8,755 for the 1997 period decreased 35.7% from the same period of 1996 and, as a percentage of sales, decreased from 36.0% to 31.3%. The decreases were due to lower sales volume, a more competitive sales environment and increased customer demand for certain lower margin products experienced in 1997, as compared to the first nine months of 1996. Warehouse, delivery, selling and general and administrative expenses increased $32,931, or 43.9%, in the first nine months of 1997 compared to the corresponding period of 1996 and constituted 15.4% and 15.8% of sales for each respective period. The dollar increase in expenses reflects the increase in sales volume for the 1997 period, which includes the sales and related expenses of the Acquisitions. Depreciation and amortization expense increased 60.7% during the nine months ended September 30, 1997 compared to the corresponding period of 1996. This increase is primarily due to the inclusion of depreciation expense, along with the amortization of goodwill, related to the Acquisitions. Interest expense increased by $5,762 due to increased borrowings during the first nine months of 1997 as compared to the corresponding period of 1996 to fund the Acquisitions. The effective income tax rate increased from 39.9% in 1996 to 40.6% in 1997, mainly due to the increased amortization of goodwill from the Acquisitions and stock option exercises under FAS 123. Earnings per share for the nine month periods ended September 30, 1997 and 1996 of $1.54 and $1.44, respectively, includes $.04 and $.06 per share, respectively, attributable to the sale of the real property in each of those periods. 10. 13 LIQUIDITY AND CAPITAL RESOURCES (DOLLAR AMOUNTS IN THOUSANDS OTHER THAN SHARE AND PER SHARE AMOUNTS) At September 30, 1997, working capital amounted to $177,571 compared to $136,765 at December 31, 1996. The increase was primarily due to an increase in accounts receivable resulting from higher sales levels in the first nine months of 1997, as well as working capital obtained from the Acquisitions. The Company's capital requirements are primarily for working capital, acquisitions and capital expenditures for continued improvements in plant capacities and material handling and processing equipment. The Company's primary sources of liquidity are from internally generated funds from operations and the Company's revolving line of credit. In October 1997, the Company entered into a credit agreement with six banks. The Company's borrowing limit under the revolving line of credit established under this agreement was increased to $200,000. Prior to the syndicated line of credit, the Company's borrowing limit with one lender had been increased to $125,000 in March 1997. In September 1997 and November 1996, the Company entered into agreements with insurance companies for private placements of debt in the aggregate amounts of $65,000 and 75,000, respectively. The proceeds of the debt funded in September 1997 were used to refinance the borrowings under the Company's revolving credit facility made to fund the acquisitions of AMI and Amalco and borrowings for general working capital purposes. The proceeds of the debt funded in January 1997 were used to pay off the $65,000 of promissory notes issued for the acquisition of Siskin with the balance of $10,000 applied to reduce the borrowings under the Company's revolving credit facility. The senior notes that were issued in the private placements have maturity dates ranging from 2002 to 2009 and bear interest at rates ranging from 6.76% to 7.37% per annum. The decrease in cash provided by operations of $19,174 during the nine month period ended September 30, 1997 compared to the corresponding 1996 period was due principally to the increase in net accounts receivable, which is primarily due to higher sales in the first nine months of 1997, including the Company's 1997 acquisitions. Capital expenditures, excluding acquisitions, were $19,159 for the nine months ended September 30, 1997. The Company had no material commitments for capital expenditures as of September 30, 1997. The Company anticipates that funds generated from operations and funds available under its line of credit will be more than sufficient to meet its working capital needs for the foreseeable future, including the expansion of its facilities at certain of its metals service centers currently in progress. In December 1994, the Board of Directors approved a Stock Repurchase Plan, authorizing the Company to purchase up to 750,000 shares (increased to 1,500,000 in February 1995) of its outstanding Common Stock. As of September 30, 1997, the Company had repurchased a total of 1,351,500 shares of its Common Stock, at an average purchase price of $11.37 per share, all of which are being treated as authorized but unissued shares. The Company repurchased 373,800 shares of its Common Stock during the nine month period ending September 30, 1997, at an average cost of $19.88 per share. The Company believes such purchases enhance shareholder value and reflect its confidence in the long-term growth potential of the Company. The acquisitions of AMI Metals, Inc. and Amalco Metals, Inc. in April 1997 were funded by borrowings under the Company's revolving line of credit. The acquisition of Service Steel Aerospace Corp. was also funded by borrowings under the revolving line of credit in October 1997. 11. 14 SEASONALITY The Company recognizes that some of its customers may be in seasonal businesses, especially customers in the construction industry. As a result of the Company's geographic, product and customer diversity, however, the Company's operations have not shown any material seasonal trends, although the months of November and December traditionally have been less profitable because of a reduced number of working days on which the Company is able to ship its products and seasonal closures for some of its customers. There can be no assurance that period-to-period fluctuations will not occur. Results of any one or more quarters are therefore not necessarily indicative of annual results. 12. 15 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Not applicable. ITEM 2. CHANGES IN SECURITIES. (a) Not applicable. (b) Not applicable. (c) Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. (a) Not applicable. (b) Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 5. OTHER INFORMATION. Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.01 Form of Note Purchase Agreement dated September 15, 1997 between each of the purchasers listed on Schedule "A" attached thereto and the Registrant. 10.02 Credit Agreement for the $200 Million Syndicated Credit Facility dated October 22, 1997. (b) Form 8-K No reports on Form 8-K have been filed during the period for which this report was filed. 13. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RELIANCE STEEL & ALUMINUM CO. Dated: October 23, 1997 By: /s/ Joe D. Crider ----------------------------- Joe D. Crider Chief Executive Officer By: /s/ Steven S. Weis ----------------------------- Steven S. Weis Senior Vice President & Chief Financial Officer 14. EX-10.01 2 EXHIBIT 10.01 1 ================================================================================ EXHIBIT 10.01 RELIANCE STEEL & ALUMINUM CO. $10,000,000 6.76% Senior Notes, Series E, due January 2, 2002, $25,000,000 7.04% Senior Notes, Series F, due January 2, 2006 and $30,000,000 7.08% Senior Notes, Series G, due January 2, 2008 ----------------------- NOTE PURCHASE AGREEMENT ----------------------- Dated September 15, 1997 ================================================================================ 2 TABLE OF CONTENTS (Not a part of the Agreement)
SECTION HEADING PAGE SECTION 1. AUTHORIZATION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2. SALE AND PURCHASE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 4. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 4.2. Performance; No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 4.3. Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 4.4. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 4.5. Purchase Permitted By Applicable Law, Etc . . . . . . . . . . . . . . . . . . . . . 4 Section 4.6. Sale of Other Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 4.7. Payment of Special Counsel Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 4.8. Private Placement Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 4.9. Changes in Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 4.10. Subsidiary Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 4.11. Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1. Organization; Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 5.2. Authorization, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 5.3. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates . . . . . . . . . 5 Section 5.5. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 5.6. Compliance with Laws, Other Instruments, Etc . . . . . . . . . . . . . . . . . . . 6 Section 5.7. Governmental Authorizations, Etc . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 5.8. Litigation; Observance of Agreements, Statutes and Orders . . . . . . . . . . . . . 7 Section 5.9. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 5.10. Title to Property; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 -3-
3 Section 5.11. Licenses, Permits, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 5.12. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 5.13. Private Offering by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.14. Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.15. Existing Debt; Future Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.16. Foreign Assets Control Regulations, Etc . . . . . . . . . . . . . . . . . . . . . . 10 Section 5.17. Status under Certain Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 5.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 6. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 6.1. Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 6.2. Source of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 6.3. Competitors of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 7. INFORMATION AS TO COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7.1. Financial and Business Information . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7.2. Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 7.3. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 8. PREPAYMENT OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 8.1. Required Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 8.2. Optional Prepayments with Make-Whole Amount . . . . . . . . . . . . . . . . . . . . 16 Section 8.3. Allocation of Partial Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 8.4. Maturity; Surrender, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 8.5. Purchase of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 8.6. Make-Whole Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 9. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 9.1. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 9.2. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 9.3. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 9.4. Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 9.5. Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 9.6. Subsidiary Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 10. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 10.1. Incurrence of Funded Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 -4-
4 Section 10.2. Subsidiary Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 10.3. Incurrence of Current Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 10.4. Minimum Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 10.5. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 10.6. Restrictions on Dividends of Subsidiaries . . . . . . . . . . . . . . . . . . . . . 24 Section 10.7. Sale of Assets, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 10.8. Merger, Consolidation, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 10.9. Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 10.10. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 10.11. Designation of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 11. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 12. REMEDIES ON DEFAULT, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 12.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 12.2. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 12.3. Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 12.4. No Waivers or Election of Remedies, Expenses, Etc . . . . . . . . . . . . . . . . . 30 Section 13. Registration; Exchange; Substitution of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 13.1. Registration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 13.2. Transfer and Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 13.3. Replacement of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 14. PAYMENTS ON NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 14.1. Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 14.2. Home Office Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 15. EXPENSES, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 15.1. Transaction Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 15.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . 33 SECTION 17. AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 -5-
5 Section 17.1. Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 17.2. Solicitation of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 17.3. Binding Effect, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 17.4. Notes Held by Company, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 18. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 19. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 20. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 21. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 22. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 22.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 22.2. Payments Due on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 22.3. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 22.4. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 22.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 22.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SCHEDULE A -- Information Relating To Purchasers SCHEDULE B -- Defined Terms SCHEDULE C -- Existing Investments SCHEDULE 4.9 -- Changes in Corporate Structure SCHEDULE 5.3 -- Disclosure Materials SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary Stock SCHEDULE 5.5 -- Financial Statements
6 SCHEDULE 5.8 -- Certain Litigation SCHEDULE 5.11 -- Patents, Etc. SCHEDULE 5.14 -- Use of Proceeds SCHEDULE 5.15 -- Existing Debt EXHIBIT 1A -- Form of 6.76% Senior Note, Series E, due January 2, 2002 EXHIBIT 1B -- Form of 7.04% Senior Note, Series F, due January 2, 2006 EXHIBIT 1C -- Form of 7.08% Senior Note, Series G, due January 2, 2008 EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel to the Company EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel to the Subsidiary Guarantors EXHIBIT 4.4(c) -- Form of Opinion of Special Counsel to the Purchasers EXHIBIT 9.6 -- Form of Subsidiary Guaranty -7- 7 RELIANCE STEEL & ALUMINUM CO. 2550 E. 25TH STREET LOS ANGELES, CALIFORNIA 90058 $10,000,000 6.76% Senior Notes, Series E, due January 2, 2002, $25,000,000 7.04% Senior Notes, Series F, due January 2, 2006 and $30,000,000 7.08% Senior Notes, Series G, due January 2, 2008 September 15, 1997 TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A: Ladies and Gentlemen: RELIANCE STEEL & ALUMINUM CO., a California corporation (the "Company"), agrees with you as follows: SECTION 1. AUTHORIZATION OF NOTES. The Company will authorize the issue and sale of (i) $10,000,000 aggregate principal amount of its 6.76% Senior Notes, Series E, due January 2, 2002 (the "Series E Notes"; such term to include any notes of the same series issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements (as hereinafter defined)), (ii) $25,000,000 aggregate principal amount of its 7.04% Senior Notes, Series F, due January 2, 2006 (the "Series F Notes"; such term to include any notes of the same series issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements (as hereinafter defined)) and (iii) $30,000,000 aggregate principal amount of its 7.08% Senior Notes, Series G, due January 2, 2008 (the "Series G Notes"; such term to include any notes of the same series issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements). The Series E Notes, the Series F Notes and the Series G Notes are herein collectively referred to as the "Notes". The Series E Notes shall be substantially in the form set out in Exhibit 1A, with such changes therefrom, if any, as may be approved by you and the Company. The Series F Notes shall be substantially in the form set out in Exhibit 1B, with such changes therefrom, if any, as 8 may be approved by you and the Company. The Series G Notes shall be substantially in the form set out in Exhibit 1C, with such changes therefrom, if any, as may be approved by you and the Company. The Notes will be guaranteed by each of the Subsidiary Guarantors. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. SECTION 2. SALE AND PURCHASE OF NOTES. Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, at the Closing provided for in Section 3, Notes of the series and in the principal amount specified opposite your name in Schedule A at the purchase price of 100% of the principal amount thereof. Contemporaneously with entering into this Agreement, the Company is entering into separate Note Purchase Agreements (the "Other Agreements"; this Agreement and the Other Agreements shall be collectively referred to as the "Agreements") identical with this Agreement with each of the other purchasers named in Schedule A (the "Other Purchasers"), providing for the sale at such Closing to each of the Other Purchasers of Notes of the series and in the principal amount specified opposite its name in Schedule A. Your obligation hereunder, and the obligations of the Other Purchasers under the Other Agreements, are several and not joint obligations, and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or nonperformance by any Other Purchaser thereunder. SECTION 3. CLOSING. The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, at 10:00 A.M. Chicago time, at a closing (the "Closing") on September 16, 1997. At the Closing the Company will deliver to you the Notes to be purchased by you in the form of a single Note for each series of Notes to be purchased by you (or such greater number of Notes of each series to be purchased by you in denominations of at least $1,000,000 as you may request) dated the date of the Closing and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 1459406400 at the principal office of Bank of America NT&SA, 525 South Flower Street, Los Angeles, California 90071, ABA #121000358, Attention: Vera Hill, -9- 9 Reference: Reliance Steel & Aluminum Co. If at the Closing the Company shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. SECTION 4. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions: Section 4.1. Representations and Warranties. The representations and warranties of the Company in this Agreement shall be correct when made and at the time of the Closing. Section 4.2. Performance; No Default. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing, and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14), no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any Restricted Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Section 10.1, 10.2, 10.3, 10.5 or 10.10 hereof had such Sections applied since such date. Section 4.3. Compliance Certificates. (a) Officer's Certificate. The Company shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled. (b) Secretary's Certificate. The Company shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and the Agreements. (c) Subsidiary Guarantor Officer's Certificate. Each Subsidiary Guarantor shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the representations and warranties of such Subsidiary Guarantor contained in its Subsidiary Guaranty are true and correct at the time of the Closing. -10- 10 (d) Subsidiary Guarantor Secretary's Certificate. Each Subsidiary Guarantor shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of its Subsidiary Guaranty. Section 4.4. Opinions of Counsel. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) from Arter & Hadden, counsel for the Company, covering the matters set forth in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you), (b) from counsel for each Subsidiary Guarantor, covering the matters set forth in Exhibit 4.4(b) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs such counsel to deliver such opinion to you) and (c) from Chapman and Cutler, your special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(c) and covering such other matters incident to such transactions as you may reasonably request. Section 4.5. Purchase Permitted By Applicable Law, Etc. On the date of the Closing your purchase of Notes shall (i) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (ii) not violate any applicable law or regulation (including, without limitation, Regulation G, T or X of the Board of Governors of the Federal Reserve System) and (iii) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. Section 4.6. Sale of Other Notes. Contemporaneously with the Closing, the Company shall sell to the Other Purchasers, and the Other Purchasers shall purchase, the Notes to be purchased by them at the Closing as specified in Schedule A. Section 4.7. Payment of Special Counsel Fees. Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of your special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Company at least three Business Days prior to the date of the Closing. -11- 11 Section 4.8. Private Placement Number. A Private Placement number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for the Series E Notes, the Series F Notes and the Series G Notes. Section 4.9. Changes in Corporate Structure. Except as specified in Schedule 4.9, the Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. Section 4.10. Subsidiary Guaranties. Each Subsidiary Guarantor shall have delivered to you its Subsidiary Guaranty. Section 4.11. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you that: Section 5.1. Organization; Power and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Other Agreements and the Notes and to perform the provisions hereof and thereof. Section 5.2. Authorization, Etc. This Agreement, the Other Agreements and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the -12- 12 enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Section 5.3. Disclosure. The Company, through its agent, Bank of America NT&SA, has delivered to you and each Other Purchaser a copy of a Private Placement Memorandum, dated August 1997 (the "Memorandum"), relating to the transactions contemplated hereby, and the Company has delivered to you a copy of its most recent Quarterly Report on Form 10-Q for the period ending June 30, 1997. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since December 31, 1996, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby. Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's directors and senior officers. Schedule 5.4 identifies which Subsidiaries are designated Restricted Subsidiaries at the date of the Closing. (b) All of the outstanding shares of capital stock or similar equity interests of each Restricted Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4). -13- 13 (c) Each Restricted Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Restricted Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (d) No Restricted Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Restricted Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Restricted Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Restricted Subsidiary. Section 5.5. Financial Statements. The Company has delivered to each Purchaser copies of the financial statements of the Company and its Restricted Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Restricted Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). Section 5.6. Compliance with Laws, Other Instruments, Etc. The execution, delivery and performance by the Company of this Agreement and the Notes will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Restricted Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Restricted Subsidiary is bound or by which the Company or any Restricted Subsidiary or any of their respective properties may be bound or affected (the consent of Bank of America NT&SA shall have been obtained at or prior to the date of the Closing, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Restricted Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Restricted Subsidiary. -14- 14 Section 5.7. Governmental Authorizations, Etc. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes. Section 5.8. Litigation; Observance of Agreements, Statutes and Orders. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Restricted Subsidiary or any property of the Company or any Restricted Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Section 5.9. Taxes. The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended December 31, 1988. Section 5.10. Title to Property; Leases. The Company and its Restricted Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Restricted Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that -15- 15 individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. Section 5.11. Licenses, Permits, Etc. Except as disclosed in Schedule 5.11, (a) the Company and its Restricted Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others; (b) to the best knowledge of the Company, no product of the Company infringes in any Material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (c) to the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Restricted Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Restricted Subsidiaries. Section 5.12. Compliance with ERISA. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) The present value of the aggregate benefit liabilities under the Plans (other than Multiemployer Plans), determined as of the end of such Plans' most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plans' most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by more than $5,000,000 in the aggregate for all Plans. The terms "benefit liabilities" has the meaning specified in section 4001 of ERISA and the terms "current value" and "present value" have the meaning specified in section 3 of ERISA. -16- 16 (c) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (d) The expected post-retirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Restricted Subsidiaries is not Material. (e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to (i) the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you and (ii) the assumption, made solely for the purpose of making such representation, that Department of Labor Interpretive Bulletin 75-2 with respect to prohibited transactions remains valid in the circumstances of the transactions contemplated herein. Section 5.13. Private Offering by the Company. Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than you, the Other Purchasers and not more than ten other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act. Section 5.14. Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation G of the Board of Governors of the Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation G. Section 5.15. Existing Debt; Future Liens. (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Debt of the Company and -17- 17 its Restricted Subsidiaries as of August 29, 1997, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Debt of the Company or its Restricted Subsidiaries. Neither the Company nor any Restricted Subsidiary is in default, and no waiver of default is currently in effect, in the payment of any principal or interest on any Debt of the Company or such Restricted Subsidiary and no event or condition exists with respect to any Debt of the Company or any Restricted Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, neither the Company nor any Restricted Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.5. Section 5.16. Foreign Assets Control Regulations, Etc. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. Section 5.17. Status under Certain Statutes. Neither the Company nor any Restricted Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as amended. Section 5.18. Environmental Matters. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing: (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; -18- 18 (b) neither the Company nor any of its Subsidiaries has (i) stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them or (ii) disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. SECTION 6. REPRESENTATIONS OF THE PURCHASER. Section 6.1. Purchase for Investment. You represent that (1) you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control and (2) you are an "accredited investor" within the meaning of Rule 501 of Regulation D of the Securities Act. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. Section 6.2. Source of Funds. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (a) if you are an insurance company, the Source does not include assets allocated to any separate account maintained by you in which any employee benefit plan (or its related trust) has any interest, other than a separate account that is maintained solely in connection with your fixed contractual obligations under which the amounts payable, or credited, to such plan and to any participant or beneficiary of such plan (including any annuitant) are not affected in any manner by the investment performance of the separate account; or (b) the Source is either (i) an insurance company pooled separate account, within the meaning of Prohibited Transaction Exemption ("PTE") 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing -19- 19 pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part l(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (c); or (d) the Source is a governmental plan; or (e) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (e); or (f) the Source constitutes assets allocated to an "insurance company general account" (as such term is defined under Section V of the United States Department of Labor's Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) maintained by you and the relevant requirements for exemptive relief under Sections I and IV of PTCE 95-60 as in effect on the date of this representation have been satisfied; or (g) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 6.2, the terms "employee benefit plan", "governmental plan", "party in interest" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. Section 6.3. Competitors of the Company. You agree that you will not resell the Notes purchased by you under this Agreement to a Person which, to the best of your knowledge, -20- 20 is a Competitor or Competitor Affiliate. It is understood and agreed that in establishing compliance by you with the foregoing, you may reasonably rely upon the written representation of the transferee of a Note to the effect that such transferee is not a Competitor or Competitor Affiliate. SECTION 7. INFORMATION AS TO COMPANY. Section 7.1. Financial and Business Information. The Company shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements -- within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of: (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); (b) Annual Statements -- within 105 days after the end of each fiscal year of the Company, duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, -21- 21 setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied (A) by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and (B) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit), provided that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with or followed by the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act delivered within 120 days after the end of such fiscal year) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission, together with the accountant's certificate described in clause (B) above, shall be deemed to satisfy the requirements of this Section 7.1(b); (c) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission and declared effective and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; -22- 22 (d) Notice of Default or Event of Default -- promptly, and in any event within five Business Days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (e) ERISA Matters -- promptly, and in any event within five Business Days after a Responsible Officer becoming aware of any of the following involving potential liability of the Company and/or any of its Subsidiaries in excess of $5,000,000, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (f) Notices from Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and -23- 23 (g) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes. Section 7.2. Officer's Certificate. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 10.1 through Section 10.7 hereof, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. Section 7.3. Inspection. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each -24- 24 Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default -- if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested. SECTION 8. PREPAYMENT OF THE NOTES. Section 8.1. Required Prepayments. Except as provided in Section 8.2, the Company may not prepay the Notes of any series prior to their respective expressed maturity date. The entire unpaid principal amount of the Series E Notes shall become due and payable on January 2, 2002. The entire unpaid principal amount of the Series F Notes shall become due and payable on January 2, 2006. The entire unpaid principal amount of the Series G Notes shall become due and payable on January 2, 2008. Section 8.2. Optional Prepayments with Make-Whole Amount. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in an amount not less than 10% of the aggregate principal amount of the Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes of each series to be prepaid on such date, the principal amount of each Note of each series held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due with respect to each series of Notes in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. -25- 25 Section 8.3. Allocation of Partial Prepayments. In the case of each partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be allocated (i) among all of the series of Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts of each series of Notes and (ii) among all of the Notes of a given series at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. Section 8.4. Maturity; Surrender, Etc. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. Section 8.5. Purchase of Notes. The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. Section 8.6. Make-Whole Amount. The term "Make-Whole Amount" means, with respect to any Note of any series, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "Called Principal" means, with respect to any Note of any series, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "Discounted Value" means, with respect to the Called Principal of any Note of any series, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted -26- 26 financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "Reinvestment Yield" means, with respect to the Called Principal of any Note of any series, 0.5% over the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as page "USD" of the Bloomberg Financial Markets Services Screen (or such other display as may replace page "USD" of the Bloomberg Financial Markets Services Screen) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H. 15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the duration closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the duration closest to and less than the Remaining Average Life. "Remaining Average Life" means, with respect to any Called Principal, the number of years (calculated to the nearest one- twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "Remaining Scheduled Payments" means, with respect to the Called Principal of any Note of any series, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment -27- 27 will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1. "Settlement Date" means, with respect to the Called Principal of any Note of any series, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. SECTION 9. AFFIRMATIVE COVENANTS. The Company covenants that from and after the execution and delivery of this Agreement and so long as any of the Notes are outstanding: Section 9.1. Compliance with Law. The Company will and will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Section 9.2. Insurance. The Company will and will cause each of its Restricted Subsidiaries to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. Section 9.3. Maintenance of Properties. The Company will and will cause each of its Restricted Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Restricted Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. -28- 28 Section 9.4. Payment of Taxes and Claims. The Company will and will cause each of its Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect. Section 9.5. Corporate Existence, Etc. The Company will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.7 and 10.8, the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Wholly-Owned Restricted Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise would not, individually or in the aggregate, have a Material Adverse Effect. Section 9.6. Subsidiary Guaranties. The Company will cause each of its Material Subsidiaries existing as of the date of the Closing to execute and deliver to each holder of Notes, at the Closing, a Guaranty Agreement in the form attached hereto as Exhibit 9.6 (a "Subsidiary Guaranty"). The Company will cause (i) each of its Restricted Subsidiaries that becomes a Material Subsidiary at any time after the Closing and (ii) each Material Subsidiary that is acquired at any time after the Closing to execute and deliver to each holder of Notes, immediately upon becoming a Material Subsidiary, a Subsidiary Guaranty. Notwithstanding the foregoing, you hereby agree that each such Subsidiary Guaranty shall be released upon your receipt of written evidence, satisfactory in form and substance to you and your counsel, that no other Debt of the Company is supported by any Guaranty from any Material Subsidiary. In the event that the Subsidiary Guaranty is so released and other Debt of the Company is thereafter supported by any Guaranty from any Material Subsidiary, the Company will cause each of its Material Subsidiaries that executed and delivered a Guaranty supporting such other Debt to execute and deliver to each holder of Notes, a Subsidiary Guaranty. SECTION 10. NEGATIVE COVENANTS. -29- 29 The Company covenants that from and after the execution and delivery of this Agreement and so long as any of the Notes are outstanding: Section 10.1. Incurrence of Funded Debt. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Funded Debt, except: (a) Funded Debt evidenced by the Notes; (b) Funded Debt of the Company and its Restricted Subsidiaries outstanding on the date hereof and disclosed in Schedule 5.15 hereto; (c) Funded Debt of the Company in addition to that otherwise permitted by the foregoing provisions of this Section 10.1, provided that on the date the Company incurs or otherwise becomes liable with respect to any such additional Funded Debt and immediately after giving effect thereto and to the concurrent retirement of any other Funded Debt, (i) no Default or Event of Default shall exist and (ii) Consolidated Funded Debt does not exceed 60% of Total Capitalization; and (d) Funded Debt of Restricted Subsidiaries permitted by Section 10.2. For the purposes of this Section 10.1, any Person becoming a Restricted Subsidiary after the date hereof shall be deemed, at the time it becomes a Restricted Subsidiary, to have incurred all of its then outstanding Debt. Notwithstanding the foregoing, the extension, renewal or refunding (without increase in principal amount) of any Funded Debt originally incurred within the limitations contained in this Section 10.1 shall not be considered to be an incurrence of Funded Debt. Section 10.2. Subsidiary Debt. The Company will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Debt, except: (a) Debt of a Restricted Subsidiary owed to the Company or to a Wholly-Owned Restricted Subsidiary; (b) Debt of a Restricted Subsidiary outstanding on the date hereof and disclosed in Schedule 5.15 hereto, provided that such Debt may not be extended, renewed or refunded except as otherwise permitted by this Agreement; -30- 30 (c) Debt of a Restricted Subsidiary outstanding at the time such Restricted Subsidiary becomes a Restricted Subsidiary, provided that (i) such Debt shall not have been incurred in contemplation of such Restricted Subsidiary becoming a Restricted Subsidiary and (ii) immediately after such Restricted Subsidiary becomes a Restricted Subsidiary no Default or Event of Default shall exist, and provided, further, that such Debt may not be extended, renewed or refunded except as otherwise permitted by this Agreement; (d) Debt of a Restricted Subsidiary in addition to that otherwise permitted by the foregoing provisions of this Section 10.2, provided that on the date the Restricted Subsidiary incurs or otherwise becomes liable with respect to any such additional Debt and immediately after giving effect thereto and the concurrent retirement of any other Debt, (i) no Default or Event of Default exists and (ii) the total amount of all Debt of Restricted Subsidiaries plus all Debt of the Company secured by Liens permitted by Section 10.5(k) does not exceed 10% of Consolidated Net Worth; and (e) Debt of any Restricted Subsidiary evidenced by a Subsidiary Guaranty with respect to the Notes. For the purposes of this Section 10.2, any Person becoming a Restricted Subsidiary after the date hereof shall be deemed, at the time it becomes a Restricted Subsidiary, to have incurred all of its then outstanding Debt. Section 10.3. Incurrence of Current Debt. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Current Debt, unless there shall have been during the immediately preceding twelve months a period of at least 28 consecutive days on each of which there shall have been no Current Debt of the Company or its Restricted Subsidiaries outstanding in excess of the amount of additional Funded Debt that the Company would have been permitted to (but did not) incur on such day under Section 10.1(c). Solely for the purpose of calculating the foregoing limitation on Current Debt, Current Debt shall be deemed to be Funded Debt and included, without duplication, in the computation of both Consolidated Funded Debt and Total Capitalization under Section 10.1(c). For the purposes of this Section 10.3, any Person becoming a Restricted Subsidiary after the date hereof shall be deemed, at the time it becomes a Restricted Subsidiary, to have incurred all of its then outstanding Current Debt. Section 10.4. Minimum Consolidated Net Worth. The Company will not, at any time, permit Consolidated Net Worth to be less than $150,000,000. -31- 31 Section 10.5. Liens. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property or asset (including, without limitation, any document or instrument in respect of goods or accounts receivable) of the Company or any such Restricted Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom, or assign or otherwise convey any right to receive income or profits, except: (a) Liens for taxes, assessments or other governmental charges which are not yet due and payable or the payment of which is not at the time required by Section 9.4; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens, in each case, incurred in the ordinary course of business for sums not yet due and payable or the payment of which is not at the time required by Section 9.4; (c) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business (i) in connection with workers' compensation, unemployment insurance and other types of social security or retirement benefits, or (ii) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal bonds, bids, leases (other than Capital Leases), performance bonds, purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property; (d) any attachment or judgment Lien, unless the judgment it secures shall not, within 60 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 60 days after the expiration of any such stay; (e) leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to, and not interfering with, the ordinary conduct of the business of the Company or any of its Subsidiaries, provided that such Liens do not, in the aggregate, materially detract from the value of such property; (f) Liens on property or assets of the Company or any of its Restricted Subsidiaries securing Debt owing to the Company or to another Restricted Subsidiary; -32- 32 (g) Liens existing on the date of this Agreement and securing the Debt of the Company and its Restricted Subsidiaries referred to in item 3 of Schedule 5.15; (h) any Lien created to secure all or any part of the purchase price, or to secure Debt incurred or assumed to pay all or any part of the purchase price or cost of construction, of property (or any improvement thereon) acquired or constructed by the Company or a Restricted Subsidiary after the date of the Closing, provided that (i) any such Lien shall extend solely to the item or items of such property (or improvement thereon) so acquired or constructed, (ii) the principal amount of the Debt secured by any such Lien shall at no time exceed an amount equal to the lesser of (A) the cost to the Company or such Restricted Subsidiary of the property (or improvement thereon) so acquired or constructed and (B) the Fair Market Value (as determined in good faith by the board of directors of the Company) of such property (or improvement thereon) at the time of such acquisition or construction, and (iii) any such Lien shall be created contemporaneously with, or within 180 days after, the acquisition or construction of such property; (i) any Lien existing on property of a Person immediately prior to its being consolidated with or merged into the Company or a Restricted Subsidiary or its becoming a Restricted Subsidiary, or any Lien existing on any property acquired by the Company or any Restricted Subsidiary at the time such property is so acquired (whether or not the Debt secured thereby shall have been assumed), provided that (i) no such Lien shall have been created or assumed in contemplation of such consolidation or merger or such Person's becoming a Restricted Subsidiary or such acquisition of property, and (ii) each such Lien shall extend solely to the item or items of property so acquired; (j) any Lien renewing, extending or refunding any Lien permitted by paragraph (g), (h) or (i) of this Section 10.5, provided that (i) the principal amount of Debt secured by such Lien immediately prior to such extension, renewal or refunding is not increased or the maturity thereof reduced, (ii) such Lien is not extended to any other property, (iii) immediately after such extension, renewal or refunding no Default or Event of Default would exist, and (iv) immediately after such extension, renewal or refunding, the Company would be permitted to incur at least $1.00 of additional Funded Debt under the provisions of Section 10.1(c) owing to a Person other than a Restricted Subsidiary; and -33- 33 (k) other Liens not otherwise permitted by paragraphs (a) through (j), securing Debt of the Company or any Restricted Subsidiary, provided that the total amount of all Debt of Restricted Subsidiaries plus all Debt of the Company secured by Liens permitted by this paragraph (k) does not exceed 10% of Consolidated Net Worth. Section 10.6. Restrictions on Dividends of Subsidiaries. The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any agreement which would restrict any Restricted Subsidiary's ability or right to pay dividends to, or make advances to or Investments in, the Company or, if such Restricted Subsidiary is not directly owned by the Company, the "parent" Subsidiary of such Restricted Subsidiary. Section 10.7. Sale of Assets, Etc. Except as permitted under Section 10.8, the Company will not, and will not permit any of its Restricted Subsidiaries to, make any Asset Disposition unless: (a) in the good faith opinion of the Company, the Asset Disposition is in exchange for consideration having a Fair Market Value at least equal to that of the property exchanged and is in the best interest of the Company or such Restricted Subsidiary; and (b) immediately after giving effect to the Asset Disposition, no Default or Event of Default would exist; and (c) immediately after giving effect to the Asset Disposition, the Disposition Value of all property that was the subject of any Asset Disposition occurring in the then current fiscal year of the Company would not exceed 10% of Consolidated Total Assets as of the end of the then most recently ended fiscal year of the Company; and (d) immediately after giving effect to the Asset Disposition, the Company would be permitted to incur at least $1.00 of additional Funded Debt under the provisions of Section 10.1(c) owing to a Person other than a Restricted Subsidiary. If the Net Proceeds Amount for any Transfer is applied to a Debt Prepayment Application or a Property Reinvestment Application within 180 days after such Transfer, then such Transfer, only for the purpose of determining compliance with subsection (c) of this Section 10.7 as of any date, shall be deemed not to be an Asset Disposition. Notwithstanding the foregoing, so long as no Default or Event of Default shall exist, the Company may, and may permit any Restricted Subsidiary to, enter into any arrangement whereby the Company or any Restricted Subsidiary shall sell or transfer any property owned by the -34- 34 Company or any Restricted Subsidiary to any Person other than the Company or a Restricted Subsidiary and, within 180 days after such Asset Disposition, the Company or any Restricted Subsidiary shall lease or intend to lease, as lessee, the same property. Section 10.8. Merger, Consolidation, Etc. The Company will not, and will not permit any of its Restricted Subsidiaries to, consolidate with or merge with any other corporation or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any Person (except that a Restricted Subsidiary of the Company may (x) consolidate with or merge with, or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to, the Company or another Restricted Subsidiary of the Company and (y) convey, transfer or lease all of its assets in compliance with the provisions of Section 10.7), provided that the foregoing restriction does not apply to the consolidation or merger of the Company with, or the conveyance, transfer or lease of substantially all of the assets of the Company in a single transaction or series of transactions to, any Person so long as: (a) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety, as the case may be (the "Successor Corporation"), shall be a solvent corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia; (b) if the Company is not the Successor Corporation, such corporation shall have executed and delivered to each holder of Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Required Holders), and the Company shall have caused to be delivered to each holder of Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof; and (c) immediately after giving effect to such transaction: (i) no Default or Event of Default would exist, and (ii) the Successor Corporation would be permitted by the provisions of Section 10.1(c) hereof to incur at least $1.00 of additional Funded Debt owing to a Person other than a Subsidiary of the Successor Corporation. -35- 35 No such conveyance, transfer or lease of substantially all of the assets of the Company shall have the effect of releasing the Company or any Successor Corporation from its liability under this Agreement or the Notes. Section 10.9. Line of Business. The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any business if, as a result, the general nature of the business in which the Company and its Restricted Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the general nature of the business in which the Company and its Restricted Subsidiaries, taken as a whole, are engaged on the date of this Agreement as described in the Memorandum. Section 10.10. Transactions with Affiliates. The Company will not and will not permit any Restricted Subsidiary to enter into directly or indirectly any transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Restricted Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate. Section 10.11. Designation of Subsidiaries. The Company may designate any Subsidiary to be a Restricted Subsidiary and may designate any Restricted Subsidiary to be an Unrestricted Subsidiary by giving written notice to each holder of Notes that the Board of Directors of the Company has made such designation, provided, however, that no Subsidiary may be designated a Restricted Subsidiary and no Restricted Subsidiary may be designated an Unrestricted Subsidiary unless, at the time of such action and after giving effect thereto, (i) solely in the case of a Restricted Subsidiary being designated an Unrestricted Subsidiary, such Restricted Subsidiary being designated an Unrestricted Subsidiary shall not have any continuing Investment in the Company or any Restricted Subsidiary, (ii) no Default or Event of Default shall exist, and (iii) the Company would be permitted to incur at least $1.00 of additional Funded Debt under the provisions of Section 10.1(c) owing to a Person other than a Restricted Subsidiary. Any Restricted Subsidiary which has been designated an Unrestricted Subsidiary and which has then been designated a Restricted Subsidiary again, in each case in accordance with the provisions of the immediately preceding sentence shall not at any time thereafter be an Unrestricted Subsidiary. Any Unrestricted Subsidiary which has been designated a Restricted Subsidiary and which has then been designated an Unrestricted Subsidiary again, in each case in accordance with the provisions of the first sentence of this Section 10.11 shall not at any time thereafter be a Restricted Subsidiary. Notwithstanding the foregoing, the Company shall not permit any Subsidiary incorporated under the laws of Mexico or any State thereof to be designated a Restricted Subsidiary unless, after giving effect to such designation, the total assets of all -36- 36 Restricted Subsidiaries incorporated under the laws of Mexico or any State thereof (in the aggregate), as of the last day of the immediately preceding fiscal quarter, would not exceed 10% of Consolidated Total Assets as of such date, in each case as reflected in the most recent annual or quarterly financial statements of the Company and its Subsidiaries. SECTION 11. EVENTS OF DEFAULT. An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or (c) the Company defaults in the performance of or compliance with any term contained in Sections 10.1 through 10.10, inclusive; or (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this paragraph (d) of Section 11; provided that if a default shall occur under Section 10.11, then promptly upon the remedy of such default the Company shall recalculate whether the Company was in compliance with Section 10.1 through 10.7 hereof, inclusive, as of the time of the occurrence of such default (such recalculations to be based upon the corrected designations with respect to Restricted Subsidiaries and Unrestricted Subsidiaries) and, if applicable, the Company shall comply with Section 7.1(d)); or (e) any representation or warranty made in writing by or on behalf of the Company or any Restricted Subsidiary or by any officer of the Company in this Agreement, the Subsidiary Guaranty or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or -37- 37 (f) (i) the Company or any Restricted Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $5,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Restricted Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $5,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) the Company or any Restricted Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $5,000,000, or (y) one or more Persons have the right to require the Company or any Restricted Subsidiary so to purchase or repay such Indebtedness; or (g) the Company or any Restricted Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Restricted Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Restricted Subsidiaries, or any such petition shall be filed against the Company or any of its Restricted Subsidiaries and such petition shall not be dismissed within 60 days; or -38- 38 (i) a final judgment or judgments for the payment of money aggregating in excess of $2,000,000 are rendered against one or more of the Company and its Restricted Subsidiaries and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or (j) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC and the amount owed by the Company or any ERISA Affiliate due to such termination exceeds $5,000,000, or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $5,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; or (k) any Subsidiary Guarantor shall breach its obligations under the Subsidiary Guaranty or any Subsidiary Guaranty shall have been declared to be unenforceable or any Subsidiary Guarantor shall contest or deny in writing the validity or enforceability of its obligations under its Subsidiary Guaranty or shall take any other affirmative action to cause its Subsidiary Guaranty to cease to be valid or enforceable. As used in Section 11(j), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in Section 3 of ERISA. SECTION 12. REMEDIES ON DEFAULT, ETC. Section 12.1. Acceleration. (a) If an Event of Default with respect to the Company or a Restricted Subsidiary described in paragraph (g) or (h) of Section 11 (other than an Event of -39- 39 Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, any holder or holders of more than 25% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Note's becoming due and payable under this Section 12.1, whether automatically or by declaration, such Note will forthwith mature and the entire unpaid principal amount of such Note, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for), and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. Section 12.2. Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. Section 12.3. Rescission. At any time after any Notes have been declared due and payable pursuant to clause (b) of Section 12.1, the holders of not less than 76% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal -40- 40 and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. Section 13.1. Registration of Notes. The Company shall keep at its principal executive office a register, by series of Notes, for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. Section 13.2. Transfer and Exchange of Notes. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes of the same series (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Any transfer shall comply with applicable securities laws. Each such new -41- 41 Note shall be payable to such Person as such holder may request and shall be substantially in the form of (i) Exhibit 1A, in the case of a Series E Note, (ii) Exhibit 1B, in the case of a Series F Note, and (iii) Exhibit 1C, in the case of a Series G Note. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $1,000,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $1,000,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2. Section 13.3. Replacement of Notes. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at least $10,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note of the same series, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. SECTION 14. PAYMENTS ON NOTES. Section 14.1. Place of Payment. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Los Angeles, California at the principal office of Bank of America NT&SA in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. Section 14.2. Home Office Payment. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the -42- 42 contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2. SECTION 15. EXPENSES, ETC. Section 15.1. Transaction Expenses. (a) Whether or not the transactions contemplated hereby are consummated, the Company will pay the reasonable attorneys' fees and disbursements of Chapman and Cutler, your special counsel, incurred in connection with the transactions contemplated by the Agreements. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses, if any, of brokers and finders (other than those retained by you). (b) The Company will pay all costs and expenses, including reasonable attorneys' fees in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (i) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder of any Note, and (ii) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. Section 15.2. Survival. The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. -43- 43 SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. SECTION 17. AMENDMENT AND WAIVER. Section 17.1. Requirements. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20. Section 17.2. Solicitation of Holders of Notes. (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. -44- 44 (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes or any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. Section 17.3. Binding Effect, Etc. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. Section 17.4. Notes Held by Company, Etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. SECTION 18. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telefacsimile if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing, -45- 45 (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Senior Financial Officer, or at such other address as the Company shall have specified to the holder of each Note in writing. Notices under this Section 18 will be deemed given only when actually received. SECTION 19. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. SECTION 20. CONFIDENTIAL INFORMATION. For the purposes of this Section 20, "Confidential Information" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, other than by your violation of the terms of this Section, (b) subsequently becomes publicly known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential -46- 46 Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party (where, in your sole discretion, the information is material and relevant to the subject matter of the litigation) or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20. SECTION 21. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" -47- 47 is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. SECTION 22. MISCELLANEOUS. Section 22.1. Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. Section 22.2. Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. Section 22.3. Severability. Any provision of this Agreement that 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 hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. Section 22.4. Construction. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. Section 22.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. Section 22.6. Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. -48- 48 * * * * * If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, RELIANCE STEEL & ALUMINUM CO. By Title: By Title: -49- 49 Accepted as of September __, 1997: [VARIATION] By [Title] -50- 50 Accepted as of September __, 1997: NATIONWIDE LIFE INSURANCE COMPANY By Its -51- 51 Accepted as of September __, 1997: GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY By Its By Its -52- 52 Accepted as of September __, 1997: TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY By Its -53- 53 Accepted as of September __, 1997: ALLSTATE LIFE INSURANCE COMPANY By Name: By Name: Authorized Signatories -54- 54 Accepted as of September __, 1997: MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By Its -55- 55 Accepted as of September __, 1997: UNITED OF OMAHA LIFE INSURANCE COMPANY By Its -56- 56 Accepted as of September __, 1997: CUNA MUTUAL INSURANCE SOCIETY By CIMCO Inc. By Its -57- 57 Accepted as of September __, 1997: CUNA MUTUAL LIFE INSURANCE COMPANY By CIMCO Inc. By Its -58- 58 INFORMATION RELATING TO PURCHASERS PRINCIPAL AMOUNT OF NAME AND ADDRESS OF PURCHASER NOTES TO BE PURCHASED SERIES E NATIONWIDE LIFE INSURANCE COMPANY $10,000,000 One Nationwide Plaza Columbus, Ohio 43215-2220 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Reliance Steel & Aluminum Co. 6.76% Senior Notes, Series E, due January 2, 2002, PPN 75952* AJ 9, principal or interest") to: The Bank of New York ABA #021-000-018 BNF: IOC566 F/A/O Nationwide Life Insurance Company Attention: P&I Department Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: Nationwide Life Insurance Company c/o The Bank of New York P. O. Box 19266 Newark, NJ 07195 Attention: P&I Department With a copy to: Nationwide Life Insurance Company One Nationwide Plaza (1-32-05) Columbus, Ohio 43215-2220 Attention: Investment Accounting SCHEDULE A (to Note Purchase Agreement) 59 All notices and communications other than those in respect to payments to be addressed: Nationwide Life Insurance Company One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attention: Corporate Fixed-Income Securities Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 31-4156830 A-60 60 PRINCIPAL AMOUNT OF NAME AND ADDRESS OF PURCHASER NOTES TO BE PURCHASED SERIES F GREAT-WEST LIFE & ANNUITY $5,000,000 INSURANCE COMPANY 8515 East Orchard Road, 3rd floor, Tower 2 Englewood, Colorado 80111 Attention: U.S. Private Placements Facsimile: (303) 689-6193 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Reliance Steel & Aluminum Co. 7.04% Senior Notes, Series F, due January 2, 2006, PPN 75952* AK 6, principal or interest and confirmation of principal balance") to: ABA #091000019 NW MPLS/TRUST CLEARING Account Number 08-40-245 Attention: GWL Account Number 12468800 Notices All notices of payments, on or in respect of the Notes and written confirmation of each such payment to: Norwest Bank Minnesota, N.A. 733 Marquette Avenue, Investors Building, 5th Floor Minneapolis, Minnesota 55479-0047 Attention: Income Collections All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 84-0467907 A-61 61 PRINCIPAL AMOUNT OF NAME AND ADDRESS OF PURCHASER NOTES TO BE PURCHASED SERIES F TRANSAMERICA OCCIDENTAL LIFE $10,000,000 INSURANCE COMPANY c/o Transamerica Investment Services 1150 South Olive Street, Suite 2700 Los Angeles, California 90015 Attention: John Casparian Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Reliance Steel & Aluminum Co. 7.04% Senior Notes, Series F, due January 2, 2006, PPN 75952* AK 6, principal or interest") to: Federal Reserve Bank of Boston Boston Safe Deposit & Trust Boston, Massachusetts ABA 011-001-234 Acct#: 12-526-1 FFC: Cost Center 1253 Transamerica Occidental Life Insurance Company Account Segment: UNI Account No. TRAF 1505102 Ref: Cusip and Description Notices All notices and communications to be addressed as first provided above, except notices with respect to payments and written confirmation of each such payment and all account statements, to: Transamerica Life Companies P. O. Box 2101 - Securities Accounting Los Angeles, California 90051-0101 Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 95-1060502 A-62 62
PRINCIPAL AMOUNT OF NAME AND ADDRESS OF PURCHASER NOTES TO BE PURCHASED SERIES G ALLSTATE LIFE INSURANCE COMPANY $3,000,000 3075 Sanders Road, STE G3A $6,000,000 Northbrook, Illinois 60062-7127 $6,000,000
Attention: Private Placements Department Telephone Number: (847) 402-4394 Telecopier Number: (847) 402-3092 Payments All payments on or in respect of the Notes to be made by Fedwire transfer of immediately available funds (identifying each payment with name of the Issuer (and the Credit, if any), the Private Placement Number preceded by "DPP" and the payment as principal, interest or premium) in the exact format as follows: BBK = Harris Trust and Savings Bank ABA #071000288 BNF = Allstate Life Insurance Company Collection Account #168-117-0 ORG = Reliance Steel & Aluminum Co. OBI = DPP - 75952* AL 4 -- Payment Due Date (MM/DD/YY) -- P ______ (enter "P" and the amount of principal being remitted, for example, P5000000.00) -- I ______ (enter "I" and the amount of interest being remitted, for example, I225000.00) Notices All notices of scheduled payments and written confirmation of each such payment, to be addressed: Allstate Insurance Company Investment Operations -- Private Placements 3075 Sanders Road, STE G4A Northbrook, Illinois 60062-7127 Telephone: (847) 402-2769 Telecopy: (847) 326-5040 A-63 63 All financial reports, compliance certificates and all other written communications, including notice of prepayments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 36-2554642 A-64 64 PRINCIPAL AMOUNT OF NAME AND ADDRESS OF PURCHASER NOTES TO BE PURCHASED SERIES G MASSACHUSETTS MUTUAL LIFE $15,000,000 INSURANCE COMPANY 1295 State Street Springfield, Massachusetts 01111 Attention: Securities Investment Division Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Reliance Steel & Aluminum Co. 7.08% Senior Notes, Series G, due January 2, 2008, PPN 75952* AL 4, principal or interest") to: Citibank, N.A. (ABA #021000089) 111 Wall Street New York, New York 10043 for credit to: MassMutual Long Term Pool Account Number 4067-3488 Re: Description of security, principal and interest split With telephone advice of payment to the Securities Custody and Collection Department of Massachusetts Mutual Life Insurance Company at (413) 744-3878. Notices All notices and communications to be addressed as first provided above, except notices with respect to payments, to be addressed Attention: Securities Custody and Collection Department, F 381. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 04-1590850 A-65 65 PRINCIPAL AMOUNT OF NAME AND ADDRESS OF PURCHASER NOTES TO BE PURCHASED SERIES F UNITED OF OMAHA LIFE INSURANCE $5,000,000 COMPANY Mutual of Omaha Plaza Omaha, Nebraska 68175 Attention: Investment Division/Securities Accounting Telefacsimile: (402) 351-2913 Confirmation: (402) 351-2583 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Reliance Steel & Aluminum Co. 7.04% Senior Notes, Series F, due January 2, 2006, PPN 75952* AK 6, principal or interest") to: First Bank, N.A. (ABA #1040-0002-9) 17th and Farnam Streets Omaha, Nebraska 68102 for credit to: United of Omaha Life Insurance Company Account Number 1-487-1447-0769 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 47-0322111 A-66 66 PRINCIPAL AMOUNT OF NAME AND ADDRESS OF PURCHASER NOTES TO BE PURCHASED SERIES F CUNA MUTUAL INSURANCE SOCIETY $3,000,000 c/o CIMCO Inc. 5910 Mineral Point Road Madison, Wisconsin 53705 Attention: Private Placements Telecopier Number: (608) 238-2316 Security Description: Reliance Steel Series F, 7.04% Par Value of securities purchased: $3,000,000 1. All payments by wire transfer of immediately available federal funds to: State Street Bank ABA 011000028 BNF: CUNA Mutual Insurance Society AG: DDA: 1044-851-2 OBI: ZT1E with sufficient information to identify the source and application of such funds, including cusip, payment date, and principal, premium or interest on the security. 2. All other communications: CIMCO Inc. 5910 Mineral Point Road Madison, WI 53705 Attn: Private Placements FAX Number: (608) 238-2316 3. Tax Identification No.: 39-0230590 4. All securities being purchased should be registered in the name of "CUNA Mutual Insurance Society" and delivered to: A-67 67 The Chase Manhattan Bank and Trust Company A/C State Street Bank Attn: Mike Jones 4 New York Plaza, Ground Floor New York, NY 10004 A/C CUNA Mutual Group A/C Number: ZT1E 5. Signature page format: CUNA Mutual Insurance Society By: CIMCO Inc. A-68 68 PRINCIPAL AMOUNT OF NAME AND ADDRESS OF PURCHASER NOTES TO BE PURCHASED SERIES F CUNA MUTUAL LIFE INSURANCE COMPANY $2,000,000 c/o CIMCO Inc. 5910 Mineral Point Road Madison, Wisconsin 53705 Attention: Private Placements Telecopier Number: (608) 238-2316 Security Description: Reliance Steel Series F, 7.04% Par Value of securities purchased: $2,000,000 1. All payments by wire transfer of immediately available federal funds to: State Street Bank ABA 011000028 BNF: CUNA Mutual Life Insurance Company AG: DDA: 1044-854-6 OBI: ZT2A with sufficient information to identify the source and application of such funds, including cusip, payment date, and principal, premium or interest on the security. 2. All other communcations: CIMCO Inc. 5910 Mineral Point Road Madison, WI 53705 Attn: Private Placements FAX Number: (608) 238-2316 3. Tax Identification No.: 42-0388260 4. All securities being purchase should be registered in the name of "CUNA Mutual Life Insurance Company" and delivered to: A-69 69 The Chase Manhattan Bank and Trust Company A/C State Street Bank Attn: Mike Jones 4 New York Plaza, Ground Floor New York, NY 10004 A/C CUNA Mutual Group A/C Number: ZT2A 5. Signature page format: CUNA Mutual Life Insurance Company By: CIMCO Inc. A-70 70 DEFINED TERMS As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "Affiliate" means, at any time, and with respect to any Person, (a) any other Person (other than a Restricted Subsidiary) that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, (b) any Person (other than a Restricted Subsidiary) beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Restricted Subsidiary or any corporation of which the Company and its Restricted Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests and (c) any other Person that is an officer or director of such first Person. As used in this definition, "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. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "Agreements" is defined in Section 2. "Asset Disposition" means any Transfer except: (a) any (i) Transfer from a Restricted Subsidiary to the Company or a Wholly-Owned Restricted Subsidiary; (ii) Transfer from the Company to a Wholly-Owned Restricted Subsidiary; and (iii) Transfer from the Company to a Restricted Subsidiary (other than a Wholly-Owned Restricted Subsidiary) or from a Restricted Subsidiary to another Restricted Subsidiary, which in either case is for Fair Market Value, so long as immediately before and immediately after the consummation of any such Transfer and after giving effect thereto, no Default or Event of Default exists and the Company would be permitted to incur at least $1.00 of additional Funded Debt under the provisions of Section 10.1(c) owing to a Person other than a Restricted Subsidiary; and SCHEDULE B (to Note Purchase Agreement) 71 (b) any Transfer made in the ordinary course of business and involving only property that is either (i) inventory held for sale or (ii) equipment, fixtures, supplies or materials that are obsolete. "Business Day" means (a) for the purposes of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in Los Angeles, California or New York, New York are required or authorized to be closed. "Capital Lease" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "Capital Lease Obligation" means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which would, in accordance with GAAP, appear as a liability on a balance sheet of such Person. "Closing" is defined in Section 3. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "Company" means Reliance Steel & Aluminum Co., a California corporation. "Competitor" shall mean any Person which is primarily engaged in the metals service center industry and the electro-polishing of stainless steel tubing and "Competitor Affiliate" shall mean with respect to any Competitor (a) any other Person at the time directly or indirectly controlling, controlled by or under direct or indirect common control with such Competitor, (b) any other Person of which such Competitor at the time owns 25% or more on a consolidated basis of the equity interest of such Person, and (c) any other Person which at the time owns 25% or more of any class of the capital stock of such Competitor, provided that: (a) the provision of investment advisory services by a Person to a Plan which is owned or controlled by a Person which would otherwise be a Competitor or Competitor Affiliate shall not of itself cause the Person providing such services to be deemed to be a Competitor or Competitor Affiliate; (b) in no event shall an Institutional Investor be deemed a Competitor or Competitor Affiliate unless such Institutional Investor controls or is controlled by, or is B-73 72 under common control with, a Person which is primarily engaged in the metals service center industry and the electro-polishing of stainless steel tubing; and (c) an Institutional Investor which would otherwise be deemed a Competitor or Competitor Affiliate pursuant to the foregoing provisions of this definition by virtue of its ownership or control as a portfolio investment of the equity Securities of any Person primarily engaged in the metals service center industry and the electro-polishing of stainless steel tubing shall not be deemed a Competitor or Competitor Affiliate if such Institutional Investor has established "firewall" like-procedures which will prevent confidential information supplied to such Institutional Investor by the Company from being transmitted or otherwise made available to such Person. "Confidential Information" is defined in Section 20. "Consolidated Funded Debt" means, as of any date of determination, the total of all Funded Debt of the Company and its Restricted Subsidiaries outstanding on such date, after eliminating all offsetting debits and credits between the Company and its Restricted Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and its Restricted Subsidiaries in accordance with GAAP. "Consolidated Net Worth" means, at any time, (a) the sum of (i) the par value of the capital stock (but excluding treasury stock and capital stock subscribed and unissued) of the Company and its Restricted Subsidiaries plus (ii) the amount of the paid-in capital and retained earnings of the Company and its Restricted Subsidiaries, in each case as such amounts would be shown on a consolidated balance sheet of the Company and its Restricted Subsidiaries as of such time prepared in accordance with GAAP, minus (b) to the extent included in clause (a) above, all amounts properly attributable to minority interests, if any, in the stock and surplus of Restricted Subsidiaries, minus (c) the book value (established at the date of incurrence) of all Restricted Investments incurred after the date of the Closing in excess of an amount equal to 5% of the amount determined pursuant to clause (a) above. "Consolidated Total Assets" means, at any time, the total assets of the Company and its Restricted Subsidiaries which would be shown as assets on a consolidated balance sheet of the Company and its Restricted Subsidiaries as of such time prepared in accordance with GAAP, after B-74 73 eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Restricted Subsidiaries. "Current Debt" means, with respect to any Person, all Debt of such Person which by its terms or by the terms of any instrument or agreement relating thereto matures on demand or within one year from the date of the creation thereof and is not directly or indirectly renewable or extendible at the option of the obligor in respect thereof to a date one year or more from such date, provided that (a) Debt outstanding under a revolving credit or similar agreement which obligates the lender or lenders to extend credit over a period of one year or more and (b) Current Maturities of Funded Debt shall constitute Funded Debt and not Current Debt, even though such Debt by its terms matures on demand or within one year from such date. "Current Maturities of Funded Debt" means, at any time and with respect to any item of Funded Debt, the portion of such Funded Debt outstanding at such time which by the terms of such Funded Debt or the terms of any instrument or agreement relating thereto is due on demand or within one year from such time (whether by sinking fund, other required prepayment or final payment at maturity) and is not directly or indirectly renewable, extendible or refundable at the option of the obligor under an agreement or firm commitment in effect at such time to a date one year or more from such time. "Debt" means, with respect to any Person, without duplication, (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capital Lease Obligations; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all recourse obligations of such Person related to Receivable Securitization transactions; (f) all obligations of such Person in respect of mandatorily redeemable preferred stock; B-75 74 (g) the face amount of all letters of credit issued for the account of such Person and all drafts drawn thereunder, other than undrawn amounts under letters of credit used in the ordinary course of business; and (h) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (g) hereof. Debt of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Debt Prepayment Application" means, with respect to any Transfer of property, the application by the Company or its Restricted Subsidiaries of cash in an amount equal to the Net Proceeds Amount with respect to such Transfer to pay Senior Debt of the Company (other than Debt owing to the Company, any of its Subsidiaries or any Affiliate). "Default" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Default Rate" means, with respect to amounts owing in respect of any series of Notes, that rate of interest that is the greater of (i) 2% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes of the applicable series or (ii) the default rate of interest applicable as of the date of any determination hereunder to Debt outstanding under that certain First Amended and Restated Business Loan Agreement dated as of June 26, 1996 between Bank of America NT&SA and the Company, as amended (or any credit facility entered into in replacement thereof). "Disposition Value" means, at any time, with respect to any property (a) in the case of property that does not constitute Subsidiary Stock, the book value thereof, valued at the time of such disposition in good faith by the Company, and (b) in the case of property that constitutes Subsidiary Stock, an amount equal to that percentage of book value of the assets of the Subsidiary that issued such stock as is equal to the percentage that the book value of such Subsidiary Stock represents of the book value of all of the outstanding capital stock of such Subsidiary (assuming, in making such calculations, that all Securities convertible into such capital stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion) determined at the time of the disposition thereof, in good faith by the Company. B-76 75 "Environmental Laws" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA Affiliate" means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. "Event of Default" is defined in Section 11. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, at any time and with respect to any property, the sale value of such property that would be realized in an arm's-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell). "Funded Debt" means, with respect to any Person, all Debt of such Person which by its terms or by the terms of any instrument or agreement relating thereto matures, or which is otherwise payable or unpaid, one year or more from, or is directly or indirectly renewable or extendible at the option of the obligor in respect thereof to a date one year or more (including, without limitation, an option of such obligor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more) from, the date of the creation thereof, provided that Funded Debt shall include, as at any date of determination, Current Maturities of Funded Debt. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America. "Governmental Authority" means (a) the government of (i) the United States of America or any State or other political subdivision thereof, or B-77 76 (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "Guaranty" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such indebtedness or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or (d) otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof. In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "Hazardous Material" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). B-78 77 "holder" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1. "Indebtedness" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable Preferred Stock; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of performance bonds or letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (f) Swaps of such Person; and (g) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof. Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Institutional Investor" means (a) any original purchaser of a Note, (b) any holder of a Note holding more than 5% of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. B-79 78 "Investment" means any investment, made in cash or by delivery of property, by the Company or any of its Restricted Subsidiaries (i) in any Person, whether by acquisition of stock, Debt or other obligation or security, or by loan, Guaranty, advance, capital contribution or otherwise, or (ii) in any property. "Lien" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). "Make-Whole Amount" is defined in Section 8.6. "Material" means material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of the Company and its Restricted Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the validity or enforceability of this Agreement, the Subsidiary Guaranty, if any, or the Notes. "Material Subsidiary" means, at any time, MetalCenter, Inc., Valex Corp., CCC Steel, Inc., Siskin Steel & Supply Company, Inc., AMI Metals, Inc. and any other Restricted Subsidiary having at such time either (i) total net revenues for the period of the immediately preceding four fiscal quarters equal to or greater than 10% of the consolidated total net revenues of the Company and its Subsidiaries for such period or (ii) total assets, as of the last day of the immediately preceding fiscal quarter, equal to or greater than 10% of the Consolidated Total Assets as of such date, in each case as reflected in the most recent annual or quarterly financial statements of the Company and its Subsidiaries. "Memorandum" is defined in Section 5.3. "Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "Net Proceeds Amount" means, with respect to any Transfer of any Property by any Person, an amount equal to the difference of B-80 79 (a) the aggregate amount of the consideration (valued at the Fair Market Value of such consideration at the time of the consummation of such Transfer) received by such Person in respect of such Transfer, minus (b) all ordinary and reasonable out-of-pocket costs and expenses actually incurred by such Person in connection with such Transfer. "Notes" is defined in Section 1. "Officer's Certificate" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "Other Agreements" is defined in Section 2. "Other Purchasers" is defined in Section 2. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "Person" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "Plan" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "Preferred Stock" means any class of capital stock of a corporation that is preferred over any other class of capital stock of such corporation as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such corporation. "property" or "properties" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "Property Reinvestment Application" means, with respect to any Transfer of property, the application of an amount equal to the Net Proceeds Amount with respect to such Transfer to the acquisition by the Company or any Restricted Subsidiary of operating assets of the Company or any Restricted Subsidiary to be used in the ordinary course of business of such Person. B-81 80 "QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "Receivable Securitization" means any transaction pursuant to which (i) accounts receivable are sold or transferred and (ii) the seller of such accounts receivable (a) retains an interest in the accounts receivable sold or transferred or (b) assumes any liability in connection with such sale or transfer. "Required Holders" means, at any time, the holders of at least 51% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). "Responsible Officer" means any Senior Financial Officer. "Restricted Investments" means all Investments except the following: (a) property to be used in the ordinary course of business of the Company and its Subsidiaries; (b) current assets arising from the sale of goods and services in the ordinary course of business of the Company and its Subsidiaries; (c) Investments in one or more Restricted Subsidiaries or any Person that concurrently with such Investment becomes a Restricted Subsidiary; (d) Investments existing on the date of the Closing and disclosed in Schedule C (including the Company's 50% equity investment in American Steel L.L.C. in an amount equal to $30,205,000 as of June 30, 1997); (e) Investments in United States Governmental Securities, provided that such obligations mature within three years from the date of acquisition thereof; (f) Investments in tax-exempt obligations of any state of the United States of America, or any municipality of any such state, in each case rated one of the two highest ratings by at least one credit rating agency of recognized national standing, provided that such obligations mature within three years from the date of acquisition thereof; (g) Investments in certificates of deposit or banker's acceptances issued by an Acceptable Bank, provided that such obligations mature within 365 days from the date of acquisition thereof; B-82 81 (h) Investments in commercial paper given one of the two highest ratings by at least one credit rating agency of recognized national standing and maturing not more than 270 days from the date of creation thereof; and (i) Investments in money market instrument programs which are classified as current assets in accordance with GAAP, which money market instrument programs are administered by an Acceptable Bank. As of any date of determination, each Restricted Investment shall be valued at the greater of: (x) the amount at which such Restricted Investment is shown on the books of the Company or any of its Restricted Subsidiaries (or zero if such Restricted Investment is not shown on any such books); and (y) either (i) in the case of any Guaranty of the obligation of any Person, the amount which the Company or any of its Restricted Subsidiaries has paid on account of such obligation less any recoupment by the Company or such Restricted Subsidiary of any such payments, or (ii) in the case of any other Restricted Investment, the excess of (x) the greater of (A) the amount originally entered on the books of the Company or any of its Restricted Subsidiaries with respect thereto and (B) the cost thereof to the Company or its Restricted Subsidiary over (y) any return of capital (after income taxes applicable thereto) upon such Restricted Investment through the sale or other liquidation thereof or part thereof or otherwise. As used in this definition of "Restricted Investments": "Acceptable Bank" means Bank of America NT&SA and any other bank or trust company (i) which is organized under the laws of the United States of America or any State thereof, (ii) which has capital, surplus and undivided profits aggregating at least $250,000,000, and (iii) whose long-term unsecured debt obligations (or the long-term unsecured debt obligations of the bank holding company owning all of the capital stock of such bank or trust company) shall have been given one of the two highest ratings by at least one credit rating agency of recognized national standing. B-83 82 "United States Governmental Security" means any direct obligation of, or obligation guaranteed by, the United States of America, or any agency controlled or supervised by or acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America, so long as such obligation or guarantee shall have the benefit of the full faith and credit of the United States of America which shall have been pledged pursuant to authority granted by the Congress of the United States of America. "Restricted Subsidiary" shall mean MetalCenter, Inc., Valex Corp., CCC Steel, Inc., Siskin Steel & Supply Company, Inc., AMI Metals, Inc., Amalco Metals, Inc. and any other Subsidiary (i) which is designated a Restricted Subsidiary by the Board of Directors of the Company in accordance with Section 10.11; (ii) which is organized under the laws of the United States or any State thereof or Canada or any Province thereof or, subject to the last sentence of Section 10.11, Mexico or any State thereof; (iii) which conducts substantially all of its business and has substantially all of its assets within the United States or Canada or, subject to the last sentence of Section 10.11, Mexico or any State thereof; and (iv) of which at least 80% (by number of votes) of the voting interests is owned by the Company and/or one or more Wholly- Owned Restricted Subsidiaries. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Senior Debt" of any Person means any Current Debt or Funded Debt of such Person not expressed to be subordinate or junior to any other Debt of such Person. "Senior Financial Officer" means the chief financial officer, principal accounting officer, treasurer or controller of the Company. "Subsidiary" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. Notwithstanding the foregoing, American Steel, L.L.C. shall not be considered a Subsidiary for any purpose of this Agreement. "Subsidiary Guarantor" means any Material Subsidiary. B-84 83 "Subsidiary Guaranty" is defined in Section 9.6. "Subsidiary Stock" means, with respect to any Person, the stock (or any options or warrants to purchase stock or other Securities exchangeable for or convertible into stock) of any Subsidiary of such Person. "Swaps" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "Total Capitalization" means the sum of (i) Consolidated Funded Debt plus (ii) Consolidated Net Worth. "Transfer" means, with respect to any Person, any transaction in which such Person sells, conveys, transfers or leases (as lessor) any of its property, including, without limitation, Subsidiary Stock. For purposes of determining the application of the Net Proceeds Amount in respect of any Transfer, the Company may designate any Transfer as one or more separate Transfers each yielding a separate Net Proceeds Amount. In any such case, (a) the Disposition Value of any property subject to each such separate Transfer and (b) the amount of Consolidated Total Assets attributable to any property subject to each such separate Transfer shall be determined by ratably allocating the aggregate Disposition Value of, and the aggregate Consolidated Total Assets attributable to, all property subject to all such separate Transfers to each such separate Transfer on a proportionate basis. "Unrestricted Subsidiary" shall mean any Subsidiary that is not a Restricted Subsidiary. "Wholly-Owned Restricted Subsidiary" means, at any time, any Restricted Subsidiary one hundred percent (100%), or in the case of Valex Corp. ninety-five percent (95%), of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-Owned Restricted Subsidiaries at such time. B-85 84 EXISTING INVESTMENTS SCHEDULE C (to Note Purchase Agreement) 85 CHANGES IN CORPORATE STRUCTURE SCHEDULE 4.9 (to Note Purchase Agreement) 86 DISCLOSURE MATERIALS SCHEDULE 5.3 (to Note Purchase Agreement) 87 SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK SCHEDULE 5.4 (to Note Purchase Agreement) 88 FINANCIAL STATEMENTS SCHEDULE 5.5 (to Note Purchase Agreement) 89 CERTAIN LITIGATION SCHEDULE 5.8 (to Note Purchase Agreement) 90 PATENTS, ETC. SCHEDULE 5.11 (to Note Purchase Agreement) 91 USE OF PROCEEDS SCHEDULE 5.14 (to Note Purchase Agreement) 92 EXISTING DEBT SCHEDULE 5.15 (to Note Purchase Agreement) 93 [FORM OF SERIES E NOTE] RELIANCE STEEL & ALUMINUM CO. 6.76% SENIOR NOTE, SERIES E, DUE JANUARY 2, 2002 No. [ER-___] [Date] $[____________] PPN 75952* AJ 9 FOR VALUE RECEIVED, the undersigned, RELIANCE STEEL & ALUMINUM CO. (herein called the "Company"), a corporation organized and existing under the laws of the State of California, hereby promises to pay to [________________], or registered assigns, the principal sum of [________________] DOLLARS on January 2, 2002, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.76% per annum from the date hereof, payable semiannually, on the last day of June and December in each year, commencing with the June 30 or December 31 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum equal to the greater of (i) 8.76% or (ii) the default rate of interest applicable as of the date of any determination hereunder to Debt outstanding under that certain First Amended and Restated Business Loan Agreement dated as of June 26, 1996 between Bank of America NT&SA and the Company, as amended (or any credit facility entered into in replacement thereof). Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America NT&SA, in Los Angeles, California or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of 6.76% Senior Notes, Series E, due January 2, 2002 issued in an aggregate principal amount of $10,000,000 (the "Series E Notes"), together with the 7.04% Senior Notes, Series F, due January 2, 2006 issued in an aggregate principal amount of $25,000,000 (the "Series F Notes") and the 7.08% Senior Notes, Series G, due January 2, 2008 issued in an aggregate principal amount of $30,000,000 (the "Series G Notes"), pursuant to separate Note Purchase Agreements, dated September 15, 1997 (as from time to time amended, EXHIBIT 1A (to Note Purchase Agreement) 94 the "Note Purchase Agreements"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreements. Capitalized terms used herein shall have the meanings set forth in the Note Purchase Agreements unless defined herein. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. The payment by the Company of all amounts due with respect to the Notes has been unconditionally guaranteed by the Material Subsidiaries of the Company pursuant to the Subsidiary Guaranty. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. RELIANCE STEEL & ALUMINUM CO. By [Title] By [Title] E-1A-96 95 [FORM OF SERIES F NOTE] RELIANCE STEEL & ALUMINUM CO. 7.04% SENIOR NOTE, SERIES F, DUE JANUARY 2, 2006 No. [FR-___][Date] $[____________]PPN 75952* AK 6 FOR VALUE RECEIVED, the undersigned, RELIANCE STEEL & ALUMINUM CO. (herein called the "Company"), a corporation organized and existing under the laws of the State of California, hereby promises to pay to [________________], or registered assigns, the principal sum of [________________] DOLLARS on January 2, 2006, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 7.04% per annum from the date hereof, payable semiannually, on the last day of June and December in each year, commencing with the June 30 or December 31 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum equal to the greater of (i) 9.04% or (ii) the default rate of interest applicable as of the date of any determination hereunder to Debt outstanding under that certain First Amended and Restated Business Loan Agreement dated as of June 26, 1996 between Bank of America NT&SA and the Company, as amended (or any credit facility entered into in replacement thereof). Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America NT&SA, in Los Angeles, California or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of 7.04% Senior Notes, Series F, due January 2, 2006 issued in an aggregate principal amount of $25,000,000 (the "Series F Notes"), together with the 6.76% Senior Notes, Series E, due January 2, 2002 issued in an aggregate principal amount of $10,000,000 (the "Series E Notes") and the 7.08% Senior Notes, Series G, due January 2, 2008 issued in an aggregate principal amount of $30,000,000 (the "Series G Notes"), pursuant to separate Note Purchase Agreements, dated September 15, 1997 (as from time to time amended, EXHIBIT 1B (to Note Purchase Agreement) 96 the "Note Purchase Agreements"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreements. Capitalized terms used herein shall have the meanings set forth in the Note Purchase Agreements unless defined herein. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. The payment by the Company of all amounts due with respect to the Notes has been unconditionally guaranteed by the Material Subsidiaries of the Company pursuant to the Subsidiary Guaranty. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. RELIANCE STEEL & ALUMINUM CO. By [Title] By [Title] E-1B-99 97 [FORM OF SERIES G NOTE] RELIANCE STEEL & ALUMINUM CO. 7.08% SENIOR NOTE, SERIES G, DUE JANUARY 2, 2008 No. [GR-___] [Date] $[____________] PPN 75952* AL 4 FOR VALUE RECEIVED, the undersigned, RELIANCE STEEL & ALUMINUM CO. (herein called the "Company"), a corporation organized and existing under the laws of the State of California, hereby promises to pay to [______________________], or registered assigns, the principal sum of [________________________] DOLLARS on January 2, 2008, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 7.08% per annum from the date hereof, payable semiannually, on the last day of June and December in each year, commencing with the June 30 or December 31 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum equal to the greater of (i) 9.08% or (ii) the default rate of interest applicable as of the date of any determination hereunder to Debt outstanding under that certain First Amended and Restated Business Loan Agreement dated as of June 26, 1996 between Bank of America NT&SA and the Company, as amended (or any credit facility entered into in replacement thereof). Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America NT&SA, in Los Angeles, California or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of 7.08% Senior Notes, Series G, due January 2, 2008 issued in an aggregate principal amount of $30,000,000 (the "Series G Notes"), together with the 6.76% Senior Notes, Series E, due January 2, 2002 issued in an aggregate principal amount of $10,000,000 (the "Series E Notes") and the 7.04% Senior Notes, Series F, due January 2, 2006 issued in an aggregate principal amount of $25,000,000 (the "Series F Notes"), pursuant to separate Note Purchase Agreements, dated September 15, 1997 (as from time to time amended, EXHIBIT 1C (to Note Purchase Agreement) 98 the "Note Purchase Agreements"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreements. Capitalized terms used herein shall have the meanings set forth in the Note Purchase Agreements unless defined herein. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. The payment by the Company of all amounts due with respect to the Notes has been unconditionally guaranteed by the Material Subsidiaries of the Company pursuant to the Subsidiary Guaranty. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. RELIANCE STEEL & ALUMINUM CO. By [Title] By [Title] E-1C-102 99 FORM OF OPINION OF SPECIAL COUNSEL TO THE COMPANY The closing opinion of Arter & Hadden, special counsel to the Company, which is called for by Section 4.4(a) of the Note Purchase Agreement, shall be dated the date of the Closing and addressed to the Purchasers, shall be satisfactory in scope and form to the Purchasers and shall be to the effect that: 1. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of California, has the corporate power and the corporate authority to execute and perform the Note Purchase Agreement and to issue the Notes and has the full corporate power and the corporate authority to conduct the activities in which it is now engaged and is duly qualified and is in good standing as a foreign corporation in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such qualification necessary. 2. Each Restricted Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and is duly qualified and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such qualification necessary and all of the issued and outstanding shares of capital stock of each such Restricted Subsidiary have been duly issued, are fully paid and non- assessable and, except for 3,000 shares (representing less than 3% of the issued and outstanding shares) of the capital stock of Valex Corp. owned by the President of Valex Corp., are owned by the Company. 3. The Note Purchase Agreement has been duly authorized by all necessary corporate action on the part of the Company, has been duly executed and delivered by the Company and constitutes the legal, valid and binding contract of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 4. The Notes have been duly authorized by all necessary corporate action on the part of the Company, have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance and EXHIBIT 4.4(a) (to Note Purchase Agreement) 100 similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 5. No approval, consent or withholding of objection on the part of, or filing, registration or qualification with, any governmental body, Federal or state, is necessary in connection with the execution and delivery of the Note Purchase Agreement or the Notes. 6. The issuance and sale of the Notes and the execution, delivery and performance by the Company of the Note Purchase Agreement do not conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any Lien upon any of the property of the Company pursuant to the provisions of the Articles of Incorporation or By-laws of the Company or any agreement or other instrument known to such counsel to which the Company is a party or by which the Company may be bound. 7. The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Purchase Agreement do not, under existing law, require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. 8. There are no actions, suits or proceedings pending or, to the knowledge of such counsel, threatened against or affecting the Company or any Restricted Subsidiary or any property of the Company or any Restricted Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority either (i) with respect to the Note Purchase Agreement or the Notes or (ii) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 9. The issuance of the Notes and the use of the proceeds of the sale of the Notes in accordance with the provisions of and as contemplated by the Note Purchase Agreement (including, without limitation, the representations and warranties set forth in the Note Purchase Agreement) do not violate or conflict with Regulation G, T or X of the Board of Governors of the Federal Reserve System. 10. The Company is not an "investment company," or a company "controlled" by an "investment company," under the Investment Company Act of 1940, as amended. The opinion of Arter & Hadden is limited to the laws of the State of California, the laws of the State of New York, the Federal laws of the United States and the securities laws of the Purchasers' states of residence, shown in Exhibit A, as reported in current standard compilations E-4.4(a)-105 101 thereof. The opinion of Arter & Hadden shall cover such other matters relating to the sale of the Notes as the Purchasers may reasonably request. With respect to matters of fact on which such opinion is based, such counsel shall be entitled to rely on appropriate certificates of public officials and officers of the Company and representations of the Purchasers set forth in the Note Purchase Agreement. E-4.4(a)-106 102 FORM OF OPINION OF SPECIAL COUNSEL TO THE SUBSIDIARY GUARANTORS The closing opinion of special counsel to each Subsidiary Guarantor, which is called for by Section 4.4(b) of the Note Purchase Agreement, shall be dated the date of the Closing and addressed to the Purchasers, shall be satisfactory in scope and form to the Purchasers and shall be to the effect that: 1. The Subsidiary Guarantor is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of ________, has the corporate power and the corporate authority to execute and perform the Subsidiary Guaranty to which it is a party and has the full corporate power and the corporate authority to conduct the activities in which it is now engaged and is duly qualified and is in good standing as a foreign corporation in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such qualification necessary. 2. The Subsidiary Guaranty to which it is a party has been duly authorized by all necessary corporate action on the part of the Subsidiary Guarantor, has been duly executed and delivered by the Subsidiary Guarantor and constitutes the legal, valid and binding contract of the Subsidiary Guarantor enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 3. No approval, consent or withholding of objection on the part of, or filing, registration or qualification with, any governmental body, Federal or state, is necessary in connection with the execution and delivery of the Subsidiary Guaranty to which it is a party. 4. The execution, delivery and performance by the Subsidiary Guarantor of the Subsidiary Guaranty to which it is a party do not conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any Lien upon any of the property of the Subsidiary Guarantor pursuant to the provisions of the ___________ of Incorporation or By-laws of the Subsidiary Guarantor or any agreement or other instrument known to such counsel to which the Subsidiary Guarantor is a party or by which the Subsidiary Guarantor may be bound. 5. There are no actions, suits or proceedings pending or, to the knowledge of such counsel, threatened against or affecting the Subsidiary Guarantor or any property of EXHIBIT 4.4(b) (to Note Purchase Agreement) 103 the Subsidiary Guarantor in any court or before any arbitrator of any kind or before or by any Governmental Authority either (i) with respect to the Subsidiary Guaranty to which it is a party or (ii) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The opinion of special counsel to each Subsidiary Guarantor shall be limited to the laws of the jurisdiction of incorporation of such Subsidiary Guarantor, the laws of the State of New York, the Federal laws of the United States and the securities laws of the Purchasers' states of residence, shown in Exhibit A, as reported in current standard compilations thereof. The opinion of special counsel to each Subsidiary Guarantor shall cover such other matters relating to the Subsidiary Guaranty to which it is a party as the Purchasers may reasonably request. With respect to matters of fact on which such opinion is based, such counsel shall be entitled to rely on appropriate certificates of public officials and officers of the Subsidiary Guarantors and representations of the Purchasers set forth in the Note Purchase Agreement. E-4.4(b)-108 104 FORM OF OPINION OF SPECIAL COUNSEL TO THE PURCHASERS The closing opinion of Chapman and Cutler, special counsel to the Purchasers, called for by Section 4.4(c) of the Note Purchase Agreement, shall be dated the date of the Closing and addressed to the Purchasers, shall be satisfactory in form and substance to the Purchasers and shall be to the effect that: 1. The Company is a corporation, validly existing and in good standing under the laws of the State of California and has the corporate power and the corporate authority to execute and deliver the Note Purchase Agreement and to issue the Notes. 2. The Note Purchase Agreement has been duly authorized by all necessary corporate action on the part of the Company, has been duly executed and delivered by the Company and constitutes the legal, valid and binding contract of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 3. The Notes have been duly authorized by all necessary corporate action on the part of the Company, and the Notes being delivered on the date hereof have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 4. The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Purchase Agreement do not, under existing law, require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. The opinion of Chapman and Cutler shall also state that the opinion of Arter & Hadden, special counsel to the Company, and each of the opinions of special counsel to the Subsidiary Guarantors are satisfactory in scope and form to Chapman and Cutler and that, in their opinion, the Purchasers are justified in relying thereon. In rendering the opinion set forth in paragraph 1 above, Chapman and Cutler may rely, as to matters referred to in paragraph 1, solely upon an examination of the Articles of Incorporation EXHIBIT 4.4(c) (to Note Purchase Agreement) 105 certified by, and a certificate of good standing of the Company from, the Secretary of State of the State of California, the By-laws of the Company and the general business corporation law of the State of California. The opinion of Chapman and Cutler is limited to the laws of the State of New York, the general business corporation law of the State of California and the Federal laws of the United States. With respect to matters of fact upon which such opinion is based, Chapman and Cutler may rely on appropriate certificates of public officials and officers of the Company and upon representations of the Company and the Purchasers delivered in connection with the issuance and sale of the Notes. E-4.4(c)-110 106 FORM OF SUBSIDIARY GUARANTY EXHIBIT 9.6 (to Note Purchase Agreement) EX-10.02 3 EXHIBIT 10.02 1 EXHIBIT 10.02 ================================================================================ CREDIT AGREEMENT Dated as of October 22, 1997 among RELIANCE STEEL & ALUMINUM CO. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as Administrative Agent and Letter of Credit Issuing Bank and THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO Arranged by [LOGO] BancAmerica Robertson Stephens ================================================================================ 2 TABLE OF CONTENTS
PAGE ---- Section 1....................................................................................1 1.1 Defined Terms.................................................................1 1.2 Use of Defined Terms.........................................................24 1.3 Accounting Terms.............................................................24 1.4 Rounding.....................................................................25 1.5 Exhibits and Schedules.......................................................25 1.6 References to................................................................25 1.7 Miscellaneous Terms..........................................................25 Section 2...................................................................................25 2.1 Committed Loans..............................................................25 2.2 Borrowings, Conversions and Continuations of Committed Loans.................26 2.3 Swing Line...................................................................27 2.4 Letters of Credit............................................................28 2.5 Prepayments..................................................................32 2.6 Voluntary Reduction or Termination of Commitments............................33 2.7 Principal and Interest.......................................................33 2.8 Fees.........................................................................33 (a) Facility Fee..........................................................33 (b) Agency Fees...........................................................34 (c) Arrangement Fee.......................................................34 (d) Participation Fee.....................................................34 2.9 Computation of Interest and Fees.............................................34 2.10 Manner and Treatment of Payments among the Banks, Borrower and the Administrative Agent.........................................................34 2.11 Funding Sources..............................................................36 2.12 Extension of Maturity Date...................................................36 Section 3...................................................................................36 3.1 Taxes........................................................................36 3.2 Increased Costs..............................................................37 3.3 Capital Adequacy.............................................................37 3.4 Illegality...................................................................37 3.5 Inability to Determine Rates.................................................38 3.6 Breakfunding Costs...........................................................38 3.7 Matters Applicable to all Requests for Compensation..........................38 Section 4...................................................................................39 4.1 Initial Loans, Etc...........................................................39 4.2 Any Extension of Credit......................................................40 Section 5...................................................................................41 5.1 Existence and Qualification; Power; Compliance With Laws.....................41 5.2 Authority; Compliance With Other Agreements and Instruments and Government Regulations.......................................................41
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PAGE ---- 5.3 No Governmental Approvals Required...........................................42 5.4 Binding Obligations..........................................................42 5.5 Litigation...................................................................42 5.6 No Default...................................................................42 5.7 ERISA Compliance.............................................................43 5.8 Use of Proceeds; Margin Regulations..........................................43 5.9 Title to Property............................................................43 5.10 Intangible Assets............................................................43 5.11 Tax Liability................................................................44 5.12 Financial Statements.........................................................44 5.13 Laws.........................................................................44 5.14 Environmental Compliance.....................................................44 5.15 Public Utility Holding Company Act; Investment Company Act...................45 5.16 Subsidiaries.................................................................45 5.17 Insurance....................................................................45 5.18 Disclosure...................................................................46 Section 6...................................................................................46 6.1 Financial Statements.........................................................46 6.2 Certificates, Notices and Other Information..................................47 6.3 Guaranties of New Subsidiaries...............................................48 6.4 Preservation of Existence....................................................49 6.5 Maintenance of Properties....................................................49 6.6 Maintenance of Insurance.....................................................49 6.7 Payment of Taxes and Other Potential Liens...................................49 6.8 Compliance With Laws.........................................................49 6.9 Environmental Laws...........................................................50 6.10 Inspection Rights............................................................50 6.11 Keeping of Records and Books of Account......................................50 6.12 Compliance with ERISA........................................................50 6.13 Compliance With Agreements...................................................50 6.14 Use of Proceeds..............................................................50 Section 7...................................................................................51 7.1 Liens, Negative Pledges......................................................51 7.2 Indebtedness.................................................................51 7.3 Prepayment of Indebtedness...................................................52 7.4 Dispositions.................................................................52 7.5 Sales and Leasebacks.........................................................52 7.6 Mergers......................................................................53 7.7 Hostile Acquisitions.........................................................53 7.8 Acquisitions.................................................................53 7.9 Distributions................................................................54 7.10 ERISA........................................................................54 7.11 Net Worth....................................................................54 7.12 Interest Coverage Ratio......................................................54 7.13 Leverage Ratio...............................................................55 7.14 Change in Nature of Business.................................................55 7.15 Transactions with Affiliates.................................................55
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PAGE ---- Section 8...................................................................................55 8.1 Events of Default................................................................55 8.2 Remedies Upon Event of Default...................................................57 Section 9...................................................................................59 9.1 Appointment and Authorization; "Administrative Agent\............................59 9.2 Delegation of Duties.............................................................60 9.3 Liability of Administrative Agent................................................60 9.4 Reliance by Administrative Agent.................................................61 9.5 Notice of Default................................................................61 9.6 Credit Decision..................................................................62 9.7 Indemnification of Administrative Agent..........................................62 9.8 Administrative Agent in Individual Capacity......................................63 9.9 Successor Administrative Agent...................................................63 Section 10..................................................................................64 10.1 Cumulative Remedies; No Waiver..................................................64 10.2 Amendments; Consents............................................................64 10.3 Attorney Costs, Expenses and Taxes..............................................65 10.4 Nature of Banks' Obligations....................................................65 10.5 Survival of Representations and Warranties......................................66 10.6 Notices.........................................................................66 10.7 Execution of Loan Documents.....................................................66 10.8 Binding Effect; Assignment......................................................67 10.9 Right of Setoff.................................................................69 10.10 Sharing of Setoffs..............................................................69 10.11 Indemnity by Borrower...........................................................70 10.12 Nonliability of the Banks.......................................................70 10.13 No Third Parties Benefited......................................................71 10.14 Confidentiality.................................................................71 10.15 Further Assurances..............................................................72 10.16 Integration.....................................................................72 10.17 Failure to Charge Not Subsequent Waiver.........................................72 10.18 Governing Law...................................................................72 10.19 Severability of Provisions......................................................72 10.20 Headings........................................................................73 10.21 Time of the Essence.............................................................73 10.22 Foreign Banks and Participants..................................................73 10.23 Waiver of Right to Trial by Jury................................................74 10.24 Purported Oral Amendments.......................................................74
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PAGE ---- EXHIBITS - -------- Form of A Request for Extension of Credit B Compliance Certificate C Committed Loan Note D Notice of Assignment and Acceptance E Master Subsidiary Guaranty F Opinion of Counsel SCHEDULES - --------- 2.1 Commitments and Pro Rata Shares 5.5 Certain Litigation 5.9 Existing Liens and Negative Pledges 5.16 Subsidiaries 7.2 Existing Indebtedness 10.6 Lending offices and Addresses for Notice
- iv - 6 CREDIT AGREEMENT This CREDIT AGREEMENT dated as of October 22, 1997, is entered into by and among Reliance Steel & Aluminum Co., a California corporation ("Borrower"), each lender whose name is set forth on the signature pages of this Agreement and each lender which may hereafter become a party to this Agreement (collectively, the "Banks" and individually, a "Bank"), and Bank of America National Trust and Savings Association, as Administrative Agent. In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: Section 1 DEFINITIONS AND ACCOUNTING TERMS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below: "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person or any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that Borrower or one of its Subsidiaries is the surviving entity. "Adjusted EBITDA" means, with respect to any Person and with respect to any fiscal period, the sum of (a) Net Income of that Person for that period, plus (b) any non-operating non-recurring loss reflected in such Net Income, minus (c) any non-operating non-recurring gain reflected in such Net Income, plus (d) Interest Expense of that Person for that period, plus (e) the aggregate amount of federal and state taxes on or measured by income of that Person for that period (whether or not payable during that period), plus (f) depreciation, amortization and all other non-cash expenses of that Person for that period, in each case as determined in accordance with Generally Accepted Accounting Principles, and adjusted by subtracting equity in earnings in 50% or less owned companies and joint ventures and by adding Cash dividends received from 50% or less owned companies and joint ventures. "Administrative Agent" means BofA, when acting in its capacity as the Administrative Agent under any of the Loan Documents, or any successor Administrative Agent. - 1 - 7 "Administrative Agent's Office" means the Administrative Agent's address and, as appropriate, account as set forth on Schedule 10.6, or such other address or account as the Administrative Agent hereafter may designate by written notice to Borrower and the Banks. "Administrative Agent-Related Persons" means the Administrative Agent (including any successor agent), together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Affiliate" means, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (and the correlative terms, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); provided that, in any event, any Person that owns, directly or indirectly, 10% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation that has more than 100 record holders of such securities, or 10% or more of the partnership or other ownership interests of any other Person that has more than 100 record holders of such interests, will be deemed to control such corporation, partnership or other Person. "Agreement" means this Agreement, either as originally executed or as it may from time to time be supplemented, modified, amended, restated or extended. - 2 - 8 "Applicable Amount" means, for any Pricing Period, the per annum amounts set forth below under Applicable Amount opposite the applicable Pricing Level; provided, however, that until the Administrative Agent's receipt of the second quarterly Compliance Certificate after the Closing Date required under Section 6.2(a), such interest rates, fees and commissions shall be those indicated for Pricing Level 3:
=========================================================================================== Applicable Amount Pricing Level (in basis points per annum) ------------------------------------------------------------------- Standby Letters Facility Fee of Credit Base Rate + Offshore Rate + - ------------------------------------------------------------------------------------------- 1 9.00 18.50 0 - ------------------------------------------------------------------------------------------- 2 11.00 21.50 0 - ------------------------------------------------------------------------------------------- 3 12.50 25.00 0 - ------------------------------------------------------------------------------------------- 4 15.00 30.00 0 - ------------------------------------------------------------------------------------------- 5 20.00 42.50 0 ===========================================================================================
"Pricing Level" means, for each period, the pricing level set forth below opposite the Leverage Ratio achieved by Borrower as of the first day of that Pricing Period:
Pricing Level Leverage Ratio ----- -------------- 1 <1.75 to 1.00 2 >=1.75 to 1.00 but <2.25 to 1.00 3 >=2.25 to 1.00 but <2.75 to 1.00 4 >=2.75 to 1.00 but <3.25 to 1.00 5 >=3.25 to 1.00
"Pricing Level Change Date" means, with respect to any change in the Pricing Level which results in a change in the Applicable Amount, the earlier of (a) 5 Business Days after the date upon which Borrower delivers a Compliance Certificate to the Administrative Agent reflecting such changed Pricing Level and (b) 5 Business Days after the date upon which Borrower is required by Section 6.2(a), to deliver such Compliance Certificate; provided, however, that if the Compliance Certificate is not delivered by the date required by the Section 6.2(a), then, subject to the other - 3 - 9 provisions of this Agreement, commencing on the date such Compliance Certificate was required until such Compliance Certificate is delivered, the Applicable Amount shall be based on the next higher level than the one previously in effect, and from and after the date such Compliance Certificate is thereafter received, the Applicable Amount shall be as determined from such Compliance Certificate. "Pricing Period" means (a) the period commencing on the Closing Date and ending on the first Pricing Level Change Date to occur thereafter and (b) each subsequent period commencing on each Pricing Level Change Date and ending the day prior to the next Pricing Level Change Date. "Applicable Taxes" means any and all present or future taxes (including documentary taxes), levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges, and all liabilities with respect thereto imposed by a Governmental Authority relating to any Loan Document, including any liabilities imposed on amounts paid by Borrower to indemnify or reimburse any Person for such amounts, excluding Bank Taxes. "Arranger" means BancAmerica Robertson Stephens. "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel and the allocated cost of internal legal services and all disbursements of internal counsel. "Availability Period" means the period commencing on the Closing Date and ending on the day before the Maturity Date. "Average Quarterly Funded Debt" means, as of the last day of each Fiscal Quarter, the average of the principal amounts outstanding of all Funded Debt of Borrower and its Subsidiaries on the last day of each of the calendar months comprising such Fiscal quarter. "Bank" means each lender from time to time party hereto. "Bank Taxes" means, in the case of each Bank, the Administrative Agent and each Eligible Assignee, and any Affiliate or Lending Office thereof: (a) taxes imposed on or measured in whole or in part by its overall net income, gross income or gross receipts or capital and franchise taxes imposed on it, by (i) any jurisdiction (or political subdivision thereof) in which it is organized or maintains its principal office or Lending Office or (ii) any jurisdiction (or political subdivision thereof) in which it is "doing business" (unless it would not be doing business in such jurisdiction (or political subdivision thereof) absent the transactions contemplated hereby), (b) any withholding taxes or other taxes based on gross income imposed by the United States of America (other than withholding taxes and - 4 - 10 taxes based on gross income resulting from or attributable to any change in any law, rule or regulation or any change in the interpretation or administration of any law, rule or regulation by any Governmental Authority) or (c) any withholding taxes or other taxes based on gross income imposed by the United States of America for any period with respect to which it has failed to provide Borrower with the appropriate form or forms required by Section 10.22, to the extent such forms are then required by applicable Laws. "Base Rate" means, for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the Reference Rate in effect for such day. "Base Rate Loan" means a Loan which bears interest based on the Base Rate. "BofA" means Bank of America National Trust and Savings Association, a national banking association. "BofA Letter of Credit Facility" means a commitment by BofA to issue for the account of Borrower letters of credit up to a maximum undrawn or drawn but unreimbursed amount not exceeding $10,000,000 at any one time. "Borrower" has the meaning set forth in the introductory paragraph hereto. "Borrower Party" means any Person, other than the Administrative Agent and the Banks, which now or hereafter is a party to any of the Loan Documents. "Borrowing" and "Borrow" each mean a borrowing hereunder consisting of Loans of the same type made on the same day and, other than in the case of Base Rate Loans, having the same Interest Period. "Borrowing Date" means the date that a Loan is made by the Banks, which shall be a Business Day. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means any such day on which dealings are carried on in the Offshore Rate Designated Market. "Capital Lease Obligations" means all monetary obligations of a Person under any leasing or similar arrangement which, in accordance with Generally Accepted Accounting Principles, is classified as a capital lease. "Cash" means, when used in connection with any Person, all monetary and non-monetary items owned by that Person that are treated as cash or cash equivalents in accordance with Generally Accepted Accounting Principles, consistently applied. - 5 - 11 "Closing Date" means the time and Business Day on which the conditions set forth in Section 4.1 are satisfied or waived. The Administrative Agent shall notify Borrower and the Banks of the date that is the Closing Date. "Code" means the Internal Revenue Code of 1986, as amended or replaced and as in effect from time to time. "Commitment" means, for each Bank, the amount set forth as such opposite such Bank's name on Schedule 2.1, as such amount may be reduced pursuant to the terms of this Agreement (collectively, the "combined Commitments"). The respective Pro Rata Shares of the Banks are set forth in Schedule 2.1. "Committed Loan" means a Loan of any type made to Borrower by any Bank in accordance with its Pro Rata Share pursuant to Section 2.1. "Committed Loan Note" means the promissory note made by Borrower to a Bank evidencing Committed Loans made by such Bank, substantially in the form of Exhibit C, either as originally executed or as the same may from time to time be supplemented, modified, amended, renewed, extended or replaced (collectively, the "Committed Loan Notes"). "Common Stock" means the common stock of Borrower or its successor by merger. "Compliance Certificate" means a certificate in the form of Exhibit B, properly completed and signed by a Responsible Officer. "Consolidated Net Worth" means, as of the date of any determination thereof, the total consolidated assets of the Borrower and its Subsidiaries less the total consolidated liabilities of the Borrower and its Subsidiaries determined in accordance with Generally Accepted Accounting Principles. "Continuation" and "Continue" each mean, with respect to any Committed Loan other than a Base Rate Loan, the continuation of such Loan as the same type of Loan in the same principal amount, but with a new Interest Period and an interest rate determined as of the first day of such new Interest Period. Continuations must occur on the last day of the Interest Period for such Loan. "Conversion" and "Convert" each mean, with respect to any Committed Loan, the conversion of one type of Loan into another type of Loan. With respect to Loans other than Base Rate Loans, Conversions must occur on the last day of the Interest Period for such Loan. "Contractual Obligation" means, as to any Person, any provision of any outstanding security issued by that Person or of - 6 - 12 any material agreement, instrument or undertaking to which that Person is a party or by which it or any of its Property is bound. "Debtor Relief Laws" means the Bankruptcy Code of the United States of America, as amended from time to time, and all other applicable liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws from time to time in effect affecting the rights of creditors generally. "Default" means any event that, with the giving of any applicable notice or passage of time specified in Section 8.1, or both, would be an Event of Default. "Default Rate" means an interest rate equal to the Base Rate plus the Applicable Amount, if any, applicable to the Base Rate plus 2%, to the fullest extent permitted by applicable Laws. "Designated Deposit Account" means a deposit account to be maintained by Borrower with BofA, as from time to time designated by Borrower by written notification to the Administrative Agent. "Disposition" means the voluntary sale, transfer, or other disposition of any asset of Borrower or any of its Subsidiaries, including without limitation any sale, assignment, pledge, hypothecation, transfer or other disposal with or without recourse of any notes or accounts receivable or any rights and claims associated therewith. "Distribution" means, with respect to any shares of capital stock or any warrant or option to purchase an equity security or other equity security issued by a Person, (a) the retirement, redemption, purchase, or other acquisition for Cash or for Property by such Person of any such security, (b) the declaration or (without duplication) payment by such Person of any dividend in Cash or in Property on or with respect to any such security, (c) any Investment by such Person in the holder of 5% or more of any such security if a purpose of such Investment is to avoid characterization of the transaction as a Distribution and (d) any other payment in Cash or Property by such Person constituting a distribution under applicable Laws with respect to such security. "Dollars" or "$" means United States dollars. "Eligible Assignee" means (a) a financial institution organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; - 7 - 13 (c) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary and (d) another Bank. "Environmental Laws" means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters applicable to any of the Real Property. "Equity Issuance Date" means any date after the Closing Date on which the Borrower or any Subsidiary issues or sells capital stock of Borrower or such Subsidiary or on which any debt securities of Borrower or any Subsidiary are converted into such capital stock. "ERISA" means the Employee Retirement Income Security Act of 1974, and any regulations issued pursuant thereto, as amended or replaced and as in effect from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate. "Event of Default" shall have the meaning provided in Section 8.1. "Existing Credit Facility" means the credit facilities extended to Borrower under that certain First Amended and - 8 - 14 Restated Business Loan Agreement, dated as of June 26, 1996, between Borrower and BofA, as amended. "Extension of Credit" means (a) the Borrowing of any Loans, (b) the Conversion or Continuation of any Loans or (c) the issuance, renewal, increase continuation, amendment or other credit action with respect to any Letter of Credit, including the Banks acquiring a participation in such Letters of Credit (collectively, the "Extensions of Credit"). "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Administrative Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent. "Fiscal Quarter" means the fiscal quarter of Borrower consisting of a three-month fiscal period ending on each March 31, June 30, September 30 and December 31. "Fiscal Year" means the fiscal year of Borrower consisting of a twelve-month period ending on each December 31. "FRB" means the Board of Governors of the Federal Reserve System or any governmental authority succeeding to its functions. "Funded Debt" means, as of the date of determination, without duplication, the sum of (a) all principal Indebtedness of Borrower and its Subsidiaries for borrowed money (including debt securities issued by Borrower or any of the Subsidiaries) on that date, plus (b) Guaranty Obligations in connection with Synthetic Leases plus (c) the aggregate amount of all Capital Lease Obligations of Borrower and the Subsidiaries on that date, plus (d) all Letter of Credit Usage. "Generally Accepted Accounting Principles" means, as of any date of determination, accounting principles (a) set forth as generally accepted in then currently effective Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) set forth as generally accepted in then currently effective Statements of the Financial Accounting Standards Board or (c) that are then approved by such other entity as may be approved by a significant segment of the accounting profession in the United States of America. The term "consistently applied," as used in connection therewith, means that the accounting principles applied are consistent in all - 9 - 15 material respects with those applied at prior dates or for prior periods. "Governmental Authority" means (a) any international, foreign, federal, state, county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, central bank or comparable authority, authority, board, bureau, commission, department, instrumentality or public body, or (c) any court or administrative tribunal of competent jurisdiction. "Guaranty Obligation" means, as to any Person, any (a) guarantee by that Person of Indebtedness of, or other obligation performable by, any other Person or (b) assurance, agreement, letter of responsibility, letter of awareness, undertaking or arrangement given by that Person to an obligee of any other Person with respect to the performance of an obligation by, or the financial condition of, such other Person, whether direct, indirect or contingent, including any purchase or repurchase agreement covering such obligation or any collateral security therefor, any agreement to provide funds (by means of loans, capital contributions or otherwise) to such other Person, any agreement to support the solvency or level of any balance sheet item of such other Person or any "keep-well" or other arrangement of whatever nature given for the purpose of assuring or holding harmless such obligee against loss with respect to any obligation of such other Person; provided, however, that the term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, covered by such Guaranty Obligation or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the Person in good faith. "Indebtedness" means, as to any Person (without duplication): (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) any direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with Generally Accepted Accounting Principles, recorded as Capital Lease Obligations; (d) all other items which, in accordance with Generally Accepted Accounting Principles, would be - 10 - 16 included as liabilities on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined; (e) net obligations under any Swap Contract in an amount equal to (i) if such Swap Contract has been closed out, the termination value thereof, or (ii) if such Swap Contract has not been closed out, the mark-to-market value thereof determined on the basis of readily available quotations provided by any recognized dealer in such Swap Contracts; and (f) whether or not so included as liabilities in accordance with Generally Accepted Accounting Principles, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (g) indebtedness of such Person arising under facilities for the discount of accounts receivable of such Person in an amount equal to the present value of the unpaid amount of all accounts receivable sold, determined by using a discount rate equal to the discount rate used in determining the purchase price of such accounts receivable under such facilities; (h) indebtedness relating to Synthetic Leases; and (i) all Guaranty Obligations of such Person in respect of any of the foregoing. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. "Indemnified Liabilities" has the meaning set forth in Section 10.11. "Intangible Assets" means assets that are considered intangible assets under Generally Accepted Accounting Principles, including customer lists, goodwill, computer software (except for purchased or licensed software), copyrights, trade names, trademarks and patents. "Interest Coverage Ratio" means, as of the last day of any Fiscal Quarter (including the last day of a Fiscal Quarter which is also the last day of a Fiscal Year), the ratio of (a) Adjusted EBITDA for the fiscal period consisting of that Fiscal Quarter and the three immediately preceding Fiscal Quarters, - 11 - 17 excluding any portion of Adjusted EBITDA allocable to any Person acquired by Borrower or any of its Subsidiaries for any fiscal period prior to the Acquisition to (b) Interest Expense for such fiscal period. "Interest Expense" means, with respect to any Person and as of the last day of any fiscal period, the sum of (a) all interest, fees, charges and related expenses paid or payable (without duplication) for that fiscal period by that Person to a lender in connection with borrowed money (including any obligations for fees, charges and related expenses payable to the issuer of any letter of credit) or the deferred purchase price of assets that are considered "interest expense" under Generally Accepted Accounting Principles plus (b) the portion of rent paid or payable (without duplication) for that fiscal period by that Person under Capital Lease Obligations that should be treated as interest in accordance with Financial Accounting Standards Board Statement No. 13. "Interest Payment Date" means, (a) with respect to any Base Rate Loan, the last Business day of each calendar quarter and the Maturity Date, and (b) with respect to any other type of Loan (other than a Swing Line Loan), (i) any date that such Loan is prepaid in whole or in part, (ii) the last day of each Interest Period applicable to, or the maturity of, such Loan; provided, however, that if any Interest Period or the maturity of any such Loan exceeds three months, the date that falls three months after the beginning of such Interest Period, shall also be an Interest Payment Date, and (iii) the Maturity Date. "Interest Period" means, as to any Committed Loans other than Base Rate Loans, the period commencing on the date specified by Borrower in its Request for Extension of Credit and ending one, two, three or six months thereafter, as selected by Borrower in the Request for Extension of Credit relating thereto; provided that: (a) The first day of any Interest Period shall be a Business Day; (b) Any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless, in the case of an Offshore Rate Loan, such Business Day falls in another calendar month, in which case such Interest Period shall end on the immediately preceding Business Day; (c) No Interest Period shall extend beyond the Maturity Date. "Issuing Bank" means Bank of America National Trust and Savings Association. "Laws" means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, - 12 - 18 regulations, ordinances, codes and administrative or judicial precedents, including without limitation the interpretation thereof by any Governmental Authority charged with the enforcement thereof. "Lending Office" means, as to any Bank, the office or offices of such Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, on Schedule 10.6, or such other office or offices as such Bank may from time to time notify Borrower and the Administrative Agent. "Letter of Credit" means any of the standby letters of credit issued by the Issuing Bank hereunder, either as originally issued or as the same may be supplemented, amended, renewed or extended. "Letter of Credit Application" means an application for issuances of, or amendments to, standby Letters of Credit as shall at any time be in use at the Issuing Bank. "Letter of Credit Usage" means, as at any date of determination, the undrawn face amount of outstanding Letters of Credit plus the aggregate amount of all drawings under the Letters of Credit honored by the Issuing Bank and not theretofore reimbursed or converted into Committed Loans. "Leverage Ratio" means, as of the last day of any Fiscal Quarter (including the last day of a Fiscal Quarters which is also the last day of a Fiscal Year), the ratio of (a) Average Quarterly Funded Debt as of that date to (b) Adjusted EBITDA for the fiscal period consisting of that Fiscal Quarter and the three immediately preceding Fiscal Quarters which may include the portion of Adjusted EBITDA for such period allocable to any Person acquired by Borrower or any of its Subsidiaries if and to the extent the Borrower has delivered to the Agent such Person's financial statements for such period either (i) audited by a "big six" public accountant or, (ii) subject to the consent of the Requisite Banks, which consent shall not unreasonably be withheld, unaudited. "Lien" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever, including any agreement to grant any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature of a security interest, and/or the filing of or agreement to give any financing statement (other than a precautionary financing statement with respect to a lease that is not in the nature of a security interest) under the Uniform Commercial Code or comparable Laws of any jurisdiction with respect to any Property, including the interest of a purchaser of accounts receivable. - 13 - 19 "Loan" means any advance made or to be made by any Bank to Borrower as provided in Section 2, and includes each Committed Loan and Swing Line Loan. "Loan Documents" means, collectively, this Agreement, the Committed Loan Notes, the Letters of Credit, the Master Subsidiary Guaranty, the Swing Line Documents, any Request for Extension of Credit, any Letter of Credit Application, any Compliance Certificate, and any other agreements of any type or nature hereafter executed and delivered by Borrower or any of its Subsidiaries or Affiliates to the Administrative Agent, the Issuing Bank or to any Bank in any way relating to or in furtherance of this Agreement, in each case either as originally executed or as the same may from time to time be supplemented, modified, amended, restated, extended or replaced. "Margin Stock" means "margin stock" as such term is defined in Regulation G or U. "Master Subsidiary Guaranty" means a guaranty of the Obligations, executed by the Borrower's Subsidiaries, substantially in the form of Exhibit E. "Material Adverse Effect" means any set of circumstances or events which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of any Loan Document, (b) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise), business operations or prospects of Borrower and its Subsidiaries, taken as a whole, or c) materially impairs or could reasonably be expected to materially impair the ability of Borrower and its Subsidiaries, taken as a whole, to perform the Obligations. "Maturity Date" means the date that in five years after the Closing Date, but not later than December 31, 2002. - 14 - 20 "Minimum Amount" means, with respect to each of the following actions, the following amounts set forth opposite such action (a reference to "Minimum Amount" shall also be deemed a reference to the multiples in excess thereof set forth below):
Minimum Multiples Minimum in excess of Type of Action Amount Minimum Amount -------------- ------ -------------- Borrowing of, $10,000,000 $1,000,000 prepayment of or Conversion into, Base Rate Loans Borrowing of, $10,000,000 $1,000,000 prepayment of, Continuation of, or Conversion into, Offshore Rate Loans Borrowing of Base Amount of Swing Rate Loans to repay Line Loans Swing Line Loans being repaid N/A Reduction in $10,000,000 $10,000,000 Commitments Assignments $5,000,000
"Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA. "Negative Pledge" means a Contractual Obligation that contains a covenant binding on Borrower or any of its Subsidiaries that prohibits Liens on any of its or their Property, other than (a) any such covenant contained in a Contractual Obligation granting a Lien permitted under Section 7.1 which affects only the Property that is the subject of such permitted Lien and (b) any such covenant that does not prohibit Liens securing the Obligations. "Net Cash Proceeds" means Net Proceeds to the extent consisting of Cash. "Net Income" means, with respect to any fiscal period, the consolidated net income of Borrower and its Subsidiaries for that period, determined in accordance with Generally Accepted Accounting Principles, consistently applied. "Net Proceeds" means, with respect to any Disposition, the gross sales proceeds received by Borrower and its Subsidiaries from such Disposition (including Cash, Property and the assumption by the purchaser of any liability of Borrower or - 15 - 21 its Subsidiaries) net of brokerage commissions, legal expenses and other transactional costs payable by Borrower and its Subsidiaries with respect to such Disposition and net of an amount determined in good faith by Borrower to be the estimated amount of income taxes payable by Borrower attributable to such Disposition. "Notice of Assignment and Acceptance" means a Notice of Assignment and Acceptance substantially in the form of Exhibit D. "Obligations" means all present and future obligations of every kind or nature of Borrower or any Borrower Party at any time and from time to time owed to the Administrative Agent, any Bank, any Person entitled to indemnification, or any one or more of them, under any one or more of the Loan Documents, whether due or to become due, matured or unmatured, liquidated or unliquidated, or contingent or noncontingent, including obligations of performance as well as obligations of payment, and including interest that accrues after the commencement of any proceeding under any Debtor Relief Law by or against Borrower or any Subsidiary or Affiliate of Borrower. "Offshore Rate" means, for any Interest Period with respect to Offshore Rate Loans comprising part of the same Borrowing, the per annum rate of interest (rounded upward to the next 1/16th of 1%) determined by the Administrative Agent (whose determination shall be conclusive in the absence of manifest error) as follows: Offshore Rate = Offshore Base Rate -------------------------------------------------- 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Reserve Percentage" means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). The Offshore Rate for any outstanding Offshore Rate Loans shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. "Offshore Base Rate" means the interest rate per annum (rounded upward to the next 1/16 of 1%) at which deposits in Dollars are offered by BofA's applicable Lending Office to major banks in the Offshore Rate Designated Market at or about 11:00 a.m. local time in the Offshore Rate Designated Market, two Business Days before the first day of the applicable Interest Period - 16 - 22 in an aggregate amount approximately equal to the amount of the Loan made by BofA with respect to such Offshore Rate Loan and for a period of time comparable to the number of days in the applicable Interest Period. The determination of the Eurodollar Reserve Percentage and the Offshore Base Rate by the Administrative Agent shall be conclusive in the absence of manifest error. "Offshore Rate Designated Market" means, with respect to any Offshore Rate Loan, (a) the London eurodollar market, (b) if major banks in the London eurodollar market are at the relevant time not accepting deposits of Dollars or if the Administrative Agent determines in good faith that the London eurodollar market does not represent at the relevant time the effective pricing to the Banks for deposits of Dollars in the London eurodollar market, the Cayman Islands offshore Dollar interbank market or (c) if major banks in the Cayman Islands offshore Dollar interbank market are at the relevant time not accepting deposits of Dollars or if the Administrative Agent determines in good faith that the Cayman Islands offshore Dollar interbank market does not represent at the relevant time the effective pricing to the Banks for deposits of Dollars in the Cayman Islands offshore Dollar interbank market, such other Offshore Market as may from time to time be selected by the Administrative Agent with the approval of Borrower and the Requisite Banks. "Offshore Rate Loan" means a Loan that bears interest based on the Offshore Rate. "Opinion of Counsel" means the favorable written legal opinion of Arter & Hadden, counsel to Borrower and its Subsidiaries, substantially in the form of Exhibit F, together with copies of all factual certificates and legal opinions upon which such counsel has relied. "Outstanding Obligations" means, as of any date, and giving effect to making any Extensions of Credit requested on such date and all payments, repayment and prepayments made on such date, the sum of (a) the aggregate outstanding principal of all Loans, and (b) all Letter of Credit Usage. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto established under ERISA. "Pension Plan" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, which is subject to Title IV of ERISA and is maintained by Borrower or any of its Subsidiaries or to which Borrower or any of its Subsidiaries contributes or has an obligation to contribute, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five plan years. - 17 - 23 "Permitted Disposition" means a Disposition of (a) Cash, Cash Equivalents, inventory or other assets sold, leased or otherwise disposed of in the ordinary course of business of Borrower or any of its Subsidiaries, (b) Dispositions of inventory, or used, worn-out or surplus equipment, all in the ordinary course of business, (c) Dispositions of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment or where Borrower or its Subsidiary determines in good faith that the failure to replace such equipment will not be detrimental to the business of Borrower or any of its Subsidiaries, (d) a Disposition to Borrower or a Subsidiary, and (e) Dispositions of the assets of a Subsidiary of Borrower to Borrower or another Subsidiary of Borrower. "Permitted Liens" means: (a) Inchoate Liens incident to construction on or maintenance of Real Property; or Liens incident to construction on or maintenance of Real Property now or hereafter filed of record for which adequate reserves have been set aside (or deposits made pursuant to applicable Laws) and which are being contested in good faith by appropriate proceedings and have not proceeded to judgment, provided that, by reason of nonpayment of the obligations secured by such Liens, no such Real Property is subject to a material risk of loss or forfeiture; (b) Liens for taxes and assessments on Real Property which are not past due; or Liens for taxes and assessments on Real Property for which adequate reserves have been set aside and are being contested in good faith by appropriate proceedings and have not proceeded to judgment, provided that, by reason of nonpayment of the obligations secured by such Liens, no such Real Property is subject to a material risk of loss or forfeiture; (e) minor defects and irregularities in title, easements, rights-of-way, restrictions and other similar encumbrances incurred in the Ordinary Course of Business which do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the businesses of the Borrower and its Subsidiaries; (f) rights reserved to or vested in any Governmental Authority to control or regulate, or obligations or duties to any Governmental Authority with respect to, the use of any Real Property; - 18 - 24 (g) rights reserved to or vested in any Governmental Agency to control or regulate, or obligations or duties to any Governmental Authority with respect to, any right, power, franchise, grant, license, or permit; (h) present or future zoning laws and ordinances or other laws and ordinances restricting the occupancy, use, or enjoyment of Real Property; (i) statutory Liens, other than those described in subsections (a) or (b) above, arising in the ordinary course of business with respect to obligations which are not delinquent or are being contested in good faith, provided that, if delinquent, adequate reserves have been set aside with respect thereto and, by reason of nonpayment, no Property is subject to a material risk of loss or forfeiture; (j) covenants, conditions, and restrictions affecting the use of Real Property which in the aggregate do not materially impair the fair market value or use of the Real Property for the purposes for which it is or may reasonably be expected to be held; (k) rights of tenants under leases and rental agreements covering Real Property entered into in the ordinary course of business of the Person owning such Real Property; (l) Liens consisting of pledges or deposits to secure obligations under workers' compensation laws or similar legislation, including Liens of judgments thereunder which are not currently dischargeable; (m) Liens consisting of pledges or deposits of Property to secure performance in connection with operating leases made in the ordinary course of business to which Borrower or a Subsidiary of Borrower is a party as lessee; (n) Liens consisting of any right of offset, or statutory bankers' lien, on bank deposit accounts maintained in the ordinary course of business so long as such bank deposit accounts are not established or maintained for the purpose of providing such right of offset or bankers' lien; (o) Liens consisting of deposits of Property to secure statutory obligations of Borrower or a Subsidiary of Borrower in the ordinary course of its business; (p) Liens consisting of deposits of Property to secure (or in lieu of) surety, appeal or customs bonds in proceedings to which Borrower or a Subsidiary of - 19 - 25 Borrower is a party in the ordinary course of its business; (q) Liens created by or resulting from any litigation or legal proceeding involving Borrower or a Subsidiary of Borrower in the ordinary course of its business which is currently being contested in good faith by appropriate proceedings, provided that adequate reserves have been set aside and no Property is subject to a material risk of loss or forfeiture; and (r) other non-consensual Liens incurred in the ordinary course of business but not in connection with an extension of credit, which do not in the aggregate, when taken together with all other Liens, materially impair the value or use of the Property of Borrower and its Subsidiaries, taken as a whole; and (s) Liens consisting of (i) an interest (other than a legal or equitable co-ownership interest, an option or right to acquire a legal or equitable co-ownership interest and any interest of a ground lessor under a ground lease), that do not materially impair the value or use of Property for the purposes for which it is or may reasonably be expected to be held, (ii) an option or right to acquire a Lien that would be a Permitted Lien, (iii) the subordination of a lease or sublease in favor of a financing entity and (iv) a license, or similar right, of or to Intangible Assets granted in the ordinary course of business. "Permitted Swap Obligations" means all obligations (contingent or otherwise) of Borrower or any of its Subsidiaries existing or arising under Swap Contracts, provided that each of the following criteria is satisfied: (a) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments or assets held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person in conjunction with a securities repurchase program not otherwise prohibited hereunder, and not for purposes of speculation or taking a "market view;" and (b) such Swap Contracts do not contain (i) any provision ("walk-away" provision) exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party, or (ii) any provision creating or permitting the declaration of an event of default, termination event or similar event upon the occurrence of an Event of Default hereunder (other than an Event of Default under Section 8.1). "Person" means any individual or entity, including a trustee, corporation, limited liability company, general partnership, limited partnership, joint stock company, trust, estate, unincorporated organization, business association, firm, joint venture, Governmental Authority, or other entity. - 20 - 26 "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Pro Rata Share" means, with respect to each Bank, the percentage of the combined Commitments set forth opposite the name of that Bank on Schedule 2.1. "Quarterly Payment Date" means the last Business Day of each calendar quarter, commencing December 31, 1997. "Real Property" means, as of any date of determination, all real Property then or theretofore owned, leased or occupied by Borrower or any of its Subsidiaries. "Reference Rate" means the rate of interest publicly announced from time to time by BofA in San Francisco, California, as its "reference rate." It is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in the Reference Rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. "Regulations G, T, U and X" means Regulations G, T, U and X, as at any time amended, of the Board of Governors of the Federal Reserve System, or any other regulations in substance substituted therefor. "Reportable Event" means, any of the events set forth in Section 4043(c) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. "Request for Extension of Credit" means a written request substantially in the form of Exhibit A or telephonic request followed by such written request, duly completed and signed by a Responsible Officer, in each case delivered to the Administrative Agent by Requisite Notice. "Requisite Banks" means (a) as of any date of determination if the Commitments are then in effect, Banks having in the aggregate 51% or more of the combined Commitments then in effect and (b) as of any date of determination if the Commitments have then been terminated and there are Loans outstanding, Banks holding Loans aggregating 51% or more of the aggregate outstanding principal amount of the Loans. "Requisite Notice" means, unless otherwise provided herein, (a) irrevocable written notice to the intended recipient or (b) irrevocable telephonic notice to the intended recipient, promptly followed by a written notice to such recipient. Such notices shall be (i) delivered or made to such recipient at the - 21 - 27 address, telephone number or facsimile number set forth on Schedule 10.6 or as otherwise designated by such recipient by Requisite Notice to the Administrative Agent and (ii) if made by a Borrower Party, given or made by a Responsible Officer. Any written notice shall be in the form, if any, prescribed in the applicable section herein and may be given by facsimile provided such facsimile is promptly confirmed by a telephone call to such recipient. "Requisite Time" means, with respect to any of the actions listed below, the time set forth opposite such action (all times are California time) on or prior to the date (the "relevant date") of such action:
Action Time Date ------ ---- ---- Borrowing or prepayment of Base Rate Loans 9:00 a.m. Relevant date Borrowing of, 10:00 a.m. 3 Business Days continuation of, prior to prepayment of or relevant date conversion into Offshore Rate Loans Voluntary Reduction 10:00 a.m. 2 Business Days of Commitments prior to relevant date Letter of Credit 10:00 a.m. 5 Business Days action prior to relevant date Funds made available by 11:00 a.m. Relevant date Banks or Borrower to Administrative Agent
"Responsible Officer" means the chief executive officer, president, chief financial officer or treasurer of Borrower, or any other officer or partner having substantially the same authority and responsibility. Any document or certificate hereunder that is signed or executed by a Responsible Officer shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of Borrower and to have acted on behalf of Borrower. "Restricted Payment" shall mean: (a) the declaration or payment of any dividend by Borrower, either in cash or property, on any shares of the capital stock of any class of Borrower (except dividends or other distributions payable solely in shares of capital stock of Borrower); - 22 - 28 (b) the purchase, redemption or retirement by Borrower of any shares of the capital stock of any class of Borrower or any warrants, rights or options to purchase or acquire any shares of its capital stock, whether directly or indirectly, or through any of its Subsidiaries; (c) any other payment or distribution by Borrower in respect of its capital stock, either directly or indirectly or through any Restricted Subsidiary; and (d) any Investment by Borrower or any of its Subsidiaries other than those described in the definition of "Permitted Investments". "Stockholders' Equity" means, as of any date of determination and with respect to any Person, the consolidated stockholders' equity of the Person as of that date determined in accordance with Generally Accepted Accounting Principles. "Subsidiary" means, as of any date of determination and with respect to any Person, any corporation, limited liability company or partnership (whether or not, in either case, characterized as such or as a "joint venture"), whether now existing or hereafter organized or acquired: (a) in the case of a corporation or limited liability company, of which a majority of the securities having ordinary voting power for the election of directors or other governing body (other than securities having such power only by reason of the happening of a contingency) are at the time beneficially owned by such Person and/or one or more Subsidiaries of such Person, or (b) in the case of a partnership, of which a majority of the partnership or other ownership interests are at the time beneficially owned by such Person and/or one or more of its Subsidiaries. For purposes of clarification, American Steel, LLC shall not be deemed to be a Subsidiary of Borrower. "Swap Agreement" means a written agreement between Borrower and one or more financial institutions providing for "swap", "cap", "collar" or other interest rate protection with respect to any Indebtedness. "Swing Line" means the revolving line of credit established by the Swing Line Bank in favor of Borrower pursuant to Section 2.3. "Swing Line Bank" means BofA. "Swing Line Commitment" means $10,000,000. "Swing Line Documents" means a promissory note, if requested by the Swing Line Bank, and any other documents executed by Borrower in favor of the Swing Line Bank in connection with the Swing Line, each in form and substance satisfactory to Borrower, the Swing Line Bank, and the Administrative Agent. - 23 - 29 "Swing Line Loans" means loans made by the Swing Line Bank to Borrower under the Swing Line. "Swing Line Outstandings" means, as of any date of determination, the aggregate principal Indebtedness of Borrower on all Swing Line Loans then outstanding. "Synthetic Lease" means, with respect to any Person, (a) a so-called synthetic lease, or (b) an agreement for the use or possession of property creating obligations which do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the Indebtedness of such Person (without regard to accounting treatment). "to the best knowledge of" means, when modifying a representation, warranty or other statement of any Person, that the fact or situation described therein is known by the Person (or, in the case of a Person other than a natural Person, known by a Responsible Officer) making the representation, warranty or other statement, or with the exercise of reasonable due diligence under the circumstances (in accordance with the standard of what a reasonable Person in similar circumstances would have done) would have been known by the Person (or, in the case of a Person other than a natural Person, would have been known by a Responsible Officer). "type" of Committed Loan means (a) a Base Rate Loan or (b) an Offshore Rate Loan with an Interest Period of one, two, three, or six months thereafter, as selected by Borrower in the Request for Extension of Credit relating thereto. "Unfunded Pension Liability" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. 1.2 Use of Defined Terms. Any defined term used in the plural shall refer to all members of the relevant class, and any defined term used in the singular shall refer to any one or more of the members of the relevant class. 1.3 Accounting Terms. All accounting terms not specifically defined in this Agreement shall be construed in conformity with, and all financial data required to be submitted by this Agreement shall be prepared in conformity with, Generally Accepted Accounting Principles applied on a consistent basis, except as otherwise specifically prescribed herein. In the event that Generally Accepted Accounting Principles change during the term of this Agreement such that the financial covenants would then be calculated in a different manner or with different components, (a) Borrower and the Banks agree to amend this Agreement in such respects as are necessary to conform those covenants as criteria for evaluating Borrower's financial - 24 - 30 condition to substantially the same criteria as were effective prior to such change in Generally Accepted Accounting Principles and (b) Borrower shall be deemed to be in compliance with the covenants contained in the aforesaid Sections during the 90-day period following any such change in Generally Accepted Accounting Principles if and to the extent that Borrower would have been in compliance therewith under Generally Accepted Accounting Principles as in effect immediately prior to such change. 1.4 Rounding. Any financial ratios required to be maintained by Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed in this Agreement and rounding the result up or down to the nearest number (with a rounding up if there is no nearest number) to the number of places by which such ratio is expressed in this Agreement. 1.5 Exhibits and Schedules. All Exhibits and Schedules to this Agreement, either as originally existing or as the same may from time to time be supplemented, modified or amended, are incorporated herein by this reference. A matter disclosed on any Schedule shall be deemed disclosed on all Schedules. 1.6 References to "Borrower and its Subsidiaries". Any reference herein to "Borrower and its Subsidiaries" or the like shall refer solely to Borrower during such times, if any, as Borrower shall have no Subsidiaries. 1.7 Miscellaneous Terms. The term "or" is disjunctive; the term "and" is conjunctive. The term "shall" is mandatory; the term "may" is permissive. Masculine terms also apply to females; feminine terms also apply to males. The term "including" is by way of example and not limitation. Section 2 COMMITMENTS; INTEREST, FEES, PAYMENT PROCEDURES 2.1 Committed Loans. (a) Subject to the terms and conditions set forth in this Agreement, each Bank severally agrees, to make, Convert and Continue Committed Loans during the Availability Period as Borrower may request; provided, however, that the Outstanding Obligations of each Bank shall not exceed such Bank's Commitment and the Outstanding Obligations of all the Banks shall not exceed the combined Commitments at any time. Subject to the foregoing and other terms and conditions hereof, Borrower may borrow, Convert, Continue, prepay and reborrow Committed Loans as set forth herein without premium or penalty. (b) Loans made by each Bank shall be evidenced by one or more loan accounts or records maintained by such Bank in the - 25 - 31 ordinary course of business. Upon the request of any Bank made through the Administrative Agent, such Bank's Loans may be evidenced by one or more Committed Loan Notes, instead of or in addition to loan accounts. (Each such Bank may endorse on the schedules annexed to its Committed Loan Note(s) the date, amount and maturity of its Committed Loans and payments with respect thereto.) Such loan accounts, records or Committed Loan Notes shall be conclusive absent manifest error of the amount of such Loans and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of Borrower to pay any amount owing with respect to the Loans. 2.2 Borrowings, Conversions and Continuations of Committed Loans. (a) Borrower may irrevocably request a Borrowing, Conversion or Continuation of Committed Loans in a Minimum Amount therefor by delivering a duly completed Request for Extension of Credit therefor by Requisite Notice to the Administrative Agent not later than the Requisite Time therefor. All Borrowings, Conversions or Continuations shall constitute Base Rate Loans unless properly and timely otherwise designated as set forth in the preceding sentence. (b) Promptly following receipt of a Request for Extension of Credit, the Administrative Agent shall notify each Bank of its Pro Rata Share thereof by Requisite Notice. In the case of a Borrowing of Loans, each Bank shall make the funds for its Loan available to the Administrative Agent at the Administrative Agent's Office not later than the Requisite Time therefor on the Business Day specified in such Request for Extension of Credit. Upon satisfaction or waiver of the applicable conditions set forth in Section 4, all funds so received shall be made available to Borrower in like funds received. (c) The Administrative Agent shall promptly notify Borrower and the Banks of the Offshore Rate applicable to any Offshore Rate Loan upon determination thereof. (d) Unless the Administrative Agent and the Requisite Banks otherwise consent, Loans with no more than ten different Interest Periods shall be outstanding at any one time. (e) No Loans other than Base Rate Loans may be requested or continued during the existence of an Event of Default. During the existence of an Event of Default, the Requisite Banks may determine that any or all of the then outstanding Committed Loans other than Base Rate Loans shall be Converted to Base Rate Loans. Such Conversion shall be effective upon notice to Borrower from the Administrative Agent and shall continue so long as such Event of Default continues to exist. (f) If a Loan is to be made on the same date that another Loan is due and payable, Borrower or the Banks, as the - 26 - 32 case may be, shall make available to the Administrative Agent the net amount of funds giving effect to both such Loans and the effect for purposes of this Agreement shall be the same as if separate transfers of funds had been made with respect to each such Loan. (g) The failure of any Bank to make any Loan on any date shall not relieve any other Bank of any obligation to make a Loan on such date, but no Bank shall be responsible for the failure of any other Bank to so make its Loan. 2.3 Swing Line. (a) The Swing Line Bank shall from time to time through the day prior to the Maturity Date make Swing Line Loans to Borrower in such amounts as Borrower may request, provided that (i) giving effect to such Swing Line Loan, the Swing Line Outstandings do not exceed the Swing Line Commitment, (ii) without the consent of all of the Banks, no Swing Line Loan may be made during the continuation of an Event of Default and (iii) the Swing Line Bank has not given at least 24 hours prior notice to Borrower that availability under the Swing Line is suspended or terminated. Borrower may borrow, repay and reborrow under this Section. Unless notified to the contrary by the Swing Line Bank, Borrowings under the Swing Line may be made in amounts which are integral multiples of $250,000 ("integral amount") upon Requisite Notice made to the Swing Line Bank not later than 2:00 p.m. California time. Promptly after receipt of such a request for Borrowing, the Swing Line Bank shall obtain telephonic verification from the Administrative Agent that, giving effect to such request, availability for Loans will exist under Section 2.1 (and such verification shall be promptly confirmed in writing by telecopier). Unless notified to the contrary by the Swing Line Bank, each repayment of a Swing Line Loan shall be in an amount which is an integral multiple of the integral amount. If Borrower instructs the Swing Line Bank to debit its demand deposit account at the Swing Line Bank in the amount of any payment with respect to a Swing Line Loan, or the Swing Line Bank otherwise receives repayment, after the Swing Line Requisite Time therefor, such payment shall be deemed received on the next Business Day. The Swing Line Bank shall promptly notify the Administrative Agent of the Swing Loan Outstandings each time there is a change therein. (b) Swing Line Loans shall bear interest at a fluctuating rate per annum equal to the Base Rate plus the Applicable Amount or, if Borrower so requests, a fixed rate of interest quoted by Swing Line Bank and agreed to by Borrower, for an interest period quoted by Swing Line Bank and agreed to by Borrower, but in any amount not longer than seven days, payable on such dates, as may be specified by the Swing Line Bank and in any event on the Maturity Date. Interest on Swing Line Loans shall be payable upon demand of the Swing Line Bank, and the Swing Line Bank shall be responsible for invoicing Borrower for such interest. The interest payable on Swing Line Loans is solely for the account of the Swing Line Bank. - 27 - 33 (c) Each Swing Line Loan shall be payable on the earlier of demand made by the Swing Line Bank or the seventh Business Day after the funding of the Swing Line Loan. (d) Upon the making of a Swing Line Loan, each Bank shall be deemed to have purchased from the Swing Line Bank a participation therein in an amount equal to that Bank's Pro Rata Share times the amount of the Swing Line Loan. Upon demand made by the Swing Line Bank, each Bank shall, according to its Pro Rata Share, promptly provide to the Swing Line Bank its purchase price therefor in an amount equal to its participation therein. The obligation of each Bank to so provide its purchase price to the Swing Line Bank shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. (e) In the event that any Swing Line Loan is outstanding for more than seven days, then on the next Business Day (unless Borrower has made other arrangements acceptable to the Swing Line Bank to repay the Swing Line Loan, Borrower shall request a Committed Loan in a Minimum Amount necessary to repay the Swing Line Loan in full. In the event that Borrower fails to request a Committed Loan within the Requisite Time therefor, the Administrative Agent may, but is not required to, without notice to or the consent of Borrower, cause Committed Loans to be made by the Banks in the Minimum Amount necessary to repay the Swing Line Loan in full and, for this purpose, the conditions precedent set forth in Section 4 shall not apply. The proceeds of such Committed Loans shall be paid to the Swing Line Bank for application to the applicable Swing Line Loan. 2.4 Letters of Credit. (a) Subject to the terms and conditions hereof, at any time and from time to time from the Closing Date through the Maturity Date, the Issuing Bank shall issue, supplement, modify, amend, renew, or extend such Letters of Credit under the Commitments as Borrower may request; provided, however, that (i) the Outstanding Obligations of each Bank shall not exceed such Bank's Commitment and the Outstanding Obligations of all the Banks shall not exceed the combined Commitments at any time and (ii) the aggregate outstanding Letter of Credit Usage shall not exceed $25,000,000 at any time. Each Letter of Credit shall be in a form reasonably acceptable to the Issuing Bank. Unless all the Banks, the Administrative Agent, and the Issuing Bank otherwise consent in a writing delivered to the Administrative Agent, and subject to permitting "evergreen" Letters of Credit as provided in subsection (b) below, the term of any Letter of Credit shall not exceed the Maturity Date. (b) Borrower may irrevocably request the issuance, supplement, modification, amendment, renewal, or extension of a Letter of Credit by delivering a duly completed Letter of Credit Application therefor to the Issuing Bank, with a copy to the Administrative Agent, by Requisite Notice not later than the - 28 - 34 Requisite Time therefor; provided, however, that for such requests the Requisite Notice must be in writing. The Administrative Agent shall promptly notify the Issuing Bank whether such Letter of Credit Application, and the action requested pursuant thereto, conforms to the requirements of this Agreement. Upon the issuance, supplement, modification, amendment, renewal, or extension of a Letter of Credit, the Issuing Bank shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify the Banks, of such action and the amount and terms thereof. Letters of Credit may have automatic extension or renewal provisions ("evergreen" Letters of Credit) so long as the Issuing Bank has the right to terminate such evergreen Letters of Credit no less frequently than annually within a notice period (the "Letter of Credit Evergreen Notice Period") to be agreed upon at the time each such Letter of Credit is issued. This Agreement shall control in the event of any conflict with any Letter of Credit Application. (c) Upon the issuance of a Letter of Credit, each Bank shall be deemed to have purchased a pro rata participation in such Letter of Credit, as from time to time supplemented, amended, renewed, or extended, from the Issuing Bank in an amount equal to that Bank's Pro Rata Share. Without limiting the scope and nature of each Bank's participation in any Letter of Credit, to the extent that the Issuing Bank has not been reimbursed by Borrower for any payment required to be made by the Issuing Bank under any Letter of Credit, each Bank shall, pro rata according to its Pro Rata Share, reimburse the Issuing Bank through the Administrative Agent promptly upon demand for the amount of such payment. The obligation of each Bank to so reimburse the Issuing Bank shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of Borrower to reimburse the Issuing Bank for the amount of any payment made by the Issuing Bank under any Letter of Credit together with interest as hereinafter provided. (d) Borrower agrees to pay to the Issuing Bank through the Administrative Agent an amount equal to any payment made by the Issuing Bank with respect to each Letter of Credit within one Business Day after demand made by the Issuing Bank therefor, together with interest on such amount from the date of any payment made by the Issuing Bank at the Default Rate. The principal amount of any such payment shall be used to reimburse the Issuing Bank for the payment made by it under the Letter of Credit. Each Bank that has reimbursed the Issuing Bank for its Pro Rata Share of any payment made by the Issuing Bank under a Letter of Credit shall thereupon acquire a pro rata participation, to the extent of such reimbursement, in the claim of the Issuing Bank against Borrower under this Section and shall share, in accordance with that pro rata participation, in any payment made by Borrower with respect to such claim. (e) If Borrower fails to make the payment required by subsection (d) above within the time period therein set forth, - 29 - 35 the Issuing Bank shall notify the Administrative Agent of such fact and the amount of such unreimbursed drawing. The Administrative Agent shall promptly notify each Bank of its Pro Rata Share of such amount by Requisite Notice. Each Bank shall make funds in an amount equal its Pro Rata Share of such amount available to the Administrative Agent at the Administrative Agent's Office not later than the Requisite Time on the Business Day specified by the Administrative Agent. Such funds shall be paid to the Issuing Bank to reimburse it for the payment made by it under the Letter of Credit. If the conditions precedent set forth in Section 4 could be satisfied (except for the giving of a Request for Extension of Credit) on the date such funds are made available by the Banks, such funds shall be deemed a Borrowing of Base Rate Loans (without regard to the Minimum Amount therefor) requested by Borrower. If the conditions precedent set forth in Section 4 could not be satisfied on the date such funds are made available by the Banks, such funds shall be deemed a funding of each Bank's participation in such Letter of Credit, and such funds shall be payable by Borrower upon demand and shall bear interest at the Default Rate. (f) Once an evergreen Letter of Credit is issued, Borrower shall not be required to request that the Issuing Bank permit the renewal thereof. If such Letter of Credit could be issued within the Letter of Credit Evergreen Notice Period, the Issuing Bank shall permit the renewal such evergreen Letter of Credit at such time. (g) The obligation of Borrower to pay to the Issuing Bank the amount of any payment made by the Issuing Bank under any Letter of Credit shall be absolute, unconditional, and irrevocable. Without limiting the foregoing, Borrower's obligations shall not be affected by any of the following circumstances: (i) any lack of validity or enforceability of the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto; (ii) any amendment or waiver of or any consent to departure from the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto, with the consent of Borrower; (iii) the existence of any claim, setoff, defense, or other rights which Borrower may have at any time against the Issuing Bank, the Administrative Agent or any Bank, any beneficiary of the Letter of Credit (or any persons or entities for whom any such beneficiary may be acting) or any other Person, whether in connection with the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto, or any unrelated transactions; (iv) any demand, statement, or any other document presented under the Letter of Credit proving to be - 30 - 36 forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever so long as any such document appeared to comply with the terms of the Letter of Credit; (v) payment by the Issuing Bank in good faith under the Letter of Credit against presentation of a draft or any accompanying document which does not strictly comply with the terms of the Letter of Credit; (vi) the existence, character, quality, quantity, condition, packing, value or delivery of any Property purported to be represented by documents presented in connection with any Letter of Credit or for any difference between any such Property and the character, quality, quantity, condition, or value of such Property as described in such documents; (vii) the time, place, manner, order or contents of shipments or deliveries of Property as described in documents presented in connection with any Letter of Credit or the existence, nature and extent of any insurance relative thereto; (viii) the solvency or financial responsibility of any party issuing any documents in connection with a Letter of Credit; (ix) any failure or delay in notice of shipments or arrival of any Property; (x) any error in the transmission of any message relating to a Letter of Credit not caused by the Issuing Bank, or any delay or interruption in any such message; (xi) any error, neglect or default of any correspondent of the Issuing Bank in connection with a Letter of Credit; (xii) any consequence arising from acts of God, wars, insurrections, civil unrest, disturbances, labor disputes, emergency conditions or other causes beyond the control of the Issuing Bank; (xiii) so long as the Issuing Bank in good faith determines that the document appears to comply with the terms of the Letter of Credit, the form, accuracy, genuineness or legal effect of any contract or document referred to in any document submitted to the Issuing Bank in connection with a Letter of Credit; and (xiv) where the Issuing Bank has acted in good faith and observed general banking usage, any other circumstances whatsoever. - 31 - 37 (h) The Uniform Customs and Practice for Documentary Credits, as published in its most current version by the International Chamber of Commerce, shall be deemed a part of this Section and shall apply to all Letters of Credit to the extent not permitted by applicable Laws. (i) Concurrently with the issuance of each Letter of Credit, Borrower shall pay a letter of credit issuance fee to the Issuing Bank, for the sole account of the Issuing Bank, in an amount set forth in a letter agreement between Borrower and the Issuing Bank. Borrower shall also pay to the Administrative Agent, for the ratable account of the Banks in accordance with their Pro Rata Share, a standby Letter of Credit fee in an amount equal to the Applicable Amount times the average daily maximum amount available to be drawn on such outstanding Letter of Credit, computed and payable in arrears on each Quarterly Payment Date, commencing December 31, 1997, through the date upon which the outstanding Letter of Credit shall expire, with the final payment to be made on such expiration date (provided that the minimum fee for each Letter of Credit shall be $500 per annum). Borrower shall also pay to the Issuing Bank for its own account, from time to time on demand, the Issuing Bank's standard processing fees, costs and charges with respect to Letters of Credit. The Letter of Credit issuance fee and the standby Letter of Credit fee are nonrefundable. (j) As of the Closing Date, BofA has issued for the account of Borrower standby letter of credit No. 3004113 in the face amount of $6,790,383.51 with an expiration date of February 28, 1998 (the "Existing Letter of Credit"). On the Closing Date, each Bank will purchase a participation in the Existing Letter of Credit in the same manner as if the Existing Letter of Credit had been a Letter of Credit issued hereunder. With respect to the Existing Letter of Credit, from and after the Closing Date the standby letter of credit fee for the ratable account of the Banks will accrue and the undrawn amount thereof shall constitute Letter of Credit Usage. 2.5 Prepayments. (a) Upon Requisite Notice to the Administrative Agent not later than the Requisite Time therefor, Borrower may at any time and from time to time voluntarily prepay Committed Loans in the Minimum Amount therefor. The Administrative Agent will promptly notify each Bank thereof and of such Bank's Pro Rata Share of such prepayment. (b) The Net Proceeds from any Disposition (other than a Permitted Disposition) shall, on the date of receipt by Borrower or its Subsidiaries, be applied to prepay the Loans (but with no concurrent reduction of the Commitments). (c) If for any reason the Outstanding Obligations exceed the combined Commitments as in effect or as reduced or because of any limitation set forth in this Agreement or - 32 - 38 otherwise, Borrower shall immediately prepay Loans and/or deposit cash to be held by the Administrative Agent Bank in an interest-bearing cash collateral account as collateral for Letter of Credit Usage hereunder in an aggregate amount equal to such excess. (d) Any prepayment of a Loan other than a Base Rate Loan shall be accompanied by all accrued interest thereon, together with the costs set forth in Section 3.6. 2.6 Voluntary Reduction or Termination of Commitments. Upon Requisite Notice to the Administrative Agent not later than the Requisite Time therefor, Borrower shall have the right, at any time and from time to time, without penalty or charge, to permanently and irrevocably reduce the Commitments in a Minimum Amount therefor, or terminate the then unused portion of the Commitments, provided, that any such reduction or termination shall be accompanied by payment of all accrued and unpaid commitment fees with respect to the portion of the Commitments being reduced or terminated. The Administrative Agent shall promptly notify the Banks of any request for reduction or termination of the Commitments under this Section. Each Bank's Commitment shall be reduced by an amount equal to such Bank's Pro Rata Share times the amount of such reduction. 2.7 Principal and Interest. (a) If not sooner paid, Borrower shall pay, and promises to pay, the outstanding principal amount of each Committed Loan on the Maturity Date. (b) Subject to subsection (c), Borrower shall pay interest on the unpaid principal amount of the Loans (before and after default, before and after maturity, before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law) from the date borrowed until paid in full (whether by acceleration or otherwise) on each Interest Payment Date for each type of Loan at a rate per annum equal to the applicable interest rate determined in accordance with the definition thereof, plus, if applicable, Applicable Amount. (c) If any amount payable by Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), it shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate. Accrued and unpaid interest on past due amounts including, without limitation, interest on past due interest) shall be compounded monthly, on the last day of each calendar month, to the fullest extent permitted by applicable Laws and payable upon demand. 2.8 Fees. (a) Facility Fee. Borrower shall pay to the Administrative Agent, for the ratable accounts of the Banks pro rata according to their Pro Rata Share, a facility fee equal to - 33 - 39 the Applicable Amount ("Facility Fee" column) times the combined Commitments. The facility fee shall accrue from the Closing Date until the Maturity Date and shall be payable quarterly in arrears on each Quarterly Payment Date and on the Maturity Date. The facility fee shall be calculated quarterly in arrears; if there is any change in the Applicable Amount during any quarter, the average daily amount shall be computed and multiplied by the Applicable Amount separately for each period that such Applicable Amount was in effect during such quarter. (b) Agency Fees. Borrower shall pay to the Administrative Agent an agency fee in such amounts and at such times as heretofore agreed upon by letter agreement between Borrower and the Administrative Agent. The agency fee is for the services to be performed by the Administrative Agent in acting as Administrative Agent and is fully earned on the date paid. The agency fee paid to the Administrative Agent is solely for its own account and is nonrefundable. (c) Arrangement Fee. On the Closing Date, Borrower shall pay to the Arranger an arrangement fee in the amount heretofore agreed upon by letter agreement between Borrower and the Arranger. Such arrangement fee is for the services of the Arranger in arranging the credit facilities under this Agreement and is fully earned when paid. The arrangement fee paid to the Arranger is solely for its own account and is nonrefundable. (d) Participation Fee. On the Closing Date, Borrower shall pay to the Administrative Agent, for the account of each Bank, participation fees in the amounts heretofore agreed upon by letter agreement between Borrower and the Arranger. 2.9 Computation of Interest and Fees. Computation of interest on Base Rate Loans shall be calculated on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed; computation of interest on all other types of Loans and all fees under this Agreement shall be calculated on the basis of a year of 360 days and the actual number of days elapsed, which results in a higher yield to the Banks than a method based on a year of 365 or 366 days. Interest shall accrue on each Loan for the day on which the Loan is made; interest shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid. Any Loan that is repaid on the same day on which it is made shall bear interest for one day. Notwithstanding anything in this Agreement to the contrary, interest in excess of the maximum amount permitted by applicable Laws shall not accrue or be payable hereunder, and any amount paid as interest hereunder which would otherwise be in excess of such maximum permitted amount shall instead be treated as a payment of principal. 2.10 Manner and Treatment of Payments among the Banks, Borrower and the Administrative Agent. (a) Unless otherwise provided herein, all payments by Borrower or any Bank hereunder shall be made to the - 34 - 40 Administrative Agent at the Administrative Agent's Office not later than the Requisite Time for such type of payment. All payments received after such Requisite Time shall be deemed received on the next succeeding Business Day. All payments shall be made in immediately available funds in lawful money of the United States of America. (b) Upon satisfaction of any applicable terms and conditions set forth herein, the Administrative Agent shall promptly make any amounts received in accordance with the prior subsection available in like funds received as follows: (i) if payable to Borrower, by crediting the Designated Deposit Account, and (ii) if payable to any Bank, by wire transfer to such Bank at the address specified in Schedule 10.6. The Administrative Agent's determination, or any Bank's determination not contradictory thereto, of any amount payable hereunder shall be conclusive in the absence of manifest error. (c) Subject to the definition of "Interest Period," if any payment to be made by Borrower or any other Borrower Party shall come due on a day other than a Business Day, payment shall instead be considered due on the next succeeding Business Day and the extension of time shall be reflected in computing interest and fees. (d) Unless Borrower or any Bank has notified the Administrative Agent prior to the date any payment to be made by it is due, that it does not intend to remit such payment, the Administrative Agent may, in its discretion, assume that Borrower or the Bank, as the case may be, has timely remitted such payment and may, in its discretion and in reliance thereon, make available such payment to the Person entitled thereto. If such payment was not in fact remitted to the Administrative Agent, then: (i) if Borrower failed to make such payment, each Bank shall forthwith on demand repay to the Administrative Agent the amount of such assumed payment made available to such Bank, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Bank to the date such amount is repaid to the Administrative Agent at the Federal Funds Rate; and (ii) if any Bank failed to make such payment, such Bank shall on the Business Day following such Borrowing Date make pay to the Administrative Agent the amount of such assumed payment made available to Borrower, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to Borrower to the date such amount is paid to the Administrative Agent at the Federal Funds Rate. Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its Commitment or to prejudice any rights which - 35 - 41 the Administrative Agent or Borrower may have against any Bank as a result of any default by such Bank hereunder. 2.11 Funding Sources. Nothing in this Agreement shall be deemed to obligate any Bank to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Bank that it has obtained or will obtain the funds for any Loan in any particular place or manner. 2.12 Extension of Maturity Date. At the request of Borrower and with the written consent of all of the Banks (which may be given or withheld in the sole and absolute discretion of each Bank) pursuant to this Section the Maturity Date may be extended for one-year periods, provided no Default or Event of Default has occurred and is continuing at the time of such request. Not earlier than three months prior to the each anniversary of the Closing Date, nor later than any anniversary of the Closing Date, Borrower may request by Requisite Notice made to the Administrative Agent (who shall promptly notify the Banks) a one year extension of the Maturity Date. Such request shall include a certificate signed by a Responsible Officer stating that (a) the representations and warranties contained in Section 5 shall be true and correct on and as of the date of such certificate and (b) no Default or Event of Default has occurred and is continuing. Each Bank shall, within 15 Business days of the Administrative Agent delivering such notice to such Bank, notify in writing the Administrative Agent whether it consents to or declines such request. The Administrative Agent shall, after receiving the notifications from all of the Banks or the expiration of such period, whichever is earlier, notify Borrower and the Banks of the results thereof. If all of the Banks have consented, then the Maturity Date shall be extended for one year. Section 3 TAXES, YIELD PROTECTION AND ILLEGALITY 3.1 Taxes. Each payment of any amount payable by Borrower or any other Borrower Party under this Agreement or any other Loan Document shall be made free and clear of, and without reduction by reason of, any Applicable Taxes. To the extent that Borrower is obligated by applicable Laws to make any deduction or withholding on account of Applicable Taxes from any amount payable to any Bank or the Issuing Bank under this Agreement, Borrower shall promptly notify the Administrative Agent of such fact and (a) make such deduction or withholding and pay the same to the relevant Governmental Authority and (b) pay such additional amount directly to that Bank or the Issuing Bank as is necessary to result in that Bank or the Issuing Bank receiving a net after-Applicable Tax amount equal to the amount to which that Bank or the Issuing Bank would have been entitled under this Agreement absent such deduction or withholding. Within 30 days after the date of any payment by Borrower of any amounts pursuant to this section, Borrower shall furnish to the Administrative - 36 - 42 Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Administrative Agent. 3.2 Increased Costs. If any Bank or the Issuing Bank determines that any Laws or guidelines (whether or not having the force of law), or compliance therewith, have the effect of increasing its cost of agreeing to make or making, to issue or participating in, funding or maintaining any Loans or Letters of Credit, then Borrower shall, upon demand by such Bank or the Issuing Bank (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Bank or the Issuing Bank additional amounts sufficient to compensate such Bank or the Issuing Bank for such increased cost. 3.3 Capital Adequacy. If any Bank or the Issuing Bank determines that any Laws regarding capital adequacy, or compliance by such Bank or the Issuing Bank (or its Lending Office) or any corporation controlling the Bank or the Issuing Bank, with any request, guideline or directive regarding capital adequacy (whether or not having the force of law) of any Governmental Authority not imposed as a result of the Issuing Bank's, such Bank's or such corporation's failure to comply with any other Laws, affects or would affect the amount of capital required or expected to be maintained by such Bank, the Issuing Bank or any corporation controlling such Bank or the Issuing Bank and (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's and the Issuing Bank's desired return on capital) determines in good faith that the amount of such capital is increased, or the rate of return on capital is reduced, as a consequence of its obligations under this Agreement, then upon demand of such Bank or the Issuing Bank (with a copy to the Administrative Agent), Borrower shall pay to such Bank or the Issuing Bank, from time to time as specified in good faith by such Bank or the Issuing Bank, additional amounts sufficient to compensate such Bank or the Issuing Bank in light of such circumstances, to the extent reasonably allocable to such obligations under this Agreement. 3.4 Illegality. If any Bank determines that any Laws has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Bank or its applicable Lending Office to make, maintain or fund Offshore Rate Loans, or materially restricts the authority of such Bank to purchase or sell, or to take deposits of, Dollars in the Offshore Rate Designated Market, or to determine or charge interest rates based upon the Offshore Rate, then, on notice thereof by the Bank to Borrower through the Administrative Agent, any obligation of that Bank to make Offshore Rate Loans shall be suspended until the Bank notifies the Administrative Agent and Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, Borrower shall, upon demand from such Bank (with a copy to the Administrative Agent), prepay or Convert all Offshore Rate Loans of that Bank, either on the last day of the Interest Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate Loans to such day, or - 37 - 43 immediately, if the Bank may not lawfully continue to maintain such Offshore Rate Loan. Each Bank agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Bank, otherwise be materially disadvantageous to such Bank. 3.5 Inability to Determine Rates. If, in connection with any Request for Extension of Credit, the Administrative Agent determines that (a) Dollar deposits are not being offered to Banks in the Offshore Rate Designated Market for the applicable amount and Interest Period of the requested Loan, (b) adequate and reasonable means do not exist for determining the underlying interest rate (other than the Base Rate) for the Loans requested therein, or (c) such underlying interest rates do not adequately and fairly reflect the cost to the Banks of funding such Loan, the Administrative Agent will promptly so notify Borrower and each Bank. Thereafter, the obligation of the Banks to make or maintain Loans based upon such affected interest rate shall be suspended until the Administrative Agent revokes such notice. Upon receipt of such notice, Borrower may revoke any pending Request for Extension of Credit for such type of Loan or, failing that, be deemed to have converted such Request for Extension of Credit into a request for Base Rate Loans in the amount specified in therein. 3.6 Breakfunding Costs. Upon Continuation, Conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day in the applicable Interest Period (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise and including any such action required under this Section 3), or upon the failure of Borrower (for a reason other than the failure of a Bank to make a Loan) to borrow, Continue or Convert any Loan other than a Base Rate Loan on the date or in the amount specified in any Request for Extension of Credit, then Borrower shall, upon demand made by any Bank (with a copy to the Administrative Agent), reimburse each Bank and hold each Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence thereof, including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. 3.7 Matters Applicable to all Requests for Compensation. (a) The Administrative Agent and any Bank shall provide reasonable detail to Borrower regarding the manner in which the amount of any payment to the Administrative Agent or that Bank under this Section 3 has been determined, concurrently with demand for such payment. The Administrative Agent's or any Bank's determination of any amount payable under this Section 3 shall be conclusive in the absence of manifest error. (b) For purposes of calculating amounts payable under this Section 3 any Loan shall be deemed to have been funded at - 38 - 44 the applicable interest rate set forth in the definition thereof whether or not such Loan was, in fact, so funded. (c) All of Borrower's obligations under this Section 3 shall survive termination of the Commitments and payment in full of all Outstanding Obligations. Section 4 CONDITIONS 4.1 Initial Loans, Etc. The obligation of each Bank to make the initial Loan to be made by it, or the obligation of the Issuing Bank to issue the initial Letter of Credit (as applicable), is subject to the following conditions precedent, each of which shall be satisfied prior to the making of the initial Loans (unless all of the Banks, in their sole and absolute discretion, shall agree otherwise): (a) The Administrative Agent shall have received all of the following, each of which shall be originals unless otherwise specified, each properly executed by a Responsible Officer, each dated as of the Closing Date or, in the case of the documents required under subsection (4) below, as of a recent date, and each in form and substance satisfactory to the Administrative Agent, each Bank, and their respective legal counsel (unless otherwise specified or, in the case of the date of any of the following, unless the Administrative Agent otherwise agrees or directs): (1) at least one executed counterpart of this Agreement, together with arrangements satisfactory to the Administrative Agent for additional executed counterparts, sufficient in number for distribution to the Banks and Borrower; (2) Committed Loan Notes executed by Borrower in favor of each Bank requesting a Committed Loan Note, each in a principal amount equal to that Bank's Pro Rata Share; (3) the Master Subsidiary Guaranty; (4) with respect to Borrower and each of its Subsidiaries, such documentation as may be required to establish the due organization, valid existence and good standing of Borrower and each such Subsidiary, its qualification to engage in business in each material jurisdiction in which it is engaged in business or required to be so qualified, its authority to execute, deliver and perform any Loan Documents to which it is a party, the identity, authority and capacity of each Responsible Officer thereof authorized to act on its behalf, including certified copies of articles of incorporation and amendments thereto, bylaws and - 39 - 45 amendments thereto, certificates of good standing and/or qualification to engage in business, tax clearance certificates, certificates of corporate resolutions, incumbency certificates, certificates of Responsible Officers, and the like; (5) the Opinion of Counsel; (6) written evidence that the Existing Credit Facility has been or will be concurrently terminated and that any Liens securing such facility have been or will be concurrently released; (7) a certificate signed by a Responsible Officer certifying that the conditions specified in Sections 4.1(f) and 4.1(g) have been satisfied; and (8) such other assurances, certificates, documents, consents or opinions as Banks or the Administrative Agent reasonably may require. (b) The arrangement fee shall have been paid. (c) The agency fee payable on the Closing Date shall have been paid. (d) The participation fees payable on the Closing Date shall have been paid. (e) Attorney Costs of BofA to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute BofA's reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not hereafter preclude final settling of accounts between the Borrower and BofA). (f) The representations and warranties of Borrower contained in Section 5 shall be true and correct. (g) Borrower and any other Borrower Parties shall be in compliance with all the terms and provisions of the Loan Documents, and giving effect to the initial Loan (or initial Letter of Credit, as applicable) no Default or Event of Default shall have occurred and be continuing. 4.2 Any Extension of Credit. The obligation of each Bank to make any Extension of Credit is subject to the following conditions precedent: (a) the representations and warranties of Borrower contained in Section 5 are true and correct in all material respects as though made on and as of the above date; - 40 - 46 (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Extension of Credit. (c) the Administrative Agent shall have timely received a duly completed Request for Extension of Credit or Letter of Credit Application, as applicable, by Requisite Notice by the Requisite Time therefor; and (d) the Administrative Agent shall have received such other assurances, certificates, documents or consents related to the foregoing as the Administrative Agent or Requisite Banks reasonably may require. Section 5 REPRESENTATIONS AND WARRANTIES Borrower represents and warrants to the Administrative Agent and the Banks that: 5.1 Existence and Qualification; Power; Compliance With Laws. Borrower is a corporation duly formed, validly existing and in good standing under the laws of its incorporation. Borrower is duly qualified or registered to transact business and is in good standing in each other jurisdiction in which the conduct of its business or the ownership or leasing of its Properties makes such qualification or registration necessary, except where the failure so to qualify or register and to be in good standing would not constitute a Material Adverse Effect. Borrower has all requisite corporate power and authority to conduct its business, to own and lease its Properties and to execute and deliver each Loan Document to which it is a party and to perform its Obligations. All outstanding shares of capital stock of Borrower are duly authorized, validly issued, fully paid and non-assessable, and no holder thereof has any enforceable right of rescission under any applicable state or federal securities Laws. Borrower is in compliance with all Laws and other legal requirements applicable to its business, has obtained all authorizations, consents, approvals, orders, licenses and permits from, and has accomplished all filings, registrations and qualifications with, or obtained exemptions from any of the foregoing from, any Governmental Authority that are necessary for the transaction of its business, except where the failure so to comply, file, register, qualify or obtain exemptions does not constitute a Material Adverse Effect. 5.2 Authority; Compliance With Other Agreements and Instruments and Government Regulations. The execution, delivery and performance by Borrower and each of its Subsidiaries of the Loan Documents to which it is a party have been duly authorized by all necessary corporate action, and do not and will not: (a) Require any consent or approval not heretofore - 41 - 47 obtained of any partner, director, stockholder, security holder or creditor of such party; (b) Violate or conflict with any provision of such party's charter, articles of incorporation or bylaws, as applicable; (c) Result in or require the creation or imposition of any Lien upon or with respect to any Property now owned or leased or hereafter acquired by such party; (d) Violate any Laws applicable to such party; and (e) Result in a breach of or constitute a default under, or cause or permit the acceleration of any obligation owed under, any indenture or loan or credit agreement or any other Contractual Obligation to which such party is a party or by which such party or any of its Property is bound or affected; 5.3 No Governmental Approvals Required. No authorization, consent, approval, order, license or permit from, or filing, registration or qualification with, any Governmental Authority is or will be required to authorize or permit under applicable Laws the execution, delivery and performance by Borrower and its Subsidiaries of the Loan Documents to which it is a party. 5.4 Binding Obligations. Each of the Loan Documents to which Borrower or any Subsidiary is a party will, when executed and delivered by such party, constitute the legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as enforcement may be limited by Debtor Relief Laws or equitable principles relating to the granting of specific performance and other equitable remedies as a matter of judicial discretion. 5.5 Litigation. Except for (a) any matter fully covered as to subject matter and amount (subject to applicable deductibles and retentions) by insurance for which the insurance carrier has not asserted lack of subject matter coverage or reserved its right to do so, (b) any matter, or series of related matters, involving a claim against Borrower or any Subsidiary of less than the $5,000,000, (c) matters of an administrative nature not involving a claim or charge against Borrower or any of its Subsidiaries and (d) matters set forth in Schedule 5.5, there are no actions, suits, proceedings or investigations pending as to which Borrower or any of its Subsidiaries have been served or have received notice or, to the best knowledge of Borrower, threatened against or affecting Borrower or any of its Subsidiaries or any Property of any of them before any Governmental Authority, which if adversely determined would have a Material Adverse Effect. 5.6 No Default. No event has occurred and is continuing that is a Default or Event of Default. - 42 - 48 5.7 ERISA Compliance. (a) Each Pension Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law. Each Pension Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the United States Internal Revenue Service or an application for such a letter is currently being processed by the United States Internal Revenue Service with respect thereto and, to the best knowledge of Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. Borrower and each ERISA Affiliate has made all required contributions to any Pension Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Pension Plan. (b) There are no pending or, to the best knowledge of Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Pension Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Pension Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. 5.8 Use of Proceeds; Margin Regulations. No part of the proceeds of any Loan hereunder will be used to purchase or carry, or to extend credit to others for the purpose of purchasing or carrying, any Margin Stock in violation of Regulations G, T, U and X. 5.9 Title to Property. Borrower and its Subsidiaries have valid title to the Property reflected in the balance sheet described in Section 5.12(a), other than items of Property which are immaterial to Borrower and its Subsidiaries, taken as a whole, and Property subsequently sold or disposed of in the ordinary course of business, free and clear of all Liens, other than Liens described in Schedule 5.9 or permitted by Section 7.1. 5.10 Intangible Assets. Borrower and its Subsidiaries own, or possess the right to use to the extent necessary in their - 43 - 49 respective businesses, all material trademarks, trade names, copyrights, patents, patent rights, computer software, licenses and other Intangible Assets that are used in the conduct of their businesses as now operated, and no such Intangible Asset, to the best knowledge of Borrower, conflicts with the valid trademark, trade name, copyright, patent, patent right or Intangible Asset of any other Person to the extent that such conflict constitutes a Material Adverse Effect. 5.11 Tax Liability. Borrower and its Subsidiaries have filed all tax returns which are required to be filed, and have paid, or made provision for the payment of, all taxes with respect to the periods, Property or transactions covered by said returns, or pursuant to any assessment received by Borrower or any of its Subsidiaries, except (a) such taxes, if any, as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been established and maintained and (b) immaterial taxes so long as no material item or portion of Property of Borrower or any of its Subsidiaries is in jeopardy of being seized, levied upon or forfeited. 5.12 Financial Statements. (a) The audited consolidated balance sheet dated December 31, 1996, the quarterly consolidated balance sheets dated March 31, 1997, and June 30, 1997, of Borrower and its Subsidiaries, and the related consolidated statements of income or operations, shareholders, equity and cash flows for the Fiscal Year or Fiscal Quarter, as applicable, ended on those dates (i) were prepared in accordance with Generally Accepted Accounting Principles consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, (ii) fairly present the financial condition of Borrower and its Subsidiaries as of the date thereof and results of operations for the period covered thereby; and show all material Indebtedness and other liabilities, direct or contingent, of Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes or other material commitments. (b) Since the date of the financial statements referred to in subsection (a) above, there has been no Material Adverse Effect. 5.13 Laws. Each of Borrower and its Subsidiaries is in compliance in all material respects with all Laws that are applicable to it. 5.14 Environmental Compliance. Borrower and its Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof Borrower has reasonably concluded that such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. - 44 - 50 5.15 Public Utility Holding Company Act; Investment Company Act. Neither Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. Neither Borrower nor any of its Subsidiaries is or is required to be registered as an "investment company" under the Investment Company Act of 1940. 5.16 Subsidiaries. (a) Schedule 5.16 hereto correctly sets forth the names, form of legal entity, number of shares of capital stock issued and outstanding, number of shares owned by Borrower or a Subsidiary of Borrower (specifying such owner) and jurisdictions of organization of all Subsidiaries of Borrower (other than Borrower). Unless otherwise indicated in Schedule 5.16, all of the outstanding shares of capital stock, or all of the units of equity interest, as the case may be, of each Subsidiary are owned of record and beneficially by Borrower, there are no outstanding options, warrants or other rights to purchase capital stock of any such Subsidiary, and all such shares or equity interests so owned are duly authorized, validly issued, fully paid and non-assessable, and were issued in compliance with all applicable state and federal securities and other Laws, and are free and clear of all Liens except for Permitted Liens. (b) Each of Borrower's Subsidiaries is a corporation duly formed, validly existing and in good standing under the Laws of its jurisdiction of organization, is duly qualified to do business as a foreign organization and is in good standing as such in each jurisdiction in which the conduct of its business or the ownership or leasing of its Properties makes such qualification necessary (except where the failure to be so duly qualified and in good standing does not constitute a Material Adverse Effect), and has all requisite power and authority to conduct its business and to own and lease its Properties. (c) Each of Borrower's Subsidiaries is in compliance with all Laws and other requirements applicable to its business and has obtained all authorizations, consents, approvals, orders, licenses, and permits from, and each such Subsidiary has accomplished all filings, registrations, and qualifications with, or obtained exemptions from any of the foregoing from, any Governmental Authority that are necessary for the transaction of its business, except where the failure to be in such compliance, obtain such authorizations, consents, approvals, orders, licenses, and permits, accomplish such filings, registrations, and qualifications, or obtain such exemptions, does not constitute a Material Adverse Effect. 5.17 Insurance. The properties of Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of Borrower, in such amounts, - 45 - 51 with such deductibles and self-insurance and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where Borrower or such Subsidiary operates. 5.18 Disclosure. No written statement made by a Responsible Officer to the Administrative Agent or any Bank in connection with this Agreement, or in connection with any Loan, as of the date thereof contained any untrue statement of a material fact or omitted a material fact necessary to make the statement made not misleading in light of all the circumstances existing at the date the statement was made. Section 6 AFFIRMATIVE COVENANTS So long as any Loan remains unpaid, or any other Obligation remains unpaid or unperformed, or any portion of the Commitments remains in force, Borrower shall, and shall cause each of its Subsidiaries to: 6.1 Financial Statements. Deliver to the Administrative Agent in form and detail satisfactory to the Administrative Agent and the Requisite Banks, with sufficient copies for each Bank: (a) As soon as practicable, and in any event within 105 days after the end of each Fiscal Year, (i) the consolidated balance sheet of Borrower and its Subsidiaries as at the end of such Fiscal Year and the consolidated statements of operations, stockholders' equity and cash flows, in each case of Borrower and its Subsidiaries for such Fiscal Year and (ii) consolidating (in accordance with past consolidating practices of Borrower) balance sheets and statements of operations, in each case as at the end of and for the Fiscal Year, all in reasonable detail. Such financial statements shall be prepared in accordance with Generally Accepted Accounting Principles, consistently applied, and such consolidated balance sheet and consolidated statements shall be accompanied by a report of independent public accountants of recognized standing selected by Borrower and reasonably satisfactory to the Requisite Banks, which report shall be prepared in accordance with generally accepted auditing standards as at such date, and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any other qualification or exception determined by the Requisite Banks in their good faith business judgment to be adverse to the interests of the Banks. Such accountants' report shall be accompanied by a certificate stating that they have read this Agreement and, in making the examination pursuant to generally accepted auditing standards necessary for the certification of such financial statements and such report, such accountants have obtained no knowledge of any Default; - 46 - 52 (b) As soon as practicable, and in any event within 60 days after the end of each Fiscal Quarter (other than the fourth Fiscal Quarter in any Fiscal Year), the consolidated balance sheet of Borrower and its Subsidiaries as at the end of such Fiscal Quarter and the consolidated statement of operations for such Fiscal Quarter, and its statement of cash flows for the portion of the Fiscal Year ended with such Fiscal Quarter, all in reasonable detail. 6.2 Certificates, Notices and Other Information. Deliver to the Administrative Agent in form and detail satisfactory to the Administrative Agent and the Requisite Banks, with sufficient copies for each Bank: (a) Concurrently with the financial statements required pursuant to Sections 6.1(a) and 6.1(b), a Compliance Certificate signed by a Responsible Officer; (b) Promptly after request by the Administrative Agent or any Bank, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of Borrower by independent accountants in connection with the accounts or books of Borrower or any of its Subsidiaries, or any audit of any of them; (c) Promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of Borrower, and copies of all annual, regular, periodic and special reports and registration statements which Borrower may file or be required to file with the Securities and Exchange Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and not otherwise required to be delivered to the Banks pursuant to other provisions of this Section; (d) Promptly after request by the Administrative Agent or any Bank, copies of any other report or other document that was filed by Borrower or any of its Subsidiaries with any Governmental Authority; (e) As soon as practicable, notice of the occurrence of any (i) ERISA Event, (ii) a Reportable Event, (iii) "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) in connection with any Pension Plan or any trust created thereunder, (iv) the adoption of, or the commencement of contributions to, any Pension Plan subject to Section 412 of the Code by Borrower or any ERISA Affiliate, or (v) the adoption of any amendment to a Plan subject to Section 412 of the Code, if such amendment results in a material increase in contributions or Unfunded Pension Liability, telephonic notice specifying the nature thereof, and, no more than five Business Days after such telephonic notice, written notice again specifying the nature thereof and specifying what action Borrower or any of its Subsidiaries is taking or proposes - 47 - 53 to take with respect thereto, and, when known, any action taken by the Internal Revenue Service with respect thereto; (f) with reasonable promptness copies of (a) all notices received by any Borrower or any of its ERISA Affiliates of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan; (b) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by Borrower or any of its ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; and (c) all notices received by Borrower or any of its ERISA Affiliates from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA; (g) As soon as practicable, notice of the occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that foreseeably will become a Default or Event of Default, specifying the nature and period of existence thereof and specifying what action Borrower is taking or propose to take with respect thereto; (h) As soon as practicable, notice of (i) the commencement of a legal proceeding with respect to a claim against Borrower or any of its Subsidiaries that is $5,000,000 or more in excess of the amount thereof that is fully covered by insurance, (ii) any creditor or lessor under a written credit agreement or material lease asserting a default thereunder on the part of Borrower or any of its Subsidiaries, (iii) commencement a legal proceeding with respect to a claim against Borrower or any of its Subsidiaries under a contract that is not a credit agreement or material lease in excess of $5,000,000 or which otherwise may reasonably be expected to result in a Material Adverse Effect, or (iv) any labor union notifying Borrower of its intent to strike Borrower or any of its Subsidiaries on a date certain and such strike would involve more than 250 employees of Borrower and its Subsidiaries, a written notice describing the pertinent facts relating thereto and what action Borrower or its Subsidiaries are taking or propose to take with respect thereto; or (v) the commencement of, or any material development in, any litigation or proceeding affecting Borrower or its Subsidiaries; including pursuant to any applicable Environmental Laws; (i) Notice of any material change in accounting policies or financial reporting practices by Borrower or any of its Subsidiaries; (j) Promptly, such other data and information as from time to time may be reasonably requested by the Administrative Agent, any Bank (through the Administrative Agent) or the Requisite Banks. 6.3 Guaranties of New Subsidiaries. Cause any of its Subsidiaries, within 30 days after becoming a Subsidiary, to become a Guarantor under the Master Subsidiary Guaranty and to deliver to Administrative Agent (a) those documents required - 48 - 54 pursuant to Sections 4.1(a)(3) and (4) as such documents pertain to such Subsidiary. 6.4 Preservation of Existence. Preserve and maintain their respective existences in the jurisdiction of their formation and all material authorizations, rights, franchises, privileges, consents, approvals, orders, licenses, permits, or registrations from any Governmental Authority that are necessary for the transaction of their respective business, except where the failure to so preserve and maintain the existence of any of Borrower's Subsidiaries and such authorizations would not constitute a Material Adverse Effect and except that a merger permitted hereunder shall not constitute a violation of this covenant; and qualify and remain qualified to transact business in each jurisdiction in which such qualification is necessary in view of their respective business or the ownership or leasing of their respective Properties except where the failure to so qualify or remain qualified would not constitute a Material Adverse Effect. 6.5 Maintenance of Properties. Maintain, preserve and protect all of their respective depreciable Properties in good order and condition, subject to normal wear and tear in the ordinary course of business, and not permit any waste of their respective Properties, except that the failure to maintain, preserve and protect a particular item of depreciable Property that is not of significant value, either intrinsically or to the operations of Borrower and its Subsidiaries, taken as a whole, shall not constitute a violation of this covenant. 6.6 Maintenance of Insurance. Maintain liability, casualty and other insurance (subject to customary deductibles, self-insurance, and retentions) with responsible insurance companies in such amounts and against such risks as is carried by responsible companies engaged in similar businesses and owning similar assets in the general areas in which Borrower and its Subsidiaries operate. 6.7 Payment of Taxes and Other Potential Liens. Pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon any of them, upon their respective Property or any part thereof and upon their respective income or profits or any part thereof, except that Borrower and its Subsidiaries shall not be required to pay or cause to be paid (a) any tax, assessment, charge or levy that is not yet past due, or is being contested in good faith by appropriate proceedings so long as the relevant entity has established and maintains adequate reserves for the payment of the same or (b) any immaterial tax so long as no material item or portion of Property of Borrower or any of its Subsidiaries is in jeopardy of being seized, levied upon or forfeited. 6.8 Compliance With Laws. Comply, within the time period, if any, given for such compliance by the relevant Governmental Authority, with all Laws noncompliance with which constitutes a Material Adverse Effect, except that Borrower and - 49 - 55 its Subsidiaries need not comply with Laws then being contested by any of them in good faith by appropriate proceedings. 6.9 Environmental Laws. Conduct its operations and keep and maintain its property in compliance with all Environmental Laws. 6.10 Inspection Rights. Upon reasonable notice, at any time during regular business hours and as often as requested (but not so as to materially interfere with the business of Borrower or any of its Subsidiaries or the performance by any officer of his or her responsibilities), permit the Administrative Agent or any Bank, or any authorized employee, agent or representative thereof, to examine, audit and make copies and abstracts from the records and books of account of, and to visit and inspect the Properties of, Borrower and its Subsidiaries and to discuss the affairs, finances and accounts of Borrower and its Subsidiaries with any of their officers, key employees or accountants and, upon request, furnish promptly to the Administrative Agent or any Bank true copies of all financial information made available to the board of directors or audit committee of the board of directors of Borrower. 6.11 Keeping of Records and Books of Account. Keep adequate records and books of account reflecting all financial transactions in conformity with Generally Accepted Accounting Principles, consistently applied, and in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over Borrower or any of its Subsidiaries. 6.12 Compliance with ERISA. Cause, and cause each of its ERISA Affiliates to: (a) maintain each Pension Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; (b) cause each Pension Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Pension Plan subject to Section 412 of the Code. 6.13 Compliance With Agreements. Promptly and fully comply with all Contractual Obligations under all material agreements, indentures, leases and/or instruments to which any one or more of them is a party, whether such material agreements, indentures, leases or instruments are with a Bank or another Person, except for any such Contractual Obligations (a) the performance of which would cause a Default or (b) then being contested by any of them in good faith by appropriate proceedings or if the failure to comply with such agreements, indentures, leases or instruments does not constitute a Material Adverse Effect. 6.14 Use of Proceeds. Use the proceeds of Loans for repayment in full of Borrower's obligations under the Existing Credit Facility and for working capital, Acquisitions, and general corporate purposes of Borrower and its Subsidiaries. - 50 - 56 Section 7 NEGATIVE COVENANTS So long as any Loan remains unpaid, or any other Obligation remains unpaid or unperformed, or any portion of the Commitments remains in force, Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: 7.1 Liens, Negative Pledges. Create, incur, assume or suffer to exist any Lien, Negative Pledge of any nature upon or with respect to any of their respective Properties, or engage in any sale and leaseback transaction with respect to any of their respective Properties, whether now owned or hereafter acquired, except: (a) Permitted Liens; (b) Liens and Negative Pledges under the Loan Documents; (c) Liens and Negative Pledges existing on the Closing Date and disclosed in Schedule 5.9 and any renewals/extensions or amendments thereof; provided that the obligations secured or benefited thereby are not increased; (d) Liens on Property acquired by Borrower or any of its Subsidiaries that were in existence at the time of the acquisition of such Property and were not created in contemplation of such acquisition; (e) Liens securing Indebtedness permitted by Section 7.2(d) on and limited to the capital assets acquired, constructed or financed with the proceeds of such Indebtedness; (f) any Lien or Negative Pledge created by an agreement or instrument entered into by Borrower or any of its Subsidiaries in the ordinary course of its business which consists of a restriction on the assignability, transfer or hypothecation of such agreement or instrument; (g) any Lien or Negative Pledge entered into by Borrower in connection with the BofA Letter of Credit Facility; provided, however, that any such Lien shall be limited to goods and documents that are the subject of commercial letters of credit; and (h) Liens and Negative Pledges not described above securing purchase money obligations on Property having in the aggregate a fair market value of not more than 10% of Consolidated Tangible Net Worth at any time. 7.2 Indebtedness. Create, incur, assume, suffer to exist, or otherwise be liable with respect to, any Indebtedness except: - 51 - 57 (a) Indebtedness existing on the Closing Date and disclosed in Schedule 7.2, and renewals, extensions or amendments that do not increase the amount thereof; (b) Indebtedness under the Loan Documents; (c) Indebtedness owed to Borrower or any of its Subsidiaries; (d) Additional Indebtedness incurred for business purposes, including without limitation Capital Leases, provided that the aggregate principal amount of such Indebtedness outstanding in any Fiscal Year, when added to the amount of dispositions of Property made (other than Permitted Dispositions) and the amount of Net Cash Proceeds from sales and leasebacks consummated in such Fiscal Year, do not exceed 10% of the Tangible Net Worth of Borrower and its Subsidiaries as of the end of the Fiscal Quarter immediately preceding such consummation of such Capital Lease; (e) Permitted Swap Obligations; (f) Indebtedness under the BofA Letter of Credit Facility. 7.3 Prepayment of Indebtedness. Pay any principal or interest on any Indebtedness of Borrower or any of its Subsidiaries prior to the date when due, or make any payment or deposit with any Person that has the effect of providing for the satisfaction of any Indebtedness of Borrower or any of its Subsidiaries prior to the date when due, in each case if a Default or Event of Default then exists or would result therefrom. 7.4 Dispositions. Make any Disposition of its Property, whether now owned or hereafter acquired, except: (a) Permitted Dispositions; and (b) Dispositions not otherwise permitted hereunder which are made for fair market value; provided, that (i) at the time of any disposition, no Event of Default shall exist or shall result from such disposition, (ii) the aggregate sales price from such disposition shall be paid in cash, and (iii) the aggregate value of all assets so sold by Borrower and its Subsidiaries, in any Fiscal Year, when added to the amount of Indebtedness permitted under Section 7.2(d), and the amount of Net Cash Proceeds from sales and leasebacks consummated in such Fiscal Year, do not exceed 10% of the Tangible Net Worth of Borrower and its Subsidiaries as of the end of the Fiscal Quarter immediately preceding such disposition of Property. 7.5 Sales and Leasebacks. Become or remain liable as lessee or as guarantor or other surety with respect to any lease with any Person, whether an Operating Lease or a Capital Lease, - 52 - 58 of any property (whether real or personal or mixed) whether now owned or hereafter acquired, (i) which Borrower or any of its Subsidiaries has sold or transferred or is to sell or transfer to such Person or such Person's Affiliate, or (ii) which Borrower or any such Subsidiary intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by Borrower or any such Subsidiary to such Person or such Person's Affiliate in connection with such lease; provided that Borrower may enter into any sale and leaseback of real property, improvements thereon and equipment of the Borrower entered into to finance or refinance the purchase price or construction of such real property, improvements and equipment; provided that the Net Cash Proceeds of each such transaction during any Fiscal Year together with aggregate Net Cash Proceeds from other sales and leasebacks consummated during such Fiscal Year, when added to the amount of Indebtedness permitted under Section 7.2(d) and the amount of dispositions of assets (other than Permitted Dispositions) made in such Fiscal Year, do not exceed 10% of the Tangible Net Worth of Borrower and its Subsidiaries as of the end of the Fiscal Quarter immediately preceding such transaction. 7.6 Mergers. Merge or consolidate with or into any Person, except: (a) mergers and consolidations of a Subsidiary of Borrower into Borrower or a Subsidiary (with Borrower or its Subsidiary as the surviving entity) or of Borrower or Subsidiaries of Borrower with each other, provided that Borrower and each of such Subsidiaries have executed such amendments to the Loan Documents as the Administrative Agent may reasonably determine are appropriate as a result of such merger; and (b) a merger or consolidation of Borrower or any of its Subsidiaries with any other Person, provided that (i) either (A) Borrower or its Subsidiary is the surviving entity, or (B) the surviving entity is a corporation organized under the Laws of a State of the United States of America or the District of Columbia and, as of the date of such merger or consolidation, expressly assumes, by an appropriate instrument, the Obligations of Borrower or its Subsidiary, as the case may be, and (ii) giving effect thereto on a pro-forma basis, no Default or Event of Default exists or would result therefrom. 7.7 Hostile Acquisitions. Directly or indirectly use the proceeds of any Committed Loan in connection with the Acquisition of part or all of a voting interest of 5% or more in any corporation or other business entity if such Acquisition is opposed by the board of directors or management of such corporation or business entity. 7.8 Acquisitions. Without the prior written consent of the Requisite Banks, not make any Acquisitions unless (i) the Acquisition has been approved by the board of directors or similar governing body of the Person whose assets, business, or securities are to be acquired or purchased, (ii) immediately - 53 - 59 after such Acquisition, Borrower would be in compliance with the terms and conditions of this Agreement on a pro forma basis and the sum of the Borrower's and its Subsidiaries' Cash plus the amount by which the combined Commitments exceeds the Outstanding Obligations (excluding Swing Line Outstandings) would be at least $25,000,000, and (iii) the business of the Person to be acquired is substantially similar to the existing business of Borrower and its Subsidiaries. 7.9 Distributions. Make any Distribution, whether from capital, income or otherwise, and whether in Cash or other Property, except: (a) Distributions by Borrower or any of its Subsidiaries to any Subsidiary of Borrower; (b) dividends payable solely in Common Stock or rights to purchase Common Stock; (c) cash dividends payable to its stockholders and purchases, redemptions or other acquisitions of shares of its capital stock or warrants, rights or options to acquire any such shares for cash solely out of not more than 35% of Net Income earned in the preceding Fiscal Year with respect to distributions made in the Fiscal Year ending 1998 and 25% of Net Income earned in the immediately preceding Fiscal Year with respect to distributions made in each Fiscal Year thereafter; provided, that, immediately after giving effect to such proposed action, no Default or Event of Default would exist. 7.10 ERISA. (a) At any time, permit any Pension Plan to: (i) engage in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code); (ii) fail to comply with ERISA or any other applicable Laws; (iii) incur any material "accumulated funding deficiency" (as defined in Section 302 of ERISA); or (iv) terminate in any manner, which, with respect to each event listed above, could reasonably be expected to result in a Material Adverse Effect, or (b) withdraw, completely or partially, from any Multiemployer Plan if to do so could reasonably be expected to result in a Material Adverse Effect. 7.11 Net Worth. Permit Consolidated Net Worth, as of the last day of any Fiscal Quarter ending after the Closing Date, to be less than the sum of (a) $160,000,000 plus (b) an amount equal to 70% of the Net Income earned in each Fiscal Quarter ending after June 30, 1997 (with no deduction for a net loss in any such Fiscal Quarter) plus (c) an amount equal to 100% of the aggregate increases in Stockholders' Equity of Borrower and its Subsidiaries after the Closing Date by reason of the issuance and sale of capital stock of Borrower or any Subsidiary (including upon any conversion of debt securities of Borrower or any Subsidiary into such capital stock). 7.12 Interest Coverage Ratio. Permit the Interest Coverage Ratio, as of the last day of any Fiscal Quarter ending after the Closing Date, to be less than 3.50 to 1.00. - 54 - 60 7.13 Leverage Ratio. Permit the Leverage Ratio, as of the last day of any Fiscal Quarter ending after the Closing Date, to be greater than the ratio set forth below opposite such Fiscal Quarter or the period during which such Fiscal Quarter ends:
Period Ratio ------ ----- Closing Date through the earlier of September 30, 1998 or any Equity Issuance Date 4.00 to 1.00 The earlier of December 31, 1998 or any Equity Issuance Date and thereafter 3.50 to 1.00.
If any calculation of the Leverage Ratio will include EBITDA of an acquired person based on unaudited financial statements of such Person, Borrower will give Requisite Notice thereof to the Administrative Agent so that the consent of the Requisite Banks thereto may be obtained. 7.14 Change in Nature of Business. Make any material change in the nature of the business of Borrower and its Subsidiaries, taken as a whole. 7.15 Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of Borrower other than (a) salary, bonus, employee stock option and other compensation arrangements with directors or officers in the ordinary course of business, (b) transactions that are fully disclosed to the board of directors of Borrower and expressly authorized by a resolution of the board of directors of Borrower which is approved by a majority of the directors not having an interest in the transaction, (c) transactions between or among Borrower and its Subsidiaries, and (d) transactions on overall terms at least as favorable to Borrower or its Subsidiaries as would be the case in an arm's-length transaction between unrelated parties of equal bargaining power. Section 8 EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT 8.1 Events of Default. The existence or occurrence of any one or more of the following events, whatever the reason therefor and under any circumstances whatsoever, shall constitute an Event of Default: (a) Borrower fails to pay any principal on any of the Loans, or any portion thereof, on the date when due; or (b) Borrower fails to pay any interest on any of the Committed Loans or Swing Line Loans, or any fees due hereunder, - 55 - 61 or any portion thereof, within five Business Days after the date when due; (c) Borrower fails to comply with any of the covenants contained in Section 7; or (d) Borrower, any of its Subsidiaries or any other Borrower Party fails to perform or observe any other covenant or agreement (not specified above) contained in any Loan Document on its part to be performed or observed and such failure continues for period of 30 days; or (e) Any representation or warranty of Borrower or any of its Subsidiaries made in any Loan Document, or in any certificate or other writing delivered by Borrower or such Subsidiary pursuant to any Loan Document, proves to have been incorrect when made or reaffirmed in any respect that is materially adverse to the interests of the Banks; or (f) Borrower or any of its Subsidiaries (i) fails to make any payment in respect of any Indebtedness having an aggregate principal amount of more than $5,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (ii) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness, and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure, if the effect of such failure, event or condition is to cause or to permit (A) the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to declare such Indebtedness to be due and payable prior to its stated maturity, or (B) any Guaranty Obligation to become payable or cash collateral in respect thereof to be demanded; or (g) Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement or action (or omission to act) of the Banks or satisfaction in full of all the Obligations, ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect which, in any such event in the reasonable opinion of the Requisite Banks, is materially adverse to the interests of the Banks; or any Borrower Party thereto denies in writing that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind same; or (h) A final judgment against Borrower or any of its Subsidiaries is entered for the payment of money in excess of $5,000,000 and, absent procurement of a stay of execution, such judgment remains unsatisfied for 30 calendar days after the date of entry of judgment, or in any event later than five days prior - 56 - 62 to the date of any proposed sale thereunder; or any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the Property of any such Person and is not released, vacated or fully bonded within 30 calendar days after its issue or levy; or (i) Borrower or any of its Subsidiaries institutes or consents to the institution of any proceeding under a Debtor Relief Law relating to it or to all or any material part of its Property, or is unable or admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its Property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of that Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under a Debtor Relief Law relating to any such Person or to all or any part of its Property is instituted without the consent of that Person and continues undismissed or unstayed for 60 calendar days; or (j) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $5,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans at any time exceeds $5,000,000; or (iii) Borrower or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $5,000,000. 8.2 Remedies Upon Event of Default. Without limiting any other rights or remedies of the Administrative Agent or the Banks provided for elsewhere in this Agreement or in any other Loan Document, or by applicable Laws, or in equity, or otherwise: (a) Upon the occurrence, and during the continuance, of any Event of Default other than an Event of Default described in Section 8.1(i): (1) the combined Commitments and all other obligations of the Administrative Agent or the Banks and all rights of Borrower and any other Borrower Parties under the Loan Documents shall be suspended without notice to or demand upon Borrower, which are expressly waived by Borrower, except that all of the Banks or the Requisite Banks, as required hereunder, may waive an Event of Default or, without waiving, determine, upon terms and conditions satisfactory to the Banks or Requisite Banks, as the case may be, to reinstate the combined Commitments and make further - 57 - 63 Extensions of Credit, which waiver or determination shall apply equally to, and shall be binding upon, all the Banks; (2) the Issuing Bank may, with the approval of the Administrative Agent on behalf of the Requisite Banks, demand immediate payment by Borrower of an amount equal to the aggregate amount of all outstanding Letters of Credit to be held by the Issuing Bank in an interest-bearing cash collateral account as collateral hereunder; and (3) the Requisite Banks may request the Administrative Agent to, and the Administrative Agent thereupon shall, terminate the combined Commitments and/or declare all or any part of the unpaid principal of all Loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by Borrower. (b) Upon the occurrence of any Event of Default described in Section 8.1(i): (1) the combined Commitments and all other obligations of the Administrative Agent or the Banks and all rights of Borrower and any other Borrower Parties under the Loan Documents shall terminate without notice to or demand upon Borrower, which are expressly waived by Borrower, except that all the Banks may waive the Event of Default or, without waiving, determine, upon terms and conditions satisfactory to all the Banks, to reinstate the combined Commitments and make further Extensions of Credit, which determination shall apply equally to, and shall be binding upon, all the Banks; (2) an amount equal to the aggregate amount of all outstanding Letters of Credit shall be immediately due and payable to the Issuing Bank without notice to or demand upon Borrower, which are expressly waived by Borrower, to be held by the Issuing Bank in an interest-bearing cash collateral account as collateral hereunder; and (3) the unpaid principal of all Loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents shall be forthwith due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by Borrower. - 58 - 64 (c) Upon the occurrence of any Event of Default, the Banks and the Administrative Agent, or any of them, without notice to (except as expressly provided for in any Loan Document) or demand upon Borrower, which are expressly waived by Borrower (except as to notices expressly provided for in any Loan Document), may proceed to protect, exercise and enforce their rights and remedies under the Loan Documents against Borrower and any other Borrower Party and such other rights and remedies as are provided by Laws or equity. (d) The order and manner in which the Banks' rights and remedies are to be exercised shall be determined by the Requisite Banks in their sole discretion, and all payments received by the Administrative Agent and the Banks, or any of them, shall be applied first to the costs and expenses (including Attorney Costs incurred by the Administrative Agent or by any Bank) of the Administrative Agent and of the Banks, and thereafter paid pro rata to the Banks in the same proportions that the aggregate Obligations owed to each Bank under the Loan Documents bear to the aggregate Obligations owed under the Loan Documents to all the Banks, without priority or preference among the Banks. Regardless of how each Bank may treat payments for the purpose of its own accounting, for the purpose of computing Borrower's Obligations hereunder, payments shall be applied first, to the costs and expenses of the Administrative Agent and the Banks, as set forth above, second, to the payment of accrued and unpaid interest due under any Loan Documents to and including the date of such application (ratably, and without duplication, according to the accrued and unpaid interest due under each of the Loan Documents), and third, to the payment of all other amounts (including principal and fees) then owing to the Administrative Agent or the Banks under the Loan Documents. No application of payments will cure any Event of Default, or prevent acceleration, or continued acceleration, of amounts payable under the Loan Documents, or prevent the exercise, or continued exercise, of rights or remedies of the Banks hereunder or thereunder or at law or in equity. Section 9 THE ADMINISTRATIVE AGENT 9.1 Appointment and Authorization; "Administrative Agent". (a) Each Bank hereby irrevocably (subject to Section 9.9) appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Administrative Agent shall not have any duties or responsibilities except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any - 59 - 65 fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) The Issuing Bank shall act on behalf of the Banks with respect to any Letters of Credit issued by it and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Requisite Banks to act for such Issuing Bank with respect thereto; provided, however, that the Issuing Bank shall have all of the benefits and immunities (i) provided to the Administrative Agent in this Section 9 with respect to any acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Administrative Agent", as used in this Section 9, included the Issuing Bank with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to the Issuing Bank. 9.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.3 Liability of Administrative Agent. None of the Administrative Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by Borrower or any Subsidiary or Affiliate of Borrower, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Administrative Agent-Related Person shall be under any obligation - 60 - 66 to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of Borrower or any of Borrower's Subsidiaries or Affiliates. 9.4 Reliance by Administrative Agent. (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Requisite Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Requisite Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. (b) For purposes of determining compliance with the conditions specified in Section 4.1, each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Bank. 9.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Banks, unless the Administrative Agent shall have received written notice from a Bank or Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Administrative Agent will notify the Banks of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Requisite Banks in accordance with Section 8; provided, however, that unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks. - 61 - 67 9.6 Credit Decision. Each Bank acknowledges that none of the Administrative Agent-Related Persons has made any representation or warranty to it, and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of Borrower and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Administrative Agent-Related Person to any Bank. Each Bank represents to the Administrative Agent that it has, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrower hereunder. Each Bank also represents that it will, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Administrative Agent, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Borrower which may come into the possession of any of the Administrative Agent-Related Persons. 9.7 Indemnification of Administrative Agent. Whether or not the transactions contemplated hereby are consummated, the Banks shall indemnify upon demand the Administrative Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrower and without limiting the obligation of Borrower to do so), pro rata, from and against any and all Indemnified Liabilities; provided, however, that no Bank shall be liable for the payment to the Administrative Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of Borrower. The undertaking in this Section shall survive the payment of all Obligations - 62 - 68 hereunder and the resignation or replacement of the Administrative Agent. 9.8 Administrative Agent in Individual Capacity. BofA and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with Borrower and its Subsidiaries and Affiliates as though BofA were not the Administrative Agent or the Issuing Bank hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates may receive information regarding Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of Borrower or such Subsidiary) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to its Loans, BofA shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Administrative Agent or the Issuing Bank. 9.9 Successor Administrative Agent. The Administrative Agent may, and at the request of the Requisite Banks shall, resign as Administrative Agent upon 30 days' notice to the Banks. If the Administrative Agent resigns under this Agreement, the Requisite Banks shall appoint from among the Banks a successor administrative agent for the Banks which successor administrative agent shall be approved by Borrower. If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Banks and Borrower, a successor administrative agent from among the Banks. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 9 and Sections 10.3 and 10.11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Requisite Banks appoint a successor agent as provided for above. Notwithstanding the foregoing, however, BofA may not be removed as the Administrative Agent at the request of the Requisite Banks unless BofA shall also simultaneously be replaced as "Issuing Bank" hereunder pursuant to documentation in form and substance reasonably satisfactory to BofA. - 63 - 69 Section 10 MISCELLANEOUS 10.1 Cumulative Remedies; No Waiver. The rights, powers, privileges and remedies of the Administrative Agent and the Banks provided herein or in any other Loan Document are cumulative and not exclusive of any right, power, privilege or remedy provided by Laws or equity. No failure or delay on the part of the Administrative Agent or any Bank in exercising any right, power, privilege or remedy may be, or may be deemed to be, a waiver thereof; nor may any single or partial exercise of any right, power, privilege or remedy preclude any other or further exercise of the same or any other right, power, privilege or remedy. The terms and conditions of Section 9 are inserted for the sole benefit of the Administrative Agent and the Banks; the same may be waived in whole or in part, with or without terms or conditions, in respect of any Loan or Letter of Credit without prejudicing the Administrative Agent's or the Banks' rights to assert them in whole or in part in respect of any other Loan. 10.2 Amendments; Consents. No amendment, modification, supplement, extension, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent hereunder or thereunder, and no consent to any departure by Borrower or any other Borrower Party therefrom, may in any event be effective unless in writing signed by the Requisite Banks (and, in the case of any amendment, modification or supplement of or to any Loan Document to which Borrower is a party, signed by Borrower and, in the case of any amendment, modification or supplement to Section 9, signed by the Administrative Agent), and then only in the specific instance and for the specific purpose given; and, without the approval in writing of all the Banks, no amendment, modification, supplement, termination, waiver or consent may be effective: (a) To amend or modify the principal of, or the amount of principal, principal prepayments or the rate of interest payable on, any Loan, or the amount of the Commitment or the Pro Rata Share of any Bank or the amount of any facility fee payable to any Bank, or any other fee or amount payable to any Bank under the Loan Documents or to waive an Event of Default consisting of the failure of Borrower to pay when due principal, interest or any facility fee; (b) To postpone any date fixed for any payment of principal of, prepayment of principal of or any installment of interest on, any Loan or any installment of any facility fee, or to extend the term of the combined Commitments, or to release the Subsidiary Guaranty; (c) To amend the provisions of the definition of "Requisite Banks", Sections 4 or 9 or this Section; or - 64 - 70 (d) To amend any provision of this Agreement that expressly requires the consent or approval of all the Banks. Any amendment, modification, supplement, termination, waiver or consent pursuant to this Section shall apply equally to, and shall be binding upon, all the Banks and the Administrative Agent. 10.3 Attorney Costs, Expenses and Taxes. Borrower shall pay within five Business Days after demand, accompanied by an invoice therefor, the reasonable costs and expenses of the Administrative Agent in connection with the negotiation, preparation, syndication, execution and delivery of the Loan Documents (subject to the limitations set forth in a letter agreement between Borrower and the Arranger entered into prior to the Closing Date) and any amendment thereto or waiver thereof. Borrower shall also pay on demand, accompanied by an invoice therefor, the reasonable costs and expenses of the Administrative Agent and the Banks in connection with the refinancing, restructuring, reorganization (including a bankruptcy reorganization) and enforcement or attempted enforcement of the Loan Documents, and any matter related thereto. The foregoing costs and expenses shall include filing fees, recording fees, title insurance fees, appraisal fees, search fees, and Attorney Costs of legal counsel employed by the Administrative Agent or any Bank, independent public accountants and other outside experts retained by the Administrative Agent or any Bank, whether or not such costs and expenses are incurred or suffered by the Administrative Agent or any Bank in connection with or during the course of any bankruptcy or insolvency proceedings of Borrower or any Subsidiary thereof. Such costs and expenses shall also include, in the case of any amendment or waiver of any Loan Document requested by Borrower, the administrative costs of the Administrative Agent reasonably attributable thereto. Borrower shall pay any and all Applicable Taxes and all costs, expenses, fees and charges payable or determined to be payable in connection with the filing or recording of this Agreement, any other Loan Document or any other instrument or writing to be delivered hereunder or thereunder, or in connection with any transaction pursuant hereto or thereto, and shall reimburse, hold harmless and indemnify the Administrative Agent and the Banks from and against any and all loss, liability or legal or other expense with respect to or resulting from any delay in paying or failure to pay any such tax, cost, expense, fee or charge or that any of them may suffer or incur by reason of the failure of any Borrower Party to perform any of its Obligations. Any amount payable to the Administrative Agent or any Bank under this Section shall bear interest from the second Business Day following the date of demand for payment at the Default Rate. 10.4 Nature of Banks' Obligations. The obligations of the Banks hereunder are several and not joint or joint and several. Nothing contained in this Agreement or any other Loan Document and no action taken by the Administrative Agent or the Banks or any of them pursuant hereto or thereto may, or may be deemed to, make the Banks a partnership, an association, a joint - 65 - 71 venture or other entity, either among themselves or with Borrower or any Affiliate of Borrower. Each Bank's obligation to make any Loan pursuant hereto is several and not joint or joint and several, and in the case of the initial Loan only is conditioned upon the performance by all other Banks of their obligations to make initial Loans. A default by any Bank will not increase the Pro Rata Share attributable to any other Bank. Any Bank not in default may, if it desires, assume in such proportion as the nondefaulting Banks agree the obligations of any Bank in default, but is not obligated to do so. 10.5 Survival of Representations and Warranties. All representations and warranties contained herein or in any other Loan Document, or in any certificate or other writing delivered by or on behalf of any one or more of the Borrower Parties to any Loan Document, will survive the making of the Loans hereunder and the execution and delivery of any Committed Loan Notes, and have been or will be relied upon by the Administrative Agent and each Bank, notwithstanding any investigation made by the Administrative Agent or any Bank or on their behalf. 10.6 Notices. Except as otherwise expressly provided in the Loan Documents, all notices, requests, demands, directions and other communications provided for therein shall be given by Requisite Notice and shall be effective as follows:
Effective on earlier of Mode of Delivery actual receipt and: ---------------- ------------------- Courier On scheduled delivery date Facsimile When transmission complete Mail Fourth Business Day after deposit in U.S. mail Personal delivery When received Telephone When answered
provided, however, that notice to the Administrative Agent pursuant to Section 2 or 9 shall not be effective until actually received by the Administrative Agent. The Administrative Agent and any Bank shall be entitled to rely and act on any notice purportedly given by or on behalf of a Borrower Party even if such notice (i) was not made in a manner specified herein, (ii) was incomplete, (iii) was not preceded or followed by any other notice specified herein, or (iv) the terms of such notice as understood by the recipient varied from any subsequent related notice provided for herein. Borrower shall indemnify the Administrative Agent and any Bank from any loss, cost, expense or liability as a result of relying on any notice permitted herein. 10.7 Execution of Loan Documents. Unless the Administrative Agent otherwise specifies with respect to any Loan - 66 - 72 Document, (a) this Agreement and any other Loan Document may be executed in any number of counterparts and any party hereto or thereto may execute any counterpart, each of which when executed and delivered will be deemed to be an original and all of which counterparts of this Agreement or any other Loan Document, as the case may be, when taken together will be deemed to be but one and the same instrument and (b) execution of any such counterpart may be evidenced by a telecopier transmission of the signature of such party. The execution of this Agreement or any other Loan Document by any party hereto or thereto will not become effective until counterparts hereof or thereof, as the case may be, have been executed by all the parties hereto or thereto. 10.8 Binding Effect; Assignment. (a) This Agreement and the other Loan Documents to which Borrower is a party will be binding upon and inure to the benefit of Borrower, the Administrative Agent, each of the Banks, and their respective successors and assigns, except that Borrower may not assign its rights hereunder or thereunder or any interest herein or therein without the prior written consent of all the Banks. Each Bank represents that it is not acquiring its Loans with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (subject to any requirement that disposition of such Loans must be within the control of such Bank). Any Bank may at any time pledge its Note or any other instrument evidencing its rights as a Bank under this Agreement to a Federal Reserve Bank, but no such pledge shall release that Bank from its obligations hereunder or grant to such Federal Reserve Bank the rights of a Bank hereunder absent foreclosure of such pledge. (b) From time to time following the Closing Date, each Bank may assign to one or more Eligible Assignees all or any portion of its Pro Rata Share; provided that (i) such assignment, if not to a Bank or an Affiliate of the assigning Bank, shall be consented to by Borrower at all times other than during the existence of an Event of Default and the Administrative Agent (which approval of Borrower shall not be unreasonably withheld or delayed), (ii) a copy of a Notice of Assignment and Acceptance shall be delivered to the Administrative Agent, (iii) except in the case of an assignment to an Affiliate of the assigning Bank, to another Bank or of the entire remaining Commitment of the assigning Bank, the assignment shall not assign a Pro Rata Share equivalent to less than the Minimum Amount therefor, and (iv) the effective date of any such assignment shall be as specified in the Notice of Assignment and Acceptance, but not earlier than the date which is five Business Days after the date the Administrative Agent has received the Notice of Assignment and Acceptance. Upon acceptance by the Administrative Agent of such Notice Assignment and Acceptance, the Eligible Assignee named therein shall be a Bank for all purposes of this Agreement, with the Pro Rata Share therein set forth and, to the extent of such Pro Rata Share, the assigning Bank shall be released from its further obligations under this Agreement. Borrower agrees that it shall execute and deliver upon request (against delivery by - 67 - 73 the assigning Bank to Borrower of any Committed Loan Note) to such assignee Bank, one or more Committed Loan Notes evidencing that assignee Bank's Pro Rata Share, and to the assigning Bank if requested, one or more Committed Loan Notes evidencing the remaining balance Pro Rata Share retained by the assigning Bank. (c) By executing and delivering a Notice of Assignment and Acceptance, the Eligible Assignee thereunder acknowledges and agrees that: (i) other than the representation and warranty that it is the legal and beneficial owner of the Pro Rata Share being assigned thereby free and clear of any adverse claim, the assigning Bank has made no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness or sufficiency of this Agreement or any other Loan Document; (ii) the assigning Bank has made no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance by Borrower of the Obligations; (iii) it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.1 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) it will, independently and without reliance upon the Administrative Agent or any Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) it appoints and authorizes the Administrative Agent to take such action and to exercise such powers under this Agreement as are delegated to the Administrative Agent by this Agreement; and (vi) it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Bank. (d) After receipt of a completed Notice of Assignment and Acceptance and an assignment fee of $2,500 from such Eligible Assignee, the Administrative Agent shall, promptly following the effective date thereof, provide to Borrower and the Banks a revised Schedule 10.6 giving effect thereto. (e) Each Bank may from time to time grant participations to one or more banks or other financial institutions (including another Bank) in a portion of its Pro Rata Share; provided, however, that (i) such Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other financial institutions shall not be a Bank hereunder for any purpose except, if the participation agreement so provides, for the purposes of Section 3 (but only to the extent that the cost of such benefits to Borrower does not exceed the cost which Borrower would have incurred in respect of such Bank absent the participation) and Section 10.9 (subject to Section 10.10), (iv) Borrower, the Administrative Agent and the other Banks shall continue to deal solely and directly with such Bank in connection - 68 - 74 with such Bank's rights and obligations under this Agreement, (v) the participation shall not restrict an increase in the Commitment or in the granting Bank's Pro Rata Share, so long as the amount of the participation interest is not affected thereby and (vi) the consent of the holder of such participation interest shall not be required for amendments or waivers of provisions of the Loan Documents other than those which (A) extend the Maturity Date as to such participant or any other date upon which any payment of money is due to such participant, (B) reduce the rate of interest owing to such participant, any fee or any other monetary amount owing to such participant or (C) reduce the amount of any installment of principal owing to such participant. 10.9 Right of Setoff. If an Event of Default has occurred and is continuing, the Administrative Agent or any Bank may exercise its rights under Section 9 of the Uniform Commercial Code and other applicable Laws and, to the extent permitted by applicable Laws, apply any funds in any deposit account maintained with it by Borrower and/or any Property of Borrower in its possession against the Obligations. 10.10 Sharing of Setoffs. Each Bank severally agrees that if it, through the exercise of any right of setoff, banker's lien or counterclaim against Borrower, or otherwise, receives payment of the Obligations held by it that is ratably more than any other Bank receives through any means in payment of the Obligations held by that Bank, then, subject to applicable Laws: (a) the Bank exercising the right of setoff, banker's lien or counterclaim or otherwise receiving such payment shall purchase, and shall be deemed to have simultaneously purchased, from the other Bank a participation in the Obligations held by the other Bank and shall pay to the other Bank a purchase price in an amount so that the share of the Obligations held by each Bank after the exercise of the right of setoff, banker's lien or counterclaim or receipt of payment shall be in the same proportion that existed prior to the exercise of the right of setoff, banker's lien or counterclaim or receipt of payment; and (b) such other adjustments and purchases of participations shall be made from time to time as shall be equitable to ensure that all of the Banks share any payment obtained in respect of the Obligations ratably in accordance with each Bank's share of the Obligations immediately prior to, and without taking into account, the payment; provided that, if all or any portion of a disproportionate payment obtained as a result of the exercise of the right of setoff, banker's lien, counterclaim or otherwise is thereafter recovered from the purchasing Bank by Borrower or any Person claiming through or succeeding to the rights of Borrower, the purchase of a participation shall be rescinded and the purchase price thereof shall be restored to the extent of the recovery, but without interest. Each Bank that purchases a participation in the Obligations pursuant to this Section shall from and after the purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Bank were the original owner of the Obligations purchased. Borrower - 69 - 75 expressly consents to the foregoing arrangements and agrees that any Bank holding a participation in an Obligation so purchased may exercise any and all rights of setoff, banker's lien or counterclaim with respect to the participation as fully as if the Bank were the original owner of the Obligation purchased. 10.11 Indemnity by Borrower. Borrower agrees to indemnify, save and hold harmless the Administrative Agent and each Bank and their respective Affiliates, directors, officers, agents, attorneys and employees (collectively the "Indemnitees") from and against: (a) any and all claims, demands, actions or causes of action (except a claim, demand, action, or cause of action for Bank Taxes) if the claim, demand, action or cause of action arises out of or relates to any act or omission (or alleged act or omission) of Borrower, its Affiliates or any of their officers, directors or stockholders relating to any Commitment or the combined Commitments, the use or contemplated use of proceeds of any Loan, or the relationship of Borrower and the Banks under this Agreement; (b) any administrative or investigative proceeding by any Governmental Authority arising out of or related to a claim, demand, action or cause of action described in subsection (a) above; and (c) any and all liabilities, losses, costs or expenses (including Attorney Costs) that any Indemnitee suffers or incurs as a result of the assertion of any foregoing claim, demand, action or cause of action (all of the foregoing collectively, the "Indemnified Liabilities"); provided that no Indemnitee shall be entitled to indemnification for any loss caused by its own gross negligence or willful misconduct or for any loss asserted against it by another Indemnitee. 10.12 Nonliability of the Banks. Borrower acknowledges and agrees that: (a) Any inspections of any Property of Borrower made by or through the Administrative Agent or the Banks are for purposes of administration of the Loan only and Borrower is not entitled to rely upon the same (whether or not such inspections are at the expense of Borrower); (b) By accepting or approving anything required to be observed, performed, fulfilled or given to the Administrative Agent or the Banks pursuant to the Loan Documents, neither the Administrative Agent nor the Banks shall be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not constitute a warranty or representation to anyone with respect thereto by the Administrative Agent or the Banks; (c) The relationship between Borrower and the Administrative Agent and the Banks is, and shall at all times remain, solely that of borrowers and lenders; neither the Administrative Agent nor the Banks shall under any circumstance be construed to be partners or joint venturers of Borrower or its Affiliates; neither the Administrative Agent nor the Banks shall - 70 - 76 under any circumstance be deemed to be in a relationship of confidence or trust or a fiduciary relationship with Borrower or its Affiliates, or to owe any fiduciary duty to Borrower or its Affiliates; neither the Administrative Agent nor the Banks undertake or assume any responsibility or duty to Borrower or its Affiliates to select, review, inspect, supervise, pass judgment upon or inform Borrower or its Affiliates of any matter in connection with its Property or the operations of Borrower or its Affiliates; Borrower and their Affiliates shall rely entirely upon their own judgment with respect to such matters; and any review, inspection, supervision, exercise of judgment or supply of information undertaken or assumed by the Administrative Agent or the Banks in connection with such matters is solely for the protection of the Administrative Agent and the Banks and neither Borrower nor any other Person is entitled to rely thereon; and (d) The Administrative Agent and the Banks shall not be responsible or liable to any Person for any loss, damage, liability or claim of any kind relating to injury or death to Persons or damage to Property caused by the actions, inaction or negligence of Borrower and/or its Affiliates and Borrower hereby indemnifies and holds the Administrative Agent and the Banks harmless from any such loss, damage, liability or claim. 10.13 No Third Parties Benefited. This Agreement is made for the purpose of defining and setting forth certain obligations, rights and duties of Borrower, the Administrative Agent and the Banks in connection with the Loans, and is made for the sole benefit of Borrower, the Administrative Agent and the Banks, and the Administrative Agent's and the Banks' successors and assigns. Except as provided in Sections 10.8 and 10.11, no other Person shall have any rights of any nature hereunder or by reason hereof. 10.14 Confidentiality. Each Bank agrees to hold any confidential information that it may receive from Borrower pursuant to this Agreement in confidence, except for disclosure: (a) to a Bank's Affiliates; (b) to other Banks and their Affiliates; (c) to legal counsel and accountants for Borrower or any Bank; (d) to other professional advisors to Borrower or any Bank, provided that the recipient has accepted such information subject to a confidentiality agreement substantially similar to this Section; (e) to regulatory officials having jurisdiction over that Bank; (f) as required by Laws or legal process or in connection with any legal proceeding to which that Bank and Borrower are adverse parties; and (g) to another financial institution in connection with a disposition or proposed disposition to that financial institution of all or part of that Bank's interests hereunder or a participation interest in its Loans, provided that the recipient has agreed to treat such information confidentially on a basis similar to the foregoing. For purposes of the foregoing, "confidential information" shall mean any information respecting Borrower or its Subsidiaries reasonably considered by Borrower to be confidential, other than (i) information previously filed with any Governmental Authority and available to the public, (ii) information previously - 71 - 77 published in any public medium from a source other than, directly or indirectly, that Bank, and (iii) information previously disclosed by Borrower to any Person not associated with Borrower without a confidentiality agreement or obligation substantially similar to this Section. Nothing in this Section shall be construed to create or give rise to any fiduciary duty on the part of the Administrative Agent or the Banks to Borrower. 10.15 Further Assurances. Borrower and its Subsidiaries shall, at their expense and without expense to the Banks or the Administrative Agent, do, execute and deliver such further acts and documents as any Bank or the Administrative Agent from time to time reasonably requires to assure and confirm the rights hereby created or intended to carry out the intention or to facilitate the performance of the terms of any Loan Document. 10.16 Integration. This Agreement, together with the other Loan Documents and any letter agreements referred to herein, comprises the complete and integrated agreement of the parties on the subject matter hereof and supersedes all prior agreements, written or oral, on the subject matter hereof. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control and govern; provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the Banks in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 10.17 Failure to Charge Not Subsequent Waiver. Any decision by the Administrative Agent or any Bank not to require payment of any interest (including Default Interest), fee, cost or other amount payable under any Loan Document, or to calculate any amount payable by a particular method, on any occasion shall in no way limit or be deemed a waiver of the Administrative Agent's or such Bank's right to require full payment of any interest (including Default Interest), fee, cost or other amount payable under any Loan Document, or to calculate an amount payable by another method that is not inconsistent with this Agreement, on any other or subsequent occasion. 10.18 Governing Law. Except to the extent otherwise provided therein, each Loan Document shall be governed by, and construed and enforced in accordance with, the local Laws of California. 10.19 Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable or invalid as to any party or in any jurisdiction shall, as to that party or jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions or the operation, enforceability or validity of that provision as to any other - 72 - 78 party or in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 10.20 Headings. Section headings in this Agreement and the other Loan Documents are included for convenience of reference only and are not part of this Agreement or the other Loan Documents for any other purpose. 10.21 Time of the Essence. Time is of the essence of the Loan Documents. 10.22 Foreign Banks and Participants. Each Bank, and each holder of a participation interest herein, that is a "foreign corporation, partnership or trust" within the meaning of the Code shall deliver to the Administrative Agent, within 20 days after the Closing Date (or after accepting an assignment or receiving a participation interest herein) two duly signed completed copies of either Form 1001 (relating to such Person and entitling it to a complete exemption from withholding on all payments to be made to such Person by Borrower pursuant to this Agreement) or Form 4224 (relating to all payments to be made to such Person by Borrower pursuant to this Agreement) of the United States Internal Revenue Service or such other evidence (including, if reasonably necessary, Form W-9) satisfactory to Borrower and the Administrative Agent that no withholding under the federal income tax laws is required with respect to such Person. Thereafter and from time to time, each such Person shall (a) promptly submit to the Administrative Agent such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to Borrower and the Administrative Agent of any available exemption from, United States withholding taxes in respect of all payments to be made to such Person by Borrower pursuant to this Agreement and (b) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Bank, and as may be reasonably necessary (including the re-designation of its Lending Office, if any) to avoid any requirement of applicable Laws that Borrower make any deduction or withholding for taxes from amounts payable to such Person. If such Person fails to deliver the above forms or other documentation, then the Administrative Agent may withhold from any interest payment to such Person an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. If any Governmental Authority asserts that the Administrative Agent did not properly withhold any tax or other amount from payments made in respect of such Person, such Person shall indemnify the Administrative Agent therefor, including all penalties and interest and costs and expenses (including Attorney Costs) of the Administrative Agent. The obligation of the Banks under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Administrative Agent. - 73 - 79 10.23 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 10.24 Purported Oral Amendments. BORROWER EXPRESSLY ACKNOWLEDGES THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 10.2. BORROWER AGREES THAT IT WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF THE ADMINISTRATIVE AGENT OR ANY BANK THAT DOES NOT COMPLY WITH SECTION 10.2 TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. (signatures on next page) - 74 - 80 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. RELIANCE STEEL & ALUMINUM CO., a California corporation By: --------------------------------- Title: ------------------------------ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By: --------------------------------- Patrick W. Zetzman Title: Vice President ------------------------------ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Issuing Bank and a Bank By: --------------------------------- Paul F. Sutherlen Title: Vice President ------------------------------ NATIONSBANK OF TEXAS, N.A., as a Bank By: --------------------------------- Title: Vice President ------------------------------ THE CHASE MANHATTAN BANK, N.A., as a Bank By: --------------------------------- Title: Vice President ------------------------------ (signatures continue on next page) - 75 - 81 THE FIRST NATIONAL BANK OF CHICAGO, as a Bank By: --------------------------------- Title: Vice President UNION BANK OF CALIFORNIA, N.A., as a Bank By: --------------------------------- Title: Vice President - 76 - 82 EXHIBIT A REQUEST FOR EXTENSION OF CREDIT Date:_________________, ____ To: Bank of America National Trust and Savings Association, as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of October 22, 1997, among Reliance Steel & Aluminum Co., a California corporation (the "Borrower"), the banks from time to time party thereto, and Bank of America National Trust and Savings Association, as Administrative Agent and Issuing Bank (as extended, renewed, amended or restated from time to time, the "Agreement;" the terms defined therein being used herein as therein defined). The undersigned hereby requests (select one): ______ A Borrowing of Loans ______ A Conversion or Continuation of Loans 1. On __________________, ____ 2. In the amount of $_______. 3. Comprised of ____________________________. [type of Loan requested] 4. If applicable: with an Interest Period of months/days. The foregoing request complies with the requirements of Section 2.1 of the Agreement. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the above date, before and after giving effect and to the application of the proceeds therefrom: (a) the representations and warranties of Borrower contained in Section 5 of the Agreement are true and correct in all material respects as though made on and as of the above date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they are true and correct as of such earlier date); and A-1 83 (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Extension of Credit. RELIANCE STEEL & ALUMINUM CO. By: ------------------------------------- Title: ---------------------------------- A-2 84 EXHIBIT B COMPLIANCE CERTIFICATE Financial Statement Date:______________, ____ To: Bank of America National Trust and Savings Association, as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of October 22, 1997, among Reliance Steel & Aluminum Co., a California corporation (the "Borrower"), the banks from time to time party thereto, and Bank of America National Trust and Savings Association, as Administrative Agent and Issuing Bank (as extended, renewed, amended or restated from time to time, the "Agreement;" the terms defined therein being used herein as therein defined). The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the ____________________________ of Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of Borrower, and that: 1. Attached as Schedule 1 hereto are either (a) the financial statements required under Section 6.1(a) of the Agreement as of the above date, with the required opinion of the Independent Auditor or (b) the financial statements required under Section 6.1(b) of the Agreement as of the above date. 2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and conditions (financial or otherwise) of Borrower during the accounting period covered by the attached financial statements. 3. To the best of the undersigned's knowledge, Borrower, during such period, has observed, performed or satisfied all of its covenants and other agreements, and satisfied every condition in the Credit Agreement to be observed, performed or satisfied by Borrower, and the undersigned has no knowledge of any Default or Event of Default. 4. The attached Schedule 2 set forth the calculation of the financial covenants provided in Sections 7.11 through 7.13, inclusive, of the Agreement. B-1 85 IN WITNESS WHEREOF, the undersigned has executed this Certificate as of ________________________, ______. RELIANCE STEEL & ALUMINUM CO. By: ------------------------------------- Title: ----------------------------------- B-2 86 Date:___________________, _____ For the Fiscal Quarter/Year ended __________________, _____ SCHEDULE 2 to the Compliance Certificate ($ in 000's) Section 7.11; Net Worth NET WORTH Total consolidated assets: $__________ minus Total consolidated liabilities: $__________ equals $__________ MINIMUM REQUIRED: the sum of - base amount: $__________ plus 0.70 times quarterly Net Income earned after June 30, 1997 (without deductions for losses): $__________ plus increase(s) in Stockholders' Equity after Closing Date: $__________ equals $__________ Section 7.12; Interest Coverage Ratio INTEREST COVERAGE RATIO Adjusted EBITDA (rolling four quarter basis) the sum of - Net Income: $__________ plus non-operating/non-recurring loss: $__________ minus non-operating/non-recurring gain: $__________ plus Interest Expense: $__________ plus federal/state income taxes: $__________ plus depreciation/amortization non-cash expenses: $__________ plus Cash dividends received from 50% owned companies/joint ventures $__________ minus equity in 50% owned companies/joint venture: $__________ total $__________
-1- 87 divided by Interest Expense (as of last day of determination period): $__________ equals (expressed as a ratio) _____ to 1.00 ====== ===== MINIMUM REQUIRED: _____ to 1.00 Section 7.13; Leverage Ratio the sum of - Funded Debt on the last day of: first month during Fiscal Quarter: $__________ plus second month during Fiscal Quarter: $__________ plus third month during Fiscal Quarter: $__________ total: $__________ divided by: total Average Quarterly Funded Debt: $__________ divided by: Adjusted EBITDA $__________ o excluding Acquisition(s) o including Acquisition(s) with audited financials submitted equals (expressed as a ratio) _____ to 1.00 ====== ===== MAXIMUM PERMITTED: through earlier of 9/30/98 or Equity Issuance Date: 4.00 to 1.00 from earlier of 12/31/98 or Equity Issuance Date and thereafter: 3.50 to 1.00
-2- 88 EXHIBIT C FORM OF COMMITTED LOAN NOTE $__________________ October 22, 1997 FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to the order of ____________________________ (the "Bank"), on the Maturity Date (as defined in the Credit Agreement referred to below) the principal amount of $_____________, or such lesser principal amount of Loans (as defined in the Credit Agreement referred to below) payable by Borrower to the Bank on such Maturity Date under that certain Credit Agreement dated as of ________________, 1997, among Borrower, the banks from time to time party thereto, and Bank of America National Trust and Savings Association, as Administrative Agent and Issuing Bank (as extended, renewed, amended or restated from time to time, the "Agreement;" the terms defined therein being used herein as therein defined) Borrower promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and payable at such times as are specified in the Credit Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Bank in United States dollars in immediately available funds at Administrative Agent's Payment office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Credit Agreement. This Note is one of the "Committed Loan Notes" referred to in the Credit Agreement. Reference is hereby made to the Credit Agreement for rights and obligations of payment and prepayment, events of default and the right of the Bank to accelerate the maturity hereof upon the occurrence of such events. Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. Borrower agrees to pay all collection expenses, court costs and Attorney Costs (whether or not litigation is commenced) which may be incurred by the Bank in connection with the collection or enforcement of this Note. C-1 89 THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. RELIANCE STEEL & ALUMINUM CO. By: ------------------------------------ Title: --------------------------------- C-2 90 EXHIBIT D FORM OF NOTICE OF ASSIGNMENT AND ACCEPTANCE ______________________, 19__ TO: Bank of America National Trust and Savings Association, as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of October 22, 1997, among Reliance Steel & Aluminum Co., California corporation (the "Borrower"), the banks from time to time party thereto, and Bank of America National Trust and Savings Association, as Administrative Agent and Issuing Bank (as extended, renewed, amended or restated from time to time, the "Agreement;" the terms defined therein being used herein as therein defined). 1. We hereby give you notice of, and request your consent to, the assignment by ___________________________ (the "Assignor") to ____________________________ (the "Assignee") of ________% of the right, title and interest of the Assignor in and to the Loan Documents, including without limitation the right, title and interest of the Assignor in and to the Commitment of the Assignor, all outstanding Loans made by the Assignor and outstanding Letter of Credit Usage. Before giving effect to such assignment: (a) the aggregate amount of the Assignor's Commitment is $________________; (b) the aggregate principal amount of its outstanding Loans is $_______________; (c) the aggregate face amount of Letter of Credit Usage is $________________; and (d) the aggregate face amount of Swing Line Outstandings is $_______________. 2. The Assignee hereby represents and warrants that it has complied with the requirements of Section 10.8 of the Credit Agreement in connection with this assignment. 3. The Assignee agrees that, upon receiving your consent to such assignment and from and after _______________, the Assignee will be bound by the terms of the Loan Documents, with respect to the interest in the Loan Documents assigned to it as specified above, as fully and to the same extent as if the D-1 91 Assignee were the Bank originally holding such interest in the Loan Documents. 4. The following administrative details apply to the Assignee: (a) Offshore Lending Office: Assignee name: Assignee name:_________________________________ Address:_______________________________________ _______________________________________ Attention:_____________________________________ Telephone: (___)______________________________ Telecopier: (___)______________________________ Telex (Answerback):____________________________ (b) Domestic Lending Office: Assignee name: Assignee name:_________________________________ Address:_______________________________________ _______________________________________ Attention:_____________________________________ Telephone: (___)______________________________ Telecopier: (___)______________________________ Telex (Answerback):____________________________ (c) Notice Address: Assignee name: Assignee name:_________________________________ Address:_______________________________________ _______________________________________ Attention:_____________________________________ Telephone: (___)______________________________ Telecopier: (___)______________________________ Telex (Answerback):____________________________ (d) Payment Instructions: Account No.: Account No.:___________________________________ Attention:_____________________________________ _____________________________________ _____________________________________ Reference:_____________________________________ IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, [Name of Assignor] By:_____________________________ Title:__________________________ D-2 92 [Name of Assignee] By:_______________________________ Title:____________________________ We hereby consent to the foregoing assignment. __________________________________ By:_______________________________________ Name:_____________________________________ Title:____________________________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By:_______________________________________ Vice President D-3 93 EXHIBIT E MASTER SUBSIDIARY GUARANTY This MASTER SUBSIDIARY GUARANTY (this "Guaranty"), dated as of October 22, 1997 is made by the undersigned entities identified as "Guarantors" on Schedule 5.16 of the Credit Agreement referred to below, the entities becoming a party hereto pursuant to Section 16 below, in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, in its capacity as Administrative Agent for the Banks ("Administrative Agent"). RECITALS A. Pursuant to that certain Credit Agreement dated as of October 22, 1997 (as from time to time amended, extended, further restated, modified or supplemented, the "Credit Agreement"; capitalized terms used herein shall have the meanings assigned to them in the Credit Agreement), among Reliance Steel & Aluminum Co. ("Borrower"), the Banks named therein ("Banks") and Bank of America National Trust and Savings Association, as Administrative Agent, the Banks agreed to extend credit facilities to Borrower on the terms and conditions set forth therein. B. The Credit Agreement provides, as a condition precedent to Banks' obligations to continue extending credit facilities to Borrower, that the Guarantors shall each execute and deliver this Guaranty in favor of Administrative Agent for the ratable benefit of Banks. C. Guarantors expect to realize direct and indirect benefits as the result of the availability of the aforementioned credit facilities, and as the result of the execution of this Guaranty. AGREEMENT NOW, THEREFORE, in order to induce Banks to continue extending credit facilities to Borrower, and for other good and valuable consideration, the receipt and adequacy of which hereby is acknowledged, Guarantors hereby represent, warrant, covenant, agree and guaranty as follows: 1. Definitions. "Credit Agreement" means that certain Credit agreement referred to in Recital A above. This Guaranty is the Guaranty referred to in the Credit Agreement and is one of the Loan Documents. The following terms, as used herein, shall have the meanings respectively set forth after each: E-1 94 "Guarantied Obligations" means all obligations of Borrower under the Loan Documents, whether due or to become due, matured or unmatured, liquidated or unliquidated, or contingent or absolute, including obligations of performance as well as obligations of payment, and including interest that accrues after the commencement of any bankruptcy or insolvency proceeding by or against Borrower, a Guarantor or any other Person. 2. Guaranty of Guarantied Obligations. For valuable consideration, Guarantors hereby irrevocably, unconditionally, jointly and severally guaranty and promise to pay and perform on demand the Guarantied Obligations and each and every one of them, including, without limitation, all amendments, modifications, supplements, renewals or extensions of any of them, whether such amendments modifications, supplements, renewals or extensions are evidenced by new or additional instruments, documents or agreements or change the rate of interest on any Guarantied Obligation or any security therefor, or otherwise. 3. Nature of Guaranty. This Guaranty is irrevocable and continuing in nature and relates to any Guarantied Obligations now existing or hereafter arising. This Guaranty is a guaranty of prompt and punctual payment and performance and is not merely a guaranty of collection. 4. Relationship to Other Agreements. Nothing herein shall in any way modify or limit the effect of terms or conditions set forth in any other document, instrument or agreement executed by any Guarantor or in connection with the Guarantied Obligations, but each and every term and condition hereof shall be in addition thereto. All provisions contained in the Credit Agreement or any other Loan Document that apply to Loan Documents generally are fully applicable to this Guaranty and are incorporated herein by this reference. 5. Subordination of Indebtedness of Borrower to a Guarantor to the Guarantied Obligations. Each Guarantor agrees that: (a) Any indebtedness of Borrower now or hereafter owed to any Guarantor hereby is subordinated to the Guarantied Obligations. (b) If any Bank so requests, any such indebtedness of Borrower now or hereafter owed to any Guarantor shall be collected, enforced and received by Guarantor as trustee for Banks and shall be paid over to Administrative Agent in kind on account of the Guarantied Obligations. (c) Should such Guarantor fail to collect or enforce any such indebtedness of Borrower now or hereafter owed to such Guarantor and pay the proceeds thereof to Administrative Agent, Administrative Agent, as such Guarantor's attorney-in-fact, may do such acts and sign such documents in such Guarantor's name as E-2 95 Banks consider necessary or desirable to effect such collection, enforcement and/or payment. 6. Statute of Limitations and Other Laws. Until the Guarantied Obligations shall have been paid and performed in full, all of the rights, privileges, powers and remedies granted to Banks hereunder shall continue to exist and may be exercised by Banks at any time and from time to time irrespective of the fact that any of the Guarantied Obligations may become barred by any statute of limitations. Each Guarantor expressly waives the benefit of any and all statutes of limitation, and any and all laws providing for exemption of property from execution or for valuation and appraisal upon foreclosure, to the maximum extent permitted by applicable law. 7. Waivers and Consents. Each Guarantor acknowledges that the obligations undertaken herein involve the guaranty of obligations of Persons other than such Guarantor and, in full recognition of that fact, consents and agrees that Administrative Agent may, at any time and from time to time, without notice or demand, and without affecting the enforceability or continuing effectiveness hereof: (a) supplement, modify, amend, extend, renew, accelerate or otherwise change the time for payment or the terms of the Guarantied Obligations or any part thereof, including any increase or decrease of the rate(s) of interest thereon; (b) supplement, modify, amend or waive, or enter into or give any agreement, approval or consent with respect to, the Guarantied Obligations or any part thereof, or any of the Loan Documents or any additional security or guaranties, or any condition, covenant, default, remedy, right, representation or term thereof or thereunder; (c) accept new or additional instruments, documents or agreements in exchange for or relative to any of the Loan Documents or the Guarantied Obligations or any part thereof; (d) accept partial payments on the Guarantied Obligations; (e) receive and hold security or additional security or guaranties for the Guarantied Obligations or any part thereof; (f) release, reconvey, terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute, transfer and/or enforce any security or guaranties, and apply any security and direct the order or manner of sale thereof as Banks in their sole and absolute discretion may determine; (g) release any Person from any liability with respect to the Guarantied Obligations or any part thereof; (h) settle, release on terms satisfactory to Banks or by operation of applicable laws or otherwise liquidate or enforce any Guarantied Obligations and any security or guaranty therefor in any manner, consent to the transfer of any security and bid and purchase at any sale; and/or (i) consent to the merger, change or any other restructuring or termination of the corporate existence of Borrower, any Guarantor or any other Person, and correspondingly restructure the Guarantied Obligations, and any such merger, change, restructuring or termination shall not affect the liability of any Guarantor or the continuing effectiveness hereof, or the enforceability hereof with respect to all or any part of the Guarantied Obligations. E-3 96 Upon the occurrence and during the continuance of any Event of Default, Banks may enforce this Guaranty independently of any other remedy or security Banks at any time may have or hold in connection with the Guarantied Obligations, and it shall not be necessary for Banks to marshal assets in favor of Borrower, any Guarantor or any other Person or to proceed upon or against and/or exhaust any security or remedy before proceeding to enforce this Guaranty. Each Guarantor expressly waives any right to require Banks to marshal assets in favor of Borrower, any Guarantor or any other Person or to proceed against Borrower, any Guarantor or any collateral provided by any Person, and agrees that Banks may proceed against Borrower, any Guarantor and/or any collateral in such order as Banks shall determine in their sole and absolute discretion. Banks may file a separate action or actions against Borrower and/or any Guarantor without respect to whether action is brought or prosecuted with respect to any security or against any other Person, or whether any other Person is joined in any action or actions. Each Guarantor agrees that Banks and any Borrower Party may deal with each other in connection with the Guarantied Obligations or otherwise, or alter any contracts or agreements now or hereafter existing between any of them, in any manner whatsoever, all without in any way altering or affecting the enforceability of this Guaranty. Banks' rights hereunder shall be reinstated and revived, and the enforceability of this Guaranty shall continue, with respect to any amount at any time paid on account of the Guarantied Obligations which thereafter shall be required to be restored or returned by Banks upon the bankruptcy, insolvency or reorganization of Borrower or any other Person, or otherwise, all as though such amount had not been paid. The rights of Banks created or granted herein and the enforceability of this Guaranty with respect to each Guarantor at all times shall remain effective to guaranty the full amount of all the Guarantied Obligations even though the Guarantied Obligations, or any part thereof, or any security or guaranty therefor, may be or hereafter may become invalid or otherwise unenforceable as against Borrower or any other guarantor or surety and whether or not Borrower shall have any personal liability with respect thereto. Each Guarantor expressly waives any and all defenses now or hereafter arising or asserted by reason of (a) any disability or other defense of Borrower with respect to the Guarantied Obligations, (b) the unenforceability or invalidity of any security or guaranty for the Guarantied Obligations or the lack of perfection or continuing perfection or failure of priority of any security for the Guarantied Obligations, (c) the cessation for any cause whatsoever of the liability of Borrower or any other guarantor (other than by reason of the full payment and performance of all Guarantied Obligations), (d) any failure of Banks to marshal assets in favor of Borrower or any other Person, (e) any failure of Banks to give notice of sale or other disposition of any collateral to Borrower, any Guarantor or any other Person or any defect in any notice that may be given in connection with any sale or disposition of any collateral, (f) any failure of Banks to comply with applicable laws in connection with the sale or other disposition of any collateral or other security for any Guarantied Obligations, including, without E-4 97 limitation, any failure of Banks to conduct a commercially reasonable sale or other disposition of any collateral or other security for any Guarantied Obligation, (g) any act or omission of Banks or others that directly or indirectly results in or aids the discharge or release of Borrower or the Guarantied Obligations or any security or guaranty therefor by operation of law or otherwise, (h) any law which provides that the obligation of a surety or guarantor must neither be large in amount nor in other respects more burdensome than that of the principal or which reduces a surety's or guarantor's obligation in proportion to the principal obligation, (i) any failure of Banks to file or enforce a claim in any bankruptcy or other proceeding with respect to any Person, (j) the election by Banks, in any bankruptcy proceeding of any Person, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code, (k) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code, (l) any use of cash collateral under Section 363 of the United States Bankruptcy Code, (m) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any Person, (n) the avoidance of any lien in favor of Banks for any reason, (o) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding commenced by or against any Person, including any discharge of, or bar or stay against collecting, all or any of the Guarantied Obligations (or any interest thereof) in or as a result of any such proceeding, (p) any rights and defenses that are or may become available to any Guarantor by reason of Sections 2787 to 2855, inclusive, of the California Civil Code, or (q) any action taken by Banks that is authorized by this Section 7 or any other provision of any Loan Document. Until such time, if any, as all of the Guarantied Obligations have been paid and performed in full and no commitment to advance funds to Borrower remains in effect, no Guarantor shall have any rights of subrogation, contribution, reimbursement or indemnity with respect to Borrower, any other Guarantor or any other Person liable for any portion of the Guarantied Obligations, and each Guarantor expressly waives any right to enforce any remedy that Banks now have or hereafter may have against any other Person and waives the benefit of, or any right to participate in, any collateral now or hereafter held by Banks. Each Guarantor expressly waives all setoffs and counterclaims and all presentments, demands for payment or performance, notices of nonpayment or nonperformance, protests, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever with respect to the Guarantied Obligations, and all notices of acceptance of this Guaranty or of the existence, creation or incurring of new or additional Guarantied Obligations. 8. Condition of Borrower Parties. Each Guarantor represents and warrants to Banks that it has established adequate means of obtaining financial and other information pertaining to the businesses, operations and condition (financial and otherwise) of Borrower and its properties on a continuing basis, and that such Guarantor now is and hereafter will be completely E-5 98 familiar with the businesses, operations and condition (financial and otherwise) of Borrower and its properties. Each Guarantor hereby expressly waives and relinquishes any duty on the part of Banks (should any such duty exist) to disclose to any Guarantor any matter, fact or thing related to the businesses, operations or condition (financial or otherwise) of Borrower or its properties, whether now known or hereafter known by Banks during the life of this Guaranty. With respect to any of the Guarantied Obligations, Banks need not inquire into the powers of Borrower or the officers or employees acting or purporting to act on its behalf, and all Guarantied Obligations made or created in good faith reliance upon the professed exercise of such powers shall be guarantied hereby. 9. Liens on Real Property. In the event that all or any part of the Guarantied Obligations at any time are secured by any one or more deeds of trust or mortgages or other instruments creating or granting liens on any interests in real property, each Guarantor authorizes Banks, upon the occurrence of and during the continuance of any Event of Default, at their sole option, without notice or demand and without affecting any Guarantied Obligations of any Guarantor, the enforceability of this Guaranty, or the validity or enforceability of any liens of Banks on any collateral, to foreclose any or all of such deeds of trust or mortgages or other instruments by judicial or nonjudicial sale. Each Guarantor understands and acknowledges that if the Administrative Agent forecloses, either by judicial foreclosure or by exercise of power of sale, any deed of trust securing the indebtedness, that foreclosure could impair or destroy any ability that any Guarantor may have to seek reimbursement, contribution or indemnification from Borrower or others based on any right any Guarantor may have of subrogation, reimbursement, contribution or indemnification for any amounts paid by any Guarantor under this Guaranty. Each Guarantor further understands and acknowledges that in the absence of this paragraph, such potential impairment or destruction of any Guarantor's rights, if any, may entitle Guarantor to assert a defense to this Guaranty based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky, 265 Cal. App. 2d. 40 (1968). By executing this Guaranty, each Guarantor freely, irrevocably and unconditionally: (i) waives and relinquishes that defense and agrees that each Guarantor will be fully liable under this Guaranty even though the Administrative Agent may foreclose, either by judicial foreclosure or by exercise of power of sale, any deed of trust securing the indebtedness; (ii) agrees that each Guarantor will not assert that defense in any action or proceeding which any Bank may commence to enforce this Guaranty; (iii) acknowledges and agrees that the rights and defenses waived by each Guarantor in this Guaranty include any right or defense that any Guarantor may have or be entitled to assert based upon or arising out of any one or more of Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure or Section 2848 of the California Civil Code; and (iv) acknowledges and agrees that Banks are relying on this waiver in creating the indebtedness, E-6 99 and that this waiver is a material part of the consideration which Banks are receiving for creating the indebtedness. 10. Costs and Expenses. Each Guarantor agrees to pay to the Administrative Agent all costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements, and costs allocated to in-house counsel) incurred by Banks in the enforcement or attempted enforcement of this Guaranty, whether or not an action is filed in connection therewith, and in connection with any waiver or amendment of any term or provision hereof. All advances, charges, costs and expenses, including reasonable attorneys' fees and disbursements, incurred or paid by Banks in exercising any right, privilege, power or remedy conferred by this Guaranty, or in the enforcement or attempted enforcement thereof, shall be subject hereto and shall become a part of the Guarantied Obligations and shall be paid to Administrative Agent by each Guarantor, immediately upon demand, together with interest thereon at the rate(s) provided for under the Credit Agreement. 11. Construction of This Guaranty. This Guaranty is intended to give rise to absolute and unconditional obligations on the part of each Guarantor; hence, in any construction hereof, notwithstanding any provision of any Loan Document to the contrary, this Guaranty shall be construed strictly in favor of Banks in order to accomplish its stated purpose. 12. Liability. The liability of each Guarantor hereunder is several and is independent of any other guaranties at any time in effect with respect to all or any part of the Guarantied Obligations, and each Guarantor's liability hereunder may be enforced regardless of the existence of any such guaranties. Any termination by or release of any Guarantor in whole or in part (whether it be another Guarantor under this instrument or not) shall not affect the continuing liability of any Guarantor hereunder, and no notice of any such termination or release shall be required. The execution hereof by each Guarantor is not founded upon an expectation or understanding that there will be any other guarantor of the Guarantied Obligations. 13. Additional Guarantors. From time to time entities which become Subsidiaries of Borrower may become a Guarantor by such Person and the existing Guarantors executing and delivering a supplement hereto substantially in the form of Exhibit A hereto. Upon Administrative Agent's receipt of a duly executed and delivered supplement, Exhibit A shall be deemed amended to include such additional Person as a Guarantor and such Person shall become a party hereto as through a signatory hereto, with no amendment or further action required hereunder and, thereafter, all references to Guarantor shall include such additional Person. 14. Maximum Liability of Guarantors. Notwithstanding anything herein to the contrary, each Guarantor's liability under this Guaranty shall be limited to the greatest of: E-7 100 (a) (i) the aggregate amount of all loans, advances, contributions and other transfers of property directly or indirectly made, delivered or otherwise provided by Borrower to, on behalf of or for the use or benefit of such Guarantor on or after the date hereof plus interest on any of the foregoing minus (ii) the aggregate amount of all principal repayments and interest payments on such loans, advances, contributions, other transfers, reimbursement obligations or Loans made by such Guarantor on or after the date hereof; (b) 95% of the Guarantor's Net Worth, calculated as of the date of this Guaranty; and (c) 95% of the Guarantor's Net Worth calculated as of any later date on which (i) the Guarantor expressly reaffirms this Guaranty, (ii) demand for payment is made on the Guarantor hereunder, (iii) payment is made by the Guarantor hereunder or (iv) any judgment, order or decree is entered requiring the Guarantor to make payment hereunder or in respect hereof. As used herein, "Net Worth" means the amount, as of the respective date of calculation, by which the sum of the "fair saleable value" of all of the Guarantor's assets (including, without limitation, contribution, indemnity, subrogation and similar rights) is greater than the amount that will be required to pay all of the Guarantor's debts, in each case matured or unmatured, contingent or otherwise, as of the date of calculation, but excluding liabilities arising under this Guaranty and excluding, to the maximum extent permitted by applicable Laws or equity with the objective of avoiding rendering such Guarantor insolvent, liabilities subordinated to the Obligations arising out of loans or advances made by Borrower or any of its Subsidiaries to such Guarantor. The meaning of the term "fair saleable value" and the calculation of assets and liabilities shall be determined in accordance with Section 548 of the Bankruptcy Code and the California Uniform Fraudulent Transfer Act, California Civil Code Sections 3439.01 et seq. Banks may permit the indebtedness of Borrower to exceed each Guarantor's liability under this Guaranty. 15. Contribution among Guarantors. In order to provide for just and equitable contribution among the Guarantors, in connection with the execution of this Guaranty, Guarantors agree among themselves that, subject to the other provisions of this Guaranty, in the event any Guarantor satisfies some or all of the Obligations under this Guaranty (a "Funding Guarantor"), the Funding Guarantor shall be entitled to contribution from the other Guarantors that have positive Net Worth at the time for all payments made by the Funding Guarantor in satisfying the Obligations, so that each Guarantor that remains obligated under this Guaranty at the time that a Funding Guarantor makes a payment hereunder (a "Remaining Guarantor") and has a positive Net Worth at such time shall bear a portion of such payment equal to the percentage that such Remaining Guarantor's Net Worth bears to the aggregate Net Worth of all Remaining Guarantors that have E-8 101 positive Net Worth at the time, in each case calculated as of the respective date of payment. 16. Amendment or Waiver of Guaranty; Incorporated Terms. No amendment or waiver of any provision of this Guaranty, and no consent with respect to any departure by Guarantors shall be effective unless the same shall be in writing and signed by Administrative Agent at the written request of Banks and Guarantors and acknowledged by Administrative Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Sections 10.1 through 10.18, inclusive, of the Credit Agreement are hereby incorporated herein by reference as though fully set forth fully herein. IN WITNESS WHEREOF, each Guarantor has executed this Guaranty by its duly authorized officer as of the date first written above. THE GUARANTORS IDENTIFIED ON SCHEDULE 5.16 TO THE CREDIT AGREEMENT By:________________________________ Title:_____________________________ ACKNOWLEDGED: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By:_______________________________ Patrick W. Zetzman Vice President E-9 102 EXHIBIT A ADDITIONAL GUARANTORS Dated: ________________, ____ Reference is made to that certain Master Subsidiary Guaranty dated as of ______________, 1997, as amended (the "Guaranty"), by and among the Guarantors from time to time party thereto in favor of Bank of America National Trust and Savings Association, as Administrative Agent for Banks. Unless otherwise defined herein, capitalized terms used herein have the respective meanings assigned to them in the Guaranty and the Credit Agreement referred to therein. ________________________, a Subsidiary of _________________, ("Subsidiary") hereby elects to become a Guarantor under the Guaranty, and agrees to be bound by all the terms and conditions applicable to a Guarantor thereunder as of the date hereof. The undersigned Subsidiary hereby represents and warrants that the execution, delivery and performance of any Loan Documents to which it is to be a party will not violate any law, decree or judgment applicable to the undersigned, except as will not have a Material Adverse Effect. The undersigned existing Guarantors hereby consent to Subsidiary becoming a party to the Guaranty. This Certificate of Additional Guarantors is executed by the parties hereto as of the date first written above. "Subsidiary" ___________________________________________ By:________________________________________ Title:_____________________________________ THE GUARANTORS IDENTIFIED ON TO SCHEDULE 5.16 TO THE CREDIT AGREEMENT By:________________________________________ Title:_____________________________________ E-10 103 ACKNOWLEDGED: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By:________________________________ Patrick W. Zetzman Vice President E-11 104 EXHIBIT F OPINION OF COUNSEL F-1 105 SCHEDULE 2.1 COMMITMENTS AND PRO RATA SHARES
Pro Rata Bank Commitment Share ---- ---------- ----- Bank of America National Trust and Savings Association $65,000,000 32.5000% NationsBank of Texas, N.A. $45,000,000 22.5000% The Chase Manhattan Bank, N.A. $30,000,000 15.0000% The First National Bank of Chicago $30,000,000 15.0000% Union Bank of California, N.A. $30,000,000 15.0000% TOTAL $200,000,000 100.0000% ============ =========
-1- 106 SCHEDULE 5.5 CERTAIN LITIGATION -1- 107 SCHEDULE 5.9 EXISTING LIENS AND NEGATIVE PLEDGES -1- 108 SCHEDULE 5.16 SUBSIDIARIES
# of Shares Jurisdiction Form of # of Shares Owned and Name of Organization Legal Entity Outstanding By Whom - ---- --------------- ------------ ----------- -------
-1- 109 SCHEDULE 7.2 EXISTING INDEBTEDNESS -1- 110 SCHEDULE 10.6 OFFSHORE AND DOMESTIC LENDING OFFICES, ADDRESSES FOR NOTICES RELIANCE STEEL & ALUMINUM CO., AS BORROWER Address for Notices: Reliance Steel & Aluminum Co. 2550 East 25th Street Los Angeles, California 90058 Attention: Steven S. Weis Chief Financial Officer Telephone: (213) 582-2272 Facsimile: (213) 582-2801 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS ADMINISTRATIVE AGENT Notices (other than Requests for Extensions of Credit) : Bank of America National Trust and Savings Association Agency Management #10831 1455 Market Street San Francisco, California 94103 Attention: Patrick W. Zetzman Telephone: (415) 436-2776 Facsimile: (415) 436-2700 Requests for Extensions of Credit: ADMINISTRATIVE AGENT'S PAYMENT OFFICE: Bank of America National Trust and Savings Association Agency Administrative Services #5596 1850 Gateway Boulevard Concord, California 94520 Attention: Aaron Tamburello Telephone: (510) 675-8446 Facsimile: (510) 675-8500 Account No.: 1233215834 Ref: Reliance Steel & Aluminum Co. Attn: Agency Administrative Services #5596 ABA No. 1210-0035-8 -1- 111 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS A BANK Domestic and Offshore Lending Office: 333 South Beaudry Avenue, 11th Floor Los Angeles, California 90071 Attention: Linda Escamilla Telephone: (213) 345-7748 Facsimile: (213) 345-7797 Notices (other than Requests for Extensions of Credit): Bank of America National Trust and Savings Association c/o Los Angeles Regional Commercial Banking Office #1459 525 South Flower St., Mezzanine Los Angeles, California 90071 Attention: Paul F. Sutherlen Vice President Telephone: (213) 228-5970 Facsimile: (213) 228-2051 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS ISSUING BANK Address for Notices: Global Payment Trade Operations #22621 333 S. Beaudry Ave., 19th Floor Los Angeles, CA 90017 Attention: Sandra W. Leon Assistant Vice President Telephone: (213) 345-5231 Facsimile: (213) 345-6694 NATIONSBANK OF TEXAS, N.A., AS A BANK Domestic and Offshore Lending Office: 901 Main Street Dallas, Texas 75202 Attention: Karen Puente Telephone: (214) 508-3089 Facsimile: (214) 508-0944 -2- 112 Notices (other than Requests for Extensions of Credit): NationsBank of Texas, N.A. 444 South Flower St., Suite 4100 Los Angeles, California 90071-2901 Attention: George W. Hausler Vice President Telephone: (213) 236-4925 Facsimile: (213) 624-5812 THE CHASE MANHATTAN BANK, N.A., AS A BANK Domestic and Offshore Lending Office: 270 Park Avenue, 23rd Floor New York, New York 10017 Attention: Raju Nanoo Telephone: (212) 270-7729 Facsimile: (212) 270-8963 Notices (other than Requests for Extensions of Credit): The Chase Manhattan Bank, N.A. 270 Park Avenue, 23rd Floor New York, New York 10017 Attention: Peter Predun Vice President Telephone: (212) 270-7005 Facsimile: (212) 270-8963 THE FIRST NATIONAL BANK OF CHICAGO, AS A BANK Domestic and Offshore Lending Office: One First National Plaza Chicago, Illinois 60670 Attention: Sharon Bosch Telephone: (312) 732-7112 Facsimile: (312) 732-4840 Notices (other than Requests for Extensions of Credit): The First National Bank of Chicago 777 South Figueroa St., 4th Floor Los Angeles, California 90017 Attention: James P. Moore Vice President Telephone: (213) 683-4966 Facsimile: (213) 683-4999 -3- 113 UNION BANK OF CALIFORNIA, N.A., AS A BANK Domestic and Offshore Lending Office: 445 South Figueroa St., 16th Floor Los Angeles, California 90071 Attention: Greg Manos Telephone: (213) 236-5273 Facsimile: (213) 236-7636 Notices (other than Requests for Extensions of Credit): Union Bank of California, N.A. 550 South Hope St., 3rd Floor Los Angeles, California 90017 Attention: Andrew Ewing, Jr. Vice President Telephone: (213) 243-3557 Facsimile: (213) 243-3552 -4- EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 3,529 0 127,931 (4,020) 140,089 277,032 215,372 (63,189) 505,233 99,461 0 0 0 61,898 147,355 505,233 254,236 254,907 197,718 197,718 40,716 0 3,009 14,466 6,051 0 0 0 0 8,415 0.55 0
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