SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended June 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
From the transition period from to
Commission File Number 1-9820
BIRMINGHAM STEEL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3213634
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification
Number)
1000 Urban Center Drive, Suite 300
Birmingham, Alabama 35242-2516
(Address of principal executive offices) (Zip Code)
(205) 970-1200
(Registrant's telephone number, including area code)
Securities Registered pursuant to Section 12 (b) of
the Act:
Name of Each Exchange
Title of Each on Which Registered
Class
Common Stock, par value New York Stock
$0.01 per share Exchange
Securities Registered pursuant to Section 12 (g) of
the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
As of September 1, 2000, 31,055,126 shares of common stock of the
registrant were outstanding. On such date the aggregate market value of shares
(based upon the closing market price of the Company's common stock on the New
York Stock Exchange on September 1, 2000) held by non-affiliates was
$76,128,660. For purposes of this calculation only directors and officers are
deemed to be affiliates.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of our Proxy Statement for the 2000 Annual Meeting of Stockholders
are incorporated herein by reference in response to items 10 through 12 in Part
III of this report.
PART I
ITEM 1. BUSINESS
Overview
Birmingham Steel Corporation (the Company) owns and operates facilities in
the mini-mill sector of the steel industry. In addition, the Company owns an
equity interest in a scrap collection and processing operation. From these
facilities, which are located across the United States and Canada, the Company
produces a variety of steel products including semi-finished steel billets,
reinforcing bars, merchant products such as rounds, flats, squares, strips,
angles and channels and Special Bar Quality (SBQ) products, including rod, bar
and wire. In fiscal 2000, the Company began production of structural products
such as angles, channels, and beams that are three inches wide and above. The
Company also operates regional warehouse and steel distribution facilities.
The following table summarizes the Company's principal production
facilities:
Location Operation Primary Products Produced
------------------- ---------------- -------------------------
Birmingham, AL Mini Mill Steel Billets, Rebar, Merchant
Products
Cartersville, GA(A) Mini Mill Steel Billets, Merchant Products,
Structural Products
Joliet, IL Rolling Mill Rebar, Merchant Products
Kankakee, IL Mini Mill Steel Billets, Rebar, Merchant
Products
Jackson, MS(A) Mini Mill Steel Billets, Rebar, Merchant
Products
Cleveland, OH Rolling Mills SBQ Rods, Bars and Wire
Memphis, TN(B) Melt Shop SBQ Blooms and Billets
Seattle, WA Mini Mill Steel Billets, Rebar, Merchant
Products
Jackson, MS Scrap Processing Scrap
(A) Facilities owned by Birmingham Southeast, LLC, an 85% owned consolidated
subsidiary.
(B) In January 2000, the Company suspended melting operations at Memphis. This
facility is currently classified as an asset held for disposal.
In addition to the production facilities listed above, the Company owns a
50% equity interest in Richmond Steel Recycling, LLC, a joint venture scrap
collection and processing operation located in Vancouver, British Columbia. The
Company also owns a 50% interest in American Iron Reduction, LLC (AIR), which
operates a direct reduced iron (DRI) production facility in Convent, Louisiana.
Change in Management
During the past three years, the Company experienced (1) significant
start-up losses relating to new capital projects; (2) capital project cost
overruns and start-up delays; (3) significant losses relating to investments in
non-core operations; and (4) a deterioration in overall financial condition, as
evidenced by substantial increases in debt and interest expense. Under prior
management, the Company acquired an interest in Laclede Steel Company for $15
million. Laclede subsequently filed for bankruptcy protection, and the Company
wrote off its entire investment in Laclede in fiscal 1998. During fiscal 1997,
the Company invested $27.5 million in Pacific Coast Recycling, LLC, a scrap
operation on the West Coast that was non-strategic to the Company's core
operations. In 1999, after significant financial problems, prior management
wrote off the Company's entire investment in Pacific Coast Recycling, LLC.
In July 1999, The United Company Shareholder Group (the United Group), a
dissident shareholder group, initiated a proxy contest to replace the Company's
Chief Executive Officer and Board of Directors and certain members of
management. On December 2, 1999, the Company and the United Group reached a
settlement appointing John D. Correnti as Chairman and Chief Executive Officer
and reconstituting the Board of Directors to include a total of twelve
directors, nine of which were appointed by the United Group and three of which
were appointed by previous management. Since the conclusion of the proxy contest
in December 1999, new management has accomplished a number of significant
achievements which it believes improved the overall financial condition of the
Company and positioned the Company for improved financial results in the future.
These achievements include the following:
o Suspended operations at the Company's Memphis facility in December 1999,
which had incurred start-up costs of more than $83 million in the last
three years and had been a major drain on the Company's liquidity.
Implementing this strategy reduced operating losses at the facility from
approximately $3.5 million per month to approximately $1 million per month.
o Reduced corporate office personnel, which is expected to reduce annual
expenses by more than $2 million.
o Finalized more flexible financing agreement with the Company's lenders,
including new $25 million financing commitment.
o Reduced inventories by $21 million from December 1999 to June 2000.
o Reduced accounts payable by $20 million from December 1999 to June
2000 and thereby improved relationships with vendors.
o Reduced SG&A spending to 4.1% of sales in the fourth quarter from 6.1% of
sales in the first quarter.
o Substantially completed capital spending and increased productivity and
sales at the new Cartersville rolling mill which resulted in breakeven cash
flow for the month of May 2000 at Cartersville.
o Strengthened sales management for Cartersville and SBQ markets.
o Implemented a turnaround plan at Cleveland, which resulted in breakeven
cash flow for the month of June 2000.
o Reached a new agreement with lenders of AIR, which has reduced the
Company's requirements for purchases of direct reduced iron from the
venture.
o Paid or settled substantially all expenses associated with the proxy
contest ($6.9 million).
o Reached severance arrangements with all but two former members of
management.
o Sold interest in Pacific Coast Recycling, a non-strategic west coast scrap
operation, generating $2.5 million cash flow and eliminating liabilities
and guarantee obligations associated with the venture.
New management is committed to continuing to improve the Company's financial
condition. Management's short-term strategies include:
o Completion of start-up operations at Cartersville.
o Disposition of non-strategic SBQ assets, including the Memphis facility and
the Company's investment in AIR.
o Reduction of long-term debt.
In addition, the Company must continue to operate under the terms and
provisions of its principal debt agreements. In May 2000, the Company amended
its principal debt and letter of credit agreements to provide for the
continuation of the financing arrangements on a long-term basis and to increase
the Company's borrowing capacity. As part of the May amendments, the Company
agreed to achieve certain cash flow performance levels at the Cleveland
operation beginning with the quarter ending September 30, 2000.
Management has taken actions to improve the operating cash flow of
Cleveland. However, if the Cleveland operation does not achieve certain cash
flow performance levels before September 30, 2000, or if the Cleveland operation
is not sold on or before September 30, 2000, the Company may be required by its
lenders to cease operations in Cleveland. If this occurs, the Company may incur
charges related to asset impairment, severance and other exit costs, which may
be material to the Company's operations. Although the Company has not adopted a
formal plan to dispose of the Cleveland facility, management is pursuing
opportunities to sell or otherwise dispose of the facility, either together with
the Memphis facility or in separate transactions. Furthermore, considering the
current economic conditions in the steel industry, the fair value of the
Cleveland assets in an immediate liquidation may be less than their carrying
value. The accompanying financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
Cleveland assets if management decides to terminate operations or sell the
Cleveland facility.
Discontinued Operations
In fiscal 1999, prior management of the Company announced plans to sell the
Company's SBQ segment, which includes rod, bar and wire facilities in Cleveland,
Ohio; a high quality melt shop in Memphis, Tennessee; and the Company's 50%
interest in AIR. Accordingly, as required by APB Opinion 30 and EITF 95-18 the
operating results of the SBQ segment were reflected as discontinued operations
in the Company's annual financial statements for fiscal 1999 and in the first
quarter of fiscal 2000. In January 2000, subsequent to the change in management
described above, the Company announced its intention to retain its SBQ rolling
mill facilities in Cleveland, Ohio, which represent a substantial portion of the
SBQ segment. As a result, the Company was required to re-establish the SBQ
operations as a part of continuing operations in the second quarter of fiscal
2000. Management also reestablished the marketing name of its Cleveland facility
to American Steel & Wire (AS&W). Management's decision to retain the AS&W
facilities was based on the following considerations (Refer to Note 2 to the
Consolidated Financial Statements):
o As of January 2000, the Company's attempts to sell the facility had not
been successful, and new management believed at that time that a sale in
the prevalent economic climate would not generate sufficient proceeds to
pay down a meaningful amount of the Company's long-term debt.
o New management believes there is a viable long-term market for AS&W's
high-quality rod, bar and wire products.
o The Company had identified several potential sources of high-quality
semi-finished billets for the AS&W operations to replace the Memphis melt
shop (which was shut down in early January 2000) as its primary supply
source.
History
The Company was formed in 1983 and commenced operations in 1984. Upon
commencement of operations, the Company owned two mini-mills--in Birmingham,
Alabama and Kankakee, Illinois. Subsequently, the Company has followed a
strategy of growing by acquisition when market and economic conditions warrant.
The Company acquired additional mini-mills in Jackson, Mississippi (1985) and
Seattle, Washington (1986). In 1991, the Company acquired the assets of Seattle
Steel, Inc. and consolidated all of its Seattle operations at the former Seattle
Steel site. In 1993, the Company entered the SBQ market with the acquisition of
AS&W, which added the Joliet mini-mill as well as rod and wire mill assets that
are currently in use in the Company's Cleveland facility.
In 1994, the Company acquired a Florida-based steel distributor, Port
Everglades Steel Corporation, which distributes steel products manufactured by
the Company and by third parties. In December 1996, the Company contributed its
Jackson, Mississippi mini-mill facility to Birmingham Southeast LLC (Birmingham
Southeast), a consolidated subsidiary owned 85% by Birmingham East Coast
Holdings, a wholly owned subsidiary of the Company, and 15% by a subsidiary of
IVACO, Inc. Birmingham Southeast then purchased steel making assets located in
Cartersville, Georgia from Atlantic Steel Industries, Inc. (Atlantic), a
subsidiary of IVACO, Inc. At the time of its formation, Birmingham Southeast
entered into a tolling agreement with Atlantic pursuant to which Atlantic
converted billets produced by Birmingham Southeast into merchant product for a
tolling fee. Birmingham Southeast also entered into a take or pay agreement to
supply billets to Atlantic. These agreements expired January 1, 1999. In March
1999, the Company commenced start-up of a new medium-section mill to replace the
rolling production that was provided under the tolling arrangement with
Atlantic.
Following its acquisition of AS&W in 1993, the Company's management sought
to build the Company's special bar quality operations using the AS&W assets as a
platform. In addition to building additional rolling mill capacity in Cleveland,
the Company constructed a melt shop in Memphis, Tennessee. The Memphis melt shop
facility was intended to provide lower cost raw materials (high grade, low
carbon billets) for the Cleveland SBQ rod, bar and wire operations. During the
development and expansion of the Cleveland and Memphis facilities, industry
overcapacity and an increase in imported SBQ products created unfavorable
pricing conditions. In August 1999, the Company announced its intention to
divest its SBQ operations in order to focus on its core mini-mill and scrap
operations. In January 2000, under new management, the Company decided to
rationalize the SBQ operations by suspending melting operations at the Memphis
facility and continuing operations at the AS&W facilities using third-party
billets.
New Projects
The Company follows a continuous program to upgrade and improve its
existing facilities, while at the same time searching for opportunities to add
productive capacity when warranted. In March 1999, the Company commenced
start-up of its new Cartersville rolling mill. The new Cartersville rolling mill
facility is expected to expand the Company's merchant and structural product
offerings and enable the Company to penetrate new markets. As of June 30, 2000,
the Cartersville rolling mill was nearing completion of the start-up phase.
<PAGE>
Operational Management
The Company's strategies for its rebar/merchant mini-mills are to (i)
increase sales by actively pursuing new customers and strengthening
relationships with existing customers; (ii) improve its position as a low-cost
producer through continued operating cost reductions; (iii) optimize capacity
utilization at each facility; and (iv) increase production and sales of merchant
and structural products.
For management purposes, the Company's rebar and merchant product
mini-mills are operated as independent business units, reporting directly to the
Company's Chief Executive Officer (a change from the SBU structure used by
former management). The rebar/merchant facilities are aggregated and reported
within a single segment because, among other things, they produce essentially
the same products using essentially identical production equipment and
techniques and they sell steel products to the same classes of customers. In
addition, their distribution methods are identical and they operate under the
same regulatory environment. Furthermore, over the long-term, the rebar/merchant
facilities are expected to generate similar long-term average gross margins.
SBQ operations are considered a separate segment for financial reporting
purposes due to differences in: (1) the class of customer served, (2) finished
product chemistry and surface quality, (3) intended uses of finished product,
and (4)expected long-term average profit margins.
Steel Manufacturing
Steel can be produced at significantly lower costs by mini-mills than by
integrated steel operations, which typically process iron ore and other raw
materials in blast furnaces to produce steel. Integrated steel mills generally
(i) use more costly raw materials; (ii) consume more energy; (iii) consist of
older and less efficient facilities which are more labor-intensive; and (iv)
employ a larger labor force than the mini-mill industry. In general, mini-mills
service geographic markets and produce a limited line of rebar and merchant
products. The domestic mini-mill steel industry currently has excess production
capacity. This over-capacity, together with competition from foreign producers,
has resulted in competitive product pricing and cyclical pressures on industry
profit margins. In this environment, efficient production and cost controls are
critical to the viability of domestic mini-mill steel producers.
The Company operates mini-mills (electric arc furnace melt shops and
finished product rolling mills) in Birmingham, Alabama; Kankakee, Illinois; and
Seattle, Washington. The Company also operates a rolling mill in Joliet,
Illinois, and has warehouse and distribution facilities in Fontana and
Livermore, California; Baltimore, Maryland; Ft. Worth, Texas; and Ft.
Lauderdale, Florida. Through its wholly owned subsidiary, Birmingham East Coast
Holdings, the Company owns 85% of Birmingham Southeast, a consolidated
subsidiary that operates mini-mills in Cartersville, Georgia and Jackson,
Mississippi. The Company also operates SBQ rod, bar and wire production
facilities in Cleveland, Ohio.
Carbon steel rebar products produced by the Company are sold primarily to
independent fabricators and distributors for use in the construction industry.
Merchant and structural products are sold to fabricators, steel service centers
and original equipment manufacturers for use in general industrial applications.
SBQ rod, bar and wire products are sold primarily to customers in the
automotive, fastener, welding, appliance and aerospace industries.
The Company's mini-mills melt ferrous scrap to produce rebar, merchant and
structural steel products. Production begins with the melting of ferrous scrap
in an electric arc furnace. The molten steel is funneled through a continuous
caster, which produces steel billets (continuous rectangular strands of steel)
which are cut into predetermined lengths. Billets are transferred to a rolling
mill where they are reheated, passed through a roughing mill for size reduction,
rolled into finished products, and cooled. Merchant and structural products then
pass through state-of-the-art straightening and stacking equipment. At the end
of the production process finished products pass through automated bundling
equipment to ensure uniform packaging for shipment to customers.
<PAGE>
The Company's SBQ operations in Cleveland obtain high quality carbon and alloy
semi-finished billets from third parties and from the Cartersville melt shop.
These semi-finished billets are reheated and rolled into a variety of high
quality rod, bar and wire products.
Raw Materials and Energy Costs
The principal raw material used in the Company's mini-mills is ferrous
scrap, generally derived from automobile, industrial and railroad scrap. The
market for scrap steel is highly competitive and its price volatility is
influenced by periodic shortages, freight costs, speculation by scrap brokers
and other conditions largely beyond the control of the Company. The Company
purchases its outside scrap requirements from a number of scrap merchants and is
not generally dependent on any single supplier. In fiscal 2000, scrap costs
represented approximately 45% of the Company's total manufacturing costs at its
rebar/merchant mini-mills.
Within the commodity product ranges dominated by the mini-mill industry,
fluctuations in scrap market conditions have an industry-wide impact on
manufacturing costs and selling prices of finished goods. During periods of
scrap price escalation, the mini-mill industry seeks to maintain profit margins
and the Company has generally been able to pass along increased raw material
costs to customers. However, temporary reductions in profit margin spreads
frequently occur because of a timing lag between the escalation of scrap prices
and the effective market acceptance of higher selling prices for finished steel
products. Following this delay in margin recovery, steel industry profitability
has historically escalated during periods of inflated scrap market pricing.
However, there can be no assurance that competitive conditions will permit the
Company to pass on scrap cost increases in the future.
The principal raw material for the Company's SBQ rod, bar and wire
operations is high quality steel billets. Because of the metallurgical
characteristics demanded by the finished product, the Company obtains its
billets only from those suppliers whose billets can meet the required
metallurgical specifications of its customers. The Company manufactures its high
quality rod, bar and wire products using approximately 120 generic grades of
billets. In fiscal 2000, the Company produced approximately 60% of its SBQ
billet requirements at Memphis and Cartersville. Until December 1999 (when
operations at Memphis were suspended) the Memphis melt shop used both high-grade
scrap and DRI as feedstock. Substantially all of the Memphis DRI was obtained
from AIR, the Company's DRI joint venture. In fiscal 2000, upon termination of
operations at Memphis, the Company was required to obtain a substantial portion
of its Cleveland billet requirements from third party suppliers. The new
arrangements provide the SBQ operations with adequate billet supplies to allow
it to produce up to 50,000 tons per month. The Company has informal arrangements
to obtain billets from several foreign and domestic steel producers.
The Company consumes large amounts of electricity and natural gas. The
Company purchases electricity from regulated utilities under interruptible
service contracts because the costs of interruptible contracts are generally
lower than alternative arrangements. However, under these high volume industrial
contracts, electricity suppliers may periodically interrupt service during peak
demand periods. Although service interruptions have ordinarily been limited to
several hours and have occurred no more than ten days per year, there can be no
assurance that such interruptions will not be more severe in the future. The
Company also consumes substantial amounts of natural gas. Since deregulation of
the natural gas industry, the Company has generally obtained natural gas through
negotiated contract purchases of well-head gas, with transportation through
local pipeline distribution networks.
<PAGE>
Production Capacity
The table below presents management's estimated melting and rolling mill
capacity, together with actual steel melting and rolling production for fiscal
2000. The capacities presented are management's estimates and are based upon a
normal 168-hour weekly work schedule, assuming an average product mix for each
facility and include the effects of capacity limitations currently impacting
each facility. Production capacities listed below are estimated year-end
capacity levels.
Annual Fiscal Annual Fiscal
Melting 2000 Rolling 2000
Capacity Production Capacity Production
(in thousands of tons)
Rebar/merchant mini-mills:
Birmingham..................... 500 503 550 538
Kankakee....................... 835 833 800 542
Joliet......................... - - 280 279
Seattle........................ 750 641 750 605
Jackson........................ 450 345 400 268
Cartersville (A)............... 1,000 551 500 209
SBQ operations:
Cleveland...................... - - 1,100 539
Memphis (B).................... 1,000 198 - -
----- ---- ----- ----
4,535 3,071 4,380 2,980
===== ===== ===== =====
(A) The Cartersville facility was in the start-up phase of operations
throughout fiscal 2000.
(B) Memphis ceased operation in December 1999. Melting production for 2000
reflects only 6 months of operations. See "Discontinued Operations and
Closing of Memphis Melt Shop" in Management's Discussion and Analysis.
The Company has the capability to produce both rebar and merchant products
at each of its rebar/merchant mini-mills. Converting rebar production to
merchant products production is a routine facet of operations at the Company's
mini-mill facilities and no major impediments exist which would preclude
changing the product mix to meet changes in demand.
Production Facilities--Rebar/Merchant Mini-Mills
Birmingham, Alabama
The Birmingham, Alabama facility was the first mini-mill built in the
United States. Since acquisition of the Birmingham facility, the Company has
installed a new electric arc furnace and sequence casting system in the melt
shop, a new reheat furnace, finishing stands, cooling bed and product shear in
the rolling mill as well as a new finished goods storage area. In 1992, the
Company transferred an in-line rolling mill from its idled facility in Norfolk,
Virginia to Birmingham. In 1994, the Company installed finished goods bundling
and transfer equipment at its Birmingham facility. The Birmingham facility
produces primarily rebar and some merchant products.
<PAGE>
Kankakee, Illinois
The Kankakee, Illinois facility is located approximately 50 miles south
of Chicago. Since its acquisition in 1981, the Company has renovated the
operation and installed a new melt shop, continuous caster, and rolling mill;
reheat furnace and in-line straightening, stacking and bundling equipment.
Kankakee enjoys a favorable geographical proximity to key Midwest markets for
merchant products resulting in lower freight costs. Reduced freight costs and
Kankakee's state-of-the-art equipment capabilities are competitive advantages in
the Company's strategy to expand market share of merchant products.
Joliet, Illinois
The Joliet, Illinois facility was acquired with the Company's purchase of
AS&W in November 1993. In fiscal 1996, concurrent with the start-up of the new
high quality bar mill in Cleveland (see "Cleveland, Ohio" below), the Company
transferred the operation of the Joliet facility from management in Cleveland,
Ohio to the operational control of the Kankakee, Illinois management group. The
Company also invested approximately $30 million to upgrade the rolling mill and
enable Joliet to produce coiled and straight length reinforcing bar, flats,
rounds and squares. The Joliet operation consists of a modernized 2-strand,
19-stand Morgan mill, 3-zone top-fired walking beam furnace, no-twist finishing
and a coil and cut-to-length line. The Joliet operation obtains its
semi-finished steel billet requirements primarily from the Company's Kankakee
facility.
Seattle, Washington
The Seattle, Washington facility is located adjacent to the Port of
Seattle. The Company began operating in Seattle in 1986 upon the acquisition of
a local steel company, which provided an entry to the West Coast steel markets.
In 1991, the Company purchased the assets of Seattle Steel, Inc., in west
Seattle, and consolidated all of its steel operations to the west Seattle site.
Soon after the acquisition of the Seattle operations, the Company began a
modernization program that included the installation of a new baghouse, new
ladle turret and billet runout table. In 1993, the Company completed
construction of a new state-of-the-art in-line rolling mill, which includes
automated in-line straightening, stacking, and bundling equipment designed to
facilitate Seattle's expansion in merchant product production. The Seattle
operation produces rebar and a variety of merchant products, including rounds,
angles, channels, squares, flats and strip.
Jackson, Mississippi
The Company originally acquired the Jackson facility in August 1985. In
December 1996, upon formation of Birmingham Southeast, the Company contributed
the assets of its Jackson facility to the newly-formed limited liability
company. Birmingham Southeast also owns the facility in Cartersville, Georgia
which was acquired from Atlantic Steel Corporation. The Company, through its
Birmingham East Coast Holdings subsidiary, owns 85% of Birmingham Southeast.
Since acquiring the Jackson operation, the Company has renovated the
facilities and equipment. The Jackson facility includes a melt shop which was
completed in 1993 and a modern in-line rolling mill. Installation of automated
in-line straightening and stacking equipment were completed in fiscal 1994. The
Jackson facility produces primarily merchant products including rounds, squares,
flats, strip and angles. The Jackson facility also produces some rebar.
<PAGE>
Cartersville, Georgia
Birmingham Southeast acquired the Cartersville, Georgia facility in
December 1996. The facility has a melt shop with a 24-foot, 140-ton Demag AC
electric arc furnace and Demag 6 strand billet caster. Cartersville is a
supplier of billets for feedstock to the Cleveland facility. In March 1999, the
Company began its own rolling operations in Cartersville, and now produces a
wide range of merchant and structural products at this facility. The Company is
nearing completion of start-up at the Cartersville facility.
PESCO Facilities
In December 1994, the Company acquired substantially all of the assets of
Port Everglades Steel Corporation (PESCO), a Florida-based steel distributor.
PESCO obtains the majority of its steel requirements from the Company's
Birmingham and Kankakee mini-mills.
Production Facilities--SBQ Operations
Cleveland, Ohio
The Company's Cleveland, Ohio facilities include a rod mill, a bar mill and
a wire mill. The rod and wire assets were acquired in 1993 when the Company
purchased AS&W.
The Cleveland facilities produce a variety of high quality steel rod, bar
and wire products. The Cleveland operation has achieved QS9000 registration,
which is a quality system requirement established by Chrysler, Ford and General
Motors and is based upon the internationally recognized ISO9000 series of
standards. The Cleveland operation also includes a facility that produces
ultra-high tensile strength specialty wire for use in the U.S. Government's
anti-tank missile guidance systems. The Cleveland plant is the only producer of
Tube-launched, Optically tracked, Wire-guided (TOW) missile wire.
Memphis, Tennessee
In November 1997, the Company began start-up operations of an SBQ melt shop
in Memphis. The Memphis melt shop was designed to produce 1.0 million tons of
high quality billets per year. The facility consists of an electric arc furnace,
vacuum degassing tank, a ladle metallurgy station, a continuous bloom caster,
and a billet rolling mill. The facility also includes inspection and
conditioning equipment used to analyze billets prior to shipment. The Company
ceased operations of the Memphis facility as of January 1, 2000 and committed to
a plan to sell the assets. The Memphis facility assets are held for sale as of
June 30, 2000. See Note 2 to the Consolidated Financial Statements.
Products
Note 12 to the Consolidated Financial Statements provides information about
net sales for each of the past three years by type of product and by geographic
area. Following is a discussion of each of the Company's principal products and
distribution methods.
<PAGE>
Rebar Products
The Company has the capability to produce rebar at each of its
rebar/merchant mini-mill facilities. Rebar is generally sold to fabricators and
manufacturers who cut, bend, shape and fabricate steel to meet engineering,
architectural or end-product specifications. Rebar is used primarily for
strengthening concrete in highway construction, building construction and other
construction applications. Unlike some other manufacturers of rebar, the Company
does not engage in the rebar fabrication business, which could put the Company
into competition with its major rebar customers. The Company instead focuses its
marketing efforts on independent rebar fabricators and steel service centers.
Rebar is a commodity steel product which makes price the primary
competitive factor. As a result, freight costs limit rebar competition to
regional producers generally concentrated within a 700-mile radius of a mill.
Except in unusual circumstances, the customer's delivery expense is limited to
freight from the nearest mini-mill. Any incremental freight charges from another
source must be absorbed by the supplier. The Company's ships rebar products to
customers primarily via common carrier and, to a lesser extent, by rail and
equalizes freight costs to the nearest competing mill.
Rebar is consumed in a wide variety of end uses, divided into roughly equal
portions between private sector applications and public works projects. Private
sector applications include commercial and industrial buildings, construction of
apartments and hotels, utility construction, agricultural uses and various
maintenance and repair applications. Public works projects include construction
of highways and streets, public buildings, water treatment facilities and other
projects.
The following data, reported by the American Iron and Steel Institute (a
rebar fabricator trade association), depict apparent rebar consumption in the
United States from 1989 through 1999. The table also includes rebar shipments by
the Company and its approximate market share percentage for the periods
indicated:
Rebar Company Approximate
Consumption Shipments Market
Calendar Year (in tons) (in tons) Share
-------------------- --------- --------- -----
1989............................... 5,213,000 972,000 18.6%
1990............................... 5,386,000 972,000 18.0%
1991............................... 4,779,000 945,000 19.8%
1992............................... 4,764,000 1,060,000 22.3%
1993............................... 5,051,000 1,181,000 23.4%
1994............................... 5,151,000 1,185,000 23.0%
1995............................... 5,454,000 1,108,000 20.3%
1996............................... 6,071,000 1,288,000 21.2%
1997............................... 6,188,000 1,432,000 23.1%
1998............................... 7,373,000 1,363,000 18.5%
1999............................... 6,546,000 1,446,000 22.1%
The Company's rebar operations are subject to a period of moderately
reduced sales from November to February, when winter weather and the holiday
season impact construction market demand.
<PAGE>
Merchant and Structural Products
The Company has the capability to produce merchant products at each of its
continuing core mini-mill facilities. Merchant products consist of rounds,
squares, flats and strips, along with, angles and channels less than three
inches wide. Merchant products are generally sold to fabricators, steel service
centers and manufacturers who cut, bend, shape and fabricate steel to meet
engineering or end product specifications. Merchant products are used to
manufacture a wide variety of products, including gratings, steel floor and roof
joists, safety walkways, ornamental furniture, stair railings and farm
equipment.
The Company has the capability to produce structural products at its
Cartersville mini-mill facility. Structural products consist of angles,
channels, and beams that are three inches wide and above. Structural products
are used to manufacture a wide variety of products including housing beams,
trailers, light to medium structural support for buildings and other
construction based uses.
Merchant and structural products typically require more specialized
processing and handling than rebar, including straightening, stacking and
specialized bundling. Because of the greater variety of shapes and sizes,
merchant and structural products are typically produced in shorter production
runs, requiring more frequent changeovers in rolling mill equipment. Merchant
products command higher prices and generally produce higher profit margins on a
per producer basis than rebar products. The Company has installed modern
straightening, stacking and bundling equipment at its mills to strengthen its
competitiveness in merchant and structural markets.
As with rebar, the Company generally ships merchant and structural products
to customers by common carrier or by rail and equalizes freight costs to the
nearest competing mill.
The following data reported by the American Iron and Steel Institute depict
apparent consumption of merchant products in the United States from 1989 through
1999. The table also includes merchant product shipments by the Company and its
approximate market share percentage for the periods indicated:
Merchant Product Company Approximate
Consumption Shipments Market
Calendar Year (in tons) (in tons) Share
-------------------- ---------------- --------- -----------
1989.......................... 8,398,000 272,000 3.2%
1990.......................... 8,379,000 306,000 3.7%
1991.......................... 7,045,000 287,000 4.1%
1992.......................... 7,504,000 330,000 4.4%
1993.......................... 8,445,000 395,000 4.6%
1994..........................10,113,000 484,000 4.8%
1995..........................10,618,000 524,000 4.9%
1996..........................10,341,000 520,000 5.0%
1997..........................10,534,000 925,000 8.8%
1998..........................11,600,000 909,000 7.8%
1999..........................10,237,000 908,000 8.9%
Data reported by the American Iron and Steel Institute depict apparent
consumption of structural products in the United States in calendar year 1999
was 6,391,000 tons. Since Cartersville did not begin construction of their
mid-section mini-mill until March 1999, and has been in start-up through June
30, 2000, the Company did not have a significant amount of structural shipments
during calendar 1999.
<PAGE>
SBQ Rod, Bar and Wire Products
The Company's SBQ facilities market high-quality rod, bar and wire products
to customers in the automotive, agricultural, industrial fastener, welding,
appliance and aerospace industries. Because of the flexibility of the Cleveland
facility, the Company produces a wide variety of SBQ products, including cold
heading quality, cold finish quality, cold rolling quality, welding quality,
specialty high carbon quality, industrial quality, bearing quality and wire
products. Approximately 70% of the Company's SBQ shipments are to customers
serving the original equipment and after-market segments of the automotive
industry.
End-uses of the Company's SBQ rod and bar products include electric motor
shafts, engine bolts, lock hasps, screws, pocket wrenches, seat belt bolts,
springs, cable wire, chain bearings, tire bead and welding wire. Steel wire
produced by the Company is used by customers to produce steel wool pads, brake
pads, golf spikes and fasteners such as bolts, rivets, screws, studs and nuts.
The Company's TOW wire products are used exclusively in the defense industry to
produce guidance systems for the TOW anti-tank missile.
Because of the nature of the end-uses, the Company's SBQ products must meet
exacting metallurgical and size tolerance specifications and defect-free surface
characteristics. The Company's marketing and sales strategy is to meet or exceed
customers' requirements for high quality steel rod and wire.
The Company's pricing strategy for SBQ products is generally market driven.
Typically, rapidly responsive market pricing prevails for most customers that
rely on market competition to determine price. The major exception to this is in
the automotive industry, where model-year pricing practices result in fixed
pricing for twelve months into the future (generally beginning August 1). This
practice provides pricing certainty to automotive industry OEM suppliers.
Competition
Price sensitivity in markets for the Company's products is driven by
competitive factors, including the cost and availability of steel in the
marketplace. The geographic marketing areas for the Company's products are
principally the United States and Canada.
Because rebar, merchant and structural products are commodity products, the
major factors affecting the sale of finished products are manufacturing cost,
competitive pricing, inventory availability, facility location and service. The
Company competes in the rebar, merchant and structural markets primarily with
numerous regional domestic mini-mill companies and foreign importers.
The Company's primary competitors in rod and bar products are divisions of
domestic and foreign integrated steel companies and domestic mini-mill
companies. The Company competes primarily in the high quality end of the rod,
bar and wire markets, differentiating itself from many of its competitors.
Although price is an important competitive factor in the Company's SBQ business,
particularly during recessionary times, the Company believes that its sales are
principally dependent upon product quality, on-time delivery and customer
service. The Company generally emphasizes its ability to meet or exceed
customers' requirements for high quality steel rod, bar and wire. The SBQ market
constitutes a relatively small percentage of total domestic steel consumption,
and therefore some domestic integrated mills have exited this business or given
it a low priority. Additionally, competing mini-mills are generally unable to
produce steel of sufficient quality and metallurgical characteristics to produce
rod, bar and wire comparable in quality to that manufactured by the Company.
<PAGE>
Foreign Competition
During the past two years, foreign steel imports have had a significant
impact on the Company's shipments. Also, selling prices have decreased in each
of the past two years, primarily because of increased imports. In July 2000, the
Company and other United States rebar producers (the Rebar Trade Action
Coalition) filed a petition with the International Trade Commission (ITC)
against dumping of rebar in certain United States regional markets. In August
2000, the ITC ruled in favor of the Rebar Trade Action Coalition, preliminarily
finding that certain regional United States markets had been injured or
threatened with injury due to dumped steel imports. As a result of these
findings, the Department of Commerce is reviewing the facts to determine if
duties should be imposed on steel imports from certain countries. The Department
of Commerce is expected to rule in December 2000.
Employees
Production Facilities
At June 30, 2000, the Company employed 1,901 people at its production
facilities. The Company estimates that approximately 25% of its current employee
compensation in operations is earned on an incentive basis linked to production.
The percentage of incentive pay varies from mill to mill based upon operating
efficiencies. During fiscal 2000, hourly employee costs at these facilities were
approximately $31 per hour, including overtime and fringe benefits, which was
competitive with other mini-mills. Approximately 94 production and maintenance
employees at the Joliet facility have been represented by United Steelworkers of
America since 1986, and are parties to a collective bargaining contract that
expired in June 2000. (The Company is currently in negotiations with union
representatives.) During fiscal 2000, hourly employee costs at this facility
were approximately $28 per hour, including overtime and fringe benefits. The
Company's other facilities are not unionized. The Company has never experienced
a strike or other work stoppage at its steel mills and management believes that
employee relations remain good.
Sales and Administrative Personnel
At June 30, 2000, the Company employed 225 sales and administrative
personnel, of which 97 were employed at the Company's corporate office
headquarters located in Birmingham, Alabama.
Environmental and Regulatory Matters
The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, waste water effluent, air emissions
and furnace dust disposal. As these regulations increase in complexity and
scope, environmental considerations play an increasingly important role in
planning, daily operations and expenses.
The Company operates engineering/environmental services departments and has
environmental coordinators at its facilities to maintain compliance with
applicable laws and regulations. These personnel are responsible for the daily
management of environmental matters. The Company believes it is currently in
compliance with all known material and applicable environmental regulations.
Changes in federal or state regulations or a discovery of unknown conditions
could require substantial additional expenditures by the Company.
The Company's mini-mills are classified as hazardous waste generators
because they produce and collect certain types of dust containing lead and
cadmium. The Company currently collects and disposes of such wastes at approved
landfill sites or recycling sites through contracts with approved waste disposal
and recycling firms.
<PAGE>
The Cleveland and Joliet facilities were acquired pursuant to an Asset
Sales Agreement dated May 19, 1986 (the "Agreement"), by and between ASW and USX
Corporation (formerly United States Steel Corporation) ("USX"). Pursuant to the
Agreement, ASW is indemnified by USX for claims, if any, which may be asserted
against ASW under the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. Subsection 6901, et seq., and the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Sub-section 9601, et. Seq., or which may be asserted under similar federal or
state statutes or regulations, which arise out of USX's actions on or prior to
June 30, 1986, the date on which ASW acquired these facilities. To date, no such
claims have been identified or asserted against ASW.
Executive Officers of the Registrant
Pursuant to General Instruction G(3) to Form 10-K, information regarding
the executive officers of the Company called for by Item 401(b) of Regulation
S-K is presented below.
The following table sets forth the name of each executive officer of the
Company, the offices they hold, and their ages as of August 21, 2000.
Name Age Office Held
---------------- --- -----------
John D. Correnti 53 Chairman of the Board and Chief Executive Officer
James A. Todd, Jr. 72 Vice Chairman and Chief Administrative Officer
Robert G. Wilson 63 Vice President - Sales and Marketing
Philip L. Oakes 53 Vice President - Human Resources
J. Daniel Garrett 42 Chief Financial Officer and Vice President - Finance
John D. Correnti joined the Company as Chairman of the Board and Chief
Executive Officer in December 1999. Prior to joining the Company, Mr. Correnti
served as Vice Chairman, President and Chief Executive Officer of Nucor
Corporation from 1996 to 1999.
James A. Todd, Jr. joined the Company as Chief Administrative Officer in
December 1999. Mr. Todd served as Chairman of the Board and Chief Executive
Officer of the Company from 1991 to January 1996.
Robert G. Wilson joined the Company in 1988 as Vice President - Sales and
has served as Vice President - Sales & Marketing since December 1999.
Philip L. Oakes joined the Company in 1996 and serves as Vice President -
Human Resources. Prior to joining the Company, Mr. Oakes served as Vice
President - Human Resources of Waste Management, Inc. from 1992 to 1996.
J. Daniel Garrett joined the Company in 1986 and has served as Chief
Financial Officer and Vice President - Finance since June 2000. From October
1997 to June 2000, Mr. Garrett served as Vice President-Finance & Control.
<PAGE>
Risk Factors
A description of "Risk Factors that May Affect Future Operating Results"
relating to the Company is included in Management's Discussion and Analysis in
Item 7.
ITEM 2. PROPERTIES
The following table lists the Company's real property and production
facilities. Management believes that these facilities are adequate to meet the
Company's current and future commitments.
Building Owned
Square Or
Location Acreage Footage Leased
------- --------- ------
Corporate Headquarters:
Birmingham, Alabama.................... - 41,433 Leased
Operating Facilities:
Rebar/Merchant mini-mills:
Birmingham, Alabama.................. 26 260,900 Owned
Kankakee, Illinois................... 222 400,000 Owned
Seattle, Washington.................. 69 736,000 Owned
Jackson, Mississippi................. 99 323,000 Owned(A)
Cartersville, Georgia................ 283 367,000 Owned
Ft. Lauderdale, Florida.............. - 29,500 Leased
SBQ Operations:
Cleveland, Ohio..................... 216 2,041,600 Owned(A)
Memphis, Tennessee (B).............. 500 184,800 Owned(A)
(A) Portions of equipment that were financed by Industrial Revenue bonds are
leased pursuant to the terms of such bonds.
(B) As of January 1, 2000 the Company suspended melting operations at Memphis.
This facility is currently held for disposal.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in litigation relating to claims arising out of its
operations in the normal course of business. Most of the existing known claims
against the Company are covered by insurance, subject to the payment of
deductible amounts by the Company. Management believes that any uninsured or
unindemnified liability resulting from existing litigation will not have a
material adverse effect on the Company's business or financial position.
However, there can be no assurance that insurance, including product liability
insurance, will be available in the future at reasonable rates.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock, par value $.01 per share (the "Common Stock"),
is traded on the New York Stock Exchange under the symbol BIR.
The table below sets forth for the two fiscal years ended June 30, 2000 and
1999, the high and low prices of the Company's common stock based upon the high
and low sales prices of the common stock as reported on the New York Stock
Exchange Composite Tape.
High Low
------ ------
Fiscal Year Ended June 30, 2000
First Quarter.................................... $ 9.06 $ 4.31
Second Quarter................................... 8.19 3.25
Third Quarter.................................... 5.44 3.19
Fourth Quarter................................... 5.00 3.00
Fiscal Year Ended June 30, 1999
First Quarter.................................... $ 12.75 $ 6.44
Second Quarter................................... 7.94 3.50
Third Quarter.................................... 5.13 3.88
Fourth Quarter................................... 7.13 3.94
The last sale price of the Common Stock as reported on the New York Stock
Exchange on August 21, 2000 was $3.00. As of August 21, 2000, there were 1,470
holders of record of the Common Stock. The Company's registrar and transfer
agent is First Union National Bank of North Carolina.
The ability of the Company to pay dividends in the future will be
dependent upon general business conditions, earnings, capital requirements,
funds legally available for such dividends, contractual provisions of debt
agreements and other relevant factors (Refer to "Selected Consolidated Financial
Data" for information concerning dividends paid by the Company during the past
five fiscal years). In December 1999, the Company's Board of Directors decided
to suspend quarterly dividend payments until the Company's profitability and
cash flows improve and the restrictive covenants of its long-term debt
obligation become less restrictive.
Under terms of the Company's amended debt agreements (Refer to Note 7 to
Consolidated Financial Statements), dividends and other "restricted payments,"
as defined in the agreements, are limited to the lesser of $750,000 per quarter
or 50% of quarterly income from continuing operations.
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------------------------------------------
2000 1999(A) 1998(A) 1997 (A) 1996(A)
--------- ---------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales.......................................... $ 932,546 $ 980,274 $1,136,019 $ 978,948 $ 832,489
Cost of sales:
Other than depreciation and amortization......... 829,415 840,339 963,354 846,910 730,447
Depreciation and amortization.................... 58,179 60,992 55,266 45,843 34,701
-------------------------------------------------------------
Gross profit..................................... 44,952 78,943 117,399 86,195 67,341
Start-up and restructuring costs and other unusual
Items (B)....................................... 210,476 50,735 34,238 10,633 23,907
Selling, general and administrative expense......... 49,226 46,126 48,645 36,670 37,731
-------------------------------------------------------------
Operating (loss) income............................. (214,750) (17,918) 34,516 38,892 5,703
Interest expense.................................... 51,687 35,265 29,008 20,195 12,036
Other income, net (C)............................... 3,039 11,288 13,968 5,260 3,975
Loss from equity investments (D).................... (11,915) (30,765) (18,326) (1,566) --
Minority interest in loss of subsidiary............. 7,978 5,497 1,643 2,347 --
-------------------------------------------------------------
(Loss) income from continuing operations before
income taxes..................................... (267,335) (67,163) 2,793 24,738 (2,358)
(Benefit from) provision for income taxes........... (41,001) (16,110) 1,164 10,321 (181)
--------------------------------------------------------------
(Loss) income from continuing operations............ (226,334) (51,053) 1,629 14,417 (2,177)
Discontinued operations:
Reversal of loss (loss) on disposal of SBQ
business, including estimated losses during
the disposal period (net of income taxes of
$78,704) (E).................................. 173,183 (173,183) -- -- --
-------------------------------------------------------------
(Loss) income before extraordinary item............. (53,151) (224,236) 1,629 14,417 (2,177)
Loss on restructuring of debt
(net of income taxes of $1,160).................. (1,669) -- -- -- --
-------------------------------------------------------------
Net (loss) income .................................. $ (54,820) $ (224,236) $ 1,629 $ 14,417 $ (2,177)
=============================================================
Basic and diluted per share amounts:
(Loss) income from continuing operations......... $ (7.51) $ (1.73) $ 0.05 $ 0.50 $ (0.08)
Income (loss) on discontinued operations......... 5.75 (5.88) -- -- --
Loss on restructuring of debt.................... (0.06) -- -- -- --
-------------------------------------------------------------
Net (loss) income................................ $ (1.82) $ (7.61) $ 0.05 $ 0.50 $ (0.08)
=============================================================
Dividends declared per share........................ $ 0.050 $ 0.175 $ 0.40 $ 0.40 $ 0.40
=============================================================
</TABLE>
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------------------
2000 1999 (A) 1998 (A) 1997 (A) 1996 (A)
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital..................................... $ 142,660 $ 110,467 $ 237,674 $ 228,882 $ 211,595
Total assets........................................ 959,857 970,737 1,244,778 1,210,989 927,987
Long-term debt less current portion................. 594,090 511,392 558,820 526,056 307,500
Stockholders' equity................................ 188,015 230,731 460,607 471,548 448,191
</TABLE>
(A) The selected consolidated financial data for fiscal 1996 through 1999 has
been restated to reflect the Company's special bar quality (SBQ) business
within continuing operations. In fiscal 2000, subsequent to a change in
management, which occurred after a proxy contest, new management announced
the Company would no longer reflect its SBQ operations as discontinued
operations. Refer to Note 2 to the Consolidated Financial Statements.
(B) Includes start-up costs of $31,933, $50,772, $34,238, $10,633 and $16,409
in 2000, 1999, 1998, 1997 and 1996, respectively. In fiscal 2000, the
Company recorded asset impairment, restructuring charges and other unusual
items amounting to $178,543. Refer to Note 14 to the Consolidated Financial
Statements.
(C) Includes $4,414 in refunds from electrode suppliers in both 1999 and 1998
and $5,200 and $5,225 gain on sales of idle properties and equipment in
1999 and 1998, respectively.
(D) Includes impairment losses for equity investees of $13,889, $19,275 and
$12,383 in 2000, 1999 and 1998, respectively. Refer to Note 3 to the
Consolidated Financial Statements.
(E) In fiscal 1999, the Company reported the SBQ segment as discontinued
operations based on former management's plan to sell the SBQ business. In
the second quarter of fiscal 2000, the Company announced that it would no
longer reflect the SBQ segment as discontinued operations based on new
management's decision to re-establish its Cleveland-based American Steel &
Wire. Refer to Note 2 to the Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations for further discussion of the status of the SBQ segment.
<
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RECENT DEVELOPMENTS
Discontinued Operations and Closing of Memphis Melt Shop
In August 1999, prior management of the Company announced a strategic
restructuring plan to dispose of its special bar quality (SBQ) operations in
order to focus on its core rebar, merchant product and scrap businesses. In its
results for the fourth quarter of fiscal 1999, the Company recorded $173.2
million in charges for the estimated loss on the sale of the SBQ operations,
which included a $56.6 million pre-tax provision for estimated losses during the
expected one-year disposal period.
In January 2000, the Company's new management decided to retain its SBQ
rolling mill facilities in Cleveland, Ohio, which represent a substantial
portion of the previously discontinued SBQ operations. As a result, the Company
was required to re-establish the SBQ operations as part of continuing
operations. The fiscal 2000 financial statements reflect the reversal of the
$173.2 million charge and the reclassification of the SBQ operations as a
component of continuing operations. The effect of reversing the previous charges
in the second quarter of fiscal 2000 were substantially offset by
re-establishing valuation allowances and other reserves as described under the
caption "Start-Up and Restructuring Costs and Other Unusual Items".
On December 28, 1999, the Company announced suspension of operations at
its melt shop facility in Memphis, Tennessee as of January 1, 2000. Operations
were suspended because of continued financial and operational difficulties
encountered in meeting quality requirements for semi-finished billet supply at
the Cleveland rolling mill operation. As part of the decision to idle the
Memphis facility, the Company assessed the impairment of the facility and
recorded an impairment charge of $85 million representing the difference between
the carrying value of those assets and the estimated fair market value (based on
an appraisal) less estimated costs to sell the facility. While the facility is
idled, management expects to incur ongoing costs of approximately $1 million per
month to maintain the facility and service outstanding lease and debt
obligations. Management is actively pursuing a sale or other disposition of the
Memphis facility, including joint venture opportunities.
Long-Term Debt Amendments
On May 15, 2000, the Company and its lenders executed amendments to its
principal debt and letter of credit agreements to provide for the continuation
of the Company's borrowing arrangements on a long-term basis. These amendments
replace previous amendments, which were negotiated by the Company's prior
management in October 1999. Refer to Note 7 to the Consolidated Financial
Statements for information about the terms and provisions of the amendments.
Information also is provided under the caption "Liquidity and Capital
Resources--Financing Activities" below.
GENERAL
In December 1999, following a proxy contest, the Company's shareholders
elected new management and reconstituted the Board of Directors. The financial
results for the year ended June 30, 2000 reflect the influence of decisions
implemented by prior management, as well as expenses associated with the proxy
contest and severance of former members of management. The results also reflect
wind-down costs related to the Memphis melt shop, which ceased operations as of
January 1, 2000.
<PAGE>
New management has accomplished a number of significant achievements since
December that have improved the overall financial condition of the Company and
positioned the Company for improved financial results in the future. These
achievements include:
o Suspended operations at the Company's Memphis facility in December 1999,
which had incurred start-up costs of more than $83 million in the last
three years and had been a major drain on the Company's liquidity.
Implementing this strategy reduced operating losses at the facility from
approximately $3.5 million per month to approximately $1 million per month.
o Reduced corporate office personnel, which is expected to reduce annual
expenses by more than $2 million.
o Finalized more flexible financing agreement with the Company's lenders,
including new $25 million financing commitment.
o Reduced inventories by $21 million from December 1999 to June 2000.
o Reduced accounts payable by $20 million from December 1999 to June 2000 and
thereby improved relationships with vendors.
o Reduced SG&A spending to 4.1% of sales in the fourth quarter from 6.1% of
sales in the first quarter.
o Substantially completed capital spending and increased productivity and
sales at the new Cartersville rolling mill which resulted in breakeven cash
flow for the month of May 2000 at Cartersville.
o Strengthened sales management for Cartersville and SBQ markets.
o Implemented a turnaround plan at Cleveland, which resulted in breakeven
cash flow for the month of June 2000.
o Reached a new agreement with lenders of AIR, which has reduced the
Company's requirements for purchases of direct reduced iron from the
venture.
o Paid or settled substantially all expenses associated with the proxy
contest ($6.9 million).
o Reached severance arrangements with all but two former members of
management.
o Sold interest in Pacific Coast Recycling, a non-strategic west coast scrap
operation, generating $2.5 million cash flow and eliminating liabilities
and guarantee obligations associated with the venture.
Loss from continuing operations for fiscal 2000 was $226.3 million, or
$7.51 per share, compared to a loss of $51.1 million, or $1.73 per share for
fiscal 1999. The following table sets forth, for the years indicated, selected
items in the consolidated statements of operations as a percentage of net sales.
Years Ended June 30,
----------------------------
2000 1999 1998
------- ------- --------
Net sales......................................... 100% 100% 100%
Cost of sales:
Other than depreciation and amortization....... 88.9 85.7 84.8
Depreciation and amortization.................. 6.2 6.2 4.9
------- -------- --------
Gross margin...................................... 4.9 8.1 10.3
Start-up and restructuring costs and
other unusual items............................ 22.6 5.2 3.0
Selling, general and administrative expense... 5.3 4.7 4.3
Interest expense.................................. 5.5 3.6 2.6
Other income, net................................. 0.3 1.2 1.2
Loss from equity investments...................... (1.3) (3.1) (1.6)
Minority interest in loss of subsidiary........... 0.9 0.6 0.1
(Benefit from) provision for income taxes......... (4.4) (1.6) 0.1
-------- -------- --------
Net (loss) income from continuing operations...... (24.3)% (5.2)% 0.2%
======== ======== ========
<PAGE>
Results From Operations
The following table sets forth, for the fiscal years indicated, trade
shipments, product mix percentages and average selling prices per ton for the
Company's rebar, merchant, rod/bar/wire and scrap operations:
<TABLE>
<CAPTION>
2000 1999 1998
----------------------- ------------------------- -------------------------
Tons % of Avg. Tons % of Avg. Tons % of Avg.
Shipped Total Selling Shipped Total Selling Shipped Total Selling
(000's) Sales Price (000's) Sales Price (000's) Sales Price
------- ----- -------- ------- ----- --------- --------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rebar............. 1,459 46.8% $ 263 1,354 44.5% $ 275 1,432 43.0% $ 302
Merchants (A)..... 950 30.5 314 885 29.1 323 925 27.8 344
Rod/Bar/Wire 528 17.0 403 649 21.3 414 662 19.9 451
Other............. 177 5.7 239 155 5.1 261 310 9.3 265
----- ----- ----- ----- ----- ------
Total......... 3,114 100.0% 3,043 100.0% 3,329 100.0%
===== ===== ===== ===== ===== ======
</TABLE>
(A) Structural products are included with merchant products due to limited
production in fiscal 2000. Structural products were not produced in fiscal
1999 or 1998.
Net Sales
Fiscal 2000 compared to fiscal 1999
In fiscal 2000, consolidated net sales decreased 4.9% to $932.5 million
from $980.3 million in fiscal 1999. Rebar/merchant segment sales increased 1.3%
to $719.2 million while SBQ segment sales decreased 21.1% to $213.3 million.
Although rebar/merchant volumes were up 7.5% (in tons) over 1999, nearly all of
the unit growth was offset by decreased selling prices which prevailed in the
later half of the year. The decrease in SBQ segment sales were attributable to
lower volumes and pricing pressures. In addition, in the fourth quarter, the
Company reduced shipments of lower margin industrial quality products and
focused efforts on higher margin SBQ products. The decline in average selling
prices in both segments was attributable to increased levels of steel imports
and general market downward pressure on pricing during fiscal 2000. The
Company's average selling price for rebar, merchant, and SBQ products decreased
$12, $9, and $11, respectively, per ton in 2000 versus 1999.
Fiscal 1999 compared to fiscal 1998
In fiscal 1999, net sales decreased 14% to $980.3 million from $1,136
million in fiscal 1998. Net sales for the rebar/merchant segment decreased 15.2%
to $709.9 million, while SBQ segment net sales decreased 9.6% to $270.4 million.
Volumes for rebar/merchant products decreased 5.0% to 2,239,000 tons, while SBQ
segment sales volumes decreased 2.0% to 649,000 tons. The decrease resulted from
a decline in average selling prices for rebar, merchant and SBQ products. The
decline in average selling prices and sales volume was attributable to
unprecedented levels of steel imports and general market downward pressure on
pricing during fiscal 1999. The Company's average selling price for rebar,
merchant, and SBQ products decreased $27, $21, and $37, respectively, per ton in
1999 versus 1998.
Cost of Sales
Fiscal 2000 compared to fiscal 1999
As a percentage of net sales, consolidated cost of sales (other than
depreciation and amortization) increased to 88.9% in fiscal 2000, compared to
85.7% in fiscal 1999. For the rebar/merchant segment, this percentage increased
to 83.4% in fiscal 2000, compared to 80.1% in fiscal 1999. For the SBQ segment,
this percentage increased to 107.8% in fiscal 2000, compared to 100.5% in fiscal
1999. The percentage increase in cost of sales resulted primarily because of
lower average sales prices, along with higher raw material costs. In addition,
for the rebar/merchant segment, fiscal 2000 includes a full year of operating
lease costs for equipment at the Cartersville, Georgia facility, which became
operational in the second half of fiscal 1999.
<PAGE>
For fiscal 2000, the SBQ segment recognized $3.8 million in inventory
write-downs (primarily for lower of cost or market adjustments) during the
second quarter.
Depreciation and amortization expense for fiscal 2000 decreased $2.8 million
compared to fiscal 1999, because of $4 million of depreciation expense reduction
due to the shut down of the Memphis facility. Average scrap cost per ton for the
rebar/merchant segment was $106 and $102 for fiscal 2000 and 1999, respectively.
Conversion cost per ton for the rebar/merchant segment was $132 and $128 for
fiscal 2000 and 1999, respectively. Average net billet cost per ton for the SBQ
segment was $302 and $348 for fiscal 2000 and 1999, respectively. Average
conversion cost per ton for the SBQ segment was $78 and $71 for fiscal 2000 and
1999, respectively.
Fiscal 1999 compared to fiscal 1998
As a percentage of net sales, consolidated cost of sales (other than
depreciation and amortization) increased to 85.7% in fiscal 1999, compared to
84.8% in fiscal 1998. For the rebar/merchant segment, this percentage decreased
to 80.1% in fiscal 1999, compared to 82.2% in fiscal 1998. For the SBQ segment,
this percentage increased to 100.5% in fiscal 1999, compared to 92.2% in fiscal
1998, primarily as a result of lower average sales prices. As a percent of net
sales, depreciation and amortization expense for fiscal 1999 increased to 6.2%
from 4.9% in fiscal 1998 primarily due to the start-up of operations at the
Company's Cartersville, Georgia mid section mill. Average scrap cost per ton for
the rebar/merchant segment was $102 and $133 for fiscal 1999 and 1998,
respectively. Conversion cost per ton for the rebar/merchant segment was $128
and $123 for fiscal 1999 and 1998, respectively. Average net billet cost per ton
for the SBQ segment was $348 and $351 for fiscal 1999 and 1998, respectively.
Average conversion cost per ton for the SBQ segment was $71 and $67 for fiscal
1999 and 1998, respectively.
Start-Up and Restructuring Costs and Other Unusual Items
Fiscal 2000 compared to fiscal 1999
Start-up expense, restructuring cost and other unusual items were to $210.5
million in fiscal 2000, compared to $50.7 million in fiscal 1999.
Start-Up: Substantially all of the fiscal 2000 start-up costs relate to
the Cartersville, Georgia mid-section mill (which began operations in March
1999) and continued efforts to optimize the Memphis melt shop (until operations
were suspended). The Company will complete the start-up operational phase soon.
In December 1999, the Company announced suspension of operations at the Memphis
facility. The Company has completed the shut down at Memphis and expects to
incur ongoing costs of approximately $1.0 million per month to maintain the
facility until it is sold or otherwise disposed of.
Restructuring Costs: Operating results, from continuing operations for
fiscal 2000 were significantly impacted by the unwinding of discontinued
operations accounting, which required the Company to reverse $251.9 million
($173.2 million after tax) of reserves which had been established in 1999 for
estimated losses to be incurred on and until disposition of the SBQ operations.
Although the discontinued operations reserves were reversed in the second
quarter of fiscal 2000, most of the previous charges were restored through
charges to continuing operations to fairly state SBQ assets, liabilities, and
operating results. Following is a summary of asset impairment and restructuring
charges for the SBQ operations, which offset a substantial portion of the income
from reversal of the 1999 discontinued operations loss (in thousands):
Asset impairment - Memphis facility.............................$ 85,000
Loss on purchase commitment - AIR................................ 40,238
Asset impairment - SBQ division goodwill......................... 22,134
Severance and termination benefits - Memphis..................... 2,473
--------
$149,845
========
In addition, the $13.9 million 1999 write-down of the Company's investment
in AIR (originally recognized as a part of the estimated loss on disposal) was
restored as an allowance for permanent impairment in fiscal 2000.
Management's decisions to shut-down the Memphis melt shop and actively
pursue a strategy to sell its interest in AIR or sell the assets of AIR will
result in significant future savings and improved operating results. Among other
things, because the Memphis facility is an asset held for sale, annual
depreciation of $7.8 million will not be charged to future operations. Monthly
operating losses at Memphis are expected to decrease by approximately $2.5
million. Also, future purchases of DRI from AIR will be reflected in cost of
sales at market cost, rather than at the higher contracted price the Company
must pay under the DRI purchase contract with AIR. In addition, as a result of
the write-off of SBQ division goodwill, annual amortization expenses will
decrease by $1.1 million.
Other costs: The Company also incurred other unusual charges during fiscal
2000, including the following (in thousands):
Proxy solicitation costs........................................$ 6,887
Executive severance costs....................................... 6,298
Asset impairment - assets retired............................... 13,111
Debt amendment costs............................................ 2,402
-------
$28,698
=======
Proxy solicitation costs, principally consisting of legal, public relations
and other consulting fees, were incurred in the Company's defense of a proxy
contest led by The United Company Shareholder Group (the "United Group"). On
December 2, 1999, the Company and the United Group reached a settlement
appointing John D. Correnti as Chairman and Chief Executive Officer and
reconstituting the Board of Directors to include a total of twelve directors,
nine of which were appointed by the United Group and three of which were
appointed by previous management. The charges include approximately $1.7 million
to reimburse the United Group for certain of its costs in connection with the
proxy contest, which was settled by issuing 498,733 shares of the Company's
common stock to the United Company during the third quarter.
As a result of the proxy contest, a total of six executives, including the
former CEO, were severed during fiscal 2000. Those executives were covered by
the Company's executive severance plan, which provides for specified benefits
after a "change in control," as defined in the plan, among other triggering
events.
In conjunction with the May 15, 2000 amendments to the Company's borrowing
agreements, the Company incurred $2.4 million in legal and financial consulting
fees.
For additional discussion of each of the above items refer to Note 14 to
the Consolidated Financial Statements.
Fiscal 1999 compared to 1998
Start-up costs amounted to $50.7 million in fiscal 1999, compared to $34.2
million in fiscal 1998. Substantially all of the startup costs in both years
related to excess production costs at the Cartersville, Georgia mid-section mill
(which began operations in March 1999) and the Memphis melt shop, which never
sustained commercially viable levels of production prior to its shut-down as of
January 1, 2000.
Selling, General and Administrative Expenses ("SG&A")
Fiscal 2000 compared to fiscal 1999
SG&A expenses were $49.2 million in fiscal 2000, an increase of 6.7% from
$46.1 million in fiscal 1999. The increase related to higher salaries and
benefits associated with increased headcount with the start-up of the
Cartersville, Georgia mid section mill and increased computer and telephone
equipment lease expense. In December 1999 and January 2000, new management
implemented a program to control SG&A costs by, among other things, decreasing
the size of the corporate office staff and eliminating corporate positions in
Cleveland and Memphis. These actions are expected to lead to reductions of $2
million per year in salaries and benefits expense.
Fiscal 1999 compared to 1998
SG&A expenses were $46.1 million in fiscal 1999, a decrease of 5.3% from
$48.7 million in fiscal 1998. The decrease relates to a $2 million non-recurring
information technology charge in 1998 related to a decision to change software
vendors for a major system upgrade.
Interest Expense
Fiscal 2000 compared to fiscal 1999
Interest expense, including debt issuance cost amortization, increased to
$51.7 million for fiscal 2000 from $35.3 million in fiscal 1999. Interest
expense was higher as a result of increased borrowings under the Company's
revolving credit line and an increase in the Company's average borrowing rate
(from 6.65% to 8.96%) for fiscal 1999 due to a series of modifications to the
Company's long-term debt agreements in fiscal 2000. The recurring amortization
of debt issue costs is also higher in 2000, reflecting the impact of amendment
fees and other issuance costs incurred in connection with amending debt
agreements in October 1999 and May 2000. Additionally, interest expense
increased because of a decline in capitalized interest previously attributed to
the mid-section mill project at the Cartersville, Georgia facility, which was
placed in service in the third quarter of fiscal 1999. The Company expects
interest expense will further increase in fiscal 2001 as a result of beginning
the year with higher debt levels and higher interest rates on both fixed and
variable rate debt. The Company is currently limited as to the amount of capital
expenditures it can make under capital spending programs and does not expect
significant levels of capital expenditures or capitalized interest during fiscal
2001. Refer to "Liquidity and Capital Resources - Financing Activities."
Fiscal 1999 compared to 1998
Interest expense increased to $35.3 million for fiscal 1999 from $29.0
million in fiscal 1998. The increase in interest expense was primarily due to
increased borrowings on the Company's revolving credit line during the year.
Depressed selling prices and lower shipment volumes in the Company's SBQ
operations reduced the Company's operating cash flows during the year. These
factors, along with capital spending to complete the Company's capital projects
at Cartersville and other facilities contributed to increased borrowing
throughout fiscal 1999. The Company also amended its debt agreements during the
second quarter of fiscal 1999, which, along with overall increases in market
rates, led to an increase in the Company's average borrowing rate. The Company's
average long-term borrowing rate was 6.79% in fiscal 1999 versus 6.64% in fiscal
1998. In fiscal 1999, the impact of the increase in total interest costs was
offset, in part, by increased capitalized interest, principally associated with
capital spending at Cartersville.
Income Tax
The effective tax rate in fiscal 2000 was 15.3%, as compared to 24.5% in
fiscal 1999 and 41.7% in fiscal 1998. The establishment of a $59 million
valuation allowance (principally related to federal and state net operating loss
carryforwards), adversely impacted the 2000 effective tax rate. A valuation
allowance was established to reserve the Company's net deferred tax assets to
zero based on uncertainty about the Company's ability to realize future tax
benefits through offset to future taxable income. In addition, the $22.1 million
impairment charge for goodwill associated with the SBQ segment was not
deductible for tax purposes, which led to a $7.7 million reduction in the tax
benefit recognized for the fiscal 2000 loss. Likewise, the fiscal 1999 tax
benefit was impacted by the establishment of valuation allowances for capital
loss and state net operating loss carryforwards that were not assured of being
realized.
The Company's consolidated federal net operating loss for fiscal 2000 was
approximately $158 million, which will be carried forward for a period of up to
20 years, along with previous years' losses of approximately $46 million, which
will be carried forward for a period of up to 19 years, for a total carryforward
of $204 million. None of these losses will be carried back, because available
prior year taxes have been recovered through previous carryback claims. In
fiscal 2000, the Company received refunds totaling $15.1 million, including
$10.6 million in claims for carryback of federal NOL's. The Company also has
state net operating loss carryforwards of approximately $171 million, of which
the majority will expire in 15 years.
As a result of the sizeable net operating loss carryforwards, the Company does
not expect to pay significant amounts of taxes in the foreseeable future.
Other Income
In fiscal 1999, operating results of the SBQ operations included a gain of
$2.2 million from the sale of real estate in Cleveland, Ohio. The gain was
offset by a one-time charge of $2.1 million to terminate a long-term raw
materials purchase commitment with a third party supplier. The Company also
received approximately $4.4 million in refunds from electrode suppliers that
related to electrodes purchased in prior years. In fiscal 1998, the Company sold
idle properties and equipment for approximately $26.9 million and recognized
(pre-tax) gains of approximately $5.2 million. The Company also received
approximately $4.4 million in refunds from electrode suppliers that related to
electrodes purchased in prior years.
Liquidity and Capital Resources
Operating Activities
Net cash used in operating activities was $45.3 million in fiscal 2000,
compared to net cash provided of $128.4 million in fiscal 1999. In fiscal 2000,
margins deteriorated due to decreases in average selling prices, higher raw
material costs as scrap costs escalated during the second and third quarters of
fiscal 2000 and higher average conversion costs due to the impact of the
Cartersville start-up and lower production of SBQ products. Additionally, in
fiscal 2000, changes in operating assets and liabilities used cash of $3.0
million, principally due to a $16.0 million increase in inventories and a $16.8
million decrease accounts payable, offset by a $30.2 million decrease in
accounts receivable and other current assets, including the tax refunds
mentioned above. In fiscal 1999, changes in operating assets provided cash of
$90.6 million, principally due to a $83.1 million decrease in inventory and a
$7.3 million decrease in accounts receivable and other current assets.
Net cash provided by operating activities increased to $128.4 million in
1999 from $48.6 million in 1998. Although the Company's continuing operations
experienced an improvement in gross margin during fiscal 1999, cash provided by
operating activities increased principally because of improvements in managing
accounts receivable and inventory levels. Days sales outstanding in accounts
receivable remained relatively stable in 1999 and 1998. In an effort to reduce
borrowings under the Company's revolving credit facility, the Company
implemented inventory reduction programs at each of its rebar/merchant
mini-mills, which were successful in reducing inventories by $41.9 million
during fiscal 1999. Likewise, SBQ inventories declined $40.4 million during
fiscal 1999.
Investing Activities
Net cash flows used in investing activities were $24.5 million in fiscal
2000, compared to $71.1 million in 1999. Expenditures related to capital
projects decreased to $26 million in fiscal 2000, versus $141 million in 1999,
principally related to the completion of the mid-section mill and caster
projects at Cartersville. The increased capital expenditures in fiscal 1999 were
offset in part from the proceeds of two sale-leaseback transactions involving
equipment at Cartersville. The first included equipment with a carrying value of
$7.8 million, was completed in December 1998, while the second, included
equipment with a value of $67.3 million, was completed in June 1999. The Company
expects additional capital expenditures will decrease to approximately $23
million in fiscal 2001, as the major capital improvement program at Cartersville
is complete. Estimated costs to complete authorized projects under construction
as of June 30, 2000, is approximately $6.6 million.
Net cash flows used in investing activities were $77.7 million in fiscal
1998. Cash used in investing activities reflected investment in the Memphis melt
shop offset by proceeds from a lease on certain equipment at the Memphis
facility. Cash used in investing activities in 1998 also reflected a $15 million
investment in Laclede Steel Company, which was written off in fiscal 1998, and
$20 million in additional investments in Pacific Coast Recycling (PCR), a 50%
owned joint venture established to operate in southern California as a
collector, processor and seller of scrap. Cash used in investing activities in
fiscal 1998 also included $30 million in proceeds from the sale of several idled
facilities, property, plant and equipment and a 50% interest in Richmond Steel
Recycling Limited.
Through June 30, 1999, the Company had invested approximately $29.4 million
in PCR, including loans of approximately $20 million. Due to conditions in the
Asian scrap export market and PCR's inability to compete in the domestic scrap
market, the Company wrote off its investment in PCR in fiscal 1999. On June 29,
2000, the Company sold its interest in PCR to Mitsui & Co. for $2.5 million and
recognized a $2.1 million gain, partially recovering the 1999 write-down. (Refer
to Note 3 to the Consolidated Financial Statements.)
In fiscal 1997, the Company and Georgetown Industries, Inc. (GII), formed
American Iron Reduction (AIR), located in Convent, Louisiana. The joint venture
produces direct reduced iron (DRI), which is used as a substitute for high-grade
scarp. Construction of the DRI facility was funded by a $177 million
non-recourse project financing arrangement, proceeds from an $8 million
industrial revenue bond and initial equity investments of $20 million by the
venture partners in fiscal 1998. The Company made additional equity investments
of $3.75 million during fiscal 1999. (Refer to Note 3 to the Consolidated
Financial Statements.)
Financing Activities
Net cash provided by financing activities was $61.6 million in fiscal 2000,
compared to cash used in financing activities of $57.2 million in fiscal 1999.
In fiscal 2000, the Company increased outstanding borrowings under its Revolving
Credit Agreement by $83 million to fund working capital needs and substantially
increased interest payments. As of June 30, 2000, approximately $26.6 million
was available to borrow under the $300 million revolving line of credit and $25
million was available under a new financing commitment (see below). In fiscal
1999, the Company's strategy of depleting inventory levels, coupled with the
completion of the sale/leaseback transactions at Cartersville, enabled the
Company to reduce outstanding borrowings under its Revolving Credit Agreement by
$37.3 million and repay $10 million in short-term notes. On October 12, 1999,
the Company reduced its quarterly cash dividend from $0.10 per share to $0.025
per share and in December 1999, the Company's Board of Directors decided to
suspend quarterly dividend payments until the Company's profitability and cash
flows improve and the restrictive covenants of its long-term debt obligations
become less restrictive.
On October 12, 1999, the Company executed amendments to its principal debt
and letter of credit agreements. The October 1999 amendments waived all then
existing covenant violations, and modified the financial and other covenants to
provide the Company with additional flexibility to meet its operating plans. The
amendments also provided for increased interest rates payable to the banks and
Senior Noteholders, granted security interests in substantially all of the
Company's assets to the lenders, and gave the lenders certain approval rights
with respect to a potential sale of the SBQ segment. The Company also paid
modification fees of approximately $1.1 million. As a result of the increased
interest rates applicable to the amended debt facilities, the increased debt
levels for fiscal 2000 and the reduction in capitalized interest, the Company's
total interest expense increased approximately $16.4 million over the fiscal
1999 level of $35.3 million. The Company recognized an extraordinary loss on
extinguishment of debt of approximately $1.7 million, or $.06 per share, related
to the October 1999 debt restructuring in its financial results for fiscal 2000.
Principally a result of non-recurring proxy solicitation, executive
severance and other unexpected costs incurred as a direct result of the outcome
of the December 1999 proxy fight at December 31, 1999 and at March 31, 2000, the
Company was not in compliance with the minimum EBITDA coverage ratio and the
fixed charge ratio covenant pertaining to its $150 million and $130 million
Senior Notes, its $300 million Revolving Credit Agreement and letter of credit
agreements underlying its capital lease and industrial revenue bond obligations.
On May 13, 2000, the Company and its lenders executed amendments to the debt and
letter of credit agreements as well as the leveraged lease agreement associated
with the Company's Memphis melt shop facility. The May 2000 amendments waived
any and all known and unknown covenant violations and modified the financial and
other covenants to provide the Company with additional flexibility to meet its
operating plan. Birmingham Southeast, LLC (BSE), an 85% owned consolidated
subsidiary of the Company, received a new $25 million financing commitment from
a group principally comprised of the Company's existing lenders. As of June 30,
2000, the Company had not used any of the available $25 million under this
agreement. In connection wit the May 2000 amendments, the Company issued stock
warrants in lieu of cash payments for modification fees and granted additional
security interests in BSE's assets to the lenders. [As a result of these
negotiations the Company agreed to achieve certain cash flow performance levels
at the Cleveland SBQ operations beginning with the quarter ending September 30,
2000.]
In addition, if the Company does not sell or otherwise dispose of the SBQ
segment by January 31, 2001, the Company will incur a 100 basis point increase
in the interest rates under the Revolving Credit Agreement and each of the
Senior Notes, which would be reduced to 50 basis points upon a subsequent sale
of the SBQ segment. Also, in the event the Company is unable to sell or restart
the Memphis facility by January 31, 2001, the Company will incur increased
rental expense on equipment subject to an operating lease at Memphis.
Based upon the current level of the Company's operations and current
industry conditions, the Company anticipates that it will have sufficient cash
flow from operations for the next twelve months to meet day-to-day operating
expenses and material commitments and remain in compliance with restrictive
covenants in its principal debt and lease agreement. In addition, the Company
anticipates that it will have sufficient resources to make all required interest
and principal payments under its revolving credit agreements and Senior Notes
through December 15, 2001. However, the Company is required to make significant
principal repayments on December 15, 2001 and, accordingly, may be required to
refinance its obligations under the Revolving Credit Agreement and Senior Notes
on or prior to such date. Management is currently evaluating alternatives for
refinancing substantially all of the Company's long-term debt. However, there
can be no assurance that any such refinancing will be possible or, if possible,
that acceptable terms could be obtained, particularly in view of the Company's
high level of debt.
On May 5, 2000, the Company restructured its obligation to purchase direct
reduced iron (DRI) from American Iron Reduction (AIR). Both the Company and its
joint venture partner (co-sponsor) have agreed to purchase AIR's DRI production
during the remaining term of the AIR project finance agreements. Pursuant to the
new agreements, the Company has agreed to purchase up to 300,000 metric tons of
DRI per year (if tendered by AIR) which can be offset by one half of third party
direct sales made by AIR. The lenders agreed to restructure the existing debt
agreements with AIR and forgive any defaults by AIR as of the closing date.
The Company intends to actively pursue a settlement of its obligations to
purchase DRI from AIR. The Company is actively seeking a buyer for the AIR
facility. Until the facility is sold the Company and the co-sponsor will remain
obligated under the DRI purchase agreement. If future market prices for DRI
continue to be less than the price the Company is obligated to pay, the Company
will continue to incur losses on future merchant DRI activities. Currently, the
market price of DRI is approximately $74 per ton less than the price the Company
is required to pay under the AIR purchase commitment. Pursuant to the Company's
current obligation to purchase DRI from AIR at its current level and assuming no
change to the market price of DRI, the Company would absorb approximately $16.8
million per year in excess DRI costs. The Company established reserves of $40.2
million in the second quarter of fiscal 2000 to cover losses on future DRI
purchases under the purchase commitment and the ultimate settlement of the
contract, which management expects to be paid upon early termination of the
contract.
As is the case with all estimates that involve predictions of future
outcomes, management's estimate of the loss on the DRI purchase commitment is
subject to change. The principal factors which could cause the actual results to
vary are the length of time the Company remains obligated under the purchase
commitment until an acceptable sale of the AIR facility can be completed, the
proceeds from the sale (which directly impact the amount of the termination
payment), fluctuations in the market price of DRI and changes in AIR's
production costs, which have increased significantly as a result of the recent
rise in natural gas prices.
In addition, pursuant to the agreements entered into with the Senior
Noteholders, the Company is generally restricted from making payments to AIR in
excess of the amounts presently required under its agreements related to AIR and
may be restricted, subject to certain exceptions set forth in the agreements
with the Senior Noteholders, to obtain the approval of its Senior Noteholders to
enter into an agreement to terminate or settle any of its obligations relating
to AIR.
In July 1998, the Board authorized a stock repurchase program pursuant to
which the Company may purchase up to 1.0 million shares of its common stock in
the open market at prices not to exceed $20. As of December 24, 1998, the
Company had purchased 476,700 shares of its stock pursuant to this program. The
Company has no present intention to resume repurchases under the authorization
in the near term and is prohibited from purchasing shares under its amended
long-term debt agreements.
Outlook
The success of the Company in the near term will depend in large part, on
the Company's ability to (a) minimize losses in its SBQ operations; (b) dispose
of the Memphis facility; and (c) realize sufficient proceeds either from the
sale or operations of the remaining SBQ operations in Cleveland to enable the
Company to reduce its debt and return to profitability. However, management's
outlook for the rebar/merchant operations, which have performed consistently in
recent years, is positive. The Company believes that start-up costs at
Cartersville will diminish through the first quarter of fiscal 2001. The
Cartersville facility will enable expansion of the Company's merchant product
line and leverage melting capacity throughout the organization. With continued
emphasis on a shift in product mix towards higher-margin merchant products, the
Company expects to be able to improve operating results at its rebar/merchant
mini-mills by increasing volumes, reducing costs and improving gross margins.
While the Company is confident of its ability to realize the benefits of
rationalizing the SBQ operations, the level of benefits to be realized could be
affected by a number of factors including, without limitations, (a) the
Company's ability (i) to obtain any consents and approvals which may be required
from its creditors to sell the SBQ assets, (ii) to find a strategic buyer or
buyers willing to acquire the SBQ assets at prices that fairly value the assets,
and (iii) to operate the Company as planned in light of the highly leveraged
nature of the Company, and (b) changes in the condition of the steel industry in
the United States. See "Risk Factors That May Affect Future Results;
Forward-Looking Statements."
Compliance with Environmental Laws and Regulations
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. Company management is highly
conscious of these regulations and supports an ongoing program to maintain the
Company's strict adherence to required standards. The Company believes that it
is currently in compliance with all known material and applicable environmental
regulations.
Impact of Inflation
The Company has not experienced any material adverse effects on operations
in recent years because of inflation, though margins can be affected by
inflationary conditions. The Company's primary cost components are ferrous
scrap, high quality semi-finished steel billets, energy and labor, all of which
are susceptible to domestic inflationary pressures. Finished product prices,
however, are influenced by nationwide construction activity, automotive
production and manufacturing capacity within the steel industry and the
availability of lower-priced foreign steel in the Company's market channels.
While the Company has generally been successful in passing on cost increases
through price adjustments, the effect of steel imports, severe market price
competition and under-utilized industry capacity has in the past, and could in
the future, limit the Company's ability to adjust pricing.
Risk Factors That May Affect Future Results; Forward Looking Statements
Certain statements contained in this report are forward-looking
statements based on the Company's current expectations and projections about
future events. The words "believe," "expect," "anticipate" and similar
expressions identify forward-looking statements. These forward-looking
statements include statements concerning market conditions, financial
performance, potential growth, future cash sources and requirements,
competition, production costs, strategic plans (including asset sales and
potential acquisitions), environmental matters, labor relations and other
matters.
These forward-looking statements are subject to a number of risks and
uncertainties, which could cause the Company's actual results to differ
materially from those expected results described in the forward-looking
statements. Due to such risks and uncertainties, readers are urged not to place
undue reliance on forward-looking statements.
All forward-looking statements included in this document are based upon
information available to the Company on the date hereof, and the Company
undertakes no obligation to publicly update or revise any forward-looking
statement. Moreover, new risk factors emerge from time to time and it is not
possible for the Company to predict all such risk factors, nor can the Company
assess the impact of all such risk factors on its business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those described or implied in any forward-looking statement. All
forward-looking statements contained in this report are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995.
<PAGE>
Risks that could cause actual results to differ materially from expected
results include, but are not limited to, the following:
o Changes in market supply and demand for steel, including the effect of
changes in general economic conditions;
o Changes in U.S. or foreign trade policies affecting steel imports or
exports;
o Changes in the availability and costs of steel scrap, steel scrap
substitute materials, steel billets and other raw materials or supplies
used by the Company, as well as the availability and cost of electricity
and other utilities;
o Unplanned equipment failures and plant outages;
o Actions by the Company's domestic and foreign competitors;
o Excess production capacity at the Company or within the steel industry;
o Costs of environmental compliance and the impact of governmental
regulations;
o Changes in the Company's relationship with its workforce;
o The Company's highly leveraged capital structure and the effect of
restrictive covenants in the Company's debt instruments on the Company's
operating and financial flexibility;
o Changes in interest rates or other borrowing costs, or the availability of
credit;
o Changes in the Company's business strategies or development plans, and any
difficulty or inability to successfully consummate or implement as planned
any projects, acquisitions, dispositions, joint ventures or strategic
alliances;
o The effect of unanticipated delays or cost overruns on the Company's
ability to complete or start-up a project when expected, or to operate it
as anticipated; and
o The effect of existing and possible future litigation filed by or against
the Company.
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Sensitive Instruments
The Company is exposed to market risk from financial instruments that could
occur upon adverse changes in interest rates (principally U.S. treasury and
prime bank rates). In order to manage this risk, the Company attempts to
maintain a balance between fixed and variable rate debt. The Company does not
currently use derivative financial instruments. At June 30, 2000, the Company
had fixed-rate long-term debt with a carrying value of $281.2 million and
variable rate borrowings of $313.0 million outstanding. Assuming a hypothetical
10% adverse change in interest rates with no change in the average or
outstanding amounts of long-term debt, the fair value of the Company's fixed
rate debt would decrease by $8.1 million. (However, the Company does not expect
that those debt obligations could be settled or repurchased in the open market
at the lower amount in the ordinary course of business.) The Company also would
incur an additional $2.6 million in interest expense per year on variable rate
borrowings. These amounts are determined by considering the impact of the
hypothetical change in interest rates on the Company's cost of borrowing. The
analysis does not consider the effects of the reduced level of overall economic
activity that could exist in such an environment. Further, in the event of a
change of such magnitude, management would likely take actions to further
mitigate its exposure to the change. However, due to the uncertainty of the
specific actions that would be taken and their possible effects, the sensitivity
analysis assumes no changes in the Company's financial structure.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
June 30,
-----------------------
2000 1999
--------- ---------
ASSETS (Restated)
Current assets:
Cash and cash equivalents........................... $ 935 $ 935
Accounts receivable, net of allowance
for doubtful accounts of $1,614 in
2000 and $1,207 in 1999........................... 93,652 104,462
Inventories.......................................... 177,835 161,801
Other current assets................................. 5,950 53,324
--------- ---------
Total current assets............................... 278,372 320,522
Property, plant and equipment:
Land and buildings................................... 299,572 242,893
Machinery and equipment.............................. 639,674 611,083
Construction in progress............................. 15,841 25,641
--------- ---------
955,087 879,617
Less accumulated depreciation........................ (316,790) (272,579)
--------- ---------
Net property, plant and equipment.................. 638,297 607,038
Excess of cost over net assets acquired................. 15,642 17,769
Other................................................... 27,546 25,408
--------- ---------
Total assets....................................$ 959,857 $ 970,737
========= =========
See accompanying notes.
<PAGE>
<TABLE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS--(Continued)
(in thousands, except per share data)
<CAPTION>
June 30,
--------------------------
2000 1999
----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (Restated)
<S> <C> <C>
Current liabilities:
Accounts payable..................................................................... $ 79,535 $ 96,336
Accrued interest payable............................................................. 2,186 1,506
Accrued payroll expenses............................................................. 10,095 9,930
Accrued operating expenses........................................................... 11,485 10,636
Loss on purchase commitment.......................................................... 8,899 --
Other current liabilities............................................................ 23,381 24,978
Current portion of long-term debt.................................................... 131 10,125
Reserve for discontinued operations.................................................. -- 56,544
---------- ---------
Total current liabilities.......................................................... 135,712 210,055
Deferred liabilities.................................................................... 12,040 10,581
Reserve for loss on purchase commitment................................................. 30,000 --
Long-term debt, less current portion.................................................... 594,090 511,392
Minority interest in subsidiary......................................................... -- 7,978
Stockholders' equity:
Preferred stock, par value $.01; authorized: 5,000 shares............................ -- --
Common stock, par value $.01; authorized: 75,000 shares;
issued: 31,058 in 2000 and 29,836 in 1999.......................................... 310 298
Additional paid-in capital........................................................... 342,257 329,056
Treasury stock, 81 and 150 shares in 2000 and 1999, respectively, at cost............ (465) (791)
Unearned compensation................................................................ (667) (718)
Retained earnings (deficiency)...................................................... . (153,420) (97,114)
---------- --------
Total stockholders' equity......................................................... 188,015 230,731
---------- --------
Total liabilities and stockholders' equity...................................... $ 959,857 $970,737
=========== ========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
Years Ended June 30,
------------------------------------
2000 1999 1998
--------- --------- ----------
(Restated) (Restated)
<S> <C> <C> <C>
Net sales.................................................................... $ 932,546 $ 980,274 $1,136,019
Cost of sales:
Other than depreciation and amortization.................................. 829,415 840,339 963,354
Depreciation and amortization............................................. 58,179 60,992 55,266
--------- --------- -----------
Gross profit................................................................. 44,952 78,943 117,399
Start-up and restructuring costs and other unusual items..................... 210,476 50,735 34,238
Selling, general and administrative expense.................................. 49,226 46,126 48,645
--------- --------- -----------
Operating (loss) income...................................................... (214,750) (17,918) 34,516
Interest expense, including amortization of debt issuance costs.............. 51,687 35,265 29,008
Other income, net............................................................ 3,039 11,288 13,968
Loss from equity investments................................................. (11,915) (30,765) (18,326)
Minority interest in loss of subsidiary...................................... 7,978 5,497 1,643
--------- --------- -----------
(Loss) income from continuing operations before income taxes................. (267,335) (67,163) 2,793
(Benefit from) provision for income taxes.................................... (41,001) (16,110) 1,164
--------- --------- ----------
(Loss) income from continuing operations..................................... (226,334) (51,053) 1,629
Discontinued operations:
Reversal of loss (loss) on disposal of SBQ business, including estimated
losses during the disposal period (net of income taxes of $78,704)...... 173,183 (173,183) --
--------- --------- ----------
(Loss) income before extraordinary item................................... (53,151) (224,236) 1,629
Loss on restructuring of debt (net of income taxes of $1,160)................ (1,669) -- --
--------- --------- ----------
Net (loss) income............................................................ $ (54,820) $(224,236) $ 1,629
========= ========= ==========
Weighted average shares outstanding.......................................... 30,118 29,481 29,674
========= ========= ==========
Basic and diluted per share amounts:
(Loss) income from continuing operations.................................. $ (7.51) $ (1.73) $ 0.05
Income (loss) on discontinued operations.................................. 5.75 (5.88) --
Loss on restructuring of debt............................................. (0.06) -- --
--------- --------- ----------
Net (loss) income ........................................................ $ (1.82) $ (7.61) $ 0.05
========= ========= ==========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Years Ended June 30,
----------------------------------
2000 1999 1998
--------- --------- ----------
(Restated) (Restated)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income from continuing operations................................... $ (54,820) $(224,236) $ 1,629
Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:
Depreciation and amortization............................................... 58,179 60,992 55,266
Provision for doubtful accounts receivable.................................. 908 376 41
Deferred income taxes (continuing operations)............................... (43,973) (1,673) (6,253)
Minority interest in loss of subsidiary.................................... (7,978) (5,497) (1,643)
Loss (gain) on sale of equity interests, idle facilities and equipment...... 909 1,149 (5,354)
Loss from equity investments................................................ 11,915 30,765 18,326
(Reversal of loss) loss on discontinued operations.......................... (173,183) 173,183 --
Impairment of fixed assets and goodwill..................................... 120,245 -- --
Provision for loss on purchase commitment................................... 40,238 -- --
Other....................................................................... 5,289 2,736 4,036
Changes in operating assets and liabilities:
Accounts receivable......................................................... 9,902 17,016 7,581
Inventories................................................................. (16,034) 83,131 (34,681)
Other current assets........................................................ 20,279 (9,715) (572)
Accounts payable............................................................ (16,801) 3,523 (1,425)
Accrued liabilities......................................................... (1,242) (6,342) 9,981
Deferred liabilities........................................................ 848 2,950 1,697
--------- --------- ----------
Net cash (used in) provided by operating activities................... (45,319) 128,358 48,629
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment................................. (26,065) (140,677) (146,567)
Proceeds from sale/leaseback............................................... -- 75,104 75,000
Proceeds from sale of equity investments, property,
plant and equipment and idle facilities.................................. 2,120 -- 29,832
Equity investments.......................................................... -- (3,750) (35,016)
Other non-current assets.................................................... (562) (1,748) (987)
--------- --------- ----------
Net cash used in investing activities.................................. (24,507) (71,071) (77,738)
See accompanying notes.
<PAGE>
</TABLE>
<TABLE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(in thousands)
<CAPTION>0
Years Ended June 30,
------------------------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings and repayments........................ $ (10,125) $ (119) $ 10,000
Proceeds from issuance of long-term debt........................ -- -- 1,500
Borrowings under revolving credit facility...................... 963,330 2,478,944 2,056,773
Payments on revolving credit facility........................... (880,501) (2,526,245) (2,025,390)
Debt issue and amendment costs paid............................. (9,643) (1,457) --
Proceeds from issuance of common stock.......................... -- -- 358
Stock compensation plan, net.................................... -- 1 --
Purchase of treasury stock...................................... -- (3,209) (2,318)
Cash dividends paid............................................. (1,485) (5,169) (11,871)
----------- ---------- -----------
Net cash provided by (used in) financing activities........ 61,576 (57,254) 29,052
----------- ---------- -----------
Net increase (decrease) in cash and cash equivalents....... -- 33 (57)
Cash and cash equivalents at:
Beginning of year............................................. 935 902 959
----------- ---------- -----------
End of year................................................... $ 935 $ 935 902
============ ========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year for:
Interest (net of amounts capitalized)......................... $ 44,822 $ 49,301 $ 29,231
Income taxes paid (refunded), net............................. (15,104) (1,801) 6,132
NON CASH FINANCING AND INVESTING ACTIVITIES:
Issuance of warrants to purchase 3,000,000 shares of common stock
in connection with debt amendments................................... $ 8,250 $ -- $ --
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except per share data)
Years Ended June 30, 2000, 1999 and 1998
----------------------------------------------------------------------------------------
<CAPTION> Common Stock Additional Treasury Stock Retained Total
-------------- Paid-in --------------- Unearned Earnings Stockholders'
Shares Amount Capital Shares Amount Compensation (Deficiency) Equity
------ ------- --------- ------ ------ ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1997.......29,736 $ 297 $331,139 (56) $ (996) $ (1,425) $142,533 $471,548
Options exercised, net of tax
benefit....................... 44 1 720 24 385 (261) -- 845
Purchase of treasury stock...... -- -- -- (159) (2,318) -- -- (2,318)
Reduction of unearned
compensation.................. -- -- -- -- -- 774 -- 774
Net income...................... -- -- -- -- -- -- 1,629 1,629
Cash dividends declared, $.40
per share..................... -- -- -- -- -- -- (11,871) (11,871)
------ ----- -------- ----- ------ -------- -------- --------
Balances at June 30, 1998...... 29,780 298 331,859 (191) (2,929) (912) 132,291 460,607
Options exercised and shares
issued (repurchased) under
stock compensation plans,
net.......................... 56 -- (108) 56 716 (615) -- (7)
Purchase of treasury stock..... -- -- -- (477) (3,209) -- -- (3,209)
Issuance of treasury shares to
employee benefit plan........ -- -- (2,695) 462 4,631 -- -- 1,936
Reduction of unearned
compensation................. -- -- -- -- -- 809 -- 809
Net loss....................... -- -- -- -- -- -- (224,236) (224,236)
Cash dividends declared, $.175
per share................... -- -- -- -- -- -- (5,169) (5,169)
------ ----- -------- ----- ------ -------- -------- --------
Balances at June 30, 1999...... 29,836 298 329,056 (150) (791) (718) (97,114) 230,731
Options exercised and shares
issued(repurchased) under stock
compensation plans, net...... 146 1 844 69 326 (686) -- 485
Issuance of common stock to
employee benefit plan......... 577 6 2,447 -- -- -- -- 2,453
Reduction of unearned
compensation.................. -- -- -- -- -- 737 -- 737
Issuance of warrants........... -- -- 8,250 -- -- -- -- 8,250
Issuance of common stock to
affiliates as reimbursement
of proxy solicitation costs.. 499 5 1,660 -- -- -- -- 1,665
Net loss........................ -- -- -- -- -- -- (54,820) (54,820)
Cash dividends declared, $.05
per share..................... -- -- -- -- -- -- (1,486) (1,486)
------ ----- -------- ----- ------ -------- -------- --------
Balances at June 30, 2000.......31,058 $ 310 $342,257 (81) $ (465) $ (667) $153,420 $188,015
====== ===== ======== ====== ====== ======== ======== ========
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000, 1999 and 1998
1. Description of the Business and Significant Accounting Policies
Description of the Business
Birmingham Steel Corporation (the Company) owns and operates facilities in
the mini-mill sector of the steel industry. In addition, the Company owns an
equity interest in a scrap collection and processing operation. From these
facilities, which are located across the United States and Canada, the Company
produces a variety of steel products including semi-finished steel billets,
reinforcing bars, merchant products such as rounds, flats, squares and strips,
along with, angles and channels, less than three inches wide and structural
products including angles, channels, and beams that are greater than three
inches wide. These products are sold primarily to customers in the steel
fabrication, manufacturing and construction business. The Company has regional
warehouse and distribution facilities that sell its finished products.
In addition, the Company's SBQ (special bar quality) line of business,
which was reported in discontinued operations prior to the second quarter of
fiscal 2000 (see Note 2), produces high-quality rod, bar and wire that is sold
primarily to customers in the automotive, agricultural, industrial fastener,
welding, appliance and aerospace industries in the United States and Canada.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned and majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Equity Investments
Investments in 50% or less owned affiliates where the Company has
substantial influence over the affiliate are accounted for using the equity
method of accounting. Under the equity method, the investment is carried at cost
of acquisition plus additional investments and advances and the Company's share
of undistributed earnings or losses since acquisition. The Company generally
records its share of income and losses in equity investees on a one-month lag.
Impairment losses are recognized when management determines that the investment
or equity in earnings is not realizable.
Revenue Recognition
Revenue from sales of steel products is recorded at the time the goods are
shipped or when title passes, if later.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The carrying amounts
reported in the accompanying consolidated balance sheets for cash and cash
equivalents approximate their fair values.
<PAGE>
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.
Long-lived Assets and Depreciation
The Company recognizes impairment losses on long-lived assets used in
operations, including allocated goodwill, when impairment indicators are present
and the undiscounted cash flows estimated to be generated by those assets are
less than their carrying values. Long-lived assets held for disposal are valued
at the lower of carrying amount or fair value less cost to sell.
Property, plant and equipment are stated at cost, less accumulated
depreciation. Depreciation is provided using the straight-line method for
financial reporting purposes and accelerated methods for income tax purposes.
Estimated useful lives range from ten to thirty years for buildings and from
five to twenty-five years for machinery and equipment.
Excess of Cost Over Net Assets Acquired
The excess of cost over net assets acquired (goodwill) is amortized on a
straight-line basis over periods not exceeding twenty years. Accumulated
amortization of goodwill was approximately $42,937,000 and $17,879,000 at June
30, 2000 and 1999, respectively. The carrying value of goodwill is reviewed if
the facts and circumstances suggest that it may be impaired. If such review
indicates that goodwill will not be recoverable based upon the undiscounted
expected future cash flows over the remaining amortization period, the carrying
value of the goodwill is reduced to its estimated fair value. In fiscal 2000,
the Company recorded an impairment charge of $22,134,000 relating to the
unamortized SBQ goodwill (see Note 14).
Income Taxes
Deferred income taxes are provided for temporary differences between
taxable income and financial reporting income in accordance with FASB Statement
No.109, Accounting for Income Taxes.
Earnings per Share
Earnings per share are presented in accordance with FASB Statement No. 128,
Earnings Per Share. Basic earnings per share are computed using the weighted
average number of outstanding common shares for the period, excluding unvested
restricted stock. Diluted earnings per share are computed using the weighted
average number of outstanding common shares and dilutive equivalents, if any.
Options to purchase 827,000 shares of common stock at an average price of $17.21
per share were outstanding at June 30, 1998, but were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares. Because the
Company reported net losses in fiscal 1999 and 2000, none of the options
outstanding at the end of those years (see Note 10) were dilutive. In addition,
warrants to purchase 3,000,000 shares of the Company's common stock at $3 per
share (see Note 7) are not dilutive in fiscal 2000.
Start-up Costs
The Company recognizes start-up costs as expense when incurred. The Company
considers a facility to be in "start-up" until it reaches commercially viable
production levels. During the start-up period, costs incurred in excess of
expected normal levels, including non-recurring operating losses, are classified
as start-up costs in the Consolidated Statements of Operations.
<PAGE>
Credit Risk
The Company extends credit, primarily on the basis of 30-day terms, to
various companies in a variety of industrial market sectors. The Company does
not believe it has a significant concentration of credit risk in any one
geographic area or market segment. The Company performs periodic credit
evaluations of its customers and generally does not require collateral.
Historically, credit losses have not been significant.
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
The Financial Accounting Standards Board has issued FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities (as amended by
Statements No. 137 and 138). These pronouncements, which become effective in
fiscal 2001, are not expected to have a material effect on the Company's
financial position or results of operations because the Company does not
presently use derivatives or engage in hedging activities.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB
101"), which provides the Staff's views on applying generally accepted
accounting principles to revenue recognition issues. The Company does not
anticipate that the adoption of SAB 101 will have a material impact on the
consolidated financial statements and will continue to analyze the impact of SAB
101.
FASB Interpretation 44, Interpretation of APB Opinion 25 ("FIN 44"), was
issued in March 2000. FIN 44 provides an interpretation of APB Opinion 25 on
accounting for employee stock compensation and describes its application to
certain transactions. FIN 44 is effective on July 1, 2000. It applies on a
prospective basis to events occurring after that date, except for certain
transactions involving options granted to non-employees, repriced fixed options,
and modifications to add reload option features, which apply to awards granted
after December 31, 1998. The provisions of FIN 44 are not expected to have a
material effect on transactions entered into through June 30, 2000.
2. Discontinued Operations
In fiscal 1999, prior management of the Company announced plans to sell the
Company's SBQ operations, which includes rod, bar and wire facilities in
Cleveland, Ohio; a high quality melt shop in Memphis, Tennessee; and the
Company's 50% interest in American Iron Reduction, L.L.C. (AIR). Accordingly, as
required by APB Opinion 30 and EITF 95-18, the operating results of the SBQ
segment were reflected as discontinued operations in the Company's annual
financial statements for fiscal 1999 and in the first quarter of fiscal 2000. On
January 31, 2000, subsequent to a change in management that occurred after a
prolonged proxy contest, new management announced the Company would no longer
reflect its SBQ segment as discontinued operations. The change was required as a
result of new management's decision to re-establish its Cleveland-based American
Steel & Wire (AS&W) in the SBQ markets. Management's decision in the second
quarter of fiscal 2000 to continue operating the AS&W facilities was based on
the following considerations:
o To date, the Company's attempts to sell the facility had not been
successful, and management believed at that time that a sale in the
prevalent economic climate would not generate sufficient proceeds to pay
down a meaningful amount of the Company's long-term debt.
o New management believes there is a viable long-term market for AS&W's
high-quality rod, bar and wire products.
o The Company had identified several potential sources of high-quality
billets for the AS&W operations to replace the Memphis melt shop (which was
shutdown in early January 2000) as its primary supply source.
<PAGE>
Furthermore, management concluded that a sale of the entire SBQ segment by
May 2000, as had been previously anticipated by former management, was no longer
likely based upon the results of selling efforts to date and then prevalent
market conditions. In accordance with EITF 90-16, Accounting for Discontinued
Operations Subsequently Retained, the results of operations of the SBQ segment
are reported within continuing operations in fiscal 2000. In addition, the
operating results of the SBQ segment for all prior years (previously reflected
in discontinued operations) have been reclassified from discontinued operations
to continuing operations. As a result of unwinding the discontinued operations
accounting treatment of the SBQ segment, the Company reversed the previously
established reserves for losses on disposal and operating losses, and their
related tax effects, in the second quarter of fiscal 2000. The reversal of
previously established reserves (net of tax) increased net income by
$173,183,000 ($5.75 per share) in fiscal 2000. Significant components of the
reversal are as follows (in thousands):
Reserve for estimated loss on disposal....................... $ 195,343
Reversal of estimated SBQ operating losses during the
expected disposal period...............................
56,544
Reversal of income tax benefit recognized in fiscal 1999.....
(78,704)
---------------
Net reversal $ 173,183
===============
Total SBQ segment assets, revenues and operating losses are summarized in
Note 12 for the periods indicated. Total liabilities of the SBQ segment at June
30, 1999, were $93,268,000.
As required by EITF 90-16, after reversing the fiscal 1999 reserves and
allowances for losses on disposal, the Company evaluated the SBQ assets for
impairment. The Company also reconsidered the adequacy of its reserves and
provisions for contingencies, contract losses and other issues that arose during
fiscal 2000 related to both the rebar/merchant and SBQ segments. The resulting
charges and provisions are summarized in Note 14.
In accordance with FASB Statement No. 121, Accounting for the Impairment
for Long-Lived Assets and for Long-Lived Assets to be Disposed Of, management
evaluated the Cleveland assets (as held for use) and determined that there was
no impairment because estimated undiscounted cash flows from continuing the
Cleveland operations exceeded the carrying value of the long-lived assets.
Management has taken actions to improve the operating cash flow of
Cleveland. However, if the Cleveland operation does not achieve certain cash
flow performance levels before September 30, 2000, or if the Cleveland operation
is not sold on or before September 30, 2000, the Company may be required by its
lenders to cease operations in Cleveland. If this occurs, the Company may incur
charges related to asset impairment, severance and other exit costs, which may
be material to the Company's operations. Although the Company has not adopted a
formal plan to dispose of the Cleveland facility, management is pursuing
opportunities to sell or otherwise dispose of the facility, either together with
the Memphis facility or in separate transactions. Furthermore, considering the
current economic conditions in the steel industry, the fair value of the
Cleveland assets in an immediate liquidation may be less than their carrying
value. The accompanying financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
Cleveland assets if management decides to terminate operations or sell the
Cleveland facility.
<PAGE>
3. Investment in Affiliated Companies
American Iron Reduction, L.L.C.
Through June 30, 1999, the Company had made equity investments of
$23,750,000 in American Iron Reduction LLC (AIR), a 50%-owned joint venture that
operates a direct reduced iron (DRI) facility in Convent, Louisiana. DRI is a
substitute for high-grade scrap that, until December 31, 1999, was used to
produce high quality billets at the Company's Memphis facility. In the fourth
quarter of fiscal 1999, the Company announced its intention to dispose of its
investment in AIR as a part of its plan of disposal for the SBQ line of
business. Given market conditions that existed in fiscal 1999 and continued to
exist in the second quarter of fiscal 2000, the Company concluded that its
investment in AIR was impaired and included the estimated loss on disposal of
its investment in AIR ($13,889,000) in the fiscal 1999 loss on disposal of the
SBQ business. In the second quarter of fiscal 2000, new management of the
Company concluded that a sale of the entire SBQ segment was unlikely to occur in
the near term, and the previously accrued loss on disposition, including the
previous write-down of the Company's investment in AIR, was reversed. However,
the Company continues to believe that the investment in AIR remains impaired.
Accordingly, the previous write-down of the AIR investment has been reinstated
(reclassified) as a component of continuing operations in fiscal 2000. The
impairment loss is reflected in "Loss from equity investment" in the
Consolidated Statements of Operations.
The AIR project is financed on a non-recourse basis to the Company and the
co-sponsor. In the fourth quarter of fiscal 1999, AIR defaulted on $178.9
million of non-recourse project finance debt. In connection with AIR's original
project financing agreements, the Company and the co-sponsor each agreed to
purchase 50% of AIR's annual DRI production (up to 600,000 metric tons), if
tendered, at prices based on AIR's total production costs (excluding
depreciation and amortization but including debt service payments under AIR's
project finance obligations). The market price of DRI has fluctuated between $30
to $75 per ton less than the price that the co-sponsors were committed to pay
under the original DRI purchase contracts. In the Company's Annual Report on
Form 10-K for the year ended June 30, 1999, the Company disclosed that, although
it intended to dispose of its interest in AIR as a part of its overall plan of
disposal for the SBQ segment, the Company could remain obligated to purchase DRI
from AIR after the disposal of the SBQ business. At the end of fiscal 1999, the
Company had no viable strategy for terminating or settling the DRI purchase
commitment. Furthermore, because of the length of the remaining term of the
commitment at that time (approximately 8 years), prior management of the Company
concluded that it could not reasonably predict DRI price movements over such a
long period, and consequently it could not reasonably estimate the ultimate
amount of loss, if any, on the DRI purchase commitment. The Company disclosed
that if it were unable to find a buyer or another third-party to assume its
obligations under the AIR purchase agreement, and future market prices for DRI
remain less than the committed costs under the purchase agreement, the Company
would incur losses on future merchant DRI sales. On the other hand, if the
market price of DRI increases during the term of the purchase commitment, the
Company could generate trading profits from merchant DRI sales. Total purchases
of DRI from AIR were $26,609,000 (175,000 metric tons), $43,683,000 (297,000
metric tons) and $24,178,000 (177,000 metric tons) for 2000, 1999 and 1998,
respectively.
On May 5, 2000, the Company, the co-sponsor, and AIR's lenders announced a
financial restructuring that, among other things, defers interest and principal
payment on AIR's debt and reduces the amount of annual DRI purchase requirements
by the co-sponsors. The revised agreements also provide a framework for the
co-sponsors to pursue a sale of the facility and terminate their continuing
obligations under the purchase contract.
Management intends to vigorously pursue disposition strategies for the AIR
facility and expects to sell the facility in one to two years. Under the revised
AIR financing and purchase agreements, the Company will continue to be obligated
to purchase approximately 300,000 metric tons per year, which can be offset by
third-party direct sales by AIR. Management expects that during this time, the
spread between the Company's committed cost under the DRI purchase contract and
the market price of DRI will be in a range of $30 to $75 per ton, contingent
upon a number of factors including the actual monthly production volume, raw
material cost and other production costs. The estimated loss on the purchase
commitment is based on the lower end of the range of DRI market prices and could
be more. Management expects to resell a portion of its share of AIR's production
to third-parties in the merchant DRI market with the remainder to be used as raw
materials in the Company's core mini-mill operations. The Company expects to
continue incurring losses on DRI purchases, at least for the near term. In
addition, management expects that the Company will incur a loss on terminating
its obligations under the DRI purchase contracts when AIR's production facility
is sold. Accordingly, the Company recorded a $40,238,000 loss (see Note 14) on
the AIR purchase commitment in the second quarter of fiscal 2000, of which
$30,000,000 is classified as non-current and the remainder is classified as a
current liability.
As is the case with all estimates that involve predictions of future
outcomes, management's estimate of the loss on the DRI purchase commitment is
subject to change. The principal factors which could cause the actual results to
vary are the length of time the Company remains obligated under the purchase
commitment until an acceptable sale of the AIR facility can be completed, the
proceeds from the sale (which directly impact the amount of the termination
payment), fluctuations in the market price of DRI and changes in AIR's
production costs, which have increased significantly as a result of the recent
rise in natural gas prices.
Assuming that the co-sponsors are unable to sell the AIR facility before
expiration of the purchase contracts, the fixed and determinable portion of the
Company's DRI purchase commitment, representing 50% of AIR's debt service on
project finance indebtedness through February 2013, is scheduled as follows (in
thousands):
Fiscal Year Ending June 30:
2001....................... $ 3,742
2002....................... 2,197
2003....................... 4,857
2004....................... 17,850
2005....................... 17,908
Thereafter................. 138,037
-------------
$ 184,591
Laclede Steel Company
On September 24, 1997, the Company purchased approximately 25% of the
outstanding shares of Laclede Steel Company (LCLD), a public company, for
$14,953,000. Through June 30, 1998, the Company accounted for its investment in
LCLD using the equity method. For the period from September 24, 1997 through
June 30, 1998, the Company recognized $2,715,000 in losses on its investment in
LCLD. In June 1998, the Company determined that the remaining carrying amount of
its investment in LCLD was impaired because, among other things: the market
price of LCLD common shares had declined significantly since the Company made
its investment; LCLD had continued to incur operating losses; and LCLD announced
a restructuring plan that had a material effect on its financial position and
future results of operations. Accordingly, the Company recognized a $12,383,000
impairment loss in the fourth quarter of fiscal 1998. The loss is included in
"Loss from equity investments" in the Consolidated Statements of Operations.
Pacific Coast Recycling, LLC
On September 18, 1996, the Company and an affiliate of Mitsui & Co., Ltd.
formed Pacific Coast Recycling, LLC (Pacific Coast), a 50/50 joint venture
established to operate in southern California as a collector, processor and
seller of scrap. Through June 30, 1999, the Company invested approximately
$29,400,000 in Pacific Coast, including loans of $20,150,000, and recognized
losses of $4,930,000 and $3,144,000 in fiscal 1999 and 1998, respectively, in
applying the equity method. During fiscal 1999, management and the Board of
Directors determined that Pacific Coast was no longer a strategic fit for the
Company's core mini-mill operations and decided not to continue its support of
the operations. The Company then re-evaluated the carrying amount of its
investment and concluded that it should be written down in the fourth quarter of
fiscal 1999. The provision for loss of $19,275,000 is reflected in "Loss from
equity investments" in the accompanying Consolidated Statements of Operations.
On June 29, 2000, the Company sold its interest in Pacific Coast for
$2,500,000 and was relieved of all liabilities and guarantee obligations
associated with Pacific Coast. The resulting gain of $2,100,000 was recognized
in the fourth quarter of fiscal 2000 and is included in "Loss from equity
investments" in the Consolidated Statements of Operations.
Richmond Steel Recycling Limited
The Company also owns a 50% interest in Richmond Steel Recycling Limited (RSR),
a scrap processing facility located in Richmond, British Columbia, Canada, which
is accounted for using the equity method. The investment in and equity in
earning of RSR are not significant.
4. Inventories
Inventories were valued at the lower of cost (first-in, first-out) or market, as
summarized in the following table (in thousands):
June 30,
2000 1999
--------- ---------
Raw materials and mill supplies........................ $ 45,328 $ 52,658
Work-in-progress....................................... 42,168 40,928
Finished goods......................................... 90,339 68,215
--------- ---------
$ 177,835 $ 161,801
========= =========
5. Capitalized Interest and Interest Expense
Capitalized interest on qualifying assets under construction and total interest
incurred were as follows (in thousands):
Years Ended June 30,
2000 1999 1998
------- ------- -------
Capitalized interest ........................ $ 1,216 $ 4,965 $ 6,486
Total interest incurred...................... 52,903 40,229 35,494
6. Short-Term Borrowing Arrangements
The following information relates to the Company's borrowings under short-term
credit facilities (in thousands):
Years Ended June 30,
2000 1999 1998
------- -------- -------
Maximum amount outstanding.................. $10,000 $20,000 $35,000
Average amount outstanding.................. $ 864 $14,780 $ 9,951
Weighted average interest rate.............. 6.4% 5.9% 6.0%
7. Long-Term Debt
Long-term debt consists of the following (in thousands):
June 30,
-----------------------
2000 1999
--------- ---------
Senior Notes, $130,000 face amount; interest
at 10.03% and 7.83% at June 30, 2000 and
1999, respectively, due in 2005............. $ 130,000 $ 130,000
Senior Notes, $150,000 face amount; interest
at 9.80% and 7.60% at June 30, 2000 and 1999,
respectively, due in 2002 and 2005.......... 150,000 150,000
$300,000 Revolving line of credit, payable in
2002; weighted average interest of 8.72% and
6.88% at June 30, 2000 and 1999, respectively,
payable in 2002............................. 269,465 186,635
Capital lease obligations, interest rates
principally ranging from 43% to
45% of bank prime, payable in 1999 and 2001. 2,500 12,500
Promissory Note, interest at 5.0%, payable in
installments through 2008................... 1,256 1,382
Industrial Revenue Bonds, interest rates
principally ranging from 44% to
45% of bank prime, payable in 2025 and 2026. 41,000 41,000
--------- ---------
594,221 521,517
Less: current portion.......................... (131) (10,125)
--------- ---------
$ 594,090 $ 511,392
========= =========
Approximately $26,632,000 under the $300,000,000 revolving line of credit
and $25 million in new funding commitments (see below) was available to borrow
as of June 30, 2000.
The aggregate fair value of the Company's long-term debt obligations is
approximately $591,238,000 compared to the carrying value of $594,221,000 at
June 30, 2000. The fair value of the Company's fixed-rate Senior Notes is
estimated using discounted cash flow analysis, based on the Company's
incremental borrowing rate for similar types of borrowings. The discounted
present value calculation does not include prepayment penalties that might be
paid under the debt agreements and thus prevent the Company from realizing any
of the implied gain.
Future maturities of long-term debt are as follows (in thousands):
Fiscal Year Ending June 30:
2001...................................... $ 131
2002...................................... 298,103
2003...................................... 105,645
2004...................................... 29,652
2005...................................... 29,660
Thereafter................................ 131,030
---------
$ 594,221
=========
The above principal maturity schedule will be accelerated when and if
the SBQ assets are sold, as the net proceeds from any sales are required to be
used to pay down part of the Company's outstanding debt.
On October 13, 1999, the Company amended its principal debt and letter
of credit agreements to provide for the continuation of the Company's borrowing
arrangements on a long-term basis. Among other things, the Company granted its
lenders a security interest in substantially all assets of the Company and
agreed to pay modification fees and generally higher interest rates. The
financial covenants also were amended.
<PAGE>
On May 15, 2000, the Company executed new amendments to provide more
operating flexibility, generally less restrictive financial covenants and $25
million in new funding commitments from the lenders. The May 15, 2000
refinancing agreements require the Company to maintain a minimum EBITDA on a
quarterly basis, a minimum fixed charge coverage amount on a quarterly basis and
a positive quarterly EBITDA (beginning with the quarter ending September 30,
2000) at the Cleveland SBQ facility. In addition, quarterly dividend and all
other restricted payments, as defined, are limited to the lesser of $750,000 or
50% of income from continuing operations. The May amendments generally did not
affect the interest rates or spreads on the Company's debt. The lenders agreed
that a change in control did not occur as a result of the December 1999 proxy
contest and resulting change in management. In addition, the May amendments
allow the Company to retain up to $100 million of proceeds from any future
issuance of new equity.
In exchange for the financing agreement modifications and the new $25
million funding commitment, the lenders received warrants to purchase 3 million
shares of the Company's common stock, which may be exercised anytime during the
10-year term of the warrants. The warrants are exercisable at a price of $3 per
share. The Company recorded the fair value of the warrants as an equity
transaction in the quarter ended June 30, 2000. The fair value of the warrants
was estimated to be $8,250,000 at the date of grant using a Black-Scholes option
pricing model with the weighted-average assumptions of a 6.68% risk free
interest rate, a 45.6% expected volatility, and a 10-year expected life. A
portion of the warrant value was recognized as debt amendment costs in the
fourth quarter of fiscal 2000, with the remainder to be amortized over the
remaining terms of the related debt as a component of interest expense.
Following is a summary of significant provisions of the Company's principal
debt and letter of credit agreements, as amended in May 2000:
Revolving Credit Agreement--As amended, the Revolving Credit Agreement
continues to provide for maximum outstanding borrowings of $300,000,000 until
maturity in March 2002. Availability under the facility will be reduced when
(and if) SBQ assets are sold. Interest is variable, based on either the London
Interbank Offer Rate (LIBOR) or the lenders' prime rates in effect from time to
time. The spread for LIBOR base rate borrowings under the Revolving Credit
Agreement is 2.25% for outstanding borrowings up to $235,000,000 (2% for LIBOR
based borrowings in excess of $235,000,000). The spread for prime rate
borrowings is .75% for outstanding borrowings up to $235,000,000 (.5% for prime
rate borrowings in excess of $235,000,000).
Senior Notes--The weighted average interest rates on the Senior Notes,
which remain fixed for the terms of the obligations, are 10.03% on the
$130,000,000 Senior Notes and 9.8% on the $150,000,000 Senior Notes. Scheduled
principal payments on the Senior Notes were not affected by the October 1999 or
the May 2000 amendments, except that a portion of the net proceeds from a sale
of SBQ assets, if any, must be applied to reduce the principal. For accounting
purposes the October 1999 modification of the Senior Note obligations was
accounted for as a debt extinguishment. The extinguishment loss of approximately
$1,669,000 (net of tax), or $.06 per share, is classified as an extraordinary
item in the Consolidated Statements of Operations.
$25 Million Revolving Loan-- The new $25 million commitment is secured by
substantially all of the assets of the Company's Cartersville and Jackson
mini-mill facilities, and bears interest at the rate of LIBOR plus 4%. The new
loan provisions allow up to $10 million to be used for corporate purposes, with
the remaining $15 million restricted for capital expenditures, maintenance and
working capital for the Cartersville and Jackson facilities.
As of June 30, 2000, the Company was in compliance with all of its debt
covenants. Based upon the current level of the Company's operations and current
industry conditions, the Company anticipates that it will have sufficient
resources to make all required interest and principal amounts under the
Revolving Credit Agreement, Senior Notes and $25 Million Revolving Loan through
December 15, 2001. However, the Company is required to make significant
principal repayments on December 15, 2001 and, accordingly, may be required to
refinance substantially all of its long-term debt obligations on or prior to
such date. There can be no assurance that any such refinancing would be possible
at such time, or, if possible, that acceptable terms could be obtained,
particularly in view of the Company's high level of debt. If principal debt
agreements are refinanced, the Company would likely incur a material debt
extinguishment loss consisting of unamortized debt issue costs, write-offs and
other costs.
<PAGE>
8. Commitments
The Company leases office space and certain production equipment under
operating lease agreements. Following is a schedule by year of future minimum
rental payments, net of minimum rentals on subleases, required under operating
leases that have initial lease terms in excess of one year (in thousands):
Consolidated Total
------------------
Fiscal Year Ending June 30,
2001............................................ $ 20,499
2002............................................ 19,896
2003............................................ 19,088
2004............................................ 18,320
2005............................................ 18,125
Thereafter...................................... 90,691
---------
$ 186,619
=========
Rental expense under operating lease agreements charged to operations was
$20,545,000, $9,066,000 and $3,986,000 in fiscal 2000, 1999 and 1998,
respectively.
In fiscal 1999, the Company executed two sale/leaseback transactions for
equipment at the Cartersville facility. Total proceeds from those transactions
were $75,104,000, which approximated the fair value of the equipment. The
Company has options to purchase the equipment both prior to and at the end of
the lease terms, which range from eight to ten years, for amounts that are
expected to approximate fair market value at the exercise dates of the options.
Under a 1995 contract with Electronic Data Systems (EDS), an information
management and consulting firm, the Company is obligated to pay $2,941,000 per
year through 2005 for information systems development, technical support and
consulting services.
9. Income Taxes
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows (in thousands):
June 30,
------------------------------
2000 1999
------------- ------------
Deferred tax liabilities: Restated
Tax depreciation in excess of book
depreciation......................... $ (47,855) $ (87,081)
Deferred tax assets:
Allowance for loss on disposal
of discontinued operations............ - 60,214
Reserve for operating losses of
discontinued operations............... - 21,478
Federal net operating loss
carryforwards......................... 71,636 15,144
State net operating loss carryforwards.... 6,599 3,742
AMT credit carryforwards.................. 5,388 7,988
Deferred compensation..................... 3,676 3,339
Workers' compensation..................... 982 1,155
Inventories............................... 1,315 2,415
Equity investments........................ 18,710 17,157
Other, net................................ 8,205 6,754
--------- ----------
Gross deferred tax assets................. 116,511 139,386
Less valuation allowance.................. (68,656) (17,349)
--------- ----------
Deferred tax assets....................... 47,855 122,037
--------- ----------
Net deferred tax asset.................... $ -- $ 34,956
========= ==========
Balance sheet classification:
Other current assets...................... $ -- $ 27,318
Other non-current assets ................. -- 7,638
--------- ----------
$ -- $ 34,956
========= ==========
<PAGE>
The provisions for income taxes consisted of the following (in thousands):
Years Ended June 30,
-------------------------------------------
2000 1999 1998
---------- ----------- ---------
Continuing Operations: (Restated) (Restated)
Current:
Federal............... $ 2,806 $ (15,428) $ 5,819
State................. 166 991 1,598
---------- ----------- ---------
2,972 (14,437) 7,417
Deferred:
Federal............... (31,555) (296) (4,785)
State................. (12,418) (1,377) (1,468)
---------- ----------- ---------
(43,973) (1,673) (6,253)
---------- ----------- ---------
$ (41,001) $ (16,110) $ 1,164
========== =========== =========
Discontinued Operations:
Current:
Federal............... $ (219) $ 219 $ --
State................. (6) 6 --
---------- ----------- ---------
(225) 225 --
Deferred:
Federal............... 75,202 (75,202) --
State................. 3,727 (3,727) --
---------- ----------- ---------
78,929 (78,929) --
---------- ----------- ---------
$ 78,704 $ (78,704) $ --
========== =========== =========
<PAGE>
The provisions for (benefit from) income taxes applicable to continuing
operations differ from the statutory tax amounts as follows (in thousands):
Years Ended June 30,
-----------------------------------
2000 1999 1998
--------- --------- ---------
(Restated) (Restated)
Tax at statutory rate (35% for 2000
and 1999) during the year....... $ (93,567) $ (23,507) $ 950
State income taxes, net............. (8,177) (2,256) 82
Amortization of non-deductible
goodwill........................ 125 683 663
Writeoff of non-deductible goodwill. 7,747 -- --
Valuation allowance................. 58,965 9,691 --
Other............................... (6,094) (721) (531)
--------- ---------- ---------
$ (41,001) $ (16,110) $ 1,164
========= ========== =========
The Company's federal net operating loss for fiscal 2000 was approximately
$158,000,000, all of which will be carried forward, and may be used to reduce
taxes due in future periods for up to 20 years, along with the previous years'
losses of approximately $46 million, which will be carried forward for a period
of up to 19 years, for a total carryforward of $204 million. Alternative minimum
tax credit carryforwards of $5,388,000 may be carried forward indefinitely. In
addition, the Company has state net operating loss carryforwards of
approximately $171,000,000, the majority of which will expire in 15 years.
In 1999, the Company provided a valuation allowance in the tax provision
applicable to continuing operations in the amount of $9,691,000 (restated) for
capital loss carryforwards that could not be used to offset regular taxable
income. In addition, the Company provided a valuation allowance in the tax
provision applicable to discontinued operations in the amount of $7,658,000
(restated) related primarily to state net operating loss carryforwards which
will most likely expire before being utilized. In fiscal 2000, after the
unwinding discontinued operations accounting for the SBQ segment (see Note 2),
the Company restored the 1999 valuation allowance for state net operating loss
carryforwards by decreasing the tax benefit from continuing operations. In
addition, the Company further increased the valuation allowance for deferred tax
assets by $51,307,000 in fiscal 2000 because, in light of recent trends and
circumstances, management concluded that the net deferred tax assets might not
be realized.
10. Stock Compensation Plans
The Company has five stock compensation plans that provide for the granting
of stock options, stock appreciation rights and restricted stock to officers,
directors and employees. The exercise price of stock option awards issued under
these plans equals or exceeds the market price of the Company's common stock on
the date of grant. Stock options under these plans are exercisable one to five
years after the grant date, usually in annual installments. No stock
appreciation rights have been issued. Until January 14, 2000, the Company
maintained a stock accumulation plan, which provided for the purchase of
restricted stock with a three-year vesting period to participants in lieu of a
portion of their cash compensation.
<PAGE>
The status of the Company's stock compensation plans is summarized below as
of June 30, 2000:
Total Number of Options or Shares
-----------------------------------------
Reserved
for
Available for Issuance
Future Grant Under
Authorized or Purchase the Plan
------------ ------------- ---------
1986 Stock Option Plan............... 900,000 -- 17,409
1990 Management Incentive Plan....... 900,000 40,700 545,625
1995 Stock Accumulation Plan......... 500,000 -- 47,105
1996 Director Stock Option Plan...... 100,000 26,500 72,000
1997 Management Incentive Plan....... 900,000 293,631 554,944
2000 Management Incentive Plan....... 2,900,000 717,500 2,182,500
The Company records stock-based compensation under the provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB No. 25) and related Interpretations. An alternative method of
accounting exists under FASB Statement No. 123, Accounting for Stock-Based
Compensation, which requires the use of option valuation models; however, these
models were not developed for use in valuing employee stock compensation awards.
Under APB No. 25, because the exercise price of the Company's employee stock
options equals or exceeds the market price of the underlying stock on the date
of grant, no compensation expense is recognized for stock options. The Company
recognizes compensation expense on grants of restricted stock and stock grants
under the 1995 Stock Accumulation Plan based on the intrinsic value of the stock
on the date of grant amortized over the vesting period. Total compensation
expense recognized for stock-based employee compensation awards was $621,000,
$541,000, and $721,000 in 2000, 1999, and 1998, respectively.
As required by Statement No. 123, the Company has determined pro forma net
income and earnings per share as if it had accounted for its employee stock
compensation awards using the fair value method of that Statement. The fair
value for these awards was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions:
2000 1999 1998
------ ------ -------
Risk free interest rate.................. 6.18% 5.76% 5.38%
Dividend yield........................... 0.00% 2.48% 2.15%
Volatility factor........................ 69.5% 60.4% 54.2%
Weighted average expected life:
Stock options......................... 5 years 5 years 5 years
Restricted stock awards............... 3 years 4 years 4 years
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock compensation awards have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock compensation awards.
<PAGE>
For purposes of pro forma disclosures, the estimated fair value of the
stock compensation awards is amortized to expense over the appropriate vesting
period. The effect on results of operations and earnings per share is not
expected to be indicative of the effects on the results of operations and
earnings per share in future years. The pro forma calculations include stock
compensation awards granted beginning in fiscal 1996. The Company's pro forma
information follows (in thousands, except for per share information):
Years Ended June 30,
--------------------------------
2000 1999 1998
--------- --------- -------
Pro forma:
(Loss) income from continuing
operations.................... $(228,301) $ (51,522) $ 2,225
(Loss) income per share from
continuing operations......... (7.58) (1.75) 0.07
Net (loss) income................. (56,787) (224,705) 1,061
Net (loss) income per share....... (1.89) (7.62) 0.04
A summary of the Company's stock option activity and related information
for the years ended June 30 is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Options Price Options Price Options Price
---------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding--beginning of year.............. 1,654,621 $10.99 1,009,165 $16.89 851,876 $16.35
Granted..................................... 2,347,500 4.62 964,000 5.95 258,000 18.50
Exercised................................... (29,500) 4.76 -- -- (51,111) 9.45
Canceled.................................... (593,440) 11.61 (318,544) 14.23 (49,600) 16.70
--------- --------- ---------
Outstanding--end of year..................... 3,379,181 6.51 1,654,621 10.99 1,009,165 16.89
========= ========= =========
Exercisable at end of year.................. 3,844,681 10.86 455,463 16.90 445,493 16.04
========= ========= =========
Weighted-average fair value of options
granted during year...................... $ 2.43 $ 2.86 $ 8.28
====== ====== ======
</TABLE>
Summary information about the Company's stock options outstanding at June
30, 2000 is as follows:
<TABLE>
<CAPTION>
Options Options
Outstanding Exercisable
--------------------------------- ----------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Number of Term (in Exercise Number of Exercise
Range of Exercise Prices Options Years) Price Options Price
------------------------ ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$4.00 - $6.31................ 2,816,700 9.39 $4.65 396,200 $ 5.03
$7.94 - $9.62................ 107,800 7.75 9.52 68,400 9.58
$15.38 - $20.00.............. 452,181 4.91 17.23 377,581 17.08
$31.88....................... 2,500 3.72 31.88 2,500 31.88
--------- -------
$4.00 - $31.88............... 3,379,181 8.73 6.51 844,681 10.86
========= =======
</TABLE>
In addition to the stock option activity presented in the preceding table, the
Company granted 100,000, 61,720 and 7,550 shares of restricted stock to
employees in 2000, 1999 and 1998, respectively. The weighted average fair value
of these awards was $2.82 in 2000, $7.35 in 1999 and $15.93 in 1998. The Company
also issued 32,195, 60,505 and 30,187 shares to employees in 2000, 1999 and
1998, respectively, under the Stock Accumulation Plan.
<PAGE>
11. Deferred Compensation and Employee Benefits
The Company maintains a defined contribution 401(K) plan that covers
substantially all non-union employees. The Company makes both discretionary and
matching contributions to the plan based on employee compensation and
contributions. Company contributions charged to operations amounted to
$6,206,000, $4,777,000 and $3,488,000 in fiscal 2000, 1999 and 1998,
respectively.
Certain officers and key employees participate in the Executive Retirement
and Compensation Deferral Plan (ERCDP), a non-qualified deferred compensation
plan, which allows participants to defer specified percentages of base and bonus
pay, and provides for Company contributions. Under the ERCDP agreement, the
Company recognizes compensation costs as contributions become vested. Investment
performance gains and losses on each participant's plan account result in
additional compensation costs to the Company. To fund its obligation under this
Plan, the Company has purchased life insurance policies on covered employees.
The Company's obligations to participants in the Plan are reported in deferred
liabilities.
Other than the plans referred to above, the Company provides no
post-retirement or post-employment benefits to its employees that would be
subject to the provisions of FASB Statements No. 106 or No. 112.
12. Segment Information
Birmingham Steel Corporation has two reportable segments: merchant/rebar
and special bar quality ("SBQ"). The Company's rebar/merchant segment consists
of six operating units that produce and/or sell steel reinforcing bar products
used in construction of concrete structures and merchant steel products
comprised of rounds, squares, flats, strip, angles and channels used in steel
fabrication products. The SBQ segment consists of one operating unit that
produces high-quality rod, bar and wire products for customers in the
automotive, agricultural, industrial fastener, welding, appliance and aerospace
industries. The SBQ segment also includes a melt shop facility in Memphis,
Tennessee designed to supply high quality billets to the SBQ production
facility. This melt shop is currently idled and is an asset held for sale. The
Company's reportable segments are differentiated based on the chemical and
finished surface qualities of products produced, the markets that each segment
serves and differences in expected long-term profitability. Each of the
operating units in both segments is managed separately because of their
geographic locations in the United States.
The Company uses profit or loss from continuing operations and profit
before tax to measure segment performance. Inter-segment sales are generally
priced at the lower of market price or cost plus $25 and corporate
administrative expenses are allocated to segments based on assets employed and
tons shipped. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
<PAGE>
Information about the Company's reportable segments is as follows (in
thousands):
Year Ended June 30, 2000
Total
Rebar/ Reportable
Merchant SBQ Segment -
------------ ----------- -----------
Net sales................................ $ 719,286 $ 213,260 $ 932,546
Intersegment revenues.................... 31,074 3,828 34,902
Start-up costs and unusual items
reflected in segment profit (loss)..... 29,648 165,241 194,889
Depreciation and amortization............ 42,294 15,885 58,179
Interest expense......................... 37,807 13,880 51,687
Income (loss) from equity investments.... 1,974 (13,889) (11,915)
Segment (loss)........................... (9,714) (244,699) (254,413)
Segment assets........................... 1,330,362 291,084 1,621,446
Segment equity investments............... 3,895 -- 3,895
Expenditures for long-lived assets....... 22,281 3,784 26,065
Year Ended June 30, 1999
Net sales................................ $ 709,876 $ 270,398 $ 980,274
Intersegment revenues.................... 3,910 612 4,522
Start-up costs and unusual items
reflected in segment profit (loss)..... 12,854 37,881 50,735
Depreciation and amortization............ 40,227 20,765 60,992
Interest expense......................... 24,249 11,016 35,265
Loss from equity investments............. (24,563) (6,202) (30,765)
Segment profit (loss).................... 43,178 (85,261) (42,083)
Segment assets........................... 1,296,059 263,316 1,559,375
Segment equity investments............... 4,015 -- 4,015
Expenditures for long-lived assets....... 121,808 18,869 140,677
Year Ended June 30, 1998
Net sales................................ $ 836,875 $ 299,144 $1,136,019
Intersegment revenues.................... 20,471 159 20,630
Start-up costs and unusual items
reflected in segment profit (loss).... 1,305 32,933 34,238
Depreciation and amortization............ 37,954 17,312 55,266
Interest expense......................... 17,261 11,747 29,008
Loss from equity investments............. (18,326) -- (18,326)
Segment profit (loss).................... 46,049 (40,112) 5,937
Segment assets........................... 1,208,517 488,841 1,697,358
Segment equity investments............... 27,957 17,998 45,955
Expenditures for long-lived assets....... 66,615 79,952 146,567
<PAGE>
Reconciliations
Years Ended June 30,
-----------------------------------
Revenues 2000 1999 1998
-----------------------------------
Total external revenues for reportable
segments................................. $ 932,546 $ 980,274 $1,136,019
Intersegment revenues for reportable
segments............................... 34,902 4,522 20,630
Elimination of intersegment revenues..... (34,902) (4,522) (20,630)
---------- ---------- ----------
Total consolidated revenues............... $ 932,546 $ 980,274 $1,136,019
========== ========== ==========
Segment Profit (loss)
Total segment (loss) profit................ $ (254,413) $ (42,083) $ 5,937
Unallocated unusual items.................. (15,587) (267) --
Other unallocated income (expense)......... 2,665 (24,813) (3,144)
---------- ---------- ----------
(Loss) income from continuing operations
before tax............................. $ (267,335) $ (67,163) $ 2,793
========== ========== ==========
Assets
Total assets for reportable segments....... $1,621,446 $1,559,375 $1,697,358
Elimination of intercompany balances....... (458,788) (419,363) (355,107)
Other eliminations......................... (202,800) (169,276) (97,472)
---------- ---------- ----------
Total assets............................... $ 959,858 $ 970,736 $1,244,779
========== ========== ==========
Products and Geographic Areas
Net sales to external customers, by product type and geographic area were
as follows for the periods indicated (in thousands):
Years Ended June 30,
-----------------------------------
2000 1999 1998
-----------------------------------
Rebar/Merchant Segment:
By product class:
Reinforcing bar....................... $ 383,716 $ 386,421 $ 439,160
Merchant products..................... 295,677 283,942 316,184
Semi-finished billets................. 27,169 27,610 70,562
Strand, mesh, and other............... 12,724 11,903 10,969
---------- --------- ---------
$ 719,286 $ 709,876 $ 836,875
========== ========= =========
By geographic area:
United States......................... $ 670,954 $ 672,034 $ 778,262
Canada................................ 47,917 37,440 57,961
All other............................. 415 402 652
---------- ---------- ----------
$ 719,286 $ 709,876 $ 836,875
========== ========= ==========
SBQ Segment:
By product class:
High-quality rod, bar and wire....... $ 209,040 $ 267,116 $ 296,774
High-quality semi-finished billets.... 679 1,955 --
Other................................. 3,541 1,327 2,370
--------- --------- ----------
$ 213,260 $ 270,398 $ 299,144
========= ========= ==========
By geographic area:
United States......................... $ 203,712 $ 266,310 $ 295,326
Canada................................ 9,363 4,088 3,818
All other............................. 185 -- --
--------- --------- ----------
$ 213,260 $ 270,398 $ 299,144
========= ========= ==========
<PAGE>
Substantially all of the Company's long-lived tangible assets are located
in the Continental United States. Revenues in the preceding table are attributed
to countries based on the location of the customers. No single customer
accounted for 10% or more of consolidated net sales.
13. 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 known material and 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. Various forms of insurance
generally cover such claims. 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.
14. Start-Up and Restructuring Costs and Other Unusual Items
Start-up and restructuring costs and other unusual items consist of the
following (in thousands):
Years Ended June 30,
-----------------------------------------
2000 1999 1998
----------- ------------ ----------
Start-up expenses:
Memphis...........................$ 15,396 $ 37,881 $ 30,515
Cartersville...................... 16,537 12,817 1,305
Other............................. -- 37 2,418
Asset impairment:
Memphis facility.................. 85,000 -- --
Assets retired.................... 13,111 -- --
Intangible write-off.............. 22,134 -- --
Restructuring charges:
Severance and termination
benefits (Memphis).............. 2,473 -- --
Loss on purchase commitment....... 40,238 -- --
Other unusual items:
Proxy solicitation costs.......... 6,887 -- --
Executive severance costs......... 6,298 -- --
Debt amendment costs............. 2,402 -- --
----------- ---------- ----------
$ 210,476 $ 50,735 $ 34,238
=========== ========== ==========
<PAGE>
Summarized by segment:
Rebar/Merchant.................... $ 29,648 $ 12,854 $ 32,933
SBQ............................... 165,241 37,881 1,305
Corporate - unallocated........... 15,587 -- --
---------- ---------- ----------
$ 210,476 $ 50,735 $ 34,238
========== ========== ==========
Year Ended June 30
Liabilities and Reserves: 2000
-----------------
Balance at beginning of year................... $ --
Accruals for restructuring liabilities,
proxy, executive severance and debt
amendment................................... 59,298
Cash payments.................................. (13,078)
Proxy expenses settled with common stock....... (1,665)
Effect of revised estimates.................... (1,000)
-----------------
Balance at end of year......................... $ 43,555
=================
Of this amount, $30 million is classified as non-current as of June 30,
2000.
A narrative description of the significant items summarized in the preceding
tables follows:
Start-up: The Company considers a facility to be in start-up until it
reaches commercially viable production levels. During start-up, costs incurred
in excess of expected normal levels, including non-recurring operating losses,
are classified as start-up.
Asset Impairment: On December 28, 1999, the Company announced the suspension
of operations at its melt shop facility in Memphis, Tennessee as of January 1,
2000. The results of the Company's impairment review indicated that the Memphis
facility was impaired. Accordingly, in the second quarter of fiscal 2000, the
Company recorded an impairment charge of $85 million representing the difference
between the carrying value of those assets and the estimated fair market value
(based on an appraisal) less estimated costs to sell the facility. Management is
actively pursuing a sale or other disposition of the Memphis facility, including
joint venture opportunities. As a result of the Company's decision to continue
SBQ rolling operations in Cleveland using third party billet sources, there is
no operational requirement to continue billet production in Memphis.
Accordingly, Memphis is considered an asset held for disposition effective
January 1, 2000, and depreciation expense has not been recognized since that
date. The effect of suspending depreciation on the Memphis facility decreased
depreciation expense by $4,000,000 in the last half of fiscal 2000. Management
is actively pursuing sale or other disposition of the Memphis facility at this
time. Management is unable to reasonably predict when a sale or disposition will
occur.
Considerable management judgment is necessary to estimate fair value,
accordingly, the ultimate loss on disposition of the facility could vary
significantly from the estimates used in determining the impairment loss. The
adjusted carrying value of the Memphis facility, which is reflected in property,
plant and equipment, is $70.8 million at June 30, 2000.
Assets Retired: In the second quarter of fiscal 2000, the Company wrote off
equipment taken out of service from the rebar/merchant segment and recognized
losses of $13.1 million.
Intangible Write-off: The $22.1 million impairment charge for intangible
assets represents the unamortized balance of goodwill related to the SBQ
division as of December 31, 1999. This goodwill was previously written down as a
part of the 1999 provision for loss on discontinued operations. After reversing
the loss on disposition (as described in Note 2), the Company effectively
restored the previous charge as a component of continuing operations (as
required by EITF 90-16). Thus, the second quarter of fiscal 2000 goodwill charge
is principally a reclassification within the income statement and had no impact
on cash flows or on stockholder's equity. The goodwill remains impaired because
the estimated undiscounted cash flows of the SBQ division are insufficient to
cover the net carrying amount of the entire division's assets, considering
recent changes in management's operating strategy and its plan for continuing
only the Cleveland facility as a part on ongoing operations.
Severance and Termination Benefits: In connection with the shut down of the
Memphis facility, the Company accrued severance and other employee related exit
costs of approximately $2.5 million in the second quarter of fiscal 2000. The
Memphis shut down resulted in the termination of approximately 250 employees,
including management, administrative, and labor positions. In accordance with
EITF 94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity, the Company established a liability for
severance and other related costs associated with involuntary termination of
employees. The affected employees were notified of their terminations and their
severance benefits prior to December 31, 1999. Most of the Memphis employees
were terminated as of December 31, 1999. Remaining employees have substantially
completed mill clean-up and other exit activities as of June 30, 2000 and
substantially all severance benefits have been paid.
Loss on purchase commitment: Refer to Note 3 for a discussion of the accrued
loss on the Company's DRI purchase commitment.
Proxy Solicitation Costs: These costs, principally consisting of legal,
public relations and other consulting fees, were incurred in the Company's
defense of a proxy contest led by The United Company Shareholder Group (the
"United Group"). On December 2, 1999, the Company and United Group reached a
settlement appointing John D. Correnti as Chairman and Chief Executive Officer
and appointing nine new board members approved by the United Group. The charges
include approximately $1.7 million to reimburse the United Group for certain of
its costs in connection with the proxy fight. As agreed, the Company settled
this obligation by issuing 498,733 unregistered shares of the Company's common
stock.
Executive Severance Costs: Several current and former key executives of the
Company were covered by the Company's executive severance plan, which provides
for specified benefits after a change in control of a majority of the Board of
Directors of the Company, among other triggering events. As a result of the
proxy contest, through June 30, 2000, seven executives, including the former
CEO, covered by the Plan, were severed. The Company is currently engaged in
litigation with the former CEO and one other covered executive concerning the
amount and payment of severance benefits. The Company has accrued its best
estimate of the ultimate settlement amounts and does not expect to incur any
further executive severance expenses associated with the proxy contest.
Debt Amendment Costs: In conjunction with the May 2000 amendments to the
Company's borrowing agreements (see Note 7), the Company incurred $2.4 million
in legal and financial consulting fees.
15. Other Income
In fiscal 1999, operating results of the SBQ operations included a gain of
$2.2 million from the sale of real estate in Cleveland, Ohio. The Company also
received approximately $4.4 million in refunds from electrode suppliers that
related to electrodes purchased in prior years. The gain was offset by a
one-time charge of $2.1 million to terminate a long-term raw materials purchase
commitment with a third party supplier.
In fiscal 1998, the Company sold idle properties and equipment for
approximately $26.9 million and recognized (pre-tax) gains of approximately $5.2
million. The Company also received approximately $4.4 million in refunds from
electrode suppliers that related to electrodes purchased in prior years. These
amounts are included in "Other income, net" in the Consolidated Statements of
Operations.
<PAGE>
16. Shareholder Rights Plan
On January 16, 1996, the Company's Board of Directors adopted a shareholder
rights plan. Under the plan, Rights to purchase stock, at a rate of one Right
for each share of common stock held, were distributed to stockholders of record
on January 19, 1996. The Rights generally become exercisable after a person or
group (i) acquires 10% or more of the Company's outstanding common stock or (ii)
commences a tender offer that would result in such a person or group owning 10%
or more of the Company's common stock. When the Rights first become exercisable,
a holder will be entitled to buy from the Company a unit consisting of one
one-hundredth of a share of Series A Junior Participating Preferred Stock of the
Company at a purchase price of $74. In the event that a person acquires 10% or
more of the Company's common stock, each Right not owned by the 10% or more
stockholder would become exercisable for common stock of the Company having a
market value equal to twice the exercise price of the Right. Alternatively,
after such stock acquisition, if the Company is acquired in a merger or other
business combination or 50% or more of its assets or earning power are sold,
each Right not owned by the 10% or more stockholder would become exercisable for
common stock of the party which has engaged in a transaction with the Company
having a market value equal to twice the exercise price of the Right. Prior to
the time that a person acquires 10% or more of the Company's common stock, the
Rights are redeemable by the Board of Directors at a price of $.01 per right.
The Rights expire on January 16, 2006, except as otherwise provided in the plan.
<PAGE>
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited; in thousands, except per share data)
<CAPTION>
2000 Quarters
--------------------------------------------------------
First(A) Second Third Fourth
--------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales.......................................... $ 234,763 $ 231,530 $ 253,141 $ 213,112
Gross profit....................................... 23,733 4,246 5,393 11,580
Start-up and restructuring costs and other unusual
items(B)....................................... 13,205 185,643 8,416 3,212
Income (loss) from continuing operations........... (15,656) (170,532) (25,995) (14,151)
Reversal of loss on discontinued operations (C) ... 21,420 151,763 -- --
Loss on restructuring of debt, (net of income -- (1,330) -- (339)
taxes)
Net income (loss).................................. 5,764 (20,099) (25,995) (14,490)
Weighted average shares outstanding................ 29,735 29,763 30,508 30,836
========= ========= ========= =========
Basic and diluted per share amounts:
Income (loss) from continuing operations........ $ (0.53) $ (5.74) $ (0.85) $ (0.46)
Reversal of loss on discontinued operations..... 0.72 5.10 -- --
Loss on restructuring of debt.................. -- (0.04) -- (0.01)
--------- --------- --------- --------
Basic and diluted earnings (loss) per share..... $ 0.19 $ (0.68) $ (0.85) $ (0.47)
========= ========= ========= =========
Cash dividends declared per share............... $ 0.025 $ 0.025 $ -- $ --
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
1999 Quarters(A)
----------------------------------------------------
First Second Third Fourth
----------------------------------------------------
<S> <C> <C> <C> <C>
Net sales.......................................... $ 270,957 $ 226,853 $ 224,486 $ 257,978
Gross profit....................................... 26,974 14,750 15,905 21,314
Start-up and restructuring costs and other unusual
items .......................................... 10,865 8,979 20,623 10,268
Income (loss) from continuing operations........... 1,024 (4,966) (15,631) (31,480)(D)
Loss on discontinued operations.................... -- -- -- (173,183)(E)
Net income (loss).................................. 1,024 (4,966) (15,631) (204,663)
Weighted average shares outstanding................ 29,488 29,254 29,509 29,674
========= ========= ========= ========
Basic and diluted per share amounts:
Income (loss) from continuing operations........ $ 0.03 $ (0.17) $ (0.53) $ (1.06)
Loss on discontinued operations................. -- -- -- (5.84)
--------- --------- --------- ---------
Basic and diluted earnings (loss) per share..... $ 0.03 $ (0.17) $ (0.53) $ (6.90)
========= ========= ========= =========
Cash dividends declared per share............... $ 0.100 $ 0.025 $ 0.025 $ 0.025
========= ========= ========= =========
</TABLE>
(A) Operating results of the SBQ segment for all periods prior to October 1,
1999 (previously reflected in discontinued operations) have been
reclassified from discontinued operations to continued operations. Refer to
Note 2 to the Consolidated Financial Statements.
(B) See Note 14 to the Consolidated Financial Statements for a summary of these
costs.
(C) Reflects reversal of remaining balance in the accrued loss on disposal of
the SBQ line of business, including estimated losses during the disposal
period (net of income tax benefit of $78,704,000). Refer to Note 2 to the
Consolidated Financial Statements.
(D) Includes provision for loss of $19,275,000 on the Company's investment in
Pacific Coast Recycling, LLC. Refer to Note 3 to the Consolidated Financial
Statements.
(E) Reflects accrued loss on disposition of the SBQ line of business (net of
income tax benefit of $78,704,000). Refer to Note 2 of the Consolidated
Financial Statements.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Birmingham Steel Corporation
We have audited the accompanying consolidated balance sheets of Birmingham
Steel Corporation as of June 30, 2000 and 1999, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended June 30, 2000. Our audits also
included the financial statement schedule listed in the index at Item 14 (a) 2.
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. The 1999 and 1998 financial
statements of Pacific Coast Recycling, LLC (a 50% owned joint venture), has been
audited by other auditors whose report, which has been furnished to us, included
an explanatory paragraph describing an uncertainty regarding the ability of
Pacific Coast Recycling, LLC to continue as a going concern. Our opinion on the
1999 and 1998 consolidated financial statements and schedule, insofar as it
relates to data included for Pacific Coast Recycling, LLC, is based solely on
the report of other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and, for 1999 and 1998, the report of
other auditors, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Birmingham Steel Corporation at June 30, 2000 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended June 30, 2000, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
Birmingham, Alabama
August 10, 2000
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Members
Pacific Coast Recycling, LLC:
We have audited the balance sheets of Pacific Coast Recycling, LLC as of
June 30, 1999 and 1998, and the related statements of operations, members'
capital (deficit) and cash flows for the years ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pacific Coast Recycling, LLC
as of June 30, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
The financial statements have been prepared assuming that Pacific Coast
Recycling, LLC will continue as a going concern. As discussed in note 3 to the
financial statements, the Company has suffered recurring losses from operations,
has a net capital deficiency and as of June 30, 1999, the members have stated
that they will no longer provide letters confirming their continuing financial
support of the Company. These parent companies provide a significant amount of
the operations of the Company as described in note 9 to the financial
statements. These circumstances raise substantial doubt about the entity's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ KPMG LLP
Los Angeles, CA
July 30, 1999
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in Birmingham Steel Corporation's 2000 Proxy
Statement, with respect to directors and executive officers of the Company, is
incorporated herein by reference in response to this Item.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in Birmingham Steel Corporation's 2000 Proxy
Statement, with respect to directors and executive officers of the Company, is
incorporated herein by reference in response to this Item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in Birmingham Steel Corporation's 2000 Proxy
Statement, with respect to directors and executive officers of the Company is
incorporated herein by reference in response to this Item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
ITEM 14 (a) 1. INDEX TO CONSOLIDATED STATEMENTS COVERED BY REPORT OF INDEPENDENT
AUDITORS
The following consolidated financial statements of Birmingham Steel
Corporation are included in Item 8:
Consolidated Balance Sheets--June 30, 2000 and 1999
Consolidated Statements of Operations--Years ended June 30, 2000, 1999
and 1998
Consolidated Statements of Changes in Stockholders' Equity--Years
ended June 30, 2000, 1999 and 1998
Consolidated Statements of Cash Flows--Years ended June 30, 2000, 1999
and 1998
Notes to Consolidated Financial Statements--June 30, 2000, 1999 and
1998
Report of Ernst & Young LLP, Independent Auditors
Independent Auditor's Report(KPMG LLP)
ITEM 14 (a) 2. INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedule is included in item
14 (d) of this report.
Form 10-K
Schedule II--Valuation and Qualifying Accounts--Years ended June 30, 2000, 1999
and 1998
Schedules other than those listed above are omitted because they are
not required or are not applicable, or the required information is shown in the
Consolidated Financial Statements or notes thereto. Columns omitted from
schedules filed have been omitted because the information is not applicable.
ITEM 14 (a) 3. EXHIBITS
The exhibits listed on the Exhibit Index below are filed or incorporated by
reference as part of this report and such Exhibit Index is hereby incorporated
herein by reference.
ITEM 14 (b). REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter ended June 30,
2000.
ITEM 14 (c) EXHIBITS
Exhibit Description of Exhibits
------- -----------------------
3.1 Restated Certificate of Incorporation of the Registrant (incorporated
by reference from Form 8-A, Exhibit 2.2, filed November 16, 1986)
3.2 By-laws of the Registrant as amended on August 3, 1999 (incorporated by
reference to Exhibit 3.1 from Current Report on Form 8-K filed August 11, 1999)
4.1 Amended and Restated $130,000,000 Senior Note Purchase Agreement dated
as of October 12, 1999 between the registrant and the financial parties thereto
(incorporated by reference to Exhibit 4.1.4 from Form 10-K/A for the year ended
June 30, 1999)
4.1.1 Second Amendment to the Amended and Restated $130,000,000 Senior Note
Purchase Agreement dated May 15, 2000*
4.2 Amended and Restated $150,000,000 Senior Note Purchase Agreement dated
as of October 12, 1999 (incorporated by reference to Exhibit 4.2.3 from Form
10-K/A for the year ended June 30, 1999)
4.2.1 Second Amendment to the Amended and Restated $150,000,000 Senior Note
Purchase Agreement dated May 15, 2000*
4.3 Letter from Birmingham Steel Corporation to Senior Noteholders dated
October 13, 1999 (incorporated by reference from Form 10-K/A for the year ended
June 30, 1999)
4.4 Shareholder Rights Plan of Registrant (incorporated by reference from
Form 8-K filed January 23, 1996)
4.5 Reimbursement Agreement, dated as of October 1, 1996, between
Birmingham Steel Corporation and PNC Bank, Kentucky, Inc. (incorporated by
reference from Form 10-Q for quarter ended December 31, 1996, exhibit 4.1)
4.6 Warrant Agreement dated May 15, 2000, between the Registrant and the
warrant holders parties thereto.*
10.1 1986 Stock Option Plan of Registrant, as amended (incorporated by
reference from Registration Statement on Form S-8 (No. 33-16648), filed August
20, 1987)
10.2 Amended and Restated Management Security Plan, effective January 1,
1994 (incorporated by reference from Form 10-K for year ended June 30, 1994,
Exhibit 10.2)
10.3 Steel Billet Sale and Purchase Master Agreement between American Steel
& Wire Corporation and QIT-Fer et Titane, Inc. dated July 1, 1994 (incorporated
by reference from Annual Report on Form 10- K for year ended June 30, 1995,
Exhibit 10.3)
10.4 Supply Agreement, dated as of August 2, 1985, among MC Acquisition
Corp., Birmingham Bolt Company, Inc., Magna Corporation, Contractors Material
Co., Inc., and Hackney Steel Co., Inc. (incorporated by reference from
Registrant Statement No. 33-945, Exhibit 10.6.3, filed November 20, 1985)
10.5 1989 Non-Union Employees' Stock Option Plan of the Registrant
(incorporated by reference from a Registration Statement on Form S-8,
Registration No. 33-30848, filed August 31, 1989, Exhibit 4.1)
10.6 Restated Birmingham Steel Corporation 401(k) Plan restated as of
January 1, 1990 (incorporated by reference from Post-Effective Amendment No. 1
to Form S-8, Registration No. 33-23563, filed July 12, 1990, Exhibit 4.1)
10.7 Special Severance Benefits Plan of the Registrant (incorporated by
reference from the Annual Report on Form 10-K for the Year ended June 30, 1989,
Exhibit 10.12)
10.8 Lease Agreement, as amended, dated July 13, 1993 between Torchmark
Development Corporation and Birmingham Steel Corporation (incorporated by
reference from Annual Report on Form 10-K for year ended June 30, 1993, Exhibit
10.12)
10.8.1 Third Amendment to Lease Agreement, dated November 30, 1993, between
Torchmark Development Corporation and Birmingham Steel Corporation (incorporated
by reference from Annual Report on Form 10-K for year ended June 30, 1997,
Exhibit 10.8.1)
10.8.2 Fourth Amendment to Lease Agreement, dated June 13, 1994, between
Torchmark Development Corporation and Birmingham Steel Corporation (incorporated
by reference from Annual Report on Form 10-K for year ended June 30, 1997,
Exhibit 10.8.2)
10.8.3 Fifth Amendment to Lease Agreement, dated September 6, 1995, between
Torchmark Development Corporation and Birmingham Steel Corporation (incorporated
by reference from Annual Report on Form 10-K for year ended June 30, 1997,
Exhibit 10.8.3)
10.8.4 Sixth Amendment to Lease Agreement, dated April 11, 1997, between
Torchmark Development Corporation and Birmingham Steel Corporation (incorporated
by reference from Annual Report on Form 10-K for year ended June 30, 1997,
Exhibit 10.8.4)
10.8.5 Seventh Amendment to Lease Agreement, dated April 11, 1997, between
Torchmark Development Corporation and Birmingham Steel Corporation (incorporated
by reference from Annual Report on Form 10-K for year ended June 30, 1997,
Exhibit 10.8.5)
10.8.6 Eighth Amendment to Lease Agreement, dated April 11, 1997, between
Torchmark Development Corporation and Birmingham Steel Corporation (incorporated
by reference from Annual Report on Form 10-K for the year ended June 30, 1998,
Exhibit 10.8.6)
10.9 1990 Management Incentive Plan of the Registrant (incorporated by
reference from a Registration Statement on Form S-8, Registration No. 33-41595,
filed July 5, 1991, Exhibit 4.1)
10.10 1992 Non-Union Employees' Stock Option Plan of the Registrant
(incorporated by reference from a Registration Statement on Form S-8,
Registration No. 33-51080, filed August 21, 1992, Exhibit 4.1)
10.11 Employment Agreement, dated May 12, 2000, between Registrant and John
D. Correnti*
10.11.1 Amendment to Employment Agreement, dated May 12, 2000, between
Registrant and John D. Correnti.*
10.12 Stock Accumulation Plan of the Registrant (incorporated by reference
from a Registration Statement on Form S-8, Registration No. 33-64069, filed
November 8, 1995, Exhibit 4.1)
10.13 Lease Agreement, dated January 7, 1997, between Torchmark Development
Corporation and Birmingham Southeast LLC (incorporated by reference from Annual
Report on Form 10-K for year ended June 30, 1998, Exhibit 10.13)
10.14 Director Stock Option Plan of the Registrant (incorporated by
reference from Form 10-Q for quarter ended September 30, 1996, exhibit 10.1)
10.15 Director Compensation Plan of the Registrant (incorporated by
reference from Form 10-K/A for the year ended June 30, 1999)
10.16 Amended and Restated Executive Severance Plan of the Registrant
(incorporated by reference from Annual Report on Form 10-K for the year ended
June 30, 1999, Exhibit 10.19)
10.17 Chief Executive Officer Incentive Compensation Plan of the Registrant
(incorporated by reference from Form 10-Q for quarter ended September 30, 1996,
exhibit 10.2)
10.18 Equity Contribution Agreement among American Iron Reduction,
L.L.C.,GS Technologies Operating Co., Inc., Birmingham Steel Corporation and
Nationsbank, N.A., dated August 30, 1996 (incorporated by reference from Form
10-Q for quarter ended September 30, 1996, exhibit 10.3)
10.19 DRI Purchase Agreement between Birmingham Steel Corporation and
American Iron Reduction, L.L.C., dated as of August 30, 1996 (incorporated by
reference from Form 10-Q for quarter ended September 30, 1996, exhibit 10.4)
10.19.1 Amended and Restated DRI Purchase Agreement between Birmingham
Steel Corporation and American Iron Reduction, LLC dated as of May 5, 2000*
10.20 Operating Agreement between Birmingham Steel Corporation and Raw
Material Development Co., Ltd., dated as of September 18, 1996 (incorporated by
reference from Form 10-Q for quarter ended September 30, 1996, exhibit 10.5)
10.21 Asset Purchase Agreement, dated as of October 31, 1996, among Mitsui
& Co., Ltd., R. Todd Neilson, as Chapter 11 Trustee for the bankruptcy estate of
Hiuka America Corporation, All-Ways Recycling Company, B&D Auto & Truck Salvage,
and Weiner Steel Corporation (incorporated by reference from Form 10-Q for
quarter ended December 31, 1996, exhibit 10.1)
10.22 Contribution Agreement, dated as of November 15, 1996, among IVACO,
Inc., Atlantic Steel Industries, Inc., Birmingham Steel Corporation and
Birmingham Southeast, LLC (incorporated by reference from Current report on Form
8-K filed December 12, 1996)
10.23 $300 million Credit Agreement, dated as of March 17, 1997 by and
among Birmingham Steel Corporation, as Borrower, the financial institutions
party hereto and their assignees under section 12.5.(d), as Lenders, PNC Bank,
National Association and The Bank of Nova Scotia, as Co-agents and Nationsbank,
N.A. (South), as Agent and as Arranger (incorporated by reference from Form 10-Q
for quarter ended March 31, 1997, exhibit 10.1)
10.23.1 First Amendment to Credit Agreement dated June 23, 1998
(incorporated by reference to Exhibit 10.2 from Current Report on Form 8-K filed
September 30, 1999)
10.23.2 Second Amendment to Credit Agreement dated September 30, 1998
(incorporated by reference to Exhibit 10.1 from Form 10-Q for quarter ended
December 31, 1998)
10.23.3 Third Amendment to Credit Agreement dated July 27, 1999
(incorporated by reference to Exhibit 10.4 from Current Report on Form 8-K filed
September 30, 1999)
10.23.4 Fourth Amendment to Credit Agreement dated September 28, 1999
(incorporated by reference to Exhibit 10.5 from Current Report on Form 8-K filed
September 30, 1999)
10.23.5 Fifth Amendment to Credit Agreement dated October 12, 1999
(incorporated by reference from Annual Report on Form 10-K/A for year ended June
30, 1999)
10.23.6 Seventh amendment to Credit Agreement dated May 15, 2000*
10.24 Collateral Agency and Intercreditor Agreement dated October 12, 1999
(incorporated by reference from Form 10-K/A for the year ended June 30, 1999)
10.24.1 Amended and Restated Collateral Agency and Intercreditor Agreement
dated May 15, 2000 amending and restating the Collateral Agency and
Intercreditor Agreement dated October 12, 1999.*
10.25 $25,000,000 Credit Agreement dated as of May 15, 2000, by and among
Birmingham Southeast, LLC, as Borrower, the financial institutions party
thereto, as lenders, and Bank of America, N.A., as agent.*
10.26 Security Agreement dated as of October 12, 1999, executed by
Birmingham Steel Corporation, as Debtor, in favor of State Street Bank and Trust
Company, as Collateral Agent, for the benefit of the secured parties named
therein.*
10.26.1 Security Agreement dated as of May 15, 2000, executed by Birmingham
Southeast, LLC, as Debtor, in favor of SouthTrust Bank, National Association, as
Collateral Agent, for the benefit of the secured parties named therein.*
10.27 Amended and Restated Collateral Agency and Intercreditor Agreement
dated May 15, 2000 amending and restating the Collateral Agency and
Intercreditor Agreement dated November 12, 1999.*
10.28 Executive Retirement and Compensation Deferral Plan of the Registrant
(incorporated by reference from Annual Report on Form 10-K for year ended June
30, 1998, Exhibit 10.22)
10.29 1997 Management Incentive Plan of the Registrant (incorporated by
reference from a Registration Statement on Form S-8, Registration No. 333-46771,
filed February 24, 1998, Exhibit 4.6)
10.30 Master Restructure Agreement among American Iron Reduction L.L.C., GS
Industries, GS Technologies Operating Co., Inc., Birmingham Steel Corporation,
Bank of America, N.A., and Canadian Imperial Bank of Commerce dated May 5,
2000.*
22.1 Subsidiaries of the Registrant*
23.1 Consent of Ernst & Young LLP, Independent Auditors*
23.2 Accountants' Consent (KPMG LLP) (to be filed by Amendment)
27 Financial Data Schedule*
* Being filed herewith
<PAGE>
ITEM 14 (d) FINANCIAL STATEMENTS
The list of financial statements and schedules referred to in Items
14(a)(1) and 14(a)(2) is incorporated herein by reference.
BIRMINGHAM STEEL CORPORATION
<TABLE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<CAPTION>
Balance Charged
at to Costs Balance at
Beginning and End of
of Year Expenses Deductions Year
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Year Ended June 30, 2000:
Deducted from assets accounts:
Allowance for doubtful accounts ......................... $ 1,207 $ 908 $ 501(A) $ 1,614
Provision for estimated losses for SBQ division
during disposal period ........................... 56,544 (56,544)(B) -- --
Provision for estimated loss on disposal of discontinued
operations ........................................... 195,342 (195,342)(B) -- --
---------- --------- ----------- ---------
$ 253,093 $(250,978) $ 501 $ 1,614
========== ========== =========== =========
Year Ended June 30, 1999:
Deducted from assets accounts:
Allowance for doubtful accounts ......................... .$ 1,838 $ 376 $ 1,007(A) $ 1,207
Provision for estimated losses for SBQ division during
disposal period ...................................... -- 56,544(C) -- 56,544
Provision for estimated loss on disposal of discontinued
operations ........................................... -- 195,342(C) -- 195,342
---------- ---------- ----------- ---------
$ 1,838 $ 252,262 $ 1,007 $ 253,093
========== ========== =========== =========
Year Ended June 30, 1998:
Deducted from assets accounts:
Allowance for doubtful accounts ......................... $ 1,797 $ 1,250 $ 1,209(A) $ 1,838
---------- ---------- ----------- ---------
$ 1,797 $ 1,250 $ 1,209 $ 1,838
========== ========== =========== =========
</TABLE>
(A) Represents accounts written off
(B) Represents the reversal of the 1999 provision for the loss on disposal of
the SBQ line of business.
(C) Represents the provision for the estimated loss on disposal of the SBQ line
of business.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
/S/ John D. Correnti 9/14/00
-----------------------------------
John D. Correnti Date
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ John D. Correnti 9/14/00 /s/ James A. Todd, Jr. 9/14/00
------------------------------- ------------------------------------
John D. Correnti Date James A. Todd, Jr. Date
Chairman of the Board, Chief Chief Administrative Officer,
Executive Officer, Director Director
/s/ Donna M. Alvarado 9/14/00 /s/ Steven R. Berrard 9/14/00
------------------------------- -------------------------------------
Donna M. Alvardao Steven R. Berrard
Director Director
/s/ Alvin R. Carpenter 9/14/00 /s/ C. Stephen Clegg 9/14/00
------------------------------- -------------------------------------
Alvin R. Carpenter C. Stephen Clegg
Director Director
/s/ Jerry E. Dempsey 9/14/00 /s/ Robert M. Gerrity 9/14/00
------------------------------- -------------------------------------
Jerry E. Dempsey Robert M. Gerrity
Director Director
/s/ James W. McGlothlin 9/14/00 /s/ Richard de J. Osborne 9/14/00
-------------------------------- -------------------------------------
James W. McGlothlin Richard de J. Osborne
Director Director
/s/ Robert H. Spilman 9/14/00 /s/ J. Daniel Garrett 9/14/00
------------------------------- -------------------------------------
Robert H. Spilman J. Daniel Garrett
Director Chief Financial Officer,
Vice President - Finance
/s/ Brant R. Holladay 9/14/00
--------------------------------
Brant R. Holladay
Controller
<PAGE>
Exhibit No. 4.1.1
BIRMINGHAM STEEL CORPORATION
-----------------------
SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT
-----------------------
Re:
Amended and Restated Note Purchase Agreements
Dated as of October 12, 1999,
and
$130,000,000 Original Principal Amount of
10.03% Senior Notes Due December 15, 2005
DATED AS OF MAY 15, 2000
<PAGE>
Table of Contents
1. PRELIMINARY STATEMENT...................................................1
1.1 Background....................................................1
1.2 Definitions...................................................3
2. AMENDMENTS..............................................................5
2.1 Amendment of Existing Note Purchase Agreement.................5
2.2 Continuity and Affirmation of Obligations.....................5
3. REPRESENTATIONS AND WARRANTIES..........................................5
3.1 Corporate Existence and Power.................................6
3.2 Corporate Authority...........................................6
3.3 Binding Effect................................................6
3.4 No Conflicts with Agreements, Etc.............................7
3.5 Consents,Etc..................................................7
3.6 Full Disclosure...............................................7
3.7 Outstanding Debt and Liens....................................8
3.8 Pending Litigation............................................8
3.9 No Defaults...................................................8
3.10 Compliance with Law...........................................9
3.11 Title to Properties...........................................9
3.12 Environmental Compliance.....................................10
3.13 Restrictions on Company and Subsidiaries.....................11
3.14 Collateral...................................................12
3.15 Solvency.....................................................12
4. AMENDMENTS.............................................................13
4.1 Disposition Prepayment........... ...........................13
4.2 Equity Issuance Prepayments..................................13
4.3 Change of Control............................................13
4.4 Fixed Charge Coverage Ratio..................................13
4.5 Minimum SBQ Division EBITDA..................................15
4.6 Minimum Consolidated EBITDA..................................15
4.7 Minimum Tangible Net Worth...................................17
4.8 Capital Expenditures.........................................17
4.9 Debt.........................................................18
4.10 AIR Dispute Settlement.......................................18
4.11 Additional Cross Default.....................................18
4.12 New Definitions..............................................18
4.13 Amended Definitions..........................................21
4.14 Further Amendment of Definitions.............................23
4.15 Indemnification..............................................23
4.16 Attachment of Schedule 1.2A to Existing Note Purchase
Agreement....................................................26
4.17 Pending Litigation...........................................26
5. CONDITIONS PRECEDENT...................................................27
5.1 Certificates.................................................27
5.2 Opinions of Counsel..........................................28
5.3 Amendment to 1995 Agreement..................................28
5.4 Seventh Amendment to Credit Agreement........................28
5.5 Amendment to Letter of Credit Documents......................29
5.6 Amendment to Intercreditor Agreement.........................29
5.7 Amendment to Memphis Lease Documents.........................29
5.8 BSE Collateral Documents.....................................29
5.9 Lien Searches................................................30
5.10 New BSE Loan.................................................30
5.11 Payment of Special Counsel and Financial Advisor Fees........30
5.12 Proceedings and Documents Satisfactory.......................31
6. MISCELLANEOUS..........................................................31
6.1 Effect of Amendment..........................................31
6.2 No Legend Required...........................................31
6.3 Fees and Expenses............................................31
6.4 Survival.....................................................32
6.5 Duplicate Originals; Execution in Counterpart................32
6.6 Release of Claims............................................32
6.7 Governing Law................................................33
BIRMINGHAM STEEL CORPORATION
SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT
Re:
Amended and Restated Note Purchase Agreements Dated as of October 12, 1999
and
$130,000,000 Original Principal Amount of
10.03% Senior Notes Due December 15, 2005
Dated as of May 15, 2000
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"), hereby agrees with you as follows:
1. PRELIMINARY STATEMENT
1.1 Background
(a) The Company entered into those certain Note Purchase Agreements dated as of
September 1, 1993, as amended by an Amendment to Note Purchase Agreement dated
as of October 18, 1996 and as further amended by Amendment to 1993 Note Purchase
Agreement dated as of December 14, 1998, with each of the institutions named in
Annex 1 thereto, under and pursuant to which the Company issued and sold to such
institutions an aggregate principal amount of One Hundred Thirty Million Dollars
($130,000,000) of the Company's 7.28% Senior Notes due December 15, 2005 (the
"1993 Notes"). Pursuant to the terms of a Waiver and Third Amendment to Note
Purchase Agreement dated as of October 12, 1999 (the "1999 Third Amendment"),
the Company entered into those certain Amended and Restated Note Purchase
Agreements dated as of October 12, 1999, and the Company subsequently entered
into a First Amendment to Note Purchase Agreement dated as of November 12, 1999
(collectively, as in effect immediately prior to the amendments contemplated
hereby, the "Existing Note Purchase Agreement," and as amended hereby, the
"Amended Note Purchase Agreement"), with each of the institutions named in Annex
1 thereto, pursuant to which the Company issued to such institutions, in
substitution for the 1993 Notes, an aggregate principal amount of One Hundred
Thirty Million Dollars ($130,000,000) of the Company's 10.03% Senior Notes due
December 15, 2005 (the "Notes").
(b) The institutions (other than the Company) listed on the signature pages to
this Agreement (collectively, the "Noteholders") are the holders of one hundred
percent (100%) of the Notes outstanding as of the date hereof.
(c) The Company entered into those certain Amended and Restated Note Purchase
Agreements dated as of October 12, 1999, with each of the institutions named in
Annex 1 thereto (together with their successors and assigns, the "1995
Noteholders"), as amended by a First Amendment to Note Purchase Agreement dated
as of November 12, 1999 (collectively, as in effect immediately prior to the
date hereof, the "1995 Existing Note Purchase Agreement"), and by a Second
Amendment to Note Purchase Agreement dated as of the date hereof (the "Amendment
to 1995 Agreement"; the 1995 Existing Note Purchase Agreement, as amended by the
Amendment to 1995 Agreement, is referred to herein as the "1995 Amended Note
Purchase Agreement"), under and pursuant to which the Company issued to such
institutions, in substitution for Notes in the same amounts issued in 1995, (i)
an aggregate principal amount of Seventy-Six Million Dollars ($76,000,000) of
the Company's 9.71% Series A Senior Notes due December 15, 2002, (ii) an
aggregate principal amount of Fourteen Million Dollars ($14,000,000) of the
Company's 9.82% Series B Senior Notes due December 15, 2005, and (iii) an
aggregate principal amount of Sixty Million Dollars ($60,000,000) of the
Company's 9.92% Series C Senior Notes due December 15, 2005 (collectively, the
"1995 Notes").
(d) The Company entered into that certain Credit Agreement dated as of March 17,
1997 (as in effect immediately prior to the date hereof, the "Existing Credit
Agreement," and as heretofore amended and as amended by a Seventh Amendment to
Credit Agreement dated as of the date hereof (the "Seventh Amendment to Credit
Agreement"), the "Amended Credit Agreement"), by and among the Company, the
banks party thereto (collectively, the "Banks"), and Bank of America, N.A., as
agent (the "Agent"), pursuant to which a Three Hundred Million Dollar
($300,000,000) credit facility has been provided to the Company.
(e) Bank of America, N.A. and PNC Bank, National Association (collectively, the
"L/C Issuers") have separately provided the Company with two (2) letters of
credit (collectively, the "Letters of Credit") which have an aggregate face
amount of Forty-One Million Four Hundred Seventy-One Thousand Seven Hundred
Eighty-Two Dollars ($41,471,782), which Letters of Credit were issued pursuant
to (i) an Amended and Restated Reimbursement Agreement, dated as of October 12,
1999, among the Company, American Steel & Wire Corporation and Bank of America,
N.A. (as amended, the "B of A Reimbursement Agreement"), and (ii) a
Reimbursement Agreement dated as of October 1, 1996, between PNC Bank, National
Association successor to PNC Bank, Kentucky, Inc. and the Company (as amended,
"PNC Reimbursement Agreement" and, collectively with the B of A Reimbursement
Agreement, the "Existing Reimbursement Agreements").
(f) The Company and the Noteholders have agreed to amend the Existing Note
Purchase Agreement to permit the Company to guarantee and secure the New BSE
Loan referred to herein and to modify certain of the covenants and other
provisions of the Existing Note Purchase Agreement, on the terms and conditions
set forth herein.
1.2 Definitions.
Capitalized terms used but not specifically defined in this Agreement have the
respective meanings assigned to them in the Existing Note Purchase Agreement. As
used in this Agreement, the following terms have the respective meanings
specified below or set forth in the Section hereof following such term:
Agent - Section 1.1(d).
Agreement, this - means this Second Amendment to Note Purchase
Agreement, as it may be amended or otherwise modified from time to
time.
Amended Credit Agreement - Section 1.1(d).
Amended Intercreditor Agreement - Section 5.6.
Amended Note Purchase Agreement - Section 1.1(a).
Amendment to 1995 Agreement - Section 1.1(c).
Banks - Section 1.1(d).
B of A Reimbursement Agreement - Section 1.1(e).
BSE Collateral Documents - means the documents listed on Schedule 1.2A
hereto, pursuant to which BSE has granted Liens upon assets of BSE as
collateral for the New BSE Loan, the other Secured Obligations (as
defined in the Amended Intercreditor Agreement), and/or indebtedness
owed by BSE to the Company, all of which indebtedness owed by BSE to
the Company has been assigned to the Collateral Agent as additional
collateral for the Secured Obligations.
BSE Credit Agreement - has the meaning set forth in the definition of
New BSE Loan.
BSE Material Adverse Effect - means a material adverse effect on (a)
the business, prospects, profits, Properties or condition (financial or
otherwise) of BSE, (b) the ability of BSE to perform its obligations
under any of the Financing Documents to which it is a party, or (c) the
validity or enforceability of any of the Financing Documents to which
BSE is a party.
Collateral Agent - means SouthTrust Bank, National Association, in its
capacity as collateral agent under the Intercreditor Agreement.
Company - the introductory sentence.
Effective Date - Section 5.
Existing Credit Agreement - Section 1.1(d).
Existing Note Documents - Section 6.6.
Existing Note Purchase Agreement - Section 1.1(a).
Existing Reimbursement Agreements - Section 1.1(e).
Financing Document - Section 3.1.
Indenture Trustee - has the meaning set forth in the Intercreditor
Agreement.
L/C Issuers - Section 1.1(e).
Letters of Credit - Section 1.1(e).
New BSE Loan - means the loan of up to $25,000,000 to be made
to BSE pursuant to the Credit Agreement dated as of the date hereof
among BSE, Bank of America, N.A., as Agent, and the financial
institutions party thereto (the "BSE Credit Agreement").
1993 Notes - Section 1.1(a).
1995 Amended Note Purchase Agreement - Section 1.1(c).
1995 Existing Note Purchase Agreement - Section 1.1(c).
1995 Noteholders - Section 1.1(c).
1995 Notes - Section 1.1(c).
1999 Third Amendment - Section 1.1(a).
Noteholders - Section 1.1(b).
Notes - Section 1.1(a).
Owner Trustee - has the meaning set forth in the Intercreditor
Agreement.
PNC Reimbursement Agreement - Section 1.1(e).
Seventh Amendment to Credit Agreement - Section 1.1(d).
Transaction Documents - has the meaning specified in the
Omnibus Collateral Agreement.
2. AMENDMENTS
2.1 Amendment of Existing Note Purchase Agreement.
On the Effective Date, the amendments set forth herein shall take effect.
2.2 Continuity and Affirmation of Obligations
Notwithstanding any other provision of this Agreement or any other document or
agreement, the indebtedness of the Company under the Existing Note Purchase
Agreement and the Notes shall not be or be deemed to be paid or discharged or
novated hereby and shall continue in full force and effect as amended hereby.
3. REPRESENTATIONS AND WARRANTIES
To induce the Noteholders to enter into this Agreement, (a) the Company
represents and warrants to the Noteholders that the representations and
warranties made by the Company in Section 3 of the 1999 Third Amendment and by
BSE in the BSE Credit Agreement are true as of the date hereof (except to the
extent that any such representation in the 1999 Third Amendment relates to a
specific other date or as set forth on Schedule 3 hereto or as disclosed to the
Noteholders or Nightingale & Associates LLC in writing prior to the date
hereof), and (b) the Company makes the additional representations and warranties
set forth in this Section 3. The Company agrees and acknowledges that for
purposes of Section 10.1(e) of the Existing Note Purchase Agreement, its
representations and warranties, as set forth in this Agreement, are and
constitute representations and warranties furnished in connection with the
Existing Note Purchase Agreement.
3.1 Corporate Existence and Power
Each of the Company and each Restricted Subsidiary has all requisite
power and authority to execute, deliver and perform its obligations under this
Agreement and each other agreement and document that is being executed or
delivered by the Company and/or any such Subsidiary in connection herewith, and
BSE has all requisite power and authority to execute, deliver and perform its
obligations under the BSE Collateral Documents and each other agreement and
document that is being executed or delivered by BSE in connection therewith
(each of such agreements and documents, including this Agreement and each of the
BSE Collateral Documents, being referred to herein as a "Financing Document").
3.2 Corporate Authority.
The execution, delivery and performance by the Company, BSE and each other
Restricted Subsidiary of each Financing Document to which the Company, BSE or
such other Restricted Subsidiary is a party, and the performance by the Company
of the Amended Note Purchase Agreement and by BSE of the BSE Collateral
Documents, is within the corporate or limited liability company powers of the
Company, BSE or such other Restricted Subsidiary, as the case may be, and has
been duly authorized by all necessary corporate or limited liability company
action on the part of the board of directors or management (no action on the
part of the stockholders or members of the Company, BSE or any such other
Restricted Subsidiary being required by law, other than such actions which have
been duly taken), of the Company, BSE or such other Restricted Subsidiary.
3.3 Binding Effect.
Each Financing Document to which the Company, BSE or any other Restricted
Subsidiary is a party has been duly executed by the Company, BSE, or such other
Restricted Subsidiary and each Financing Document and the Amended Note Purchase
Agreement, the Security Documents and the BSE Collateral Documents are legal,
valid and binding obligations of the Company, BSE or such other Restricted
Subsidiary, as the case may be, enforceable against the Company, BSE or such
other Restricted Subsidiary in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally, or by general
principles of equity.
3.4 No Conflicts with Agreements, Etc.
Neither the execution and delivery by the Company, BSE or any other Restricted
Subsidiary of any Financing Document to which it is a party, nor the fulfillment
of, or compliance with, the terms and provisions of the Amended Note Purchase
Agreement, the Notes, the Security Documents, or any of the Financing Documents,
will conflict with, or result in a breach or violation of any term, condition or
provision of, or constitute a default under, or result in the creation of any
Lien on any Property of the Company, BSE or such other Restricted Subsidiary
pursuant to its charter or by-laws or operating agreement, or any contract,
agreement, mortgage, indenture, lease or instrument to which it is a party or by
which it is bound or to which it or any of its Property is subject, or any
order, statute, law, rule or regulation to which it or any of its Property is
subject.
3.5 Consents, Etc.
No consent, approval or authorization of, or declaration, registration or filing
(except as contemplated under Section 4) with, any Governmental Authority or any
nongovernmental Person, including, without limitation, any creditor (other than
the 1995 Noteholders, the Banks, the L/C Issuer, the Owner Trustee and the
Indenture Trustee), or any stockholder or member of the Company, BSE or any
other Restricted Subsidiary, is required in connection with the execution or
delivery by the Company, BSE or any other Restricted Subsidiary of any Financing
Document to which it is a party or the performance by the Company, BSE or such
other Restricted Subsidiary of its obligations under any Financing Document, or
as a condition to the legality, validity or enforceability of any such Financing
Document, except, in each case, those which have been obtained or which are
contemplated by the Transaction Documents.
3.6 Full Disclosure.
The financial statements and other written statements, certificates and
materials provided to the Noteholders pursuant to the Existing Note Purchase
Agreement and the written statements, certificates and materials furnished by or
on behalf of the Company to you in connection with this Agreement and the
transactions contemplated hereby do not 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. Except as disclosed (i) in the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1999, (ii) in the other reports filed by the
Company with the Securities and Exchange Commission after June 30, 1999, (iii)
in press releases issued by the Company prior to the date hereof, or (iv) to you
or Nightingale Associates, LLC in writing, there is no fact known to the Company
which materially affects adversely or, so far as the Company can now reasonably
foresee, will materially affect adversely the business, prospects, profits,
Properties or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or the ability of each of the Company, BSE and
each other Restricted Subsidiary to perform its obligations set forth in the
Financing Documents to which it is a party or, in the case of the Company, the
Amended Note Purchase Agreement or the Notes. The financial statements included
in the reports referred to in clauses (i) and (ii) of the preceding sentence
fairly present, in all material respects, the financial condition and results of
operations of the Company and its Subsidiaries as of the dates thereof and for
the periods covered thereby in accordance with generally accepted accounting
principles.
3.7 Outstanding Debt and Liens.
Schedule 3 hereto sets forth a correct and complete schedule and brief
description of all Debt of the Company and the Subsidiaries outstanding on the
Effective Date and all consensual Liens securing such Debt. There are no Liens
on any of the Property of the Company or any Restricted Subsidiary except Liens
permitted by Section 8.17(a) of the Amended Note Purchase Agreement.
3.8 Pending Litigation.
There are no proceedings, actions or investigations pending or, to the knowledge
of the Company, threatened against or affecting the Company, BSE or any other
Subsidiary in any court or before any Governmental Authority or arbitration
board or tribunal (a) challenging, or in any way dealing with, the legality,
validity or enforceability of any Financing Document, the Amended Note Purchase
Agreement or the Notes or the authority of the Company, BSE or any other
Restricted Subsidiary to enter into or execute any Financing Document, the
Amended Note Purchase Agreement or the Notes, or (b) except as disclosed (i) in
the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1999, (ii) in the other reports filed by the Company with the Securities and
Exchange Commission after June 30, 1999, (iii) in press releases issued by the
Company prior to the Effective Date, or (iv) to you or Nightingale Associates,
LLC in writing, that, in the aggregate for all such proceedings, actions and
investigations, could reasonably be expected to have a Material Adverse Effect
or a BSE Material Adverse Effect.
3.9 No Defaults.
No event has occurred and is continuing and no condition exists which, upon
execution and delivery of this Agreement (and after giving effect to any waivers
and amendments that have become effective on or before the date hereof) and the
other Transaction Documents, would constitute a Default or Event of Default.
Neither the Company nor BSE nor any other Subsidiary is in violation in any
respect of any term of any charter instrument or by-law or limited liability
company agreement and neither the Company nor BSE nor any other Subsidiary is in
default in the payment of principal or interest on any Debt or in default under
any instrument or instruments or agreements under and subject to which any Debt
has been issued and no event has occurred and is continuing under the provisions
of any such instrument or agreement which with the lapse of time or the giving
of notice, or both, would constitute a default or an event of default
thereunder, which individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect or a BSE Material Adverse Effect.
3.10 Compliance with Law.
Neither the Company nor BSE nor any other Subsidiary is in violation of any law,
ordinance, governmental rule or regulation to which it is subject, except for
such violations that, in the aggregate, could not reasonably be expected to have
a Material Adverse Effect or a BSE Material Adverse Effect.
3.11 Title to Properties.
(a) Each of the Company and BSE and the other Subsidiaries has good and
marketable title to all real Property, and good title to all of the other
Property, reflected in the most recent balance sheet delivered pursuant to
Section 9.1 of the Existing Note Purchase Agreement (except as sold or
otherwise disposed of in the ordinary course of business), except for such
failures to have such good and marketable title as are immaterial to such
financial statements and that, in the aggregate for all such failures,
could not reasonably be expected to have a Material Adverse Effect or a BSE
Material Adverse Effect. All such Property is free from Liens not permitted
by Section 8.17(a) of the Amended Note Purchase Agreement.
(b) Upon execution and delivery of this Agreement and the other Transaction
Documents, each lease of real Property in the name or for the benefit of
the Company or BSE or any Subsidiary is valid and subsisting and in full
force and effect and good standing, except for such failures to be valid
and subsisting and in full force and effect and good standing that, in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect or a BSE Material Adverse Effect.
(c) Each of the Company and BSE and the Subsidiaries owns, possesses or has
the right to use all of the patents, trademarks, service marks, trade
names, copyrights and licenses, and rights with respect thereto, necessary
for the present and currently planned future conduct of its business,
without any known conflict with the rights of others, except for such
failures to own, possess, or have the right to use, that, in the aggregate
for all such failures, could not reasonably be expected to have a Material
Adverse Effect or a BSE Material Adverse Effect.
3.12 Environmental Compliance.
Except as disclosed (i) in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1999, (ii) in the other reports filed by the Company
with the Securities and Exchange Commission after June 30, 1999, (iii) in press
releases issued by the Company prior to the Effective Date, or (iv) to the
Noteholders or Nightingale Associates, LLC in writing:
(a) Compliance -- each of the Company and BSE and the Subsidiaries is in
compliance with all Environmental Protection Laws in effect in each
jurisdiction where it is presently doing business, and in which the failure
so to comply could be reasonably expected to have a Material Adverse Effect
or a BSE Material Adverse Effect;
(b) Liability -- neither the Company nor BSE nor any of the Subsidiaries is
subject to any liability under any Environmental Protection Laws that, in
the aggregate, could reasonably be expected to have a Material Adverse
Effect or a BSE Material Adverse Effect; and
(c) Notices -- neither the Company nor BSE nor any Subsidiary has received
any
(i) notice from any Governmental Authority by which any of its present
or previously-owned or leased real Properties has been designated,
listed, or identified in any manner by any Governmental Authority
charged with administering or enforcing any Environmental Protection
Law as a Hazardous Substance disposal or removal site, "Super Fund"
clean-up site, or candidate for removal or closure pursuant to any
Environmental Protection Law,
(ii) notice of any Lien arising under or in connection with any
Environmental Protection Law that has attached to any revenues of, or
to, any of its owned or leased real Properties, or
(iii) summons, citation, notice, directive, letter, or other
communication, written or oral, from any Governmental Authority
concerning any intentional or unintentional action or omission by the
Company or such Subsidiary in connection with its ownership or leasing
of any real Property resulting in the releasing, spilling, leaking,
pumping, pouring, emitting, emptying, dumping, or otherwise disposing
of any Hazardous Substance into the environment resulting in any
material violation of any Environmental Protection Law, in each case
where the effect of the matters that are the subject of any such
notice, summons, citation, directive, letter or other communication
could reasonably be expected to have a Material Adverse Effect or a
BSE Material Adverse Effect.
3.13 Restrictions on Company and Subsidiaries.
Neither the Company nor BSE nor any other Subsidiary:
(a) except as set forth in Schedule 3 hereto, is a party to any
contract or agreement, or subject to any charter or other corporate or
limited liability company restriction that, in the aggregate for all
such contracts, agreements, charter and corporate and limited
liability company restrictions, could reasonably be expected to have a
Material Adverse Effect or a BSE Material Adverse Effect;
(b) is a party to any contract or agreement that restricts the right
or ability of such corporation to incur Debt, other than the Amended
Note Purchase Agreement, the 1995 Amended Note Purchase Agreement, the
Amended Credit Agreement, any other Transaction Document and the
agreements listed in Schedule 3 hereto, the terms of none of which is
violated by the execution and delivery by the Company or BSE or any
other Restricted Subsidiary of the Financing Documents to which it is
a party, or compliance by the Company or BSE or any other Restricted
Subsidiary with the Financing Documents to which it is a party or, in
the case of the Company, the Amended Note Purchase Agreement and the
Notes or, in the case of BSE, the BSE Collateral Documents; and
(c) has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its Property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted
by Section 8.17(a) of the Amended Note Purchase Agreement.
3.14 Collateral.
(a) Collateral Documents.
(i) BSE Mortgages. Each Mortgage included in the BSE Collateral
Documents creates a valid Lien upon the grantor's right, title
and interest in the real property and interests described therein
in favor of the Collateral Agent, and when such document has been
recorded as indicated on Schedule 3 and all appropriate recording
fees and taxes have been paid, such Lien shall be a perfected
first priority Lien subject to no other Liens except to the
extent permitted by Section 8.17(a) of the Amended Note Purchase
Agreement;
(ii) BSE Security Agreement. The Security Agreement included in
the BSE Collateral Documents creates a valid Lien in and to the
Collateral (as defined in such Security Agreement) in favor of
the Collateral Agent, and when all UCC-1 financing statements
required by such Security Agreement to be filed with public
recording offices have been so filed, and all taxes, recording
fees and other fees and charges required by applicable law to be
paid in connection therewith have been duly paid in full, such
Lien shall be a perfected, first priority Lien on the Collateral
of a type which may be perfected by the filing of a UCC financing
statement or by possession, subject to no Liens except to the
extent permitted by Section 8.17(a) of the Amended Note Purchase
Agreement;
(b) Warranties and Representations True. All warranties and representations
made by BSE in each of the BSE Collateral Documents are true and correct as
of the date hereof.
3.15 Solvency.
After giving effect to the transactions contemplated by the Transaction
Documents, (a) the fair value and the fair salable value of the assets of the
Company and BSE and each other Restricted Subsidiary (excluding any Debt due
from the Company, BSE or such other Restricted Subsidiary, as the case may be)
will each be in excess of the fair valuation of its total liabilities (including
all contingent liabilities), (b) the Company and BSE and each other Restricted
Subsidiary will each be able to pay its debts or other obligations in the
ordinary course as they mature, and (c) the Company and BSE and each other
Restricted Subsidiary each has capital not unreasonably small to carry on its
business and all business in which it proposes to be engaged.
4. AMENDMENTS
Effective on the Effective Date, the Existing Note Purchase Agreement is amended
as follows:
4.1 Disposition Prepayment.
The words "such amounts shall be distributed" are deleted from the seventh line
of Section 5.2(d) and the words "such amounts shall, except as otherwise
expressly provided in Section 4.9 of the Intercreditor Agreement, be
distributed" are substituted therefor.
4.2 Equity Issuance Prepayments.
The first sentence of Section 5.2(e) is deleted and the following sentence is
substituted therefor: In the event of any Equity Issuance by the Company other
than a Special Equity Issuance, all of the Net Proceeds of such Equity Issuance
shall be promptly paid over to the Collateral Agent for distribution as provided
in Section 4.1(b) of the Intercreditor Agreement.
4.3 Change of Control.
The following sentence is inserted at the end of subsection (a) of Section 6.1:
Notwithstanding any other provision of this subsection (a), all references in
this subsection (a) to a "Change in Control" shall refer only to a Change in
Control that occurs after December 31, 1999.
4.4 Fixed Charge Coverage Ratio.
Section 8.11 is deleted and the following Section 8.11 is substituted therefor:
8.11. Fixed Charge Coverage Ratio.
(a) Prior to Satisfaction of Cleveland Cessation Condition.
The Company will not permit the Fixed Charge Coverage Ratio for any
Applicable Fixed Charge Period specified in the following table to be
less than or equal to the ratio corresponding to such period in the
table, provided that this paragraph shall be in effect with respect to
an Applicable Fixed Charge Period ending at the end of a particular
fiscal quarter only if, on the last day of such fiscal quarter, the
Cleveland Cessation Condition has not been satisfied.
--------------------------------------- ----------------------------------
Applicable Fixed Charge Period Ending Minimum Ratio
--------------------------------------- ----------------------------------
March 31, 2000 0.35 to 1.00
--------------------------------------- ----------------------------------
June 30, 2000 1.05 to 1.00
--------------------------------------- ----------------------------------
September 30, 2000 1.11 to 1.00
--------------------------------------- ----------------------------------
December 31, 2000 1.17 to 1.00
--------------------------------------- ----------------------------------
March 31, 2001 1.15 to 1.00
--------------------------------------- ----------------------------------
June 30, 2001 1.25 to 1.00
--------------------------------------- ----------------------------------
September 30, 2001 1.31 to 1.00
--------------------------------------- ----------------------------------
December 31, 2001 1.02 to 1.00
--------------------------------------- ----------------------------------
March 31, 2002 1.07 to 1.00
--------------------------------------- ----------------------------------
June 30, 2002 1.13 to 1.00
--------------------------------------- ----------------------------------
September 30, 2002 1.17 to 1.00
--------------------------------------- ----------------------------------
December 31, 2002 0.71 to 1.00
--------------------------------------- ----------------------------------
March 31, 2003 and thereafter 25 to 1.00
--------------------------------------- ----------------------------------
(b) After Satisfaction of Cleveland Cessation Condition. The Company
will not permit the Fixed Charge Coverage Ratio for any Applicable Fixed Charge
Period specified in the following table to be less than or equal to the ratio
corresponding to such period in the table, provided that this paragraph shall be
in effect with respect to an Applicable Fixed Charge Period ending at the end of
a particular fiscal quarter only if, on the last day of such fiscal quarter, the
Cleveland Cessation Condition has been satisfied.
--------------------------------------- ----------------------------------
Applicable Fixed Charge Period Ending Minimum Ratio
--------------------------------------- ----------------------------------
June 30, 2000 1.05 to 1.00
--------------------------------------- ----------------------------------
September 30, 2000 1.11 to 1.00
--------------------------------------- ----------------------------------
December 31, 2000 1.14 to 1.00
--------------------------------------- ----------------------------------
March 31, 2001 1.09 to 1.00
--------------------------------------- ----------------------------------
June 30, 2001 1.17 to 1.00
--------------------------------------- ----------------------------------
September 30, 2001 1.20 to 1.00
--------------------------------------- ----------------------------------
December 31, 2001 0.93 to 1.00
--------------------------------------- ----------------------------------
March 31, 2002 0.98 to 1.00
--------------------------------------- ----------------------------------
June 30, 2002 1.04 to 1.00
--------------------------------------- ----------------------------------
September 30, 2002 1.08 to 1.00
--------------------------------------- ----------------------------------
December 31, 2002 0.66 to 1.00
--------------------------------------- ----------------------------------
March 31, 2003 and thereafter 1.25 to 1.00
--------------------------------------- ----------------------------------
For the purposes of this Section 8.11, the "Applicable Fixed Charge
Period" means (a) with respect to the calculation of the Fixed Charge Coverage
Ratio for the fiscal quarters ended March 31, 2000, June 30, 2000, and March 31,
2003, the fiscal quarter then ended; (b) with respect to the calculation of the
Fixed Charge Coverage Ratio for the fiscal quarters ended September 30, 2000 and
June 30, 2003, the two fiscal quarters then ended; (c) with respect to the
calculation of the Fixed Charge Coverage Ratio for the fiscal quarters ended
December 31, 2000 and September 30, 2003, the three fiscal quarters then ended;
and (d) with respect to the calculation of the Fixed Charge Coverage Ratio at
the end of all other fiscal quarters, the four fiscal quarters then ended.
4.5 Minimum SBQ Division EBITDA.
The following Section 8.12A is inserted after Section 8.12:
8.12A. Minimum SBQ Division EBITDA.
(a) Subject to the provisions of Section 8.12A(b) below, the
Company will not permit the aggregate amount of SBQ Division
EBITDA for any fiscal quarter ending on or after September 30,
2000 to be less than $1.00.
(b) Notwithstanding the foregoing, the terms of the covenant in
this Section 8.12A are subject to the provisions set forth in
a letter agreement dated as of May 15, 2000 among the Company,
the holders of the Notes, the Banks, and certain other
parties.
4.6 Minimum Consolidated EBITDA.
Section 8.12 is deleted and the following Section 8.12 is substituted therefor:
8.12. Minimum Consolidated EBITDA.
(a) Prior to Satisfaction of Cleveland Cessation Condition. The Company
will not permit the aggregate amount of Consolidated EBITDA for any
Applicable EBITDA Period specified in the following table to be less
than the amount corresponding to such period in such table, provided
that this paragraph shall be in effect with respect to an Applicable
EBITDA Period ending at the end of a particular fiscal quarter only if,
on the last day of such fiscal quarter, the Cleveland Cessation
Condition has not been satisfied:
--------------------------------------- ----------------------------------
Applicable EBITDA Period Ending Minimum EBITDA
--------------------------------------- ----------------------------------
March 31, 2000 $3,453,000
--------------------------------------- ----------------------------------
June 30, 2000 $20,935,000
--------------------------------------- ----------------------------------
September 30, 2000 $46,350,000
--------------------------------------- ----------------------------------
December 31, 2000 $63,778,000
--------------------------------------- ----------------------------------
March 31, 2001 $79,625,000
--------------------------------------- ----------------------------------
June 30, 2001 $90,021,000
--------------------------------------- ----------------------------------
September 30, 2001 $94,128,000
--------------------------------------- ----------------------------------
December 31, 2001 $99,417,000
--------------------------------------- ----------------------------------
March 31, 2002 $104,096,000
--------------------------------------- ----------------------------------
June 30, 2002 $108,952,000
--------------------------------------- ----------------------------------
September 30, 2002 $112,636,000
--------------------------------------- ----------------------------------
December 31, 2002 and $116,033,000
Thereafter
--------------------------------------- ----------------------------------
(b) After Satisfaction of Cleveland Cessation Condition. The Company will
not permit the aggregate amount of Consolidated EBITDA for any
Applicable EBITDA Period specified in the following table to be less
than the amount corresponding to such period in such table, provided
that this paragraph shall be in effect with respect to an Applicable
EBITDA Period ending at the end of a particular fiscal quarter only if,
on the last day of such fiscal quarter, the Cleveland Cessation
Condition has been satisfied:
--------------------------------------- ----------------------------------
Applicable EBITDA Period Ending Minimum EBITDA
--------------------------------------- ----------------------------------
March 31, 2000 $3,453,000
--------------------------------------- ----------------------------------
June 30, 2000 $20,935,000
--------------------------------------- ----------------------------------
September 30, 2000 $46,350,000
--------------------------------------- ----------------------------------
December 31, 2000 $63,778,000
--------------------------------------- ----------------------------------
March 31, 2001 $79,625,000
--------------------------------------- ----------------------------------
June 30, 2001 $90,021,000
--------------------------------------- ----------------------------------
September 30, 2001 $94,128, 000
--------------------------------------- ----------------------------------
December 31, 2001 $99,417,000
--------------------------------------- ----------------------------------
March 31, 2002 $104,096,000
--------------------------------------- ----------------------------------
June 30, 2002 $108,952,000
--------------------------------------- ----------------------------------
September 30, 2002 $112,636,000
--------------------------------------- ----------------------------------
December 31, 2002 and Thereafter $116,033,000
--------------------------------------- ----------------------------------
For the purposes of this Section 8.12, the "Applicable EBITDA Period" means (a)
with respect to the calculation of Consolidated EBITDA for the fiscal quarter
ended March 31, 2000, the fiscal quarter ended March 31, 2000; (b) with respect
to the calculation of Consolidated EBITDA for the fiscal quarter ended June 30,
2000, the two fiscal quarters ended June 30, 2000; (c) with respect to the
calculation of Consolidated EBITDA for the fiscal quarter ended September 30,
2000, the three fiscal quarters ended September 30, 2000; (d) with respect to
the calculation of Consolidated EBITDA for each fiscal quarter ended after
September 30, 2000, the four fiscal quarters then ended.
4.7 Minimum Tangible Net Worth.
Section 8.13 is deleted and the following Section 8.13 is substituted therefor:
8.13. Minimum Tangible Net Worth
The Company will not permit Consolidated Tangible Net Worth at any time to be
less than (i) (A) $118,000,000 prior to the satisfaction of the Cleveland
Cessation Condition, and (B) $104,000,000 after the satisfaction of the
Cleveland Cessation Condition, plus (ii) fifty percent (50%) of Adjusted Net
Income (only if greater than Zero Dollars ($0)) of the Company and its
Subsidiaries on a consolidated basis for each fiscal quarter of the Company
ending after December 31, 1999, minus (iii) the sum of the amounts by which
Consolidated Tangible Net Worth was reduced (i.e. the amount by which
stockholders' equity was reduced) after December 31, 1999 by any TNW Adjustment
plus (iv) all of the Net Proceeds from each Equity Issuance by the Company after
December 31, 1999.
4.8 Capital Expenditures.
Section 8.14 is deleted and the following Section 8.14 is substituted
therefor:
8.14. Capital Expenditures.
The Company will not permit the aggregate amount of Capital Expenditures of the
Company and the Restricted Subsidiaries to be greater than: (i) Forty Million
Dollars ($40,000,000) during the Company's fiscal year ending June 30, 2000;
(ii) Forty Million Dollars ($40,000,000) during the Company's fiscal year ending
June 30, 2001; and (iii) Twenty-Five Million Dollars ($25,000,000) during the
Company's fiscal year ending June 30, 2002. If there is a shut-down and
discontinuance of operations of American Steel & Wire, Inc.'s facility in
Cleveland, Ohio, the Company thereafter will not make, or permit any of the
Restricted Subsidiaries to make, any Capital Expenditures with respect to such
facility, except that the Company may expend up to $500,000 to the extent that
such expenditures are necessary in connection with the shut down or sale of such
facility. To the extent that the aggregate amount of Capital Expenditures of the
Company and the Restricted Subsidiaries during a fiscal year is less than the
amount that is permitted by the first sentence of this Section 8.14 (the result
of such permitted amount minus the actual amount of Capital Expenditures during
a fiscal year being the "Unused Amount of Capital Expenditures" with respect to
such fiscal year), the aggregate amount of Capital Expenditures that may be made
by the Company and the Restricted Subsidiaries during the next succeeding fiscal
year of the Company will be the sum of the amount permitted by clause (ii) or
(iii) of this Section 8.14, as applicable, plus the Unused Amount of Capital
Expenditures with respect to the previous fiscal year.
4.9 Debt.
Clause (h) of Section 8.16 is redesignated as clause (i); the reference in such
redesignated clause (i) to clause (g) of Section 8.16 is changed so as to refer
to clause (h); the word "and" is deleted at the end of clause (g); and the
following clause (h) is inserted after clause (g) of Section 8.16:
(h) Debt that consists of the New BSE Loan and a Guaranty of the New
BSE Loan; and
4.10 AIR Dispute Settlement.
The following Section 8.25 is inserted after Section 8.24:
8.25. AIR Dispute Settlement.
The Company will not enter into or agree to any AIR Dispute Settlement
without the prior written consent of the Majority Holders.
4.11 Additional Cross Default.
The word "or" is deleted from the end of clause (j) of Section 10.1; "; or" is
added to the end of clause (k); and the following clause (l) is added to the end
of Section 10.1:
(l) Other Cross Defaults. Any of the following shall have occurred and
be continuing: (i) an "Event of Default" under and as defined in that certain
Indenture of Trust dated as of December 1, 1998 by and between Development
Authority of Bartow County and Sun Trust Bank, Atlanta, as Trustee, relating to
certain property of BSE; (ii) a "Default" under and as defined in that certain
Equipment Lease Agreement dated as of December 31, 1998 by and among the Company
and BSE, as lessees, and Banc of America Leasing & Capital, LLC, as lessor;
(iii) a "Default" under and as defined in that certain Equipment Lease Agreement
dated as of June 29, 1999 by and among the Company and BSE, as lessees, and
First Security National Bank Association, as Owner Trustee, as lessor; or (iv) a
"Lease Event of Default" under and as defined in that certain Equipment Lease
Agreement dated as of September 30, 1997 by and between Chase Manhattan Trust
Company, National Association, as Owner Trustee, as Lessor, and the Company, as
Lessee.
4.12 New Definitions.
The following definitions are inserted in Section 11.1 in alphabetical order:
Adjusted Net Income -- means, for any period, the sum of (i) the net
income of the Company and its Subsidiaries as shown in the financial statements
for the Company and its Subsidiaries for such period prepared in accordance with
GAAP and (ii) any TNW Adjustment with respect to such period.
AIR Dispute Settlement -- means an agreement or arrangement pursuant to which
the Company's obligations with respect to its membership interest in AIR, the
purchase of goods from AIR, or the indebtedness of AIR is compromised, settled,
amended or paid.
Applicable EBITDA Period -- Section 8.12.
BSE Collateral Documents -- means the documents listed on Schedule 1.2A hereto,
pursuant to which BSE has granted Liens upon assets of BSE as collateral for the
New BSE Loan, the other Secured Obligations (as defined in the Intercreditor
Agreement), and/or indebtedness owed by BSE to the Company, all of which
indebtedness owed by BSE to the Company has been assigned to the Collateral
Agent as additional collateral for the Secured Obligations.
BSE Credit Agreement -- has the meaning set forth in the definition of New BSE
Loan in this Section 11.1.
Claims and Expenses -- Section 12.9.
Cleveland Cessation Condition -- means, in order to be satisfied as of any date,
that the Company (a) has shut down and discontinued operations at American Steel
& Wire, Inc.'s facility in Cleveland, (b) has completed the sale of American
Steel & Wire, Inc.'s Cleveland facility to a Person that is not a Subsidiary or
Affiliate of the Company, with no continuing interest in the profits, losses or
value of the Cleveland facility and no continuing obligations with respect to
its operations (other than by virtue of representations, warranties and
indemnity obligations customary in such transactions), or (c) has completed a
transaction in the nature of a joint venture pursuant to which American Steel &
Wire, Inc.'s Cleveland operations have been transferred, at no cost to the
Company (i.e. no cost to the Company or any Subsidiary or Affiliate of the
Company), to a separate legal entity in which the Company may have an ownership
interest or other profit participation under an arrangement where the Company
has no initial or continuing obligation to contribute capital (other than the
operating assets of the Cleveland facility) or operating or other funds to such
entity (other than by virtue of representations, warranties and indemnity
obligations customary in such transactions) and has no obligation to supply
product to or purchase product from such entity or otherwise guaranty or
purchase any debts or obligations of such entity (other than obligations of such
entity to the holders of the Notes and to the Banks).
Indemnified Party -- Section 12.9.
Indemnity Proceeding -- Section 12.9.
New BSE Loan -- means, the loan of up to $25,000,000 made to BSE pursuant to the
Credit Agreement dated as of the date hereof among BSE, the financial
institutions party thereto, and Bank of America, N.A. as Agent (as may be
amended from time to time, the "BSE Credit Agreement")
New BSE Loan Agent -- means Bank of America, N.A., as agent for itself and the
other New BSE Loan Lenders, and any replacement or successor agent under the BSE
Credit Agreement.
New BSE Loan Lenders -- means the financial institutions listed on the signature
pages of the BSE Credit Agreement and their respective successors and assigns.
SBQ Division EBITDA -- means, for any period, the portion of the Consolidated
EBITDA for such period that is allocable to the Cleveland facility of the SBQ
Division, such allocation to be made in a manner consistent with the Company's
manner of allocation in respect thereof for the fiscal quarter ending on
December 31, 1999 and as set forth in the written material furnished to the
holders of the Notes on or before March 31, 2000.
Special Equity Issuance -- has the meaning specified in the Intercreditor
Agreement (as in effect on the date hereof).
TNW Adjustment -- means, for any period, the net after-tax effect of any of the
following expenses incurred during such period, but only to the extent that any
such expense had been deducted during such period in the calculation of net
income of the Company and its Subsidiaries as shown in the financial statements
for the Company and its Subsidiaries for such period prepared in accordance with
GAAP:
(w) any expense incurred pursuant to severance plans in effect on December 31,
1999 with respect to officers of the Company whose employment by the Company
ended prior to May 15, 2000 (excluding severance payments included in clause (y)
or (z) of Section 8.13), (x) non-cash expenses incurred by the Company in
connection with the shut down and discontinuance of operations, if any, of
American Steel & Wire, Inc.'s Cleveland facility or the shut down and
discontinuance of operations of the Company's Memphis facility, (y) cash
expenses incurred by the Company as a result of, or continuing subsequent to,
the shut down and discontinuance of operations at the Company's Memphis
facility, which are required to be expended by law or contract or are payable
pursuant to severance plans and policies in effect on December 31, 1999,
including any lease payments made after such shut down with respect to such
Memphis facility and (z) cash expenses incurred by the Company as a result of,
or continuing subsequent to, the shut down and discontinuance of operations, if
any, at American Steel & Wire, Inc.'s Cleveland facility which are required to
be expended by law or contract or are payable pursuant to severance plans and
policies in effect on December 31, 1999, including any lease payments made after
such shut down with respect to such Cleveland facility, provided that the amount
deducted pursuant to this clause (z), other than severance payments and ad
valorem property taxes, shall not exceed $500,000 for any individual month.
Unused Amount of Capital Expenditures -- Section 8.14.
4.13 Amended Definitions.
The definitions in Section 11.1 of the following terms are deleted and the
following definitions are substituted therefor:
Consolidated EBITDA - means, for any period, the sum of (a) Consolidated Net
Income for such period, plus (b) the aggregate amount (without duplication) of
(i) taxes imposed on, or measured by, income or excess profits, (ii)
Consolidated Interest Expense, (iii) depreciation and amortization for such
period, (iv) any expense incurred pursuant to severance plans in effect on
December 31, 1999 with respect to officers of the Company whose employment by
the Company ended prior to May 15, 2000 (excluding severance payments included
in clause (ix) below in this definition), (v) any costs attributable to the
issuance by the Company of warrants in connection with the execution of the BSE
Credit Agreement (including amortization of debt issuance costs relating to the
issuance of such Warrants), (vi) amortization of debt expense, (vii) any amount
included in Consolidated Net Income that is allocable to a minority interest
owned in a Restricted Subsidiary by a Person that is not a Subsidiary, (viii)
non-cash expenses incurred by the Company in connection with the shut down and
discontinuance of operations, if any, at American Steel & Wire, Inc.'s Cleveland
facility or the shut down and discontinuance of operations of the Company's
Memphis facility, and (ix) cash expenses incurred by the Company as a result of,
or continuing subsequent to, the shut down and discontinuance of operations at
the Company's Memphis facility or the shut down and discontinuance of
operations, if any, at American Steel & Wire Inc.'s Cleveland facility which are
required to be expended by law or contract or are payable pursuant to severance
plans and policies in effect on December 31, 1999, including any lease payments
made with respect to such Cleveland facility or Memphis facility after such shut
down, provided that the amount added back pursuant to this clause (ix) with
respect to American Steel & Wire, Inc.'s Cleveland facility, other than
severance payments and ad valorem property taxes, shall not exceed $500,000 in
any individual month (to the extent, and only to the extent, that any such
amount in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) or (ix) was
deducted in the computation of Consolidated Net Income for such period), in each
case accrued for such period by the Company and the Restricted Subsidiaries,
determined on a consolidated basis for such Persons.
Consolidated EBITDAR - means, for any period, the sum of (a)
Consolidated EBITDA for such period, plus (b) Rental Expense for such period (to
the extent, and only to the extent, deducted in the computation of Consolidated
Net Income for such period and excluding any Rental Expense that was added back
in the calculation of such Consolidated EBITDA).
Consolidated Interest Expense - means, for any period, all interest
charges for such period accrued on or with respect to Debt of the Company and
the Restricted Subsidiaries (including, without limitation, amortization of debt
discount and imputed interest on Capitalized Lease obligations, but excluding
amortization of debt issuance costs relating to the issuance of the warrants
referred to in clause (v) of the definition of Consolidated EBITDA and
amortization of debt expense).
Intercreditor Agreement - means
(a) that certain Amended and Restated Collateral Agency and
Intercreditor Agreement dated as of the date hereof, among SouthTrust
Bank, National Association (as successor Collateral Agent to State
Street Bank and Trust Company), the Agent under the Credit Agreement,
the Banks, the L/C Issuers, the holders of the 1995 Notes, the holders
of the Notes, The Chase Manhattan Trust Company, National Association,
as successor to PNC Bank, National Association, as successor to PNC
Bank, Kentucky, Inc., in the capacity specified therein, First Union
National Bank, in the capacity specified therein, the Company and each
of the Restricted Subsidiaries identified on the signature pages
thereto, which agreement amends and restates an agreement initially
dated as of October 12, 1999, and/or
(b) that certain Collateral Agency and Intercreditor Agreement
dated as of the date hereof, among SouthTrust Bank, National
Association, the Agent under the Credit Agreement, the Banks, the L/C
Issuers, the holders of the 1995 Notes, the holders of the Notes, The
Chase Manhattan Trust Company, National Association, as successor to
PNC Bank, National Association, as successor to PNC Bank, Kentucky,
Inc., in the capacity specified therein, First Union National Bank, in
the capacity specified therein, the Company and each of the Restricted
Subsidiaries identified on the signature pages thereto, which agreement
amends and restates an agreement initially dated as of November 12,
1999,
in each case as amended, restated or otherwise modified from time to time. So
long as both such agreements shall remain in effect, the term "Intercreditor
Agreement" shall be deemed to be a collective reference to both such agreements.
If at any time only one of such agreements shall be in effect, the term
"Intercreditor Agreement" shall be deemed to be a reference to such agreement.
Restricted Subsidiary - means, at any time, a Subsidiary
(a) organized under the laws of the United States, Puerto Rico or
Canada or a jurisdiction thereof at such time,
(b) that conducts substantially all of its business and has
substantially all of its Property within the United States, Puerto Rico and
Canada at such time, and
(c) at least eighty percent (80%) (by number of votes) of each class
of Voting Stock of which and one hundred percent (100%) of all other equity
Securities of which are legally and beneficially owned by the Company and
its Wholly-Owned Restricted Subsidiaries at such time.
Subsidiary - means, at any time, a corporation, partnership, limited liability
company or other business entity of which the Company owns, directly or
indirectly, more than 50% (by number of votes) of each class of Voting Stock at
such time.
Voting Stock - means capital stock (or equivalent ownership interest) of any
class or classes of a corporation, partnership, limited liability company or
other business entity, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect corporate directors, managers or trustees (or
Persons performing similar functions).
4.14 Further Amendment of Definitions. The definition of Consolidated
Net Income is amended by deleting the text of clause (h) therefrom and
substituting "Intentionally Deleted" therefor.
4.15 Indemnification.
The following Section 12.9 is inserted after Section 12.8:
12.9. Indemnification.
(a) The Company shall and hereby agrees to indemnify, defend and hold
harmless each holder of Notes, the Collateral Agent and their respective
directors, trustees, officers, shareholders, agents, employees and counsel
(each referred to herein as an "Indemnified Party") from and against any
and all losses, claims, damages, liabilities, deficiencies, judgments or
expenses of every kind and nature (including, without limitation, amounts
paid in settlement, court costs and the fees and disbursements of counsel
incurred in connection with any litigation, investigation, claim or
proceeding or any advice rendered in connection therewith) (the foregoing
items referred to herein as "Claims and Expenses") incurred by an
Indemnified Party arising out of or by reason of any suit, cause of action,
claim, arbitration, investigation or settlement, consent decree or other
proceeding (the foregoing referred to herein as an "Indemnity Proceeding")
which arise out of, or are in any way related directly or indirectly to:
(i) this Agreement, any other Note Purchase Agreement, any of the other
Financing Documents, or the transactions contemplated thereby; (ii) the
purchase of Notes under any of the Note Purchase Agreements; (iii) any
actual or proposed use by the Company of the proceeds of the Notes; (iv)
the holders of the Notes having entered into this Agreement and the other
Note Purchase Agreements; (v) the fact that the holders of the Notes are
creditors of the Company and have or are alleged to have information
regarding the financial condition, strategic plans or business operations
of the Company and the Subsidiaries; (vi) the fact that the holders of the
Notes are material creditors of the Company and are alleged to influence
directly or indirectly the business decisions or affairs of the Company and
the Subsidiaries or their financial condition; (vii) the exercise of any
right or remedy the holders of the Notes or the Collateral Agent may have
under this Agreement, the other Note Purchase Agreements, or the other
Financing Documents; provided, however, that the Company shall not be
obligated to indemnify any Indemnified Party for any acts or omissions of
such Indemnified Party in connection with matters described in this
subparagraph (vii) that constitute gross negligence or willful misconduct;
(viii) any violation or non-compliance by the Company or any Subsidiary of
any law or regulation (including any Environmental Protection Law)
including, but not limited to, any Indemnity Proceeding commenced by (A)
the Internal Revenue Service or a state taxing authority or (B) any
Governmental Authority or other Person under any Environmental Protection
Law, including any Indemnity Proceeding commenced by a Governmental
Authority or other Person seeking remedial or other action to cause the
Company or its Subsidiaries (or its respective properties) (or the holders
of the Notes or Collateral Agent (or their respective nominees) as
successors to the Company) to be in compliance with such Environmental
Protection Laws.
(b) This indemnification shall apply to all Indemnity Proceedings arising
out of, or related to, the foregoing whether or not an Indemnified Party is
a named party in such Indemnity Proceeding. In this connection, this
indemnification shall cover all costs and expenses of any Indemnified Party
in connection with any deposition of any Indemnified Party or compliance
with any subpoena (including any subpoena requesting the production of
documents). This indemnification shall, among other things, apply to any
Indemnity Proceeding commenced by other creditors of the Company or any
Subsidiary, any shareholder of the Company or any Subsidiary (whether such
shareholder(s) are prosecuting such Indemnity Proceeding in their
individual capacity or derivatively on behalf of the Company), any account
debtor of the Company or any Subsidiary or by any Governmental Authority.
(c) This indemnification shall apply to any Indemnity Proceeding arising
during the pendency of any bankruptcy proceeding filed by or against the
Company and/or any Subsidiary.
(d) An Indemnified Party may conduct its own investigation and defense of,
and may formulate its own strategy with respect to, any Indemnity
Proceeding covered by this Section and, as provided above, all costs and
expenses incurred by the Indemnified Party shall be reimbursed by the
Company if (i) such investigation and defense has been specifically
authorized in writing by the Company, or (ii) the named parties to any
Indemnity Proceeding (including any impleaded parties) include both the
Company and such Indemnified Party and representation of both the Company
and such Indemnity Party by the same counsel would be inappropriate due to
actual or potential conflicts of interests. No action taken by legal
counsel chosen by an Indemnified Party in investigating or defending
against any such Indemnity Proceeding shall vitiate or in any way impair
the obligations and duties of the Company hereunder to indemnify and hold
harmless each such Indemnified Party; provided, however, that (i) if the
Company is required to indemnify an Indemnified Party pursuant hereto and
(ii) the Company has provided evidence reasonably satisfactory to such
Indemnified Party that the Company has the financial wherewithal to
reimburse such Indemnified Party for any amount paid by such Indemnified
Party with respect to such Indemnity Proceeding, such Indemnified Party
shall not settle or compromise any such Indemnity Proceeding without the
prior written consent of the Company (which consent shall not be
unreasonably withheld or delayed).
(e) If and to the extent that the obligations of the Company hereunder are
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
(f) Subject to the immediately following subsection (g), the Company's
obligations hereunder shall survive any termination of this Agreement and
the other Financing Documents and the payment in full of the Notes, and are
in addition to, and not in substitution of, any other of their obligations
set forth in this Agreement or any other Financing Document to which it is
a party.
(g) Notwithstanding the foregoing, the Company shall have no obligation to
any Indemnified Party under the provisions of this Section with respect to
Claims and Expenses incurred or arising after the date (the "Cutoff Date")
five years following the indefeasible payment in full of all of the Notes
and the termination of this Agreement and the other Financing Documents in
accordance with their terms; provided, however, the foregoing limitation
shall not apply to Claims and Expenses (i) in respect of which an
Indemnified Party has specifically made written demand for indemnification
under this Section prior to the Cutoff Date or (ii) relating to alleged
criminal acts of the Company, any Subsidiary, or any of their respective
officers, directors, employees and agents or claims that the Company or any
of its Subsidiaries (x) did not have the power and authority to enter into
and perform their obligations under the Financing Documents or (y) acted
wrongfully in entering into and performing their obligations under the
Financing Documents.
4.16 Attachment of Schedule 1.2A to Existing Note Purchase Agreement.
Schedule 1.2A attached hereto is hereby attached to the Existing Note
Purchase Agreement as Schedule 1.2A.
4.17 Pending Litigation.
The words "Except as otherwise disclosed in writing to the holders of
the Notes on or before May 15, 2000," are added to the beginning of Section 2.4.
5. CONDITIONS PRECEDENT
The grant of collateral pursuant to the BSE Collateral Documents will be
effective at the times that fully executed counterparts of the respective BSE
Collateral Documents are delivered to the grantee of the collateral. Any
warrants delivered pursuant to the BSE Credit Agreement will be effective when
they are delivered to the holders thereof (or to their special counsel). The
amendments set forth in Sections 2.1, 2.2 and 4 shall become effective upon the
satisfaction of the following conditions (the date of such effectiveness is
herein referred to as the "Effective Date"):
5.1 Certificates.
(a) Company Officer's Certificate. The Company shall have delivered to
the Noteholders (or their special counsel) a certificate signed by the
Chairman, the Vice Chairman, the President or the Executive Vice
President-Chief Financial Officer of the Company, dated the Effective Date,
certifying that (i) no Default or Event of Default under the Amended Note
Purchase Agreement exists and (ii) the representations and warranties set
forth in Section 3 (including those incorporated by reference from the 1999
Third Amendment and the BSE Credit Agreement) and in each of the other
Financing Documents are true and correct on the Effective Date.
(b) Company Secretary's Certificate. The Company shall have delivered
to the Noteholders a certificate signed by the Secretary or one of the
Assistant Secretaries of the Company, dated the Effective Date, certifying
as true and correct copies of the Company's charter and by-laws and the
resolutions attached thereto and other corporate proceedings relating to
the authorization, execution and delivery of each of the Financing
Documents to which the Company is a party.
(c) Subsidiary and BSE Secretary's Certificates. BSE and each other
Restricted Subsidiary entering into one or more of the Financing Documents
shall have delivered to the Noteholders a certificate signed by the
Secretary or one of the Assistant Secretaries of BSE or such other
Restricted Subsidiary, dated the Effective Date, certifying as true and
correct (with respect to Restricted Subsidiaries other than BSE) copies of
such Restricted Subsidiary's charter and by-laws and the resolutions
attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Financing Documents to which
such Restricted Subsidiary is a party and, with respect to BSE, certifying
as true and correct copies of BSE's operating agreement and the proceedings
taken by it relating to the authorization, execution and delivery of the
Financing Documents to which it is a party.
5.2 Opinions of Counsel.
The Noteholders shall have received opinions from:
(a) Balch & Bingham LLP and Burr & Forman LLP, special
counsel for the Company, BSE and the other Restricted
Subsidiaries, and
(b) special local counsel for the Company, BSE and the other
Restricted Subsidiaries, as applicable, in the States of Georgia,
Mississippi, and New York,
each dated as of the Effective Date, substantially in the respective forms set
forth in Exhibit A1 and Exhibit A2, and as to such other matters as the
Noteholders may reasonably request. The Noteholders also shall have received an
opinion from Bingham Dana LLP, special counsel for the Noteholders, in form and
substance satisfactory to the Noteholders.
5.3 Amendment to 1995 Agreement.
The Company and the 1995 Noteholders shall have delivered to the Noteholders (or
their special counsel) a true and correct counterpart of the fully executed
Amendment to 1995 Agreement.
5.4 Seventh Amendment to Credit Agreement.
The Company, the Banks and the Agent shall have delivered to the Noteholders (or
their special counsel) a true and correct counterpart of the fully executed
Seventh Amendment to Credit Agreement, which shall be in form and substance
satisfactory to the Noteholders and their special counsel.
5.5 Amendment to Letter of Credit Documents.
The Company shall have delivered to the Noteholders (or their special counsel) a
true and correct counterpart of an Amendment to PNC Reimbursement Agreement,
which shall be in form and substance satisfactory to the Noteholders and their
special counsel.
5.6 Amendment to Intercreditor Agreement.
The Banks, the 1995 Noteholders, the L/C Issuers, SouthTrust Bank, National
Association, the Company, BSE, the Owner Trustee, the Indenture Trustee and each
of the Restricted Subsidiaries identified on the signature pages thereto, shall
have delivered to the Noteholders (or their special counsel) a fully executed
counterpart of the Amended and Restated Collateral Agency and Intercreditor
Agreement, in the form attached hereto as Exhibit B (the "Amended Intercreditor
Agreement").
5.7 Amendment to Memphis Lease Documents.
The Company shall have delivered to the Noteholders (or their special counsel) a
true and correct counterpart of the Waiver and Amendment No. 1 to the Melt Shop
Equipment Financing Documents, which shall be in form and substance satisfactory
to the Noteholders and their special counsel.
5.8 BSE Collateral Documents.
(a) Delivery of Documents. The Company shall have delivered to the
Collateral Agent (or its special counsel) a fully executed counterpart of each
of the BSE Collateral Documents, each duly executed by BSE, together with
assignments to the Collateral Agent from the Company of any of its rights under
such documents with respect to which the Company shall have been granted any
collateral or other rights, each of which documents and assignments shall be in
form acceptable to the Noteholders (or their special counsel). The BSE
Collateral Documents shall include, without limitation, a mortgage and security
agreement pursuant to which BSE grants to the Collateral Agent, as security for
the Secured Obligations, as defined in the Intercreditor Agreement, a mortgage
upon and security interest in BSE's rolling mill and other fixed assets located
in Jackson, Mississippi and all of BSE's accounts receivable, inventory
(wherever located) and general intangibles, all whether now owned or hereafter
acquired.
(b) Perfection of Liens. BSE and the Company shall have executed and
delivered to the Collateral Agent all UCC-1 financing statements as are
necessary to perfect the Liens of the Company in the collateral granted to the
Company which may be perfected by the filing thereof and to evidence the
assignment thereof to the Collateral Agent.
(c) Title Matters. With respect to each of the mortgages or deeds of trust
included in the BSE Collateral Documents, the Company shall have delivered or
caused to be delivered to the Collateral Agent one or more loan policies of
title insurance, or commitments therefor, satisfactory to the Noteholders (or
their special counsel) and showing no exceptions to title except as reasonably
acceptable to the Noteholders (or their special counsel).
(d) Certificates of Insurance. The Company shall have caused BSE to deliver
to the Noteholders (or their special counsel) certificates of insurance
evidencing the insurance required by the BSE Collateral Documents, showing the
Collateral Agent as loss payee (as its interest may appear) thereunder.
(e) Taxes. All taxes, fees and other charges payable in connection with the
execution, delivery, recording, filing and registration of the BSE Collateral
Documents shall have been paid or provision for such payment shall have been
made to the reasonable satisfaction of the Noteholders (or their special
counsel).
5.9 Lien Searches.
The Noteholders (or their special counsel) shall have received Lien searches
showing that the Collateral (as defined in the BSE Collateral Documents) granted
by BSE pursuant to the BSE Collateral Documents is subject to no Liens other
than Liens permitted under Section 8.17(a)` of the Amended Note Purchase
Agreement.
5.10 New BSE Loan.
The BSE Credit Agreement shall have been executed and delivered by each of the
parties thereto and the conditions precedent to BSE receiving its initial loan
thereunder shall have been satisfied.
5.11 Payment of Special Counsel and Financial Advisor Fees.
Without limiting the provisions of Section 6.3, the Company shall have paid on
or before the Effective Date the fees, charges and disbursements of the
Noteholders' special counsel referred to in Section 5.2, and Nightingale &
Associates, LLC, in each case to the extent reflected in statements rendered to
the Company on or prior to the Effective Date.
5.12 Proceedings and Documents Satisfactory.
All opinions, certificates and other instruments and all proceedings taken in
connection with the execution and delivery of this Agreement and the
transactions contemplated hereby shall be reasonably satisfactory to the
Noteholders and their special counsel; and the Noteholders and their special
counsel shall have received copies of such documents and papers as may be
reasonably requested in connection therewith.
6. MISCELLANEOUS
6.1 Effect of Amendment.
If the foregoing is acceptable to you, please note your acceptance in the space
provided below. Upon the execution and delivery of this Agreement by each of the
Noteholders and the Company, the conditions set forth in Section 5 shall be
deemed satisfied or waived and the Existing Note Purchase Agreement shall be
deemed to be amended as set forth above. This Agreement shall be binding upon,
and shall inure to the benefit of, the permitted successors and assigns of the
parties hereto and the holders from time to time of the Notes.
6.2 No Legend Required.
Any and all notices, requests, certificates and other instruments including,
without limitation, the Notes, may refer to the Note Purchase Agreement or the
Note Purchase Agreement, in each case dated as of September 1, 1993 or as of
October 12, 1999, without making specific reference to this Second Amendment to
Note Purchase Agreement, but nevertheless all such references shall be deemed to
include this Second Amendment to Note Purchase Agreement unless the context
shall otherwise require.
6.3 Fees and Expenses.
Whether or not the transactions herein contemplated shall be consummated, the
Company agrees to pay directly all reasonable out-of-pocket travel expenses and
other reasonable out-of-pocket expenses of the Noteholders in connection with
the preparation, negotiation, execution and delivery of the Financing Documents
and the Amended Note Purchase Agreement, and the transactions contemplated
hereby and thereby, including, but not limited to, the reasonable fees and
disbursements of Bingham Dana LLP, the Noteholders' special counsel, and
Nightingale & Associates, LLC, financial advisor to the Noteholders and the 1995
Noteholders, photocopying costs, and so long as any Noteholder shall hold any of
the Notes, all such expenses relating to any amendments, waivers or consents
pursuant to the provisions of the Amended Note Purchase Agreement, including,
without limitation, any amendments, waivers or consents resulting from any
work-out, restructuring or similar events relating to the performance by the
Company and the Subsidiaries of their respective obligations under the Financing
Documents, the Amended Note Purchase Agreement and the Notes. The Company also
agrees that it will pay and save each Noteholder harmless against any and all
liability with respect to stamp and other similar taxes, if any, which may be
payable or which may be determined to be payable in connection with the
execution and delivery of the Financing Documents and this Agreement. The
Company agrees to protect and indemnify each Noteholder against any liability
for any and all brokerage fees and commissions payable or claimed to be payable
to any Person retained by the Company, the Restricted Subsidiaries, or any of
the Affiliates that are controlled by the Company in connection with the
transactions contemplated by this Agreement.
6.4 Survival.
All warranties, representations, certifications and covenants made by the
Company in this Agreement or in any certificate or other instrument delivered by
it or on its behalf under this Agreement shall be considered to have been relied
upon by the Noteholders and shall survive the execution of this Agreement,
regardless of any investigation made by or on behalf of the Noteholders. All
statements in any such certificate or other instrument shall constitute
warranties and representations of the Company under this Agreement.
6.5 Duplicate Originals; Execution in Counterpart.
Two or more duplicate originals of this Agreement 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 Agreement may be executed in one or more
counterparts and shall be effective when at least one counterpart shall have
been executed by each party to this Agreement, and each set of counterparts
which, collectively, show execution by each such party to this Agreement shall
constitute one duplicate original.
6.6 Release of Claims.
The Company, for itself and all of its predecessors, successors and assigns,
acknowledges, affirms and represents that immediately prior to giving effect to
this Agreement, it is legally, validly and enforceably obligated to each of the
Noteholders under and pursuant to the Notes and the Existing Note Purchase
Agreement and that the Company has no defense, offset, counterclaim or right of
recoupment with regard to such obligations. Additionally, the Company for itself
and all of its predecessors, successors and assigns, does hereby fully, forever
and completely release and discharge each of the Noteholders and all of their
respective employees, officers, directors, trustees, shareholders, affiliates,
agents, attorneys, representatives, predecessors, successors and assigns
(collectively, the "Released Parties"), from any and all claims, demands,
liabilities, damages and causes of action of any kind whatsoever, whether based
on facts in existence prior to or as of the date hereof, whether known or
unknown, which the Company may now have or may have had at any time heretofore
or may have at anytime hereafter, whether for contribution or indemnity or
otherwise, and whether direct or indirect, fixed or contingent, liquidated or
unliquidated, arising out of or related in any way to any of the following: (a)
the Notes and the Existing Note Purchase Agreement and all documents relating
thereto or executed in connection therewith (the "Existing Note Documents"); and
(b) any action, inaction or omission by any of the Released Parties in
connection with the Existing Note Documents or the administration thereof.
6.7 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF NEW YORK.
[Remainder of page intentionally left blank; next page is
signature page.]
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below, whereupon the foregoing shall become a
binding agreement between you and the Company as of the date first above
written.
BIRMINGHAM STEEL CORPORATION
By: /s/ J. Daniel Garrett
----------------------
Name: J. Daniel Garrett
Title: Vice President - Finance
<
Very truly yours,
PRINCIPAL LIFE INSURANCE COMPANY
(f/k/a Principal Mutual Life Insurance Company)
By: Principal Capital Management, LLC,
A Delaware limited liability company,
Its authorized signatory
By: /s/ Sarah J. Pitts
-------------------
Name: Sarah J. Pitts
Title: Counsel
By: /s/ James C. Fifield
---------------------
Name: James C. Fifield
Title: Counsel
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
By: /s/ Robert Bayer
-----------------
Name: Robert Bayer
Title: Investment Officer
JEFFERSON-PILOT LIFE INSURANCE COMPANY
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
AMERICAN UNITED LIFE INSURANCE COMPANY
By: /s/ Christopher D. Pahlke
--------------------------
Name: Christopher D. Pahlke
Title: Vice President Private Placements
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 Investment Officer
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Roi G. Chandy
------------------
Name: Roi G. Chandy
Title: Director, Special Situations
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By: /s/ Christopher Wilkos
-----------------------
Name: Christopher Wilkos
Title: Vice President, Corporate Portfolio
Management - Phoenix Home Life
THE CANADA LIFE ASSURANCE COMPANY
(J. ROMEO & CO. as nominee)
By: /s/ Kevin Phelan
-----------------
Name: Kevin Phelan
Title: Assistant Treasurer
CANADA LIFE INSURANCE COMPANY OF NEW YORK
(J. ROMEO & CO. as nominee)
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
CANADA LIFE INSURANCE COMPANY OF AMERICA
(J. ROMEO & CO. as nominee)
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
AMERITAS LIFE INSURANCE CORP.
By: Ameritas Investment Advisors Inc., as Agent
By: /s/ Patrick J. Henry
---------------------
Name: Patrick J. Henry
Title: Vice President - Fixed Income Securities
BERKSHIRE LIFE INSURANCE COMPANY
By: /s/ Ellen I. Whittaker
-----------------------
Name: Ellen I. Whittaker
Title: Senior Investment Officer
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
By: /s/ Christopher J. Grant
-------------------------
Name: Christopher J. Grant
Title: Investment Officer
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By: /s/ Wayne T. Hoffman
---------------------
Name: Wayne T. Hoffman
Title: Investments
By: /s/ Julie Bock
---------------
Name: Julie Bock
Title: Asst. Vice President
J. ROMEO & CO., as nominee for MONY LIFE INSURANCE COMPANY
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
<PAGE>
Exhibit 4.2.1
BIRMINGHAM STEEL CORPORATION
----------------------
SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT
-----------------------
Re:
Amended and Restated Note Purchase Agreements Dated as of October 12, 1999,
and
$76,000,000
9.71% SERIES A SENIOR NOTES DUE DECEMBER 15, 2002
$14,000,000
9.82% SERIES B SENIOR NOTES DUE DECEMBER 15, 2005
$60,000,000
9.92% SERIES C SENIOR NOTES DUE DECEMBER 15, 2005
DATED AS OF MAY 15, 2000
<PAGE>
ii
Table of Contents
1. PRELIMINARY STATEMENT....................................................1
1.1 Background......................................................1
1.2 Definitions.....................................................4
2. AMENDMENTS...............................................................6
2.1 Amendment of Existing Note Purchase Agreement..................6
2.2 Continuity and Affirmation of Obligations......................6
3. REPRESENTATIONS AND
WARRANTIES...........................................................6
3.1 Corporate Existence and Power..................................6
3.2 Corporate Authority............................................6
3.3 Binding Effect.................................................7
3.4 No Conflicts with Agreements, Etc..............................7
3.5 Consents, Etc..................................................7
3.6 Full Disclosure................................................8
3.7 Outstanding Debt and Liens.....................................8
3.8 Pending Litigation.............................................8
3.9 No Defaults....................................................9
3.10 Compliance with Law...........................................9
3.11 Title to Properties...........................................9
3.12 Environmental Compliance.....................................10
3.13 Restrictions on Company and Subsidiaries....................11
3.14 Collateral...................................................12
3.15 Solvency.....................................................13
4. AMENDMENTS..............................................................13
4.1 Disposition Prepayment........................................13
4.2 Equity Issuance Prepayments...................................13
4.3 Change of Control.............................................13
4.4 Fixed Charge Coverage Ratio...................................14
4.5 Minimum SBQ Division EBITDA...................................15
4.6 Minimum Consolidated EBITDA...................................15
4.7 Minimum Tangible Net Worth....................................17
4.8 Capital Expenditures..........................................17
4.9 Debt..........................................................18
4.10 AIR Dispute Settlement.......................................18
4.11 Additional Cross Default.....................................18
4.12 New Definitions..............................................19
4.13 Amended Definitions..........................................21
4.14 Further Amendment of Definitions.............................23
4.15 Indemnification..............................................23
4.16 Attachment of Schedule 1.2A to Existing Note Purchase
Agreement..................................................26
4.17 Pending Litigation...........................................26
5. CONDITIONS PRECEDENT....................................................26
5.1 Certificates..................................................27
5.2 Opinions of Counsel...........................................27
5.3 Amendment to 1993 Agreement...................................28
5.4 Seventh Amendment to Credit Agreement.........................28
5.5 Amendment to Letter of Credit Documents.......................28
5.6 Amendment to Intercreditor Agreement..........................28
5.7 Amendment to Memphis Lease Documents..........................28
5.8 BSE Collateral Documents......................................29
5.9 Lien Searches.................................................30
5.10 New BSE Loan.................................................30
5.11 Payment of Special Counsel and Financial Advisor Fees........30
5.12 Proceedings and Documents Satisfactory.......................30
6. MISCELLANEOUS...........................................................30
6.1 Effect of Amendment...........................................30
6.2 No Legend Required............................................30
6.3 Fees and Expenses.............................................31
6.4 Survival......................................................31
6.5 Duplicate Originals; Execution in Counterpart.................33
6.6 Release of Claims.............................................33
6.7 Governing Law.................................................33
BIRMINGHAM STEEL CORPORATION
SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT
Re:
Amended and Restated Note Purchase Agreements Dated as of October 12, 1999
and
$76,000,000
9.71% SERIES A SENIOR NOTES DUE DECEMBER 15, 2002
$14,000,000
9.82% SERIES B SENIOR NOTES DUE DECEMBER 15, 2005
$60,000,000
9.92% SERIES C SENIOR NOTES DUE DECEMBER 15, 2005
Dated as of May 15, 2000
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"), hereby agrees with you as follows:
1. PRELIMINARY STATEMENT.
1.1 Background.
(a) The Company entered into those certain Note Purchase Agreements dated
as of September 15, 1995, as amended by an Amendment to 1995 Note Purchase
Agreement dated as of December 14, 1998, with each of the institutions named in
Annex 1 thereto, under and pursuant to which the Company issued and sold to such
institutions (i) an aggregate principal amount of Seventy-Six Million Dollars
($76,000,000) of the Company's 6.96% Series A Senior Notes due December 15,
2002, (ii) an aggregate principal amount of Fourteen Million Dollars
($14,000,000) of the Company's 7.07% Series B Senior Notes due December 15,
2005, and (iii) an aggregate principal amount of Sixty Million Dollars
($60,000,000) of the Company's 7.17% Series C Senior Notes due December 15, 2005
(the "1995 Notes"). Pursuant to the terms of a Waiver and Second Amendment to
Note Purchase Agreement dated as of October 12, 1999 (the "1999 Second
Amendment"), the Company entered into those certain Amended and Restated Note
Purchase Agreements dated as of October 12, 1999, and the Company subsequently
entered into a First Amendment to Note Purchase Agreement dated as of November
12, 1999 (collectively, as in effect immediately prior to the amendments
contemplated hereby, the "Existing Note Purchase Agreement," and as amended
hereby, the "Amended Note Purchase Agreement"), with each of the institutions
named in Annex 1 thereto, pursuant to which the Company issued to such
institutions, in substitution for the 1993 Notes, (i) an aggregate principal
amount of Seventy-Six Million Dollars ($76,000,000) of the Company's 9.71%
Series A Senior Notes due December 15, 2002, (ii) an aggregate principal amount
of Fourteen Million Dollars ($14,000,000) of the Company's 9.82% Series B Senior
Notes due December 15, 2005, and (iii) an aggregate principal amount of Sixty
Million Dollars ($60,000,000) of the Company's 9.92% Series C Senior Notes due
December 15, 2005 (collectively, the "Notes").
(b) The institutions (other than the Company) listed on the signature pages
to this Agreement (collectively, the "Noteholders") are the holders of one
hundred percent (100%) of the Notes outstanding as of the date hereof.
(c) The Company entered into those certain Amended and Restated Note
Purchase Agreements dated as of October 12, 1999, with each of the institutions
named in Annex 1 thereto (together with their successors and assigns, the "1993
Noteholders"), as amended by a First Amendment to Note Purchase Agreement dated
as of November 12, 1999 (collectively, as in effect immediately prior to the
date hereof, the "1993 Existing Note Purchase Agreement), and by a Second
Amendment to Note Purchase Agreement dated as of the date hereof (the "Amendment
to 1993 Agreement"; the 1993 Existing Note Purchase Agreement, as amended by the
Amendment to 1993 Agreement, is referred to herein as the "1993 Amended Note
Purchase Agreement"), under and pursuant to which the Company issued to such
institutions, in substitution for Notes in the same amounts issued in 1993, an
aggregate principal amount of One Hundred Thirty Million Dollars ($130,000,000)
of the Company's 10.03% Senior Notes due December 15, 2005 (collectively, the
"1993 Notes").
(d) The Company entered into that certain Credit Agreement dated as of
March 17, 1997 (as in effect immediately prior to the date hereof, the "Existing
Credit Agreement," and as heretofore amended and as amended by a Seventh
Amendment to Credit Agreement dated as of the date hereof (the "Seventh
Amendment to Credit Agreement"), the "Amended Credit Agreement"), by and among
the Company, the banks party thereto (collectively, the "Banks"), and Bank of
America, N.A., as agent (the "Agent"), pursuant to which a Three Hundred Million
Dollar ($300,000,000) credit facility has been provided to the Company.
(e) Bank of America, N.A. and PNC Bank, National Association (collectively,
the "L/C Issuers") have separately provided the Company with two (2) letters of
credit (collectively, the "Letters of Credit") which have an aggregate face
amount of Forty-One Million Four Hundred Seventy-One Thousand Seven Hundred
Eighty-Two Dollars ($41,471,782), which Letters of Credit were issued pursuant
to (i) an Amended and Restated Reimbursement Agreement, dated as of October 12,
1999, among the Company, American Steel & Wire Corporation and Bank of America,
N.A. (as amended, the "B of A Reimbursement Agreement"), and (ii) a
Reimbursement Agreement dated as of October 1, 1996, between PNC Bank, National
Association successor to PNC Bank, Kentucky, Inc. and the Company (as amended,
"PNC Reimbursement Agreement" and, collectively with the B of A Reimbursement
Agreement, the "Existing Reimbursement Agreements").
(f) The Company and the Noteholders have agreed to amend the Existing Note
Purchase Agreement to permit the Company to guarantee and secure the New BSE
Loan referred to herein and to modify certain of the covenants and other
provisions of the Existing Note Purchase Agreement, on the terms and conditions
set forth herein.
1.2 Definitions.
Capitalized terms used but not specifically defined in this Agreement have the
respective meanings assigned to them in the Existing Note Purchase Agreement. As
used in this Agreement, the following terms have the respective meanings
specified below or set forth in the Section hereof following such term:
Agent - Section 1.1(d).
Agreement, this - means this Second Amendment to Note Purchase
Agreement, as it may be amended or otherwise modified from time to
time.
Amended Credit Agreement - Section 1.1(d).
Amended Intercreditor Agreement - Section 5.6.
Amended Note Purchase Agreement - Section 1.1(a).
Amendment to 1993 Agreement - Section 1.1(c).
Banks - Section 1.1(d).
B of A Reimbursement Agreement - Section 1.1(e).
BSE Collateral Documents - means the documents listed on
Schedule 1.2A hereto, pursuant to which BSE has granted Liens upon
assets of BSE as collateral for the New BSE Loan, the other Secured
Obligations (as defined in the Amended Intercreditor Agreement), and/or
indebtedness owed by BSE to the Company, all of which indebtedness owed
by BSE to the Company has been assigned to the Collateral Agent as
additional collateral for the Secured Obligations.
BSE Credit Agreement - has the meaning set forth in the
definition of New BSE Loan.
BSE Material Adverse Effect - means a material adverse effect
on (a) the business, prospects, profits, Properties or condition
(financial or otherwise) of BSE, (b) the ability of BSE to perform its
obligations under any of the Financing Documents to which it is a
party, or (c) the validity or enforceability of any of the Financing
Documents to which BSE is a party.
Collateral Agent - means SouthTrust Bank, National
Association, in its capacity as collateral agent under the
Intercreditor Agreement.
Company - the introductory sentence.
Effective Date - Section 5.
Existing Credit Agreement - Section 1.1(d).
Existing Note Documents - Section 6.6.
Existing Note Purchase Agreement - Section 1.1(a).
Existing Reimbursement Agreements - Section 1.1(e).
Financing Document - Section 3.1.
Indenture Trustee - has the meaning set forth in the
Intercreditor Agreement.
L/C Issuers - Section 1.1(e).
Letters of Credit - Section 1.1(e).
New BSE Loan - means the loan of up to $25,000,000 to be made
to BSE pursuant to the Credit Agreement dated as of the date hereof
among BSE, Bank of America, N.A., as Agent, and the financial
institutions party thereto (the "BSE Credit Agreement").
1993 Notes - Section 1.1(a).
1993 Amended Note Purchase Agreement - Section 1.1(c).
1993 Existing Note Purchase Agreement - Section 1.1(c).
1993 Noteholders - Section 1.1(c).
1993 Notes - Section 1.1(c).
1999 Second Amendment - Section 1.1(a).
Noteholders - Section 1.1(b).
Notes - Section 1.1(a).
Owner Trustee - has the meaning set forth in the Intercreditor
Agreement.
PNC Reimbursement Agreement - Section 1.1(e).
Seventh Amendment to Credit Agreement - Section 1.1(d).
Transaction Documents - has the meaning specified in the
Omnibus Collateral Agreement.
2. AMENDMENTS
2.1 Amendment of Existing Note Purchase Agreement.
On the Effective Date, the amendments set forth herein shall take effect.
2.2 Continuity and Affirmation of Obligations.
3. REPRESENTATIONS AND WARRANTIES
Notwithstanding any other provision of this Agreement or any other document or
agreement, the indebtedness of the Company under the Existing Note Purchase
Agreement and the Notes shall not be or be deemed to be paid or discharged or
novated hereby and shall continue in full force and effect as amended hereby.
To induce the Noteholders to enter into this Agreement, (a) the Company
represents and warrants to the Noteholders that the representations and
warranties made by the Company in Section 3 of the 1999 Third Amendment and by
BSE in the BSE Credit Agreement are true as of the date hereof (except to the
extent that any such representation in the 1999 Third Amendment relates to a
specific other date or as set forth on Schedule 3 hereto or as disclosed to the
Noteholders or Nightingale & Associates LLC in writing prior to the date
hereof), and (b) the Company makes the additional representations and warranties
set forth in this Section 3. The Company agrees and acknowledges that for
purposes of Section 10.1(e) of the Existing Note Purchase Agreement, its
representations and warranties, as set forth in this Agreement, are and
constitute representations and warranties furnished in connection with the
Existing Note Purchase Agreement.
3.1 Corporate Existence and Power.
Each of the Company and each Restricted Subsidiary has all requisite
power and authority to execute, deliver and perform its obligations under this
Agreement and each other agreement and document that is being executed or
delivered by the Company and/or any such Subsidiary in connection herewith, and
BSE has all requisite power and authority to execute, deliver and perform its
obligations under the BSE Collateral Documents and each other agreement and
document that is being executed or delivered by BSE in connection therewith
(each of such agreements and documents, including this Agreement and each of the
BSE Collateral Documents, being referred to herein as a "Financing Document").
3.2 Corporate Authority.
The execution, delivery and performance by the Company, BSE and each other
Restricted Subsidiary of each Financing Document to which the Company, BSE or
such other Restricted Subsidiary is a party, and the performance by the Company
of the Amended Note Purchase Agreement and by BSE of the BSE Collateral
Documents, is within the corporate or limited liability company powers of the
Company, BSE or such other Restricted Subsidiary, as the case may be, and has
been duly authorized by all necessary corporate or limited liability company
action on the part of the board of directors or management (no action on the
part of the stockholders or members of the Company, BSE or any such other
Restricted Subsidiary being required by law, other than such actions which have
been duly taken), of the Company, BSE or such other Restricted Subsidiary.
3.3 Binding Effect.
Each Financing Document to which the Company, BSE or any other Restricted
Subsidiary is a party has been duly executed by the Company, BSE, or such other
Restricted Subsidiary and each Financing Document and the Amended Note Purchase
Agreement, the Security Documents and the BSE Collateral Documents are legal,
valid and binding obligations of the Company, BSE or such other Restricted
Subsidiary, as the case may be, enforceable against the Company, BSE or such
other Restricted Subsidiary in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally, or by general
principles of equity.
3.4 No Conflicts with Agreements, Etc.
Neither the execution and delivery by the Company, BSE or any other Restricted
Subsidiary of any Financing Document to which it is a party, nor the fulfillment
of, or compliance with, the terms and provisions of the Amended Note Purchase
Agreement, the Notes, the Security Documents, or any of the Financing Documents,
will conflict with, or result in a breach or violation of any term, condition or
provision of, or constitute a default under, or result in the creation of any
Lien on any Property of the Company, BSE or such other Restricted Subsidiary
pursuant to its charter or by-laws or operating agreement, or any contract,
agreement, mortgage, indenture, lease or instrument to which it is a party or by
which it is bound or to which it or any of its Property is subject, or any
order, statute, law, rule or regulation to which it or any of its Property is
subject.
3.5 Consents, Etc.
No consent, approval or authorization of, or declaration, registration or filing
(except as contemplated under Section 4) with, any Governmental Authority or any
nongovernmental Person, including, without limitation, any creditor (other than
the 1993 Noteholders, the Banks, the L/C Issuer, the Owner Trustee and the
Indenture Trustee), or any stockholder or member of the Company, BSE or any
other Restricted Subsidiary, is required in connection with the execution or
delivery by the Company, BSE or any other Restricted Subsidiary of any Financing
Document to which it is a party or the performance by the Company, BSE or such
other Restricted Subsidiary of its obligations under any Financing Document, or
as a condition to the legality, validity or enforceability of any such Financing
Document, except, in each case, those which have been obtained or which are
contemplated by the Transaction Documents.
3.6 Full Disclosure.
The financial statements and other written statements, certificates and
materials provided to the Noteholders pursuant to the Existing Note Purchase
Agreement and the written statements, certificates and materials furnished by or
on behalf of the Company to you in connection with this Agreement and the
transactions contemplated hereby do not 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. Except as disclosed (i) in the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1999, (ii) in the other reports filed by the
Company with the Securities and Exchange Commission after June 30, 1999, (iii)
in press releases issued by the Company prior to the date hereof, or (iv) to you
or Nightingale Associates, LLC in writing, there is no fact known to the Company
which materially affects adversely or, so far as the Company can now reasonably
foresee, will materially affect adversely the business, prospects, profits,
Properties or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or the ability of each of the Company, BSE and
each other Restricted Subsidiary to perform its obligations set forth in the
Financing Documents to which it is a party or, in the case of the Company, the
Amended Note Purchase Agreement or the Notes. The financial statements included
in the reports referred to in clauses (i) and (ii) of the preceding sentence
fairly present, in all material respects, the financial condition and results of
operations of the Company and its Subsidiaries as of the dates thereof and for
the periods covered thereby in accordance with generally accepted accounting
principles.
3.7 Outstanding Debt and Liens.
Schedule 3 hereto sets forth a correct and complete schedule and brief
description of all Debt of the Company and the Subsidiaries outstanding on the
Effective Date and all consensual Liens securing such Debt. There are no Liens
on any of the Property of the Company or any Restricted Subsidiary except Liens
permitted by Section 8.17(a) of the Amended Note Purchase Agreement.
3.8 Pending Litigation.
There are no proceedings, actions or investigations pending or, to the knowledge
of the Company, threatened against or affecting the Company, BSE or any other
Subsidiary in any court or before any Governmental Authority or arbitration
board or tribunal (a) challenging, or in any way dealing with, the legality,
validity or enforceability of any Financing Document, the Amended Note Purchase
Agreement or the Notes or the authority of the Company, BSE or any other
Restricted Subsidiary to enter into or execute any Financing Document, the
Amended Note Purchase Agreement or the Notes, or (b) except as disclosed (i) in
the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1999, (ii) in the other reports filed by the Company with the Securities and
Exchange Commission after June 30, 1999, (iii) in press releases issued by the
Company prior to the Effective Date, or (iv) to you or Nightingale Associates,
LLC in writing, that, in the aggregate for all such proceedings, actions and
investigations, could reasonably be expected to have a Material Adverse Effect
or a BSE Material Adverse Effect.
3.9 No Defaults.
No event has occurred and is continuing and no condition exists which, upon
execution and delivery of this Agreement (and after giving effect to any waivers
and amendments that have become effective on or before the date hereof) and the
other Transaction Documents, would constitute a Default or Event of Default.
Neither the Company nor BSE nor any other Subsidiary is in violation in any
respect of any term of any charter instrument or by-law or limited liability
company agreement and neither the Company nor BSE nor any other Subsidiary is in
default in the payment of principal or interest on any Debt or in default under
any instrument or instruments or agreements under and subject to which any Debt
has been issued and no event has occurred and is continuing under the provisions
of any such instrument or agreement which with the lapse of time or the giving
of notice, or both, would constitute a default or an event of default
thereunder, which individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect or a BSE Material Adverse Effect.
3.10 Compliance with Law.
Neither the Company nor BSE nor any other Subsidiary is in violation of any law,
ordinance, governmental rule or regulation to which it is subject, except for
such violations that, in the aggregate, could not reasonably be expected to have
a Material Adverse Effect or a BSE Material Adverse Effect.
3.11 Title to Properties.
(a) Each of the Company and BSE and the other Subsidiaries has good and
marketable title to all real Property, and good title to all of the other
Property, reflected in the most recent balance sheet delivered pursuant to
Section 9.1 of the Existing Note Purchase Agreement (except as sold or otherwise
disposed of in the ordinary course of business), except for such failures to
have such good and marketable title as are immaterial to such financial
statements and that, in the aggregate for all such failures, could not
reasonably be expected to have a Material Adverse Effect or a BSE Material
Adverse Effect. All such Property is free from Liens not permitted by Section
8.17(a) of the Amended Note Purchase Agreement.
(b) Upon execution and delivery of this Agreement and the other Transaction
Documents, each lease of real Property in the name or for the benefit of the
Company or BSE or any Subsidiary is valid and subsisting and in full force and
effect and good standing, except for such failures to be valid and subsisting
and in full force and effect and good standing that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect or a BSE Material
Adverse Effect.
(c) Each of the Company and BSE and the Subsidiaries owns, possesses or has
the right to use all of the patents, trademarks, service marks, trade names,
copyrights and licenses, and rights with respect thereto, necessary for the
present and currently planned future conduct of its business, without any known
conflict with the rights of others, except for such failures to own, possess, or
have the right to use, that, in the aggregate for all such failures, could not
reasonably be expected to have a Material Adverse Effect or a BSE Material
Adverse Effect.
3.12 Environmental Compliance.
Except as disclosed (i) in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1999, (ii) in the other reports filed by the Company
with the Securities and Exchange Commission after June 30, 1999, (iii) in press
releases issued by the Company prior to the Effective Date, or (iv) to the
Noteholders or Nightingale Associates, LLC in writing:
(a) Compliance -- each of the Company and BSE and the Subsidiaries is
in compliance with all Environmental Protection Laws in effect in each
jurisdiction where it is presently doing business, and in which the failure
so to comply could be reasonably expected to have a Material Adverse Effect
or a BSE Material Adverse Effect;
(b) Liability -- neither the Company nor BSE nor any of the
Subsidiaries is subject to any liability under any Environmental Protection
Laws that, in the aggregate, could reasonably be expected to have a
Material Adverse Effect or a BSE Material Adverse Effect; and
(c) Notices -- neither the Company nor BSE nor any Subsidiary has
received any
(i) notice from any Governmental Authority by which any
of its present or previously-owned or leased real
Properties has been designated, listed, or identified
in any manner by any Governmental Authority charged
with administering or enforcing any Environmental
Protection Law as a Hazardous Substance disposal or
removal site, "Super Fund" clean-up site, or
candidate for removal or closure pursuant to any
Environmental Protection Law,
(ii) notice of any Lien arising under or in connection
with any Environmental Protection Law that has
attached to any revenues of, or to, any of its owned
or leased real Properties, or
(iii) summons, citation, notice, directive, letter, or
other communication, written or oral, from any
Governmental Authority concerning any intentional or
unintentional action or omission by the Company or
such Subsidiary in connection with its ownership or
leasing of any real Property resulting in the
releasing, spilling, leaking, pumping, pouring,
emitting, emptying, dumping, or otherwise disposing
of any Hazardous Substance into the environment
resulting in any material violation of any
Environmental Protection Law,
in each case where the effect of the matters that are the subject of
any such notice, summons, citation, directive, letter or other
communication could reasonably be expected to have a Material Adverse
Effect or a BSE Material Adverse Effect.
3.13 Restrictions on Company and Subsidiaries.
Neither the Company nor BSE nor any other Subsidiary:
(a) except as set forth in Schedule 3 hereto, is a party to any
contract or agreement, or subject to any charter or other corporate or
limited liability company restriction that, in the aggregate for all
such contracts, agreements, charter and corporate and limited
liability company restrictions, could reasonably be expected to have a
Material Adverse Effect or a BSE Material Adverse Effect;
(b) is a party to any contract or agreement that restricts the right
or ability of such corporation to incur Debt, other than the Amended
Note Purchase Agreement, the 1993 Amended Note Purchase Agreement, the
Amended Credit Agreement, any other Transaction Document and the
agreements listed in Schedule 3 hereto, the terms of none of which is
violated by the execution and delivery by the Company or BSE or any
other Restricted Subsidiary of the Financing Documents to which it is
a party, or compliance by the Company or BSE or any other Restricted
Subsidiary with the Financing Documents to which it is a party or, in
the case of the Company, the Amended Note Purchase Agreement and the
Notes or, in the case of BSE, the BSE Collateral Documents; and
(c) has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its Property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted
by Section 8.17(a) of the Amended Note Purchase Agreement.
3.14 Collateral.
(a) Collateral Documents.
(i) BSE Mortgages. Each Mortgage included in the BSE
Collateral Documents creates a valid Lien upon the grantor's
right, title and interest in the real property and interests
described therein in favor of the Collateral Agent, and when
such document has been recorded as indicated on Schedule 3 and
all appropriate recording fees and taxes have been paid, such
Lien shall be a perfected first priority Lien subject to no
other Liens except to the extent permitted by Section 8.17(a)
of the Amended Note Purchase Agreement;
(ii) BSE Security Agreement. The Security Agreement
included in the BSE Collateral Documents creates a valid Lien
in and to the Collateral (as defined in such Security
Agreement) in favor of the Collateral Agent, and when all
UCC-1 financing statements required by such Security Agreement
to be filed with public recording offices have been so filed,
and all taxes, recording fees and other fees and charges
required by applicable law to be paid in connection therewith
have been duly paid in full, such Lien shall be a perfected,
first priority Lien on the Collateral of a type which may be
perfected by the filing of a UCC financing statement or by
possession, subject to no Liens except to the extent permitted
by Section 8.17(a) of the Amended Note Purchase Agreement;
(b) Warranties and Representations True. All warranties and
representations made by BSE in each of the BSE Collateral Documents
are true and correct as of the date hereof.
3.15 Solvency.
After giving effect to the transactions contemplated by the Transaction
Documents, (a) the fair value and the fair salable value of the assets of the
Company and BSE and each other Restricted Subsidiary (excluding any Debt due
from the Company, BSE or such other Restricted Subsidiary, as the case may be)
will each be in excess of the fair valuation of its total liabilities (including
all contingent liabilities), (b) the Company and BSE and each other Restricted
Subsidiary will each be able to pay its debts or other obligations in the
ordinary course as they mature, and (c) the Company and BSE and each other
Restricted Subsidiary each has capital not unreasonably small to carry on its
business and all business in which it proposes to be engaged.
4. AMENDMENTS
Effective on the Effective Date, the Existing Note Purchase Agreement is amended
as follows:
4.1 Disposition Prepayment.
The words "such amounts shall be distributed" are deleted from the
seventh line of Section 5.2(d) and the words "such amounts shall, except as
otherwise expressly provided in Section 4.9 of the Intercreditor Agreement, be
distributed" are substituted therefor.
4.2 Equity Issuance Prepayments.
The first sentence of Section 5.2(e) is deleted and the following sentence is
substituted therefor: In the event of any Equity Issuance by the Company other
than a Special Equity Issuance, all of the Net Proceeds of such Equity Issuance
shall be promptly paid over to the Collateral Agent for distribution as provided
in Section 4.1(b) of the Intercreditor Agreement.
4.3 Change of Control.
The following sentence is inserted at the end of subsection (a) of Section 6.1:
Notwithstanding any other provision of this subsection (a), all references in
this subsection (a) to a "Change in Control" shall refer only to a Change in
Control that occurs after December 31, 1999.
4.4 Fixed Charge Coverage Ratio.
Section 8.11 is deleted and the following Section 8.11 is substituted therefor:
8.11. Fixed Charge Coverage Ratio.
(a) Prior to Satisfaction of Cleveland Cessation Condition. The Company
will not permit the Fixed Charge Coverage Ratio for any Applicable
Fixed Charge Period specified in the following table to be less than or
equal to the ratio corresponding to such period in the table, provided
that this paragraph shall be in effect with respect to an Applicable
Fixed Charge Period ending at the end of a particular fiscal quarter
only if, on the last day of such fiscal quarter, the Cleveland
Cessation Condition has not been satisfied.
--------------------------------------- ----------------------------------
Applicable Fixed Charge Period Ending Minimum Ratio
--------------------------------------- ----------------------------------
March 31, 2000 0.35 to 1.00
--------------------------------------- ----------------------------------
June 30, 2000 1.05 to 1.00
--------------------------------------- ----------------------------------
September 30, 2000 1.11 to 1.00
--------------------------------------- ----------------------------------
December 31, 2000 1.17 to 1.00
--------------------------------------- ----------------------------------
March 31, 2001 1.15 to 1.00
--------------------------------------- ----------------------------------
June 30, 2001 1.25 to 1.00
--------------------------------------- ----------------------------------
September 30, 2001 1.31 to 1.00
--------------------------------------- ----------------------------------
December 31, 2001 1.02 to 1.00
--------------------------------------- ----------------------------------
March 31, 2002 1.07 to 1.00
--------------------------------------- ----------------------------------
June 30, 2002 1.13 to 1.00
--------------------------------------- ----------------------------------
September 30, 2002 1.17 to 1.00
--------------------------------------- ----------------------------------
December 31, 2002 0.71 to 1.00
--------------------------------------- ----------------------------------
March 31, 2003 and thereafter 1.25 to 1.00
--------------------------------------- ----------------------------------
(b) After Satisfaction of Cleveland Cessation Condition. The Company will
not permit the Fixed Charge Coverage Ratio for any Applicable Fixed
Charge Period specified in the following table to be less than or equal
to the ratio corresponding to such period in the table, provided that
this paragraph shall be in effect with respect to an Applicable Fixed
Charge Period ending at the end of a particular fiscal quarter only if,
on the last day of such fiscal quarter, the Cleveland Cessation
Condition has been satisfied.
--------------------------------------- ----------------------------------
Applicable Fixed Charge Period Ending Minimum Ratio
--------------------------------------- ----------------------------------
June 30, 2000 1.05 to 1.00
--------------------------------------- ----------------------------------
September 30, 2000 1.11 to 1.00
--------------------------------------- ----------------------------------
December 31, 2000 1.14 to 1.00
--------------------------------------- ----------------------------------
March 31, 2001 1.09 to 1.00
--------------------------------------- ----------------------------------
June 30, 2001 1.17 to 1.00
--------------------------------------- ----------------------------------
September 30, 2001 1.20 to 1.00
--------------------------------------- ----------------------------------
December 31, 2001 0.93 to 1.00
--------------------------------------- ----------------------------------
March 31, 2002 0.98 to 1.00
--------------------------------------- ----------------------------------
June 30, 2002 1.04 to 1.00
--------------------------------------- ----------------------------------
September 30, 2002 1.08 to 1.00
--------------------------------------- ----------------------------------
December 31, 2002 0.66 to 1.00
--------------------------------------- ----------------------------------
March 31, 2003 and thereafter 1.25 to 1.00
--------------------------------------- ----------------------------------
For the purposes of this Section 8.11, the "Applicable Fixed Charge Period"
means (a) with respect to the calculation of the Fixed Charge Coverage Ratio for
the fiscal quarters ended March 31, 2000, June 30, 2000, and March 31, 2003, the
fiscal quarter then ended; (b) with respect to the calculation of the Fixed
Charge Coverage Ratio for the fiscal quarters ended September 30, 2000 and June
30, 2003, the two fiscal quarters then ended; (c) with respect to the
calculation of the Fixed Charge Coverage Ratio for the fiscal quarters ended
December 31, 2000 and September 30, 2003, the three fiscal quarters then ended;
and (d) with respect to the calculation of the Fixed Charge Coverage Ratio at
the end of all other fiscal quarters, the four fiscal quarters then ended.
4.5 Minimum SBQ Division EBITDA.
The following Section 8.12A is inserted after Section 8.12:
8.12A. Minimum SBQ Division EBITDA.
(a) Subject to the provisions of Section 8.12A(b) below, the
Company will not permit the aggregate amount of SBQ Division
EBITDA for any fiscal quarter ending on or after September 30,
2000 to be less than $1.00.
(b) Notwithstanding the foregoing, the terms of the covenant
in this Section 8.12A are subject to the provisions set
forth in a letter agreement dated as of May 15, 2000 among
the Company, the holders of the Notes, the Banks, and
certain other parties.
4.6 Minimum Consolidated EBITDA.
Section 8.12 is deleted and the following Section 8.12 is substituted therefor:
8.12. Minimum Consolidated EBITDA.
(a) Prior to Satisfaction of Cleveland Cessation Condition. The Company
will not permit the aggregate amount of Consolidated EBITDA for any
Applicable EBITDA Period specified in the following table to be less
than the amount corresponding to such period in such table, provided
that this paragraph shall be in effect with respect to an Applicable
EBITDA Period ending at the end of a particular fiscal quarter only if,
on the last day of such fiscal quarter, the Cleveland Cessation
Condition has not been satisfied:
--------------------------------------- ----------------------------------
Applicable EBITDA Period Ending Minimum EBITDA
--------------------------------------- ----------------------------------
March 31, 2000 $3,453,000
--------------------------------------- ----------------------------------
June 30, 2000 $20,935,000
--------------------------------------- ----------------------------------
September 30, 2000 $46,350,000
--------------------------------------- ----------------------------------
December 31, 2000 $63,778,000
--------------------------------------- ----------------------------------
March 31, 2001 $79,625,000
--------------------------------------- ----------------------------------
June 30, 2001 $90,021,000
--------------------------------------- ----------------------------------
September 30, 2001 $94,128,000
--------------------------------------- ----------------------------------
December 31, 2001 $99,417,000
--------------------------------------- ----------------------------------
March 31, 2002 $104,096,000
--------------------------------------- ----------------------------------
June 30, 2002 $108,952,000
--------------------------------------- ----------------------------------
September 30, 2002 $112,636,000
--------------------------------------- ----------------------------------
December 31, 2002 and $116,033,000
Thereafter
--------------------------------------- ----------------------------------
(b) After Satisfaction of Cleveland Cessation Condition. The Company will
not permit the aggregate amount of Consolidated EBITDA for any
Applicable EBITDA Period specified in the following table to be less
than the amount corresponding to such period in such table, provided
that this paragraph shall be in effect with respect to an Applicable
EBITDA Period ending at the end of a particular fiscal quarter only if,
on the last day of such fiscal quarter, the Cleveland Cessation
Condition has been satisfied:
--------------------------------------- ----------------------------------
Applicable EBITDA Period Ending Minimum EBITDA
--------------------------------------- ----------------------------------
June 30, 2000 $20,935,000
--------------------------------------- ----------------------------------
September 30, 2000 $46,350,000
--------------------------------------- ----------------------------------
December 31, 2000 $61,848,000
--------------------------------------- ----------------------------------
March 31, 2001 $75,244,000
--------------------------------------- ----------------------------------
June 30, 2001 $83,189,000
--------------------------------------- ----------------------------------
September 30, 2001 $84,847,000
--------------------------------------- ----------------------------------
December 31, 2001 $89,616,000
--------------------------------------- ----------------------------------
March 31, 2002 $94,295,000
--------------------------------------- ----------------------------------
June 30, 2002 $99,150,000
--------------------------------------- ----------------------------------
September 30, 2002 $102,834,000
-------------------------------------- ----------------------------------
December 31, 2002 and $106,231,000
Thereafter
--------------------------------------- ----------------------------------
For the purposes of this Section 8.12, the "Applicable EBITDA Period" means (a)
with respect to the calculation of Consolidated EBITDA for the fiscal quarter
ended March 31, 2000, the fiscal quarter ended March 31, 2000; (b) with respect
to the calculation of Consolidated EBITDA for the fiscal quarter ended June 30,
2000, the two fiscal quarters ended June 30, 2000; (c) with respect to the
calculation of Consolidated EBITDA for the fiscal quarter ended September 30,
2000, the three fiscal quarters ended September 30, 2000; (d) with respect to
the calculation of Consolidated EBITDA for each fiscal quarter ended after
September 30, 2000, the four fiscal quarters then ended.
4.7 Minimum Tangible Net Worth.
Section 8.13 is deleted and the following Section 8.13 is substituted therefor:
8.13. Minimum Tangible Net Worth
The Company will not permit Consolidated Tangible Net Worth at any time to be
less than (i) (A) $118,000,000 prior to the satisfaction of the Cleveland
Cessation Condition, and (B) $104,000,000 after the satisfaction of the
Cleveland Cessation Condition, plus (ii) fifty percent (50%) of Adjusted Net
Income (only if greater than Zero Dollars ($0)) of the Company and its
Subsidiaries on a consolidated basis for each fiscal quarter of the Company
ending after December 31, 1999, minus (iii) the sum of the amounts by which
Consolidated Tangible Net Worth was reduced (i.e. the amount by which
stockholders' equity was reduced) after December 31, 1999 by any TNW Adjustment
plus (iv) all of the Net Proceeds from each Equity Issuance by the Company after
December 31, 1999.
4.8 Capital Expenditures.
Section 8.14 is deleted and the following Section 8.14 is substituted therefor:
8.14. Capital Expenditures The Company will not permit the aggregate amount of
Capital Expenditures of the Company and the Restricted Subsidiaries to be
greater than: (i) Forty Million Dollars ($40,000,000) during the Company's
fiscal year ending June 30, 2000; (ii) Forty Million Dollars ($40,000,000)
during the Company's fiscal year ending June 30, 2001; and (iii) Twenty-Five
Million Dollars ($25,000,000) during the Company's fiscal year ending June 30,
2002. If there is a shut-down and discontinuance of operations of American Steel
& Wire, Inc.'s facility in Cleveland, Ohio, the Company thereafter will not
make, or permit any of the Restricted Subsidiaries to make, any Capital
Expenditures with respect to such facility, except that the Company may expend
up to $500,000 to the extent that such expenditures are necessary in connection
with the shut down or sale of such facility. To the extent that the aggregate
amount of Capital Expenditures of the Company and the Restricted Subsidiaries
during a fiscal year is less than the amount that is permitted by the first
sentence of this Section 8.14 (the result of such permitted amount minus the
actual amount of Capital Expenditures during a fiscal year being the "Unused
Amount of Capital Expenditures" with respect to such fiscal year), the aggregate
amount of Capital Expenditures that may be made by the Company and the
Restricted Subsidiaries during the next succeeding fiscal year of the Company
will be the sum of the amount permitted by clause (ii) or (iii) of this Section
8.14, as applicable, plus the Unused Amount of Capital Expenditures with respect
to the previous fiscal year.
4.9 Debt.
Clause (h) of Section 8.16 is redesignated as clause (i); the reference in such
redesignated clause (i) to clause (g) of Section 8.16 is changed so as to refer
to clause (h); the word "and" is deleted at the end of clause (g); and the
following clause (h) is inserted after clause (g) of Section 8.16:
(h) Debt that consists of the New BSE Loan and a Guaranty of the New BSE
Loan; and
4.10 AIR Dispute Settlement.
The following Section 8.25 is inserted after Section 8.24:
8.25. AIR Dispute Settlement.
The Company will not enter into or agree to any AIR Dispute
Settlement without the prior written consent of the Majority Holders.
4.11 Additional Cross Default
The word "or" is deleted from the end of clause (j) of Section 10.1; "; or" is
added to the end of clause (k); and the following clause (l) is added to the end
of Section 10.1:
(l) Other Cross Defaults. Any of the following shall have occurred and
be continuing: (i) an "Event of Default" under and as defined in that certain
Indenture of Trust dated as of December 1, 1998 by and between Development
Authority of Bartow County and Sun Trust Bank, Atlanta, as Trustee, relating to
certain property of BSE; (ii) a "Default" under and as defined in that certain
Equipment Lease Agreement dated as of December 31, 1998 by and among the Company
and BSE, as lessees, and Banc of America Leasing & Capital, LLC, as lessor;
(iii) a "Default" under and as defined in that certain Equipment Lease Agreement
dated as of June 29, 1999 by and among the Company and BSE, as lessees, and
First Security National Bank Association, as Owner Trustee, as lessor; or (iv) a
"Lease Event of Default" under and as defined in that certain Equipment Lease
Agreement dated as of September 30, 1997 by and between Chase Manhattan Trust
Company, National Association, as Owner Trustee, as Lessor, and the Company, as
Lessee.
4.12 New Definitions.
The following definitions are inserted in Section 11.1 in alphabetical order:
Adjusted Net Income - means, for any period, the sum of (i) the net income of
the Company and its Subsidiaries as shown in the financial statements for the
Company and its Subsidiaries for such period prepared in accordance with GAAP
and (ii) any TNW Adjustment with respect to such period.
AIR Dispute Settlement - means an agreement or arrangement pursuant to which the
Company's obligations with respect to its membership interest in AIR, the
purchase of goods from AIR, or the indebtedness of AIR is compromised, settled,
amended or paid.
Applicable EBITDA Period - Section 8.12.
BSE Collateral Documents - means the documents listed on Schedule 1.2A hereto,
pursuant to which BSE has granted Liens upon assets of BSE as collateral for the
New BSE Loan, the other Secured Obligations (as defined in the Intercreditor
Agreement), and/or indebtedness owed by BSE to the Company, all of which
indebtedness owed by BSE to the Company has been assigned to the Collateral
Agent as additional collateral for the Secured Obligations.
BSE Credit Agreement - has the meaning set forth in the definition of New BSE
Loan in this Section 11.1.
Claims and Expenses - Section 12.9.
Cleveland Cessation Condition - means, in order to be satisfied as of any date,
that the Company (a) has shut down and discontinued operations at American Steel
& Wire, Inc.'s facility in Cleveland, (b) has completed the sale of American
Steel & Wire, Inc.'s Cleveland facility to a Person that is not a Subsidiary or
Affiliate of the Company, with no continuing interest in the profits, losses or
value of the Cleveland facility and no continuing obligations with respect to
its operations (other than by virtue of representations, warranties and
indemnity obligations customary in such transactions), or (c) has completed a
transaction in the nature of a joint venture pursuant to which American Steel &
Wire, Inc.'s Cleveland operations have been transferred, at no cost to the
Company (i.e. no cost to the Company or any Subsidiary or Affiliate of the
Company), to a separate legal entity in which the Company may have an ownership
interest or other profit participation under an arrangement where the Company
has no initial or continuing obligation to contribute capital (other than the
operating assets of the Cleveland facility) or operating or other funds to such
entity (other than by virtue of representations, warranties and indemnity
obligations customary in such transactions) and has no obligation to supply
product to or purchase product from such entity or otherwise guaranty or
purchase any debts or obligations of such entity (other than obligations of such
entity to the holders of the Notes and to the Banks).
Indemnified Party - Section 12.9.
Indemnity Proceeding - Section 12.9.
New BSE Loan - means, the loan of up to $25,000,000 made to BSE pursuant to the
Credit Agreement dated as of the date hereof among BSE, the financial
institutions party thereto, and Bank of America, N.A. as Agent (as may be
amended from time to time, the "BSE Credit Agreement")
New BSE Loan Agent - means Bank of America, N.A., as agent for itself and the
other New BSE Loan Lenders, and any replacement or successor agent under the BSE
Credit Agreement.
New BSE Loan Lenders - means the financial institutions listed on the signature
pages of the BSE Credit Agreement and their respective successors and assigns.
SBQ Division EBITDA - means, for any period, the portion of the Consolidated
EBITDA for such period that is allocable to the Cleveland facility of the SBQ
Division, such allocation to be made in a manner consistent with the Company's
manner of allocation in respect thereof for the fiscal quarter ending on
December 31, 1999 and as set forth in the written material furnished to the
holders of the Notes on or before March 31, 2000.
Special Equity Issuance - has the meaning specified in the Intercreditor
Agreement (as in effect on the date hereof).
TNW Adjustment - means, for any period, the net after-tax effect of any of the
following expenses incurred during such period, but only to the extent that any
such expense had been deducted during such period in the calculation of net
income of the Company and its Subsidiaries as shown in the financial statements
for the Company and its Subsidiaries for such period prepared in accordance with
GAAP:
(w) any expense incurred pursuant to severance plans in effect on December 31,
1999 with respect to officers of the Company whose employment by the Company
ended prior to May 15, 2000 (excluding severance payments included in clause (y)
or (z) of Section 8.13), (x) non-cash expenses incurred by the Company in
connection with the shut down and discontinuance of operations, if any, of
American Steel & Wire, Inc.'s Cleveland facility or the shut down and
discontinuance of operations of the Company's Memphis facility, (y) cash
expenses incurred by the Company as a result of, or continuing subsequent to,
the shut down and discontinuance of operations at the Company's Memphis
facility, which are required to be expended by law or contract or are payable
pursuant to severance plans and policies in effect on December 31, 1999,
including any lease payments made after such shut down with respect to such
Memphis facility and (z) cash expenses incurred by the Company as a result of,
or continuing subsequent to, the shut down and discontinuance of operations, if
any, at American Steel & Wire, Inc.'s Cleveland facility which are required to
be expended by law or contract or are payable pursuant to severance plans and
policies in effect on December 31, 1999, including any lease payments made after
such shut down with respect to such Cleveland facility, provided that the amount
deducted pursuant to this clause (z), other than severance payments and ad
valorem property taxes, shall not exceed $500,000 for any individual month.
Unused Amount of Capital Expenditures - Section 8.14.
4.13 Amended Definitions.
The definitions in Section 11.1 of the following terms are deleted and the
following definitions are substituted therefor:
Consolidated EBITDA - means, for any period, the sum of (a)
Consolidated Net Income for such period, plus (b) the aggregate amount (without
duplication) of (i) taxes imposed on, or measured by, income or excess profits,
(ii) Consolidated Interest Expense, (iii) depreciation and amortization for such
period, (iv) any expense incurred pursuant to severance plans in effect on
December 31, 1999 with respect to officers of the Company whose employment by
the Company ended prior to May 15, 2000 (excluding severance payments included
in clause (ix) below in this definition), (v) any costs attributable to the
issuance by the Company of warrants in connection with the execution of the BSE
Credit Agreement (including amortization of debt issuance costs relating to the
issuance of such Warrants), (vi) amortization of debt expense, (vii) any amount
included in Consolidated Net Income that is allocable to a minority interest
owned in a Restricted Subsidiary by a Person that is not a Subsidiary, (viii)
non-cash expenses incurred by the Company in connection with the shut down and
discontinuance of operations, if any, at American Steel & Wire, Inc.'s Cleveland
facility or the shut down and discontinuance of operations of the Company's
Memphis facility, and (ix) cash expenses incurred by the Company as a result of,
or continuing subsequent to, the shut down and discontinuance of operations at
the Company's Memphis facility or the shut down and discontinuance of
operations, if any, at American Steel & Wire Inc.'s Cleveland facility which are
required to be expended by law or contract or are payable pursuant to severance
plans and policies in effect on December 31, 1999, including any lease payments
made with respect to such Cleveland facility or Memphis facility after such shut
down, provided that the amount added back pursuant to this clause (ix) with
respect to American Steel & Wire, Inc.'s Cleveland facility, other than
severance payments and ad valorem property taxes, shall not exceed $500,000 in
any individual month (to the extent, and only to the extent, that any such
amount in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) or (ix) was
deducted in the computation of Consolidated Net Income for such period), in each
case accrued for such period by the Company and the Restricted Subsidiaries,
determined on a consolidated basis for such Persons.
Consolidated EBITDAR - means, for any period, the sum of (a)
Consolidated EBITDA for such period, plus (b) Rental Expense for such period (to
the extent, and only to the extent, deducted in the computation of Consolidated
Net Income for such period and excluding any Rental Expense that was added back
in the calculation of such Consolidated EBITDA).
Consolidated Interest Expense - means, for any period, all interest
charges for such period accrued on or with respect to Debt of the Company and
the Restricted Subsidiaries (including, without limitation, amortization of debt
discount and imputed interest on Capitalized Lease obligations, but excluding
amortization of debt issuance costs relating to the issuance of the warrants
referred to in clause (v) of the definition of Consolidated EBITDA and
amortization of debt expense).
Intercreditor Agreement - means
(a) that certain Amended and Restated Collateral Agency and
Intercreditor Agreement dated as of the date hereof, among SouthTrust
Bank, National Association (as successor Collateral Agent to State
Street Bank and Trust Company), the Agent under the Credit Agreement,
the Banks, the L/C Issuers, the holders of the 1993 Notes, the holders
of the Notes, The Chase Manhattan Trust Company, National Association,
as successor to PNC Bank, National Association, as successor to PNC
Bank, Kentucky, Inc., in the capacity specified therein, First Union
National Bank, in the capacity specified therein, the Company and each
of the Restricted Subsidiaries identified on the signature pages
thereto, which agreement amends and restates an agreement initially
dated as of October 12, 1999, and/or
(b) that certain Collateral Agency and Intercreditor Agreement
dated as of the date hereof, among SouthTrust Bank, National
Association, the Agent under the Credit Agreement, the Banks, the L/C
Issuers, the holders of the 1995 Notes, the holders of the Notes, The
Chase Manhattan Trust Company, National Association, as successor to
PNC Bank, National Association, as successor to PNC Bank, Kentucky,
Inc., in the capacity specified therein, First Union National Bank, in
the capacity specified
<PAGE>
therein, the Company and each of the Restricted Subsidiaries
identified on the signature pages thereto, which agreement amends and
restates an agreement initially dated as of November 12, 1999,
in each case as amended, restated or otherwise modified from time to time. So
long as both such agreements shall remain in effect, the term "Intercreditor
Agreement" shall be deemed to be a collective reference to both such agreements.
If at any time only one of such agreements shall be in effect, the term
"Intercreditor Agreement" shall be deemed to be a reference to such agreement.
Restricted Subsidiary - means, at any time, a Subsidiary
(a) organized under the laws of the United States, Puerto Rico or
Canada or a jurisdiction thereof at such time,
(b) that conducts substantially all of its business and has
substantially all of its Property within the United States, Puerto Rico
and Canada at such time, and
(c) at least eighty percent (80%) (by number of votes) of each
class of Voting Stock of which and one hundred percent (100%) of all
other equity Securities of which are legally and beneficially owned by
the Company and its Wholly-Owned Restricted Subsidiaries at such time.
Subsidiary - means, at any time, a corporation, partnership, limited liability
company or other business entity of which the Company owns, directly or
indirectly, more than 50% (by number of votes) of each class of Voting Stock at
such time.
Voting Stock - means capital stock (or equivalent ownership interest) of any
class or classes of a corporation, partnership, limited liability company or
other business entity, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect corporate directors, managers or trustees (or
Persons performing similar functions).
4.14 Further Amendment of Definitions. The definition of Consolidated
Net Income is amended by deleting the text of clause (h) therefrom and
substituting "Intentionally Deleted" therefor.
4.15 Indemnification.
The following Section 12.9 is inserted after Section 12.8:
12.9. Indemnification.
(a) The Company shall and hereby agrees to indemnify, defend and hold
harmless each holder of Notes, the Collateral Agent and their
respective directors, trustees, officers, shareholders, agents,
employees and counsel (each referred to herein as an "Indemnified
Party") from and against any and all losses, claims, damages,
liabilities, deficiencies, judgments or expenses of every kind and
nature (including, without limitation, amounts paid in settlement,
court costs and the fees and disbursements of counsel incurred in
connection with any litigation, investigation, claim or proceeding
or any advice rendered in connection therewith) (the foregoing
items referred to herein as "Claims and Expenses") incurred by an
Indemnified Party arising out of or by reason of any suit, cause
of action, claim, arbitration, investigation or settlement,
consent decree or other proceeding (the foregoing referred to
herein as an "Indemnity Proceeding") which arise out of, or are in
any way related directly or indirectly to: (i) this Agreement, any
other Note Purchase Agreement, any of the other Financing
Documents, or the transactions contemplated thereby; (ii) the
purchase of Notes under any of the Note Purchase Agreements; (iii)
any actual or proposed use by the Company of the proceeds of the
Notes; (iv) the holders of the Notes having entered into this
Agreement and the other Note Purchase Agreements; (v) the fact
that the holders of the Notes are creditors of the Company and
have or are alleged to have information regarding the financial
condition, strategic plans or business operations of the Company
and the Subsidiaries; (vi) the fact that the holders of the Notes
are material creditors of the Company and are alleged to influence
directly or indirectly the business decisions or affairs of the
Company and the Subsidiaries or their financial condition; (vii)
the exercise of any right or remedy the holders of the Notes or
the Collateral Agent may have under this Agreement, the other Note
Purchase Agreements, or the other Financing Documents; provided,
however, that the Company shall not be obligated to indemnify any
Indemnified Party for any acts or omissions of such Indemnified
Party in connection with matters described in this subparagraph
(vii) that constitute gross negligence or willful misconduct;
(viii) any violation or non-compliance by the Company or any
Subsidiary of any law or regulation (including any Environmental
Protection Law) including, but not limited to, any Indemnity
Proceeding commenced by (A) the Internal Revenue Service or a
state taxing authority or (B) any Governmental Authority or other
Person under any Environmental Protection Law, including any
Indemnity Proceeding commenced by a Governmental Authority or
other Person seeking remedial or other action to cause the Company
or its Subsidiaries (or its respective properties) (or the holders
of the Notes or Collateral Agent (or their respective nominees) as
successors to the Company) to be in compliance with such
Environmental Protection Laws.
(b) This indemnification shall apply to all Indemnity Proceedings arising out
of, or related to, the foregoing whether or not an Indemnified Party is a named
party in such Indemnity Proceeding. In this connection, this indemnification
shall cover all costs and expenses of any Indemnified Party in connection with
any deposition of any Indemnified Party or compliance with any subpoena
(including any subpoena requesting the production of documents). This
indemnification shall, among other things, apply to any Indemnity Proceeding
commenced by other creditors of the Company or any Subsidiary, any shareholder
of the Company or any Subsidiary (whether such shareholder(s) are prosecuting
such Indemnity Proceeding in their individual capacity or derivatively on behalf
of the Company), any account debtor of the Company or any Subsidiary or by any
Governmental Authority.
(c) This indemnification shall apply to any Indemnity Proceeding arising during
the pendency of any bankruptcy proceeding filed by or against the Company and/or
any Subsidiary.
(d) An Indemnified Party may conduct its own investigation and defense of, and
may formulate its own strategy with respect to, any Indemnity Proceeding covered
by this Section and, as provided above, all costs and expenses incurred by the
Indemnified Party shall be reimbursed by the Company if (i) such investigation
and defense has been specifically authorized in writing by the Company, or (ii)
the named parties to any Indemnity Proceeding (including any impleaded parties)
include both the Company and such Indemnified Party and representation of both
the Company and such Indemnity Party by the same counsel would be inappropriate
due to actual or potential conflicts of interests. No action taken by legal
counsel chosen by an Indemnified Party in investigating or defending against any
such Indemnity Proceeding shall vitiate or in any way impair the obligations and
duties of the Company hereunder to indemnify and hold harmless each such
Indemnified Party; provided, however, that (i) if the Company is required to
indemnify an Indemnified Party pursuant hereto and (ii) the Company has provided
evidence reasonably satisfactory to such Indemnified Party that the Company has
the financial wherewithal to reimburse such Indemnified Party for any amount
paid by such Indemnified Party with respect to such Indemnity Proceeding, such
Indemnified Party shall not settle or compromise any such Indemnity Proceeding
without the prior written consent of the Company (which consent shall not be
unreasonably withheld or delayed).
(e) If and to the extent that the obligations of the Company hereunder are
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
(f) Subject to the immediately following subsection (g), the Company's
obligations hereunder shall survive any termination of this Agreement and the
other Financing Documents and the payment in full of the Notes, and are in
addition to, and not in substitution of, any other of their obligations set
forth in this Agreement or any other Financing Document to which it is a party.
Notwithstanding the foregoing, the Company shall have no obligation to any
Indemnified Party under the provisions of this Section with respect to Claims
and Expenses incurred or arising after the date (the "Cutoff Date") five years
following the indefeasible payment in full of all of the Notes and the
termination of this Agreement and the other Financing Documents in accordance
with their terms; provided, however, the foregoing limitation shall not apply to
Claims and Expenses (i) in respect of which an Indemnified Party has
specifically made written demand for indemnification under this Section prior to
the Cutoff Date or (ii) relating to alleged criminal acts of the Company, any
Subsidiary, or any of their respective officers, directors, employees and agents
or claims that the Company or any of its Subsidiaries (x) did not have the power
and authority to enter into and perform their obligations under the Financing
Documents or (y) acted wrongfully in entering into and performing their
obligations under the Financing Documents.
4.16 Attachment of Schedule 1.2A to Existing Note Purchase Agreement.
Schedule 1.2A attached hereto is hereby attached to the Existing Note
Purchase Agreement as Schedule 1.2A.
4.17 Pending Litigation .
The words "Except as otherwise disclosed in writing to the holders of
the Notes on or before May 15, 2000," are added to the beginning of Section 2.4.
5. CONDITIONS PRECEDENT
The grant of collateral pursuant to the BSE Collateral Documents will be
effective at the times that fully executed counterparts of the respective BSE
Collateral Documents are delivered to the grantee of the collateral. Any
warrants delivered pursuant to the BSE Credit Agreement will be effective when
they are delivered to the holders thereof (or to their special counsel). The
amendments set forth in Sections 2.1, 2.2 and 4 shall become effective upon the
satisfaction of the following conditions (the date of such effectiveness is
herein referred to as the "Effective Date"):
5.1 Certificates.
(a) Company Officer's Certificate. The Company shall have delivered to
the Noteholders (or their special counsel) a certificate signed by the
Chairman, the Vice Chairman, the President or the Executive Vice
President-Chief Financial Officer of the Company, dated the Effective Date,
certifying that (i) no Default or Event of Default under the Amended Note
Purchase Agreement exists and (ii) the representations and warranties set
forth in Section 3 (including those incorporated by reference from the 1999
Second Amendment and the BSE Credit Agreement) and in each of the other
Financing Documents are true and correct on the Effective Date.
(b) Company Secretary's Certificate. The Company shall have delivered
to the Noteholders a certificate signed by the Secretary or one of the
Assistant Secretaries of the Company, dated the Effective Date, certifying
as true and correct copies of the Company's charter and by-laws and the
resolutions attached thereto and other corporate proceedings relating to
the authorization, execution and delivery of each of the Financing
Documents to which the Company is a party.
(c) Subsidiary and BSE Secretary's Certificates. BSE and each other
Restricted Subsidiary entering into one or more of the Financing Documents
shall have delivered to the Noteholders a certificate signed by the
Secretary or one of the Assistant Secretaries of BSE or such other
Restricted Subsidiary, dated the Effective Date, certifying as true and
correct (with respect to Restricted Subsidiaries other than BSE) copies of
such Restricted Subsidiary's charter and by-laws and the resolutions
attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Financing Documents to which
such Restricted Subsidiary is a party and, with respect to BSE, certifying
as true and correct copies of BSE's operating agreement and the proceedings
taken by it relating to the authorization, execution and delivery of the
Financing Documents to which it is a party.
5.2 Opinions of Counsel.
The Noteholders shall have received opinions from
(a) Balch & Bingham LLP and Burr & Forman LLP, special counsel for the
Company, BSE and the other Restricted Subsidiaries, and
(b) special local counsel for the Company, BSE and the other
Restricted Subsidiaries, as applicable, in the States of Georgia,
Mississippi, and New York,
(c) each dated as of the Effective Date, substantially in the
respective forms set forth in Exhibit A1 and Exhibit A2, and as to such
other matters as the Noteholders may reasonably request. The Noteholders
also shall have received an opinion from Bingham Dana LLP, special counsel
for the Noteholders, in form and substance satisfactory to the Noteholders.
5.3 Amendment to 1993 Agreement.
The Company and the 1993 Noteholders shall have delivered to the Noteholders (or
their special counsel) a true and correct counterpart of the fully executed
Amendment to 1993 Agreement.
5.4 Seventh Amendment to Credit Agreement.
The Company, the Banks and the Agent shall have delivered to the Noteholders (or
their special counsel) a true and correct counterpart of the fully executed
Seventh Amendment to Credit Agreement, which shall be in form and substance
satisfactory to the Noteholders and their special counsel.
5.5 Amendment to Letter of Credit Documents.
The Company shall have delivered to the Noteholders (or their special counsel) a
true and correct counterpart of an Amendment to PNC Reimbursement Agreement,
which shall be in form and substance satisfactory to the Noteholders and their
special counsel.
5.6 Amendment to Intercreditor Agreement.
The Banks, the 1993 Noteholders, the L/C Issuers, SouthTrust Bank, National
Association, the Company, BSE, the Owner Trustee, the Indenture Trustee and each
of the Restricted Subsidiaries identified on the signature pages thereto, shall
have delivered to the Noteholders (or their special counsel) a fully executed
counterpart of the Amended and Restated Collateral Agency and Intercreditor
Agreement, in the form attached hereto as Exhibit B (the "Amended Intercreditor
Agreement").
5.7 Amendment to Memphis Lease Documents.
The Company shall have delivered to the Noteholders (or their special counsel) a
true and correct counterpart of the Waiver and Amendment No. 1 to the Melt Shop
Equipment Financing Documents, which shall be in form and substance satisfactory
to the Noteholders and their special counsel.
5.8 BSE Collateral Documents.
(a) Delivery of Documents. The Company shall have delivered to the
Collateral Agent (or its special counsel) a fully executed counterpart of
each of the BSE Collateral Documents, each duly executed by BSE, together
with assignments to the Collateral Agent from the Company of any of its
rights under such documents with respect to which the Company shall have
been granted any collateral or other rights, each of which documents and
assignments shall be in form acceptable to the Noteholders (or their
special counsel). The BSE Collateral Documents shall include, without
limitation, a mortgage and security agreement pursuant to which BSE grants
to the Collateral Agent, as security for the Secured Obligations, as
defined in the Intercreditor Agreement, a mortgage upon and security
interest in BSE's rolling mill and other fixed assets located in Jackson,
Mississippi and all of BSE's accounts receivable, inventory (wherever
located) and general intangibles, all whether now owned or hereafter
acquired.
(b) Perfection of Liens. BSE and the Company shall have executed and
delivered to the Collateral Agent all UCC-1 financing statements as are
necessary to perfect the Liens of the Company in the collateral granted to
the Company which may be perfected by the filing thereof and to evidence
the assignment thereof to the Collateral Agent.
(c) Title Matters. With respect to each of the mortgages or deeds of
trust included in the BSE Collateral Documents, the Company shall have
delivered or caused to be delivered to the Collateral Agent one or more
loan policies of title insurance, or commitments therefor, satisfactory to
the Noteholders (or their special counsel) and showing no exceptions to
title except as reasonably acceptable to the Noteholders (or their special
counsel).
(d) Certificates of Insurance. The Company shall have caused BSE to
deliver to the Noteholders (or their special counsel) certificates of
insurance evidencing the insurance required by the BSE Collateral
Documents, showing the Collateral Agent as loss payee (as its interest may
appear) thereunder.
(e) Taxes. All taxes, fees and other charges payable in connection
with the execution, delivery, recording, filing and registration of the BSE
Collateral Documents shall have been paid or provision for such payment
shall have been made to the reasonable satisfaction of the Noteholders (or
their special counsel).
5.9 Lien Searches.
The Noteholders (or their special counsel) shall have received Lien searches
showing that the Collateral (as defined in the BSE Collateral Documents) granted
by BSE pursuant to the BSE Collateral Documents is subject to no Liens other
than Liens permitted under Section 8.17(a)` of the Amended Note Purchase
Agreement.
5.10 New BSE Loan.
The BSE Credit Agreement shall have been executed and delivered by each of the
parties thereto and the conditions precedent to BSE receiving its initial loan
thereunder shall have been satisfied.
5.11 Payment of Special Counsel and Financial Advisor Fees.
Without limiting the provisions of Section 6.3, the Company shall have paid on
or before the Effective Date the fees, charges and disbursements of the
Noteholders' special counsel referred to in Section 5.2, and Nightingale &
Associates, LLC, in each case to the extent reflected in statements rendered to
the Company on or prior to the Effective Date.
5.12 Proceedings and Documents Satisfactory.
All opinions, certificates and other instruments and all proceedings taken in
connection with the execution and delivery of this Agreement and the
transactions contemplated hereby shall be reasonably satisfactory to the
Noteholders and their special counsel; and the Noteholders and their special
counsel shall have received copies of such documents and papers as may be
reasonably requested in connection therewith.
6. MISCELLANEOUS
6.1 Effect of Amendment.
If the foregoing is acceptable to you, please note your acceptance in the space
provided below. Upon the execution and delivery of this Agreement by each of the
Noteholders and the Company, the conditions set forth in Section 5 shall be
deemed satisfied or waived and the Existing Note Purchase Agreement shall be
deemed to be amended as set forth above. This Agreement shall be binding upon,
and shall inure to the benefit of, the permitted successors and assigns of the
parties hereto and the holders from time to time of the Notes.
6.2 No Legend Required.
Any and all notices, requests, certificates and other instruments including,
without limitation, the Notes, may refer to the Note Purchase Agreement or the
Note Purchase Agreement, in each case dated as of September 1, 1993 or as of
October 12, 1999, without making specific reference to this Second Amendment to
Note Purchase Agreement, but nevertheless all such references shall be deemed to
include this Second Amendment to Note Purchase Agreement unless the context
shall otherwise require.
6.3 Fees and Expenses.
Whether or not the transactions herein contemplated shall be consummated, the
Company agrees to pay directly all reasonable out-of-pocket travel expenses and
other reasonable out-of-pocket expenses of the Noteholders in connection with
the preparation, negotiation, execution and delivery of the Financing Documents
and the Amended Note Purchase Agreement, and the transactions contemplated
hereby and thereby, including, but not limited to, the reasonable fees and
disbursements of Bingham Dana LLP, the Noteholders' special counsel, and
Nightingale & Associates, LLC, financial advisor to the Noteholders and the 1993
Noteholders, photocopying costs, and so long as any Noteholder shall hold any of
the Notes, all such expenses relating to any amendments, waivers or consents
pursuant to the provisions of the Amended Note Purchase Agreement, including,
without limitation, any amendments, waivers or consents resulting from any
work-out, restructuring or similar events relating to the performance by the
Company and the Subsidiaries of their respective obligations under the Financing
Documents, the Amended Note Purchase Agreement and the Notes. The Company also
agrees that it will pay and save each Noteholder harmless against any and all
liability with respect to stamp and other similar taxes, if any, which may be
payable or which may be determined to be payable in connection with the
execution and delivery of the Financing Documents and this Agreement. The
Company agrees to protect and indemnify each Noteholder against any liability
for any and all brokerage fees and commissions payable or claimed to be payable
to any Person retained by the Company, the Restricted Subsidiaries, or any of
the Affiliates that are controlled by the Company in connection with the
transactions contemplated by this Agreement.
6.4 Survival.
All warranties, representations, certifications and covenants made by the
Company in this Agreement or in any certificate or other instrument delivered by
it or on its behalf under this Agreement shall be considered to have been relied
upon by the Noteholders and shall survive the execution of this Agreement,
regardless of any investigation made by or on behalf of the Noteholders. All
statements in any such certificate or other instrument shall constitute
warranties and representations of the Company under this Agreement.
<PAGE>
6.5 Duplicate Originals; Execution in Counterpart.
Two or more duplicate originals of this Agreement 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 Agreement may be executed in one or more
counterparts and shall be effective when at least one counterpart shall have
been executed by each party to this Agreement, and each set of counterparts
which, collectively, show execution by each such party to this Agreement shall
constitute one duplicate original.
6.6 Release of Claims.
The Company, for itself and all of its predecessors, successors and assigns,
acknowledges, affirms and represents that immediately prior to giving effect to
this Agreement, it is legally, validly and enforceably obligated to each of the
Noteholders under and pursuant to the Notes and the Existing Note Purchase
Agreement and that the Company has no defense, offset, counterclaim or right of
recoupment with regard to such obligations. Additionally, the Company for itself
and all of its predecessors, successors and assigns, does hereby fully, forever
and completely release and discharge each of the Noteholders and all of their
respective employees, officers, directors, trustees, shareholders, affiliates,
agents, attorneys, representatives, predecessors, successors and assigns
(collectively, the "Released Parties"), from any and all claims, demands,
liabilities, damages and causes of action of any kind whatsoever, whether based
on facts in existence prior to or as of the date hereof, whether known or
unknown, which the Company may now have or may have had at any time heretofore
or may have at anytime hereafter, whether for contribution or indemnity or
otherwise, and whether direct or indirect, fixed or contingent, liquidated or
unliquidated, arising out of or related in any way to any of the following: (a)
the Notes and the Existing Note Purchase Agreement and all documents relating
thereto or executed in connection therewith (the "Existing Note Documents"); and
(b) any action, inaction or omission by any of the Released Parties in
connection with the Existing Note Documents or the administration thereof.
6.7 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF NEW YORK.
[Remainder of page intentionally left blank; next page is
signature page.]
<PAGE>
If you are in agreement with the foregoing, please sign the
form of acceptance in the space provided below, whereupon the foregoing shall
become a binding agreement between you and the Company as of the date first
above written.
BIRMINGHAM STEEL CORPORATION
By: /s/ J. Daniel Garrett
----------------------
Name: J. Daniel Garrett
Title: Vice President - Finance
<PAGE>
Very truly yours,
PRINCIPAL LIFE INSURANCE COMPANY
(f/k/a Principal Mutual Life Insurance Company)
By: Principal Capital Management, LLC,
A Delaware limited liability company,
Its authorized signatory
By: /s/ Sarah J. Pitts
-------------------
Name: Sarah J. Pitts
Title: Counsel
By: /s/ James C. Fifield
---------------------
Name: James C. Fifield
Title: Counsel
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
By: /s/ Robert Bayer
-----------------
Name: Robert Bayer
Title: Investment Officer
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Mark W. Poeppelman
-----------------------
Name: Mark W. Poeppelman
Title: Associate Vice President
NATIONWIDE LIFE INSURANCE COMPANY (as successor to Employers
Life Insurance Company of Wausau)
By: /s/ Mark W. Poeppelman
-----------------------
Name: Mark W. Poeppelman
Title: Associate Vice President
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
LIFE INSURANCE COMPANY OF NORTH AMERICA
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
ACE PROPERTY AND CASUALTY INSURANCE COMPANY
By CIGNA Investments Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
CENTURY INDEMNITY COMPANY
By CIGNA Investments Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ Richard A. Strait
----------------------
Name: Richard A. Strait
Title: Its Authorized Representative
<PAGE>
qqqq AMERICAN UNITED LIFE INSURANCE COMPANY
By: /s/ Christopher D. Pahlke
--------------------------
Name: Christopher D. Pahlke
Title: Vice President Private Placements
THE STATE LIFE INSURANCE COMPANY
By American United Life Insurance Company, it's agent
By: /s/ Christopher D. Pahlke
--------------------------
Name: Christopher D. Pahlke
Title: Vice President Private Placements
AMERITAS LIFE INSURANCE CORP.
By: Ameritas Investment Advisors Inc., as Agent
By: /s/ Patrick J. Henry
---------------------
Name: Patrick J. Henry
Title: Vice President - Fixed Income Securities
ACACIA 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
MTL INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ John Leiviska
------------------
Name: John Leiviska
Title: Vice President
GUARANTEE RESERVE LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Marilyn Froelich
---------------------
Name: Marilyn Froelich
Title: Vice President
NATIONAL TRAVELERS LIFE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Joseph R. Betlej
---------------------
Name: Joseph R. Betlej
Title: Vice President
MINNESOTA LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Steven S. Nelson
---------------------
Name: Steven S. Nelson
Title: Vice President
THE RELIABLE LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Jeffrey R. Erickson
------------------------
Name: Jeffrey R. Erickson
Title: Vice President
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S)
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements -
for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and Counsel - for
Secretary
SUN LIFE ASSURANCE COMPANY OF CANADA
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements -
for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and Counsel - for
Secretary
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements -
for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and Counsel - for
Secretary
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY (formerly known as
Great Northern Insured Annuity Corporation)
By: /s/ Morian C. Mooers
---------------------
Name: Morian C. Mooers
Title: Investment Officer
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: Lincoln Investment Management, Inc.,
Its Attorney-In-Fact
By: /s/ Annette M. Teders
----------------------
Name: Annette M. Teders
Title: Vice President
FEDERATED LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Wayne R. Schmidt
---------------------
Name: Wayne R. Schmidt
Title: Vice President
FEDERATED MUTUAL INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Loren Haugland
-------------------
Name: Loren Haugland
Title: Vice President
<PAGE>
Exhibit No. 4.6
WARRANT AGREEMENT
Between
BIRMINGHAM STEEL CORPORATION
and
THE WARRANTHOLDERS PARTIES HERETO
Dated as of May 15, 2000
<PAGE>
BIRMINGHAM STEEL CORPORATION
1000 Urban Center Drive, Suite 300
Birmingham, Alabama 35242-2516
WARRANT AGREEMENT
Dated as of: May 15, 2000
THE WARRANTHOLDERS LISTED
IN ANNEX 1 HERETO:
Ladies and Gentlemen:
The undersigned, BIRMINGHAM STEEL CORPORATION, a Delaware corporation
(herein, together with its successors in title and assigns, called the
"Company"), proposes to issue to the Warrantholders listed on Annex 1 hereto
(herein, as more particularly defined in Article VIII below, called the
"Warrantholders"), Common Stock Purchase Warrants of the Company on the terms
and subject to the conditions contained in this Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
AUTHORIZATION OF WARRANT; REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Warrantholders as follows:
ss.1.01. Capitalization of Company. As more particularly set forth in
ss.1.07 below, the equity capital of the Company consists of (a) seventy-five
million (75,000,000) shares of authorized Common Stock, of which thirty-one
million sixty-four thousand five hundred thirty (31,064,530) shares are issued
and outstanding and (b) five million (5,000,000) shares of preferred stock, none
of which are outstanding. There are no other equity securities or options,
warrants, securities convertible to equity securities, registration rights, or
other rights (including, without limitation, rights to require the Company or
any Subsidiary to repurchase or otherwise acquire or retire any equity interests
of the Company), existing with respect to the Common Stock or other equity
interests of the Company except as listed on Schedule I attached hereto.
ss.1.02. Authorization of Warrants. The Company has duly and properly
authorized the issuance of (i) the Company's Common Stock Purchase Warrants, to
be substantially in the form of Exhibit A attached hereto (the "Warrants"),
evidencing rights to purchase from the Company three million (3,000,000) shares
of Common Stock in the aggregate (subject to adjustment as provided therein);
and (ii) the Common Stock issuable by the Company upon exercise of the Warrants.
As used herein the term "Acquired Equity Interests" shall mean the Common Stock
and other equity interests issuable or issued upon exercise of the Warrants.
ss.1.03. Restrictions. Neither the Company nor any Subsidiary is a
party to any contract or agreement that restricts its right or ability to issue
Capital Stock, or Rights in respect of Capital Stock, of the Company, as the
case may be, other than the agreements listed on Part 1 of Schedule I, none of
which restricts the issuance of the Warrants or the Equity Interests or the
execution and delivery of, or the compliance with, this Agreement by the
Company.
ss.1.04. Due Authorization; Enforceability.
--- ------------- --------------
(a) Issue is Legal and Authorized. The issuance and delivery
of the Acquired Securities, the execution and delivery by the Company of each of
the Fundamental Documents to which it is a party and compliance by the Company
with all of the provisions of such Fundamental Documents:
(i) is and will be within the corporate powers of the
Company; and -
(ii) is and will be legal under current law and does
not and will not conflict with, result in any breach of any of the
provisions of, constitute a default under, or result in the creation of
any lien upon any property of the Company or any Subsidiary under the
provisions of:
(A) any agreement, charter instrument, bylaw
or other instrument to which the Company or any Subsidiary is
a party or by which the Company or any Subsidiary is or may be
bound;
(B) any order, judgment, decree, or ruling of any
court, arbitrator or - governmental authority currently
applicable to the Company or any of its Property; or
(C) any statute or other rule or regulation
of any governmental authority currently applicable to the
Company or any of its Property.
(b) Obligations are Enforceable. The Company has duly
authorized by all necessary action on its part each of the Fundamental
Documents. Each such Fundamental Document has been executed and delivered by one
or more duly authorized officers of the Company, and constitutes a legal, valid
and binding obligation of the Company enforceable in accordance with its terms,
except that:
(i) the enforceability thereof may be limited by
applicable bankruptcy, reorganization, arrangement, insolvency,
moratorium, or other similar laws affecting the enforceability of
creditors' rights generally and subject to the availability of
equitable remedies; and
(ii) rights to indemnity and contribution contained
therein may be limited by applicable law or public policy.
ss.1.05. Governmental Consent to Issue.
------------ ------- -- -----
(a) Neither the nature of the Company nor any of its
businesses or properties, nor any relationship between the Company and any other
Person, nor any circumstance in connection with the offer, issuance or delivery
of the Acquired Securities and the execution and delivery of any Fundamental
Document, nor the performance of the obligations of the Company hereunder or
thereunder, is, under current law, such as to require a consent, approval or
authorization of, or pre-filing, registration or qualification with, any
governmental authority on the part of the Company as a condition thereto, except
for such consents, approvals, authorizations, pre-filings, registrations and
qualifications described on Part 2 of Schedule I (none of which require consent
or any response from such governmental authority), all of which have been
obtained on or prior to the Closing Date.
(b) Neither issuance of the Acquired Securities nor the
incurrence of the obligations represented thereby, nor the execution and
delivery of any Fundamental Document and the performance of the obligations of
the Company hereunder and thereunder:
(i) is or will be subject to regulations under the
Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Transportation Acts of the United
States of America (49 U.S.C.), as amended, or the Federal Power Act, as
amended; or
(ii) violates, under current law, any provision of
any statute or other rule or regulation of any governmental authority
applicable to the Company.
ss.1.06. Private Offering of Warrants.
------- -------- -- --------
(a) Number of Offerees. Neither the Company nor any other
Person acting on behalf of the Company has offered any of the Warrants or any
security of the Company similar to the Warrants for sale to, or solicited offers
to buy any thereof from, or otherwise approached or negotiated with respect
thereto with, any prospective purchaser, other than the Warrantholders within
the six (6) month period prior to the Closing Date.
(b) Conduct of Issue. Neither the Company nor any Person
acting on behalf of the Company in connection with the transactions contemplated
by the Fundamental Documents (including, without limitation, the issue of the
Warrants) has engaged in any conduct or entered into any agreements or
understanding so as to subject the transactions contemplated by the Fundamental
Documents to the registration provisions of Section 5 of the Securities Act, the
provisions of the Trust Indenture Act of 1939, as amended, or to the
registration, qualification or other similar provisions of any securities or
"blue sky" law of any applicable state.
ss.1.07. Capitalization.
--------------
(a) Capitalization of the Company. Part 3 of Schedule I
correctly sets forth, after giving effect to the issuance of the Warrants and
the consummation of all other transactions contemplated by this Agreement on the
Closing Date:
(i) the authorized and outstanding shares of the
Capital Stock and other Securities of the Company (specifying the type,
class or series of all such Capital Stock and other securities and
whether such Capital Stock and other Securities are voting or
non-voting);
(ii) all Rights, together with descriptions of the
terms thereof; and
(iii) all obligations (contingent or otherwise) of
the Company to repurchase or otherwise acquire or retire any Rights or
shares of Capital Stock of the Company.
All such outstanding shares of Capital Stock have been duly authorized and
validly issued and are fully paid, and non-assessable. There are no preemptive
rights, subscription rights, or other contractual rights similar in nature to
preemptive rights with respect to any Capital Stock of the Company.
(b) Stockholders Agreements. To the best knowledge of the
Company, other than as specified on Part 4 of Schedule I, there is no agreement
or understanding between or among the holders of Rights or Capital Stock of the
Company regarding the Capital Stock of the Company. The Company has provided
each Warrantholder (or their special counsel) with true, accurate and complete
copies of all agreements referred to in Schedule I.
ARTICLE II
ISSUANCE OF WARRANTS
ss.2.01. Issuance of Warrants. At the Closing hereunder, the Company
will issue to each Warrantholder the Warrants to purchase the number of shares
of Common Stock set forth next to its name on Annex I hereto. The Warrants will
be exercisable on or prior to May 15, 2010 at a price per share of three dollars
($3.00), subject to adjustment as set forth therein (the "Exercise Price").
ss.2.02. Acknowledgements of the Company and the Warrantholders.
---------------- -- --- ------- --- ------------------
(a) The Company and the Warrantholders understand, acknowledge
and agree that the Company is entering into this Agreement in order to induce
certain of the Warrantholders to provide the BSE Financing. It is the intention
of the Company and the Warrantholders, and the Company and the Warrantholders
hereby agree, that the value of the Warrants as of the date hereof is (i)
additional compensation ("Additional Compensation") to Warrantholders for
agreeing to the BSE Financing on the terms applicable to such BSE Financing and
(ii) Eight Million Two Hundred Fifty Thousand Dollars ($8,250,000) in the
aggregate of all of the Warrants.
(b) The Company and the Warrantholders understand, acknowledge
and agree that neither the Warrantholders nor any of the directors, trustees or
employees of the Warrantholders have rendered or agreed to render any services
to the Company in connection with the issuance of the Warrants or in connection
with the BSE Financing.
(c) The Company agrees with the Warrantholders that neither
the Company nor any of its Subsidiaries will take any action for tax or
accounting purposes which is in any respect inconsistent with the understandings
and agreements set forth in this ss.2.02.
ss.2.03 Legend. Each certificate or instrument, if any, representing or
evidencing any Acquired Securities shall bear a legend in or substantially in
the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
EXEMPTION FROM SUCH REGISTRATION."
ss.2.04 Registration Books. The Company will keep or cause to be kept
at its office maintained at the address of the Company set forth on the first
page hereof or at such other office of the Company in the United States of
America of which the Company shall have given notice to each Warrantholder,
books for registration and transfer of the Warrants. Such books shall show the
names and addresses of the respective holders of the Warrants, the date, the
registration number and the number of Warrant Shares set forth on the face of
each certificate or document (a "Warrant Certificate") representing or
evidencing the Warrants held by each such holder. Any Warrantholder may review
and, at such Warrantholder's expense, make photocopies of, such books during
business hours upon reasonable notice to the Company.
ss.2.05 Effect of Issuance in Registered Form. Every holder of a
Warrant Certificate by accepting the same consents and agrees with the Company
and with every other Warrantholder that:
(a) the Warrant Certificates are transferable only on the
registry books of the Company if surrendered at the office of the Company
referred to in ss.2.04 hereof, accompanied by a duly executed instrument of
assignment and payment of any applicable transfer tax or stamp tax; and
(b) the Company and each Warrantholder may deem and treat the
person in whose name each Warrant Certificate is registered as the absolute
owner thereof and of the Warrants evidenced thereby (notwithstanding any
notations of ownership or writing on the Warrant Certificates made by anyone
other than the Company) for all purposes whatsoever, and neither the Company nor
any Warrantholder shall be affected by any notice to the contrary.
ARTICLE III
THE CLOSING
The closing under this Agreement (the "Closing") will take place at the
offices of Alston & Bird, at 10:00 a.m., local time, on May 15, 2000, or at such
other time and on such other date or place as may be mutually agreed upon in
writing by the Warrantholders and the Company. The date of the Closing is herein
called the "Closing Date." At the Closing, the Company will (among other things)
deliver to the Warrantholders the Warrants to be issued to the Warrantholders
hereunder.
ARTICLE IV
REPRESENTATIONS OF The Warrantholders
Each of the Warrantholders represents and warrants to the Company with
respect to itself, severally and not jointly, that as of the Closing Date:
ss.4.01. Investment Representations.
---------- ---------------
(a) Such Warrantholder is acquiring the Warrants from the
Company in accordance with the terms hereof for its own account without a view
to any distribution thereof in violation of the Securities Act, but, subject,
nevertheless, to any requirement of law that the disposition of its property
shall at all times be within its control. The Warrantholders have been informed
and understand that the Acquired Securities have not been registered pursuant to
the provisions of Section 5 of the Securities Act and must be held indefinitely
unless such Securities are subsequently registered under the provisions of the
Securities Act or an exemption from such registration is available.
(b) Such Warrantholder has been furnished with, or has had
access to, such information concerning the Company and its Subsidiaries, and
such opportunity to raise questions of officers of the Company, as it has deemed
necessary or appropriate in order to enable it to make an informed investment
decision with respect to the acquisition of the Warrants by it. Such
Warrantholder has such knowledge and experience in financial matters that it is
capable of evaluating the merits and risks of its investment in the Acquired
Securities. Such Warrantholder's financial condition is such that it is able to
bear all economic risks of investment in the Acquired Securities, including a
complete loss of its investments therein and the risks of holding the Acquired
Securities for an indefinite period of time.
ARTICLE V
COVENANTS OF COMPANY
The Company hereby covenants to the Warrantholders that, from the
Closing Date and for so long as any of the Warrants remain outstanding, except
as otherwise expressly permitted or provided, in any particular instance, by a
written Special Warrantholders Consent:
ss.5.01. Financial Statements, Certificates and Information. The
Company will deliver or cause to be delivered to each of the Warrantholders all
of the financial statements, reports and other information required to be
delivered by BSE or the Company pursuant to the Loan Agreement, the Company
Credit Agreement, and the Note Purchase Agreement, in each case when such
financial statements, reports and other information is provided to the lenders
or holders of notes under such agreements.
ss.5.02. Notice of Litigation. If (a) any action, suit, proceeding or
investigation by or against the Company or any of its Subsidiaries shall be
instituted in or before any court, governmental or regulatory body, agency,
commission or official, board of arbitration or arbitrator or shall be
threatened, and the outcome of any such action, suit, proceeding or
investigation is reasonably likely to materially affect the present or future
financial condition, business, operations or prospects of the Company or of any
of its Subsidiaries, or (b) any material development, not previously disclosed
by the Company to the Warrantholders in writing, shall occur in any such action,
suit, proceeding or investigation, then, promptly (and, in any event, within
thirty (30) days) after the Company shall have first become aware of such
action, suit, proceeding or investigation or of the occurrence of such
development, the Company will furnish to each of the Warrantholders a written
notice setting forth brief particulars of such action, suit, proceeding,
investigation or development.
ss.5.03. Inspection; Visitation Rights.
----------- ---------- ------
(a) The Company will permit any of the duly authorized
representatives of any Warrantholder to visit and inspect any of the assets or
properties now or at any time hereafter owned or held under lease by the Company
or any of its Subsidiaries, and, on the request of any Warrantholder, to examine
the books of account, records, reports and other papers (and to make copies
thereof and to take extracts therefrom) of the Company or any of its
Subsidiaries and to discuss the affairs, finances and accounts of the Company or
any of its Subsidiaries with the directors, officers, agents and independent
accountants of the Company and its Subsidiaries, all at such times and as often
as any Warrantholder may reasonably request, but subject to any requirements and
limitations of applicable securities laws.
(b) The Company will at all times allow, or cause to be
allowed, any individual designated by a Special Majority of the Warrantholders
to attend all meetings of the stockholders of the Company. The individual so
designated will be furnished with prior notice of each of such meetings and will
also be furnished with copies of all other written notices, all written
information, all financial statements, business plans and projections, and all
other reports, memoranda and documents of any kind from time to time furnished
to stockholders of the Company, subject to any requirements and limitations of
applicable securities laws. All such notices, information, reports and other
documents will be furnished to the individual so designated not later than the
same are furnished to stockholders of the Company.
ss.5.04. Issuance of Preferred Equity Interests, etc.
-------- -- --------- ------ --------- ---
(a) The Company will not at any time after the Closing Date
issue (whether by way of a dividend payment or otherwise), sell or grant to any
Person or Persons (i) any Preferred Equity Interests (as defined in ss.5.04(b)
hereof), (ii) any rights in respect of Preferred Equity Interests, or (iii) any
options, warrants or any other rights to acquire any Preferred Equity Interests
unless, in each case, the Company shall have received consideration at least
equal to the fair market value (determined in good faith by the Board of
Directors of the Company) of the Preferred Equity Interests, rights, options or
warrants so issued, sold or granted, determined in each case as of the date of
such issue, sale or grant. The Board of Directors of the Company will act in all
respects as a fiduciary with respect to the interests of each holder of a
Warrant, in each case as if such holder directly held the Common Stock into
which such Warrant was exercisable.
(b) As used in this Article V, the term Preferred Equity
Interests shall mean: any class or any series of any class of the equity
interests of the Company: (A) which shall be entitled, upon any distribution of
any assets of the Company, whether by dividend or by liquidation or by
redemption, to any preference ranking prior or superior to the Common Stock; or
(B) which shall be entitled, upon any redemption of any of such equity
interests, whether at the option of the Company, at the option of the holders
thereof, or upon the happening of any specified events, to any preference in
redemption payments ranking prior or superior to the Common Stock; or (C) which
shall be convertible into, or exchangeable for, whether at the option of the
Company, at the option of the holders thereof, or upon the happening of any
specified events or conditions, any Preferred Equity Interests of any class or
series.
ss.5.05. Amendments to Charter Documents; etc. Without limiting the
obligations of the Company set forth in ss.5.04(a) above, the Company will not
at any time cause or permit the Certificate of Incorporation or By-laws of the
Company to be modified, amended or supplemented so as: (a) to authorize or
create any new class or any new series of any class of the equity interests of
the Company which constitutes Preferred Equity Interests; or (b) to reclassify
the authorized equity interests of the Company of any class or of any series of
any class, by changing the designations, preferences, or relative,
participating, optional, or other special rights of the equity interests, or the
qualifications, limitations or restrictions of such rights; or (c) to alter,
change or abolish any of the powers, preferences or rights of any of the equity
interests of the Company of any class or of any series of any class of such
equity interests; or (d) to create any powers, preferences or rights in respect
of any of the equity interests of the Company of any class or of any series of
any class; or (e) to amend, repeal, abolish or modify any term or provision of,
or add any term or provision to, any Article or Section of the Certificate of
Incorporation or By-laws of the Company; if any such action of the kind
described in this ss.5.05 would either (1) change or otherwise affect any of the
powers, designations, preferences, privileges or rights of the Acquired Equity
Interests or any of the restrictions provided for the benefit of the Acquired
Equity Interests or (2) result, directly or indirectly, in the failure of the
Company or the Board of Directors of the Company to perform its obligations set
forth in ss.5.04(a) above.
ss.5.06. Compliance with Agreements. The Company shall comply with all
its covenants, agreements and obligations in the Company Credit Agreement and
Note Purchase Agreement, and the Company shall cause BSE to comply with all its
covenants, agreements and obligations in the Loan Agreement.
ARTICLE VI
REGISTRATION RIGHTS
The Company hereby grants to the Warrantholders certain rights to
participate with the Company in any registration by the Company of Acquired
Equity Interests under the Securities Act. The provisions governing such
registration rights are set out in this Article VI. The Company and the
Warrantholders hereby absolutely and unconditionally agree to be bound and
governed by, and specifically make and adopt, all of the terms and provisions
contained in this Article VI.
ss.6.01. Definitions. As used in this Article VI:
-----------
(a) the term "Commission" shall mean the Securities and
Exchange Commission; - ----------
(b) the term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, or any federal statute or
code which is a successor thereto;
(c) the terms "Form S-1", "Form S-2" and "Form S-3"
shall mean the forms so designated, promulgated by the
Commission for registration of securities under the
Securities Act, and any forms succeeding to the functions of
such forms, whether or not bearing the same designation;
(d) the term "Holders" shall mean, collectively, all
persons holding the Acquired Securities, and the term
"Holder" shall mean any one of the Holders; ------
(e) the term "Majority of Registrable Securities" shall
mean, in relation to any registration, more than sixty-six
and two-thirds percent (66 2/3%) of all Registrable
Securities included or to be included in such registration;
(f) the terms "register", "registered" and
"registration" shall refer to a registration effected by
preparing and filing a registration statement in compliance
with the Securities Act and the declaration or ordering by
the Commission of effectiveness of such registration
statement;
(g) the term "Registrable Securities" shall mean, in
relation to the Holders at any particular time: (A) all
equity interests issuable upon conversion of or in exchange
for or upon exercise of rights under any Acquired Equity
Interests; and (B) all Acquired Equity Interests held of
record at such time by Holders; as to any particular
Registrable Securities once issued, such interests and
Acquired Equity Interests shall cease to be Registrable
Securities:
(i) when a registration statement with respect to the
sale of such interests and Equity Interests shall have
become effective under the Securities Act and such
Securities have been disposed of in accordance with such
registration statement;
(ii) when they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision)
under the Securities Act;
(iii) when they shall have been otherwise transferred
and subsequent disposition of them shall not require registration or
qualification under the Securities Act or any similar state law then in
force; or
(iv) when they shall have ceased to be outstanding or
issuable upon exercise of the Warrants;
(h) the term "Rule 144" shall mean Rule 144 issued by the
Commission under the Securities Act, or any subsequent rule pertaining to the
disposition of securities without registration;
(i) the term "Securities Act" shall mean the Securities Act
of 1933, as amended, or any federal statute or code which is a
successor thereto;
(j) the terms "underwritten registration" or "underwritten
offering" shall refer to any registration in which securities of the Company are
sold or to be sold pursuant to a firm commitment underwriting; and
(k) a Holder shall, for all purposes of this Article VI,
unless the context shall otherwise require, be deemed to hold, at any particular
time, all equity interests issuable upon conversion of or in exchange for or
upon exercise of rights under all Acquired Securities or other securities
(including, without limitation, options and warrants) of the Company held of
record by such Holder at such time.
ss.6.02. Demand Registration.
------ ------------
(a) Requests for Demand Registration.
- -------- --- ------ ------------
(i) Subject to the limitations contained in the
following paragraphs of this ss.6.02, the Holders of not less than
sixty-six and two-thirds percent (66-2/3%) of the Registrable
Securities at any time outstanding may at any time and from time to
time give to the Company, pursuant to this clause (i), a written
request for the registration by the Company under the Securities Act of
all or any part of the Registrable Securities of such Holders (such
registration being herein called a "Demand Registration"). Within ten
(10) days after the receipt by the Company of any such written request,
the Company will give written notice of such registration request to
all Holders of Registrable Securities.
(ii) Subject to the limitations contained in the
following paragraphs of this ss.6.02, after the receipt of each such
written request for a Demand Registration, (A) the Company will be
obligated and required to include in such Demand Registration all
Registrable Securities with respect to which the Company shall receive
from Holders of Registrable Securities, within thirty (30) days after
the date on which the Company shall have given to all Holders a written
notice of registration request pursuant to ss.6.02(a)(i) hereof, the
written requests of such Holders for inclusion in such Demand
Registration, and (B) the Company will use its best efforts in good
faith to effect promptly the registration of all such Registrable
Securities. All written requests made by Holders of Registrable
Securities pursuant to this clause (ii) will specify the number of
shares of Registrable Securities to be registered and will also specify
the intended method of disposition thereof. Such method of disposition
shall, in any case, be an underwritten offering if an underwritten
offering is requested by Holders of a Majority of Registrable
Securities to be included in such Demand Registration.
(b) Limitations on Demand Registration.
- ----------- -- ------ ------------
(i) The Holders of Registrable Securities will be
entitled to require the Company to effect one (1) and only one (1)
Demand Registration pursuant to ss.6.02(a) hereof.
(ii) Any registration initiated by Holders of
Registrable Securities as a Demand Registration pursuant to ss.6.02(a)
hereof shall not, for purposes of this ss.6.02, count as a Demand
Registration unless and until such registration shall have become
effective and all Registrable Securities included in such registration,
and which were requested to be included for sale by the holder thereof,
shall have been actually sold; provided, however, that such a Demand
Registration shall count as a Demand Registration if such shares are
withdrawn by any such holder from an offering pursuant to an effective
registration for reasons other than a request to so withdraw made by
the Company or any underwriter of such offering.
(iii) The Company shall not be obligated or required
to effect any Demand Registration of any Registrable Securities
pursuant to ss.6.02(a) hereof during the period commencing on the date
falling sixty (60) days prior to the Company's estimated date of filing
of, and ending on the date sixty (60) days following the effective date
of, any registration statement pertaining to any underwritten
registration initiated by the Company, for the account of the Company,
if the written request of Holders for such Demand Registration pursuant
to ss.6.02(a)(i) hereof shall have been received by the Company after
the Company shall have given to all Holders of Registrable Securities a
written notice stating that the Company is commencing an underwritten
registration initiated by the Company; provided, however, that the
Company will use its best efforts in good faith to cause any such
registration statement to be filed and to become effective as
expeditiously as shall be reasonably possible.
(c) Effective Registration - Expenses. In any registration
initiated by the Holders as a Demand Registration pursuant to ss.6.02(a) hereof,
the Company will pay all Registration Expenses (which does not include
underwriters' commissions and discounts as provided in the definition thereof)
of each such registration regardless of whether such registration constitutes a
Demand Registration for purposes of this ss.6.02.
(d) Limitation on Rights to Piggyback on Demand
Registrations.
(i) Neither the Company nor any of its
securityholders (other than Holders of Registrable Securities in their
capacity as Holders) shall have the right or otherwise be entitled to
include any of the Company's securities in any registration initiated
by Holders of Registrable Securities as a Demand Registration pursuant
to ss.6.02(a) hereof, unless (A) such securities are of the same class
as the Registrable Securities to be included in such Demand
Registration, (B) the Holders of a Majority of Registrable Securities
to be included in such Demand Registration shall have given to the
Company the prior written consent of such Holders for such inclusion,
and (C) if such Demand Registration is an underwritten offering, the
Company or (as the case may be) such securityholders shall have duly
and properly agreed in writing to sell their securities on the same
terms and conditions as shall apply to the Registrable Securities to be
included in such Demand Registration.
(ii) The Company will not grant or agree to grant to
any persons any registration rights which will conflict or be
inconsistent in any respect with any of the provisions of clause (i) of
this ss.6.02(d). In the event of any such conflict or inconsistency,
the provisions of such clause (i) shall in any case prevail and be
controlling.
(e) Priority on Demand Registrations. If any Demand
Registration or any registration effected pursuant to ss.6.04 hereof is an
underwritten offering, and the managing underwriters shall give written advice
to the Company and the Holders of Registrable Securities to be included in such
registration that, in the reasonable opinion of such managing underwriters,
marketing factors require a limitation on the total number of securities to be
underwritten (in this paragraph (e) called the "Underwriters' Maximum Number"),
then: (i) the Company will be obligated and required to include in such
registration that number of Registrable Securities requested by the Holders
thereof to be included in such registration which does not exceed the
Underwriters' Maximum Number, and such number of Registrable Securities shall be
allocated pro rata among the Holders of such Registrable Securities on the basis
of the number of Registrable Securities requested to be included therein by each
such Holder; (ii) if the Underwriters' Maximum Number exceeds the number of
Registrable Securities requested by the Holders thereof to be included in such
registration, then the Company will be entitled to include in such registration
that number of securities which shall have been requested by the Company to be
included in such registration for the account of the Company and which shall not
be greater than such excess; and (iii) if the Underwriters' Maximum Number
exceeds the sum of the number of Registrable Securities which the Company shall
be required to include in such Demand Registration and the number of securities
which the Company proposes to offer and sell for its own account in such
registration, then the Company may include in such registration that number of
other securities which persons (other than the Holders as such) shall have
requested be included in such registration and which shall not be greater than
such excess.
(f) Selection of Underwriters. If any Demand Registration or
any registration effected pursuant to ss.6.04 hereof is an underwritten
offering, or a best efforts underwritten offering, the investment bankers and
managing underwriters in such registration will be selected by the Holders of a
Majority of Registrable Securities to be included in such registration.
ss.6.03. Piggyback Registrations.
--------- -------------
(a) Rights to Piggyback.
- ------ -- ---------
(i) If (and on each occasion that) the Company
proposes to register any of its securities under the Securities Act,
either for the Company's own account or for the account of any of its
securityholders, on a form which would permit registration of
Registrable Securities for resale by Holders thereof to the public
under the Securities Act (each such registration being herein called a
"Piggyback Registration"), the Company will give written notice to all
Holders of Registrable Securities of the Company's intention to effect
such Piggyback Registration not later than the earlier to occur of (A)
the tenth (10th) day following the receipt by the Company of notice of
exercise of any registration rights by any persons, and (B) sixty (60)
days prior to the anticipated filing date of such Piggyback
Registration.
(ii) Subject to the provisions contained in
paragraphs (c) and (d) of this ss.6.03 and in the last sentence of this
clause (ii), (A) the Company will be obligated and required to include
in each Piggyback Registration all Registrable Securities with respect
to which the Company shall receive from Holders of Registrable
Securities, within thirty (30) days after the date on which the Company
shall have given written notice of such Piggyback Registration to all
Holders of Registrable Securities pursuant to ss.6.03(a)(i) hereof, the
written requests of such Holders for inclusion in such Piggyback
Registration, and (B) the Company will use its best efforts in good
faith to effect promptly the registration of all such Registrable
Securities. The Holders of Registrable Securities shall be permitted to
withdraw all or any part of the Registrable Securities of such Holders
from any Piggyback Registration at any time prior to the effective date
of such Piggyback Registration. The Company will not be obligated or
required to include any Registrable Securities in any registration
effected solely to implement an employee benefit plan or a transaction
to which Rule 145 of the Commission is applicable.
(iii) If any Piggyback Registration is an
underwritten primary registration initiated by the Company, all persons
whose securities are included in such Piggyback Registration shall be
obligated to sell their securities on the same terms and conditions as
shall apply to the securities being issued and sold by the Company. If
any Piggyback Registration is an underwritten secondary registration
initiated by holders of the Company's securities, all persons whose
securities are included in such Piggyback Registration shall be
obligated to sell their securities on the same terms and conditions as
shall apply to the securities being sold by the holders who initiated
the underwritten secondary registration.
(b) Piggyback Registration Expenses. The Company will pay all
Registration Expenses (which does not include underwriter's commissions and
discounts as provided in the definition thereof) of each Piggyback Registration
attributable to Registrable Securities or otherwise incurred or sustained in
connection with or arising out of the inclusion in each such Piggyback
Registration of Registrable Securities.
(c) Priority on Primary Registration. If a Piggyback
Registration is an underwritten primary registration initiated by the Company,
and the managing underwriters shall give written advice to the Company that, in
the reasonable opinion of such managing underwriters, marketing factors require
a limitation on the total amount of securities to be underwritten (in this
paragraph (c) called the "Underwriters' Maximum Number"), then: (A) the Company
shall be entitled to include in such registration that amount of securities
which the Company proposes to offer and sell for its own account in such
registration and which does not exceed the Underwriters' Maximum Number; (B) the
Company will be obligated and required to include in such registration that
amount of Registrable Securities which shall have been requested by the Holders
thereof to be included in such registration which, when added to the number of
securities included in such registration for the account of the Company, does
not exceed the Underwriters' Maximum Number, and such amount of Registrable
Securities shall be allocated pro rata among the Holders of such Registrable
Securities on the basis of the amount of Registrable Securities requested to be
included therein by each such Holder; and (C) if the Underwriters' Maximum
Number exceeds the sum of the amount of Registrable Securities which the Company
shall be required to include in such registration and the amount of securities
which the Company proposes to offer and sell for its own account in such
registration, then the Company may include in such registration that amount of
other securities which persons (other than the Holders as such) shall have
requested be included in such registration and which shall not be greater than
such excess.
(d) Priority on Secondary Registrations. If any Piggyback
Registration is an underwritten secondary registration initiated by holders of
the Company's securities, and the managing underwriters shall give written
advice to the Company that, in the reasonable opinion of such managing
underwriters, marketing factors require a limitation on the total amount of
securities to be underwritten (in this paragraph (d) called the "Underwriters'
Maximum Number"), then: (i) the Company will be obligated and required to
include in such registration, to the extent of the Underwriters' Maximum Number,
the securities requested to be included therein by the holders initiating such
registration, and such securities shall be allocated among the holders of such
securities in such proportions as the Company and such holders may agree, and
(ii) if the Underwriters' Maximum Number exceeds the amount of securities to be
included in such registration by holders initiating such registration, then the
Company will be obligated and required to include, to the extent of such excess,
the Registrable Securities requested to be included in such registration, and
such securities shall be allocated pro rata among the Holders of such
Registrable Securities on the basis of the amount of Registrable Securities
requested to be included therein by such respective Holders.
(e) Selection of Underwriters. In any Piggyback Registration,
the Company shall (unless the Company shall otherwise agree) have the right to
select the investment bankers and managing underwriters in such registration.
ss.6.04. Lockup Agreements.
------ ----------
(a) Restrictions on Public Sale by Holders of Registrable
Securities. Each Holder of Registrable Securities, any of whose Registrable
Securities are included in any underwritten registration of the Company's
securities, if the Company or the managing underwriters so request in connection
with such registration, will not, without the prior written consent of the
Company or such underwriters, effect any public sale or other distribution of
Registrable Securities, including any sale pursuant to Rule 144, during the
seven (7) days prior to, and during the ninety (90) day period commencing on,
the effective date of such underwritten registration, except in connection with
such underwritten registration, provided that each officer and director of the
Company and each holder of more than one percent (1%) of the issued and
outstanding Registrable Securities shall have entered into a similar agreement
restricting his or its ability to make such public sales and distributions.
Notwithstanding the foregoing, no Holder shall be required to refrain from
making such public sale or other distribution to the extent that such Holder is
prohibited by applicable law or exercise of fiduciary duties from agreeing to
withhold Registrable Securities for sale or is acting in its capacity as a
fiduciary or investment advisor. Without limiting the scope of the term
"fiduciary", a Holder shall be deemed to be acting as a fiduciary or an
investment advisor if its actions or the Registrable Securities proposed to be
sold are subject to the Employee Retirement Income Security Act of 1974, as
amended, or the Investment Company Act of 1940, as amended, or if such
Registrable Securities are held in a separate account under applicable insurance
laws or regulations.
(b) Restrictions on Public Sale by Company. The Company agrees
not to effect any public sale or other distribution of its equity securities, or
any securities convertible into or exchangeable or exercisable for such equity
securities, during the period commencing on the seventh (7th) day prior to, and
ending on the ninetieth (90th) day following, the effective date of any
underwritten Piggyback Registration, except in connection with any such
underwritten registration.
ss.6.05. Registration Procedures. If (and on each occasion that) the
Company shall, in accordance with the terms of this Article VI, become obligated
to effect any registration (whether a Demand Registration, a Piggyback
Registration or a registration pursuant to ss.6.04 hereof) of any Registrable
Securities, the Company will use its best efforts in good faith to effect
promptly the registration of such Registrable Securities under the Securities
Act and to permit the public offering and sale of such Registrable Securities in
accordance with the intended method of disposition thereof, and, in connection
therewith, the Company, as expeditiously as shall be reasonably possible, will:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities, and use its best efforts
in good faith to cause such registration statement to become and remain
effective as provided herein;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus included in such
registration statement as may be necessary or advisable to comply in all
material respects with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement or as may
be necessary to keep such registration statement effective and current, but for
no longer than nine (9) months subsequent to the effective date of such
registration;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus included
in such registration statement (including each preliminary prospectus), and such
other documents as any such seller may reasonably request in order to facilitate
the disposition of the Registrable Securities held by such seller;
(d) enter into such customary agreements and take all such
other action in connection therewith as the Holders of a Majority of Registrable
Securities being registered reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(e) use its best efforts in good faith to register and qualify
the Registrable Securities covered by such registration statement under such
securities or Blue Sky laws of such jurisdictions as any seller shall reasonably
request and do any and all such other acts and things as may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities held by such seller; and
(f) furnish to each prospective seller a signed counterpart,
addressed to the prospective sellers, of (i) an opinion of counsel for the
Company, dated the effective date of the registration statement, and (ii) a
"comfort" letter signed by the independent public accountants who have certified
the Company's financial statements included in the registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
"comfort" letter) with respect to events subsequent to the date of the financial
statements, as are customarily covered (at the time of such registration) in
opinions of issuer's counsel and in "comfort" letters delivered to the
underwriters in underwritten public offerings of securities.
ss.6.06. Cooperation by Prospective Sellers, etc.
----------- -- ----------- ------- ---
(a) Each prospective seller of Registrable Securities will
furnish to the Company in writing such information as the Company may reasonably
require from such seller in connection with any registration statement with
respect to such Registrable Securities.
(b) The failure of any prospective seller of Registrable
Securities to furnish any information or documents in accordance with any
provision contained in this Article VI shall not affect the obligations of the
Company under this Article VI to any remaining sellers who furnish such
information and documents unless, in the reasonable opinion of counsel to the
Company or the underwriters, such failure impairs or may impair the viability of
the offering or the legality of the registration statement or the underlying
offering.
(c) The Holders of Registrable Securities included in any
registration statement will not (until further notice) effect sales thereof
after receipt of telegraphic or written notice from the Company to suspend sales
to permit the Company to correct or update such registration statement or
prospectus; but the obligations of the Company with respect to maintaining any
registration statement current and effective shall be extended by a period of
days equal to the period such suspension is in effect.
(d) At the end of any period during which the Company is
obligated to keep any registration statement current and effective as provided
by ss.6.05 hereof (and any extensions thereof required by the preceding
paragraph (c) of this ss.6.06), the Holders of Registrable Securities included
in such registration statement shall discontinue sales of securities pursuant to
such registration statement upon receipt of notice from the Company of its
intention to remove from registration the securities covered by such
registration statement which remain unsold, and such Holders shall notify the
Company of the amount of securities registered which remain unsold promptly
after receipt of such notice from the Company.
ss.6.07. Registration Expenses.
------------ --------
(a) All costs and expenses incurred or sustained in connection
with or arising out of each registration pursuant to ss.6.02 or ss.6.03 hereof,
including, without limitation, all registration and filing fees, fees and
expenses of compliance with securities or Blue Sky laws (including reasonable
fees and disbursements of counsel for the underwriters in connection with the
Blue Sky qualification of Registrable Securities), printing expenses, messenger,
telephone and delivery expenses, fees and disbursements of counsel for the
Company and for the sellers of Registrable Securities (subject to the
limitations contained in paragraph (b) of this ss.6.07), fees and disbursements
of all independent certified public accountants (including the expenses relating
to the preparation and delivery of any special audit or "cold comfort" letters
required by or incident to such registration), and fees and disbursements of
underwriters (excluding discounts and commissions, but including underwriters'
liability insurance if the Company or if the underwriters so require), the
reasonable fees and expenses of any special experts retained by the Company of
its own initiative or at the request of the managing underwriters in connection
with such registration, and fees and expenses of all (if any) other persons
retained by the Company (all such costs and expenses being herein called,
collectively, the "Registration Expenses"), will be borne and paid by the
Company as provided by the provisions contained in this Article VI. The Company
will, in any case, pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the expense of liability
insurance referred to above, and the fees and expenses incurred in connection
with the listing of the securities to be registered on each securities exchange
on which similar securities of the Company are then listed.
(b) In connection with each registration of Registrable
Securities pursuant to this Article VI, the Company will reimburse the Holders
of Registrable Securities being registered in such registration for the
reasonable fees and disbursements of no more than three (3) law firms which act
as counsel chosen by Holders collectively constituting a Majority of Registrable
Securities. The Company will not bear the cost of nor pay for any equity
interest transfer taxes imposed in respect of the transfer of any Registrable
Securities to any purchaser thereof by any Holder of Registrable Securities in
connection with any registration of Registrable Securities pursuant to this
Article VI.
(c) To the extent that Registration Expenses incident to any
registration are, under the terms of this Article VI, not required to be paid by
the Company, each Holder of Registrable Securities included in such registration
will pay all Registration Expenses which are clearly solely attributable to the
registration of such Holder's Registrable Securities so included in such
registration, and all other Registration Expenses not so attributable to one
Holder will be borne and paid by all sellers of securities included in such
registration in proportion to the amount of securities so included by each such
seller.
ss.6.08. Indemnification.
---------------
(a) Indemnification by Company. The Company will indemnify
each Holder requesting or joining in a registration, the officers, directors,
trustees, stockholders and partners of each such Holder, each person who
controls any thereof (within the meaning of the Securities Act) and each
underwriter of the securities so registered, against any and all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of any material fact
contained in any prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged omission) to
state therein any material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by the Company of
any rule or regulation promulgated under the Securities Act applicable to the
Company and relating to any action or inaction required of the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, officer, director, trustee, partner,
controlling person, and underwriter for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company in an
instrument duly executed by such Holder, officer, director, stockholder,
trustee, partner, controlling person, or underwriter and stated to be
exclusively and specifically for use therein.
(b) Indemnification by Each Holder. Each Holder joining in a
registration, and each underwriter of the securities so registered, will
indemnify each other Holder, the Company and its officers and directors and each
person, if any, who controls any thereof (within the meaning of the Securities
Act) and their respective successors in title and assigns against any and all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of any
material fact contained in any prospectus, offering circular or other document
incident to any registration, qualification or compliance (or in any related
registration statement, notification or the like) or any omission (or alleged
omission) to state therein any material fact required to be stated therein or
necessary to make the statement therein not misleading, and such Holder will
reimburse the Company and each other person indemnified pursuant to this
paragraph (b) for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that this paragraph (b) shall apply only
if (and only to the extent that) such statement or omission was made in reliance
upon written information furnished to the Company in any instrument duly
executed by such Holder and stated to be specifically for use in such
prospectus, offering circular or other document (or related registration
statement, notification or the like) or any amendment or supplement thereto. The
maximum liability under this paragraph (b) of each Holder joining in any
registration shall be limited to the aggregate amount of all sales proceeds
actually received by such Holder upon the sale of such Holder's Registrable
Securities in connection with such registration.
(c) Indemnification Proceedings. Each party entitled to
indemnification pursuant to this ss.6.08 (the "indemnified party") shall give
notice to the party required to provide indemnification pursuant to this ss.6.08
(the "indemnifying party") promptly after such indemnified party acquires actual
knowledge of any claim as to which indemnity may be sought, and shall permit the
indemnifying party (at its expense) to assume the defense of any claim or any
litigation resulting therefrom; provided that counsel for the indemnifying
party, who shall conduct the defense of such claim or litigation, shall be
acceptable to the indemnified party, and the indemnified party may participate
in such defense at such party's expense; and provided further, that if any
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to such indemnified party which are different from or
additional to and are inconsistent with those available to the indemnifying
party, or that such claim or litigation involves or could have an effect upon
matters beyond the scope of the indemnity agreement provided in this ss.6.08,
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party and such indemnifying party shall
reimburse such indemnified party and any person controlling such indemnified
party for that portion of the fees and expenses of any counsel retained by the
indemnified party which are reasonably related to the matters covered by the
indemnity agreement provided in this ss.6.08; and provided, further, that the
failure by any indemnified party to give notice as provided in this paragraph
(c) shall not relieve the indemnifying party of its obligations under this
ss.6.08 except to the extent that the failure results in a failure of actual
notice to the indemnifying party and such indemnifying party is damaged (or the
indemnification liability of such indemnifying party hereunder would be
increased) solely as a result of the failure to give notice. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation. The reimbursement required
by this ss.6.08 shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred.
ss.6.09. Rule 144 Requirements. The Company will make every effort in
good faith to make publicly available and available to the Holders of
Registrable Securities, pursuant to Rule 144 of the Commission under the
Securities Act, such information as shall be necessary to enable the Holders of
Registrable Securities to make sales of Registrable Securities pursuant to that
Rule. The Company will furnish to any Holder of Registrable Securities, upon
request made by such Holder at any time, a written statement signed by the
Company, addressed to such Holder, describing briefly the action the Company has
taken or proposes to take to comply with the current public information
requirements of Rule 144. The Company will, at the request of any Holder of
Registrable Securities, upon receipt from such Holder of a certificate
certifying (i) that such Holder has held such Registrable Securities for a
period of not less than two (2) consecutive years, and (ii) that such Holder has
not been an affiliate (as defined in Rule 144) of the Company for more than the
ninety (90) preceding days, remove from the certificates or instruments, if any,
representing such Registrable Securities that portion of any restrictive legend
which relates to the registration provisions of the Securities Act.
ss.6.10. Participation in Underwritten Registrations. No person may
participate in any underwritten registration pursuant to this Article VI unless
such person (a) agrees to sell such person's securities on the basis provided in
any underwriting arrangements approved by the persons entitled, under the
provisions contained in this Article VI, to approve such arrangements, and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required by the terms of
such underwriting arrangements, provided, however, that no such indemnities or
underwriting agreements shall provide for indemnification or contribution
obligations of any Holder to a greater extent than the obligations of such
Holder set forth in ss.6.08(b) hereof. Any Holder of Registrable Securities to
be included in any underwritten registration shall be entitled at any time to
withdraw such Registrable Securities from such registration in the event that
such Holder shall disapprove of any of the terms of the related underwriting
agreement.
ss.6.11. No Inconsistent Agreements. The Company will not, at any time
after the effective date of this Agreement, enter into any agreement or contract
(whether written or oral) with respect to any of its securities which is
inconsistent in any respect with the registration rights granted by the Company
to the Warrantholders pursuant to Article VI of this Agreement.
ss.6.12. Registrable Securities Held by the Company. Whenever the
consent or approval of Holders of Registrable Securities is required pursuant to
this Article VI, Registrable Securities held by the Company or any Affiliate of
the Company shall not be counted in determining whether such consent or approval
was duly and properly given by such Holders pursuant to and in compliance with
any of the terms of Article VI of this Agreement.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.
-------- -- --------------- ---------------
ss.7.01. Survival of Representations. The representations and
warranties of the Company and of the Warrantholders contained in this Agreement,
or any agreement, instrument or document delivered pursuant to any of the
provisions of this Agreement, shall survive the execution and delivery of this
Agreement, any examination or investigation conducted by or on behalf of the
Company or the Warrantholders, and the Closing hereunder.
ss.7.02. Indemnification for Misrepresentations. The Company agrees to
indemnify and hold the Warrantholders harmless from and against, and to pay to
the Warrantholders, on demand by any Holder from time to time, the full amount
of any loss, claim, damage, liability, cost or expense (including reasonable
attorneys' fees) resulting to the Warrantholders from any false, incorrect or
misleading representation or warranty of the Company contained in this
Agreement, or any agreement, instrument or document delivered by the Company to
the Warrantholders pursuant to any of the provisions of this Agreement.
ss.7.03. Expenses. Whether or not all or any of the arrangements or
transactions contemplated by this Agreement or by any of the other Fundamental
Documents shall be consummated, the Company agrees to pay to the Warrantholders,
on demand by the Warrantholders at any time and as often as the occasion
therefor may require: (a) all of the reasonable legal fees, plus all reasonable
out-of-pocket expenses and disbursements, of Bingham Dana LLP, Alston & Bird LLP
and Tucker Arensberg, P.C., special counsel for certain of the Warrantholders,
which have been or shall be incurred or sustained at any time in connection with
the preparation, negotiation, execution or delivery of this Agreement, any of
the other Fundamental Documents or any other agreements, instruments or
documents relating thereto; and (b) all reasonable out-of-pocket costs and
expenses which shall be incurred or sustained by any Person holding the Acquired
Securities at any time in connection with any modifications or amendments to or
consents, approvals or waivers under this Agreement or any of the other
Fundamental Documents, or in connection with any litigation, proceeding or
dispute arising out of or relating to any Fundamental Documents or relationships
created thereby, or in connection with any action or proceeding taken by any
Person holding Acquired Securities to protect or preserve all or any of the
rights, remedies, powers or privileges of the Warrantholders under any of such
documents or to enforce any of the covenants, agreements or obligations of the
Company under any of such documents (including, without limitation, all of the
reasonable fees and disbursements of legal counsel for the Warrantholders).
ARTICLE VIII
CERTAIN DEFINED TERMS
In addition to the terms defined in Article VI as used herein, the
following terms shall have the respective meanings assigned to them in this
Article VIII:
"Acquired Equity Interests" shall have the meaning ascribed to
that term in ss.1.02 hereof.
"Acquired Securities" shall mean the Warrants and the Acquired
Equity Interests acquired upon exercise of the Warrants.
"Affiliate" means, at any time, and with respect to any
Person, any other Person that at such time directly or indirectly through one or
more intermediaries Controls, or is Controlled by, or is under common Control
with, such first Person. As used in this definition, "Control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Unless the context
otherwise clearly requires, any reference to an "Affiliate" is a reference to an
Affiliate of the Company.
"BSE" shall mean Birmingham Southeast, LLC.
"BSE Financing" shall mean the financing provided to BSE
pursuant to the Loan Agreement.
"Capital Stock" shall mean, with respect to any Person, any
class of preferred, common or other capital or similar equity interest of a
Person, including, without limitation, limited or general partnership interests
in a partnership and membership interests in a limited liability company.
"Closing" shall have the meaning ascribed to that term in
Article III.
"Closing Date" shall have the meaning ascribed to that term
in Article III>
"Common Stock" shall mean the Company's common stock, $.01 par
value per share.
"Company Credit Agreement" shall mean the Credit Agreement
dated as of March 10, 1997 among the Company, the financial institutions party
thereto, and Bank of America, N.A., as Agent, as amended from time to time.
"Fundamental Documents" shall mean, collectively: (i) this
Agreement; and (ii) the Warrants.
"Loan Agreement" shall mean the Credit Agreement dated as of
May __, 2000 among BSE, the financial institutions party thereto, and Bank of
America, N.A., as Agent, as amended from time to time. If the Loan Agreement is
no longer in effect, "Loan Agreement" refers to the Loan Agreement immediately
before it ceased to be in effect.
"Note Purchase Agreement" shall mean, collectively, those
certain Amended and Restated Note Purchase Agreements dated as of October 12,
1999 (amending and restating the separate Note Purchase Agreements dated as of
September 15, 1993 and dated as of September 15, 1995) between the Company and
each of the institutions named on Annex I thereto, each as amended from time to
time.
"Permitted Transferee" shall mean:
(i) any Affiliate of the transferor or any other
Warrantholder;
(ii) any accredited investor, as defined in Regulation D
promulgated under the Securities Act;
(iii) any Person (A) who shall acquire Acquired Securities
from the Warrantholders or from any Permitted Transferees thereof in a
transaction not involving any public offering, and (B) who shall, after
giving effect to such transaction, hold of record not less than 1% of
the aggregate number of the Acquired Securities then outstanding;
(iv) in the case of any Permitted Transferee which is not a
natural person, any Person who shall acquire (whether by operation of
law or otherwise) all or any substantial part of the assets of such
Permitted Transferee; or
(v) in the case of any Permitted Transferee thereof who is a
natural person, any executor, administrator, heir or legatee of such
Permitted Transferee.
Unless the context shall otherwise clearly require, the term "the
Warrantholders", as used in this Agreement, shall include all of the Permitted
Transferees of the Warrantholders and all of the Permitted Transferees of such
Permitted Transferees.
"person" or "Person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, trust, or unincorporated
organization, or a government or any agency or political subdivision thereof.
"Rights" shall mean:
------
(a) any warrant (including, without limitation, any Warrant)
or any option (including, without limitation, employee stock
options) to acquire Capital Stock of the Company;
(b) any right issued to holders of such Capital Stock, or any
class thereof, permitting the holders thereof to subscribe to
additional shares of such Capital Stock (pursuant to a rights offering
or otherwise);
(c) any right to acquire such Capital Stock pursuant to the
provisions of any Security - convertible or exchangeable into
such Capital Stock; and
(d) any similar right permitting the holder thereof to
subscribe for or purchase shares of - such Capital Stock.
"Special Warrantholders Consent" shall mean, at any particular
date, the consent, approval or vote of Persons holding of record or deemed to be
holding of record, at such date, more than sixty-six and two-thirds percent
(66-2/3%) of the total number of all Warrant Shares held of record or deemed to
be held of record by such Persons at such date.
"Special Majority of the Warrantholders" shall mean, at any
particular date, Persons holding of record or deemed to be holding of record, at
such date, more than sixty-six and two-thirds percent (66-2/3%) of the total
number of all Warrant Shares held of record or deemed to be held of record by
all Persons at such date.
"Subsidiary" shall mean, in relation to the Company at any
particular time, any corporation or other entity at least fifty percent (50%) of
the outstanding voting shares or equity interests of which shall be owned or
controlled (whether directly or indirectly) by the Company and/or by any one or
more of the Company's other Subsidiaries.
"Warrantholders" means, collectively, (i) the Persons listed
on Annex 1 hereto so long as such Persons shall continue to own and hold of
record any of the Acquired Securities, (ii) each Permitted Transferee of the
Warrantholders so long as such Permitted Transferee shall continue to own and
hold of record any of the Acquired Securities, and (iii) each Permitted
Transferee of any other Permitted Transferee so long as such Permitted
Transferee shall continue to own and hold of record any of the Acquired
Securities.
"Warrants" shall have the meaning ascribed to that term in
ss.1.02(a) hereof and shall in any event include all other warrants delivered in
exchange or in substitution therefor.
"Warrant Shares" shall mean shares of Acquired Equity
Interests (a) issuable upon exercise of any Warrants or (b) that have been
issued upon exercise of the Warrants. For purposes of the definitions of Special
Warrantholders Consent and Special Majority of the Warrantholders, holders of
Warrants shall be deemed to be holders of Warrant Shares described in clause (a)
of this definition that are at such time issuable upon exercise in full of the
Warrants.
ARTICLE IX
MISCELLANEOUS
ss.9.01. Notices.
-------
(a) All notices and other communications pursuant to this
Agreement shall be in writing, either delivered in hand or sent by certified
mail, postage prepaid, or sent by recognized overnight delivery service,
addressed as follows:
(i) if to the Company, at the address of the Company
set forth on the first page hereof, or at such other address as shall
have been furnished to the Warrantholders by notice in writing by the
Company;
(ii) if to any Warrantholder, to the address of such
Warrantholder set forth on Annex 1 hereto or to such other addresses
(in each case) as shall have been furnished to the Company by such
Warrantholder (including any Permitted Transferee, each of which is
included with the term the Warrantholders) by notice in writing.
(b) Any notice or other communication pursuant to this
Agreement shall be deemed to have been duly given or made and to have become
effective (i) when delivered in hand to the party to which it was directed, (ii)
if sent by overnight delivery service and properly addressed in accordance with
the foregoing provisions of this ss.9.01, when received by the addressee, (iii)
if sent by facsimile transmission, when received by the telecopy recipient or
(iv) if sent by certified mail, postage prepaid, and properly addressed in
accordance with the foregoing provisions of this ss.9.01, (A) when received by
the addressee, or (B) on the fifth (5th) business day following the day of
dispatch thereof, whichever of (A) or (B) shall be the earlier.
ss.9.02. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO ITS CHOICE OF LAW PRINCIPLES.
ss.9.03. Amendments and Waivers.
---------- --- -------
(a) Except as otherwise provided by paragraph (b) of this
ss.9.03, and except as otherwise expressly required by any other provisions of
this Agreement, none of the terms or provisions contained in this Agreement or
in Section 5 through Section 11, inclusive, of any Warrant, and none of the
agreements, obligations or covenants of the Company contained in this Agreement
or in Section 5 through Section 11, inclusive, of any Warrant, may be amended,
modified, supplemented, waived or terminated unless (i) the Company shall
execute an instrument in writing agreeing or consenting to such amendment,
modification, supplement, waiver or termination, and (ii) the Company shall
receive the prior Special Warrantholders Consent therefor.
(b) Each of the terms and provisions contained in this ss.9.03
or in the definitions of Permitted Transferee, Special Warrantholders Consent
and Special Majority of The Warrantholders contained in Article IX or in any
Warrant (other than Section 5 through 11, inclusive) hereof may be amended,
modified, supplemented, waived or terminated only by a written instrument or
consent signed by the Company and by all Persons holding of record Acquired
Securities.
(c) In connection with any action taken or to be taken
pursuant to paragraph (a) of this ss.9.03, there shall be no obligation or
requirement on the part of the Company, the Warrantholders or any other persons
(i) to solicit or to attempt to solicit from the Warrantholders the consent or
approval of the Warrantholders for such action, or (ii) to submit any notices of
any kind to the Warrantholders in advance of any action proposed to be taken
pursuant to paragraph (a) of this ss.9.03. However, copies of all written
consents or approvals given by the Warrantholders in connection with any action
taken or to be taken pursuant to and in compliance with paragraph (a) of this
ss.9.03 shall be sent by the Company, promptly after the receipt thereof by the
Company, to any Person holding Warrant Shares who shall have failed or refused
to give a written consent or approval for such action.
(d) Any action taken pursuant to and in compliance with
paragraph (a) of this ss.9.03 shall be binding upon the Company and upon the
Warrantholders, including all of the Persons holding Warrant Shares who shall
have failed or refused to give a written consent or approval for such action.
ss.9.04. Proportional Adjustments. There are references in this
Agreement to a specific price per share of the Company's Common Stock or to a
specific number of shares in the Capital Stock of the Company. The specific
price per share and the specific number of shares so stated are effective as of
the Closing Date. As more particularly set forth in Section 4 of the Warrants,
the specific price per share and the specific number of shares so stated shall
(in each case) be proportionally adjusted from time to time if (and on each
occasion that) there shall be effected by the Company any stock dividend, stock
split, subdivision of shares, combination of shares, reclassification,
recapitalization or other similar corporate reorganization affecting the capital
structure of the Company. The exact amount and the effective date of each
adjustment effected pursuant to this ss.9.04 shall be determined in good faith
and on a reasonable basis by the Board of Directors of the Company. The Company
shall promptly notify each Warrantholder in writing of each such adjustment.
ss.9.05. Rights and Obligations Several. The rights and obligations of each
of the parties hereto shall be several (and not joint), except as otherwise
expressly provided by this Agreement.
ss.9.06. No Waiver; Cumulative Remedies. No failure or delay on the
part of the Warrantholders in exercising any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
ss.9.07. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes any prior understandings or agreements concerning the subject matter
hereof.
ss.9.08. Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of
any other provision.
ss.9.09. Binding Effect. All of the covenants and agreements of the
Company contained in, and all of the rights granted by the Company pursuant to,
this Agreement, shall inure to the benefit of the Warrantholders, including each
of the Permitted Transferees that are included in the definition of the
Warrantholders. Except as otherwise provided herein, none of such covenants,
agreements or rights shall be assignable or transferable by the Warrantholders
to any person except to a person who is a Permitted Transferee.
ss.9.10. Counterparts. This Agreement may be executed simultaneously in
several counterparts, and by the different parties hereto on separate
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement. In making proof of this
Agreement, it shall not be necessary to produce or account for more than one
such counterpart signed by each of the parties hereto.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return such
counterpart to the undersigned, whereupon this Agreement, as so accepted by you,
shall become a binding agreement under seal between you and the undersigned.
Very truly yours,
BIRMINGHAM STEEL CORPORATION
By: /s/ J. Daniel Garrett
----------------------
Name: J. Daniel Garrett
Title: Vice President - Finance
<PAGE>
The foregoing Warrant Agreement with Birmingham Steel Corporation is
hereby accepted by the undersigned on and as of the date thereof.
Very truly yours,
PRINCIPAL LIFE INSURANCE COMPANY
(f/k/a Principal Mutual Life Insurance Company)
By: Principal Capital Management, LLC,
A Delaware limited liability company,
Its authorized signatory
By: /s/ Sarah J. Pitts
--------------------
Name: Sarah J. Pitts
Title: Counsel
By: /s/ James C. Fifield
---------------------
Name: James C. Fifield
Title: Counsel
PRINCIPAL LIFE INSURANCE COMPANY, ON BEHALF OF ONE OR MORE
SEPARATE ACCOUNTS
By: Principal Capital Management, LLC,
a Delaware limited liability company,
Its authorized signatory
By: /s/ Sarah J. Pitts
-------------------
Name: Sarah J. Pitts
Title: Counsel
By: /s/ Debra Svoboda Epp
----------------------
Name: Debra Svoboda Epp
Title: Counsel
THE CANADA LIFE ASSURANCE COMPANY
(J. ROMEO & CO. as nominee)
By: /s/ Kevin Phelan
-----------------
Name: Kevin Phelan
Title: Assistant Treasurer
CANADA LIFE INSURANCE COMPANY OF NEW YORK
(J. Romeo & Co. as nominee)
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
CANADA LIFE INSURANCE COMPANY OF AMERICA
(J. Romeo & Co. as nominee)
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY (formerly known as
Great Northern Insured Annuity Corporation)
By: /s/ Morian C. Mooers
---------------------
Name: Morian C. Mooers
Title: Investment Officer
PROTECTED HOME MUTUAL LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Annette M. Masterson
-------------------------
Name: Annette M. Masterson
Title: Vice President
COLORADO BANKERS LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Jeffrey R. Erickson
------------------------
Name: Jeffrey R. Erickson
Title: Vice President
THE CATHOLIC AID ASSOCIATION
By: Advantus Capital Management, Inc.
By: /s/ David R. Hackney
---------------------
Name: David R. Hackney
Title: Vice President
COLUMBIAN MUTUAL LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Annette M. Masterson
-------------------------
Name: Annette M. Masterson
Title: Vice President
FARM BUREAU LIFE INSURANCE COMPANY OF MICHIGAN
By: Advantus Capital Management, Inc.
By: /s/ David R. Hackney
---------------------
Name: David R. Hackney
Title: Vice President
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
PIONEER MUTUAL LIFE INSURANCE COMPANY
By: American United Life Insurance Company
By: /s/ Kent R. Adams
------------------
Name: Kent R. Adams
Title: Vice President, American United Life
Insurance Company as Agent for Pioneer
Mutual Life Insurance Company
JEFFERSON-PILOT LIFE INSURANCE COMPANY
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
By: /s/ Robert Bayer
-----------------
Name: Robert Bayer
Title: Investment Officer
SUN LIFE ASSURANCE COMPANY OF CANADA
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private
Placements - for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and
Counsel - for Secretary
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements -
for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and
Counsel - for Secretary
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements -
for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and
Counsel - for Secretary
CENTURY INDEMNITY COMPANY
By: CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
ACE PROPERTY AND CASUALTY INSURANCE COMPANY
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
LIFE INSURANCE COMPANY OF NORTH AMERICA
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
-------------------------
Name: Stephen H. Wilson
Title: Managing Director
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
------------------------
Name: Stephen H. Wilson
Title: Managing Director
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
By: /s/ Christopher J. Grant
-------------------------
Name: Christopher J. Grant
Title: Investment Officer
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ Richard A. Strait
----------------------
Name: Richard A. Strait
Title: Its Authorized Representative
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By: /s/ Wayne T. Hoffman
---------------------
Name: Wayne T. Hoffman
Title: Vice President
Investments
By: /s/ Julie Bock
---------------
Name: Julie Bock
Title: Asst. Vice President
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By: /s/ Christopher Wilkos
-----------------------
Name: Christopher Wilkos
Title: Vice President, Corporate Portfolio
Management - Phoenix Home Life
THE STATE LIFE INSURANCE COMPANY
By American United Life Insurance Company, it's agent
By: /s/ Christopher D. Pahlke
--------------------------
Name: Christopher D. Pahlke
Title: Vice President Private Placements
AMERICAN UNITED LIFE INSURANCE COMPANY
By: /s/ Christopher D. Pahlke
--------------------------
Name: Christopher D. Pahlke
Title: Vice President Private Placements
AMERITAS LIFE INSURANCE CORP.
By: Ameritas Investment Advisors Inc.,
as Agent
By: /s/ Patrick J. Henry
---------------------
Name: Patrick J. Henry
Title: Vice President - Fixed Income Securities
ACACIA 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
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 Investment Officer
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Mark W. Poeppelman
-----------------------
Name: Mark W. Poeppelman
Title: Associate Vice President
MINNESOTA LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Steven S. Nelson
---------------------
Name: Steven S. Nelson
Title: Vice President
<PAGE>
FEDERATED MUTUAL INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Loren Haugland
-------------------
Name: Loren Haugland
Title: Vice President
FEDERATED LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Wayne R. Schmidt
---------------------
Name: Wayne R. Schmidt
Title: Vice President
THE RELIABLE LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Jeffrey R. Erickson
------------------------
Name: Jeffrey R. Erickson
Title: Vice President
NATIONAL TRAVELERS LIFE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Joseph R. Betlej
---------------------
Name: Joseph R. Betlej
Title: Vice President
GUARANTEE RESERVE LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Marilyn Froelich
---------------------
Name: Marilyn Froelich
Title: Vice President
MTL INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ John Leiviska
------------------
Name: John Leiviska
Title: Vice President
BERKSHIRE LIFE INSURANCE COMPANY
By: /s/ Ellen I. Whittaker
-----------------------
Name: Ellen I. Whittaker
Title: Senior Investment Officer
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: Lincoln Investment Management, Inc., It's Attorney-In-Fact
By: /s/ Annette M. Teders
----------------------
Name: Annette M. Teders
Title: Vice President
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Roi G. Chandy
------------------
Name: Roi G. Chandy
Title: Director, Special Situations
J. ROMEO & CO., as nominee for MONY LIFE INSURANCE COMPANY
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
BANKS:
BANK OF AMERICA, N.A., as Agent and as a Lender
By: /s/ Jay T. Wampler
-------------------
Name: Jay T. Wampler
Title: Managing Director
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Martin E. Mueller
----------------------
Name: Martin E. Mueller
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Peter Van Schaick
----------------------
Name: Peter Van Schaick
Title: Director
THE BANK OF TOKYO-MITSUBISHI, LTD
By: /s/ Gary L. England
--------------------
Name: G. England
Title: V.P. & Manager
CIBC, INC.
By: /s/ Ronald E. Spitzer
----------------------
Name: Ronald E. Spitzer
Title: Agent
AMSOUTH BANK
By: /s/ Darlene E. Chandler
------------------------
Name: Darlene E. Chander
Title: Vice President
DG BANK DEUTSCHE GENOSSENCHAFTSBANK, CAYMAN ISLAND BRANCH
By: /s/ J.W. Somers Kurt A. Morris
---------------- --------------
Name: J. W. Somers Kurt A. Morris
Title: S.V.P. Vice President
CFE, INC.
By: /s/ C. Warren
--------------
Name: C. Warren
Title: Vice President
BANK ONE, NA
By: /s/ Richard Babcock
--------------------
Name: Richard Babcock
Title: Vice President
THE SANWA BANK, LIMITED
By: /s/ John T. Fenney
-------------------
Name: John T. Fenney
Title: Vice President
UBS AG, STAMFORD BRANCH
By: /s/ Marco Breitenmoser
-----------------------
Name: Marco Breitenmoser
Title: Director
Recovery Management
By: /s/ Dorothy McKinley
---------------------
Name: Dorothy McKinley
Title: Director
Loan Portfolio Support, US
<PAGE>
Exhibit 10.11
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made by and between
Birmingham Steel Corporation, a Delaware corporation (the "Company"), and John
D. Correnti ("Executive") as of May 12, 2000. This Agreement is offered by the
Company to induce Executive to accept employment. The Company and Executive,
each intending to be legally bound by the terms hereof, agree as provided below.
Provisions
1. Employment Term
The Company hereby employs Executive and Executive hereby accepts
employment upon the terms and conditions of this Agreement, for an initial five
year term running from December 1, 1999, to and including November 30, 2004 (the
"Initial Term"). The Initial Term shall be extended automatically for successive
one year renewal terms (each, a "Renewal Term") unless either party notifies the
other in writing no later than 60 days before the expiration of the current term
that such party does not wish to extend the term of employment. The employment
term under this Agreement is referred to as the "Term."
2. Offices; Duties; Directorship; Other Activities
2.1. Offices and Duties. Executive shall serve during the course of his
employment as Chairman of the Board and Chief Executive Officer. Executive shall
have the duties and authority as are prescribed by the bylaws of the Company for
such officers on the date of this Agreement, such other duties and
responsibilities as customarily are assigned to the senior executive officer,
and such other duties and responsibilities as may be assigned to him by the
Company's Board of Directors (the "Board"), provided that such assignments by
the Board are customary and appropriate for the senior executive officer of the
Company. Executive shall be given such authority as is appropriate to carry out
his duties. The Company will not take any action to create an executive office
having greater authority over the daily management of the Company than that of
the Chief Executive Officer.
2.2. Service on Board. Executive agrees to serve as a director of the Company
during the Term and to serve on such committees of the Board as to which he
might be appointed. During the Term of this Agreement, Executive shall report
directly to the Board and committees of the Board.
2.3. Efforts and Other Activities. During the Term, except for periods of
vacation and sick leave, personal leave granted by the Board or leave to which
Executive is entitled under law, Executive shall devote reasonable attention and
time during normal business hours to the business and affairs of the Company to
the extent necessary to discharge his duties under this Agreement. With the
prior approval of the Board, Executive may serve as a director or trustee of
other corporations or businesses which do not compete with the Company.
Executive also may serve on civic, trade or charitable boards or committees.
Executive may invest in real estate for his own account or become a passive
partner or a passive stockholder in any corporation, partnership or other
venture not in direct competition with the Company. Executive may invest in
mutual funds or similar vehicles in which Executive does not direct the
investment of funds in particular securities. Executive may deliver lectures,
fulfill speaking engagements, or teach at educational institutions, and may
manage personal investments, provided that such activities do not materially
interfere with the performance of Executive's responsibilities for the Company.
2.4. Place of Business. Executive's services shall be performed primarily at the
Company's headquarters in Birmingham, Alabama.
3. Compensation and Benefits
3.1. Base Salary. The Company will pay to Executive a base salary at the rate of
$600,000 per year for each year of the Term, subject to increase as provided
herein ("Base Salary"). Base Salary will be earned monthly and will be payable
in periodic installments in accordance with the Company's customary practices
for executive officers. Amounts payable will be reduced by standard withholding
and other authorized deductions. The Company shall review Executive's salary at
least annually, and the Base Salary will be increased on a basis consistent with
increases in salary, if any, for the Company's other senior executives. The
Company may increase Executive's Base Salary in any year of the Term but it may
not reduce it from the amount applicable in the preceding Term year.
3.2. Cash Bonus. (a) Executive shall receive during the Term an annual cash
bonus ("Bonus") equal to one percent (1%) of "Base Earnings" for each fiscal
year, or portion thereof, in the Term (including the fiscal years in which the
Term commences and in which it expires). Base Earnings shall be determined from
the Company's audited consolidated statement of operations (the "Income
Statement") for such fiscal year and shall be a sum equal to (i) the Company's
consolidated pre-tax income plus, (ii) the total of all interest charges, (iii)
the total of all depreciation and amortization charges, and (iv) the total of
all "Extraordinary Charges", all as shown on the Income Statement.
"Extraordinary Charges" means all reserves and charges or accruals on the Income
Statement arising from extraordinary items, goodwill write-offs and other
unusual items.
(b) The Bonus for each fiscal year (or portion thereof) in the
Term shall be paid in a single payment not later than 30 days after the issuance
of the Income Statement by the Company's auditors.
(c) The Bonus shall be in lieu of any other cash incentive
compensation program offered by the Company to its management employees, unless
otherwise provided by the Board or as specifically provided in this Agreement.
3.3. Inducement Restricted Stock Grant. (a) To induce Executive to accept
employment by the Company, the Company hereby grants to Executive 100,000 shares
of the Company's common stock, $0.01 par value per share (the "Grant Shares").
(b) Stock certificates evidencing the Grant Shares shall be
retained by the Company pending release to Executive as provided herein. The
Company shall keep such certificates free from all claims and encumbrances other
than the Company's rights under this Agreement. In lieu of issuance of
certificates for Grant Shares that are subject to forfeiture, the Company may
make a "book entry" in the record of stockholders to evidence the ownership of
such shares.
(c) The Grant Shares shall be subject to forfeiture to the
Company if Executive's employment terminates prior to the third anniversary of
the date hereof. Subject to the earlier termination of forfeiture restrictions
as provided in Section 4, at each of the first and second anniversaries of the
date hereof, the forfeiture restrictions applicable to 33,333 Grant Shares shall
terminate and such shares shall be transferable and non-forfeitable. Subject to
the earlier termination of forfeiture restrictions as provided in Section 4, on
the third anniversary of the date hereof, Executive's interest in 33,334 Grant
Shares shall be transferable and non-forfeitable. Promptly upon such lapse of
restrictions the Company shall deliver, or cause its transfer agent to deliver,
a duly executed share certificate for such shares to Executive.
(d) Pending forfeiture, Executive will be deemed the record
holder of all Grant Shares, whether or not subject to forfeiture, and shall be
entitled to all voting rights, distributions and other rights of an owner of the
Grant Shares.
(e) During the Initial Term of this Agreement, except for
participation in the Company's 1995 Stock Accumulation Plan (the "Stock
Accumulation Plan"), Executive shall not be eligible to participate in the
Company's incentive restricted stock or other stock-based compensation plans
applicable to executive employees generally, unless otherwise provided by the
Board. After the Initial Term, Executive shall participate in any such plan
applicable to senior executives generally.
(f) Grant Shares that are subject to forfeiture under this
Section may not be transferred by Executive except by will or laws of descent
and distribution, and will not be subject in any manner to any other sale,
transfer, pledge or other encumbrance, lien or charge (other than to the
Company). Grant Shares not subject to forfeiture may be transferred by Executive
upon receipt by the Company of an opinion of counsel acceptable to the Company
that such shares may be transferred without registration under federal and state
securities laws. All certificates for Grant Shares may bear a legend to such
effect.
(g) The Company will indemnify and hold Executive harmless
from any income, employment or other tax liability incurred as a result of the
grant or vesting of the Grant Shares.
3.4. Inducement Grant of Options; Exercise Price. Subject to the terms and
conditions set forth herein, the Company hereby grants to Executive options to
purchase 1,000,000 shares of Common Stock at a price per share of $4.88 (the
"Exercise Price"), which shall be subject to the terms and conditions provided
below (the "Options"). The number of shares subject to the Options, the Exercise
Price therefor and other matters resulting from certain transactions shall be
adjusted as provided in Exhibit A hereto.
3.4.1. Exercise of Options.
(a) The Options shall be exercisable by the delivery to the
Company of a written notice in the form of Exhibit B stating the
number of shares to be purchased pursuant to the Options and
accompanied by payment in full in accordance with this Agreement,
in an amount equal to the Exercise Price per share multiplied by
the number of shares to be purchased. The exercise shall be
effective upon hand delivery of the exercise notice to the
Company or the date of postmark of any exercise notice delivered
by mail (the "Exercise Date") provided such payment accompanies
the notice of exercise; if not so accompanied, then the Exercise
Date shall be the later date on which payment of the Exercise
Price is made in accordance with this Agreement.
(b) Any exercise of Options by Executive must conform to the
Company's insider trading restrictions applicable to directors
and officers generally. Any exercise by Executive that may not be
made due to such restrictions may be made within the next
available exercise period permitted by such restrictions even if
the right to exercise Options under this Agreement otherwise has
terminated.
(c) All Options will expire 10 years from the date hereof
(unless an earlier termination date is provided herein).
(d) Fractional share interests shall be disregarded, but may
be accumulated. No fewer than 5,000 Option shares may be
purchased at any one time (subject to appropriate adjustment in
accordance with adjustments made pursuant to Exhibit A), unless
the number purchased is the total number at the time remaining
for purchase under the Options.
3.4.2. Permitted Consideration. The purchase price of any shares purchased on
exercise of a vested Option shall be paid in full at the time of each purchase
in one or a combination of the following methods: (i) in cash or by electronic
funds transfer; (ii) by check payable to the order of the Company; or (iii) by
delivery of shares owned by Executive or vested stock options (whether Options
or other stock options) held by Executive (in the case of options, to be valued
per option as the difference between the exercise price thereof and the price
per share of the stock to which such option pertains, as such stock price is
determined below). Any shares (or the value of shares used for determining the
value of the options) used to satisfy the Exercise Price of an Option shall be
valued (i) if the shares are traded on the New York Stock Exchange, at the
closing price as reported by such exchange for the trading day immediately
preceding the Exercise Date, (ii) if such shares are not traded on the New York
Stock Exchange, but are traded on another national exchange, at the closing
price as reported by such exchange for the trading day immediately preceding the
Exercise Date, (iii) if the shares are not traded on an exchange but are
reported on NASDAQ, then at the closing price as reported on NASDAQ for the
trading day immediately preceding the Exercise Date, or (iv) if the shares are
not traded on any of the foregoing, then at their fair market value on the
Exercise Date as mutually determined by the Board of Directors and Executive (if
unable to agree, then determined by arbitration under Section 7. Any shares or
options surrendered as payment of the Exercise Price and shall have been owned
by Executive or have been vested for at least six months prior to the Exercise
Date.
3.4.3. Vesting. Subject to the acceleration of vesting as provided by this
Agreement, a specified number of Executive's Options shall vest and become
exercisable on each anniversary of this Agreement if Executive is then employed
by the Company. The number of Executive's Options that shall vest and become
exercisable at the indicated dates are as follows:
Date Number of Options Vesting
___________, 2000 200,000
___________, 2001 200,000
___________, 2002 200,000
___________, 2003 200,000
___________, 2004 200,000
Early termination of exercise rights and accelerated vesting of unexercised
Options shall be as provided in Section 4. The vesting schedule shall be
adjusted as appropriate if and as required pursuant to Exhibit A.
3.4.4. Share Certificates; Shareholder Rights. Upon proper exercise of an Option
and payment of the related Exercise Price, the Company shall cause to be issued
and delivered to Executive a certificate for the shares issuable upon such
exercise. Such certificate shall be deemed to have been issued as of the
Exercise Date. Executive shall be deemed to be the holder of record of the
shares issuable upon such exercise as of the Exercise Date and the Company
agrees to make such entries in its records of shareholders to reflect such
status.
3.4.5. Payment of Taxes. The Company shall pay all documentary stamp taxes, if
any, attributable to this Agreement or the issuance of any of the shares or
other securities upon the exercise of the Options.
3.4.6. Reservation of Shares. The Company will reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
shares, the full number of shares deliverable upon exercise of the Options for
the purpose of enabling it to satisfy any obligation to issue shares upon
exercise of the Options.
3.4.7. Representations of the Company; Registration of the Shares. The Company
covenants and represents that all shares which may be issued upon the exercise
of the options will, upon issuance, be fully paid and nonassessable and free
from all taxes (other than withholding taxes on income and wages), liens,
charges and security interests with respect to the issue thereof. The Company
will in good faith, and as expeditiously as possible, take all action which may
be necessary to obtain and keep effective any and all registrations, permits,
consents and approvals of governmental agencies and authorities, and will make
any and all necessary filings under Federal and State securities laws, or of
exchanges or similar markets on which the class of option shares are listed,
necessary in connection with the issuance of the options, the exercise of the
options, and the issuance, sale, transfer and delivery of shares upon exercise
of the options by Executive.
3.4.8. Non-transferability. Except as provided in Section 4, the Options are
exercisable only by Executive. Prior to vesting, the options are
non-transferable and shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge (other
than to the Company), except by operation of law or by will or laws of descent
and distribution.
3.4.9. Company Incentive Option Plans. Unless otherwise provided by the Board,
during the Initial Term of the Agreement Executive shall not be eligible to
participate in the Company's incentive stock option plans applicable to
executive employees generally. After the Initial Term, Executive shall
participate in any such plan applicable to senior executives generally.
3.4.10. Option Share Exercise Record. Executive and the Company shall keep a
record of exercise of all Options (the "Option Share Exercise Record").
3.5. Stock Accumulation Plan. During the Term, Executive shall participate in
the Company's Stock Accumulation Plan. In lieu of any contribution required
under such plan, and notwithstanding the terms of the plan, Executive will defer
or contribute annually from 5% to 20% of his annual Base Salary or Bonus (such
amount and sources as Executive may elect), to the Stock Accumulation Plan.
Executive's obligations under this section will be reduced, or eliminated, for
each applicable deferral period by the aggregate Exercise Price of Options
exercised by Executive during such period, but Executive retains the right to
make such deferral or contribution under the Stock Accumulation Plan
notwithstanding his exercise of Options.
3.6. Executive Retirement and Compensation Deferral Plan. During the Term,
Executive shall participate in the Company's Executive Retirement and
Compensation Deferral Plan as a "Group 1 Participant".
3.7. Other Savings and Retirement Plans. Except as specifically provided herein,
Executive shall be entitled to participate in all savings and retirement plans,
practices, policies and programs applicable generally to other executives of the
Company.
3.8. Welfare Benefit Plans. Executive shall be eligible for participation in and
shall receive all benefits under welfare benefit plans, practices, policies and
programs provided by the Company (including medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other executives of the Company.
3.9. Severance Plan. Executive shall be entitled to the benefits of the
Company's Executive Severance Plan, but without duplication of any such
payments.
3.10. Expenses. (a) For the first two years of the Term of this Agreement,
Executive shall be reimbursed for (or at Executive's request, where feasible,
the Company shall pay directly) the following special expenses:
(i) the costs of an apartment in Birmingham, Alabama,
furnishings, parking, utilities and related costs; and
(ii) weekly commuting expenses from Executive's residences in
Charlotte, North Carolina and Blytheville, Arkansas to and from
Birmingham (if Executive uses any aircraft owned or leased by him, the
reimbursement rate shall be as agreed by Executive and Company from
time to time).
(b) Reimbursement of Executive's living expenses under
subsection (a) shall be made promptly by the Company upon receipt of request by
Executive. Executive's request may be made not more than once per month, and
must be accompanied by reasonable documentation evidencing such expenses.
(c) Executive is encouraged to incur reasonable expenses for
promoting the Company's business. Such promotional expenses include travel,
entertainment (including memberships in social and athletic clubs), and
community service expenses. Executive is encouraged to attend seminars, trade
and professional meetings and conventions, and educational courses that are
reasonably related to Executive's employment with the Company. The cost of
travel, tuition or registration, food, and lodging for attending those
activities, and other charges of a type for which executive managers of the
Company typically are reimbursed, shall be paid by the Company. Other costs
shall be paid by Executive, unless the Company authorizes those costs. Executive
also will be entitled to reimbursement for reasonable employment expenses
incurred by him during the Term in accordance with the policies, practices and
procedures then as in effect generally with respect to other senior executives
of the Company. When Executive attends trade, Company or promotional events at
which spouses customarily attend, the Company also shall reimburse Executive for
expenses arising from the attendance of Executive's spouse.
3.11. Relocation Expenses.
(a) The Company shall reimburse the Executive for (i) the
amount of brokers' commissions paid in connection with the sale during the Term
of Executive's residence in either Charlotte, North Carolina or Blytheville,
Arkansas, (ii) broker's commissions payable in connection with Executive's
purchase during the Term of a residence in or near Birmingham, Alabama, (iii)
moving expenses (including storage) for Executive's goods from Charlotte, North
Carolina to either Blytheville, Arkansas or Birmingham, Alabama, and moving
expenses (including storage and reasonable travel expenses for Executive and his
family) from Blytheville, Arkansas or Charlotte, North Carolina to Birmingham,
Alabama. Such reimbursement shall be made with respect to any relocation made
during the Term.
(b) If Executive relocates to Birmingham, Alabama and sells
his current residence in Blytheville, Arkansas during the Term, the Company also
shall pay to the Executive the amount of any difference between (i) the fair
market value (or, if higher, the "Adjusted Cost") of Executive's current
residence in Blytheville, Arkansas and (ii) the price paid by the buyer of the
residence. For the purposes of this Section, fair market value shall be as
determined by the average of three appraisals made by qualified appraisers (the
cost of which shall be paid by the Company), and the "Adjusted Cost" shall be
the purchase price paid by Executive (or cost of construction pursuant to a
construction contract) plus the amount of all improvements made by Executive and
evidenced by reasonably satisfactory documentation. In no event shall the
Company's obligation under this Section 3.11(b) exceed the Adjusted Cost.
3.12. Fringe Benefits. Executive shall be entitled to fringe benefits in
accordance with the plans, practices, programs and policies as in effect
generally with respect to other executives of the Company.
3.13. Vacations and Leave.
(a) During the Term, at such reasonable times as the Board
shall permit, Executive shall be entitled, without loss of pay, to be absent
from the performance of his duties under this Agreement. In addition, Executive
shall be entitled to annual vacation in accordance with policies established by
the Board for executive officers.
(b) Executive shall be entitled to sick leave (without loss of
pay) in accordance with the Company's policies in effect from time to time, and
other personal and family leave as provided by law.
3.14. Effect of Termination on Restricted Stock Options and Benefits. The
obligations of the Company with respect to Grant Shares, Options, other
restricted stock or stock options granted to Executive under Company plans or
other agreements, and other employee benefits, shall be as provided in Section
4.
3.15. Conflict. In the event of any conflict between this Agreement and the
terms of any benefit, severance, deferred compensation, incentive or similar
plan or agreement in which Executive is or becomes a participant during the
Term, the result most favorable to the Executive shall apply unless Executive
makes a specific written election otherwise, but Executive shall not be entitled
to duplicative payments or benefits.
4. Termination
4.1. Change of Control Defined. (a) For the purposes of this Section, the
following terms are used as defined below:
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended;
(ii) "Voting Securities" means any voting securities of the Company;
(iii) "Person" is used as such term is used for purposes of Section 13(d)
or 14(d) of the Exchange Act;
(iv) "Beneficial Ownership" is used as such term is used within the meaning
of Rule 13d-3 promulgated under the Exchange Act;
(v) "Election Contest" is used as described in Rule 14a-11 promulgated
under the Exchange Act, including any agreement intended to avoid or settle any
Election Contest;
(vi) "Proxy Contest" means an actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board, including any
agreement intended to avoid or settle any Proxy Contest;
(vii) "Incumbent Board" means the individuals who as of the date of this
Agreement are members of the Board;
(viii) "Subsidiary" means any corporation or other entity with respect to
which the Company has the direct or indirect right to vote shares representing
50% or more of the votes eligible to be cast in the election of directors or
managers of each such entity;
(ix) "Non-Control Acquisition" means an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained by (1) the Company
or (2) any corporation or other Person of which a majority of its voting power
or its voting equity securities or equity interest is owned, directly or
indirectly, by the Company (for purposes of this definition, a "Subsidiary") (B)
the Company or its Subsidiaries, or (C) any Person in connection with a
"Non-Control Transaction";
(x) "Non-Control Transaction" means a merger, consolidation or
reorganization of the Company where:
(A) the stockholders of the Company immediately before such merger,
consolidation or reorganization, own directly or indirectly immediately
following such merger, consolidation or reorganization, at least seventy
percent (70%) of the combined voting power of all outstanding Voting
Securities of the corporation resulting from such merger or consolidation
or reorganization (the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities immediately before
such merger, consolidation or reorganization,
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such
merger, consolidation or reorganization constitute at least two-thirds of
the members of the board of directors of the Surviving Corporation, or a
corporation beneficially directly or indirectly owning a majority of the
voting securities of the Surviving Corporation, and
(C) no Person other than (1) the Company or any of its Subsidiaries,
(2) any employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation, or any of its
subsidiaries, or (3) any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of fifteen percent
(15%) or more of the then outstanding Voting Securities, has Beneficial
Ownership of fifteen percent (15%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting securities.
(b) A "Change in Control" shall mean the occurrence during the
Term of any one of the following events:
(i) An acquisition (other than directly from the
Company) of Voting Securities by any Person, immediately after which
such Person has Beneficial Ownership of more than fifteen percent (15%)
of the combined voting power of the Company's then outstanding Voting
Securities, but in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a Non-Control
Acquisition under Section 4.1(a)(ix)(A) or (B) shall not constitute an
acquisition which would cause a Change in Control;
(ii) The individuals who, as of the date of this
Agreement are members of the Incumbent Board, cease for any reason to
constitute at least two-thirds of the members of the Board; but if the
election, or nomination for election by the Company's common
stockholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall, for
purposes of this Plan, be considered as a member of the Incumbent
Board, but no individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as a result of either
an actual or threatened Election Contest or Proxy Contest;
(iii) Approval by stockholders of the Company of a
merger, consolidation or reorganization involving the Company, unless
such merger, consolidation or reorganization is a Non-Control
Transaction;
(iv) A complete liquidation or dissolution of the
Company; or
(v) An agreement for the sale or other disposition of
all or substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary).
(c) Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the then outstanding
Voting Securities as a result of the acquisition of Voting Securities by the
Company which, by reducing the number of Voting Securities then outstanding,
increases the proportional number of shares Beneficially Owned by the Subject
Persons, provided that if a Change in Control would occur (but for the operation
of this sentence) as a result of the acquisition of Voting Securities by the
Company, and after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional Voting Securities which increases
the percentage of the then outstanding Voting Securities Beneficially Owned by
the Subject Person, then a Change in Control shall occur.
4.2. Termination for Cause. The Company may terminate Executive's employment for
Cause. For purposes of this Agreement, a termination of employment is for
"Cause" if Executive (i) has been convicted of a felony, (ii) intentionally
engaged in conduct that is demonstrably and materially injurious to the Company,
monetarily or otherwise, or (iii) has refused to attempt to perform his
employment duties under this Agreement (other than due to temporary physical or
mental incapacity not constituting Permanent Disability) and Executive has not
undertaken his employment duties within 5 business days after demand has been
made by the Company (but Executive's temporary performance of duties followed by
resumption of refusal to perform occurring within 12 months from such demand
will not require another demand by the Company). However, no termination of
Executive's employment shall be for Cause as set forth in clause (ii) or (iii)
above until (A) there shall have been delivered to Executive a copy of a written
notice setting forth that Executive was guilty of the conduct set forth in
clause (ii) or (iii) and specifying the particulars thereof in detail, and (B)
Executive shall have been provided an opportunity to be heard by the Board (with
the assistance of Executive's counsel if Executive so desires). If within 5
business days of such hearing the Board does not confirm in writing its
determination of Cause and the termination of employment of Executive, then the
initial notice shall be deemed null and void (subject, however, to Executive's
right to treat the initial notice as effective, notwithstanding the Board's
failure to confirm termination for Cause, as set forth below). No act, or
failure to act, on Executive's part, shall be considered "intentional" unless he
has acted, or failed to act, with an absence of good faith and without a
reasonable belief that his action or failure to act was in the best interest of
the Company. Any action, or failure to act, by Executive in furtherance of a
Company objective that the Board (or committee of the Board) approved or of
which the Board (or committee of the Board) was aware shall not constitute
Cause. Notwithstanding anything contained in this Agreement to the contrary, no
failure to perform by Executive after a notice of termination is given by
Executive shall constitute Cause for purposes of this Agreement. If the Company
asserts grounds for termination for Cause but withdraws the assertion (or fails
to make the confirmation of termination for Cause after hearing, as described
above), Executive shall have the option of accepting termination at any time
within 30 days of such withdrawal (or within 30 days after the expiration of 5
days after such hearing, as applicable), in which case the termination shall be
deemed as having been made by the Company without Cause. A plea of nolo
contendere or its equivalent, shall not, of itself, constitute Cause or create a
presumption that the Executive's conduct constitutes Cause. Any determination of
Cause by the Board will not be binding on the Executive and, if challenged in an
action for breach or for injunctive relief, the Company shall retain the burden
of proof.
4.3. Death or Permanent Disability. Executive's employment shall terminate
automatically upon Executive's death. If Executive suffers a Permanent
Disability (as defined below) which results in an absence from full-time
performance of his duties for a period of 180 consecutive days or if longer,
such period as is required before Executive is entitled to disability payments
under the Company's disability insurance policy covering Executive, the Company
shall be entitled to terminate his employment. For purposes of this Agreement,
"Permanent Disability" shall mean a physical or mental impairment which
substantially limits a major life activity of Executive and which renders
Executive unable to perform the essential functions of his position. Executive
shall be entitled to the compensation and benefits provided for under this
Agreement for any period during the Term and prior to the establishment of the
Executive's Permanent Disability during which the Executive is unable to work
due to a physical or mental infirmity. Notwithstanding anything contained in
this Agreement to the contrary, until the termination date specified in a notice
of termination relating to Executive's Permanent Disability, Executive shall be
entitled to return to his position with the Company as set forth in this
Agreement, in which event no Permanent Disability of Executive will be deemed to
have occurred.
4.4. Resignation for Good Reason. Executive may resign for "Good Reason." For
purposes of this Agreement, "Good Reason" means the resignation of Executive
after (i) the Company fails to nominate Executive for election as a director of
the Company for re-election upon termination of Executive's initial term or any
successive term as director, or if nominated the shareholders of the Company do
not elect Executive for such term, (ii) Executive is removed from or not named
to serve on the Executive Committee of the Board, except where Executive is also
removed as a director for Cause (iii) Executive is removed as a director by the
Board or shareholders for reasons other than would constitute Cause, or (iv) the
Company, without the consent of Executive, materially breaches this Agreement,
Executive notifies the Company in writing of the nature of such material breach
and the Company does not correct such material breach within 30 calendar days
after its receipt of such notice. The Company agrees that a material breach for
purposes of this provision shall include (i) a change in Executive's titles or
offices without his consent, (ii) the assignment of Executive of duties that are
materially inconsistent with Executive's position or the withdrawal of duties,
responsibilities or authority previously granted to Executive, (iii) a change in
Executive's principal work location by more than 25 miles from Birmingham,
Alabama without his consent (or more than 25 miles from any other principal
location previously agreed to by Executive), (iv) failure by the Company to
increase Executive's Base Salary in accordance with Section 3.1, or (v) at any
time following a Change of Control, the Company fails to maintain any benefit or
compensation plans in which the Executive was participating (or fails to provide
equivalent plans) or reduces the Executive's benefits under any such plan as in
effect immediately prior to the Change of Control, or fails to provide Executive
with fringe benefits or the same number of vacation days to which he was
entitled immediately prior to the Change of Control. Executive's right to
terminate his employment pursuant to this Section shall not be affected by his
incapacity due to physical or mental illness.
4.5. Obligations of the Company Upon Termination.
4.5.1. Termination for Cause or Resignation Without Good Reason. If Executive is
terminated for Cause or if Executive resigns from the Company prior to a Change
of Control without Good Reason or resigns after one year from a Change in
Control without Good Reason, this Agreement shall terminate without further
obligation to Executive other than for the timely payment of: (i) Executive's
annual Base Salary through the date of termination to the extent not theretofore
paid, any vested Grant Shares, and any unpaid Bonus to which Executive is
entitled, on or prior to the date of termination, (ii) any compensation
previously deferred by Executive (together with any accrued interest or earnings
thereon) and accrued vacation pay, and reimbursable expenses incurred under
Sections 3.10 and 3.11, in each case to the extent not theretofore paid (the sum
of the amounts described in clauses (i) and (ii) shall be hereinafter referred
to as the "Accrued Obligations"), which shall be paid to Executive within 30
days of the termination date. Executive's rights upon termination as described
in this section under savings, retirement or similar plans in which Executive is
a participant shall be governed by the terms of such plans.
4.5.2. Termination for Death or Permanent Disability. If Executive's employment
is terminated by the Company because of Executive's death or Permanent
Disability, this Agreement shall terminate without further obligation to
Executive other than for the timely payment to Executive or his estate or
beneficiary, as applicable, of (i) the Accrued Obligations, (ii) the payment of
a Bonus for the current fiscal year equal to the Bonus paid with respect to the
prior fiscal year, prorated for the current fiscal year based on the date of
termination, and (iii) payment to Executive of any amounts due pursuant to the
terms of any applicable savings and retirement plans and welfare benefit plans.
4.5.3. Termination by the Company for Other than Cause, Death or Disability;
Resignation By Executive for Good Reason or Within One Year After a Change of
Control. If the Company terminates Executive's employment for other than Cause,
death or Permanent Disability, or if Executive resigns for Good Reason or
resigns within one year after a Change of Control without Good Reason, this
Agreement shall terminate with the following obligations owed by the Company to
Executive: (i) the timely payment of Accrued Obligations, and (ii) the payment
of a Bonus for the current fiscal year equal to the Bonus paid with respect to
the prior fiscal year, prorated for the current fiscal year based on the date of
termination, and (iii) a "Severance Payment" as provided herein. The Severance
Payment shall be a lump sum cash payment equal to the largest of the following
amounts: (i) a sum equal to (A) $3,000,000 less all Base Salary paid or payable
through the date of termination, plus (B) the "Bonus Component" (as defined an
computed as set forth below), (ii) the severance payment due to the Executive
under the Company's Severance Plan, and (iii) an amount equal to (A) three times
the Executive's current Base Salary plus (B) the Bonus Component. For the
purposes of this Section, the Bonus Component shall be calculated as follows:
(i) if Executive's employment terminates on or after January
1, 2003, the Bonus Component shall be an amount equal to three times
the average of the Bonus payments payable for the past three fiscal
years;
(ii) if Executive's employment terminates after December 31,
2000 and prior to January 1, 2003, the Bonus Component shall be an
amount equal to three times the Bonus payment payable with respect to
the fiscal year preceding the year in which employment terminates; and
(iii) if Executive's employment terminates on or before
December 31, 2000, the Bonus Component shall be an amount equal to
three times what the Bonus Payment would have been if Executive had
been employed by the Company throughout 2000 and a Bonus Payment
(calculated in accordance with Section 3.2) had been payable with
respect to that year.
4.5.4. Continuation of Benefits. If Executive's employment is terminated (i) by
the Company without Cause, (ii) by the Executive for Good Reason, or (iii) at
anytime within one year after a Change of Control except for Cause, Executive
shall continue to participate in the Company's pension and welfare benefit
plans, until the first anniversary of the termination of Executive's employment
(the "Benefit Extension Period"); if Executive is not eligible to participate in
any such plan, the Company shall provide him with a substantially equivalent
benefit. To the extent a benefit cannot be provided under the terms of the
applicable plan, policy or program, the Company shall provide a comparable
benefit under another plan or make a cash payment of equivalent value.
Executive's rights under such benefit plans during the Benefit Extension Period
will be on the same terms as if Executive's employment had continued through the
Benefit Extension Period, except that Executive shall cease to accrue all
service for purposes of determining his entitlement to, and the amount of, his
pension benefits upon the Executive's commencement of receipt of benefits under
any of the Company's pension plans and Executive's rights under welfare benefit
plans during the Benefit Extension Period shall cease on any earlier date on
which Executive becomes eligible for comparable welfare benefits from a
subsequent employer. Other than as provided in this Section, Executive's vested
right to benefits under the benefit plans and the amount of such benefits shall
be determined based on Executive's age and service as though he had remained
employed under this Agreement through the Benefit Extension Period. If under any
other agreement or plan Executive is entitled to more favorable benefits, or a
longer benefit continuation period, than provided hereby, the terms of such
agreement or plan shall apply
4.5.5. Tax Reimbursement. (a) If any payment or benefit (within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), to the Executive or for his benefit paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise in connection
with, or arising out of, his employment with the Company or a Change of Control
(a "Payment" or "Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are collectively referred to as the "Excise Tax"),
then the Executive will be entitled to receive an additional payment (a
"Gross-Up Payment"). The amount of the Gross Payment will be such that after
payment by the Executive of all taxes (including any interest or penalties,
other than interest and penalties imposed by reason of the Executive's failure
to file timely a tax return or pay taxes shown due on his return, imposed with
respect to such taxes and the Excise Tax), including any Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) An initial determination as to whether a Gross-Up Payment is required
pursuant to this Agreement and the amount of such Gross-Up Payment shall be made
by an accounting firm selected by the Company and reasonably acceptable to the
Executive, which is designated as one of the five largest accounting firms in
the United States (the "Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination"), together with detailed supporting
calculations and documentation, to the Company and the Executive within five
days of the termination date if applicable, or such other time as requested by
the Company or by the Executive (provided the Executive reasonably believes that
any of the Payments may be subject to the Excise Tax) and if the Accounting Firm
determines that no Excise Tax is payable by the Executive with respect to a
Payment or Payments, it shall furnish the Executive with an opinion reasonably
acceptable to the Executive that no Excise Tax will be imposed with respect to
any such Payment or Payments. Within ten days of the delivery of the
Determination to the Executive, the Executive shall have the right to dispute
the Determination (the "Dispute"). The Gross-Up Payment, if any, as determined
pursuant to this Section 4.5.5 shall be paid by the Company to the Executive
within five days of the receipt of the Determination. The existence of the
Dispute shall not in any way affect the Executive's right to receive the
Gross-Up Payment in accordance with the Determination. Upon the final resolution
of a Dispute, the Company shall promptly pay to the Executive any additional
amount required by such resolution. If there is no Dispute, the Determination
shall be binding, final and conclusive upon the Company and the Executive
subject to the application of subsection (c), below.
(c) Notwithstanding anything contained in this Agreement to the contrary,
if according to the Determination an Excise Tax will be imposed on any Payment
or Payments, the Company shall pay to the applicable government taxing
authorities as Excise Tax withholding, the amount of the Excise Tax that the
Company has actually withheld from the Payment or Payments.
4.5.6. Options and Restricted Stock Rights Upon Termination.
(a) If Executive's employment terminates under the provisions of Section
4.5.1, any of Executive's Options that are vested on or prior to the date of
termination shall not be forfeited. If Executive is terminated for Cause, such
vested Options may be exercised by Executive or by Executive's legal
representative or representatives or the persons who become entitled to such
property under Executive's will or under the laws of descent and distribution
(referred to herein as "Executive's Successors") at any time within the earlier
of the date on which such Options otherwise expire and one year from the date of
termination of employment, and if Executive resigns prior to a Change of Control
or within one year after a Change of Control without Good Reason, such vested
Options may be exercised by Executive or Executive's Successors at any time
within the earlier of the date on which such Options otherwise expire and two
years from the date of termination. Any unvested Grant Shares or Options shall
be forfeited.
(b) If Executive's employment terminates under the provisions of Section
4.5.2, all unvested Options shall vest immediately upon the date of termination
and all of the Executive's unexercised Options may be exercised by Executive or
Executive's Successors at any time within one year of termination. All Grant
Shares subject to forfeiture at the date of termination under Section 4.5.2
shall no longer be subject to forfeiture and shall be released to Executive or
Executive's estate.
(c) If Executive's employment terminates under the provisions of Section
4.5.3, all unvested Options shall vest immediately upon the date of termination
and all of Executive's unexercised Options may be exercised by Executive or
Executive's Successors at any time within five years from the date of
termination. All Grant Shares subject to forfeiture at the date of termination
shall no longer be subject to forfeiture and shall be released to Executive.
(d) The vesting and forfeiture, upon termination of Executive's employment,
of any restricted stock or options owned by Executive under any Company plan or
agreement, and the Executive's rights under any other employee benefit plan or
agreement, other than those under Sections 3.3 or 3.4 of this Agreement, shall
be governed by the provisions of such plan or other agreement.
5. Non-Competition; Confidentiality
5.1. Non-Competition; Non-Solicitation of Customers. At no time during the Term
of Executive's employment by the Company or, if Executive is terminated under
Section 4.5.3 and the Severance Payment is paid, for a period of 12 months after
termination of employment will Executive, directly or indirectly, alone or as an
employee, independent contractor or consultant of any type, partner, officer,
director, creditor, owner, substantial (i.e., 5.0% or greater) stockholder or
holder of any option or right to become a substantial stockholder in or owner of
an entity or organization, (i) engage in any business that competes with that of
the Company or any subsidiary of the Company, or (ii) solicit or attempt to
divert the business of any person or entity that had been a customer of the
Company during the two years prior to termination of Executive's employment
under this Agreement. For the purpose of this Section 5.1, (i) a business is
deemed to "compete" with the Company if such company or other entity has more
than 25% of its sales in products that compete with products then being sold by
the Company or any subsidiary, or that will compete with products that are then
in development by the Company or any subsidiary (as evidenced by the business
records of the Company or any subsidiary) for its most recent fiscal year then
concluded, and (ii) to "solicit the business" of a customer or former customer
of the Company means to attempt to sell or otherwise provide products to such
customer that are competitive with products provided by the Company (or
competitive with products that are in development by the Company, as described
above, at the time of termination of Executive's employment). If Executive
remains employed by the Company for the Base Term, this non-competition
agreement shall not be in effect as to the Executive following termination of
employment.
5.2. Confidentiality. Except as may be required by Executive's employment by the
Company, Executive will not, during his employment and for two years thereafter,
intentionally divulge, disclose or communicate to any person, corporation or
other entity any material and confidential information concerning the products,
services or business of the Company, its subsidiaries, or affiliates. Subject to
the foregoing, the information not to be disclosed includes policies, prices,
expenses, other financial information, contractual relationships, past or
contemplated actions, personnel matters, marketing or sales data and written or
oral communications or understandings of any sort of the Company or any customer
with which the Company does business. This nondisclosure agreement shall not
apply to (i) information that is generally available to the public, unless made
public by Executive in breach of this Agreement or (ii) disclosure by Executive
pursuant to legal requirement or process (in which case Executive will give
prior notice to the Company, to the extent practicable, so that the Company may
try to protect its interests).
5.3. Non-Solicitation of Employees. Executive agrees that during his employment
by the Company and for one year following the termination, for any reason, of
such employment, he will not, either directly or indirectly, on his own behalf
or in the service of or on behalf of others, solicit, divert or hire away, or
attempt to solicit, divert or hire away any person employed by the Company,
whether or not such employee is a full-time employee or a temporary employee of
the Company and whether or not such employment is pursuant to a written
agreement and whether or not such employment is for a determined period or is at
will.
6. Indemnification
(a) In addition to any indemnification required by law, under the
Certificate of Incorporation or bylaws of the Company, under a resolution of the
Board, under Company policy or under any other agreement between the Company and
Executive, the Company shall indemnify and hold Executive harmless, to the
fullest extent allowed by law, against:
(i) expenses, including attorneys' fees, incurred by him in
connection with any threatened, pending or completed action, suit or proceeding
(including appeals), whether or not brought by or on behalf of the Company or by
a third party, and whether civil, criminal, administrative, investigative or
arbitrative (a "Proceeding"), seeking to hold him liable by reason of the fact
that he is or was acting as an agent, officer or other employee of the Company
or as a director of the Company, or he is or was acting in connection with the
business of the Company, or he is or was acting at the request of the Company as
a director, officer, partner, trustee, employee or agent for any other
corporation, partnership, limited liability company, joint venture, trust or
other enterprise, or as a trustee or administrator under an employee benefit
plan, and
(ii) payments for which he is liable or under made by him in
satisfaction of any judgment, money decree, fine, tax, penalty or settlement for
which he may have become liable with respect to such capacity in any such
Proceeding.
Such amounts due from the Company shall include interest from the date of
payment by Executive (if paid by Executive) at the "prime rate" as most recently
reported in The Wall Street Journal (or a comparable rate if publication of the
prime rate is discontinued) (the "Prime Rate") on the date of such payment by
Executive (or, if not published on such date, the nearest date on which such
rate is published). Notwithstanding the above, Executive shall be entitled to
indemnification rights equal to any more favorable rights granted to any
director or officer of the Company.
(b) The Company shall have the burden of proving that the Company is
not required to indemnify Executive under this Agreement.
(c) At the request of Executive, the Company shall, at the option of
Executive, pay or advance to Executive the expenses incurred by him, including
attorneys' fees in defending a Proceeding for which indemnification is claimed
in advance of final disposition, upon receipt of (i) evidence of Executive's
obligation and (ii) if then required under the general Corporation Law of the
State of Delaware, an undertaking by or on behalf of the Executive to repay such
amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Company against such expenses. The undertaking need not be
secured and shall be sufficient without reference to the financial ability of
the Executive to make repayment.
(d) Executive also shall be entitled to recovery of expenses, including
attorneys' fees, incurred in connection with enforcement of indemnification
rights under this Agreement, plus interest from the date of payment at the Prime
Rate as most recently reported in The Wall Street Journal (or a comparable rate
if publication of the prime rate is discontinued) on the date of such payment by
Executive (or, if not published on such date, the nearest date on which such
rate is published).
(e) Within ten days after receipt of a claim for indemnification under
this Agreement, accompanied by evidence of the liability or expense, the Company
shall pay the indemnification claim or cause it to be paid unless the Company
claims that the indemnification claim is not covered by this Agreement. If the
Company believes that the indemnification claim is not covered it shall so
advise the Executive in writing within the ten day period.
(f) Executive shall give notice to the Company promptly and in any
event no later than ten days after Executive is served with written notice of
any claim against Executive that may give rise to a claim for indemnification
under this Agreement. A copy of any documents which have been served upon
Executive shall accompany such notice or, where this is not feasible, shall be
delivered to the Company as soon as reasonably practicable thereafter.
(g) Subject to any rights of or duties to any insurer, reinsurer or
other third party having liability for any claim made or brought against
Executive, the Company shall have the right, at its option, to assume, at its
own expense, the control of the defense thereof, including the employment of
legal counsel reasonably satisfactory to Executive. If the Company exercises the
foregoing right, the Executive shall cooperate with the Company and make
available to it all information under the control of the Executive that is
relevant to the claim. If the Company decides not to exercise the foregoing
right, the Executive, at the request of the Company, shall keep the Company
reasonably apprised of the progress of the defense of the claim.
(h) Nothing herein shall preclude Executive, at his sole discretion and
expense, from employing legal counsel of his choosing to participate in the
defense of any claim made or brought against him in addition to legal counsel
employed by the Company.
(i) If the Company elects to assume control of the defense of any
claim, the Company shall not settle or compromise the claim for or on behalf of
Executive without his written consent. However, if the Company receives an offer
of settlement or compromise from the other party or parties to the claim in a
particular amount or obtains a commitment from such party or parties to accept a
compromise or settlement in such amount if offered, and if such settlement or
compromise requires only the payment of such amount, the granting of an
appropriate release of Executive or similar accommodation, and no other relief,
and the Executive refuses to consent thereto and elects to continue to defend
the claim, then the extent of the indemnity to which Executive shall be entitled
hereunder shall be limited to such amount and the legal fees and expenses that
Executive would have been entitled to receive from the Company if such
compromise or settlement has been accepted.
7. Arbitration
Any controversy or claim arising out of or relating to this Agreement,
its enforcement or interpretation, or because of an alleged breach, default or
misrepresentation in connection with any of its provisions, or any failure to
reach agreement on the value of the Company's stock as contemplated by Section
3.4.2, shall be submitted to arbitration to be held in Birmingham, Alabama, in
accordance with the American Arbitration Association's National Rules for the
Resolution of Employment Disputes. All expenses of arbitration, including the
arbitrator's fees and expenses, shall be paid entirely by the Company.
8. Successors
8.1. This Agreement is personal to Executive and shall not, without the prior
written consent of the Company be assignable by Executive.
8.2. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and any such successor or assignee shall
be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" and "assignee" shall include any person,
firm, corporation or other entity which at any time, whether by purchase, merger
or otherwise, directly or indirectly acquires the stock of the Company or to
which the Company assigns this Agreement by operation of law or otherwise.
9. Waiver
No waiver of any breach of any term or provision of this Agreement
shall be construed to be, nor shall be, a waiver of any other breach of this
Agreement. No waiver shall be binding unless in writing and signed by the party
waiving the breach.
10. Modification
This Agreement may not be amended or modified other than by written
agreement executed by Executive and the Company, with the approval of the Board
of Directors.
11. Savings Clause
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
12. Complete Agreement
This Agreement constitutes and contains the entire agreement and final
understanding concerning Executive's employment with the Company and the other
subject matters addressed herein between the parties. It is intended by the
parties as a complete and exclusive statement of the terms of their agreement.
It supersedes and replaces all prior negotiations and all agreements proposed or
otherwise, whether written or oral, concerning the subject matter hereof. Any
representation, promise or agreement not specifically included in this Agreement
shall not be binding upon or enforceable against either party. This is a fully
integrated agreement.
13. Governing Law
This Agreement shall be deemed to have been executed and delivered
within the State of Delaware, and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with, and governed by,
the laws of the State of Delaware without regard to principles of conflict of
laws.
14. Construction
Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. The term "including" is illustrative and not
exclusive.
15. Communications
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if deliverable or if
mailed by registered or certified mail, postage prepaid, addressed to Executive
at the address given by Executive to the Company for payroll and tax reporting
purposes, and addressed to the Company at: Birmingham Steel Corporation,1000
Urban Center Drive, Suite 300, Birmingham, Alabama 35242-2516, ATTN: Corporate
Secretary
Either party may change the address at which notice shall be given by written
notice in the above manner.
16. Legal Fees and Expenses
The Company shall pay all legal fees and expenses, if any, incurred by
Executive in obtaining, enforcing, or defending any right or benefit provided by
this Agreement, if successful in whole or in part (including any settlement),
and the reasonable legal fees incurred by Executive in connection with the
formation of this Agreement.
17. Execution
This Agreement is being executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Photographic copies of such signed counterparts may
be used in lieu of the originals for any purpose.
18. Survival
The provisions of Sections 3.3(g), 3.4 (as modified by Section 4.5.6),
3.14, 3.15, 4.5, and 5-18 of this Agreement shall survive termination of
Executive's employment or termination of other obligations under this Agreement.
<PAGE>
IN WITNESS THEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/s/ John D. Correnti
---------------------
John D. Correnti
BIRMINGHAM STEEL CORPORATION
By: /s/ James A. Todd, Jr.
-----------------------
James A. Todd, Jr.
Its: Chief Administrative Officer
ATTEST
By: /s/ Catherine W. Pecher
------------------------
Catherine W. Pecher
Corporate Secretary
[Corporate Seal]
<PAGE>
A-1
Exhibit A to Employment Agreement
Between Birmingham Steel Corporation and John D. Correnti
STOCK OPTION ADJUSTMENTS
A. Generally. The Exercise Price and the number of shares of purchasable
upon the exercise of an Option are subject to adjustment from time to time as
provided in this Exhibit A as follows:
(1) If there shall occur any extraordinary dividend or other
extraordinary distribution in respect of the shares (whether in the form of
cash, shares, other securities, or other property), or any recapitalization,
stock split (including a stock split in the form of a stock dividend), reverse
stock split, reorganization, merger, combination, consolidation, split-up,
spin-off, combination, repurchase, or exchange of shares or other securities of
the Company, or there shall occur any other fundamental change or event in
respect of the shares or a sale of substantially all the assets of the Company
as an entirety, then the Company shall:
(a) equitably and proportionately adjust (i) the number and type
of shares subject to the then outstanding Options, and (ii) the
Exercise Price of the Options; or
(b) in the case of an extraordinary dividend or other
distribution, split-up, or spin-off, make an appropriate, equitable
provision for a distribution upon exercise of the Options of
equivalent value (in property, securities or cash) to the distribution
to shareholders; or
(c) in the case of a merger, combination or other reorganization
that the Company does not survive, or in a sale of assets, provide for
the substitution or exchange of the Options (or the shares deliverable
on exercise of the Options) for a right to acquire the consideration
payable to holders of other shares of the Company upon or in respect
of such event.
However, in each case described in clauses (a) through (c), above, no such
adjustment shall fail to provide, upon a merger or other reorganization or
similar event of the type described above that the Company does not legally
survive, for a conversion of the Options into a right to acquire consideration
at least as favorable to Executive as that distributed or payable upon or in
respect of such event in respect of the number of shares as to which the Options
is or thereafter may be exercised, with appropriate, proportionate and equitable
adjustments to the Exercise Price and any other affected features.
If, in the case of any such event, the stock or other securities or property
receivable thereupon by shareholders of the Company includes shares of stock or
other securities or property of or from an entity other than a successor legally
bound hereby, such other entity shall execute and deliver for the benefit of
Executive an agreement to be bound hereby, together with such additional
provisions to protect the interests of Executive as the Company shall reasonably
consider necessary by reason of the foregoing or as the Company may otherwise
provide.
(2) If Options are not exercised prior to a dissolution of the Company,
express provision shall be made in the plan of dissolution or otherwise for the
substitution or other settlement of such Options for the payment of the fair
value thereof, or upon exercise, for the payment of value equivalent to that
paid in the dissolution to the holders of a like number of shares as then are
subject to the Options.
(3) Except as provided herein, adjustments under Section A(1) or (2) of
this Exhibit A shall become effective immediately after the record date for the
determination of shareholders entitled to receive the applicable rights
contemplated thereby.
(4) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least 1% of the Exercise
Price per share, but any adjustments that by reason of this subsection (4) are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section A of Exhibit A shall
be made to the nearer cent or to the nearer one-hundredth of a share, as the
case may be. The Company shall not be required to issue any fractional share,
but any fractional share interest shall be paid in cash equal to the fair market
value of the applicable percentage of a share in lieu thereof or, at the
Company's election, paid in a fractional or whole share.
(5) The provisions of Section A(1) and (2) of this Exhibit A shall bind
Executive to the adjustments or substitutions made by the Company in good faith
in accordance with the terms hereof. These provisions also shall apply to any
successive recapitalization, reorganization or other change.
B. Notices to Executive.
(1) Adjustments. Upon any adjustment of the Exercise Price or the
number of shares Executive shall be entitled to purchase upon exercise of the
Options pursuant to Section A of this Exhibit A, the Company within 20 days
thereafter shall (a) mail to Executive (at the address last appearing on the
Company's records for such purposes) a certificate of a firm of independent
public accountants of recognized standing selected by the Board of Directors of
the Company (who may be the regular auditors of the Company) setting forth the
Exercise Price after such adjustment and the adjusted number of shares (or
fraction thereof) purchasable upon exercise of the Options and setting forth in
reasonable detail the method of calculation and the facts upon which the
calculation is based.
(2) Distributions; Certain Major Events. If:
(a) the Company shall declare a dividend (or any other
distribution) payable to the holders of shares otherwise than in cash;
or
(b) the Company shall authorize the granting to the holders of
shares of rights to subscribe for or purchase any shares of any class
or of any other rights; or
(c) the Company shall authorize any reclassification or change of
the shares (other than a subdivision or combination of its outstanding
shares), or any reclassification, consolidation, merger or other
reorganization to which the Company is a party and for which approval
of any shareholders of the Company is required, or the sale or
conveyance of all or substantially all the property or business of the
Company; or
(d) there shall be proposed any voluntary or involuntary
dissolution, liquidation or winding up of the Company;then the Company
shall cause to be mailed to Executive, (at the address last appearing
on the Company's records for such purposes), at least 20 days prior to
the applicable record date or effective date hereinafter specified, by
first class mail, postage prepaid, a written notice stating (i) the
date as of which the holders of record of shares to be entitled to
receive any such rights, warrants or distribution are to be
determined, or (ii) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected
that holders of record of shares shall be entitled to exchange their
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, reorganization, conveyance,
transfer, dissolution, liquidation or winding up. If any action
referred to in this subsection B(2) requires the approval of holders
of shares, the Company shall cause notice of the proposed action and
the record date for the determination of holders of shares entitled to
vote on such matter to be mailed to Executive (at such address), at
least 20 days prior to such record date, by first class mail, postage
prepaid. The failure to give any notice required by this subsection
B(2) or any defect therein shall not affect the legality of any such
reclassification, consolidation, merger, reorganization, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any
action, but the failure to give any notice will extend the period
during which the Options may be exercised by a like number of days and
during which the holder is entitled to receive securities or other
property, as the case may be, upon exercise of the Options.
<PAGE>
B-1
Exhibit B to Employment Agreement
Between Birmingham Steel Corporation and John D. Correnti
FORM OF EXERCISE OF OPTION
(To be executed upon each exercise of Option)
The undersigned hereby irrevocably elects to exercise the right, evidenced by
the Employment Agreement dated as of _____, ______ (the "Agreement"), to
purchase _______ shares (the "shares") of common stock of Birmingham Steel
Corporation and herewith tenders payment in full for such shares as follows:
[check applicable box(es)]
----by certified or official bank check payable to the order of Birmingham
Steel Corporation in the amount of $_______________
----by electronic funds transfer in the amount of $_______________
----by delivery of ____________ shares with a value of $____________ per
share, or $____________ in the aggregate, or options for ________ shares having
a value (as determined in accordance with such Agreement) of $__________
in accordance with the terms of the Agreement.
Executive requests that a certificate for such shares be registered to Executive
and delivered to:
------------------------------------------------------------------------------
If the number of shares for which exercise is made hereby is less than all of
the shares purchasable under the Agreement, Executive represents that he has
made (and authorizes the Company to likewise make) notation of the partial
exercise and the date hereof on the Option Share Exercise Record as provided by
the Agreement.
Dated:________________________
John D. Correnti
Insert Taxpayer I.D. No. of Executive
<PAGE>
ACCEPTED BY:
BIRMINGHAM STEEL CORPORATION Dated: _________________
By:
Name: ________________________
Title: ________________________
<PAGE>
Exhibit 10.11.1
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") is made by and
between Birmingham Steel Corporation, a Delaware corporation (the "Company"),
and John D. Correnti ("Executive") as of May 12, 2000.
The Company and the Executive have entered into an Employment Agreement
(the "Agreement") dated May 12, 2000. The parties have determined that certain
amendments should be made to the Agreement as provided below.
Provisions
1. Effective December 1, 1999, Section 3.1 of the Agreement is hereby
amended to change the base rate of salary to $510,000 per year for each year of
the Term, subject to increase as provided in the Agreement.
2. Section 3.2 of the Agreement is hereby amended in its entirety to
read as follows:
"3.2 Annual Bonus. (a) Executive shall receive during the Term
an annual bonus ("Bonus") equal to one percent (1%) of "Base Earnings"
for each fiscal year, or portion thereof, in the Term (including the
fiscal years in which the Term commences and in which it expires). Base
Earnings shall be determined from the Company's audited consolidated
statement of operations (the "Income Statement") for such fiscal year
and shall be a sum equal to (i) the Company's consolidated pre-tax
income plus, (ii) the total of all interest charges, (iii) the total of
the depreciation and amortization charges, and (iv) the total of all
"Extraordinary Charges", all as shown on the Income Statement.
"Extraordinary Charges" means all reserves and charges or accruals on
the Income Statement arising from extraordinary items, goodwill
write-offs and other unusual items.
(b) The Bonus for each fiscal year (or portion thereof) in the
Term shall be paid in a single payment not later than 30 days after the
issuance of the Income Statement by the Company's auditors. Such
payment will consist of a combination of shares of the Company's common
stock and cash, with the cash percentage component thereof being at
least equal to the sum of the maximum marginal tax rates under the
Federal and Alabama income tax laws as in effect at the time of payment
(currently 39.6% and 5%, respectively, or a total of 44.6%). For
purposes of determining the amount of said payment, the shares of the
Company's stock will be valued based on the closing price of the
Company's common stock on the date that the Compensation Committee of
the Board of Directors of the Company approves payment of the bonus
based on the formula described in subparagraph (a) above. The shares of
the Company's stock issued pursuant to this Section will be immediately
fully vested and transferable and will, upon issuance, be fully paid
and nonassessable and free from all taxes (other than withholding taxes
on income and wages), liens, charges and security interests with
respect to the issue thereof. The Company will in good faith, and as
expeditiously as possible, take all action which may be necessary to
obtain and keep effective any and all registrations, permits, consents
and approvals of governmental agencies and authorities, and will make
any and all necessary filings under Federal and State securities laws,
or of exchanges or similar markets on which the shares are listed,
necessary in connection with the issuance, transfer, and delivery of
the shares.
(c) The Bonus shall be in lieu of any other cash incentive
compensation program offered by the Company to its management
employees, unless otherwise provided by the Board or as specifically
provided in this Agreement."
3. Section 3.3(e) of the Agreement is hereby deleted.
4. The vesting schedule contained in Section 3.4.3 of the Agreement is
hereby amended to read as follows:
Date Number of Options Vesting
January 14, 2001 200,000
January 14, 2002 200,000
January 14, 2003 200,000
January 14, 2004 200,000
January 14, 2005 200,000
5. Section 3.4.9 of the Agreement is hereby amended in its entirety to
read as follows:
"3.4.9. Company Incentive Stock Option Plan. The options
issued under this Section 3.4 will be "incentive stock options" to the
extent permitted under the Internal Revenue Code. Except as provided in
this Agreement, unless provided by the Board or the appropriate
committee of the Board, during the Initial Term of the Agreement,
Executive shall not be eligible to participate in the Company's
incentive stock option plans applicable to executive employees
generally. After the Initial Term, Executive shall participate in any
such plan applicable to senior executives generally."
6. Section 3.5 of the Agreement is hereby deleted.
7. Section 16 of the Agreement is hereby amended by adding the
following at the conclusion thereof:
"The Company shall pay the reasonable legal fees incurred by Executive
in connection with any amendment to the Agreement."
8. The remaining provisions of the Agreement will remain unchanged.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
<PAGE>
Exhibit No. 10.19.1
DRI PURCHASE AGREEMENT
Between
BIRMINGHAM STEEL CORPORATION
and
AMERICAN IRON REDUCTION L.L.C.
Dated as of August 30, 1996
and
Amended and Restated
as of May 30, 1997
and
as of May 5, 2000
------------------------------------------------------------------------------
<PAGE>
iii
Table of Contents
Article 1. PURCHASE AND SALE OF DRI......................................3
Section 1.1 Obligation to Produce and Tender.......................3
Section 1.2 Obligation to Purchase; Quantity.......................3
Section 1.3 Termination of Buyer's Obligation to Purchase..........4
Section 1.4 Production of DRI......................................4
Section 1.5 Allocation of DRI among Buyer, Co-Buyer and
Third Parties..........................................4
Section 1.6 Economic Delivery Quantities...........................4
Section 1.7 Non-Competition........................................5
Section 1.8 Obligation to Refer Possible Third Party Direct Sales..5
Article 2. DELIVERY;TRANSPORTATION.......................................5
Section 2.1 FOB Terms..............................................5
Section 2.2 Title and Risk of Loss.................................5
Section 2.3 Weights................................................6
Section 2.4 Buyer's Obligation to Arrange Transportation...........6
Article 3. SPECIFICATIONS FOR DRI AND SAMPLING...........................6
Section 3.1 Specifications.........................................6
Section 3.2 Sampling, Analyzing and Inspecting Procedures.........7
Section 3.3 Inspection of DRI at Time of Delivery..................7
Article 4. BILLING AND PAYMENT TERMS.....................................7
Section 4.1 Determination of Estimated Invoice Price...............7
Section 4.2 Delivery Invoices......................................8
Section 4.3 Determination of Actual Invoice Price..................8
Section 4.4 True-Up Invoices.......................................9
Section 4.5 Determination of Buyer's Clawback Amount...............9
Section 4.6 Clawback Invoice......................................10
Section 4.7 Termination True-Up Invoice...........................10
Section 4.8 Payment Terms.........................................11
Section 4.9 Voluntary Payment Terms...............................11
Section 4.10 Increased Price Resulting from Third-Party Operator..11
Section 4.11 Pricing for DRI Following Co-Buyer Nonperformance
Event.................................................12
Section 4.12 Covenant of Buyer to Disclose Resale Transactions.....13
Article 5. ACCOUNTING AND RECORDS........................................13
Section 5.1 Maintaining Records; Access to Facility and
Inspections; Audits......................................13
Section 5.2 Delivery of Seller's Financial Statements..............14
Section 5.3 Planning and Budgeting.................................14
Article 6. WARRANTIES AND LIMITATION OF LIABILITY........................17
Section 6.1 Specifications Warranty...............................17
Section 6.2 Warranty Limitation...................................17
Section 6.3 Claims................................................17
Article 7. REPRESENTATIONS AND WARRANTIES OF BUYER......................18
Section 7.1 Organization; Power; Qualification....................18
Section 7.2 Authorization; Enforceable Obligations;
Compliance with Law......................................18
Section 7.3 Governmental Approval; No Conflicts...................18
Article 8. TERM, DEFAULT AND
TERMINATION........................................................18
Section 8.1 Term..................................................18
Section 8.2 Default...............................................19
(a) Monetary Default.................................19
(b) Non-Monetary Default.............................19
(c) Rights Upon Cancellation.........................19
Section 8.3 Bankruptcy, Receivership, etc.........................20
Section 8.4 No Impact on Section 25-2-609 and -610................20
Article 9. FORCE MAJEURE................................................20
Section 9.1 Force Majeure.........................................20
(a) Force Majeure Defined............................20
(b) Effect of Force Majeure.........................21
Section 9.2 Notice of Force Majeure...............................21
Section 9.3 Extension.............................................22
Article 10. SELLER'S REPORTING COVENANT..................................22
Article 11. DEFINITIONS.....................................................22
Section 11.1 Certain Defined Terms................................22
Section 11.2 Index of Defined Terms...............................30
Article 12.
MISCELLANEOUS......................................................32
Section 12.1 Notice...............................................32
Section 12.2 Rights and Remedies Cumulative.......................32
Section 12.3 Taxes................................................33
Section 12.4 Successors and Assigns/Assignment....................33
Section 12.5 Waiver...............................................33
Section 12.6 Governing Law........................................33
Section 12.7 Number...............................................33
Section 12.8 Table of Contents and Headings.......................34
Section 12.9 Severability.........................................34
Section 12.10 Counterparts.........................................34
Section 12.11 Entire Agreement.....................................34
Section 12.12 No Third Party Beneficiaries.........................34
Section 12.13 Construction of Agreement............................34
SCHEDULES
Schedule 1.............................................Specifications for DRI
Schedule 2..................................................Principal Amounts
Schedule 3......................................Computation of Buyer Invoices
<PAGE>
32
4
DRI PURCHASE AGREEMENT
.........
THIS DRI PURCHASE AGREEMENT (the "Agreement"), originally dated as of
August 30, 1996, as amended and restated as of May 30, 1997 and as further
amended and restated as of May 5, 2000, between BIRMINGHAM STEEL CORPORATION, a
Delaware corporation with its principal corporate office in Birmingham, Alabama
("Buyer"), and AMERICAN IRON REDUCTION L.L.C., a Delaware limited liability
company with its principal place of business in Convent, Louisiana ("Seller");
.........WHEREAS, Seller has constructed and completed a Facility for the
production of DRI which Facility has a rated capacity of 1.2 million Metric
Tonnes of DRI per year; and
WHEREAS, Seller and Buyer entered into a long term DRI Purchase
Agreement for the sale and purchase, respectively, of such DRI, dated as of
August 30, 1996, as first amended and restated as of May 30, 1997 (as so amended
and restated through such date, the "Previous DRI Purchase Agreement"); and
WHEREAS, the parties desire to restate entirely their respective rights and
obligations under the Previous DRI Purchase Agreement; ......... NOW, THEREFORE,
in consideration of the foregoing, of the mutual covenants set forth below and
of other good and valuable consideration, the receipt and sufficiency of which
are acknowledged by the parties hereto, the parties agree that from and after
the Amendment Date the Previous DRI Purchase Agreement shall be restated in its
entirety as follows, and this Agreement shall from and after the Amendment Date
govern the relationship of Buyer and Seller concerning the purchase and sale of
DRI:
ARTICLE 1. PURCHASE AND SALE OF DRI
Section 1.1 Obligation to Produce and Tender
Subject to the terms and conditions of this Agreement, including,
without limitation, Article 9 hereof, Seller agrees to use commercially
reasonable efforts to produce and tender to Buyer during each Month of the Term
an amount of DRI equal to Buyer's DRI Purchase Requirement for such Month.
Section 1.2 Obligation to Purchase; Quantity
Buyer agrees, subject to the terms and conditions hereof, including,
without limitation, Section 1.3 hereof, to take its DRI Purchase Requirement for
each Month of the Term to the extent the same or any portion thereof is tendered
to Buyer as provided in Section 1.1 and Section 1.6 hereof. Buyer shall pay for
any DRI so taken at the price and upon the terms specified in Article 3 of this
Agreement. Buyer may, but shall have no obligation to, purchase more than the
DRI Purchase Requirement during any Month of the Term.
Section 1.3 Termination of Buyer's Obligation to Purchase
If a Termination Event shall occur entirely after the end of a
Preliminary Action Period and prior to the occurrence of an Increased Production
Event, then Buyer may, within 30 days after the occurrence of such Termination
Event, notify the Seller in writing of Buyer's election to terminate this
Agreement (hereinafter a "Termination Notice"). Receipt of such Termination
Notice by Seller shall commence a Standstill Period. Such termination shall take
effect immediately upon the expiration of such Standstill Period unless (i) an
Increased Production Event occurs during such Standstill Period or (ii) Seller
receives a written notice from Buyer revoking such Termination Notice
(hereinafter a "Revocation of Termination Notice") during such Standstill
Period. If Buyer is precluded from terminating this Agreement as a result of the
occurrence of an Increased Production Event or revokes its Termination Notice,
then Buyer may not terminate this Agreement pursuant to this Section 1.3 except
in accordance with the first sentence of this Section 1.3 following the
occurrence of a subsequent Termination Event after the occurrence of a new
Preliminary Action Period.
Section 1.4 Production of DRI
Except as otherwise provided in this Agreement, the parties agree that
the amount of DRI produced and sold (i) in Third Party Direct Sales, (ii)
pursuant to Section 1.1 and Section 1.2 hereof and (iii) pursuant to the
comparable sections of the Co-Buyer Agreement will aggregate at least 600,000 MT
per calendar year (or the pro rated portion thereof during any partial calendar
year of the Term). The foregoing statement shall not be, and shall not be deemed
in any way to constitute, an obligation to purchase DRI by either the Buyer or
the Co-Buyer. Any such obligation to purchase is contained in the terms
otherwise provided herein and shall not be affected by this Section 1.4. The
actual amount of DRI to be produced in any period shall be determined pursuant
to 0.
Section 1.5 Allocation of DRI among Buyer, Co-Buyer and Third Parties
The allocation of DRI among the Buyer, Co-Buyer and any Third Parties
with which AIR has a contract for the Delivery of DRI during any Month will be
determined by the Project Operating Budget so long as the production and
Delivery of DRI are substantially in accordance with the Project Operating
Budget for that Month. At any time production and Delivery of DRI for a Month
constitute a shortfall from the amount projected in the Project Operating
Budget, then the DRI available shall be allocated insofar as is practicable
among the Buyer, Co-Buyer and any such Third Parties in the same ratio as the
fraction whose numerator is the amount of DRI allocated to such Person in the
Project Operating Budget for such Month and whose denominator is the aggregate
amount of DRI projected to be Delivered to all such Persons in the Project
Operating Budget for such Month. No failure of Seller to produce and Deliver DRI
substantially in accordance with the Project Operating Budget shall constitute a
default by Seller hereunder or otherwise excuse Buyer's or Co-Buyer's commitment
to purchase DRI in accordance with Section 1.2 above.
Section 1.6 Economic Delivery Quantities
Notwithstanding anything herein to the contrary, Buyer shall have no
obligation to take Delivery of any DRI hereunder in quantities of less than
2,500 MT per Delivery. The parties hereto understand and acknowledge that
production of DRI may not equal shipments to Buyer, Co-Buyer and Third Parties
every Month. However, Seller and Buyer agree to cooperate with each other and
with Co-Buyer to minimize any differences between production and shipment.
Section 1.7 Non-Competition
Buyer and Seller agree that Buyer may at any time have only one Exempt
Purchaser. So long as (i) Buyer has committed no default under Section 8.2 that
is continuing on the date of determination and which would allow Seller to
terminate this Agreement on such date, (ii) Buyer owns 50% of Seller, and (iii)
Buyer has effected an Exempt Transaction with its Exempt Purchaser within six
Months of the date of determination, Seller shall not on such date, without the
prior written consent of Buyer, sell or make an offer to sell DRI to such Exempt
Purchaser, or solicit from such Exempt Purchaser an offer to buy DRI except
pursuant to a then-existing contract entered into before such Person became
Buyer's Exempt Purchaser.
Section 1.8 Obligation to Refer Possible Third Party Direct Sales
Buyer agrees that so long as it has an Exempt Purchaser, it will refer
to Seller any opportunities of which Buyer is aware for Third Party Direct Sales
of DRI other than to its Exempt Purchaser; provided, however, Buyer retains the
right, in its discretion, to enter into Resale Transactions of up to 5,000 MT
per Month, in individual contracts, or up to 10,000 MT per Month in joint and
several contracts with Co-Buyer; provided further, however, in no event may
Buyer's and Co-Buyer's combined Resale Transactions (as such term is defined
herein and in Co-Buyer Agreement) in any Month exceed an aggregate of 10,000 MT
other than Exempt Transactions with their respective Exempt Purchasers (as such
terms are defined herein and in the Co-Buyer Agreement).
ARTICLE 2. DELIVERY; TRANSPORTATION
Section 2.1 FOB Terms
Seller shall make Delivery of DRI in the amounts determined pursuant to
Section 1.1 and Section 1.2 hereof to Buyer FOB Buyer's vessel or train at the
Materials Handling Facility or FOB Buyer's truck at the Facility (in either
case, as instructed by Buyer prior to Delivery). For purposes hereof, "Delivery"
of DRI or the term "Delivered" shall mean Seller's putting the DRI in the
possession of the carrier specified by Buyer or by a Third Party in the case of
direct sales to Third Parties, or the tender to Buyer as provided in Section
2.4.
Section 2.2 Title and Risk of Loss
Title to and risk of loss of DRI sold by Seller to Buyer hereunder shall
pass to Buyer or its designee upon Delivery to Buyer or its designee as provided
in Section 2.1 of this Agreement. Weights
The weight of each shipment of DRI shall be determined
(a) by the Carrier by scale weights obtained at the
Materials Handling Facility if the DRI is to be shipped by
rail or by means of a draft survey conducted by an independent
qualified marine surveyor (engaged by Carrier) upon loading if
shipped by ship or barge, or
(b) by Seller by scale weights obtained at the
Facility (a) if the DRI is to be shipped by truck or (b) if
the Buyer fails to arrange transportation as provided in
Section 2.4.
Such weight shall be furnished to Buyer or its designee with each
shipment and shall be presumed to be correct. However, Buyer shall have the
right to investigate such weights and to otherwise verify the weight of any
shipment. To such end, Seller will at the request of Buyer exercise such rights
as it may have under the Materials Handling Agreement regarding inspection of
the Carrier's scales. In the event investigation or verification by Buyer
indicates a variance from the weight provided by the Carrier, the source of the
variance shall be jointly analyzed by representatives of the Seller, the Carrier
and the Buyer and errors when ascertained shall be promptly corrected to the
extent appropriate in accordance with the Materials Handling Agreement.
Section 2.4 Buyer's Obligation to Arrange Transportation
Buyer agrees to arrange for transportation for all Deliveries of DRI
tendered to Buyer in accordance with the Project Operating Budget. In the event
that Seller produces and tenders DRI in accordance with such Project Operating
Budget and Buyer fails to provide transportation therefor upon tender to the
Buyer in accordance with such Project Operating Budget, Seller may, but shall
not be obligated to, arrange for the storage of such DRI at the expense of
Buyer. If Seller arranges for such storage, it shall give Buyer prompt written
notice thereof. Buyer acknowledges and agrees that the Seller may store such DRI
at the Materials Handling Facility (including rail cars located on or in
reasonable proximity to the Materials Handling Facility), at any temporary or
permanent storage facilities located at the Facility, on river barges engaged
for such purposes or at such other reasonable locations as Seller may elect.
Delivery to Buyer of such DRI so stored shall be deemed to have occurred as
provided in Section 2.1 hereof upon the tender to Buyer of such DRI.
ARTICLE 3. SPECIFICATIONS FOR DRI AND SAMPLING
Section 3.1 Specifications
DRI shall be supplied in the form of pellets or in such other form as
may be agreed upon by the parties hereto. DRI Delivered pursuant to this
Agreement shall have the specifications set forth on attached Schedule 1. It is
understood and agreed by the parties hereto that although individual samples of
DRI Delivered pursuant to this Agreement may vary from the specifications set
forth on Schedule 1, the DRI will meet or exceed such specifications when such
samples are taken as an average over an entire shipment. No warranty is made
with respect to DRI pursuant to this Section 3.1. Any warranty made in this
Agreement is made pursuant to Section 6.1.
Section 3.2 Sampling, Analyzing and Inspecting Procedures
Seller shall continue to ensure the full and proper implementation of
procedures for the representative sampling and analysis of DRI produced at the
Facility. Such sampling procedures shall comply with International Standards
Organization standards and good industry practices. Seller shall conduct its
analysis of the samples at the Facility prior to Delivery thereof. Buyer shall
have the right to audit such procedures and their implementation as well as all
analytical results relating to shipments of DRI Delivered to Buyer at reasonable
times and with reasonable frequency. Buyer shall also have the right to inspect
and observe the process at the Facility. Copies of applicable test results shall
be provided to Buyer by Seller upon receipt of a written request for such
results. Seller shall retain such samples for a period of not less than six (6)
months and shall make the same available to Buyer upon its reasonable request.
Section 3.3 Inspection of DRI at Time of Delivery
Seller shall give Buyer oral notice of its intent to Deliver a shipment
of DRI in accordance with the Project Operating Budget, and Buyer shall have the
right to inspect the same at the time of Delivery.
ARTICLE 4. BILLING AND PAYMENT TERMS
Section 4.1 Determination of Estimated Invoice Price
(a) Base Computation. On the first Business Day of each Month, Seller shall
determine:
(1) the Estimated Fixed Cost of operating the Facility during such
Month;
(2) the Estimated Variable Cost of producing the number of MT of DRI
scheduled for Delivery during such Month;
(3)......the Estimated Third Party Direct Revenues for such Month;
(4)......the Estimated Buyer Shipments for such Month;
(5) the Estimated Third Party Direct Shipments for such Month; and
(6)......the Estimated Total Shipments for such Month.
Each such estimate shall be based upon the assumption that the Facility will
Deliver the number of MT of DRI specified in the Project Operating Budget for
such Month at the times and amounts specified in such Project Operating Budget
and shall use the cost assumptions utilized in such Project Operating Budget.
The foregoing amounts shall be the basis for determining the Estimated Invoice
Price per MT of DRI to be Delivered to Buyer during such Month.
(b) Computation of Estimated Invoice Price per MT. The "Estimated
Invoice Price per MT" for a Month shall mean the quotient which results
when the sum of --
(1) 1/2 of the remainder (whether positive or negative) which
results when Estimated Third Party Direct Revenues for such Month are
subtracted from Estimated Fixed Cost for such Month plus
(2) an amount equal to the product of Estimated Variable Cost for
such Month multiplied by the fraction whose numerator is the sum of
Estimated Buyer Shipments for such Month plus 1/2 of Estimated Third
Party Direct Shipments for such Month, and whose denominator is
Estimated Total Shipments for such Month, plus
(3) any unused Credit Balance due Buyer is divided by Estimated
Buyer Shipments for such Month.
Section 4.2 Delivery Invoices
Seller shall invoice Buyer on the date Seller Delivers DRI to Buyer as
provided in Section 2.1 hereof (each such invoice a "Delivery Invoice"). The
price per Metric Tonne of DRI as shown on such invoice shall be the Estimated
Invoice Price per MT for DRI for the Month in which Delivery of such DRI occurs.
Section 4.3 Determination of Actual Invoice Price
(a) Base Computation. On the third Business Day of the first
Month following the Amendment Date and on the third Business Day of
each Month of the Term thereafter, Seller shall determine:
(1) the Fixed Cost of operating the Facility during the
prior Month;
(2) the Variable Cost of producing the number of MT of DRI
Delivered during the prior Month;
(3) the Third Party Direct Revenues for the prior Month;
(4) the Buyer Shipments for the prior Month;
(5) the Third Party Direct Shipments for the prior Month and
(6) the Total Shipments for such Month.
The foregoing amounts shall be the basis for determining the Invoice Price for
each MT of DRI Delivered to Buyer during such Month.
(b) Computation of Invoice Price per MT. The "Invoice Price
per MT" for a Month shall mean the quotient which results when
the sum of
(1) 1/2 of the remainder (whether positive or negative) which
results when Third Party Direct Revenues for such Month are
subtracted from Fixed Cost for such Month plus
(2) an amount equal to the product of Variable Cost for such
Month multiplied by the fraction whose numerator is the sum of
Buyer Shipments for such Month plus 1/2 of Third Party Direct
Shipments for such Month, and whose denominator is Total
Shipments for such Month, plus
(3) any unused Credit Balance due Buyer is divided by Buyer
Shipments for such Month.
Except as provided in Section 4.11 and so long as the Co-Buyer Agreement is in
effect and the Co-Buyer is not in default thereunder, the parties agree it is
their intent that, to the extent DRI is tendered to Buyer in accordance with
this Agreement, the amount to be paid by Buyer for DRI each Month, when combined
with the amounts to be paid for DRI by Co-Buyer and Third Parties in such Month
and the utilization of Credit Balances of Buyer and Co-Buyer in such Month, will
be sufficient to meet Seller's Fixed Cost and Variable Cost for each such Month.
Section 4.4 True-Up Invoices
On the third Business Day of the first Month following the Amendment
Date and on the third Business Day of each Month of the Term thereafter, Seller
shall recompute the invoices sent to Buyer during the prior Month by using the
Invoice Price per MT for such Month (a "True-Up Invoice"). The amount so
invoiced may be a Credit Balance.
Section 4.5 Determination of Buyer's Clawback Amount
(a) Base Computation. On the third Business Day of the
second Month following the Amendment Date and on the third
Business Day of each Month of the Term thereafter, Seller shall
determine (1) Average Third Party Indirect Revenues per MT for
the prior Month, (2) Average Number 1 Bundles Price for the prior
Month, (3) Average Third Party Direct Revenues per MT for the
prior Month; (4) Average Invoice Price per MT for the prior
Month; and (4) Buyer Consumption for the prior Month.
The foregoing amounts shall be the basis for determining the Buyer's Clawback
Amount for such Month.
(b) Computation of Buyer's Clawback Amount. The Buyer's
"Clawback Amount" for a Month shall mean 75% of the sum of the
following: (1) Third Party Indirect Component: The excess of
Average Third Party Indirect Revenues per MT for the Month over
the Average Invoice Price per MT for the Month, multiplied by
Resale Transaction Shipments for such Month, plus (2) Buyer
Consumption Component: The excess of 80% of the Average Number 1
Bundles Price for such Month over Average Invoice Price per MT
for the Month, multiplied by Buyer Consumption for such Month,
plus (3) Third Party Direct Component: The excess of Average
Third Party Direct Revenues per MT for the Month over the Average
Invoice Price per MT for the Month, multiplied by one-half of
Third Party Direct Shipments for such Month. Neither the Third
Party Indirect Component, the Buyer Consumption Component, nor
the Third Party Direct Component may be less than zero. In any
instance in which a Reimbursed Payments Component is used in
computing Average Invoice Price per MT for the Month, the parties
agree to use good faith efforts to determine whether there should
have been a Clawback Amount paid in the prior periods when the
Expenses reimbursed by the Reimbursed Payments Component were
incurred, and if there should have been Clawback Amounts, such
amounts shall be included in a Clawback Invoice pursuant to
Section 4.6. (c) Clawback Amounts may not be reduced or paid by
Credit Balances.
Section 4.6 Clawback Invoice
On the third Business Day of the first Month following the Amendment
Date and on the third Business Day of each Month of the Term thereafter (unless
the first day of the preceding Month is also a Clawback Suspension Date), Seller
shall invoice Buyer in the amount of the Clawback Amount for such Month (a
"Clawback Invoice"). Clawback Invoices may be paid or satisfied by Credit
Balances.
Section 4.7 Termination True-Up Invoice
(a) In the event Buyer terminates this Agreement pursuant to
Section 1.3 hereof, Seller shall prepare a written invoice (the
"Termination True-Up Invoice") indicating the supplemental amount, if
any, that Buyer is required to pay Seller for DRI previously Delivered
to Buyer. Seller shall furnish the Termination True-Up Invoice to Buyer
promptly after Buyer's termination of this Agreement pursuant to
Section 1.3 becomes effective. Buyer agrees to pay to Seller within
five (5) Business Days after receipt of the Termination True-Up Invoice
the amount due thereunder.
(b)......The amount of the Termination True-Up Invoice shall
be the excess of
(i)......the sum of
(A) the Hypothetical True-Up Invoice for the Three
Months Preceding Termination, plus (B) 12 1/2% of the
Debt Service Component for the Three Months Preceding
Termination; plus (C) at all times prior to the third
anniversary of the Amendment Date, 1/2 of those
amounts set forth in the second column of Schedule 2
hereto that have payment dates during the Three
Months Preceding Termination; plus
.........(D) any Credit Balance; over
(ii) the sum of the amounts Buyer paid Seller pursuant to
Delivery Invoices and True-Up Invoices (without duplication)
for the Three Months Preceding Termination.
(c)......Certain Defined Terms
"Hypothetical True-Up Invoice" means a Buyer Invoice for 1/2
of the sum of all Fixed Cost plus Variable Cost incurred by
Seller during the Three Months Preceding Termination less 1/2
of the Third Party Direct Revenues for the Three Months
Preceding Termination.
"Three Months Preceding Termination" means the three-month
period ended on the last day of the Month preceding the Month
in which Buyer's termination of this Agreement pursuant to
Section 1.3 is effective.
Section 4.8 Payment Terms
Each Buyer Invoice sent to Buyer pursuant to Section 4.2 or Section 4.6
shall be due and payable on the 30th day after such Buyer Invoice was sent to
Buyer. Each Buyer Invoice recomputed pursuant to Section 4.4 shall be due on the
date the Buyer Invoice it replaced was originally due pursuant to this Section,
or if paid, on the date rendered. All payments shall be made in US Dollars.
Interest shall accrue on the amount of any invoice which is not paid when due at
the Base Rate plus 2% per annum.
Section 4.9 Voluntary Payment Terms
Nothing in this Agreement shall prevent Buyer from agreeing to pay for
DRI in advance of its due date or its Delivery or from agreeing to pay an amount
greater than the Invoice Price per MT or other applicable price therefor.
Section 4.10 Increased Price Resulting from Third-Party Operator
Buyer acknowledges that under certain circumstances, the Lenders
pursuant to Section 7.19 of the Credit Agreement may require the Seller to
engage a Third-Party Operator for the Facility and further acknowledges that as
a result of the compensation arrangement (which may include incentive-based
compensation) for such Third-Party Operator, the Buyer may be required to pay a
higher Invoice Price per MT of DRI hereunder than would have been applicable in
the absence of such Third-Party Operator.
Section 4.11 Pricing for DRI Following Co-Buyer Nonperformance Event
If at any time during the Term any of the following events shall occur
(any such event referred to as a "Co-Buyer Nonperformance Event"):
(a) either (i) a custodian, receiver, liquidator, or trustee
of Co-Buyer, or any material portion of its properties, is appointed or
takes possession and such appointment or possession remains uncontested
or in effect for more than ninety (90) days; or Co-Buyer generally
fails to pay its debts as they become due or admits in writing its
inability to pay its debts as they mature or commits an act of
bankruptcy under any bankruptcy, reorganization, insolvency or similar
law for the relief of debtors having applicability to Co-Buyer; or
Co-Buyer is adjudicated bankrupt or insolvent; or any of the material
property of Co-Buyer is sequestered by court order and the order
remains in effect for more than 90 days or a petition is filed or
proceeding commenced against Co-Buyer under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
subsequently in effect, and is not stayed or dismissed within 90 days
after filing; or (ii) Co-Buyer files a petition or otherwise commences
a proceeding in voluntary bankruptcy or seeking relief under any
provision of any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or subsequently in effect; or consents to the
filing of any petition or the commencement of any proceeding against it
under any such law; or consents to the appointment of or taking
possession by a custodian, receiver, trustee or liquidator of Co-Buyer
or its property; and Co-Buyer rejects, fails to assume in full (and pay
any outstanding amounts or fulfill any outstanding purchase obligation
in toto at the time of such assumption), or otherwise defaults in its
performance of the Co-Buyer Agreement, or
(b) Co-Buyer fails to pay any Buyer Invoice, as defined in and
rendered under the Co-Buyer Agreement when due or fails to take any DRI
properly Delivered to Co-Buyer within the terms of the Co-Buyer
Agreement, then Buyer agrees that it shall continue to perform its
obligations under this Agreement and to purchase and pay for its DRI
Purchase Requirement as set forth herein, provided, that, if the Buyer
is not in default under any provision hereof, the purchase price for
such DRI in a Month shall be calculated pursuant to Article 4 by using
the assumptions that Seller produces and tenders during such Month and
Co-Buyer purchases and pays for a quantity of DRI under the Co-Buyer
Agreement equal to the lesser of 25,000 MT of DRI or an amount equal to
the amount of DRI the Buyer takes during such Month (such adjusted
invoice price the "Special Adjusted Price"). Notwithstanding the
foregoing, upon thirty (30) days advance written notification by Seller
to Buyer at any time during the period commencing upon the occurrence
of the Co-Buyer Nonperformance Event, Seller may request that Buyer
purchase DRI at the full Invoice Price per MT as calculated in Article
4 without using such assumptions. Buyer shall elect, at its sole
option, whether to accept such request, and shall notify Seller in
writing of such determination to purchase at the full Invoice Price per
MT, within ten (10) days of Buyer's receipt of such request. Any
failure by Buyer to provide such notice of its election shall be deemed
a rejection by Buyer of Seller's request. Purchases at the full Invoice
Price per MT shall be referred to as the "Full Price Invoice Election."
Once elected, the Full Price Invoice Election shall remain in effect
until the (i) Buyer shall have paid total Increased Costs of
$15,000,000 or (ii) either Seller or Buyer shall have elected to
discontinue the Full Price Invoice Election by giving the other written
notice of such election, following which Buyer Invoices shall be
computed at the Special Adjusted Price until such time if any that the
Co-Buyer resumes its performance under and in compliance with the
Co-Buyer Agreement, in which case Buyer shall resume payment in
accordance with the provisions of Sections 4.1 through 4.10 of this
Agreement.
As used herein, "Increased Costs" shall mean the aggregate amount equal
to (i) the aggregate payment for all such purchases of DRI following
the effectiveness of such Full Price Invoice Election less (ii) the
aggregate payment for all such purchases of DRI which would have been
payable at the Special Adjusted Price. The Seller shall calculate and
maintain the balance of such Increased Costs paid by Buyer, which
balance shall be provided to Buyer at the end of each calendar quarter.
Upon payment of Increased Costs of $15,000,000, Buyer shall continue to
honor its commitment to purchase DRI tendered hereunder, but only at
the Special Adjusted Price throughout the remaining Term of this
Agreement until such time if any that the Co-Buyer resumes its
performance under and in compliance with the Co-Buyer Agreement, in
which case Buyer shall resume payment in accordance with the provisions
of Sections 4.1 through 4.10 of this Agreement. Any Increased Costs
paid hereunder shall be credited against the Discounted Amount (as
defined in the Master Restructure Agreement) payable by Buyer in
accordance with the Master Restructure Agreement, or if Buyer does not
elect to pay the Discounted Amount, then credited against the Shortfall
Share (as defined in the Master Restructure Agreement) payable by Buyer
thereunder.
Section 4.12 Covenant of Buyer to Disclose Resale Transactions
The Buyer covenants and agrees that it will promptly disclose to
Seller, and in no event later than the second Business Day of any Month, any
Resale Transactions it consummated during the prior Month.
ARTICLE 5. ACCOUNTING AND RECORDS
Section 5.1 Maintaining Records; Access to Facility and Inspections; Audits
The Seller shall maintain all financial records in accordance with
GAAP. Seller shall also permit any representatives designated by the Buyer, upon
not less than three (3) Business Days prior notice, at Buyer's expense, to visit
and inspect the Facility and to inspect Seller's financial and business records,
to make extracts therefrom and copies thereof and to cause a firm of independent
accountants of national reputation to make test audits of Seller's
determinations of the Invoice Price, all at reasonable times and in a manner so
as not to unreasonably disrupt the operations of the Seller and as often as
reasonably requested. Seller shall also permit any representatives designated by
the Buyer to discuss the affairs, finances and condition of the Seller with the
officers thereof and independent accountants therefor. If Buyer's audit shall
disclose that the Invoice Price for any period was overstated, Buyer shall make
such information available to Seller, and Seller shall promptly reimburse Buyer
for the amount of such overstatement. If the amount of such overstatement
exceeds the Invoice Price by more than 5%, Seller shall also reimburse Buyer for
the reasonable cost of such audit. Understatements shall be included as Expenses
in the next succeeding month for inclusion in the calculation of Invoice Price
per MT, or in the event of a termination of this Agreement, shall be promptly
paid by Buyer to Seller.
Section 5.2 Delivery of Seller's Financial Statements
The Seller shall deliver to the Buyer:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Seller, audited statements of income,
retained earnings and cash flow of the Seller for such fiscal year and
the related audited balance sheets as of the end of such fiscal year
(the "Annual Financial Statements"), setting forth in each case in
comparative form the corresponding figures for the preceding fiscal
year, and accompanied by a report of independent auditors of national
reputation selected by Seller, which report shall state that such
financial statements fairly present the financial condition and results
of operations of the Seller in accordance with GAAP;
(b) as soon as available and in any event within 30 days after the end
of each Month of each fiscal year of the Seller, statements of income,
and cash flow of the Seller for such month and for the period from the
beginning of the current fiscal year to the end of such month,
statements of income, and cash flow of the Seller for such period, and
the related balance sheets as of the end of such period (the statements
of income and cash flow for such month and the balance sheet as of the
end of such period being referred to herein as the "Monthly Financial
Statements"), setting forth in each case in comparative form the
corresponding figures for the corresponding periods in the preceding
fiscal year, and accompanied by a certificate of a financial officer of
the Seller, which certificate shall state that such financial
statements fairly present the financial condition and results of
operations of the Seller in accordance with GAAP (subject to normal
year-end adjustments and absence of full footnote disclosures); and
(c) promptly upon the receipt thereof, copies of all "management
letters" received by the Seller or any Subsidiary from its independent
accountants.
Section 5.3 Planning and Budgeting
(a) Attached hereto as Exhibit A is the plan for the
production of DRI for the period from the Amendment Date through
December 31, 2000. On or before the first Business Day of December of
each year during the Term, Seller, Buyer and Co-Buyer shall prepare a
plan for production of DRI for the next succeeding calendar year. Each
plan referred to in the two preceding sentences shall be referred to
herein as a "Project Operating Budget". Each Project Operating Budget
shall include (i) schedules of quantities of DRI to be produced, (ii) a
schedule for Delivery of such DRI to the Buyer and the Co-Buyer, (iii)
a detailed operating financial budget on a monthly basis, (iv) a
detailed capital budget breaking out separately the proposed Capital
Expenditures and major maintenance items, (v) projected inventory
levels in MT's for iron ore and DRI on a monthly basis, (vi) the
proposed Scheduled Down-Time(s) (if any) during such year, and (vii) a
detailed description of such other activities and information
(financial or otherwise) reasonably necessary in order to inform the
Buyer of all matters relevant to the operation and management of the
Seller's business and affairs. The Buyer and the Seller shall (i)
consult with each other and with the Co-Buyer in the preparation of
each Project Operating Budget and shall determine, subject to the
immediately preceding sentence and the other terms and conditions
hereof, the amount of DRI to be produced for the next succeeding
calendar year and (ii) negotiate in good faith to agree upon a Delivery
schedule for such DRI for the next succeeding calendar year. Each such
Project Operating Budget shall provide for the production of (x) at
least 600,000 MT of DRI during such calendar year (or the proportionate
amount of DRI if the period of such Project Operating Budget is for
less than a full year), (y) such greater amount as the Seller, the
Buyer and/or the Co-Buyer agree in writing or (z) such lesser amount as
a prudent operator of the Facility would produce after due
consideration of the Rated Capacity of the Facility, the necessity for
Scheduled Down-Time and such other matters as such prudent operator of
the Facility would consider other than market conditions for the sale
of DRI. If the Seller, the Buyer and the Co-Buyer cannot agree upon a
Project Operating Budget for a calendar year, the Seller shall (i)
establish the production schedule so that the Facility will produce at
least 600,000 MT of DRI during such calendar year (or such
proportionately smaller amount as is appropriate for a shorter period)
or such lesser amount as it determines pursuant to clause (z) of the
preceding sentence, (ii) set the Delivery schedule for such DRI in its
discretion consistent with the intent expressed in Section 1.4 hereof,
and (iii) otherwise determine the terms of the Project Operating
Budget. Anything herein to the contrary notwithstanding, it is the
intent of the parties hereto that (i) DRI shall be produced at the
Facility insofar as is practicable evenly over each year or partial
year of the Term subject only to Scheduled Down-Time and Force Majeure,
and all Delivery schedules shall reflect such even production, and (ii)
in the event the Project Operating Budget for a year (or a shorter
period, as the case may be) provides for the production of less than
600,000 MT of DRI during any year (or such proportionately smaller
amount as is appropriate for a shorter period), such Project Operating
Budget shall be promptly amended by the Seller (after consultation with
the Buyer and the Co-Buyer but without the necessity of obtaining the
consent of the Buyer or the Co-Buyer) to increase the level of
production to 600,000 MT of DRI on an annualized basis for the
remainder of such year (or shorter period), and the other provisions of
such Budget shall be adjusted as may be necessary to reflect such
increased production, promptly after any impediment to the production
of DRI at such level (as described in clause (iii) of subsection (b) of
this Section 5.3) shall have been removed or shall otherwise have
ceased to affect the Facility.
(b) The Project Operating Budget shall be subject to the following
considerations:
(i) Scheduled Down-Time. Each such Project Operating
Budget may provide for Scheduled Down-Time during each
calendar year (or such shorter period) during which major
maintenance shall be performed on the Facility; provided,
however, no period of Scheduled Down-Time shall exceed 30
consecutive days of which no more than 20 days may occur in
any Month. The Project Operating Budget shall provide for the
required production of DRI notwithstanding such Scheduled
Down-Time. To the extent practicable, Seller shall schedule
the required Scheduled Down-Time at such times as are
convenient to Buyer and Co-Buyer consistent with the
reasonably anticipated need for major maintenance for the
Facility, and shall negotiate in good faith with Buyer and
Co-Buyer to reach agreement regarding the timing of such
Scheduled Down-Time. If the Seller, the Buyer and the Co-Buyer
cannot agree as to the timing of such Scheduled Down-Time, the
Seller shall determine the timing thereof consistent with the
reasonably anticipated need for major maintenance of the
Facility.
(ii) Long Lead-Time Commitments. Seller shall
exercise its reasonable judgment in committing to any long
lead-time items, including, but not limited to, ore purchases,
ship charters, and gas deliveries with a view toward assuring
its ability to produce and tender the amounts of DRI set forth
in each such Project Operating Budget at the times provided
therein at the lowest cost reasonably practicable.
(iii) Plans Calling for Less Than 600,000 MT of DRI.
To the extent that any Project Operating Budget provides for
production of less than 600,000 MT of DRI during any calendar
year (or the proportionate amount of DRI if the period of such
Project Operating Budget is less than a full calendar year),
such Project Operating Budget shall contain a statement of
Seller in reasonable detail describing the reasons why at
least 600,000 MT of DRI (or such proportionate amount) cannot
be produced during such period.
(iv) Amendments to Project Operating Budgets. Subject
to the last sentence of subsection (a) of this Section 5.3,
once any such Project Operating Budget has become effective
pursuant to the terms of this Section 5.3, Seller subject to
Section 8.06(b) of the Credit Agreement shall amend the same
(i) at the request of Buyer and Co-Buyer or (ii) at any time
an order calling for the production and Delivery of DRI
within the current Month for a Third Party Direct Sale is
accepted.
(c) At least five (5) days before the first day of each Month
after the Amendment Date, Seller will consult with Buyer and the
Co-Buyer to update the Project Operating Budget with respect to the
determination of the amount of DRI to be produced in the next three (3)
succeeding Months, the production schedule therefor, the approximate
dates and quantities of Deliveries thereof to Buyer and Co-Buyer and
any other matters referred to in Section 5.3(a). Each such update shall
be provided to the Buyer and Co-Buyer by the first day of each Month,
and if approved by the Buyer and Co-Buyer, such update shall be deemed
to be an amendment to the Project Operating Budget and incorporated
therein. If the Seller, the Buyer and the Co-Buyer cannot agree as to
the production and Delivery schedules, the Seller shall establish the
production schedule for DRI and set the Delivery schedule for such DRI
in its discretion, subject in each case to the last sentence of Section
5.3(a).
(d) Subject to the provisions of subsection (b) of this
Section 5.3, Seller agrees to use commercially reasonable efforts to
operate the Facility and otherwise to conduct its business consistent
with the terms of each Project Operating Budget, and so long as it does
so, it shall incur no liability to Buyer hereunder as a result of its
failure to operate the Facility in a manner consistent with each such
Project Operating Budget.
ARTICLE 6. WARRANTIES AND LIMITATION OF LIABILITY
Section 6.1 Specifications Warranty
Seller warrants that each shipment of DRI hereunder shall conform to
specifications referred to in Article 3.
Section 6.2 Warranty Limitation
The only warranties made by Seller in respect of DRI to be sold
hereunder are set forth in Section 6.1 of this Agreement. SUCH WARRANTIES AND
THE RIGHTS, REMEDIES, AND OBLIGATIONS OF THE PARTIES IN CONNECTION WITH THE SALE
OF DRI HEREUNDER ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REMEDIES, WARRANTIES,
GUARANTIES OR LIABILITIES, EXPRESS OR IMPLIED, ARISING AT LAW OR OTHERWISE,
INCLUDING WITHOUT LIMITATION ANY WARRANTIES WITH RESPECT TO FITNESS FOR A
PARTICULAR PURPOSE OR MERCHANTABILITY, ALL SUCH OTHER WARRANTIES BEING EXPRESSLY
DISCLAIMED. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER
ANY THEORY OF TORT (INCLUDING WITHOUT LIMITATION NEGLIGENCE), CONTRACT, STRICT
LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR INDIRECT, CONSEQUENTIAL,
SPECIAL, INCIDENTAL, OR PUNITIVE DAMAGES, HOWEVER CAUSED, ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE.
Section 6.3 Claims
If any DRI Delivered to the Buyer hereunder is not in accordance with
specifications set forth in Section 3.1 hereof, then Seller shall have the
right, at its discretion, either to replace such DRI or refund the aggregate
Invoice Price per MT applicable thereto. It is the intent of the parties hereto
that the Invoice Price per MT applicable thereto shall be adjusted so that there
will be no net loss of cash to the Seller. Notwithstanding the foregoing,
Seller's liability for damages in respect of any claims whatsoever hereunder
arising with respect to DRI Delivered to the Buyer under this Agreement shall
not exceed the aggregate Invoice Price per MT of the DRI for which such damages
are claimed, and in no event shall either party be liable for prospective
profits or special or indirect or consequential damages. Any claim for damages
must be made in writing by the Buyer to Seller within thirty (30) days of such
occurrence, along with supporting evidence as to the quantity involved in such
claim. The quantity involved must be determined in a mutually acceptable manner.
In asserting any claim that the DRI did not conform the specifications set forth
herein, the Buyer must sustain the burden of proof that such nonconformity
occurred or existed prior to Seller's tender of such DRI for Delivery.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF BUYER
Section 7.1 Organization; Power; Qualification
The Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has the power and authority to
own its properties and to carry on its business as now being and hereafter
proposed to be conducted and is duly qualified and authorized to do business in
each jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization.
Section 7.2 Authorization; Enforceable Obligations; Compliance with Law
The Buyer has the right and power to execute, deliver and perform this
Agreement in accordance with its terms and has taken all necessary corporate
action to authorize such execution, delivery and performance. This Agreement has
been duly executed and delivered by the duly authorized officers of the Buyer
and is a legal, valid and binding obligation of the Buyer enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity (regardless of
whether enforcement thereof is sought in a proceeding at law or in equity). The
Buyer is in compliance with all applicable laws binding upon it except to the
extent that the failure to comply therewith (i) would not, in the aggregate,
have a material adverse effect on the properties, business, operations, or
financial condition of the Buyer and (ii) would not materially adversely affect
the ability of the Buyer to perform its obligations under this Agreement.
Section 7.3 Governmental Approval; No Conflicts
The execution and delivery by the Buyer of this Agreement does not
require any authorizations, consents, approvals, waivers, exemptions, variances,
franchises, permissions, permits and licenses of, or filings and declarations
with, any governmental authority and does not conflict with, and will not result
in a breach of, any material contract, agreement or other document or instrument
to which the Buyer is a party or with the certificate of incorporation or
by-laws of the Buyer.
ARTICLE 8. TERM, DEFAULT AND TERMINATION
Section 8.1 Term
The term of this Agreement, subject to earlier cancellation or
extension as provided for herein or in the Master Restructure Agreement (the
"Term"), shall be the period beginning on the Amendment Date, and ending on
March 31, 2013. The "Termination Date" shall be the last day of the Term.
Section 8.2 Default
(a) Monetary Default
In the event that either party to this Agreement shall fail or refuse
to make timely payments of amounts due hereunder, the other party shall
be entitled, at its option, to give written notice of such breach to
the defaulting party and, if such breach is not corrected within
fifteen (15) days after delivery of such notice to the defaulting
party, the notifying party, at its option and without prejudice to any
other available legal remedy which it may have, shall have the right to
cancel this Agreement by giving the defaulting party at least fifteen
(15) days' additional notice of its intention to cancel, and upon the
expiration of the time fixed in such latter notice, if such default has
not been cured or waived, this Agreement shall be canceled. It is the
intent of the parties that Credit Balances due Buyer shall be satisfied
only in connection with the determination of Buyer Invoices.
(b) Non-Monetary Default
In the event that either party to this Agreement shall fail or refuse
to perform any other material obligation hereunder, or shall have
breached any material representation or warranty made herein, the other
party shall be entitled, at its option, to give written notice of such
breach to the defaulting party and, if such breach is not corrected
within sixty (60) days after delivery of such notice to the defaulting
party, the notifying party, at its option and without prejudice to any
other available legal remedy which it may have, shall have the right to
cancel this Agreement by giving the defaulting party at least thirty
(30) days additional notice of its intention to cancel, and upon the
expiration of the time fixed in such latter notice, if such default has
not been cured or waived, this Agreement shall be canceled.
(c) Rights Upon Cancellation
Upon cancellation of this Agreement under Section 8.2(a) or Section
8.2(b) of this Article 8 for any reason or cause, each party shall
fulfill all obligations hereunder existing as of the effective date of
cancellation, including, but not limited to, the discharge of all
indebtedness hereunder owing to the other party. The right of a
nondefaulting party to cancel this Agreement shall not be in derogation
of or in any way limit such party's legal or equitable rights and
remedies against the defaulting party. Notwithstanding any such
cancellation, the defaulting party shall remain liable to the canceling
party for all provable damages, if any, resulting from loss of ongoing
benefits of this Agreement. This Section 8.2(c) is subject to the
provisions of Section 6.2 hereof.
Section 8.3 Bankruptcy, Receivership, etc.
In addition to rights of cancellation otherwise afforded under this
Agreement or under applicable law, Seller shall have the right to terminate this
Agreement, upon thirty (30) days, written notice to Buyer if:
(a) A custodian, receiver, liquidator, or trustee of Buyer, or
any material portion of its properties, is appointed or takes
possession and such appointment or possession remains uncontested or in
effect for more than ninety (90) days; or Buyer generally fails to pay
its debts as they become due or admits in writing its inability to pay
its debts as they mature or commits an act of bankruptcy under any
bankruptcy, reorganization, insolvency or similar law for the relief of
debtors having applicability to Buyer; or Buyer is adjudicated bankrupt
or insolvent; or any of the material property of Buyer is sequestered
by court order and the order remains in effect for more than 90 days or
a petition is filed or proceeding commenced against Buyer under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether now
or subsequently in effect, and is not stayed or dismissed within 90
days after filing; or
(b) Buyer files a petition or otherwise commences a proceeding
in voluntary bankruptcy or seeking relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether now
or subsequently in effect; or consents to the filing of any petition or
the commencement of any proceeding against it under any such law; or
consents to the appointment of or taking possession by a custodian,
receiver, trustee or liquidator of Buyer or its property.
Section 8.4 No Impact on Section 25-2-609 and -610
Nothing in this Agreement shall in any way diminish or discharge any rights
of Seller or obligations of Buyer under Sections 25-2-609 and -610 of North
Carolina General Statutes.
ARTICLE 9. FORCE MAJEURE
Section 9.1 Force Majeure
(a) Force Majeure Defined
For purposes of this Agreement, the term "Force Majeure" shall mean and
include the following: any failure or delay on the part of either the
Seller or the Buyer in performance of any of the obligations imposed
upon it hereunder (other than the obligation to pay money) which is
beyond its control and is the direct or indirect result of any of the
following causes, whether or not existing at the date hereof and
whether or not reasonably within contemplation of the parties at the
date hereof; namely, acts of God; earthquakes; fire, flood, or the
elements; malicious mischief; insurrection; riot; strikes; lockouts;
boycotts; picketing; labor disturbances; public enemy; war (declared or
undeclared); compliance with any Federal, state, or municipal law, or
with any regulation, order, or rule (including, but not limited to,
priority, rationing or allocation orders or regulation) of governmental
agencies, or authorities or representatives of any government (foreign
or domestic) acting under claim or color of authority (including any
reduced level of operations or cessation of operations at the Facility
required by any Federal or state authority arising from noncompliance
with any law, regulations or applicable permits); inability despite
reasonable efforts of a party to obtain or maintain in effect all
permits required for the intended operation of the Facility; equipment
failure not attributable to operator negligence; total or partial
failure or loss or shortage of all or part of transportation facilities
ordinarily available to and used by a party hereto in the performance
of the obligations imposed by this Agreement, whether such facilities
are such party's own or those of others; the commandeering or
requisitioning by civil or military authorities of any raw or component
materials, products, or facilities, including, but not limited to,
producing, manufacturing, transportation, and delivery facilities;
perils of navigation, even when occasioned by negligence, malfeasance,
defaults, or errors in judgment of the pilot, master, mariners, or
other servants of the ship's owner; total or partial loss, shortage or
unavailability of raw component material, fuel, power or products
ordinarily required by Seller, including without limitation any refusal
by a third party supplier to supply utilities, commodities, services or
support functions required for proper operation of the Facility;
provided, if such refusal is attributable to Seller's breach or failure
to make payment to such third-party supplier, such event will not be
deemed Force Majeure if Seller had sufficient funds to make such
payment (considering its other obligations) or was otherwise capable of
performing such obligation; or any cause whatsoever beyond the control
of either party hereto, whether similar to or dissimilar from the
causes herein enumerated; provided, however, that the settlement of
strikes or lockouts shall be entirely within the discretion of the
party having the difficulty. The inability to use or resell, or the
undesirability of, DRI that conforms to the terms of this Agreement
shall not be considered an event of Force Majeure.
(b) Effect of Force Majeure
If the performance of this Agreement by either party is delayed,
interrupted, or prevented (in whole or in part) by reason of Force
Majeure (a) such party shall be excused from the performance of this
Agreement while and to the extent that such party is delayed,
interrupted or prevented from so performing by such Force Majeure and
such party shall not be liable for damages or otherwise on account
thereof, and (b) subject to the last sentence of this Section 9.1(b),
the performance of this Agreement shall be resumed as soon as
practicable after such Force Majeure is removed. If any Force Majeure
continues for a period of more than one (1) year, the party prepared to
perform may, by giving at least sixty (60) days' prior written notice
to the other party, cancel this Agreement.
Section 9.2 Notice of Force Majeure
The party affected thereby shall give notice to the other and to the
Agents under the Credit Agreement as soon as practicable after the occurrence of
Force Majeure and specifying the details thereof and, insofar as is known, the
probable extent to which such party will be unable to perform or be delayed in
performing its obligations hereunder. The parties shall exercise due diligence
to eliminate or remedy any Force Majeure delaying or interrupting its
performance hereunder and shall give the other parties prompt written notice
when that has been accomplished, provided that neither party shall be required
to settle any labor dispute except on terms acceptable to it.
Section 9.3 Extension
The Term of this Agreement shall be extended for the period of any
Force Majeure unless either party gives notice of cancellation pursuant to
Section 9.1 and Section 9.1(b), provided the aggregate extension hereunder shall
not extend beyond October 31, 2013.
ARTICLE 10. SELLER'S REPORTING COVENANT
Seller covenants and agrees that during the Term hereof, it will
(a) Notify Buyer of the occurrence of each Termination Event
and each Increased Production Event promptly after the occurrence
thereof.
(b) Notify Buyer of its receipt of any Termination Notice
from Co-Buyer and of the occurrence of a Standstill Period.
(c) Promptly after receipt of a written request from Buyer,
give the Buyer a computation (together with such detail of the
computation thereof as the Buyer shall reasonably request) of the
Average Production of DRI for any period.
ARTICLE 11. DEFINITIONS
Section 11. 1 Certain Defined Terms
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to such terms in the Credit Agreement as in effect on
the date hereof notwithstanding the termination thereof for any reason. As used
herein, the following terms shall mean the following:
"Agreement" shall mean this DRI Purchase Agreement, as amended, modified or
supplemented from time to time.
"Allocated Invoice Price per MT" means (i) the sum of Sponsor Fixed Cost and
Sponsor Variable Cost for any Month, divided by (ii) Buyer Shipments plus
one-half of Third Party Direct Shipments.
"Amendment Date" shall have the meaning set forth in the Credit Agreement.
"Annual DRI Production Goal" for a fiscal quarter means
--------------------------
for the fiscal quarter ending June 30, 2000: 200,000 MT of DRI;
for the fiscal quarter ending September 30, 2000: 400,000 MT of DRI
during the 2 fiscal quarters then ending;
for the fiscal quarter ending December 31, 2000: 600,000 MT of DRI
during the 3 fiscal
quarters then ending December 31, 2000; and
for each fiscal quarter ending thereafter: 800,000 MT of DRI for the 4
fiscal quarters then ending.
"Average Invoice Price per MT" for a Month means the quotient which results
when the sum of the products of Buyer Shipments for such Month multiplied by the
Allocated Invoice Price per MT for such Month, Buyer Shipments for the preceding
Month multiplied by Allocated Invoice Price per MT for such preceding Month, and
Buyer Shipments for the second preceding Month multiplied by the Allocated
Invoice Price per MT for such second preceding Month, plus one-half of the
Reimbursed Payments Component for such Month and the two preceding Months is
divided by the sum of Buyer Shipments for such Month and the two preceding
Months.
"Average Number 1 Bundles Price" for a Month means the average of the Number 1
Bundles Price for such Month and the two preceding Months.
"Average Production of DRI" for a period shall mean average annualized
production of DRI computed without including any days during which the Facility
was subject to Force Majeure or Scheduled Down-Time.
"Average Third Party Direct Revenues per MT" for a Month means the quotient
which results when the sum of Third Party Direct Revenues for such
Month and the two preceding Months is divided by the sum of Third Party
Direct Shipments for such Month and the two preceding Months.
"Average Third Party Indirect Revenue per MT" for a Month means the quotient
which results when the sum of Third Party Indirect Revenue for such
Month and the two preceding Months is divided by the sum of Resale
Transaction Shipments for such Month and the two preceding Months.
"Buyer Consumption" for a period shall mean the aggregate MT of Buyer Shipments
for the period less Resale Transaction Shipments for such period.
"Buyer Invoice" means an invoice sent by Seller to Buyer pursuant to Section
4.2, Section 4.4, Section 4.6 or Section 4.8. in substantially the form of
Schedule 3 attached hereto.
"Buyer Shipments" for a period means the aggregate MT of the portion of Sponsor
Shipments for such period that were Delivered to Buyer. Buyer Shipments shall
include any Deliveries of DRI that were part of Resale Transaction Shipments
effected by the Buyer during the period.
"Capital Expenditure" means any expenditure which is required to be capitalized
in accordance with GAAP.
"Capital Expenditures Component" for a Month shall mean all cash Capital
Expenditures during such Month by Seller, consistent with the Project Operating
Budget or as otherwise approved by the Buyer and Co-Buyer.
"Carrier" means the IC RailMarine Terminal L.L.C.
"Catalyst Recovery Component" for each of the initial 12 Months following the
Amendment Date means $162,747.58.
"Catalyst Reserve Component" means $83,334.00.
--------------------------
"Catalyst Reserve Trigger Event" means the occurrence of any fiscal quarter of
Seller for which the Annual DRI Production Goal was not met or exceeded.
"Clawback Suspension Date" means any day on which both of the following
statements are accurate: (i) the Outstanding Balance is less than or equal to
the amount for such date shown as the "Balance" under Column 3 of Schedule 2
attached hereto and (ii) the Tranche C Term Loan, the Tranche C Bond L/C Amount
and the PIK Notes relating thereto have been paid in full.
"Co-Buyer Agreement" means the DRI Purchase Agreement of even date herewith
between the Seller and the Co-Buyer.
"Co-Buyer" means GS Technologies Operating Co., Inc.
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"Credit Agreement" means the Credit and Reimbursement Agreement dated as of
August 30 1996, and as amended and restated as of May 30, 1997 and as of the
date hereof, among the Seller, Bank of America, N.A., successor to NationsBank,
N.A., as administrative agent, Canadian Imperial Bank of Commerce as
documentation agent, and the other lenders therein listed. For purposes of this
Agreement, the term Credit Agreement shall refer to the Credit Agreement as it
existed on the date hereof together with any subsequent amendments approved in
writing by the Buyer and the Co-Buyer.
"Credit Balance" means (i) any credit balance owing to Buyer as determined by
Seller in computing any Buyer Invoice rendered pursuant to Section 4.2 or
Section 4.4 or (ii) any overpayment of a Buyer Invoice pursuant to Section 4.10
that has not been applied against a Buyer Invoice (other than an invoice for a
Clawback Amount).
"Credit Documents" shall have the meaning set forth in the Credit Agreement.
"Debt Service Component" for a Month means all Scheduled Payments of Principal
regarding Indebtedness of the Seller for the next succeeding Month and estimated
interest (including all fees and other amounts other than principal actually due
and payable under the Credit Documents) payable with respect to such
Indebtedness during such next succeeding Month, excluding (i) any amounts
payable with respect to the Tranche C Term Loan, the Tranche C Bond L/C Amount
and the PIK Notes relating thereto and (ii) any amounts payable with respect to
the Tranche B Term Loan, the Tranche B Bond L/C Amount and the PIK Notes
relating thereto to extent the Credit Agreement provides for the capitalization
of any such amounts.
"DRI" means direct reduced iron meeting the specifications set forth on Schedule
1.
"DRI Purchase Requirement" shall mean for any Month the lesser of the following:
(1) 25,000 MT of DRI less 1/2 of Third Party Direct Shipments for
such Month, subject to the last sentence of Section 5.3(a),
but in any event, not less than 5,000 MT of DRI; or
(2) the number of MT of DRI allocated to Buyer in the Project
Operating Budget for such Month (but not less than 5,000 MT of
DRI).
"Estimated Buyer Shipments" for a Month means an estimate of the aggregate MT of
the portion of Sponsor Shipments for such Month that are to be Delivered to
Buyer during such Month. Estimated Buyer Shipments shall include any Deliveries
of DRI that are estimated to be part of Resale Transaction Shipments to be
effected by the Buyer during the Month. All such estimates shall be taken from
the Project Operating Budget for such Month.
"Estimated Fixed Cost" for a Month means an estimate of all Expenses for such
Month other than Estimated Variable Cost for such Month, plus estimates of the
Capital Expenditures Component for such Month, the Catalyst Recovery Component
for such Month and the Debt Service Component for such Month. All such estimates
shall be taken from the Project Operating Budget for such Month. Anything in
this definition to the contrary notwithstanding, Estimated Fixed Cost shall
include 66 2/3% of Estimated Fixed Manufacturing Cost, and the remaining 33 1/3%
shall be included in Estimated Variable Cost.
"Estimated Fixed Manufacturing Cost" for a Month means an estimate of Total
Manufacturing Cost for such Month other than Expenses for ore, natural gas, ore
handling, electricity, lime, nitrogen, oxide fines credit, DRI fines credit, and
internal Facility cleanup. All such estimates shall be taken from the Project
Operating Budget for such Month.
"Estimated Sponsor Shipments" for a Month means an estimate of the aggregate MT
of DRI that are to be Delivered to the Buyer and the Co-Buyer for such month.
Estimated Sponsor Shipments shall include any deliveries of DRI that are
estimated to be part of Resale Transaction Shipments to be effected by the Buyer
and the Co-Buyer during the Month. All such estimates shall be taken from the
Project Operating Budget for such Month.
"Estimated Third Party Direct Revenues" for a Month means estimates of the
aggregate cash amounts to be accrued by Seller from Third Party Direct Shipments
for such Month, net of any offsets, returns, discounts or deferred payments to
be accrued in such Month plus the aggregate cash amounts to be accrued by Seller
for such Month from deliveries of Related Inventory during such Month. All such
estimates shall be taken from the Project Operating Budget for such Month.
"Estimated Third Party Direct Shipments" for a Month means an estimate of the
aggregate MT of Third Party Direct Sales during such Month, such estimate to be
taken from the Project Operating Budget for such Month.
"Estimated Total Shipments" for a Month means the aggregate MT of Estimated
Sponsor Shipments and Estimated Third Party Direct Shipments for such Month.
"Estimated Variable Cost" for a Month means an estimate of the Working Capital
Component for such Month plus the sum of estimates of the following expenses for
such Month: ore, natural gas, ore handling, electricity, lime, nitrogen,
internal Facility cleanup, and royalty fees pursuant to the Process License
Agreement. All such estimates shall be taken from the Project Operating Budget
for such Month. Anything in this definition to the contrary notwithstanding,
Estimated Variable Cost shall include 33 1/3% of Estimated Fixed Manufacturing
Cost, and the remaining 66 2/3% shall be included in Estimated Fixed Cost.
"Exempt Purchaser" means a Third Party other than Charter Manufacturing, Inc.,
USX Corporation, Wheeling-Pittsburgh Steel Corporation, Gulf States Steel, Inc.,
NUCOR Corporation, Bethlehem Steel Corporation, and Magnesium Corporation and
their consolidated subsidiaries that purchase DRI from Buyer within 6 months
after the Amendment Date, and following the expiration of the purchase contract
with any such Third Party, any other substitute Third Party (other than those
listed above) that purchases DRI from Buyer within 6 months after the expiration
of such contract; provided, however, no such Third Party shall be deemed to be
an Exempt Purchaser unless the Buyer shall have given written notice of its
selection of such Third Party as an Exempt Purchaser to the Seller and to the
Administrative Agent, and provided, further, that any successor Third Party
following Buyer's designation of an initial Exempt Purchaser shall be limited to
an annual maximum purchase of 300,000 MT by such successor Third Party under
such exempt contract, with any excess to be sold by Seller directly to such
purchaser as Third Party Direct Sales. The owner of the steel manufacturing
facility in Decatur, AL, currently owned by Trico Steel Company, L.L.C., shall
not be eligible to be Buyer's Exempt Purchaser for DRI to be used at its
Decatur, AL mill as long as such owner is Co-Buyer's Exempt Purchaser.
Notwithstanding the foregoing, Buyer may select any Third Party (including any
of the foregoing named Third Parties) as its Exempt Purchaser if such Third
Party purchases its mill in Memphis, TN, but only with respect to DRI to be used
at such mill. For purposes of the foregoing sentence, the purchaser of such mill
shall include the successors and assigns of such purchaser. As used in this
definition, the term "Co-Buyer's Exempt Purchaser" means the Exempt Purchaser,
as such term is defined in the Co-Buyer Agreement, from time to time selected by
Co-Buyer pursuant to such Agreement.
"Exempt Transaction" means a Resale Transaction by Buyer to an Exempt Purchaser.
------------------
"Expenses" means all expenses, including accruals of operating costs and
contract damages, determined in accordance with GAAP, but excluding (i)
depreciation and amortization and similar non-cash items, (ii) material handling
charges by the Carrier relating to the loading of DRI on Buyer's or Co-Buyer's
vessel or train (which material handling charges shall be billed to Buyer or
Co-Buyer separately), and (iii) all interest and fees on Indebtedness of Seller
under the Credit Agreement.
"Facility" shall have the meaning set forth in the Credit Agreement.
"Fixed Cost" for a Month means all Expenses for such Month other than Variable
Cost for such Month, plus the Capital Expenditures Component for such Month,
plus the Catalyst Recovery Component for such Month, plus the Debt Service
Component for such Month, minus the Reimbursed Payments Component for such
Month. In addition, Fixed Cost for a Month shall include the Catalyst Reserve
Component during each Month following the occurrence of a Catalyst Reserve
Trigger Event until (1) the Catalyst Reserve Fund of the Restructure Security
Deposit Agreement contains $1,000,000 from payments from Buyer or (2) the Seller
has a fiscal quarter in which it meets the Annual DRI Production Goal. Anything
in this definition to the contrary notwithstanding, Fixed Cost shall include 66
2/3% of Fixed Manufacturing Cost, and the remaining 33 1/3% shall be included in
Variable Cost.
"Fixed Manufacturing Cost" for a Month means Total Manufacturing Cost for such
Month as shown in the Project Operating Budget other than Expenses for ore,
natural gas, ore handling, electricity, lime, nitrogen, oxide fines credit, DRI
fines credit, and internal Facility cleanup.
"FOB" shall have the meaning ascribed to such term in the Uniform Commercial
Code as in effect in the State of North Carolina as of the date of this
Agreement.
"GAAP" means generally accepted accounting principles applied in the United
States and practices which are recognized as such by the American Institute of
Certified Public Accountants applied for all periods to the extent practicable
on a basis consistent with that used in the preparation of the audited financial
statements for the period ended December 31, 1998 delivered by the Seller
pursuant to Section 5.2 hereof, so as to present fairly the financial condition
and the results of operations of the Seller. In the event of a change in GAAP
that is applicable to the Seller, compliance with covenants contained herein
shall continue to be determined in accordance with GAAP as in effect prior to
such change; provided, however, that the Seller, the Buyer and the Co-Buyer will
thereafter negotiate in good faith to revise such covenants to the extent
necessary to conform such covenants to GAAP as then in effect.
"Increased Production Event" shall mean the occurrence of a period of at least
30 consecutive days during which aggregate period the Average Production of DRI
at the Facility equals or exceeds an annual equivalent of 240,000 MT per year.
For purposes of this definition, a period of days shall be deemed to be
consecutive notwithstanding the occurrence of periods of Force Majeure or
Scheduled Down-Time.
"Indebtedness" shall have the meaning ascribed to such term in the Credit
Agreement except that Indebtedness of the Seller shall include (i) only such
Indebtedness created pursuant to the Credit Agreement, as such term is defined
herein and (ii) other Indebtedness of the Seller to the extent incurred in
compliance with the terms of the Credit Agreement and with the express prior
written consent of the Buyer.
"Master Restructure Agreement" shall mean the Master Restructure Agreement dated
as of the Amendment Date among Seller, Buyer, Co-Buyer, GS Industries, Inc.,
Bank of America, N.A., Canadian Imperial Bank of Commerce, and the other lenders
thereto, as modified, amended and restated from time to time.
"Materials Handling Agreement" shall have the meaning set forth in the Credit
Agreement.
"Materials Handling Facility" shall have the meaning set forth in the Credit
Agreement.
"Metric Tonne" or "MT" means a unit of metric weight of 1,000 kilograms or
2,204.62 Pounds.
"Month" shall mean a calendar month; provided, however, in the case of the last
Month of the Term, Month shall mean the period from the first day of the Month
in which the Termination Date occurs to the Termination Date.
"Number 1 Bundles Price" for a Month means the average for such Month of the
estimated domestic consumer buying prices in US$/gross ton, delivered mill
(Chicago) for No. 1 bundles of ferrous scrap as listed under the "Scrap Iron &
Steel Prices"--"Consumer Buying Prices" as quoted in American Metal Market. If
such price is quoted in American Metal Market as a range of prices, then the
Number 1 Bundles Price shall be calculated using the midpoint of such range. To
the extent such price quotations are not stated in gross tons, such quotations
will be converted to gross tons. In the event that American Metal Market
discontinues the publication of the estimated domestic consumer buying prices in
US$/gross ton, delivered mill (Chicago) for No. 1 bundles of ferrous scrap or if
there is any material change in the method for the computation of such price or
the date(s) of publication of such price, the parties shall in good faith agree
to re-define the Number 1 Bundles Price to preserve the intent of this Agreement
and such that, when applied historically, it yields the same value as the former
Number 1 Bundles Price.
"Outstanding Balance" at any date shall mean the outstanding balance of all
Notes on that date.
"Pound" means a unit of weight of sixteen (16) ounces avoirdupois.
"Reimbursed Payments Component" for a Month shall mean the aggregate of all
Special Payments or Insurance and Condemnation Proceeds (as defined in the
Restructure Security Deposit Agreement) received by Seller in such Month to the
extent they represent amounts previously included in Invoice Price per MT, or if
they were not included in Invoice Price per MT, they were paid directly by Buyer
and Co-Buyer or indirectly by Buyer and Co-Buyer through the pricing method then
in effect.
"Resale Transaction Shipments" means the aggregate MT of DRI included in any
Resale Transaction.
"Resale Transactions" means arms-length resales by the Buyer of DRI (including
DRI purchased from Co-Buyer) to Third Parties or to Co-Buyer.
"Scheduled Down-Time" means up to 30 days per calendar year during the Term
hereof of scheduled maintenance at the Facility during which no DRI will be
produced.
"Scheduled Payments of Principal" shall mean all regularly scheduled payments of
principal of the Term Loans pursuant to Section 2.04 of the Credit Agreement,
any mandatory redemption of the Bonds pursuant to the Bond Documents (including
without limitation any Bond LC Reimbursement Obligations resulting therefrom),
and with respect to any Indebtedness of the Seller not governed by the Credit
Agreement, any regularly scheduled payments of principal pursuant to the
documents governing the same, including the principal portion of any rental
payment on a Capital Lease; provided, however, that Scheduled Payments of
Principal shall not include (i) any payments of principal which are due prior to
their scheduled due date by reason of acceleration or (ii) any payments of
principal on the Tranche C Term Loan, the Tranche C Bond L/C Amount and the PIK
Notes relating thereto.
"Sponsor Fixed Cost" for any Month means one-half of Fixed Cost.
------------------
"Sponsor Shipments" for a Month means the aggregate MT of Total Shipments for
such Month by Seller less Third Party Direct Shipments for such Month.
"Sponsor Variable Cost" for any Month means (a) Variable Cost multiplied by (b)
the ratio of (i) Buyer Shipments plus one-half of Third Party Direct Shipments
to (ii) Total Shipments.
"Standstill Period" shall mean the period which commences upon the receipt by
the Seller of a Termination Notice and which ends on the earlier of (a) eight
(8) Months following receipt by the Seller of such Termination Notice; (b) the
occurrence of an Increased Production Event; or (c) receipt by Seller of a
Revocation of Termination Notice.
"Termination Event" shall mean the occurrence of a period of at least three
consecutive Months commencing after a Preliminary Action Period in which Average
Production of DRI at the Facility is less than an annual equivalent of 240,000
MT per year during each such Month, provided, that such reduced level of
production is not a result of Force Majeure or Scheduled Down-Time.
"Third Party" means any Person to which Seller, Buyer or Co-Buyer Delivers DRI
other than Buyer, Co-Buyer or any of their Affiliates.
"Third Party Direct Obligation" means an obligation of Seller to Deliver DRI to
a Third Party other than Buyer, Co-Buyer or any of their Affiliates.
"Third Party Direct Revenues" for a Month means the aggregate cash amounts
accrued by Seller from Third Party Direct Shipments for such Month, net of any
offsets, returns, discounts or deferred payments accrued in such Month plus the
aggregate cash amounts accrued by Seller for such Month from deliveries of
Related Inventory during such Month.
"Third Party Direct Sales" means Deliveries of DRI by Seller in satisfaction of
Third Party Direct Obligations.
"Third Party Direct Shipments" for a Month means the aggregate MT of Third Party
Direct Sales during such Month.
"Third Party Indirect Revenues" for a period means the aggregate cash amounts
accrued by Buyer from Resale Transactions for such period, net of actual costs,
expenses and charges incurred by Buyer to unaffiliated third parties for the
sale and Delivery of DRI and any offsets, returns, discounts or deferred
payments accrued in such period
"Total Manufacturing Costs" means the amounts set forth in the Project Operating
Budget in the line item titled "Total Manufacturing Costs".
"Total Shipments" for a Month means the MT of all Deliveries of DRI to Buyer
under this Agreement, to Co-Buyer under the Co-Buyer Agreement, and Third Party
Direct Shipments for such Month.
"Variable Cost" for a Month means the sum of the Working Capital Component for
such Month plus the sum of the following expenses for such Month: ore, natural
gas, ore handling, electricity, lime, nitrogen, internal Facility cleanup and
royalty fees pursuant to the Process License Agreement. Anything in this
definition to the contrary notwithstanding, Variable Cost shall include 33 1/3%
of Fixed Manufacturing Cost, and the remaining 66 2/3% shall be included in
Fixed Cost.
"Working Capital Balance" as of any day for a Person shall be the sum of the
balances of cash, accounts receivable and inventory for such day less accounts
payable for such day, determined in accordance with GAAP.
"Working Capital Component" for a Month shall mean the difference (either
negative or positive) computed by subtracting the Working Capital Balance at the
beginning of the next succeeding Month1 from the estimated Working Capital
Balance at the end of such next succeeding Month. Estimates of the Working
Capital Balance shall be taken from the Project Operating Budget.
Section 11.2 Index of Defined Terms
<PAGE>
A
Agreement.......................................3, 22
---------
Amendment Date.....................................22
--------------
Annual DRI Production Goal.........................22
--------------------------
Annual Financial Statements........................14
---------------------------
Average Invoice Price per MT.......................23
----------------------------
Average Number 1 Bundles Price.....................23
------------------------------
Average Production of DRI..........................23
-------------------------
Average Third Party Direct Revenues per MT.........23
------------------------------------------
Average Third Party Indirect Revenue per MT........23
-------------------------------------------
B
Buyer Consumption..................................23
-----------------
Buyer Consumption Component........................10
---------------------------
Buyer Invoice......................................23
-------------
Buyer Shipments....................................24
---------------
C
Capital Expenditure................................24
-------------------
Capital Expenditures Component.....................24
------------------------------
Carrier............................................24
-------
Catalyst Recovery Component........................24
---------------------------
Catalyst Reserve Component.........................24
--------------------------
Catalyst Reserve Trigger Event.....................24
------------------------------
Clawback Amount....................................10
---------------
Clawback Invoice...................................10
----------------
Clawback Suspension Date...........................24
------------------------
Co-Buyer...........................................24
--------
Co-Buyer Agreement.................................24
------------------
Co-Buyer Nonperformance Event......................12
-----------------------------
Consent to Assignment..............................33
Credit Agreement...................................24
----------------
Credit Balance.....................................24
--------------
Credit Documents...................................24
----------------
D
Debt Service Component.............................24
----------------------
Delivered...........................................5
---------
Delivery............................................5
--------
Delivery Invoice....................................8
----------------
Discounted Amount..................................13
DRI................................................25
---
DRI Purchase Requirement...........................25
------------------------
E
Estimated Buyer Shipments..........................25
-------------------------
Estimated Fixed Cost...............................25
--------------------
Estimated Fixed Manufacturing Cost.................25
----------------------------------
Estimated Invoice Price per MT......................8
------------------------------
Estimated Sponsor Shipments........................25
---------------------------
Estimated Third Party Direct Revenues..............25
-------------------------------------
Estimated Third Party Direct Shipments.............26
--------------------------------------
Estimated Total Shipments..........................26
-------------------------
Estimated Variable Cost............................26
-----------------------
Exempt Purchaser...................................26
----------------
Exempt Transaction.................................26
------------------
Expenses...........................................26
--------
F
Facility...........................................27
--------
Fixed Cost.........................................27
----------
Fixed Manufacturing Cost...........................27
------------------------
FOB................................................27
---
Force Majeure......................................20
-------------
Full Price Invoice Election........................13
---------------------------
G
GAAP...............................................27
----
H
Hypothetical True-Up Invoice.......................11
----------------------------
I
Increased Costs....................................13
---------------
Increased Production Event.........................27
--------------------------
Indebtedness.......................................27
------------
Invoice Price per MT................................9
--------------------
M
Master Restructure Agreement.......................27
----------------------------
Materials Handling Agreement.......................28
----------------------------
Materials Handling Facility........................28
---------------------------
Metric Tonne.......................................28
------------
Month..............................................28
-----
Monthly Financial Statements.......................14
----------------------------
MT.................................................28
--
N
Number 1 Bundles Price.............................28
----------------------
O
Outstanding Balance................................28
-------------------
P
Pound..............................................28
-----
Previous DRI Purchase Agreement.....................3
-------------------------------
Project Operating Budget...........................15
------------------------
R
Reimbursed Payments Component......................28
-----------------------------
Resale Transaction Shipments.......................28
----------------------------
Resale Transactions................................28
-------------------
Revocation of Termination Notice....................4
--------------------------------
S
Scheduled Down-Time................................28
-------------------
Scheduled Payments of Principal....................28
-------------------------------
Seller..............................................3
------
Shortfall Share....................................13
Special Adjusted Price.............................12
----------------------
Sponsor Shipments..................................29
-----------------
Standstill Period..................................29
-----------------
T
Term...............................................18
----
Termination Date...................................18
----------------
Termination Event..................................29
-----------------
Termination Notice..................................4
------------------
Termination TrueUp Invoice.........................10
--------------------------
Third Party........................................29
-----------
Third Party Direct Component.......................10
----------------------------
Third Party Direct Obligation......................29
-----------------------------
Third Party Direct Revenues........................29
---------------------------
Third Party Direct Sales...........................29
------------------------
Third Party Direct Shipments.......................29
----------------------------
Third Party Indirect Component.....................10
------------------------------
Third Party Indirect Revenues......................29
-----------------------------
Three Months Preceding Termination.................11
----------------------------------
Total Shipments....................................30
---------------
True-Up Invoice.....................................9
---------------
V
Variable Cost......................................30
-------------
W
Working Capital Balance............................30
-----------------------
Working Capital Component..........................30
-------------------------
<PAGE>
ARTICLE 12. MISCELLANEOUS
Section 12.1 Notice
Any notice or other communication permitted or required by this
Agreement shall be properly given if personally delivered, mailed by certified
or registered mail, return receipt requested and postage prepaid, sent via
nationally recognized overnight courier, by cable, telex, facsimile
transmission, or by other electronic means for transmission, with confirmation
by letter given by the close of business on the next business day, or by first
class, registered or certified, postage prepaid mail addressed as follows:
If to Buyer:...............Birmingham Steel Corp.
1000 Urban Center Drive
Suite 300
Birmingham, Alabama 35242
Attn: Chief Financial Officer
Facsimile No. 205-970-1352
If to Seller:..............American Iron Reduction L.L.C.
7300 Louisiana State Highway
Convent, Louisiana 70723
Attn: General Manager
Facsimile No. 504-562-0015
Any such notice or communication shall be deemed to have been given on
the date of delivery if personally delivered, sent by nationally recognized
overnight courier, or sent by cable, telex, facsimile, or other electronic
means, and five (5) business days after mailing if sent by mail. "Business Day"
as used herein shall mean a weekday on which banks are open in Charlotte, North
Carolina and New York, New York.
Either party may, by giving notice as provided herein, change its
address for receiving such notice.
Section 12.2 Rights and Remedies Cumulative
Each right and remedy of the parties provided in this Agreement or now
or hereafter existing at law or in equity or by statute or otherwise, except as
expressly limited by this Agreement, shall be cumulative and concurrent and
shall be in addition to every other right or remedy provided for in this
Agreement or now or hereafter existing at law or in equity. The exercise or
partial exercise by a party of any one or more of such rights or remedies shall
not preclude the simultaneous or later exercise by such party of all such other
rights or remedies, and no failure or delay on the part of a party to exercise
any such right or remedy shall operate as a waiver thereof.
Section 12.3 Taxes
Each party agrees to discharge and to hold the other party harmless on
account of any taxes or governmental charges of any government or governmental
instrumentality with respect to its activities hereunder, including any income
earned or payments received by it hereunder. Buyer shall be responsible for
sales tax, if any, resulting from the sale of DRI to Buyer pursuant to the terms
of this Agreement.
Section 12.4 Successors and Assigns/Assignment
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto. Neither of the parties may assign
this Agreement or any rights hereunder without prior written consent of the
other party, except that each party hereby consents to the assignment by the
other party of such other party's rights and obligations under this Agreement to
any of such other party's majority owned subsidiaries, parent, majority-owned
subsidiary of such parent or successor to its entire business, but no such
assignment shall relieve the assigning party from its obligations hereunder. In
addition, Buyer acknowledges and agrees that Seller intends to assign this
Agreement, along with Seller's rights and duties hereunder, as collateral
security to one or more lenders in connection with the financing of the
Facility, such assignment to be effective upon Buyer's execution of a "Consent
to Assignment" as set forth below. No such assignment shall relieve Seller of
its obligations hereunder, and Buyer agrees that, following any such assignment,
any such lenders shall be third-party beneficiaries of this Agreement. Buyer
agrees to execute a "Consent to Assignment" in form mutually satisfactory to the
parties, such consent to be effective as of the Amendment Date.
Section 12.5 Waiver
The failure of any party to enforce at any time any of the provisions
of or rights under this Agreement shall in no way be construed to be a waiver of
such provisions or rights nor in any way to affect the validity of this
Agreement or any part thereof, or the right of any party thereafter to enforce
each and every such provision or right. No waiver of any breach of this
Agreement shall be held to be a waiver of any other or subsequent breach.
Section 12.6 Governing Law
This Agreement shall be governed and interpreted in accordance with the
laws applicable to agreements entered into and to be performed entirely in the
State of North Carolina.
Section 12.7 Number
Whenever used in this Agreement, the singular shall include the plural
and the plural shall include the singular.
Section 12.8 Table of Contents and Headings
The Table of Contents and captions of Articles and Sections of this
Agreement are inserted for convenience only and shall not constitute or affect
the meaning of any of the terms of this Agreement.
Section 12.9 Severability
If any provision of this Agreement is held to be unenforceable for any
reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to the
fullest extent.
Section 12.10 Counterparts
This Agreement may be executed in any number of counterparts and each
separate counterpart shall constitute an original instrument, but all such
separate counterparts shall together constitute but one instrument.
Section 12.11 Entire Agreement
This Agreement constitutes and contains the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior agreements and understandings between the parties
respecting the subject matter of this Agreement. No amendment, modification, or
alteration of the terms and conditions of this Agreement or any schedule thereto
shall be binding unless the same shall be set forth in an instrument in writing,
dated subsequent to the date hereof, and duly executed by an authorized officer
of each of the parties hereto.
Section 12.12 No Third Party Beneficiaries
Except for any collateral assignment contemplated by Section 12.4,
neither the Co-Buyer nor any other person, shall be a third party beneficiary of
this Agreement or the rights and obligations of the parties hereto; provided,
however, that, by executing this Agreement, each of the Buyer and Seller agree
that they shall not amend, modify or deviate from the terms of, this Agreement
without the written consent of the Co-Buyer.
Section 12.13 Construction of Agreement
In construing the provisions of this Agreement and all schedules,
exhibits and other agreements delivered in connection herewith, the parties
hereby acknowledge and agree that each of the parties hereto and thereto are
jointly responsible for the drafting and negotiation of all terms and provisions
contained herein and therein, and that such terms and provisions shall not as a
result of such drafting and negotiation be construed more strictly against
either party.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused a counterpart of
this Agreement to be duly executed and delivered as of the date set forth above.
.................AMERICAN IRON REDUCTION L.L.C., as Seller
By: /s/ Patricia Foshee
------------------------
..........Name: Patricia Foshee
Title: Authorized Representative
By: /s/ Tobin Pospisil
-----------------------
..........Name: Tobin Pospisil
Title: Authorized Representative
BIRMINGHAM STEEL CORPORATION, as Buyer
By: /s/ James A. Todd, Jr.
---------------------------
..........Name: James A. Todd, Jr.
Title: Chief Administrative Officer
<PAGE>
Exhibit No. 10.23.6
SEVENTH AMENDMENT TO CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT dated as of May 15, 2000
(this "Amendment"), by and among Birmingham Steel Corporation (the "Borrower"),
each of the financial institutions party hereto, and BANK OF AMERICA, N.A.,
successor to NationsBank, N.A. (South), as Agent (the "Agent").
WHEREAS, the Borrower, the Lenders, the Swingline Lender and the Agent
have entered into that certain Credit Agreement dated as of March 17, 1997, as
amended as of June 23, 1998, as of September 30, 1998, as of July 27, 1999, as
of September 28, 1999, as of October 12, 1999, and as of November 12, 1999 (as
so amended, the "Credit Agreement"); and
WHEREAS, the Borrower, the Agent, the Lenders and the Swingline Lender
desire to amend the Credit Agreement upon the terms and conditions set forth
herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by all of the parties hereto, all
of the parties hereto agree as follows:
Section 1. Amendments to Credit Agreement. Subject to the terms and
conditions hereof, including
without limitation, satisfaction of the conditions contained in Section 2,
the parties hereto agree that the Credit Agreement is amended as follows:
(a) The Credit Agreement is amended by deleting from Section 1.1 the
definitions of the terms "Affiliate", "Consolidated EBITDA", "Consolidated
EBITDAR", "Consolidated Interest Expense", "Disposition", "Hazardous Materials",
"Net Proceeds" and "Termination Date" in their entirety and substituting in
their respective places the following:
"Affiliate" means, at any time, a Person (other than a
Restricted Subsidiary) (a) that directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common
control with, the Borrower, (b) that beneficially owns or holds 5% or
more of any class of the Voting Stock of the Borrower, or (c) 5% or
more of the Voting Stock (or in the case of a Person that is not a
corporation, 5% or more of the equity interest) of which is
beneficially owned by the Borrower or a Subsidiary. For purposes of
this definition, "control" (including with correlative meanings, the
terms "controlled by" and "under common control with") means the
possession directly or indirectly of the power to direct or cause the
direction of the management and policies of a Person, whether through
the ownership of voting securities or by contract or otherwise.
Notwithstanding the foregoing, no Lender shall be considered to be an
Affiliate of the Borrower solely as a result of holding a Warrant or
any security issued or issuable upon the exercise of a Warrant.
"Consolidated EBITDA" means, for any period, the sum of (a)
Consolidated Net Income for such period, plus (b) the aggregate amount
(without duplication) of (i) taxes imposed on, or measured by, income
or excess profits, (ii) Consolidated Interest Expense, (iii)
depreciation and amortization for such period, (iv) any expenses
incurred pursuant to severance plans in effect on December 31, 1999
with respect to officers of the Borrower whose employment by the
Borrower ended prior to May 15, 2000 (excluding severance payments
included in clause (ix) below in this definition), (v) any costs
attributable to the issuance by the Borrower of the Warrants in
connection with the execution of the BSE Credit Agreement (including
amortization of debt issuance costs relating to the issuance of such
Warrants), (vi) amortization of debt expense, (vii) any amount included
in Consolidated Net Income that is allocable to a minority interest
owned in a Restricted Subsidiary by a Person that is not a Subsidiary,
(viii) non-cash expenses incurred by the Borrower in connection with
the shut down and discontinuance of operations, if any, at American
Steel & Wire, Inc.'s Cleveland facility or the shut down and
discontinuance of operations of the Borrower's Memphis facility, and
(ix) cash expenses incurred by the Borrower as a result of, or
continuing subsequent to, the shut down and discontinuance of
operations at the Borrower's Memphis facility or the shut down and
discontinuance of operations, if any, at American Steel & Wire Inc.'s
Cleveland facility which are required to be expended by law or contract
or are payable pursuant to severance plans and policies in effect on
December 31, 1999, including any lease payments made with respect to
such Cleveland facility or Memphis facility after such shut down,
provided that the amount added back pursuant to this clause (ix) with
respect to American Steel & Wire, Inc.'s Cleveland facility, other than
severance payments and ad valorem property taxes, shall not exceed
$500,000 in any individual month (to the extent, and only to the
extent, that any such amount in clauses (i), (ii), (iii), (iv), (v),
(vi), (vii), (viii) or (ix) was deducted in the computation of
Consolidated Net Income for such period), in each case accrued for such
period by the Borrower and the Restricted Subsidiaries, determined on a
consolidated basis for such Persons.
"Consolidated EBITDAR" means, for any period, the sum of (a)
Consolidated EBITDA for such period, plus (b) Rental Expense for such
period (to the extent, and only to the extent, deducted in the
computation of Consolidated Net Income for such period and excluding
any Rental Expense that was added back in the calculation of such
Consolidated EBITDA).
"Consolidated Interest Expense" means, for any period, all
interest charges for such period accrued on or with respect to all Debt
of the Borrower and its Restricted Subsidiaries (including without
limitation, amortization of debt discount and expense and imputed
interest on Capitalized Lease obligations, but excluding amortization
of debt issuance costs relating to the issuance of the Warrants
referred to in clause (v) of the definition of Consolidated EBITDA and
amortization of debt expense).
"Disposition" has the meaning given that term in the
Collateral Agency Agreement.
"Hazardous Materials" means all or any of the following: (a)
substances that are defined or listed in, or otherwise classified
pursuant to, any applicable Environmental Laws as "hazardous
substances", "hazardous materials", "hazardous wastes", "toxic
substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive
toxicity, "TLCP" toxicity, or "EP toxicity"; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or
synthetic gas and drilling fluids, produced waters and other wastes
associated with the exploration, development, production or use of
crude oil, natural gas or geothermal resources; (c) any flammable
substances or explosives or any radioactive materials; (d) asbestos in
any form; and (e) electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty parts per million.
"Net Proceeds" has the meaning given that term in the
Collateral Agency Agreement.
(b) Section 1.1 of the Credit Agreement is hereby amended by adding the
definitions of the following terms thereto in the appropriate alphabetical
order:
"Adjusted Net Income" means, for any period, the sum of (a)
the net income of the Borrower and its Subsidiaries as shown in the
financial statements for the Borrower and its Subsidiaries for such
period prepared in accordance with GAAP and (b) any TNW Adjustment with
respect to such period.
"BSE Credit Agreement" means that certain Credit Agreement
dated as of May 15, 2000 by and among BSE, the financial institutions
party thereto as "Lenders" and Bank of America, N.A., as Agent.
"BSE Loan Documents" means the "Loan Documents" under, and as
defined in, the BSE Credit Agreement.
"Cleveland Cessation Condition" means, in order to be
satisfied as of any date, that the Borrower (a) has shut down and
discontinued operations at American Steel & Wire, Inc.'s facility in
Cleveland, (b) has completed the sale of American Steel & Wire, Inc.'s
Cleveland facility to a Person that is not a Subsidiary or Affiliate of
the Borrower, with no continuing interest in the profits, losses or
value of the Cleveland facility and no continuing obligations with
respect to its operations (other than by virtue of representations,
warranties and indemnity obligations customary in such transactions),
or (c) has completed a transaction in the nature of a joint venture
pursuant to which American Steel & Wire, Inc.'s Cleveland operations
have been transferred, at no cost to the Borrower (i.e. no cost to the
Borrower or any Subsidiary or Affiliate of the Borrower), to a separate
legal entity in which the Borrower may have an ownership interest or
other profit participation under an arrangement where the Borrower has
no initial or continuing obligation to contribute capital (other than
the operating assets of the Cleveland facility) or operating or other
funds to such entity (other than by virtue of representations,
warranties and indemnity obligations customary in such transactions)
and has no obligation to supply product to or purchase product from
such entity or otherwise guaranty or purchase any debts or obligations
of such entity (other than obligations of such entity to the holders of
the notes issued in connection with the Existing Note Purchase
Agreements and to the Lenders).
"SBQ Division EBITDA" means, for any period, the portion of
the Consolidated EBITDA for such period that is allocable to the
Cleveland facility of the SBQ Division, such allocation to be made in a
manner consistent with the Borrower's manner of allocation in respect
thereof for the fiscal quarter ending on December 31, 1999 and as set
forth in the written material furnished to the Lenders on or before
March 31, 2000.
"TNW Adjustment" means, for any period, the net after-tax
effect of any of the following expenses incurred during such period,
but only to the extent that any such expense had been deducted during
such period in the calculation of net income of the Borrower and its
Subsidiaries as shown in the financial statements for the Borrower and
its Subsidiaries for such period prepared in accordance with GAAP: (w)
any expense incurred pursuant to severance plans in effect on December
31, 1999 with respect to officers of the Borrower whose employment by
the Borrower ended prior to May 15, 2000 (excluding severance payments
included in clause (y) or (z) of this definition), (x) non-cash
expenses incurred by the Borrower in connection with the shut down and
discontinuance of operations, if any, of American Steel & Wire, Inc.'s
Cleveland facility or the shut down and discontinuance of operations of
the Borrower's Memphis facility, (y) cash expenses incurred by the
Borrower as a result of, or continuing subsequent to, the shut down and
discontinuance of operations at the Borrower's Memphis facility, which
are required to be expended by law or contract or are payable pursuant
to severance plans and policies in effect on December 31, 1999,
including any lease payments made after such shut down with respect to
such Memphis facility and (z) cash expenses incurred by the Borrower as
a result of, or continuing subsequent to, the shut down and
discontinuance of operations, if any, at American Steel & Wire, Inc.'s
Cleveland facility which are required to be expended by law or contract
or are payable pursuant to severance plans and policies in effect on
December 31, 1999, including any lease payments made after such shut
down with respect to such Cleveland facility, provided that the amount
deducted pursuant to this clause (z), other than severance payments and
ad valorem property taxes, shall not exceed $500,000 for any individual
month.
"Warrant" has the meaning given such term in the Warrant
Agreement.
"Warrant Agreement" means that certain Warrant Purchase
Agreement dated as of May 15, 2000 entered into by the Borrower, the
Lenders and the other parties thereto.
(c) The Credit Agreement is amended by deleting the first sentence of
Section 1.2 in its entirety and substituting in its place the following:
All accounting terms, ratios and measurements shall be interpreted or
determined in accordance with GAAP except as otherwise expressly
provided in this Agreement or any other Loan Document.
(d) The Credit Agreement is amended by deleting Section 6.01(i) in its
entirety and substituting in its place the following:
(i) Litigation. Except as disclosed (i) in the Borrower's
Annual Report on Form 10K for the year ended June 30, 1998, (ii) in any
other report filed by the Borrower with the Securities and Exchange
Commission after June 30, 1998 but prior to the Fifth Amendment Date,
(iii) in any press release issued by the Borrower after June 30, 1998
but prior to the Fifth Amendment Date, (iv) in writing to the Agent by
the Borrower prior to the Fifth Amendment Date or (v) in a letter dated
May 15, 2000 from the Borrower to the Lenders and certain other Persons
regarding certain pending litigation involving Bob Garvey and Harold
Olden, there are no actions, suits or proceedings pending (nor, to the
knowledge of the Borrower, are there any actions, suits or proceedings
threatened) against or in any other way relating adversely to or
affecting the Borrower or any Subsidiary or any of its respective
property in any court or before any arbitrator of any kind or before or
by any governmental body which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect, and there are
no strikes, slow downs, work stoppages or walkouts or other labor
disputes in progress, or to the knowledge of the Borrower threatened,
relating to the Borrower or any Subsidiary.
(e) The Credit Agreement is amended by deleting the last sentence of
Section 6.1(k) in its entirety and substituting in its place the following:
Each of the Borrower and the Restricted Subsidiaries is Solvent.
(f) The Credit Agreement is amended by deleting Section 6.01(l)(vii)
in its entirety and substituting in its place the following:
(vii) Except as disclosed in a letter dated May 15, 2000 from
the Borrower to the Lenders and certain other Persons regarding certain
pending litigation involving Bob Garvey and Harold Olden, no
proceeding, claim, lawsuit and/or investigation exists or, to the best
knowledge of the Borrower after due inquiry, is threatened concerning
or involving any Employee Benefit Plan which if adversely determined
could reasonably be expected to have a Material Adverse Effect.
(g) The Credit Agreement is amended by deleting Sections 8.4(d) and
(e) in their entirety and substituting in their respective places the
following:
(d) Promptly following, and in any event within 30 days of,
the end of each calendar month, the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such month and the
related consolidated statement of income of the Borrower and its
Subsidiaries for such month and for such fiscal year to date compared
to budget and to the figures for the corresponding periods of the prior
fiscal year, all of which shall be certified by an assistant treasurer,
chief financial officer or vice president-finance and control of the
Borrower, in his or her opinion, to present fairly, in accordance with
GAAP and in all material respects, the consolidated financial position
of the Borrower and its Subsidiaries as at the date thereof and the
results of operations for such month (without notes and subject to
normal year-end adjustments). Together with such financial statements,
the Borrower shall deliver a cash analysis report substantially in the
form of Exhibit N;
(e) As soon as practicable after the end of each quarterly
fiscal period in each fiscal year of the Borrower, and in any event
within 30 days thereafter, a copy of the "Financial Report" (the
Borrower's monthly internal operating report) together with the
schedules that are supplemental thereto; and
(f) The Credit Agreement is amended by deleting Section 9.1. in its
entirety and substituting in its place the following:
Section 9.1. Financial Covenants.
The Borrower shall not:
(a) Fixed Charge Coverage Ratio.
---------------------------
(i) Prior to Satisfaction of Cleveland Cessation
Condition. Permit the Fixed Charge Coverage Ratio for any
Applicable Fixed Charge Period specified in the following
table to be less than or equal to the ratio corresponding to
such period in the table, provided that this clause (i) shall
be in effect with respect to an Applicable Fixed Charge Period
ending at the end of a particular fiscal quarter only if, on
the last day of such fiscal quarter, the Cleveland Cessation
Condition has not been satisfied:
--------------------------------------- ----------------------------------
Applicable Fixed
Charge Period Ending Minimum Ratio
--------------------------------------- ----------------------------------
March 31, 2000 0.35 to 1.00
--------------------------------------- ----------------------------------
June 30, 2000 1.05 to 1.00
-------------------------------------- ----------------------------------
September 30, 2000 1.11 to 1.00
--------------------------------------- ----------------------------------
December 31, 2000 1.17 to 1.00
--------------------------------------- ----------------------------------
March 31, 2001 1.15 to 1.00
--------------------------------------- ----------------------------------
June 30, 2001 1.25 to 1.00
--------------------------------------- ----------------------------------
September 30, 2001 1.31 to 1.00
--------------------------------------- ----------------------------------
December 31, 2001 1.02 to 1.00
--------------------------------------- ----------------------------------
(ii) After Satisfaction of Cleveland Cessation
Condition. Permit the Fixed Charge Coverage Ratio for any
Applicable Fixed Charge Period specified in the following
table to be less than or equal to the ratio corresponding to
such period in the table, provided that this clause (ii) shall
be in effect with respect to an Applicable Fixed Charge Period
ending at the end of a particular fiscal quarter only if, on
the last day of such fiscal quarter, the Cleveland Cessation
Condition has been satisfied:
-------------------------------------- ----------------------------------
Applicable Fixed
Charge Period Minimum Ratio
-------------------------------------- ----------------------------------
June 30, 2000 1.05 to 1.00
-------------------------------------- ----------------------------------
September 30, 2000 1.11 to 1.00
-------------------------------------- ----------------------------------
December 31, 2000 1.14 to 1.00
-------------------------------------- ----------------------------------
March 31, 2001 1.09 to 1.00
-------------------------------------- ----------------------------------
June 30, 2001 1.17 to 1.00
-------------------------------------- ----------------------------------
September 30, 2001 1.20 to 1.00
-------------------------------------- ----------------------------------
December 31, 2001 0.93 to 1.00
-------------------------------------- ----------------------------------
For the purposes of this subsection (a), the "Applicable Fixed Charge
Period" means (w) with respect to the calculation of the Fixed Charge
Coverage Ratio for the Borrower's fiscal quarters ended March 31, 2000
and June 30, 2000, the fiscal quarter then ended; (x) with respect to
the calculation of the Fixed Charge Coverage Ratio for the Borrower's
fiscal quarter ended September 30, 2000, the period of two consecutive
fiscal quarters then ended; (y) with respect to the calculation of the
Fixed Charge Coverage Ratio for the Borrower's fiscal quarter ended
December 31, 2000, the period of three consecutive fiscal quarters then
ended; and (z) with respect to the calculation of the Fixed Charge
Coverage Ratio for any other fiscal quarter of the Borrower, the Four
Quarter Period then ended.
(b) Minimum Consolidated EBITDA.
---------------------------
(i) Prior to Satisfaction of Cleveland Cessation
Condition. Permit the aggregate amount of Consolidated EBITDA
for any Applicable EBITDA Period specified in the following
table to be less than the amount corresponding to such period
in the table, provided that this clause (i) shall be in effect
with respect to an Applicable EBITDA Period ending at the end
of a particular fiscal quarter only if, on the last day of
such fiscal quarter, the Cleveland Cessation Condition has not
been satisfied:
--------------------------------------- ----------------------------------
Applicable EBITDA Period Ending Minimum EBITDA
--------------------------------------- ----------------------------------
March 31, 2000 $3,453,000
--------------------------------------- ----------------------------------
June 30, 2000 $20,935,000
--------------------------------------- ----------------------------------
September 30, 2000 $46,350,000
--------------------------------------- ----------------------------------
December 31, 2000 $63,778,000
--------------------------------------- ----------------------------------
March 31, 2001 $79,625,000
--------------------------------------- ----------------------------------
June 30, 2001 $90,021,000
--------------------------------------- ----------------------------------
September 30, 2001 $94,128,000
--------------------------------------- ----------------------------------
December 31, 2001 $99,417,000
--------------------------------------- ----------------------------------
(ii) After Satisfaction of Cleveland Cessation
Condition. Permit the aggregate amount of Consolidated EBITDA
for any Applicable EBITDA Period specified in the following
table to be less than the amount corresponding to such period
in such table, provided that this clause (ii) shall be in
effect with respect to an Applicable EBITDA Period ending at
the end of a particular fiscal quarter only if, on the last
day of such fiscal quarter, the Cleveland Cessation Condition
has been satisfied:
--------------------------------------- ----------------------------------
Applicable EBITDA Period Ending Minimum EBITDA
--------------------------------------- ----------------------------------
June 30, 2000 $20,935,000
--------------------------------------- ----------------------------------
September 30, 2000 $46,350,000
--------------------------------------- ----------------------------------
December 31, 2000 $61,848,000
--------------------------------------- ----------------------------------
March 31, 2001 $75,244,000
--------------------------------------- ----------------------------------
June 30, 2001 $83,189,000
--------------------------------------- ----------------------------------
September 30, 2001 $84,847,000
--------------------------------------- ----------------------------------
December 31, 2001 $89,616,000
--------------------------------------- ----------------------------------
For the purposes of this subsection (b), the term "Applicable
EBITDA Period" means (w) with respect to the calculation of
Consolidated EBITDA for the Borrower's fiscal quarter ended
March 31, 2000, the fiscal quarter ended March 31, 2000; (x)
with respect to the calculation of Consolidated EBITDA for the
Borrower's fiscal quarter ended June 30, 2000, the period of
two consecutive fiscal quarters ended June 30, 2000; (y) with
respect to the calculation of Consolidated EBITDA for the
Borrower's fiscal quarter ended September 30, 2000, the period
of three consecutive fiscal quarters ended September 30, 2000;
and (z) with respect to the calculation of Consolidated EBITDA
for any other fiscal quarter of the Borrower, the Four Quarter
Period then ended.
(c) Minimum Tangible Net Worth. Permit Consolidated Tangible
Net Worth at any time to be less than (i)(A) $118,000,000 prior to the
satisfaction of the Cleveland Cessation Condition and (B) $104,000,000
after the satisfaction of the Cleveland Cessation Condition, plus (ii)
50% of Adjusted Net Income (only if greater than $0) of the Borrower
and its Subsidiaries on a consolidated basis for each fiscal quarter of
the Borrower ending after December 31, 1999, minus (iii) the sum of the
amounts by which Consolidated Tangible Net Worth was reduced (i.e., the
amount by which stockholders' equity was reduced) after December 31,
1999 by any TNW Adjustment, plus (iv) all Net Proceeds from any Equity
Issuance after December 31, 1999.
(d) Capital Expenditures. Permit the aggregate amount of
Capital Expenditures of the Borrower and its Restricted Subsidiaries to
be greater than: (i) $40,000,000 during the Borrower's fiscal year
ending June 30, 2000; (ii) $40,000,000 during the Borrower's fiscal
year ending June 30, 2001; and (iii) $25,000,000 during the Borrower's
fiscal year ending June 30, 2002. If there is a shut-down and
discontinuance of operations of American Steel & Wire, Inc.'s facility
in Cleveland, Ohio, the Borrower thereafter will not make, or permit
any of the Restricted Subsidiaries to make, any Capital Expenditures
with respect to such facility, except that the Borrower may expend up
to $500,000 to the extent that such expenditures are necessary in
connection with the shut-down or sale of such facility. To the extent
that the aggregate amount of Capital Expenditures of the Borrower and
the Restricted Subsidiaries during a fiscal year is less than the
amount that is permitted by the first sentence of this Section 9.1(d)
(the result of such permitted amount minus the actual amount of Capital
Expenditures during a fiscal year being the "Unused Amount of Capital
Expenditures" with respect to such fiscal year), the aggregate amount
of Capital Expenditures that may be made by the Borrower and the
Restricted Subsidiaries during the next succeeding fiscal year of the
Borrower will be the sum of the amount permitted by clause (ii) or
(iii) of this Section 9.1(d), as applicable, plus the Unused Amount of
Capital Expenditures with respect to the previous fiscal year.
(e) Debt to Consolidated EBITDA Ratio. For any Four-Quarter
Period ending on or after the Performance Release Date, permit the Debt
to Consolidated EBITDA Ratio to be greater than or equal to 3.50 to
1.00.
(f) SBQ Minimum EBITDA.
------------------
(i) Subject to the provisions of the immediately
following clause (ii), the Borrower will not permit the
aggregate amount of SBQ Division EBITDA for any fiscal quarter
ending on or after September 30, 2000 to be less than $1.00.
(ii) Notwithstanding the foregoing, the terms of the
covenant in this subsection (f) are subject to the provisions
set forth in a letter agreement dated as of May 15, 2000 among
the Borrower, the Lenders, the holders of the notes issued in
connection with the Existing Note Purchase Agreements, and
certain other parties.
(g) Section 9.2(d) of the Credit Agreement is amended by deleting the
"." at the end of clause (ix) and substituting in its place "; and", deleting
the "and" at the end of clause (viii) and adding the following clause (x) at the
end of Section 9.2(d):
(x) Debt arising under the BSE Loan Documents.
(h) The Credit Agreement is amended by deleting Section 10.1(d)(ii) in
its entirety and substituting in its place the following:
(ii) (x) the maturity of any such Material Debt shall have
been accelerated in accordance with the provisions of any indenture,
contract or instrument evidencing, providing for the creation of or
otherwise concerning such Material Debt or (y) any of such Material
Debt shall have been required to be prepaid or repurchased prior to the
stated maturity thereof; provided, however, this clause (y) shall not
be deemed to apply to the Debt evidenced by the industrial revenue
bonds described on Schedule 6.1.(g) which are supported by letters of
credit issued for the account of the Borrower or American Steel & Wire
Corporation; or
(i) The Credit Agreement is amended by adding to the end of Section
10.1 the following new subsections:
(p) BSE Credit Agreement Default. An "Event of Default" under and
as defined in the BSE Credit Agreement shall have occurred and be
continuing.
(q) Other Cross Defaults. Any of the following shall have
occurred and be continuing: (i) an "Event of Default" under and as
defined that certain Indenture of Trust dated as of December 1, 1998 by
and between Development Authority of Bartow County and SunTrust Bank,
Atlanta, as Trustee, relating to certain Property of BSE; (ii) a
"Default" under and as defined in that certain Equipment Lease
Agreement dated as of December 31, 1998 by and among the Borrower and
BSE, as lessees, and Bank of America Leasing & Capital, LLC, successor
in interest to NationsBanc Leasing Corporation, as lessor; (iii) a
"Default" under and as defined in the that certain Equipment Lease
Agreement dated as of June 29, 1999 by and among the Borrower and BSE,
as lessees, and First Security National Bank Association, as Owner
Trustee, as lessor; or (iv) a "Lease Event of Default" under and as
defined in that certain Equipment Lease Agreement dated as of September
30, 1997 by and between Chase Manhattan Trust Company, National
Association, as Owner Trustee, as Lessor, and the Borrower, as Lessee.
Section 2. Conditions Precedent. The effectiveness of Section 1 and Section 12
of this Amendment is subject to receipt by the Agent (unless receipt thereof is
waived in writing by the Requisite Lenders) of each of the following, each in
form and substance satisfactory to the Agent:
(a) Evidence that the conditions precedent contained in Section 5.1 of
the Credit Agreement dated as of May 15, 2000 (the "BSE Credit Agreement") by
and among BSE, the financial institutions party thereto as "Lenders" and Bank of
America, N.A., as Agent, have been satisfied or waived as permitted under the
terms thereof;
(b) Copies of fully-executed amendments to (or amendments and
restatements of) each of the following agreements evidencing that such
agreements have been amended in a manner comparable to the amendments to the
Credit Agreement provided for in Section 1 above or otherwise in a manner
satisfactory to the Requisite Lenders:
(i) the Existing Note Purchase Agreements;
(ii) the Existing Reimbursement Agreements still in effect;
(iii) the Collateral Agency Agreement; and
(iv) the Trust Indenture and Security Agreement dated as of
September 30, 1997 by and between Chase Manhattan Trust Company,
National Association, as Owner Trustee, and First Union National Bank,
as Indenture Trustee, the Equipment Lease Agreement dated as of
September 30, 1997 by and between Chase Manhattan Trust Company,
National Association, as Owner Trustee, as Lessor, and the Borrower,
as Lessee, and the other documents executed and delivered in
connection therewith.
(c) Fully-executed copies of each of the following documents:
(i) the BSE Credit Agreement and the other Loan Documents (as
defined in the BSE Credit Agreement);
(ii) the Warrant Agreement;
(iii) all of the Certificates evidencing all of the Warrants to
be issued pursuant to the Warrant Agreement;
(iv) that certain Guarantee dated as of the date hereof (the "BSE
Guarantee") executed by BSE in favor of the Collateral Agent for the
benefit of the Guaranteed Parties referred to therein; and
(v) all corporate or other necessary action taken by the Borrower
to authorize the execution, delivery and performance of the this
Amendment and the other Loan Documents being delivered in connection
herewith, certified by the Secretary or Assistant Secretary of the
Borrower.
(d) All fees and expenses payable by the Borrower to the Agent and the
Lenders on or prior to the effectiveness of this Amendment, including without
limitation, all fees and expenses of the Agent's counsel and each Lender's
counsel as provided in Section 7 hereof;
(e) An opinion or opinions of counsel to the Borrower and the
Restricted Subsidiaries, in form reasonably satisfactory to the Agent, regarding
(i) the formation of the Borrower and each Guarantor, (ii) the authority of the
Borrower and each Guarantor to execute, deliver and perform this Amendment, the
Credit Agreement as amended by this Amendment, the other Loan Documents and
Amendment Documents being executed and delivered in connection herewith (to the
extent a party thereto), (iii) the enforceability of such Loan Documents and
Amendment Documents under the laws of the State of Georgia or New York, as the
case may be, (iv) whether the execution, delivery and performance by the
Borrower and such Guarantor of such Loan Document and Amendment Documents
violate certain specified agreements to which the Borrower or any Guarantor is a
party and (v) such other matters as the Agent may reasonably request;
(f) If requested by the Agent, a letter from the Borrower addressed to
the Agent and the Lenders in which the Borrower agrees to use commercially
reasonable efforts to deliver to the Agent by specified dates items which were
to be delivered to the Agent on or prior to the date hereof; and
(g) Such other documents, agreements and instruments as the Agent may
reasonably request.
Section 3. Representations and Warranties of the Borrower. To induce
the Agent, the Lenders and the Swingline Lender to enter into this Amendment,
the Borrower represents and warrants to each of them as follows as of the date
hereof (and assuming the effectiveness of this Amendment):
(a) No Default or Event of Default has occurred and is continuing;
(b) The representations and warranties made or deemed made by the
Borrower and each Restricted Subsidiary in the Loan Documents to which it is a
party, are true and correct with the same force and effect as if made on and as
of the date hereof except to the extent that such representations and warranties
expressly relate solely to an earlier date (in which case such representations
and warranties were true and accurate on and as of such earlier date) and except
for changes in factual circumstances specifically and expressly permitted under
the Credit Agreement;
(c) The Borrower and the Restricted Subsidiaries have the right and
power, and each has taken all necessary action to authorize it, to execute,
deliver and perform this Amendment, the Guarantee, the Collateral Agency
Agreement, the BSE Loan Documents and all of the other documents, instruments
and agreements being executed by the Borrower or any Restricted Subsidiary in
connection with any of the foregoing (collectively, the "Amendment Documents")
to the extent such Person is a party thereto, and, with respect to the Borrower,
to perform the Credit Agreement as amended by this Amendment, in each case in
accordance with their respective terms. This Amendment and the other Amendment
Documents to which the Borrower or any Restricted Subsidiary is a party have
been duly executed and delivered by the duly authorized officers of the Borrower
and its Restricted Subsidiaries, as the case may be, and each of this Amendment,
such other Amendment Documents and the Credit Agreement as amended by this
Amendment is a legal, valid and binding obligation of the Borrower and each
Restricted Subsidiary a party thereto enforceable against such Person in
accordance with its respective terms except as may be limited by bankruptcy,
insolvency or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and general principles of equity; and
(d) The execution and delivery of this Amendment, such other Amendment
Documents, and the performance of each of this Amendment, such other Amendment
Documents and the Credit Agreement as amended by this Amendment, in accordance
with their respective terms, 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 Restricted Subsidiary, 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 except for Liens granted
pursuant to, or contemplated by, the Collateral Agency Agreement.
Section 4. No Third Party Beneficiaries. Except for the Borrower, the Lenders,
the Swingline Lender and the Agent, no Person is intended to be a beneficiary of
this Amendment and no other Person shall be authorized to rely upon the contents
of this Amendment.
Section 5. Effect. The amendments contained herein shall be deemed to have
prospective application only.
Section 6. Release of Claims. The Borrower, for itself and all of its
predecessors, successors and assigns, acknowledges, affirms and represents that
immediately prior to giving effect to this Amendment, it is legally, validly and
enforceably obligated to each of the Agent, the Lenders and the Swingline Lender
under and pursuant to the Credit Agreement and each of the other Loan Documents
to which the Borrower is a party (the Credit Agreement, together with such other
Loan Document, the "Existing Loan Documents") and that the Borrower has no
defense, offset, counterclaim or right of recoupment with regard to such
obligations, hereby fully, forever and completely releases and discharges each
of the Agent, the Lenders and the Swingline Lender and all of their respective
employees, officers, directors, trustees, shareholders, affiliates, agents
(including, without limitation, Banc of America Securities LLC), attorneys,
representatives, predecessors, successors and assigns (collectively, the
"Released Parties"), from any and all claims, demands, liabilities, damages and
causes of action of any kind whatsoever, whether based on facts in existence
prior to or as of the date of the effectiveness of this Amendment, whether known
or unknown, which the Borrower may now have or may have had at any time
heretofore or may have at anytime hereafter, whether for contribution or
indemnity or otherwise, and whether direct or indirect, fixed or contingent,
liquidated or unliquidated, arising out of or related in any way to any of the
following: (a) any of the Existing Loan Documents; and (b) any action, inaction
or omission by any of the Released Parties in connection with any of the
Existing Loan Documents or the administration thereof.
Section 7. Expenses. The Borrower agrees to pay or reimburse the Agent and each
Lender for all of their reasonable out-of-pocket costs and expenses incurred in
connection with the preparation, negotiation and execution of this Amendment,
any of the other Amendment Documents (including due diligence expenses and
travel expenses relating to closing), and the consummation of the transactions
contemplated hereby and thereby, including the reasonable fees and disbursements
of counsel to the Agent and counsel to each Lender.
Section 8. 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 9. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall constitute an original, but all of which taken
together shall be one and the same instrument.
Section 10. Severability. If any provision of this Amendment shall be determined
to be invalid, then only such provision shall be invalid and all other
provisions of this Amendment shall remain effective and binding.
Section 11. Defined Terms. Terms not otherwise defined in this Amendment which
are defined in the Credit Agreement are used herein with the respective meanings
given them in the Credit Agreement.
Section 12. No Change of Control. The Lenders confirm that the
reconstitution of the Borrower's Board of Directors effected pursuant to the
Settlement Agreement dated as of December 2, 1999 by and among the Borrower, The
United Company and the other parties thereto, did not constitute an Event of
Default under Section 10.1(l) of the Credit Agreement.
Section 13. References to Credit Agreement. 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 14. Transaction Documents. The Lenders direct and authorize the Agent to
enter into each Amendment Document to which the Agent (in such capacity) is or
is to become a party.
[Signatures on Following Page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Seventh
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
THE AGENT AND THE LENDERS:
BANK OF AMERICA, N.A., successor to NationsBank, N.A. (South),
as Agent, as a Lender and as Swingline Lender
By: /s/ Jay T. Wampler
-------------------
Name: Jay T. Wampler
Title: Managing Director
PNC BANK, NATIONAL ASSOCIATION, as Co-Agent and as a Lender
By: /s/ Martin E. Mueller
----------------------
Name: Martin E. Mueller
Title: Vice President
THE BANK OF NOVA SCOTIA, as Co-Agent and as a Lender
By: /s/ Peter J. Van Schaick
-----------------------------
Name: Peter J. Van Schaick
Title: Relationship Manager
[Signatures Continued on Following Page]
<PAGE>
THE BANK OF TOKYO - MITSUBISHI, ltd
By: /s/ Gary L. England
--------------------
Name: G. England
Title: V.P & Manager
CIBC INC.
By: /s/ Ronald E. Spitzer
----------------------
Name: Ronald E. Spitzer
Title: Agent
AMSOUTH BANK
By: /s/ Darlene E. Chandler
------------------------
Name: Darlene E. Chandler
Title: Vice President
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK, CAYMAN ISLAND BRANCH
By: /s/ J. W. Somers
--------------------
Name: J. W. Somers
Title: S.V. P.
By: /s/ Kurt A. Morris
-------------------
Name: Kurt A. Morris
Title: Vice President
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Gregory L. Hong
--------------------
Name: Greogry L. Hong
Title: Duly Authorized Signatory
BANK ONE, NA, formerly known as The First National
Bank of Chicago
By: /s/ Richard Babcock
--------------------
Name: Richard Babcock
Title: Vice President
THE SANWA BANK, LIMITED
By: /s/ John T. Fenney
-------------------
Name: John T. Fenney
Title: Vice President
UBS AG, STAMFORD BRANCH, successor to Union Bank of
Switzerland, New York Branch
By: /s/ Marco Breitenmoser
-----------------------
Name: Marco Breitenmoser
Title: Director
Recovery Management
By: /s/ Dorothy McKinley
----------------
Name: Dorothy McKinley
Title: Director
Loan Portfolio Support, US
John D. Correnti
BIRMINGHAM STEEL CORPORATION
By: /s/ John D. Correnti
---------------------
John D. Correnti
ATTEST Its: Chairman & Chief Executive Officer
By: /s/ Catherine W. Pecher
------------------------
Catherine W. Pecher
Its: Secretary
<PAGE>
Exhibit No. 10.24.1
AMENDED AND RESTATED
COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT
This AMENDED AND RESTATED COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT
(as may be amended from time to time, this "Agreement") dated as of the 15th day
of May, 2000, by and among: (i) SouthTrust Bank, National Association (in its
individual capacity herein referred to as the "Collateral Agent Bank" and in its
capacity as collateral agent herein referred to as the "Collateral Agent"), (ii)
Bank of America, N.A. and the other financial institutions (collectively,
together with their respective successors and assigns, the "Banks") which are
parties to the Credit Agreement (as defined below), (iii) Bank of America, N.A.,
as agent for itself and the other Banks (the "Agent Bank"), (iv) Bank of
America, N.A. and the other financial institutions (collectively, together with
their respective successors and assigns, the "May, 2000 Lenders") which are
parties to the May, 2000 Credit Agreement (as defined below), (v) Bank of
America, N.A., as agent for itself and the other May, 2000 Lenders (the "May,
2000 Agent") (vi) each of the holders of Notes (together with their respective
successors and assigns as holders of Notes) issued pursuant to the Note Purchase
Agreements (as defined below) (the "Note Holders"), (vii) Bank of America, N.A.
and PNC Bank, National Association, each as the issuer of IRB Letters of Credit
(as defined below) (each, an "LC Issuer"), (viii) Birmingham Steel Corporation
(the "Company"), (ix) Chase Manhattan Trust Company, National Association, as
successor to PNC Bank National Association, as successor to PNC Bank, Kentucky,
Inc., as Owner Trustee (the "Owner Trustee") under the Equipment Lease Agreement
dated as of September 30, 1997 between the Owner Trustee, as Lessor, and
Birmingham Steel Corporation, as Lessee, as supplemented by Lease Supplement No.
1, dated November 10, 1997, and as further amended, modified and supplemented
from time to time (the "Equipment Lease"), (x) First Union National Bank, as
Indenture Trustee (the "Indenture Trustee") under the Trust Indenture and
Security Agreement dated as of September 30, 1997, as supplemented by Trust
Indenture Supplement No. 1, dated November 10, 1997, and as further amended,
modified and supplemented from time to time (the "Indenture") between the Owner
Trustee and Indenture Trustee, and (xi) each Guarantor (as defined below) which
executes this Agreement or which from time to time hereafter executes an
instrument accepting and agreeing to the provisions of this Agreement.
PREAMBLE
WHEREAS, pursuant to a Credit Agreement dated as of March 17, 1997, as
amended, among the Company, the Agent Bank, PNC Bank, National Association, and
The Bank of Nova Scotia, as Co-Agents, and the Banks (as further amended from
time to time, the "Credit Agreement"), the Banks have, upon the terms and
subject to the conditions contained therein, made and agreed to make loans and
otherwise extended and agreed to extend credit to the Company; and
WHEREAS, pursuant to separate Amended and Restated Note Purchase
Agreements, each dated as of October 12, 1999, as amended (collectively, as
further amended from time to time, the "1993 Note Purchase Agreement"), between
the Company and each purchaser as party thereto, the Company issued, and such
purchasers purchased, $130,000,000 principal amount of the Company's 10.03%
Senior Notes (as may be amended from time to time, the "1993 Notes"); and
WHEREAS, pursuant to certain other separate Amended and Restated Note
Purchase Agreements, each dated as of October 12, 1999, as amended
(collectively, as further amended from time to time, the "1995 Note Purchase
Agreement" and, collectively with the 1993 Note Purchase Agreement, the "Note
Purchase Agreements"), between the Company and each purchaser as party thereto,
the Company has issued, and such purchasers purchased, (i) $76,000,000 principal
amount of the Company's 9.71% Series A Senior Notes, (ii) $14,000,000 principal
amount of the Company's 9.82% Series B Senior Notes, and (iii) $60,000,000
principal amount of the Company's 9.92% Series C Senior Notes (the Notes
described in clauses (i), (ii) and (iii), as such Notes may be amended from time
to time being the "1995 Notes" and, collectively with the 1993 Notes, the
"Notes"); and
WHEREAS, Bank of America, N.A. has issued a letter of credit pursuant
to which up to $15,172,603 may be drawn in connection with certain Industrial
Revenue Bonds issued to provide financing to the Company with respect to the
facility of America Steel and Wire Corporation in Cleveland, Ohio (the "Bank of
America Letter of Credit"); and PNC Bank, National Association, has issued a
letter of credit pursuant to which up to $26,299,179 may be drawn in connection
with certain Industrial Revenue Bonds issued to provide financing to the Company
with respect to the facility of the Company in Memphis, Tennessee (the "PNC
Letter of Credit"; and, collectively with the Bank of America Letter of Credit,
the "IRB Letters of Credit"); and the Company has agreed to reimburse the LC
Issuers for all amounts drawn on the IRB Letters of Credit pursuant to an
Amended and Restated Reimbursement Agreement dated as of October 12, 1999, as
amended, between Bank of America, N.A. (as successor to Bank of America
Illinois), American Steel and Wire Corporation, and the Company (the "Bank of
America Reimbursement Agreement"), and a Reimbursement Agreement dated as of
October 1, 1996, as amended, between PNC Bank, National Association (as
successor to PNC Bank, Kentucky, Inc.), and the Company (the "PNC Reimbursement
Agreement" and, collectively with the Bank of America Reimbursement Agreement,
as may be further amended from time to time, the "Reimbursement Agreements");
and
WHEREAS, pursuant to the Equipment Lease, the Owner Trustee, as Lessor,
has leased certain melt shop equipment to the Company, as Lessee, and the rights
of the Owner Trustee to payments thereunder have been collaterally assigned to
the Indenture Trustee to secure amounts due with respect to the Equipment Notes
outstanding under (and as defined in) the Indenture (the "Equipment Notes"); and
WHEREAS, pursuant to a Credit Agreement dated as of May 15, 2000, among
Birmingham Southeast, LLC, the May, 2000 Agent, and the May, 2000 Lenders (as
amended from time to time, the "May, 2000 Credit Agreement"), the May, 2000
Lenders have, upon the terms and subject to the conditions contained therein,
made and agreed to make loans and otherwise extended and agreed to extend credit
to Birmingham Southeast, LLC, in connection with which Birmingham Southeast, LLC
has agreed to become a Guarantor and to become party to this Agreement; and
WHEREAS, pursuant to certain guaranties, security agreements, mortgages
and related documents, the Guarantors have guaranteed the Secured Obligations
(as hereinafter defined) on the terms set forth in their respective Guaranties
and the Company and the Guarantors (excluding BSE) have guaranteed the May, 2000
Debt (as hereinafter defined), and the Company and each of the Guarantors
(including BSE) have granted a valid lien on and security interest in the
Collateral (as hereinafter defined) to the Collateral Agent, for the benefit of
(1) the Banks and the Agent Bank, as security for the Company's obligations to
the Banks and the Agent Bank under the Credit Agreement and the Guarantors'
guarantee thereof, (2) the Note Holders, as security for the Company's
obligations under the Note Purchase Agreements and the Notes and the Guarantors'
guarantee thereof, (3) the LC Issuers, as security for the Company's obligations
under the Reimbursement Agreements and the Guarantors' guarantee thereof, (4)
the Owner Trustee and the Indenture Trustee, as assignee of the Owner Trustee,
as security for the Lease Claims, as defined herein, and (5) the May, 2000
Lenders, as security for BSE's obligations to the May, 2000 Lenders and the May
2000 Agent, under the May, 2000 Credit Agreement and the Company's and
Guarantors' (excluding BSE's) guarantee thereof provided that the Collateral
granted by BSE secures each of the respective Secured Obligations only to the
extent set forth in the applicable Security Documents; and
WHEREAS, in connection with the granting of such lien on and security
interest in the Collateral, the Company, the Guarantors (excluding BSE), and
certain of the Secured Parties entered into a Collateral Agency and
Intercreditor Agreement dated as of October 12, 1999 (the "Initial Intercreditor
Agreement"); and
WHEREAS, pursuant to the terms of the Initial Intercreditor Agreement,
the Collateral Agent Bank became the successor Collateral Agent (as defined in
the Initial Intercreditor Agreement) and the parties ratified and confirmed
their intention that the Initial Intercreditor Agreement and the grant of a lien
on and security interest in the Collateral continue to have full force and
effect, with SouthTrust Bank, National Association as the successor Collateral
Agent thereunder; and
WHEREAS, for the avoidance of any doubt as to the status or
enforceability of the Initial Intercreditor Agreement or any of the security
interests, mortgages and related documents executed in connection therewith
pursuant to which liens and security interests in the Collateral were granted to
secure the Secured Obligations, the parties (a) entered into additional security
agreements, mortgages and related documents dated as of November 12, 1999,
pursuant to which the Collateral Agent hereunder was granted liens on and
security interests in all of the Collateral (except for certain Collateral that
is being granted by BSE on the date hereof), and (b) except for BSE, entered
into a Collateral Agency and Intercreditor Agreement (the "Subsequent
Intercreditor Agreement"), which, prior to the amendment and restatement thereof
as of the date hereof, set forth the same rights and obligations of the parties
thereto as are set forth in the Initial Intercreditor Agreement; and
WHEREAS, the parties are entering into an amended and restated
Subsequent Intercreditor Agreement of even date herewith, which reflects the
same amendments as are being made herein.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree that the Collateral Agency and
Intercreditor Agreement dated as of October 12, 1999 is amended and restated in
its entirety as follows:
ss.1. DEFINITIONS.
-----------
ss.1.1. Definitions. The following terms shall have the meanings set forth in
thisss.1 or elsewhere in the provisions of this Agreement referred to below:
Action. Seess.2.2(a).
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Actionable Default. Any failure of the Company or any
Guarantor to pay any of the Secured Obligations as and when due and payable in
accordance with the terms of any Bank Credit Document, Note Credit Document,
May, 2000 Credit Document, Reimbursement Agreement, Equipment Lease or Security
Document, whether by acceleration (including automatic acceleration upon the
commencement of a bankruptcy case) or otherwise (collectively, a "Payment
Default"), or the commencement of any bankruptcy, insolvency, reorganization or
other similar case or proceeding by or against the Company or any Guarantor, or
the making by the Company or any Guarantor of an assignment for the benefit of
its creditors.
Additional Advance Amount. The principal amount of any
additional loans made or letters of credit issued under the Credit Agreement
such that, after giving effect to all of such additional loans and letters of
credit, the sum of the Loan and Reimbursement Principal Obligations and
Outstanding Bank LC Exposure at the time of reference thereto do not exceed in
the aggregate the Maximum Bank Commitment.
Additional Company Retained Proceeds. With respect to the
following categories of assets, the following amounts: (a) with respect to any
sale or transfer of the megashredder owned by Cumberland Recyclers, LLC,
$1,500,000; (b) with respect to any sale or transfer of the equity interest of
the Company or any Affiliate of the Company in Pacific Coast Recycling, LLC or
any portion thereof or any distribution to the Company or any Affiliate of the
Company in connection with or as a result of the liquidation or sale of the
assets of Pacific Coast Recycling, $2,000,000 in the aggregate; and (c) with
respect to any sale or transfer of the equity interest of the Company or any
Affiliate of the Company in Richmond Steel Recycling, Ltd. or any portion
thereof or any distribution to the Company or any Affiliate of the Company in
connection with or as a result of the liquidation or sale of the assets of
Richmond Steel Recycling, Ltd., one-half of the Net Proceeds received by or
payable to the Company or any Affiliate of the Company on account thereof.
Affiliate. As to any Person, a Person controlling, controlled by, or under
common control with such Person.
Agent Bank. As defined in the introductory paragraph hereto and shall
include any replacement or successor Agent under the Credit Agreement, or any
like agent (or replacement thereof or successor thereto) under any Replacement
Credit Agreement.
Agreement. As defined in the introductory paragraph hereto.
Applicable Amount. Seess.4.1(d) hereof.
Applicable Deposit. Seess.4.1(c) hereof.
Applicable LC Issuer. Seess.4.1(d) hereof.
Avoidance Event. The commencement of bankruptcy or insolvency proceedings
against the Company within ninety (90) days after the date that the Lien of the
Collateral Agent in the Collateral becomes perfected with respect to such
portion of the Collateral existing on October 12, 1999 as may be perfected by
the filing of UCC-1 financing statements, and the avoidance of such Lien of the
Collateral Agent in any material amount of such Collateral as to which such Lien
that may be perfected by the filing of UCC-1 financing statements.
Bank Credit Documents. The Credit Agreement and the other Bank Loan
Documents, and any Replacement Credit Agreement, as the same may hereafter be
amended, renewed, extended, restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement.
Bank Debt. The "Obligations" as defined in the Credit Agreement (as in
effect on the date hereof), or any like term of the same meaning contained in
any Replacement Credit Agreement. Notwithstanding the foregoing, Bank Debt shall
not include Loan and Reimbursement Principal Obligations and Outstanding Bank LC
Exposure to the extent, and only to the extent, that the sum of the Loan and
Reimbursement Principal Obligations and Outstanding Bank LC Exposure exceeds the
Maximum Bank Commitment.
Bank Loan Documents. The "Loan Documents", as defined in the Credit
Agreement, or any like term of the same meaning contained in any Replacement
Credit Agreement.
Bank of America Letter of Credit. As defined in the Preamble hereto.
Bank of America Reimbursement Agreement. As defined in the Preamble hereto.
Bank of America Reimbursement Agreement Debt. All indebtedness, obligations
and liabilities of the Company or American Steel & Wire Corporation owing to
Bank of America, N.A. arising or incurred under the Bank of America
Reimbursement Agreement, whether existing on the date of this Agreement or
arising hereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, arising by contract, operation of law or otherwise.
Notwithstanding the foregoing, Bank of America Reimbursement Agreement Debt
shall not include (a) the principal amount of any reimbursement obligations in
respect of drawings under the Bank of America Letter of Credit in excess of
$15,172,603 in the aggregate, or (b) any Outstanding IRB LC Exposure; provided,
that (i) drawings of amounts which will be automatically reinstated unless a
notice is timely given by the LC Issuer that such amount will not be reinstated
will not be deemed to be drawings for the purposes of this sentence unless such
notice of non-reinstatement is in fact given, and (ii) drawings to fund any
tender purchase price of the related industrial revenue bonds will not be deemed
to be drawings for the purposes of this sentence so long as the related LC
Issuer has reinstated the amount of such paid drawing.
Bankruptcy Event. (a) Commencement by the Company or any Guarantor (the
Company or any such Guarantor, a "Debtor") of a voluntary case in the United
States seeking liquidation, reorganization, or other relief under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, consent
to the entry of an order for relief in an involuntary case under any such law,
or consent by the Debtor to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of a Debtor or of any substantial part of its property, or any
general assignment by a Debtor for the benefit of creditors; (b) a court having
jurisdiction in the premises shall enter a decree or order for relief in respect
of a Debtor in an involuntary case in the United States under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of a Debtor or for any substantial part of its property, or
shall order the winding-up or liquidation of its affairs; or (c) any involuntary
bankruptcy petition shall have been filed against any Debtor seeking a decree or
order of relief of the type referred to in clause (b) above and such petition
shall not have been dismissed within a period of sixty (60) consecutive days.
Banks. As defined in the introductory paragraph hereto, together with their
respective successors and assigns, and shall include any replacement, additional
or successive lenders under any Replacement Credit Agreement.
BSE. Birmingham Southeast, LLC.
Cash Collections Collateral. Collateral consisting of cash amounts
deposited in local depository bank accounts and lock-box accounts of the Company
or any of the Securing Guarantors and cash amounts deposited from such accounts
into any like account or accounts maintained by the Agent Bank or any of the
other Banks or the Collateral Agent.
Casualty Event. See definition of Net Proceeds in thisss.1.1.
Clause (i) Deposit. Seess.4.1(i) hereof.
Clause (i) Distribution Date. Seess.4.1(i) hereof.
Collateral. Any of the properties and assets of whatever nature, tangible
or intangible, now owned or existing or hereafter acquired or arising, of the
Company or any of the Guarantors in which at the time of reference a Lien has
been granted or has purportedly been granted (directly or by assignment) to the
Collateral Agent to secure the Secured Obligations and which has not been
released pursuant to the terms hereof, including, without limitation, (a) all
Cash Collections Collateral and all other cash provided to be the subject of a
Lien to secure any of the Secured Obligations as contemplated by any Security
Document, (b) all May, 2000 Priority Collateral, and (c) any property and assets
paid or payable to the Secured Parties or Collateral Agent under any of the
Guaranties or any subordination agreement, but specifically excluding the Lease
Assets.
Collateral Agent. As defined in the introductory paragraph hereto unless
and until a successor Collateral Agent shall have been appointed pursuant to
ss.5.4 hereof, and thereafter "Collateral Agent" shall mean such successor
Collateral Agent.
Collateral Agent Bank. As defined in the introductory paragraph hereto and
any bank, in its individual capacity, serving as Collateral Agent.
Collateral Agent Substitution Agreement. Seess.11.14 hereof.
Company. As defined in the introductory paragraph hereto.
Credit Agreement. As defined in the Preamble hereto.
Credit Documents. Collectively, the Bank Credit Documents, the May, 2000
Credit Documents, the Note Credit Documents, the Reimbursement Agreements, the
Lease Documents, and the Security Documents.
Debtor. See definition of Bankruptcy Event in thisss.1.1.
Default. Any event or condition which, with the giving of notice or the
lapse of time, or both, would become an Event of Default.
Demand Notice. Seess.4.4(a).
Disposition. Any sale, exchange, or other disposition of assets, except
that the following shall not constitute Dispositions hereunder: (a) any sale of
inventory in the ordinary course of business; (b) the Transfer of assets by the
Company to a Guarantor (excluding BSE) or by a Guarantor (excluding BSE) to the
Company or another Guarantor (excluding BSE), and (c) any sale or other Transfer
of assets of Cumberland Recyclers L.L.C. to BSE provided that such assets are
sold subject to the continuing Lien of the Collateral Agent.
Distribution Amount. Seess.4.1(c)(i).
Enforcement Notice. Written notice given by the Requisite Parties or
Special Requisite Parties, as the case may be, to the Collateral Agent (a)
stating that a Notice of Actionable Default has theretofore been given by such
Requisite Parties or Special Requisite Parties, as the case may be, to the
Collateral Agent and that the Actionable Default specified in such Notice of
Actionable Default continued to exist uncured for the applicable period
described in ss.4.5, and (b) setting forth instructions from such Requisite
Parties or Special Requisite Parties, as the case may be, to the Collateral
Agent to exercise all or any such rights, powers and remedies as are available
under the Security Documents and making such additional statements as may be
called for under ss.4.5.
Equipment Lease. As defined in the Preamble hereto.
Equipment Notes. As defined in the Preamble hereto.
Equity Interests. With respect to any Person, shares of capital stock of
(or other ownership or profit interests in) such Person, warrants, options or
other rights for the purchase or other acquisition from such Person of shares of
capital stock of (or other ownership or profit interests in) such Person,
securities convertible into or exchangeable for shares of capital stock of (or
other ownership or profit interests in) such Person or warrants, rights or
options for the purchase or other acquisition from such Person of such shares
(or such other interests), and other ownership or profit interests in such
Person (including, without limitation, partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are authorized or otherwise existing on any
date of determination.
Equity Issuance. Any issuance or sale by a Person of any Equity Interest in
such Person; provided, however, that the term "Equity Issuance" does not include
any issuance or sale by a Person to the extent that such issuance or sale is
made (a) to a current or former director, officer or employee of such Person
pursuant to an "employee benefit plan", as such term is defined in Rule 405
promulgated under the Securities Act of 1933, as amended, or (b) pursuant to a
rights plan existing on October 12, 1999 (or such other rights plan as to which
the issuance of Equity Interests thereunder has been excluded from the
definition of "Equity Interest" herein with the written consent of the Requisite
Parties).
Event of Default. Any "Event of Default" under and as defined in the Credit
Agreement, any "Event of Default" under and as defined in either of the Note
Purchase Agreements, any Event of Default under either of the Reimbursement
Agreements, any "Event of Default" under and as defined in the May, 2000 Credit
Agreement, any "Lease Event of Default" under or as defined in the Equipment
Lease or any like term of similar meaning contained in any Replacement Credit
Agreement.
Guaranties. See definition of "Guarantors" in thisss.1.1.
Guarantors. American Steel & Wire Corporation, Birmingham East Coast
Holdings, LLC, Norfolk Steel Corporation, Port Everglades Steel Corporation,
Birmingham Recycling Investment Company, Midwest Holdings, Inc., BSE, and
Cumberland Recyclers, LLC, and any other party that may from time to time
hereafter execute and deliver a guaranty for the benefit of any one or more of
the Secured Parties guarantying any or all of the Secured Obligations
(collectively, the "Guaranties").
Indemnity. Seess.4.1(d) hereof.
Indenture. As defined in the introductory paragraph hereto.
Indenture Trustee. As defined in the introductory paragraph hereto.
Initial Intercreditor Agreement. As defined in the Preamble hereto.
IRB Letters of Credit. As defined in the Preamble hereto.
Jackson. Jackson, Mississippi.
Jackson Mortgage. The Mortgage dated as of the date hereof, pursuant to
which BSE has granted to the Collateral Agent, as security for BSE's Guaranty of
the Secured Obligations other than the May, 2000 Debt, a mortgage on and
security interest in the real property and certain other assets of BSE located
in Jackson, including the proceeds therefrom, as the same may hereafter be
amended, renewed, extended, restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement.
Jackson Security Agreement. The Jackson Security Agreement dated as of the
date hereof, pursuant to which BSE has granted to the Collateral Agent, as
security for BSE's Guaranty of the Secured Obligations other than the May, 2000
Debt, a security interest in its equipment and other fixed assets located in
Jackson, including the proceeds therefrom, as the same may hereafter be amended,
renewed, extended, restated, supplemented or otherwise modified from time to
time in accordance with the terms of this Agreement.
LC Issuers. As defined in the introductory paragraph hereto, together with
their respective successors and assigns (except that references to LC Issuers in
ss.4.1(d) hereof refer to the LC Issuers without giving effect to any succession
or assignment that is effected or agreed to in connection with or as a condition
of a sale of the assets of SBQ).
Lease Assets. The "Equipment" and the "Indenture Estate", as each term is
defined in the Equipment Lease (as in effect on the date hereof), and any other
property of the Owner Trustee or the Indenture Trustee.
Lease Claims. All Lease Payment Claims and Lease Expense/Indemnity Claims.
Lease Documents. The "Operative Agreements," as defined in the Equipment
Lease (as in effect of the date hereof).
Lease Expense/Indemnity Claims. All claims of the Owner Trustee, the
Indenture Trustee, or any of the Owner Participants or the Lenders against the
Company under any of the Lease Documents or under ss.11.11 of this Agreement
(other than the Lease Payment Claims), in each case whether existing on the date
hereof or arising thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, arising by contract, operation of law or
otherwise.
Lease Payment Claims. All claims of the Owner Trustee against the Company
under the Equipment Lease (as in effect on the date hereof) for payment of
"Basic Rent," "Stipulated Loss Value," "Make-Whole Amount" (as each term is
defined therein), and interest accrued on any of the foregoing, in each case
whether existing on the date of this Agreement or arising hereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
arising by contract, operation of law or otherwise.
Lease Sharing Amount. An amount equal, as of any date, to either (a) if the
Equipment Lease has been terminated on or prior to such date, the aggregate
unpaid amount of Lease Payment Claims claimed by the Owner Trustee (and/or the
Indenture Trustee, as assignee) under Section 15 of the Equipment Lease (or, in
the event that such claim has been liquidated by adjudication or settlement,
such liquidated amount), or (b) if the Equipment Lease has not been terminated
on or prior to such date, an amount equal to 33 1/3% of the Stipulated Loss
Value as of such date.
Lenders. As defined in the Indenture.
Letter of Credit Collateral Obligations. The obligations of the Company
under any Bank Credit Document or Reimbursement Agreement (as in effect on the
date hereof) to deposit cash with respect to Outstanding Bank LC Exposure or
Outstanding IRB LC Exposure up to, but not exceeding, one dollar of cash for
each dollar of undrawn face amount of each applicable outstanding letter of
credit.
Lien. Any mortgage, security deed, deed of trust, pledge, lien, security
interest or other encumbrance, whether now existing or hereafter created,
acquired or arising, and whether voluntary or involuntary, to secure payment of
a debt or performance of an obligation.
Loan and Reimbursement Principal Obligations. At the time of reference
thereto, Bank Debt consisting of the principal amount of loans outstanding under
the Bank Credit Documents and any unpaid reimbursement obligations in respect of
drawings under letters of credit issued pursuant to the Bank Credit Documents.
Majority Secured Parties. (i) A group of holders of Secured Obligations
which includes (a) the holders of at least 51% of the Note Principal
Obligations, (b) the holders of at least 51% of the Reimbursement Agreement
Debt, (c) the holders of at least 51% of the Loan and Reimbursement Principal
Obligations, and (d) the holders of at least 51% of the May, 2000 Debt, or (ii)
after the Secured Obligations referred to in clause (i) above have been paid in
full, the Indenture Trustee for so long as the Lien of the Indenture remains
outstanding, and thereafter the Owner Trustee.
Make-Whole Amount. With respect to either of the Note Purchase Agreements
and the Note Debt owed thereunder, the "Make-Whole Amount" as defined in such
Note Purchase Agreement as in effect on the date hereof.
Maximum Bank Commitment. (a) $300,000,000 prior to any mandatory reductions
of the Commitments, as such term is defined in the Credit Agreement, pursuant to
Section 2.12 of the Credit Agreement; and (b) after any mandatory reductions of
such Commitments pursuant to Section 2.12 of the Credit Agreement, the result of
(i) $300,000,000 minus (ii) the aggregate amount of such mandatory reductions.
May, 2000 Agent. Bank of America, N.A., as agent for itself and the other
May, 2000 Lenders, and any replacement or successor agent under the May, 2000
Credit Documents.
May, 2000 Closing Date. The date upon which the first loan is made by the
May, 2000 Lenders to BSE pursuant to the May, 2000 Credit Agreement.
May, 2000 Credit Agreement. The Credit Agreement dated as of May 15, 2000,
among BSE, the May, 2000 Lenders, and the May, 2000 Agent, as amended, renewed,
extended, restated, supplemented or otherwise modified from time to time in
accordance with the terms of this Agreement.
May, 2000 Credit Documents. The May, 2000 Notes, the May, 2000 Credit
Agreement, and any other documents executed and delivered in connection
therewith (not including this Agreement or the Security Documents), in each case
as amended, renewed, extended, restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement.
May, 2000 Debt. The "Obligations" as defined in the May, 2000 Credit
Agreement (as in effect on the date hereof). Notwithstanding the foregoing, May,
2000 Debt shall not include the May, 2000 Principal Obligations to the extent,
and only to the extent, that the amount of the May, 2000 Principal Obligations
exceeds the May, 2000 Maximum Commitment.
May, 2000 Guaranties. The Guaranties by the Company and each of the
Guarantors (excluding BSE) of the obligations of BSE under the May, 2000 Credit
Agreement and May, 2000 Notes.
May, 2000 Lenders. Each of the holders of the May, 2000 Notes, and their
respective successors and assigns as holders of May, 2000 Notes.
May, 2000 Maximum Commitment. $25,000,000.
May, 2000 Notes. The $25,000,000 in aggregate principal amount of Notes
issued pursuant to the May, 2000 Credit Agreement.
May, 2000 Principal Obligations. At any time, the principal amount then
outstanding under the
May, 2000 Credit Agreement.
May, 2000 Priority Collateral. All property of BSE, now existing or
hereafter arising, wherever located, which is listed on Schedule A attached
hereto.
May, 2000 Pro Rata Amount. With respect to any amount as to which the May,
2000 Pro Rata Amount is to be determined, such amount multiplied by a fraction,
the numerator of which is the amount of the May, 2000 Principal Obligations, and
the denominator of which is the sum of (a) the May, 2000 Principal Obligations,
plus (b) the Note Principal Obligations, plus (c) the Loan and Reimbursement
Principal Obligations, plus (d) the Reimbursement Agreement Debt, plus (e) the
Lease Sharing Amount.
Net Lease Sharing Amount. An amount equal, as of any date, to either (a) if
the Equipment Lease has been terminated on or prior to such date, the Lease
Sharing Amount as of such date, or (b) if the Equipment Lease has not been
terminated on or prior to such date, the result of the Lease Sharing Amount as
of such date minus the sum of all amounts previously deposited in the Section
4.1(e) Cash Collateral Account.
Net Proceeds. (a) In the case of (x) a Disposition, the aggregate amount of
all cash received (including without limitation, all cash payments received by
way of deferred payment of principal or interest pursuant to a note or
installment receivable or otherwise, but only as and when received), directly or
indirectly, by the Company or any Guarantor in connection with such Disposition
or (y) in the case of any loss, theft, damage, destruction, or taking or other
eminent domain action (a "Casualty Event"), the aggregate amount of cash
proceeds of insurance, condemnation awards and other compensation received by
the Company or any Guarantor in respect of such Casualty Event, in each case net
of (i) the amount of any reasonable out-of-pocket legal fees, title and
recording tax expenses, commissions and other customary fees and expenses
actually incurred by the Company or any Guarantor in connection with such
Disposition or Casualty Event, (ii) any income taxes reasonably estimated in
good faith by the independent certified public accountant of the Company or any
such Guarantor to be payable in connection with such Disposition or Casualty
Event and other taxes thereon to the extent such other taxes are actually paid
by the Company or any Guarantor, (iii) any repayments by the Company or any
Guarantor of indebtedness (other than indebtedness under any of the Credit
Documents (other than the Lease Documents)) to the extent that such indebtedness
is secured by a Lien on the property that is the subject of such Disposition or
Casualty Event, (iv) in the case of a Casualty Event, the amount of any proceeds
permitted under the Security Documents to be paid to the Company or any
Guarantor for the purpose of replacing, rebuilding or restoring the Collateral
which was affected by the Casualty Event, (v) in the case of a Disposition, the
amount of any proceeds which are not required under the Credit Agreement, the
May, 2000 Credit Agreement, the Note Purchase Agreements or any of the Security
Documents to be applied to prepay the Bank Debt, the May, 2000 Debt or the Note
Debt, and (vi) in the case of a Disposition, any amount of cash reserves
reasonably required to be established to satisfy liabilities relating to the
assets sold, so long as such reserves are paid to and held by the Collateral
Agent as additional Collateral hereunder; and (b) in the case of an Equity
Issuance, sixty percent (60%) of the aggregate amount of all cash received by
the Company or any Guarantor (excluding BSE) in respect of such Equity Issuance,
net of investment banking fees, legal fees, accountants fees, underwriting
discounts and commissions and other customary fees and expenses actually
incurred by the Company in connection with such Equity Issuance.
1993 Note Purchase Agreement. As defined in the Preamble hereto.
1995 Note Purchase Agreement. As defined in the Preamble hereto.
1993 Notes. As defined in the Preamble hereto.
1995 Notes. As defined in the Preamble hereto.
Non-May, 2000 Collateral. Collateral other than the May, 2000 Priority
Collateral.
Non-May, 2000 Pro Rata Amount. With respect to any amount as to which
the Non-May, 2000 Pro Rata Amount is to be determined, such amount
multiplied by a fraction, the numerator of which is the sum of (a) the
Principal Obligations other than the May, 2000 Principal Obligations plus
(b) the Lease Sharing Amount, and the denominator of which is the sum of
the Principal Obligations (including the May, 2000 Principal Obligations)
plus the Lease Sharing Amount.
Note Credit Documents. The Note Purchase Agreements and the other Note
Purchase Documents, as the same may hereafter be amended, renewed,
extended, restated, supplemented or otherwise modified from time to time in
accordance with the terms of this Agreement.
Note Debt. All indebtedness, obligations and liabilities of any of the
Company, the Guarantors and the Subsidiaries to or for the benefit of any
Note Holder arising or incurred under the Note Purchase Agreements
(including, without limitation, Make-Whole Amounts), the Notes or the
Guaranties, existing on the date of this Agreement or arising hereafter,
direct or indirect, joint or several, absolute or contingent, matured or
unmatured, arising by contract, operation of law or otherwise.
Notwithstanding the foregoing, Note Debt shall not include Note Principal
Obligations to the extent, and only to the extent, that such Note Principal
Obligations at any time exceed $280,000,000.
Note Holders. As defined in the introductory paragraph hereto,
together with their respective successors and assigns, and shall include
any replacement, additional or successive lender or note purchaser.
Note Principal Obligations. At the time of reference thereto, Note
Debt consisting of the amounts of principal outstanding under the Notes.
Note Purchase Agreements. As defined in the Preamble hereto.
Note Purchase Documents. The Notes, the Note Purchase
Agreements and any "notes" and "loan documents", or any like terms of the same
meaning, may be amended, renewed, extended, restated, supplemented or otherwise
modified from time to time in accordance with the terms of this Agreement.
Notes. The Notes, as such term is defined in the Preamble
hereto, together with any promissory notes or other evidences of indebtedness
issued in exchange for, replacement of or substitution for the Notes under the
Note Purchase Agreements.
Notice of Actionable Default. A notice by the Requisite
Parties or the Special Requisite Parties as the case may be, delivered to the
Collateral Agent, stating that an Actionable Default has occurred and is
continuing.
Other Banks. Seess.4.1(d) hereof.
Outstanding Bank LC Exposure. The undrawn face amount of all
outstanding letters of credit issued under the Bank Credit Documents. For the
avoidance of doubt, the undrawn face amount of the Outstanding IRB Letters of
Credit are not included in the Outstanding Bank LC Exposure.
Outstanding IRB LC Exposure. The aggregate undrawn face amount
of the outstanding IRB Letters of Credit.
Owner Participants. As defined in the Indenture.
Owner Trustee. As defined in the Preamble hereto.
Paid Percentage. Seess.4.1(c)(ii).
Payment Default. Seess.1.1 (in the definition of Actionable
Default).
Permitted Liens. Liens the existence of which does not
breach Section 8.19(a) of each of the Note Purchase Agreements
(as in effect on the date hereof) and the existence of which does
not breach Section 9.2(a) of the Credit Agreement.
Person. Any individual, corporation, partnership, limited
liability company, trust, unincorporated association, business or
other legal entity, and any government or any governmental agency
or political subdivision thereof.
PNC Letter of Credit. As defined in the Preamble hereto.
PNC Reimbursement Agreement. As defined in the Preamble
hereto.
PNC Reimbursement Agreement Debt. The "Company Obligations"
as defined in the PNC Reimbursement Agreement. Notwithstanding
the foregoing, PNC Reimbursement Agreement Debt shall not include
(a) the principal amount of any reimbursement obligations in
respect of drawings under the PNC Letter of Credit in excess of
$26,299,179 in the aggregate, or (b) any Outstanding IRB LC
Exposure; provided, that (i) drawings of amounts which will be
automatically reinstated unless a notice is timely given by the
LC Issuer that such amount will not be reinstated will not be
deemed to be drawings for the purposes of this sentence unless
such notice of non-reinstatement is in fact given, and (ii)
drawings to fund any tender purchase price of the related
industrial revenue bonds will not be deemed to be drawings for
the purposes of this sentence so long as the related LC Issuer
has reinstated the amount of such paid drawing.
Post-Default Cash Sweep Payment. Any payment to any Bank
pursuant to the provisions of Section 2.8(b)(iii) of the Credit
Agreement (as in effect on the date hereof) or any similar
successor provision which, in any such case, shall have been made
after the Collateral Agent receives notice from any Bank, Note
Holder, May, 2000 Lender, or LC Issuer of the occurrence of an
Event of Default and prior to the receipt by the Collateral Agent
from such Bank, Note Holder, May, 2000 Lender, or LC Issuer, or
from the Requisite Parties, of notice that payments referred to
in this definition made after such Event of Default shall
nevertheless not constitute Post-Default Cash Sweep Payments
(subject to the implementation of the same provisions after
notice to the Collateral Agent of any subsequent Event of
Default).
Pre-Reduction Percentage. Seess.4.1(c)(i).
Principal Obligations. Loan and Reimbursement Principal
Obligations, Note Principal Obligations, May, 2000 Principal
Obligations, Bank of America Reimbursement Agreement Debt in an
amount not to exceed $15,172,603, and PNC Reimbursement Agreement
Debt in an amount not to exceed $26,299,179.
Priority Debt. The aggregate amount of Loan and
Reimbursement Principal Obligations and Outstanding Bank LC
Exposure under any Bank Credit Document at any time in an amount
equal to the lesser of (a) the amount thereof at such time in
excess of the Priority Threshold Amount, and (b) $65,000,000.
Priority Threshold Amount. $235,000,000, as reduced from
time to time by the same amount as the "Priority Threshold
Amount" (as such term is defined in the Credit Agreement) is
reduced pursuant to Section 2.12(d) thereof as in effect on the
date hereof.
Qualifying Assets. Seess.4.9(b) hereof.
Reimbursement Agreements. As defined in the Preamble hereto.
Reimbursement Agreement Debt. Collectively, the Bank of
America Reimbursement Agreement Debt and the PNC Reimbursement
Agreement Debt.
Replacement Credit Agreement. Seess.4.10(a).
Requisite Parties. As of any date, (i) the holders of at
least 66 2/3% in aggregate principal amount of the sum of the
Reimbursement Agreement Debt, the Note Debt, the Bank Debt and
the May, 2000 Debt outstanding on such date, or (ii) after the
Secured Obligations referred to in clause (i) above have been
paid in full, the Indenture Trustee so long as the Lien of the
Indenture remains outstanding, and thereafter the Owner Trustee.
Responsible Officer. With respect to the Collateral Agent
means an officer in its Corporate Trust Department.
Restricted Subsidiary. As defined in the Credit Agreement.
SBQ. The "special bar quality" division of the Company and
its Subsidiaries which includes (a) all assets of the Company and
its Subsidiaries located in, or related to its operations in,
Memphis, Tennessee; and (b) the assets of American Steel and Wire
Corporation (and the Company's equity interests in American Steel
and Wire Corporation), but specifically excluding (i) the
"missile wire" facility, located in Cleveland, Ohio, (ii) the
Company's equity interest in American Iron Reduction, LLC, and
(iii) the interests of the Owner Trustee and/or the Indenture
Trustee in the Lease Assets.
Section 4.1(e) Cash Collateral Account. Seess.4.1(e) hereof.
Section 4.1(h) Cash Reserves Account. Seess.4.1(h) hereof.
Section 4.1(e) Distribution Amount. Seess.4.1(e) hereof.
Secured Obligations. Collectively, (a) the Bank Debt, unless
and until the Agent Bank has given notice in writing to the
Collateral Agent that either (i) the Bank Debt has been paid in
full and all commitments under the Bank Credit Documents have
terminated, been canceled or permanently reduced to zero or (ii)
the Bank Debt otherwise no longer constitutes Secured Obligations
hereunder, (b) the Note Debt, unless and until all of the Note
Holders have given notice in writing to the Collateral Agent that
the Note Debt has been paid in full or no longer constitutes
Secured Obligations hereunder, (c) the May, 2000 Debt and May,
2000 Guaranties, unless and until the May, 2000 Agent has given
notice in writing to the Collateral Agent that either (i) the
May, 2000 Debt has been paid in full and all commitments under
the May, 2000 Credit Documents have terminated, been canceled or
permanently reduced to zero or (ii) the May, 2000 Debt and the
May, 2000 Guaranties otherwise no longer constitute Secured
Obligations hereunder, (d) the Lease Claims, unless and until the
Indenture Trustee and Owner Trustee have given notice in writing
to the Collateral Agent that the Lease Claims have been paid in
full or no longer constitute Secured Obligations hereunder, (e)
the Bank of America Reimbursement Agreement Debt unless and until
the holder thereof has given notice in writing to the Collateral
Agent that the Bank of America Letter of Credit has been
terminated and any and all Bank of America Reimbursement
Agreement Debt has been paid in full or no longer constitutes
Secured Obligations hereunder, (f) the PNC Reimbursement
Agreement Debt unless and until the holder thereof has given
notice in writing to the Collateral Agent that the PNC Letter of
Credit has been terminated and any and all PNC Reimbursement
Agreement Debt has been paid in full or no longer constitutes
Secured Obligations hereunder, (g) involuntary overdrafts arising
in the ordinary course of banking business of cash management,
payroll and similar deposit accounts maintained by the Company
with any of the Banks, which overdrafts exist at the time that an
Event of Default occurs, and (h) all indebtedness, obligations
and liability of the Company or any Guarantor to the Collateral
Agent under any Security Document.
Secured Parties. The Agent Bank, the Banks, the Note
Holders, the May, 2000 Lenders, the May, 2000 Agent, the Owner
Trustee, the Indenture Trustee, the LC Issuers and the Collateral
Agent.
Securing Guarantors. The Guarantors who have granted to the
Collateral Agent for the benefit of the Secured Parties a Lien on
any of their properties and assets to secure payment or
performance of any of the Secured Obligations.
Security Documents. Any and all instruments or agreements
pursuant to which a Lien is created or arises, or a Guaranty or
May, 2000 Guaranty is delivered, in favor of the Collateral Agent
or any other Secured Party to secure or guarantee any of the
Secured Obligations (but excluding in any event the Lease
Documents).
Special Cash Collateral Account. Seess.4.1(c).
Special Clause (i) Account. Seess.4.1(i).
Special Equity Issuances. One or more Equity Issuances by
the Company between the May, 2000 Closing Date and December 15,
2001 from which the gross proceeds (in the aggregate for all such
Equity Issuances) do not exceed $100,000,000.
Special Requisite Parties. As of any date, either (a) the
holders of at least 25% in aggregate principal amount of the
Reimbursement Agreement Debt, the Note Debt, the Bank Debt, and
the May, 2000 Debt outstanding on such date if a Payment Default
shall have occurred and be continuing with respect to such
Reimbursement Agreement Debt, Note Debt, Bank Debt, or May, 2000
Debt, as the case may be, on such date and at least thirty (30)
days prior to such date the Agent Bank, the LC Issuers, the May,
2000 Agent, each of the Note Holders and the Indenture Trustee
(or, if the Lien of the Indenture shall no longer remain
outstanding, the Owner Trustee) shall have received written
notice of such Payment Default, or (b) the Requisite Parties.
Stipulated Loss Value. As defined in the Equipment Lease (as
in effect on the date hereof).
Stock Pledge Agreement. One or more instruments or
agreements executed in favor of and delivered to the Collateral
Agent in connection with this Agreement which purports to pledge
and grant a security interest to the Collateral Agent in shares
of capital stock or other debt or equity interest of any
Subsidiary or other Person.
Subsidiary. As defined in the Note Purchase Agreements (as
in effect on the date hereof).
Terminated IRB LC. Seess.4.1(d) hereof.
Total Undrawn Letter of Credit Exposure. At the time of
reference thereto, the Outstanding Bank LC Exposure at such time
and the Outstanding IRB LC Exposure at such time.
Transfer. Any sale (including any sale and subsequent lease
as lessee), lease as lessor, transfer or other disposition of any
asset.
ss.1.2. Terms Generally. The definitions in ss.1.1 shall
apply (except as otherwise specified) equally to both the
singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the
phrase "without limitation". All references herein to Sections
shall be deemed references to Sections of this Agreement unless
the context shall otherwise require. All references herein to the
Note Holders, the Banks, the L/C Issuers, and the Lenders shall
be deemed to refer to such Persons in their capacities as such
but not in their capacities as May, 2000 Lenders, and all
references herein to the May, 2000 Lenders shall be deemed to
refer to such Persons in their capacities as May, 2000 Lenders
but not in their capacities as Note Holders, the Banks, the L/C
Issuers, and Lenders. All references to any agreement as it is in
effect on the date hereof shall mean after giving effect to any
amendment thereto contained in any of the documents listed on
Schedule B hereto.
ss.2. RECOURSE OF SECURED PARTIES; OTHER COLLATERAL; ACTION BY SECURED
PARTIES.
ss.2.1. Recourse of Secured Parties; Other Collateral.
(a) Each of the Secured Parties acknowledges and agrees that (i) it
shall only have recourse to the Guaranties, the May, 2000 Guaranties, and
the Collateral through the Collateral Agent and that it shall have no
independent recourse to the Guaranties, the May, 2000 Guaranties, or the
Collateral and (ii) the Collateral Agent shall have no obligation to, and
shall not (except pursuant to ss.3.2(c) or as otherwise specifically
provided herein), take any action hereunder or under any Security Document
to which it is a party, except upon instructions from the Requisite Parties
in accordance with ss.2.2 hereof.
(b) Nothing contained herein shall restrict (i) the rights of any
Secured Party to pursue remedies, by proceedings in law and equity, to
collect any of the Secured Obligations or to enforce the performance of and
provisions of any of the Secured Obligations, to the extent in either case
that such remedies do not relate to the Collateral or interfere with the
Collateral Agent's ability to take action hereunder or under the Security
Documents or (ii) the rights of any Secured Party to initiate an action or
actions in any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar
proceeding in its individual capacity and to appear or be heard on any
matter before the bankruptcy or other applicable court in any such
proceeding, including, without limitation, with respect to any question
concerning the post-petition usage of Collateral and post-petition
financing arrangements.
(c) None of the Agent Bank, the Collateral Agent or any other Secured
Party shall contest the validity, perfection, priority or enforceability of
or seek to avoid any Lien securing any Secured Obligation, and each party
hereby agrees to cooperate in the defense of any action contesting the
validity, perfection, priority or enforceability of such Liens. Except as
expressly provided in this Agreement with respect to distributions of
Collateral or proceeds by the Collateral Agent to the Secured Parties, no
Secured Party shall have the right to obtain any of the Collateral for its
sole account or the benefit for its sole account of any Lien securing any
of the Secured Obligations. No Secured Party may seek, and each Secured
Party hereby waives, any right to require any of the Collateral to be
partitioned.
(d) Notwithstanding the foregoing, nothing in this Agreement, any
Security Document or any related agreement shall impair or otherwise
adversely affect in any respect any rights or entitlements of the Owner
Trustee or the Indenture Trustee under any of the Lease Documents or, in
the event of any Bankruptcy Event, under Section 365 of the United States
Bankruptcy Code with respect to any of the Lease Documents.
ss.2.2. Action by Secured Parties.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action permitted or required by this Agreement to be given
or taken by the Requisite Parties or Special Requisite Parties shall be
embodied in and evidenced by one or more instruments and signed by or on
behalf of such Requisite Parties or Special Requisite Parties, as
applicable, and, except as otherwise expressly provided in any such
instrument to be effective at a later date, any such action shall become
effective when such instrument or instruments shall have been received by
the Collateral Agent. The instrument or instruments evidencing any action
(and the action embodied therein and evidenced thereby) are sometimes
referred to herein as an "Action" of the Persons signing such instrument or
instruments.
(b) The Collateral Agent shall be entitled to rely absolutely upon an
Action of the Requisite Parties or Special Requisite Parties if such Action
purports to be taken by or on behalf of such Requisite Parties or Special
Requisite Parties, and nothing in this ss.2.2 or elsewhere in this
Agreement shall be construed to require the Collateral Agent to demonstrate
that such Requisite Parties or Special Requisite Parties have been
authorized by the Banks, Note Holders, May, 2000 Lenders, LC Issuers, the
Indenture Trustee and/or the Owner Trustee, as applicable, to take any
action which they purport to be taking, the Collateral Agent being entitled
to rely conclusively, and being fully protected in so relying, on any
Action of any Banks, any Note Holders, May, 2000 Lenders, LC Issuers, the
Indenture Trustee and/or the Owner Trustee, as the case may be.
ss.3. DUTIES OF COLLATERAL AGENT.
------ -- ---------- -----
ss.3.1. Notices to the Secured Parties. The Collateral Agent shall, as
soon as practicable but in any event, if applicable, within five (5) business
days following receipt thereof, furnish to each of the Agent Bank, the May, 2000
Agent, each of the Note Holders, each of the LC Issuers, and the Owner Trustee
and the Indenture Trustee:
(a) a copy of each Notice of Actionable Default, Demand Notice or
Enforcement Notice received by the Collateral Agent;
(b) a copy of each certificate received by the Collateral Agent
rescinding or withdrawing a Notice of Actionable Default, Demand Notice or
Enforcement Notice;
(c) written notice of any release or subordination by the Collateral
Agent of any Collateral;
(d) a copy of any notice or other communication given or received by
the Collateral Agent under any Security Document; and
(e) such other notices required by the terms of this Agreement to be
furnished by or to the Collateral Agent.
Any Notice of Actionable Default, Demand Notice or Enforcement Notice
shall be deemed to have been given when actually received by a Responsible
Officer of the Collateral Agent and, subject to ss.4.5(c), to have been
rescinded or withdrawn when a Responsible Officer of the Collateral Agent has
actually received from the notifying party a notice rescinding or withdrawing
such Notice of Actionable Default, Demand Notice or Enforcement Notice. Any
Notice of Actionable Default, Demand Notice or Enforcement Notice shall be
deemed to be outstanding at all times after such notice has been given until
such time, if any, as such notice has been rescinded or withdrawn.
ss.3.2. Actions Under Security Documents.
------- ----- -------- ---------
(a) The Collateral Agent shall not be obligated to take any
action under this Agreement or any of the Security Documents except for the
performance of such duties as are specifically set forth herein or therein. The
Collateral Agent shall take any action under or with respect to the Security
Documents or the Collateral which is requested by the Requisite Parties or
Special Requisite Parties pursuant to ss.4.5; provided that the Collateral Agent
shall not amend or waive any provision of the Security Documents except in
accordance with ss.7.
(b) The Collateral Agent shall exercise or refrain from
exercising all such rights, powers and remedies as shall be available to it
under the Security Documents to which it is a party or any of them or with
respect to the Collateral solely in accordance with an Enforcement Notice
received from the Requisite Parties or Special Requisite Parties in accordance
with ss.4.5. The Collateral Agent shall have the right to decline to follow any
such direction if (i) the Collateral Agent, being advised by counsel and acting
in good faith, determines that the directed action is not permitted by the terms
of this Agreement or the Security Documents or is unlawful or (ii) the
Collateral Agent, being advised by counsel and acting in good faith, is in
reasonable doubt as to whether such directed action is permitted by this
Agreement or the Security Documents or would involve it in personal liability
and, in the case of this clause (ii), is not provided, upon its request
therefor, written confirmation from the Requisite Parties or the Special
Requisite Parties, as the case may be, providing the Enforcement Notice that the
Collateral Agent's indemnity by the other Secured Parties contained in this
Agreement would apply without exception for such directed action. All directions
from the Requisite Parties and Special Requisite Parties shall be as
contemplated and permitted by this Agreement and the applicable Security
Document and will not be illegal. The Collateral Agent may rely on any such
direction given to it by the Requisite Parties and Special Requisite Parties and
shall be fully protected, and shall under no circumstances (absent the gross
negligence and willful misconduct of the Collateral Agent) be liable to the
Company, any Guarantor, any holder of any Secured Obligations, or any other
Person for taking or refraining from taking action in accordance with such
direction and the otherwise applicable terms of this Agreement.
(c) In the absence of an Enforcement Notice (which may relate
to the exercise of specific remedies or to the exercise of remedies in general)
from the Requisite Parties or Special Requisite Parties, the Collateral Agent
shall not, without the written consent or direction of the Requisite Parties or
Special Requisite Parties, exercise remedies available to it under any Security
Documents or with respect to the Collateral or any part thereof.
ss.3.3. Status of Moneys Received.
------ -- ------ --------
All moneys received by the Collateral Agent pursuant to this Agreement
shall be held in trust for the purposes for which they were paid, and shall be
segregated from any other moneys held by the Collateral Agent, and may be
deposited by the Collateral Agent under such general conditions as may be
prescribed by law in the general banking department of the Collateral Agent, and
the Collateral Agent shall not be liable for any interest thereon except for
interest and other income obtained in accordance with this paragraph. The
Collateral Agent shall invest any funds held by it pursuant to this Agreement as
directed in writing by the Requisite Parties in any of the following: (i)
obligations issued or guaranteed by The United States of America or any agency
or instrumentality thereof; (ii) certificates of deposit of or interest bearing
accounts with national banks or corporations endowed with trust powers having
capital and surplus in excess of $100,000,000; (iii) commercial paper that at
the time of investment is rated A-1 by Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., or Prime-1 by Moody's Investor's Service, Inc.;
(iv) repurchase agreements with any bank or corporation described in clause (ii)
fully secured by obligations described in clause (i); and (v) shares of a money
market fund investing only in short term U.S. Treasury obligations or
obligations backed by short-term U.S. Treasury obligations. The Collateral Agent
shall add any interest or other income from such investments to the amounts to
be distributed in accordance with ss.4.1(b) hereof.
All interest earned on such investments shall be considered the
currently reportable income of the Company for federal income tax purposes. The
Collateral Agent annually shall file information returns with the United States
Internal Revenue Service and payee statements with the Company, documenting such
interest payments. The Company shall provide the Collateral Agent all forms and
information necessary to complete such information returns and payee statements.
Should the Collateral Agent become liable for the payment of taxes
including withholding taxes, relating to income derived from any funds held by
its pursuant to this Agreement or any payment made hereunder, the Collateral
Agent may pay such taxes from such funds.
ss.4. CERTAIN INTERCREDITOR ARRANGEMENTS.
------- ------------- ------------
ss.4.1. General Rule: Pari Passu Rights Against Collateral.
------- ---- ---- ----- ------ ------- ----------
(a) General Rule. All amounts owing with respect to the
Secured Obligations shall be secured (to the extent set forth in the Security
Documents) by the Guaranties, the May, 2000 Guaranties, and the Collateral
without distinction as to whether some Secured Obligations are then due and
payable and other Secured Obligations are not then due and payable, all in
accordance with the priorities established in this ss.4.
(b) Application of Collateral Proceeds Generally. If (i) the
Collateral Agent receives any cash amounts as payments under any Security
Documents or as proceeds of or otherwise constituting the Collateral (which
amounts, under the terms of any of the Security Documents, are to be applied to
any of the Secured Obligations), including (but subject to ss.4.1(d) below) any
amounts received pursuant to ss.4.6 and ss.4.7, any proceeds received by the
Collateral Agent in connection with any Disposition of the assets of SBQ or any
of the other Collateral and, if applicable, any sum received by the Collateral
Agent pursuant to ss.507(b) of the Bankruptcy Code in any bankruptcy case in
which the Company or a Guarantor is a debtor, or (ii) the Company or any
Guarantor receives any Net Proceeds from a Disposition or Casualty Event with
respect to the Collateral or if the Company or any Guarantor (excluding BSE)
receives any Net Proceeds from an Equity Issuance (other than a Special Equity
Issuance, so long as the proceeds from such Special Equity Issuance are not
applied directly or indirectly to any of the Secured Obligations)), all such
cash amounts shall be applied as follows (subject to ss.4.2 hereof):
A. If such cash amounts were received by the Collateral Agent (x) as
proceeds of or otherwise constituting the May, 2000 Priority Collateral or in
connection with a Disposition or Casualty Event with respect to May, 2000
Priority Collateral, or (y) pursuant to ss.507(b) of the Bankruptcy Code in any
bankruptcy case in which BSE is the debtor and the amount paid under ss.507(b)
relates to the May, 2000 Priority Collateral:
(i) first, to the payment of any unpaid fees or other amounts owing to
the Collateral Agent pursuant toss.5.5,ss.5.6 orss.5.7;
(ii) second, equally and ratably to reimburse the May, 2000 Lenders
for any ------ amounts paid by them in their capacities as May, 2000
Lenders pursuant toss.5.6;
(iii) third, if any amounts have been applied pursuant to clauses (i)
and (ii) of subparagraph B of this ss.4.1(b) (other than with respect to
amounts which were expended by the Collateral Agent solely in relation to
Non-May, 2000 Collateral or in connection with the disposition of Non-May,
2000 Collateral), the May, 2000 Pro Rata Amount thereof shall be applied
equally and ratably to reimburse the holders of Bank Debt, Note Debt,
Reimbursement Agreement Debt, and the Lease Payment Claims, according to
the aggregate outstanding amounts thereof (other than the Lease Payment
Claims) on the dates that the respective amounts were paid pursuant to
clauses (i) and (ii) of subparagraph B of this ss.4.1(b) and, in the case
of Lease Payment Claims, the Net Lease Sharing Amount as of such dates; for
the purposes of this clause (iii), the May, 2000 Pro Rata Amount shall be
calculated as of the dates that the respective amounts were paid pursuant
to clauses (i) and (ii) of subparagraph B of this ss.4.1(b);
(iv) fourth, equally and ratably to all outstanding May, 2000 Debt,
until the May, 2000 Debt has been paid in full;
(v) fifth, to the extent that the Secured Obligations other than the
May, 2000 Debt are secured by the Collateral that generated such proceeds,
equally and ratably to all outstanding accrued and unpaid interest on and
principal of Priority Debt;
(vi) sixth, to the extent that the Secured Obligations other than the
May, 2000 Debt are secured by the Collateral that generated such proceeds,
equally and ratably to all outstanding accrued and unpaid interest and
Make-Whole Amounts and outstanding Loan and Reimbursement Principal
Obligations, Reimbursement Agreement Debt, Outstanding Bank LC Exposure,
Outstanding IRB LC Exposure, and Note Principal Obligations, constituting
Bank Debt, Note Debt, or Reimbursement Agreement Debt, and the Lease
Payment Claims, according to the aggregate amounts thereof (other than the
Lease Payment Claims) on the date of such distribution and, in the case of
Lease Payment Claims, the Net Lease Sharing Amount as of the date of such
distribution;
(vii) seventh, to the extent that the Secured Obligations other than
the May, 2000 Debt are secured by the Collateral that generated such
proceeds, equally and ratably, to all other Secured Obligations not covered
by clauses (i) through (vi) of this ss.4.1(b)(A); and
(viii) eighth, after payment of all Secured Obligations that are
secured by the Collateral that generated such proceeds, to BSE or to
whomever else the Collateral Agent may be required to pay by applicable
law.
It is understood that (x) certain of the Collateral granted to the
Collateral Agent by BSE (i.e. the equipment, real property and other fixed
assets of BSE located in Cartersville, including the proceeds therefrom) secures
the May, 2000 Debt but does not secure any of the other Secured Obligations, and
(y) nothing herein is intended to provide for any proceeds of Collateral for the
May, 2000 Debt that does not also secure the other Secured Obligations to be
applied to such other Secured Obligations.
B. If such cash amounts were received by the Collateral Agent (w) as
proceeds of or otherwise constituting Collateral other than the May, 2000
Priority Collateral or in connection with a Disposition or Casualty Event
with respect to Collateral other than the May, 2000 Priority Collateral,
(x) as proceeds received by the Collateral Agent in connection with any
Disposition of the assets of SBQ, (y) pursuant to ss.507(b) of the
Bankruptcy Code in any bankruptcy case in which the Company or a Guarantor
is a debtor (except when BSE is the debtor in the bankruptcy case and the
amounts paid relate to the May, 2000 Priority Collateral), or (z) as Net
Proceeds from an Equity Issuance by the Company or any Guarantor, excluding
BSE (other than Net Proceeds from a Special Equity Issuance, so long as the
proceeds from such Special Equity Issuance are not applied directly or
indirectly to any of the Secured Obligations), all such cash amounts shall
be applied as follows (subject to ss.4.2 hereof):
(i) first, to the payment of any unpaid fees or other amounts
owing to the Collateral Agent pursuant toss.5.5,ss.5.6 orss.5.7;
(ii) second, equally and ratably to reimburse the Secured Parties
for any amounts paid by the Secured Parties pursuant to ss.5.6 (other
than amounts paid by them in their capacities as May, 2000 Lenders);
(iii) third, if any amounts have been applied pursuant to clauses
(i) and
(ii) of subparagraph A of this ss.4.1(b) (other than with respect to
amounts which were expended by the Collateral Agent solely in relation
to the May, 2000 Priority Collateral or in connection with the
disposition of May, 2000 Priority Collateral), the Non-May, 2000 Pro
Rata Amount thereof shall be applied equally and ratably to reimburse
the holders of May, 2000 Debt, according to the amount thereof on the
dates that the respective amounts were paid pursuant to clauses (i) and
(ii) of subparagraph A of this ss.4.1(b); for the purposes of this
clause (iii), the Non-May, 2000 Pro Rata Amount shall be calculated as
of the dates that the respective amounts were paid pursuant to clauses
(i) and (ii) of subparagraph A of this ss.4.1(b);
(iv) fourth, equally and ratably to all outstanding accrued and
unpaid interest on and principal of Priority Debt, provided that,
except as provided in ss.4.1(g) hereof, none of the proceeds from any
sale of the assets of SBQ or any Equity Issuance shall be applied
pursuant to this clause (iv);
(v) fifth, equally and ratably to all outstanding accrued and
unpaid interest and Make-Whole Amounts and outstanding Loan and
Reimbursement Principal Obligations, May, 2000 Principal Obligations,
Reimbursement Agreement Debt, Outstanding Bank LC Exposure,
Outstanding IRB LC Exposure, and Note Principal Obligations,
constituting Bank Debt, Note Debt, May, 2000 Debt, or Reimbursement
Agreement Debt, and the Lease Payment Claims, according to the
aggregate amounts thereof (other than the Lease Payment Claims) on the
date of such distribution and, in the case of Lease Payment Claims,
the Net Lease Sharing Amount as of the date of such distribution;
(vi) sixth, equally and ratably, to all other Secured Obligations
not covered by clauses (i) through (v) of thisss.4.1(b)(B); and
(vii) seventh, after payment of all Secured Obligations, to the
Company or to whomever else the Collateral Agent may be required to
pay by applicable law.
(c) Special Letter of Credit Provision. Except to the extent
provided otherwise in ss.4.1(d) hereof, any payment pursuant to clause
(vi) of ss.4.1(b)(A) or clause (v) of ss.4.1(b)(B) with respect to
Outstanding Bank LC Exposure or Outstanding IRB LC Exposure (an
"Applicable Deposit") shall be paid to (or retained by) the Collateral
Agent for deposit in an account (the "Special Cash Collateral
Account") to be held as Collateral for the Secured Obligations and to
be applied as provided in this ss.4.1(c).
(i) Distributions of Cash Collateral. On each date
after the creation of the Special Cash Collateral Account on which a
reduction in Total Undrawn Letter of Credit Exposure occurs by reason
of either a drawing under any letter of credit (including any IRB
Letter of Credit) or any other reduction, expiration or cancellation of
any such letter of credit, the Collateral Agent shall distribute from
the Special Cash Collateral Account an amount (a "Distribution Amount")
equal to the product of (1) the Paid Percentage immediately prior to
such reduction in Total Undrawn Letter of Credit Exposure (the
"Pre-Reduction Percentage") and (2) the amount of such reduction,
provided, that any reduction of Outstanding IRB LC Exposure which will
be automatically reinstated unless a notice is timely given by the
applicable LC Issuer that such reduction will not be reinstated, shall
not be deemed to be a reduction of Total Undrawn Letter of Credit
Exposure unless such notice of non-reinstatement is in fact given. The
Distribution Amount shall be distributed as follows: (A) first, to pay
any outstanding principal amount of whichever of the Loan and
Reimbursement Principal Obligations, Bank of America Reimbursement
Agreement Debt, and PNC Reimbursement Agreement Debt, if any, shall
have been increased by such reduction pro rata in proportion to the
respective amounts thereof owed to each Bank and LC Issuer, to the
extent, if any, necessary so that the Paid Percentage of each of the
Loan and Reimbursement Principal Obligations, Bank of America
Reimbursement Agreement Debt and PNC Reimbursement Agreement Debt (not
including Outstanding IRB LC Exposure) immediately after giving effect
both to any increase in the amount thereof which may have occurred as a
result of such reduction in the Total Undrawn Letter of Credit Exposure
and to such payment being made from the Special Cash Collateral Account
under this clause (A), is equal to the Pre-Reduction Percentage; and
(B) next, to the extent of any balance of the Distribution Amount, as
provided in clauses (iv), (v), (vi), and (vii) of ss.4.1(b)(B). Subject
to the provisions of ss.4.1(d) hereof, at such times as the Outstanding
Bank LC Exposure and Outstanding IRB LC Exposure are reduced to zero,
any amount remaining in the Special Cash Collateral Account, after the
payment of all prior Distribution Amounts, shall be distributed as
provided in clauses (iv), (v), (vi), and (vii) of ss.4.1(b)(B).
(ii) Definition of Paid Percentage. The "Paid
Percentage" means, at the relevant time of reference thereto with
respect to any Distribution Amount, the fraction (expressed as a
percentage) the numerator of which is (x) the sum of all payments with
respect to Principal Obligations made pursuant to ss.4.1 (other than
pursuant to ss.4.1(b)(A)(iv) and (v) and ss.4.1(b)(B)(iv)) prior to or
at such time and the denominator of which is (y) the aggregate amount
of Principal Obligations outstanding, immediately before the Applicable
Deposit from which such Distribution Amount was funded. In the event
that, at the relevant time of reference thereto, no payments with
respect to Principal Obligations (other than the May, 2000 Principal
Obligations) shall have been made pursuant to ss.4.1 (other than
pursuant to ss.4.1(b)(A)(iv) and (v) and ss.4.1(b)(B)(iv)), the Paid
Percentage shall be zero.
(d) Special Provisions Regarding Proceeds from Sale of SBQ.
Notwithstanding the provisions of ss.4.1(b), under the circumstances set forth
in this ss.4.1(d), the distribution to the May, 2000 Lenders, the Note Holders,
the Banks, and the LC Issuers of the proceeds from any sale of the assets of SBQ
shall be made in accordance with the provisions of this ss.4.1(d), it being
understood that nothing in this ss.4.1(d) shall alter the amount of such
proceeds otherwise required to be distributed under ss.4.1(b) in respect of the
Lease Payment Claims. If (i) there is a sale of all or a substantial portion of
the assets of SBQ, and (ii) prior to, contemporaneous with, or as a condition of
such sale, the IRB Letters of Credit (or either of them) expire undrawn, are
terminated, are cancelled (any of the foregoing being a "Terminated IRB LC"), or
the LC Issuers receive any letter of credit, indemnity or other comfort
(collectively "Indemnity") that the IRB Letters of Credit (or any portion of
them or either of them) will not be drawn or that, if drawn, the LC Issuers will
be reimbursed or indemnified for all or a portion of the amount drawn by a
Person or Persons other than the Company and the Guarantors (or from assets
other than those of the Company and the Guarantors), regardless of whether such
Indemnity is absolute or is contingent or conditional (the issuer of a
Terminated IRB LC or recipient of an Indemnity being an "Applicable LC Issuer"),
then
(w) for purposes of determining the amount payable to the May, 2000
Lenders and the Note Holders, the net proceeds from any sale of the assets
of SBQ shall be deemed to have been greater than the actual net proceeds
from any sale of the assets of SBQ by an amount equal to the sum, if any,
of (A) with respect to Terminated IRB LCs, the aggregate undrawn face
amount of the IRB Letters of Credit immediately prior to the expiration,
termination or cancellation thereof, and (B) with respect to IRB Letters of
Credit as to which Indemnity was obtained, the amount of such Indemnity
(collectively, the sum of (A) and (B) being the "Applicable Amount"),
(x) the May, 2000 Lenders and the Note Holders will
receive the same amount from the net proceeds from
the sale of the assets of SBQ as the May, 2000
Lenders and the Note Holders would have received
pursuant to ss.4.1(b) had such net proceeds been
increased by such Applicable Amount,
(y) after the May, 2000 Lenders and the Note Holders have
received the amount payable to them pursuant to
ss.4.1(b) (after giving effect to this ss.4.1(d)),
the amounts payable pursuant to ss.4.1(b) to the
Banks that are not (and whose direct and indirect
assignors were not) the Applicable LC Issuers (the
"Other Banks") shall be the amount that the Other
Banks would have received if the net proceeds from
the sale of the assets of SBQ had been increased by
the Applicable Amount, and
(z) after the May, 2000 Lenders, the Note Holders and the
Other Banks have received the amounts payable to them
pursuant to ss.4.1(b) (after giving effect to this
ss.4.1(d)), the Banks that are (or whose direct or
indirect assignors were) the Applicable LC Issuers
shall receive on account of the Bank Debt the
remaining net proceeds, if any, allocable to the
Banks that are the LC Issuers from the sale of the
assets of SBQ, provided that,
(1) if the net proceeds from the sale of the assets of SBQ are
not sufficient for the Note Holders to receive the amount that they are
entitled to receive pursuant to ss.4.1(b) (after giving effect to this
ss.4.1(d)), then (A) the Note Holders shall receive all of the remaining
proceeds from the sale of the assets of SBQ covered by this ss.4.1(d), (B)
the Applicable LC Issuers shall make such arrangements with the Banks that
are not the Applicable LC Issuers (which arrangements shall be without cost
to or effect on the Secured Parties other than the Banks and the Applicable
LC Issuers) so as to cause the Banks that are not the Applicable LC Issuers
to have received (at or about the same time that the Note Holders are paid
pursuant to clause (A) of this paragraph) the same percentage of the amount
that would have been payable to the Banks that are not the Applicable LC
Issuers pursuant to clause (y) (if there had been sufficient proceeds to
pay such amounts), as the percentage that the amount that the Note Holders
receive pursuant to clause (A) of this paragraph constitutes with respect
to the amount that the Note Holders would have received pursuant to clause
(x) had there been sufficient proceeds to pay such amounts, and (C) all
amounts that thereafter become payable pursuant to ss.4.1(b) with respect
to the Bank Debt to the Banks that are (or whose direct or indirect
assignors were) the Applicable LC Issuers shall be paid instead equally and
ratably to the Note Holders and the Banks that are not the Applicable LC
Issuers (and allocated among each of them equally and ratably) until the
Note Holders and Banks that are not Applicable LC Issuers have received, in
addition to all other amounts payable to them hereunder, the amounts that
would have been paid to them pursuant to this ss.4.1(d) but for the Net
Proceeds from the sale of the assets of SBQ being insufficient to pay such
amounts to them, provided that, notwithstanding the foregoing, the
provisions of this ss.4.1(d) shall not be applied to pay to the Note
Holders or Banks that are not Applicable LC Issuers amounts that are
payable to the Applicable LC Issuers pursuant to clause (v) of ss.4.1(b)(A)
or clause (iv) of ss.4.1(b)(B) after the following events have occurred:
(1) the holders of 51% of the Bank Debt give notice to the Collateral Agent
that an Actionable Default has occurred, and (2) the Banks declare all of
the Bank Debt to be due and payable on account of such Actionable Default.
(e) Special Equipment Lease Provisions. Any payment pursuant
to ss.4.1(b)(A) or ss.4.1(b)(B) which is to be applied to Lease Payment Claims
prior to the termination of the Equipment Lease shall be paid to (or retained
by) the Collateral Agent for deposit in an account (the "Section 4.1(e) Cash
Collateral Account") to be held as Collateral for the sole and exclusive benefit
of the Lease Payment Claims (subject to and to the extent set forth in this
ss.4.1(e)) and to be applied as provided in this ss.4.1(e). Any payment pursuant
to ss.4.1(b)(A) or ss.4.1(b)(B) which is to be applied to Lease Payment Claims
on or after termination of the Equipment Lease shall be paid by the Collateral
Agent to the Indenture Trustee (for distribution by the Indenture Trustee in the
order of priority set forth in Section 3.03(a) of the Indenture for so long as
the Lien of the Indenture remains outstanding, and thereafter to the Owner
Trustee).
(i) Distribution of Section 4.1(e) Cash Collateral
After Termination of Equipment Lease. If, on any date on or after
creation of the Section 4.1(e) Cash Collateral Account, the Equipment
Lease is terminated, the Collateral Agent shall distribute to the
Indenture Trustee (for distribution by the Indenture Trustee in the
order of priority set forth in Section 3.03(a) of the Indenture, for so
long as the Lien of the Indenture remains outstanding, and thereafter
to the Owner Trustee), from the Section 4.1(e) Cash Collateral Account
an amount (a "Section 4.1(e) Distribution Amount") equal to the lesser
of (x) the Lease Sharing Amount as of such date, and (y) the amount in
the Section 4.1(e) Cash Collateral Account. Any amount remaining in the
Section 4.1(e) Cash Collateral Account after such distribution to the
Indenture Trustee or the Owner Trustee, as the case may be, shall be
applied in accordance with ss.4.1(b) hereof.
(ii) Other Distributions of Section 4.1(e) Cash
Collateral. If the Equipment Lease expires at the end of its term (and
is not terminated prior to such expiration) and all Lease Payment
Claims have been paid in full, then the amount in the Section 4.1(e)
Cash Collateral Account shall be applied in accordance with ss.4.1(b)
hereof.
(f) Reallocation of Subsequent Distributions. Notwithstanding
the foregoing, if (i) any deposit(s) shall be made into the Section 4.1(e) Cash
Collateral Account on any date(s) in respect of the Lease Payment Claims
pursuant to this ss.4.1 and (ii) the Equipment Lease shall be terminated on a
subsequent date and the Lease Sharing Amount thereupon shall become an amount
smaller or larger than 33 1/3% of the Stipulated Loss Value as of such earlier
date(s), a "true-up" shall be effected with respect to the next distribution(s)
of Collateral proceeds and other amounts pursuant to clause (iii), (vi) or (vii)
of ss.4.1(b)(A) or clause (iii), (v) or (vi) of ss.4.1(b)(B) hereof so that the
Lease Payment Claims shall receive pursuant to this ss.4.1 a cumulative amount
of Collateral proceeds and other amounts pursuant to ss.4.1 hereof equal to what
the Indenture Trustee or Owner Trustee, as the case may be, would have received
pursuant to this ss.4.1 had the revised Lease Sharing Amount been in effect at
the time of such deposit(s).
(g) Special Provision Regarding Allocation of SBQ and Equity
Issuance Proceeds After the Occurrence of an Event of Default. If the holders of
51% of the Bank Debt give notice to the Collateral Agent before a distribution
by the Collateral Agent pursuant to ss.4.1(b)(A) or ss.4.1(b)(B) hereof that an
Event of Default has occurred under the Credit Agreement, and if such notice
certifies that there is at the time of such distribution any outstanding accrued
and unpaid interest on or principal of Priority Debt, and if such distribution
includes proceeds from the sale of the assets of SBQ or any Equity Issuance (the
"SBQ or Equity Issuance Proceeds"), then the amount of such distribution that is
allocable to the SBQ or Equity Issuance Proceeds shall be paid to (or retained
by) the Collateral Agent to the extent of the amount of such outstanding accrued
and unpaid interest on or principal of Priority Debt, for deposit in an account
to be held as Collateral for the Secured Obligations (the "Section 4.1(g)
Account"), and to be applied as provided in this ss.4.1(g).
(i) Distributions on Account of Priority Debt. If the
Banks declare all of the Bank Debt to be due and payable on account of
such Event of Default within thirty (30) days after the date that such
notice is given to the Collateral Agent pursuant to this ss.4.1(g) that
an Event of Default has occurred, and if during such thirty (30) day
period after such notice is given such declaration is not rescinded or
waived and no loans are made and no credit is extended by the Banks to
the Company or the Guarantors (excluding BSE), then the distribution
that is to be made by the Collateral Agent on account of the SBQ or
Equity Issuance Proceeds shall be applied to the Priority Debt, to the
extent of the amount thereof, before being applied pursuant to clause
(v) of ss.4.1(b)(B).
(ii) Distributions on Account of Other Secured
Obligations. Any amounts in the Section 4.1(g) Account that are not
distributable to the Banks on account of Priority Debt pursuant to
clause (i) of this ss.4.1(g) shall be applied by the Collateral Agent
in accordance with clauses (v), (vi), and (vii) of ss.4.1(b)(B) hereof.
(h) Special Provision Regarding Cash Reserves Relating for
Sold Assets. Any amount of cash reserves referred to in clause (vi) of the
definition of Net Proceeds shall be deposited by the Collateral Agent in an
account (the "Section 4.1(h) Cash Reserves Account") to be held as Collateral
for the Secured Obligations and to be applied as provided in this ss.4.1(h).
(i) If, prior to the Collateral Agent receiving
notice from any Bank, Note Holder, May, 2000 Lender, LC Issuer or the
Requisite Parties that an Actionable Default has occurred, the Company
certifies to the Collateral Agent in writing that an amount specified
in such certification is payable to the buyer of assets (the sale of
which gave rise to the requirement that cash reserves be maintained) to
satisfy liabilities owed to such buyer under the purchase agreement
relating to such assets, then the Collateral Agent shall pay to the
Company the amount specified in such certification (but not more than
the amount maintained in the Section 4.1(h) Cash Reserves Account on
account of the applicable sale).
(ii) If the Collateral Agent receives notice from any
Bank, Note Holder, May, 2000 Lender, LC Issuer or the Requisite Parties
that an Actionable Default has occurred, then the Collateral Agent
shall not pay or distribute any funds from the Section 4.1(h) Cash
Reserves Account except in accordance with the written instructions of
the Requisite Parties, provided that such instructions may only
instruct the Collateral Agent to pay the funds (or a portion thereof)
in the Section 4.1(h) Cash Reserves Account to the Company (or the
applicable seller) or to the Secured Parties in accordance with this
ss.4.1. By way of example, with respect to funds derived from the sale
of May, 2000 Priority Collateral, such instructions may only instruct
the Collateral Agent to pay such funds to the Secured Parties in
accordance with the provisions of ss.4.1(b)(A).
(i) Special Provision Regarding Distributions to May, 2000
Lenders. Any payment to the May, 2000 Lenders with regard to the May, 2000 Debt
(A) pursuant to clause (v) of ss.4.1(b)(B) or (B) from the proceeds of the
equipment, real property or other fixed assets of BSE located in Jackson or
other "Collateral" as defined in the Jackson Security Agreement or "Property" as
defined in the Jackson Mortgage, as in effect on the date hereof (a payment
referred to clause (A) or (B) or this paragraph (i) being a "Clause (i)
Deposit") shall be paid to (or retained by) the Collateral Agent for deposit in
an account (the "Special Clause (i) Account") to be held as Collateral for the
Secured Obligations and to be applied as provided in this ss.4.1(i). Each of the
Clause (i) Deposits shall be remain in the Special Clause (i) Account until the
earliest (the "Clause (i) Distribution Date") of (x) the disposition of all of
the May, 2000 Priority Collateral, and distribution of the proceeds therefrom in
accordance with the terms hereof, (y) the payment in full of the May, 2000 Debt,
and (z) with respect to any individual Clause (i) Deposit, the date two (2)
years after the date of such Clause (i) Deposit. On the Clause (i) Distribution
Date, the Collateral Agent shall distribute the amounts in the Special Clause
(i) Account to the May, 2000 Lenders in payment of the May, 2000 Debt (if any
May, 2000 Debt remains outstanding) and, if any amounts remain in the Special
Clause (i) Account after the May, 2000 Debt has been paid in full, any remaining
amount in the Special Clause (i) Account shall be applied in accordance with
clauses (v), (vi), and (vii) of ss.4.1(b)(A) or clauses (iv), (v), and (vi) of
ss.4.1(b)(B).
(j) On each occasion that the Collateral Agent makes any
payment or distribution to a Secured Party pursuant to this ss.4.1, the
Collateral Agent shall give notice to the Company setting forth the amount paid
or distributed to each Secured Party.
ss.4.2. Non-Cash Distributions or Proceeds. If the Collateral Agent
receives any non-cash distributions or proceeds in respect of the Guaranties,
the May, 2000 Guaranties, or the Collateral, then, unless the Requisite Parties
instruct the Collateral Agent to the contrary, the Collateral Agent shall hold
such non-cash distributions and proceeds as Collateral upon the terms of this
Agreement and the Security Documents until converted to cash and thereupon
applied or disbursed in accordance with this ss.4; provided, however, that, if
any non-cash distribution is received by the Collateral Agent and is to be
applied in satisfaction of any Secured Obligation by operation of a plan of
reorganization under Chapter 11 of the United States Bankruptcy Code or
otherwise as required by applicable law, the Requisite Parties may, instead of
awaiting the conversion of such non-cash distribution to cash, direct the
Collateral Agent to distribute such non-cash distribution as provided in
ss.4.1(b), except in respect of a distribution under ss.4.1(b)(i).
ss.4.3. Additional Collateral. If any of the Banks, the Agent Bank,
May, 2000 Lenders, the LC Issuers or the Note Holders receives any mortgage,
pledge, security interest in or other lien or encumbrance on any assets of the
Company, any Guarantor or any other of the Company's Subsidiaries, then any such
mortgage, pledge, security interest or other lien or encumbrance shall secure
the Secured Obligations, and be assigned to the Collateral Agent for the benefit
of the Secured Parties. Notwithstanding the foregoing, (a) the Collateral Agent
may receive, for the benefit of the May, 2000 Lenders, a security interest in
the equipment, real property and other fixed assets of BSE, including the
proceeds therefrom, to secure the May, 2000 Debt and a security interest in any
or all of the assets of the Company and the Guarantors (other than BSE) to
secure the May, 2000 Guaranties, and (b) the LC Issuers may receive a pledge of
industrial development bonds that are purchased by the Company or its
Subsidiaries with the proceeds of remarketing drawings on the IRB Letters of
Credit (it being understood that such industrial development bonds shall not
constitute Reimbursement Agreement Debt or Secured Obligations).
ss.4.4. Notice of Demand; Acceleration.
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(a) Each of the Banks, the Agent Bank, the LC Issuers, the
Note Holders, May, 2000 Lenders, the May, 2000 Agent, the Owner Trustee and the
Indenture Trustee hereby agrees to give written notice to the Collateral Agent
of any demand for payment in full of the Secured Obligations owing to the
demanding party, whether by acceleration of such obligations or otherwise (a
"Demand Notice").
(b) Neither the Agent Bank, any Bank, any LC Issuer, any Note
Holder, any May, 2000 Lender, the May, 2000 Agent, the Owner Trustee nor the
Indenture Trustee shall incur liability of any kind should it, upon the
occurrence of any Actionable Default, refrain from accelerating the maturity or
otherwise demanding payment in full of any Secured Obligations owing to it, or
should it refrain from exercising any of its rights and remedies against the
Company, any Guarantor or any other obligor in respect of the Secured
Obligations.
ss.4.5. Enforcement.
-----------
(a) The Collateral Agent shall (subject to the provisions of
ss.3.2 and ss.5) take any such actions in the exercise of rights and remedies
under the Security Documents as are directed in an Enforcement Notice given by
the Requisite Parties or Special Requisite Parties, as the case may be, at any
time more than three (3) business days after a Notice of Actionable Default has
been given to a Responsible Officer of the Collateral Agent with respect to the
Event of Default that is the basis (or one of the bases) of the Enforcement
Notice. The Requisite Parties or Special Requisite Parties, as the case may be,
giving a Notice of Actionable Default or Enforcement Notice to the Collateral
Agent shall contemporaneously give a copy thereof to the other Secured Parties.
(b) Each of the Agent Bank, the May, 2000 Agent, each
Bank, each LC Issuer, each Note Holder, each May, 2000 Lender, the
Indenture Trustee and the Owner Trustee agrees that it will promptly,
and in any event within five (5) business days after the request by one
of the others (which request may be made telephonically), advise the
requesting party (telephonically, confirmed in writing) as to the
outstanding principal amount of the Loan and Reimbursement Principal
Obligations, Outstanding Bank LC Exposure, Outstanding IRB LC Exposure,
Letter of Credit Collateral Obligations, Reimbursement Agreement Debt,
May, 2000 Debt, or Note Principal Obligations owed to it (or, in the
case of the Agent Bank, owed to the Banks or, in the case of the May,
2000 Agent, owed to the May, 2000 Lenders) or (in the case of the Owner
Trustee or Indenture Trustee) as to the Lease Sharing Amount. Any party
may rely on such information (or other means available to it) to
determine whether the Requisite Parties have acted with respect to any
action or proposed action.
(c) No Enforcement Notice, when issued, may be rescinded or
withdrawn without the written consent of the Requisite Parties or Special
Requisite Parties, whichever shall have given such Enforcement Notice .
ss.4.6. Turnover of Collateral and Post-Default Cash Sweep. If any
Secured Party (other than the Owner Trustee or Indenture Trustee) acquires
custody, control or possession of any payment or assets constituting a
Post-Default Cash Sweep Payment or any Collateral (including proceeds
therefrom), other than pursuant to the terms of ss.4.1 or ss.4.2 hereof, such
Secured Party shall, promptly with respect to Collateral (including proceeds
thereof), and within fifteen (15) days after their receipt thereof with respect
to Post-Default Cash Sweep Payments, cause such payment or assets to be
delivered to or put in the custody, possession or control of the Collateral
Agent or, if the Collateral Agent shall so designate, an agent of the Collateral
Agent (which agent may be a branch or affiliate of the Collateral Agent) in the
same form of payment received, with appropriate endorsements, for distribution
in accordance with the provisions of ss.4.1 or ss.4.2, as applicable. The
Collateral Agent shall notify each of the Secured Parties within two (2)
business days after the Collateral Agent receives any notice (a) from any Bank,
May, 2000 Lender, Note Holder or LC Issuer of the occurrence of an Event of
Default, or (b) from the Requisite Parties that payments referred to in the
definition of Post-Default Cash Sweep Payments will not constitute Post-Default
Cash Sweep payments on account of such Event of Default. If any cash is received
by any of the Banks with respect to Letter of Credit Collateral Obligations
other than pursuant to ss.4.1 hereof, and such cash has not been applied to
reduce Loan and Reimbursement Principal Obligations resulting from a drawing
upon a letter of credit relating to such Letter of Credit Collateral Obligations
prior to the time that an Enforcement Notice is given, such cash shall, at the
time that such Enforcement Notice is given, be delivered to the Collateral Agent
and applied as provided in ss.4.1. Until such time as the provisions of the
immediately preceding sentences have been complied with, such Secured Party
shall be deemed to hold such Collateral in trust for the Collateral Agent.
Notwithstanding the foregoing, neither the Agent Bank, the Banks, the May, 2000
Lenders, the May, 2000 Agent, the LC Issuers nor the Note Holders shall be
required to deliver to the Collateral Agent or such agent of the Collateral
Agent, any amounts received by the Agent Bank, the Banks, the May, 2000 Lenders,
the May, 2000 Agent, the LC Issuers, or the Note Holders prior to receipt by
such Secured Party of a Notice of Actionable Default to the extent that such
amounts constitute (a) payments of principal (other than Post-Default Cash Sweep
Payments) on the Bank Debt, the May, 2000 Debt, the Reimbursement Agreement Debt
or the Notes required to be made pursuant to the Credit Documents and due and
paid prior to such date, or (b) regular payments of interest, fees and other
charges on or in respect of the Bank Debt, the May, 2000 Debt, the Reimbursement
Agreement Debt or the Notes due and paid prior to such date.
ss.4.7. Setoffs. Each of the Secured Parties agrees with each other
Secured Party that (a) if any Secured Party (other than the Owner Trustee or
Indenture Trustee) exercises any right of setoff, banker's lien or similar right
with respect to any Collateral or any assets of the Company or any Guarantor
(other than a setoff by a Bank or a May, 2000 Lender prior to any Notice of
Actionable Default (x) to repay an involuntary overdraft arising in the ordinary
cause of banking business of cash management, payroll and similar deposit
accounts maintained by the Company or any Guarantor with any of the Banks or the
May, 2000 Lenders, or (y) to pay regular account maintenance fees), the amount
set off shall be applied ratably to the Secured Obligations in accordance with
ss.4.1 or ss.4.2, as the case may be, (b) if such Secured Party (other than the
Owner Trustee or Indenture Trustee) shall receive from the Company or any
Guarantor, (i) whether by voluntary payment, exercise of the right of setoff,
counterclaim, cross-action, enforcement of the claim in respect of the Secured
Obligations owing to such Secured Party by proceedings against the Company at
law or in equity or by proof thereof in bankruptcy, reorganization, liquidation,
receivership or similar proceedings, or otherwise, for application to the
payment of the Secured Obligations owing to such Secured Party any amount in
excess of its ratable portion of the payments received by the other Secured
Parties as contemplated by ss.4.1 or ss.4.2, as the case may be, or (ii) any of
the Banks shall receive any Post-Default Cash Sweep Payment, such Bank or other
Secured Party will make such disposition and arrangements with the other Secured
Parties with respect to such excess, either by way of distribution, pro tanto
assignment of claims, subrogation or otherwise as shall result in each Secured
Party receiving in respect of the Secured Obligations owing to it its
proportionate payment as contemplated by ss.4.1 or ss.4.2, as the case may be;
provided that if all or any part of such excess payment is thereafter recovered
from such Secured Party, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
ss.4.8. Waivers and Amendments of Credit Documents.
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(a) Without the prior written consent of the Agent Bank, the
May, 2000 Agent, the holders of 51% of the Note Debt, the holders of 51% of the
PNC Reimbursement Agreement Debt, and the holders of 51% of the Bank of America
Reimbursement Agreement Debt, the parties hereto (other than the Owner Trustee
and the Indenture Trustee) shall not modify or amend any provisions of or give
any waiver with respect to the Credit Documents to which such party hereto is a
signatory, if the effect of such modification or amendment or waiver is (i) to
cause the maximum principal amount or maximum commitment of or in respect of the
Bank Debt to exceed the Maximum Bank Commitment, or (ii) to increase the
principal amount of the Note Debt or Reimbursement Agreement Debt then
outstanding, or (iii) to increase the stated rate of interest or any fees or
other amounts due under any of the Credit Documents to which such party hereto
is a signatory as outstanding on the date hereof, or (iv) to amend or modify any
term defined therein which is incorporated by reference into this Agreement, or
is specifically referred to in this Agreement in such a way as to alter its
meaning in this Agreement, or (v) to increase the maximum principal amount or
maximum commitment of or in respect of the May, 2000 Debt to exceed $25,000,000.
Without the prior written consent of the Requisite Parties, the parties hereto
(other than the Owner Trustee and the Indenture Trustee) shall not modify or
amend any provisions of or give any waiver with respect to the Credit Documents
to which such party is a signatory, if the effect of such modification or
amendment or waiver is to provide for loans to be made or letters of credit to
be issued (other than by extension or renewal) after the issuance of an
Enforcement Notice. Except as otherwise specified in the two preceding
sentences, the Agent Bank and the Banks, the May, 2000 Lenders and the May, 2000
Agent, the Note Holders and the LC Issuers, without the consent of the other
parties, shall be free to deal with the Company and the Guarantors in their
respective sole discretion under and in respect of the provisions of the Credit
Documents to which they are party, with the right and power without limitation
to modify, amend or waive any terms or provisions of such Credit Documents, to
grant extensions of the time of payment or performance, and to make compromises
and settlements with the Company or any Guarantor.
(b) The Agent Bank and the Banks agree that they will not
modify or amend any covenants, defaults or payment provisions which are based on
the financial condition or results of operations of the Company and/or its
Subsidiaries contained in the Bank Credit Documents without giving at least five
(5) business days' prior written notice thereof to the Note Holders, the May,
2000 Agent, and the LC Issuers; the Note Holders agree that they will not modify
or amend any covenants, defaults or payment provisions which are based on the
financial condition or results of operations of the Company and/or its
Subsidiaries in the Note Credit Documents without giving at least five (5)
business days' prior written notice thereof to the Agent Bank, the May, 2000
Agent, and the LC Issuers; the May, 2000 Agent and the May, 2000 Lenders agree
that they will not modify or amend any covenants, defaults or payment provisions
which are based on the financial condition or results of operations of the
Company and/or its Subsidiaries in the May, 2000 Credit Documents without giving
at least five (5) business days' prior written notice thereof to the Agent Bank,
the Note Holders, and the LC Issuers; the Owner Trustee and the Indenture
Trustee agree that they will not modify or amend any covenants, defaults or
payment provisions which are based on the financial condition or results of
operations of the Company and/or its Subsidiaries in the Equipment Lease without
giving at least five (5) business days' prior written notice thereof to the
Agent Bank, the May, 2000 Agent, the Note Holders and the LC Issuers; and each
LC Issuer agrees that it will not modify or amend any covenants, defaults or
payment provisions which are based on the financial condition or results of
operations of the Company and/or its Subsidiaries contained in the Reimbursement
Agreement to which it is a party without giving at least five (5) business days'
prior written notice thereof to the Agent Bank, the May, 2000 Agent, and the
Note Holders. Notwithstanding the foregoing provisions of this paragraph (b), no
notice shall be required hereunder in connection with the execution of the
documents listed on Schedule B attached hereto, each as in effect on of the date
hereof.
ss.4.9. Release or Subordination of Collateral.
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(a) Collateral consisting of (i) Net Proceeds of any
Disposition which, together with the aggregate Net Proceeds of all other
Dispositions of Collateral within the preceding twelve (12) months, do not
exceed $1,000,000, and the proceeds of any other Disposition with the consent of
the Requisite Parties, (ii) the Net Proceeds of any Casualty Event which, taken
together with the aggregate Net Proceeds of all other Casualty Events with
respect to Collateral within the preceding twelve (12) months, do not exceed
$5,000,000, and (iii) Additional Company Retained Proceeds shall, unless, in
either case, a party hereto has notified the Collateral Agent that a Default or
an Event of Default has occurred and is continuing or would occur after giving
effect thereto, be released to the Company or Guarantor that owned the
Collateral, as the case may be, subject to the provisions of the next sentence.
The Collateral Agent is hereby authorized to release such Collateral and to
provide such discharge, release and termination statements with respect to such
released Collateral upon receipt of a certificate of the chief financial officer
or any vice president of the Company to the effect that no Default or Event of
Default exists or would result therefrom and that such release is permitted
under this ss.4.9(a), and that, with respect to Net Proceeds of Casualty Events,
the Company intends to use such Net Proceeds to repair or replace the Collateral
that was the subject of the Casualty Event. The Company shall cause the Net
Proceeds from Dispositions of assets that generate Additional Company Retained
Proceeds to be paid to the Collateral Agent, and any such Net Proceeds from any
such Dispositions of assets in excess of the amount of Additional Company
Retained Proceeds which are to be released to the Company or applicable
Guarantor pursuant to the first sentence of this ss.4.9(a) (which amount shall
be determined separately for each asset in accordance with the definition of
Additional Company Retained Proceeds, rather than cumulatively for all
categories of assets that may generate Additional Company Retained Proceeds)
shall be distributed in accordance with ss.4.1 hereof.
(b) The Collateral Agent shall, if requested by the Company or
any Guarantor, release any Collateral that is the subject of a Disposition but
which is not released pursuant to ss.4.9(a), and provide such releases and
termination statements as may be reasonably requested by the Company or any such
Guarantor with respect thereto in connection with any Disposition thereof, so
long as (i) the Requisite Parties have consented to such request, (ii) the
Collateral Agent receives a certificate of the chief financial officer or any
vice president of the Company to the effect that (A) no Default or Event of
Default exists or would result from the honoring of such request, (B) the
transferee of the Collateral is not the Company or an Affiliate of the Company,
and (C) the proceeds of such Disposition equal or exceed the fair market value
of the Collateral subject to such Disposition, (iii) the Collateral Agent
obtains a perfected security interest in any non-cash proceeds of such
Disposition, (iv) except as otherwise provided herein, the Net Proceeds of such
Disposition are delivered to the Collateral Agent, and (v) any cash portion of
the Net Proceeds of such Disposition are applied or paid in accordance with this
Agreement;
provided, that, with respect to a Disposition of the assets of SBQ, no consent
of the Requisite Parties shall be required under clause (i) of this ss.4.9(b)
and the provisions of clause (ii)(C) of this ss.4.9(b) shall not be applicable
if: (1) an executive officer of the Company certifies that the Company has
consulted with and received advice from a nationally recognized investment
banking company in connection with such Disposition and has received a letter
from such nationally recognized investment banking company stating that in its
view the consideration to be received by the Company in connection with such
Disposition is fair from a financial point of view under the circumstances, and
such executive officer shall identify such investment banking company in such
certification; (2) the cash portion of the sales price is not less than 75% of
the total sales price; and (3) the cash portion of the Net Proceeds of such sale
are applied to the Secured Obligations in accordance with the terms of this
Agreement, and
further provided that (x) if the certificate provided pursuant to clause (ii) of
this ss.4.9(b) further certifies that the Company intends to purchase, within
one hundred eighty (180) days after the date of the applicable Disposition,
assets of the same type of assets that were the subject of the Disposition (e.g.
the purchase of equipment after the sale of equipment, even if the purchased
equipment is of a different type than the equipment that was sold) which are
usable in the ordinary course of the Company's business ("Qualifying Assets"),
(y) subject to the provisions of clause (z) below, the Collateral Agent shall
retain, rather than distributing, the proceeds from such Disposition (except
that this clause (y) and clause (z) below in this paragraph (b) shall not apply
to any Disposition of SBQ or any Disposition that would cause the proceeds
received by the Collateral Agent from Dispositions during any consecutive twelve
(12) month period to exceed $10,000,000), and (z) if the Collateral Agent
receives a certificate of the chief financial officer or any vice president of
the Company on or within ninety (90) days after the date of such Disposition, to
the effect that (1) (A) the Company has purchased Qualifying Assets on or within
ninety (90) days after the date of the applicable Disposition, or (B) the
Company has provided to the Collateral Agent a letter of intent or other
evidence satisfactory to the Requisite Lenders that the Company has entered into
an agreement or an agreement in principle to purchase Qualifying Assets within
one hundred eighty (180) days after the date of such Disposition, (2) the cash
portion of the purchase price of such Qualifying Assets was (or, with respect to
clause (1)(B) of this proviso, will be), as set forth in such certificate, (3)
such Qualifying Assets were (or, with respect to clause (1)(B) of this proviso,
will be) purchased from a Person that is not the Company or an Affiliate of the
Company, (4) the purchase price for such Qualifying Assets did not (or, with
respect to clause (1)(B) of this proviso, will not) exceed their fair market
value, and (5) no Default or Event of Default exists or would result from the
purchase of the Qualifying Assets, the Collateral Agent shall,
-- in the case of a certification pursuant to clause (1)(A) of this
proviso, pay to the Company the lesser of the purchase price for the
Qualifying Assets and the amount received by the Collateral Agent from
the applicable Disposition, and
-- in the case of a certification pursuant to clause (1)(B) of this
proviso, continue to hold the lesser of the proposed purchase price for
the Qualifying Assets and the amount received by the Collateral Agent
from the applicable Disposition, and thereafter pay to the Company the
lesser of the actual purchase price for the Qualifying Assets and the
amount received by the Collateral Agent from the applicable Disposition
if the Collateral Agent receives a further certificate of the chief
financial officer or any vice president of the Company within one
hundred eighty (180) days after the date of such Disposition, to the
effect that (1) the Company has purchased Qualifying Assets within one
hundred eighty (180) days after the date of the applicable Disposition
substantially on the terms and conditions set forth in, and from the
seller (or an affiliate of the seller) named in, the letter of intent
or other evidence provided to the Collateral Agent pursuant to clause
(1)(B) of this proviso, (2) the cash portion of the purchase price of
such Qualifying Assets was as set forth in such certificate, (3) such
Qualifying Assets were purchased from a Person that is not the Company
or an Affiliate of the Company, (4) the purchase price for such
Qualifying Assets did not exceed their fair market value, and (5) no
Default or Event of Default exists or would result from the purchase of
the Qualifying Assets.
Any amounts not paid to the Company pursuant to the preceding sentence shall be
distributed in accordance with ss.4.1 hereof.
(c) The Net Proceeds from any Casualty Event with respect to
Collateral shall (i) be paid to (or retained by) the Collateral Agent for
distribution in accordance with ss.4.1 hereof, if such Net Proceeds from any
such Casualty Event equal or exceed $25,000,000, and (ii) except as provided in
ss.4.9(a) and except as set forth below in this paragraph (c), be paid to (or
retained by) the Collateral Agent for distribution in accordance with ss.4.1
hereof, if such Net Proceeds from any such Casualty Event are less than
$25,000,000. The Company may utilize the Net Proceeds from a Casualty Event with
respect to Collateral if such Net Proceeds are less than $25,000,000 (1) with
the written consent of the Requisite Parties, on such terms and conditions as
may be established by the Requisite Parties with respect thereto, or (2) without
such written consent of the Requisite Parties, on the following conditions and
in the following manner: (A) the Company shall provide to the Collateral Agent,
within thirty (30) days after the date that the amount of the Net Proceeds is
determined, a certificate of the chief financial officer or any vice president
of the Company to the effect that (x) no Default or Event of Default exists (or
would exist if the Net Proceeds from Casualty Event were used to repair or
replace the Collateral that was the subject of the Casualty Event), (y) the
Company intends to repair or replace the Collateral that was the subject of the
Casualty Event, and (z) the Company has sufficient cash on hand or available in
order to fund such repair or replacement, if such Net Proceeds are made
available to the Company, (B) to the extent that the Company desires funding or
reimbursement therefor from the Net Proceeds applicable thereto, the Company
shall submit to the Collateral Agent (or to such agent as may be retained by the
Collateral Agent to carry out the responsibilities of the Collateral Agent
pursuant to this sentence) such invoices as the Company receives from time to
time for goods or services purchased or obtained in connection with such repair
or replacement, together with a written request that such invoice be paid from
such applicable Net Proceeds (or that the Company be reimbursed from such
applicable Net Proceeds for its payment of such invoice), (C) no Event of
Default shall have occurred prior to the requested payment from time to time of
an invoice pursuant to this paragraph (c), and (D) the Company shall provide
such evidence as the Requisite Parties or any agent retained by the Collateral
Agent in accordance with clause (B) above may require in order to evidence that
the remaining Net Proceeds are sufficient to fund the balance of cost of the
repair or replacement of the Collateral that was the subject of the Casualty
Event. The Company shall pay to the Collateral Agent, as and when billed
therefor, all fees and reasonable expenses incurred by the Collateral Agent or
any such agent in connection with the matters set forth in this paragraph.
(d) To the extent that the Credit Documents (other than the
Lease Documents) of any party explicitly permit any Disposition without consent
under such Credit Document but in respect to which such party's consent is
required pursuant to this ss.4.9, such party shall be deemed to have provided,
and shall upon request provide that consent. But nothing in this ss.4.9 shall
(i) be deemed to imply any waiver of any restriction on Dispositions under the
Credit Agreement, either of the Note Purchase Agreements or any other Credit
Document, or (ii) without the prior written consent of the Requisite Parties,
authorize the Collateral Agent in any bankruptcy case to enter into any
agreement for, or give any authorization or consent with respect to, the
post-petition usage of Collateral.
(e) In the event all of the security interests created by the
Security Documents in favor of the Secured Parties other than the Owner Trustee
and Indenture Trustee are terminated pursuant to ss.11.5(a)(i), (ii), (iii), and
(v) hereof, the security interest created by the Security Documents in favor of
the Owner Trustee and Indenture Trustee shall also be released and thereupon the
Lease Claims shall no longer constitute Secured Obligations hereunder; provided
that concurrently with such release, the Company shall secure the Lease Claims
with a perfected first priority security interest in separate collateral in
amount and in form reasonably satisfactory to the Indenture Trustee and the
Owner Trustee.
(f) Whether or not so instructed by the Requisite Parties, the
Collateral Agent may release any Collateral and may provide any release,
termination statement or instrument of subordination required by order of a
court of competent jurisdiction or otherwise required by applicable law.
ss.4.10. Replacement Credit Facilities.
----------- ------ ----------
(a) The Company shall be free, without the consent of the Note
Holders, May, 2000 Lenders, the LC Issuers, the Owner Trustee or the Indenture
Trustee, to enter into a Replacement Credit Agreement (as defined below)
provided that (i) upon giving effect to such Replacement Credit Agreement all
outstanding Secured Obligations owed to the Banks shall have been discharged and
the Credit Agreement shall have been terminated, (ii) each lender under such
Replacement Credit Agreement shall assume in writing all obligations of the
Banks hereunder accruing on or after the date such lenders become parties
hereto, as amended as provided in clause (iv) hereof, (iii) after giving effect
to such Replacement Credit Agreement, no Default or Event of Default shall then
be in existence, and (iv) such technical amendments to the Note Credit
Documents, the Lease Documents and this Agreement, reasonably requested by the
Note Holders, the May, 2000 Lenders, the LC Issuers, the Owner Trustee or the
Indenture Trustee, as the case may be, as necessary for any terms in the Note
Credit Documents, May, 2000 Credit Documents, the Lease Documents or this
Agreement cross referencing the Credit Agreement to cross reference instead such
Replacement Credit Agreement, shall have been made. A "Replacement Credit
Agreement" shall mean a credit facility from one or more commercial banks or
other financial institutions providing the Company with loans, letters of credit
or other advances or extensions of credit (A) without any lien or other priority
over the other Secured Obligations, (B) not in excess of the Commitments (as
defined in the Credit Agreement) under the Credit Agreement immediately prior to
such refinancing and pursuant to which the loan availability and loan
commitments to the Company from such refinancing shall not be less than that
available and in effect immediately prior to such refinancing, (C) for a
committed term of at least 36 months, (D) the financial covenants of such
refinancing or extension shall not be more stringent than the financial
covenants contained in the amended Note Purchase Agreements as reasonably
determined by the holders of 51% of the Note Debt; and (E) such refinancing
would be permitted under the then applicable debt incurrence tests of the Note
Purchase Agreements.
(b) The term of the existing Credit Agreement may be extended
(i) without the consent of the Note Holders if such extension provides for no
Priority Debt, or (ii) in all other cases with, but only with, the consent of
the holders of 66 2/3% of the Note Debt. To the extent that the term of the
Credit Agreement is extended with such consent, or any other provisions thereof
are amended or modified by the parties thereto, the Credit Agreement shall not
be considered a Replacement Credit Agreement for purposes of ss.4.10(a).
ss.4.11. Independent Investigation; Sharing of Financial Information.
Each of the Banks, the Agent Bank, May, 2000 Lenders, the May, 2000 Agent, the
LC Issuers, and the Note Holders acknowledges and agrees that it has entered
into the Credit Documents to which it is party and (as applicable) extended
funds and/or credit or provided services to the Company on the basis of its own
independent investigation of the Company, its Subsidiaries and affiliated
companies, and their business, operations and financial condition, that it shall
continue to make such investigations in connection with the credit and/or loans
extended to the Company as it deems appropriate and that it has not conducted
any such investigations in reliance upon information, analysis and
recommendations which it may have obtained from any other Secured Party. Without
derogation in any way of the preceding sentence, the Company acknowledges and
consents to any exchange of information by and among the Banks, the Agent Bank,
May, 2000 Lenders, the May, 2000 Agent, the LC Issuers, the Note Holders, the
Owner Trustee and the Indenture Trustee, without regard to whether the impact of
any such exchange is favorable or unfavorable to the Company and without regard
to the accuracy or completeness of any information so exchanged.
ss.4.12. Agents. Except as specifically provided in this Agreement, and
except for the role of the Collateral Agent as specified in this Agreement,
neither the Agent Bank nor any of the Banks is acting as agent for any Note
Holder, LC Issuer or the Owner Trustee or Indenture Trustee (except, with
respect to the Agent Bank, to the extent that it is an agent for the May, 2000
Lenders in its capacity as the May, 2000 Agent); neither the May, 2000 Agent nor
any of the May, 2000 Lenders is acting as agent for any Bank, Note Holder, LC
Issuer or the Owner Trustee or Indenture Trustee (except, with respect to the
May, 2000 Agent, to the extent that any of such Persons is also a May, 2000
Lender); no Note Holder is acting as agent for the Agent Bank or any Bank or for
the May, 2000 Agent or any May, 2000 Lender or for the LC Issuer or the Owner
Trustee or Indenture Trustee; no LC Issuer is acting as agent for the Agent
Bank, the Banks, May, 2000 Agent, the May, 2000 Lenders, any Note Holder, or the
Owner Trustee or Indenture Trustee; neither the Owner Trustee nor the Indenture
Trustee is acting as agent for the Agent Bank, the Banks, the May, 2000 Agent,
the May, 2000 Lenders, the Note Holders or the LC Issuers; and nothing stated or
implied in this Agreement shall be deemed to create such an agency, or other
fiduciary relationship.
ss.4.13. Effect of Avoidance. If an Avoidance Event occurs, (a) the
provisions of ss.2 hereof and this ss.4 with respect to the Collateral and
distribution of the proceeds thereof shall cease to be effective with respect to
the Collateral as to which the Lien of the Collateral Agent is avoided and the
proceeds thereof, (b) ss.4.1(d) shall cease to be effective, and (c) this
Agreement shall not thereafter restrict any party's right to amend and
administer its Credit Documents in such party's discretion. For the avoidance of
doubt, nothing in this paragraph is intended to affect any of the provisions
herein regarding the Guaranties or the May, 2000 Guaranties.
ss.5. CONCERNING THE COLLATERAL AGENT.
---------- --- ---------- -----
ss.5.1. Appointment of Collateral Agent. The Agent Bank, acting on
instructions from the Banks, the May, 2000 Agent, acting on instructions from
the May, 2000 Lenders, the Note Holders, the Owner Trustee, Indenture Trustee,
and the LC Issuers hereby appoint the Collateral Agent Bank to act as collateral
agent pursuant to the terms of this Agreement and the Security Documents, and
the Collateral Agent Bank hereby accepts such appointment. The relationship
between the Collateral Agent and the holders of the Secured Obligations is and
shall be that of agent and principal only, and nothing contained in this
Agreement or any of the Credit Documents shall be construed to appoint the
Collateral Agent as a trustee for any such holder.
ss.5.2. Limitations on Responsibility of Collateral Agent.
----------- -- -------------- -- ---------- -----
(a) The Collateral Agent shall not be responsible in any
manner whatsoever for the correctness of any recitals, statements,
representations or warranties contained herein or in any Security Document,
except for those made by it herein. The Collateral Agent makes no representation
as to the value or condition of the Collateral or any part thereof, as to the
title of the Company or any Guarantor to the Collateral, as to the security
afforded by this Agreement or any Security Document or, except as set forth in
ss.6, as to the validity, execution, enforceability, legality or sufficiency of
this Agreement or any Security Document, and the Collateral Agent shall incur no
liability or responsibility in respect of any such matters. The Collateral Agent
shall not be responsible for insuring the Collateral, for the payment of taxes,
charges, assessments or liens upon the Collateral or otherwise as to the
maintenance of the Collateral, except as provided in the immediately following
sentence when the Collateral Agent has possession of the Collateral. The
Collateral Agent shall have no duty to the Company or any Guarantor or to the
holders of any of the Secured Obligations as to the care of any Collateral in
its possession or control or in the possession or control of any agent or
nominee of the Collateral Agent or any income thereon or as to the preservation
of rights against prior parties or any other rights pertaining thereto, except
the duty to accord such of the Collateral as may be in its possession
substantially the same care as it accords its own assets and the duty to account
for monies received by it. The Collateral Agent's duties and responsibilities
shall be determined solely by the provisions of this Agreement and the Security
Documents to which it is a party, and the Collateral Agent shall not be liable
or responsible for any duties or obligations set forth in any other document to
which it is not a party.
(b) The Collateral Agent shall not be responsible for any loss
suffered with respect to any investment permitted to be made under this
Agreement and shall not be responsible for the consequences of any oversight or
error of judgment whatsoever, except that the Collateral Agent may be liable for
losses due to its willful misconduct, or negligence. The Collateral Agent shall
not be required to ascertain or inquire as to the performance by the Company of
any of the covenants or agreements contained herein or in any of the Credit
Documents. Neither the Collateral Agent nor any officer, agent or representative
thereof shall be personally liable for any action taken or omitted to be taken
by any such Person in connection with this Agreement or any Security Document
except for such Person's own gross negligence or willful misconduct. Neither the
Collateral Agent nor any officer shall be personally liable for any action taken
by any such Person in accordance with any notice given by the Requisite Parties
in accordance with and pursuant to the terms of this Agreement even if, at the
time such action is taken by any such Person, the Requisite Parties or Persons
purporting to be the Requisite Parties are not so authorized by the Requisite
Parties to give such notice, except where a Responsible Officer of the
Collateral Agent has actual knowledge that such Requisite Parties or Persons
purporting to be the Requisite Parties are not so authorized by the Requisite
Parties to give such notice. The Collateral Agent may execute any of the powers
granted under this Agreement or any of the Security Documents and perform any
duty hereunder or thereunder either directly or by or through agents or
attorneys-in-fact and shall not be responsible for anything done by such agents
or attorneys-in-fact selected by it with due care.
(c) Whenever pursuant to the provisions hereof or of any
Security Document it is required that any party hereto obtain the consent or
approval of the Collateral Agent, or that any matter prove satisfactory to the
Collateral Agent, or that any action be taken at the request, discretion, option
or determination of the Collateral Agent, the Collateral Agent, prior to giving
any such consent or approval or request, or exercising any such option,
discretion or determination, or indicating its satisfaction with any such
matter, shall (except where the failure to do so, in its good faith judgment,
could imperil the Collateral or the Liens thereon) be required to consult with
the Secured Parties in a manner deemed reasonable by the Collateral Agent, and
the Collateral Agent shall be protected in following any direction of the
Requisite Parties or Special Requisite Parties, as the case may be.
(d) The foregoing provisions of this ss.5.2 shall not relieve
the Collateral Agent of any liability for any failure to perform any contractual
duty expressly undertaken by it to be performed under this Agreement if such
liability is caused by the negligence or willful misconduct of the Collateral
Agent.
ss.5.3. Reliance by Collateral Agent; Etc.
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(a) Whenever in the performance of its duties under this
Agreement the Collateral Agent shall deem it necessary or desirable that a
matter be proved or established with respect to any Person in connection with
the taking, suffering or omitting of any action hereunder by the Collateral
Agent, such matter may be conclusively deemed to be proved or established by a
certificate executed by an officer of such Person, and the Collateral Agent
shall have no liability with respect to any action taken, suffered or omitted in
reliance in good faith thereon.
(b) The Collateral Agent may consult with counsel and shall be
fully protected in taking any action hereunder in good faith in accordance with
any advice of such counsel. The Collateral Agent shall have the right but not
the obligation at any time to seek instructions concerning the administration of
this Agreement, the duties created hereunder, or any of the Collateral from any
court of competent jurisdiction.
(c) The Collateral Agent shall be fully protected in relying
in good faith upon any resolution, statement, certificate, instrument, opinion,
report, notice, request, consent, order or other paper or document which it
believes to be genuine and to have been signed or presented by the proper party
or parties. In the absence of its gross negligence or willful misconduct, the
Collateral Agent may conclusively rely in good faith, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificate or opinions furnished to the Collateral Agent in connection with
this Agreement.
(d) The Collateral Agent shall not be deemed to have actual,
constructive, direct or indirect notice or knowledge of the occurrence of any
Event of Default or Actionable Default unless and until a Responsible Officer of
the Collateral Agent shall have received a Notice of Actionable Default or
notice of such Event of Default. The Collateral Agent shall have no obligation
whatsoever either prior to or after receiving such a Notice of Actionable
Default to inquire whether an Actionable Default has, in fact, occurred and
shall be entitled to rely in good faith conclusively, and shall be fully
protected in so relying, on any certificate so furnished to it and shall have no
obligation, absent written instructions from the Requisite Parties, to take or
omit to take any action with respect to such Notice of Actionable Default.
(e) To the extent the Collateral Agent is required (pursuant
to ss.4 or otherwise) to determine any amount of, or take any action to
distribute any amount in respect of, any Secured Obligation hereunder,
it shall have no obligation to do so unless such amount shall have been
certified in writing by the holder of such Secured Obligations as being
the amount in question. Each of the other parties hereto agrees to
certify such amounts upon request of the Collateral Agent. If any
dispute or disagreement shall arise as to the allocation of any sum of
money received by the Collateral Agent hereunder or under any Security
Document, the Collateral Agent shall have the right to deliver such sum
to a court of competent jurisdiction and therein commence an action for
interpleader.
(f) The Collateral Agent shall assume for all purposes
hereunder that the Lien of the Indenture remains outstanding unless and until
the Collateral Agent receives notice from the Indenture Trustee that the Lien of
the Indenture is no longer outstanding.
ss.5.4. Resignation or Removal of the Collateral Agent. The Collateral
Agent may at any time resign by giving at least sixty (60) days prior written
notice thereof to each Secured Party and the Company, and the Collateral Agent
may at any time be removed for cause (consisting of fraud, gross misconduct,
willful or reckless breach of this Agreement or other just cause, as determined
in their discretion by the Requisite Parties) by at least sixty (60) days prior
written notice thereof to the Collateral Agent, each other Secured Party and the
Company given by the Requisite Parties, provided that no resignation or removal
shall be effective until a successor for the Collateral Agent is appointed. Upon
such resignation or removal, the Requisite Parties shall have the right to
appoint a successor Collateral Agent. In addition to the foregoing, Secured
Parties constituting both the Majority Secured Parties and Requisite Parties may
by written agreement remove the Collateral Agent and simultaneously replace it
with a successor without regard to the notice provisions of the first sentence
of this Section so long as the Collateral Agent being removed and such successor
have both given their written consent thereto. If no successor Collateral Agent
shall have been so appointed by the Requisite Parties and shall have accepted
such appointment within forty-five (45) days after the retiring Collateral
Agent's giving of notice of resignation or the giving of notice of removal, as
the case may be, then the retiring Collateral Agent may, on behalf of the
Secured Parties, appoint a successor Collateral Agent, which shall be a
financial institution having a long-term bank deposit rating of not less than
"A" from Standard & Poor's Ratings Group, a Division of McGraw-Hill, Inc., or
"A-2" from Moody's Investors Service, Inc. Upon the acceptance of any
appointment as Collateral Agent hereunder by a successor Collateral Agent, such
successor Collateral Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Collateral Agent, and
the retiring Collateral Agent shall be discharged from its duties and
obligations hereunder. After any retiring Collateral Agent's resignation or
removal, the provisions of this Agreement and the Security Documents shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Collateral Agent. Any corporation into
which the Collateral Agent Bank may be merged or with which it may be
consolidated, or any corporation which acquires all or substantially all of the
corporate trust business of the Collateral Agent Bank, including the Collateral
agency established pursuant to this Agreement, or any corporation resulting from
any merger or consolidation to which the Collateral Agent Bank shall be a party,
shall be the successor to the Collateral Agent Bank without the execution of any
paper.
ss.5.5. Expenses and Indemnification by the Company and BSE. By
countersigning this Agreement, the Company and BSE jointly and severally agree
(a) to reimburse the Collateral Agent, on demand, for any expenses incurred by
the Collateral Agent, including reasonable counsel fees and disbursements and
compensation of agents, arising out of, in any way connected with, or as a
result of, the execution or delivery of this Agreement or any Security Document
or any agreement or instrument contemplated hereby or thereby or the performance
by the parties hereto or thereto of their respective obligations hereunder or
thereunder or in connection with the enforcement or protection of the rights of
the Collateral Agent and the Secured Parties hereunder or under the Security
Documents, (b) to indemnify and hold harmless the Collateral Agent and its
directors, officers, employees and agents, on demand, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Collateral Agent Bank in
its capacity as the Collateral Agent or any of them in any way relating to or
arising out of this Agreement or any Security Document or any action taken or
omitted by them under this Agreement or any Security Document; provided that the
Company and BSE shall not be liable to the Collateral Agent for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross negligence or
willful misconduct of the Collateral Agent or any of its directors, officers,
employees or agents as determined by a final non-appealable order of a court of
competent jurisdiction, and (c) to indemnify and hold harmless the Collateral
Agent, on demand, from and against any and all liabilities which may be imposed
on or incurred by the Collateral Agent Bank (in its capacity as Collateral
Agent) for the net amount of taxes (after taking into account any deduction,
credit or other tax reduction or benefit available by reason of the imposition
of any such tax) in any jurisdiction in which the Collateral Agent Bank would
not otherwise be subject to tax except by reason of its acting under this
Agreement or the Security Documents (directly or through agents); provided that
such indemnification for taxes (i) shall apply only in respect of taxes
attributable to the performance of the Collateral Agent's obligations hereunder
and (ii) shall in no event cover any federal, state, local or other taxes
imposed upon the Collateral Agent Bank with respect to or measured by its gross
or net income or profits or franchise or excise taxes. A statement by the
Collateral Agent that is submitted to the Company and BSE with respect to the
amount of such expenses and containing a basic description thereof and/or the
amount of its indemnification obligation shall be prima facie evidence of the
amount thereof owing to the Collateral Agent or the Collateral Agent Bank, as
the case may be. Except as otherwise expressly provided herein, the Collateral
Agent shall be under no obligation to take any action to protect, preserve or
enforce any rights or interests in the Collateral or to take any action in
connection with the execution or enforcement of its duties hereunder, whether on
its own motion or on request of any other Person, which in the opinion of the
Collateral Agent may involve loss, liability or expense to it, unless one or
more of the Requisite Parties shall offer and furnish security or indemnity,
reasonably satisfactory to the Collateral Agent in accordance herewith, against
loss, liability and expense to the Collateral Agent. Notwithstanding anything to
the contrary contained in this Agreement, or any Security Document, Credit
Document or any other document noted in Section 10 of this Agreement, in the
event that the Collateral Agent is entitled or required to commence an action to
foreclose on such Security Document, Credit Document or other document, or
otherwise exercise its remedies to acquire control or possession of any property
constituting all or part of the Collateral, the Collateral Agent shall not be
required to commence any such action or exercise any such remedy if the
Collateral Agent has determined in good faith that it may incur liability under
any federal or state environmental or hazardous waste law, rule or regulation as
the result of the presence at, or release on or from, any property of any
hazardous materials or waste, as defined under such federal or state laws,
unless it has received security or indemnity from a Person, in an amount and in
form, all satisfactory to the Collateral Agent in its sole discretion,
protecting the Collateral Agent from all such liability. As between the Company
and BSE, the Company agrees to indemnify and hold harmless BSE against, and to
reimburse BSE for, all amounts paid by BSE pursuant to this ss.5.5, except for
amounts paid by BSE as a result of (a) costs, including reasonable counsel fees,
of the Collateral Agent's exercising remedies with respect to Collateral granted
by BSE, and (b) the negligence or willful misconduct of BSE.
ss.5.6. Expenses and Indemnification by Secured Parties. Each of the
Banks, the May, 2000 Lenders, the LC Issuers and the Note Holders severally
agrees (i) to reimburse the Collateral Agent, on demand, in the amount of its
pro rata share for any expenses referred to in ss.5.5 and fees due pursuant to
ss.5.7 which shall not have been reimbursed or paid by the Company or BSE, or
paid from the proceeds of Collateral as provided herein and (ii) to indemnify
and hold harmless the Collateral Agent, the Collateral Agent Bank and its
directors, officers, employees and agents, on demand, in the amount of its pro
rata share, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
referred to in ss.5.5, to the extent the same shall not have been reimbursed by
the Company or BSE or paid from the proceeds of Collateral as provided herein;
provided that no Bank, May, 2000 Lender, LC Issuer, or Note Holder shall be
liable to the Collateral Agent or the Collateral Agent Bank for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross negligence or
willful misconduct of, or the negligence or willful misconduct in the failure to
perform any express duty undertaken under this Agreement to be performed by, the
Collateral Agent or the Collateral Agent Bank or any of its directors, officers,
employees or agents. For purposes of this ss.5.6, the pro rata share of any
Bank's, May, 2000 Lender's, Note Holder's, or LC Issuer's claim for which a
reimbursement or indemnity obligation arises under this ss.5.6 shall be its
percentage share of the sum of the Principal Obligations, the Outstanding Bank
LC Exposure and the Outstanding IRB LC Exposure as of the last day of the
calendar month preceding the date on which such claim was incurred and on which
any Outstanding Bank LC Exposure or Outstanding IRB LC Exposure existed or any
Principal Obligations were outstanding.
ss.5.7. Collateral Agent's Fee. By countersigning this Agreement, the
Company and BSE jointly and severally agree to pay to the Collateral Agent for
the Collateral Agent's own account, a non-refundable Collateral Agent's fee, in
an amount designated in writing by the Collateral Agent to the Company, on the
date hereof and at the end of each quarterly period hereafter until the Secured
Obligations have been paid in full in cash, the commitments represented by the
Bank Credit Documents and the May, 2000 Credit Documents shall have expired or
been reduced to zero or terminated, there is no Outstanding IRB LC Exposure, and
the Collateral Agent no longer has any duties hereunder. As between the Company
and BSE, the Company agrees to reimburse BSE for all amounts paid by BSE
pursuant to this paragraph.
ss.5.8. Appointments of Co-Agent or Separate Agent.
------------------------------------------
(a) Notwithstanding any other provision of this Agreement, at
any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Collateral may at the time be
located, the Collateral Agent shall have the power and may execute and
deliver all instruments to appoint one or more Persons to act as a
co-agent, or separate agent, of all or any part of the Collateral, and
to vest in such Person, in such capacity and for the benefit of the
Secured Parties, subject to the other provisions of this ss.5.8, such
powers, duties, obligations, rights and trusts as the Collateral Agent
may consider necessary or desirable. No co-agent or separate agent
hereunder shall be required to meet the terms of eligibility as a
successor Collateral Agent under ss.5.4 and no notice to Secured
Parties of the appointment of any co-agent or separate agent shall be
required.
(b) Every separate agent and co-agent shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Collateral Agent shall be conferred or
imposed upon and exercised or performed by the Collateral Agent and
such separate agent or co-agent jointly (it being understood that such
separate agent or co-agent is not authorized to act separately without
the Collateral Agent joining in such act), except to the extent that
under any laws of any jurisdiction in which any particular act or acts
are to be performed, the Collateral Agent shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the
Collateral or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate agent or co-agent, but
solely at the direction of the Collateral Agent;
(ii) no agent hereunder shall be personally liable by
reason of any act or omission of any other agent hereunder appointed
with due care or for any action or omission in connection with its
duties hereunder not constituting gross negligence or willful
misconduct; and
(iii) the Collateral Agent may at any time accept the
resignation of or remove any separate agent or co-agent.
(c) Any notice, request or other writing given to the
Collateral Agent shall be deemed to have been given to each of the then separate
agents and co-agents, as effectively as if given to each of them. Every
instrument appointing any separate agent or co-agent shall refer to this
Agreement and the conditions of this ss.5.8. Each separate agent and co-agent,
upon its acceptance of the agency conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Collateral Agent or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Collateral Agent. Every such instrument shall be filed with
the Collateral Agent.
(d) Any separate agent or co-agent may at any time appoint the
Collateral Agent, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect to
this Agreement on its behalf and in its name. If any separate agent or co-agent
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Collateral Agent, to the extent permitted by law, without the appointment of a
new or successor agent.
ss.6. REPRESENTATIONS AND WARRANTIES. Each of the Collateral Agent, the Agent
Bank, the May, 2000 Agent, the May, 2000 Lenders, the LC Issuers, the Note
Holders, the Owner Trustee, the Indenture Trustee, and, by countersigning this
Agreement, the Company and each Guarantor, represents and warrants to the other
parties hereto that (a) the execution, delivery and performance of this
Agreement (i) have been duly authorized by all requisite corporate action on its
part and, in the case of the Agent Bank, by the appropriate number of Banks
required under the Credit Agreement, and (ii) do not conflict with or result in
any breach or contravention of any provision of law, statute, rule or regulation
to which it is subject or any judgment, order, writ, injunction, license or
permit applicable to it and will not conflict with any provision of its
corporate charter or bylaws or any agreement or other instrument binding upon
it; and (b) this Agreement has been duly executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms. Each of the Agent Bank, the LC Issuers, the Note Holders, the
Owner Trustee, the Indenture Trustee, the Company and the Guarantors represents
and warrants to the other parties hereto that there have been no amendments of
any Credit Document to which such Person is a party between November 12, 1999
and the date hereof, except for the amendments dated the date hereof (which are
listed on Schedule B attached hereto).
ss.7. AMENDMENT OF THIS AGREEMENT.
--------- -- ---- ---------
ss.7.1. Amendments. No modification or amendment of this Agreement
shall be effective unless the same shall be in writing and signed by the
Majority Secured Parties and no modification or amendment of any Security
Document shall be effective, nor shall any waiver of any provision of any
Security Document be executed by the Collateral Agent, without the written
consent of the Requisite Parties; provided, however, (i) no amendment or waiver
shall adversely affect any of the Collateral Agent's rights, immunities or
rights to indemnification hereunder or under any of the Security Documents or
expand its duties or reduce any amount payable to the Collateral Agent hereunder
or under any Security Documents without the written consent of the Collateral
Agent; (ii) ss.ss.3 and 5 of this Agreement and any other provision of this
Agreement or of any of the Security Documents affecting the rights and
obligations of the Collateral Agent hereunder may not be amended without the
written consent of the Collateral Agent; (iii) no modification or amendment of
(x) ss.4.1(j), ss.4.9(a), ss.4.9(b) (except for the last sentence thereof),
ss.4.9(c), ss.4.9(e), ss.5.5, ss.5.7, clause (iii) of ss.7.1, ss.8, ss.11.5(a),
ss.11.5(b), ss.11.5(c), or ss.11.11 of this Agreement, or (y) the definitions of
Equity Interests, Equity Issuance, Disposition, Net Proceeds, SBQ, Lease Claims,
Lease Payment Claims on Lease Expense/Indemnity Claims set forth herein, or (z)
ss.4.8, if the effect of the modification or amendment is to increase the vote
that is required to give any waiver with respect to any of the Credit Documents,
shall be effective unless the same shall have been consented to in writing by
the Company; (iv) no modification, amendment or waiver of the provisions of this
Agreement or any of the Security Documents that changes the amount that a
Secured Party receives from a distribution hereunder or that delays the time of
a distribution or expands the obligations of such Secured Party hereunder shall
be effective without the consent of such Secured Party, (v) no amendment,
modification or waiver of the provisions of this Agreement or any of the
Security Documents that could directly or indirectly prejudice the Lease Claims
in a discriminatory manner vis-a-vis the other Secured Parties shall be
effective without the written consent of the Owner Trustee and, for so long as
the Lien of the Indenture remains outstanding, the Indenture Trustee, (vi) the
parties hereto consent to the amendment of the Security Documents to provide
that the Company may retain the proceeds from Special Equity Issuances rather
than paying them to the Collateral Agent for distribution to the Secured
Parties, except that, if the Company intends to directly or indirectly use any
of such proceeds (the "Intended Debt Payment Amount") to repay any of its
Secured Obligations, it shall instead pay such Intended Debt Payment Amount to
the Collateral Agent for distribution in accordance with ss.4.1 of this
Agreement, and (vii) the parties hereto consent, to the extent required hereby,
to the execution of the documents listed on Schedule B hereto, and the parties
hereto request that the Collateral Agent execute such documents listed thereon
as provide for the Collateral Agent to be a party thereto; provided that (x) the
Agent Bank shall be authorized to give any consent on behalf of the Banks under
this paragraph if the Agent Bank represents that it has such authority under the
Credit Agreement, and (y) the May, 2000 Agent shall be authorized to give any
consent on behalf of the May, 2000 Lenders under this paragraph if the May, 2000
Agent represents that it has such authority under the May, 2000 Credit
Agreement. Any Security Document executed after the date hereof shall be
approved by the Requisite Parties as to form and, in the case of Collateral
consisting of any mortgage or deed of trust over a real estate interest, shall
not be deemed to have been accepted until such time as environmental site
assessments satisfactory to the Requisite Parties have been delivered if
requested by such Requisite Parties (and shall not be deemed to have been
accepted until such time as environmental site assessments satisfactory to the
Collateral Agent have been delivered if requested by the Collateral Agent).
ss.7.2. Waivers. No waiver of any provision of this Agreement and no
consent to any departure by any party hereto from the provisions hereof shall be
effective unless such waiver or consent shall be set forth in a written
instrument executed by the party against which it is sought to be enforced, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice to or demand on any party hereto in
any case shall entitle such party to any other or further notice or demand in
the same, similar or other circumstances.
ss.8. APPROVAL BY THE COMPANY AND GUARANTORS; COMPANY'S OBLIGATIONS ABSOLUTE.
-------- -- --- ------- --- ---------- --------- ----------- --------
ss.8.1. General. By countersigning this Agreement, each of the Company
and the Guarantors acknowledges and consents to and agrees to perform and be
bound by each provision of this Agreement which expressly recites that the
Company or such Guarantor is agreeing to such provision by countersigning this
Agreement.
ss.8.2. Obligations Absolute. Nothing contained in this Agreement shall
impair, as between the Company or any Guarantor and the Agent, the Banks, the
May, 2000 Agent, the May, 2000 Lenders, the LC Issuers, and the Note Holders,
(a) the obligation of the Company or such Guarantor (to the extent, with respect
to BSE, set forth in its Guaranty) to pay to the Agent Bank and the Banks all
amounts payable in respect of the Bank Debt as and when the same shall become
due and payable in accordance with the terms thereof, or prevent the Agent Bank
or any of the Banks (except as expressly otherwise provided in this Agreement)
from exercising all rights, powers and remedies otherwise permitted by the Bank
Credit Documents and by applicable law upon a default in the payment of the Bank
Debt, all, however, subject to the rights of the Note Holders and LC Issuers as
set forth in this Agreement; or (b) the obligation of the Company or such
Guarantor (to the extent, with respect to BSE, set forth in its Guaranty) to pay
to the Note Holders all amounts payable in respect of the Note Debt as and when
the same shall become due and payable in accordance with the terms thereof, or
prevent any of the Note Holders (except as expressly otherwise provided in this
Agreement) from exercising all rights, powers and remedies otherwise permitted
by the Note Credit Documents and by applicable law upon a default in the payment
of the Note Debt, all, however, subject to the rights of the Agent Bank, the
Banks and the LC Issuers as set forth in this Agreement, or (c) the obligation
of the Company or such Guarantor (to the extent, with respect to BSE, set forth
in its Guaranty) to pay to the LC Issuers all amounts payable in respect of the
Reimbursement Agreement Debt as and when the same shall become due and payable
in accordance with the terms thereof, or prevent either of the LC Issuers
(except as expressly otherwise provided in this Agreement) from exercising all
rights, powers and remedies otherwise permitted by the Reimbursement Agreements
and by applicable law upon a default in the payment of the Reimbursement
Agreement Debt, all, however, subject to the rights of the Agent Bank, the Banks
and the Note Holders as set forth in this Agreement, or (d) the obligation of
the Company or such Guarantor to pay to the May, 2000 Lenders all amounts
payable in respect of the May, 2000 Debt as and when the same shall become due
and payable in accordance with the terms thereof, or prevent any of the May,
2000 Lenders (except as expressly otherwise provided in this Agreement) from
exercising all rights, powers and remedies otherwise permitted by the May, 2000
Credit Documents and by applicable law upon a default in the payment of the May,
2000 Debt, all, however, subject to the rights of the Agent Bank, the Banks, the
Note Holders and the LC Issuers as set forth in this Agreement.
ss.8.3. No Additional Rights for Company Hereunder. If the Collateral
Agent, the Agent Bank, May, 2000 Agent or any Secured Party shall enforce its
rights or remedies in violation of the terms of this Agreement, the Company and
each Guarantor agrees, by its consent hereto, that it shall not use such
violation as a defense to such enforcement by any such party nor assert such
violation as a counterclaim or basis for setoff or recoupment against any such
party. Nothing contained in this Agreement shall constitute a commitment by any
Bank or other Secured Party to make available to the Company or any Guarantor
any loans or letters of credit which would comprise, in the case of the Banks,
an Additional Advance Amount or, in the case of any other Secured Party, any
additional loans or letters of credit.
ss.9. COLLATERAL AGENT AS AGENT AND LENDER. If a Secured Party is at any time
the Collateral Agent or a co-agent or separate agent pursuant to ss.5.8, such
Secured Party shall, in its individual capacity and as Collateral Agent, have
the same obligations and the same rights, powers and privileges as it would have
had were it not also the Collateral Agent.
ss.10. INTENTIONALLY DELETED.
------------- -------
ss.11. MISCELLANEOUS.
-------------
ss.11.1. Further Assurances, Etc. The Agent Bank, the May, 2000 Agent,
the May, 2000 Lenders, the Banks, the LC Issuers and the Note Holders and, by
countersigning this Agreement, the Company and each Guarantor agree to execute
and deliver such other documents and instruments, in form and substance
reasonably satisfactory to the Collateral Agent, and shall take such other
action, in each case as the Collateral Agent (upon instructions from the
Requisite Parties) or any Secured Party may reasonably request (at the sole, but
reasonable, cost and expense of the Company which, by countersigning this
Agreement, agrees to pay such reasonable costs and expenses), to effectuate and
carry out the provisions of this Agreement including, without limitation, by
recording or filing in such places as the requesting party may deem desirable,
this Agreement or such other documents or instruments.
ss.11.2. No Individual Action; Marshaling; Etc. No holder of any
Secured Obligations may require the Collateral Agent to take or refrain from
taking any action hereunder or under any of the Security Documents or with
respect to any of the Collateral except as and to the extent expressly set forth
in this Agreement. The Collateral Agent shall have no duty to, and the Company
and each Guarantor hereby waives any and all right to require the Collateral
Agent to, marshal any assets or otherwise to take any actions with respect to
marshaling.
ss.11.3. Successors and Assigns.
---------- --- -------
(a) This Agreement shall be binding on and inure to the
benefit of the Collateral Agent, each of the Banks, the Agent Bank, each of the
LC Issuers, each of the Note Holders, May, 2000 Agent, each of the May, 2000
Lenders, the Owner Trustee, the Indenture Trustee, and their respective
successors and assigns, and shall be binding on the Company and each Guarantor
and their respective successors and permitted assigns. Each of the Note Holders
acknowledges that the provisions of this Agreement apply regardless of any sale,
transfer, pledge, assignment, hypothecation or other disposition by such Note
Holder of any Notes to any Person, each of the Banks, LC Issuers, Owner Trustee
and Indenture Trustee agrees that the provisions of this Agreement apply
regardless of any sale, transfer, pledge, assignment, hypothecation or other
disposition by such Bank, LC Issuer, Owner Trustee or Indenture Trustee of any
instrument or right evidencing the Bank Debt, Reimbursement Agreement Debt or
Lease Claims to any Person, and each of the May, 2000 Lenders agrees that the
provisions of this Agreement apply regardless of any sale, transfer, pledge,
assignment, hypothecation or other disposition by such May, 2000 Lender of any
instrument or right evidencing the May, 2000 Debt to any Person. Each Secured
Party agrees that it shall not sell, transfer, assign or otherwise dispose of
any interest in any Secured Obligation unless the buyer, transferee or assignee
assumes in writing the obligations of such Secured Party under this Agreement;
provided, however, that the foregoing shall not prohibit any Secured Party from
pledging or otherwise granting a security interest in any Secured Obligation so
long as the pledgee or other secured party, as a condition to its retaining or
further transferring such Secured Obligation by way of enforcement of such
pledge or other security interest, assumes or causes its transferee to assume in
writing the obligations of such Secured Party under this Agreement.
(b) No Secured Party (other than the Owner Trustee or
Indenture Trustee) may sell any Secured Obligation or any interest therein to
the Company or any Subsidiary or affiliate of the Company, or accept any payment
of a Secured Obligation from an affiliate of the Company that is not a Guarantor
of the applicable Secured Obligation, without the consent of the Requisite
Parties. The Agent Bank shall require each Bank becoming a party to the Credit
Agreement after the date of this Agreement to execute and deliver to the other
parties hereto a counterpart of this Agreement. Any Note Holder assigning all or
a portion of its note shall require its assignee to execute and deliver to all
other parties hereto a counterpart of this Agreement. The May, 2000 Agent shall
require each May, 2000 Lender becoming a party to the May, 2000 Credit Agreement
after the execution of the May, 2000 Credit Agreement to execute and deliver to
the other parties hereto a counterpart of this Agreement.
(c) Nothing contained in this ss.11.3 shall permit any
assignment of any Secured Obligation created or evidenced by any Credit Document
if such assignment is not otherwise permitted by that Credit Document.
ss.11.4. Notices. All notices and other communications made or required
to be given pursuant to this Agreement or the Security Documents shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier or sent
by telecopy, confirmed by delivery via courier or postal service, addressed as
set forth on Schedule 11.4 hereto or to such other address or addresses as any
such party shall specify by notice given to the other parties. Any such notice
and other communications shall be deemed to have been duly given or made and to
have become effective (i) if delivered by hand, overnight courier or facsimile,
at the time of the receipt thereof, and (ii) if sent by registered or certified
first class mail postage prepaid, on the fourth (4th) business day following the
mailing thereof; provided, however, that a Notice of Actionable Default or any
other notice to be delivered to the Collateral Agent pursuant to the terms of
this Agreement shall not be deemed to have been received by a Responsible
Officer of the Collateral Agent until the Collateral Agent actually receives
such notice. Any party hereto (other than the Collateral Agent) that is required
or permitted to give notice to any other party hereto may, in lieu of giving
such notice directly to such other party, give such notice to the Collateral
Agent for delivery to such other party or parties, provided that (a) the party
giving such notice shall expressly instruct the Collateral Agent in writing as
to which parties to deliver such notice to, (b) the Collateral Agent shall give
such notice within two (2) Business Days after receiving such request, and (c)
such notice will only be deemed to have been given (in accordance with clauses
(i) and (ii) of the preceding sentence) to the recipients thereof after such
notice was given by the Collateral Agent, rather than when such request was made
to the Collateral Agent.
ss.11.5. Termination.
-----------
(a) The security interests created by the Security Documents,
including the security interest of the Collateral Agent, shall terminate and all
right, title and interest in the Collateral shall revert to the Company and its
successors and assigns upon the satisfaction of each of the following six
conditions:
(i) receipt by the Collateral Agent from the Agent Bank
of notice stating that either:
(A) the Bank Debt has been paid in full, in cash, and all
commitments under the Credit Agreement have terminated, been
canceled or been reduced to zero; or
(B) the Bank Debt no longer constitutes a Secured Obligation
under the Security Documents; and
(ii) receipt by the Collateral Agent from each of the
Note Holders of notice that either:
(A) the Note Debt held by such Note Holders has been paid in
full, in cash, in accordance with the Note Purchase Agreement; or
(B) the Note Debt held by such Note Holders no longer
constitutes a Secured Obligation under the Security Documents;
and
(iii) receipt by the Collateral Agent from each of the LC
Issuers of notice stating that:
(A) the Reimbursement Obligations due to it have been paid
in full, in cash, and it has no Outstanding IRB LC Exposure; or
--
(B) the Reimbursement Obligations due to it no longer
constitute a Secured Obligation under the Security Documents; and
(iv) receipt by the Collateral Agent from the Owner
Trustee and Indenture Trustee of notice that either:
(A) the Lease Claims have been paid in full, in cash, in
accordance with the Lease Documents; or
(B) the Lease Claims no longer constitute a Secured
Obligation under the Security Documents; and
(v) receipt by the Collateral Agent from the May, 2000
Agent of notice stating that either:
(A) the May, 2000 Debt has been paid in full, in cash, and
all commitments under the May, 2000 Credit Agreement have
terminated, been canceled or been reduced to zero; or
(B) the May, 2000 Debt no longer constitutes a Secured
Obligation under the Security Documents; and
(vi) payment in full in cash of all amounts owed to the
Collateral Agent pursuant to ss.5.5 and ss.5.7.
The Secured Parties agree, severally and not jointly, to provide the
notices contemplated by ss.11.5(a)(i), ss.11.5(a)(ii), ss.11.5(a)(iii),
ss.11.5(a)(iv), and ss.11.5(a)(v) under the circumstances provided in Clause (A)
of such Sections for such notices to be capable of being given, upon the
Company's request and in any event as if ss.9-208 of the Uniform Commercial Code
as in effect in the State of New York on the date hereof were applicable to them
as direct secured parties.
(b) Upon the termination of the Collateral Agent's security
interest and the release of the Collateral in accordance with subsection (a) of
this ss.11.5, the Collateral Agent will promptly, at the Company's written
request and expense, (i) execute and deliver to the Company or BSE, as
applicable, such documents as the Company or BSE, as applicable, shall
reasonably request to evidence the termination of such security interest, the
release of the Collateral or the discharge of the Guaranties and (ii) deliver or
cause to be delivered to the Company or BSE, as applicable, all property of the
Company or BSE, as applicable, constituting Collateral then held by Collateral
Agent or any agent thereof.
(c) This Agreement shall terminate automatically when the
security interests granted under the Security Documents have terminated and the
Collateral has been released to the Company and BSE by the Collateral Agent as
provided in the foregoing provisions of this ss.11.5.
(d) If, at any time, any payment made or value received with
respect to any Secured Obligation must be returned by the Secured Party
receiving the same upon the insolvency, bankruptcy or reorganization of the
Company or any Guarantor, or otherwise, with the effect as though such payment
had not been made or value received, the security interest in the Collateral
created by the Security Documents in favor of the Collateral Agent and the
rights of the Collateral Agent to act as agent hereunder and to receive amounts
pursuant to this Agreement shall be reinstated to the extent those rights had
previously been terminated. In such event each Secured Party (other than the
Owner Trustee and the Indenture Trustee) agrees that it will pay to the other
Secured Parties such amounts so that, after giving effect to the payments
hereunder by all Secured Parties, the amounts received by all Secured Parties
are not in excess of the amounts to be paid to them hereunder as though any
payment so returned had not been made.
(e) Notwithstanding the foregoing, ss.5.5, ss.5.6 and ss.5.7
of this Agreement shall survive, and remain operative and in full force and
effect, regardless of the termination of this Agreement.
ss.11.6. Applicable Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK (WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PRINCIPLES).
ss.11.7. Waiver of Rights. Neither any failure nor any delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, and a single or partial exercise thereof shall not preclude
any other or further exercise or the exercise of any other right, power or
privilege.
ss.11.8. Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provision.
ss.11.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
ss.11.10. Section Headings. The section headings used herein are for convenience
of reference only and are not to affect the construction of or be taken into
consideration in interpreting this Agreement.
ss.11.11. Additional Fees. Contemporaneously with the execution hereof, the
Company (a) shall pay all reasonable counsel fees of the Owner Trustee, the
Indenture Trustee, the Lenders and the Owner Participants under the Indenture in
connection with the negotiation and execution of this Agreement. In addition,
the Company and the Guarantors shall pay all on-going fees and expenses
(including any fees and expenses of counsel) of the Owner Trustee, the Indenture
Trustee, the Owner Participants and the Lenders to enforce this Agreement, and
(b) agree, notwithstanding any language to the contrary contained herein or in
the Lease Documents, to indemnify the Owner Participants against any adverse tax
consequences resulting from the Owner Trustee's entering into this Agreement, or
the Waiver and Amendment No. 1 to the Melt Shop Equipment Financing Documents
dated as of the date hereof among the Company, the Owner Trustee, the Indenture
Trustee, the Owner Participants, and the Lenders. The parties hereto acknowledge
that the Owner Participants and the Lenders are third party beneficiaries of
this ss.11.11 and agree not to amend this ss.11.11 as it pertains to the Owner
Participants and the Lenders without their prior written consent. The Company
acknowledges and agrees that, in executing and delivering this Agreement to the
other parties hereto and in performing its obligations hereunder, the Indenture
Trustee and Owner Trustee shall be entitled to all of the rights and benefits
afforded to the Indenture Trustee and Owner Trustee under the Lease Documents,
including, without limitation, the Company's indemnification obligations under
Section 7.2 of the Participation Agreement, as such term is defined in the
Indenture, and the limitations on liability provided under Section 10.11(a) of
the Participation Agreement and Section 5.04 of the Indenture, and the Company
hereby agrees that its indemnification of the Indenture Trustee and Owner
Trustee under Section 7.2 of the Participation Agreement shall include, subject
to the provisions of Section 7.2(d) thereof, any and all Claims (as defined
therein) arising out of the Indenture Trustee's and Owner Trustee's execution,
delivery and performance of its obligations under this Agreement.
ss.11.12. Complete Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes and all other prior representations, negotiations, writings,
memoranda and agreements. To the extent any provision of this Agreement
conflicts with the Credit Agreement, the Note Purchase Agreements, the May, 2000
Credit Documents, or any other Credit Document (other than the Lease Documents),
as between the Secured Parties the provisions of this Agreement shall be
controlling. Nothing in this Agreement, expressed or implied, is intended to
confer upon any person other than the parties hereto any rights or remedies
under or by reason of this Agreement.
ss.11.13. No Recourse to the Owner Trustee or Indenture Trustee. It is expressly
understood and agreed by the parties hereto that, subject to the proviso
contained in this ss.11.13, all representations, warranties and agreements of
the Owner Trustee and Indenture Trustee hereunder shall be binding upon the
Owner Trustee and Indenture Trustee, only in their respective capacities as
Owner Trustee and Indenture Trustee and (except as expressly provided herein)
the Owner Trustee and Indenture Trustee shall not be liable in their respective
individual capacities for any breach thereof, except for their gross negligence
or willful misconduct, or for breach of their respective agreements,
representations and warranties contained herein, except to the extent agreed or
made in their respective individual capacities; provided, however, that nothing
in this ss.11.13 shall be construed to limit in scope or substance those
representations and warranties of the Owner Trustee or Indenture Trustee made
expressly in its individual capacity set forth herein. The terms "Owner Trustee"
and "Indenture Trustee" as used in this Agreement shall include any successor
thereto as Owner Trustee or Indenture Trustee.
ss.11.14. Interpretation of Concurrent Documents Without limiting the scope of
the Collateral Agent Substitution Agreement (the "Collateral Agent Substitution
Agreement") dated November 12, 1999 by and among State Street Bank and Trust
Company, SouthTrust Bank, National Association, the Secured Parties who are
parties thereto, the Company and the Guarantors (including, by virtue of its
becoming a party thereto on the date hereof, BSE), the parties hereto who are
parties thereto agree to be bound by and shall comply with Section 4(b) of the
Collateral Agent Substitution Agreement.
[Remainder of page left intentionally blank; next page is the signature page.]
<PAGE>
IN WITNESS WHEREOF, the Collateral Agent Bank, the Collateral
Agent, the Agent Bank, the Banks, the Note Holders, the May, 2000 Agent, the
May, 2000 Lenders, the LC Issuers, the Owner Trustee, the Indenture Trustee, the
Company and each of the Guarantors have caused this Collateral Agency and
Intercreditor Agreement to be duly executed by their duly authorized officers,
all as of the day and year first above written.
SOUTHTRUST BANK, National
Association, in its capacity as Collateral Agent and
Collateral Agent Bank
By: /s/ Virginia Petty
-------------------
Name: Virginia Petty
Title: AVP
BANK OF AMERICA, N.A.
in its capacity as Agent Bank
and May, 2000 Agent
By: /s/ Jay T. Wampler
-------------------
Name: Jay T. Wampler
Title: Managing Director
BANK OF AMERICA, N.A.,
in its capacity as Bank, LC Issuer,
and May, 2000 Lender
By: /s/ Jay T. Wampler
-------------------
Name: Jay T. Wampler
Title: Managing Director
PNC BANK, NATIONAL ASSOCIATION, as LC Issuer
By: /s/ Martin E. Mueller
-------------------------
Name: Martin E. Mueller
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
in its capacity as Bank and
as May 2000 Lender
By: /s/ Martin E. Mueller
-----------------
Name: Martin E. Mueller
Title: Vice President
FIRST UNION NATIONAL BANK,
in its capacity as Indenture Trustee
By: /s/ Robert Ashbaugh
--------------------
Name: Robert Ashbaugh
Title: Vice President
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION as
Successor to PNC BANK, NATIONAL ASSOCIATION, in its capacity
as Owner Trustee
By: /s/ Jack R. Cornwall
---------------------
Name: Jack R. Cornwall
Title: Vice President
THE BANK OF NOVA SCOTIA,
in its capacity as Bank and
as May 2000 Lender
By: /s/ Pieter J. Van Schaick
--------------------------
Name: Pieter J. Van Schaick
Title: Relationship Manager
THE BANK OF TOKYO-MITSUBISHI,
LTD, in its capacity as Bank and
as May 2000 Lender
By: /s/ Gary L. England
--------------------
Name: G. England
Title: V.P. & Manager
CIBC, INC.,
in its capacity as Bank and
as May 2000 Lender
By: /s/ Ronald E. Spitzer
----------------------
Name: Ronald E. Spitzer
Title: Agent
AMSOUTH BANK,
in its capacity as Bank and
as May 2000 Lender
By: /s/ Darlene E. Chandler
-------------------
Name: Darlene E. Chandler
Title: Vice President
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK CAYMAN ISLAND BRANCH, in
its capacity as Bank and as May 2000 Lender
By: /s/ J.W. Somers Kurt A. Morris
---------------- -----------------
Name: J.W. Somers Kurt A. Morris
Title: S.V.P. Vice President
GENERAL ELECTRIC CAPITAL CORPORATION,
in its capacity as Bank and as May 2000 Lender
By: /s/ Gregory L. Hong
--------------------
Name: Gregory L. Hong
Title: Duly Authorized Signatory
BANK ONE, NA,
in its capacity as Bank and
as May 2000 Lender
By: /s/ Richard Babcock
--------------------
Name: Richard Babcock
Title: Vice President
THE SANWA BANK, LIMITED,
in its capacity as Bank and
as May 2000 Lender
By: /s/ John T. Fenney
-------------------
Name: John T. Fenney
Title: Vice President
UBS AG, STAMFORD BRANCH,
in its capacity as Bank and
as May 2000 Lender
By: /s/ Marco Breitenmoser
-----------------------
Name: Marco Breitenmoser
Title: Director - Recovery Management
By: /s/ Dorothy McKinley
---------------------
Name: Dorothy McKinley
Title: Director - Loan Portfolio Support U.S.
Very truly yours,
PRINCIPAL LIFE INSURANCE COMPANY (f/k/a Principal Mutual Life
Insurance Company) By: Principal Capital Management, LLC, A
Delaware limited liability company, Its authorized signatory
By: /s/ Sarah J. Pitts
-------------------
Name: Sarah J. Pitts
Title: Counsel
By: /s/ James C. Fifield
---------------------
Name: James C. Fifield
Title: Counsel
PRINCIPAL LIFE INSURANCE COMPANY, ON BEHALF OF ONE OR MORE
SEPARATE ACCOUNTS
By: Principal Capital Management, LLC,
a Delaware limited liability company,
Its authorized signatory
By: /s/ Sarah J. Pitts
-------------------
Name: Sarah J. Pitts
Title: Counsel
By: /s/ Debra Svoboda Epp
----------------------
Name: Debra Svoboda Epp
Title: Counsel
J. ROMEO & CO., as nominee for MONY LIFE INSURANCE COMPANY
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
THE CANADA LIFE ASSURANCE COMPANY
(J. ROMEO & CO. as nominee)
By: /s/ Kevin Phelan
-----------------
Name: Kevin Phelan
Title: Assistant Treasurer
CANADA LIFE INSURANCE COMPANY OF NEW YORK
(J. ROMEO & CO. as nominee)
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
CANADA LIFE INSURANCE COMPANY OF AMERICA
(J. ROMEO & CO. as nominee)
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY (formerly known as
Great Northern Insured Annuity Corporation)
By: /s/ Morian C. Mooers
---------------------
Name: Morian C. Mooers
Title: Investment Officer
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
PIONEER MUTUAL LIFE INSURANCE COMPANY
By: American United Life Insurance Company
By: /s/ Kent R. Adams
------------------
Name: Kent R. Adams
Title: Vice President, American United Life
Insurance Company as Agent for Pioneer
Mutual Life Insurance Company
JEFFERSON-PILOT LIFE INSURANCE COMPANY
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
By: /s/ Robert Bayer
-----------------
Name: Robert Bayer
Title: Investment Officer
SUN LIFE ASSURANCE COMPANY OF CANADA
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements -
for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and
Counsel - for Secretary
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements -
for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and
Counsel - for Secretary
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements -
for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and
Counsel - for Secretary
CENTURY INDEMNITY COMPANY
By: CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
ACE PROPERTY AND CASUALTY
INSURANCE COMPANY
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
LIFE INSURANCE COMPANY OF NORTH AMERICA
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
CONNECTICUT GENERAL
LIFE INSURANCE COMPANY
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
By: /s/ Christopher J. Grant
-------------------------
Name: Christopher J. Grant
Title: Investment Officer
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Richard A. Strait
----------------------
Name: Richard A. Strait
Title: Its Authorized Representative
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By: /s/ Wayne T. Hoffman
---------------------
Name: Wayne T. Hoffman
Title: Investments
By: /s/ Julie Bock
---------------
Name: Julie Bock
Title: Asst. Vice President
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By: /s/ Christopher Wilkos
-----------------------
Name: Christopher Wilkos
Title: Vice President, Corporate Portfolio
Management - Phoenix Home Life
J. ROMEO & CO. as nominee for MONY LIFE INSURANCE COMPANY
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
THE STATE LIFE INSURANCE COMPANY
By: American United Life Insurance Company, its agent
By: /s/ Christopher D. Pahlke
--------------------------
Name: Christopher D. Pahlke
Title: Vice President Private Placements
AMERICAN UNITED LIFE INSURANCE COMPANY
By: /s/ Christopher D. Pahlke
--------------------------
Name: Christopher D. Pahlke
Title: Vice President Private Placements
AMERITAS LIFE INSURANCE CORP.
By: Ameritas Investment Advisors Inc.,
as Agent
By: /s/ Patrick J. Henry
---------------------
Name: Patrick J. Henry
Title: Vice President - Fixed Income Securities
ACACIA 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
<PAGE>
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 Investment Officer
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Mark W. Poeppelman
-----------------------
Name: Mark W. Poeppelman
Title: Associate Vice President
NATIONWIDE LIFE INSURANCE COMPANY (as successor to EMPLOYERS
LIFE INSURANCE COMPANY OF WAUSAU)
By: /s/ Mark W. Poeppelman
-----------------------
Name: Mark W. Poeppelman
Title: Associate Vice President
MINNESOTA LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Steven S. Nelson
---------------------
Name: Steven S. Nelson
Title: Vice President
FEDERATED MUTUAL INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Loren Haugland
-------------------
Name: Loren Haugland
Title: Vice President
FEDERATED LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Wayne R. Schmidt
---------------------
Name: Wayne R. Schmidt
Title: Vice President
THE RELIABLE LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Jeffrey R. Erickson
------------------------
Name: Jeffrey R. Erickson
Title: Vice President
NATIONAL TRAVELERS LIFE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Joseph R. Betlej
---------------------
Name: Joseph R. Betlej
Title: Vice President
GUARANTEE RESERVE LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Marilyn Froelich
---------------------
Name: Marilyn Froelich
Title: Vice President
MTL INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Thomas G. Meyer
--------------------
Name: Thomas G. Meyer
Title: Vice President
BERKSHIRE LIFE INSURANCE COMPANY
By: /s/ Ellen I. Whittaker
-----------------------
Name: Ellen I. Whittaker
Title: Senior Investment Officer
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: Lincoln Investment Management, Inc., Its
Attorney-In-Fact
By: /s/ Annette M. Teders
----------------------
Name: Annette M. Teders
Title: Vice President
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Roi G. Chandy
------------------
Name: Roi G. Chandy
Title: Director, Special Situations
ACCEPTED AND AGREED TO:
BIRMINGHAM STEEL CORPORATION
By: /s/ J. Daniel Garrett
----------------------
Name: J. Daniel Garrett
Title: Vice President - Finance
AMERICAN STEEL & WIRE CORPORATION
BIRMINGHAM EAST COAST HOLDINGS, LLC
NORFOLK STEEL CORPORATION
PORT EVERGLADES STEEL CORPORATION
BIRMINGHAM RECYCLING INVESTMENT COMPANY
MIDWEST HOLDINGS, INC.
CUMBERLAND RECYCLERS, LLC
By: /s/ J. Daniel Garrett
----------------------
Name: J. Daniel Garrett
Title: Vice President - Finance
BIRMINGHAM SOUTHEAST, LLC
By: /s/ J. Daniel Garrett
----------------------
Name: J. Daniel Garrett
Title: Vice President - Finance
<PAGE>
Schedule B-2
SCHEDULE B
Amended and Restated Collateral Agency and Intercreditor Agreement (with
respect to the agreement initially dated as of October 12, 1999)
Amended and Restated Collateral Agency and Intercreditor Agreement (with
respect to the agreement initially dated as of November 12, 1999)
First Amendment to Collateral Agent Substitution Agreement
Letter Agreement re Omnibus Collateral Agreement (with respect to the
agreement initially dated as of October 12, 1999)
Letter Agreement re Omnibus Collateral Agreement (with respect to the
agreement initially dated as of November 12, 1999)
Seventh Amendment to Credit Agreement
Second Amendment to 1993 Note Purchase Agreements
Second Amendment to 1995 Note Purchase Agreements
Fourth Amendment to PNC Reimbursement Agreement
Amendment to Memphis Equipment Lease Agreement
Side Letter regarding Cleveland Facility and Minimum SBQ Division EBITDA
<PAGE>
Exhibit No. 10.25
$25,000,000
CREDIT AGREEMENT
Dated as of May 15, 2000
by and among
,
as Borrower
The financial institutions party hereto
and their assignees under Section 12.5.(d),
as Lenders,
and
BANK OF AMERICA, N.A.,
as Agent
===============================================================================
<PAGE>
TABLE OF CONTENTS*
Article I.
Definitions..........................................................iv
Section 1.1. Definitions.............................................iv
Section 1.2. General...............................................xvii
Article II. Credit
Facility..........................................................xviii
Section 2.1. Revolving Loans.....................................xviii
Section 2.2. Rates and Payment of Interest on Loans................xix
Section 2.3. Number of Interest Periods............................xix
Section 2.4. Repayment of Loans....................................xix
Section 2.5. Prepayments............................................xx
Section 2.6. Expiration of Interest Period..........................xx
Section 2.7. Notes..................................................xx
Article III. Payments and Other GeneralProvisions............................xxi
Section 3.1. Payments..............................................xxi
Section 3.2. Pro Rata Treatment....................................xxi
Section 3.3. Sharing of Payments,Etc...............................xxi
Section 3.4. Several Obligations..................................xxii
Section 3.5. Minimum Amounts......................................xxii
Section 3.6. Computations.........................................xxii
Section 3.7. Usury................................................xxii
Section 3.8. Agreement Regarding Interest and Charges............xxiii
Section 3.9. Statements of Account...............................xxiii
Section 3.10. Defaulting Lenders..................................xxiii
Section 3.11. Taxes................................................xxiv
Article IV. Yield Protection, Etc...........................................xxvi
Section 4.1. Additional Costs; Capital Adequacy...................xxvi
Section 4.2. Suspension of LIBOR Loans...........................xxvii
Section 4.3. Illegality..........................................xxvii
Section 4.4. Compensation........................................xxvii
Section 4.5. Treatment of Affected Loans........................xxviii
Section 4.6. Assumptions Concerning Funding of LIBOR Loans........xxix
Article V. Conditions
Precedent..........................................................xxix
Section 5.1. Initial Conditions Precedent.........................xxix
Section 5.2. Conditions Precedent to All Loans...................xxxiv
Section 5.3. Termination of Agreement............................xxxiv
Article VI. Representations and Warranties..................................xxxv
Section 6.1. Representations and Warranties.......................xxxv
Section 6.2. Survival of Representations and Warranties, Etc........xl
Article VII. Affirmative Covenants............................................xl
Section 7.1. Preservation of Existence and Similar Matters..........xl
Section 7.2. Compliance with Applicable Law and Material
Contracts...........................................xli
Section 7.3. Visits and Inspections................................xli
Section 7.4. Use of Proceeds.......................................xli
Section 7.5. Environmental Matters................................xlii
Section 7.6. Further Assurances...................................xlii
Section 7.7. Agreement to Provide Security........................xlii
Section 7.8. Future Real Property................................xliii
Section 7.9. Future Intellectual Property........................xliii
Section 7.10. Certificates Regarding Authorization, Etc...........xliii
Section 7.11. Appraisals...........................................xliv
Section 7.12. Incorporation of Certain Covenants of BSC Credit
Agreement..........................................xliv
Article VIII.
Information........................................................xliv
Section 8.1. Quarterly Financial Statements.......................xliv
Section 8.2. Year-End Statements..................................xliv
Section 8.3. Copies of Other Reports...............................xlv
Section 8.4. Notice of Litigation and Other Matters................xlv
Section 8.5. Other Information....................................xlvi
Article IX. Negative Covenants..............................................xlvi
Section. 9.1. Transfer of Bonds or Rights Under Certain
Documents..........................................xlvi
Section. 9.2. Amendment of Bond Documents or Lease Documents.......xlvi
Section 9.3. Creation or Acquisition of Subsidiaries.............xlvii
Article X.
Default..........................................................xlviii
Section 10.1. Events of Default.................................xlviii
Section 10.2. Remedies Upon Event of Default.........................l
Section 10.3. Allocation of Proceeds................................li
Section 10.4. Performance by Agent.................................lii
Section 10.5. Rights Cumulative....................................lii
Section 10.6. Rescission of Acceleration by Requisite Lenders......lii
Article XI. The Agent.......................................................liii
Section 11.1. Authorization and Action............................liii
Section 11.2. Agent's Reliance,Etc................................liii
Section 11.3. Notice of Defaults...................................liv
Section 11.4. Bank of America as Lender............................liv
Section 11.5. Lender Credit Decision, Etc...........................lv
Section 11.6. Indemnification of Agent..............................lv
Section 11.7. Successor Agent......................................lvi
Article XII.
Miscellaneous.......................................................lvi
Section 12.1. Notices...............................................lvi
Section 12.2. Expenses.............................................lvii
Section 12.3. Setoff..............................................lviii
Section 12.4. Litigation; Jurisdiction; Other Matters; Waivers....lviii
Section 12.5. Successors and Assigns.................................lx
Section 12.6. Amendments...........................................lxii
Section 12.7. Nonliability of Agent and Lenders....................lxii
Section 12.8. Confidentiality.....................................lxiii
Section 12.9. Indemnification.....................................lxiii
Section 12.10.Termination; Survival.................................lxv
Section 12.11.Severability of Provisions............................lxv
Section 12.12.GOVERNING LAW.........................................lxv
Section 12.13.Counterparts..........................................lxv
Section 12.14.No Fiduciary Relationship.............................lxv
Section 12.15.Limitation of Liability..............................lxvi
Section 12.16.Entire Agreement.....................................lxvi
Section 12.17.Construction.........................................lxvi
Section 12.18.BSC Credit Agreement Provisions......................lxvi
Section 12.19. SUBJECT TO INTERCREDITOR AGREEMENT................lxvii
SCHEDULE 1.1(a) Commitments
SCHEDULE 6.1.(d) Agreements Limiting Debt
SCHEDULE 6.1.(f) Title to Properties; Leases
SCHEDULE 6.1.(g) Debt
EXHIBIT A Form of Assignment and Acceptance Agreement
EXHIBIT B Form of Notice of Borrowing
EXHIBIT C Form of Security Agreement
EXHIBIT D Form of Revolving Note
EXHIBIT E Form of Guarantee
<PAGE>
THIS CREDIT AGREEMENT dated as of May 15, 2000 by and among , a limited
liability company organized under the laws of the State of Delaware (the
"Borrower"), each of the financial institutions initially a signatory hereto
together with their assignees pursuant to Section 12.5.(d), and BANK OF AMERICA,
N.A., as Agent.
WHEREAS, the Lenders desire to make available to the Borrower a
$25,000,000 revolving credit facility on the terms and conditions contained
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto agree as follows:
ARTICLE 1 DEFINITIONS
Section 1 Definitions.
In addition to terms defined elsewhere herein, the following terms
shall have the following meanings for the purposes of this Agreement:
"Accession Agreement" means an Accession Agreement to be executed by a
Restricted Subsidiary substantially in the form of Exhibit H to the Omnibus
Agreement.
"Additional Costs" has the meaning given that term in Section 4.1.
"Adjusted Eurodollar Rate" means, with respect to each Interest Period
for any LIBOR Loan, the rate obtained by dividing (a) LIBOR for such Interest
Period by (b) a percentage equal to 1 minus the stated maximum rate (stated as a
decimal) of all reserves, if any, required to be maintained against
"Eurocurrency liabilities" as specified in Regulation D of the Board of
Governors of the Federal Reserve System (or against any other category of
liabilities which includes deposits by reference to which the interest rate on
LIBOR Loans is determined or any category of extensions of credit or other
assets which includes loans by an office of any Lender outside of the United
States of America to residents of the United States of America).
"Affiliate" means, at any time, a Person (other than a Subsidiary) (a)
that directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Borrower, (b) that
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Borrower, or (c) 5% or more of the Voting Stock (or in the case of a Person that
is not a corporation, 5% or more of the equity interest) of which is
beneficially owned by the Borrower or a Subsidiary. For purposes of this
definition, "control" (including with correlative meanings, the terms
"controlled by" and "under common control with") means the possession directly
or indirectly of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities or
by contract or otherwise. Notwithstanding the foregoing, no Lender shall be
considered to be an Affiliate of BSC or the Borrower solely as a result of
holding a Warrant or any security issued or issuable upon the exercise of a
Warrant.
"Agent" means Bank of America, N.A., in its capacity as agent for the
Lenders under the terms of this Agreement, and any successor agent.
"Agreement" means this Credit Agreement.
"Agreement Date" means the date as of which this Agreement is dated.
"Applicable Law" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all governmental bodies and all
orders and decrees of all courts, tribunals and arbitrators.
"Applicable Margin" means (a) four percent (4.00%) with respect to
LIBOR Loans and (b) three percent (3.00%) with respect to Base Rate Loans.
"Assignee" has the meaning given that term in Section 12.5.(d).
"Assignment and Acceptance Agreement" means an Assignment and
Acceptance Agreement among a Lender, an Assignee and the Agent, substantially in
the form of Exhibit A.
"Assignment, Assumption and Security Agreements" means, collectively,
the Rolling Mill Assignment, Assumption and Security Agreement and the Casting
Mill Assignment, Assumption and Security Agreement.
"Bank of America" means Bank of America, N.A., and its respective successors and
assigns.
"Base Rate" means the per annum rate of interest equal to the greater
of (a) the Prime Rate or (b) the Federal Funds Rate plus one-half of one percent
(0.5%). Any change in the Base Rate resulting from a change in the Prime Rate or
the Federal Funds Rate shall become effective as of 12:01 a.m. E.S.T. of the
Business Day on which each such change occurs. The Base Rate is a reference rate
used by the Agent in determining interest rates on certain loans and is not
intended to be the lowest rate of interest charged on any extension of credit to
any debtor.
"Base Rate Loan" means a Loan bearing interest at a rate based on the
Base Rate.
"Borrower" has the meaning set forth in the introductory paragraph
hereof and shall include the Borrower's successors and assigns.
"BSC" means Birmingham Steel Corporation, a corporation organized under
the laws of the State of Delaware, together with its successors and assigns.
"BSC Credit Agreement" means that certain Credit Agreement dated as of
March 17, 1997 by and among BSC, the financial institutions party thereto and
their assignees under Section 12.5(d) thereof, PNC Bank, National Association
and the Bank of Nova Scotia, as Co-Agents, and Bank of America, formerly known
as NationsBank, N.A. (South), as Administrative Agent and Arranger.
"BSC Credit Agreement Default" means any event or condition set forth
in Section 10.1 of the BSC Credit Agreement.
"BSC Credit Agreement Representations" means the representations and
warranties of BSC and its Subsidiaries made or deemed made under the BSC Credit
Agreement or any other Loan Document (as defined in the BSC Credit Agreement),
including without limitation, the representation and warranties set forth in
Article VI of the BSC Credit Agreement.
"BSC Guarantee" means (a) that certain Guarantee dated as of October
12, 1999 executed by certain of BSC's Restricted Subsidiaries in favor of the
Collateral Agent and the other Secured Parties and (b) that certain Guarantee
dated as of November 12, 1999 executed by certain of BSC's Restricted
Subsidiaries in favor of the Collateral Agent and the other Secured Parties. So
long as both such agreements remain in effect, the term "BSC Guarantee" shall be
deemed to be a collective reference to both such agreements. If at any time only
one of such agreements shall be in effect, the term "BSC Guarantee" shall be
deemed to be a reference to such agreement.
"Business Day" means (a) any day other than a Saturday, Sunday or other
day on which banks in Atlanta, Georgia or Charlotte, North Carolina are
authorized or required to close and (b) with reference to a LIBOR Loan, any such
day that is also a day on which dealings in Dollar deposits are carried out in
the London interbank market.
"Capital Expenditures" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets which
are not, in accordance with GAAP, treated as expense items for such Person in
the year made or incurred or as a prepaid expense applicable to a future year or
years, and shall include all Capitalized Lease obligations.
"Capitalized Lease" means, at any time, a lease with respect to which,
under GAAP, the lessee is or will be required to recognize the acquisition of an
asset and the incurrence of a liability at such time.
"Cartersville Bond Documents" means (a) the Cartersville Indenture, (b)
the Real Property Lease Agreement dated as of December 1, 1998 by and between
Development Authority of Bartow County and the Borrower, (c) the Cartersville
Equipment Lease, and (d) the other documents, instruments and agreements
executed and delivered by the Borrower, Development Authority of Bartow County
or SunTrust Bank, Atlanta, as Trustee, in connection with any of the foregoing.
"Cartersville Bonds" means the "Bonds" under and as defined in the
Cartersville Indenture.
"Cartersville Casting Lease Equipment" means the "Equipment" under and
as defined in the Casting Mill Equipment Lease.
"Cartersville Equipment Lease" means that certain Lease Agreement
(Equipment) dated as of December 1, 1998 by and between Development Authority of
Bartow County and the Borrower.
"Cartersville Indenture" means that certain Indenture of Trust dated as
of December 1, 1998 by and between Development Authority of Bartow County and
SunTrust Bank, Atlanta, as Trustee.
"Cartersville Indenture Default" means an "Event of Default" under and
as defined in the Cartersville Indenture, including, without limitation, any of
the events described in Section 1101 thereof.
"Cartersville Rolling Mill Equipment" means the "Equipment" under and
as defined in the Rolling Mill Lease.
"Casting Mill Assignment, Assumption and Security Agreement" means that
certain Assignment, Assumption and Security Agreement dated as of December 31,
1998 by and between the Borrower and NationsBanc Leasing.
"Casting Mill Equipment Lease" means that certain Equipment Lease
Agreement dated as of December 31, 1998 by and among the Borrower and BSC, as
lessees, and NationsBanc Leasing, as lessor, including all schedules and riders
attached thereto.
"Casting Mill Lease Default" means a "Default" under and as defined in
the Casting Mill Equipment Lease, including, without limitation, any of the
events described in Section 15 thereof.
"Casting Mill Lease Documents" means (a) the Casting Mill Equipment
Lease, (b) that certain Purchase Agreement Assignment dated as of December 31,
1998 executed by the Borrower in favor of NationsBanc Leasing, (c) the Casting
Mill Assignment, Assumption and Security Agreement, and (d) the other documents,
instruments and agreements executed and delivered by the Borrower in connection
with any of the foregoing.
"Collateral" means any Property in which the Collateral Agent holds a
Lien as security for any of the Obligations.
"Collateral Agent" has the meaning given that term in the Intercreditor
Agreement.
"Commitment" means, as to each Lender, such Lender's obligation to make
Revolving Loans pursuant to Section 2.1. in an amount up to, but not exceeding,
the amount set forth for such Lender on Schedule 1.1.(a) as such Lender's
"Commitment Amount" or as set forth in the applicable Assignment and Acceptance
Agreement, as the same may be reduced from time to time as appropriate to
reflect any assignments to or by such Lender effected in accordance with Section
12.5.
"Commitment Percentage" means, as to each Lender, the ratio, expressed
as a percentage, of (a) the amount of such Lender's Commitment to (b) the
aggregate amount of the Commitments of all Lenders hereunder; provided, however,
that if at the time of determination the Commitments have terminated or been
reduced to zero, the "Commitment Percentage" of each Lender shall be the
Commitment Percentage of such Lender in effect immediately prior to such
termination or reduction.
"Convert," "Conversion" and "Converted" each refers to the conversion
of a LIBOR Loan into a Base Rate Loan.
"Debt" means, with respect to a Person and at the time of determination
thereof, all of the following (without duplication): (a) obligations of such
Person in respect of money borrowed; (b) obligations of such Person (other than
trade debt incurred in the ordinary course of business), (i) represented by
notes payable, or drafts accepted, in each case representing extensions of
credit, (ii) evidenced by bonds, debentures, notes or similar instruments, or
(iii) constituting purchase money indebtedness, conditional sales contracts,
title retention debt instruments or other similar instruments, upon which
interest charges are customarily paid or that are issued or assumed as full or
partial payment for property; (c) obligations of such Person in respect of
mandatorily redeemable Securities issued by such Person; (d) Capitalized Lease
obligations of such Person; (e) all reimbursement obligations of such Person
under any letters of credit or acceptances (whether or not the same have been
presented for payment); and (f) all Debt of other Persons which (i) such Person
has guaranteed or (ii) are secured by a Lien on any property of such Person
(whether or not such Person has assumed liability with respect to such Debt).
"Default" means any of the events specified in Section 10.1., whether
or not there has been satisfied any requirement for the giving of notice, the
lapse of time, or both.
"Defaulting Lender" has the meaning set forth in Section 3.10.
"Dollars" or "$" means the lawful currency of the United States of
America.
"Effective Date" means the later of: (a) the Agreement Date; and (b) the date on
which all of the conditions precedent set forth in Section 5.1. shall have been
fulfilled or waived in writing by the Requisite Lenders.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of the
Borrower, any of its Subsidiaries or any of its other ERISA Affiliates or is
assumed by the Borrower, any of its Subsidiaries or any of its other ERISA
Affiliates in connection with any acquisition or other business combination or
(b) has at any time been maintained for the employees of the Borrower, any of
its Subsidiaries or any other current or former ERISA Affiliate.
"Environmental Laws" means any Applicable Law relating to environmental
protection or the manufacture, storage, disposal or clean-up of Hazardous
Materials including, without limitation, the following: Clean Air Act, 42
U.S.C.ss.7401 et seq; Federal Water Pollution Control Act, 33 U.S.C.ss.1251 et
seq.; Solid Waste Disposal Act, 42 U.S.C.ss.6901 et seq.; Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.ss. 9601 et
seq.; National Environmental Policy Act, 42 U.S.C.ss.4321 et seq.; regulations
of the Environmental Protection Agency and any applicable rule of common law and
any judicial interpretation thereof relating primarily to the environment or
Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect from time to time.
"ERISA Affiliate" means any entity required at any relevant time to be
aggregated with the Borrower or any Subsidiary under Sections 414(b) or (c) of
the Internal Revenue Code. In addition, for purposes of any provision of this
Agreement that relates to Section 412(n) of the Internal Revenue Code, the term
ERISA Affiliate shall mean any entity aggregated with the Borrower or any
Subsidiary under Sections 414(b), (c), (m) or (o) of the Internal Revenue Code.
"E.S.T." means Charlotte, North Carolina time.
"Event of Default" means any of the events specified in Section 10.1.,
provided that any requirement for notice or lapse of time or any other condition
has been satisfied.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward to the nearest 1/100th of 1%) equal to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding such day,
provided that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate quoted to the
Agent by federal funds dealers selected by the Agent on such day on such
transaction as determined by the Agent.
"First Amendment to Memphis Melt Shop Lease" means that certain Waiver
and Amendment No. 1 to the Melt Shop Equipment Financing Documents dated as of
May 15, 2000 by and among BSC, as Lessee, Chase Manhattan Trust Company,
National Association, as Owner Trustee, First Union National Bank, as Indenture
Trustee, Bank of America, National Association and AmSouth Leasing, Ltd., each
as Owner Participants, and each of the holders of the Equipment Notes issued
under the Memphis Melt Shop Indenture and identified on the signature pages
thereto.
"GAAP" means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, bureau or entity (including, without limitation, the
Federal Deposit Insurance Corporation, the Comptroller of the Currency or the
Federal Reserve Board, any central bank or any comparable authority) or any
arbitrator with authority to bind a party at law.
"Guarantee" means a Guarantee executed by BSC and each of the
Guarantors party to the BSC Guarantee pursuant to which each Guarantor
guarantees the payment and performance of all of the Obligations, such Guarantee
to be substantially in the form of Exhibit E.
"Guarantor" means each Person that executes, or otherwise becomes a
party to, the Guarantee.
"Hazardous Materials" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable Environmental Laws as "hazardous substances", "hazardous materials",
"hazardous wastes", "toxic substances" or any other formulation intended to
define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity,
"TLCP" toxicity, or "EP toxicity"; (b) oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development, production or use of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; (d) asbestos in any form; and (e) electrical equipment which contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty parts per million.
"Intellectual Property" means all patents, licenses, franchises,
trademarks, trademark rights, trade names, trade name rights, trade secrets and
any license agreement relating to any of the foregoing.
"Intercreditor Agreement" means, collectively, (a) that certain Amended
and Restated Collateral Agency and Intercreditor Agreement dated as of May 15,
2000 by and among BSC, each of the Subsidiaries of BSC a party thereto, the
Secured Parties described therein and the Collateral Agent, which amended and
restated that certain Collateral Agency and Intercreditor Agreement dated as of
October 12, 1999 by and among the same parties and (b) that certain Amended and
Restated Collateral Agency and Intercreditor Agreement dated as of May 15, 2000
by and among BSC, each of the Subsidiaries of BSC a party thereto, the Secured
Parties described therein and the Collateral Agent, which amended and restated
that certain Collateral Agency and Intercreditor Agreement dated as of November
12, 1999 by and among the same parties. So long as both such agreements shall
remain in effect, the term "Intercreditor Agreement" shall be deemed to be a
collective reference to both such agreements. If at any time only one of such
agreements shall be in effect, the term "Intercreditor Agreement" shall be
deemed to be a reference to such agreement.
"Interest Period" means, with respect to any LIBOR Loan, each period
commencing on the date such LIBOR Loan is made or the last day of the next
preceding Interest Period for such Loan and ending on the numerically
corresponding day in the first calendar month thereafter, except that each
Interest Period that commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
subsequent calendar month. Notwithstanding the foregoing: (i) if any Interest
Period would otherwise end after the Termination Date, such Interest Period
shall end on the Termination Date; (ii) each Interest Period that would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); and (iii)
notwithstanding the immediately preceding clause (i), no Interest Period for any
LIBOR Loan shall have a duration of less than one month and, if the Interest
Period for any LIBOR Loan would otherwise be a shorter period, such Loan shall
not be available hereunder for such period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Lender" means each financial institution from time to time party
hereto as a "Lender", together with its respective successors and assigns.
"Lending Office" means, for each Lender and for each Type of Loan, the
office of such Lender specified as such on its signature page hereto or in the
applicable Assignment and Acceptance Agreement, or such other office of such
Lender as such Lender may notify the Agent in writing from time to time.
"LIBOR" means, for any LIBOR Loan for any Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period. If for any
reason such rate is not available, the term "LIBOR Rate" shall mean, for any
LIBOR Loan for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"LIBOR Loans" means Loans bearing interest at a rate based on LIBOR.
"Lien" means any interest in Property constituting any pledge,
assignment, hypothecation, mortgage, security interest, deposit arrangement,
conditional sale or title retaining contract, sale and leaseback transaction,
effective financing statement filing, lessor's or lessee's interest under any
lease, subordination of any claim or right, or any other arrangement, express or
implied, under which such Property is transferred, sequestered or otherwise
identified for the purpose of subjecting the same to the payment of Debt or
performance of any other obligation in priority to the payment of general,
unsecured creditors. The term "Lien" includes, with respect to stock,
stockholder agreements, voting trust agreements, buyback agreements and all
similar arrangements, but excludes, with respect to any ownership interest in a
limited liability company or partnership, limited liability company agreements,
operating agreements, partnership agreements, voting trust agreements, buy-back
agreements and all similar arrangements. For the purposes hereof, the Borrower
and each Subsidiary is deemed to be the owner of any Property that it shall have
acquired or holds subject to a conditional sale agreement, Capitalized Lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person for security purposes, and such retention or
vesting is deemed a Lien.
"Loan" means a Revolving Loan.
"Loan Document" means this Agreement, each Note, the Guarantee, each
Security Document, each document, instrument or agreement executed and delivered
by the Borrower to or in favor of the Agent in connection with or relating to
this Agreement, and each other document or instrument now or hereafter executed
and delivered by the Borrower or any Subsidiary to or in favor of the Agent or
any Lender in connection with, pursuant to or relating to this Agreement.
"Material Adverse Effect" means a materially adverse effect on (a) the
business, assets, liabilities, financial condition or results of operations of
the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower or any Subsidiary to perform its obligations under any Loan Document to
which it is a party, (c) the validity or enforceability of any of the Loan
Documents, or (d) the timely payment of the principal of or interest on the
Loans or other amounts payable in connection therewith.
"Material Contract" means any contract or other arrangement (other than
any of the Loan Documents), whether written or oral, to which the Borrower or
any Subsidiary is a party as to which the breach, nonperformance, cancellation
or failure to renew by any party thereto could reasonably be expected to have a
Material Adverse Effect.
"Memphis Melt Shop Indenture" means that certain Trust Indenture and
Security Agreement dated as of September 30, 1997 by and between Chase Manhattan
Trust Company, National Association, as Owner Trustee, and First Union National
Bank, as Indenture Trustee.
"Memphis Melt Shop Lease" means that certain Equipment Lease Agreement
dated as of September 30, 1997 by and between Chase Manhattan Trust Company,
National Association, as Owner Trustee, as Lessor, and BSC, as Lessee.
"Mortgages" means separate Deeds to Secure Debt, Deeds of Trust,
Mortgages or other similar instruments executed by the Borrower and conveying to
the Collateral Agent for the benefit of the Lenders a Lien in each parcel of
Real Property of the Borrower, each substantially in the form of the mortgages
executed and delivered by BSC in connection with the Intercreditor Agreement and
otherwise in form and substance satisfactory to the Collateral Agent, the Agent
and the Requisite Lenders (or their respective special counsel).
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower, any of its Subsidiaries or any other
ERISA Affiliate is making, or is accruing an obligation to make, contributions
or has made, or been obligated to make, contributions.
"NationsBanc Leasing" means Banc of America Leasing & Capital, LLC,
successor to NationsBanc Leasing Corporation, together with its successors and
assigns.
"Note" means a Revolving Note.
"Note Purchase Agreement Amendments" means those certain Second
Amendments to Note Purchase Agreements each dated as of May 15, 2000 by and
among the parties to the Note Purchase Agreements.
"Note Purchase Agreement Representations" means the representations and
warranties of BSC and its Subsidiaries made or deemed made under the Note
Purchase Agreements.
"Note Purchase Agreements" means, collectively, (a) those certain Note
Purchase Agreements dated as of September 1, 1993, with each of the institutions
named in Annex 1 thereto, as amended by an Amendment to Note Purchase Agreement
dated as of October 18, 1996, an Amendment to 1993 Note Purchase Agreement dated
as of December 14, 1998, a Waiver and Third Amendment to 1993 Note Purchase
Agreement dated as of October 12, 1999, by the related Amended and Restated Note
Purchase Agreement dated as of October 12, 1999 and that certain First Amendment
to Note Purchase Agreement dated as of November 12, 1999, under and pursuant to
which BSC issued and sold to such institutions an aggregate principal amount of
One Hundred Thirty Million Dollars ($130,000,000) of BSC's 10.03% Senior Notes
due December 15, 2005; and (b) those certain Note Purchase Agreements dated as
of September 15, 1995, as amended by an Amendment to 1995 Note Purchase
Agreement dated as of December 14, 1998, by a Waiver and Second Amendment to
Note Purchase Agreement dated as of October 12, 1999, by the related Amended and
Restated Note Purchase Agreement dated as of October 12, 1999, and by the
related First Amendment to Note Purchase Agreement dated as of November 12,
1999, with each of the institutions named in Annex 1 thereto, under and pursuant
to which BSC issued and sold to such institutions (i) an aggregate principal
amount of Seventy-Six Million Dollars ($76,000,000) of BSC's 9.71% Series A
Senior Notes due December 15, 2002, (ii) an aggregate principal amount of
Fourteen Million Dollars ($14,000,000) of BSC's 9.82% Series B Senior Notes due
December 15, 2005, and (iii) an aggregate principal amount of Sixty Million
Dollars ($60,000,000) of BSC's 9.92% Series C Senior Notes due December 15,
2005.
"Notice of Borrowing" means a notice in the form of Exhibit B to be
delivered to the Agent pursuant to Section 2.1.(b) evidencing the Borrower's
request for a borrowing of Revolving Loans.
"Obligations" means, individually and collectively: (a) the aggregate
principal balance of, and all accrued and unpaid interest on, all Loans; (b) all
other indebtedness, liabilities, obligations, covenants and duties of the
Borrower owing to the Agent or any Lender, of every kind, nature and
description, under or in respect of this Agreement or any of the other Loan
Documents, including, without limitation, all indemnification obligations,
whether direct or indirect, absolute or contingent, due or not due, contractual
or tortious, liquidated or unliquidated, and whether or not evidenced by any
promissory note.
"Omnibus Agreement" means (a) that certain Omnibus Collateral Agreement
dated as of October 12, 1999 executed by BSC and certain Subsidiaries of BSC a
party thereto in favor of the Collateral Agent and the Secured Parties
identified therein and (b) that certain Omnibus Collateral Agreement dated as of
November 12, 1999 executed by BSC and certain Subsidiaries of BSC a party
thereto in favor of the Collateral Agent and the Secured Parties identified
therein. So long as both such agreements remain in effect, the term "Omnibus
Agreement" shall be deemed to be a collective reference to both such agreements.
If at any time only one of such agreements shall be in effect, the term "Omnibus
Agreement" shall be deemed to be a reference to such agreement.
"Outstanding Credit" means the aggregate principal amount of all
outstanding Revolving Loans.
"Participant" has the meaning given that term in Section 12.5.(c).
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
agency.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Post-Default Rate" means, in respect of any principal of any Loan or
any other Obligation, a rate per annum equal to two percent (2.0%) plus the
interest rate for Base Rate Loans as provided in Section 2.2.(a); provided that,
if the amount so in default is the principal of a LIBOR Loan, the "Post-Default
Rate" for such principal shall be two percent (2.0%) plus the interest rate for
such Loan as provided in Section 2.2.(a).
"Prime Rate" means the rate of interest per annum announced publicly by
the Agent as its prime rate from time to time. The Prime Rate is not necessarily
the best or the lowest rate of interest offered by the Agent or any Lender.
"Principal Office" means the main office of the Agent located in
Charlotte, North Carolina, or such other office of the Agent as the Agent may
designate from time to time.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"Real Property" means all real property in which the Borrower holds any
fee simple interest or estate for years, together with all of the Borrower's
interest in all improvements thereon, including without limitation, all real
property associated with the Borrower's facilities located in Cartersville,
Georgia and Jackson, Mississippi.
"Register" has the meaning given that term in Section 12.5.(e).
"Regulatory Change" means, with respect to any Lender, any change
effective after the Agreement Date in Applicable Law (including without
limitation, Regulation D of the Board of Governors of the Federal Reserve
System) or the adoption or making after such date of any interpretation,
directive or request applying to a class of financial institutions, including
such Lender, of or under any Applicable Law (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful) by any
Governmental Authority or monetary authority charged with the interpretation or
administration thereof or compliance by any Lender with any request or directive
regarding capital adequacy.
"Reimbursement Agreement Amendment" means that certain Fourth Amendment
to Reimbursement Agreement dated as of May 15, 2000 by and between BSC and PNC
Bank, National Association.
"Requisite Lenders" means, as of any date, Lenders having more than
66-2/3% of the aggregate amount of the Commitments, or, if the Commitments have
been terminated or reduced to zero, Lenders holding more than 66-2/3% of the
principal amount of the Loans.
"Restricted Subsidiary" has the meaning given that term in the BSC
Credit Agreement.
"Revolving Loan" means a loan made by the Lenders to the Borrower
pursuant to Section 2.1.(a).
"Revolving Note" has the meaning given that term in Section 2.7.(a).
"Rolling Mill Assignment, Assumption and Security Agreement" means that
certain Assignment, Assumption and Security Agreement dated as of June 29, 1999
by and between the Borrower and the Rolling Mill Lease Trustee.
"Rolling Mill Lease" means that certain Equipment Lease Agreement dated
as of June 29, 1999 by and among the Borrower and BSC, as lessees, and the
Rolling Mill Lease Trustee, in its capacity as Owner Trustee under and as
defined in the Rolling Mill Trust Agreement.
"Rolling Mill Lease Default" means a "Default" under and as defined in
the Rolling Mill Lease, including, without limitation, any of the events
described in Section 15 thereof.
"Rolling Mill Lease Documents" means (a) the Rolling Mill Lease, (b)
that certain Purchase Agreement Assignment dated as of June 29, 1999 executed by
the Borrower in favor of the Rolling Mill Lease Trustee, (c) the Rolling Mill
Assignment, Assumption and Security Agreement, and (d) the other documents,
instruments and agreements executed and delivered by the Borrower in connection
with any of the foregoing.
"Rolling Mill Lease Trustee" means First Security National Bank
Association, its successors and assigns.
"Rolling Mill Owner Participants" means each of the Owner Participants
under and as defined in the Rolling Mill Trust Agreement.
"Rolling Mill Trust Agreement" means that certain Trust Agreement
(Birmingham Steel Trust No. 99-1) dated as of June 29, 1999 among each of the
Rolling Mill Owner Participants a party thereto and the Rolling Mill Lease
Trustee.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, together with all rules and regulations issued thereunder.
"Security" means a "security" as defined by Section 2(1) of the
Securities Act.
"Security Agreement" means a Security Agreement executed by the
Borrower conveying to the Collateral Agent a Lien in, subject to the limitations
of Section 7.7., all personal Property of the Borrower, such Security Agreement
to be substantially in the form of Exhibit C.
"Security Document" means the Security Agreement, any Mortgage, the
Guarantee, and any and all other instruments or agreements pursuant to which a
Lien is created or arises, or a guaranty is provided for, in favor of the
Collateral Agent, the Agent or any Lender to secure or guarantee any of the
Obligations.
"Seventh Amendment to BSC Credit Agreement" means a Seventh Amendment
to Credit Agreement by and among various parties to the BSC Credit Agreement.
"Solvent" means, when used with respect to any Person, that (a) the
fair value and the fair salable value of its assets (excluding any Debt due from
any Affiliate of such Person) are each in excess of the fair valuation of its
total liabilities (including all contingent liabilities); and (b) such Person is
able to pay its debts or other obligations in the ordinary course as they mature
and (c) that the Person has capital not unreasonably small to carry on its
business and all business in which it proposes to be engaged.
"Subsidiary" means with respect to a Person, at any time, a
corporation, partnership, limited liability company or other business entity of
which such Person owns, directly or indirectly, more than 50% (by number of
votes) of each class of Voting Stock at such time.
"Taxes" has the meaning given that term in Section 3.11.
"Termination Date" means January 31, 2002; provided, however, if the
Lenders shall have received satisfactory evidence that either (a) Chase
Manhattan Trust Company, National Association, as Owner Trustee, and First Union
National Bank, as Indenture Trustee, have determined that as of January 31, 2002
(i) BSC has placed its Memphis facility (including the "Equipment" under and as
defined in Memphis Melt Shop Lease) back into normal and continuous operation
and (ii) BSC is otherwise in full compliance with Section 8 of the Memphis Melt
Shop Lease, or (b) the parties to the First Amendment to Memphis Melt Shop Lease
shall have extended the termination date of the waiver provided for in Section 1
of the First Amendment to Memphis Melt Shop Lease from January 31, 2002 to a
later date, then the Termination Date shall be extended to the earlier of (x)
March 17, 2002 or (y) the later date referred to in the immediately preceding
clause (b).
"Transaction Documents" means this Agreement, the Security Documents,
the other Loan Documents, the Note Purchase Agreement Amendments, the
Reimbursement Agreement Amendment, the Seventh Amendment to BSC Credit
Agreement, and any document, instrument or agreement executed by the Borrower,
BSC, any other Restricted Subsidiary, any Lender or the Collateral Agent in
connection with any of the foregoing.
"Type" with respect to any Loan, refers to whether such Loan is a LIBOR
Loan or Base Rate Loan.
"Voting Stock" shall mean capital stock (or equivalent ownership
interest) of any class or classes of a corporation, partnership, limited
liability company or other business entity, the holders of which are ordinarily,
in the absence of contingencies, entitled to elect corporate directors, managers
or trustees (or Persons performing similar functions).
"Warrant Agreement" means that certain Warrant Purchase Agreement dated
as of May 15, 2000 entered into by BSC, the Lenders and the other parties
thereto.
"Warrants" has the meaning given that term in the Warrant Agreement.
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary 100% of
all of the equity Securities (except directors' qualifying shares) of which are
owned by any one or more of the Borrower and the Borrower's other wholly-owned
Subsidiaries at such time.
Section 1 General.
All accounting terms shall be interpreted or determined in accordance
with GAAP as in effect on the Agreement Date. References in this Agreement to
"Sections", "Articles", "Exhibits" and "Schedules" are to sections, articles,
exhibits and schedules herein and hereto unless otherwise indicated. references
in this Agreement to any document, instrument or agreement (a) shall include all
exhibits, schedules and other attachments thereto, (b) shall include all
documents, instruments or agreements issued or executed in replacement thereof,
to the extent permitted hereby and (c) shall mean such document, instrument or
agreement, or replacement or predecessor thereto, as amended, supplemented,
restated or otherwise modified prior to the date hereof, and to the extent
permitted hereby, as the same may be further amended, supplemented, restated or
otherwise modified from time to time. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and plural, and pronouns stated in the masculine, feminine or neuter
gender shall include the masculine, the feminine and the neuter. Unless
explicitly set forth to the contrary, a reference to "Subsidiary" means a
Subsidiary of the Borrower or a Subsidiary of such Subsidiary and a reference to
an "Affiliate" means a reference to an Affiliate of the Borrower. Titles and
captions of Articles, Sections, subsections and clauses in this Agreement are
for convenience only, and neither limit nor amplify the provisions of this
Agreement.
ARTICLE 2 CREDIT FACILITY
Section 2 Revolving Loans.
(a) Generally. Subject to the terms and conditions hereof, during the
period from the Effective Date to but excluding the Termination Date, each
Lender severally and not jointly agrees to make Revolving Loans to the Borrower
in an aggregate principal amount at any one time outstanding up to, but not
exceeding, the amount of such Lender's Commitment. Subject to the terms and
conditions of this Agreement, during the period from the Effective Date to but
excluding the Termination Date, the Borrower may borrow and repay Revolving
Loans hereunder. Once repaid, any principal amount of a Revolving Loan may not
be reborrowed.
(b) Requesting Revolving Loans. The Borrower shall give the Agent
notice pursuant to a Notice of Borrowing or telephonic notice of each borrowing
of Revolving Loans. Each Notice of Borrowing shall be delivered to the Agent
before 11:00 a.m. E.S.T. on the date 15 calendar days prior to the proposed date
of such borrowing. Any such telephonic notice shall include all information to
be specified in a written Notice of Borrowing and shall be promptly confirmed in
writing by the Borrower pursuant to a Notice of Borrowing sent to the Agent by
telecopy on the same day of the giving of such telephonic notice. The Agent will
transmit by telecopy the Notice of Borrowing (or the information contained in
such Notice of Borrowing) to each Lender promptly upon receipt by the Agent.
Each Notice of Borrowing or telephonic notice of each borrowing shall be
irrevocable once given and binding on the Borrower. No Notice of Borrowing can
be given within 30 calendar days of the giving of any other Notice of Borrowing.
The Borrower shall only be entitled to request borrowings of Base Rate Loans (i)
if it cannot borrow LIBOR Loans because an Interest Period therefor is not
available as a result of clause (iii) of the last sentence of the definition of
the term "Interest Period", or (ii) as contemplated by Section 4.5.
(c) Disbursements of Revolving Loan Proceeds. No later than 10:00 a.m.
E.S.T. on the date specified in the Notice of Borrowing, each Lender will make
available for the account of its applicable Lending Office to the Agent at the
Principal Office, in immediately available funds, the proceeds of the Revolving
Loan to be made by such Lender. With respect to Revolving Loans to be made after
the Effective Date, unless the Agent shall have been notified by any Lender
prior to the specified date of borrowing that such Lender does not intend to
make available to the Agent the Revolving Loan to be made by such Lender on such
date, the Agent may assume that such Lender will make the proceeds of such
Revolving Loan available to the Agent on the date of the requested borrowing as
set forth in the Notice of Borrowing and the Agent may (but shall not be
obligated to), in reliance upon such assumption, make available to the Borrower
the amount of such Revolving Loan to be provided by such Lender. Subject to
satisfaction of the applicable conditions set forth in Article V. for such
borrowing, the Agent will make the proceeds of such borrowing available to the
Borrower no later than 3:00 p.m. E.S.T. on the date and at the account specified
by the Borrower in such Notice of Borrowing.
Section 2 Rates and Payment of Interest on Loans.
(a) Rates.
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(i) Generally. The Borrower promises to pay to the Agent for
account of each Lender interest on the unpaid principal amount of each
Loan made by such Lender for the period from and including the date of
the making of such Loan to but excluding the date such Loan shall be
paid in full, at the following per annum rates:
(A) during such periods as such Loan is a Base Rate
Loan, at the Base Rate (as in effect from time to time), plus
the Applicable Margin; and
(B) during such periods as such Loan is a LIBOR Loan,
at the Adjusted Eurodollar Rate for such Loan for the Interest
Period therefor, plus the Applicable Margin.
(ii) Default Interest. Notwithstanding the foregoing, during
the continuance of an Event of Default, the Borrower shall pay to the
Agent for the account of each Lender interest at the Post-Default Rate
on the outstanding principal amount of all Loans made by such Lender
and on any other amount payable by the Borrower hereunder or under the
Notes held by such Lender to or for the account of such Lender
(including without limitation, accrued but unpaid interest to the
extent permitted under Applicable Law).
(b) Payment. Accrued interest on each Loan shall be payable (i) in the
case of all Loans, monthly on the last day of each calendar month, (ii) in the
case of a LIBOR Loan, on the last day of each Interest Period therefor and upon
the payment or prepayment thereof or the Conversion of such Loan (but only on
the principal amount so paid, prepaid or Converted) and (iii) in the case of any
Loan, upon the payment or prepayment thereof in full. Interest payable at the
Post-Default Rate shall be payable from time to time on demand. Promptly after
the determination of any interest rate provided for herein or any change
therein, the Agent shall give notice thereof to the Lenders to which such
interest is payable and to the Borrower. All determinations by the Agent of an
interest rate hereunder shall be conclusive and binding on the Lenders and the
Borrower for all purposes, absent manifest error.
Section 2.3. Number of Interest Periods.
There may be no more than 1 Interest Period for Revolving Loans outstanding
at the same time.
Section 2 Repayment of Loans.
The Borrower shall repay the entire outstanding principal amount of,
and all accrued but unpaid interest on, the Revolving Loans on the Termination
Date.
Section 2 Prepayments.
(a) Optional. Subject to Section 4.4., the Borrower may prepay any
Loan at any time without premium or penalty. The Borrower shall give the
Agent at least three Business Days prior written notice of the prepayment
of any Loan.
(b) Mandatory.
(i) Outstandings in Excess of Commitments. If at any time the
Outstanding Credit exceeds the aggregate amount of the Commitments in
effect at such time, the Borrower shall immediately pay to the Agent
for the account of the Lenders the amount of such excess.
(ii) Application of Mandatory Prepayments. Any payment
received by the Agent as a result of the immediately preceding clause
(i) shall be applied to pay all amounts of principal outstanding on the
Loans pro rata in accordance with Section 3.2. If the Borrower is
required to pay any outstanding LIBOR Loans by reason of this
subsection (b) prior to the end of the applicable Interest Period
therefor, the Borrower shall pay all amounts due under Section 4.4.
Section 2.6. Expiration of Interest Period.
Subject to (a) clause (iii) of the last sentence of the definition of
the term "Interest Period" and (b) Section 4.5., so long as the Revolving Loans
are LIBOR Loans, a new Interest Period for such Revolving Loans shall commence
as of the last day of the immediately preceding Interest Period.
Section 2 Notes.
(a) Revolving Note. The Revolving Loans made by each Lender shall, in
addition to this Agreement, also be evidenced by a promissory note of the
Borrower substantially in the form of Exhibit D (each a "Revolving Note"),
payable to the order of such Lender in a principal amount equal to the amount of
its Commitment as originally in effect and otherwise duly completed.
(b) Records; Endorsement on Transfer. The date, amount, interest rate,
Type and duration of Interest Periods (if applicable) of each Loan made by each
Lender to the Borrower, and each payment made on account of the principal
thereof, shall be recorded by such Lender on its books and such entries shall be
binding on the Borrower absent manifest error. Prior to the transfer of any
Note, the Lender shall endorse such items on such Note or any allonge thereof;
provided that the failure of such Lender to make any such recordation or
endorsement shall not affect the obligations of the Borrower to make a payment
when due of any amount owing hereunder or under such Note in respect of the
Loans evidenced by such Note.
ARTICLE 3 PAYMENTS AND OTHER GENERAL PROVISIONS
Section 3 Payments.
Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrower under this
Agreement or any other Loan Document shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the Agent at its
Principal Office, not later than 11:00 a.m. E.S.T. on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day).
Subject to Sections 3.2. and 3.3., the Agent, or any Lender for whose account
any such payment is made, may (but shall not be obligated to) debit the amount
of any such payment which is not made by such time from any special or general
deposit account of the Borrower with the Agent or such Lender, as the case may
be (with notice to the Borrower, the other Lenders and the Agent). The Borrower
shall, at the time of making each payment under this Agreement or any Note,
specify to the Agent the amounts payable by the Borrower hereunder to which such
payment is to be applied. Each payment received by the Agent for the account of
a Lender under this Agreement or any Note shall be paid promptly to such Lender
at the applicable Lending Office of such Lender. If the due date of any payment
under this Agreement or any other Loan Document would otherwise fall on a day
which is not a Business Day such date shall be extended to the next succeeding
Business Day and interest shall be payable for the period of such extension.
Section 3 Pro Rata Treatment.
Except to the extent otherwise provided herein: (a) each borrowing from
the Lenders under Section 2.1.(a) shall be made from the Lenders pro rata
according to the amounts of their respective Commitments; (b) each payment or
prepayment of principal of Revolving Loans by the Borrower shall be made for
account of the Lenders pro rata in accordance with the respective unpaid
principal amounts of the Revolving Loans held by them, provided that if
immediately prior to giving effect to any such payment in respect of any
Revolving Loans the outstanding principal amount of the Revolving Loans shall
not be held by the Lenders pro rata in accordance with their respective
Commitments in effect at the time such Loans were made, then such payment shall
be applied to the Revolving Loans in such manner as shall result, as nearly as
is practicable, in the outstanding principal amount of the Revolving Loans being
held by the Lenders pro rata in accordance with their respective Commitments;
(c) each payment of interest on Revolving Loans by the Borrower shall be made
for account of the Lenders pro rata in accordance with the amounts of interest
on such Loans then due and payable to the respective Lenders; and (d) the making
of Revolving Loans shall be made pro rata among the Lenders according to the
amounts of their respective Commitments (in the case of making of Loans) and the
then current Interest Period for each Lender's portion of each Loan of such Type
shall be coterminous.
Section 3 Sharing of Payments, Etc.
If a Lender shall obtain payment of any principal of, or interest on,
any Loan made by it to the Borrower under this Agreement, or, subject to Section
12.3., shall obtain payment on any other Obligation through the exercise of any
right of counterclaim or similar right or otherwise or through voluntary
prepayments directly to a Lender or other payments made by the Borrower to a
Lender not in accordance with the terms of this Agreement and such payment
should be distributed to the Lenders pro rata in accordance with Section 3.2. or
Section 10.3, as applicable, such Lender shall promptly purchase from the other
Lenders participations in (or, if and to the extent specified by such Lender,
direct interests in) the Loans made by the other Lenders or other Obligations
owed to such other Lenders in such amounts, and make such other adjustments from
time to time as shall be equitable, to the end that all the Lenders shall share
the benefit of such payment (net of any reasonable expenses which may be
incurred by such Lender in obtaining or preserving such benefit) pro rata in
accordance with Section 3.2. or Section 10.3, as applicable. To such end, all
the Lenders shall make appropriate adjustments among themselves (by the resale
of participations sold or otherwise) if such payment is rescinded or must
otherwise be restored. The Borrower agrees that any Lender so purchasing a
participation (or direct interest) in the Loans or other Obligations owed to
such other Lenders may, subject to Section 12.3., exercise all rights of
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans in the amount of such participation.
Nothing contained herein shall require any Lender to exercise any such right or
shall affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness or obligation
of the Borrower.
Section 2 Several Obligations.
No Lender shall be responsible for the failure of any other Lender to
make a Loan or to perform any other obligation to be made or performed by such
other Lender hereunder, and the failure of any Lender to make a Loan or to
perform any other obligation to be made or performed by it hereunder shall not
relieve the obligation of any other Lender to make any Loan or to perform any
other obligation to be made or performed by such other Lender.
Section 3.5. Minimum Amounts.
(a) Borrowings. Each borrowing of Loans shall be in an aggregate minimum
amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof.
(b) Prepayments. Each voluntary prepayment of Revolving Loans shall be in
an aggregate minimum amount of $1,000,000 and integral multiples of $100,000 in
excess thereof.
Section 3 Computations.
Unless otherwise expressly set forth herein, any accrued interest on
any Loan or other Obligation due hereunder shall be computed on the basis of a
year of 360 days and the actual number of days elapsed.
Section 3 Usury.
In no event shall the amount of interest due or payable on the Loans or
other Obligations exceed the maximum rate of interest allowed by Applicable Law
and, if any such payment is paid by the Borrower or received by any Lender, then
such excess sum shall be credited as a payment of principal, unless the Borrower
shall notify the respective Lender in writing that the Borrower elects to have
such excess sum returned to it forthwith. It is the express intent of the
parties hereto that the Borrower not pay and the Lenders not receive, directly
or indirectly, in any manner whatsoever, interest in excess of that which may be
lawfully paid by the Borrower under Applicable Law.
Section 3 Agreement Regarding Interest and Charges.
The parties hereto hereby agree and stipulate that the only charge
imposed upon the Borrower for the use of money in connection with this Agreement
is and shall be the interest specifically described in Sections 2.2.(a).
Notwithstanding the foregoing, the parties hereto further agree and stipulate
that all agency fees, facility fees, underwriting fees, default charges, late
charges, funding or "breakage" charges, increased cost charges, attorneys' fees
and reimbursement for costs and expenses paid by the Agent or any Lender to
third parties or for damages incurred by the Agent or any Lender, are charges
made to compensate the Agent or any such Lender for underwriting or
administrative services and costs or losses performed or incurred, and to be
performed or incurred, by the Agent and the Lenders in connection with this
Agreement and shall under no circumstances be deemed to be charges for the use
of money pursuant to Official Code of Georgia Annotated Sections 7-4-2 and
7-4-18. All charges other than charges for the use of money shall be fully
earned and nonrefundable when due.
Section 3 Statements of Account.
The Agent will maintain records with respect to, and account to the
Borrower quarterly with respect to, Loans, accrued interest, charges and
payments made pursuant to this Agreement and the other Loan Documents, and such
records and accounts rendered by the Agent shall be deemed conclusive upon
Borrower absent manifest error. The failure of the Agent to maintain such
records or to deliver any such statement of account shall not relieve or
discharge the Borrower from any of its obligations hereunder.
Section 3.10. Defaulting Lenders.
(a) Generally. If for any reason any Lender (a "Defaulting Lender")
shall fail or refuse to perform any of its obligations under this Agreement or
any other Loan Document to which it is a party within the time period specified
for performance of such obligation or, if no time period is specified, if such
failure or refusal continues for a period of two Business Days after notice from
the Agent, then, in addition to the rights and remedies that may be available to
the Agent or the Borrower under this Agreement or Applicable Law, such
Defaulting Lender's right to participate in the administration of the Loans,
this Agreement and the other Loan Documents, including without limitation, any
right to vote in respect of, to consent to or to direct any action or inaction
of the Agent or to be taken into account in the calculation of the Requisite
Lenders, shall be suspended during the pendency of such failure or refusal. If a
Lender is a Defaulting Lender because it has failed to make timely payment to
the Agent of any amount required to be paid to the Agent hereunder (without
giving effect to any notice or cure periods), in addition to other rights and
remedies which the Agent or the Borrower may have under the immediately
preceding provisions or otherwise, the Agent shall be entitled (i) to collect
interest from such Defaulting Lender on such delinquent payment for the period
from the date on which the payment was due until the date on which the payment
is made at the Federal Funds Rate, (ii) to withhold or setoff and to apply in
satisfaction of the defaulted payment and any related interest, any amounts
otherwise payable to such Defaulting Lender under this Agreement or any other
Loan Document and (iii) to bring an action or suit against such Defaulting
Lender in a court of competent jurisdiction to recover the defaulted amount and
any related interest. Any amounts received by the Agent in respect of a
Defaulting Lender's Loans shall not be paid to such Defaulting Lender and shall
be held by the Agent and either applied against the purchase price of such Loans
under the following subsection (b) or paid to such Defaulting Lender upon the
Defaulting Lender's curing of its default. A Defaulting Lender shall not be
entitled to the benefits of Section 12.15. with respect to events or
circumstances arising or occurring on or after it became a Defaulting Lender.
(b) Purchase of Defaulting Lender's Commitment. Any Lender who is not a
Defaulting Lender shall have the right, but not the obligation, in its sole
discretion, to acquire all of a Defaulting Lender's Commitment. If more than one
Lender exercises such right, each such Lender shall have the right to acquire
such proportion of such Defaulting Lender's Commitment as they may mutually
agree. Upon any such purchase, the Defaulting Lender's interest in the Loans and
its rights hereunder (but not its liability in respect thereof or under the Loan
Documents or this Agreement to the extent the same relate to the period prior to
the effective date of the purchase) shall terminate on the date of purchase, and
the Defaulting Lender shall promptly execute all documents reasonably requested
to surrender and transfer such interest to the purchaser thereof, including an
appropriate Assignment and Acceptance Agreement and shall comply with the
provisions of Section 12.5.(d) in connection with such Assignment and Acceptance
Agreement. The purchase price for the Commitment of a Defaulting Lender shall be
equal to the amount of the principal balance of the Loans outstanding and owed
by the Borrower to the Defaulting Lender. Prior to payment of such purchase
price to a Defaulting Lender, the Agent shall apply against such purchase price
any amounts retained by the Agent pursuant to the next to last sentence of the
immediately preceding subsection (a). The Defaulting Lender shall be entitled to
receive all unpaid interest and other amounts owed to it by the Borrower under
the Loan Documents which accrued prior to the date of the default by the
Defaulting Lender, to the extent the same are received by the Agent from or on
behalf of the Borrower. There shall be no recourse against any Lender or the
Agent for the payment of such sums except to the extent of the receipt of
payments from any other party or in respect of the Loans.
Section 3 Taxes.
(a) Taxes Generally. All payments by the Borrower of principal of, and
interest on, the Loans and all other Obligations shall be made free and clear of
and without deduction for any present or future excise, stamp or other taxes,
fees, duties, levies, imposts, charges, deductions, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, but excluding
(i) franchise taxes, (ii) any taxes (other than withholding taxes) that would
not be imposed but for a connection between the Agent or a Lender and the
jurisdiction imposing such taxes (other than a connection arising solely by
virtue of the activities of the Agent or such Lender pursuant to or in respect
of this Agreement or any other Loan Document), (iii) any withholding taxes
payable with respect to payments hereunder or under any other Loan Document
under Applicable Law in effect on the Agreement Date, (iv) any taxes imposed on
or measured by any Lender's assets, net income, receipts or branch profits and
(v) any taxes arising after the Agreement Date solely as a result of or
attributable to a Lender changing its designated Lending Office after the date
such Lender becomes a party hereto (such non-excluded items being collectively
called "Taxes"). If any withholding or deduction from any payment to be made by
the Borrower hereunder is required in respect of any Taxes pursuant to any
Applicable Law, then the Borrower will:
(i) pay directly to the relevant Governmental Authority the full
amount required to be so withheld or deducted;
(ii) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
Governmental Authority; and
(iii) pay to the Agent for its account or the account of the
applicable Lender, as the case may be, such additional amount or amounts as
is necessary to ensure that the net amount actually received by the Agent
or such Lender will equal the full amount that the Agent or such Lender
would have received had no such withholding or deduction been required.
(b) Tax Indemnification. If the Borrower fails to pay any Taxes when
due to the appropriate Governmental Authority or fails to remit to the Agent,
for its account or the account of the respective Lender, as the case may be, the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Agent and the Lenders for any incremental Taxes, interest or
penalties that may become payable by the Agent or any Lender as a result of any
such failure. For purposes of this Section, a distribution hereunder by the
Agent or any Lender to or for the account of any Lender shall be deemed a
payment by the Borrower.
(c) Tax Forms. Prior to the date that any Lender or participant
organized under the laws of a jurisdiction outside the United States of America
becomes a party hereto, such Person shall deliver to the Borrower and the Agent
such certificates, documents or other evidence, as required by the Internal
Revenue Code or Treasury Regulations issued pursuant thereto (including Internal
Revenue Service Forms W-8ECI or W-8BEN, as applicable, or appropriate successor
forms), properly completed, currently effective and duly executed by such Lender
or participant establishing that payments to it hereunder and under the Notes
are (i) not subject to United States Federal backup withholding tax or (ii) not
subject to United States Federal withholding tax under the Internal Revenue Code
because such payment is either effectively connected with the conduct by such
Lender or participant of a trade or business in the United States or totally
exempt from United States Federal withholding tax by reason of the application
of the provisions of a treaty to which the United States is a party or such
Lender is otherwise exempt.
ARTICLE 4 YIELD PROTECTION, ETC.
Section 3 Additional Costs; Capital Adequacy.
(a) Additional Costs. The Borrower shall promptly pay to the Agent for
the account of a Lender from time to time such amounts as such Lender may
determine to be necessary to compensate such Lender for any costs incurred by
such Lender that it determines are attributable to its making or maintaining of
any LIBOR Loans or its obligation to make any LIBOR Loans hereunder, or any
reduction in any amount receivable by such Lender under this Agreement or any of
the other Loan Documents in respect of any of such Loans or such obligations or
the maintenance by such Lender of capital in respect of its Loans or its
Commitments (such increases in costs and reductions in amounts receivable being
herein called "Additional Costs"), resulting from any Regulatory Change that:
(i) changes the basis of taxation of any amounts payable to such Lender under
this Agreement or any of the other Loan Documents in respect of any of such
Loans or its Commitments (other than taxes imposed on or measured by the overall
net income of such Lender or of its Lending Office for any of such Loans by the
jurisdiction in which such Lender has its principal office or such Lending
Office); or (ii) imposes or modifies any reserve, special deposit or similar
requirements (other than Regulation D of the Board of Governors of the Federal
Reserve System or other reserve requirement utilized in the determination of the
Adjusted Eurodollar Rate for such Loan) relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, such Lender, or
any commitment of such Lender (including, without limitation, the Commitments of
such Lender hereunder); or (iii) has or would have the effect of reducing the
rate of return on capital of such Lender to a level below that which such Lender
could have achieved but for such Regulatory Change (taking into consideration
such Lender's policies with respect to capital adequacy).
(b) Lender's Suspension of LIBOR Loans. Without limiting the effect of
the provisions of the immediately preceding subsection (a), if by reason of any
Regulatory Change, any Lender either (i) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a category of
deposits or other liabilities of such Lender that includes deposits by reference
to which the interest rate on LIBOR Loans is determined as provided in this
Agreement or a category of extensions of credit or other assets of such Lender
that includes LIBOR Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets that it may hold, then, if such
Lender so elects by notice to the Borrower (with a copy to the Agent), the
obligation of such Lender to make LIBOR Loans hereunder shall be suspended until
such Regulatory Change ceases to be in effect (in which case the provisions of
Section 4.5. shall apply).
(c) Notification and Determination of Additional Costs. Each of the
Agent and each Lender agrees to notify the Borrower of any event occurring after
the Agreement Date entitling the Agent or such Lender to compensation under any
of the preceding subsections of this Section as promptly as practicable;
provided, however, the failure of the Agent or any Lender to give such notice
shall not release the Borrower from any of its obligations hereunder. The Agent
or such Lender, as the case may be, agrees to furnish to the Borrower a
certificate setting forth the basis and amount of each request by the Agent or
such Lender for compensation under this Section. Determinations by the Agent or
any Lender of the effect of any Regulatory Change shall be conclusive absent
manifest error, provided that such determinations are made on a reasonable basis
and in good faith.
Section 2 Suspension of LIBOR Loans.
Anything herein to the contrary notwithstanding, if, on or prior to the
determination of any Adjusted Eurodollar Rate for any Interest Period:
(a) the Agent reasonably determines (which determination shall
be conclusive) that quotations of interest rates for the relevant
deposits referred to in the definition of LIBOR are not being provided
in the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for LIBOR Loans as provided herein or is
otherwise unable to determine the Adjusted Eurodollar Rate, or
(b) the Agent reasonably determines (which determination shall
be conclusive) that the relevant rates of interest referred to in the
definition of LIBOR upon the basis of which the rate of interest for
LIBOR Loans for such Interest Period is to be determined are not likely
adequately to cover the cost to the Lenders of making or maintaining
LIBOR Loans for such Interest Period;
then the Agent shall give the Borrower and each Lender prompt notice thereof
and, so long as such condition remains in effect, the Lenders shall be under no
obligation to, and shall not, make additional LIBOR Loans and the Borrower
shall, on the last day of each current Interest Period for each outstanding
LIBOR Loan, either repay such Loan or Convert such Loan into a Base Rate Loan.
Section 4.3. Illegality.
Notwithstanding any other provision of this Agreement, if it becomes
unlawful for any Lender to honor its obligation to make or maintain LIBOR Loans
hereunder, then such Lender shall promptly notify the Borrower thereof (with a
copy to the Agent) and such Lender's obligation to make LIBOR Loans shall be
suspended until such time as such Lender may again make and maintain LIBOR Loans
(in which case the provisions of Section 4.5. shall be applicable).
Section 2 Compensation.
The Borrower shall pay to the Agent for account of each Lender, upon
the request of such Lender through the Agent, such amount or amounts as shall be
sufficient (in the reasonable opinion of such Lender) to compensate it for any
loss, cost or expense that such Lender determines is attributable to:
(a) any payment or prepayment (whether mandatory or optional)
of a LIBOR Loan or Conversion of a LIBOR Loan, made by such Lender for
any reason (including, without limitation, acceleration) on a date
other than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any of the applicable conditions
precedent specified in Article V. to be satisfied) to borrow a LIBOR
Loan from such Lender on the date for such borrowing,
such compensation to include, without limitation, an amount equal to the excess,
if any, of (i) the amount of interest that otherwise would have accrued on the
principal amount so paid, prepaid or Converted or not borrowed for the period
from the date of such payment, prepayment, Conversion or failure to borrow or
Convert to the last day of the then current Interest Period for such Loan (or,
in the case of a failure to borrow or Convert, the Interest Period for such Loan
that would have commenced on the date specified for such borrowing or
Conversion) at the applicable rate of interest for such Loan provided for herein
over (ii) LIBOR as reasonably determined by such Lender, for Dollar deposits of
amounts comparable to such principal amount and maturities comparable to such
period. Upon the Borrower's request, any Lender requesting compensation under
this Section shall provide the Borrower with a statement setting forth the basis
for requesting such compensation and the method for determining the amount
thereof. Any such statement shall be conclusive absent manifest error.
Section 4.5. Treatment of Affected Loans.
If the obligation of any Lender to make LIBOR Loans shall be suspended
pursuant to Section 4.1.(b), Section 4.2. or Section 4.3., then such Lender's
LIBOR Loans shall be automatically Converted into Base Rate Loans on the last
day(s) of the then current Interest Period(s) for LIBOR Loans (or, in the case
of a Conversion required by Section 4.1.(b) or 4.3., on such earlier date as
such Lender may specify to the Borrower with a copy to the Agent) and, unless
and until such Lender gives notice as provided below that the circumstances
specified in Section 4.1., Section 4.2. or 4.3. that gave rise to such
Conversion no longer exist:
(a) to the extent that such Lender's LIBOR Loans have been so
Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's LIBOR Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made by such Lender as
LIBOR Loans shall be made instead as Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 4.1. or 4.3. that gave rise to the Conversion
of such Lender's LIBOR Loans pursuant to this Section no longer exist (which
such Lender agrees to do promptly upon such circumstances ceasing to exist) at a
time when LIBOR Loans made by other Lenders are outstanding, then such Lender's
Base Rate Loans shall be automatically converted into LIBOR Loans, on the first
day(s) of the next succeeding Interest Period(s) for such outstanding LIBOR
Loans, to the extent necessary so that, after giving effect thereto, all Loans
held by the Lenders holding LIBOR Loans and by such Lender are held pro rata (as
to principal amounts, Types and Interest Periods) in accordance with their
respective Commitments.
Section 4.6. Assumptions Concerning Funding of LIBOR Loans.
Calculation of all amounts payable to a Lender under this Article IV.
shall be made as though such Lender had actually funded LIBOR Loans through the
purchase of deposits in the relevant market bearing interest at the rate
applicable to such LIBOR Loans in an amount equal to the amount of the LIBOR
Loans and having a maturity comparable to the relevant Interest Period;
provided, however, that each Lender may fund each of its LIBOR Loans in any
manner it sees fit and the foregoing assumption shall be used only for
calculation of amounts payable under this Article IV.
ARTICLE 4 CONDITIONS PRECEDENT
Section 4 Initial Conditions Precedent.
The obligation of the Lenders to make the initial Revolving Loans
hereunder is subject to the following conditions precedent:
(a) The Agent shall have received each of the following, in form and
substance satisfactory to the Agent and the Requisite Lenders (or their
respective counsel):
(i) Counterparts of this Agreement executed by each of the
parties hereto;
(ii) Notes executed by the Borrower, payable to each Lender
and complying with the terms of Section 2.7. executed by the
Borrower;
(iii) The Security Agreement, the Mortgages encumbering all
Real Property of the Borrower, and all other Security Documents
required to be executed by the Borrower so that the Borrower shall have
granted to the Collateral Agent for the benefit of the Lenders a Lien
in all of the Borrower's Property subject to the limitations of Section
7.7.;
(iv) The Guarantee duly executed by each of the parties thereto;
(v) The Certificate of Formation of the Borrower certified as of
a recent date by the Secretary of State of the State of Delaware;
(vi) A long-form good standing certificate with respect to the
Borrower issued as of a recent date by the Secretary of State of the
State of Delaware;
(vii) A certificate of incumbency signed by the manager of the
management committee of the Borrower with respect to each of the
officers of the Borrower authorized to execute and deliver this
Agreement and the other Loan Documents to which the Borrower is a
party;
(viii) Copies (certified by an officer of the Borrower) of the
limited liability company agreement of the Borrower and of all
necessary limited liability company and other legal action taken by the
Borrower to authorize the execution, delivery and performance of the
Loan Documents to which it is a party;
(ix) The articles of incorporation, articles of organization,
certificate of limited partnership or other comparable organizational
instrument (if any) of BSC and each other party to the Guarantee
certified as of a recent date by the Secretary of State of the State of
formation of such Person;
(x) A certificate of good standing or certificate of similar
meaning with respect to BSC and each other party to the Guarantee
issued as of a recent date by the Secretary of State of the State of
formation of each such Person and certificates of qualification to
transact business or other comparable certificates issued by each
Secretary of State (and any state department of taxation, as
applicable) of each state in which such Person is required to be so
qualified;
(xi) A certificate of incumbency signed by the Secretary or
Assistant Secretary (or other individual performing similar functions)
of BSC and each other party to the Guarantee with respect to each of
the officers of such Person authorized to execute and deliver the
Guarantee, and the other Loan Documents and Transaction Documents to
which such Person is a party;
(xii) Copies certified by the Secretary or Assistant Secretary
of BSC and each other party to the Guarantee (or other individual
performing similar functions) of (i) the by-laws of such Person, if a
corporation, the operating agreement, if a limited liability company,
the partnership agreement, if a limited or general partnership, or
other comparable document in the case of any other form of legal entity
and (ii) all corporate, partnership, member or other necessary action
taken by such Person to authorize the execution, delivery and
performance of the Guarantee and the other Loan Documents and other
Transaction Documents to which it is a party;
(xiii) A certificate from the Vice President-Finance of the
Borrower certifying that (1) there does not then exist any default or
event of default under any Debt of the Borrower, and (2) immediately
after giving effect to the making of the first Revolving Loans
hereunder, there will not exist any Default or Event of Default and the
Borrower will be Solvent;
(xiv) Certificates of insurance evidencing the insurance
required by the Loan Documents and other Transaction Documents, showing
the Collateral Agent as loss payee (as its interest may appear)
thereunder and otherwise complying with the requirements of the
applicable Loan Documents;
(xv) Evidence that all taxes, fees and other charges payable
in connection with the execution, delivery, recording, filing and
registration of the Mortgages, the Security Agreement and any of the
other Security Documents shall have been paid or provision for such
payment shall have been made to the reasonable satisfaction of the
Agent and the Requisite Lenders (or their respective special counsel);
(xvi) With respect to each of the Mortgages, one or more loan
policies of title insurance, or commitment therefor, satisfactory to
the Agent and the Requisite Lenders and showing no exceptions to title
except as acceptable to such Persons (or their respective special
counsels), and including, without limitation, satisfactory zoning
endorsements;
(xvii) With respect to each of the Mortgages, an opinion of
counsel admitted to practice law in the jurisdiction in which the Real
Property subject to such Mortgage is located and acceptable to the
Agent and the Requisite Lenders (or their respective special counsel),
addressed to the Collateral Agent, the Agent and each Lender covering
the form of such Mortgage, the enforceability thereof and such legal
matters as the Agent and the Requisite Lenders (or their respective
special counsel) may reasonably request;
(xviii) Copies of the most recent real estate tax bill and
notice of assessment with respect to each parcel of Real Property
subject to a Mortgage;
(xix) A copy of (1) the Plat of Survey prepared by Hoffman &
Company, Inc. dated November 3, 1996 and last revised November 9, 1996
with respect to the Borrower's facility located in Cartersville,
Georgia and (2) the Plat of Survey prepared by Robert Marion Case dated
November 14, 1996 with respect to the Borrower's facility located in
Jackson, Mississippi;
(xx) A certificate dated as of a recent date from a licensed
engineer or other professional satisfactory to the Agent, or other
evidence, that no parcel of Real Property subject to a Mortgage is
located in a Special Flood Hazard Area as defined by the Federal
Insurance Administration;
(xxi) A "Phase I" environmental assessment not more than 12
months old with respect to each parcel of real Property that is subject
to a Mortgage, which report (1) has been prepared by an environmental
engineering firm acceptable to the Agent and (2) complies with current
ASTM requirements for "Phase I" environmental assessments, and any
other environmental assessments or other reports relating to such
Property, including any "Phase II" environmental assessment prepared or
recommended by such environmental engineering firm to be prepared for
such Property;
(xxii) Favorable UCC, tax, judgment and lien search reports
(including without limitation, searches of the records of the United
States Patent and Trademark Office) with respect to the Borrower in all
necessary or appropriate jurisdictions and under all legal and
appropriate trade names indicating that there are no prior liens on any
of the Collateral other than Liens to be terminated prior to the
Effective Date or Liens permitted to exist under the express terms of
the BSC Credit Agreement and the Note Purchase Agreements;
(xxiii) All Uniform Commercial Code financing statements
naming the Borrower as debtor, the Collateral Agent as secured party,
and to be filed in each jurisdiction where the filing of such financing
statements may be necessary or appropriate as determined by the
Collateral Agent, the Agent or the Requisite Lenders (or their
respective special counsel);
(xxiv) Certified copies (certified by an officer of the Borrower)
of the following:
(1) the Casting Mill Lease Documents;
(2) the Cartersville Bond Documents; and
(3) the Rolling Mill Lease Documents;
(xxv) A letter agreement signed by Development Authority of
Bartow County, SunTrust Bank, as Trustee, and the Borrower, in its
capacity as the only holder of the outstanding Cartersville Bonds, to
the effect that each such Person consents to the transactions
contemplated by the Loan Documents;
(xxvi) Evidence satisfactory to the Agent that the Seventh
Amendment to the BSC Credit Agreement has been executed by BSC, the
Agent and the Requisite Lenders (as defined in the BSC Credit
Agreement) and all conditions precedent to the effectiveness thereof
have been satisfied;
(xxvii) Evidence satisfactory to the Agent that the Note
Purchase Agreement Amendments have been executed by BSC and the other
Persons required to be a party thereto and all conditions precedent to
the effectiveness thereof have been satisfied;
(xxviii) Evidence satisfactory to the Agent that the
Reimbursement Agreement Amendment has been executed by BSC and PNC
Bank, National Association and all conditions precedent to the
effectiveness thereof have been satisfied;
(xxix) The Warrant Agreement duly executed by the parties
thereto;
(xxx) Certificates evidencing all of the Warrants to be issued
pursuant to the Warrant Agreement;
(xxxi) An amended and restated Intercreditor Agreement executed
by each of the parties to the Intercreditor Agreement;
(xxxii) Amendments and/or modifications to the Security
Documents executed by BSC, any of its Restricted Subsidiaries, or the
Collateral Agent on or prior to the date hereof, and which are
necessary to give effect to the transactions contemplated by the
Transaction Documents;
(xxxiii) Opinions of counsel to BSC, the Borrower and the
other Restricted Subsidiaries regarding the formation of each such
Person, the authorization, execution, delivery and enforceability of
each of the Loan Documents and other Transaction Documents to which
BSC, the Borrower or any other Restricted Subsidiary is a party, the
perfection of security interests granted under or in connection with
any of the Transaction Documents, and such other matters as the Agent
and the Requisite Lenders (or their respective special counsel) may
reasonably request;
(xxxiv) A copy of that certain Guaranty Agreement dated as of
the date hereof (the "BSE Guaranty") executed by the Borrower in favor
of the Secured Parties named therein which provides for the guaranty by
the Borrower of all Secured Obligations (as defined in the
Intercreditor Agreement) excluding the May, 2000 Debt (as defined in
the Intercreditor Agreement);
(xxxv) A copy of that certain Jackson Security Agreement dated
as of the date hereof executed by the Borrower in favor of the
Collateral Agent which secures the Borrower's obligations in respect of
the BSE Guaranty; and
(xxxvi) A copy of that certain Deed of Trust and Security
Agreement (Guaranteed Obligations) dated as of the date hereof executed
by the Borrower in favor of the Collateral Agent which encumbers the
Borrower's facility located in Jackson, Mississippi and which secures
the Borrower's obligations in respect of the BSE Guaranty; and
(xxxvii) Such other documents, agreements and instruments as the
Agent or any Lender may reasonably request; and
(b) In the good faith judgment of the Agent and the Lenders:
(i) There shall not have occurred or become known to the Agent
or the Lenders any event, condition, situation or status since the date
of the information contained in the financial and business projections,
budgets, pro forma data and forecasts concerning BSC, the Borrower and
the other Subsidiaries of BSC delivered to the Agent and the Lenders
prior to the Agreement Date that has had or could reasonably be
expected to have a Material Adverse Effect;
(ii) No litigation, action, suit, investigation or other
arbitral, administrative or judicial proceeding shall be pending or
threatened which could reasonably be expected to (1) result in a
Material Adverse Effect or (2) restrain or enjoin, impose materially
burdensome conditions on, or otherwise materially and adversely affect
the ability of BSC, the Borrower or any other Restricted Subsidiary to
fulfill its obligations under the Loan Documents or other Transaction
Documents to which it is a party;
(iii) BSC, the Borrower and the other Subsidiaries of BSC
shall have received all approvals, consents and waivers, and shall have
made or given all necessary filings and notices as shall be required to
consummate the transactions contemplated hereby and by the other
Transaction Documents without the occurrence of any default under,
conflict with or violation of (1) any Applicable Law or (2) any
agreement, document or instrument to which BSC, the Borrower or any
Subsidiary of BSC is a party or by which any of them or their
respective properties is bound, except for such approvals, consents,
waivers, filings and notices the receipt, making or giving of which
would not reasonably be likely to (A) have a Material Adverse Effect,
or (B) restrain or enjoin, impose materially burdensome conditions on,
or otherwise materially and adversely affect the ability of BSC, the
Borrower or any other Restricted Subsidiary to fulfill its obligations
under the Loan Documents to which it is a party; and
(iv) There shall not have occurred or exist any other material
disruption of financial or capital markets that could reasonably be
expected to materially and adversely affect the transactions
contemplated by the Loan Documents and the other Transaction Documents.
Section 4 Conditions Precedent to All Loans.
The obligation of the Lenders to make any Revolving Loans is subject to
the further condition precedent that, as of the date of the making of such Loan
and after giving effect thereto: (a) no Default or Event of Default shall have
occurred and be continuing and (b) the representations and warranties made or
deemed made by the Borrower in the Loan Documents to which it is a party, shall
be true and correct on and as of the date of the making of such Loan with the
same force and effect as if made on and as of such date except to the extent
that such representations and warranties expressly relate solely to an earlier
date (in which case such representations and warranties shall have been true and
accurate on and as of such earlier date) and except for changes in factual
circumstances specifically and expressly permitted hereunder. The making of each
Revolving Loan shall constitute a certification by the Borrower to the effect
set forth in the preceding sentence (both as of the date of the giving of notice
relating to such Revolving Loan and, unless the Borrower otherwise notifies the
Agent prior to the date of the making of such Revolving Loan, as of such date).
Section 5.3. Termination of Agreement
If all of the conditions precedent contained in Section 5.1. have not
been satisfied by 5:00 p.m. E.S.T. on May 30, 2000, then the Lenders'
Commitments and all other obligations of the Lenders under this Agreement and
any of the other Loan Documents shall automatically terminate without any notice
to the Borrower or any other Person, the Borrower shall have no rights under
this Agreement or any of the other Loan Documents and this Agreement shall
terminate and be of no further force or effect (except for provisions of this
Agreement which by the terms of Section 12.10. survive such termination).
ARTICLE 5 REPRESENTATIONS AND WARRANTIES
Section 5 Representations and Warranties.
In order to induce the Agent and each Lender to enter into this
Agreement and to make Loans, the Borrower represents and warrants to the Agent
and each Lender as follows:
(a) Organization; Power; Qualification. The Borrower is a limited
liability company, and each of its Subsidiaries is a corporation, partnership,
limited liability company or other business entity, all of which are duly
organized, validly existing and in good standing under their respective
jurisdictions of formation. Each of the Borrower and its Subsidiaries has the
power and authority to own or lease its respective properties and to carry on
its respective business as now being and hereafter proposed to be conducted and
is duly qualified and is in good standing as a foreign corporation, and
authorized to do business, in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification or
authorization and where the failure to be so qualified or authorized could
reasonably be expected to have, in each instance, a Material Adverse Effect.
(b) Ownership Structure. BSC owns all of the issued and outstanding capital
stock of Birmingham East Coast Holdings, L.L.C., a Delaware limited liability
company, which owns 85.0% of the membership interests in the Borrower. Ivacan
Industries, Inc., a Delaware corporation and successor to Canron Industries,
Inc., owns 15.0% of the membership interests in the Borrower. The Borrower, as
of the Agreement Date, has no Subsidiaries.
(c) Authorization of Agreement, Notes, Loan Documents and Borrowings.
The Borrower has the right and power, and has taken all necessary action to
authorize it, to borrow hereunder and each of BSC, the Borrower and each other
Restricted Subsidiary has the right and power, and has taken all necessary
action to authorize it, to execute, deliver and perform this Agreement, the
Notes and the other Loan Documents and Transaction Documents to which it is a
party in accordance with their respective terms and to consummate the
transactions contemplated hereby and thereby. This Agreement, the Notes and each
of the other Loan Documents and Transaction Documents to which the Borrower, BSC
or any other Restricted Subsidiary is a party have been duly executed and
delivered by the duly authorized officers of such Person and each is a legal,
valid and binding obligation of such Person enforceable against such Person in
accordance with its respective terms except as the enforceability thereof may be
limited by bankruptcy, insolvency or other laws of general application relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity.
(d) Compliance of Agreement, Notes, Loan Documents and Borrowing with
Laws, etc. The execution, delivery and performance of this Agreement, the Notes
and the other Loan Documents and Transaction Documents to which the Borrower,
BSC or any other Restricted Subsidiary is a party 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,
BSC or any Subsidiary of BSC; (ii) conflict with, result in a breach of or
constitute a default under the Certificate of Formation or limited liability
company agreement of the Borrower or any organizational document of BSC or any
Restricted Subsidiary, or any indenture, agreement or other instrument to which
the Borrower, BSC or any Restricted Subsidiary is a party or by which the
Borrower, BSC or any Restricted Subsidiary or any of their respective properties
may be bound, including, without limitation, the Cartersville Bond Documents,
the Casting Mill Lease Documents, or the Rolling Mill Lease Documents; or (iii)
result in or require the imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by the Borrower, BSC or any Restricted
Subsidiary, other than the Liens in favor of the Collateral Agent. As of the
Agreement Date, the Borrower is not a party to, or otherwise subject to any
provision contained in, any instrument evidencing indebtedness of the Borrower,
any agreement relating thereto or any other contract or agreement (including any
of its organizational documents) which limits the amount of, or otherwise
imposes restrictions on the incurring of, Debt by the Borrower of the type of
the Obligations except as set forth in the agreements listed on Schedule
6.1.(d).
(e) Compliance with Law; Governmental Approvals. The Borrower and each
Subsidiary is in compliance with each Governmental Approval applicable to it and
in compliance with all other Applicable Law relating to it except for
noncompliances which, and Governmental Approvals the failure to possess which,
could not, singly or in the aggregate, cause a Default or Event of Default or
could reasonably be expected to have a Material Adverse Effect.
(f) Title to Properties; Leases. Each of the Borrower and its
Subsidiaries has good, marketable and legal title to, or a valid leasehold
interest in, its respective assets, free and clear of all Liens except for those
described in Schedule 6.1.(f). All leases necessary in any material respect for
the conduct of the respective businesses of the Borrower and its Subsidiaries
are valid and subsisting and are in full force and effect.
(g) Debt. Schedule 6.1.(g) is, as of the Agreement Date, a complete and
correct listing of all (i) Debt of the Borrower (including all guarantees of
Debt of another Person) and (ii) all letters of credit and acceptance facilities
extended to the Borrower. The Borrower has performed and is in compliance with
all of the material terms of such Debt and all instruments and agreements
relating thereto, and no default or event of default, or event or condition
which with the giving of notice, the lapse of time, or otherwise, would
constitute such a default or event of default, exists with respect to any such
Debt. All Debt of the Borrower (other than Debt secured by a Lien permitted
hereunder) ranks pari passu in, or subordinate to, right of repayment to all the
Obligations.
(h) Other Agreements. Neither the Borrower nor any Subsidiary is (i) a
party to or subject to any judgment, order, decree, agreement, lease or
instrument, or subject to other restrictions, which individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect; or
(ii) in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Material Contract to which
the Borrower or any Subsidiary is a party, which default has had, or if not
remedied within any applicable grace period could reasonably be expected to
have, a Material Adverse Effect.
(i) Litigation. There are no actions, suits or proceedings pending
(nor, to the knowledge of the Borrower, are there any actions, suits or
proceedings threatened) against or in any other way relating adversely to or
affecting the Borrower or any Subsidiary or any of its respective property in
any court or before any arbitrator of any kind or before or by any governmental
body which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect, and there are no strikes, slow downs, work stoppages or
walkouts or other labor disputes in progress, or to the knowledge of the
Borrower threatened, relating to the Borrower or any Subsidiary.
(j) Financial Statements and Condition. The Borrower has furnished to
each Lender copies of the audited balance sheet of the Borrower as at June 30,
1999, and the related statements of income, retained earnings and cash flows for
the fiscal year ending on such date, with the opinion thereon of Ernst & Young
LLP, and the unaudited balance sheet of the Borrower as at March 31, 2000, and
the related statements of income, retained earnings and cash flow of the
Borrower for the fiscal quarter ending on such date. All such financial
statements (including in each case related schedules and notes) are complete and
correct and present fairly, in accordance with GAAP consistently applied
throughout the periods involved, in all material respects, the financial
position of the Borrower as at their respective dates and the results of
operations and the cash flows for such periods (subject, as to interim
statements, to changes resulting from audits and normal year-end adjustments).
Since March 31, 2000 there has been no material adverse change in the financial
condition, operations, or business of the Borrower and its consolidated
Subsidiaries taken as a whole. After giving effect to the transactions
contemplated by this Agreement and the other Transaction Documents, each of the
Borrower and its Subsidiaries is Solvent.
(k) ERISA.
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(i) No liability has been incurred by the Borrower, any
Subsidiary or any other ERISA Affiliate which remains unsatisfied for
any taxes or penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan which liability could reasonably be expected to have
a Material Adverse Effect.
(ii) Neither the Borrower, any Subsidiary nor any other ERISA
Affiliate has (A) engaged in a nonexempt prohibited transaction
described in Section 4975 of the Internal Revenue Code or Section 406
of ERISA affecting any of the Employee Benefit Plans or the trusts
created thereunder which could subject any such Employee Benefit Plan
or trust to a tax or penalty on prohibited transactions imposed under
Section 4975 of the Internal Revenue Code or under ERISA, (B) incurred
any accumulated funding deficiency with respect to any Employee Benefit
Plan, whether or not waived, or any other liability to the PBGC which
remains outstanding other than the payment of premiums and there are no
premium payments which are due and unpaid, (C) failed to make a
required contribution or payment to a Multiemployer Plan, or (D) failed
to make a required installment or other required payment under Section
412 of the Internal Revenue Code, Section 302 of ERISA or the terms of
such Employee Benefit Plan, which tax, penalty, accumulated funding
deficiency, liability or failure could reasonably be expected to have a
Material Adverse Effect.
(iii) To the best of the Borrower's knowledge, each Employee
Benefit Plan subject to Title IV of ERISA, maintained by the Borrower,
any Subsidiary or any other ERISA Affiliate, has been administered in
accordance with its terms in all material respects and is in compliance
in all material respects with all applicable requirements of ERISA and
other Applicable Laws except for such noncompliances which could not
reasonably be expected to have a Material Adverse Effect.
(iv) The consummation of the Loans provided for herein will
not involve any prohibited transaction under ERISA which is not subject
to a statutory or administrative exemption.
(v) Except as previously disclosed to the Lenders in writing,
no proceeding, claim, lawsuit and/or investigation exists, or, to the
best knowledge of the Borrower after due inquiry, is threatened
concerning or involving any Employee Benefit Plan which if adversely
determined could reasonably be expected to have a Material Adverse
Effect.
(l) Environmental Laws. Each of the Borrower and its Subsidiaries has
obtained all Governmental Approvals which are required under Environmental Laws
and is in compliance with all terms and conditions of such Governmental
Approvals except for those Governmental Approvals, the failure to obtain or the
failure with which to comply, could not reasonably be expected to have a
Material Adverse Effect. Each of the Borrower and its Subsidiaries is also in
material compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
contained in the Environmental Laws. Except for matters which could not
reasonably be expected to have a Material Adverse Effect, the Borrower is not
aware of, and has not received notice of, any past, present, or future events,
conditions, circumstances, activities, practices, incidents, actions, or plans
which, with respect to the Borrower or any of its Subsidiaries, may interfere
with or prevent compliance or continued compliance with Environmental Laws, or
may give rise to any common-law or legal liability, or otherwise form the basis
of any claim, action, demand, suit, proceeding, hearing, study, or
investigation, based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, chemical, or industrial, toxic, or other Hazardous Material. There
is no civil, criminal, or administrative action, suit, demand, claim, hearing,
notice, or demand letter, notice of violation, investigation, or proceeding
pending or, to the Borrower's knowledge, threatened, against the Borrower or any
of its Subsidiaries relating in any way to Environmental Laws an adverse
determination in respect of which could reasonably be expected to have a
Material Adverse Effect.
(m) Legal Limitations on Borrowing. Neither the Borrower nor any
Subsidiary is subject to any Applicable Law which purports to regulate or
restrict its ability to borrow money or to consummate the transactions
contemplated by this Agreement or to perform its obligations under any Loan
Document or Transaction Document to which it is a party.
(n) Margin Stock. Neither the Borrower nor any Subsidiary is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose, whether immediate, incidental or ultimate, of buying or
carrying "margin stock" within the meaning of Regulations U and X of the Board
of Governors of the Federal Reserve System.
(o) Borrower a Subsidiary. The Borrower is (a) a "Subsidiary" under and
as defined in the BSC Credit Agreement and (b) a "Subsidiary" under and as
defined in each of the Note Purchase Agreements.
(p) Cartersville Bonds. The Borrower is the holder of all of the issued and
outstanding Cartersville Bonds. As of the date hereof, the
aggregate principal amount of Cartersville Bonds outstanding is $130,000,000.
(q) BSC Credit Agreement Representations and Note Purchase Agreement
Representations. Except for matters previously disclosed to the Lenders as
contemplated under Section 6.1.(k)(v), the BSC Credit Agreement Representations
and the Note Purchase Agreement Representations are each true and correct.
(r) Transaction Documents Representations. Except for matters
previously disclosed to the Lenders as contemplated under Section 6.1.(k)(v),
all representations and warranties made or deemed made by the Borrower in any of
the Transaction Documents are true and correct except to the extent that such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties were true and accurate on and as of
such earlier date).
(s) Collateral.
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(i) Mortgages. When executed and delivered, each Mortgage will
create a valid Lien upon the grantor's right, title and interest in the
Real Property and interests described therein in favor of the
Collateral Agent, and when such document has been recorded and all
appropriate recording fees and taxes have been paid, such Lien shall be
a perfected first priority Lien subject to no other Liens except Liens
permitted by the express terms of the BSC Credit Agreement and the Note
Purchase Agreements; and
(ii) Security Agreement. The Security Agreement creates a
valid Lien in and to the Collateral (as defined in the Security
Agreement) in favor of the Collateral Agent, and when all UCC-1
financing statements required by the Security Agreement to be filed
with public recording offices have been so filed, and all taxes,
recording fees and other fees and charges required by applicable law to
be paid in connection therewith have been duly paid in full, such Lien
shall be a perfected, first priority Lien on the Collateral of a type
which may be perfected by the filing of a UCC financing statement or by
possession, subject to no Liens except Liens permitted by the express
terms of the BSC Credit Agreement and the Note Purchase Agreements.
(t) Accuracy and Completeness of Information. Other than statements,
estimates and projections provided by the Borrower with respect to the
anticipated future performance of the Borrower and its Subsidiaries, all written
information, reports and other papers and data furnished to the Agent or any
Lender by, on behalf of, or at the direction of, the Borrower or any Subsidiary
in connection with any of the Loan Documents were, at the time the same were so
furnished, complete and correct in all material respects, to the extent
necessary to give the recipient a true and accurate knowledge of the subject
matter and did not contain any untrue statement of a fact material to the
creditworthiness of the Borrower or any Subsidiary and did not omit to state a
material fact necessary in order to make the statements contained therein not
misleading, or, in the case of financial statements, present fairly, in all
material respects and in accordance with GAAP consistently applied throughout
the periods involved, the financial position of the Persons involved as at the
date thereof and the results of operations for such periods. Although the
Borrower offers no assurances as to future events, all statements, estimates and
projections provided by BSC or the Borrower with respect to the anticipated
future performance of the Borrower and its Subsidiaries and previously delivered
to the Lenders have been prepared on the basis of reasonable assumptions
regarding BSC, the Borrower and the Subsidiaries and their projected growth and
performance, the future of the steel industry, the present and future state of
the economy and other variables and factors used in the preparation of such
projections.
Section 5 Survival of Representations and Warranties, Etc.
All statements contained in any certificate, financial statement or
other instrument delivered by or on behalf of the Borrower or any Subsidiary to
the Agent or any Lender pursuant to or in connection with this Agreement or any
of the other Loan Documents (including, but not limited to, any such statement
made in or in connection with any amendment thereto or any statement contained
in any certificate, financial statement or other instrument delivered by or on
behalf of the Borrower prior to the Agreement Date and delivered to the Agent or
any Lender in connection with closing the transactions contemplated hereby)
shall constitute representations and warranties made by the Borrower under this
Agreement. All representations and warranties made under this Agreement shall be
deemed to be made at and as of the Agreement Date and at and as of the date of
the making of each Revolving Loan, except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representations and warranties shall have been true and accurate
on and as of such earlier date) and except for changes in factual circumstances
specifically permitted hereunder.
ARTICLE 6 AFFIRMATIVE COVENANTS
For so long as this Agreement is in effect, unless the Requisite Lenders
(or, if required pursuant to Section 12.6., all of the Lenders) shall otherwise
consent in the manner provided for in Section 12.6., the Borrower shall:
Section 6 Preservation of Existence and Similar Matters.
Preserve and maintain, and cause each Subsidiary (other than those
Subsidiaries not material to the financial condition or business operations of
the Borrower and its Subsidiaries taken as a whole) to preserve and maintain,
its respective existence, rights, franchises, licenses and privileges in the
jurisdiction of its formation and qualify and remain qualified and authorized to
do business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization and where
the failure to be so authorized and qualified could reasonably be expected to
have a Material Adverse Effect.
Section 6 Compliance with Applicable Law and Material Contracts.
Comply, and cause each Subsidiary to comply, with (a) all Applicable
Law, including the obtaining of all Governmental Approvals, if the failure to
comply with which could reasonably be expected to have a Material Adverse
Effect, and (b) all material terms and conditions of all Material Contracts to
which it is a party unless, in the good faith judgment of the Borrower failure
to comply would be in the best interests of the Borrower; provided, however, the
provisions of this clause (b) shall not be construed or deemed to be a waiver by
a Lender of any rights it may have or claim under or with respect to any such
Material Contract.
Section 6 Visits and Inspections.
Permit, and cause each Subsidiary to permit, representatives or agents
of the Agent or any Lender, from time to time, as often as may be reasonably
requested in light of all circumstances, financial or otherwise, surrounding the
Borrower and its operations, but only during normal business hours, and at the
expense of the Agent or such Lender so long as no Event of Default shall be
continuing, to: (a) visit and inspect all properties of the Borrower and its
Subsidiaries; (b) inspect and make extracts from their respective relevant books
and records, including but not limited to management letters prepared by
independent accountants; and (c) discuss with its principal officers, and its
independent accountants, the business, assets, liabilities, financial conditions
and results of operations of the Borrower and its Subsidiaries. If requested by
the Agent, the Borrower shall execute an authorization letter addressed to its
accountants authorizing the Agent or any Lender to discuss the financial affairs
of the Borrower and any Subsidiary with its accountants.
Section 6 Use of Proceeds.
Use the proceeds of all Loans solely for (a) the purpose of funding
Capital Expenditures or deferred maintenance expenses, in either case, incurred
or to be incurred by the Borrower after January 6, 2000 or (b) working capital
purposes; provided, however, the aggregate outstanding principal amount of Loans
the proceeds of which the Borrower is using for working capital purposes may not
exceed the lesser of (i) $10,000,000 or (ii) the aggregate amount of Capital
Expenditures and deferred maintenance expenses, in either case, incurred by BSC
or any of its Subsidiaries (as defined in the BSC Credit Agreement) excluding
the Borrower after January 6, 2000. The Borrower shall not use any part of the
proceeds of any Loan to purchase or carry, or to reduce or retire or refinance
any credit incurred to purchase or carry, any margin stock (within the meaning
of Regulations U and X of the Board of Governors of the Federal Reserve System)
or to extend credit to others for the purpose of purchasing or carrying any such
margin stock if such use would result in a violation of such Regulations or any
other Applicable Law.
Section 6 Environmental Matters.
Comply, and cause all of its Subsidiaries to comply, with all
Environmental Laws the failure with which to comply could reasonably be expected
to have a Material Adverse Effect. If the Borrower or any Subsidiary shall (a)
receive notice that any violation of any Environmental Law which could
reasonably be expected to have a Material Adverse Effect may have been committed
or is about to be committed by such Person, (b) receive notice that any
administrative or judicial complaint or order has been filed or is about to be
filed against the Borrower or any Subsidiary alleging violations of any
Environmental Law or requiring the Borrower or any Subsidiary to take any action
in connection with the release of Hazardous Materials, which violation or
required action could reasonably be expected to have a Material Adverse Effect
or (c) receive any notice from a Governmental Authority or private party
alleging that the Borrower or any Subsidiary may be liable or responsible for
costs associated with a response to or cleanup of a release of a Hazardous
Material or any damages caused thereby, which liability, responsibility or
damages could reasonably be expected to have a Material Adverse Effect, then the
Borrower shall provide the Agent with a copy of such notice within 10 days after
the receipt thereof by the Borrower or any of the Subsidiaries. The Borrower and
the Subsidiaries shall promptly take all actions necessary to prevent the
imposition of any Liens on any of their respective properties arising out of or
related to any Environmental Laws.
Section 7.6. Further Assurances.
At the Borrower's cost and expense, upon request of the Agent, duly
execute and deliver or cause to be duly executed and delivered, to the Agent
such further instruments, documents and certificates, and do and cause to be
done such further acts that may be reasonably necessary or advisable in the
reasonable opinion of the Agent to carry out more effectively the provisions and
purposes of this Agreement and the other Loan Documents.
Section 7.7. Agreement to Provide Security.
(a) To induce the Agent and the Lenders to enter into this Agreement,
the other Loan Documents and the other Transaction Documents, the Borrower
agrees, subject to the terms of the immediately following subsections, (i) to
cause each of its Subsidiaries to guarantee the payment and performance of all
of the Secured Obligations (as defined in the Intercreditor Agreement) and (ii)
to grant, and to cause each Subsidiary to grant, to the Collateral Agent for the
benefit of the Lenders a Lien in all of its Properties (or in the case of the
Borrower only, all of its currently unencumbered Properties) subject to the
terms of the applicable Security Documents.
(b) Notwithstanding the immediately preceding subsection (a), but
subject to the immediately following subsection (c), (i) the Borrower shall only
be required to grant, and to cause any Subsidiary to grant, to the Collateral
Agent a Lien in Property to the extent provided in the applicable Security
Documents and (ii) the Borrower shall not be required to grant to the Collateral
Agent a Lien in any of the Borrower's right, title or interest in or to any of
the following (the "Excluded Cartersville Property"): (A) the Cartersville
Rolling Mill Equipment, (B) the Rolling Mill Lease Documents, (C) the
Cartersville Casting Lease Equipment, (D) the Casting Mill Lease Documents or
(E) the Cartersville Bond Documents.
(c) Except with respect to the Excluded Cartersville Property, the
Borrower shall use its good faith efforts to obtain a waiver of, or consent
pursuant to, any provision of an agreement or contract which permitted the
Borrower or any Subsidiary to be exempt in any way by virtue of the immediately
preceding subsection (b) of this Section from the general obligation under the
immediately preceding subsection (a) to provide security for, or guarantee, the
Obligations. Promptly upon the receipt of any such waiver or consent the
Borrower (i) shall deliver a copy thereof to the Collateral Agent, the Agent and
each of the Lenders and (ii) execute, or cause to be executed, Security
Documents as necessary to make such Property a part of the Collateral and to
take all other actions necessary to perfect the Liens of the Collateral Agent in
such Property.
Section 7.8. Future Real Property.
The Borrower will, and will cause each Subsidiary to, promptly
following the acquisition of any fee simple interest, or estate for years, in
any Real Property, provide written notice thereof to the Agent and the Lenders
and execute and deliver to the Collateral Agent a Mortgage creating a first
priority Lien on such Property (including fixtures) in favor of the Collateral
Agent, subject to no Liens, except Liens permitted to exist under the express
terms of the BSC Credit Agreement and the Note Purchase Agreements, and provide
to the Collateral Agent such customary lender's title insurance policies,
appraisals, surveys, environmental reports and other related documents as the
Collateral Agent and the Requisite Lenders (or their respective special counsel)
may reasonably request.
Section 7.9. Future Intellectual Property.
The Borrower will, and will cause each Subsidiary to, promptly
following the acquisition, creation or development of any Intellectual Property,
provide written notice thereof to the Collateral Agent and the Lenders and
execute and deliver to the Collateral Agent an appropriate Security Document in
form and substance satisfactory to the Collateral Agent, creating a first
priority Lien on such Intellectual Property in favor of the Collateral Agent,
subject to no Liens, except Liens permitted to exist under the express terms of
the BSC Credit Agreement and the Note Purchase Agreements, and provide to the
Collateral Agent and the Lenders such other related documents as the Collateral
Agent and the Requisite Lenders (or their respective special counsel) may
reasonably request.
Section 7.10. Certificates Regarding Authorization, Etc.
Each Security Document delivered by the Borrower or any Subsidiary
pursuant to any of the terms of this Agreement shall be accompanied by (a)
copies of the constitutive documents and corporate resolutions (or equivalent)
of the Borrower or such Subsidiary authorizing the respective transactions
contemplated thereby, in each case certified as true and correct by a senior
officer of the Borrower or such Subsidiary; (b) legal opinions comparable in
scope to those delivered by counsel to the Borrower in connection with the
closing of the transactions contemplated by this Agreement, and otherwise
addressing such matters as may be requested by, and in form and substance
satisfactory to, the Collateral Agent, the Agent and the Requisite Lenders (or
their respective special counsel); and (c) such other documents, instruments,
agreements and certifications as the Collateral Agent, the Agent, or the
Requisite Lenders (or their respective special counsel), as applicable, may
reasonably request.
Section 7.11. Appraisals.
If, under the Financial Institution Recovery, Reform and Enforcement
Act of 1989, as amended ("FIRREA"), or any other Applicable Law, a Lender is
required to have an appraisal of any parcel of real Property subject to a
Mortgage, the Borrower shall deliver or cause to be delivered to such Lender an
appraisal which satisfies the minimum specifications required under FIRREA or
other Applicable Law.
Section 7.12. Incorporation of Certain Covenants of BSC Credit Agreement.
The Borrower shall perform and comply with each of the agreements,
covenants and obligations which BSC is to cause the Borrower to perform or
comply with under the BSC Credit Agreement or any other Loan Document (as
defined in the BSC Credit Agreement), including without limitation, those
contained in Sections 7.1 through 7.6, Sections 7.8 through 7.9, and Sections
9.2 through 9.7 of the BSC Credit Agreement, each of which (together with the
related definitions and ancillary provisions) is hereby incorporated herein by
reference.
ARTICLE 7 INFORMATION
For so long as this Agreement is in effect, unless the Requisite
Lenders (or, if required pursuant to Section 12.6., all of the Lenders) shall
otherwise consent in the manner set forth in Section 12.6., the Borrower shall
furnish to each Lender (or to the Agent if so provided below) at its Lending
Office:
Section 7 Quarterly Financial Statements.
As soon as available and in any event within 45 days after the close of
each of the first, second and third fiscal quarters of the Borrower, the
consolidated balance sheet of the Borrower and its Subsidiaries as at the end of
such period and the related consolidated statements of income, retained earnings
and cash flows of the Borrower and its Subsidiaries for such period, setting
forth in each case in comparative form the figures for the corresponding periods
of the previous fiscal year, all of which shall be certified by the Vice
President-Finance of the Borrower, in his or her opinion, to present fairly, in
accordance with GAAP and in all material respects, the consolidated financial
position of the Borrower and its Subsidiaries as at the date thereof and the
results of operations for such period (subject to normal year-end adjustments).
Section 7 Year-End Statements.
As soon as available and in any event within 90 days after the end of
each fiscal year of the Borrower, the audited consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year and the related
audited consolidated statements of income, retained earnings and cash flows of
the Borrower and its Subsidiaries for such fiscal year, setting forth in
comparative form the figures as at the end of and for the previous fiscal year,
all of which shall be certified by the Vice President-Finance of the Borrower,
in his or her opinion, to present fairly, in accordance with GAAP and in all
material respects, the financial position of the Borrower and its Subsidiaries
as at the date thereof and the results of operations for such period and by
independent certified public accountants of recognized national standing
acceptable to the Agent, whose certificate shall be in scope and substance
satisfactory to the Agent and who shall have authorized the Borrower to deliver
such financial statements and certification thereof to the Agent and the Lenders
pursuant to this Agreement.
Section 8.3. Copies of Other Reports.
The Borrower shall furnish to the Agent and each Lender:
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or its management committee by its independent
public accountants in connection with any annual, interim or special audit,
including, without limitation, any management report;
(b) Promptly upon the mailing thereof to the members of the Borrower
generally, copies of all financial statements, reports, notices and proxy
statements so mailed;
(c) Not later than the time furnished under the Note Purchase
Agreements, copies of each report, statement, document, notice or other
item furnished pursuant to Section 9 of any such Note Purchase Agreement or
any related instrument, agreement or other document, to the extent not
otherwise provided to the Lenders under any of the other provisions of this
Agreement; and
(d) Not later than the time furnished under the BSC Credit Agreement,
copies of each report, statement, document, notice or other item relating
to the Borrower and furnished pursuant to the terms of the BSC Credit
Agreement or any related instrument, agreement or other document, to the
extent not otherwise provided to the Lenders under any of the other
provisions of this Agreement.
Section 7 Notice of Litigation and Other Matters.
The Borrower shall give the Agent and each Lender prompt notice of:
(a) to the extent the Borrower is aware of the same, the commencement
of any proceeding or investigation by or before any Governmental Authority
and any action or proceeding in any court or other tribunal or before any
arbitrator against or in any other way relating adversely to, or adversely
affecting, the Borrower or any Subsidiary or any of their respective
properties, assets or businesses which, if determined or resolved adversely
to such Person, could reasonably be expected to have a Material Adverse
Effect;
(b) any change in the business, assets, liabilities, financial
condition or results of operations of the Borrower or any Subsidiary which
has had, or could reasonably be expected to have, a Material Adverse
Effect;
(c) the occurrence of (i) any Default or Event of Default, including
without limitation, any Cartersville Indenture Default, Rolling Mill Lease
Default or Casting Mill Lease Default; or (ii) any event which constitutes
or which with the passage of time, the giving of notice or otherwise would
constitute a default or event of default by the Borrower or any Subsidiary
under any Material Contract to which any such Person is a party or by which
any such Person or any of its respective properties may be bound; and
(d) any notification of a violation of any Applicable Law or any
inquiry regarding any alleged violation of any Applicable Law which
violation could reasonably be expected to have a Material Adverse Effect
shall have been received by the Borrower or any of the Subsidiaries from
any Governmental Authority.
Section 7 Other Information.
From time to time and promptly upon each request, such data,
certificates, reports, statements, documents or further information regarding
the business, assets, liabilities, financial condition, or results of operations
of the Borrower or any of its Subsidiaries as the Agent or any Lender may
reasonably request.
ARTICLE 7 NEGATIVE COVENANTS
For so long as this Agreement is in effect, unless the Requisite
Lenders (or, if required pursuant to Section 12.6, all of the Lenders) shall
otherwise consent in the manner set forth in Section 12.6, the Borrower shall
comply with the following covenants:
Section. 9.1. Transfer of Bonds or Rights Under Certain Documents.
The Borrower will not sell, transfer, assign, convey or otherwise
dispose of any of its right, title or interest in or under the Cartersville Bond
Documents or the Cartersville Bonds other than pursuant to the Assignment,
Assumption and Security Agreements existing as of the date hereof.
Section. 9.2. Amendment of Bond Documents or Lease Documents.
The Borrower will not amend, restate, replace, supplement or otherwise
modify any of the Casting Mill Lease Documents, Rolling Mill Lease Documents or
the Cartersville Bond Documents without the prior written consent of the
Requisite Lenders.
Section 9.3. Creation or Acquisition of Subsidiaries.
The Borrower will not, directly or indirectly, create, or acquire or
own, any Subsidiary unless (a) such Subsidiary is (i) a Wholly-Owned Subsidiary;
(ii) a Restricted Subsidiary and (iii) not a Foreign Subsidiary (as defined in
the BSC Credit Agreement) and (b) immediately prior to the Borrower's
acquisition of any equity interest in such Subsidiary, and immediately
thereafter, no Default or Event of Default exists or would exist. Promptly after
(and in any event within ten (10) Business Days of) any Person becoming a direct
or indirect Subsidiary of the Borrower, the Borrower shall do all of the
following:
(A) Deliver to the Agent a copy of the Accession Agreement with respect
to such Subsidiary required to be delivered under the Omnibus Agreement, which
Accession Agreement, among other things, makes such Subsidiary a party to the
Omnibus Agreement, the Intercreditor Agreement and the Guarantee;
(B) Deliver to the Collateral Agent (with a copy to the Agent) a
security agreement executed by such Subsidiary conveying to the Collateral Agent
a Lien in, subject to the limitations of Section 7.7., all personal Property of
such Subsidiary, such security agreement to be substantially in the form of the
Security Agreement and otherwise in form and substance satisfactory to the
Collateral Agent, the Agent and the Requisite Lenders (or their respective
special counsel);
(C) Deliver to the Collateral Agent (with a copy to the Agent) a pledge
agreement executed the Borrower (or if such Subsidiary is an indirect Subsidiary
of the Borrower, executed by the Subsidiary which directly owns equity interests
in such Subsidiary) conveying to the Collateral Agent a Lien in all of the
issued and outstanding equity interests in such Subsidiary, such pledge
agreement to be substantially in the form of the stock pledge agreement executed
and delivered by BSC in connection with the Intercreditor Agreement and
otherwise in form and substance satisfactory to the Collateral Agent, the Agent
and the Requisite Lenders (or their respective special counsel). All
certificates evidencing any such equity interest and undated transfer powers
executed in blank required to be executed and delivered to the Collateral Agent
by the terms of such pledge agreement shall have been so delivered;
(D) Deliver to the Collateral Agent (with a copies to the Agent) any other
Security Document required to be delivered under the terms of this Agreement,
including without limitation, under Section 7.8. or 7.9., and all other items
required to be delivered under Section 7.10.; and
(E) Take all actions necessary to perfect the Liens of the Collateral
Agent being granted in connection with any of the foregoing (including, without
limitation, the filing of all appropriate Uniform Commercial Code financing
statements, the recording of all appropriate documents with public officials,
and the payment of all applicable fees and taxes).
ARTICLE 9 DEFAULT
Section 9 Events of Default.
Each of the following shall constitute an Event of Default, whatever
the reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of Applicable Law or pursuant to any judgment or order of
any Governmental Authority:
(a) Default in Payment. (i) The Borrower shall fail to pay when due
(whether upon demand, at maturity, by reason of acceleration or otherwise) the
principal of any of the Loans or (ii) the Borrower shall fail to pay when due
any interest on any of the Loans or any of the other payment Obligations owing
by the Borrower under this Agreement or any other Loan Document and in the case
of this clause (ii), such failure shall continue for a period of 5 days.
(b) Default in Performance. (i) The Borrower shall fail to perform or
observe any term, covenant, condition or agreement contained in Sections 7.7.
through 7.11. or in Article IX. or (ii) the Borrower or any Subsidiary shall
fail to perform or observe any term, covenant, condition or agreement on its
part to be performed and contained in this Agreement or any other Loan Document
to which it is a party and not otherwise mentioned in this Section and such
failure shall continue for a period of 30 days after the earlier of (x) the date
upon which the Borrower or such Subsidiary, as applicable, obtains knowledge of
such failure or (y) the date upon which the Borrower or such Subsidiary, as
applicable, has received written notice of such failure from the Agent.
(c) Misrepresentations. Any written statement, representation or
warranty made or deemed made by or on behalf of BSC, the Borrower or any other
Subsidiary of BSC under this Agreement or under any other Loan Document or other
Transaction Document, or any amendment hereto or thereto, or in any other
writing or statement at any time furnished or made or deemed made by or on
behalf of BSC, the Borrower or any Subsidiary of BSC to the Agent or any Lender,
shall at any time prove to have been incorrect or misleading in any material
respect when furnished or made.
(d) Debt Cross-Default.
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(i) the Borrower or any Subsidiary shall fail to pay when due
and payable and after the expiration of any applicable grace and cure
periods the principal of, or interest on, any Debt other than the Loans
having an aggregate outstanding principal amount of $1,000,000 or more
("Material Debt"); or
(ii) (x) the maturity of any such Material Debt shall have
been accelerated in accordance with the provisions of any indenture,
contract or instrument evidencing, providing for the creation of or
otherwise concerning such Material Debt or (y) any of such Material
Debt shall have been required to be prepaid or repurchased prior to the
stated maturity thereof; or
(iii) any other event shall have occurred and be continuing
which, with or without the passage of time, the giving of notice, or
otherwise, would permit any holder or holders of such Material Debt,
any trustee or agent acting on behalf of such holder or holders or any
other Person, (x) to accelerate the maturity of any such Material Debt
or (y) require any such Material Debt to be prepaid or repurchased
prior to its stated maturity.
(e) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary
shall: (i) commence a voluntary case under the Bankruptcy Code of 1978, as
amended or other federal bankruptcy laws (as now or hereafter in effect); (ii)
file a petition seeking to take advantage of any other Applicable Laws, domestic
or foreign, relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts; (iii) consent to, or fail to contest in a
timely and appropriate manner, any petition filed against it in an involuntary
case under such bankruptcy laws or other Applicable Laws or consent to any
proceeding or action described in the immediately following subsection; (iv)
apply for or consent to, or fail to contest in a timely and appropriate manner,
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its property,
domestic or foreign; (v) admit in writing its inability to pay its debts as they
become due; (vi) make a general assignment for the benefit of creditors; (vii)
make a conveyance fraudulent as to creditors under any Applicable Law; or (viii)
take any corporate or similar action for the purpose of effecting any of the
foregoing.
(f) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be commenced against the Borrower or any Subsidiary in any court of competent
jurisdiction seeking: (i) relief under the Bankruptcy Code of 1978, as amended
or other federal bankruptcy laws (as now or hereafter in effect) or under any
other Applicable Laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts; or (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of such
Person, or of all or any substantial part of the assets, domestic or foreign, of
such Person, and such case or proceeding shall continue undismissed or unstayed
for a period of 45 consecutive calendar days, or an order granting the relief
requested in such case or proceeding against the Borrower or such Subsidiary
(including, but not limited to, an order for relief under such Bankruptcy Code
or such other federal bankruptcy laws) shall be entered.
(g) Contesting Loan Documents. The Borrower or any Subsidiary shall
disavow, revoke or terminate any Loan Document to which it is a party or shall
otherwise challenge or contest in any action, suit or proceeding in any court or
before any Governmental Authority the validity or enforceability of any Loan
Document.
(h) Judgment. A judgment or order for the payment of money (not
adequately covered by insurance as to which the insurance company has
acknowledged coverage in writing) shall be entered against the Borrower or any
Subsidiary by any court or other tribunal which exceeds, individually or
together with all other such judgments or orders entered against the Borrower
and its Subsidiaries, $1,000,000 in amount and such judgment or order shall
continue for a period of 30 days without being stayed or dismissed through
appropriate appellate proceedings.
(i) Loan Documents. An Event of Default (as defined therein) shall occur
and be continuing under any of the other Loan Documents.
(j) BSC Credit Agreement Default. A BSC Credit Agreement Default shall
occur and be continuing.
(k) Cartersville Indenture Default; Casting Mill Lease Default; Rolling
Mill Lease Default. A Cartersville Indenture Default, Casting Mill Lease Default
or Rolling Mill Lease Default shall occur and be continuing.
(l) Change of Control. (i) BSC shall cease to own all of the issued and
outstanding equity interests of Birmingham East Coast Holdings, L.L.C. ("East
Coast"); (ii) East Coast shall cease to own at least 85.0% of the membership
interests in the Borrower or (iii) any manager on the Borrower's management
committee shall have been appointed by any Person other than East Coast without
East Coast's prior written consent thereto.
(m) Suspension of Business. The cessation or substantial curtailment of
revenue producing activities of the Borrower or any Subsidiary shall occur
(whether as a result of strike, lockout, labor dispute, embargo, condemnation,
force majeure or otherwise) which could reasonably be expected to have a
Material Adverse Effect.
(n) Perfection. The Collateral Agent shall, for a period of 30 days,
cease to have a valid and perfected first-priority security interest (subject
only to Liens permitted to exist under the express terms of the BSC Credit
Agreement and the Note Purchase Agreements) in Collateral having an aggregate
book value in excess of $250,000 or in any other material portion of the
Collateral, for any reason other than the failure of the Collateral Agent to
take any action within its control.
(o) Designation as "Unrestricted Subsidiary." BSC shall designate the
Borrower as an "Unrestricted Subsidiary" under, and as defined in, the BSC
Credit Agreement or the Note Purchase Agreements.
(p) Note Purchase Agreement Default. An Event of Default under and as
defined in any of the Note Purchase Agreements shall occur and be continuing.
(q) Memphis Melt Shop Default. A Lease Event of Default under and as
defined in the Memphis Melt Shop Lease shall occur and be continuing.
Section 9 Remedies Upon Event of Default.
Upon the occurrence of an Event of Default the following provisions
shall apply:
(a) Acceleration; Termination of Facilities.
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(i) Automatic. Upon the occurrence of an Event of Default
specified in Sections 10.1.(e) or 10.1.(f), (A)(i) the principal of,
and all accrued interest on, the Loans and the Notes at the time
outstanding, and (ii) all of the other Obligations of the Borrower,
including, but not limited to, the other amounts owed to the Lenders
and the Agent under this Agreement, the Notes or any of the other Loan
Documents shall become immediately and automatically due and payable by
the Borrower without presentment, demand, protest, or other notice of
any kind, all of which are expressly waived by the Borrower and (B)
each of the Commitments, and the obligation of the Lenders to make
Revolving Loans, shall immediately and automatically terminate.
(ii) Optional. If any other Event of Default shall have
occurred and be continuing, the Requisite Lenders may direct the Agent
to, and the Agent if so directed shall: (I) declare (1) the principal
of, and accrued interest on, the Revolving Loans and the Notes at the
time outstanding, and (2) all of the other Obligations, including, but
not limited to, the other amounts owed to the Lenders and the Agent
under this Agreement, the Notes or any of the other Loan Documents to
be forthwith due and payable, whereupon the same shall immediately
become due and payable without presentment, demand, protest or other
notice of any kind, all of which are expressly waived by the Borrower
and (II) terminate the Commitments and the obligation of the Lenders to
make Revolving Loans.
(b) Loan Documents. The Requisite Lenders may direct the Agent to, and the
Agent if so directed shall, exercise any and all of its rights under any and all
of the other Loan Documents.
(c) Applicable Law. The Requisite Lenders may direct the Agent to, and the
Agent if so directed shall, exercise all other rights and
remedies it may have under any Applicable Law.
(d) Appointment of Receiver. To the extent permitted by Applicable Law,
the Agent and the Lenders shall be entitled to the appointment of a receiver for
the assets and properties of the Borrower and its Subsidiaries, without notice
of any kind whatsoever and without regard to the adequacy of any security for
the Obligations or the solvency of any party bound for its payment, to take
possession of all or any portion of the business operations of the Borrower and
its Subsidiaries and to exercise such power as the court shall confer upon such
receiver.
Section 10.3. Allocation of Proceeds.
If an Event of Default shall have occurred and be continuing and the
maturity of the Notes has been accelerated, all payments received by the Agent
under any of the Loan Documents, in respect of any principal of or interest on
the Obligations or any other amounts payable by the Borrower hereunder or
thereunder, shall be applied by the Agent in the following order and priority:
(a) amounts due to the Agent and the Lenders in respect of expenses due
under Section 12.2.;
(b) payments of interest on Loans, to be applied for the ratable benefit of
the Lenders;
(c) payments of principal of Loans, to be applied for the ratable benefit
of the Lenders;
(d) amounts due to the Agent and the Lenders pursuant to Sections 11.6. and
12.9.;
(e) payments of all other amounts due under any of the Loan Documents, if
any, to be applied for the ratable benefit of the Lenders; and
(f) any amount remaining after application as provided above, shall be paid
to the Borrower or whomever else may be legally entitled thereto.
Section 9 Performance by Agent.
If the Borrower shall fail to perform any covenant, duty or agreement
contained in any of the Loan Documents, the Agent may perform or attempt to
perform such covenant, duty or agreement on behalf of the Borrower after the
expiration of any cure or grace periods set forth herein. In such event, the
Borrower shall, at the request of the Agent, promptly pay any amount reasonably
expended by the Agent in such performance or attempted performance to the Agent,
together with interest thereon at the applicable Post-Default Rate from the date
of such expenditure until paid. Notwithstanding the foregoing, neither the Agent
nor any Lender shall have any liability or responsibility whatsoever for the
performance of any obligation of the Borrower under this Agreement or any other
Loan Document.
Section 9 Rights Cumulative.
The rights and remedies of the Agent and the Lenders under this
Agreement and each of the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies which any of them may otherwise have under
Applicable Law. In exercising their respective rights and remedies the Agent and
the Lenders may be selective and no failure or delay by the Agent or any of the
Lenders in exercising any right shall operate as a waiver of it, nor shall any
single or partial exercise of any power or right preclude its other or further
exercise or the exercise of any other power or right.
Section 9 Rescission of Acceleration by Requisite Lenders.
If at any time after acceleration of the maturity of the Obligations,
the Borrower shall pay all arrears of interest and all payments on account of
principal of the Obligations which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by
Applicable Law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Defaults (other than nonpayment of principal of
and accrued interest on the Obligations due and payable solely by virtue of
acceleration) shall be remedied or waived to the satisfaction of the Requisite
Lenders, then by written notice to the Borrower, the Requisite Lenders may
elect, in the sole discretion of such Requisite Lenders, to rescind and annul
the acceleration and its consequences; but such action shall not affect any
subsequent Default or Event of Default or impair any right or remedy consequent
thereon. The provisions of the preceding sentence are intended merely to bind
the Lenders to a decision which may be made at the election of the Requisite
Lenders; they are not intended to benefit the Borrower and do not give the
Borrower the right to require the Lenders to rescind or annul any acceleration
hereunder, even if the conditions set forth herein are satisfied.
ARTICLE 10 THE AGENT
Section 10 Authorization and Action.
Each Lender hereby appoints and authorizes the Agent to take such
action as agent on such Lender's behalf and to exercise such powers under this
Agreement and the other Loan Documents as are specifically delegated to the
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. The relationship between the Agent and the
Lenders shall be that of principal and agent only and nothing herein shall be
construed to deem the Agent a trustee or fiduciary for any Lender nor to impose
on the Agent duties or obligations other than those expressly provided for
herein. At the request of a Lender, the Agent will forward to each Lender copies
or, where appropriate, originals of the documents delivered to the Agent
pursuant to this Agreement or the other Loan Documents. The Agent will also
furnish to any Lender, upon the request of such Lender, a copy of any
certificate or notice furnished to the Agent by the Borrower, any Subsidiary or
any other Affiliate of the Borrower, pursuant to this Agreement or any other
Loan Document not already delivered to such Lender pursuant to the terms of this
Agreement or any such other Loan Document. As to any matters not expressly
provided for by the Loan Documents (including, without limitation, enforcement
or collection of any of the Obligations), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Requisite Lenders, and such
instructions shall be binding upon all Lenders and all holders of any of the
Obligations; provided, however, that, notwithstanding anything in this Agreement
to the contrary, the Agent shall not be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement
or any other Loan Document or Applicable Law. Not in limitation of the
foregoing, the Agent shall not exercise any right or remedy it or the Lenders
may have under any Loan Document upon the occurrence of a Default or an Event of
Default unless the Requisite Lenders have so directed the Agent to exercise such
right or remedy.
Section 10 Agent's Reliance, Etc.
Neither the Agent nor any of its directors, officers, agents, employees
or counsel shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement, except for its or their own
gross negligence or willful misconduct. Without limiting the generality of the
foregoing, the Agent: (a) may treat the payee of any Note as the holder thereof
until the Agent receives written notice of the assignment or transfer thereof
signed by such payee and in form satisfactory to the Agent; (b) may consult with
legal counsel (including its own counsel or counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender or any other Person and shall not be
responsible to any Lender or any other Person for any statements, warranties or
representations made by any Person in or in connection with this Agreement or
any other Loan Document; (d) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions
of any of this Agreement or any other Loan Document or the satisfaction of any
conditions precedent under this Agreement or any Loan Document on the part of
the Borrower or other Persons or to inspect the property, books or records of
the Borrower or any other Person; (e) shall not be responsible to any Lender for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or any other Loan Document, any other instrument or
document furnished pursuant hereto or thereto or any collateral covered thereby
or the perfection or priority of any Lien in favor of the Agent on behalf of the
Lenders in any such collateral; and (f) shall incur no liability under or in
respect of this Agreement or any other Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telephone
or telecopy) believed by it to be genuine and signed, sent or given by the
proper party or parties.
Section 11.3. Notice of Defaults.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or Event of Default unless the Agent has received notice
from a Lender or the Borrower referring to this Agreement, describing with
reasonable specificity such Default or Event of Default and stating that such
notice is a "notice of default." If any Lender becomes aware of any Default or
Event of Default, it shall promptly send to the Agent such a "notice of
default." Further, if the Agent receives such a "notice of default", the Agent
shall give prompt notice thereof to the Lenders.
Section 10 Bank of America as Lender.
Bank of America, as a Lender, shall have the same rights and powers
under this Agreement and any other Loan Document as any other Lender and may
exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Bank of America
in each case in its individual capacity. Bank of America and its affiliates may
each accept deposits from, maintain deposits or credit balances for, invest in,
lend money to, act as trustee under indentures of, serve as financial advisor
to, and generally engage in any kind of business with the Borrower, any
Subsidiary or any other Affiliate thereof as if it were any other bank and
without any duty to account therefor to the other Lenders. Further, the Agent
and any affiliate may accept fees and other consideration from the Borrower for
services in connection with this Agreement and otherwise without having to
account for the same to the other Lenders.
Section 10 Lender Credit Decision, Etc.
Each Lender expressly acknowledges and agrees that neither the Agent
nor any of its officers, directors, employees, agents, counsel,
attorneys-in-fact or other affiliates has made any representations or warranties
as to the financial condition, operations, creditworthiness, solvency or other
information concerning the business or affairs of the Borrower, any Subsidiary
or other Person to such Lender and that no act by the Agent hereinafter taken,
including any review of the affairs of the Borrower, shall be deemed to
constitute any such representation or warranty by the Agent to any Lender. Each
Lender acknowledges that it has, independently and without reliance upon the
Agent, any other Lender or counsel to the Agent, or any of their respective
officers, directors, employees and agents, and based on the financial statements
of the Borrower, the Subsidiaries or any other Affiliate thereof, and inquiries
of such Persons, its independent due diligence of the business and affairs of
the Borrower, the Subsidiaries and other Persons, its review of the Loan
Documents, the legal opinions required to be delivered to it hereunder, the
advice of its own counsel and such other documents and information as it has
deemed appropriate, made its own credit and legal analysis and decision to enter
into this Agreement and the transaction contemplated hereby. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent,
any other Lender or counsel to the Agent or any of their respective officers,
directors, employees and agents, and based on such review, advice, documents and
information as it shall deem appropriate at the time, continue to make its own
decisions in taking or not taking action under the Loan Documents. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall have no duty or responsibility
to provide any Lender with any credit or other information concerning the
business, operations, property, financial and other condition or
creditworthiness of the Borrower, any Subsidiary or any other Affiliate thereof
which may come into possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or other Affiliates.
Section 10 Indemnification of Agent.
Each Lender agrees to indemnify the Agent (to the extent not reimbursed
by the Borrower and without limiting the obligation of the Borrower to do so)
pro rata in accordance with such Lender's respective Commitment Percentage, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may at any time be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of the Loan Documents,
any transaction contemplated hereby or thereby or any action taken or omitted by
the Agent under the Loan Documents; provided, however, that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements to the
extent resulting from the Agent's gross negligence or willful misconduct or if
the Agent fails to follow the written direction of the Requisite Lenders unless
such failure is pursuant to the advice of counsel of which the Lenders have
received notice. Without limiting the generality of the foregoing, each Lender
agrees to reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees of the counsel of the Agent's own
choosing) incurred by the Agent in connection with the preparation, execution,
administration, or enforcement of, or legal advice with respect to the rights or
responsibilities of the parties under, the Loan Documents, any suit or action
brought by the Agent to enforce the terms of the Loan Documents and/or collect
any Obligations, any "lender liability" suit or claim brought against the Agent
and/or the Lenders, and any claim or suit brought against the Agent and/or the
Lenders arising under any Environmental Laws, to the extent that the Agent is
not reimbursed for such expenses by the Borrower. Such out-of-pocket expenses
(including counsel fees) shall be advanced by the Lenders on the request of the
Agent notwithstanding any claim or assertion that the Agent is not entitled to
indemnification hereunder upon receipt of an undertaking by the Agent that the
Agent will reimburse the Lenders if it is actually and finally determined by a
court of competent jurisdiction that the Agent is not so entitled to
indemnification. The agreements in this Section shall survive the payment of the
Loans and all other amounts payable hereunder or under the other Loan Documents
and the termination of this Agreement.
Section 10 Successor Agent.
The Agent may resign at any time as Agent under the Loan Documents by
giving written notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Requisite Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Requisite
Lenders, and shall have accepted such appointment, within 30 days after the
resigning Agent's giving of notice of resignation, then the resigning Agent may,
on behalf of the Lenders, appoint a successor Agent, which shall be a Lender, if
any Lender shall be willing to serve, and otherwise shall be a commercial bank
having combined capital and surplus of at least $1,000,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the resigning Agent, and the retiring
Agent shall be discharged from its duties and obligations under the Loan
Documents. After any resigning Agent's resignation hereunder as Agent, the
provisions of this Article XI. shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under the Loan Documents.
ARTICLE 11 MISCELLANEOUS
Section 11 Notices.
Unless otherwise provided herein, communications provided for hereunder
shall be in writing and shall be mailed, telecopied or delivered as follows:
If to the Borrower:
Birmingham Southeast, LLC
c/o Birmingham Steel Corporation
1000 Urban Center Parkway, Suite 300
Birmingham, Alabama 35242
Attention: Vice President-Finance
Telecopy Number: (205) 970-1352
Telephone Number: (205) 970-1200
_________If to the Agent:
Bank of America, N.A.
Bank of America Plaza
TX1-492-66-01
901 Main Street
Dallas, Texas 75202-3714
Attention: Jay T. Wampler
Telecopy Number: (214) 209-3711
Telephone Number: (214) 209-0604/3533
If to a Lender:
To such Lender's address or telecopy number, as applicable,
set forth on its signature page hereto or in the applicable
Assignment and Acceptance Agreement.
or, as to each party at such other address as shall be designated by such party
in a written notice to the other parties delivered in compliance with this
Section. All such notices and other communications shall be effective (i) if
mailed, when received; (ii) if telecopied, when transmitted; or (iii) if hand
delivered, when delivered. Notwithstanding the immediately preceding sentence,
all notices or communications to the Agent or any Lender under Article II. shall
be effective only when actually received. Neither the Agent nor any Lender shall
incur any liability to the Borrower (nor shall the Agent incur any liability to
the Lenders) for acting upon any telephonic notice referred to in this Agreement
which the Agent or such Lender, as the case may be, believes in good faith to
have been given by a Person authorized to deliver such notice or for otherwise
acting in good faith under hereunder.
Section 11 Expenses.
The Borrower agrees (a) to pay or reimburse the Agent and each Lender
for all of their reasonable out-of-pocket costs and expenses incurred in
connection with the preparation, negotiation and execution of, and any
amendment, supplement or modification to, any of the Loan Documents (including
due diligence expenses and travel expenses relating to closing), and the
consummation of the transactions contemplated thereby, including the reasonable
fees and disbursements of counsel to the Agent and each Lender, (b) to pay or
reimburse the Agent and the Lenders for all their costs and expenses incurred in
connection with the enforcement or preservation of any rights under the Loan
Documents, including the reasonable fees and disbursements of their respective
counsel (including the allocated fees and expenses of in-house counsel) and any
payments in indemnification or otherwise payable by the Lenders to the Agent
pursuant to the Loan Documents, (c) to pay, indemnify and hold the Agent and the
Lenders harmless from any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any failure to pay or delay in
paying, documentary, stamp, excise and other similar taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of any of the Loan Documents, or consummation of any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
any Loan Document and (d) to the extent not already covered by any of the
preceding subsections, to pay or reimburse the Agent and the Lenders for all
their costs and expenses incurred in connection with any bankruptcy or other
proceeding of the type described in Sections 10.1.(e) or 10.1.(f), including the
reasonable fees and disbursements of counsel to the Agent and any Lender,
whether such fees and expenses are incurred prior to, during or after the
commencement of such proceeding or the confirmation or conclusion of any such
proceeding.
Section 11 Setoff.
In addition to any rights now or hereafter granted under Applicable Law
and not by way of limitation of any such rights, the Agent, each Lender and each
Participant is hereby authorized by the Borrower, at any time or from time to
time during the continuance of an Event of Default, without notice to the
Borrower or to any other Person, any such notice being hereby expressly waived,
but subject to receipt of the prior written consent of the Requisite Lenders, to
set-off and to appropriate and to apply any and all deposits (general or
special, including, but not limited to, indebtedness evidenced by certificates
of deposit, whether matured or unmatured) and any other indebtedness at any time
held or owing by the Agent, such Lender or any affiliate of the Agent or such
Lender, to or for the credit or the account of the Borrower against and on
account of any of the Obligations, irrespective of whether or not any or all of
the Loans and all other Obligations have been declared to be, or have otherwise
become, due and payable as permitted by Section 10.2., and although such
Obligations shall be contingent or unmatured.
Section 11 Litigation; Jurisdiction; Other Matters; Waivers.
(a) EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY
BETWEEN OR AMONG THE BORROWER, THE AGENT OR ANY OF THE LENDERS WOULD BE BASED ON
DIFFICULT AND COMPLEX ISSUES OF LAW AND FACT AND WOULD RESULT IN DELAY AND
EXPENSE TO THE PARTIES. ACCORDINGLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE LENDERS, THE AGENT AND THE BORROWER HEREBY WAIVES ITS RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR
TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST ANY PARTY HERETO
ARISING OUT OF THIS AGREEMENT, THE NOTES, OR ANY OTHER LOAN DOCUMENT.
(b) EACH OF THE BORROWER, THE AGENT AND EACH LENDER HEREBY AGREES THAT
THE FEDERAL DISTRICT COURT OF THE NORTHERN DISTRICT OF GEORGIA OR AT THE OPTION
OF THE AGENT, ANY STATE COURT LOCATED IN FULTON COUNTY, GEORGIA, SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG THE
BORROWER, THE AGENT OR ANY OF THE LENDERS, PERTAINING DIRECTLY OR INDIRECTLY TO
THIS AGREEMENT, THE LOANS, THE NOTES OR ANY OTHER LOAN DOCUMENT OR TO ANY MATTER
ARISING HEREFROM OR THEREFROM. THE BORROWER AND EACH OF THE LENDERS EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN THE STATE OF GEORGIA IN
ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS. THE BORROWER HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED
THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT, OR OTHER PROCESS
OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE BORROWER
AT ITS ADDRESS FOR NOTICES PROVIDED FOR HEREIN.
(c) THE BORROWER, THE AGENT AND THE LENDERS EXPRESSLY ACKNOWLEDGE AND
AGREE THAT (i) NONE OF THIS AGREEMENT NOR ANY OF THE OTHER LOAN DOCUMENTS, WERE
OR WILL BE MADE OR ENTERED INTO IN THE STATE OF ALABAMA, (ii) NONE OF THE
OBLIGATIONS OF ANY PARTY TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
ARE TO BE PERFORMED IN THE STATE OF ALABAMA, AND (iii) THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE TRANSACTIONS IN
INTERSTATE COMMERCE WITHIN THE MEANING OF THE APPLICABLE PROVISIONS OF THE
CONSTITUTION OF THE UNITED STATES OF AMERICA. IN THE EVENT THAT, NOTWITHSTANDING
THE FOREGOING, ANY COURT OF COMPETENT JURISDICTION SHOULD REACH A CONTRARY
CONCLUSION, THE BORROWER HEREBY EXPRESSLY WAIVES, DISCLAIMS AND AGREES NOT TO
ASSERT OR OTHERWISE SEEK TO INVOKE ANY RIGHT, REMEDY OR OPTION THE BORROWER MAY
HAVE IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE RELATED DOCUMENTS UNDER OR
AS A RESULT OF ANY APPLICABLE LAW OF THE STATE OF ALABAMA, INCLUDING WITHOUT
LIMITATION SECTION 10-2B-15.02 OF THE CODE OF ALABAMA, 1975, RELATING TO THE
TRANSACTING OF INTRASTATE BUSINESS BY CORPORATIONS NOT QUALIFIED TO DO BUSINESS
IN THE STATE OF ALABAMA.
(d) EACH PARTY FURTHER WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT
OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND EACH
AGREES NOT TO PLEAD OR CLAIM THE SAME.
(e) THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED
TO PRECLUDE THE BRINGING OF ANY ACTION BY THE AGENT, ANY LENDER OR THE BORROWER,
OR THE ENFORCEMENT BY THE AGENT, ANY LENDER OR THE BORROWER OF ANY JUDGMENT
OBTAINED IN SUCH FORUM IN ANY OTHER APPROPRIATE JURISDICTION.
(f) THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF COUNSEL AND
WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF, AND SHALL SURVIVE
THE PAYMENT OF THE LOANS AND ALL OTHER AMOUNTS PAYABLE HEREUNDER OR UNDER THE
OTHER LOAN DOCUMENTS AND THE TERMINATION OF THIS AGREEMENT.
Section 12.5. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that the Borrower may not assign or otherwise transfer any of its rights
under this Agreement without the prior written consent of all Lenders.
(b) Any Lender may make, carry or transfer Loans at, to or for the
account of, any of its branch offices or the office of an affiliate of such
Lender except to the extent such transfer would result in increased costs to the
Borrower.
(c) Any Lender may at any time grant to one or more banks or other
financial institutions (each a "Participant") participating interests in its
Commitment or the Obligations owing to such Lender; provided, however, any such
participating interest must be for a constant and not a varying percentage
interest. No Participant shall have any rights or benefits under this Agreement
or any other Loan Document. In the event of any such grant by a Lender of a
participating interest to a Participant, such Lender shall remain responsible
for the performance of its obligations hereunder, and the Borrower and the Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement. Any agreement
pursuant to which any Lender may grant such a participating interest shall
provide that such Lender shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; provided, however, such Lender may agree with the Participant
that it will not, without the consent of the Participant, agree to (i) increase,
or extend the term or extend the time or waive any requirement for the reduction
or termination of, such Lender's Commitment, (ii) extend the date fixed for the
payment of principal of or interest on the Loans or portions thereof owing to
such Lender, (iii) reduce the amount of any such payment of principal, or (iv)
reduce the rate at which interest is payable thereon. An assignment or other
transfer which is not permitted by subsection (d) or (e) below shall be given
effect for purposes of this Agreement only to the extent of a participating
interest granted in accordance with this subsection (c). The selling Lender
shall notify the Agent and the Borrower of the sale of any participation
hereunder and the terms thereof.
(d) Any Lender may assign to one or more banks or other financial
institutions (each an "Assignee") all, but not a portion, of its Commitment and
its other rights and obligations under this Agreement and the Notes; provided,
however, (i) such Lender shall give the Borrower and the Agent prior written
notice of any such assignment; (ii) if such Lender's Commitment has not been
fully utilized and not terminated, the Agent shall have given its prior written
consent to such assignment (which consent shall not be unreasonably withheld),
except that no such consent shall be required pursuant to this clause (ii) in
the case of any assignment to another Lender or any affiliate of such Lender or
another Lender; (iii) each such assignment shall be for a constant and not a
varying percentage; (iv) each such assignment shall be effected by means of an
Assignment and Acceptance Agreement and (v) no Assignee may be BSC or any
Affiliate of BSC. Upon execution and delivery of such instrument and payment by
such Assignee to such transferor Lender of an amount equal to the purchase price
agreed between such transferor Lender and such Assignee, such Assignee shall be
deemed to be a Lender party to this Agreement as of the effective date of the
Assignment and Acceptance Agreement and shall have all the rights and
obligations of a Lender with a Commitment as set forth in such Assignment and
Acceptance Agreement, and the transferor Lender shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (d), the Agent and the Borrower shall make
appropriate arrangements so that a new Note is issued to the Assignee. In
connection with any such assignment, the transferor Lender shall pay to the
Agent an administrative fee for processing such assignment in the amount of
$3,500.
(e) The Agent shall maintain at the Principal Office a copy of each
Assignment and Acceptance Agreement delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitments of each Lender from time to time (the "Register"). The Agent shall
give each Lender and the Borrower notice of the assignment by any Lender of its
rights as contemplated by this Section. The Borrower, the Agent and the Lenders
may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register and copies of each
Assignment and Acceptance Agreement shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice to the Agent. Upon its receipt of an Assignment and
Acceptance Agreement executed by an assigning Lender, together with each Note
subject to such assignment (the "Surrendered Note"), the Agent shall, if such
Assignment and Acceptance Agreement has been completed and if the Agent receives
the processing and recording fee described in subsection (d) above, (i) accept
such Assignment and Acceptance Agreement, (ii) record the information contained
therein in the Register, and (iii) give prompt notice thereof to the Borrower.
(f) In addition to the assignments and participations permitted under
the foregoing provisions of this Section, any Lender that is a bank may assign
and pledge all or any portion of its Loans and its Notes to any Federal Reserve
Bank as collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank, and such Loans and Notes shall be fully
transferable as provided therein. No such assignment shall release the assigning
Lender from its obligations hereunder.
(g) A Lender may furnish any information concerning the Borrower or any
of its Subsidiaries in the possession of such Lender from time to time to
Assignees and Participants (including prospective Assignees and Participants) so
long as such Persons agree to keep such information confidential as provided in
Section 12.8.
(h) Anything in this Section to the contrary notwithstanding, no Lender
may assign or participate any interest in any Loan held by it hereunder to the
Borrower or any of its Affiliates or Subsidiaries.
(i) Each Lender agrees that, without the prior written consent of the
Borrower and the Agent, it will not make any assignment hereunder in any manner
or under any circumstances that would require registration or qualification of,
or filings in respect of, any Loan or Note under the Securities Act or any other
securities laws of the United States of America or of any other jurisdiction.
Section 11 Amendments.
Except as otherwise expressly provided in this Agreement, any consent
or approval required or permitted by this Agreement or in any Loan Document to
be given by the Lenders may be given, and any term of this Agreement or of any
other Loan Document may be amended, and the performance or observance by the
Borrower or any Subsidiary of any terms of this Agreement or such other Loan
Document or the continuance of any Default or Event of Default may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Requisite Lenders
(and, in the case of an amendment to any Loan Document, the written consent of
the Borrower). Notwithstanding the foregoing, no amendment, waiver or consent
shall, unless in writing, and signed by all of the Lenders (or by the Agent at
the written direction of all of the Lenders), do any of the following: (a)
increase the Commitments of the Lenders or subject the Lenders to any additional
obligations; (b) reduce the principal of, or interest rates that have accrued or
that will be charged on the outstanding principal amount of, any Loans or other
Obligations; (c) postpone any date fixed for any payment of any principal of,
interest on, or Fees with respect to, any Loans or any other Obligations; (d)
change the Commitment Percentages; (e) amend this Section or amend the
definitions of the terms used in this Agreement or the other Loan Documents
insofar as such definitions affect the substance of this Section; (f) modify the
definition of the term "Requisite Lenders" or modify in any other manner the
number or percentage of the Lenders required to make any determinations or waive
any rights hereunder or to modify any provision hereof; or (g) release any
Guarantor from any of its obligations under the Guarantee. Further, no
amendment, waiver or consent unless in writing and signed by the Agent, in
addition to the Lenders required hereinabove to take such action, shall affect
the rights or duties of the Agent under this Agreement or any of the other Loan
Documents. No waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon and any amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose set forth therein. No course of dealing or delay or omission on the part
of the Agent or any Lender in exercising any right shall operate as a waiver
thereof or otherwise be prejudicial thereto. Except as otherwise explicitly
provided for herein or in any other Loan Document, no notice to or demand upon
the Borrower shall entitle the Borrower to other or further notice or demand in
similar or other circumstances.
Section 11 Nonliability of Agent and Lenders.
The relationship between the Borrower and the Lenders and the Agent
shall be solely that of borrower and lender. Neither the Agent nor any Lender
shall have any fiduciary responsibilities to the Borrower. Neither the Agent nor
any Lender undertakes any responsibility to the Borrower to review or inform the
Borrower of any matter in connection with any phase of the Borrower's business
or operations.
Section 11 Confidentiality.
Except as otherwise provided by Applicable Law, the Agent and each
Lender shall utilize all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential or
proprietary by the Borrower in accordance with its customary procedure for
handling confidential information of this nature and in accordance with safe and
sound lending practices but in any event may make disclosure: (a) to any of
their respective affiliates (provided they shall agree to keep such information
confidential in accordance with the terms of this Section); (b) as reasonably
required by any bona fide Assignee, Participant or other transferee in
connection with the contemplated transfer of any Commitment or participations
therein as permitted hereunder (provided they shall agree to keep such
information confidential in accordance with the terms of this Section); (c) as
required or requested by any Governmental Authority, the National Association of
Insurance Commissioners, other similar regulatory body or representative of any
of the foregoing or pursuant to legal process or in connection with any legal
proceedings relating to any of the Loan Documents or the transactions
contemplated thereby; (d) to the Agent's or such Lender's independent auditors
and other professional advisors (provided they shall be notified of the
confidential nature of the information); and (e) after the happening and during
the continuance of an Event of Default, to any other Person, in connection with
the exercise by the Agent or the Lenders of rights hereunder or under any of the
other Loan Documents.
Section 11 Indemnification.
(a) The Borrower shall and hereby agrees to indemnify, defend and hold
harmless the Agent, any affiliate of the Agent and each of the Lenders and their
respective directors, trustees, officers, shareholders, agents, employees and
counsel (each referred to herein as an "Indemnified Party") from and against any
and all losses, claims, damages, liabilities, deficiencies, judgments or
expenses of every kind and nature (including, without limitation, amounts paid
in settlement, court costs and the fees and disbursements of counsel incurred in
connection with any litigation, investigation, claim or proceeding or any advice
rendered in connection therewith) (the foregoing items referred to herein as
"Claims and Expenses") incurred by an Indemnified Party arising out of or by
reason of any suit, cause of action, claim, arbitration, investigation or
settlement, consent decree or other proceeding (the foregoing referred to herein
as an "Indemnity Proceeding") which arise out of, or are in any way related
directly or indirectly to: (i) this Agreement or any other Loan Document or the
transactions contemplated thereby; (ii) the making of any Loans hereunder; (iii)
any actual or proposed use by the Borrower of the proceeds of the Loans; (iv)
the Agent's or any Lender's entering into this Agreement; (v) the fact that the
Agent and the Lenders have established the credit facility evidenced hereby in
favor of the Borrower; (vi) the fact that the Agent and the Lenders are
creditors of the Borrower and have or are alleged to have information regarding
the financial condition, strategic plans or business operations of the Borrower
and the Subsidiaries; (vii) the fact that the Agent and the Lenders are material
creditors of the Borrower and are alleged to influence directly or indirectly
the business decisions or affairs of the Borrower and the Subsidiaries or their
financial condition; (viii) the exercise of any right or remedy the Agent or the
Lenders may have under this Agreement or the other Loan Documents; provided,
however, that the Borrower shall not be obligated to indemnify any Indemnified
Party for any acts or omissions of such Indemnified Party in connection with
matters described in this subparagraph (viii) that constitute gross negligence
or willful misconduct; (ix) any violation or non-compliance by the Borrower or
any Subsidiary of any Applicable Law (including any Environmental Law)
including, but not limited to, any Indemnity Proceeding commenced by (A) the
Internal Revenue Service or state taxing authority or (B) any Governmental
Authority or other Person under any Environmental Law, including any Indemnity
Proceeding commenced by a Governmental Authority or other Person seeking
remedial or other action to cause the Borrower or its Subsidiaries (or its
respective properties) (or the Agent and/or the Lenders as successors to the
Borrower) to be in compliance with such Environmental Laws.
(b) This indemnification shall apply to all Indemnity Proceedings
arising out of, or related to, the foregoing whether or not an Indemnified Party
is a named party in such Indemnity Proceeding. In this connection, this
indemnification shall cover all costs and expenses of any Indemnified Party in
connection with any deposition of any Indemnified Party or compliance with any
subpoena (including any subpoena requesting the production of documents). This
indemnification shall, among other things, apply to any Indemnity Proceeding
commenced by other creditors of the Borrower or any Subsidiary, any shareholder,
member or other equity holder of the Borrower or any Subsidiary (whether such
shareholder, member or other equity holder is prosecuting such Indemnity
Proceeding in their individual capacity or derivately on behalf of the
Borrower), any account debtor of the Borrower or any Subsidiary or by any
Governmental Authority.
(c) This indemnification shall apply to any Indemnity Proceeding
arising during the pendency of any bankruptcy proceeding filed by or against the
Borrower and/or any Subsidiary.
(d) An Indemnified Party may conduct its own investigation and defense
of, and may formulate its own strategy with respect to, any Indemnity Proceeding
covered by this Section and, as provided above, all costs and expenses incurred
by the Indemnified Party shall be reimbursed by the Borrower if (i) such
investigation and defense has been specifically authorized in writing by the
Borrower, or (ii) the named parties to any Indemnity Proceeding (including any
impleaded parties) include both the Borrower and such Indemnified Party and
representation of both the Borrower and such Indemnified Party by the same
counsel would be inappropriate due to actual or potential conflicts of
interests. No action taken by legal counsel chosen by an Indemnified Party in
investigating or defending against any such Indemnity Proceeding shall vitiate
or in any way impair the obligations and duties of the Borrower hereunder to
indemnify and hold harmless each such Indemnified Party; provided, however, that
(i) if the Borrower is required to indemnify an Indemnified Party pursuant
hereto and (ii) the Borrower has provided evidence reasonably satisfactory to
such Indemnified Party that the Borrower has the financial wherewithal to
reimburse such Indemnified Party for any amount paid by such Indemnified Party
with respect to such Indemnity Proceeding, such Indemnified Party shall not
settle or compromise any such Indemnity Proceeding without the prior written
consent of the Borrower (which consent shall not be unreasonably withheld or
delayed).
(e) If and to the extent that the obligations of the Borrower hereunder
are unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under Applicable Law.
(f) The Borrower's obligations hereunder shall survive any termination
of this Agreement and the other Loan Documents and the payment in full of the
Obligations, and are in addition to, and not in substitution of, any other of
their obligations set forth in this Agreement or any other Loan Document to
which it is a party.
Section 11 Termination; Survival.
At such time as (a) all of the Commitments have been terminated, (b)
none of the Lenders is obligated any longer under this Agreement to make any
Loans, and (c) all Obligations (other than obligations which survive as provided
in the following sentence) have been paid and satisfied in full, this Agreement
shall terminate. Notwithstanding any termination of this Agreement, or of the
other Loan Documents, the indemnities to which the Agent and the Lenders are
entitled under the provisions of Sections 11.6., 12.2. and 12.9. and any other
provision of this Agreement and the other Loan Documents, and the waivers of
jury trial and submission to jurisdictions contained in Section 12.4., shall
continue in full force and effect and shall protect the Agent and the Lenders
against events arising after such termination as well as before.
Section 11 Severability of Provisions.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remainder of such provision or the remaining provisions or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 11 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE
FULLY PERFORMED, IN SUCH STATE.
Section 11 Counterparts.
This Agreement and any amendments, waivers, consents or supplements may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
Section 11 No Fiduciary Relationship.
No provision in this Agreement or in any of the other Loan Documents
and no course of dealing between the parties shall be deemed to create any
fiduciary duty owing by the Agent or any Lender to any Lender, the Borrower or
any Subsidiary.
Section 11 Limitation of Liability.
Neither the Agent nor any Lender, nor any affiliate, officer, director,
trustee, employee, attorney, or agent of the Agent or any Lender shall have any
liability with respect to, and the Borrower hereby waives, releases, and agrees
not to sue any of them upon, any claim for any special, indirect, incidental, or
consequential damages suffered or incurred by the Borrower in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents. The Borrower hereby waives, releases, and agrees
not to sue the Agent or any Lender or any of the Agent's or any Lender's
affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or financed hereby.
Section 11 Entire Agreement.
This Agreement, the Notes, and the other Loan Documents referred to
herein embody the final, entire agreement among the parties hereto and supersede
any and all prior commitments, agreements, representations, and understandings,
whether written or oral, relating to the subject matter hereof and may not be
contradicted or varied by evidence of prior, contemporaneous, or subsequent oral
agreements or discussions of the parties hereto.
Section 11 Construction.
The Agent, the Borrower and each Lender acknowledge that each of them
has had the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement and the other Loan Documents with its legal
counsel and that this Agreement and the other Loan Documents shall be construed
as if jointly drafted by the Agent, the Borrower and each Lender.
Section 12.18. BSC Credit Agreement Provisions.
(a) Notwithstanding any provision of this Agreement to the contrary, no
waiver, amendment or other modification to (i) the BSC Credit Agreement
Representations, (ii) the BSC Credit Agreement Defaults or (iii) the covenants
from the BSC Credit Agreement referred to in Section 7.12., which shall have
become effective under the BSC Credit Agreement after the Effective Date shall
be deemed to be incorporated herein by reference unless and until consented to
by the Requisite Lenders in writing.
(b) The BSC Credit Agreement Representations, the BSC Credit Agreement
Defaults and the covenants from the BSC Credit Agreement referred to in Section
7.12. incorporated herein by reference and any definitions or other terms or
provisions of the BSC Credit Agreement incorporated herein by reference, will be
deemed to continue in effect for the benefit of the Agent and the Lenders until
the Commitments have terminated, all Obligations have been indefeasibly paid in
full and this Agreement shall have terminated in accordance with its terms,
whether or not the BSC Credit Agreement or any Commitment thereunder remains in
effect or whether or not the BSC Credit Agreement is amended, restated or
terminated after the date hereof.
Section 11 SUBJECT TO INTERCREDITOR AGREEMENT.
This Agreement is subject to the terms and conditions of the
Intercreditor Agreement.
[Signatures on Following Pages]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed by their authorized officers all as of the day and year
first above written.
By: /s/ J. Daniel Garrett
----------------------
Name: J. Daniel Garrett
Title: Vice President - Finance
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<PAGE>
BANK OF AMERICA, N.A., as Agent and as a Lender
By: /s/ Jay T. Wampler
------------------
Name: Jay T. Wampler
Title: Managing Director
Lending Office (all Types of Loans):
One Independence Center
NC1-001-15-03
101 N. Tryon St.
Charlotte, NC 28255-0001
Attention: Laura Schultz
Telecopy Number: (704) 388-3919
Telephone Number: (704) 409-0025
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<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Martin E. Mueller
---------------------
Name: Martin E. Mueller
Title: Vice President
Lending Office (all Types of Loans)
and Address for Notices:
PNC Capital Recovery Corp.
Fifth Avenue and Wood Street - 18th Floor
Pittsburgh, Pennsylvania 15222
Attn: Martin E. Mueller
Telecopier: (412) 762-4157
Telephone: (412) 762-5263
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<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ Peter Van Schaick
---------------------
Name: Peter Van Schaick
Title: Director
Lending Office (all Types of Loans):
The Bank of Nova Scotia, Atlanta Agency
Atlanta Agency, Suite 2700
600 Peachtree St., NW
Atlanta, Georgia 30308
Attn: Dottie Legista
Telecopier: (404) 888-8998
Telephone: (404) 877-1535
Address for notices:
The Bank of Nova Scotia
Special Accounts Management, NY
1 Liberty Plaza
New York, New York 10006
Attn: Norm Gillespie / Pieter Van Schaick
Telecopier: (212) 225-5205
Telephone: (212) 225-6405/(212) 225-5005
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, ltd
By: /s/ G. England
--------------
Name: G. England
Title: V.P. and Manager
Lending Office (all Types of Loans):
Bank of Tokyo - Mitsubishi, New York Branch
1251 Avenue of the Americas, 12th Floor
New York, New York 10020-1104
Attn: Roland Uy
Telecopier: (201) 521-2304/5
Telephone: (201) 413-8570
Address for notices:
Bank of Tokyo-Mitsubishi, Ltd.
133 Peachtree Street, Suite 3450
Atlanta, Georgia 30303
Attn: Gary England
Telecopier: (404) 522-1155
Telephone: (404) 222-4205
<PAGE>
CIBC INC.
By: /s/ Ronald E. Spitzer
--------------------
Name: Ronald E. Spitzer
Title: Agent
Lending Office (all Types of Loans):
2727 Paces Ferry Road, Suite 12000
2 Paces West, Building 2
Atlanta, Georgia 30339
Attn: Ava Cool
Telecopier: (770) 319-4950
Telephone: (770) 319-4816
Address for notices:
CIBC Inc.
Credit Capital Markets
425 Lexington Avenue
New York, New York 10017
Attn: Robert Novack
Telecopier: (212) 856-3991
Telephone: (212) 856-4180
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<PAGE>
AMSOUTH BANK
By: /s/ Darlene E. Chandler
------------------------
Name: Darlene E. Chandler
Title: Vice President
Lending Office (all Types of Loans) and
Address for Notices:
AmSouth Bank
1900 5th Ave. North
Birmingham, Alabama 35203
Attn: Darlene E. Chandler
Telecopier: 205-801-0745
Telephone: 205-801-0549
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<PAGE>
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK, CAYMAN ISLAND BRANCH
By: /s/ J. W. Somers
-----------------
Name: J.W. Somers
Title: S.V.P.
By: /s/ Kurt A. Morris
---------------
Name: Kurt A. Morris
Title: Vice President
Lending Office (all Types of Loans)
and Address for Notices:
DG BANK, AG, Atlanta Agency
Suite 2900
One Peachtree Center
303 Peachtree Street, NE
Atlanta, Georgia 30308
Attn: John Somers
Telecopier: 404-524-4006
Telephone: 404-524-3966
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<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Gregory L. Hong
---------------------
Name: Gregory L. Hong
Title: Duly Authorized Signatory
Lending Office (all Types of Loans):
GE Capital - Commercial Finance
60 Long Ridge Road
Stamford, Connecticut 06927-5100
Attn: Jason Kwik
Telecopier: (203) 602-8344
Telephone: (203) 357-6293
Address for notices:
GE Capital - Commercial Finance
60 Long Ridge Road
Stamford, Connecticut 06927-5100
Attn: Thomas McNicholas
Telecopier: (203) 316-7978
Telephone: (203) 961-5793
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<PAGE>
BANK ONE, NA
By: /s/ Richard Babcock
--------------------
Name: Richard Babcock
Title: Vice President
Lending Office (all Types of Loans)
and Address and Notices:
Bank One, NA
1 Bank One Plaza - ILI-0631
Chicago, Illinois 60670
Attn: Richard Babcock
Telecopier: (312) 732-1775
Telephone: (312) 732-3022
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<PAGE>
THE SANWA BANK, LIMITED
By: /s/ John T. Fenney
------------------
Name: John T. Fenney
Title: Vice President
Lending Office (all Types of Loans):
The Sanwa Bank, Limited
New York Branch
55 East 52nd Street
New York, NY 10055
Attn: Marlin Chin
Telecopier: 212-754-2368
Telephone: 212-339-6392
Address for notices:
The Sanwa Bank, Limited
New York Branch
55 East 52nd Street
New York, NY 10055
Attn: John T. Feeney
Telecopier: 212-754-1304
Telephone: 212-339-6366
[Signatures Continued on Next Page]
<PAGE>
UBS AG, STAMFORD BRANCH
By: /s/ Marco Breitenmoser
-----------------------
Name: Marco Breitenmoser
Title: Director
Recovery Management
By: /s/ Dorothy McKinley
--------------------
Name: Dorothy McKinley
Title: Director
Loan Portfolio Support, US
Lending Office (all Types of Loans):
UBS AG Stamford Branch
677 Washington Boulevard
Stamford, Connecticut 06901
Attn: Jennifer Poccia
Telecopier: 203-719-3888
Telephone: 203-719-3834
Address for notices:
UBS AG Stamford Branch
677 Washington Boulevard
Stamford, Connecticut 06901
Attn: Marco Breitenmoser
Telecopier: 203-719-3162
Telephone: 203-719-3114
[Signatures Continued on Next Page]
Very truly yours,
PRINCIPAL LIFE INSURANCE COMPANY
(f/k/a Principal Mutual Life Insurance Company)
By: Principal Capital Management, LLC, a Delaware
limited liability company, its authorized signatory
By: /s/ Sarah J. Pitts
-------------------
Name: Sarah J. Pitts
Title: Counsel
By: /s/ James C. Fifield
----------------
Name: James C. Fifield
Title: Counsel
PRINCIPAL LIFE INSURANCE COMPANY, ON
BEHALF OF ONE OR MORE SEPARATE ACCOUNTS
By: Principal Capital Management, LLC, a Delaware
limited liability company, its authorized signatory
By: /s/ Debra Svoboda Epp
----------------------
Name: Debra Svoboda Epp
Title: Counsel
By: /s/ Sarah J. Pitts
-------------------
Name: Sarah J. Pitts
Title: Counsel
THE CANADA LIFE ASSURANCE COMPANY
(J. Romeo & Co. as nominee)
By: /s/ Kevin Phelan
-----------------
Name: Kevin Phelan
Title: Assistant Treasurer
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
JEFFERSON-PILOT LIFE INSURANCE COMPANY
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
PIONEER MUTUAL LIFE INSURANCE COMPANY
By: American United Life Insurance Company
By: /s/ Kent R. Adams
------------------
Name: Kent R. Adams
Title: Vice President, American United Life
Insurance Company as Agent for Pioneer
Mutual Life Insurance Company
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
By: /s/ Robert Bayer
-----------------
Name: Robert Bayer
Title: Investment Officer
SUN LIFE ASSURANCE COMPANY OF CANADA
By: /s/ John N. Whelihan
----------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private
Placements - for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and Counsel -
for Secretary
SUN LIFE ASSURANCE COMPANY OF CANADA
(U.S.)
By: /s/ John N. Whelihan
-------------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private
Placements - for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and Counsel -
for Secretary
SUN LIFE INSURANCE AND ANNUITY COMPANY
OF NEW YORK
By: /s/ John N. Whelihan
-------------------------
Name: John N. Wheliham
Title: Vice President, U.S. Private
Placements - for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and Counsel -
for Secretary
ACE PROPERTY AND CASUALTY INSURANCE COMPANY
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
--------------------------
Name: Stephen H. Wilson
Title: Managing Director
LIFE INSURANCE COMPANY OF NORTH AMERICA
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
--------------------------
Name: Stephen H. Wilson
Title: Managing Director
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
--------------------------
Name: Stephen H. Wilson
Title: Managing Director
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ Richard A. Strait
----------------------
Name: Richard A. Strait
Title: Its Authorized Representative
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By: /s/ Wayne T. Hoffmann
----------------------
Name: Wayne T. Hoffmann
Title: Vice President
Investments
By: /s/ Julie Bock
---------------
Name: Julie Bock
Title: Asst. Vice President
THE STATE LIFE INSURANCE COMPANY
By American United Life Insurance Company, it's agent
By: /s/ Kent R. Adams
------------------
Name: Kent R. Adams
Title: Vice President Fixed Income Securities
AMERICAN UNITED LIFE INSURANCE COMPANY
By: /s/ Kent R. Adams
------------------
Name: Kent R. Adams
Title: Vice President Fixed Income Securities
AMERITAS LIFE INSURANCE CORPORATION
By: Ameritas Investment Advisors Inc., as Agent
By: /s/ Patrick J.Henry
--------------------
Name: Patrick J. Henry
Title: Vice President - Fixed Income
Securities
ACACIA 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
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 Investment Officer
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Mark W. Poeppelman
-----------------------
Name: Mark W. Poeppelman
Title: Associate Vice President
NATIONWIDE LIFE INSURANCE COMPANY (as successor to
Employers Life Insurance Company of Wausau)
By: /s/ Mark W. Poeppelman
-----------------------
Name: Mark W. Poeppelman
Title: Associate Vice President
BERKSHIRE LIFE INSURANCE COMPANY
By: /s/ Ellen I. Whittaker
-----------------------
Name: Ellen I. Whittaker
Title: Senior Investment Officer
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Roi G. Chandy
------------------
Name: Roi G. Chandy
Title: Director, Special Situations
<PAGE>
Exhibit 10.26
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of October 12, 1999 (this
"Agreement"), executed by BIRMINGHAM STEEL CORPORATION, a Delaware corporation
(the "Borrower"), each of the undersigned Subsidiaries and the other Persons
from time to time party hereto pursuant to the execution and delivery of an
Accession Agreement (the Borrower, each of such Subsidiaries and each such other
Person a "Debtor" and collectively the "Debtors") in favor of STATE STREET BANK
AND TRUST COMPANY, solely in its capacity as Collateral Agent (the "Collateral
Agent") for the benefit, and on behalf, of the Secured Parties.
WHEREAS, the Borrower, certain of its Restricted Subsidiaries, the
Secured Parties and the Collateral Agent have entered into that certain Omnibus
Collateral Agreement dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "Omnibus Collateral
Agreement"), to provide for, among other things, the securing of the Secured
Obligations owing to the Secured Parties; and
WHEREAS, Collateral Agent holds the Collateral (as defined herein)
subject to the terms and conditions contained in the Intercreditor Agreement;
WHEREAS, it is a condition precedent to, among other things, the
effectiveness of various amendments by the Secured Parties to certain terms of
the agreements evidencing the terms of such Secured Obligations that the parties
hereto execute and deliver this Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto agree as follows:
Section 1. Grant of Security Interest. To secure the prompt and
complete payment, observance and performance when due (whether at stated
maturity, by acceleration or otherwise) of all of the Secured Obligations, each
Debtor hereby collaterally assigns and pledges to the Collateral Agent for the
benefit of the Secured Parties, and grants to the Collateral Agent for the
benefit of the Secured Parties, a security interest in, all Collateral of such
Debtor.
Section 2. Representations and Warranties. Each Debtor represents and
warrants to the Collateral Agent and the Secured Parties as follows:
(a) Name; Corporate Changes; Taxpayer ID Numbers. The exact legal name
of each Debtor is set forth on the signature page hereto or to the Accession
Agreement by which such Debtor became a party hereto. Except as set forth in
Schedule I attached hereto: (i) no Debtor conducts, nor during the five-year
period immediately preceding the date of this Agreement or, in the case of a
Debtor becoming a party hereto pursuant to an Accession Agreement, the date of
such Accession Agreement, has conducted, business under any trade name, other
fictitious name or other legal name and (ii) no Debtor has changed its name,
identity or corporate structure in any way. The Internal Revenue Service
taxpayer identification number of each Debtor is set forth on such Schedule.
(b) Chief Executive Office; Places of Business. The chief executive
office of each Debtor, and the books and records relating to the Receivables and
the other Collateral of each such Debtor, are located at the respective
addresses set forth on Schedule I attached hereto, and have been located there
for the five-year period immediately preceding the date hereof or, in the case
of a Debtor becoming a party hereto pursuant to an Accession Agreement, the date
of such Accession Agreement. The addresses (including the applicable counties)
of all of the respective places of business of each Debtor are set forth on such
Schedule.
(c) Inventory. Substantially all Inventory of each Debtor is in good
condition, meets, in all material respects, all standards imposed by any
governmental agency, or department or division thereof, having regulatory
authority over such goods, their use or sale, and is currently either usable or
salable in the normal course of such Debtor's business. The Inventory of each
Debtor is located on one or more of the places set forth on Schedule I attached
hereto or is in transit to one of such locations. Such Schedule sets forth with
respect to each such location whether such Debtor owns or leases such location
or whether such location is that of a processor or consignee of such Inventory,
and if so the name of such processor or consignee.
(d) Equipment. All Equipment of each Debtor is in good working order and
repair and is located on or at one or more of the places set forth on Schedule I
attached hereto.
(e) Security Interest. It is the intent of each Debtor that this
Agreement create a valid and perfected first-priority security interest in the
Collateral, securing the payment and performance of the Secured Obligations
subject to those Liens set forth on Schedule 2(e).
Section 3. Collateral Covenants.
(a) Sale of Collateral. No Debtor shall sell, lease, transfer or
otherwise dispose of any Collateral except as expressly permitted under
applicable provisions of the Transaction Documents. The inclusion of "proceeds"
in the Collateral shall not be deemed to be a consent by the Collateral Agent or
any Secured Party to any other sale or other disposition of any part or all of
the Collateral.
(b) Liens. No Debtor shall create, assume, incur or permit or suffer to
exist or to be created, assumed or incurred, any Lien upon any of the Collateral
other than Permitted Liens and those Liens set forth on Schedule 2(e).
(c) Proceeds of Collateral. Each Debtor shall account fully and
faithfully for, and upon the Collateral Agent's request, promptly pay or turn
over to the Collateral Agent, proceeds in whatever form received in disposition
in any manner of any of such Debtor's Collateral except, (a) so long as no Event
of Default has occurred and is continuing, proceeds arising from the sale of
Inventory and Accounts collected in the ordinary course of business and (b) as
expressly permitted under the Transaction Documents.
(d) Payment of Taxes and Claims. Each Debtor shall pay or discharge
when due: (i) all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits or upon such Debtor's Collateral or any
other properties belonging to it, and (ii) all lawful claims of materialmen,
mechanics, carriers, warehousemen and landlords for labor, materials, supplies
and rentals which, if unpaid, might become a Lien on any of the Collateral or
other properties of the Debtor; provided, however, that this Section shall not
require the payment or discharge of any such tax, assessment, charge, levy or
claim which is being contested in good faith by appropriate proceedings which
operate to suspend the collection thereof and for which adequate reserves have
been established on the appropriate books.
(e) Location of Office. Each Debtor's chief executive office and its
books and records relating to the Collateral will continue to be kept at the
respective address set forth in Schedule I attached hereto and no Debtor will
change the location of such office or such books and records without giving the
Collateral Agent at least 60 days' prior written notice thereof.
(f) Location of Collateral. All Inventory, other than Inventory in
transit to any such location, and all Equipment will at all times be kept by
each Debtor at the respective locations set forth on Schedule I attached hereto,
and shall not be removed therefrom except as expressly permitted under the
Transaction Documents and, so long as no Event of Default shall have occurred
and be continuing, in connection with sales thereof in the ordinary course of
business or.
(g) Change of Name, Structure, Etc. Without giving the Collateral Agent
at least 60 days' prior written notice, no Debtor will (i) change is name,
identity or structure or (ii) conduct business under any trade name or other
fictitious name other than those set forth on Schedule I attached hereto.
(h) Defense of Title. Each Debtor shall defend its title in and to, and the
Security Interest in, such Collateral against the claims and demands of all
Persons.
(i) Maintenance of Collateral. Each Debtor shall maintain all physical
property that constitutes its Collateral in good and workable condition, with
reasonable allowance for wear and tear, and shall exercise proper custody over
all such property.
(j) Insurance. Each Debtor shall at all times maintain, or cause to be
maintained, insurance on its Collateral against loss or damage by fire, theft,
burglary, pilferage, loss in transit and such additional casualties and
contingencies, in each case, as shall be in accordance with general practices of
businesses engaged in similar activities in similar geographic areas, and that
the insurance be on an all risks basis, with broad form flood, earthquake
coverages and electronic data processing coverage, with a full replacement cost
endorsement, and with sufficient insurance so that the debtor will not be deemed
to be a co-insurer, in amounts and under policies issued by such Debtor's
present insurers or other insurers reasonably acceptable to the Collateral
Agent. All premiums on such insurance shall be paid by the Debtors and certified
copies of the policies, or other evidence of insurance acceptable to the
Collateral Agent, shall be delivered to the Collateral Agent or any Secured
Party promptly upon written request. No Debtor will use or permit its Collateral
to be used unlawfully (including any law dealing with the control shipment,
storage or disposal of hazardous materials or substances) or outside of any
insurance coverage. All insurance policies required under this Section shall
contain loss payable clauses on New York standard loss payee forms or other
forms satisfactory to the Collateral Agent, naming the Collateral Agent as loss
payee, and providing that: (i) all proceeds thereunder shall be payable directly
to the Collateral Agent; (ii) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy; (iii)
such policies and loss payable clauses may not be canceled, amended or
terminated with respect to the Collateral Agent unless at least 30 days' prior
written notice is given to the Collateral Agent; and (iv) there shall be no
recourse against the Collateral Agent or any Secured Party for payment of
premiums or other amounts with respect thereto. Any proceeds of insurance
referred to in this Section which are paid to the Collateral Agent shall be
applied in accordance with the applicable provisions of the Intercreditor
Agreement.
(k) Records of Receivables Genuine. All books, records, and documents
relating to any of the Receivables (including computer records) are and will be
genuine and in all respects what they purport to be and the amount of each of
the Receivables shown on the books and records of each Debtor are and will be
the correct amount actually owing or to be owing at maturity of such
Receivables, subject only to unintentional errors.
(l) Government Contracts. Each Debtor shall notify the Collateral Agent
if (i) any single Receivable owing to such Debtor in an amount of $250,000 or
more or (ii) Receivables owing to such Debtor in an aggregate amount of $300,000
or more, shall arise out of a contract or contracts with the United States of
America or any department, agency, or instrumentality thereof, and each Debtor
shall, at its sole cost and expense, take all action that may be necessary or
desirable, or that the Collateral Agent may otherwise request, to perfect the
assignment of the rights of the Debtor's in and to such Receivable or
Receivables to the Collateral Agent as required by the Federal Assignment of
Claims Act or any similar act or regulation.
(m) Records Relating to Collateral. Each Debtor will at all times keep
complete and accurate records of its Inventory and Equipment, itemizing and
describing the kind, type and quantity of such Inventory and Equipment and the
Debtor's cost therefor and a current price list for its Inventory, and keep
complete and accurate records of all of its Receivables and other Collateral.
(n) Inspection. The Collateral Agent and each Secured Party (by any of
their respective officers, employees or agents) shall have the right, to the
extent that the exercise of such right shall be within the control of any
Debtor, at any time or times during normal business hours and, so long as no
Event of Default shall have occurred and be continuing, with reasonable prior
notice and at the expense of the Collateral Agent and each Secured Party: (i) to
inspect the Collateral, all files relating thereto and the premises upon which
any of the Collateral is located, (ii) to discuss a Debtor's affairs and
finances, insofar as the same are reasonably related to the rights of the
Collateral Agent or such Secured Party hereunder, with any Person, to verify the
amount, quantity, value and condition of, or any other matter relating to, any
of the Collateral and (iii) to review, audit and make extracts from all records
and files of the Debtors related to any of the Collateral.
(o) Other Information. Each Debtor shall furnish to the Collateral
Agent such other information with respect to the Collateral, including, but not
limited to, physical listings of Inventory and Equipment, as the Collateral
Agent may reasonably request from time to time.
(p) Verification. Upon the occurrence of an Event of Default and its
continuance the Collateral Agent shall have the right at any time and from time
to time, in the name of the Collateral Agent or in the name of any Debtor, to
verify the validity, amount or any other matter relating to any Receivables of a
Debtor by mail, telephone or otherwise.
(q) Payments Directly to Collateral Agent. The Collateral Agent may at
any time and from time to time after the occurrence and during the continuance
of an Event of Default, notify, or request any Debtor to notify, in writing or
otherwise, any account debtor or other obligor with respect to any one or more
of such Debtor's Receivables or Assigned Contracts to make payment to the
Collateral Agent or any agent or designee of the Collateral Agent directly, at
such address as may be specified by the Collateral Agent. If, notwithstanding
the giving of any such notice, any account debtor or other such obligor shall
make payment to a Debtor, such Debtor shall hold all such payments it receives
in trust for the Collateral Agent and the Secured Parties, without commingling
the same with other funds or property of or held by any Debtor, and shall
promptly deliver the same to the Collateral Agent or any such agent or designee
promptly upon receipt by such Debtor in the identical form received, together
with any necessary endorsements.
Section 4. Covenants Regarding Contracts.
(a) Debtors to Remain Obligated. Anything herein to the contrary
notwithstanding, (i) each Debtor shall remain liable under all Assigned
Contracts to the extent set forth therein to perform its respective duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by the Collateral Agent of any of its rights
hereunder shall not release any Debtor from any of its respective duties or
obligations under any of the Assigned Contracts and (iii) neither the Collateral
Agent nor any Secured Party shall have any duties, obligations or liabilities
under any of the Assigned Contracts or duties by reason of this Agreement, nor
shall the Collateral Agent nor any Secured Party be obligated to perform any of
the respective duties or obligations of any Debtor thereunder, to make any
payment, to make any inquiry as to the nature or sufficiency of any payment
received by any Debtor or the sufficiency of any performance by any party under
any such contract or agreement, or to take any action to collect or enforce any
claim for payment assigned hereunder.
(b) Debtors to Perform. Each Debtor shall at its sole cost and
expense:
(i) perform and observe all the terms and provisions of the
Assigned Contracts to be performed or observed by it in accordance with
its normal business practices, maintain the Assigned Contracts in full
force and effect consistent with such Debtor's normal business
practices, and enforce the Assigned Contracts in accordance with their
terms consistent with such Debtor's normal business practices; and
(ii) upon the reasonable request of the Collateral Agent
furnish to the Collateral Agent promptly upon receipt thereof copies of
all notices, requests and other documents received by any Debtor under
or pursuant to the Assigned Contracts, and from time to time (A)
furnish to the Collateral Agent such information and reports regarding
the Assigned Contracts as such Person may reasonably request and (B)
upon the reasonable request of the Collateral Agent, make to each other
party to the Assigned Contracts such demands and request for
information and reports or for action as such Debtor is entitled to
make under such Assigned Contracts.
(c) No Failure to Act. No Debtor shall take, or omit to take, any
action with respect to any Assigned Contract which could reasonably be expected
to have a material adverse effect on the financial condition or business
operations of such Debtor.
Section 5. Continued Priority of Security Interest.
(a) Generally. The Security Interest shall at all times be valid,
perfected and of first priority (subject to those Liens set forth on Schedule
2(e) and enforceable against all of the Debtors and all other Persons, in
accordance with the terms of this Agreement, as security for the Secured
Obligations.
(b) Further Assurances. Each Debtor shall, at its sole cost and
expense, take all action that may be necessary or desirable, or that the
Collateral Agent may otherwise request, so as at all times to maintain the
validity, perfection, enforceability and priority and rank of the Security
Interest in conformity with the requirements of the immediately preceding
subsection (a), or to enable the Collateral Agent to exercise or enforce its
rights hereunder including, but not limited to:
(i) paying all taxes, assessments and other claims lawfully
levied or assessed on any of such Debtor's Collateral, except to the
extent that such taxes assessments and other claims constitute
Permitted Liens;
(ii) using its good faith efforts to obtain landlords',
mortgagees', mechanics', bailees', warehousemen's or processors'
releases, subordinations or waivers with respect to any or all of such
Debtor's Collateral, in form and substance satisfactory to the
Collateral Agent;
(iii) delivering to the Collateral Agent, endorsed or
accompanied by such instruments of assignment as the Collateral Agent
may specify, any and all chattel paper, instruments, letters of credit
and all other advices of guaranty and documents evidencing or forming a
part of such Debtor's Collateral;
(iv) executing and delivering financing statements, pledges,
designations, mortgages, deeds to secure debt, deeds of trust,
hypothecations, notices and assignments, in each case in form and
substance satisfactory to the Collateral Agent, relating to the
creation, validity, perfection, priority or continuation of the
Security Interest under the Uniform Commercial Code or other Applicable
Law.
(c) Authority to File. Each Debtor hereby authorizes the Collateral
Agent to execute and file in all necessary and appropriate jurisdictions (as
determined by the Collateral Agent in its sole discretion) one or more financing
or continuation statements (or any other document or instrument referred to in
the immediately preceding subsection (b)) in the name of the appropriate Debtor.
To the extent permitted by Applicable Law, a carbon, photographic, xerographic,
photostatic, microphotographic, optical image reproduction or other reproduction
of this Agreement or of any financing statement filed in connection with any
Security Document is sufficient as a financing statement.
(d) Delivery of Instruments. If any of the Collateral becomes evidenced
by chattel paper, a promissory note, a trade acceptance or any other instrument,
the applicable Debtor will promptly thereafter deliver such instrument to the
Collateral Agent, accompanied by all appropriate endorsements and other
instruments of transfer.
Section 6. Remedies Upon Default. Upon the occurrence and during the
continuance of an Event of Default, without notice to any of the Debtors (except
for such notice required under, and which cannot be waived under, Applicable
Law), at the same or different times:
(a) Actions With Regard to Receivables. The Collateral Agent (i) may
collect all Receivables, in the name of the Collateral Agent or any Debtor, and
take control of any cash or non-cash proceeds of Collateral and of any returned
or repossessed goods; (ii) may enforce the obligations of any account debtor or
other obligor with respect to any Receivables, prosecute any action or
proceeding against any account debtor or other obligor with respect to
Receivables, extend the time of payment of any and all Receivables, make
allowances and adjustments with respect thereto and issue credits in the name of
the Collateral Agent or any Debtor; and (iii) may settle, compromise, extend,
renew, release, terminate or discharge, in whole or in part, any Receivable and
deal with the same as the Collateral Agent may deem advisable in its sole
discretion.
(b) Inventory and Equipment.
(i) Entry. The Collateral Agent may enter upon any premises on
which Inventory, Equipment or any other Collateral may be located and
take physical possession of any or all of the Collateral and maintain
such possession on such premises or move the same or any part thereof
to such other place or places as the Collateral Agent shall choose,
without being liable to any Debtor on account of any loss, damage or
depreciation that may occur as a result thereof, without judicial
process, without obtaining a final judgment or giving any of the
Debtors notice and opportunity for a hearing on the validity of the
Collateral Agent's claim, without any pre-seizure hearing as a
condition precedent to repossession through such action, without any
obligation to pay rent to any of the Debtors, and without resistance or
interference by any of the Debtors.
(ii) Assembly. The Debtors shall, upon request of and without
charge to the Collateral Agent, assemble the Inventory, Equipment and
other tangible Collateral and maintain or deliver it into the
possession of the Collateral Agent or any agent or representative of
the Collateral Agent, at such place or places as the Collateral Agent
may designate and as are reasonably convenient to both the Collateral
Agent and the Debtors.
(iii) Warehousing. The Collateral Agent may, at the expense of
the Debtors, cause any of the Inventory or Equipment to be placed in a
public or field warehouse, and the Collateral Agent and the Secured
Parties shall not be liable to the Debtors on account of any loss,
damage or depreciation that may occur as a result thereof.
(c) Use of Premises and Patents.
(i) The Collateral Agent may, without notice, demand or other
process, and without payment of any rent or any other charge, enter any
of the Debtors' premises and, without breach of the peace, until the
Collateral Agent completes the enforcement of its rights in the
Collateral, take possession of such premises or place custodians in
exclusive control thereof, remain on such premises and use the same and
any of the Debtors' Equipment, for the purpose of (A) completing any
work in process, preparing any Inventory for disposition and disposing
thereof and (B) collecting any Receivable; and
(ii) in the exercise of the rights of the Collateral Agent
under this Agreement, without payment or compensation of any kind, use
any and all trademarks, trade styles, trade names, patents, patent
applications, licenses, franchises and the like to the extent of the
rights of the Debtors therein, and the Debtors grant a fully-paid
irrevocable license to the Collateral Agent for this purpose.
(d) Cash Collateral. The Collateral Agent may apply or hold for
distribution any cash Collateral to the payment of the Secured Obligations in
accordance with the applicable terms of the Intercreditor Agreement.
(e) Lockboxes. The Collateral Agent may establish or cause to be
established one or
more lockboxes or other arrangements for the deposit of proceeds of Receivables.
(f) Rights as a Secured Creditor. (a) In addition to any right or
remedy that the Collateral Agent may have under the Omnibus Collateral
Agreement, or the other Transaction Documents or otherwise under Applicable Law,
if an Event of Default shall have occurred and is continuing, the Collateral
Agent may exercise any and all the rights and remedies of a secured party under
the Uniform Commercial Code as in effect in any applicable jurisdiction (the
"Code") and may otherwise sell, assign, transfer, endorse and deliver the whole
or, from time to time, any part of the Collateral at a public or private sale,
for cash, upon credit or for other property, for immediate or future delivery,
and for such price or prices and on such terms as the Collateral Agent shall
deem appropriate. Each purchaser at any sale of Collateral shall take and hold
the property sold absolutely free from any claim or right on the part of any
Debtor, and each Debtor hereby waives (to the fullest extent permitted by
Applicable Law) all rights of redemption, stay and/or appraisal which such
Debtor now has or may at any time in the future have under any Applicable Law
now existing or hereafter enacted. Each Debtor agrees that, to the extent notice
of sale shall be required by Applicable Law, at least 10 days' prior written
notice to such Debtor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification,
but notice given in any other reasonable manner or at any other reasonable time
shall constitute reasonable notification. Such notice, in case of public sale,
shall state the time and place for such sale, and, in the case of sale on a
securities exchange, shall state the exchange on which such sale is to be made
and the day on which the Collateral, or portion thereof, will first be offered
for sale at such exchange. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Collateral Agent may fix and shall state in the notice or publication (if any)
of such sale. At any such sale, the Collateral, or portion thereof to be sold,
may be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may determine in its sole and absolute discretion. The Collateral Agent
shall not be obligated to make any sale of the Collateral if it shall determine
not to do so regardless of the fact that notice of sale of the Collateral may
have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case the sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability to the Debtors
in case any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be sold
again upon like notice. At any public sale made pursuant to this Agreement, the
Collateral Agent and the Secured Parties, to the extent permitted by Applicable
Law, may bid for or purchase, free from any right of redemption, stay and/or
appraisal on the part of any Debtor (all said rights being also hereby waived
and released to the extent permitted by Applicable Law), any part of or all the
Collateral offered for sale and may make payment on account thereof by using any
claim then due and payable to the Secured Parties from any Debtor as a credit
against the purchase price, and the Collateral Agent and the Secured Parties
may, upon compliance with the terms of sale and to the extent permitted by
Applicable Law, hold, retain and dispose of such property without further
accountability to any Debtor therefor. For purposes hereof, a written agreement
to purchase all or any part of the Collateral shall be treated as a sale
thereof; the Collateral Agent shall be free to carry out such sale pursuant to
such agreement and no Debtor shall be entitled to the return of any Collateral
subject thereto, notwithstanding the fact that after the Collateral Agent shall
have entered into such an agreement all Events of Default may have been remedied
or the Secured Obligations may have been paid in full as herein provided.
(g) Waiver of Marshalling. To the fullest extent permitted by
Applicable Law, each Debtor hereby waives any right to require any marshalling
of assets and any similar right.
(h) Appointment of Receiver. The Collateral Agent and the Secured
Parties shall be entitled to the appointment of a receiver, without notice of
any kind whatsoever and without regard to the adequacy of any security for the
Secured Obligations or the solvency of any party bound for its payment, to take
possession of all or any portion of the Collateral and/or the business
operations of the Debtors and to exercise such power as the court shall confer
upon such receiver.
(i) Receivables/Assigned Contracts. The Collateral Agent shall have the
exclusive right to assert, either directly or on behalf of the appropriate
Debtor, any and all rights and claims such Debtor may have under or in respect
of any Receivables and/or any of the Assigned Contracts as the Collateral Agent
may deem proper and to receive and collect any and all Receivables and Assigned
Contracts and any and all rent, fees, damages, awards and other monies arising
thereunder or resulting therefrom and to apply the same on account of any of the
Secured Obligations.
Section 7. Application of Proceeds of Collateral and Cash. The proceeds
of any sale or other disposition of the whole or any part of the Collateral, as
well as any other moneys payable to the Collateral Agent under the provisions of
this Agreement, shall be applied in accordance with the applicable provisions of
the Intercreditor Agreement. Each Debtor shall remain liable and shall pay, on
demand, any deficiency remaining in respect of the Secured Obligations.
Section 8. Collateral Agent Appointed Attorney-in-Fact. Each Debtor
hereby irrevocably appoints the Collateral Agent as such Debtor's
attorney-in-fact, with full authority in the place and stead of such Debtor and
in the name of such Debtor or otherwise, from time to time, upon the occurrence
and during the continuance of an Event of Default, in the Collateral Agent's
discretion, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement and to exercise any rights and remedies the Collateral Agent may
have under this Agreement or Applicable Law, including, without limitation: (a)
to obtain and adjust insurance required to be maintained pursuant to Section
3(j) hereof; (b) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral including any Receivable; (c) to receive,
endorse, and collect any drafts or other instruments, documents and chattel
paper, in connection with clause (a) or (b) above; (d) to sell or assign any
Receivable upon such terms, for such amount and at such time or times as the
Collateral Agent deems advisable, to settle, adjust, compromise, extend or renew
any Receivable or to discharge and release any Receivable; and (e) to file any
claims or take any action or institute any proceedings which the Collateral
Agent may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the Collateral Agent with
respect to any of the Collateral. The power-of-attorney granted hereby shall be
irrevocable and coupled with an interest.
Section 9. Collateral Agent May Perform. If any Debtor fails to perform
any agreement contained herein, the Collateral Agent may, without notice to such
Debtor, itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Collateral Agent incurred in connection therewith
shall be payable by such Debtor and shall constitute a Secured Obligation.
Section 10. The Collateral Agent's Duties. The powers conferred on the
Collateral Agent hereunder are solely to protect the interest of the Collateral
Agent for the benefit of the Secured Parties in the Collateral and shall not
impose any duty upon the Collateral Agent, nor any of the Secured Parties to
cause the Collateral Agent, to exercise any such powers. Except for reasonable
care in the custody and preservation of any Collateral in the possession of the
Collateral Agent and the accounting for moneys actually received by it
hereunder, the Collateral Agent shall have no duty to any Debtor as to any
Collateral in the absence of willful misconduct or gross negligence. With
respect to the Debtors, the Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which the Collateral Agent accords its own property; it being understood that
the Collateral Agent shall be under no obligation to take any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral, but may do so at its option, and all reasonable expenses incurred in
connection therewith shall be for the sole account of the Debtors.
Section 11. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall (a) remain in full
force and effect until indefeasible payment in full of the Secured Obligations,
(b) be binding upon each Debtor, and its respective successors and assigns and
(c) inure to the benefit of the Collateral Agent and the Secured Parties, and
their respective successors and permitted assigns. A Debtor's successors and
assigns shall include, without limitation, a receiver, trustee or
debtor-in-possession thereof or therefor and the Secured Parties' successors and
assigns shall include all permitted assignees and participants of any of the
Secured Obligations. In addition to any releases of certain Collateral
explicitly provided for in any of the other Transaction Documents, upon
termination of this Agreement in accordance with its terms the Collateral Agent
agrees to take such actions as the Debtors may reasonably request and at the
sole cost and expense of the Debtors, (a) to return the Collateral to the
Debtors, and (b) to evidence the termination of this Agreement, including,
without limitation, the filing of any releases or any termination statements
under the Uniform Commercial Code.
Section 12. Amendments, Waivers, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by any Debtor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by such Debtor and the Collateral Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, Schedule I attached hereto shall be
deemed amended to include the information set forth on Schedule I to any
Accession Agreement executed and delivered by any Debtor after the date hereof.
Section 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
Section 14. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement shall be prohibited
by or invalid under Applicable Law, such provisions shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
Section 15. WAIVER OF BOND, NOTICE, OTHER LAWS. EACH DEBTOR WAIVES (a)
ANY NOTICE PRIOR TO THE TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY
POSTING OF ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO
ALLOWING THE COLLATERAL AGENT TO EXERCISE ANY OF THE COLLATERAL AGENT'S REMEDIES
SET FORTH HEREIN AND (b) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND
EXEMPTION LAWS.
Section 16. Rights Cumulative. The rights and remedies of the
Collateral Agent and the Secured Parties under or in respect of this Agreement
and the other Transaction Documents are cumulative and not exclusive of any
rights or remedies which any of them would otherwise have. In exercising rights
and remedies the Collateral Agent and the Secured Parties may be selective and
no failure or delay by the Collateral Agent or any Secured Party in exercising
any right shall operate as a waiver of it, nor shall any single or partial
exercise of any power or right preclude its other or further exercise or the
exercise of any other power or right.
Section 17. Reimbursement of Collateral Agent. Without limiting the
obligations of the Debtors under the other Transaction Documents, the Debtors
agree to pay upon demand to the Collateral Agent the amount of any and all
reasonable expenses, including the reasonable fees, disbursements and other
charges of its counsel and of any experts or agents that the Collateral Agent
may incur in connection with (a) the administration of this Agreement, (b) the
custody or preservation of, or any sale of, collection from, or other
realization upon, any of the Collateral, including, without limitation, the
expenses incurred by the Collateral Agent in connection with the collection of
Receivables directly from account debtors, (c) the exercise or enforcement of
any of the rights or other remedies of the Collateral Agent hereunder, or (d)
the failure by any Debtor to perform or observe any of the provisions hereof, in
each case, whether or not an Event of Default has occurred. Any such amounts
payable as provided hereunder shall be additional obligations secured hereby.
Section 18. Notices. All notices and other communications required or
permitted under this Agreement shall be given, and shall be deemed effective, in
accordance with the applicable provisions of the Omnibus Collateral Agreement.
Section 19. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which, taken
together, shall constitute but one and the same instrument.
Section 20. Joint and Several Obligations. The obligations of the Debtors
hereunder shall be joint and several and each Debtor confirms that it is liable
for all of the obligations and liabilities of other Debtors hereunder.
Section 21. Authority of Collateral Agent. Each Debtor acknowledges
that the rights and responsibilities of the Collateral Agent under this
Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as among the Collateral Agent and the Secured
Parties, be governed by the Omnibus Collateral Agreement and the Intercreditor
Agreement and such other agreement with respect thereto as may exist from time
to time among them, but, as between the Collateral Agent and a Debtor, the
Collateral Agent shall be conclusively presumed to be acting as agent for the
Secured Parties with full and valid authority to act or refrain from acting, and
no Debtor shall be under any obligations, or entitlement, to make any inquiry
respecting such authority.
Section 22. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of the Debtors hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of any Transaction
Document, or any other agreement or instrument relating thereto, (b) any change
in the time, manner or place of the payment of, or in any other term of, all or
any of the Secured Obligations, or any other amendment or waiver of or any
consent to any departure from the terms of any Transaction Document, (c) any
exchange, release or nonperfection of any other collateral securing all or any
part of any of the Secured Obligations, or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Debtor in
respect of the Secured Obligations or in respect of this Agreement.
Section 23. Indemnification. The Debtors agree to indemnify and hold
the Collateral Agent, the Collateral Agent Bank, the Secured Parties and any
corporation controlling, controlled by, or under common control with, the
Collateral Agent or any Secured Party, and any officer, attorney, director,
shareholder, agent or employee of the Collateral Agent, any Secured Party or any
such corporation (each an "Indemnified Person"), harmless from and against any
claim, loss, damage, action, cause of action, liability, cost and expense or
suit of any kind or nature whatsoever (collectively, "Losses"), brought against
or incurred by an Indemnified Person, in any manner arising out of or, directly
or indirectly, related to or connected with this Agreement, including without
limitation, the exercise by the Collateral Agent of any of its rights and
remedies under this Agreement or any other action taken by the Collateral Agent
pursuant to the terms of this Agreement; provided, however, the Debtors shall
not be liable to an Indemnified Person for any Losses to the extent found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. The Debtors' obligations under this section shall survive the
termination of this Agreement and the payment in full of the Secured
Obligations.
Section 24. Definitions. (a) When used herein, the following terms have the
following meanings:
"Account" means a right of each Debtor to payment for goods sold or
leased or for services rendered (whether classified under the Uniform Commercial
Code as accounts, chattel paper, general intangibles, or otherwise) including,
but not limited to, accounts receivable, proceeds of any letters of credit
naming a Debtor as beneficiary, chattel paper, tax refunds, insurance proceeds,
Contract Rights, notes, drafts, instruments, documents, acceptances, and all
other debts, obligations and liabilities in whatever form from any Person.
"Affiliate" means, with respect to any Debtor, at any time, a Person
(a) that directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, such Debtor, (b) that
beneficially owns or holds 5% or more of any class of the Voting Stock of such
Debtor, or (c) 5% or more of the Voting Stock (or in the case of a Person that
is not a corporation, 5% or more of the equity interest) of which is
beneficially owned by such Debtor, or the Person of which such Debtor is a
Subsidiary (the "Parent") or any Subsidiary of the Parent or such Debtor . For
purposes of this definition, "control" (including with correlative meanings, the
terms "controlled by" and "under common control with") means the possession
directly or indirectly of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities or by contract or otherwise.
"Applicable Law" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all governmental bodies and all
orders and decrees of all courts, tribunals and arbitrators.
"Assigned Contracts" means contracts, agreements and other arrangements
to which any Debtor is a party or which run in favor of any Debtor and which
constitute part of the Collateral.
"Collateral" means all of each Debtor's right, title and interests in,
to and under each of the following, wherever located and whether now or
hereafter existing, or now owned or hereafter acquired or arising:
(i) all Receivables;
(ii) all Inventory;
(iii) all Equipment;
(iv) all Investment Property;
(v) all general intangibles of each Debtor of every kind and
nature including, but not limited to, all contract rights, choses in
action and causes of action of each Debtor against any Person or
property, all tax refunds owing to each Debtor, all insurance policies
of each Debtor and all rights of each Debtor to receive monies
thereunder and all licenses, franchises, trademarks, trade names, trade
secrets, patents, patent applications, copyrights and any and all other
intellectual property of each Debtor;
(vi) all rights of each Debtor as an unpaid vendor or lienor
(including, without limitation, stoppage in transit, replevin and
reclamation) with respect to any Inventory or other properties of such
Debtor;
(vii) all chattel paper, documents and instruments of each
Debtor including all documents of title and certificates of
insurance;
(viii) all books, records, files, computer programs, data
processing records, computer software, documents, correspondence and
other information at any time evidencing, describing or pertaining to
or in any way related to any of the foregoing or otherwise pertaining
or relating to the business or operations of the Debtors;
(ix) any and all balances, credits, deposits, accounts, items
and monies of any Debtor now or hereafter with the Collateral Agent or
any Secured Party or any Affiliate of any Secured Party or deposited
with the Collateral Agent or any Secured Party or any financial
institution selected by the Collateral Agent pursuant to any lockbox,
deposit, escrow or collection agreement or otherwise, and all property
of any Debtor of every kind and description now or hereafter in the
possession or control of the Collateral Agent or any Secured Party for
any reason; and
(x) any and all products and proceeds of any of the foregoing
(including, but not limited to, any claims to any items referred to in
this definition, and any claims of any Debtor against third parties for
loss of, damage to or destruction of, any or all of the Collateral or
for proceeds payable under, or unearned premiums with respect to,
policies of insurance) in whatever form, including, but not limited to,
cash, instruments, general intangibles, accounts, equipment, inventory,
farm products, other goods, documents and chattel paper and all
proceeds of such proceeds.
Notwithstanding the foregoing, (i) in the event a Debtor's rights in or with
respect to any Collateral consisting of (A) Assigned Contracts, (B) Contract
Rights, (C) Equipment that is subject to a prior leasehold interest or security
interest in favor of a third party which prohibits such Debtor from encumbering
its interest in such Equipment, or (D) a general intangible, in each case, would
be forfeited or would become void, voidable, terminable or revocable, or if the
Debtor would be deemed to have breached, violated or defaulted under any
Assigned Contract, solely as a consequence of the collateral assignment or grant
of a security interest created by this Agreement (collectively, the "Excepted
Collateral"), then such Collateral shall be excepted and excluded from the
Security Interest granted by this Agreement and the related definitions of
Accounts, Contract Rights, Assigned Contracts, Receivables, Inventory and
Equipment contained in this Agreement, as applicable, but only to the extent
necessary to avoid such forfeiture, voidness, voidability, terminability,
revocability, breach, violation or default and only in the event that any such
breach, violation, default or other event cannot be remedied by such Debtor
using its good faith efforts (but without any obligation to make any
expenditures of money or commence legal proceedings) unless any such provision
in any Assigned Contract shall not be effective in accordance with Section
9-318(4) of the UCC or any other Applicable Law and (ii) no stock or other
securities, which pursuant to the terms of any of the Transaction Documents are
not required to be pledged pursuant to the Stock Pledge Agreement shall be
included in the foregoing Collateral.
In applying the law of any jurisdiction that at any time enacts all or
substantially all of the uniform provisions of revised Article 9 of the Uniform
Commercial Code approved in 1998 by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws, the foregoing definition of
Collateral covers all assets of the Debtor except for the Excepted Collateral.
"Contract Right" means a right of a Debtor to receive payment or
performance, together with all rights and remedies of such Debtor (whether
expressly set forth in any Assigned Contract or under Applicable Law), under an
Assigned Contract.
"Equipment" means all equipment, machinery, apparatus, fittings,
fixtures and other tangible personal property (other than Inventory) of every
kind and description used in any Debtor's business operations or owned by any
Debtor or in which any Debtor has an interest, and all parts, accessories and
special tools and all improvements and accessions thereto and substitutions and
replacements therefor.
"Event of Default" has the meaning given such term in the Omnibus
Collateral Agreement.
"Inventory" means all inventory of each Debtor of every kind and
description whether now or hereafter existing or acquired, including, but not
limited to, all goods, merchandise and other personal property now owned or
hereafter acquired by any Debtor (including all minerals) which are held for
sale or lease, or are furnished or to be furnished under any contract of service
or which are raw materials, work-in-process, or finished products used or
consumed in any Debtor's business, and all products thereof, and all
substitutions, replacements, additions, or accessions therefor and thereto, and
all materials and supplies used in connection with the maintenance, packing,
shipping or furnishing of any of the foregoing.
"Investment Property" has the meaning given such term under the Uniform
Commercial Code.
"Receivables" means each Debtor's right, title and interest in and to
all Accounts, Contract Rights, all instruments, documents, chattel paper,
general intangibles (including, but not limited to, choses in action, tax
refunds, and insurance proceeds); any other obligations or indebtedness owed to
any Debtor from whatever source arising; all rights of any Debtor to receive any
payments in money or kind; all guaranties of the foregoing in favor of any
Debtor and security therefor; all of the right, title, and interest of any
Debtor in and with respect to the goods, services, or other property that give
rise to, or that secure, any of the foregoing and insurance policies and
proceeds relating thereto and all of the foregoing, whether now owned or
existing or hereafter created or acquired.
"Security Interest" means the Lien of the Collateral Agent for the
benefit of the Secured Parties on, and the collateral assignments to the
Collateral Agent for the benefit of the Secured Parties of, the Collateral
effected hereby or pursuant to the terms hereof.
"Subsidiary" means, at any time, with respect to any Person, a
corporation, partnership, limited liability company or other business entity of
which such Person owns, directly or indirectly, more than 50% (by number of
votes) of each class of Voting Stock at such time.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in the State of New York or, where the context herein
requires, the Uniform Commercial Code of the jurisdiction that governs the
creation and perfection of a security interest in any Collateral or that governs
the rights, remedies and obligations of the Collateral Agent in connection with
the repossession or foreclosure of any Collateral.
"Voting Stock" shall mean capital stock (or equivalent ownership
interest) of any class or classes of a corporation, partnership, limited
liability company or other business entity, the holders of which are ordinarily,
in the absence of contingencies, entitled to elect corporate directors, managers
or trustees (or Persons performing similar functions).
(b) Terms not otherwise defined herein and which are defined in the
Omnibus Collateral Agreement have the respective meaning given them therein.
[Signatures Begin Next Page]
<PAGE>
IN WITNESS WHEREOF, the Debtors have caused this Security Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
THE DEBTORS:
BIRMINGHAM STEEL CORPORATION
By: /s/ Kevin E. Walsh
---------------------------
Name: Kevin E. Walsh
Title: Executive Vice President
AMERICAN STEEL & WIRE CORPORATION
NORFOLK STEEL CORPORATION
PORT EVERGLADES STEEL CORPORATION
BIRMINGHAM RECYCLING INVESTMENT COMPANY
BIRMINGHAM EAST COAST HOLDINGS, LLC
MIDWEST HOLDINGS, INC.
CUMBERLAND RECYCLERS, LLC
By: /s/ Kevin E. Walsh
---------------------------
Name: Kevin E. Walsh
Title: Executive Vice President
Signed, sealed and delivered as of the 12th day of October, 1999, in the
presence of:
/s/ Marjorie Jordan
----------------------------
Marjorie Jordan
Notary Public
My Commission Expires: Notary Public, Fulton County, Georgia
My Commission Expires January 30, 2001
[NOTARIAL SEAL]
[Signature Page to Security Agreement dated as of October 12, 1999
for Birmingham Steel Corporation]
Agreed and Accepted as of the date first written above:
STATE STREET BANK AND TRUST COMPANY,
solely in its capacity as
Collateral Agent
By: /s/ Michael M. Hopkins
------------------
Name: Michael M. Hopkins
Title: Vice President
<PAGE>
Exhibit No. 10.26.1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of May 15, 2000 (this "Agreement"),
executed by BIRMINGHAM SOUTHEAST, LLC, a limited liability company organized
under the laws of the state of Delaware (the "Debtor") in favor of SOUTHTRUST
BANK, NATIONAL ASSOCIATION (the "Collateral Agent") for the benefit, and on
behalf, of the Secured Parties.
WHEREAS, the Debtor, the Lenders a party thereto (the "Lenders") and
Bank of America, N.A. (the "Agent"; the Collateral Agent, the Lenders and the
Agent collectively the "Secured Parties") have entered into that certain Credit
Agreement dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), pursuant to which
the Lenders have agreed to make available to the Debtor a $25,000,000 revolving
credit facility subject to the terms and conditions of the Credit Agreement; and
WHEREAS, to induce such Secured Parties to extend credit under the
Credit Agreement, the Debtor desires to execute and deliver this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto agree as follows:
Section 1. Grant of Security Interest. To secure the prompt and
complete payment, observance and performance when due (whether at stated
maturity, by acceleration or otherwise) of all of the Obligations, the Debtor
hereby collaterally assigns and pledges to the Collateral Agent for the benefit
of the Secured Parties, and grants to the Collateral Agent for the benefit of
the Secured Parties, a security interest in, all Collateral of the Debtor.
Section 2. Representations and Warranties. The Debtor represents and
warrants to the Collateral Agent and the Secured Parties as follows:
(a) Name; Corporate Changes; Taxpayer ID Number. The exact legal name
of the Debtor is set forth on the signature page hereto. Except as set forth in
Schedule I attached hereto: (i) the Debtor does not conduct and has not
conducted, during the five-year period immediately preceding the date of this
Agreement, business under any trade name, other fictitious name or other legal
name and (ii) the Debtor has not changed its name, identity or organizational
structure in any way. The Internal Revenue Service taxpayer identification
number of the Debtor is set forth on such Schedule.
(b) Chief Executive Office; Places of Business. The chief executive
office of the Debtor, and the books and records relating to the Receivables and
the other Collateral of the Debtor, are located at the respective addresses set
forth on Schedule I attached hereto, and have always been located there. The
addresses (including the applicable counties) of all of the respective places of
business of the Debtor are set forth on such Schedule.
(c) Equipment. All Equipment of the Debtor is in good working order and
repair and is located on or at one or more of the places set forth on Schedule I
attached hereto.
(d) Security Interest. It is the intent of the Debtor that this
Agreement create a valid and perfected first-priority security interest in the
Collateral, securing the payment and performance of the Obligations subject to
those Liens set forth on Schedule 2(d).
(e) Excepted Collateral Not Material. Except for the contracts listed on
Schedule 2(e), none of the Excepted Collateral is material to the conduct of the
business, operation, properties or financial condition of the Debtor.
Section 3. Collateral Covenants.
--------------------
(a) Sale of Collateral. The Debtor shall not sell, lease, transfer or
otherwise dispose of any Collateral except as expressly permitted under
applicable provisions of the Transaction Documents. The inclusion of "proceeds"
in the Collateral shall not be deemed to be a consent by the Collateral Agent or
any Secured Party to any other sale or other disposition of any part or all of
the Collateral.
(b) Liens. The Debtor shall not create, assume, incur or permit or
suffer to exist or to be created, assumed or incurred, any Lien upon any of the
Collateral other than Permitted Liens and those Liens set forth on Schedule
2(d).
(c) Proceeds of Collateral. The Debtor shall account fully and
faithfully for, and upon the Collateral Agent's request, promptly pay or turn
over to the Collateral Agent, proceeds in whatever form received in disposition
in any manner of any of the Collateral except, as expressly permitted under Loan
Documents and the other Transaction Documents.
(d) Payment of Taxes and Claims. The Debtor shall pay or discharge when
due: (i) all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits or upon the Collateral or any other properties
belonging to it, and (ii) all lawful claims of materialmen, mechanics, carriers,
warehousemen and landlords for labor, materials, supplies and rentals which, if
unpaid, might become a Lien on any of the Collateral or other properties of the
Debtor; provided, however, that this Section shall not require the payment or
discharge of any such tax, assessment, charge, levy or claim which is being
contested in good faith by appropriate proceedings which operate to suspend the
collection thereof and for which adequate reserves have been established on the
appropriate books.
(e) Location of Office. The Debtor's chief executive office and its
books and records relating to the Collateral will continue to be kept at the
respective address set forth in Schedule I attached hereto and the Debtor will
not change the location of such office or such books and records without giving
the Collateral Agent at least 60 days' prior written notice thereof.
(f) Location of Collateral. All Equipment will at all times be kept by
the Debtor at the locations set forth on Schedule I attached hereto, and shall
not be removed therefrom except as expressly permitted under Loan Documents and
the other Transaction Documents.
(g) Change of Name, Structure, Etc. Without giving the Collateral Agent
at least 60 days' prior written notice, the Debtor will not (i) change is name,
identity or structure or (ii) conduct business under any trade name or other
fictitious name other than those set forth on Schedule I attached hereto.
(h) Defense of Title. The Debtor shall defend its title in and to, and the
Security Interest in, such Collateral against the claims and demands of all
Persons.
(i) Maintenance of Collateral. The Debtor shall maintain all physical
property that constitutes its Collateral in good and workable condition, with
reasonable allowance for wear and tear, and shall exercise proper custody over
all such property.
(j) Insurance. The Debtor shall at all times maintain, or cause to be
maintained, insurance on its Collateral against loss or damage by fire, theft,
burglary, pilferage, loss in transit and such additional casualties and
contingencies, in each case, as shall be in accordance with general practices of
businesses engaged in similar activities in similar geographic areas, and that
the insurance be on an all risks basis, with broad form flood, earthquake
coverages and electronic data processing coverage, with a full replacement cost
endorsement, and with sufficient insurance so that the debtor will not be deemed
to be a co-insurer, in amounts and under policies issued by the Debtor's present
insurers or other insurers reasonably acceptable to the Collateral Agent. All
premiums on such insurance shall be paid by the Debtor and certified copies of
the policies, or other evidence of insurance acceptable to the Collateral Agent,
shall be delivered to the Collateral Agent or any Secured Party promptly upon
written request. The Debtor will not use or permit its Collateral to be used
unlawfully (including any law dealing with the control shipment, storage or
disposal of hazardous materials or substances) or outside of any insurance
coverage. All insurance policies required under this Section shall contain loss
payable clauses on New York standard loss payee forms or other forms
satisfactory to the Collateral Agent, naming the Collateral Agent as loss payee,
and providing that: (i) all proceeds thereunder shall be payable directly to the
Collateral Agent; (ii) no such insurance shall be affected by any act or neglect
of the insured or owner of the property described in such policy; (iii) such
policies and loss payable clauses may not be canceled, amended or terminated
with respect to the Collateral Agent unless at least 30 days' prior written
notice is given to the Collateral Agent; and (iv) there shall be no recourse
against the Collateral Agent or any Secured Party for payment of premiums or
other amounts with respect thereto. Any proceeds of insurance referred to in
this Section which are paid to the Collateral Agent shall be applied in
accordance with the applicable provisions of the Intercreditor Agreement and the
Credit Agreement.
(k) Records of Receivables Genuine. All books, records, and documents
relating to any of the Receivables (including computer records) are and will be
genuine and in all respects what they purport to be and the amount of each of
the Receivables shown on the books and records of the Debtor are and will be the
correct amount actually owing or to be owing at maturity of such Receivables,
subject only to unintentional errors.
(l) Government Contracts. The Debtor shall notify the Collateral Agent
if (i) any single Receivable owing to the Debtor in an amount of $250,000 or
more or (ii) Receivables owing to the Debtor in an aggregate amount of $300,000
or more, shall arise out of a contract or contracts with the United States of
America or any department, agency, or instrumentality thereof, and the Debtor
shall, at its sole cost and expense, take all action that may be necessary or
desirable, or that the Collateral Agent may otherwise request, to perfect the
assignment of the rights of the Debtor's in and to such Receivable or
Receivables to the Collateral Agent as required by the Federal Assignment of
Claims Act or any similar act or regulation.
(m) Records Relating to Collateral. The Debtor will at all times keep
complete and accurate records of its Equipment, itemizing and describing the
kind, type and quantity of such Equipment and the Debtor's cost therefor, and
keep complete and accurate records of all of its Receivables and other
Collateral.
(n) Inspection. The Collateral Agent and each Secured Party (by any of
their respective officers, employees or agents) shall have the right, to the
extent that the exercise of such right shall be within the control of the
Debtor, at any time or times during normal business hours and, so long as no
Event of Default shall have occurred and be continuing, with reasonable prior
notice and at the expense of the Collateral Agent and each Secured Party: (i) to
inspect the Collateral, all files relating thereto and the premises upon which
any of the Collateral is located, (ii) to discuss the Debtor's affairs and
finances, insofar as the same are reasonably related to the rights of the
Collateral Agent or such Secured Party hereunder, with any Person, to verify the
amount, quantity, value and condition of, or any other matter relating to, any
of the Collateral and (iii) to review, audit and make extracts from all records
and files of the Debtor related to any of the Collateral.
(o) Other Information. The Debtor shall furnish to the Collateral Agent
such other information with respect to the Collateral, including, but not
limited to, physical listings of Equipment, as the Collateral Agent may
reasonably request from time to time.
(p) Verification. Upon the occurrence of an Event of Default and during
its continuance, the Collateral Agent shall have the right at any time and from
time to time, in the name of the Collateral Agent or in the name of the Debtor,
to verify the validity, amount or any other matter relating to any Receivables
of the Debtor by mail, telephone or otherwise.
(q) Payments Directly to Collateral Agent. The Collateral Agent may at
any time and from time to time after the occurrence and during the continuance
of an Event of Default, notify, or request the Debtor to notify, in writing or
otherwise, any account debtor or other obligor with respect to any one or more
of the Debtor's Receivables or Assigned Contracts to make payment to the
Collateral Agent or any agent or designee of the Collateral Agent directly, at
such address as may be specified by the Collateral Agent. If, notwithstanding
the giving of any such notice, any account debtor or other such obligor shall
make payment to the Debtor, the Debtor shall hold all such payments it receives
in trust for the Collateral Agent and the Secured Parties, without commingling
the same with other funds or property of or held by the Debtor, and shall
promptly deliver the same to the Collateral Agent or any such agent or designee
promptly upon receipt by the Debtor in the identical form received, together
with any necessary endorsements.
Section 4. Covenants Regarding Contracts.
-----------------------------
(a) Debtor to Remain Obligated. Anything herein to the contrary
notwithstanding, (i) the Debtor shall remain liable under all Assigned Contracts
to the extent set forth therein to perform its respective duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (ii)
the exercise by the Collateral Agent of any of its rights hereunder shall not
release the Debtor from any of its respective duties or obligations under any of
the Assigned Contracts and (iii) neither the Collateral Agent nor any Secured
Party shall have any duties, obligations or liabilities under any of the
Assigned Contracts or duties by reason of this Agreement, nor shall the
Collateral Agent nor any Secured Party be obligated to perform any of the
respective duties or obligations of the Debtor thereunder, to make any payment,
to make any inquiry as to the nature or sufficiency of any payment received by
the Debtor or the sufficiency of any performance by any party under any such
contract or agreement, or to take any action to collect or enforce any claim for
payment assigned hereunder.
(b) Debtor to Perform. The Debtor shall at its sole cost and expense:
(i) perform and observe all the terms and provisions of the
Assigned Contracts to be performed or observed by it in accordance with
its normal business practices, maintain the Assigned Contracts in full
force and effect consistent with the Debtor's normal business
practices, and enforce the Assigned Contracts in accordance with their
terms consistent with the Debtor's normal business practices; and
(ii) upon the reasonable request of the Collateral Agent
furnish to the Collateral Agent promptly upon receipt thereof copies of
all notices, requests and other documents received by the Debtor under
or pursuant to the Assigned Contracts, and from time to time (A)
furnish to the Collateral Agent such information and reports regarding
the Assigned Contracts as such Person may reasonably request and (B)
upon the reasonable request of the Collateral Agent, make to each other
party to the Assigned Contracts such demands and request for
information and reports or for action as the Debtor is entitled to make
under such Assigned Contracts.
(c) No Failure to Act. The Debtor shall not take, or omit to take, any
action with respect to any Assigned Contract which could reasonably be expected
to have a material adverse effect on the financial condition or business
operations of the Debtor.
Section 5. Continued Priority of Security Interest.
---------------------------------------
(a) Generally. The Security Interest shall at all times be valid,
perfected and of first priority (subject to those Liens set forth on Schedule
2(d) and enforceable against the Debtor and all other Persons, in accordance
with the terms of this Agreement, as security for the Obligations.
(b) Further Assurances. The Debtor shall, at its sole cost and expense,
take all action that may be necessary or desirable, or that the Collateral Agent
may otherwise request, so as at all times to maintain the validity, perfection,
enforceability and priority and rank of the Security Interest in conformity with
the requirements of the immediately preceding subsection (a), or to enable the
Collateral Agent to exercise or enforce its rights hereunder including, but not
limited to:
(i) paying all taxes, assessments and other claims lawfully
levied or assessed on any of the Collateral, except to the extent that
such taxes assessments and other claims constitute Permitted Liens;
(ii) using its good faith efforts to obtain landlords',
mortgagees', mechanics', bailees', warehousemen's or processors'
releases, subordinations or waivers with respect to any or all of the
Collateral, in form and substance satisfactory to the Collateral Agent;
(iii) delivering to the Collateral Agent, endorsed or
accompanied by such instruments of assignment as the Collateral Agent
may specify, any and all chattel paper, instruments, letters of credit
and all other advices of guaranty and documents evidencing or forming a
part of the Collateral;
(iv) executing and delivering financing statements, pledges,
designations, mortgages, deeds to secure debt, deeds of trust,
hypothecations, notices and assignments, in each case in form and
substance satisfactory to the Collateral Agent, relating to the
creation, validity, perfection, priority or continuation of the
Security Interest under the Uniform Commercial Code or other Applicable
Law.
(c) Authority to File. The Debtor hereby authorizes the Collateral
Agent to execute and file in all necessary and appropriate jurisdictions (as
determined by the Collateral Agent in its sole discretion) one or more financing
or continuation statements (or any other document or instrument referred to in
the immediately preceding subsection (b)) in the name of the Debtor. To the
extent permitted by Applicable Law, a carbon, photographic, xerographic,
photostatic, microphotographic, optical image reproduction or other reproduction
of this Agreement or of any financing statement filed in connection with any
Security Document or any Loan Document is sufficient as a financing statement.
(d) Delivery of Instruments. If any of the Collateral becomes evidenced
by chattel paper, a promissory note, a trade acceptance or any other instrument,
the Debtor will promptly thereafter deliver such instrument to the Collateral
Agent, accompanied by all appropriate endorsements and other instruments of
transfer.
Section 6. Remedies Upon Default. Upon the occurrence and during the
continuance of an Event of Default, without notice to the Debtor (except for
such notice required under, and which cannot be waived under, Applicable Law),
at the same or different times:
(a) Actions With Regard to Receivables. The Collateral Agent (i) may
collect all Receivables, in the name of the Collateral Agent or the Debtor, and
take control of any cash or non-cash proceeds of Collateral and of any returned
or repossessed goods; (ii) may enforce the obligations of any account debtor or
other obligor with respect to any Receivables, prosecute any action or
proceeding against any account debtor or other obligor with respect to
Receivables, extend the time of payment of any and all Receivables, make
allowances and adjustments with respect thereto and issue credits in the name of
the Collateral Agent or the Debtor; and (iii) may settle, compromise, extend,
renew, release, terminate or discharge, in whole or in part, any Receivable and
deal with the same as the Collateral Agent may deem advisable in its sole
discretion.
(b) Equipment.
---------
(i) Entry. The Collateral Agent may enter upon any premises on
which Equipment or any other Collateral may be located and take
physical possession of any or all of the Collateral and maintain such
possession on such premises or move the same or any part thereof to
such other place or places as the Collateral Agent shall choose,
without being liable to the Debtor on account of any loss, damage or
depreciation that may occur as a result thereof, without judicial
process, without obtaining a final judgment or giving the Debtor notice
and opportunity for a hearing on the validity of the Collateral Agent's
claim, without any pre-seizure hearing as a condition precedent to
repossession through such action, without any obligation to pay rent to
the Debtor, and without resistance or interference by the Debtor.
(ii) Assembly. The Debtor shall, upon request of and without
charge to the Collateral Agent, assemble the Equipment and other
tangible Collateral and maintain or deliver it into the possession of
the Collateral Agent or any agent or representative of the Collateral
Agent, at such place or places as the Collateral Agent may designate
and as are reasonably convenient to both the Collateral Agent and the
Debtor.
(iii) Warehousing. The Collateral Agent may, at the expense of
the Debtor, cause any of the Equipment to be placed in a public or
field warehouse, and the Collateral Agent and the Secured Parties shall
not be liable to the Debtor on account of any loss, damage or
depreciation that may occur as a result thereof.
(c) Use of Premises and Patents.
---------------------------
(i) The Collateral Agent may, without notice, demand or other
process, and without payment of any rent or any other charge, enter the
Debtor's premises and, without breach of the peace, until the
Collateral Agent completes the enforcement of its rights in the
Collateral, take possession of such premises or place custodians in
exclusive control thereof, remain on such premises and use the same and
the Equipment, for the purpose of (A) completing any work in process,
preparing any Inventory for disposition and disposing thereof and (B)
collecting any Receivable; and
(ii) in the exercise of the rights of the Collateral Agent
under this Agreement, without payment or compensation of any kind, use
any and all trademarks, trade styles, trade names, patents, patent
applications, licenses, franchises and the like to the extent of the
rights of the Debtor therein, and the Debtor grants a fully-paid
irrevocable license to the Collateral Agent for this purpose.
(d) Cash Collateral. The Collateral Agent may apply or hold for
distribution any cash Collateral to the payment of the Obligations in accordance
with the applicable terms of the Intercreditor Agreement and the Credit
Agreement.
(e) Lockboxes. The Collateral Agent may establish or cause to be
established one or more lockboxes or other arrangements for the deposit of
proceeds of Receivables.
(f) Rights as a Secured Creditor. (a) In addition to any right or remedy
that the Collateral Agent may have under the Credit Agreement, or the other
Transaction Documents or otherwise under Applicable Law, if an Event of Default
shall have occurred and is continuing, the Collateral Agent may exercise any and
all the rights and remedies of a secured party under the Uniform Commercial Code
as in effect in any applicable jurisdiction (the "Code") and may otherwise sell,
assign, transfer, endorse and deliver the whole or, from time to time, any part
of the Collateral at a public or private sale, for cash, upon credit or for
other property, for immediate or future delivery, and for such price or prices
and on such terms as the Collateral Agent shall deem appropriate. Each purchaser
at any sale of Collateral shall take and hold the property sold absolutely free
from any claim or right on the part of the Debtor, and the Debtor hereby waives
(to the fullest extent permitted by Applicable Law) all rights of redemption,
stay and/or appraisal which the Debtor now has or may at any time in the future
have under any Applicable Law now existing or hereafter enacted. The Debtor
agrees that, to the extent notice of sale shall be required by Applicable Law,
at least 10 days' prior written notice to the Debtor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification, but notice given in any other reasonable
manner or at any other reasonable time shall constitute reasonable notification.
Such notice, in case of public sale, shall state the time and place for such
sale, and, in the case of sale on a securities exchange, shall state the
exchange on which such sale is to be made and the day on which the Collateral,
or portion thereof, will first be offered for sale at such exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix and shall state in
the notice or publication (if any) of such sale. At any such sale, the
Collateral, or portion thereof to be sold, may be sold in one lot as an entirety
or in separate parcels, as the Collateral Agent may determine in its sole and
absolute discretion. The Collateral Agent shall not be obligated to make any
sale of the Collateral if it shall determine not to do so regardless of the fact
that notice of sale of the Collateral may have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case the sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Collateral Agent shall not incur
any liability to the Debtor in case any such purchaser or purchasers shall fail
to take up and pay for the Collateral so sold and, in case of any such failure,
such Collateral may be sold again upon like notice. At any public sale made
pursuant to this Agreement, the Collateral Agent and the Secured Parties, to the
extent permitted by Applicable Law, may bid for or purchase, free from any right
of redemption, stay and/or appraisal on the part of the Debtor (all said rights
being also hereby waived and released to the extent permitted by Applicable
Law), any part of or all the Collateral offered for sale and may make payment on
account thereof by using any claim then due and payable to the Secured Parties
from the Debtor as a credit against the purchase price, and the Collateral Agent
and the Secured Parties may, upon compliance with the terms of sale and to the
extent permitted by Applicable Law, hold, retain and dispose of such property
without further accountability to the Debtor therefor. For purposes hereof, a
written agreement to purchase all or any part of the Collateral shall be treated
as a sale thereof; the Collateral Agent shall be free to carry out such sale
pursuant to such agreement and the Debtor shall not be entitled to the return of
any Collateral subject thereto, notwithstanding the fact that after the
Collateral Agent shall have entered into such an agreement all Events of Default
may have been remedied or the Obligations may have been paid in full as herein
provided.
(g) Waiver of Marshalling. To the fullest extent permitted by
Applicable Law, the Debtor hereby waives any right to require any marshalling of
assets and any similar right.
(h) Appointment of Receiver. The Collateral Agent and the Secured
Parties shall be entitled to the appointment of a receiver, without notice of
any kind whatsoever and without regard to the adequacy of any security for the
Obligations or the solvency of any party bound for its payment, to take
possession of all or any portion of the Collateral and/or the business
operations of the Debtor and to exercise such power as the court shall confer
upon such receiver.
(i) Receivables/Assigned Contracts. The Collateral Agent shall have the
exclusive right to assert, either directly or on behalf of the appropriate
Debtor, any and all rights and claims the Debtor may have under or in respect of
any Receivables and/or any of the Assigned Contracts as the Collateral Agent may
deem proper and to receive and collect any and all Receivables and Assigned
Contracts and any and all rent, fees, damages, awards and other monies arising
thereunder or resulting therefrom and to apply the same on account of any of the
Obligations.
Section 7. Application of Proceeds of Collateral and Cash. The proceeds
of any sale or other disposition of the whole or any part of the Collateral, as
well as any other moneys payable to the Collateral Agent under the provisions of
this Agreement, shall be applied in accordance with the applicable provisions of
the Intercreditor Agreement. The Debtor shall remain liable and shall pay, on
demand, any deficiency remaining in respect of the Obligations.
Section 8. Collateral Agent Appointed Attorney-in-Fact. The Debtor
hereby irrevocably appoints the Collateral Agent as the Debtor's
attorney-in-fact, with full authority in the place and stead of the Debtor and
in the name of the Debtor or otherwise, from time to time, upon the occurrence
and during the continuance of an Event of Default, in the Collateral Agent's
discretion, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement and to exercise any rights and remedies the Collateral Agent may
have under this Agreement or Applicable Law, including, without limitation: (a)
to obtain and adjust insurance required to be maintained pursuant to Section
3(j) hereof; (b) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral including any Receivable; (c) to receive,
endorse, and collect any drafts or other instruments, documents and chattel
paper, in connection with clause (a) or (b) above; (d) to sell or assign any
Receivable upon such terms, for such amount and at such time or times as the
Collateral Agent deems advisable, to settle, adjust, compromise, extend or renew
any Receivable or to discharge and release any Receivable; and (e) to file any
claims or take any action or institute any proceedings which the Collateral
Agent may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the Collateral Agent with
respect to any of the Collateral. The power-of-attorney granted hereby shall be
irrevocable and coupled with an interest.
Section 9. Collateral Agent May Perform. If the Debtor fails to perform
any agreement contained herein, the Collateral Agent may, without notice to the
Debtor, itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Collateral Agent incurred in connection therewith
shall be payable by the Debtor and shall constitute a Secured Obligation.
Section 10. The Collateral Agent's Duties. The powers conferred on the
Collateral Agent hereunder are solely to protect the interest of the Collateral
Agent for the benefit of the Secured Parties in the Collateral and shall not
impose any duty upon the Collateral Agent, nor any of the Secured Parties to
cause the Collateral Agent, to exercise any such powers. Except for reasonable
care in the custody and preservation of any Collateral in the possession of the
Collateral Agent and the accounting for moneys actually received by it
hereunder, the Collateral Agent shall have no duty to the Debtor as to any
Collateral in the absence of willful misconduct or gross negligence. With
respect to the Debtor, the Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which the Collateral Agent accords its own property; it being understood that
the Collateral Agent shall be under no obligation to take any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral, but may do so at its option, and all reasonable expenses incurred in
connection therewith shall be for the sole account of the Debtor.
Section 11. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall (a) remain in full
force and effect until indefeasible payment in full of the Obligations, (b) be
binding upon the Debtor, and its respective successors and assigns and (c) inure
to the benefit of the Collateral Agent and the Secured Parties, and their
respective successors and permitted assigns. The Debtor's successors and assigns
shall include, without limitation, a receiver, trustee or debtor-in-possession
thereof or therefor and the Secured Parties' successors and assigns shall
include all permitted assignees and participants of any of the Obligations. In
addition to any releases of certain Collateral explicitly provided for in any of
the other Transaction Documents, upon termination of this Agreement in
accordance with its terms the Collateral Agent agrees to take such actions as
the Debtor may reasonably request and at the sole cost and expense of the
Debtor, (a) to return the Collateral to the Debtor, and (b) to evidence the
termination of this Agreement, including, without limitation, the filing of any
releases or any termination statements under the Uniform Commercial Code.
Section 12. Amendments, Waivers, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Debtor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Debtor and the Collateral Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
Section 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
Section 14. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement shall be prohibited
by or invalid under Applicable Law, such provisions shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
Section 15. WAIVER OF BOND, NOTICE, OTHER LAWS. THE DEBTOR WAIVES (a)
ANY NOTICE PRIOR TO THE TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY
POSTING OF ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO
ALLOWING THE COLLATERAL AGENT TO EXERCISE ANY OF THE COLLATERAL AGENT'S REMEDIES
SET FORTH HEREIN AND (b) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND
EXEMPTION LAWS.
Section 16. Rights Cumulative. The rights and remedies of the
Collateral Agent and the Secured Parties under or in respect of this Agreement,
the other Loan Documents and the other Transaction Documents are cumulative and
not exclusive of any rights or remedies which any of them would otherwise have.
In exercising rights and remedies the Collateral Agent and the Secured Parties
may be selective and no failure or delay by the Collateral Agent or any Secured
Party in exercising any right shall operate as a waiver of it, nor shall any
single or partial exercise of any power or right preclude its other or further
exercise or the exercise of any other power or right.
Section 17. Reimbursement of Collateral Agent. Without limiting the
obligations of the Debtor under the Loan Documents or any other Transaction
Documents, the Debtor agrees to pay upon demand to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees,
disbursements and other charges of its counsel and of any experts or agents that
the Collateral Agent may incur in connection with (a) the administration of this
Agreement, (b) the custody or preservation of, or any sale of, collection from,
or other realization upon, any of the Collateral, including, without limitation,
the expenses incurred by the Collateral Agent in connection with the collection
of Receivables directly from account debtors, (c) the exercise or enforcement of
any of the rights or other remedies of the Collateral Agent hereunder, or (d)
the failure by the Debtor to perform or observe any of the provisions hereof, in
each case, whether or not an Event of Default has occurred. Any such amounts
payable as provided hereunder shall be additional obligations secured hereby.
Section 18. Notices. All notices and other communications required or
permitted under this Agreement shall be given, and shall be deemed effective, in
accordance with the applicable provisions of the Credit Agreement.
Section 19. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which, taken
together, shall constitute but one and the
same instrument.
Section 20. Authority of Collateral Agent. The Debtor acknowledges that
the rights and responsibilities of the Collateral Agent under this Agreement
with respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as among the Collateral Agent and the Secured Parties, be
governed by the Intercreditor Agreement and such other agreement with respect
thereto as may exist from time to time among them, but, as between the
Collateral Agent and the Debtor, the Collateral Agent shall be conclusively
presumed to be acting as agent for the Secured Parties with full and valid
authority to act or refrain from acting, and the Debtor shall not be under any
obligations, or entitlement, to make any inquiry respecting such authority.
Section 21. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of the Debtor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of any Loan Document,
any other Transaction Document or any other agreement or instrument relating
thereto, (b) any change in the time, manner or place of the payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the terms of any Loan Document,
any other Transaction Document or any other agreement or instrument relating
thereto, (c) any exchange, release or nonperfection of any other collateral
securing all or any part of any of the Obligations, or (d) any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Debtor in respect of the Obligations or in respect of this
Agreement.
Section 22. Indemnification. The Debtor agrees to indemnify and hold
the Collateral Agent, the Secured Parties and any corporation controlling,
controlled by, or under common control with, the Collateral Agent or any Secured
Party, and any officer, attorney, director, shareholder, agent or employee of
the Collateral Agent, any Secured Party or any such corporation (each an
"Indemnified Person"), harmless from and against any claim, loss, damage,
action, cause of action, liability, cost and expense or suit of any kind or
nature whatsoever (collectively, "Losses"), brought against or incurred by an
Indemnified Person, in any manner arising out of or, directly or indirectly,
related to or connected with this Agreement, including without limitation, the
exercise by the Collateral Agent of any of its rights and remedies under this
Agreement or any other action taken by the Collateral Agent pursuant to the
terms of this Agreement; provided, however, the Debtor shall not be liable to an
Indemnified Person for any Losses to the extent found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of such Indemnified Person. The Debtor's
obligations under this section shall survive the termination of this Agreement
and the payment in full of the Obligations.
Section 23. Definitions. (a) When used herein, the following terms have the
following meanings:
"Applicable Law" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all governmental bodies and all
orders and decrees of all courts, tribunals and arbitrators.
"Assigned Contracts" means contracts, agreements and other arrangements
to which the Debtor is a party or which run in favor of the Debtor and which
constitute part of the Collateral.
"Collateral" means all of the Debtor's right, title and interests in,
to and under each of the following, wherever located and whether now or
hereafter existing, or now owned or hereafter acquired or arising:
(i) all Receivables;
(ii) all Equipment;
(iii) all Investment Property;
(iv) all general intangibles of the Debtor of every kind and
nature including, but not limited to, all contract rights, choses in
action and causes of action of the Debtor against any Person or
property, all tax refunds owing to the Debtor, all insurance policies
of the Debtor and all rights of the Debtor to receive monies thereunder
and all licenses, franchises, trademarks, trade names, trade secrets,
patents, patent applications, copyrights and any and all other
intellectual property of the Debtor;
(v) all rights of the Debtor as an unpaid vendor or lienor
(including, without limitation, stoppage in transit, replevin and
reclamation) with respect to any Inventory or other properties of the
Debtor;
(vi) all chattel paper, documents and instruments of the Debtor
including all documents of title and certificates of insurance;
(vii) all books, records, files, computer programs, data
processing records, computer software, documents, correspondence and
other information at any time evidencing, describing or pertaining to
or in any way related to any of the foregoing or otherwise pertaining
or relating to the business or operations of the Debtor;
(viii) any and all balances, credits, deposits, accounts,
items and monies of the Debtor now or hereafter with the Collateral
Agent or any Secured Party or any Affiliate of any Secured Party or
deposited with the Collateral Agent or any Secured Party or any
financial institution selected by the Collateral Agent pursuant to any
lockbox, deposit, escrow or collection agreement or otherwise, and all
property of the Debtor of every kind and description now or hereafter
in the possession or control of the Collateral Agent or any Secured
Party for any reason; and
(ix) any and all products and proceeds of any of the foregoing
(including, but not limited to, any claims to any items referred to in
this definition, and any claims of the Debtor against third parties for
loss of, damage to or destruction of, any or all of the Collateral or
for proceeds payable under, or unearned premiums with respect to,
policies of insurance) in whatever form, including, but not limited to,
cash, instruments, general intangibles, accounts, equipment, inventory,
farm products, other goods, documents and chattel paper and all
proceeds of such proceeds.
Notwithstanding the foregoing, (i) in the event a Debtor's rights in or with
respect to any Collateral consisting of (A) Assigned Contracts, (B) Contract
Rights, (C) Equipment that is subject to a prior leasehold interest or security
interest in favor of a third party which prohibits such Debtor from encumbering
its interest in such Equipment, or (D) a general intangible, in each case, would
be forfeited or would become void, voidable, terminable or revocable, or if the
Debtor would be deemed to have breached, violated or defaulted under any
Assigned Contract, solely as a consequence of the collateral assignment or grant
of a security interest created by this Agreement (collectively, the "Excepted
Collateral"), then such Collateral shall be excepted and excluded from the
Security Interest granted by this Agreement and the related definitions of
Contract Rights, Assigned Contracts, Receivables and Equipment contained in this
Agreement, as applicable, but only to the extent necessary to avoid such
forfeiture, voidness, voidability, terminability, revocability, breach,
violation or default and only in the event that any such breach, violation,
default or other event cannot be remedied by such Debtor using its good faith
efforts (but without any obligation to make any expenditures of money or
commence legal proceedings) unless any such provision in any Assigned Contract
shall not be effective in accordance with Section 9-318(4) of the UCC or any
other Applicable Law; (ii) no stock or other securities, which pursuant to the
terms of any of the Transaction Documents are not required to be pledged, shall
be included in the foregoing Collateral; and (iii) the "Collateral" shall not
include any property of the Debtor described on Schedule 3 hereto (all of the
foregoing collectively the "Excluded Collateral").
In applying the law of any jurisdiction that at any time enacts all or
substantially all of the uniform provisions of revised Article 9 of the Uniform
Commercial Code approved in 1998 by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws, the foregoing definition of
Collateral covers all assets of the Debtor except for the Excluded Collateral.
"Contract Right" means a right of the Debtor to receive payment or
performance, together with all rights and remedies of the Debtor (whether
expressly set forth in any Assigned Contract or under Applicable Law), under an
Assigned Contract.
"Equipment" means all equipment, machinery, apparatus, fittings,
fixtures and other tangible personal property of every kind and description used
in the Debtor's business operations or owned by the Debtor or in which the
Debtor has an interest, and all parts, accessories and special tools and all
improvements and accessions thereto and substitutions and replacements therefor.
"Event of Default" has the meaning given such term in the Credit
Agreement.
"Investment Property" has the meaning given such term under the Uniform
Commercial Code.
"Receivables" means the Debtor's right, title and interest in and to
all Contract Rights, all instruments, documents, chattel paper, general
intangibles (including, but not limited to, choses in action, tax refunds, and
insurance proceeds); any other obligations or indebtedness owed to the Debtor
from whatever source arising; all rights of the Debtor to receive any payments
in money or kind; all guaranties of the foregoing in favor of the Debtor and
security therefor; all of the right, title, and interest of the Debtor in and
with respect to the goods, services, or other property that give rise to, or
that secure, any of the foregoing and insurance policies and proceeds relating
thereto and all of the foregoing, whether now owned or existing or hereafter
created or acquired.
"Security Interest" means the Lien of the Collateral Agent for the
benefit of the Secured Parties on, and the collateral assignments to the
Collateral Agent for the benefit of the Secured Parties of, the Collateral
effected hereby or pursuant to the terms hereof.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in the State of New York or, where the context herein
requires, the Uniform Commercial Code of the jurisdiction that governs the
creation and perfection of a security interest in any Collateral or that governs
the rights, remedies and obligations of the Collateral Agent in connection with
the repossession or foreclosure of any Collateral.
(b) Terms not otherwise defined herein and which are defined in the
Credit Agreement or, if not defined therein, the Omnibus Agreement, have the
respective meaning given them therein.
[Signatures Begin on Next Page]
<PAGE>
IN WITNESS WHEREOF, the Debtor has caused this Security Agreement to be
executed and delivered by its duly authorized officer as of the date first above
written.
THE DEBTOR:
BIRMINGHAM SOUTHEAST, LLC
By: /s/ J. Daniel Garrett
----------------------
Name: J. Daniel Garrett
Title: Vice President - Finance
Signed, sealed and delivered as of the ____ day of May, 2000, in the presence
of:
/s/ Marjorie Jordan
--------------------
Marjorie Jordan
Notary Public
My Commission Expires: 1-30-2001
Fulton County, GA
[NOTARIAL SEAL]
[Acceptance of Collateral Agent on Following Page]
<PAGE>
Agreed and Accepted as of the date first written above:
SOUTHTRUST BANK, NATIONAL ASSOCIATION,
solely in its capacity as Collateral Agent
By: /s/ Virginia Petty
--------------------
Name: Virginia Petty
Title: AVP
<PAGE>
<PAGE>
Exhibit No. 10.27
AMENDED AND RESTATED
COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT
This AMENDED AND RESTATED COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT
(as may be amended from time to time, this "Agreement") dated as of the 15th day
of May, 2000, by and among: (i) SouthTrust Bank, National Association (in its
individual capacity herein referred to as the "Collateral Agent Bank" and in its
capacity as collateral agent herein referred to as the "Collateral Agent"), (ii)
Bank of America, N.A. and the other financial institutions (collectively,
together with their respective successors and assigns, the "Banks") which are
parties to the Credit Agreement (as defined below), (iii) Bank of America, N.A.,
as agent for itself and the other Banks (the "Agent Bank"), (iv) Bank of
America, N.A. and the other financial institutions (collectively, together with
their respective successors and assigns, the "May, 2000 Lenders") which are
parties to the May, 2000 Credit Agreement (as defined below), (v) Bank of
America, N.A., as agent for itself and the other May, 2000 Lenders (the "May,
2000 Agent") (vi) each of the holders of Notes (together with their respective
successors and assigns as holders of Notes) issued pursuant to the Note Purchase
Agreements (as defined below) (the "Note Holders"), (vii) Bank of America, N.A.
and PNC Bank, National Association, each as the issuer of IRB Letters of Credit
(as defined below) (each, an "LC Issuer"), (viii) Birmingham Steel Corporation
(the "Company"), (ix) Chase Manhattan Trust Company, National Association, as
successor to PNC Bank National Association, as successor to PNC Bank, Kentucky,
Inc., as Owner Trustee (the "Owner Trustee") under the Equipment Lease Agreement
dated as of September 30, 1997 between the Owner Trustee, as Lessor, and
Birmingham Steel Corporation, as Lessee, as supplemented by Lease Supplement No.
1, dated November 10, 1997, and as further amended, modified and supplemented
from time to time (the "Equipment Lease"), (x) First Union National Bank, as
Indenture Trustee (the "Indenture Trustee") under the Trust Indenture and
Security Agreement dated as of September 30, 1997, as supplemented by Trust
Indenture Supplement No. 1, dated November 10, 1997, and as further amended,
modified and supplemented from time to time (the "Indenture") between the Owner
Trustee and Indenture Trustee, and (xi) each Guarantor (as defined below) which
executes this Agreement or which from time to time hereafter executes an
instrument accepting and agreeing to the provisions of this Agreement.
<PAGE>
PREAMBLE
WHEREAS, pursuant to a Credit Agreement dated as of March 17, 1997, as
amended, among the Company, the Agent Bank, PNC Bank, National Association, and
The Bank of Nova Scotia, as Co-Agents, and the Banks (as further amended from
time to time, the "Credit Agreement"), the Banks have, upon the terms and
subject to the conditions contained therein, made and agreed to make loans and
otherwise extended and agreed to extend credit to the Company; and
WHEREAS, pursuant to separate Amended and Restated Note Purchase
Agreements, each dated as of October 12, 1999, as amended (collectively, as
further amended from time to time, the "1993 Note Purchase Agreement"), between
the Company and each purchaser as party thereto, the Company issued, and such
purchasers purchased, $130,000,000 principal amount of the Company's 10.03%
Senior Notes (as may be amended from time to time, the "1993 Notes"); and
WHEREAS, pursuant to certain other separate Amended and Restated Note
Purchase Agreements, each dated as of October 12, 1999, as amended
(collectively, as further amended from time to time, the "1995 Note Purchase
Agreement" and, collectively with the 1993 Note Purchase Agreement, the "Note
Purchase Agreements"), between the Company and each purchaser as party thereto,
the Company has issued, and such purchasers purchased, (i) $76,000,000 principal
amount of the Company's 9.71% Series A Senior Notes, (ii) $14,000,000 principal
amount of the Company's 9.82% Series B Senior Notes, and (iii) $60,000,000
principal amount of the Company's 9.92% Series C Senior Notes (the Notes
described in clauses (i), (ii) and (iii), as such Notes may be amended from time
to time being the "1995 Notes" and, collectively with the 1993 Notes, the
"Notes"); and
WHEREAS, Bank of America, N.A. has issued a letter of credit pursuant
to which up to $15,172,603 may be drawn in connection with certain Industrial
Revenue Bonds issued to provide financing to the Company with respect to the
facility of America Steel and Wire Corporation in Cleveland, Ohio (the "Bank of
America Letter of Credit"); and PNC Bank, National Association, has issued a
letter of credit pursuant to which up to $26,299,179 may be drawn in connection
with certain Industrial Revenue Bonds issued to provide financing to the Company
with respect to the facility of the Company in Memphis, Tennessee (the "PNC
Letter of Credit"; and, collectively with the Bank of America Letter of Credit,
the "IRB Letters of Credit"); and the Company has agreed to reimburse the LC
Issuers for all amounts drawn on the IRB Letters of Credit pursuant to an
Amended and Restated Reimbursement Agreement dated as of October 12, 1999, as
amended, between Bank of America, N.A. (as successor to Bank of America
Illinois), American Steel and Wire Corporation, and the Company (the "Bank of
America Reimbursement Agreement"), and a Reimbursement Agreement dated as of
October 1, 1996, as amended, between PNC Bank, National Association (as
successor to PNC Bank, Kentucky, Inc.), and the Company (the "PNC Reimbursement
Agreement" and, collectively with the Bank of America Reimbursement Agreement,
as may be further amended from time to time, the "Reimbursement Agreements");
and
WHEREAS, pursuant to the Equipment Lease, the Owner Trustee, as Lessor,
has leased certain melt shop equipment to the Company, as Lessee, and the rights
of the Owner Trustee to payments thereunder have been collaterally
<PAGE>
assigned to the Indenture Trustee to secure amounts due with respect to
the Equipment Notes outstanding under (and as defined in) the Indenture (the
"Equipment Notes"); and
WHEREAS, pursuant to a Credit Agreement dated as of May 15, 2000, among
Birmingham Southeast, LLC, the May, 2000 Agent, and the May, 2000 Lenders (as
amended from time to time, the "May, 2000 Credit Agreement"), the May, 2000
Lenders have, upon the terms and subject to the conditions contained therein,
made and agreed to make loans and otherwise extended and agreed to extend credit
to Birmingham Southeast, LLC, in connection with which Birmingham Southeast, LLC
has agreed to become a Guarantor and to become party to this Agreement; and
WHEREAS, pursuant to certain guaranties, security agreements, mortgages
and related documents, the Guarantors have guaranteed the Secured Obligations
(as hereinafter defined) on the terms set forth in their respective Guaranties
and the Company and the Guarantors (excluding BSE) have guaranteed the May, 2000
Debt (as hereinafter defined), and the Company and each of the Guarantors
(including BSE) have granted a valid lien on and security interest in the
Collateral (as hereinafter defined) to the Collateral Agent, for the benefit of
(1) the Banks and the Agent Bank, as security for the Company's obligations to
the Banks and the Agent Bank under the Credit Agreement and the Guarantors'
guarantee thereof, (2) the Note Holders, as security for the Company's
obligations under the Note Purchase Agreements and the Notes and the Guarantors'
guarantee thereof, (3) the LC Issuers, as security for the Company's obligations
under the Reimbursement Agreements and the Guarantors' guarantee thereof, (4)
the Owner Trustee and the Indenture Trustee, as assignee of the Owner Trustee,
as security for the Lease Claims, as defined herein, and (5) the May, 2000
Lenders, as security for BSE's obligations to the May, 2000 Lenders and the May
2000 Agent, under the May, 2000 Credit Agreement and the Company's and
Guarantors' (excluding BSE's) guarantee thereof provided that the Collateral
granted by BSE secures each of the respective Secured Obligations only to the
extent set forth in the applicable Security Documents; and
WHEREAS, in connection with the granting of such lien on and security
interest in the Collateral, the Company, the Guarantors (excluding BSE), and
certain of the Secured Parties entered into a Collateral Agency and
Intercreditor Agreement dated as of October 12, 1999 (the "Initial Intercreditor
Agreement"); and
WHEREAS, pursuant to the terms of the Initial Intercreditor Agreement,
the Collateral Agent Bank became the successor Collateral Agent (as defined in
the Initial Intercreditor Agreement) and the parties ratified and confirmed
their
<PAGE>
intention that the Initial Intercreditor Agreement and the grant of a lien on
and security interest in the Collateral continue to have full force and effect,
with SouthTrust Bank, National Association as the successor Collateral Agent
thereunder; and
WHEREAS, for the avoidance of any doubt as to the status or
enforceability of the Initial Intercreditor Agreement or any of the security
interests, mortgages and related documents executed in connection therewith
pursuant to which liens and security interests in the Collateral were granted to
secure the Secured Obligations, the parties (a) entered into additional security
agreements, mortgages and related documents dated as of November 12, 1999,
pursuant to which the Collateral Agent hereunder was granted liens on and
security interests in all of the Collateral (except for certain Collateral that
is being granted by BSE on the date hereof), and (b) except for BSE, entered
into this Agreement, which, prior to the amendment and restatement hereof as of
the date hereof, set forth the same rights and obligations of the parties hereto
as are set forth in the Initial Intercreditor Agreement; and
WHEREAS, the parties are entering into an amended and restated Initial
Intercreditor Agreement of even date herewith, which reflects the same
amendments as are being made herein.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree that the Collateral Agency and
Intercreditor Agreement dated as of November 12, 1999 is amended and restated in
its entirety as follows:
ss.1. DEFINITIONS.
-----------
ss.1.1. Definitions. The following terms shall have the meanings set forth in
thisss.1 or elsewhere in the provisions of this Agreement referred to below:
Action. Seess.2.2(a). Actionable Default. Any failure of the Company or any
Guarantor to pay any of the Secured Obligations as and when due and payable in
accordance with the terms of any Bank Credit Document, Note Credit Document,
May, 2000 Credit Document, Reimbursement Agreement, Equipment Lease or Security
Document, whether by acceleration (including automatic acceleration upon the
commencement of a bankruptcy case) or otherwise (collectively, a "Payment
Default"), or the commencement of any bankruptcy, insolvency, reorganization or
other similar case or proceeding by or against the Company or any Guarantor, or
the making by the Company or any Guarantor of an assignment for the benefit of
its creditors.
Additional Advance Amount. The principal amount of any
additional loans made or letters of credit issued under the Credit Agreement
such that, after giving effect to all of such additional loans and letters of
credit, the sum of the Loan and Reimbursement Principal Obligations and
Outstanding Bank LC Exposure at the time of reference thereto do not exceed in
the aggregate the Maximum Bank Commitment.
Additional Company Retained Proceeds. With respect to the
following categories of assets, the following amounts: (a) with respect to any
sale or transfer of the megashredder owned by Cumberland Recyclers, LLC,
$1,500,000; (b) with respect to any sale or transfer of the equity interest of
the Company or any Affiliate of the Company in Pacific Coast Recycling, LLC or
any portion thereof or any distribution to the Company or any Affiliate of the
Company in connection with or as a result of the liquidation or sale of the
assets of Pacific Coast Recycling, $2,000,000 in the aggregate; and (c) with
respect to any sale or transfer of the equity interest of the Company or any
Affiliate of the Company in Richmond Steel Recycling, Ltd. or any portion
thereof or any distribution to the Company or any Affiliate of the Company in
connection with or as a result of the liquidation or sale of the assets of
Richmond Steel Recycling, Ltd., one-half of the Net Proceeds received by or
payable to the Company or any Affiliate of the Company on account thereof.
Affiliate. As to any Person, a Person controlling, controlled by, or under
common control with such Person.
Agent Bank. As defined in the introductory paragraph hereto and shall
include any replacement or successor Agent under the Credit Agreement, or any
like agent (or replacement thereof or successor thereto) under any Replacement
Credit Agreement.
Agreement. As defined in the introductory paragraph hereto.
Applicable Amount. Seess.4.1(d) hereof.
Applicable Deposit. Seess.4.1(c) hereof.
Applicable LC Issuer. Seess.4.1(d) hereof.
Avoidance Event. The commencement of bankruptcy or insolvency proceedings
against the Company within ninety (90) days after the date that the Lien of the
Collateral Agent in the Collateral becomes perfected with respect to
<PAGE>
such portion of the Collateral existing on November 12, 1999 as may be perfected
by the filing of UCC-1 financing statements, and the avoidance of such Lien of
the Collateral Agent in any material amount of such Collateral as to which such
Lien that may be perfected by the filing of UCC-1 financing statements.
Bank Credit Documents. The Credit Agreement and the other Bank
Loan Documents, and any Replacement Credit Agreement, as the same may hereafter
be amended, renewed, extended, restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement.
Bank Debt. The "Obligations" as defined in the Credit Agreement (as in
effect on the date hereof), or any like term of the same meaning contained in
any Replacement Credit Agreement. Notwithstanding the foregoing, Bank Debt shall
not include Loan and Reimbursement Principal Obligations and Outstanding Bank LC
Exposure to the extent, and only to the extent, that the sum of the Loan and
Reimbursement Principal Obligations and Outstanding Bank LC Exposure exceeds the
Maximum Bank Commitment.
Bank Loan Documents. The "Loan Documents", as defined in the Credit
Agreement, or any like term of the same meaning contained in any Replacement
Credit Agreement.
Bank of America Letter of Credit. As defined in the Preamble hereto.
Bank of America Reimbursement Agreement. As defined in the Preamble hereto.
Bank of America Reimbursement Agreement Debt. All indebtedness, obligations
and liabilities of the Company or American Steel & Wire Corporation owing to
Bank of America, N.A. arising or incurred under the Bank of America
Reimbursement Agreement, whether existing on the date of this Agreement or
arising hereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, arising by contract, operation of law or otherwise.
Notwithstanding the foregoing, Bank of America Reimbursement Agreement Debt
shall not include (a) the principal amount of any reimbursement obligations in
respect of drawings under the Bank of America Letter of Credit in excess of
$15,172,603 in the aggregate, or (b) any Outstanding IRB LC Exposure; provided,
that (i) drawings of amounts which will be automatically reinstated unless a
notice is timely given by the LC Issuer that such amount will not be reinstated
will not be deemed to be drawings for the purposes of this sentence unless such
notice of non-reinstatement is in fact given, and (ii) drawings to fund any
tender purchase price of the related industrial revenue bonds will not be deemed
to be drawings for the purposes of this sentence so long as the related LC
Issuer has reinstated the amount of such paid drawing.
Bankruptcy Event. (a) Commencement by the Company or any
Guarantor (the Company or any such Guarantor, a "Debtor") of a voluntary case in
the United States seeking liquidation, reorganization, or other relief under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, consent to the entry of an order for relief in an involuntary case under
any such law, or consent by the Debtor to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of a Debtor or of any substantial part of its
property, or any general assignment by a Debtor for the benefit of creditors;
(b) a court having jurisdiction in the premises shall enter a decree or order
for relief in respect of a Debtor in an involuntary case in the United States
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall appoint a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of a Debtor or for any
substantial part of its property, or shall order the winding-up or liquidation
of its affairs; or (c) any involuntary bankruptcy petition shall have been filed
against any Debtor seeking a decree or order of relief of the type referred to
in clause (b) above and such petition shall not have been dismissed within a
period of sixty (60) consecutive days.
Banks. As defined in the introductory paragraph hereto,
together with their respective successors and assigns, and shall include any
replacement, additional or successive lenders under any Replacement Credit
Agreement.
BSE. Birmingham Southeast, LLC.
---
Cash Collections Collateral. Collateral consisting of cash
amounts deposited in local depository bank accounts and lock-box accounts of the
Company or any of the Securing Guarantors and cash amounts deposited from such
accounts into any like account or accounts maintained by the Agent Bank or any
of the other Banks or the Collateral Agent.
Casualty Event. See definition of Net Proceeds in thisss.1.1.
--------------
Clause (i) Deposit. Seess.4.1(i) hereof.
------------------
Clause (i) Distribution Date. Seess.4.1(i) hereof.
----------------------------
Collateral. Any of the properties and assets of whatever
nature, tangible or intangible, now owned or existing or hereafter acquired or
arising, of the Company or any of the Guarantors in which at the time of
reference a Lien has been granted or has purportedly been granted (directly or
by assignment) to the Collateral Agent to secure the Secured Obligations and
which has not been released pursuant to the terms hereof, including, without
limitation, (a) all Cash Collections Collateral and all other cash provided to
be the subject of a Lien to secure any of the
<PAGE>
Secured Obligations as contemplated by any Security Document, (b) all May, 2000
Priority Collateral, and (c) any property and assets paid or payable to the
Secured Parties or Collateral Agent under any of the Guaranties or any
subordination agreement, but specifically excluding the Lease Assets.
Collateral Agent. As defined in the introductory paragraph hereto unless
and until a successor Collateral Agent shall have been appointed pursuant to
ss.5.4 hereof, and thereafter "Collateral Agent" shall mean such successor
Collateral Agent.
Collateral Agent Bank. As defined in the introductory paragraph hereto and
any bank, in its individual capacity, serving as Collateral Agent.
Collateral Agent Substitution Agreement. Seess.11.14 hereof.
Company. As defined in the introductory paragraph hereto.
Credit Agreement. As defined in the Preamble hereto.
Credit Documents. Collectively, the Bank Credit Documents, the May, 2000
Credit Documents, the Note Credit Documents, the Reimbursement Agreements, the
Lease Documents, and the Security Documents.
Debtor. See definition of Bankruptcy Event in thisss.1.1.
Default. Any event or condition which, with the giving of notice or the
lapse of time, or both, would become an Event of Default.
Demand Notice. Seess.4.4(a).
Disposition. Any sale, exchange, or other disposition of
assets, except that the following shall not constitute Dispositions hereunder:
(a) any sale of inventory in the ordinary course of business; (b) the Transfer
of assets by the Company to a Guarantor (excluding BSE) or by a Guarantor
(excluding BSE) to the Company or another Guarantor (excluding BSE), and (c) any
sale or other Transfer of assets of Cumberland Recyclers L.L.C. to BSE provided
that such assets are sold subject to the continuing Lien of the Collateral
Agent.
Distribution Amount. Seess.4.1(c)(i).
-------------------
Enforcement Notice. Written notice given by the Requisite
Parties or Special Requisite Parties, as the case may be, to the Collateral
Agent (a) stating that a Notice of Actionable Default has theretofore been given
by such Requisite Parties or Special Requisite Parties, as the case may be, to
the Collateral Agent and that the Actionable Default specified in such Notice of
Actionable Default continued to exist uncured for the applicable period
described in ss.4.5, and (b) setting forth instructions from such Requisite
Parties or Special Requisite Parties, as the case may be, to the Collateral
Agent to exercise all or any such rights, powers and remedies as are available
under the Security Documents and making such additional statements as may be
called for under ss.4.5.
Equipment Lease. As defined in the Preamble hereto.
---------------
Equipment Notes. As defined in the Preamble hereto.
---------------
Equity Interests. With respect to any Person, shares of
capital stock of (or other ownership or profit interests in) such Person,
warrants, options or other rights for the purchase or other acquisition from
such Person of shares of capital stock of (or other ownership or profit
interests in) such Person, securities convertible into or exchangeable for
shares of capital stock of (or other ownership or profit interests in) such
Person or warrants, rights or options for the purchase or other acquisition from
such Person of such shares (or such other interests), and other ownership or
profit interests in such Person (including, without limitation, partnership,
member or trust interests therein), whether voting or nonvoting, and whether or
not such shares, warrants, options, rights or other interests are authorized or
otherwise existing on any date of determination.
Equity Issuance. Any issuance or sale by a Person of any
Equity Interest in such Person; provided, however, that the term "Equity
Issuance" does not include any issuance or sale by a Person to the extent that
such issuance or sale is made (a) to a current or former director, officer or
employee of such Person pursuant to an "employee benefit plan", as such term is
defined in Rule 405 promulgated under the Securities Act of 1933, as amended, or
(b) pursuant to a rights plan existing on November 12, 1999 (or such other
rights plan as to which the issuance of Equity Interests thereunder has been
excluded from the definition of "Equity Interest" herein with the written
consent of the Requisite Parties).
Event of Default. Any "Event of Default" under and as defined
in the Credit Agreement, any "Event of Default" under and as defined in either
of the Note Purchase Agreements, any Event of Default under either of the
Reimbursement Agreements, any "Event of Default" under and as defined in the
May, 2000 Credit Agreement, any "Lease Event of Default" under or as defined in
the Equipment Lease or any like term of similar meaning contained in any
Replacement Credit Agreement.
Guaranties. See definition of "Guarantors" in thisss.1.1.
----------
Guarantors. American Steel & Wire Corporation, Birmingham East
Coast Holdings, LLC, Norfolk Steel Corporation, Port Everglades Steel
Corporation, Birmingham Recycling Investment Company, Midwest Holdings, Inc.,
BSE, and Cumberland Recyclers, LLC, and any other party that may from time to
time hereafter execute and deliver a guaranty for the benefit of any one or more
of the Secured Parties guarantying any or all of the Secured Obligations
(collectively, the "Guaranties").
Indemnity. Seess.4.1(d) hereof.
Indenture. As defined in the introductory paragraph hereto.
Indenture Trustee. As defined in the introductory paragraph hereto.
Initial Intercreditor Agreement. As defined in the Preamble hereto.
IRB Letters of Credit. As defined in the Preamble hereto.
Jackson. Jackson, Mississippi.
Jackson Mortgage. The Mortgage dated as of the date hereof,
pursuant to which BSE has granted to the Collateral Agent, as security for BSE's
Guaranty of the Secured Obligations other than the May, 2000 Debt, a mortgage on
and security interest in the real property and certain other assets of BSE
located in Jackson, including the proceeds therefrom, as the same may hereafter
be amended, renewed, extended, restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement.
Jackson Security Agreement. The Jackson Security Agreement
dated as of the date hereof, pursuant to which BSE has granted to the Collateral
Agent, as security for BSE's Guaranty of the Secured Obligations other than the
May, 2000 Debt, a security interest in its equipment and other fixed assets
located in Jackson, including the proceeds therefrom, as the same may hereafter
be amended, renewed, extended, restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement.
LC Issuers. As defined in the introductory paragraph hereto,
together with their respective successors and assigns (except that references to
LC Issuers in ss.4.1(d) hereof refer to the LC Issuers without giving effect to
any succession or assignment that is effected or agreed to in connection with or
as a condition of a sale of the assets of SBQ).
Lease Assets. The "Equipment" and the "Indenture Estate", as
each term is defined in the Equipment Lease (as in effect on the date hereof),
and any other property of the Owner Trustee or the Indenture Trustee.
Lease Claims. All Lease Payment Claims and Lease
Expense/Indemnity Claims.
Lease Documents. The "Operative Agreements," as defined in the
Equipment Lease (as in effect as of the date hereof).
Lease Expense/Indemnity Claims. All claims of the Owner
Trustee, the Indenture Trustee, or any of the Owner Participants or the Lenders
against the Company under any of the Lease Documents or under ss.11.11 of this
Agreement (other than the Lease Payment Claims), in each case whether existing
on the date hereof or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, arising by contract, operation of
law or otherwise.
Lease Payment Claims. All claims of the Owner Trustee against
the Company under the Equipment Lease (as in effect on the date hereof) for
payment of "Basic Rent," "Stipulated Loss Value," "Make-Whole Amount" (as each
term is defined therein), and interest accrued on any of the foregoing, in each
case whether existing on the date of this Agreement or arising hereafter, direct
or indirect, joint or several, absolute or contingent, matured or unmatured,
arising by contract, operation of law or otherwise.
Lease Sharing Amount. An amount equal, as of any date, to
either (a) if the Equipment Lease has been terminated on or prior to such date,
the aggregate unpaid amount of Lease Payment Claims claimed by the Owner Trustee
(and/or the Indenture Trustee, as assignee) under Section 15 of the Equipment
Lease (or, in the event that such claim has been liquidated by adjudication or
settlement, such liquidated amount), or (b) if the Equipment Lease has not been
terminated on or prior to such date, an amount equal to 33 1/3% of the
Stipulated Loss Value as of such date.
Lenders. As defined in the Indenture.
-------
Letter of Credit Collateral Obligations. The obligations of
the Company under any Bank Credit Document or Reimbursement Agreement (as in
effect on the date hereof) to deposit cash with respect to Outstanding Bank LC
Exposure or Outstanding IRB LC Exposure up to, but not exceeding, one dollar of
cash for each dollar of undrawn face amount of each applicable outstanding
letter of credit.
Lien. Any mortgage, security deed, deed of trust, pledge,
lien, security interest or other encumbrance, whether now existing or hereafter
created, acquired or arising, and whether voluntary or involuntary, to secure
payment of a debt or performance of an obligation.
Loan and Reimbursement Principal Obligations. At the time of
reference thereto, Bank Debt consisting of the principal amount of loans
outstanding under the Bank Credit Documents and any unpaid reimbursement
obligations in respect of drawings under letters of credit issued pursuant to
the Bank Credit Documents.
Majority Secured Parties. (i) A group of holders of Secured Obligations which
includes (a) the holders of at least 51% of the Note Principal Obligations, (b)
the holders of at least 51% of the Reimbursement Agreement Debt, (c) the holders
of at least 51% of the Loan and Reimbursement Principal Obligations, and (d) the
holders of at least 51% of the May, 2000 Debt, or (ii) after the Secured
Obligations referred to in clause (i) above have been paid in full, the
Indenture Trustee for so long as the Lien of the Indenture remains outstanding,
and thereafter the Owner Trustee.
Make-Whole Amount. With respect to either of the Note Purchase
Agreements and the Note Debt owed thereunder, the "Make-Whole Amount" as defined
in such Note Purchase Agreement as in effect on the date hereof.
Maximum Bank Commitment. (a) $300,000,000 prior to any
mandatory reductions of the Commitments, as such term is defined in the Credit
Agreement, pursuant to Section 2.12 of the Credit Agreement; and (b) after any
mandatory reductions of such Commitments pursuant to Section 2.12 of the Credit
Agreement, the result of (i) $300,000,000 minus (ii) the aggregate amount of
such mandatory reductions.
May, 2000 Agent. Bank of America, N.A., as agent for itself and the other
May, 2000 Lenders, and any replacement or successor agent under the May, 2000
Credit Documents.
May, 2000 Closing Date. The date upon which the first loan is
made by the May, 2000 Lenders to BSE pursuant to the May, 2000 Credit Agreement.
May, 2000 Credit Agreement. The Credit Agreement dated as of
May 15, 2000, among BSE, the May, 2000 Lenders, and the May, 2000 Agent, as
amended, renewed, extended, restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement.
May, 2000 Credit Documents. The May, 2000 Notes, the May, 2000
Credit Agreement, and any other documents executed and delivered in connection
therewith (not including this Agreement or the Security Documents), in each case
as amended, renewed, extended, restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement.
May, 2000 Debt. The "Obligations" as defined in the May, 2000
Credit Agreement (as in effect on the date hereof). Notwithstanding the
foregoing, May, 2000 Debt shall not include the May, 2000 Principal Obligations
to the extent, and only to the extent, that the amount of the May, 2000
Principal Obligations exceeds the May, 2000 Maximum Commitment.
May, 2000 Guaranties. The Guaranties by the Company and each
of the Guarantors (excluding BSE) of the obligations of BSE under the May, 2000
Credit Agreement and May, 2000 Notes.
May, 2000 Lenders. Each of the holders of the May, 2000 Notes,
and their respective successors and assigns as holders of May, 2000 Notes.
May, 2000 Maximum Commitment. $25,000,000.
May, 2000 Notes. The $25,000,000 in aggregate principal amount
of Notes issued pursuant to the May, 2000 Credit Agreement.
May, 2000 Principal Obligations. At any time, the principal amount then
outstanding under the May, 2000 Credit Agreement.
May, 2000 Priority Collateral. All property of BSE, now
existing or hereafter arising, wherever located, which is listed on Schedule A
attached hereto.
May, 2000 Pro Rata Amount. With respect to any amount as to
which the May, 2000 Pro Rata Amount is to be determined, such amount multiplied
by a fraction, the numerator of which is the amount of the May, 2000 Principal
Obligations, and the denominator of which is the sum of (a) the May, 2000
Principal Obligations, plus (b) the Note Principal Obligations, plus (c) the
Loan and Reimbursement Principal Obligations, plus (d) the Reimbursement
Agreement Debt, plus (e) the Lease Sharing Amount.
Net Lease Sharing Amount. An amount equal, as of any date, to
either (a) if the Equipment Lease has been terminated on or prior to such date,
the Lease Sharing Amount as of such date, or (b) if the Equipment Lease has not
been terminated on or prior to such date, the result of the Lease Sharing Amount
as of such date minus the sum of all amounts previously deposited in the Section
4.1(e) Cash Collateral Account.
Net Proceeds. (a) In the case of (x) a Disposition, the
aggregate amount of all cash received (including without limitation, all cash
payments received by way of deferred payment of principal or interest pursuant
to a note or installment receivable or otherwise, but only as and when
received), directly or indirectly, by the Company or any Guarantor in connection
with such Disposition or (y) in the case of any loss, theft, damage,
destruction, or taking or other eminent domain action (a "Casualty Event"), the
aggregate amount of cash proceeds of insurance, condemnation awards and other
compensation received by the Company or any Guarantor in respect of such
Casualty Event, in each case net of (i) the amount of any reasonable
out-of-pocket legal fees, title and recording tax expenses, commissions and
other customary fees and expenses actually incurred by the Company or any
Guarantor in connection with such Disposition or Casualty Event, (ii) any income
taxes reasonably estimated in good faith by the independent certified public
accountant of the Company or any such Guarantor to be payable in connection with
such Disposition or Casualty Event and other taxes thereon to the extent such
other taxes are actually paid by the Company or any Guarantor, (iii) any
repayments by the Company or any Guarantor of indebtedness (other than
indebtedness under any of the Credit Documents (other than the Lease Documents))
to the extent that such indebtedness is secured by a Lien on the property that
is the subject of such Disposition or Casualty Event, (iv) in the case of a
Casualty Event, the amount of any proceeds permitted under the Security
Documents to be paid to the Company or any Guarantor for the purpose of
replacing, rebuilding or restoring the Collateral which was affected by the
Casualty Event, (v) in the case of a Disposition, the amount of any proceeds
which are not required under the Credit Agreement, the May, 2000 Credit
Agreement, the Note Purchase Agreements or any of the Security Documents to be
applied to prepay the Bank Debt, the May, 2000 Debt or the Note Debt, and (vi)
in the case of a Disposition, any amount of cash reserves reasonably required to
be established to satisfy liabilities relating to the assets sold, so long as
such reserves are paid to and held by the Collateral Agent as additional
Collateral hereunder; and (b) in the case of an Equity Issuance, sixty percent
(60%) of the aggregate amount of all cash received by the Company or any
Guarantor (excluding BSE) in respect of such Equity Issuance, net of investment
banking fees, legal fees, accountants fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred by the
Company in connection with such Equity Issuance.
1993 Note Purchase Agreement. As defined in the Preamble hereto.
1995 Note Purchase Agreement. As defined in the Preamble hereto.
1993 Notes. As defined in the Preamble hereto.
1995 Notes. As defined in the Preamble hereto.
Non-May, 2000 Collateral. Collateral other than the May, 2000
Priority Collateral.
Non-May, 2000 Pro Rata Amount. With respect to any amount as
to which the Non-May, 2000 Pro Rata Amount is to be determined, such amount
multiplied by a fraction, the numerator of which is the sum of (a) the Principal
Obligations other than the May, 2000 Principal Obligations plus (b) the Lease
Sharing Amount, and the denominator of which is the sum of the Principal
Obligations (including the May, 2000 Principal Obligations) plus the Lease
Sharing Amount.
Note Credit Documents. The Note Purchase Agreements and the
other Note Purchase Documents, as the same may hereafter be amended, renewed,
extended, restated, supplemented or otherwise modified from time to time in
accordance with the terms of this Agreement.
Note Debt. All indebtedness, obligations and liabilities of
any of the Company, the Guarantors and the Subsidiaries to or for the benefit of
any Note Holder arising or incurred under the Note Purchase Agreements
(including, without limitation, Make-Whole Amounts), the Notes or the
Guaranties, existing on the date of this Agreement or arising hereafter, direct
or indirect, joint or several, absolute or contingent, matured or unmatured,
arising by contract, operation of law or otherwise. Notwithstanding the
foregoing, Note Debt shall not include Note Principal Obligations to the extent,
and only to the extent, that such Note Principal Obligations at any time exceed
$280,000,000.
Note Holders. As defined in the introductory paragraph hereto,
together with their respective successors and assigns, and shall include any
replacement, additional or successive lender or note purchaser.
Note Principal Obligations. At the time of reference thereto, Note
Debt consisting of the amounts of principal outstanding under the Notes.
Note Purchase Agreements. As defined in the Preamble hereto.
Note Purchase Documents. The Notes, the Note Purchase
Agreements and any "notes" and "loan documents", or any like terms of the same
meaning, may be amended, renewed, extended, restated, supplemented or otherwise
modified from time to time in accordance with the terms of this Agreement.
Notes. The Notes, as such term is defined in the Preamble
hereto, together with any promissory notes or other evidences of indebtedness
issued in exchange for, replacement of or substitution for the Notes under the
Note Purchase Agreements.
Notice of Actionable Default. A notice by the Requisite
Parties or the Special Requisite Parties as the case may be, delivered to the
Collateral Agent, stating that an Actionable Default has occurred and is
continuing.
Other Banks. Seess.4.1(d) hereof.
-----------
Outstanding Bank LC Exposure. The undrawn face amount of all
outstanding letters of credit issued under the Bank Credit Documents. For the
avoidance of doubt, the undrawn face amount of the Outstanding IRB Letters of
Credit are not included in the Outstanding Bank LC Exposure.
Outstanding IRB LC Exposure. The aggregate undrawn face amount
of the outstanding IRB Letters of Credit.
Owner Participants. As defined in the Indenture.
------------------
Owner Trustee. As defined in the Preamble hereto.
-------------
Paid Percentage. Seess.4.1(c)(ii).
---------------
Payment Default. Seess.1.1 (in the definition of Actionable
Default).
Permitted Liens. Liens the existence of which does not breach
Section 8.19(a) of each of the Note Purchase Agreements (as in effect on the
date hereof) and the existence of which does not breach Section 9.2(a) of the
Credit Agreement.
Person. Any individual, corporation, partnership, limited
liability company, trust, unincorporated association, business or other legal
entity, and any government or any governmental agency or political subdivision
thereof.
PNC Letter of Credit. As defined in the Preamble hereto.
--------------------
PNC Reimbursement Agreement. As defined in the Preamble hereto.
---------------------------
PNC Reimbursement Agreement Debt. The "Company Obligations" as
defined in the PNC Reimbursement Agreement. Notwithstanding the foregoing, PNC
Reimbursement Agreement Debt shall not include (a) the principal amount of any
reimbursement obligations in respect of drawings under the PNC Letter of Credit
in excess of $26,299,179 in the aggregate, or (b) any Outstanding IRB LC
Exposure; provided, that (i) drawings of amounts which will be automatically
reinstated unless a notice is timely given by the LC Issuer that such amount
will not be reinstated will not be deemed to be drawings for the purposes of
this sentence unless such notice of non-reinstatement is in fact given, and (ii)
drawings to fund any tender purchase price of the related industrial revenue
bonds will not be deemed to be drawings for the purposes of this sentence so
long as the related LC Issuer has reinstated the amount of such paid drawing.
Post-Default Cash Sweep Payment. Any payment to any Bank pursuant to the
provisions of Section 2.8(b)(iii) of the Credit Agreement (as in effect on the
date hereof) or any similar successor provision which, in any such case, shall
have been made after the Collateral Agent receives notice from any Bank, Note
Holder, May, 2000 Lender, or LC Issuer of the occurrence of an Event of Default
and prior to the receipt by the Collateral Agent from such Bank, Note Holder,
May, 2000 Lender, or LC Issuer, or from the Requisite Parties, of notice that
payments
<PAGE>
referred to in this definition made after such Event of Default shall
nevertheless not constitute Post-Default Cash Sweep Payments (subject to the
implementation of the same provisions after notice to the Collateral Agent of
any subsequent Event of Default).
Pre-Reduction Percentage. Seess.4.1(c)(i).
------------------------
Principal Obligations. Loan and Reimbursement Principal Obligations, Note
Principal Obligations, May, 2000 Principal Obligations, Bank of America
Reimbursement Agreement Debt in an amount not to exceed $15,172,603, and PNC
Reimbursement Agreement Debt in an amount not to exceed $26,299,179.
Priority Debt. The aggregate amount of Loan and Reimbursement
Principal Obligations and Outstanding Bank LC Exposure under any Bank Credit
Document at any time in an amount equal to the lesser of (a) the amount thereof
at such time in excess of the Priority Threshold Amount, and (b) $65,000,000.
Priority Threshold Amount. $235,000,000, as reduced from time
to time by the same amount as the "Priority Threshold Amount" (as such term is
defined in the Credit Agreement) is reduced pursuant to Section 2.12(d) thereof
as in effect on the date hereof.
Qualifying Assets. Seess.4.9(b) hereof.
Reimbursement Agreements. As defined in the Preamble hereto.
Reimbursement Agreement Debt. Collectively, the Bank of America
Reimbursement Agreement Debt and the PNC Reimbursement Agreement Debt.
Replacement Credit Agreement. Seess.4.10(a).
----------------------------
Requisite Parties. As of any date, (i) the holders of at least
66 2/3% in aggregate principal amount of the sum of the Reimbursement Agreement
Debt, the Note Debt, the Bank Debt and the May, 2000 Debt outstanding on such
date, or (ii) after the Secured Obligations referred to in clause (i) above have
been paid in full, the Indenture Trustee so long as the Lien of the Indenture
remains outstanding, and thereafter the Owner Trustee.
Responsible Officer. With respect to the Collateral Agent means
an officer in its Corporate Trust Department.
Restricted Subsidiary. As defined in the Credit Agreement.
---------------------
SBQ. The "special bar quality" division of the Company and its
Subsidiaries which includes (a) all assets of the Company and its Subsidiaries
located in, or related to its operations in, Memphis, Tennessee; and (b) the
assets of American Steel and Wire Corporation (and the Company's equity
interests in American Steel and Wire Corporation), but specifically excluding
(i) the "missile wire" facility, located in Cleveland, Ohio, (ii) the Company's
equity interest in American Iron Reduction, LLC, and (iii) the interests of the
Owner Trustee and/or the Indenture Trustee in the Lease Assets.
Section 4.1(e) Cash Collateral Account. Seess.4.1(e) hereof.
--------------------------------------
Section 4.1(h) Cash Reserves Account. Seess.4.1(h) hereof.
------------------------------------
Section 4.1(e) Distribution Amount. Seess.4.1(e) hereof.
----------------------------------
Secured Obligations. Collectively, (a) the Bank Debt, unless
and until the Agent Bank has given notice in writing to the Collateral Agent
that either (i) the Bank Debt has been paid in full and all commitments under
the Bank Credit Documents have terminated, been canceled or permanently reduced
to zero or (ii) the Bank Debt otherwise no longer constitutes Secured
Obligations hereunder, (b) the Note Debt, unless and until all of the Note
Holders have given notice in writing to the Collateral Agent that the Note Debt
has been paid in full or no longer constitutes Secured Obligations hereunder,
(c) the May, 2000 Debt and May, 2000 Guaranties, unless and until the May, 2000
Agent has given notice in writing to the Collateral Agent that either (i) the
May, 2000 Debt has been paid in full and all commitments under the May, 2000
Credit Documents have terminated, been canceled or permanently reduced to zero
or (ii) the May, 2000 Debt and the May, 2000 Guaranties otherwise no longer
constitute Secured Obligations hereunder, (d) the Lease Claims, unless and until
the Indenture Trustee and Owner Trustee have given notice in writing to the
Collateral Agent that the Lease Claims have been paid in full or no longer
constitute Secured Obligations hereunder, (e) the Bank of America Reimbursement
Agreement Debt unless and until the holder thereof has given notice in writing
to the Collateral Agent that the Bank of America Letter of Credit has been
terminated and any and all Bank of America Reimbursement Agreement Debt has been
paid in full or no longer constitutes Secured Obligations hereunder, (f) the PNC
Reimbursement Agreement Debt unless and until the holder thereof has given
notice in writing to the Collateral Agent that the PNC Letter of Credit has been
terminated and any and all PNC Reimbursement Agreement Debt has been paid in
full or no longer constitutes Secured Obligations hereunder, (g) involuntary
overdrafts arising in the ordinary course of banking business of cash
management, payroll and similar deposit accounts maintained by the Company with
any of the Banks, which overdrafts exist at the time that an Event of Default
occurs, and (h) all indebtedness, obligations and liability of the Company or
any Guarantor to the Collateral Agent under any Security Document.
Secured Parties. The Agent Bank, the Banks, the Note Holders, the May, 2000
Lenders, the May, 2000 Agent, the Owner Trustee, the Indenture Trustee, the LC
Issuers and the Collateral Agent.
Securing Guarantors. The Guarantors who have granted to the
Collateral Agent for the benefit of the Secured Parties a Lien on any of their
properties and assets to secure payment or performance of any of the Secured
Obligations.
Security Documents. Any and all instruments or agreements
pursuant to which a Lien is created or arises, or a Guaranty or May, 2000
Guaranty is delivered, in favor of the Collateral Agent or any other Secured
Party to secure or guarantee any of the Secured Obligations (but excluding in
any event the Lease Documents).
Special Cash Collateral Account. Seess.4.1(c).
-------------------------------
Special Clause (i) Account. Seess.4.1(i).
--------------------------
Special Equity Issuances. One or more Equity Issuances by the
Company between the May, 2000 Closing Date and December 15, 2001 from which the
gross proceeds (in the aggregate for all such Equity Issuances) do not exceed
$100,000,000.
Special Requisite Parties. As of any date, either (a) the
holders of at least 25% in aggregate principal amount of the Reimbursement
Agreement Debt, the Note Debt, the Bank Debt, and the May, 2000 Debt outstanding
on such date if a Payment Default shall have occurred and be continuing with
respect to such Reimbursement Agreement Debt, Note Debt, Bank Debt, or May, 2000
Debt, as the case may be, on such date and at least thirty (30) days prior to
such date the Agent Bank, the LC Issuers, the May, 2000 Agent, each of the Note
Holders and the Indenture Trustee (or, if the Lien of the Indenture shall no
longer remain outstanding, the Owner Trustee) shall have received written notice
of such Payment Default, or (b) the Requisite Parties.
Stipulated Loss Value. As defined in the Equipment Lease (as in effect
on the date hereof).
Stock Pledge Agreement. One or more instruments or agreements
executed in favor of and delivered to the Collateral Agent in connection with
this Agreement which purports to pledge and grant a security interest to the
Collateral Agent in shares of capital stock or other debt or equity interest of
any Subsidiary or other Person.
Subsidiary. As defined in the Note Purchase Agreements (as in effect on the
date hereof).
Terminated IRB LC. Seess.4.1(d) hereof.
Total Undrawn Letter of Credit Exposure. At the time of
reference thereto, the Outstanding Bank LC Exposure at such time and the
Outstanding IRB LC Exposure at such time.
Transfer. Any sale (including any sale and subsequent lease as lessee),
lease as lessor, transfer or other disposition of any asset.
ss.1.2. Terms Generally. The definitions in ss.1.1 shall apply (except
as otherwise specified) equally to both the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". All references herein to Sections shall be deemed references to
Sections of this Agreement unless the context shall otherwise require. All
references herein to the Note Holders, the Banks, the L/C Issuers, and the
Lenders shall be deemed to refer to such Persons in their capacities as such but
not in their capacities as May, 2000 Lenders, and all references herein to the
May, 2000 Lenders shall be deemed to refer to such Persons in their capacities
as May, 2000 Lenders but not in their capacities as Note Holders, the Banks, the
L/C Issuers, and Lenders. All references to any agreement as it is in effect on
the date hereof shall mean after giving effect to any amendment thereto
contained in any of the documents listed on Schedule B hereto.
ss.2 RECOURSE OF SECURED PARTIES; OTHER COLLATERAL; ACTION BY SECURED PARTIES.
------------------------------------------------------------------------
ss.2.1. Recourse of Secured Parties; Other Collateral.
---------------------------------------------
(a) Each of the Secured Parties acknowledges and agrees that
(i) it shall only have recourse to the Guaranties, the May, 2000 Guaranties, and
the Collateral through the Collateral Agent and that it shall have no
independent recourse to the Guaranties, the May, 2000 Guaranties, or the
Collateral and (ii) the Collateral Agent shall have no obligation to, and shall
not (except pursuant to ss.3.2(c) or as otherwise specifically provided herein),
take any action hereunder or under any Security Document to which it is a party,
except upon instructions from the Requisite Parties in accordance with ss.2.2
hereof.
(b) Nothing contained herein shall restrict (i) the rights of
any Secured Party to pursue remedies, by proceedings in law and equity, to
collect any of the Secured Obligations or to enforce the performance of and
provisions of any of the Secured Obligations, to the extent in either case that
such remedies do not relate to the Collateral or interfere with the Collateral
Agent's ability to take action hereunder or under the Security Documents or (ii)
the rights of any Secured Party to initiate an action or actions in any
bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar proceeding in its individual
capacity and to appear or be heard on any matter before the bankruptcy or other
applicable court in any such proceeding, including, without limitation, with
respect to any question concerning the post-petition usage of Collateral and
post-petition financing arrangements.
(c) None of the Agent Bank, the Collateral Agent or any other
Secured Party shall contest the validity, perfection, priority or enforceability
of or seek to avoid any Lien securing any Secured Obligation, and each party
hereby agrees to cooperate in the defense of any action contesting the validity,
perfection, priority or enforceability of such Liens. Except as expressly
provided in this Agreement with respect to distributions of Collateral or
proceeds by the Collateral Agent to the Secured Parties, no Secured Party shall
have the right to obtain any of the Collateral for its sole account or the
benefit for its sole account of any Lien securing any of the Secured
Obligations. No Secured Party may seek, and each Secured Party hereby waives,
any right to require any of the Collateral to be partitioned.
(d) Notwithstanding the foregoing, nothing in this Agreement,
any Security Document or any related agreement shall impair or otherwise
adversely affect in any respect any rights or entitlements of the Owner Trustee
or the Indenture Trustee under any of the Lease Documents or, in the event of
any Bankruptcy Event, under Section 365 of the United States Bankruptcy Code
with respect to any of the Lease Documents.
ss.2.2. Action by Secured Parties.
-------------------------
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action permitted or required by this Agreement to be
given or taken by the Requisite Parties or Special Requisite Parties shall be
embodied in and evidenced by one or more instruments and signed by or on behalf
of such Requisite Parties or Special Requisite Parties, as applicable, and,
except as otherwise expressly provided in any such instrument to be effective at
a later date, any such action shall become effective when such instrument or
instruments shall have been received by the Collateral Agent. The instrument or
instruments evidencing any action (and the action embodied therein and evidenced
thereby) are sometimes referred to herein as an "Action" of the Persons signing
such instrument or instruments.
(b) The Collateral Agent shall be entitled to rely absolutely
upon an Action of the Requisite Parties or Special Requisite Parties if such
Action purports to be taken by or on behalf of such Requisite Parties or Special
Requisite Parties, and nothing in this ss.2.2 or elsewhere in this Agreement
shall be construed to require the Collateral Agent to demonstrate that such
Requisite Parties or Special Requisite Parties have been authorized by the
Banks, Note Holders, May, 2000 Lenders, LC Issuers, the Indenture Trustee and/or
the Owner Trustee, as applicable, to take any action which they purport to be
taking, the Collateral Agent being entitled to rely conclusively, and being
fully protected in so relying, on any Action of any Banks, any Note Holders,
May, 2000 Lenders, LC Issuers, the Indenture Trustee and/or the Owner Trustee,
as the case may be.
ss.3. DUTIES OF COLLATERAL AGENT.
--------------------------
ss.3.1. Notices to the Secured Parties. The Collateral Agent shall, as
soon as practicable but in any event, if applicable, within five (5) business
days following receipt thereof, furnish to each of the Agent Bank, the May, 2000
Agent, each of the Note Holders, each of the LC Issuers, and the Owner Trustee
and the Indenture Trustee:
(a) a copy of each Notice of Actionable Default, Demand Notice or
Enforcement Notice received by the Collateral Agent;
(b) a copy of each certificate received by the Collateral Agent rescinding
or withdrawing a Notice of Actionable Default, Demand Notice or Enforcement
Notice;
(c) written notice of any release or subordination by the Collateral Agent
of any Collateral;
(d) a copy of any notice or other communication given or received by the
Collateral Agent
under any Security Document; and
(e) such other notices required by the terms of this Agreement to be
furnished by or to the Collateral Agent.
Any Notice of Actionable Default, Demand Notice or Enforcement Notice
shall be deemed to have been given when actually received by a Responsible
Officer of the Collateral Agent and, subject to ss.4.5(c), to have been
rescinded or withdrawn when a Responsible Officer of the Collateral Agent has
actually received from the notifying party a notice rescinding or withdrawing
such Notice of Actionable Default, Demand Notice or Enforcement Notice. Any
Notice of Actionable Default, Demand Notice or Enforcement Notice shall be
deemed to be outstanding at all times after such notice has been given until
such time, if any, as such notice has been rescinded or withdrawn.
ss.3.2. Actions Under Security Documents.
--------------------------------
(a) The Collateral Agent shall not be obligated to take any
action under this Agreement or any of the Security Documents except for the
performance of such duties as are specifically set forth herein or therein. The
Collateral Agent shall take any action under or with respect to the Security
Documents or the Collateral which is requested by the Requisite Parties or
Special Requisite Parties pursuant to ss.4.5; provided that the Collateral Agent
shall not amend or waive any provision of the Security Documents except in
accordance with ss.7.
(b) The Collateral Agent shall exercise or refrain from
exercising all such rights, powers and remedies as shall be available to it
under the Security Documents to which it is a party or any of them or with
respect to the Collateral solely in accordance with an Enforcement Notice
received from the Requisite Parties or Special Requisite Parties in accordance
with ss.4.5. The Collateral Agent shall have the right to decline to follow any
such direction if (i) the Collateral Agent, being advised by counsel and acting
in good faith, determines that the directed action is not permitted by the terms
of this Agreement or the Security Documents or is unlawful or (ii) the
Collateral Agent, being advised by counsel and acting in good faith, is in
reasonable doubt as to whether such directed action is permitted by this
Agreement or the Security Documents or would involve it in personal liability
and, in the case of this clause (ii), is not provided, upon its request
therefor, written confirmation from the Requisite Parties or the Special
Requisite Parties, as the case may be, providing the Enforcement Notice that the
Collateral Agent's indemnity by the other Secured Parties contained in this
Agreement would apply without exception for such directed action. All directions
from the Requisite Parties and Special Requisite Parties shall be as
contemplated and permitted by this Agreement and the applicable Security
Document and will not be illegal. The Collateral Agent may rely on any such
direction given to it by the Requisite Parties and Special Requisite Parties and
shall be fully protected, and shall under no circumstances (absent the gross
negligence and willful misconduct of the Collateral Agent) be liable to the
Company, any Guarantor, any holder of any Secured Obligations, or any other
Person for taking or refraining from taking action in accordance with such
direction and the otherwise applicable terms of this Agreement.
(c) In the absence of an Enforcement Notice (which may relate
to the exercise of specific remedies or to the exercise of remedies in general)
from the Requisite Parties or Special Requisite Parties, the Collateral Agent
shall not, without the written consent or direction of the Requisite Parties or
Special Requisite Parties, exercise remedies available to it under any Security
Documents or with respect to the Collateral or any part thereof.
ss.3.3. Status of Moneys Received.
-------------------------
All moneys received by the Collateral Agent pursuant to this Agreement
shall be held in trust for the purposes for which they were paid, and shall be
segregated from any other moneys held by the Collateral Agent, and may be
deposited by the Collateral Agent under such general conditions as may be
prescribed by law in the general banking department of the Collateral Agent, and
the Collateral Agent shall not be liable for any interest thereon except for
interest and other income obtained in accordance with this paragraph. The
Collateral Agent shall invest any funds held by it pursuant to this Agreement as
directed in writing by the Requisite Parties in any of the following: (i)
obligations issued or guaranteed by The United States of America or any agency
or instrumentality thereof; (ii) certificates of deposit of or interest bearing
accounts with national banks or corporations endowed with trust powers having
capital and surplus in excess of $100,000,000; (iii) commercial paper that at
the time of investment is rated A-1 by Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., or Prime-1 by Moody's Investor's Service, Inc.;
(iv) repurchase agreements with any bank or corporation described in clause (ii)
fully secured by obligations described in clause (i); and (v) shares of a money
market fund investing only in short term U.S. Treasury obligations or
obligations backed by short-term U.S. Treasury obligations. The Collateral Agent
shall add any interest or other income from such investments to the amounts to
be distributed in accordance with ss.4.1(b) hereof.
All interest earned on such investments shall be considered the
currently reportable income of the Company for federal income tax purposes. The
Collateral Agent annually shall file information returns with the United States
Internal Revenue Service and payee statements with the Company, documenting such
interest payments. The Company shall provide the Collateral Agent all forms and
information necessary to complete such information returns and payee statements.
Should the Collateral Agent become liable for the payment of taxes
including withholding taxes, relating to income derived from any funds held by
its pursuant to this Agreement or any payment made hereunder, the Collateral
Agent may pay such taxes from such funds.
ss.4. CERTAIN INTERCREDITOR ARRANGEMENTS.
----------------------------------
ss.4.1. General Rule: Pari Passu Rights Against Collateral.
---------------------------------------------------
(a) General Rule. All amounts owing with respect to the
Secured Obligations shall be secured (to the extent set forth in the Security
Documents) by the Guaranties, the May, 2000 Guaranties, and the Collateral
without distinction as to whether some Secured Obligations are then due and
payable and other Secured Obligations are not then due and payable, all in
accordance with the priorities established in this ss.4.
(b) Application of Collateral Proceeds Generally. If (i) the
Collateral Agent receives any cash amounts as payments under any Security
Documents or as proceeds of or otherwise constituting the Collateral (which
amounts, under the terms of any of the Security Documents, are to be applied to
any of the Secured Obligations), including (but subject to ss.4.1(d) below) any
amounts received pursuant to ss.4.6 and ss.4.7, any proceeds received by the
Collateral Agent in connection with any Disposition of the assets of SBQ or any
of the other Collateral and, if applicable, any sum received by the Collateral
Agent pursuant to ss.507(b) of the Bankruptcy Code in any bankruptcy case in
which the Company or a Guarantor is a debtor, or (ii) the Company or any
Guarantor receives any Net Proceeds from a Disposition or Casualty Event with
respect to the Collateral or if the Company or any Guarantor (excluding BSE)
receives any Net Proceeds from an Equity Issuance (other than a Special Equity
Issuance, so long as the proceeds from such Special Equity Issuance are not
applied directly or indirectly to any of the Secured Obligations)), all such
cash amounts shall be applied as follows (subject to ss.4.2 hereof):
A. If such cash amounts were received by the Collateral Agent (x) as
proceeds of or otherwise constituting the May, 2000 Priority Collateral or in
connection with a Disposition or Casualty Event with respect to May, 2000
Priority Collateral, or (y) pursuant to ss.507(b) of the Bankruptcy Code in any
bankruptcy case in which BSE is the debtor and the amount paid under ss.507(b)
relates to the May, 2000 Priority Collateral:
(i) first, to the payment of any unpaid fees or other amounts owing to
the Collateral Agent pursuant toss.5.5,ss.5.6 orss.5.7;
(ii) second, equally and ratably to reimburse the May, 2000 Lenders
for any amounts paid by them in their capacities as May, 2000 Lenders
pursuant toss.5.6;
(iii) third, if any amounts have been applied pursuant to clauses (i)
and (ii) of subparagraph B of this ss.4.1(b) (other than with respect to
amounts which were expended by the Collateral Agent solely in relation to
Non-May, 2000 Collateral or in connection with the disposition of Non-May,
2000 Collateral), the May, 2000 Pro Rata Amount thereof shall be applied
equally and ratably to reimburse the holders of Bank Debt, Note Debt,
Reimbursement Agreement Debt, and the Lease Payment Claims, according to
the aggregate outstanding amounts thereof (other than the Lease Payment
Claims) on the dates that the respective amounts were paid pursuant to
clauses (i) and (ii) of subparagraph B of this ss.4.1(b) and, in the case
of Lease Payment Claims, the Net Lease Sharing Amount as of such dates; for
the
<PAGE>
purposes of this clause (iii), the May, 2000 Pro Rata Amount shall be
calculated as of the dates that the respective amounts were paid
pursuant to clauses (i) and (ii) of subparagraph B of this ss.4.1(b);
(iv) fourth, equally and ratably to all outstanding May, 2000
Debt, until the May, 2000 Debt has been paid in full;
(v) fifth, to the extent that the Secured Obligations other than
the May, 2000 Debt are secured by the Collateral that generated such
proceeds, equally and ratably to all outstanding accrued and unpaid
interest on and principal of Priority Debt;
(vi) sixth, to the extent that the Secured Obligations other than
the May, 2000 Debt are secured by the Collateral that generated such
proceeds, equally and ratably to all outstanding accrued and unpaid
interest and Make-Whole Amounts and outstanding Loan and Reimbursement
Principal Obligations, Reimbursement Agreement Debt, Outstanding Bank
LC Exposure, Outstanding IRB LC Exposure, and Note Principal
Obligations, constituting Bank Debt, Note Debt, or Reimbursement
Agreement Debt, and the Lease Payment Claims, according to the
aggregate amounts thereof (other than the Lease Payment Claims) on the
date of such distribution and, in the case of Lease Payment Claims,
the Net Lease Sharing Amount as of the date of such distribution;
(vii) seventh, to the extent that the Secured Obligations other
than the May, 2000 Debt are secured by the Collateral that generated
such proceeds, equally and ratably, to all other Secured Obligations
not covered by clauses (i) through (vi) of this ss.4.1(b)(A); and
(viii) eighth, after payment of all Secured Obligations that are
secured by the Collateral that generated such proceeds, to BSE or to
whomever else the Collateral Agent may be required to pay by
applicable law.
It is understood that (x) certain of the Collateral granted to the
Collateral Agent by BSE (i.e. the equipment, real property and other fixed
assets of BSE located in Cartersville, including the proceeds therefrom) secures
the May, 2000 Debt but does not secure any of the other Secured Obligations, and
(y) nothing herein is intended to provide for any proceeds of Collateral for the
May, 2000 Debt that does not also secure the other Secured Obligations to be
applied to such other Secured Obligations.
B. If such cash amounts were received by the Collateral Agent (w) as
proceeds of or otherwise constituting Collateral other than the May, 2000
Priority Collateral or in connection with a Disposition or Casualty Event with
respect to Collateral other than the May, 2000 Priority Collateral, (x) as
proceeds received by the Collateral Agent in connection with any Disposition of
the assets of SBQ, (y) pursuant to ss.507(b) of the Bankruptcy Code in any
bankruptcy case in which the Company or a Guarantor is a debtor (except when BSE
is the debtor in the bankruptcy case and the amounts paid relate to the May,
2000 Priority Collateral), or (z) as Net Proceeds from an Equity Issuance by the
Company or any Guarantor, excluding BSE (other than Net Proceeds from a Special
Equity Issuance, so long as the proceeds from such Special Equity Issuance are
not applied directly or indirectly to any of the Secured Obligations), all such
cash amounts shall be applied as follows (subject to ss.4.2 hereof):
(i) first, to the payment of any unpaid fees or other amounts owing to
the Collateral Agent pursuant toss.5.5,ss.5.6 orss.5.7;
(ii) second, equally and ratably to reimburse the Secured Parties for
any amounts paid by the Secured Parties pursuant to ss.5.6 (other than
amounts paid by them in their capacities as May, 2000 Lenders);
(iii) third, if any amounts have been applied pursuant to clauses (i)
and (ii) of subparagraph A of this ss.4.1(b) (other than with respect to
amounts which were expended by the Collateral Agent solely in relation to
the May, 2000 Priority Collateral or in connection with the disposition of
May, 2000 Priority Collateral), the Non-May, 2000 Pro Rata Amount thereof
shall be applied equally and ratably to reimburse the holders of May, 2000
Debt, according to the amount thereof on the dates that the respective
amounts were paid pursuant to clauses (i) and (ii) of subparagraph A of
this ss.4.1(b); for the purposes of this clause (iii), the Non-May, 2000
Pro Rata Amount shall be calculated as of the dates that the respective
amounts were paid pursuant to clauses (i) and (ii) of subparagraph A of
this ss.4.1(b);
(iv) fourth, equally and ratably to all outstanding accrued and unpaid
interest on and principal of Priority Debt, provided that, except as
provided in ss.4.1(g) hereof, none of the proceeds from any sale of the
assets of SBQ or any Equity Issuance shall be applied pursuant to this
clause (iv);
(v) fifth, equally and ratably to all outstanding accrued and unpaid
interest and Make-Whole Amounts and outstanding Loan and Reimbursement
Principal Obligations, May, 2000 Principal Obligations, Reimbursement
Agreement Debt, Outstanding Bank LC Exposure, Outstanding IRB LC Exposure,
and Note Principal Obligations, constituting Bank Debt, Note Debt, May,
2000 Debt, or Reimbursement Agreement Debt, and the Lease Payment Claims,
according to the aggregate amounts thereof (other than the Lease Payment
Claims) on the date of such distribution and, in the case of Lease Payment
Claims, the Net Lease Sharing Amount as of the date of such distribution;
(vi) sixth, equally and ratably, to all other Secured Obligations not
covered by clauses (i) through (v) of thisss.4.1(b)(B); and
(vii) seventh, after payment of all Secured Obligations, to the
Company or to whomever else the Collateral Agent may be required to pay by
applicable law.
(c) Special Letter of Credit Provision. Except to the extent
provided otherwise in ss.4.1(d) hereof, any payment pursuant to clause (vi) of
ss.4.1(b)(A) or clause (v) of ss.4.1(b)(B) with respect to Outstanding Bank LC
Exposure or Outstanding IRB LC Exposure (an "Applicable Deposit") shall be paid
to (or retained by) the Collateral Agent for deposit in an account (the "Special
Cash Collateral Account") to be held as Collateral for the Secured Obligations
and to be applied as provided in this ss.4.1(c).
(i) Distributions of Cash Collateral. On each date
after the creation of the Special Cash Collateral Account on which a
reduction in Total Undrawn Letter of Credit Exposure occurs by reason
of either a drawing under any letter of credit (including any IRB
Letter of Credit) or any other reduction, expiration or cancellation of
any such letter of credit, the Collateral Agent shall distribute from
the Special Cash Collateral Account an amount (a "Distribution Amount")
equal to the product of (1) the Paid Percentage immediately prior to
such reduction in Total Undrawn Letter of Credit Exposure (the
"Pre-Reduction Percentage") and (2) the amount of such reduction,
provided, that any reduction of Outstanding IRB LC Exposure which will
be automatically reinstated unless a notice is timely given by the
applicable LC Issuer that such reduction will not be reinstated, shall
not be deemed to be a reduction of Total Undrawn Letter of Credit
Exposure unless such notice of non-reinstatement is in fact given. The
Distribution Amount shall be distributed as follows: (A) first, to pay
any outstanding principal amount of whichever of the Loan and
Reimbursement Principal Obligations, Bank of America Reimbursement
Agreement Debt, and PNC Reimbursement Agreement Debt, if any, shall
have been increased by such reduction pro rata in proportion to the
respective amounts thereof owed to each Bank and LC Issuer, to the
extent, if any, necessary so that the Paid Percentage of each of the
Loan and Reimbursement Principal Obligations, Bank of America
Reimbursement Agreement Debt and PNC Reimbursement Agreement Debt (not
including Outstanding IRB LC Exposure) immediately after giving effect
both to any increase in the amount thereof which may have occurred as a
result of such reduction in the Total Undrawn Letter of Credit Exposure
and to such payment being made from the Special Cash Collateral Account
under this clause (A), is equal to the Pre-Reduction Percentage; and
(B) next, to the extent of any balance of the Distribution Amount, as
provided in clauses (iv), (v), (vi), and (vii) of ss.4.1(b)(B). Subject
to the provisions of ss.4.1(d) hereof, at such times as the Outstanding
Bank LC Exposure and Outstanding IRB LC Exposure are reduced to zero,
any amount remaining in the Special Cash Collateral Account, after the
payment of all prior Distribution Amounts, shall be distributed as
provided in clauses (iv), (v), (vi), and (vii) of ss.4.1(b)(B).
(ii) Definition of Paid Percentage. The "Paid
Percentage" means, at the relevant time of reference thereto with
respect to any Distribution Amount, the fraction (expressed as a
percentage) the numerator of which is (x) the sum of all payments with
respect to Principal Obligations made pursuant to ss.4.1 (other than
pursuant to ss.4.1(b)(A)(iv) and (v) and ss.4.1(b)(B)(iv)) prior to or
at such time and the denominator of which is (y) the aggregate amount
of Principal Obligations outstanding, immediately before the Applicable
Deposit from which such Distribution Amount was funded. In the event
that, at the relevant time of reference thereto, no payments with
respect to Principal Obligations (other than the May, 2000 Principal
Obligations) shall have been made pursuant to ss.4.1 (other than
pursuant to ss.4.1(b)(A)(iv) and (v) and ss.4.1(b)(B)(iv)), the Paid
Percentage shall be zero.
(d) Special Provisions Regarding Proceeds from Sale of SBQ.
Notwithstanding the provisions of ss.4.1(b), under the circumstances set forth
in this ss.4.1(d), the distribution to the May, 2000 Lenders, the Note Holders,
the Banks, and the LC Issuers of the proceeds from any sale of the assets of SBQ
shall be made in accordance with the provisions of this ss.4.1(d), it being
understood that nothing in this ss.4.1(d) shall alter the amount of such
proceeds otherwise required to be distributed under ss.4.1(b) in respect of the
Lease Payment Claims. If (i) there is a sale of all or a substantial portion of
the assets of SBQ, and (ii) prior to, contemporaneous with, or as a condition of
such sale, the IRB Letters of Credit (or either of them) expire undrawn, are
terminated, are cancelled (any of the foregoing being a "Terminated IRB LC"), or
the LC Issuers receive any letter of credit, indemnity or other comfort
(collectively "Indemnity") that the IRB Letters of Credit (or any portion of
them or either of them) will not be drawn or that, if drawn, the LC Issuers will
be reimbursed or indemnified for all or a portion of the amount drawn by a
Person or Persons other than the Company and the Guarantors (or from assets
other than those of the Company and the Guarantors), regardless of whether such
Indemnity is absolute or is contingent or conditional (the issuer of a
Terminated IRB LC or recipient of an Indemnity being an "Applicable LC Issuer"),
then
(w) for purposes of determining the amount payable to the May, 2000
Lenders and the Note Holders, the net proceeds from any sale of the assets
of SBQ shall be deemed to have been greater than the actual net proceeds
from any sale of the assets of SBQ by an amount equal to the sum, if any,
of (A) with respect to Terminated IRB LCs, the aggregate undrawn face
amount of the IRB Letters of Credit immediately prior to the expiration,
termination or cancellation thereof, and (B) with respect to IRB Letters of
Credit as to which Indemnity was obtained, the amount of such Indemnity
(collectively, the sum of (A) and (B) being the "Applicable Amount"),
(x) the May, 2000 Lenders and the Note Holders will
receive the same amount from the net proceeds from
the sale of the assets of SBQ as the May, 2000
Lenders and the Note Holders would have received
pursuant to ss.4.1(b) had such net proceeds been
increased by such Applicable Amount,
(y) after the May, 2000 Lenders and the Note Holders have
received the amount payable to them pursuant to
ss.4.1(b) (after giving effect to this ss.4.1(d)),
the amounts payable pursuant to ss.4.1(b) to the
Banks that are not (and whose direct and indirect
assignors were not) the Applicable LC Issuers (the
"Other Banks") shall be the amount that the Other
Banks would have received if the net proceeds from
the sale of the assets of SBQ had been increased by
the Applicable Amount, and
(z) after the May, 2000 Lenders, the Note Holders and the
Other Banks have received the amounts payable to them
pursuant to ss.4.1(b) (after giving effect to this
ss.4.1(d)), the Banks that are (or whose direct or
indirect assignors were) the Applicable LC Issuers
shall receive on account of the Bank Debt the
remaining net proceeds, if any, allocable to the
Banks that are the LC Issuers from the sale of the
assets of SBQ, provided that,
(1) if the net proceeds from the sale of the assets of SBQ are
not sufficient for the Note Holders to receive the amount that they are
entitled to receive pursuant to ss.4.1(b) (after giving effect to this
ss.4.1(d)), then (A) the Note Holders shall receive all of the remaining
proceeds from the sale of the assets of SBQ covered by this ss.4.1(d), (B)
the Applicable LC Issuers shall make such arrangements with the Banks that
are not the Applicable LC Issuers (which arrangements shall be without cost
to or effect on the Secured Parties other than the Banks and the Applicable
LC Issuers) so as to cause the Banks that are not the Applicable LC Issuers
to have received (at or about the same time that the Note Holders are paid
pursuant to clause (A) of this paragraph) the same percentage of the amount
that would have been payable to the Banks that are not the Applicable LC
Issuers pursuant to clause (y) (if there had been sufficient proceeds to
pay such amounts), as the percentage that the amount that the Note Holders
receive pursuant to clause (A) of this paragraph constitutes with respect
to the amount that the Note Holders would have received pursuant to clause
(x) had there been sufficient proceeds to pay such amounts, and (C) all
amounts that thereafter become payable pursuant to ss.4.1(b) with respect
to the Bank Debt to the Banks that are (or whose direct or indirect
assignors were) the Applicable LC Issuers shall be paid instead equally and
ratably to the Note Holders and the Banks that are not the Applicable LC
Issuers (and allocated among each of them equally and ratably) until the
Note Holders and Banks that are not Applicable LC Issuers have received, in
addition to all other amounts payable to them hereunder, the amounts that
would have been paid to them pursuant to this ss.4.1(d) but for the Net
Proceeds from the sale of the assets of SBQ being insufficient to pay such
amounts to them, provided that, notwithstanding the foregoing, the
provisions of this ss.4.1(d) shall not be applied to pay to the Note
Holders or Banks that are not Applicable LC Issuers amounts that are
payable to the Applicable LC Issuers pursuant to clause (v) of ss.4.1(b)(A)
or clause (iv) of ss.4.1(b)(B) after the following events have occurred:
(1) the holders of 51% of the Bank Debt give notice to the Collateral Agent
that an Actionable Default has occurred, and (2) the Banks declare all of
the Bank Debt to be due and payable on account of such Actionable Default.
(e) Special Equipment Lease Provisions. Any payment pursuant
to ss.4.1(b)(A) or ss.4.1(b)(B) which is to be applied to Lease Payment Claims
prior to the termination of the Equipment Lease shall be paid to (or retained
by) the Collateral Agent for deposit in an account (the "Section 4.1(e) Cash
Collateral Account") to be held as Collateral for the sole and exclusive benefit
of the Lease Payment Claims (subject to and to the extent set forth in this
ss.4.1(e)) and to be applied as provided in this ss.4.1(e). Any payment pursuant
to ss.4.1(b)(A) or ss.4.1(b)(B) which is to be applied to Lease Payment Claims
on or after termination of the Equipment Lease shall be paid by the Collateral
Agent to the Indenture Trustee (for distribution by the Indenture Trustee in the
order of priority set forth in Section 3.03(a) of the Indenture for so long as
the Lien of the Indenture remains outstanding, and thereafter to the Owner
Trustee).
(i) Distribution of Section 4.1(e) Cash Collateral After Termination of
Equipment Lease. If, on any date on or after creation of the Section 4.1(e) Cash
Collateral Account, the Equipment Lease is terminated, the Collateral Agent
shall distribute to the Indenture Trustee (for distribution by the Indenture
Trustee in the order of priority set forth in Section 3.03(a) of the Indenture,
for so long as the Lien of the Indenture remains outstanding, and thereafter to
the Owner Trustee), from the Section 4.1(e) Cash Collateral Account an amount (a
"Section 4.1(e) Distribution Amount") equal to the lesser of (x) the Lease
Sharing Amount as of such date, and (y) the amount in the Section 4.1(e) Cash
Collateral Account. Any amount remaining in the Section 4.1(e) Cash Collateral
Account after such distribution to the Indenture Trustee or the Owner Trustee,
as the case may be, shall be applied in accordance with ss.4.1(b) hereof.
(ii) Other Distributions of Section 4.1(e) Cash Collateral. If the
Equipment Lease expires at the end of its term (and is not terminated prior to
such expiration) and all Lease Payment Claims have been paid in full, then the
amount in the Section 4.1(e) Cash Collateral Account shall be applied in
accordance with ss.4.1(b) hereof.
(f) Reallocation of Subsequent Distributions. Notwithstanding
the foregoing, if (i) any deposit(s) shall be made into the Section 4.1(e) Cash
Collateral Account on any date(s) in respect of the Lease Payment Claims
pursuant to this ss.4.1 and (ii) the Equipment Lease shall be terminated on a
subsequent date and the Lease Sharing Amount thereupon shall become an amount
smaller or larger than 33 1/3% of the Stipulated Loss Value as of such earlier
date(s), a "true-up" shall be effected with respect to the next distribution(s)
of Collateral proceeds and other amounts pursuant to clause (iii), (vi) or (vii)
of ss.4.1(b)(A) or clause (iii), (v) or (vi) of ss.4.1(b)(B) hereof so that the
Lease Payment Claims shall receive pursuant to this ss.4.1 a cumulative amount
of Collateral proceeds and other amounts pursuant to ss.4.1 hereof equal to what
the Indenture Trustee or Owner Trustee, as the case may be, would have received
pursuant to this ss.4.1 had the revised Lease Sharing Amount been in effect at
the time of such deposit(s).
(g) Special Provision Regarding Allocation of SBQ and Equity
Issuance Proceeds After the Occurrence of an Event of Default. If the holders of
51% of the Bank Debt give notice to the Collateral Agent before a distribution
by the Collateral Agent pursuant to ss.4.1(b)(A) or ss.4.1(b)(B) hereof that an
Event of Default has occurred under the Credit Agreement, and if such notice
certifies that there is at the time of such distribution any outstanding accrued
and unpaid interest on or principal of Priority Debt, and if such distribution
includes proceeds from the sale of the assets of SBQ or any Equity Issuance (the
"SBQ or Equity Issuance Proceeds"), then the amount of such distribution that is
allocable to the SBQ or Equity Issuance Proceeds shall be paid to (or retained
by) the Collateral Agent to the extent of the amount of such outstanding accrued
and unpaid interest on or principal of Priority Debt, for deposit in an account
to be held as Collateral for the Secured Obligations (the "Section 4.1(g)
Account"), and to be applied as provided in this ss.4.1(g).
(i) Distributions on Account of Priority Debt. If the
Banks declare all of the Bank Debt to be due and payable on
account of such Event of Default within thirty (30) days after
the date that such notice is given to the Collateral Agent
pursuant to this ss.4.1(g) that an Event of Default has
occurred, and if during such thirty (30) day period after such
notice is given such declaration is not rescinded or waived
and no loans are made and no credit is extended by the Banks
to the Company or the Guarantors (excluding BSE), then the
distribution that is to be made by the Collateral Agent on
account of the SBQ or Equity Issuance Proceeds shall be
applied to the Priority Debt, to the extent of the amount
thereof, before being applied pursuant to clause (v) of
ss.4.1(b)(B).
(ii) Distributions on Account of Other Secured
Obligations. Any amounts in the Section 4.1(g) Account that
are not distributable to the Banks on account of Priority Debt
pursuant to clause (i) of this ss.4.1(g) shall be applied by
the Collateral Agent in accordance with clauses (v), (vi), and
(vii) of ss.4.1(b)(B) hereof.
(h) Special Provision Regarding Cash Reserves Relating for
Sold Assets. Any amount of cash reserves referred to in clause (vi) of the
definition of Net Proceeds shall be deposited by the Collateral Agent in an
account (the "Section 4.1(h) Cash Reserves Account") to be held as Collateral
for the Secured Obligations and to be applied as provided in this ss.4.1(h).
(i) If, prior to the Collateral Agent receiving
notice from any Bank, Note Holder, May, 2000 Lender, LC Issuer
or the Requisite Parties that an Actionable Default has
occurred, the Company certifies to the Collateral Agent in
writing that an amount specified in such certification is
payable to the buyer of assets (the sale of which gave rise to
the requirement that cash reserves be maintained) to satisfy
liabilities owed to such buyer under the purchase agreement
relating to such assets, then the Collateral Agent shall pay
to the Company the amount specified in such certification (but
not more than the amount maintained in the Section 4.1(h) Cash
Reserves Account on account of the applicable sale).
(ii) If the Collateral Agent receives notice from any
Bank, Note Holder, May, 2000 Lender, LC Issuer or the
Requisite Parties that an Actionable Default has occurred,
then the Collateral Agent shall not pay or distribute any
funds from the Section 4.1(h) Cash Reserves Account except in
accordance with the written instructions of the Requisite
Parties, provided that such instructions may only instruct the
Collateral Agent to pay the funds (or a portion thereof) in
the Section 4.1(h) Cash Reserves Account to the Company (or
the applicable seller) or to the Secured Parties in accordance
with this ss.4.1. By way of example, with respect to funds
derived from the sale of May, 2000 Priority Collateral, such
instructions may only instruct the Collateral Agent to pay
such funds to the Secured Parties in accordance with the
provisions of ss.4.1(b)(A).
(i) Special Provision Regarding Distributions to May, 2000
Lenders. Any payment to the May, 2000 Lenders with regard to the May, 2000 Debt
(A) pursuant to clause (v) of ss.4.1(b)(B) or (B) from the proceeds of the
equipment, real property or other fixed assets of BSE located in Jackson or
other "Collateral" as defined in the Jackson Security Agreement or "Property" as
defined in the Jackson Mortgage, as in effect on the date hereof (a payment
referred to clause (A) or (B) or this paragraph (i) being a "Clause (i)
Deposit") shall be paid to (or retained by) the Collateral Agent for deposit in
an account (the "Special Clause (i) Account") to be held as Collateral for the
Secured Obligations and to be applied as provided in this ss.4.1(i). Each of the
Clause (i) Deposits shall be remain in the Special Clause (i) Account until the
earliest (the "Clause (i) Distribution Date") of (x) the disposition of all of
the May, 2000 Priority Collateral, and distribution of the proceeds therefrom in
accordance with the terms hereof, (y) the payment in full of the May, 2000 Debt,
and (z) with respect to any individual Clause (i) Deposit, the date two (2)
years after the date of such Clause (i) Deposit. On the Clause (i) Distribution
Date, the Collateral Agent shall distribute the amounts in the Special Clause
(i) Account to the May, 2000 Lenders in payment of the May, 2000 Debt (if any
May, 2000 Debt remains outstanding) and, if any amounts remain in the Special
Clause (i) Account after the May, 2000 Debt has been paid in full, any remaining
amount in the Special Clause (i) Account shall be applied in accordance with
clauses (v), (vi), and (vii) of ss.4.1(b)(A) or clauses (iv), (v), and (vi) of
ss.4.1(b)(B).
(j) On each occasion that the Collateral Agent makes any
payment or distribution to a Secured Party pursuant to this ss.4.1, the
Collateral Agent shall give notice to the Company setting forth the amount paid
or distributed to each Secured Party.
ss.4.2. Non-Cash Distributions or Proceeds. If the Collateral Agent
receives any non-cash distributions or proceeds in respect of the Guaranties,
the May, 2000 Guaranties, or the Collateral, then, unless the Requisite Parties
instruct the Collateral Agent to the contrary, the Collateral Agent shall hold
such non-cash distributions and proceeds as Collateral upon the terms of this
Agreement and the Security Documents until converted to cash and thereupon
applied or disbursed in accordance with this ss.4; provided, however, that, if
any non-cash distribution is received by the Collateral Agent and is to be
applied in satisfaction of any Secured Obligation by operation of a plan of
reorganization under Chapter 11 of the United States Bankruptcy Code or
otherwise as required by applicable law, the Requisite Parties may, instead of
awaiting the conversion of such non-cash distribution to cash, direct the
Collateral Agent to distribute such non-cash distribution as provided in
ss.4.1(b), except in respect of a distribution under ss.4.1(b)(i).
ss.4.3. Additional Collateral. If any of the Banks, the Agent Bank,
May, 2000 Lenders, the LC Issuers or the Note Holders receives any mortgage,
pledge, security interest in or other lien or encumbrance on any assets of the
Company, any Guarantor or any other of the Company's Subsidiaries, then any such
mortgage, pledge, security interest or other lien or encumbrance shall secure
the Secured Obligations, and be assigned to the Collateral Agent for the benefit
of the Secured Parties. Notwithstanding the foregoing, (a) the Collateral Agent
may receive, for the benefit of the May, 2000 Lenders, a security interest in
the equipment, real property and other fixed assets of BSE, including the
proceeds therefrom, to secure the May, 2000 Debt and a security interest in any
or all of the assets of the Company and the Guarantors (other than BSE) to
secure the May, 2000 Guaranties, and (b) the LC Issuers may receive a pledge of
industrial development bonds that are purchased by the Company or its
Subsidiaries with the proceeds of remarketing drawings on the IRB Letters of
Credit (it being understood that such industrial development bonds shall not
constitute Reimbursement Agreement Debt or Secured Obligations).
ss.4.4. Notice of Demand; Acceleration.
------------------------------
(a) Each of the Banks, the Agent Bank, the LC Issuers, the
Note Holders, May, 2000 Lenders, the May, 2000 Agent, the Owner Trustee and the
Indenture Trustee hereby agrees to give written notice to the Collateral Agent
of any demand for payment in full of the Secured Obligations owing to the
demanding party, whether by acceleration of such obligations or otherwise (a
"Demand Notice").
(b) Neither the Agent Bank, any Bank, any LC Issuer, any Note
Holder, any May, 2000 Lender, the May, 2000 Agent, the Owner Trustee nor the
Indenture Trustee shall incur liability of any kind should it, upon the
occurrence of any Actionable Default, refrain from accelerating the maturity or
otherwise demanding payment in full of any Secured Obligations owing to it, or
should it refrain from exercising any of its rights and remedies against the
Company, any Guarantor or any other obligor in respect of the Secured
Obligations.
ss.4.5. Enforcement.
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(a) The Collateral Agent shall (subject to the provisions of
ss.3.2 and ss.5) take any such actions in the exercise of rights and remedies
under the Security Documents as are directed in an Enforcement Notice given by
the Requisite Parties or Special Requisite Parties, as the case may be, at any
time more than three (3) business days after a Notice of Actionable Default has
been given to a Responsible Officer of the Collateral Agent with respect to the
Event of Default that is the basis (or one of the bases) of the Enforcement
Notice. The Requisite Parties or Special Requisite Parties, as the case may be,
giving a Notice of Actionable Default or Enforcement Notice to the Collateral
Agent shall contemporaneously give a copy thereof to the other Secured Parties.
(b) Each of the Agent Bank, the May, 2000 Agent, each
Bank, each LC Issuer, each Note Holder, each May, 2000 Lender, the
Indenture Trustee and the Owner Trustee agrees that it will promptly,
and in any event within five (5) business days after the request by one
of the others (which request may be made telephonically), advise the
requesting party (telephonically, confirmed in writing) as to the
outstanding principal amount of the Loan and Reimbursement Principal
Obligations, Outstanding Bank LC Exposure, Outstanding IRB LC Exposure,
Letter of Credit Collateral Obligations, Reimbursement Agreement Debt,
May, 2000 Debt, or Note Principal Obligations owed to it (or, in the
case of the Agent Bank, owed to the Banks or, in the case of the May,
2000 Agent, owed to the May, 2000 Lenders) or (in the case of the Owner
Trustee or Indenture Trustee) as to the Lease Sharing Amount. Any party
may rely on such information (or other means available to it) to
determine whether the Requisite Parties have acted with respect to any
action or proposed action.
(c) No Enforcement Notice, when issued, may be rescinded or
withdrawn without the written consent of the Requisite Parties or Special
Requisite Parties, whichever shall have given such Enforcement Notice .
ss.4.6. Turnover of Collateral and Post-Default Cash Sweep. If any
Secured Party (other than the Owner Trustee or Indenture Trustee) acquires
custody, control or possession of any payment or assets constituting a
Post-Default Cash Sweep Payment or any Collateral (including proceeds
therefrom), other than pursuant to the terms of ss.4.1 or ss.4.2 hereof, such
Secured Party shall, promptly with respect to Collateral (including proceeds
thereof), and within fifteen (15) days after their receipt thereof with respect
to Post-Default Cash Sweep Payments, cause such payment or assets to be
delivered to or put in the custody, possession or control of the Collateral
Agent or, if the Collateral Agent shall so designate, an agent of the Collateral
Agent (which agent may be a branch or affiliate of the Collateral Agent) in the
same form of payment received, with appropriate endorsements, for distribution
in accordance with the provisions of ss.4.1 or ss.4.2, as applicable. The
Collateral Agent shall notify each of the Secured Parties within two (2)
business days after the Collateral Agent receives any notice (a) from any Bank,
May, 2000 Lender, Note Holder or LC Issuer of the occurrence of an Event of
Default, or (b) from the Requisite Parties that payments referred to in the
definition of Post-Default Cash Sweep Payments will not constitute Post-Default
Cash Sweep payments on account of such Event of Default. If any cash is received
by any of the Banks with respect to Letter of Credit Collateral Obligations
other than pursuant to ss.4.1 hereof, and such cash has not been applied to
reduce Loan and Reimbursement Principal Obligations resulting from a drawing
upon a letter of credit relating to such Letter of Credit Collateral Obligations
prior to the time that an Enforcement Notice is given, such cash shall, at the
time that such Enforcement Notice is given, be delivered to the Collateral Agent
and applied as provided in ss.4.1. Until such time as the provisions of the
immediately preceding sentences have been complied with, such Secured Party
shall be deemed to hold such Collateral in trust for the Collateral Agent.
Notwithstanding the foregoing, neither the Agent Bank, the Banks, the May, 2000
Lenders, the May, 2000 Agent, the LC Issuers nor the Note Holders shall be
required to deliver to the Collateral Agent or such agent of the Collateral
Agent, any amounts received by the Agent Bank, the Banks, the May, 2000 Lenders,
the May, 2000 Agent, the LC Issuers, or the Note Holders prior to receipt by
such Secured Party of a Notice of Actionable Default to the extent that such
amounts constitute (a) payments of principal (other than Post-Default Cash Sweep
Payments) on the Bank Debt, the May, 2000 Debt, the Reimbursement Agreement Debt
or the Notes required to be made pursuant to the Credit Documents and due and
paid prior to such date, or (b) regular payments of interest, fees and other
charges on or in respect of the Bank Debt, the May, 2000 Debt, the Reimbursement
Agreement Debt or the Notes due and paid prior to such date.
ss.4.7. Setoffs. Each of the Secured Parties agrees with each other
Secured Party that (a) if any Secured Party (other than the Owner Trustee or
Indenture Trustee) exercises any right of setoff, banker's lien or similar right
with respect to any Collateral or any assets of the Company or any Guarantor
(other than a setoff by a Bank or a May, 2000 Lender prior to any Notice of
Actionable Default (x) to repay an involuntary overdraft arising in the ordinary
cause of banking business of cash management, payroll and similar deposit
accounts maintained by the Company or any Guarantor with any of the Banks or the
May, 2000 Lenders, or (y) to pay regular account maintenance fees), the amount
set off shall be applied ratably to the Secured Obligations in accordance with
ss.4.1 or ss.4.2, as the case may be, (b) if such Secured Party (other than the
Owner Trustee or Indenture Trustee) shall receive from the Company or any
Guarantor, (i) whether by voluntary payment, exercise of the right of setoff,
counterclaim, cross-action, enforcement of the claim in respect of the Secured
Obligations owing to such Secured Party by proceedings against the Company at
law or in equity or by proof thereof in bankruptcy, reorganization, liquidation,
receivership or similar proceedings, or otherwise, for application to the
payment of the Secured Obligations owing to such Secured Party any amount in
excess of its ratable portion of the payments received by the other Secured
Parties as contemplated by ss.4.1 or ss.4.2, as the case may be, or (ii) any of
the Banks shall receive any Post-Default Cash Sweep Payment, such Bank or other
Secured Party will make such disposition and arrangements with the other Secured
Parties with respect to such excess, either by way of distribution, pro tanto
assignment of claims, subrogation or otherwise as shall result in each Secured
Party receiving in respect of the Secured Obligations owing to it its
proportionate payment as contemplated by ss.4.1 or ss.4.2, as the case may be;
provided that if all or any part of such excess payment is thereafter recovered
from such Secured Party, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
ss.4.8. Waivers and Amendments of Credit Documents.
------------------------------------------
(a) Without the prior written consent of the Agent Bank, the
May, 2000 Agent, the holders of 51% of the Note Debt, the holders of 51% of the
PNC Reimbursement Agreement Debt, and the holders of 51% of the Bank of America
Reimbursement Agreement Debt, the parties hereto (other than the Owner Trustee
and the Indenture Trustee) shall not modify or amend any provisions of or give
any waiver with respect to the Credit Documents to which such party hereto is a
signatory, if the effect of such modification or amendment or waiver is (i) to
cause the maximum principal amount or maximum commitment of or in respect of the
Bank Debt to exceed the Maximum Bank Commitment, or (ii) to increase the
principal amount of the Note Debt or Reimbursement Agreement Debt then
outstanding, or (iii) to increase the stated rate of interest or any fees or
other amounts due under any of the Credit Documents to which such party hereto
is a signatory as outstanding on the date hereof, or (iv) to amend or modify any
term defined therein which is incorporated by reference into this Agreement, or
is specifically referred to in this Agreement in such a way as to alter its
meaning in this Agreement, or (v) to increase the maximum principal amount or
maximum commitment of or in respect of the May, 2000 Debt to exceed $25,000,000.
Without the prior written consent of the Requisite Parties, the parties hereto
(other than the Owner Trustee and the Indenture Trustee) shall not modify or
amend any provisions of or give any waiver with respect to the Credit Documents
to which such party is a signatory, if the effect of such modification or
amendment or waiver is to provide for loans to be made or letters of credit to
be issued (other than by extension or renewal) after the issuance of an
Enforcement Notice. Except as otherwise specified in the two preceding
sentences, the Agent Bank and the Banks, the May, 2000 Lenders and the May, 2000
Agent, the Note Holders and the LC Issuers, without the consent of the other
parties, shall be free to deal with the Company and the Guarantors in their
respective sole discretion under and in respect of the provisions of the Credit
Documents to which they are party, with the right and power without limitation
to modify, amend or waive any terms or provisions of such Credit Documents, to
grant extensions of the time of payment or performance, and to make compromises
and settlements with the Company or any Guarantor.
(b) The Agent Bank and the Banks agree that they will not
modify or amend any covenants, defaults or payment provisions which are based on
the financial condition or results of operations of the Company and/or its
Subsidiaries contained in the Bank Credit Documents without giving at least five
(5) business days' prior written notice thereof to the Note Holders, the May,
2000 Agent, and the LC Issuers; the Note Holders agree that they will not modify
or amend any covenants, defaults or payment provisions which are based on the
financial condition or results of operations of the Company and/or its
Subsidiaries in the Note Credit Documents without giving at least five (5)
business days' prior written notice thereof to the Agent Bank, the May, 2000
Agent, and the LC Issuers; the May, 2000 Agent and the May, 2000 Lenders agree
that they will not modify or amend any covenants, defaults or payment provisions
which are based on the financial condition or results of operations of the
Company and/or its Subsidiaries in the May, 2000 Credit Documents without giving
at least five (5) business days' prior written notice thereof to the Agent Bank,
the Note Holders, and the LC Issuers; the Owner Trustee and the Indenture
Trustee agree that they will not modify or amend any covenants, defaults or
payment provisions which are based on the financial condition or results of
operations of the Company and/or its Subsidiaries in the Equipment Lease without
giving at least five (5) business days' prior written notice thereof to the
Agent Bank, the May, 2000 Agent, the Note Holders and the LC Issuers; and each
LC Issuer agrees that it will not modify or amend any covenants, defaults or
payment provisions which are based on the financial condition or results of
operations of the Company and/or its Subsidiaries contained in the Reimbursement
Agreement to which it is a party without giving at least five (5) business days'
prior written notice thereof to the Agent Bank, the May, 2000 Agent, and the
Note Holders. Notwithstanding the foregoing provisions of this paragraph (b), no
notice shall be required hereunder in connection with the execution of the
documents listed on Schedule B attached hereto, each as in effect on of the date
hereof.
ss.4.9. Release or Subordination of Collateral.
--------------------------------------
(a) Collateral consisting of (i) Net Proceeds of any
Disposition which, together with the aggregate Net Proceeds of all other
Dispositions of Collateral within the preceding twelve (12) months, do not
exceed $1,000,000, and the proceeds of any other Disposition with the consent of
the Requisite Parties, (ii) the Net Proceeds of any Casualty Event which, taken
together with the aggregate Net Proceeds of all other Casualty Events with
respect to Collateral within the preceding twelve (12) months, do not exceed
$5,000,000, and (iii) Additional Company Retained Proceeds shall, unless, in
either case, a party hereto has notified the Collateral Agent that a Default or
an Event of Default has occurred and is continuing or would occur after giving
effect thereto, be released to the Company or Guarantor that owned the
Collateral, as the case may be, subject to the provisions of the next sentence.
The Collateral Agent is hereby authorized to release such Collateral and to
provide such discharge, release and termination statements with respect to such
released Collateral upon receipt of a certificate of the chief financial officer
or any vice president of the Company to the effect that no Default or Event of
Default exists or would result therefrom and that such release is permitted
under this ss.4.9(a), and that, with respect to Net Proceeds of Casualty Events,
the Company intends to use such Net Proceeds to repair or replace the Collateral
that was the subject of the Casualty Event. The Company shall cause the Net
Proceeds from Dispositions of assets that generate Additional Company Retained
Proceeds to be paid to the Collateral Agent, and any such Net Proceeds from any
such Dispositions of assets in excess of the amount of Additional Company
Retained Proceeds which are to be released to the Company or applicable
Guarantor pursuant to the first sentence of this ss.4.9(a) (which amount shall
be determined separately for each asset in accordance with the definition of
Additional Company Retained Proceeds, rather than cumulatively for all
categories of assets that may generate Additional Company Retained Proceeds)
shall be distributed in accordance with ss.4.1 hereof.
(b) The Collateral Agent shall, if requested by the Company or any
Guarantor, release any Collateral that is the subject of a Disposition but which
is not released pursuant to ss.4.9(a), and provide such releases and termination
statements as may be reasonably requested by the Company or any such Guarantor
with respect thereto in connection with any Disposition thereof, so long as (i)
the Requisite Parties have consented to such request, (ii) the Collateral Agent
receives a certificate of the chief financial officer or any vice president of
the Company to the effect that (A) no Default or Event of Default exists or
would result from the honoring of such request, (B) the transferee of the
Collateral is not the Company or an Affiliate of the Company, and (C) the
proceeds of such Disposition equal or exceed the fair market value of the
Collateral subject to such Disposition, (iii) the Collateral Agent obtains a
perfected security interest in any non-cash proceeds of such Disposition, (iv)
except as otherwise provided herein, the Net Proceeds of such Disposition are
delivered to the Collateral Agent, and (v) any cash portion of the Net Proceeds
of such Disposition are applied or paid in accordance with this
Agreement;provided, that, with respect to a Disposition of the assets of SBQ, no
consent of the Requisite Parties shall be required under clause (i) of this
ss.4.9(b) and the provisions of clause (ii)(C) of this ss.4.9(b) shall not be
applicable if: (1) an executive officer of the Company certifies that the
Company has consulted with and received advice from a nationally recognized
investment banking company in connection with such Disposition and has received
a letter from such nationally recognized investment banking company stating that
in its view the consideration to be received by the Company in connection with
such Disposition is fair from a financial point of view under the circumstances,
and such executive officer shall identify such investment banking company in
such certification; (2) the cash portion of the sales price is not less than 75%
of the total sales price; and (3) the cash portion of the Net Proceeds of such
sale are applied to the Secured Obligations in accordance with the terms of this
Agreement, and
further provided that (x) if the certificate provided pursuant to clause (ii) of
this ss.4.9(b) further certifies that the Company intends to purchase, within
one hundred eighty (180) days after the date of the applicable Disposition,
assets of the same type of assets that were the subject of the Disposition (e.g.
the purchase of equipment after the sale of equipment, even if the purchased
equipment is of a different type than the equipment that was sold) which are
usable in the ordinary course of the Company's business ("Qualifying Assets"),
(y) subject to the provisions of clause (z) below, the Collateral Agent shall
retain, rather than distributing, the proceeds from such Disposition (except
that this clause (y) and clause (z) below in this paragraph (b) shall not apply
to any Disposition of SBQ or any Disposition that would cause the proceeds
received by the Collateral Agent from Dispositions during any consecutive twelve
(12) month period to exceed $10,000,000), and (z) if the Collateral Agent
receives a certificate of the chief financial officer or any vice president of
the Company on or within ninety (90) days after the date of such Disposition, to
the effect that (1) (A) the Company has purchased Qualifying Assets on or within
ninety (90) days after the date of the applicable Disposition, or (B) the
Company has provided to the Collateral Agent a letter of intent or other
evidence satisfactory to the Requisite Lenders that the Company has entered into
an agreement or an agreement in principle to purchase Qualifying Assets within
one hundred eighty (180) days after the date of such Disposition, (2) the cash
portion of the purchase price of such Qualifying Assets was (or, with respect to
clause (1)(B) of this proviso, will be), as set forth in such certificate, (3)
such Qualifying Assets were (or, with respect to clause (1)(B) of this proviso,
will be) purchased from a Person that is not the Company or an Affiliate of the
Company, (4) the purchase price for such Qualifying Assets did not (or, with
respect to clause (1)(B) of this proviso, will not) exceed their fair market
value, and (5) no Default or Event of Default exists or would result from the
purchase of the Qualifying Assets, the Collateral Agent shall,
-- in the case of a certification pursuant to clause (1)(A) of this
proviso, pay to the Company the lesser of the purchase price for the
Qualifying Assets and the amount received by the Collateral Agent from
the applicable Disposition, and
-- in the case of a certification pursuant to clause (1)(B) of this
proviso, continue to hold the lesser of the proposed purchase price for
the Qualifying Assets and the amount received by the Collateral Agent
from the applicable Disposition, and thereafter pay to the Company the
lesser of the actual purchase price for the Qualifying Assets and the
amount received by the Collateral Agent from the applicable Disposition
if the Collateral Agent receives a further certificate of the chief
financial officer or any vice president of the Company within one
hundred eighty (180) days after the date of such Disposition, to the
effect that (1) the Company has purchased Qualifying Assets within one
hundred eighty (180) days after the date of the applicable Disposition
substantially on the terms and conditions set forth in, and from the
seller (or an affiliate of the seller) named in, the letter of intent
or other evidence provided to the Collateral Agent pursuant to clause
(1)(B) of this proviso, (2) the cash portion of the purchase price of
such Qualifying Assets was as set forth in such certificate, (3) such
Qualifying Assets were purchased from a Person that is not the Company
or an Affiliate of the Company, (4) the purchase price for such
Qualifying Assets did not exceed their fair market value, and (5) no
Default or Event of Default exists or would result from the purchase of
the Qualifying Assets.
Any amounts not paid to the Company pursuant to the preceding sentence shall be
distributed in accordance with ss.4.1 hereof.
(c) The Net Proceeds from any Casualty Event with respect to
Collateral shall (i) be paid to (or retained by) the Collateral Agent for
distribution in accordance with ss.4.1 hereof, if such Net Proceeds from any
such Casualty Event equal or exceed $25,000,000, and (ii) except as provided in
ss.4.9(a) and except as set forth below in this paragraph (c), be paid to (or
retained by) the Collateral Agent for distribution in accordance with ss.4.1
hereof, if such Net Proceeds from any such Casualty Event are less than
$25,000,000. The Company may utilize the Net Proceeds from a Casualty Event with
respect to Collateral if such Net Proceeds are less than $25,000,000 (1) with
the written consent of the Requisite Parties, on such terms and conditions as
may be established by the Requisite Parties with respect thereto, or (2) without
such written consent of the Requisite Parties, on the following conditions and
in the following manner: (A) the Company shall provide to the Collateral Agent,
within thirty (30) days after the date that the amount of the Net Proceeds is
determined, a certificate of the chief financial officer or any vice president
of the Company to the effect that (x) no Default or Event of Default exists (or
would exist if the Net Proceeds from Casualty Event were used to repair or
replace the Collateral that was the subject of the Casualty Event), (y) the
Company intends to repair or replace the Collateral that was the subject of the
Casualty Event, and (z) the Company has sufficient cash on hand or available in
order to fund such repair or replacement, if such Net Proceeds are made
available to the Company, (B) to the extent that the Company desires funding or
reimbursement therefor from the Net Proceeds applicable thereto, the Company
shall submit to the Collateral Agent (or to such agent as may be retained by the
Collateral Agent to carry out the responsibilities of the Collateral Agent
pursuant to this sentence) such invoices as the Company receives from time to
time for goods or services purchased or obtained in connection with such repair
or replacement, together with a written request that such invoice be paid from
such applicable Net Proceeds (or that the Company be reimbursed from such
applicable Net Proceeds for its payment of such invoice), (C) no Event of
Default shall have occurred prior to the requested payment from time to time of
an invoice pursuant to this paragraph (c), and (D) the Company shall provide
such evidence as the Requisite Parties or any agent retained by the Collateral
Agent in accordance with clause (B) above may require in order to evidence that
the remaining Net Proceeds are sufficient to fund the balance of cost of the
repair or replacement of the Collateral that was the subject of the Casualty
Event. The Company shall pay to the Collateral Agent, as and when billed
therefor, all fees and reasonable expenses incurred by the Collateral Agent or
any such agent in connection with the matters set forth in this paragraph.
(d) To the extent that the Credit Documents (other than the
Lease Documents) of any party explicitly permit any Disposition without consent
under such Credit Document but in respect to which such party's consent is
required pursuant to this ss.4.9, such party shall be deemed to have provided,
and shall upon request provide, that consent. But nothing in this ss.4.9 shall
(i) be deemed to imply any waiver of any restriction on Dispositions under the
Credit Agreement, either of the Note Purchase Agreements or any other Credit
Document, or (ii) without the prior written consent of the Requisite Parties,
authorize the Collateral Agent in any bankruptcy case to enter into any
agreement for, or give any authorization or consent with respect to, the
post-petition usage of Collateral.
(e) In the event all of the security interests created by the
Security Documents in favor of the Secured Parties other than the Owner Trustee
and Indenture Trustee are terminated pursuant to ss.11.5(a)(i), (ii), (iii), and
(v) hereof, the security interest created by the Security Documents in favor of
the Owner Trustee and Indenture Trustee shall also be released and thereupon the
Lease Claims shall no longer constitute Secured Obligations hereunder; provided
that concurrently with such release, the Company shall secure the Lease Claims
with a perfected first priority security interest in separate collateral in
amount and in form reasonably satisfactory to the Indenture Trustee and the
Owner Trustee.
(f) Whether or not so instructed by the Requisite Parties, the
Collateral Agent may release any Collateral and may provide any release,
termination statement or instrument of subordination required by order of a
court of competent jurisdiction or otherwise required by applicable law.
ss.4.10. Replacement Credit Facilities.
-----------------------------
(a) The Company shall be free, without the consent of the Note
Holders, May, 2000 Lenders, the LC Issuers, the Owner Trustee or the Indenture
Trustee, to enter into a Replacement Credit Agreement (as defined below)
provided that (i) upon giving effect to such Replacement Credit Agreement all
outstanding Secured Obligations owed to the Banks shall have been discharged and
the Credit Agreement shall have been terminated, (ii) each lender under such
Replacement Credit Agreement shall assume in writing all obligations of the
Banks hereunder accruing on or after the date such lenders become parties
hereto, as amended as provided in clause (iv) hereof, (iii) after giving effect
to such Replacement Credit Agreement, no Default or Event of Default shall then
be in existence, and (iv) such technical amendments to the Note Credit
Documents, the Lease Documents and this Agreement, reasonably requested by the
Note Holders, the May, 2000 Lenders, the LC Issuers, the Owner Trustee or the
Indenture Trustee, as the case may be, as necessary for any terms in the Note
Credit Documents, May, 2000 Credit Documents, the Lease Documents or this
Agreement cross referencing the Credit Agreement to cross reference instead such
Replacement Credit Agreement, shall have been made. A "Replacement Credit
Agreement" shall mean a credit facility from one or more commercial banks or
other financial institutions providing the Company with loans, letters of credit
or other advances or extensions of credit (A) without any lien or other priority
over the other Secured Obligations, (B) not in excess of the Commitments (as
defined in the Credit Agreement) under the Credit Agreement immediately prior to
such refinancing and pursuant to which the loan availability and loan
commitments to the Company from such refinancing shall not be less than that
available and in effect immediately prior to such refinancing, (C) for a
committed term of at least 36 months, (D) the financial covenants of such
refinancing or extension shall not be more stringent than the financial
covenants contained in the amended Note Purchase Agreements as reasonably
determined by the holders of 51% of the Note Debt; and (E) such refinancing
would be permitted under the then applicable debt incurrence tests of the Note
Purchase Agreements.
(b) The term of the existing Credit Agreement may be extended
(i) without the consent of the Note Holders if such extension provides for no
Priority Debt, or (ii) in all other cases with, but only with, the consent of
the holders of 66 2/3% of the Note Debt. To the extent that the term of the
Credit Agreement is extended with such consent, or any other provisions thereof
are amended or modified by the parties thereto, the Credit Agreement shall not
be considered a Replacement Credit Agreement for purposes of ss.4.10(a).
ss.4.11. Independent Investigation; Sharing of Financial Information.
Each of the Banks, the Agent Bank, May, 2000 Lenders, the May, 2000 Agent, the
LC Issuers, and the Note Holders acknowledges and agrees that it has entered
into the Credit Documents to which it is party and (as applicable) extended
funds and/or credit or provided services to the Company on the basis of its own
independent investigation of the Company, its Subsidiaries and affiliated
companies, and their business, operations and financial condition, that it shall
continue to make such investigations in connection with the credit and/or loans
extended to the Company as it deems appropriate and that it has not conducted
any such investigations in reliance upon information, analysis and
recommendations which it may have obtained from any other Secured Party. Without
derogation in any way of the preceding sentence, the Company acknowledges and
consents to any exchange of information by and among the Banks, the Agent Bank,
May, 2000 Lenders, the May, 2000 Agent, the LC Issuers, the Note Holders, the
Owner Trustee and the Indenture Trustee, without regard to whether the impact of
any such exchange is favorable or unfavorable to the Company and without regard
to the accuracy or completeness of any information so exchanged.
ss.4.12. Agents. Except as specifically provided in this Agreement, and
except for the role of the Collateral Agent as specified in this Agreement,
neither the Agent Bank nor any of the Banks is acting as agent for any Note
Holder, LC Issuer or the Owner Trustee or Indenture Trustee (except, with
respect to the Agent Bank, to the extent that it is an agent for the May, 2000
Lenders in its capacity as the May, 2000 Agent); neither the May, 2000 Agent nor
any of the May, 2000 Lenders is acting as agent for any Bank, Note Holder, LC
Issuer or the Owner Trustee or Indenture Trustee (except, with respect to the
May, 2000 Agent, to the extent that any of such Persons is also a May, 2000
Lender); no Note Holder is acting as agent for the Agent Bank or any Bank or for
the May, 2000 Agent or any May, 2000 Lender or for the LC Issuer or the Owner
Trustee or Indenture Trustee; no LC Issuer is acting as agent for the Agent
Bank, the Banks, May, 2000 Agent, the May, 2000 Lenders, any Note Holder, or the
Owner Trustee or Indenture Trustee; neither the Owner Trustee nor the Indenture
Trustee is acting as agent for the Agent Bank, the Banks, the May, 2000 Agent,
the May, 2000 Lenders, the Note Holders or the LC Issuers; and nothing stated or
implied in this Agreement shall be deemed to create such an agency, or other
fiduciary relationship.
ss.4.13. Effect of Avoidance. If an Avoidance Event occurs, (a) the
provisions of ss.2 hereof and this ss.4 with respect to the Collateral and
distribution of the proceeds thereof shall cease to be effective with respect to
the Collateral as to which the Lien of the Collateral Agent is avoided and the
proceeds thereof, (b) ss.4.1(d) shall cease to be effective, and (c) this
Agreement shall not thereafter restrict any party's right to amend and
administer its Credit Documents in such party's discretion. For the avoidance of
doubt, nothing in this paragraph is intended to affect any of the provisions
herein regarding the Guaranties or the May, 2000 Guaranties.
ss.5. CONCERNING THE COLLATERAL AGENT.
-------------------------------
ss.5.1. Appointment of Collateral Agent. The Agent Bank, acting on
instructions from the Banks, the May, 2000 Agent, acting on instructions from
the May, 2000 Lenders, the Note Holders, the Owner Trustee, Indenture Trustee,
and the LC Issuers hereby appoint the Collateral Agent Bank to act as collateral
agent pursuant to the terms of this Agreement and the Security Documents, and
the Collateral Agent Bank hereby accepts such appointment. The relationship
between the Collateral Agent and the holders of the Secured Obligations is and
shall be that of agent and principal only, and nothing contained in this
Agreement or any of the Credit Documents shall be construed to appoint the
Collateral Agent as a trustee for any such holder.
ss.5.2. Limitations on Responsibility of Collateral Agent.
-------------------------------------------------
(a) The Collateral Agent shall not be responsible in any
manner whatsoever for the correctness of any recitals, statements,
representations or warranties contained herein or in any Security Document,
except for those made by it herein. The Collateral Agent makes no representation
as to the value or condition of the Collateral or any part thereof, as to the
title of the Company or any Guarantor to the Collateral, as to the security
afforded by this Agreement or any Security Document or, except as set forth in
ss.6, as to the validity, execution, enforceability, legality or sufficiency of
this Agreement or any Security Document, and the Collateral Agent shall incur no
liability or responsibility in respect of any such matters. The Collateral Agent
shall not be responsible for insuring the Collateral, for the payment of taxes,
charges, assessments or liens upon the Collateral or otherwise as to the
maintenance of the Collateral, except as provided in the immediately following
sentence when the Collateral Agent has possession of the Collateral. The
Collateral Agent shall have no duty to the Company or any Guarantor or to the
holders of any of the Secured Obligations as to the care of any Collateral in
its possession or control or in the possession or control of any agent or
nominee of the Collateral Agent or any income thereon or as to the preservation
of rights against prior parties or any other rights pertaining thereto, except
the duty to accord such of the Collateral as may be in its possession
substantially the same care as it accords its own assets and the duty to account
for monies received by it. The Collateral Agent's duties and responsibilities
shall be determined solely by the provisions of this Agreement and the Security
Documents to which it is a party, and the Collateral Agent shall not be liable
or responsible for any duties or obligations set forth in any other document to
which it is not a party.
(b) The Collateral Agent shall not be responsible for any loss
suffered with respect to any investment permitted to be made under this
Agreement and shall not be responsible for the consequences of any oversight or
error of judgment whatsoever, except that the Collateral Agent may be liable for
losses due to its willful misconduct, or negligence. The Collateral Agent shall
not be required to ascertain or inquire as to the performance by the Company of
any of the covenants or agreements contained herein or in any of the Credit
Documents. Neither the Collateral Agent nor any officer, agent or representative
thereof shall be personally liable for any action taken or omitted to be taken
by any such Person in connection with this Agreement or any Security Document
except for such Person's own gross negligence or willful misconduct. Neither the
Collateral Agent nor any officer shall be personally liable for any action taken
by any such Person in accordance with any notice given by the Requisite Parties
in accordance with and pursuant to the terms of this Agreement even if, at the
time such action is taken by any such Person, the Requisite Parties or Persons
purporting to be the Requisite Parties are not so authorized by the Requisite
Parties to give such notice, except where a Responsible Officer of the
Collateral Agent has actual knowledge that such Requisite Parties or Persons
purporting to be the Requisite Parties are not so authorized by the Requisite
Parties to give such notice. The Collateral Agent may execute any of the powers
granted under this Agreement or any of the Security Documents and perform any
duty hereunder or thereunder either directly or by or through agents or
attorneys-in-fact and shall not be responsible for anything done by such agents
or attorneys-in-fact selected by it with due care.
(c) Whenever pursuant to the provisions hereof or of any
Security Document it is required that any party hereto obtain the consent or
approval of the Collateral Agent, or that any matter prove satisfactory to the
Collateral Agent, or that any action be taken at the request, discretion, option
or determination of the Collateral Agent, the Collateral Agent, prior to giving
any such consent or approval or request, or exercising any such option,
discretion or determination, or indicating its satisfaction with any such
matter, shall (except where the failure to do so, in its good faith judgment,
could imperil the Collateral or the Liens thereon) be required to consult with
the Secured Parties in a manner deemed reasonable by the Collateral Agent, and
the Collateral Agent shall be protected in following any direction of the
Requisite Parties or Special Requisite Parties, as the case may be.
(d) The foregoing provisions of this ss.5.2 shall not relieve
the Collateral Agent of any liability for any failure to perform any contractual
duty expressly undertaken by it to be performed under this Agreement if such
liability is caused by the negligence or willful misconduct of the Collateral
Agent.
ss.5.3. Reliance by Collateral Agent; Etc.
---------------------------------
(a) Whenever in the performance of its duties under this
Agreement the Collateral Agent shall deem it necessary or desirable that a
matter be proved or established with respect to any Person in connection with
the taking, suffering or omitting of any action hereunder by the Collateral
Agent, such matter may be conclusively deemed to be proved or established by a
certificate executed by an officer of such Person, and the Collateral Agent
shall have no liability with respect to any action taken, suffered or omitted in
reliance in good faith thereon.
(b) The Collateral Agent may consult with counsel and shall be
fully protected in taking any action hereunder in good faith in accordance with
any advice of such counsel. The Collateral Agent shall have the right but not
the obligation at any time to seek instructions concerning the administration of
this Agreement, the duties created hereunder, or any of the Collateral from any
court of competent jurisdiction.
(c) The Collateral Agent shall be fully protected in relying
in good faith upon any resolution, statement, certificate, instrument, opinion,
report, notice, request, consent, order or other paper or document which it
believes to be genuine and to have been signed or presented by the proper party
or parties. In the absence of its gross negligence or willful misconduct, the
Collateral Agent may conclusively rely in good faith, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificate or opinions furnished to the Collateral Agent in connection with
this Agreement.
(d) The Collateral Agent shall not be deemed to have actual,
constructive, direct or indirect notice or knowledge of the occurrence of any
Event of Default or Actionable Default unless and until a Responsible Officer of
the Collateral Agent shall have received a Notice of Actionable Default or
notice of such Event of Default. The Collateral Agent shall have no obligation
whatsoever either prior to or after receiving such a Notice of Actionable
Default to inquire whether an Actionable Default has, in fact, occurred and
shall be entitled to rely in good faith conclusively, and shall be fully
protected in so relying, on any certificate so furnished to it and shall have no
obligation, absent written instructions from the Requisite Parties, to take or
omit to take any action with respect to such Notice of Actionable Default.
(e) To the extent the Collateral Agent is required (pursuant
to ss.4 or otherwise) to determine any amount of, or take any action to
distribute any amount in respect of, any Secured Obligation hereunder,
it shall have no obligation to do so unless such amount shall have been
certified in writing by the holder of such Secured Obligations as being
the amount in question. Each of the other parties hereto agrees to
certify such amounts upon request of the Collateral Agent. If any
dispute or disagreement shall arise as to the allocation of any sum of
money received by the Collateral Agent hereunder or under any Security
Document, the Collateral Agent shall have the right to deliver such sum
to a court of competent jurisdiction and therein commence an action for
interpleader.
(f) The Collateral Agent shall assume for all purposes
hereunder that the Lien of the Indenture remains outstanding unless and until
the Collateral Agent receives notice from the Indenture Trustee that the Lien of
the Indenture is no longer outstanding.
ss.5.4. Resignation or Removal of the Collateral Agent. The Collateral
Agent may at any time resign by giving at least sixty (60) days prior written
notice thereof to each Secured Party and the Company, and the Collateral Agent
may at any time be removed for cause (consisting of fraud, gross misconduct,
willful or reckless breach of this Agreement or other just cause, as determined
in their discretion by the Requisite Parties) by at least sixty (60) days prior
written notice thereof to the Collateral Agent, each other Secured Party and the
Company given by the Requisite Parties, provided that no resignation or removal
shall be effective until a successor for the Collateral Agent is appointed. Upon
such resignation or removal, the Requisite Parties shall have the right to
appoint a successor Collateral Agent. In addition to the foregoing, Secured
Parties constituting both the Majority Secured Parties and Requisite Parties may
by written agreement remove the Collateral Agent and simultaneously replace it
with a successor without regard to the notice provisions of the first sentence
of this Section so long as the Collateral Agent being removed and such successor
have both given their written consent thereto. If no successor Collateral Agent
shall have been so appointed by the Requisite Parties and shall have accepted
such appointment within forty-five (45) days after the retiring Collateral
Agent's giving of notice of resignation or the giving of notice of removal, as
the case may be, then the retiring Collateral Agent may, on behalf of the
Secured Parties, appoint a successor Collateral Agent, which shall be a
financial institution having a long-term bank deposit rating of not less than
"A" from Standard & Poor's Ratings Group, a Division of McGraw-Hill, Inc., or
"A-2" from Moody's Investors Service, Inc. Upon the acceptance of any
appointment as Collateral Agent hereunder by a successor Collateral Agent, such
successor Collateral Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Collateral Agent, and
the retiring Collateral Agent shall be discharged from its duties and
obligations hereunder. After any retiring Collateral Agent's resignation or
removal, the provisions of this Agreement and the Security Documents shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Collateral Agent. Any corporation into
which the Collateral Agent Bank may be merged or with which it may be
consolidated, or any corporation which acquires all or substantially all of the
corporate trust business of the Collateral Agent Bank, including the Collateral
agency established pursuant to this Agreement, or any corporation resulting from
any merger or consolidation to which the Collateral Agent Bank shall be a party,
shall be the successor to the Collateral Agent Bank without the execution of any
paper.
ss.5.5. Expenses and Indemnification by the Company and BSE. By
countersigning this Agreement, the Company and BSE jointly and severally agree
(a) to reimburse the Collateral Agent, on demand, for any expenses incurred by
the Collateral Agent, including reasonable counsel fees and disbursements and
compensation of agents, arising out of, in any way connected with, or as a
result of, the execution or delivery of this Agreement or any Security Document
or any agreement or instrument contemplated hereby or thereby or the performance
by the parties hereto or thereto of their respective obligations hereunder or
thereunder or in connection with the enforcement or protection of the rights of
the Collateral Agent and the Secured Parties hereunder or under the Security
Documents, (b) to indemnify and hold harmless the Collateral Agent and its
directors, officers, employees and agents, on demand, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Collateral Agent Bank in
its capacity as the Collateral Agent or any of them in any way relating to or
arising out of this Agreement or any Security Document or any action taken or
omitted by them under this Agreement or any Security Document; provided that the
Company and BSE shall not be liable to the Collateral Agent for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross negligence or
willful misconduct of the Collateral Agent or any of its directors, officers,
employees or agents as determined by a final non-appealable order of a court of
competent jurisdiction, and (c) to indemnify and hold harmless the Collateral
Agent, on demand, from and against any and all liabilities which may be imposed
on or incurred by the Collateral Agent Bank (in its capacity as Collateral
Agent) for the net amount of taxes (after taking into account any deduction,
credit or other tax reduction or benefit available by reason of the imposition
of any such tax) in any jurisdiction in which the Collateral Agent Bank would
not otherwise be subject to tax except by reason of its acting under this
Agreement or the Security Documents (directly or through agents); provided that
such indemnification for taxes (i) shall apply only in respect of taxes
attributable to the performance of the Collateral Agent's obligations hereunder
and (ii) shall in no event cover any federal, state, local or other taxes
imposed upon the Collateral Agent Bank with respect to or measured by its gross
or net income or profits or franchise or excise taxes. A statement by the
Collateral Agent that is submitted to the Company and BSE with respect to the
amount of such expenses and containing a basic description thereof and/or the
amount of its indemnification obligation shall be prima facie evidence of the
amount thereof owing to the Collateral Agent or the Collateral Agent Bank, as
the case may be. Except as otherwise expressly provided herein, the Collateral
Agent shall be under no obligation to take any action to protect, preserve or
enforce any rights or interests in the Collateral or to take any action in
connection with the execution or enforcement of its duties hereunder, whether on
its own motion or on request of any other Person, which in the opinion of the
Collateral Agent may involve loss, liability or expense to it, unless one or
more of the Requisite Parties shall offer and furnish security or indemnity,
reasonably satisfactory to the Collateral Agent in accordance herewith, against
loss, liability and expense to the Collateral Agent. Notwithstanding anything to
the contrary contained in this Agreement, or any Security Document, Credit
Document or any other document noted in Section 10 of this Agreement, in the
event that the Collateral Agent is entitled or required to commence an action to
foreclose on such Security Document, Credit Document or other document, or
otherwise exercise its remedies to acquire control or possession of any property
constituting all or part of the Collateral, the Collateral Agent shall not be
required to commence any such action or exercise any such remedy if the
Collateral Agent has determined in good faith that it may incur liability under
any federal or state environmental or hazardous waste law, rule or regulation as
the result of the presence at, or release on or from, any property of any
hazardous materials or waste, as defined under such federal or state laws,
unless it has received security or indemnity from a Person, in an amount and in
form, all satisfactory to the Collateral Agent in its sole discretion,
protecting the Collateral Agent from all such liability. As between the Company
and BSE, the Company agrees to indemnify and hold harmless BSE against, and to
reimburse BSE for, all amounts paid by BSE pursuant to this ss.5.5, except for
amounts paid by BSE as a result of (a) costs, including reasonable counsel fees,
of the Collateral Agent's exercising remedies with respect to Collateral granted
by BSE, and (b) the negligence or willful misconduct of BSE.
ss.5.6. Expenses and Indemnification by Secured Parties. Each of the
Banks, the May, 2000 Lenders, the LC Issuers and the Note Holders severally
agrees (i) to reimburse the Collateral Agent, on demand, in the amount of its
pro rata share for any expenses referred to in ss.5.5 and fees due pursuant to
ss.5.7 which shall not have been reimbursed or paid by the Company or BSE, or
paid from the proceeds of Collateral as provided herein and (ii) to indemnify
and hold harmless the Collateral Agent, the Collateral Agent Bank and its
directors, officers, employees and agents, on demand, in the amount of its pro
rata share, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
referred to in ss.5.5, to the extent the same shall not have been reimbursed by
the Company or BSE or paid from the proceeds of Collateral as provided herein;
provided that no Bank, May, 2000 Lender, LC Issuer, or Note Holder shall be
liable to the Collateral Agent or the Collateral Agent Bank for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross negligence or
willful misconduct of, or the negligence or willful misconduct in the failure to
perform any express duty undertaken under this Agreement to be performed by, the
Collateral Agent or the Collateral Agent Bank or any of its directors, officers,
employees or agents. For purposes of this ss.5.6, the pro rata share of any
Bank's, May, 2000 Lender's, Note Holder's, or LC Issuer's claim for which a
reimbursement or indemnity obligation arises under this ss.5.6 shall be its
percentage share of the sum of the Principal Obligations, the Outstanding Bank
LC Exposure and the Outstanding IRB LC Exposure as of the last day of the
calendar month preceding the date on which such claim was incurred and on which
any Outstanding Bank LC Exposure or Outstanding IRB LC Exposure existed or any
Principal Obligations were outstanding.
ss.5.7. Collateral Agent's Fee. By countersigning this Agreement, the
Company and BSE jointly and severally agree to pay to the Collateral Agent for
the Collateral Agent's own account, a non-refundable Collateral Agent's fee, in
an amount designated in writing by the Collateral Agent to the Company, on the
date hereof and at the end of each quarterly period hereafter until the Secured
Obligations have been paid in full in cash, the commitments represented by the
Bank Credit Documents and the May, 2000 Credit Documents shall have expired or
been reduced to zero or terminated, there is no Outstanding IRB LC Exposure, and
the Collateral Agent no longer has any duties hereunder. As between the Company
and BSE, the Company agrees to reimburse BSE for all amounts paid by BSE
pursuant to this paragraph.
ss.5.8. Appointments of Co-Agent or Separate Agent.
------------------------------------------
(a) Notwithstanding any other provision of this Agreement, at
any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Collateral may at the time be
located, the Collateral Agent shall have the power and may execute and
deliver all instruments to appoint one or more Persons to act as a
co-agent, or separate agent, of all or any part of the Collateral, and
to vest in such Person, in such capacity and for the benefit of the
Secured Parties, subject to the other provisions of this ss.5.8, such
powers, duties, obligations, rights and trusts as the Collateral Agent
may consider necessary or desirable. No co-agent or separate agent
hereunder shall be required to meet the terms of eligibility as a
successor Collateral Agent under ss.5.4 and no notice to Secured
Parties of the appointment of any co-agent or separate agent shall be
required.
(b) Every separate agent and co-agent shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Collateral Agent shall be conferred or
imposed upon and exercised or performed by the Collateral Agent and
such separate agent or co-agent jointly (it being understood that such
separate agent or co-agent is not authorized to act separately without
the Collateral Agent joining in such act), except to the extent that
under any laws of any jurisdiction in which any particular act or acts
are to be performed, the Collateral Agent shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the
Collateral or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate agent or co-agent, but
solely at the direction of the Collateral Agent;
(ii) no agent hereunder shall be personally liable by
reason of any act or omission of any other agent hereunder appointed
with due care or for any action or omission in connection with its
duties hereunder not constituting gross negligence or willful
misconduct; and
(iii) the Collateral Agent may at any time accept the
resignation of or remove any separate agent or co-agent.
(c) Any notice, request or other writing given to the
Collateral Agent shall be deemed to have been given to each of the then separate
agents and co-agents, as effectively as if given to each of them. Every
instrument appointing any separate agent or co-agent shall refer to this
Agreement and the conditions of this ss.5.8. Each separate agent and co-agent,
upon its acceptance of the agency conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Collateral Agent or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Collateral Agent. Every such instrument shall be filed with
the Collateral Agent.
(d) Any separate agent or co-agent may at any time appoint the
Collateral Agent, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect to
this Agreement on its behalf and in its name. If any separate agent or co-agent
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Collateral Agent, to the extent permitted by law, without the appointment of a
new or successor agent.
ss.6. REPRESENTATIONS AND WARRANTIES. Each of the Collateral Agent, the Agent
Bank, the May, 2000 Agent, the May, 2000 Lenders, the LC Issuers, the Note
Holders, the Owner Trustee, the Indenture Trustee, and, by countersigning this
Agreement, the Company and each Guarantor, represents and warrants to the other
parties hereto that (a) the execution, delivery and performance of this
Agreement (i) have been duly authorized by all requisite corporate action on its
part and, in the case of the Agent Bank, by the appropriate number of Banks
required under the Credit Agreement, and (ii) do not conflict with or result in
any breach or contravention of any provision of law, statute, rule or regulation
to which it is subject or any judgment, order, writ, injunction, license or
permit applicable to it and will not conflict with any provision of its
corporate charter or bylaws or any agreement or other instrument binding upon
it; and (b) this Agreement has been duly executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms. Each of the Agent Bank, the LC Issuers, the Note Holders, the
Owner Trustee, the Indenture Trustee, the Company and the Guarantors represents
and warrants to the other parties hereto that there have been no amendments of
any Credit Document to which such Person is a party between November 12, 1999
and the date hereof, except for the amendments dated the date hereof (which are
listed on Schedule B attached hereto).
ss.7. AMENDMENT OF THIS AGREEMENT.
---------------------------
ss.7.1. Amendments. No modification or amendment of this Agreement
shall be effective unless the same shall be in writing and signed by the
Majority Secured Parties and no modification or amendment of any Security
Document shall be effective, nor shall any waiver of any provision of any
Security Document be executed by the Collateral Agent, without the written
consent of the Requisite Parties; provided, however, (i) no amendment or waiver
shall adversely affect any of the Collateral Agent's rights, immunities or
rights to indemnification hereunder or under any of the Security Documents or
expand its duties or reduce any amount payable to the Collateral Agent hereunder
or under any Security Documents without the written consent of the Collateral
Agent; (ii) ss.ss.3 and 5 of this Agreement and any other provision of this
Agreement or of any of the Security Documents affecting the rights and
obligations of the Collateral Agent hereunder may not be amended without the
written consent of the Collateral Agent; (iii) no modification or amendment of
(x) ss.4.1(j), ss.4.9(a), ss.4.9(b) (except for the last sentence thereof),
ss.4.9(c), ss.4.9(e), ss.5.5, ss.5.7, clause (iii) of ss.7.1, ss.8, ss.11.5(a),
ss.11.5(b), ss.11.5(c), or ss.11.11 of this Agreement, or (y) the definitions of
Equity Interests, Equity Issuance, Disposition, Net Proceeds, SBQ, Lease Claims,
Lease Payment Claims on Lease Expense/Indemnity Claims set forth herein, or (z)
ss.4.8, if the effect of the modification or amendment is to increase the vote
that is required to give any waiver with respect to any of the Credit Documents,
shall be effective unless the same shall have been consented to in writing by
the Company; (iv) no modification, amendment or waiver of the provisions of this
Agreement or any of the Security Documents that changes the amount that a
Secured Party receives from a distribution hereunder or that delays the time of
a distribution or expands the obligations of such Secured Party hereunder shall
be effective without the consent of such Secured Party, (v) no amendment,
modification or waiver of the provisions of this Agreement or any of the
Security Documents that could directly or indirectly prejudice the Lease Claims
in a discriminatory manner vis-a-vis the other Secured Parties shall be
effective without the written consent of the Owner Trustee and, for so long as
the Lien of the Indenture remains outstanding, the Indenture Trustee, (vi) the
parties hereto consent to the amendment of the Security Documents to provide
that the Company may retain the proceeds from Special Equity Issuances rather
than paying them to the Collateral Agent for distribution to the Secured
Parties, except that, if the Company intends to directly or indirectly use any
of such proceeds (the "Intended Debt Payment Amount") to repay any of its
Secured Obligations, it shall instead pay such Intended Debt Payment Amount to
the Collateral Agent for distribution in accordance with ss.4.1 of this
Agreement, and (vii) the parties hereto consent, to the extent required hereby,
to the execution of the documents listed on Schedule B hereto, and the parties
hereto request that the Collateral Agent execute such documents listed thereon
as provide for the Collateral Agent to be a party thereto; provided that (x) the
Agent Bank shall be authorized to give any consent on behalf of the Banks under
this paragraph if the Agent Bank represents that it has such authority under the
Credit Agreement, and (y) the May, 2000 Agent shall be authorized to give any
consent on behalf of the May, 2000 Lenders under this paragraph if the May, 2000
Agent represents that it has such authority under the May, 2000 Credit
Agreement. Any Security Document executed after the date hereof shall be
approved by the Requisite Parties as to form and, in the case of Collateral
consisting of any mortgage or deed of trust over a real estate interest, shall
not be deemed to have been accepted until such time as environmental site
assessments satisfactory to the Requisite Parties have been delivered if
requested by such Requisite Parties (and shall not be deemed to have been
accepted until such time as environmental site assessments satisfactory to the
Collateral Agent have been delivered if requested by the Collateral Agent).
ss.7.2. Waivers. No waiver of any provision of this Agreement and no
consent to any departure by any party hereto from the provisions hereof shall be
effective unless such waiver or consent shall be set forth in a written
instrument executed by the party against which it is sought to be enforced, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice to or demand on any party hereto in
any case shall entitle such party to any other or further notice or demand in
the same, similar or other circumstances.
ss.8. APPROVAL BY THE COMPANY AND GUARANTORS; COMPANY'S OBLIGATIONS ABSOLUTE.
----------------------------------------------------------------------
ss.8.1. General. By countersigning this Agreement, each of the Company
and the Guarantors acknowledges and consents to and agrees to perform and be
bound by each provision of this Agreement which expressly recites that the
Company or such Guarantor is agreeing to such provision by countersigning this
Agreement.
ss.8.2. Obligations Absolute. Nothing contained in this Agreement shall
impair, as between the Company or any Guarantor and the Agent, the Banks, the
May, 2000 Agent, the May, 2000 Lenders, the LC Issuers, and the Note Holders,
(a) the obligation of the Company or such Guarantor (to the extent, with respect
to BSE, set forth in its Guaranty) to pay to the Agent Bank and the Banks all
amounts payable in respect of the Bank Debt as and when the same shall become
due and payable in accordance with the terms thereof, or prevent the Agent Bank
or any of the Banks (except as expressly otherwise provided in this Agreement)
from exercising all rights, powers and remedies otherwise permitted by the Bank
Credit Documents and by applicable law upon a default in the payment of the Bank
Debt, all, however, subject to the rights of the Note Holders and LC Issuers as
set forth in this Agreement; or (b) the obligation of the Company or such
Guarantor (to the extent, with respect to BSE, set forth in its Guaranty) to pay
to the Note Holders all amounts payable in respect of the Note Debt as and when
the same shall become due and payable in accordance with the terms thereof, or
prevent any of the Note Holders (except as expressly otherwise provided in this
Agreement) from exercising all rights, powers and remedies otherwise permitted
by the Note Credit Documents and by applicable law upon a default in the payment
of the Note Debt, all, however, subject to the rights of the Agent Bank, the
Banks and the LC Issuers as set forth in this Agreement, or (c) the obligation
of the Company or such Guarantor (to the extent, with respect to BSE, set forth
in its Guaranty) to pay to the LC Issuers all amounts payable in respect of the
Reimbursement Agreement Debt as and when the same shall become due and payable
in accordance with the terms thereof, or prevent either of the LC Issuers
(except as expressly otherwise provided in this Agreement) from exercising all
rights, powers and remedies otherwise permitted by the Reimbursement Agreements
and by applicable law upon a default in the payment of the Reimbursement
Agreement Debt, all, however, subject to the rights of the Agent Bank, the Banks
and the Note Holders as set forth in this Agreement, or (d) the obligation of
the Company or such Guarantor to pay to the May, 2000 Lenders all amounts
payable in respect of the May, 2000 Debt as and when the same shall become due
and payable in accordance with the terms thereof, or prevent any of the May,
2000 Lenders (except as expressly otherwise provided in this Agreement) from
exercising all rights, powers and remedies otherwise permitted by the May, 2000
Credit Documents and by applicable law upon a default in the payment of the May,
2000 Debt, all, however, subject to the rights of the Agent Bank, the Banks, the
Note Holders and the LC Issuers as set forth in this Agreement.
ss.8.3. No Additional Rights for Company Hereunder. If the Collateral
Agent, the Agent Bank, May, 2000 Agent or any Secured Party shall enforce its
rights or remedies in violation of the terms of this Agreement, the Company and
each Guarantor agrees, by its consent hereto, that it shall not use such
violation as a defense to such enforcement by any such party nor assert such
violation as a counterclaim or basis for setoff or recoupment against any such
party. Nothing contained in this Agreement shall constitute a commitment by any
Bank or other Secured Party to make available to the Company or any Guarantor
any loans or letters of credit which would comprise, in the case of the Banks,
an Additional Advance Amount or, in the case of any other Secured Party, any
additional loans or letters of credit.
ss.9. COLLATERAL AGENT AS AGENT AND LENDER. If a Secured Party is at any time
the Collateral Agent or a co-agent or separate agent pursuant to ss.5.8, such
Secured Party shall, in its individual capacity and as Collateral Agent, have
the same obligations and the same rights, powers and privileges as it would have
had were it not also the Collateral Agent.
ss.10. INTENTIONALLY DELETED.
---------------------
ss.11. MISCELLANEOUS.
-------------
ss.11.1. Further Assurances, Etc. The Agent Bank, the May, 2000 Agent,
the May, 2000 Lenders, the Banks, the LC Issuers and the Note Holders and, by
countersigning this Agreement, the Company and each Guarantor agree to execute
and deliver such other documents and instruments, in form and substance
reasonably satisfactory to the Collateral Agent, and shall take such other
action, in each case as the Collateral Agent (upon instructions from the
Requisite Parties) or any Secured Party may reasonably request (at the sole, but
reasonable, cost and expense of the Company which, by countersigning this
Agreement, agrees to pay such reasonable costs and expenses), to effectuate and
carry out the provisions of this Agreement including, without limitation, by
recording or filing in such places as the requesting party may deem desirable,
this Agreement or such other documents or instruments.
ss.11.2. No Individual Action; Marshaling; Etc. No holder of any
Secured Obligations may require the Collateral Agent to take or refrain from
taking any action hereunder or under any of the Security Documents or with
respect to any of the Collateral except as and to the extent expressly set forth
in this Agreement. The Collateral Agent shall have no duty to, and the Company
and each Guarantor hereby waives any and all right to require the Collateral
Agent to, marshal any assets or otherwise to take any actions with respect to
marshaling.
ss.11.3. Successors and Assigns.
----------------------
(a) This Agreement shall be binding on and inure to the
benefit of the Collateral Agent, each of the Banks, the Agent Bank, each of the
LC Issuers, each of the Note Holders, May, 2000 Agent, each of the May, 2000
Lenders, the Owner Trustee, the Indenture Trustee, and their respective
successors and assigns, and shall be binding on the Company and each Guarantor
and their respective successors and permitted assigns. Each of the Note Holders
acknowledges that the provisions of this Agreement apply regardless of any sale,
transfer, pledge, assignment, hypothecation or other disposition by such Note
Holder of any Notes to any Person, each of the Banks, LC Issuers, Owner Trustee
and Indenture Trustee agrees that the provisions of this Agreement apply
regardless of any sale, transfer, pledge, assignment, hypothecation or other
disposition by such Bank, LC Issuer, Owner Trustee or Indenture Trustee of any
instrument or right evidencing the Bank Debt, Reimbursement Agreement Debt or
Lease Claims to any Person, and each of the May, 2000 Lenders agrees that the
provisions of this Agreement apply regardless of any sale, transfer, pledge,
assignment, hypothecation or other disposition by such May, 2000 Lender of any
instrument or right evidencing the May, 2000 Debt to any Person. Each Secured
Party agrees that it shall not sell, transfer, assign or otherwise dispose of
any interest in any Secured Obligation unless the buyer, transferee or assignee
assumes in writing the obligations of such Secured Party under this Agreement;
provided, however, that the foregoing shall not prohibit any Secured Party from
pledging or otherwise granting a security interest in any Secured Obligation so
long as the pledgee or other secured party, as a condition to its retaining or
further transferring such Secured Obligation by way of enforcement of such
pledge or other security interest, assumes or causes its transferee to assume in
writing the obligations of such Secured Party under this Agreement.
(b) No Secured Party (other than the Owner Trustee or
Indenture Trustee) may sell any Secured Obligation or any interest therein to
the Company or any Subsidiary or affiliate of the Company, or accept any payment
of a Secured Obligation from an affiliate of the Company that is not a Guarantor
of the applicable Secured Obligation, without the consent of the Requisite
Parties. The Agent Bank shall require each Bank becoming a party to the Credit
Agreement after the date of this Agreement to execute and deliver to the other
parties hereto a counterpart of this Agreement. Any Note Holder assigning all or
a portion of its note shall require its assignee to execute and deliver to all
other parties hereto a counterpart of this Agreement. The May, 2000 Agent shall
require each May, 2000 Lender becoming a party to the May, 2000 Credit Agreement
after the execution of the May, 2000 Credit Agreement to execute and deliver to
the other parties hereto a counterpart of this Agreement.
(c) Nothing contained in this ss.11.3 shall permit any
assignment of any Secured Obligation created or evidenced by any Credit Document
if such assignment is not otherwise permitted by that Credit Document.
ss.11.4. Notices. All notices and other communications made or required
to be given pursuant to this Agreement or the Security Documents shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier or sent
by telecopy, confirmed by delivery via courier or postal service, addressed as
set forth on Schedule 11.4 hereto or to such other address or addresses as any
such party shall specify by notice given to the other parties. Any such notice
and other communications shall be deemed to have been duly given or made and to
have become effective (i) if delivered by hand, overnight courier or facsimile,
at the time of the receipt thereof, and (ii) if sent by registered or certified
first class mail postage prepaid, on the fourth (4th) business day following the
mailing thereof; provided, however, that a Notice of Actionable Default or any
other notice to be delivered to the Collateral Agent pursuant to the terms of
this Agreement shall not be deemed to have been received by a Responsible
Officer of the Collateral Agent until the Collateral Agent actually receives
such notice. Any party hereto (other than the Collateral Agent) that is required
or permitted to give notice to any other party hereto may, in lieu of giving
such notice directly to such other party, give such notice to the Collateral
Agent for delivery to such other party or parties, provided that (a) the party
giving such notice shall expressly instruct the Collateral Agent in writing as
to which parties to deliver such notice to, (b) the Collateral Agent shall give
such notice within two (2) Business Days after receiving such request, and (c)
such notice will only be deemed to have been given (in accordance with clauses
(i) and (ii) of the preceding sentence) to the recipients thereof after such
notice was given by the Collateral Agent, rather than when such request was made
to the Collateral Agent.
ss.11.5. Termination.
-----------
(a) The security interests created by the Security Documents,
including the security interest of the Collateral Agent, shall terminate and all
right, title and interest in the Collateral shall revert to the Company and its
successors and assigns upon the satisfaction of each of the following six
conditions:
(i) receipt by the Collateral Agent from the Agent
Bank of notice stating that either:
(A) the Bank Debt has been paid in full, in cash, and all commitments under
the Credit Agreement have terminated, been canceled or been reduced to zero; or
(B) the Bank Debt no longer constitutes a Secured Obligation under the
Security Documents; and
(ii) receipt by the Collateral Agent from each of the Note Holders of
notice that either:
(A) the Note Debt held by such Note Holders has been paid in
full, in cash, in accordance with the Note Purchase Agreement; or
(B) the Note Debt held by such Note Holders no longer constitutes
a Secured Obligation under the Security Documents; and
(iii) receipt by the Collateral Agent from each of the LC
Issuers of notice stating that:
(A) the Reimbursement Obligations due to it have been paid in full, in
cash, and it has no Outstanding IRB LC Exposure; or --
(B) the Reimbursement Obligations due to it no longer constitute a
Secured Obligation under the Security Documents; and
(iv) receipt by the Collateral Agent from the Owner
Trustee and Indenture Trustee of notice that either:
(A) the Lease Claims have been paid in full, in cash, in accordance
with the Lease Documents; or
(B) the Lease Claims no longer constitute a Secured Obligation under
the Security Documents; and
(v) receipt by the Collateral Agent from the May, 2000 Agent of notice
stating that either:
(A) the May, 2000 Debt has been paid in full, in cash, and all
commitments under the May, 2000 Credit Agreement have terminated, been
canceled or been reduced to zero; or
(B) the May, 2000 Debt no longer constitutes a Secured Obligation
under the Security Documents; and ---
(vi) payment in full in cash of all amounts owed to
the Collateral Agent pursuant to ss.5.5 and ss.5.7.
The Secured Parties agree, severally and not jointly, to provide the
notices contemplated by ss.11.5(a)(i), ss.11.5(a)(ii), ss.11.5(a)(iii),
ss.11.5(a)(iv), and ss.11.5(a)(v) under the circumstances provided in Clause (A)
of such Sections for such notices to be capable of being given, upon the
Company's request and in any event as if ss.9-208 of the Uniform Commercial Code
as in effect in the State of New York on the date hereof were applicable to them
as direct secured parties.
(b) Upon the termination of the Collateral Agent's security
interest and the release of the Collateral in accordance with subsection (a) of
this ss.11.5, the Collateral Agent will promptly, at the Company's written
request and expense, (i) execute and deliver to the Company or BSE, as
applicable, such documents as the Company or BSE, as applicable, shall
reasonably request to evidence the termination of such security interest, the
release of the Collateral or the discharge of the Guaranties and (ii) deliver or
cause to be delivered to the Company or BSE, as applicable, all property of the
Company or BSE, as applicable, constituting Collateral then held by Collateral
Agent or any agent thereof.
(c) This Agreement shall terminate automatically when the
security interests granted under the Security Documents have terminated and the
Collateral has been released to the Company and BSE by the Collateral Agent as
provided in the foregoing provisions of this ss.11.5.
(d) If, at any time, any payment made or value received with
respect to any Secured Obligation must be returned by the Secured Party
receiving the same upon the insolvency, bankruptcy or reorganization of the
Company or any Guarantor, or otherwise, with the effect as though such payment
had not been made or value received, the security interest in the Collateral
created by the Security Documents in favor of the Collateral Agent and the
rights of the Collateral Agent to act as agent hereunder and to receive amounts
pursuant to this Agreement shall be reinstated to the extent those rights had
previously been terminated. In such event each Secured Party (other than the
Owner Trustee and the Indenture Trustee) agrees that it will pay to the other
Secured Parties such amounts so that, after giving effect to the payments
hereunder by all Secured Parties, the amounts received by all Secured Parties
are not in excess of the amounts to be paid to them hereunder as though any
payment so returned had not been made.
(e) Notwithstanding the foregoing, ss.5.5, ss.5.6 and ss.5.7
of this Agreement shall survive, and remain operative and in full force and
effect, regardless of the termination of this Agreement.
ss.11.6. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REFERENCE TO ITS CONFLICT OF LAWS PRINCIPLES).
ss.11.7. Waiver of Rights. Neither any failure nor any delay on the
part of any party hereto in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, and a single or partial exercise thereof
shall not preclude any other or further exercise or the exercise of any other
right, power or privilege.
ss.11.8. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provision.
ss.11.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument.
ss.11.10. Section Headings. The section headings used herein are for
convenience of reference only and
are not to affect the construction of or be taken into consideration
in interpreting this Agreement.
ss.11.11. Additional Fees. Contemporaneously with the execution hereof,
the Company shall pay all reasonable counsel fees of the Owner Trustee, the
Indenture Trustee, the Lenders and the Owner Participants under the Indenture in
connection with the negotiation and execution of this Agreement. In addition,
the Company and the Guarantors shall pay all on-going fees and expenses
(including any fees and expenses of counsel) of the Owner Trustee, the Indenture
Trustee, the Owner Participants and the Lenders to enforce this Agreement, and
agree, notwithstanding any language to the contrary contained herein or in the
Lease Documents, to indemnify the Owner Participants against any adverse tax
consequences resulting from the Owner Trustee's entering into this Agreement or
the Waiver and Amendment No. 1 to the Melt Shop Equipment Financing Documents
dated as of the date hereof among the Company, the Owner Trustee, the Indenture
Trustee, the Owner Participants, and the Lenders. The parties hereto acknowledge
that the Owner Participants and the Lenders are third party beneficiaries of
this ss.11.11 and agree not to amend this ss.11.11 as it pertains to the Owner
Participants and the Lenders without their prior written consent. The Company
acknowledges and agrees that, in executing and delivering this Agreement to the
other parties hereto and in performing its obligations hereunder, the Indenture
Trustee and Owner Trustee shall be entitled to all of the rights and benefits
afforded to the Indenture Trustee and Owner Trustee under the Lease Documents,
including, without limitation, the Company's indemnification obligations under
Section 7.2 of the Participation Agreement, as such term is defined in the
Indenture, and the limitations on liability provided under Section 10.11(a) of
the Participation Agreement and Section 5.04 of the Indenture, and the Company
hereby agrees that its indemnification of the Indenture Trustee and Owner
Trustee under Section 7.2 of the Participation Agreement shall include, subject
to the provisions of Section 7.2(d) thereof, any and all Claims (as defined
therein) arising out of the Indenture Trustee's and Owner Trustee's execution,
delivery and performance of its obligations under this Agreement.
ss.11.12. Complete Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes and all other prior representations, negotiations, writings,
memoranda and agreements. To the extent any provision of this Agreement
conflicts with the Credit Agreement, the Note Purchase Agreements, the May, 2000
Credit Documents, or any other Credit Document (other than the Lease Documents),
as between the Secured Parties the provisions of this Agreement shall be
controlling. Nothing in this Agreement, expressed or implied, is intended to
confer upon any person other than the parties hereto any rights or remedies
under or by reason of this Agreement.
ss.11.13. No Recourse to the Owner Trustee or Indenture Trustee. It is
expressly understood and agreed by the parties hereto that, subject to the
proviso contained in this ss.11.13, all representations, warranties and
agreements of the Owner Trustee and Indenture Trustee hereunder shall be binding
upon the Owner Trustee and Indenture Trustee, only in their respective
capacities as Owner Trustee and Indenture Trustee and (except as expressly
provided herein) the Owner Trustee and Indenture Trustee shall not be liable in
their respective individual capacities for any breach thereof, except for their
gross negligence or willful misconduct, or for breach of their respective
agreements, representations and warranties contained herein, except to the
extent agreed or made in their respective individual capacities; provided,
however, that nothing in this ss.11.13 shall be construed to limit in scope or
substance those representations and warranties of the Owner Trustee or Indenture
Trustee made expressly in its individual capacity set forth herein. The terms
"Owner Trustee" and "Indenture Trustee" as used in this Agreement shall include
any successor thereto as Owner Trustee or Indenture Trustee.
ss.11.14. Interpretation of Concurrent Documents Without limiting the
scope of the Collateral Agent Substitution Agreement (the "Collateral Agent
Substitution Agreement") dated November 12, 1999 by and among State Street Bank
and Trust Company, SouthTrust Bank, National Association, the Secured Parties
who are parties thereto, the Company and the Guarantors (including, by virtue of
its becoming a party thereto on the date hereof, BSE), the parties hereto who
are parties thereto agree to be bound by and shall comply with Section 4(b) of
the Collateral Agent Substitution Agreement.
[Remainder of page left intentionally blank; next page is
the signature page.]
<PAGE>
IN WITNESS WHEREOF, the Collateral Agent Bank, the Collateral
Agent, the Agent Bank, the Banks, the Note Holders, the May, 2000 Agent, the
May, 2000 Lenders, the LC Issuers, the Owner Trustee, the Indenture Trustee, the
Company and each of the Guarantors have caused this Collateral Agency and
Intercreditor Agreement to be duly executed by their duly authorized officers,
all as of the day and year first above written.
SOUTHTRUST BANK, National
Association, in its capacity as Collateral Agent and
Collateral Agent Bank
By: /s/ Virginia Petty
-------------------
Name: Virginia Petty
Title: AVP
BANK OF AMERICA, N.A.
in its capacity as Agent Bank
and May, 2000 Agent
By: /s/ Jay T. Wampler
-------------------
Name: Jay T. Wampler
Title: Managing Director
BANK OF AMERICA, N.A.,
in its capacity as Bank, LC Issuer,
and May, 2000 Lender
By: /s/ Jay T. Wampler
-------------------
Name: Jay T. Wampler
Title: Managing Director
PNC BANK, NATIONAL ASSOCIATION,as LC Issuer
By: /s/ Martin E. Mueller
----------------------
Name: Martin E. Mueller
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
in its capacity as Bank and
as May 2000 Lender
By /s/ Martin E. Mueller
----------------------
Name: Martin E. Mueller
Title: Vice President
FIRST UNION NATIONAL BANK,
in its capacity as Indenture Trustee
By: /s/ Robert Ashbaugh
--------------------
Name: Robert Ashbaugh
Title: Vice President
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION as
Successor to PNC BANK, NATIONAL ASSOCIATION, in
its capacity as Owner Trustee
By: /s/ Jack R. Cornwall
---------------------
Name: Jack R. Cornwall
Title: Vice President
THE BANK OF NOVA SCOTIA,
in its capacity as Bank and
as May 2000 Lender
By: /s/ Pieter J. Van Schaick
--------------------------
Name: Pieter J. Van Schaick
Title: Relationship Manager
THE BANK OF TOKYO-MITSUBISHI,
LTD, in its capacity as Bank and
as May 2000 Lender
By: /s/ G. England
---------------
Name: G. England
Title: V.P. & Manager
CIBC, INC.,
in its capacity as Bank and
as May 2000 Lender
By: /s/ Ronald E. Spitzer
----------------------
Name: Ronald E. Spitzer
Title: Agent
AMSOUTH BANK,
in its capacity as Bank and
as May 2000 Lender
By: /s/ Darlene E. Chandler
------------------------
Name: Darlene E. Chandler
Title: Vice President
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK CAYMAN
ISLAND BRANCH, in its
capacity as Bank and as May
2000 Lender
By: /s/ J.W. Somers Kurt A. Morris
---------------- -----------------
Name: J.W. Somers Kurt A. Morris
Title: S.V.P. Vice President
GENERAL ELECTRIC CAPITAL CORPORATION,
in its capacity as Bank and as May 2000 Lender
By: /s/ Gregory L. Hong
--------------------
Name: Gregory L. Hong
Title: Duly Authorized Signatory
BANK ONE, NA,
in its capacity as Bank and
as May 2000 Lender
By: /s/ Richard Babcock
--------------------
Name: Richard Babcock
Title: Vice President
<PAGE>
THE SANWA BANK, LIMITED,
in its capacity as Bank and
as May 2000 Lender
By: /s/ John T. Fenney
-------------------
Name: John T. Fenney
Title: Vice President
UBS AG, STAMFORD BRANCH,
in its capacity as Bank and
as May 2000 Lender
By: /s/ Marco Breitenmoser
-----------------------
Name: Marco Breitenmoser
Title: Director - Recovery Management
By: /s/ Dorothy McKinley
---------------------
Name: Dorothy McKinley
Title: Director - Loan Portfolio Support
U.S.
Very truly yours,
PRINCIPAL LIFE INSURANCE COMPANY
(f/k/a Principal Mutual Life Insurance Company)
By: Principal Capital Management, LLC,
A Delaware limited liability company,
Its authorized signatory
By: /s/ Sarah J. Pitts
-------------------
Name: Sarah J. Pitts
Title: Counsel
By: /s/ James C. Fifield
---------------------
Name: James C. Fifield
Title: Counsel
PRINCIPAL LIFE INSURANCE COMPANY, ON BEHALF OF ONE OR MORE
SEPARATE ACCOUNTS
By: Principal Capital Management, LLC,
a Delaware limited liability company,
Its authorized signatory
By: /s/ Sarah J. Pitts
-------------------
Name: Sarah J. Pitts
Title: Counsel
By: /s/ Debra Svoboda Epp
----------------------
Name: Debra Svoboda Epp
Title: Counsel
J. ROMEO & CO., as nominee
for MONY LIFE INSURANCE COMPANY OF NEW YORK
By: /s Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
THE CANADA LIFE ASSURANCE COMPANY
(J. ROMEO & CO. as nominee)
By: /s/ Kevin Phelan
-----------------
Name: Kevin Phelan
Title: Assistant Treasurer
CANADA LIFE INSURANCE COMPANY OF NEW YORK
(J. ROMEO & CO. as nominee)
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
CANADA LIFE INSURANCE COMPANY OF AMERICA
(J. ROMEO & CO. as nominee)
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
GENERAL ELECTRIC CAPITAL
ASSURANCE COMPANY (formerly
known as Great Northern
Insured Annuity
Corporation)
By: /s/ Morian C. Mooers
---------------------
Name: Morian C. Mooers
Title: Investment Officer
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
PIONEER MUTUAL LIFE INSURANCE
COMPANY
By American United Life Insurance Company
By: /s/ Kent R. Adams
------------------
Name: Kent R. Adams
Title: Vice President, American United Life
Insurance Company as Agent for Pioneer
Mutual Life Insurance Company
JEFFERSON-PILOT LIFE INSURANCE COMPANY
By: /s/ Robert E. Whalen, II
-------------------------
Name: Robert E. Whalen, II
Title: Vice President
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
By: /s/ Robert Bayer
-----------------
Name: Robert Bayer
Title: Investment Officer
SUN LIFE ASSURANCE COMPANY OF CANADA
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements -
for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and
Counsel - for Secretary
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements -
for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and
Counsel - for Secretary
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
By: /s/ John N. Whelihan
---------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private Placements -
for President
By: /s/ Roy P. Creedon
-------------------
Name: Roy P. Creedon
Title: Assistant Vice President and
Counsel - for Secretary
CENTURY INDEMNITY COMPANY
By: CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
ACE PROPERTY AND CASUALTY
INSURANCE COMPANY
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
LIFE INSURANCE COMPANY OF NORTH AMERICA
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
CONNECTICUT GENERAL
LIFE INSURANCE COMPANY
By CIGNA Investments, Inc., its authorized agent
By: /s/ Stephen H. Wilson
----------------------
Name: Stephen H. Wilson
Title: Managing Director
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
By: /s/ Christopher J. Grant
-------------------------
Name: Christopher J. Grant
Title: Investment Officer
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ Richard A. Strait
----------------------
Name: Richard A. Strait
Title: Its Authorized Representative
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By: /s/ Wayne T. Hoffman
---------------------
Name: Wayne T. Hoffman
Title: Investments
By: /s/ Julie Bock
---------------
Name: Julie Bock
Title: Asst. Vice President
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By: /s/ Christopher Wilkos
-----------------------
Name: Christopher Wilkos
Title: Vice President, Corporate Portfolio
Management - Phoenix Home Life
J. ROMEO & CO. as nominee for MONY LIFE INSURANCE COMPANY
By: /s/ Peter Coccia
-----------------
Name: Peter Coccia
Title: Partner
THE STATE LIFE INSURANCE COMPANY
By: /s/ Christopher D. Pahlke
--------------------------
Name: Christopher D. Pahlke
Title: Vice President Private Placements
AMERICAN UNITED LIFE INSURANCE COMPANY
By: /s/ Christopher D. Pahlke
--------------------------
Name: Christopher D. Pahlke
Title: Vice President Private Placements
AMERITAS LIFE INSURANCE CORP.
By: Ameritas Investment Advisors Inc.,
as Agent
By: /s/ Patrick J. Henry
---------------------
Name: Patrick J. Henry
Title: Vice President - Fixed Income Securities
ACACIA 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
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 Investment Officer
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Mark W. Poeppelman
-----------------------
Name: Mark W. Poeppelman
Title: Associate Vice President
NATIONWIDE LIFE INSURANCE COMPANY (as successor to EMPLOYERS
LIFE INSURANCE COMPANY OF WAUSAU)
By: /s/ Mark W. Poeppelman
-----------------------
Name: Mark W. Poeppelman
Title: Associate Vice President
MINNESOTA LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Steven S. Nelson
---------------------
Name: Steven S. Nelson
Title: Vice President
<PAGE>
FEDERATED LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Wayne R. Schmidt
---------------------
Name: Wayne R. Schmidt
Title: Vice President
FEDERATED MUTUAL INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Loren Haugland
-------------------
Name: Loren Haugland
Title: Vice President
THE RELIABLE LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Jeffrey R. Erickson
------------------------
Name: Jeffrey R. Erickson
Title: Vice President
NATIONAL TRAVELERS LIFE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Joseph R. Betlej
---------------------
Name: Joseph R. Betlej
Title: Vice President
GUARANTEE RESERVE LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Marilyn Froelich
---------------------
Name: Marilyn Froelich
Title: Vice President
MTL INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Thomas G. Meyer
--------------------
Name: Thomas G. Meyer
Title: Vice President
BERKSHIRE LIFE INSURANCE COMPANY
By: /s/ Ellen I. Whittaker
-----------------------
Name: Ellen I. Whittaker
Title: Senior Investment Officer
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: Lincoln Investment Management, Inc., Its
Attorney-In-Fact
By: /s/ Annette M. Teders
----------------------
Name: Annette M. Teders
Title: Vice President
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Roi G. Chandy
---------------------
Name: Roi G. Chandy
Title: Director, Special Situations
ACCEPTED AND AGREED TO:
BIRMINGHAM STEEL CORPORATION
By: /s/ J. Daniel Garrett
--------------------------
Name: J. Daniel Garrett
Title: Vice President - Finance
AMERICAN STEEL & WIRE CORPORATION
BIRMINGHAM EAST COAST HOLDINGS, LLC
NORFOLK STEEL CORPORATION
PORT EVERGLADES STEEL CORPORATION
BIRMINGHAM RECYCLING INVESTMENT COMPANY
MIDWEST HOLDINGS, INC.
CUMBERLAND RECYCLERS, LLC
By: /s/ J. Daniel Garrett
--------------------------
Name: J. Daniel Garrett
Title: Vice President - Finance
BIRMINGHAM SOUTHEAST, LLC
By: /s/ J. Daniel Garrett
--------------------------
Name: J. Daniel Garrett
Title: Vice President - Finance
<PAGE>
Schedule B-1
Amended and Restated Collateral Agency and Intercreditor Agreement (with
respect to the agreement initially dated as of October 12, 1999)
Amended and Restated Collateral Agency and Intercreditor Agreement (with
respect to the agreement initially dated as of November 12, 1999)
First Amendment to Collateral Agent Substitution Agreement
Letter Agreement re Omnibus Collateral Agreement (with respect to the
agreement initially dated as of October 12, 1999)
Letter Agreement re Omnibus Collateral Agreement (with respect to the
agreement initially dated as of November 12, 1999)
Seventh Amendment to Credit Agreement
Second Amendment to 1993 Note Purchase Agreements
Second Amendment to 1995 Note Purchase Agreements
Fourth Amendment to PNC Reimbursement Agreement
Amendment to Memphis Equipment Lease Agreement
Side Letter regarding Cleveland Facility and Minimum SBQ Division EBITDA
<PAGE>
Exhibit No. 10.30
MASTER RESTRUCTURE AGREEMENT
among
AMERICAN IRON REDUCTION L.L.C.,
(the "Borrower"),
GS INDUSTRIES, INC., ("GSI"),
---
GS TECHNOLOGIES OPERATING CO., INC., ("GSTOC"),
-----
BIRMINGHAM STEEL CORPORATION,
("BSC" together with GSTOC, the "Sponsors"),
--- --------
and
BANK OF AMERICA, N.A.,
as Administrative Agent,
as Collateral Agent, as Bond LC Issuer,
as a Bond LC Lender,
and as a Lender,
CANADIAN IMPERIAL BANK OF COMMERCE,
as Documentation Agent,
as a Bond LC Lender
and as a Lender,
And the other Lenders Party to the Credit Agreement
May 5, 2000
<PAGE>
TABLE OF CONTENTS
1. Definitions...................................................3
2. Conditions Precedent..........................................8
3. Waiver of Pre-Restructure Defaults............................9
4. Amendment Date Payments.......................................9
5. Release of Net Swap Agreement Proceeds........................9
6. Restructure Credit Facility..................................10
7. Restructure Project Documents................................11
8. Termination of Equity Contribution Agreement.................11
9. Trade Credit Security........................................11
10. Project Documents............................................11
11. Sale of the Project..........................................12
12. In-Kind Call Option..........................................13
13. Foreclosure..................................................15
14. Catalyst Reserve Credit......................................18
15. Lender Warrant...............................................18
16. Consent to Relief From Stay..................................19
17. Release of Contingent Equity Letter of Credit................20
18. Consent to Post-Date Certain Project Documents Modifications.20
19. Waiver of Defenses...........................................20
20. Mutual Releases..............................................20
21. Limited Modification.........................................20
22. Authority....................................................20
23. Notice.......................................................21
24. Captions.....................................................21
25. Credit Document..............................................21
26. Jointly Drafted Agreements...................................21
27. Entire Agreement.............................................21
28. Governing Law; Jurisdiction and Venue........................22
29. Counterparts; Telecopy Signatures............................23
.........
<PAGE>
SCHEDULES
Schedule I........Post Date Certain Project Modifications
Schedule II.......Pre-Restructure Swap Agreements
Schedule III......Sale Formula Amount, Examples of Shortfall Shares
EXHIBITS
Exhibit A-1.......Form of Birmingham Steel Corporation Shortfall Share Loan
Agreement
Exhibit A-2.......Form of GS Technologies Operating Co., Inc. Shortfall Share
Loan Agreement
Exhibit B.........Form of Mutual Release
Exhibit C.........Form of Sponsor / Borrower Mutual Release
Exhibit D.........Form of Termination Agreement
<PAGE>
MASTER RESTRUCTURE AGREEMENT
THIS MASTER RESTRUCTURE AGREEMENT (this "Agreement") executed as of May
5, 2000 is entered into among AMERICAN IRON REDUCTION L.L.C., a Delaware limited
liability company (the "Borrower"), GS INDUSTRIES, INC., a Delaware corporation
("GSI"), GS TECHNOLOGIES OPERATING CO., INC., a Delaware corporation ("GSTOC"),
BIRMINGHAM STEEL CORPORATION, a Delaware corporation ("BSC" and, together with
GSTOC, the "Sponsors"), and BANK OF AMERICA, N.A., formerly known as
NationsBank, N.A., a national banking association (the "Agent"), as
Administrative Agent, as Collateral Agent, as a Lender, as Bond LC Issuer and as
a Bond LC Lender, CANADIAN IMPERIAL BANK OF COMMERCE, as Documentation Agent, as
a Bond LC Lender and as a Lender, and the other Lenders party to the Credit
Agreement (defined below). Except as expressly defined or otherwise referenced
herein, capitalized terms used herein shall have the meanings set forth in the
in the Credit Agreement (defined below).
RECITALS:
A........The Borrower was formed for the purpose of constructing,
owning and operating the Project, which was designed to produce DRI.
B........The Sponsors currently hold the only membership interests in
the Borrower, with each holding a fifty percent (50%) interest.
C........GSTOC is a wholly owned indirect subsidiary of GSI. GSI has
guarantied GSTOC's performance of certain of GSTOC's obligations under the
Project Documents pursuant to the terms of the GSI Guaranty.
D........To finance the Project, the Borrower, the Agent and the
Lenders entered into that certain Credit and Reimbursement Agreement, dated as
of August 30, 1996, amended and restated as of May 30, 1997, amended as of July
2, 1997, amended as of May 6, 1998, amended as of October 30, 1998, and amended
as of December 4, 1998 (the "Credit Agreement").
E........Each Sponsor and Borrower entered into a DRI Purchase
Agreement, dated as of August 30, 1996 and amended and restated as of May 30,
1997, wherein each Sponsor agreed to purchase certain amounts of DRI from
Borrower to be produced at the Facility.
F........With respect to each DRI Purchase Agreement, Borrower executed
an Assignment of Direct Reduced Iron Purchase Agreement and Security Agreement,
dated as of August 30, 1996 in favor of Agent, wherein the Borrower assigned its
rights under each DRI Purchase Agreement to Agent. Each Sponsor executed a
Consent and Agreement dated as of August 30, 1996 wherein each Sponsor consented
to such assignment.
G........Pursuant to the Credit Agreement, and in order to finance the
construction of the Project, the Lenders extended $200,000,000 in Loans to the
Borrower.
H........Pursuant to the Credit Agreement, and in order to finance the
construction of the Project, the Bond LC Issuer issued, and the Bond LC Lenders
participated in, the Bond Letter of Credit in favor of the Borrower. The Bond
Letter of Credit terminates upon August 31, 2000 if not extended.
I........The Borrower's ability to service its Obligations under the
Credit Documents depends on its ability to tender and receive payment for DRI.
J........The Borrower defaulted on the Construction Loans and
corresponding Construction Notes by failing to either: (1) pay them in full by
the Construction Loan Maturity Date or (2) effect Conversion of the Construction
Loans to Term Loans by the Date Certain.
K........As of the Amendment Date, there remains due and owing
$176,907,945.21 in Loans (the "Pre-Restructure Loans") and $14,660,407.92 in
accrued and unpaid interest thereon (the "Pre-Restructure Interest").
L........As of the Amendment Date, the stated amount of the Bond Letter
of Credit is $8,092,054.79 (the "Pre-Restructure Bond LC Amount").
M........As of the Amendment Date, the Borrower is obligated in the
amount of $167,908.60 in respect of past-due fees owing in connection with the
Bond Letter of Credit (the "Pre-Restructure Bond LC Fees").
N........On November 22, 1999, the Agent, on behalf of the Lenders, and
Professional Services International, Inc. ("PSI") entered into an agreement
whereby the Agent agreed to a limited subordination of its lien rights with
respect to a portion of the Borrower's inventory to a lien in favor of PSI (the
"PSI Lien") sufficient to secure a $1,632,000 purchase money financing
obligation that Borrower owed to PSI, which financing allowed the Borrower to
purchase a reformer necessary to repair the failed converter.
O........During the period from March 31, 1999 through the Amendment
Date, the Borrower entered into several modifications (the "Post-Date Certain
Project Documents Modifications") to Project Documents between the Borrower and
third parties, which Project Documents previously were assigned to the Agent. A
schedule of the Post-Date Certain Project Documents Modifications is attached
hereto as Schedule I.
P........Before the Amendment Date, the Borrower entered into several
Swap Agreements (the "Pre-Restructure Swap Agreements") with certain Swap
Counterparties. Each of the Pre-Restructure Swap Agreements was unwound by the
applicable Swap Counterparty before the Amendment Date. A schedule of the
Pre-Restructure Swap Agreements and the obligations and counter obligations
created by the unwinding of the Pre-Restructure Swap Agreements is attached
hereto as Schedule II.
Q........In December of 1999, the Borrower received a tax refund from
the State of Louisiana in the amount of $2,647,970.14 (the "LA Tax Refund"). The
proceeds of the LA Tax Refund were placed in the Funding Account, and the entire
amount of such proceeds has since been used by the Borrower, with the consent of
the Agent and the Lenders, to pay for the short-term working capital needs of
the Borrower.
R........On January 18, 2000, the Borrower and ICRM entered into a
settlement agreement whereby ICRM paid to the Borrower $3,100,0000 in settlement
of the Borrower's claims concerning the Materials Handling Facility (the "ICRM
Settlement Proceeds").
S........The Lenders have asserted that, following the Construction
Loan Maturity Date, Conversion and Completion occurred and certain of the
Sponsors' obligations under the DRI Purchase Agreements to purchase DRI became
operative. The Borrower, the Sponsors and GSI (collectively, the "AIR Parties")
have disputed these assertions. The AIR Parties and the Lenders, however, have
decided to resolve their disputes in accordance with this Agreement.
T........The AIR Parties have requested that the Lenders (i) agree to
restructure the Loans, including the deferral of significant portions of
principal and interest, (ii) consent to the restructuring of the DRI Purchase
Agreements and (iii) agree to certain terms regarding the sale of the Project
and the amounts which the Sponsors would be required to pay to be relieved of
their obligations in connection with the Project.
U........The Lenders have agreed to do so, upon the terms and
conditions set forth herein, in consideration of (i) the Borrower's agreement to
eliminate the significance of Conversion, Completion and the Pricing Changeover
Date and (ii) the Sponsors' agreement to purchase DRI on an ongoing basis in
certain amounts and to pay certain sums in order to be relieved of their
obligations in connection with the Project upon the occurrence of certain events
as set forth herein.
NOW, THEREFORE, for valuable consideration, the mutual receipt of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions.
-----------
In addition to the definitions set forth or incorporated
elsewhere herein, the following terms used herein shall have the
following meanings (such definitions to be equally applicable to both
the singular and the plural forms of the defined terms):
"Aggregate LOI Net Project Sale Proceeds" means LOI Net
Project Sale Proceeds plus any Net Project Sale Proceeds Supplement.
"Aggregate Net Project Sale Proceeds" means Net Project Sale
Proceeds plus any Net Project Sale Proceeds Supplement.
"Amendment Date" means the date of this Agreement.
"Amendment Date Payments" shall have the meaning set forth in
Section 4.
"Amendment Date Principal Reduction" shall have the meaning
set forth in Section 4(a).
"Borrower's Swap Unwind Proceeds" shall have the meaning set
forth in Section 5.
"Bond LC Fees" shall have the meaning set forth in the
Restructure Credit Agreement.
"BSC Shortfall Share Loan Agreement" means a loan agreement in
the form of that attached hereto as Exhibit A-1, executed by BSC, the
Agent and the Lenders in connection with BSC's issuance of Shortfall
Share Notes in favor of the Lenders.
"Discounted Amount" means, as applicable, an amount equal to:
(a) if Aggregate Net Project Sale Proceeds are greater than or equal to
$100,000,000 but equal to or less than $130,000,000, $15,000,000 minus
6.25 cents ($.0625) for every dollar by which Aggregate Net Project
Sale Proceeds exceed $100,000,000, or (b) if Aggregate Net Project Sale
Proceeds are greater than $130,000,000, the Shortfall Share multiplied
by seventy-five percent (75%).
"Foreclosure Discounted Amount" means, as applicable, an
amount equal to: (a) if Foreclosure Sale Proceeds are greater than or
equal to $100,000,000 but equal to or less than $130,000,000,
$15,000,000 minus 6.25 cents ($.0625) for every dollar by which
Foreclosure Sale Proceeds exceed $100,000,000, or (b) if Foreclosure
Sale Proceeds are greater than $130,000,000, the Foreclosure Shortfall
Share multiplied by seventy-five percent (75%).
"Foreclosure Sale" shall have the meaning set forth in Section
13.
"Foreclosure Sale Proceeds" means, as applicable, following
transfer of title to the Facility pursuant to a Foreclosure Sale: (a)
the amount of cash sale proceeds available for immediate payment to the
Agent, for the benefit of the Lenders, for application to the
Restructure Loans and/or the Bond LC Obligations or (b) in the case of
a successful credit bid by a Lender Party, the amount of any credit bid
proceeds available for immediate credit to the Restructure Loans and/or
Bond LC Obligations.
"Foreclosure Shortfall Share" shall mean, upon a Foreclosure
Sale, an amount equal to the Shortfall Share that would have been due
from a Sponsor if a Project Sale generating Net Project Sale Proceeds
equal to the greater of (a) $100,000,000 or (b) the amount of
Foreclosure Sale Proceeds, had occurred pursuant to and in accordance
with Section 11 of this Agreement.
"GSI Shortfall Share Guaranty" means a guaranty, in the form
of that attached as Schedule 4.1(a)(iii) to the GSTOC Shortfall Share
Loan Agreement, executed by GSI in connection with GSTOC's issuance of
Shortfall Share Notes in favor of the Lenders.
"GSTOC Shortfall Share Loan Agreement" means a loan agreement
in the form of that attached hereto as Exhibit A-2, executed by GSTOC,
the Agent and the Lenders in connection with GSTOC's issuance of
Shortfall Share Notes in favor of the Lenders.
"In-Kind Discounted Amount" means, as applicable, an amount
equal to: (a) if Aggregate LOI Net Project Sale Proceeds are greater
than or equal to $100,000,000 but equal to or less than $130,000,000,
$15,000,000 minus 6.25 cents ($.0625) for every dollar by which
Aggregate LOI Net Project Sale Proceeds exceed $100,000,000, (b) if
Aggregate LOI Net Project Sale Proceeds are greater than $130,000,000,
the In-Kind Shortfall Share multiplied by seventy-five percent (75%) or
(c) if title to the Project Assets or the membership interests in the
Borrower are transferred to the Lenders pursuant to the Lenders'
exercise of an In-Kind Call Option that was triggered by an event other
than a Triggering LOI, $15,000,000.
"In-Kind Call Option" shall have the meaning set forth in
Section 12(a).
"In-Kind Shortfall Amount" means: (a) in the event an LOI
triggers the Lenders' exercise of the In-Kind Call Option, an amount
equal to (i) the Sale Formula Amount, minus (ii) the amount of
Aggregate LOI Net Project Sale Proceeds, minus (iii) the aggregate
amount of principal paid on the Tranche A Term Loans and the Tranche B
Term Loans (each as defined in Section 6(a) below) before the transfer
of title to the Project, or of the membership interests in the
Borrower, to the Lenders or their designee, minus (iv) payments made
pursuant to Section 4.01(a) of the Restructure Credit Agreement before
the transfer of title to the Project, or of the membership interests in
the Borrower, to the Lenders or their designee, but only to the extent
such payments have not been applied to Tranche A Term Loans or Tranche
B Term Loans; or (b) in the event the Lenders' exercise of an In-Kind
Call Option is not triggered by an LOI, (i) $50,000,000, minus (ii) the
aggregate amount of principal paid on the Tranche A Term Loans and the
Tranche B Term Loans before the transfer of title to the Project, or of
the membership interests in the Borrower, to the Lenders or their
designee, minus (iii) payments made pursuant to Section 4.01(a) of the
Restructure Credit Agreement before the transfer of title to the
Project, or of the membership interests in the Borrower, to the Lenders
or their designee, but only to the extent such payments have not been
applied to Tranche A Term Loans or Tranche B Term Loans.
"In-Kind Shortfall Share" means fifty percent (50%) of the
In-Kind Shortfall Amount.
"Lender Party" means the Agent, a Lender or any Person which
is controlled by one or more of the Lenders. For purposes of this
definition, "control" (including, with correlative meanings, the term
"controlled by"), as used with respect to any Person, shall mean the
ownership of more than fifty percent (50%) of the outstanding voting
securities of such Person and the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of such Person.
"Lender Warrant" shall have the meaning set forth in Section
14.
"LOI" means a fully-executed, bona fide letter of intent or
contract, with customary terms, for a Project Sale to a bona fide
third-party purchaser capable, in the Lenders' reasonable judgment, of
performing thereunder.
"LOI Net Project Sale Proceeds" means the amount of the Net
Project Sale Proceeds that would be generated by a closing of a Project
Sale pursuant to a particular LOI, assuming reasonable and customary
costs of closing.
"Minimum Cash Payment" means immediately available funds in an
amount equal to the greater of: (i) (A) $120,000,000, if a Project Sale
is closed on or before December 31, 2000 or (B) $100,000,000, if a
Project Sale is closed after December 31, 2000 and (ii) the Net Project
Sale Proceeds.
"Mutual Release" shall have the meaning set forth in Section
19.
"Net Project Sale Proceeds" means the cash amount of sale
proceeds available for immediate payment to the Agent, for the benefit
of the Lenders, upon closing of a Project Sale.
"Net Project Sale Proceeds Supplement" means a cash amount
equal to the amount by which $100,000,000 exceeds, as applicable, the
Net Project Sale Proceeds or the LOI Net Project Sale Proceeds.
"Non-Controlled Third Party" means any Person that does not
qualify as a Lender Party.
"Payoff Amount" means, at any time, the aggregate of the
outstanding balance of principal and accrued interest on the
Restructure Loans, any amounts necessary to fully cash-collateralize
the Bond Letter of Credit, and any and all other amounts due and
payable under the Restructure Credit Documents.
"Pre-Restructure Bond LC Fees" shall have the meaning given to
such term in Recital M hereof.
"Pre-Restructure Indebtedness" means a collective reference to
the Pre-Restructure Loans, the Pre-Restructure Interest, the
Pre-Restructure Bond LC Amount and the Pre-Restructure Bond LC Fees.
"Proceeding" means any insolvency, bankruptcy, receivership,
dissolution, reorganization or similar proceeding, whether federal or
state, voluntary or involuntary, under any present or future law or
act.
"Project Assets" means, collectively, all real and personal
property, tangible or intangible, of the Borrower, excluding the
Borrower's interests in the Restructure DRI Purchase Agreements.
"Project Sale" means either (a) a sale (evidenced by transfer
of title), wholly for immediately available cash, of all or
substantially all Project Assets by the Borrower to a third party, or
(b) a transfer, wholly for immediately available cash, by the Sponsors
to a third party of one hundred percent (100%) of the membership
interests in the Borrower.
"Restructure Credit Documents" shall mean the "Credit
Documents" as defined in the Restructure Credit Agreement.
"Restructure Credit Agreement" shall have the meaning set
forth in Section 7.
"Restructure DRI Purchase Agreements" shall have the meaning
set forth in Section 7.
"Restructure Loans" shall have the meaning set forth in
Section 6.
"Restructure Notes" shall have the meaning set forth in
Section 6.
"Restructure Project Documents" shall mean the "Project
Documents" as defined in the Restructure Credit Agreement, but shall
not include any Shortfall Share Loan Agreement, Shortfall Share Note or
GSI Shortfall Share Guaranty.
"Restructure Security Deposit Agreement" shall have the
meaning set forth in Section 7.
"Restructure Sponsor Performance and Indemnity Agreements"
shall have the meaning set forth in Section 7.
"Sale Formula Amount" means an amount equal to the sum of: (a)
fifty percent (50%) of, as applicable, the Aggregate Net Project Sale
Proceeds or the Aggregate LOI Net Project Sale Proceeds plus (b)
$100,000,000.
"Sale Formula Period" means the period from the Amendment Date
through May 5, 2003.
"Shortfall Amount" means, in connection with a Project Sale,
the amount, if any, by which the Sale Formula Amount exceeds the
Aggregate Net Project Sale Proceeds, minus the aggregate amount of
principal paid on the Tranche A Term Loans and the Tranche B Term Loans
before the Project Sale occurred, minus payments made pursuant to
Section 4.01(a) of the Restructure Credit Agreement before the Project
Sale occurred, but only to the extent such payments have not been
applied to Tranche A Term Loans or Tranche B Term Loans.
"Shortfall Share" means fifty percent (50%) of the Shortfall
Amount.
"Shortfall Share Loan Agreement" means, as applicable, a BSC
Shortfall Share Loan Agreement or a GSTOC Shortfall Share Loan
Agreement.
"Shortfall Share Note" means a promissory note, in form of
that attached as Schedule 2.4 to a Shortfall Share Loan Agreement,
delivered by a Sponsor to a Lender to pay all or a portion of such
Lender's ratable share of such Sponsor's respective Shortfall Share,
In-Kind Shortfall Share, or Foreclosure Shortfall Share, as applicable.
"Sponsor/Borrower Mutual Release" shall have the meaning set
forth in Section 19.
"Termination Agreement" shall have the meaning set forth in
Section 8.
"Tranche A Term Loans", "Tranche B Term Loans", "Tranche C
Term Loans" and "Tranche D Term Loans" shall have the respective
meanings given to such terms in Section 6.
"Triggering LOI" shall have the meaning set forth in Section
12(a).
2. Conditions Precedent.
--------------------
As conditions precedent to the effectiveness of this Agreement:
(a) Borrower shall have made the Amendment Date Payments;
(b) Borrower and Sponsors shall have (or, where applicable,
caused to have been) executed and delivered to the Agent, for the
benefit of the Lenders, each of the documents referred to in Section 7
below;
(c) Borrower and Sponsors shall have (or, where applicable,
caused to have been) executed and delivered to the Agent, for the
benefit of the Lenders, each of the documents referred to in Section
6.01 of the Restructure Credit Agreement and have otherwise satisfied
all conditions precedent to the effectiveness of the Restructure Credit
Agreement as set forth in Section 6.01 thereof;
(d) The parties hereto each shall have executed the Mutual
Release;
(e) The AIR Parties each shall have executed the Sponsor/Borrower
Mutual Release and delivered a copy thereof to the Agent; and
(f) The Borrower shall have executed and delivered to the Agent,
for the
benefit of the Lenders, the Lender Warrant.
3. Waiver of Pre-Restructure Defaults. The Agent and the Lenders hereby
waive Defaults and Events of Default that existed under the Credit Agreement
prior to the Amendment Date; provided, however, that this waiver shall in no way
modify or affect the obligations of the Borrower to comply fully with each and
every term and condition of the Restructure Credit Agreement and the other
Restructure Credit Documents from and after the date hereof.
4. Amendment Date Payments. On or before the Amendment Date, the Borrower
shall make the following payments (collectively, the "Amendment Date Payments"):
(a) Amendment Date Principal Reduction. Pay to the Agent for the
benefit of the Lenders the sum of $2,750,000 (the "Amendment Date Principal
Reduction") for application to the outstanding principal balance of the
Pre-Restructure Loans immediately prior to the restructuring of the
Pre-Restructure Indebtedness in accordance with the terms of this
Agreement;
(b) Cash Collateral Contingency Fund. Deliver to the Deposit Agent the
sum of $350,000 for the Deposit Agent to retain as cash collateral for the
Restructure Loans and Bond LC Obligations in accordance with the
Restructure Security Deposit Agreement; and
(c) Reimbursement of Expenses of Agent and Lenders. Pay to the Agent
for the benefit of the Lenders the sum of $_________ to reimburse the Agent
and the Lenders for their unreimbursed actual costs and expenses incurred
through the Amendment Date in connection with the Project.
The parties hereby agree that the entire ICRM Settlement Proceeds shall be
applied toward the funding of the Amendment Date Payments.
5. Release of Net Swap Agreement Proceeds. The Agent, at the direction of
the Lenders, hereby releases its security interest, held for the benefit of the
Lenders, and each Hedge Counterparty hereby releases its security interest, in
any proceeds due the Borrower as a result of the unwinding of the
Pre-Restructure Swap Agreements ("Borrower's Swap Unwind Proceeds") to allow the
Borrower to use such proceeds to fund a portion of the Amendment Date Payments;
provided, however, that Borrower's Swap Unwind Proceeds shall first be used to
satisfy any obligations of Borrower to Swap Counterparties generated by the
unwinding of the Pre-Restructure Swap Agreements.
6. Restructure Credit Facility
(a) Tranche Allocation. The Pre-Restructure Indebtedness is hereby
restructured as follows:
(i) $47,779,957.53 of the Pre-Restructure Loans shall
be deemed to be the "Tranche A Term Loans", and $2,220,042.47
of the Pre-Restructure Bond LC Amount shall hereafter be
considered the "Tranche A Bond LC Amount";
(ii) $92,932,017.40 of the Pre-Restructure Loans
shall be deemed to be the "Tranche B Term Loans" and
$4,317,982.60 of the Pre-Restructure Bond LC Amount shall
hereafter be considered the "Tranche B Bond LC Amount";
(iii) $33,445,970.27 of the Pre-Restructure Loans,
$10,995,305.94 of Pre-Restructure Interest and $125,931.45 of
the Pre-Restructure Bond LC Fees shall be deemed to be term
loans in the aggregate principal amount of $44,567,207.66 (the
"Tranche C Term Loans") and $1,554,029.72 of the
Pre-Restructure Bond LC Amount shall hereafter be considered
the "Tranche C Bond LC Amount" (collectively, the Tranche A
Bond LC Amount, the Tranche B Bond LC Amount and the Tranche C
Bond LC Amount shall be referred to as the "Bond LC Amounts");
and
(iv) $3,665,101.98 of Pre-Restructure Interest and
$41,977.15 of Pre-Restructure Bond LC Fees shall be deemed to
be term loans in the aggregate principal amount of
$3,707,079.13 (the "Tranche D Term Loans"; collectively, the
Tranche A Term Loans, Tranche B Term Loans, Tranche C Term
Loans and Tranche D Term Loans shall be referred to as the
"Restructure Loans").
(b) Evidence of Indebtedness/Security. The Restructure Loans
shall be evidenced by amended and restated promissory notes issued in
connection therewith (the "Restructure Notes") and governed in
accordance with the terms and conditions of the Restructure Credit
Agreement. The restructuring of the Pre-Restructure Loans,
Pre-Restructure Interest and Pre-Restructure Bond LC Fees by the
Restructure Loans is not intended by the parties hereto to be and
should not be construed as a novation. The Restructure Loans shall
continue to be secured by the Security Documents.
(c) Bond Letter of Credit. The Bond Letter of Credit shall
remain outstanding under its current terms in conformity with the Bond
Documents. The Borrower's obligations with respect to the Bond Letter
of Credit and the Bond LC Amounts shall be governed in accordance with
the Restructure Credit Agreement. The Bond LC Obligations shall
continue to be secured by the Security Documents.
7. Restructure Project Documents. Contemporaneously with the full execution
of this Agreement:
(a) The Credit Agreement shall be amended and restated by an
Amended and Restated Credit and Reimbursement Agreement (the
"Restructure Credit Agreement") among the Borrower, the Lenders and
the Agent dated as of the Amendment Date;
(b) The Notes shall be amended and restated by the Restructure
Notes;
(c) The DRI Purchase Agreements shall be amended and restated by
Amended and Restated DRI Purchase Agreements (the "Restructure DRI
Purchase Agreements");
(d) The Security Deposit Agreement shall be amended and restated
by an Amended and Restated Security Deposit Agreement (the
"Restructure Security Deposit Agreement"); and
(e) The Sponsor Performance and Indemnity Agreements shall be
amended and restated by Amended and Restated Sponsor Performance and
Indemnity Agreements (the "Restructure Sponsor Performance and
Indemnity Agreements").
8. Termination of Equity Contribution Agreement. The Agent and the AIR
Parties shall terminate the Equity Contribution Agreement and any corresponding
Assignment and Consent to Assignment by executing, simultaneously with the
execution of this Agreement, a Termination Agreement in the form of that
attached hereto as Exhibit D hereto.
9. Trade Credit Security. The Agent and the Lenders agree to consider in
good faith, and on a case-by-case basis, requests by the Borrower to use certain
of its inventory assets to secure trade creditors. Any subordination of the
Agent's liens held on behalf of the Lenders to facilitate the Borrower's
procurement of trade credit, however, shall be made in the sole discretion of
the Lenders on terms and conditions satisfactory to the Lenders in their sole
discretion.
10. Project Documents. The Lenders agree to consider in good faith
directing the Agent to consent to any restructuring of Restructure Project
Documents proposed by the Borrower. Any such direction to consent, however,
shall be in the sole good faith discretion of the Lenders based on the Lenders'
belief that the proposed Restructure Project Documents restructuring in question
shall not on balance be prejudicial to the Lenders' legitimate interests.
11. Sale of the Project. (a) Release of Liens. At any time during the Sale
Formula Period, the AIR Parties shall have the right, subject to the In-Kind
Call Option, rights and remedies of the Agent and the Lenders arising after an
Event of Default (as defined in the Restructure Credit Agreement) and the other
terms and conditions of this Agreement, to effect a Project Sale free and clear
of any interests of the Agent and the Lenders upon a tendering to the Agent, for
the benefit of the Lenders, of the Sale Formula Amount in accordance with the
terms hereof, provided that (i) no installments of accrued interest on the
Restructure Loans are past due, (ii) no Bond LC Fees are past due, (iii) the
Sale Formula Amount shall not be less than $150,000,000, (iv) at the closing of
such Project Sale, the Agent, for the benefit of the Lenders, shall receive the
Minimum Cash Payment, (v) the Borrower shall have first repaid the full
outstanding balance of the Tranche D Term Loans and (vi) the Borrower shall have
first paid to PSI any and all amounts necessary to extinguish the PSI Lien. Upon
such a tendering by the AIR Parties to the Agent, for the benefit of the
Lenders, of the Sale Formula Amount (including the Minimum Cash Payment and, if
a Shortfall Amount exists, the Shortfall Shares) in accordance with the terms
hereof, the Borrower shall be released from its obligations to the Agent, the
Lenders and the Sponsors under any and all of the Restructure Project Documents
and the Sponsors shall be released from their obligations to the Agent, the
Lenders and the Borrower under any and all of the Restructure Project Documents;
provided, however that the Mutual Release and the Sponsor/Borrower Mutual
Release shall survive and remain in full force and effect. In the event that the
Net Project Sale Proceeds from a proposed sale would not generate a Sale Formula
Amount of at least $150,000,000, the Borrower shall be entitled to supplement
such Net Project Sale Proceeds with a Net Project Sale Proceeds Supplement.
(b) Shortfall Amount. To the extent that a Project Sale pursuant to Section
11(a) yields a Shortfall Amount, each of the Sponsors shall be obligated to
immediately pay to the Lenders its Shortfall Share.
(c) Payment of Shortfall Shares. Each Sponsor shall be entitled to the
following options in connection with the payment of any Shortfall Share:
(i) Shortfall Share Notes. The Sponsor shall be
entitled to pay any Shortfall Share via the delivery to the
Agent of Shortfall Share Notes. Shortfall Share Notes issued
by a Sponsor shall be in an aggregate face amount equal to
that portion of such Sponsor's Shortfall Share not paid in
cash at closing of the Project Sale and shall be dated as of
the date the Shortfall Share is due. In connection with the
issuance of such Shortfall Share Notes, (A) the issuing
Sponsor, the Agent and the Lenders shall enter into a
Shortfall Share Loan Agreement and (B) if applicable, GSI
shall execute and deliver to the Agent the GSI Shortfall Share
Guaranty, each of the foregoing dated as of the date the
Shortfall Share is due. Each Sponsor's right to pay any
Shortfall Share via the delivery to the Agent of Shortfall
Share Notes shall be independent of the other Sponsor's right
to do so.
(ii) Discounted Amount. Alternatively, immediately
upon closing of a Project Sale, the Sponsor shall have a
one-time right to satisfy any Shortfall Share by the payment
to the Lenders of the full Discounted Amount in cash. Each
Sponsor's right to take advantage of the Discounted Amount
shall be independent of the other Sponsor's right to do so.
(d) Examples. Several examples of calculations of the Sale
Formula Amount and Shortfall Shares in accordance with this Section 11
are attached hereto as Schedule III.
(e) Notice. The Agent and the Lenders and the AIR Parties
hereby agree to keep each other apprised of all negotiations concerning
potential Project Sales and the proposed purchase price or range of
prices discussed or proposed. The Borrower and the Sponsors shall
submit to the Lenders (i) any Project Sale offer they receive within
five (5) Business Days of receipt and (ii) any LOI within three (3)
Business Days of execution. The Borrower and the Sponsors shall
simultaneously submit with any LOI written confirmation of the
Sponsors' intent, and evidence reasonably satisfactory to the Lenders
of the Sponsors' ability, to close a Project Sale in accordance with
the terms hereof pursuant to such LOI. The Lenders will evaluate and
consider all Project Sale offers submitted by Borrower or the Sponsors
during the Sale Formula Period that do not conform to the terms set
forth herein, but in no event shall the Lenders be required to assent
to or accommodate any such non-conforming offer.
(f) Required Sales. Borrower and Sponsors agree to use their
best efforts to consummate a Project Sale, upon the terms set forth in
this Section 11, to any good faith qualified buyer nominated by the
Lenders who is willing to purchase the Project Assets or the membership
interests in the Borrower at a price that would yield: (i) a minimum
Sale Formula Amount of $150,000,000 (without any Net Project Sale
Proceeds Supplement) and (ii) the Minimum Cash Payment; provided,
however, that the terms and conditions of any such Project Sale may not
include conditions of sale reasonably unacceptable to either Sponsor
and may not require or result in any continuing obligations of either
Sponsor, other than the payment by the Sponsors of any Shortfall Amount
generated by such sale in accordance with the terms of this Section 11.
12. In-Kind Call Option.
-------------------
(a) Exercise. The Lenders may, at their sole option and in
their absolute discretion, elect to take title (or have their designee
take title) to either the Project Assets or the membership interests in
the Borrower upon the earliest to occur of: (i) delivery to the Agent
of (A) an executed LOI and (B) written confirmation of the Sponsors'
intent, and evidence reasonably satisfactory to the Lenders of the
Sponsors' ability, to close a Project Sale in accordance with the terms
of Section 11 hereof pursuant to such an LOI (collectively, a
"Triggering LOI"); (ii) a Proceeding instituted by or against either of
the Sponsors; or (iii) May 5, 2003 (an "In-Kind Call Option"). Under no
circumstances shall the Agent or the Lenders ever be required to take
title to any portion of the Project or any membership interest in the
Borrower unless they so elect.
(b) Lapse. Upon receipt of a Triggering LOI, the Agent must
confirm any intent to exercise the resulting In-Kind Call Option in
writing to the Borrower and the Sponsors within twenty (20) days or the
In-Kind Call Option shall lapse; provided, however, that (i) in the
event the AIR Parties have not satisfied their notice obligations
described in Section 11(e) of this Agreement, the period for the
Lenders to confirm their intent to exercise their In-Kind Call Option
set forth in this section shall, upon Notice by the Agent to the
Borrower, be extended by twenty-five (25) days, (ii) a change in the
price term of the Project Sale contemplated by a Triggering LOI shall
reinstate the In-Kind Call Option for a new twenty (20) day period,
such period to commence from the date the change in price term is
communicated to the Agent in writing, and (iii) a new In-Kind Call
Option shall arise if either of the circumstances described in
subsections (ii) and (iii) of Section 12(a) occurs before the Project
Sale contemplated by a Triggering LOI closes. In the event that an
In-Kind Call Option is triggered by either of the circumstances
described in subsections (ii) or (iii) of Section 12(a), the Agent must
confirm any exercise of such In-Kind Call Option in writing to the
Borrower and the Sponsors on or before the ninetieth (90th) day after
the In-Kind Call Option is triggered or the In-Kind Call Option shall
lapse.
(c) In-Kind Shortfall Amount. To the extent that transfer of
title to the Project or the membership interests in the Borrower
pursuant to the exercise of the In-Kind Call Option yields an In-Kind
Shortfall Amount, each of the Sponsors shall be obligated to
immediately pay to the Lenders its In-Kind Shortfall Share.
(d) Satisfaction of Obligations. Upon (i) transfer of title to
the Project or the membership interests in the Borrower pursuant to the
exercise of the In-Kind Call Option and (ii) receipt by the Agent of
(A) if the option is triggered by an LOI, any Net Project Sale Proceeds
Supplement and (B) the In-Kind Shortfall Shares, the Borrower shall be
released from its obligations to the Agent, the Lenders and the
Sponsors under any and all of the Restructure Project Documents and the
Sponsors shall be released from their obligations to the Agent, the
Lenders and the Borrower under any and all of the Restructure Project
Documents; provided, however that the Mutual Release and the
Sponsor/Borrower Mutual Release shall survive and remain in full force
and effect.
(e) Payment of In-Kind Shortfall Shares. Each Sponsor shall be
entitled to the following options in connection with the payment of
any In-Kind Shortfall Share:
(i) Shortfall Share Notes. The Sponsor shall be
entitled to pay any In-Kind Shortfall Share via the delivery
to the Agent of Shortfall Share Notes. Shortfall Share Notes
issued by a Sponsor shall be in an aggregate face amount equal
to that portion of such Sponsor's In-Kind Shortfall Share not
paid in cash upon the transfer of title to the Project or the
membership interests in the Borrower pursuant to the exercise
of the In-Kind Call Option and shall be dated as of the date
the In-Kind Shortfall Share is due. In connection with the
issuance of such Shortfall Share Notes, (A) the issuing
Sponsor, the Agent and the Lenders shall enter into a
Shortfall Share Loan Agreement and (B) if applicable, GSI
shall execute and deliver to the Agent the GSI Shortfall Share
Guaranty, each of the foregoing dated as of the date the
In-Kind Shortfall Share is due. Each Sponsor's right to pay
any In-Kind Shortfall Share via the delivery to the Agent of
Shortfall Share Notes shall be independent of the other
Sponsor's right to do so.
(ii) In-Kind Discounted Amount. Alternatively,
immediately upon the transfer of title to the Project or the
membership interests in the Borrower pursuant to the exercise
of the In-Kind Call Option, the Sponsor shall have a one-time
right to satisfy any Shortfall Share by the payment to the
Lenders of the full In-Kind Discounted Amount in cash. Each
Sponsor's right to take advantage of the In-Kind Discounted
Amount shall be independent of the other Sponsor's right to do
so.
(f) Further Assurances. Upon an exercise of the In-Kind Call
Option by the Lenders in accordance with the terms hereof, the Borrower
and the Sponsors, as applicable, shall promptly take any action
reasonably requested by the Lenders to effect the transfer of the
Project Assets or the membership interests of the Sponsors, as
applicable, to the Lenders or the Lenders' nominee.
13. Foreclosure.
(a) Foreclosure Shortfall Shares. If after an Event of Default
(as defined in the Restructure Credit Agreement), the Agent, on behalf
of the Lenders, causes a foreclosure sale (a "Foreclosure Sale") of the
Facility to occur, then upon transfer of title to the Facility pursuant
to such Foreclosure Sale:
(i) Sale to a Non-Controlled Third Party. In the event that the
Facility is sold to a Non-Controlled Third Party:
(A) Non-Defaulting Sponsor. A Sponsor which
is not in default of any of its material obligations
under the Restructure Project Documents shall be
released from its obligations to the Agent, the
Lenders and the Borrower under any and all of the
Restructure Project Documents, if it immediately pays
to the Agent, for the benefit of the Lenders, a
Foreclosure Shortfall Share; provided, however, that
the Mutual Release and the Sponsor/Borrower Mutual
Release shall survive and remain in full force and
effect; and
(B) Defaulting Sponsor. A Sponsor which is in default
of any one or more of its material obligations under any
Restructure Project Document shall remain bound by any and
all Restructure Project Documents to which it is a party;
and
(ii) Sale to a Lender Party for $100,000,000 or More.
In the event that the Facility is sold to a Lender Party and
such sale generates Foreclosure Sale Proceeds equal to or
greater than $100,000,000:
(A) Non-Defaulting Sponsor. A Sponsor which
is not in default of any of its material obligations
under the Restructure Project Documents shall be
released from its obligations to the Agent, the
Lenders and the Borrower under any and all of the
Restructure Project Documents, if it immediately pays
to the Agent, for the benefit of the Lenders, a
Foreclosure Shortfall Share; provided, however, that
the Mutual Release and the Sponsor/Borrower Mutual
Release shall survive and remain in full force and
effect; and
(B) Defaulting Sponsor. A Sponsor which is in default
of any one or more of its material obligations under any
Restructure Project Document shall remain bound by any and
all Restructure Project Documents to which it is a party;
and
(iii) Sale to a Lender Party for Less Than
$100,000,000. In the event that the Facility is sold to a
Lender Party and such sale generates less than $100,000,000 of
Foreclosure Sale Proceeds:
(A) Non Defaulting Sponsor. A Sponsor which is not in
default of any of its material obligations under the
Restructure Project Documents:
(I) shall be released from its
obligations to the Agent, the Lenders and
the Borrower under any and all of the
Restructure Project Documents, if it
immediately pays to the Agent, for the
benefit of the Lenders: (x) an amount equal
to fifty percent (50%) of the amount of the
difference between $100,000,000 and the
Foreclosure Sale Proceeds and (y) a
Foreclosure Shortfall Share; provided,
however, that the Mutual Release and the
Sponsor/Borrower Mutual Release shall
survive and remain in full force and effect;
or
(II) if such Sponsor fails to
satisfy the conditions set forth in Section
13(a)(iii)(A)(I) for a release from its
obligations under the Restructure Project
Documents, such Sponsor shall remain bound
by any and all Restructure Project Documents
to which it is a party, including its
respective Restructure DRI Purchase
Agreement; provided, however, that if the
other Sponsor is not performing under its
Restructure DRI Purchase Agreement, the
Invoice Price (as defined in the Restructure
DRI Purchase Agreements) for DRI paid by
such Sponsor shall equal the applicable
Special Adjusted Price (as defined in the
Restructure DRI Purchase Agreements),
ignoring the effect of any application of
Foreclosure Sale Proceeds to the Restructure
Loans and/or Bond LC Obligations; and
provided further, however, that if a Lender
Party contracts to transfer title to the
Facility to a Non-Controlled Third Party at
any time prior to May 5, 2003, such Sponsor,
so long as it is not then in material
default of any Restructure Project Document
to which it is a party, shall be released
from its obligations to the Agent, the
Lenders and the Borrower under any and all
of the Restructure Project Documents, upon,
within thirty (30) days of receiving written
notice of such contract to transfer, its
payment to the Agent, for the benefit of the
Lenders, of a Foreclosure Shortfall Share;
provided that (x) the Mutual Release and the
Sponsor/Borrower Mutual Release shall
survive and remain in full force and effect
and (y) for avoidance of doubt, the parties
hereto agree that the price at which the
Facility is transferred to such
Non-Controlled Party shall have no bearing
on the calculation of the Foreclosure
Shortfall Share; and
(B) Defaulting Sponsor. A Sponsor which is
in default of any one or more of its material
obligations under any Restructure Project Document
shall remain bound by any and all Restructure Project
Documents to which it is a party.
(b) Right to Arrange Resale. In the event that a Lender Party
takes title to the Facility pursuant to a Foreclosure Sale, a Sponsor
who is not in default of any of its material obligations under the
Restructure Project Documents shall have the right to market the
Facility to third parties until the earlier of (i) the date that such
Lender Party contracts in good faith to transfer title to the Facility
to a Non-Controlled Third-Party and (ii) May 5, 2003. In the event that
prior to such earlier date such Sponsor (or the other Sponsor) produces
a bona fide, ready, willing and able purchaser for the Facility for at
least $100,000,000 in cash, the Lenders shall either: (x) cause such
Lender Party to consummate a sale of the Facility to such third party
as soon as practicable subject to the provisions of Section
13(a)(iii)(A)(II) or (y) within thirty (30) days of receiving such
offer notify such Sponsor in writing that the Lender Party is not
willing to sell the Facility to such third party, in which case such
Sponsor shall be released from its obligations to the Agent, the
Lenders and the Borrower under any and all of the Restructure Project
Documents upon, within thirty (30) days of receiving such notice, its
payment to the Agent, for the benefit of the Lenders, of a Foreclosure
Shortfall Share; provided, however, that (i) the Mutual Release and the
Sponsor/Borrower Mutual Release shall survive and remain in full force
and effect and (ii) for avoidance of doubt, the parties hereto agree
that the price term of the offer from the third party nominated by a
Sponsor shall have no bearing on the calculation of the Foreclosure
Shortfall Share.
(c) Payment of Foreclosure Shortfall Shares. A Sponsor
entitled to a release as described in Section 13(a)(i)(A),
13(a)(ii)(A), 13(a)(iii)(A)(I), 13(a)(iii)(A)(II) or 13(b) shall be
entitled to the following options in connection with the payment of any
Foreclosure Shortfall Share:
(i) Foreclosure Shortfall Share Notes. The Sponsor
shall be entitled to pay any Foreclosure Shortfall Share via
the delivery to the Agent of Shortfall Share Notes. Shortfall
Share Notes issued by a Sponsor shall be in an aggregate face
amount equal to that portion of such Sponsor's Foreclosure
Shortfall Share not paid by the Sponsor in cash upon transfer
of the title to the Facility pursuant to the Foreclosure Sale
and shall be dated as of the date such Foreclosure Shortfall
Share is due. In connection with the issuance of such
Shortfall Share Notes, (A) the issuing Sponsor, the Agent and
the Lenders shall enter into a Shortfall Share Loan Agreement
and (B) if applicable, GSI shall execute and deliver to the
Agent the GSI Shortfall Share Guaranty, each of the foregoing
dated as of the date such Foreclosure Shortfall Share is due.
Each Sponsor's right to pay any Foreclosure Shortfall Share
via the delivery to the Agent of Shortfall Share Notes shall
be independent of any right of the other Sponsor to do so.
(ii) Foreclosure Discounted Amount. Alternatively,
immediately upon the transfer of title to the Facility
pursuant to a Foreclosure Sale, the Sponsor shall have a
one-time right to satisfy any Foreclosure Shortfall Share by
the payment to the Lenders of the full Foreclosure Discounted
Amount in cash. Each Sponsor's right to take advantage of the
Foreclosure Discounted Amount shall be independent of any
right of the other Sponsor to do so.
14. Catalyst Reserve Credit.
-----------------------
Notwithstanding anything in this Agreement to the contrary, if a
Shortfall Share, In-Kind Shortfall Share or a Foreclosure Shortfall Share shall
be due from a Sponsor, such Sponsor shall be entitled to a dollar-for-dollar
credit equal to such Sponsor's ratable portion (as determined by the relative
amounts funded into the account) of any amount then remaining in the Catalyst
Repair Reserve Account (as defined in the Restructure Credit Agreement) not
necessary to fund immediate catalyst repairs against such Shortfall Share,
In-Kind Shortfall Share or Foreclosure Shortfall Share, or, if applicable,
against any Discounted Amount, In-Kind Discounted Amount or Foreclosure
Discounted Amount.
15. Lender Warrant.
--------------
Contemporaneously with the execution of this Agreement, the Borrower
shall issue to the Agent, for the ratable benefit of the Lenders, a warrant (a
"Lender Warrant"), representing such Lender's ratable share of 99.99% of the
fully diluted common equity of the Borrower and having the following
characteristics:
(a) Terms. The Lender Warrant shall have a strike price of
$1.00 and be exercisable, after 180 days written notice to the
Sponsors, at any time from and after the earlier of (i) the occurrence
of an Event of Default under the Restructure Credit Agreement or (ii)
May 5, 2003; provided, however, that upon an Event of Default caused by
the issuance of a Termination Notice (as defined in the Restructure DRI
Purchase Agreements) the Agent, on behalf of the Lenders, shall have
the right to exercise the Lender Warrant immediately; and provided
further, however, that the Lender Warrant shall no longer be
exercisable following the earlier of (i) a Project Sale or such other
event which pursuant to the terms hereof results in the release of
Borrower from its obligations under the Restructure Credit Documents,
(ii) payment of the Payoff Amount on or after the March 31, 2013, or
(iii) March 31, 2027. Upon exercise of the Lender Warrant and transfer
of the corresponding membership interests, the Sponsors agree to sell,
and the Lenders agree to purchase, the remaining .01% interest in the
Borrower for an aggregate price of $1.00.
(b) Call. At any time prior to the date fifteen (15) days
after the Agent's exercise of the Lender Warrant, the Borrower,
provided no Event of Default arising from a failure to make any payment
due under the Restructure Credit Documents shall exist, shall have the
right to repurchase the Lender Warrant for an amount equal to (i) the
Payoff Amount plus (ii) 50% of the fair market value of the Project
that is in excess of the Payoff Amount.
(c) Sponsors' Obligations Upon Exercise. Upon the exercise of
the Lender Warrant by the Agent, (i) each Sponsor shall be severally
liable to the Lenders for the In-Kind Shortfall Share that would have
been applicable if the Lenders had exercised an In-Kind Call Option to
take title to the Project or the membership interests in the Borrower
as provided in Section 12 absent an LOI, and (ii) upon receipt by the
Agent of the In-Kind Shortfall Amount from a Sponsor (paid in
accordance with Section 12(c) and 12(d)), such Sponsor's obligations
under the Restructure Project Documents, including but not limited to
the Restructure DRI Purchase Agreements, shall terminate; provided,
however, that the Mutual Release and the Sponsor/Borrower Mutual
Release shall survive and remain in full force and effect.
(d) Further Assurances. The Borrower shall execute and deliver, or
cause to be executed and delivered, such documents, agreements or opinions
as the Agent reasonably deems necessary to confirm the legality and
enforceability of the Lender Warrant.
16. Consent to Relief From Stay. The Borrower and the Sponsors each
hereby irrevocably agree and consent that in the event that the Borrower is
the subject of a Proceeding, the Agent shall be entitled to the immediate
and absolute lifting of any automatic stay as to permit the Agent's
enforcement of its remedies under the Restructure Credit Documents against
any of the Collateral (as defined in the Restructure Credit Agreement),
including specifically, but not limited to, the stay imposed by Section 362
of the United States Bankruptcy Code, as it may be amended from time to
time hereafter. The Borrower and the Sponsors each hereby irrevocably
consent to the immediate lifting of any such automatic stay, and will not
contest any motion by the Agent to lift such stay.
17. Release of Contingent Equity Letter of Credit.
Upon the effectiveness of this Agreement, the Agent shall release the
GSTOC Contingent Equity Letter of Credit.
18. Consent to Post-Date Certain Project Documents Modifications.
------------------------------------------------------------
The Agent and each of the Lenders hereby consent to the Post-Date
Certain Project Documents Modifications to the extent and only to the extent
such consent is required pursuant to the Project Documents.
19. Waiver of Defenses.
The Borrower hereby waives any existing (prior to the effectiveness of
this Agreement) offset, counterclaim or defense, whether known or unknown, to
the payment of any amounts payable by the Borrower or to the performance of any
obligation by the Borrower arising under any Credit Document (as defined in the
Restructure Credit Agreement) to which it is a party. Each of the Sponsors
hereby waives any existing (prior to the effectiveness of this Agreement)
offset, recoupment, counterclaim or defense, whether known or unknown, to the
payment of any amounts payable by it or to the performance of any obligation by
it arising under any Restructure Project Document to which it is a party.
20. Mutual Releases.
Contemporaneously with the execution of this Agreement: (a) the parties
hereto shall execute a mutual release (the "Mutual Release") in the form of that
attached hereto as Exhibit B and (b) the AIR Parties shall execute a mutual
release (the "Sponsor/Borrower Mutual Release") in the form of that attached
hereto as Exhibit C.
21. Limited Modification.
--------------------
Except as expressly restructured in accordance with this Agreement as
of the date hereof, all the terms, provisions and conditions of the Project
Documents shall remain unchanged and shall continue in full force and effect.
22. Authority.
---------
Each party to this Agreement represents and warrants to the other
parties that it has full power and authority to enter into and perform this
Agreement, and that this Agreement has been duly authorized by such party, is
legal, valid and binding and enforceable against such party in accordance with
its terms, and is not in contravention of any law, order or agreement by which
such party is bound or of such party's organizational documents. Each of GSI,
GSTOC and BSC have obtained any and all approvals and/or consents from their
senior lenders, shareholders, or management which are necessary for such entity
to enter into and perform its obligations under the Master Restructure
Agreement, the Restructure DRI Purchase Agreements or any other Restructure
Project Documents to the extent such entity is a party to any such agreements.
23. Notice.
------
Any notice required by this Agreement to be given to any party shall be
in writing and shall be sent in accordance with Section 13.03 of the Restructure
Credit Agreement, as amended from time to time and, in the cases of the Sponsors
and GSI, in accordance with Section 18 of their respective Restructure Sponsor
Performance and Indemnity Agreements, as amended from time to time.
24. Captions.
--------
Underlined captions used in this Agreement are for ease of reference
only and shall not be used in the interpretation of this Agreement.
25. Credit Document.
---------------
This Agreement is a Credit Document and shall be construed,
administered and applied in accordance with the terms and provisions of the
Restructure Credit Agreement.
26. Jointly Drafted Agreements.
--------------------------
The parties hereto hereby acknowledge and agree that each of them is
jointly responsible for the drafting and negotiation of all the terms and
provisions contained in this Agreement and in all the schedules, exhibits and
other agreements delivered in connection herewith, and that no such terms and
provisions should as a result of such negotiation and drafting be strictly
construed against any such party.
27. Entire Agreement.
----------------
This Agreement, together with the other Restructure Project Documents,
constitutes the complete and final agreement by and among the parties hereto.
There are no other understandings or agreements, whether oral or written, among
the parties hereto with respect to the matters addressed by this Agreement; and
no prior understandings or agreements with respect to the subject matter hereof
shall survive execution and delivery of this Agreement.
28. Governing Law; Jurisdiction and Venue.
-------------------------------------
(a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF NORTH CAROLINA.
(b) EACH AIR PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY, IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR
ANY SECURITY DOCUMENT OR FOR RECOGNITION AND ENFORCEMENT OF
ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NORTH CAROLINA, THE
COURTS OF THE UNITED STATES OF AMERICA FOR THE WESTERN
DISTRICT OF NORTH CAROLINA, AND APPELLATE COURTS FROM ANY
THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY
BE BROUGHT IN SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING
WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD
OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH
ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF
BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR
FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS
SPECIFIED HEREIN AND, IF APPLICABLE, TO THE AGENT, THE ISSUING
BANK AND THE LENDERS AT THEIR RESPECTIVE ADDRESSES SPECIFIED
HEREIN OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE
AGENT OR THE BORROWER, IF APPLICABLE, SHALL HAVE BEEN NOTIFIED
PURSUANT HERETO; AND
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER
JURISDICTION.
(c) EACH OF PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO OR
ARISING OUT OF THIS AGREEMENT, THE NOTES OR ANY SECURITY DOCUMENT AND
FOR ANY COUNTERCLAIM THEREUNDER.
29. Counterparts; Telecopy Signatures.
---------------------------------
This Agreement may be executed in one or more counterparts, each of
which shall constitute an executed original of this Agreement and which together
shall constitute only one and the same executed original hereof. This Agreement
shall be deemed fully executed and delivered, and enforceable according to its
terms, upon the receipt of telecopy signatures of the parties hereto.
Notwithstanding the foregoing, the parties shall promptly provide the Agent with
an executed original of this Agreement after delivery of an executed copy hereof
by telecopy.
[Remainder of page left blank intentionally.]
<PAGE>
Each of the parties hereto has caused a counterpart of this Agreement
to be duly executed and delivered as of the date first above written.
AMERICAN IRON REDUCTION L.L.C.
By: /s/ Tobin Pospisil
-----------------------
Name: Tobin Pospisil
Title: Authorized Representative
By: /s/ Patricia Foshee
------------------------
Name: Patricia Foshee
Title: Authorized Representative
GS TECHNOLOGIES OPERATING CO., INC.
By: /s/ Tobin Pospisil
-----------------------
Name: Tobin Pospisil
Title: V.P. Strategic & Financial
Planning
BIRMINGHAM STEEL CORPORATION
By: /s/ James A. Todd, Jr.
---------------------------
Name: James A. Todd, Jr.
Title: Chief Administrative Officer
GS INDUSTRIES, INC.
By: /s/ Tobin Pospisil
-----------------------
Name: Tobin Pospisil
Title: V.P. Strategic & Financial
Planning
BANK OF AMERICA, N.A., as Administrative
Agent, as Collateral Agent, as a Lender, as
Bond LC Issuer and as a Bond LC Lender
By: /s/ W. Eric Dunn
---------------------
Name: W. Eric Dunn
Title: S. V. P.
CANADIAN IMPERIAL BANK OF COMMERCE, as
Documentation Agent, as a Lender and as a Bond
LC Lender
By: /s/ Ronald E. Spitzer
--------------------------
Name: Ronald E. Spitzer
Title: Asst. General Manager
Canadian Imperial
Bank of Commerce
THE BANK OF NOVA SCOTIA
By: /s/ Pieter J. Van Schaick
------------------------------
Name: Pieter J. Van Schaick
Title: Relationship Manager
THE SAKURA BANK, LIMITED
By: /s/ Tamihiro Kawauchi
--------------------------
Name: Tamihiro Kawauchi
Title: Senior Vice President &
Group Head Fixed Income Group
THE SANWA BANK LIMITED
By: /s/ Laurance J. Bressler
-----------------------------
Name: Laurance J. Bressler
Title: Senior Vice President & Area
Manager
REGIONS BANK
By: /s/ James E. Schmalz
-------------------------
Name: James E. Schmalz
Title: V.P.
<PAGE>
GULF INTERNATIONAL BANK, B.S.C.
By: /s/ Mireille Khalidi/Abdel-Fattah
Tahoun
Name: Mireille Khalidi/Abdel-Fattah
Tahoun
Title: AVP /
SVP
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Eric A. Schaefer
-------------------------
Name: Eric A. Schaefer
Title: Manager Operations
<PAGE>
EX-22.1
SUBSIDIARIES OF THE REGISTRANT AS OF JUNE 30, 2000
BIRMINGHAM STEEL CORPORATION
American Steel & Wire Corporation, a Delaware corporation
Norfolk Steel Corporation*, a Virginia corporation
Birmingham Steel Overseas, Ltd, a Barbados corporation
Port Everglades Steel Corporation, a Delaware corporation
Birmingham Recycling Investment Company, a Delaware corporation
Birmingham East Coast Holdings, a Delaware corporation
Birmingham Southeast, LLC, a Delaware corporation
Midwest Holdings, Inc., a Delaware corporation
Cumberland Recyclers, LLC*, a Delaware corporation
* Denotes inactive/dormant subsidiary
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference (i) in the Registration Statement
(Form S-8 No. 33-16648) pertaining to the Birmingham Steel Corporation 1986
Stock Option Plan; (ii) in the Registration Statement (Form S-8 No. 33-23563)
pertaining to the Birmingham Steel Corporation 401 (k) Plan; (iii) in the
Registration Statement (Form S-8 No. 33-30848) pertaining to the Birmingham
Steel Corporation 1989 Non-Union Stock Option Plan; (iv) in the Registration
Statement (Form S-8 No. 33-41595) pertaining to the Birmingham Steel Corporation
1990 Management Incentive Plan; (v) in the Registration Statement (Form S-8 No.
33-51080) pertaining to the Birmingham Steel Corporation 1992 Non-Union
Employee's Stock Option Plan; (vi) in the Registration Statement (Form S-8 No.
33-64069) pertaining to the Birmingham Steel Corporation 1995 Stock Accumulation
Plan; (vii) in the Registration Statement (Form S-8 No. 333-34291) pertaining to
the Birmingham Steel Corporation 1996 Director Stock Option Plan; and (viii) in
the Registration Statement (Form S-8 No. 333-46771) pertaining to the Birmingham
Steel Corporation 1997 Management Incentive Plan; and (ix) in the Registration
Statement (Form S-8 No. 90365) pertaining to the Birmingham Steel Corporation
1999 Director Compensation Plan of our report dated August 10, 2000, with
respect to the consolidated financial statements and schedule of Birmingham
Steel Corporation, included in the Annual Report (Form 10-K) for the year ended
June 30, 2000.
/s/ Ernst & Young LLP
Birmingham, Alabama
September 12, 2000
<PAGE>
