10-Q
Current Report on Form 10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998
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
No. 1-9820
BIRMINGHAM STEEL CORPORATION
DELAWARE 13-3213634
(State of Incorporation) (I.R.S. Employer Identification No.)
1000 Urban Center Parkway, Suite 300
Birmingham, Alabama 35242
(205) 970-1200
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 and 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 .
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 29,658,055 Shares of Common
Stock, Par Value $.01 Outstanding at February 4, 1998.
<PAGE>
BIRMINGHAM STEEL CORPORATION
Consolidated Balance Sheets
(in thousands, except per share data)
December 31, June 30,
ASSETS 1998 1998
(Unaudited) (Audited)
----------------- ---------------
Current assets:
Cash and cash equivalents $ 1,090 $ 902
Accounts receivable, net of
allowance for doubtful accounts
$1,379 at December 31, 1998
and $1,838 at June 30, 1998 91,969 121,854
Inventories 207,798 243,275
Other 25,441 27,967
----------------- ---------------
Total current assets 326,298 393,998
Property, plant and equipment
Land and buildings 263,987 258,905
Machinery and equipment 654,724 652,240
Construction in progress 120,431 67,401
---------------- ---------------
1,039,142 978,546
Less accumulated depreciation (245,585) (221,051)
---------------- ---------------
Net property, plant and equipment 793,557 757,495
Excess of cost over net assets acquired 42,560 44,420
Other 42,556 48,865
----------------- ---------------
Total assets $ 1,204,971 $ 1,244,778
================= ===============
<PAGE>
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current
portion of long-term debt $ 122 $ 10,119
Accounts payable 71,460 92,813
Accrued interest payable 3,061 1,761
Accrued payroll expenses 3,269 12,015
Accrued operating expenses 8,482 12,901
Other current liabilities 19,131 26,715
--------------- ---------------
Total current liabilities 105,525 156,324
Deferred income taxes 46,354 47,922
Deferred liabilities 8,899 7,630
Long-term debt less current portion 582,359 558,820
Minority interest in subsidiary 11,546 13,475
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, par value
$.01; authorized: 5,000 shares - -
Common stock, par value
$.01; authorized: 75,000
shares; issued: 29,833 at
December 31, 1998 and
29,780 at June 30, 1998 298 298
Additional paid-in capital 331,890 331,859
Treasury stock, 634 and 191
shares at December 31,
1998 and June 30, 1998,
respectively, at cost (5,508) (2,929)
Unearned compensation (1,055) (912)
Retained earnings 124,663 132,291
--------------- ---------------
Total stockholders' equity 450,288 460,607
--------------- ---------------
Total liabilities and
stockholders' equity $ 1,204,971 $ 1,244,778
=============== ===============
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
Three months ended Six months ended
December 31, December 31,
---------------------------- -------------------------------
1998 1997 1998 1997
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales $ 226,853 $ 267,453 $ 497,810 $ 555,000
Cost of sales:
Other than depreciation
and amortization 197,079 229,117 426,103 473,114
Depreciation and amortization 15,024 12,825 29,983 25,615
------- --------- --------- --------
Gross profit 14,750 25,511 41,724 56,271
Pre-operating/start-up
costs 8,979 6,603 19,844 9,105
Selling, general and administrative 8,932 10,875 20,421 21,895
Interest 8,583 6,511 17,383 12,580
------- --------- -------- ---------
(11,744) 1,522 (15,924) 12,691
Other income, net 4,413 3,633 11,286 4,867
Loss from equity investments (1,676) (595) (3,355) (1,240)
Minority interest in loss of subsidiary 1,177 292 1,929 813
------- -------- -------- ---------
Income (loss) before income taxes (7,830) 4,852 (6,064) 17,131
Provision for income taxes (2,864) 2,075 (2,122) 7,109
------- --------- ------- --------
Net income (loss) $ (4,966) $ 2,777 $ (3,942) $ 10,022
======== ========= ====== =======
Weighted average shares outstanding 29,254 29,710 29,371 29,698
======== ========= ====== =======
Basic and diluted earnings
(loss) per share $ (0.17) $ 0.09 $ (0.13) $ 0.34
======== ======= ====== =======
Dividends declared per share $ 0.025 $ 0.100 $ 0.125 $ 0.200
======== ======= ====== =======
See accompanying notes
</TABLE>
<PAGE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
December 31,
---------------------------
1998 1997
(Unaudited) (Unaudited)
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (3,942) $ 10,022
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 29,983 25,615
Provision for doubtful accounts receivable (200) -
Deferred income taxes (1,568) 3,209
Minority interest in loss of subsidiary (1,929) (813)
Loss from equity investments 3,355 899
Other 986 398
Changes in operating assets and liabilities
Accounts receivable 30,085 13,314
Inventories 35,477 7,734
Other current assets 2,525 3,719
Accounts payable (21,353) (2,352)
Other accrued liabilities (19,080) 2,504
Deferred compensation 900 614
------------ ----------
Net cash provided by operating activities 55,239 64,863
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (including
expenditures reimburseable under lease agreement) (71,889) (100,490)
Proceeds from lease agreement 7,779 75,000
Proceeds from disposal of property,
plant and equipment 2,584 17,345
Equity investment in Laclede Steel Company - (15,003)
Equity investment in American Iron Reduction, LLC - (11,397)
Additions to other non-current assets (2,242) (1,425)
Reductions in other non-current assets 2,070 5,285
------------ ----------
Net cash used in investing activities (61,698) (30,685)
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings and repayments (10,000) 10,000
Payments on long-term debt (59) -
Borrowings under revolving credit facility 1,050,646 1,205,911
Payments on revolving credit facility (1,027,045) (1,242,934)
Proceeds from issuance of common stock - 113
Purchase of treasury stock (3,209) (1,053)
Cash dividends paid (3,686) (5,940)
-------------- -----------
Net cash provided by (used in)
financing activities 6,647 (33,903)
-------------- ------------
Net increase in cash and cash equivalents 188 275
Cash and cash equivalents at:
Beginning of period 902 959
-------------- -----------
End of period $ 1,090 $ 1,234
============== ===========
Supplemental cash flow disclosures: Cash paid during the period for:
Interest (net of amounts capitalized) $ 15,878 $ 13,300
Income taxes 861 3,764
See accompanying notes.
<PAGE>
BIRMINGHAM STEEL COOPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
Birmingham Steel Corporation (the Company) operates steel mini-mills in the
United States producing steel reinforcing bar, merchant products and SBQ
(special bar quality) bar, rod and wire. The Company sells to third parties
primarily in the construction and automotive industries throughout the United
States and Canada.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its wholly-owned and majority-owned subsidiaries. In the opinion of management,
all adjustments considered necessary for a fair presentation have been included.
All such adjustments are of a normal recurring nature only. All significant
intercompany accounts and transactions have been eliminated. When necessary,
prior year amounts have been reclassified to conform to the current year's
presentation.
Inventories
Inventories are stated at the lower of cost or market value. The cost of
inventories is determined using the first-in, first-out method.
Earnings per share
The Company reports earnings per share according to FASB Statement No. 128,
"Earnings per Share". Basic earnings per share is computed using the weighted
average number of outstanding common shares for the period. Diluted earnings per
share is computed using the weighted average number of outstanding common shares
and any dilutive equivalents. The adoption of Statement No. 128 had no effect on
earnings per share in the prior year period reflected herein.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Accounting Pronouncements
In June 1997, the FASB issued Statement No. 131 "Disclosures about Segments of
an Enterprise and Related Information" effective for fiscal years beginning
after December 15, 1997. The Company will adopt Statement No. 131 in its annual
financial statements for the fiscal year ending June 30, 1999. The statement
requires companies to report certain financial information based on operating
segments of the business. Management is currently considering the impact, if
any, Statement No. 131 will have on the Company's financial reporting.
<PAGE>
2. INVENTORIES
Inventories were valued at the lower of cost (first-in, first-out) or market as
summarized in the following table (in thousands):
December 31, June 30,
1998 1997
--------- ---------
Raw materials and mill supplies $ 46,323 $ 60,960
Work-in-progress 70,969 84,325
Finished goods 90,506 97,990
---------- ----------
$ 207,798 $ 243,275
========== ==========
3. LONG TERM DEBT
The Company amended its debt agreements in the second quarter Fiscal 1999. The
amendment to the $300,000,000 Revolving line of credit included a variable
increase in interest rates based on certain ratios calculations. The interest
rate at December 31, 1998 was 6.13%. The amendment to the $130,000,000 and
$150,000,000 Senior unsecured notes included an increase in interest rates of
0.55%, the new interest rates are 7.83% and 7.60%, respectively. In return for
the increase in interest rates and an increase in certain fees, the lenders have
agreed to less restrictive debt covenants.
4. CONTINGENCIES
Environmental
The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, waste water effluents, air
emissions and furnace dust management and disposal. The Company believes that it
is currently in compliance with all applicable environmental regulations.
Legal Proceedings
The Company is involved in litigation relating to claims arising out of its
operations in the normal course of business. Such claims are generally covered
by various forms of insurance. In the opinion of management, any uninsured or
unindemnified liability resulting from existing litigation would not have a
material effect on the Company's business, its financial position, liquidity or
results of operations.
5. OTHER INCOME
In the first six months of fiscal 1999, the Company sold real estate in
Cleveland, Ohio and recognized a gain of $2,232,000. Gains on sales of property,
plant and equipment are included in "other income, net" in the Consolidated
Statements of Operations.
In the first six months of fiscal 1999, the Company recorded settlements from
electrode suppliers of $4,355,000 which were included in "other income, net" in
the Consolidated Statements of Operations.
<PAGE>
6. PRE-OPERATING/START-UP COSTS
Pre-operating/start-up costs in the accompanying financial statements consists
of the following (in thousands):
Three Months Ended Six Months Ended
December 31, December 31,
----------------------- ------------------------
1998 1997 1998 1997
------ -------- -------- -------
Pre-operating/start-up
expenses:
Memphis $7,247 $6,481 $16,749 $8,695
Cartersville 1,694 122 2,828 410
Other 38 - 267 -
------- ------- -------- -------
$8,979 $6,603 $19,844 $9,105
======= ======= ======== =======
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements contained in this report that are not purely historical or which
might be considered an opinion or projection concerning the Company or its
business, whether express or implied, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements include the Company's expectations, hopes, anticipations, intentions,
plans and strategies regarding the future. Forward-looking statements include,
but are not limited to: expectations about environmental remediation costs,
assessments of expected impact of litigation and adequacy of insurance coverage
for litigation, expectations regarding the costs of new projects, expectations
regarding future earnings, expectations concerning the anticipated performance
of new ventures, and expectations regarding the date when facilities under
construction will be operational and the future performance and capabilities of
those facilities. Moreover, when making forward-looking statements, management
must make certain assumptions that are based on management's collective opinion
concerning future events, and blend these assumptions with information available
to management when such assumptions are made. Whether these assumptions are
valid will depend not only on management's skill, but also on a variety of
volatile and highly unpredictable risk factors. Some, but not all, of these risk
factors are described below under the heading "Risk Factors That May Affect
Future Operating Results". The Company's actual results could differ materially
from those described or implied by any forward-looking statements herein. Any
forward-looking statements contained in this document speak only as of the date
hereof, and the Company disclaims any intent or obligation to update such
forward-looking statements. Comparisons of results for current and prior periods
are not necessarily indicative of future performance, and should not be relied
on for any purpose other than as historical data.
For the second quarter of fiscal 1999, the Company reported a loss of
$4,966,000, or $(0.17) per share, basic and diluted, compared with earnings of
$2,777,000, or $.09 per share in the second quarter of fiscal 1998.
<PAGE>
Net Sales
The Company reported net sales of $226,853,000 in the second quarter of fiscal
1999, a decrease of 15.2 percent from $267,453,000 reported in the second period
of fiscal 1998. In the second quarter, the Company achieved steel shipments of
705,587 tons, down 12.0 percent from 801,529 tons reported in the same period
last year. Shipments declined in the fiscal 1999 period as a result of record
level of steel imports in the Company's products. The following table compares
the price per ton from the second fiscal quarter of 1998 versus 1999:
FY98 FY99
------- -------
Rebar products $301 $285
Merchant products 339 335
SBQ products 450 432
Cost of Sales
As a percentage of net sales, cost of sales (other than depreciation and
amortization) was 86.9% in the current period compared with 85.7% in the second
quarter last year. The percentage increase in cost of sales resulted primarily
because of a decline in average steel selling prices as shown in the table
above.
The average scrap cost per ton declined to $103 in fiscal 1999 from $135 in
fiscal 1998. The record level of steel imports was the primary reason for the
decline in a steel and scrap prices.
Compared with the prior year period, depreciation and amortization was $2.2
million greater in the second quarter of fiscal 1999. The increase was primarily
attributable to the recognition of depreciation expense on assets placed into
service at Memphis, which began start-up operations in November, 1997.
Pre-operating/Start-up Costs
Pre-operating/start-up costs were $ 8,979,000 in the second quarter of fiscal
1999, compared with $6,603,000 last year. The increased charges primarily
related to start-up costs at the Memphis melt shop and pre-operating costs
associated with the Cartersville, Georgia rolling mill project. The charges for
the same period a year ago relate primarily to pre-operating expenses/start-up
incurred during the construction of the Memphis project. The Company believes
that the Memphis facility will be able to produce billets at costs equal to the
market price of billets upon attainment of a production level of 75% of
capacity. The operation is currently producing at a rate in excess of 50% of
capacity. The Company believes that Memphis could attain a 75% run rate in the
third quarter of fiscal 1999.
<PAGE>
Selling, General and Administrative Expenses ("SG&A")
SG&A expense was $8,932,000 in the second quarter of fiscal 1999, compared with
$10,875,000 in the same period last year. As a percentage of sales, SG&A was 3.9
percent in the second quarter, down from 4.1 percent in the same quarter a year
ago. The decrease was primarily the result of a decline in overall spending
levels and changes in estimates for certain accruals and reserves, including
workers compensation, discretionary bonus, and allowance for doubtful accounts.
Interest Expense
Interest expense increased to $8,583,000 in the second quarter of fiscal 1999
from $6,511,000 reported last year. The increase resulted from additional
borrowings under the Company's long-term credit facility and a reduction in
capitalized interest concurrent with start-up of the Memphis project.
Income Taxes
Effective income tax rates for the six months ended December 31, 1998 were
35.0%, down from 41.5% for the same period last year. The change in the tax rate
is the result of a change in the estimate for earnings in fiscal 1999 and the
exclusion of certain state income tax benefits.
Liquidity and Capital Resources
Operating Activities:
For the three months ended December 31, 1998, net cash provided by operating
activities was $42.5 million, compared with $27.3 million in the second quarter
a year ago. The difference of $15.2 million was primarily caused by decreases in
inventories ($37 million) and accounts receivable ($17 million). Also, the
Company received income tax refunds of $3.8 million and cash from settlements
with electrode suppliers in the amount of $2.9 million. These cash receipts were
partially offset by decreases in accounts payable ($34 million) and other
accrued liabilities ($4 million).
Investing Activities:
Net cash used in investing activities was $27.5 million at for the quarter ended
December 31, 1998, compared with cash received of $36.6 million in the same
period last year. The primary use of cash in the current period was for
additions to property, plant and equipment, primarily for the Cartersville
project. In the prior year period, approximately $17 million in proceeds was
received from the sale of the Emeryville and Norfolk properties, and $75 million
was received from a lease transaction at Memphis.
<PAGE>
In the second quarter of fiscal 1999, the Company did not increase its equity
investment in American Iron Reduction, L.L.C. (AIR). Pursuant to the Equity
Contribution Agreement, the Company could be obligated to make equity
investments in AIR of not more than $7,500,000. The Company has agreed to
purchase one-half of the annual output of the facility (a maximum of
approximately 600,000 metric tons per year) at prices which are equivalent to
AIR's total cash costs, which exclude depreciation and amortization, but include
debt service payments. For financial reporting purposes, the Company is
accounting for AIR as an equity method investee. Because AIR is a captive
supplier of raw materials, the Company recognizes its share of operating profits
or losses of AIR as a component of cost of sales.
Financing Activities:
Net cash used by financing activities was $16.6 million in the second quarter of
fiscal 1999. The Company reduced total debt by $15.4 million in the second
quarter of fiscal 1999, primarily by cash flow generated through inventory
reductions and completion of a lease transaction related to equipment located in
Cartersville.
In July, 1998 the Company's Board of Directors authorized a one-year stock
buyback program pursuant to which the Company is authorized to purchase up to
1,000,000 shares of its common stock in the open market at a purchase price not
to exceed $20 per share. In the second quarter, 109,800 shares were repurchased
at a cost of approximately $500,000. As of December 31, 1998, the Company held
634,023 shares of treasury stock at a cost of $5.5 million.
During the second quarter of fiscal 1999 the Company amended its $300 million
revolving credit facility and $280 million private debt agreements in order to
provide additional room for a temporary period with respect to restrictive debt
covenants. The Company is currently in compliance with the restrictive debt
covenants governing its loan agreements. However, should factors described under
"Risk factors" adversely affect fiscal 1999 operating results, the Company could
violate one or more of it's restrictive covenants within the next twelve months.
The Company has evaluated its alternatives, including refinancing the Company's
outstanding obligations, in the event that it is unable to comply with its
restrictive covenants in the near term. The impact of such measures is not
expected to have a significant impact on future results of operations or
liquidity.
Working Capital:
Working capital at the end of the second quarter was $220.8 million, compared
with $195.6 million at the end of December, 1997. The change was primarily
related to a decrease in accounts payable and other accrued liabilities,
partially offset by lower accounts receivable.
Other Comments
On January 19, 1999, the Company declared a dividend of $0.025 per share (two &
one-half cents per share) payable on February 8, 1999 to shareholders of record
on January 29, 1999.
The Company regrets to report the recent passing of T. Evans Wyckoff, director.
Mr. Wyckoff had served as a director of the Company since August, 1993.
Year 2000 Issues
The following Year 200 discussion is provided in response to the Securities and
Exchange Commission's recent interpretive statement expressing it's view that
public companies should include detailed discussion of Year 2000 issues in their
10Q submission of the MD&A.
Birmingham Steel Corporation is pursuing an organized program to assure the
Company's information technology systems and related infrastructure will be Year
2000 compliant. The Company has divided its Year 2000 issues into five areas
including: (1) business systems at corporate headquarters, (2) business systems
at the Cleveland, Ohio operation, (3) infrastructure systems at all locations,
(4) manufacturing systems at all locations, and (5) facility and support systems
at all locations. (The Company includes certain systems which might not be
considered as IT systems, such as phone switches and certain safety systems, in
the facility and support systems area of the Year 2000 project). The Company's
Year 2000 program includes three phases: (1) an audit and assessment phase
designed to identify Year 2000 issues; (2) a modification phase designed to
correct Year 2000 issues (this phase includes testing of individual
modifications as they are installed); and (3) a testing phase to test entire
systems for Year 2000 compliance after individual modifications have been
installed and tested. A dedicated Year 2000 project manager has been assigned to
this project for over one and a half years. Project teams have been assembled
for each area, specific responsibilities have been identified and specific time
lines have been prepared for the activities to take place within each area of
the project. Senior management receives monthly updates on the progress against
the time lines for each strategic area.
The Company has completed the audit, assessment and testing phase in its
business systems at both the corporate headquarters and at the Cleveland, Ohio
operation and for infrastructure at all locations. The company completed
upgrading and performing extensive year 2000 testing on the business systems at
the Cleveland, Ohio operations in December of 1998. The upgraded Year 2000
complaint business system software at the Cleveland, Ohio operation was placed
into production use in January 1999. The company completed upgrading and
performing extensive year 2000 testing on the business systems used at Corporate
headquarters in January 1999. The upgraded year 2000 complaint business system
software at corporate headquarters will be placed into daily production usage in
February 1999.
The Company currently expects to complete the second phase of its program
(modifications and testing) for its infrastructure systems, manufacturing
systems, facility and support systems by the end of the current fiscal year.
Appropriate systems testing will be conducted after June 30, 1999 and problems
which are identified will then be corrected.
<PAGE>
Management has determined that the costs for correction of the Year 2000 issues,
including any software and hardware changes (but excluding any hardware systems
that would have been replaced in any event) and the cost of personnel involved
in working on this project, will be less than $3 million dollars. The Company
estimates that 50% of the costs have been spent to date. The Year 2000 upgrades
are being funded out of the normal operating funds, and account for less than
25% of the Company's IT budget.
The Year 2000 compliance effort is a priority project for the Company's IT
department. Other IT projects, however, including upgrades of certain existing
systems and design and installation of new systems, continue while the Year 2000
effort is being accomplished.
The Company's Year 2000 program also includes investigation of major vendors'
and customers' Year 2000 readiness. The Company is using questionnaires, letters
and protocols to determine its vendors' and customers' Year 2000 readiness. The
Company is contacting, for example, energy and scrap vendors and its phone and
data line service vendors to determine their Year 2000 compliance status. If any
such vendors indicate that they will not be Year 2000 compliant, the Company
will develop contingency plans to address the issue, which may include changing
vendors. In addition, the Company is contacting significant customers to
determine their progress towards Year 2000 compliance and to identify issues, if
any, which might develop because of customers' failure to be prepared for Year
2000 issues. In the event issues are identified, the Company expects to try to
develop procedures to permit the Company to continue to supply the customer
involved despite the Year 2000 issues. The Company has been assured by its key
financial institutions that they are already Year 2000 compliant or will be Year
2000 compliant in early 1999.
Management of the Company believes it has an effective program in place to
resolve the year 2000 issue in a timely manner. As noted above, the Company has
not yet completed all necessary phases of the Year 2000 program. In the event
that the Company does not complete the additional phases, the Company could
experience problems with plant control systems that could result in the
temporary shutdown of production at some of the steel making facilities. In
addition, disruptions in the economy generally resulting from Year 2000 issues
could also materially adversely affect the Company. The Company could be subject
to litigation for computer systems product failure, for example, equipment
shutdown or failure to properly date business records. The amount of the
potential liability and lost revenue cannot be reasonably estimated at this
time.
The Company will complete the development of a Year 2000 contingency plan for
its business systems by May 1999. The plan will involve, among other actions,
manual workarounds, increasing inventories and adjusting staffing strategies.
<PAGE>
Notice: various statements in this discussion of Year 2000 are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements include statements of the Company's expectations,
statements with regard to schedules and expected completion dates and statements
regarding expected Year 2000 compliance. These forward-looking statements are
subject to various risk factors which may materially affect the Company's
efforts to achieve Year 2000 compliance. These risk factors include the
inability of the Company to complete the plans and modification that it has
identified, the failure of software vendors to deliver the upgrades and repairs
to which they have committed, the wide variety of information technology systems
and components, both hardware and software, that must be evaluated and the large
number of vendors and customers with which the Company interacts. The Company's
assessment of the effects of Year 2000 on the Company are based, in part, upon
information received from third parties upon which the Company reasonably relied
must be considered as a risk factor that might affect the Company's Year 2000
efforts. The Company is attempting to reduce the risks by utilizing an organized
approach, extensive testing, and allowance of ample contingency time to address
issues identified by tests.
*This Year 2000 Readiness Disclosure (the "Disclosure") is made pursuant to the
Year 2000 Information Readiness Disclosure Act, Public Law 105-271. This
Disclosure is not a warranty, and it does not alter the terms of service for any
customer. This Disclosure should not be used for purposes of making investment
decisions. Additional information may be found on the World Wide Web at
www.birsteel.com.
Market Risk Sensitive Instruments
The market risk inherent in the Company's financial instruments represents the
potential loss arising from adverse changes in interest rates (principally U.S.
Treasury and prime bank rates). In order to manage this risk, the Company
attempts to maintain certain ratios of fixed to variable rate debt. However, the
Company does not currently use derivative financial instruments. There have been
no significant changes in market risk versus those disclosed in the Company's
1998 annual report.
Risk Factors That May Affect Future Operating Results
The Company's actual results could differ materially from those described or
implied in any forward-looking statements contained in this document. Among the
factors that could cause actual results to differ materially are the factors
detailed below. In addition, readers should consider the risk factors described
from time to time in other Company reports filed with the Securities and
Exchange Commission, including the Company's fiscal 1998 Annual Report filed on
Form 10K.
The Company's results are currently being impacted by distressed economic
conditions in other countries creating a dramatic increase in steel imports in
the U.S. Until such time as the U.S. government intervenes with trade sanctions
or the foreign economic situation improves, the Company's performance will
continue to be adversely impacted by the import situation.
As a result of a number of factors primarily related to start-up operations, the
Company's new melt shop in Memphis continues to operate at less than a
commercially viable production level. Continued delays or other start-up issues
in this project could materially adversely affect the Company's future results.
While in start-up operations, the facility can experience "learning curve"
problems which would prevent the Company from realizing the timing of certain
plans that it has made for the future. Until the Memphis melt shop begins
producing at acceptable levels and costs, the Company's SBQ Division will
continue to incur start-up losses.
The Company expects to begin start-up operations of a new mid section rolling
mill at its Cartersville facility in the third quarter of fiscal 1999. Results
in fiscal 1999 will continue to reflect pre-operating and start-up losses
associated with this project. Unexpected increases in the amount of
pre-operating and start-up losses could negatively impact the Company's
financial performance.
Recent declines in the demand for steel products in the Pacific Rim region have
caused steel manufacturers in these countries to reduce their production of
steel products. Pacific Coast Recycling, LLC, the venture jointly owned by the
Company and Raw Materials Development Corporation, an affiliate of Mitsui and
Company, Ltd., is heavily involved in the export of scrap products to Pacific
Rim markets. Further significant erosion in the demand for scrap products
occasioned by the reduced demand for steel products in these countries could
have a material adverse effect on Pacific Coast Recycling, LLC, and in turn, on
the value of the Company's investment in the joint venture.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Refer to the information in MANAGEMENT'S DICUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS under the caption MARKET RISK SENSITIVE
INSTRUMENTS
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on October 13, 1998,
at which the following matters were brought before and voted upon by the
shareholders:
1. The election of the following to the Board of Directors, each to serve until
the next Annual Meeting of stockholders:
Director Voted For Voted Against
Robert A Garvey 24,205,729 444,222
E. Mandell de Windt 24,224,225 425,726
Stephen Clegg 24,192,289 457,662
E. Bradley Jones 24,233,334 416,617
Harry Holiday, Jr. 24,232,368 417,583
William J. Cabaniss, Jr 24,208,899 441,052
T. Evans Wyckoff 24,235,084 414,867
Richard de J. Osborne 24,179,543 470,408
Alfred C. DeCrane, Jr. 24,206,916 443,035
2. Proposal to approve and ratify the selection of Ernst & Young LLP
as the independent auditors for the Company and its subsidiaries
for the fiscal year ending June 30, 1999.
Voted for: 24,551,221
Voted against: 52,948
Abstained: 45,782
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are required to be filed with this report:
10.1 Second Amendment to Credit Agreement dated September 30, 1998, (amending
the $300 Million Credit Agreement, dated March 17, 1997 incorporated by
reference from Form 10-Q for quarter ended March 31, 1997, exhibit 10.1)
10.2 Amendment to 1995 Note Purchase Agreement, dated December 14, 1998
(amending the $150,000,000 Senior Note Purchase Agreement dated December
15, 1995 incorporated by reference from Form 10-Q for quarter ended
December 31, 1995, exhibit 4.1)
10.3 Amendment to 1993 Note Purchase Agreement, dated December 14, 1998
(amending the $130,000,000 Senior Note Purchase Agreement dated December
15, 1993, incorporated by reference from Form 10-Q for quarter ended
December 31, 1993, exhibit 4.1)
10.4 Equipment Lease Agreement dated December 31, 1998 between Nationsbanc
Leasing Corporation and Birmingham Southeast, LLC and Birmingham Steel
Corporation.
10.4.1 Riders to Equipment Lease Agreement dated December 31, 1998.
During the quarter ended December 31, 1998, no reports on Form 8-K were required
to be filed.
<PAGE>
EXHIBIT 10.1
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated as
of September 30,1998 by and among BIRMINGHAM STEEL CORPORATION (the "Borrower"),
each of the financial institutions a party hereto (the "Lenders"), and
NATIONSBANK, N.A., successor to NationsBank, N.A. (South), as Agent (the
"Agent").
WHEREAS, the Borrower, the Lenders and the Agent have entered into that
certain Credit Agreement dated as of March 17, 1997, as amended (the "Credit
Agreement");
WHEREAS, the Borrower, the Lenders and the Agent desire to amend
certain provisions of the Credit Agreement on the terms and conditions contained
herein; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
Section 1. Specific Amendments to Credit Agreement. The parties hereto agree
that the Credit Agreement is amended as follows:
(a) The Credit Agreement is amended by adding to Section 1. 1 in the appropriate
alphabetical location the following definition:
"Second Amendment Date" means September 30, 1998.
(b) The Credit Agreement is amended by deleting the definition of the
term "Applicable Facility Fee" contained in Section 1. 1 and substituting in its
place the following:
"Applicable Facility Fee" means the percentage set forth in
the table below corresponding to the level at which the "Applicable
Margin" is determined in accordance with the definition thereof and the
table set for therein:
Level Applicable Facility Fee
1 0.250%
- ------
2 0.225%
- ------
3 0.200%
- ------
4 0.150%
- ------
5 0.125%
- ------
(c) The Credit Agreement is amended by deleting the table contained in the
definition "Applicable Margin" and substituting in its place the following
table:
"Applicable Margin" means, except as set forth below in this
definition, (a) from the Second Amendment Date through the date four
days following the date of receipt by the Agent of a Compliance
Certificate in respect of the fiscal period of the Borrower and its
Subsidiaries ending on September 30, 1998, the percent per annum
provided for in level I of the following table and (b) thereafter for
each period beginning on the date five days following the date of
receipt by the Agent of a Compliance Certificate in respect of any
quarterly fiscal period of the Borrower and its Subsidiaries ending
after September 30, 1998 and ending on the date four days following
the date of receipt by the Agent of a Compliance Certificate in
respect of a subsequent fiscal period, that percent per annum set
forth below opposite the Debt to Capitalization Ratio applicable to
the fiscal period of the Borrower and its Subsidiaries then ended as
reflected in the applicable Compliance Certificate:
Level Debt to Capitalization Ratio Applicable Margin
1 Less than or equal to 0.60 to 1.00
but greater than 0.55 to 1.00 1.000%
2 Less than or equal to 0.55 to 1.00
but greater than 0.50 to 1.00 .0650%
3 Less than or equal to .050 to 1.00
but greater than 0.40 to 1.00 .0425%
4 Less than or equal to 0.40 to 1.00
but greater than 0.30 to 1.00 .0350%
5 Less than or equal to 0.30 to 1.00 .0325%
Notwithstanding the above, if the Borrower shall fail to deliver any such
Compliance Certificate within the time period required by Section 8.3., then the
Applicable Margin shall be the percent per annum provided for in level 1 above
until the appropriate Compliance Certificate is so delivered.
(d) The Credit Agreement is amended by deleting from the definition of
the term "Consolidated Net Income" contained in Section 1. 1 the word "and"
appearing immediately before clause (h) of such definition and adding to the end
of such definition the following:
"and (i) write-downs of assets resulting from the Borrower's investment
in (x) Laclede Steel Company not to exceed $12,400,000 during the term
of this Agreement and (y) Pacific Coast Recycling, LLC not to exceed
$10,000,000 during the term of this Agreement"
(e) Subject to Section 3 below, the Credit Agreement is
amended by deleting Section 9. 1.(b) in its entirety and substituting in its
place the following:
(b) Interest Coverage Ratio. Permit the ratio of
Consolidated EBIT to Consolidated Interest Expense to be
less than (i) 1.50 to 1.00 at the end of any
Four-Quarter Period ending during the period from
September 30, 1998 through and including June 30, 1999;
(ii) 1.60 to 1-.00 at the end-of any Four-Quarter Period
ending during the period from July 1, 1999 through and
including September 30, 1999 and (iii) 1.75 to 1.00 for
any Four-Quarter Period ending anytime thereafter.
(c) Section 2. Condition Precedent to Effectiveness
Generally. The effectiveness of this Amendment is
subject to the condition precedent that the Agent
received each of the following, in form and substance
satisfactory to the Agent;
(a)A counterpart of this Amendment duly executed by the Borrower and the
Requisite Lenders;
(b)Evidence of payment by the Borrower of the fee referred to in Section 4 below
and
(c)Such other documents, agreements and instruments as the Agent may reasonably
request.
Section 3. Condition Precedent to Section 1(e). In addition to the
condition precedent contained in the immediately preceding Section 2, the
effectiveness of the amendment contained in Section l(e) above is subject to the
condition precedent that the Requisite Lenders receive, in form and substance
satisfactory to the Requisite Lenders, evidence that the interest coverage
ratios contained in the following agreements have been amended in a manner
comparable to the amendment set forth in Section I (e) above: (a) those certain
Note Purchase Agreements dated as of September 1, 1993 (the " 1993 Note
Agreement") executed by the Company in favor of the purchasers of the Company's
7.28% Senior Notes due December 15, 2005 in the aggregate amount of $130,000,000
and (b) those certain Note Purchase Agreements dated as of September 15, 1995
(the " 1995 Note Agreement") executed by the Company in favor of the purchasers
of the Company's (i) 6.96% Series A Senior Notes due December 15, 2002 in the
aggregate amount of $76,000,000; (ii) 7.07% Series B Senior Notes due December
15, 2005 in the aggregate amount of $14,000,000; and (iii) 7.17% Series C Senior
Notes due December 15, 2005 in the aggregate amount of $60,000,000.
Section 4. Amendment Fee. The Borrower agrees to pay to the Agent for the
account of each Lender an amendment fee equal to --------- 0.075% of the amount
of such Lender's Commitment.
Section 5. Representations. The Borrower represents and warrants to the Agent
and the Lenders that:
(a) Authorization. The Borrower has the right and power, and has taken
all necessary action to authorize it, to execute and deliver this Amendment and
to per-form its obligations hereunder and under the Credit Agreement, as amended
by this Amendment, in accordance with their respective terms. This Amendment has
been duly executed and delivered by a duly authorized officer of the Borrower
and each of this Amendment and the Credit Agreement, as amended by this
Amendment, is a legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with its respective terms except as may be
limited by bankruptcy, insolvency or other laws of genepa4 application-relating
to or affecting the enforcement of creditors rights generally and general
principles of equity.
(b) Compliance with Laws, etc. The execution and delivery by the
Borrower of this Amendment and the performance by the Borrower of this Amendment
and the Credit Agreement, as amended by this Amendment, in accordance with their
respective terms and the borrowings hereunder do not and will not, by the
passage of time, the giving of notice, or otherwise: (i) require any
Governmental Approval or violate any Applicable Law relating to the Borrower or
any Subsidiary; (ii) conflict with, result in a breach of or constitute a
default under the certificate of incorporation or the bylaws of the Borrower, or
any indenture, agreement or other instrument to which the Borrower or any
Subsidiary is a party or by which the Borrower or any Subsidiary or any of its
respective properties may be bound; or (iii) result in or require the creation
or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by the Borrower or any Subsidiary.
(c)No Default. No Default or Event of Default has occurred and is continuing as
of the date hereof nor will exist immediately after giving effect to this
Amendment.
Section6. Reaffirmation of Representations. The Borrower hereby repeats and
reaffirms all representations and warranties made by the Borrower to the Agent
and the Lenders in the Credit Agreement and the other Loan Documents to which it
is a party on and as of the date hereof with the same force and effect as if
such representations and warranties were set forth in this Amendment in full.
Section 7. Certain References. Each reference to the Credit Agreement in any of
the Loan Documents shall be deemed to be a reference to the Credit Agreement as
amended by this Amendment.
Section 8. Expenses. The Borrower shall reimburse the Agent and each
Lender upon demand for all costs and expenses (including attorneys' fees)
incurred by the Agent or such Lender in connection with the preparation,
negotiation and execution of this Amendment and the other agreements and
documents executed and delivered in connection herewith.
Section 9. Benefits. This Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Section 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
Section 11. Effect. Except as expressly herein amended, the terms and
conditions of the Credit Agreement and the other Loan Documents remain in full
force and effect. The amendments contained herein shall be deemed to have
prospective application only.
Section 12. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns.
Section 13. Definitions. All capitalized terms not otherwise defined herein are
used herein with the respective definitions given them in the Credit Agreement.
[Signatures on Following Pages]
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
Credit Agreement to be executed as of the date first above written.
THE BORROWER:
BIRMINGHAM STEEL CORPORATION
By: /s/ J. Daniel Garrett
Name: J. Daniel Garrett
Title: Vice President - Finance & Control
THE AGENT AND THE LENDERS:
NATIONSBANK,N.A., successor to
NationsBank, N.A.
(South)Agent and as a Lender
By: /s/ Nancy S. Goldman
Name: Nancy S. Goldman
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION, as
Co-Agent and as a Lender
By: /s/David M. Mengel
Name: David M. Mengel
Title: Senior Vice President
THE BANK OF NOVA SCOTIA, as Co-Agent and
as a Lender
By:/s/ William E. Zarrett
Name: William E. Zarrett
Title: Senior Relationship Manager
[Signatures continued on the following
page]
[Signature Page to Second Amendment to Credit Agreement dated as of
September 30, 1998 with Birmingham Steel Corporation]
BANK OF AMERICA NT&SA, successor of Bank of
America Illinois
By:/s/ Deirdre B. Boyle
Name: Deirdre B. Boyle
Title: Vice President
THE BANK OF TOKYO - MITSUBISHI, LTD
ATLANTA AGENCY
By: /s/ William L. Otott Jr.
Name: William L. Otott Jr.
Title: Vice President
CIBC, INC.
By: /s/ Timothy Doyle
Name: Timothy Doyle
Title: Managing Director
CIBC Oppenheimer Corp. AS AGENT
AMSOUTH BANK
By: /s/ Mary Ann Raburn
Name: Mary Ann Raburn
Title: Vice President
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLAND BRANCH
By: /s/ JW Somers & JC Yeager
Name: JW Somers & JC Yeager
Title: SVP & AVP
[Signatures continue on the following page]
Signature Page to Second Amendment to Credit Agreement dated as of
September 30, 1998 with Birmingham Steel Corporation]
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: /s/ Rebecca J.S. Silbert
Name: Rebecca J.S. Silbert
Title: SVP
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Kristen H. Hertel
Name: Kristen H. Hertel
Title: Vice President
FIRST AMERICAN NATIONAL BANK
By: /s/ H.Hope Stewart
Name: H.Hope Stewart
Title: Assistant Vice President
THE SANWA BANK, LTD.
By:_________________________
Name:_______________________
Title: _______________________
[Signatures continue on the following page]
Signature Page to Second Amendment to Credit Agreement dated as of
September 30, 1998 with Birmingham Steel Corporation
UBS AG, NEW YORK BRANCH
By: /s/ Eric C. Hansen
Name: Eric C. Hansen
Title: Associate Director
By: /s/ Leo L. Baltz
Name: Leo L. Baltz
Title: Director
<PAGE>
EXHIBIT 10.2
AMENDMENT TO 1995 NOTE PURCHASE AGREEMENT
Dated as of December 14, 1998
To the Persons listed on
the signature pages hereof
Ladies and Gentlemen:
Birmingham Steel Corporation, a Delaware corporation (together with its
successors and assigns, the "Company") entered into separate Note Purchase
Agreements (collectively, the " 1995 Note Purchase Agreement"), each dated as of
September 15, 1995, with each of the Persons listed on Annex 1 thereto, for the
purchase from the Company of a portion of $76,000,000 in the aggregate of 6.96%
Series A Senior Notes due December 15, 2002, $14,000,000 in the aggregate of
7.07% Series B Senior Notes due December 15, 2005, and $60,000,000 of 7.17%
Series C Senior Notes due December 15, 2005 (collectively, as may be amended
from time to time, the "Notes"). Each of the Persons listed on the signature
pages hereof is herein referred to, individually, as a "Holder", and
collectively, as the "Holders". As of the Effective Date, the Holders hold,
beneficially or of record, 100% of the outstanding Notes.
The Company wishes to enter into this Amendment to 1995 Note Purchase
Agreement (this "Amendment") to amend certain sections of the 1995 Note Purchase
Agreement as set forth herein. Capitalized terms used herein not otherwise
defined herein shall have the meaning as defined in the 1995 Note Purchase
Agreement (assuming, the effectiveness of the amendments set forth herein). As
used in this Amendment, the term "Transaction Documents" means, collectively,
each of this Amendment, the 1995 Note Purchase Agreement, as amended by this
Amendment, and the Notes.
The Company and, subject to satisfaction of the conditions set forth in
Section 7 hereof, the Holders, hereby agree to the amendments to the 1995 Note
Purchase Agreement set forth herein.
I . Section 11. 1 of the 1995 Note Purchase Agreement is hereby amended by
adding the following new definitions in proper
alphabetical order:
"Amendment Fee Termination Date -- means, the earlier of
(a) the fiscal quarter-end of the Company at which,
for the period of two full consecutive fiscal
quarters of the Company ending on such date, the
Company's ratio of Consolidated Debt to Consolidated
Total Capitalization has not at any time during such
period been greater than 0.50 to 1.00, and (b) the
date upon which the principal amount of the Notes
shall be paid in full."
"Consolidated Debt -- means, as of any date of determination,
the total of all Debt of the Company and the Restricted
Subsidiaries outstanding on such date, determined on a
consolidated basis for such Persons."
"Consolidated Total Capitalization -- means, at any time, the sum of
Consolidated Net Worth and Consolidated Debt."
"Consolidated Net Worth -- means, at any time,
(a) the sum of (1), the par value (or value stated
on the books of the Company) of the capital stock
(but excluding treasury stock and capital stock
subscribed and unissued) of the Company and the
Restricted Subsidiaries, plus (ii) the amount of
paid-in capital and retained earnings of the
Company and the Restricted Subsidiaries, in each
case as such amounts would be shown on the
consolidated balance sheet of the Company and the
Restricted Subsidiaries as of such time prepared in
accordance with GAAP, minus
(b) to the extent included in clause (a), all
amounts properly attributable to minority
interests, if any, in the stock and surplus of the
Restricted Subsidiaries."
2. Section 8.6(b) of the 1995 Note Purchase Agreement is hereby deleted
in its entirety and the following is substituted in lieu thereof:
8.6 Funded Debt.
"(b) The Company will at all times maintain a ratio
of Consolidated Debt to Consolidated Total Capitalization of
not greater than .60 to 1.0."
3. Section 8.7 of the 1995 Note Purchase Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
"8.7 Interest Coverage.
The Company will at all times maintain a ratio of Consolidated
Net Earnings Before Interest and Taxes for each period of four
(4) fiscal quarters then most recently ended to Consolidated
Interest Expense for such period of not less than the ratios
presented below for the following such periods:
Period Ended Ratio
December 31, 1998 1.50 to 1.0
March 31, 1999 1.50 to 1.0
June 30, 1999 1.50 to 1.0
September 30, 1999 1.60 to 1.0
December 31, 1999 and thereafter 1.75 to 1.0"
4. Section 8 of the 1995 Note Purchase Agreement is hereby amended to
add at the end thereof a new section, designated Section 8.16, to read in its
entirety as follows:
"8.16 Amendment Fee
The Company agrees to pay, to each holder from time to time of
the Notes, an amendment fee which shall accrue (computed on
the basis of a 360-day year of twelve 30-day months) on the
unpaid principal balance of such holder's Notes at the rate of
fifty-five one-hundredths percent (0.55%)per annum. Such
amendment fee shall accrue from December 15, 1998 through and
including the Amendment Fee Ten-Termination Date, and be
payable (a) with respect to each outstanding Note, on the
fifteenth (15th) day of each June and December in each year,
commencing on June 15, 1999, and (b) with respect to any
principal amount of any Note being paid, on the date of such
payment. The Company shall promptly notify each holder of
Notes of the occurrence of the Amendment Fee Termination Date
(other than on the maturity date of the Notes), which notice
shall include supporting financial statements and ratio
calculations, certified as true and correct by a senior
financial officer of the Company."
5 . On the Effective Date, the Company shall pay to each holder of the
Notes an additional amendment fee equal to seven and one-half (7.5) basis points
(.075%) times the principal amount of the Notes held by such holder at such
time.
6. In order to induce the Holders to enter into this Amendment, the
Company represents and warrants to each Holder as to the matters set forth on
Exhibit A attached hereto and made a part hereof.
7. The amendments to the 1995 Note Purchase Agreement set forth herein
shall not become effective unless all of the following conditions precedent have
been satisfied (the date upon which such satisfaction occurs being referred to
herein as the "Effective Date"):
(a) The Company and the Supermajority Holders shall have
executed and delivered a counterpart of this Amendment.
(b) The warranties and representations set forth on Exhibit A hereto shall be
true on the Effective Date with the same effect as though made on and as of that
date.
(c)The Company shall have performed and complied with all
agreement and conditions contained herein that are required to
be performed or complied with by the Company on or prior to
the Effective Date, and such performance and compliance shall
remain in effect on the Effective Date.
(d) The Company shall have delivered to you a copy of its
Credit Agreement, dated as of March 17, 1997 with the financial
institutions party thereto, and NationsBank, N.A., as Agent (the "Bank
Agreement"), as amended and in effect on the Effective Date, certified
as true, complete and correct by an officer of the Company. The Bank
Agreement shall be in form and substance satisfactory to you.
(e) The Company shall have paid to each Holder the amendment
fee referred to in Section 5 hereof that is required to be paid to such
Holder on the Effective Date.
(f) On the Effective Date, the Company shall pay the statement
for reasonable fees and disbursements of the Special Counsel presented
to the Company on or prior to the Effective Date (this provision shall
not limit the obligation of the Company under Section 1.5(a)(v) of the
1995 Note Purchase Agreement to also pay, upon receipt of any statement
thereof, each additional statement for reasonable fees and
disbursements of the Special Counsel rendered after the Effective Date
in connection with this Amendment).
(g) All proceedings taken in connection with the
execution and delivery of this Amendment and the
transactions contemplated hereby shall be
satisfactory to the Holders and the Special Counsel;
and the Holders and the Special Counsel shall have
received copies of such documents and papers as they
may reasonably request in connection therewith.
8. Except as expressly provided herein, no terms or provisions of any
agreement or instrument are modified or changed by this Amendment and the terms
and provisions of the 1995 Note Purchase Agreement, as amended by this
Amendment, shall continue in full force and effect. This Amendment together with
the 1995 Note Purchase Agreement constitutes the final written expression of all
terms hereof and is a complete and exclusive statement of those terms.
9. Two or more duplicate originals hereof may be signed by the parties,
each of which shall be an original, but all of which together shall constitute
one and the same instrument. This Amendment may be executed in one or more
counterparts and shall be effective when at least one counterpart shall have
been executed by each party hereto, and each set of counterparts that,
collectively, show execution by each party hereto shall constitute one duplicate
original.
10. This Amendment shall be governed by, and construed and enforced in
accordance with, internal New York law. If this Amendment is
satisfactory to you, please so indicate by signing your acceptance at
the foot of the counterpart hereof
and returning such counterpart to the Company whereupon this Amendment, subject
to satisfaction of the conditions set forth in Section 7 hereof, shall become
binding between us in accordance with its terms.
Very truly yours,
BIRMINGHAM STEEL CORPORATION
By: /s/ Kevin E. Walsh
Kevin E. Walsh
Executive Vice President and
Chief Financial Officer
cc: Mr. Robert A. Garvey, Birmingham Steel Corporation
Mr. J. Daniel Garrett, Birmingham-ham Steel Corporation
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
Accepted:
PRINCIPAL LIFE INSURANCE COMPANY
(f/k/a Principal Mutual Life Insurance Company)
By:_/s/ Sarah J. Pitts_________________
Name: Sarah J. Ptts
Title: Counsel
By:_/s/ Jon C. Heiny__________________
Name: Jon C. Heiny
Title: Counsel
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
NATIONWIDE LIFE INSURANCE COMPANY
By:_/s/ James W. Pruden______________
Name: James W. Pruden
Title: Vice President, Municipal Securities
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU
By:_/s/ James W. Pruden______________
Name: James W. Pruden
Title: Vice President, Municipal Securities
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By:_/s/ Richard A. Strait_______________
Name: Richard A. Strait
Title: Authorized Representative
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
By:_/s/ Marcia Haydel ________________
Name: Marcia Haydel
Title: Investment Officer
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA Investments, Inc., its authorized agent
By:_/s/ Thomas P. Shea_ ________
Name: Thomas P. Shea
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
LIFE INSURANCE COMPANY OF NORTH AMERICA
By CIGNA Investments, Inc., its authorized agent
By:_/s/ Thomas P. Shea_ ________
Name: Thomas P. Shea
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY
By CIGNA Investments, Inc., its authorized agent
By:_/s/ Thomas P. Shea_ ________
Name: Thomas P. Shea
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
CENTURY INDEMNITY COMPANY
By CIGNA Investments, Inc., its authorized a-agent
By:_/s/ Thomas P. Shea_ ________
Name: Thomas P. Shea
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: Lincoln Investment Management, Inc.,
Its Attorney-In-Fact
By:_/s/ David C. Patch_________________
Name: David C. Patch
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
By:_/s/ John N. Wheliham__ __________
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements - for President
By:_/s/ Julia H. Holloway______________
Name: Julia H. Holloway
Title: Associate Counsel-for Secretary
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
SUN LIFE ASSURANCE COMPANY OF CANADA
By:_/s/ John N. Wheliham__ __________
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements - for President
By:_/s/ Julia H. Holloway______________
Name: Julia H. Holloway
Title: Associate Counsel-for Secretary
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
By:_/s/ James M.A. Anderson ______
Name: James M.A. Anderson
Title: Vice President, Investments
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
FIRST COLONY LIFE INSURANCE COMPANY
By: _/s/ Jon M. Lucia __________
Name: Jon M. Lucia
Title: Assistant Vice President and Investment Officer
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By:_/s/_Loren Haughland_______________
Name: Loren Haughland
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
FEDERATED MUTUAL INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By:_/s/ Steven Laude_________________
Name: Steven Laude
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
FEDERATED LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By:_/s/ John Leiviska____________________
Name: John Leiviska
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
AMERICAN UNITED LIFE INSURANCE COMPANY
By:_/s/ Christopher D. Pahlke_____________
Name: Christopher D. Pahlke
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
THE STATE LIFE INSURANCE COMPANY
By:_/s/ Christopher D. Pahlke_____________ Name: Christopher D. Pahlke Title:
Vice President of American United Life Insurance Company, as Agent for The State
Life Insurance Company
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
AMERITAS LIFE INSURANCE COMPANY
By: Ameritas Investment Advisors Inc., as Agent
By:_/s/ Patrick J. Henry__________________
Name: Patrick J. Henry
Title: Vice President-Fixed Income Securities
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
MUTUAL TRUST LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By:_/s/ Marilyn Froelich_________________
Name: Marilyn Forelich
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
GUARANTEE RESERVE LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By:_/s/ Guy M. de Lambert________________
Name: Guy M. de Lambert
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
NATIONAL TRAVELERS LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By:_/s/ Annette M. Masterson______________
Name: Annette M. Masterson
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
THE RELIABLE LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By:_/s/ Joseph R. Betlej_____________________________________
Name: Joseph R. Betlej
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1995 NOTE PURCHASE AGREEMENT)
EXHIBIT A
REPRESENTATIONS AND WARRANTIES.
The Company warrants and represents to each Holder that as of the
Effective Date:
1 . Organization; Power and Authority. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, 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 the Amendment and to perform the provisions of
the Transaction Documents.
2. Authorization, etc. The Amendment has been duly authorized by all
necessary corporate action on the part of the Company, and each of the
Transaction Documents constitutes 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 (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting- the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3 . Disclosure. None of the written statements, documents or other
written materials (including, without limitation, the financial statements and
related certificates most recently provided to the Holders pursuant to Section
9. 1 (a), Section 9. 1 (b) and Section 9.2 of the 1995 Note Purchase Agreement)
furnished by, or on behalf of, the Company to the Holders in connection with the
negotiation, execution and delivery of the Amendment contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading in light of the
circumstances in which they were made. There is no fact which the Company has
not disclosed to the Holders which materially affects adversely or, so far as
the Company can now foresee, will materially affect adversely the business,
prospects, profits, Properties or condition (financial or otherwise) of the
Company and the Restricted Subsidiaries, taken as a whole, or the ability of the
Company to perform its obligations set forth in the Transaction Documents.
4. Compliance with Laws, Other Instruments, etc. The execution, delivery and
performance by the Company of the Amendment will not:
(a) 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 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 Subsidiary is bound or by which the Company or
any Subsidiary or any of their respective Properties may be bound or
affected;
(b) 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 Subsidiary; or
(c) violate any provisions of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or
any Subsidiary.
5 . 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 the Amendment.
6. Litigation; Observance of Agreements, Statutes and Orders.
(a) There are no actions, suits or proceedings pending or, to
the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary or any Property of the Company or any
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 Protection Laws) of any Governmental
Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
7. No Defaults. No event has occurred and is continuing and no
condition exists which, upon the effectiveness of the amendments provided for in
the Amendment, would constitute a Default or Event of Default.
<PAGE>
EXHIBIT 10.3
AMENDMENT TO 1993 NOTE PURCHASE AGREEMENT
Dated as of December 14, 1998
To the Persons listed on
the signature pages hereof
Ladies and Gentlemen:
Birmingham Steel Corporation, a Delaware corporation (together with its
successors and assigns, the "Company") entered into separate Note Purchase
Agreements (collectively, as amended by amendment dated as of October 18, 1996,
the " 1993 Note Purchase Agreement"), each dated as of September 1, 1993, with
each of the Persons listed on Annex 1 thereto for the purchase from the Company
of a portion of $130,000,000 in the aggregate of 7.28% Senior Notes due December
15, 2005, (collectively, as may be amended from time to time, the "Notes"). Each
of the Persons listed on the signature pages hereof is herein referred to,
individually, as a "Holder", and collectively, as the "Holders". As of the
Effective Date, the Holders hold, beneficially or of record, 100% of the
outstanding Notes.
The Company wishes to enter into this Amendment to 1993 Note Purchase
Agreement (this "Amendment") to amend certain sections of the 1993 Note Purchase
Agreement as set forth herein. Capitalized terms used herein not otherwise
defined herein shall have the meaning as defined in the 1993 Note Purchase
Agreement (assuming the effectiveness of the amendments set forth herein). As
used in this Amendment, the term "Transaction Documents" means, collectively,
each of this Amendment, the 1993 Note Purchase Agreement, as amended by this
Amendment, and the Notes.
The Company and, subject to satisfaction of the conditions set forth in
Section 7 hereof, the Holders, hereby agree to the amendments to the 1993 Note
Purchase Agreement set forth herein.
1 . Section 11. 1 of the 1993 Note Purchase Agreement is hereby amended by
adding the following new definitions in proper alphabetical order:
"Amendment Fee Termination Date -- means, the earlier of
(a) the fiscal quarter-end of the Company at which,
for the period of two full consecutive fiscal
quarters of the Company ending on such date, the
Company's ratio of Consolidated Debt to Consolidated
Total Capitalization has not at any time during such
period been greater than 0.50 to 1.00, and (b) the
date upon which the principal amount of the Notes
shall be paid in full."
"Consolidated Debt -- means, as of any date of determination,
the total of all Debt of the Company and the Restricted
Subsidiaries outstanding on such date, determined on a
consolidated basis for such Persons."
"Consolidated Total Capitalization -- means, at any time, the sum of
Consolidated Net Worth and Consolidated Debt."
"Consolidated Net Worth -- means, at any time,
(a) the sum of (i), the par value (or value stated on
the books of the Company) of the capital stock (but
excluding treasury stock and capital stock subscribed
and unissued) of the Company and the Restricted
Subsidiaries, plus (ii) the amount of paid-in capital
and retained earnings of the Company and the
Restricted Subsidiaries, in each case as such amounts
would be shown on the consolidated balance sheet of
the Company and the Restricted Subsidiaries as of
such time prepared in accordance with GAAP, minus
(b) to the extent included in clause (a), all amounts
properly attributable to minority interests, if any,
in the stock and surplus of the Restricted
Subsidiaries."
2. Section 8.6(b) of the 1993 Note Purchase Agreement is hereby deleted
in its entirety and the following is substituted in lieu thereof:
8.6 Funded Debt.
"(b) The Company will at all times maintain a ratio
of Consolidated Debt to Consolidated Total Capitalization of
not greater than .60 to 1.0."
3. Section 8.7 of the 1993 Note Purchase Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
" 8.7 Interest Coverage.
The Company will at all times maintain a ratio of Consolidated
Net Earnings Before Interest and Taxes for each period of four
(4) fiscal quarters then most recently ended to Consolidated
Interest Expense for such period of not less than the ratios
presented below for the following such periods:
Period Ended Ratio
December 31, 1998 1.50 to 1.0
March 31, 1999 1.50 to 1.0
June 30, 1999 1.50 to 1.0
September 30, 1999 1.60 to 1.0
December 31, 1999 and thereafter 1.75 to 1.0"
4. Section 8 of the 1993 Note Purchase Agreement is hereby amended to
add at the end thereof a new section, designated Section 8.17, to read in its
entirety as follows:
"8.17 Amendment Fee
The Company agrees to pay, to each holder from time to time of
the Notes, an amendment fee which shall accrue (computed on
the basis of a 360-day year of twelve 30-day months) on the
unpaid principal balance of such holder's Notes at the rate of
fifty-five one-hundredths percent (0.55%) per annum. Such
amendment fee shall accrue from December 15, 1998 through and
including the Amendment Fee Termination Date, and be payable
(a) with respect to each outstanding Note, on the fifteenth
(15th) day of each June and December in each year, commencing
on June 15, 1999, and (b) with respect to any principal amount
of any Note being paid, on the date of such payment. The
Company shall promptly notify each holder of Notes of the
occurrence of the Amendment Fee Termination Date (other than
on the maturity date of the Notes), which notice shall include
supporting financial statements and ratio calculations,
certified as true and correct by a senior financial officer of
the Company."
5. On the Effective Date, the Company shall pay to each holder of the
Notes an additional amendment fee equal to seven and one-half (7.5) basis points
(.075%) times the principal amount of the Notes held by such holder at such
time.
6. In order to induce the Holders to enter into this Amendment, the
Company represents and warrants to each Holder as to the matters set forth on
Exhibit A attached hereto and made a part hereof.
7. The amendments to the 1993 Note Purchase Agreement set forth herein
shall not become effective unless all of the following conditions precedent have
been satisfied (the date upon which such satisfaction occurs being referred to
herein as the "Effective Date"):
(a) The Company and the Supermajority Holders shall have
executed and delivered a counterpart of this Amendment.
(b) The warranties and representations set forth on Exhibit A
hereto shall be true on the Effective Date with the same effect as
though made on and as of that date.
(c) The Company shall have performed and complied with all
agreements and
conditions contained herein that are required to be performed or
complied with by the Company on or prior to the Effective Date, and
such performance and compliance shall remain in effect on the Effective
Date.
(d) The Company shall have delivered to you a copy of its
Credit Agreement, dated as of March 17, 1997 with the financial
institutions party thereto, and NationsBank, N.A., as Agent (the "Bank
Agreement"), as amended and in effect on the Effective Date, certified
as true, complete and correct by an officer of the Company. The Bank
Agreement shall be in form and substance satisfactory to you.
(e) The Company shall have paid to each Holder the amendment
fee referred to in Section 5 hereof that is required to be paid to such
Holder on the Effective Date.
(f) On the Effective Date, the Company shall pay the statement
for reasonable fees and disbursements of the Special Counsel presented
to the Company on or prior to the Effective Date (this provision shall
not limit the obligations of the Company under Section 1.5(a)(v) of the
1993 Note Purchase Agreement to also pay, upon receipt of any statement
thereof, each additional statement for reasonable fees and
disbursements of the Special Counsel rendered after the Effective Date
in connection with this Amendment).
(g) All proceedings taken in connection with the execution and
delivery of this Amendment and the transactions contemplated hereby
shall be satisfactory to the Holders and the Special Counsel; and the
Holders and the Special Counsel shall have received copies of such
documents and papers as they may reasonably request in connection
therewith.
8. Except as expressly provided herein, no terms or provisions of any
agreement or instrument are modified or changed by this Amendment and the terms
and provisions of the 1993 Note Purchase Agreement, as amended by this
Amendment, shall continue in full force and effect. This Amendment together with
the 1993 Note Purchase Agreement constitutes the final written expression of all
terms hereof and is a complete and exclusive statement of those terms.
9. Two or more duplicate originals hereof may be signed by the parties,
each of which shall be an original, but all of which together shall constitute
one and the same instrument. This Amendment may be executed in one or more
counterparts and shall be effective when at least one counterpart shall have
been executed by each party hereto, and each set of counterparts that,
collectively, show execution by each party hereto shall constitute one duplicate
original.
10. This Amendment shall be governed by, and construed and enforced in
accordance with, internal New York law.
If this Amendment is satisfactory to you, please so indicate by signing
your acceptance at the foot of the counterpart hereof and returning such
counterpart to the Company whereupon this Amendment shall, subject to
satisfaction of the conditions set forth in Section 7 hereof, become binding
between us in accordance with its terms.
Very truly yours,
BIRMINGHAM STEEL CORPORATION
By: /s/ Kevin Walsh
Kevin E. Walsh
Executive Vice President
and Chief Financial Officer
cc: Mr. Robert A. Garvey, Birmingham Steel Corporation
Mr. J. Daniel Garrett, Birmingham Steel Corporation
(SIGNATURE PAGE TO AMENDMENT TO 1993 NOTE PURCHASE AGREEMENT) Accepted:
PRINCIPAL LIFE INSURANCE COMPANY
(f/k/a Principal Mutual Life Insurance Company)
By:_/s/ Sarah J. Pitts_________________
Name: Sarah J. Pitts
Title: Counsel
By:_/s/ Jon C. Heiny_________________
Name: Jon C. Heiny
Title: Counsel
(SIGNATURE PAGE TO AMENDMENT TO 1993 NOTE PURCHASE AGREEMENT)
JEFFERSON-PILOT
LIFE INSURANCE COMPANY
By:_/s/ Robert E. Whalen, II_____________
Name: Robert E. Whalen, II
Title: Second Viice President
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By:_/s/ Marcia Haydel_________________
Name: Marcia Haydel
Title: Investment Officer
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
J. ROMEO & CO.
By:_/s/ Peter Coccia___________________
Name: Peter Coccia
Title: a Partner
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By: /s/ Julie Bock_____________________
Name: Julie Bock
Title: Asst. Vice President
By:_/s/ James G. Lowery_______________
Name: James G. Lowery
Title: Assistant Vice President, Investment
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
THE GREAT-WEST LIFE ASSURANCE COMPANY
By: /s/ B.R. Allison___________________
Name: B.R. Allison
Title: Director, Bond Investments
By:_/s/ P.G. Munro___________________
Name: P.G. Munro
Title: Executive Vice President, Chief Financial Officer
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By:_/s/ Nancy Freund Heller ___________
Name: Nancy Freund Heller
Title: Managing Director
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By:_/s/ Christopher Wilkos_____________
Name: Christopher Wilkos
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
AMERICAN UNITED LIFE INSURANCE COMPANY
By:_/s/ Christopher D. Pahlke___________
Name: Christopher D. Pahlke
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
THE CANADA LIFE ASSURANCE COMPANY
By: /s/ Peter Coccia
Name: Peter Coccia
Title: a Partner
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
CANADA LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Peter Coccia
Name: Peter Coccia
Title: a Partner
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
CANADA LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Peter Coccia
Name: Peter Coccia
Title: a Partner
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
AMERITAS LIFE INSURANCE CORP.
By: /s/ Patrick J. Henry________________
Name: Patrick J. Henry
Title: Vice President-Fixed Income Securities
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
BERKSHIRE LIFE INSURANCE COMPANY
By: _/s/ Ellen I. Whittaker_______________
Name: Ellen I. Whittaker
Title: Senior Investment Officer
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
PROVIDENT MUTUAL LIFE INSURANCE COMPANY - CALIC
By: _/s/ S.C. Lange_____________________
Name: S.C. Lange
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
By: _/s/ S.C. Lange_____________________
Name: S.C. Lange
Title: Vice President
(SIGNATURE PAGE TO AMENDMENT
TO 1993 NOTE PURCHASE AGREEMENT)
EXHIBIT A
REPRESENTATIONS AND WARRANTIES
The Company warrants and represents to each Holder that as of the
Effective Date:
1 . Organization; Power and Authority. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, 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 the Amendment and to perform the provisions of
the Transaction Documents.
2. Authorization, etc. The Amendment has been duly authorized by all
necessary corporate action on the part of the Company, and each of the
Transaction Documents constitutes 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 (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditor's rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3 . Disclosure. None of the written statements, documents or other
written materials (including, without limitation, the financial statements and
related certificates most recently provided to the Holders pursuant to Section
9. 1 (a), Section 9. 1 (b) and Section 9.2 of the 1993 Note Purchase Agreement)
furnished by, or on behalf of, the Company to the Holders in connection with the
negotiation, execution and delivery of the Amendment contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading in light of the
circumstances in which they were made. There is no fact which the Company has
not disclosed to the Holders which materially affects adversely or, so far as
the Company can now foresee, will materially affect adversely the business,
prospects, profits, Properties or condition (financial or otherwise) of the
Company and the Restricted Subsidiaries, taken as a whole, or the ability of the
Company to perform its obligations set forth in the Transaction Documents.
4. Compliance with Laws, Other Instruments, etc. The execution, delivery and
performance by the Company of the Amendment will not:
(a) 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 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 Subsidiary is bound or by which the Company or
any Subsidiary or any of their respective Properties may be bound or
affected;
(b) 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 Subsidiary; or
(c) violate any provisions of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or
any Subsidiary.
5 . 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 the Amendment.
6. Litigation; Observance of Agreements, Statutes and Orders.
(a) There are no actions, suits or proceedings pending or, to
the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary or any Property of the Company or any
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 Protection Laws) of any Governmental
Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
7. No Defaults. No event has occurred and is continuing and no
condition exists which, upon the effectiveness of the amendments provided for in
the Amendment, would constitute a Default or Event of Default.
<PAGE>
EXHIBIT 10.4
NATIONSBANC LEASING CORPORATION
EQUIPMENT LEASE AGREEMENT
THIS EQUIPMENT LEASE AGREEMENT (the "Lease") is made as of the 3 1 st
day of December, 1998, by and among NATIONSBANC LEASING CORPORATION, its
successors and assigns ("Lessor"), BIRMINGHAM SOUTHEAST, LLC, a Delaware
limited liability company, its permitted successors and assigns ("BSE") and
BIRMINGHAM STEEL CORPORATION, a Delaware corporation, its permitted successors
and assigns("BSC").
The parties hereto agree that the obligations of BSE and BSC are
joint and several. Each reference to the term "Lessee" shall be deemed to
refer to each of BSE and BSC; each representation and warranty made by Lessee
shall be deemed to have been made by each such party; each covenant and
undertaking on the part of Lessee shall be deemed individually applicable with
respect to each such party; and each event constituting a Default under this
Lease and with respect to any Equipment Schedule shall be determined with
respect to each such party. A separate action or actions may be brought and
prosecuted against any such party whether an action is brought against any
other party or whether any other party is joined in any such action or
actions. Each such party waives any right to require Lessor to: (a) proceed
against any other party; (b) proceed against or exhaust any security held from
any other party; or (c) pursue any other remedy in Lessor's power whatsoever.
Notices hereunder required to be provided to Lessee shall be effective only if
provided to BSE and BSC. Any consent on the part of Lessee hereunder shall be
effective when provided by any such party and Lessor shall be entitled to rely
upon any notice or consent given by any such party as being notice or consent
given by Lessee hereunder.
The parties agree that Lessee shall lease from Lessor all of Lessor's
right, title and interest in and to the property (the "Equipment") described
in the Equipment Schedule(s) to be executed pursuant hereto (collectively, the
"Equipment Schedule"), subject to the terms set forth herein, in the Riders
annexed hereto and in the Equipment Schedule. Certain definitions and
construction of certain of the terms used herein are provided in Section 19
hereof
I . TERM. The term of lease with respect to any item of the Equipment
shall consist of the term set forth in the Equipment Schedule relating
thereto; provided, however, that this Lease shall be effective from and after
the date of execution hereof.
2. RENT. Lessee shall pay Lessor the rental installments in the
aggregate amounts specified in the Equipment Schedule, without prior notice or
demand, and all other amounts payable pursuant to this Lease (such
installments and other amounts, the "rent"). Each Equipment Schedule
constitutes a non-cancelable net lease, and Lessee's obligation to pay rent,
and to otherwise perform its obligations under this Lease, each such Equipment
Schedule and, all of the other documents and agreements entered in connection
herewith (collectively, the "Lease Documents"), are and shall be absolute and
unconditional and shall not be affected by any right of setoff, counterclaim,
recoupment, deduction, defense or other right which Lessee may have against
Lessor, the manufacturer or vendor of the Equipment (the "Suppliers"), or
anyone else, for any reason whatsoever. Rental installments are payable as and
when specified in the Equipment Schedule either by mailing the same to Lessor
at its address specified pursuant to this Lease or by such other method as may
be mutually agreed to by Lessor and Lessee (including without limitation
pursuant to the wire transfer of funds in accordance with arrangements made by
Lessor and Lessee in one or more letter agreements, which wire transfer
arrangements may be modified from time to time by additional letter
agreements); and payments of rent shall be effective upon receipt. Timeliness
of Lessee's payment and its other performance under the Lease Documents is of
the essence. If any rent is not paid on the due date, Lessor may collect, and
Lessee agrees to pay, a charge (the "Late Charge") calculated as the product
of the late charge rate specified in the Equipment Schedule (the "Late Charge
Rate") and the amount in arrears for the period such amount remains unpaid.
3. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee represents and
warrants that: (a) Lessee is duly organized, validly existing and in good
standing under the laws of the state of its incorporation or organization, as
the case may be. (b) The execution, delivery and performance of the Lease
Documents: (1) have been duly authorized by all necessary action on the part of
Lessee; (2) do not require the approval of any member, stockholder, trustee or
holder of any obligations of Lessee except such as have been duly obtained; and
(3) do not and will not contravene any law, governmental rule, regulation or
order now binding on Lessee, or the organizational documents or by-laws of
Lessee, or contravene the provisions of, or constitute a default under, or
result in the creation of any lien or encumbrance upon the property of Lessee
under, any indenture, mortgage, contract or other agreement to which Lessee is a
party or by which it or its property is bound. (c) Each of the Lease Documents,
when entered into, will constitute legal, valid and binding obligations of
Lessee enforceable against Lessee, in accordance with the terms thereof. (d)
There are no pending actions or proceedings to which Lessee is a party, and
there are no other pending or threatened actions or proceedings of which Lessee
has knowledge, before any court, arbitrator or administrative agency, which,
either individually or in the aggregate, would adversely affect the financial
condition of Lessee, or the ability of Lessee to perform its obligations or
remain in compliance with the Lease Documents. Further, Lessee is not in default
under any obligation for borrowed money, for the deferred purchase price of
property or any lease agreement which, either individually or in the aggregate,
would have the same such effect. (e) BSE is the sole owner of the real property
on which the Equipment will be located and such real property is free and clear
of any and all Liens. (f) The financial statements of Lessee (copies of which
have been furnished to Lessor) have been prepared in accordance with generally
accepted accounting principles consistently applied ("GAAP"), and fairly present
Lessee's financial condition and the results of its operations as of the date of
and for the period covered by such statements, and since the date of such
statements there has been no Material adverse change in such conditions or
operations. (g) The address stated below the signature of Lessee is the chief
place of business and chief executive office of Lessee; and Lessee does not
conduct business under a trade, assumed or fictitious name. (h) Lessee has
reviewed the areas within its business and operations which could be adversely
affected by, and has developed or is developing a program to address on a timely
basis, the "Year 2000 Problem" (that is, the risk that computer applications
used by Lessee may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date on or after December 31,
1999), and has made related appropriate inquiry of material suppliers and
vendors. Based on such review and program, Lessee believes that the Year 2000
Problem will not adversely affect the financial condition of the Lessee, or the
ability of the Lessee to perform its obligations or remain in compliance with
the Lease Documents. From time to time, at the reasonable request of Lessor,
Lessee shall provide to Lessor such updated information or documentation as is
reasonably requested regarding the status of its efforts to address the Year
2000 Problem.
4. FINANCIALS, FURTHER ASSURANCES AND NOTICES. Lessee covenants and
agrees as follows: (a) Lessee will furnish Lessor (1) within one hundred twenty
(120) days after the end of each fiscal year of BSC, an audited consolidated
balance sheet of BSC and its consolidated subsidiaries as at the end of such
year, and the related audited consolidated statement of income, cash flows and
common shareholders' equity for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, prepared in
accordance with GAAP, all in reasonable detail and certified by independent
certified public accountants of recognized standing selected by BSC; (2) as soon
as available, and in any event, within sixty (60) days after the end of each of
the first three quarters of each fiscal year of BSC, a consolidated balance
sheet of BSC and its consolidated subsidiaries as at the end of such quarter,
and the related consolidated statement of income and statement of cash flows of
BSC for such quarter certified by Lessee's chief financial officer setting forth
in each case in comparative form (A) for the consolidated balance sheet, the
figures as of the end of BSC's previous fiscal year, and (B) for the
consolidated statement of income and cash flows, the figures for the
corresponding portion of BSC's previous fiscal year, prepared in accordance with
GAAP (except for the absence of footnotes and subject to normal year end
adjustment); and (3) promptly after the date on which they are filed, all
regular periodic reports, forms and other filings required to be made by Lessee
to the Securities and Exchange Commission, if any. (b) Lessee will promptly
execute and deliver to Lessor such further documents, instruments and assurances
and take such further action as Lessor from time to time may reasonably request
in order to carry out the intent and purpose of this Lease and to establish and
protect the rights and remedies of Lessor addressed under the Lease Documents.
(c) Lessee shall provide written notice to Lessor: (1) thirty (30) days prior to
any contemplated change in the name or address of the chief executive office of
Lessee; (2) promptly upon the occurrence of any Default (as hereinafter defined)
or event which, with the lapse of time or the giving of notice by Lessor, or
both, would become a Default (a "default"; except as used in Sections 15 and
16); and (3) promptly upon Lessee becoming aware that a violation of applicable
law relating to the Equipment or this Lease might reasonably be deemed to have
occurred.
5. CONDITIONS PRECEDENT. Lessor's obligations under each Equipment
Schedule, including its obligation to acquire and lease any Equipment to be
leased thereunder, are conditioned upon Lessor's determination that all of the
following have been satisfied: (a) Lessor having received the following, in form
and substance reasonably satisfactory to Lessor: (1) evidence as to due
compliance with the insurance provisions hereof; (2) Uniform Commercial Code
financing statements and all other filings and recordings as required by Lessor;
(3) certificate of Lessee's Secretary certifying: (i) resolutions of Lessee's
Board of Directors duly authorizing the leasing of the Equipment hereunder and
the execution, delivery and performance of this Lease and the Equipment Schedule
and all related instruments and documents, and (ii) the incumbency and signature
of the officers of Lessee authorized to execute such documents; (4) an opinion
of counsel for Lessee as to each of the matters set forth in subparts (a)
through (d) of Section 3 hereof; (5) the only manually executed original of the
Equipment Schedule and all other Lease Documents; (6) all acquisition documents
pertaining to the Equipment, including without limitation, the Bond Documents
(collectively, the "Supply Contract"); (7) copy of IRS Form W-9, Payer Request
for Taxpayer Identification Number, executed by Lessee; and (8) such other
documents, agreements, instruments, certificates, opinions, assurances, as
Lessor reasonably may require. (b) All representations and warranties provided
in favor of Lessor in any of the Lease Documents shall be true and correct on
the effective date of such Equipment Schedule with the same effect as though
made as of such date (Lessee's execution and delivery of the Equipment Schedule
shall constitute an acknowledgment of the same). (c) There shall be no default
or Default under the Equipment Schedule or any other Lease Documents. The
Equipment shall have been delivered to and accepted by Lessee, and shall be in
the condition and repair required hereby; and on the effective date of the
Equipment Schedule, Lessor shall have received good title to the Equipment to be
leased thereunder, free and clear of any lien, claim or encumbrance of any kind.
6. DELIVERY; INSPECTION AND ACCEPTANCE BY LESSEE. Upon delivery, Lessee
shall inspect and, to the extent the Equipment conforms to the condition
required by the applicable Supply Contract, accept the Equipment and shall
execute and deliver to Lessor an Equipment Schedule containing a complete
description of the item of Equipment accepted; whereupon, as between Lessor and
Lessee, the same shall be deemed to have been finally accepted by Lessee
pursuant to this Lease. All expenses incurred in connection with Lessor's
purchase of the Equipment (including shipment, delivery and installation) shall
be the responsibility of Lessee and shall be paid by Lessee upon demand or
reimbursed by Lessor, in the discretion of Lessor. If Lessee shall, for
reasonable cause, refuse to accept delivery of any item of the Equipment, Lessee
will be assigned all rights (including the rights of rejection and revocation
under Article 2 of the UCC) and shall assume all obligations as purchaser of the
Equipment.
7. USE AND MAINTENANCE. (a) Lessee shall: (1) use the Equipment solely
in the Continental United States and in the conduct of its or an affiliate's
business, for the purpose for which the Equipment was designed, in a careful and
proper manner, and shall not permanently discontinue use of the Equipment; (2)
operate, maintain, service and repair the Equipment, and maintain all records
and other materials relating thereto, (i) in accordance and consistent with (A)
the Supplier's recommendations and all maintenance and operating manuals or
service agreements, whenever furnished or entered into, including any subsequent
amendments or replacements thereof, issued by the Supplier or service provider,
(B) the requirements of all applicable insurance policies, (C) the Supply
Contract, so as to preserve all of Lessee's and Lessor's rights thereunder,
including all rights to any warranties, indemnities or other rights or remedies,
(D) all applicable laws, and (E) the prudent practice of other similar companies
in the same business as Lessee, but in any event, to no lesser standard than
that employed by Lessee for comparable equipment owned or leased by it; and (ii)
without limiting the foregoing, so as to cause the Equipment to be in good
repair and operating condition and in at least the same condition as when
delivered to Lessee hereunder, except for ordinary wear and tear resulting
despite Lessee's full compliance with the terms hereof, (3) not change the
location of any Equipment as specified in the Equipment Schedule without the
prior written consent of Lessor; (4) not attach or incorporate the Equipment to
or in any other item of equipment in such a manner that the Equipment may be
deemed to have become an accession to or a part of such other item of equipment;
and (5) cause each principal item of the Equipment to be continually marked, in
a plain and distinct manner, with the name of Lessor followed by the words
"Owner and Lessor," or other appropriate words designated by Lessor on labels
furnished by Lessor. (b) Within a reasonable time, Lessee will replace any parts
of the Equipment which become worn out, lost, destroyed, damaged beyond repair
or otherwise permanently rendered unfit for use, with manufacturer's approved
new or reconditioned replacement parts which are free and clear of all liens,
encumbrances or rights of others and have a value, utility and remaining useful
life at least equal to the parts replaced. Title to all parts, improvements and
additions to the Equipment immediately shall vest in Lessor, without cost or
expense to Lessor or any further action by any other person, and such parts,
improvements and additions shall be deemed incorporated in the Equipment and
subject to the terms of this Lease as if originally leased hereunder, if such
parts are essential to the operation of the Equipment or cannot be detached from
the Equipment without materially interfering with the operation of the Equipment
or adversely affecting the value, utility and remaining useful life which the
Equipment would have had without the addition thereof. Lessee shall not make any
material alterations to the Equipment without the prior written consent of
Lessor. (c) Upon forty-eight (48) hours' notice, Lessee shall afford Lessor
access to the premises where the Equipment is located for the purpose of
inspecting such Equipment and all applicable maintenance or other records at any
reasonable time during Lessee's normal business hours; provided, however, if a
default or Default shall have occurred and then be continuing, no notice of any
inspection by Lessor shall be required.
8. DISCLAIMER OF WARRANTIES. LESSOR IS NOT A SELLER, SUPPLIER OR
MANUFACTURER (AS SUCH TERMS ARE DEFINED OR USED, AS THE CASE MAY BE, IN THE
UNIFORM COMMERCIAL CODE), DEALER, OR A SELLER'S OR A DEALER'S AGENT. THE
EQUIPMENT IS LEASED HEREUNDER "AS IS", AND LESSOR HAS NOT MADE, AND HEREBY
DISCLAIMS LIABILITY FOR, AND LESSEE HEREBY WAIVES ALL RIGHTS AGAINST LESSOR
RELATING TO, ANY AND ALL WARRANTIES, REPRESENTATIONS OR OBLIGATIONS OF ANY KIND
WITH RESPECT TO THE EQUIPMENT, EITHER EXPRESS OR IMPLIED, ARISING BY APPLICABLE
LAW OR OTHERWISE, INCLUDING ANY OF THE SAME RELATING TO OR ARISING IN OR UNDER
(a) MERCHANTABILITY OR FITNESS FOR PARTICULAR USE OR PURPOSE, (b) COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OR TRADE OR (c) TORT (WHETHER OR NOT
ARISING FROM THE ACTUAL, IMPLIED OR IMPUTED NEGLIGENCE OF LESSOR OR STRICT
LIABILITY) OR THE UNIFORM COMMERCIAL CODE (INCLUDING ARTICLE 2A, AS HEREINAFTER
DEFINED; AND, WITHOUT LIMITING THE FOREGOING, INCLUDING, (i) ANY WARRANTIES
CONTAINED IN ss. 2A-210, 2A-211 2A-212 AND 2A-213, (ii) ANY RIGHT TO DEEM LESSOR
IN DEFAULT PURSUANT THERETO, AND (iii) ALL OF LESSEE'S RIGHTS AND REMEDIES UNDER
ss. 2A-508 THROUGH 2A-521) OR OTHER APPLICABLE LAW WITH RESPECT TO THE
EQUIPMENT, INCLUDING ITS TITLE OR FREEDOM FROM LIENS, FREEDOM FROM TRADEMARK,
PATENT OR COPYRIGHT INFRINGEMENT, FREEDOM FROM LATENT DEFECTS (WHETHER OR NOT
DISCOVERABLE), CONDITION, MANUFACTURE, DESIGN, SERVICING OR COMPLIANCE WITH
APPLICABLE LAW; it being agreed that all such risks, as between Lessor and
Lessee, are to be borne by Lessee; and Lessor's agreement to enter into this
Lease and any Equipment Schedule is in reliance upon the freedom from and
complete negation of liability or responsibility for the matters waived and
disclaimed herein. Lessor is not responsible for any direct, indirect,
incidental or consequential damage to or losses resulting from the installation,
operation or use of the Equipment or any products manufactured thereby. All
assignable warranties made by the Supplier to Lessor are hereby assigned to
Lessee for and during the term of this Lease and Lessee agrees to resolve all
claims under such warranties directly with the Supplier. Provided that no
default or Default has occurred and is then continuing, Lessor fully shall
cooperate with Lessee with respect to the resolution of such claims, in good
faith and by appropriate proceedings at Lessee's expense. Any such claim shall
not affect in any manner the unconditional obligation of Lessee to make rent
payments hereunder.
9. FEES AND TAXES. (a) To the extent permitted by law, Lessee shall
file any necessary report and return for, shall pay promptly when due, shall
otherwise be liable to reimburse Lessor for, and agrees to indemnify and hold
Lessor harmless from (in all cases on an after-tax basis): (i) all titling,
recordation, documentary stamp and other fees; and (ii) taxes, assessments and
all other charges or withholdings of any nature (together with any penalties,
fines or interest thereon); arising at any time upon or relating to the
Equipment or this Lease or the delivery, acquisition, ownership, sale, use,
operation or leasing or other disposition of the Equipment, or upon the rent,
whether the same be assessed to Lessor or Lessee, or upon or with respect to any
Bond Document or any of the transactions contemplated therein or the lease of
the Equipment from the Authority to Lessor (any of the foregoing, an
"Imposition"). The indemnity obligation in the preceding sentence shall not
apply to any Imposition calculated solely on the basis of income (other than
Impositions that are, or are in the nature of, sales, use, rental, transfer,
property, stamp, value added or similar impositions). (b) If any report, return
or property listing, or any Imposition is, by law, required to be filed by,
assessed or billed to, or paid by, Lessor, Lessee at its own expense will do all
things required to be done by Lessor (to the extent permitted by law) in
connection therewith and is hereby authorized by Lessor to act on behalf of
Lessor in all respects, including the contest or protest, in good faith and by
appropriate proceedings, of the validity of any Imposition, or the amount
thereof, provided, however, that Lessee may not conduct and control the contest
of any Imposition if such contest cannot be pursued independently from any other
proceeding involving a tax or other liability of Lessor for which Lessee is not
obligated to indemnify Lessor pursuant to this Section; provided further, that
Lessee shall not be required to contest, or otherwise take any action with
respect to, any imposition excluded under the second sentence of subsection (a)
of this Section 9. Lessor agrees fully to cooperate with Lessee in any such
contest, and Lessee agrees promptly to indemnify Lessor for all reasonable
expenses incurred by Lessor in the course of such cooperation. An Imposition or
Claim (as hereinafter defined) therefor shall be paid, subject to refund
proceedings, if failure to pay would adversely affect the title or rights of
Lessor. Provided that no default or Default has occurred and is continuing, if
Lessor obtains a refund of any Imposition which has been paid (by Lessee, or by
Lessor and for which Lessor has been reimbursed by Lessee), Lessor shall
promptly pay or credit to Lessee the net amount of such refund to the extent
actually received. Lessee will cause all billings of such charges to Lessor to
be made to Lessor in care of Lessee and will, in preparing any report or return
required by law, show the ownership of the Equipment in Lessor, and shall send a
copy of any such report or return to Lessor. If Lessee fails to pay any such
charges when due, except any Imposition being contested in good faith and by
appropriate proceedings as above provided for a reasonable period of time,
Lessor at its option may do so, in which event the amount so paid (including any
penalty or interest incurred as a result of Lessee's failure), plus interest
thereon at the Late Charge Rate, shall be paid by Lessee to Lessor with the next
periodic payment of rent. (c) As used herein, the term "Lessor" shall mean and
include Lessor and the consolidated Federal taxpayer group of which Lessor is a
member. The obligations of Lessee under this Section shall survive the
expiration or termination of the Lease.
10. INTENT, TITLE AND LIENS. (a) The parties intend and agree that the
Equipment shall remain personal property, and that Lessor's legal ownership
thereto not be impaired, notwithstanding the manner in which it may be affixed
to any real property. Lessee shall obtain and deliver to Lessor, from any person
having an interest in the property where the Equipment is to be located, waivers
of any lien, encumbrance or interest which such person might have or hereafter
obtain or claim with respect to the Equipment. (b) It is the express intention
of the parties hereto that (1) each Equipment Schedule, incorporating by
reference the terms of this Lease, constitutes a true "lease" and a "finance
lease" as such terms are defined in the Uniform Commercial Code Article 2A
Leases ("Article 2A") (whether or not Article 2A is then in effect in the State)
and not a sale or retention of security interest; and (2) legal ownership to the
Equipment shall at all times remain in Lessor, and Lessee shall acquire no
ownership, property, rights, equity, or interest other than a leasehold
interest, solely as Lessee subject to the terms and conditions hereof. If,
notwithstanding the express intent of the parties, a court of competent
jurisdiction determines that any Equipment Schedule is not a true lease, but is
rather a sale and extension of credit, a lease intended for security, a loan
secured by the Equipment specified in such Equipment Schedule, or other similar
arrangement, the parties agree that in such event: (i) (A) in order to secure
the prompt payment and performance as and when due of all of Lessee's
obligations (both now existing and hereafter arising) under each such Equipment
Schedule, Lessee shall be deemed to have granted, and it hereby grnats, to
Lessor a first priority security interest in the following (whether now existing
or hereafter created): the Equipment leased pursuant to such Equipment Schedule
and all replacements, substitutions, accessions, and proceeds (cash and
non-cash; but without power of sale), including the proceeds of all insurance
policies, thereof, and (B) Lessee agrees that with respect to the Equipment, in
addition to all of the other rights and remedies available to Lessor hereunder
upon the occurrence of a Default, Lessor shall have all of the rights and
remedies of a first priority secured party under the UCC; and (ii) (A) the
original principal amount of any such obligation, as determined from the
execution date of the applicable Equipment Schedule, shall be an amount equal to
the aggregate Total Invoice Cost of all Equipment referenced on such Equipment
Schedule, (B) the remaining term of any such obligation shall be the same as the
remaining term specified for such Equipment in the related Equipment Schedule,
(C) the payments under any such obligation shall be the remaining regular
installments of rent specified in the Equipment Schedule for such Equipment, and
(D) any such obligation shall be at an interest rate that is equal to the lesser
of the maximum lawful rate permitted by applicable law or the effective interest
rate calculated on the basis of the foregoing principal amount, term and
payments as if the principal amount were fully amortized over the term of the
obligation. For purposes of this sub-part (b), this Lease, the Equipment
Schedule, or a photocopy of either thereof may be filed as a financing statement
under the UCC. (c) Lessee may not dispose of any of the Equipment except to the
extent expressly provided herein, notwithstanding the fact that proceeds
constitute a part of the Equipment. (d) Lessee further agrees to maintain the
Equipment free from all claims, liens, attachments, rights of others and legal
processes ("Liens") of creditors of Lessee or any other persons, other than the
Bond Lease, the Indenture and Liens for fees, taxes, levies, duties or other
governmental charges of any kind, Liens of mechanics, materialmen, laborers,
employees or suppliers and similar Liens arising by operation of law incurred by
Lessee in the ordinary course of business for sums that are not yet delinquent
or are being, contested in good faith by negotiations or by appropriate
proceedings which suspend the collection thereof (provided, however, that such
proceedings do not involve any substantial danger (as determined in Lessor's
sole reasonable discretion) of the sale, forfeiture or loss of the Equipment or
any interest therein). Lessee will defend, at its own expense, Lessor's title to
the Equipment from such claims, Liens or legal processes. Lessee shall also
notify Lessor immediately upon receipt of notice of any Lien affecting the
Equipment in whole or in part.
11. INSURANCE. Lessee shall obtain and maintain all-risk insurance
coverage with respect to the Equipment insuring against, among other things:
casualty coverage, including loss or damage due to fire and the risks normally
included in extended coverage, malicious mischief and vandalism, for not less
than the greater of the full replacement value or the Stipulated Loss Value (as
defined in Section 12 hereof); and public liability coverage, including both
personal injury and property damage with a combined single limit per occurrence
of not less than the amount specified in the Equipment Schedule. The aggregate
deductibles for such coverages for all Equipment shall not exceed $500,000. All
said insurance shall be in form (including all endorsements reasonably required
by Lessor) and amount and with companies reasonably satisfactory to Lessor. All
insurance for loss or damage shall provide that losses, if any, shall be payable
to Lessor as loss payee and Lessee shall utilize its best efforts to have all
checks relating to any such losses delivered promptly to Lessor. Lessor shall be
named as an additional insured with respect to all such liability insurance.
Lessee shall pay the premiums therefor and deliver to Lessor evidence
satisfactory to Lessor of such insurance coverage. Lessee shall cause to be
provided to Lessor, not less than fifteen (15) days prior to the scheduled
expiration or lapse of such insurance coverage, evidence satisfactory to Lessor
of renewal or replacement coverage. Each insurer shall agree, by endorsement
upon the policy or policies issued by it or by independent instrument furnished
to Lessor, that (a) it will give Lessor thirty (30) days' prior written notice
of the effective date of any material alteration or cancellation of such policy;
and (b) insurance as to the interest of any named additional insured or loss
payee other than Lessee shall not be invalidated by any actions, inactions,
breach of warranty or conditions or negligence of Lessee or any person other
than Lessor with respect to such policy or policies. The proceeds of such
insurance payable as a result of loss of or damage to the Equipment shall be
applied as required by the provisions of Section 12 hereof.
12. LOSS AND DAMAGE. Lessee assumes the risk of direct and
consequential loss and damage to the Equipment from all causes. Except as
provided in this Section for discharge upon payment of Stipulated Loss Value, no
loss or damage to the Equipment or any part thereof shall release or impair any
obligations of Lessee under this Lease. Lessee agrees that Lessor shall not
incur any liability to Lessee for any loss of business, loss of profits,
expenses or any other Claims resulting to Lessee by reason of any failure of or
delay in delivery or any delay caused by any non-performance, defective
performance or breakdown of the Equipment, nor shall Lessor at any time be
responsible for personal injury or the loss or destruction of any other property
resulting from the Equipment. In the event of loss or damage to any item of
Equipment which does not constitute a Total Loss (as hereinafter defined),
Lessee shall, at its sole cost and expense, promptly repair and restore such
item of the Equipment to the condition required by this Lease. Provided that no
default or Default has occurred and is continuing, upon receipt of evidence
reasonably satisfactory to Lessor of completion of such repairs, Lessor will
apply any net insurance proceeds received by Lessor on account of such loss to
the cost of repairs. Upon the occurrence of the actual or constructive total
loss of any item of the Equipment, or the loss, disappearance, theft or
destruction of any item of the Equipment or damage to any item of the Equipment
to such extent as shall make repair thereof uneconomical or shall render any
item of the Equipment permanently unfit for normal use for any reason
whatsoever, or the condemnation, confiscation, requisition, seizure, forfeiture
or other taking of use of any item of the Equipment or the imposition of any
Lien thereon by any governmental authority (as established to the reasonable
satisfaction of Lessor; any such occurrence being herein referred to as a "Total
Loss"), during the term of this Lease, Lessee shall give prompt notice thereof
to Lessor. On the next date for the payment of rent, Lessee shall pay to Lessor
the rent due on that date plus the Stipulated Loss Value of the item or items of
the Equipment with respect to which the Total Loss has occurred and any other
sums due hereunder with respect to that Equipment (less any insurance proceeds
or condemnation award actually paid). Upon making such payment, this Lease and
the obligation to make future rental payments shall terminate solely with
respect to the Equipment or items thereof so paid for and (to the extent
applicable) Lessee shall promptly become entitled thereto, AS IS, WHERE IS and
without warranty, express or implied, with respect to any matter whatsoever.
Lessor shall deliver to Lessee a bill of sale transferring and assigning to
Lessee without recourse or warranty, all of Lessor's right, title and interest
in and to such Equipment. Lessor shall not be required to make and may
specifically disclaim any representation or warranty as to the condition of the
Equipment or any other matters. As used in this Lease, "Stipulated Loss Value"
shall mean the product of the Invoice Cost (designated on the appropriate
Equipment Schedule) for such item of Equipment and the applicable percentage
factor set forth on the Schedule of Stipulated Loss Values attached to the
Equipment Schedule. Stipulated Loss Value shall be determined as of the next
date on which a payment of rent is or would be due after a Total Loss or other
termination of an Equipment Schedule, after payment of any rent due on such
date, and the applicable percentage factor shall be that which is set forth with
respect to such rent payment. After payment of the final payment of rent due
under the original term of this Lease and during any renewal term thereof,
Stipulated Loss Value shall be determined as of the date of termination of such
Equipment Schedule (absent any renewal thereof or, if during a renewal term, on
the next date on which a payment of rent is or would be due after a Total Loss
or other termination of such renewal term, after payment of any rent due on such
date, and the applicable percentage factor shall be the last percentage factor
set forth on the Schedule of Stipulated Loss Values attached to such Equipment
Schedule.
13. REDELIVERY. Upon the expiration or earlier termination of the term
of any Equipment Schedule (or of any renewal thereof, if applicable), Lessee
shall, at its own expense, disassemble, crate and deliver the Equipment to
Lessor no later than ten (10) days after the end of the lease term for such
Equipment (or the end of the Storage Period (as hereinafter defined if
applicable), (a) in the same condition as when delivered to Lessee hereunder,
ordinary wear and tear resulting from proper use thereof excepted, (b) in the
operating condition required for a third party to immediately install it at an
alternate location for its original intended use, capable of its designed
capacity, (c) having been used, operated, serviced and repaired in accordance
with, and other-wise complying with, Section 7 hereof, and (d) free and clear of
all Liens whatsoever except Liens resulting from claims against Lessor not
relating to the ownership of such Equipment. Lessee shall return the Equipment
by delivering it to such place within the Continental United States as Lessor
shall specify. In addition to Lessor's other rights and remedies hereunder, if
the Equipment is not returned on the last day of the lease term for such
Equipment, or if repairs are necessary to place any items of Equipment in the
condition required in this Section, Lessee shall continue to pay to Lessor per
diem rent at the last prevailing lease rate under the applicable Equipment
Schedule with respect to such items of Equipment, for the period of delay in
redelivery, or for the period of time reasonably necessary to accomplish such
repairs together with the reasonable cost of such repairs, as applicable.
Lessor's acceptance of such rent on account of such delay or repair does not
constitute a renewal of the term of the related Equipment Schedule or a waiver
of Lessor's right to prompt return of the Equipment in proper condition. Lessee
shall permit Lessor to store the Equipment intact, free of charge, at the
facility of Lessee where the Equipment was last agreed to be located during the
Lease for a period (the "Storage Period") beginning on the last day of the lease
term and ending not more than 120 days thereafter. During the Storage Period
Lessee shall (i) be responsible for such storage in respect of the stored
Equipment at Lessee's sole cost and expense, (ii) maintain insurance in respect
thereof in accordance with Section 1 11, and (iii) not relocate or disassemble
the Equipment without the prior written consent of Lessor. Lessee shall not be
required to store the Equipment after the Storage Period. In the event that
Lessee shall not have timely provided Lessor with written notice of its election
to either renew or purchase any Equipment in accordance with the provisions of
the applicable Equipment Schedule, from the date such above-referenced written
notice was due under the terms of this Lease, through the end of the Storage
Period, Lessee will permit Lessor and any representative or representatives of
Lessor or any prospective purchaser or user of such Equipment to inspect the
same (at Lessee's expense for the initial inspection, if any, during the Storage
Period but at Lessor's expense for each such inspection, if any, after the
initial inspection during the Storage Period) during Lessee's normal business
hours. If pursuant to such inspection the inspected Equipment is determined by
Lessor (or such representative) not to conform to the requirements of this
Section 13, Lessee shall promptly make such repairs or replacements as shall be
necessary for such Equipment to so conform; provided, that such inspection shall
be subject to Lessee's reasonable safety requirements and arranged at a mutually
convenient time (not unduly delayed from the time so requested) so as not to
materially interfere with the normal conduct of Lessee's business.
14. INDEMNITY. Lessee assumes and agrees to indemnify, defend and keep
harmless Lessor, and any assignee of Lessor's rights, obligations, title or
interests under any Equipment Schedule, its agents and employees
("Indemnitees"), from and against any and all Claims (other than such as may
result from the gross negligence or willful misconduct of such Indemnitees), by
paying (on an after-tax basis) or otherwise discharging same, when and as such
Claims shall become due, including Claims arising on account of (a) any Lease
Document or Bond Document, or (b) the Equipment, or any part thereof, including
the ordering, acquisition, delivery, installation or rejection of the Equipment,
the possession, maintenance, use, condition, ownership or operation of any item
of Equipment, and by whomsoever owned, used or operated, during the term of any
Equipment Schedule with respect to that item of Equipment, the existence of
latent and other defects (whether or not discoverable by Lessor or Lessee), any
claim in tort for negligence or strict liability, any claim for patent,
trademark or copyright infringement, any claim for the loss, damage,
destruction, removal, return, surrender, sale or other disposition of the
Equipment or any item thereof, or for whatever other reason whatsoever. It is
the express intention of both Lessor and Lessee that the indemnity provided for
in this Section includes the agreement by Lessee to indemnify the Indemnitees
from the consequences of such Indemnitees' own simple negligence, whether that
negligence is the sole or concurring cause of the Claims, and to further
indemnify such Indemnitees with respect to Claims for which the Indemnitees are
strictly liable. Lessor shall give Lessee prompt notice of any Claim hereby
indemnified against and Lessee shall be entitled to control the defense thereof,
so long as no payment default, bankruptcy or insolvency default or Default has
occurred and is then continuing; provided, however, that Lessor shall have the
right, in its reasonable discretion, to approve defense counsel selected by
Lessee. For the purposes of this Lease, the term "Claims" shall mean all claims,
allegations, harms, judgments, good faith settlements entered into, suits,
actions, debts, obligations, damages (whether incidental, consequential or
direct), demands (for compensation, indemnification, reimbursement or
otherwise), losses, penalties, fines, liabilities (including strict liability),
charges that Lessor has incurred or for which it is responsible, in the nature
of interest, Liens, and costs (including attorneys' fees and disbursements and
any other legal or non-legal expenses of investigation or defense of any Claim,
whether or not such Claim is ultimately defeated or incurred in enforcing the
rights, remedies or indemnities provided for hereunder, or otherwise available
at law or equity to Lessor), of whatever kind or nature, contingent or
otherwise, matured or unmatured, foreseeable or unforeseeable, by or against any
person.
15. DEFAULT. (a) A default shall be deemed to have occurred hereunder
and under an Equipment Schedule ("Default") if (1) Lessee shall fail to make any
payment of rent hereunder or under an Equipment Schedule within ten (10) days
after the same shall have become due; or (2) Lessee shall fail to obtain and
maintain the insurance required herein; or (3) Lessee shall fail to perform or
observe any other covenant, condition or agreement to be performed or observed
by it under any Lease Document and such failure shall continue unremedied for a
period of thirty (30) days after the earlier of (i) actual knowledge thereof by
any Responsible Officer, or (ii) written notice thereof to Lessee by Lessor; or
(4) Lessee shall (i) be generally not paying its debts as they become due; or
(ii take action for the purpose of invoking the protection of any bankruptcy or
insolvency law, or any such law is invoked against or with respect to Lessee or
its property, and any such action taken against Lessee is not dismissed within
sixty (60) days; or (5) Lessee shall make or permit any unauthorized Lien
against, or assignment or transfer of, this Lease, an Equipment Schedule, the
Equipment, or any interest therein; or (6) any certificate, statement,
representation, warranty or audit contained herein or furnished with respect
hereto by or on behalf of Lessee proves to have been false in any material
respect at the time as of which the facts therein set forth were stated or
certified, or to have omitted any substantial contingent or unliquidated
liability or Claim against Lessee; or (7) Lessee shall be in default under the
Bond Documents or any material obligation for borrowed money under which BSE is
indebted for a sum exceeding $1,000,000 or under which BSC is indebted for a sum
exceeding $10,000,000, for the deferred purchase price of property or any lease
agreement, and the applicable grace period with respect thereto shall have
expired; or (8) Lessee shall have terminated its corporate existence,
consolidated with, merged into, or conveyed or leased substantially all of its
assets as an entirety to any person (such actions being referred to as an
"Event"), unless not less than sixty (60) days prior to such Event: (i) such
person executes and delivers to Lessor an agreement satisfactory in form and
substance to Lessor, in its sole discretion containing such person's effective
assumption, and its agreement to pay, perform, comply with and otherwise be
liable for, in a due and punctual manner, all of Lessee's obligations having
previously arisen, or then or thereafter arising, under any and all of the Lease
Documents; and (ii) Lessor is satisfied as to the creditworthiness of such
person, and as to such person's conformance to the other standard criteria then
used by Lessor for such purposes; or (9) there occurs a default or anticipatory
repudiation under any guaranty executed in connection with this Lease; or (10)
in the event Lessee is a privately held corporation and effective control of
Lessee's voting capital stock, issued and outstanding from time to time, is not
retained by the present controlling stockholder (if one stockholder has such
effective control) or stockholders (if more than one stockholder has such
effective control) unless, in any case, Lessee shall have provided sixty (60)
days' prior written notice to Lessor of the proposed disposition of stock and
Lessor shall have consented thereto in writing; or (1 1) in the event Lessee is
a publicly held corporation and, as a result of or in connection with a material
change in the ownership of Lessee's capital stock, Lessee's Debt to Tangible Net
Worth equals or exceeds twice the ratio of Lessee's Debt to tangible Net Worth
as of the date of this Lease, without the prior written consent of Lessor. As
used herein, "Debt" shall mean Lessee's total liabilities which, in accordance
with GAAP, would be included in the liability side of a balance sheet; and
"Tangible Net Worth" shall mean Lessee's tangible net worth including the sum of
the par or stated value of all outstanding capital stock, surplus and undivided
profits, less any amounts attributable to goodwill, patents, copyrights, mailing
lists, catalogs, trademarks, bond discount and underwriting expenses,
organization expense and other intangibles. Accounting terms used herein shall
be as defined, and all calculations hereunder shall be made, in accordance with
GAAP. (b) The occurrence of a Default with respect to any Equipment Schedule
shall, at the sole discretion of Lessor, constitute a Default with respect to
any or all Equipment Schedules to which it is then a party. Notwithstanding
anything set forth herein, Lessor may exercise all rights and remedies hereunder
independently with respect to each Equipment Schedule.
16. REMEDIES. Without limiting Lessor's other rights hereunder, if
Lessee shall fail to pay any amount of rent hereunder or under any Equipment
Schedule within sixty (60) days after the same shall have become due, Lessee
automatically shall be deemed to be in default hereunder and under said
Equipment Schedule and all of Lessee's rights, but not its obligations, under
such Equipment Schedule and in and to the Equipment leased thereunder
automatically shall be cancelled, whereupon Lessee's right to possess and use
such Equipment immediately shall cease; and Lessee hereby agrees that the
foregoing shall occur without act or notice as a condition thereto, and any such
requirement of any act or notice under applicable law is hereby expressly and
irrevocably waived to the extent permitted thereunder. Upon the occurrence of
any other Default under the provisions of Section 15 hereof (including the
failure to make any payment of rent as and when due), Lessor may, at its option,
declare this Lease and such Equipment Schedule to be in default. At any time
after cancellation of an Equipment Schedule or after declaration by Lessor that
such Equipment Schedule is in default, Lessor may, in addition to any other
remedies provided herein or by applicable law (including, without limitation,
such remedies specified under the Uniform Commercial Code), exercise one or more
of the following remedies as Lessor in its sole discretion shall elect:
(a) Require Lessee to assemble any or all of the Equipment at the
location to which the Equipment was delivered or the location to which such
Equipment may have been moved by Lessee or such other location in reasonable
proximity to either of the foregoing as Lessor shall designate; and/or to return
promptly, at Lessee's expense, any or all of the Equipment to Lessor at the
location, in the condition and otherwise in accordance with all of the terms of
Section 13 hereof; and/or take possession of and render unusable by Lessee any
or all of the Equipment, wherever it may be located, without any court order or
other process of law and without liability for any damages occasioned by such
taking of possession (other than to premises) (any such taking of possession
shall constitute an automatic cancellation of the Equipment Schedule pertaining
thereto, as it applies to those items taken without further notice, and such
taking of possession shall not prohibit Lessor from exercising its other
remedies hereunder).
(b) Sell, re-lease or otherwise dispose of any or all of the Equipment,
whether or not in Lessor's possession, in a commercially reasonable manner at
public or private sale with notice to Lessee (the parties agreeing that ten (10)
days' prior written notice shall constitute adequate notice of such sale), with
the right of Lessor to purchase and apply the net proceeds of such disposition,
after deducting all costs of such disposition (including but not limited to
costs of transportation, possession, storage, refurbishing, advertising and
brokers' fees), to the obligations of Lessee pursuant to this sub-part (b), with
Lessee remaining liable for any deficiency and with any excess being retained by
Lessor; or retain any or all of the Equipment; and recover from Lessee damages,
not as a penalty, but herein liquidated for all purposes as follows:
(1) if Lessor elects to dispose of the Equipment under an
Equipment Schedule pursuant to a lease which is substantially similar
to this Lease and such Equipment Schedule: an amount equal to the sum
of (A) any accrued and unpaid rent under this Lease and such Equipment
Schedule as of the date of commencement (the "Commencement Date") of
the term of the new lease, and (B) (i) the present value as of the
Commencement Date of the total rent for the then remaining term of such
Equipment Schedule, minus (ii) the present value as of the Commencement
Date of the rent under the new lease applicable to that period of the
new lease term which is comparable to the then remaining term of such
Equipment Schedule, and (C) any incidental damages allowed under
Article 2A, less expenses saved by Lessor in consequence of the Default
("Incidental Damages");
(2) if Lessor elects to retain the Equipment or to dispose of
the Equipment under an Equipment Schedule by sale, by re-lease
(pursuant to a lease which is not substantially similar to this Lease
and such Equipment Schedule), or otherwise: an amount equal to the sum
of (A) any accrued and unpaid rent as of the date Lessor repossesses
the Equipment or such earlier date as Lessee tenders possession of the
Equipment to Lessor, (B) (i) the present value as of the date
determined under clause (A) of the total rent for the then remaining
term of such Equipment Schedule, minus (ii) the present value, as of
that certain date which may be determined by taking a reasonable
opportunity to repossess and remarket the Equipment, of the "market
rent" (as computed pursuant to Article 2A) at the place where the
Equipment was located on that date, computed for the same lease term,
and (C) any Incidental Damages (provided, however, that if the measure
of damages provided is inadequate to put Lessor in as good a position
as performance would have, the damages shall be the present value of
the profit, including reasonable overhead, Lessor would have made from
full performance by Lessee, together with any incidental damages
allowed under Article 2A, due allowance for costs reasonably incurred
and due credit for payments or proceeds of disposition);
(3) if, with respect to an Equipment Schedule, Lessor has not
repossessed the Equipment, or if Lessor has repossessed the Equipment
or Lessee has tendered possession of the Equipment to Lessor and Lessor
is unable after reasonable effort to dispose of the Equipment at a
reasonable price or the circumstances reasonably indicate that such an
effort will be unavailing: an amount equal to the sum of (A) accrued
and unpaid rent as of the date of entry of judgment in favor of Lessor,
(B) the present value as of the date determined under clause (A) of the
rent for the then remaining term of such Equipment Schedule, and (C)
any Incidental Damages. Lessor may dispose of the Equipment at any time
before collection of a judgment for damages. If the disposition is
before the end of the remaining term of such Equipment Schedule,
Lessor's recovery against Lessee for damages will be governed by
sub-part (b)(1) or (2) (as applicable), and Lessor will cause an
appropriate credit to be provided against any judgment for damages to
the extent that the amount of the judgment exceeds the applicable
recovery pursuant to sub-part (b)(1) or (2).
(c) In lieu of the damages specified in sub-part (b), with respect to
each applicable Equipment Schedule, Lessor may recover from Lessee, as
liquidated damages for loss of a bargain and not as a penalty, an amount
calculated as the sum of: (1) the greater of either (A) the Stipulated Loss
Value of the Equipment (determined as of the next date on which a payment is or
would have been due after the occurrence of the subject Default), together with
all other sums due under such Equipment Schedule as of such determination date
or (B) all sums due and to become due under such Equipment Schedule for the full
term thereof (including any tax indemnities becoming due as a result of the
Default, and any mandatory purchase or renewal options which Lessee has
contracted to pay) (provided that all sums becoming due after the occurrence of
such Default shall be discounted to present value as of the date of payment by
Lessee) plus Lessor's estimated residual interest in the Equipment; plus (2) the
amount of all commercially reasonable costs and expenses incurred by Lessor in
connection with repossession, recovery, storage, repair, return, sale, re-lease
or other disposition of the Equipment, including reasonable attorneys' fees and
costs incurred in connection therewith or otherwise resulting from the Default;
minus (3) if Lessor has repossessed the Equipment, the amount calculated
pursuant to clause (B) (ii) of sub-part (b)(1) or (2) (as applicable).
Notwithstanding the foregoing, in the event such Equipment Schedule and Lessee's
rights thereunder automatically are cancelled pursuant to the first sentence of
this Section 16, the amounts payable under clause (1) of this paragraph (c)
automatically shall become due and payable on the date of such cancellation,
without notice or demand, except as otherwise may be provided in writing by
Lessor.
(d) Cancel such Equipment Schedule as to any or all of the Equipment.
(e) Proceed by appropriate court action, either at law or in equity
(including an action for specific performance), to enforce performance by Lessee
or to recover damages associated with such Default; or exercise any other right
or remedy available to Lessor at law or in equity.
All amounts to be present valued shall be discounted at a rate in effect
on the applicable date equal to the per annum rate of interest (computed on the
basis of a 360 day year of twelve 30 day months) established from time to time
by NationsBank, N.A. or any successor thereto, as its prime lending rate, which
rate may not be the lowest rate of interest charged by NationsBank, N.A., or any
successor thereto, to its customers. Unless otherwise provided above, a
cancellation of any Equipment Schedule shall occur only upon written notice by
Lessor to Lessee and only with respect to such items of the Equipment as Lessor
specifically elects to cancel in such notice. Except as to such items of the
Equipment with respect to which there is a cancellation, this Lease and the
Equipment Schedules not so cancelled shall remain in full force and effect and
Lessee shall be and remain liable for the full performance of all its
obligations hereunder and thereunder. Lessee shall be liable for all reasonable
legal fees and other expenses incurred by reason of any default or Default or
the exercise of Lessor's remedies, including all reasonable expenses actually
incurred in connection with the return of any Equipment in accordance with the
terms of Section 13 hereof or in placing, such Equipment in the condition
required by said Section, and all other pre-judgment and post-judgment
enforcement related activities. No right or remedy referred to in this Section
is intended to be exclusive, but each shall be cumulative and shall be in
addition to any other remedy referred to above or otherwise available at law or
in equity, and may be exercised concurrently or separately from time to time.
The failure of Lessor to exercise the rights granted hereunder upon any Default
by Lessee shall not constitute a waiver of any such right upon the continuation
or reoccurrence of any such Default. In no event shall the execution of an
Equipment Schedule constitute a waiver by Lessor of any preexisting Default in
the performance of the terms and conditions hereof.
17. ASSIGNMENT. (a) WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR (WHICH
SHALL NOT UNREASONABLY BE WITHHELD), LESSEE WILL NOT ASSIGN, TRANSFER OR
ENCUMBER ANY OF ITS RIGHTS OR OBLIGATIONS HEREUNDER OR UNDER ANY EQUIPMENT
SCHEDULE, OR ITS LEASEHOLD INTEREST, SUBLET THE EQUIPMENT OR OTHERWISE PERMIT
THE EQUIPMENT TO BE OPERATED OR USED BY, OR TO COME INTO OR REMAIN IN THE
POSSESSION OF, ANYONE BUT LESSEE. No assignment or sublease, whether authorized
in this Section or in violation of the terms hereof, shall relieve Lessee of its
obligations, and Lessee shall remain primarily liable, hereunder and under each
Equipment Schedule. Any unpermitted assignment, transfer, encumbrance,
delegation or sublease by Lessee shall be void ab initio. (b) LESSOR MAY AT ANY
TIME ASSIGN ANY OR ALL OF ITS RIGHTS, OBLIGATIONS, TITLE AND INTERESTS HEREUNDER
AND UNDER ANY EQUIPMENT SCHEDULE, TO ANY OTHER PERSON. If Lessee is given notice
of any such assignment, Lessee shall acknowledge receipt thereof in writing. Any
such assignee shall have and be entitled to exercise any and all rights and
powers of Lessor hereunder, but such assignee shall not be obligated to perform
any of the obligations of Lessor hereunder (other than the covenant of quiet
enjoyment specified in Section 18(d) hereof). Lessee will pay all rent and other
amounts payable by Lessee hereunder to such assignee, notwithstanding any
defense or claim of whatever nature, whether by reason of breach or otherwise
which it may now or hereafter have against Lessor; it being understood that in
the event of a default or breach by Lessor, that Lessee shall pursue any rights
on account thereof solely against Lessor. Lessee agrees that any such assignment
shall not materially change Lessee's duties or obligations under the Lease or
any Equipment Schedule nor materially increase Lessee's risks or burdens. Upon
such assignment and except as may otherwise be provided therein all references
in this Lease to Lessor shall include such assignee. (c) Subject always to the
foregoing, this Lease and each Equipment Schedule inure to the benefit of, and
are binding upon, the successors and assigns of the parties hereto and thereto,
as the case maybe.
18. MISCELLANEOUS. (a) This Lease, the Riders annexed hereto, each
Equipment Schedule and any commitment letter between the parties, constitute the
entire agreement between the parties with respect to the subject matter hereof
and thereof and shall not be rescinded, amended or modified in any manner except
by a document in writing executed by both parties. (b) Any provision of this
Lease which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. (c) The
representations, warranties and covenants of Lessee herein shall be deemed to be
continuing and to survive the execution and delivery of this Lease, each
Equipment Schedule and any other Lease Documents. Each execution by Lessee of an
Equipment Schedule shall be deemed a reaffirmation and warranty that there shall
have been no material adverse change in the business or financial condition of
Lessee from the date of execution hereof With respect to each Equipment
Schedule, the obligations of Lessee under Sections 7-, 8, 9,10, 13 and 14
hereof, together with any of Lessee's obligations under the other provisions of
this Lease (as incorporated therein) which have accrued but not been fully
satisfied, performed or complied with prior to the cancellation or termination
of such Equipment Schedule, shall survive the cancellation or termination
thereof to the extent necessary for the full and complete performance of such
obligations. (d) Lessor represents and covenants to Lessee that Lessor has full
authority to enter into this Lease and any other Lease Documents to which it may
become a party, and so long as no Default occurs with respect to an Equipment
Schedule, neither Lessor nor any person authorized by Lessor shall interfere
with Lessee's right to peaceably and quietly possess and use the Equipment
during the term thereof, subject to the terms and provisions hereof. (e)
Reasonable expenses incurred by Lessor in connection with (1) the filing or
recording of real property waivers and Uniform Commercial Code statements, and
(2) lien search reports and copies of filings with respect to Lessee and/or the
Equipment, shall be for the account of Lessee and shall be payable by Lessee
upon demand. (f) If Lessee fails to perform any of its obligations hereunder
with respect to an Equipment Schedule, Lessor shall have the right, but shall
not be obligated, to effect such performance, and the amount of any out of
pocket and other reasonable expenses of Lessor incurred in connection with such
performance, together with interest thereon at the Late Charge Rate, shall be
payable by Lessee upon demand. Lessor's effecting such compliance shall not be a
waiver of Lessee's default. (g) Lessee irrevocably appoints Lessor as Lessee's
attorney-in-fact (which power shall be deemed coupled with an interest) to
execute, endorse and deliver any UCC statements and any documents and checks or
drafts relating to or received in payment for any loss or damage under the
policies of insurance required by the provisions of Section 1 1 hereof, but only
to the extent that the same relates to the Equipment; provided, however, Lessor
shall not take any action pursuant to such appointment as attorney-in-fact
unless Lessor has requested (to the extent pen-permitted by applicable law)
Lessee to take such action and Lessee has not completed such action (to the
reasonable satisfaction of Lessor and within a reasonable time period, as
determined by Lessor). (h) TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSOR AND
LESSEE HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH LESSEE
AND/OR LESSOR MAY BE PARTIES ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS
LEASE. LESSEE AUTHORIZES LESSOR TO FILE THIS PROVISION WITH THE CLERK OR JUDGE
OF ANY COURT HEARING ANY SUCH CLAIM. IT IS HEREBY AGREED AND UNDERSTOOD THAT
THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST PARTIES
TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT
PARTIES TO THIS LEASE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE
BY THE PARTIES AND THE PARTIES HEREBY ACKNOWLEDGE THAT NO REPRESENTATIONS OF
FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL
BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. LESSOR AND LESSEE FURTHER
ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS LEASE AND IN
THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN
FREE WILL, AND THAT THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL. (i) All notices (excluding billings and communications in the ordinary
course of business) hereunder shall be in writing, personally delivered,
delivered by overnight courier service, sent by facsimile transmission (with
confirmation of receipt), or sent by certified mail, return receipt requested,
addressed to the other party at its respective address stated below the
signature of such party or at such other address as such party shall from time
to time designate in writing to the other party; and shall be effective from the
date of receipt. (j) This Lease and all of the other Lease Documents shall not
be effective unless and until accepted by execution by an officer of Lessor at
the address, in the State of North Carolina, as set forth below the signature of
Lessor. THIS LEASE AND ALL OF THE OTHER LEASE DOCUMENTS, AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER, SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
(WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF THE STATE), INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF
THE EQUIPMENT. The parties agree that any action or proceeding arising out of or
relating to this Lease may be commenced in any state or Federal court in the
State, and agree that a summons and complaint commencing an action or proceeding
in any such court shall be properly served and shall confer personal
jurisdiction if served personally or by certified mail to it at its address
hereinbelow set forth, or as it may provide in writing from time to time, or as
otherwise provided under the laws of the State. (k) This Lease and all of the
other Lease Documents may be executed in any number of counterparts and by
different parties hereto or thereto on separate counterparts, each of which,
when so executed and delivered, shall be an original, but all such counterparts
shall together consist of but one and the same instrument; provided, however,
that to the extent that this Lease and/or the Equipment Schedule would
constitute chattel paper, as such term is defined in the Uniform Commercial Code
as in effect in any applicable jurisdiction, no security interest herein or
therein may be created through the transfer or possession of this Lease in and
of itself without the transfer or possession of the original of such Equipment
Schedule and incorporating the Lease by reference; and no security interest in
this Lease and an Equipment Schedule may be created by the transfer or
possession of any counterpart of such Equipment Schedule other than the original
thereof, which shall be identified as the document marked "Original" and all
other counterparts shall be marked "Duplicate".
19. DEFINITIONS AND RULES OF CONSTRUCTION. (a) The following terms when
used in this Lease or in any of the Equipment Schedules have the following
meanings: (1) "applicable law" or "law": any law, rule, regulation, ordinance,
order, code, common law, interpretation, judgment, directive, decree, treaty,
injunction, writ, determination, award, permit or similar norm or decision of
any applicable governmental authority; (2) "Bond Documents" means collectively,
the Lease Agreement (Equipment) dated as of December 1, 1998 (the "Bond Lease")
between the Development Authority of Bartow County (the "Authority") and BSE,
the Bond Purchase Agreement dated as of December 1, 1998 between the Authority
and BSE, the Indenture, the Limited Warranty Deed and Bill of Sale and the Bonds
(as such terms are defined in the Bond Lease); (3) "business day": any day,
other than a Saturday, Sunday, or legal holiday for commercial banks under the
laws of the State; (4) "UCC" or "Uniform Commercial Code": the Uniform
Commercial Code as in effect in the State or in any other applicable
jurisdiction; and any reference to an article (including Article 2A) or section
thereof shall mean the corresponding article or section (however termed) of any
such other applicable version of the Uniform Commercial Code; (5) "Financing
Transaction": the determination by a court of competent jurisdiction that the
transactions evidenced by the Lease Documents constitute a financing (not a true
lease) of the Equipment provided by Lessor in favor of Lessee; (6) "governmental
authority": any federal, state, county, municipal, regional or other
governmental authority, agency, board, body, instrumentality or court, in each
case, whether domestic or foreign; (7) "person": any individual, corporation,
partnership, joint venture, or other legal entity or a governmental authority,
whether employed, hired, affiliated, owned, contracted with, or otherwise
related or unrelated to Lessee or Lessor; (8) "Responsible Officer": the
chairman or vice chairman of the board of directors, the chairman or vice
chairman of the executive committee of the board of directors, the president,
any senior vice president or executive vice president, any vice president, the
secretary, any assistant secretary, the treasurer, or any assistant treasurer,
and (9)"State": the State of New York. (b) The following terms when used herein
or in any of the Equipment Schedules shall be construed as- follows: "herein,"
"hereof," "hereunder," etc.: in, of, under, etc. this Lease or such other Lease
Document in which such term appears (and not merely in, of, under, etc. the
section or provision where the reference occurs); "including": containing,
embracing or involving all of the enumerated items, but not limited to such
items unless such term is followed by the words "and limited to," or similar
words; and "or": at least one, but not necessarily only one, of the alternatives
enumerated. Any defined term used in the singular preceded by "any" indicates
any number of the members of the relevant class. Any Lease Document or other
agreement or instrument referred to herein means such agreement or instrument as
supplemented and amended. from time to time. Any reference to Lessor or Lessee
shall include its respective permitted successors and assigns. Any reference to
a law shall also mean such law as amended, superseded or replaced from time to
time. Unless otherwise expressly provided herein to the contrary, all actions
that Lessee takes or is required to take under any Lease Document shall be taken
at Lessee's sole cost and expense, and all such costs and expenses shall
constitute Claims and be covered by Section 14 hereof. To the extent Lessor is
required to give its consent or approval with respect to any matter, the
reasonableness of Lessor's withholding of such consent shall be determined based
on the then existing circumstances; provided, that Lessor's withholding of its
consent shall be deemed reasonable for all purposes (i) if the taking of the
action that is the subject of such request, might result (in Lessor's reasonable
judgement), (A) in a material impairment of Lessor's rights, title or interests
hereunder or under any Equipment Schedule or other Lease Document, or to the
Equipment, or (B) expose Lessor to any Claims, or (ii) to the extent Lessee
fails to provide promptly to Lessor any filings, certificates, opinions or
indemnities reasonably specified by Lessor to Lessee in writing.
20. CO-LESSEE WAIVERS. In the event any obligation of Lessee
under this Lease or any Equipment Schedule is deemed to be an agreement by any
individual Lessee to answer for the debt or default of another individual Lessee
(including each other) or as a hypothecation of property as security therefor
each Lessee represents and warrants that: (x) no representation has been made to
it as to the creditworthiness of any other obligor, and (y) it has established
adequate means of obtaining from each other obligor on a continuing basis,
financial or other information pertaining to each other obligor's financial
condition. Each Lessee expressly waives diligence, demand, presentment, protest
and notice of every kind and nature whatsoever, consents to the taking by Lessor
of any additional security for the obligations secured hereby (to the extent
this Lease or any Equipment Schedule is deemed to evidence a Financing
Transaction), or the alteration or release in any manner of any security now or
hereafter held in connection with any obligations now or hereafter secured
hereby (to the extent this Lease or any Equipment Schedule is deemed to evidence
a Financing Transaction), and consents that Lessor and any obligor may deal with
each other in connection with said obligations or otherwise, or alter any
contracts now or hereafter existing between them, in any manner whatsoever,
including without limitation the renewal, extension, acceleration, changes in
time for payment, and increases or decreases in any rent, rate of interest or
other amounts owing, all without in any way altering the liability of each
Lessee, or affecting any security for such obligations. Should any default be
made in the payment of any such obligations or in the terms or conditions of any
security held (to the extent this Lease or any Equipment Schedule is deemed to
evidence a Financing Transaction), Lessor is hereby expressly given the right,
at its option, to proceed in the enforcement of this Lease and each Equipment
Schedule independently of any other remedy or security it may at any time hold
in connection with such obligations secured and it shall not be necessary for
Lessor to proceed upon or against and/or exhaust any other security or remedy
before proceeding to enforce its rights against any Lessee. Each Lessee further
subordinates any right of subrogation, reimbursement, exoneration, contribution,
indemnification, setoff or other recourse in respect of sums paid to Lessor by
any Lessee until such time as all amounts due and owing to Lessor pursuant to
this Lease and the other Lease Documents have been paid in full and for a period
thereafter of an additional 367 days.
21. TRUE LEASE. It is the intent of the parties to this Lease that it
will be a true lease and not a "conditional sale," and that Lessor shall at all
times be considered to be the owner of the Equipment which is the subject of
this Lease for the purposes of all Federal, state, city and local income taxes
or for franchise taxes measured by income, and that this Lease conveys to Lessee
no right, title or interest in any Equipment except as lessee.
[The remainder of this page is intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Equipment Lease
Agreement to be duly executed as of the day and year first above set forth.
NATIONSBANC LEASING CORPORATION,
Lessor
By: ______________________________
Name: ______________________________
Title: ______________________________
121 West Trade Street, NC 1 -005-15-01
Charlotte, North Carolina 28255
Attn: Corporate Lease Administration
Facsimile: 704-386-0892
BIRMINGHAM SOUTHEAST, LLC,
Co-Lessee
By: /s/ William R. Lucas, Jr.
Name: William R. Lucas, Jr.
Title: Secretary
1000 Urban Center Drive
Suite 225
Birmingham, Alabama 35242
Attn: Chief Financial Officer
Facsimile: 205-972-8820
BIRMINGHAM STEEL CORPORATION,
Co-Lessee
By: /s/ J. Daniel Garrett
Name: J. Daniel Garrett
Title: Vice President Finance and Control
1000 Urban Center Drive
Suite 300
Birmingham, Alabama 35242-2516
Attn: Chief Financial Officer
Facsimile: 205-968-4757
IN WITNESS VY'HERE I OF, the parties hereto have caused this Equipment Lease
Agreement to be duly executed as of the day and year first above set forth.
NATIONSBANC LEASING CORPORATION,
Lessor
By: /s/ M. Randall Ross
Name: M. Randall Ross
Title: Senior Vice President
121 West Trade Street, NC 1 -005-15-01
Charlotte, North Carolina 28255
Attn: Corporate Lease Administration
Facsimile: 704-386-0892
BIRMINGHAM SOUTHEAST, LLC,
Co-Lessee
By:________________________________
Name:______________________________
Title:_______________________________
1000 Urban Center Drive
Suite 225
Birmingham, Alabama 35242
Attn: Chief Financial Officer
Facsimile:___________________________
BIRMINGHAM STEEL CORPORATION,
Co-Lessee
By:_________________________________
Name_______________________________
Title:_______________________________
1000 Urban Center Drive
Suite 300
Birmingham, Alabama 35242-2516
Attn: Chief Financial Officer
Facsimile:____________________________
<PAGE>
EXHIBIT 10.4.1
NATIONSBANC LEASING CORPORATION
RIDER NO. 1
To and part of Equipment Lease Agreement dated as of the 31st day of December,
1998 (the "Lease"), between NationsBanc Leasing Corporation, its successors and
assigns ("Lessor"), and Birmingham Southeast, LLC, a Delaware limited liability
company its permitted successors and assigns ("BSE") and Birmingham Steel
Corporation, a Delaware corporation, its permitted successors and permitted
assigns ("BSC") (collectively, BSE and BSC being referred to herein as the
"Lessee").
TAX INDEMNITY.
(1) Lessee represents and warrants that: (a) it believes that it is
reasonable to estimate that the useful life of the Equipment exceeds the lease
term (including any interim and fixed rental renewal periods) by the greater of
one (1) year or twenty (20) percent of such estimated useful life, and that said
Equipment will have a value at the end of the lease term, including any fixed
rate renewal period, of at least twenty (20) percent of the Total Invoice Cost
of the Equipment, without including in such value any increase or decrease for
inflation or deflation during the original lease term; (b) at no time during the
term of the Lease will the Equipment be used "predominantly outside the United
States" ' within the meaning of Sections 168(g)(1)(A) and 168(g)(4) of the
Internal Revenue Code of 1986, as now or hereafter amended (the "Code"); (c) at
no time during the term of the Lease will the Equipment constitute "tax-exempt
use property" within the meaning of Section 168(h) of the Code; (d) under
current law, neither the Equipment nor any component thereof constitutes
"limited use property" within the meaning of Revenue Procedure 76-30, 1976-2
C.B. 647; (e) with respect to the term of the Lease, Lessee (including any
affiliate of Lessee) will not claim the NIACRS Deductions or any depreciation or
cost recovery deduction with respect to the Equipment; (f) as of the date of
this Lease, the Equipment will not require any improvement, modification or
addition in order to be rendered complete for its intended use by Lessee; and
(g) the Equipment will be treated as placed in service by Lessor as of the date
of this Lease.
(2) If (a) by reason of (i) any act or failure to act of Lessee
(including without limitation a breach of any covenant of Lessee set forth in
Section 4 of the Lease), or (ii) the misrepresentation of or breach by Lessee of
any of the warranties and representations set forth in Section 3 of the Lease or
Section (1) of this Rider, or (iii) the enactment or promulgation of any change
in the Code, Treasury Regulations, or administrative or judicial interpretations
thereof, or (iv) the existence of the Bond Documents, the transactions
contemplated by the Bond Documents, the possession of legal title to the
Equipment by the Authority, or the lease of the Equipment by the Authority to
the Lessor, the Lessor in computing its taxable income or liability for tax,
shall lose, or shall not have, or shall lose the right to claim or there shall
be disallowed or recaptured for Federal and/or state income tax purposes, in
whole or in part, the benefit of MACRS Deductions; or (b) Lessor shall become
liable for additional tax as a result of Lessee having added an attachment or
made an alteration to the Equipment, including (without limitation) any such
attachment or alteration which would increase the productivity or capability of
the Equipment so as to violate the provisions of Rev. Proc. 75-21, 1975-1 C.B.
715, or Rev. Proc. 79-48, 1979-2 C.B.529 (as either or both may hereafter be
modified or superseded); or (c) the statutory full-year marginal Federal tax
rate (including any surcharge) for corporations is other than thirty-five (35)
percent; the occurrence of any event described in clause (a), (b) or (c) of this
Section (2) of this Rider hereinafter referred to as a "Loss"; then Lessee shall
pay Lessor the Tax Indemnification Payment as additional rent and Lessor shall
revise the Schedule(s) of Stipulated Loss Values to reflect the Loss. As used
herein, "NIACRS Deductions" shall mean the deductions under Section 167 of the
Code determined in accordance with the modified Accelerated Cost Recovery System
with respect to the Total Invoice Cost of any item of the Equipment using the
accelerated method set forth in Section 168(b)(1) or 168(b)(2) of the Code as in
effect on the date of this Lease for property assigned to the class of property
specified in the Equipment Schedule pertaining thereto and, unless Section
168(d)(3) of the Code is applicable, using the half-year convention set forth in
Section 168(d)(1) and (4)(A) of the Code; "Lessor" shall be deemed to include
the consolidated Federal taxpayer group of which Lessor is a member; and "Tax
Indemnification Payment" shall mean such amount as, after consideration of (i)
all taxes required to be paid by Lessor in respect of the receipt thereof under
the laws of any governmental or taxing authority in the United States, and (ii)
the amount of any interest or penalty which may be payable by Lessor in
connection with the Loss, shall be required to cause Lessor's after-tax net
return (the "Net Return") to be equal to, but no greater than, the Net Return
computed consistently with current tax laws (and with the assumption that Lessor
is taxed at the highest marginal Federal and state tax rates) as of the date of
this Lease that would have been available to Lessor had the Loss not occurred.
(3) Lessor promptly shall notify Lessee in writing of such
Loss and Lessee shall pay to Lessor the Tax Indemnification Payment within
thirty (30) days of the later of the date of such notice or the date of final
determination of the contest of a Proposed Adjustment as described in Section
(4) of this Rider. For these purposes, a Loss shall occur upon the earliest of-
(a) the happening of any event (such as disposition or change in use of any item
of the Equipment) which will cause such Loss; (b) the payment by Lessor to the
Internal Revenue Service or state taxing authority of the tax increase
(including an increase in estimated taxes) resulting from such Loss; (c) the
date on which the Loss is realized by Lessor; or (d) the adjustment of the tax
return of Lessor to reflect such Loss.
(4) Lessor shall notify Lessee in writing of any actual or proposed
claim, adjustment, or other action of any tax authority received by Lessor in
writing with respect to which Lessee may be required to provide indemnification
under this Rider ("Proposed Adjustment") (but failure of Lessor to so notify
Lessee shall not relieve Lessee of its obligations hereunder except to the
extent that the contest of such claim is precluded or materially adversely
affected by such failure). If Lessee shall request in writing within twenty (20)
days after Lessor's notice described above that the Proposed Adjustment be
contested, Lessor shall contest the Proposed Adjustment; ,provided, however,
that: (i) prior to taking such action, Lessee shall have furnished Lessor with
an opinion of independent tax counsel chosen by Lessee and reasonably acceptable
to Lessor ("Tax Counsel"), to the effect that Lessor has a reasonable
possibility of success in contesting the claim; (ii) prior to taking such
action, Lessee shall have (A) acknowledged its obligation to indemnify Lessor
hereunder in the event Lessor does not prevail in such contest and (B) agreed to
reimburse Lessor, promptly on demand, all costs and expenses that Lessor may
incur in connection with contesting such claim, including without limitation
reasonable attorneys' and accountants' fees and expenses; (iii) Lessor shall not
be obligated to contest any Proposed Adjustment that would result in Lessee's
entire indemnity liability hereunder being less than $50,000.00; and (iv) Lessor
shall in all events control the contest, and Lessee shall not have any right to
inspect the books and records of Lessor, but shall have reasonable opportunity
to review and comment on portions of documentation, protests, memoranda or
briefs relating exclusively to a Proposed Adjustment. In the event Lessor shall
pay the tax claimed and then seek a refund, Lessor may require Lessee to advance
funds on an after-tax basis sufficient to pay the tax that would be indemnified
by Lessee hereunder if the claim were resolved adversely to Lessor, in which
case, to the extent the refund claim is successful, such funds received from the
taxing authority and attributable thereto (including any interest), to the
extent not required to be applied to an indemnity payable hereunder, shall be
paid to Lessee. Notwithstanding anything to the contrary in this Section (4),
Lessor may at any time decline to take any further action with respect to a
Proposed Adjustment or may settle any contest without the consent of Lessee;
provided, however, that if Lessee shall have duly complied with all the terms of
this Section (4), and Lessee shall reasonably withhold in writing its consent to
all or part of such assessment or settlement based upon its evaluation of the
merits, Lessee shall not be obligated to indemnify Lessor for the portion of
such assessment or settlement to which Lessee has reasonably withheld its
consent.
(5) The obligations of Lessee under this Rider shall survive the expiration or
termination of the Lease.
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IN WITNESS WHEREOF, the parties hereto have caused this Rider to be duly
executed as of the day and year first above set forth.
NATIONSBANC LEASING CORPORATION
Lessor
By: /s/ M. Randall Ross
Name: M. Randall Ross
Title: Senior Vice President
BIRMINGHAM SOUTHEAST, LLC
co-Lessee
By: /s/ William R. Lucas, Jr.
Name: William R. Lucas, Jr.
Title: Secretary
BIRMINGHAM STEEL CORPORATION
co-Lessee
By: /s/ J. Daniel Garrett
Name: J. Daniel Garrett
Title: Vice President -Finance & Control
NATIONSBANC LEASING CORPORATION
RIDER NO. 2
To and part of Equipment Lease Agreement dated as of the 3 1 st day of
December, 1998 (the "Lease") between NationsBanc Leasing Corporation, its
successors and assigns ("Lessor"), and Birmingham Southeast, LLC, a Delaware
limited liability company its permitted successors and assigns ("BSE") and
Birmingham Steel Corporation, a Delaware corporation, its permitted successors
and permitted assigns ("BSC") (collectively, BSE and BSC being referred to
herein as the "Lessee").
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS. I . As used herein, the
following terms shall have the following meaning: (a) "Adverse Environmental
Condition": shall mean (i) the existence or the continuation of the existence,
of an Environmental Contamination (including, without limitation, a sudden or
non-sudden accidental or non-accidental Environmental Contamination), of, or
exposure to, any substance, chemical, material, pollutant, Hazardous Substance
odor or audible noise or the release or emission in, into or onto the
environment (including without limitation, the air, ground, water or any
surface). at, in, by, from or related to any Equipment, (ii) the environmental
aspect of the transportation, storage, treatment or disposal or materials in
connection with the operation of any Equipment, or (iii) the violation, or
alleged violation, of any Environmental Law, permits or licenses of, by or from
any governmental authority, agency or court relating to environmental matters
connected with any of the Equipment.
(b) "Affiliate" shall mean, with respect to any given Person, any
Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such Person.
(c) "Environmental Claim" shall mean any accusation, allegation,
notice of violation, claim, demand, abatement or other order
on direction (conditional or otherwise) by any governmental
authority or any Person for personal injury (including
sickness, disease or death), tangible or intangible property
damage, damage to the environment or other adverse affects on
the environment, or for fines, penalties or restrictions,
resulting from or based upon any Adverse Environmental
Condition.
(d) "Environmental Contamination" shall mean any actual or
threatened release, spill, emission, leaking, pumping,
injection, presence, deposit, abandonment, disposal,
discharge, dispersal, leaching or migration into the indoor or
outdoor environment, or into or out of any of the Equipment,
including, without limitation, the movement of any Hazardous
Substance or other substance through or in the air, soil,
surface water, groundwater or property.
(e) "Environmental Law" shall mean may present or future federal, foreign, state
or local law, ordinance, order, rule or regulation and all judicial,
administrative and regulatory decrees, judgments and orders, pertaining to
health, industrial hygiene, the use, disposal or transportation of Hazardous
Substances, Environmental Contamination, or pertaining to the protection of the
environment, including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C.ss.9601 et seq.),
the Hazardous Material Transportation Act (49 U.S.C.ss.1801 et seq.) the
- -------- -------- Federal Water Pollution Control Act (33 U.S.C. Section 1251 et
seq.) the Resource Conservation and Recovery Act (42 U.S.C. -------- ss.6901 et
seq.), the Clean Air Act (42 U.S.C.ss.7401 et seq.), the Toxic Substances
Control Act (15 U.S.C.ss.2601 et seq.), the -------- -- ----- -- Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.ss.1361 et seq.), the
Occupational Safety and Health Act (19 -- --- U.S.C.ss.651 et seq.), the Noise
Control of 1972 (42 U.S.C.ss.4901 et seq.), and the Hazardous and Solid Waste
Amendments (42 -- --- -- --- U.S.C.ss.2601 et seq.), as these laws have been or
may be amended or supplemented, and any successor thereto, and may --------
analogous foreign, state or local statutes, and the rules, regulations and
orders promulgated pursuant thereto.
(f) "Environmental Loss" shall mean any lost, cost, damage, liability,
deficiency, fine, penalty or expense (including, without limitation,
reasonable attorneys' fees, engineering and other professional or
expert fees), investigation, removal, cleanup and remedial costs
(voluntarily or involuntarily incurred) and damages to, loss of the use
of or decrease in value of the Equipment arising out of or related to
any Adverse Environmental Condition.
(g) "Hazardous Substances" shall mean and include hazardous substances as
defined in CERCLA; oil of any kind, petroleum products and their
by-products, including, but not limited to, sludge or residue, asbestos
containing materials; polychlorinated biphenyls; any and all other
hazardous or toxic substance; hazardous waste, as defined in CERCLA;
medical waste; infectious waste; those substances listed in the United
States Department of Transportation Table (49 C.F.R. ss.172.101);
explosives; radioactive materials; and all other pollutants,
contaminants and other substances regulated or controlled by the
Environmental Laws and any other substance that requires special
handling in its collection, storage, treatment or disposal under the
Environmental Law.
(h) "Person" shall mean any individual, partnership, corporation, trusts,
unincorporated organization, governmental or department or agency
thereof and any other entity.
2. Lessee hereby represents, warrants and covenants that: (a) it has
conducted, and will continue to conduct its business operations, and
throughout the term of the Lease will use the Equipment, so as to
comply with all Environmental Laws; (b) as of the date hereof, and as
of the date of execution of each Equipment Schedule, except as have
been previously disclosed in writing by Lessee or Lessor, there are no
Hazardous Substances generated, treated, handled, stored, transported,
discharged, emitted, released or otherwise disposed of in connection
with Lessee's use of the Equipment; and (c) Lessee has, and throughout
the term of the Lease will continue to have in full force and effect
all federal, state and local licenses, permits, orders and approvals
required to operate the Equipment in compliance with all Environmental
Laws.
3. Lessee agrees that if required to return the Equipment or any item
thereof to Lessor or Lessor's agents, Lessee shall return such
Equipment free from all Hazardous Substances and otherwise fully in
compliance with all Environmental Laws.
4. Lessee shall fully and promptly pay, perform, discharge, defend,
indemnify and hold harmless Lessor and its Affiliates, and their
successors and assigns, directors, officers, employees and agents, from
and against any Environmental Claim or Environmental Loss.
5. The provisions of this Rider shall survive any expiration or termination of
the Lease.
[The remainder of this page has been intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Rider to be duly
executed as of the day and year first above set forth.
NATIONSBANC LEASING CORPORATION
Lessor
By: /s/ M. Randall Ross
Name: M. Randall Ross
Title: Senior Vice President
BIRMINGHAM SOUTHEAST, LLC
co-Lessee
By: /s/ William R. Lucas, Jr.
Name: William R. Lucas, Jr.
Title: Secretary
BIRMINGHAM STEEL CORPORATION
co-Lessee
By: /s/ J. Daniel Garrett
Name: J. Daniel Garrett
Title: Vice President - Finance & Control
NATIONSBANC LEASING CORPORATION
EQUIPMENT SCHEDULE NO. 1
dated December 31, 1998 (this "Equipment Schedule") executed pursuant to that
certain Equipment Lease Agreement dated as of December 31, 1998 (the "Lease";
which is incorporated herein by reference) by and among NationsBanc Leasing
Corporation, a North Carolina corporation, its successors and assigns
("Lessor"), and Birmingham Southeast, LLC, a Delaware limited liability company,
its permitted successors and assigns ("BSE") and Birmingham Steel Corporation, a
Delaware corporation ("BSC")(BSE and BSC are collectively referred to herein as
the "Lessee"). This Equipment Schedule, incorporating by reference the terms and
conditions of the Lease, constitutes a separate instrument of lease and
capitalized terms used herein and not otherwise defined herein shall have the
meaning provided thereto in the Lease.
1 . EQUIPMENT. The Equipment leased hereunder shall be as set forth in
the schedule attached hereto and incorporated herein by reference (the
"Equipment").
TOTAL INVOICE COST: $9,664,125.00
2. TERM. Upon and after the date of execution hereof, the Equipment shall be
subject to the terms and conditions provided herein and in the Lease.
A full term of lease with respect to said Equipment shall commence on
the date hereof and shall extend for one hundred twenty-three (123) months
after December 31, 1998 (the "Base Lease Commencement Date") to March 3 0,
2009.
3. RENT.
(a) During the period from the date hereof to the Base Lease
Commencement Date (the "Interim Term"), the pro-rated daily rent for said
Equipment shall be computed as the product of the Interest Rate and the Total
Invoice Cost specified above, divided by three hundred sixty (360). This
pro-rated payment shall be made on the Base Lease Commencement Date. As used
herein, "Interest Rate shall mean an amount computed as a percentage per annum
equal to the sum of (a) two hundred (200) basis points, plus (b) the LIBOR
Rate. As used herein, "LIBOR Rate" shall mean, for the Interim Term, an
interest rate per annum (rounded upward to the next higher whole multiple of
one-sixteenth percent if such rate is not such a multiple), equal at all times
during such Interim Term to the rate per annum (rounded upwards to the next
higher whole multiple of one-sixteenth percent if such rate is not such a
multiple) as determined on the basis of the average of the rates offered by a
majority of the banks in the London interbank market for deposits in U.S.
Dollars for three (3) months, to the extent the rates offered by these banks
appear in the Money Rates column of The Wall Street Journal on the Business
Day next preceding the date hereof. As used herein, "Business Day" shall mean
any day other than a Saturday, a Sunday, and any day on which banking
institutions located in the States of North Carolina or Georgia are authorized
by law or other governmental action to close.
(b) From and after the Base Lease Commencement Date, the quarterly rent
on each Rent Payment Date (as such term is defined below) for any item of
Equipment during the initial term of this Lease shall be an amount equal to the
product of (x) the Invoice Cost for such Equipment specified on the Schedule of
Equipment attached hereto and (y) the percentages, set forth opposite such Rent
Payment Date on the Schedule of Rent attached hereto and incorporated herein by
reference, and shall be applicable solely to the Equipment described in this
Equipment Schedule. Rent payments shall be made on March 30, 1999 and on June
30, September 30, December 30 and March 30 of each calendar year thereafter for
the remainder of the term of Lease for Equipment (each such date a "Rent Payment
Date").
4. LESSEE'S CONFIRMATION. Lessee hereby confirms and warrants to
Lessor that the Equipment: (a) was duly delivered to Lessee at the location
specified in Section 5 hereof, (b) has been received, inspected and determined
to be in compliance with all applicable specifications and that the Equipment is
hereby accepted for all purposes of the Lease; and (c) is a part of the
"Equipment" referred to in the Lease and is taken subject to all terms and
conditions therein and herein provided.
5. LOCATION OF EQUIPMENT. The location of the Equipment is 384 Old Grassdale
Rd., N.E., Bartow County, Cartersville, Georgia 30121.
6. LATE CHARGE RATE. The Late Charge Rate shall be for any day the
lesser of (a) the maximum rate permitted by applicable law and (b) two percent
over the Prime Rate on such day. "Prime Rate" shall mean the per annum rate of
interest (computed on the basis of a 360 day year of twelve 30 day months)
established from time to time by Nationsbank, N.A., or any successor thereto, as
its prime lending rate, which rate may not be the lowest rate of interest
charged by NationsBank, N.A. to its customers.
7. SCHEDULE OF STIPULATED LOSS VALUES. The Schedule of Stipulated Loss
Values attached hereto is incorporated herein by reference, and shall be
applicable solely to the Equipment described in this Equipment Schedule.
8. RECOVERY PROPERTY CLASS. The class of property to which the Equipment is
assigned (as referenced in Section 2 of Rider No. 1 to the Lease) is seven-year
property.
9. PUBLIC LIABILITY INSURANCE. The amount of public liability insurance
referenced in Section 11 of the Lease is
$5,000,000.00 per occurrence.
10. RENEWAL OPTIONS; PURCHASE OPTIONS; RETURN. Provided that Lessee is
not then in Default (and that this Equipment Schedule has not been earlier
terminated),
Lessee shall have the option upon providing the Lessor with irrevocable
written notice at least three hundred sixty (360) days before the expiration
of the applicable term of the Lease with respect to such Equipment, to elect
to retain the Equipment, in which event Lessee shall then either renew the
applicable term of the Lease with respect to, or purchase, all the Equipment
subject to this Equipment Schedule. Upon providing such notice, Lessee shall
engage in negotiations with the Lessor to determine the periodic rent to be
paid during the relevant renewal term (in the event Lessee elects the renewal
option provided for in Clause A below) and the purchase price (in the event
Lessee elects the purchase option provided for in Clause B(2) below). Not less
than one hundred eighty (1 80) days before the expiration of the applicable
term of the Lease with respect to such Equipment, Lessee shall give
irrevocable written notice (the "180 day notice") of its election to either
(i) renew the applicable term of the Lease with respect to all of the
Equipment on the terms provided for in Clause A below, or (ii) purchase all of
the Equipment on the terms provided for in Clause B(2) below; provided,
however, that in the event Lessee shall fail -to provide Lessor with such 180
day notice, Lessee shall be deemed to have
elected the option to purchase the Equipment.
A. OPTION TO RENEW. Upon timely notification to the Lessor, Lessee
shall have the option to renew the Lease with respect to all but not less than
all of the Equipment subject to this Equipment Schedule, at the expiration of
the initial term and each of the first four renewal terms, if any, of the
Lease with respect to such Equipment, on the terms and conditions set forth
herein, for up to five (5) one year renewal terms at a periodic rent equal to
the Fair Market Rental Value of such Equipment determined it the time of
renewal. Such election shall be effective with respect to all Equipment leased
under tills Equipment Schedule.
For purposes of this Section, "Fair Market Rental Value" shall be
deemed to be an amount equal to the rental, as installed and in use,
obtainable in an arms' length transaction between a willing and informed
lessor and a willing and informed lessee under no compulsion to lease (and
assuming that, as of the date of determination, the Equipment is in at least
the condition required by Section 13 of the Lease). If (prior to two hundred
forty (240) days before expiration of the applicable term of the Lease with
respect to such Equipment) the parties are unable to agree on the Fair Market
Rental Value of the Equipment, then (at least one hundred eighty (180) days
before expiration of the applicable term) Lessor and Lessee shall at Lessee's
expense obtain appraisal values from three independent appraisers (other than
American Appraisal Associates, Inc.) (one to be selected by Lessor, one by
Lessee, and the other by the two appraisers selected by Lessor and Lessee;
each of whom must be associated with a professional organization of equipment
or personal property appraisers, such as the American Society of Appraisers)
and the average Fair Market Rental Value as determined by such appraisers
shall be binding on the parties hereto. If the appraisers selected by Lessor
and Lessee are unable to agree on the third appraiser, then American Appraisal
Associates, Inc. will be selected to provide the third appraisal value.
B. OPTION TO PURCHASE.
(1) Provided that Lessee is not then in Default (and this Equipment
Schedule shall not have been earlier terminated), Lessee shall have the option
to purchase, on September 30, 2007, (the "Early Termination Dat6"), all but not
less than all of the Equipment subject to this Equipment Schedule upon the
following terms and conditions: If Lessee desires to exercise this option it
shall give Lessor irrevocable written notice of its election to purchase at
least one hundred eighty (180) days and not more than two hundred forty (240)
days before the Early Termination Date. On the Early Termination Date Lessee
shall pay to Lessor in cash the purchase price for the Equipment so purchased,
determined as hereinafter provided. The purchase price of the Equipment as of
the Early Termination Date shall be an amount equal to 42.6022% (the "EBO
Percentage") multiplied by the original Total Invoice Cost of such Equipment (as
specified on this Equipment Schedule), together with all taxes and charges upon
sale. Lessor and Lessee agree that such purchase price represents a reasonable
prediction of the Fair Market Value of the Equipment at the time the option is
exercisable.
(2) Upon timely notification to the Lessor, Lessee shall have the
option to purchase, upon the expiration of the term of this Lease, or of any
subsequent renewal term, if applicable, all but not less than all of the
Equipment subject to this Equipment Schedule. Thereupon, at the expiration of
the term (or renewal term, as the case may be) of the Lease, Lessee shall pay to
Lessor in. cash the purchase price for the Equipment so purchased, determined as
hereinafter provided. The purchase price of the Equipment shall be an amount
equal to its then Fair Market Value, together with all taxes and charges upon
sale.
For purposes of this Section, "Fair Market Value" shall be deemed to be
an amount equal to the sale price of the Equipment, as installed and in use,
obtainable in an arms' length transaction between a willing, and informed buyer
and a willing and informed seller under no compulsion to sell (and assuming
that, as of the date of determination, the Equipment is in at least the
condition required by Section 13 of the Lease). If the parties are unable to
agree on the Fair Market Value of the Equipment, then the appraisal procedure
set forth in Section 10 A hereof shall be followed. Notwithstanding any election
of Lessee to purchase, the provisions of the Lease with respect to the Equipment
being- purchased shall continue in full force and effect until the passage of
ownership of such Equipment upon the date of purchase. On the date of purchase,
Lessor shall deliver to Lessee a bill of sale transferring and assigning to
Lessee without recourse or warranty, except (with respect to the status of title
conveyed) in respect of Lessor's acts, all of Lessors right, title and interest
in and to such Equipment. Lessor shall not be required to make and may
specifically disclaim any representation or' warranty as to the condition of the
Equipment or any other matters.
C. RETURN In the event Lessee does not elect to exercise either the
renewal or purchase options provided in Clauses A and B above,
Lessee shall return, all but not less than all of the Equipment then
subject to this Equipment Schedule to the Lessor in accordance with
the provisions of Section 13. of the Lease and, in addition, pay to
the Lessor on the final day of the term of the Lease with respect to
such Equipment, a remarketing and re-delivery fee equal to $410
725.31
[The remainder of this page has been intentionally left blank].
IN WITNESS WHEREOF, the parties hereto have caused this Equipment Schedule to be
duly executed by the parties hereto as of the day and year first above Written.
NATIONSBANC LEASING CORPORATION
Lessor
By: /s/ M. Randall Ross
Name: M. Randall Ross
Title: Senior Vice President
BIRMINGHAM SOUTHEAST, LLC
co-Lessee
By: /s/ William R. Lucas, Jr.
Name: William R. Lucas, Jr.
Title: Secretary
BIRMINGHAM STEEL CORPORATION
co-Lessee
By: /s/ J. Daniel Garrett
Name: J. Daniel Garrett
Title: Vice President-Finance & Control
NATIONSBANC LEASING CORPORATION
SCHEDULE OF RENT PAYMENTS
TO EQUIPMENT SCHEDULE NO.1
Rent Payment Date Rent Payment*
3/30/99 2.6013746
6/30/99 2.6013746
9/30/99 2.6013746
12/30/99 2.6013746
3/30/00 2.6013746
6/30/00 2.6013746
9/30/00 2.6013746
12/30/00 2.6013746
3/30/01 2.6013746
6/30/01 2.6013746
9/30/01 2.6013746
12/30/01 2.6013746
3/30/02 2.6013746
6/30/02 2.6013746
9/30/02 2.6013746
12/30/02 2.6013746
3/30/03 2.6013746
6/30/03 2.6013746
9/30/03 2.6013746
12/30/03 2.6013746
3/30/04 2.6013746
6/30/04 3.1517382
9/30/04 3.1517382
12/30/04 3.1517382
3/30/05 3.1517382
6/30/05 3.1517382
9/30/05 3.1517382
12/30/05 3.1517382
3/30/06 3.1517382
6/30/06 3.1517382
9/30/06 3.1517382
12/30/06 3.1517382
3/30/07 3.1517382
6/30/07 3.1517382
9/30/07 3.1517382
12/30/07 3.1517382
3/30/08 3.1517382
6/30/08 3.1517382
9/30/08 3.1517382
12/30/08 3.1517382
3/30/09 3.1517382
NATIONSBANC LEASING CORPORATION
SCHEDULE OF STIPULATED LOSS VALUES
TO EQUIPMENT SCHEDULE NO.1
Rent Payment Date Stipulated Loss Value*
12/31/98 101.4857003
3/30/99 100.7411921
6/30/99 99.9505757
9/30/99 99.0956144
12/30/99 98.1843660
3/30/00 97.216148
6/30/00 96.2078347
9/30/00 95.1500415
12/30/00 94.0466176
3/30/01 92.8970091
6/30/01 91.7113382
9/30/01 90.4865404
12/30/01 89.2234548
3/30/02 87.9216168
6/30/02 86.586322
9/30/02 85.2190172
12/30/02 83.8183877
3/30/03 82.3840295
6/30/03 80.914607
9/30/03 79.4115471
12/30/03 77.8735161
3/30/04 76.3000894
6/30/04 74.1416148
9/30/04 71.9411636
12/30/04 69.6962613
3/30/05 67.4063682
6/30/05 65.0752171
9/30/05 62.7125213
12/30/05 60.3127911
3/30/06 57.8755776
6/30/06 55.4008845
9/30/06 52.9040699
12/30/06 50.3769592
3/30/07 47.8191848
6/30/07 45.2224685
9/30/07 42.6021503
12/30/07 39.9500381
3/30/08 37.2657456
6/30/08 34.5409767
9/30/08 31.7910525
12/30/08 29.0077619
3/30/09 26.1906999
*Expressed as a percentage of Invoice Cost.
<PAGE>
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.
Birmingham Steel Corporation
February 12, 1999
/s/ Kevin E. Walsh
-------------------------------
Kevin E. Walsh
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the December
31, 1998 Consolidated Balance Sheets and Consolidated Statements of Operations
of Birmingham Steel Corporation and is qualified in its entirety by reference to
such.
</LEGEND>
<CIK> 0000779334
<NAME> Birmingham Steel Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Jun-30-1999
<PERIOD-END> Dec-31-1998
<CASH> 1,090
<SECURITIES> 0
<RECEIVABLES> 91,969
<ALLOWANCES> 1,379
<INVENTORY> 207,798
<CURRENT-ASSETS> 326,298
<PP&E> 1,039,142
<DEPRECIATION> 245,585
<TOTAL-ASSETS> 1,204,971
<CURRENT-LIABILITIES> 105,525
<BONDS> 53,500
0
0
<COMMON> 298
<OTHER-SE> 449,990
<TOTAL-LIABILITY-AND-EQUITY> 1,204,971
<SALES> 226,853
<TOTAL-REVENUES> 226,853
<CGS> 212,103
<TOTAL-COSTS> 212,103
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,979
<INTEREST-EXPENSE> 8,583
<INCOME-PRETAX> (7,830)
<INCOME-TAX> (2,864)
<INCOME-CONTINUING> (4,966)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,966)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
