EXHIBIT 10(vi)
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CO-STEEL INC.
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Second Amended and Restated
Note Agreement
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DATED AS OF APRIL 30, 2002
$45,000,000 SERIES A SENIOR SECURED NOTES DUE JANUARY 15, 2004
$75,000,000 SERIES B SENIOR SECURED NOTES DUE JULY 15, 2006
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TABLE OF CONTENTS
1. PRELIMINARY STATEMENT 1
1A. Prior Issuances 1
1B. Form of Notes 2
2. AMENDMENT AND RESTATEMENT OF EXISTING AGREEMENTS; CLOSING CONDITIONS; POST-CLOSING DELIVERIES 2
2A. The Exchange of Existing Notes 2
2B. Accrued ▇▇▇▇▇▇▇▇ ▇
▇▇. ▇▇▇▇ ▇
▇▇. ▇▇▇▇▇▇▇ Documents 3
2E. Representations and Warranties; No Default 5
2F. Exchange Permitted by Applicable Laws 5
2G. Payment of Special Counsel Fees 5
2H. Payment of Significant Share Offering Proportion 5
2I. Insurance 6
2J. Certificate of Status/Compliance 6
2K. Compliance with Financial Covenants 6
2L. Post-Closing Deliveries 6
3. INTEREST RATE 10
3A. Applicable Rates 10
3B. Default Rate 10
3C. Computation of ▇▇▇▇▇▇▇▇ ▇▇
▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇ (▇▇▇▇▇▇) 11
4. PREPAYMENTS 12
4A. Scheduled Prepayments 12
4B. Required Prepayments 13
4C. Optional Prepayment With Yield-Maintenance Amount 14
4D. Notice of Prepayment 15
4E. Application of Prepayments 15
4F. Application of Partial Payments 16
4G. Retirement of Notes 16
5. AFFIRMATIVE COVENANTS 16
5A. Financial Statements; Business Plans 16
5B. Information Required by Rule 144A 20
5C. Inspection of Property 20
5D. Covenant to Secure Notes Equally 21
5E. Maintenance of Insurance 21
5F. Compliance with Environmental Laws 21
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5G. Other Laws, Regulations etc. 22
5H. ERISA Notices 22
5I. Payment of Taxes and Claims 23
5J. Maintenance of Properties and Books 23
5K. Corporate Existence, Etc. 24
5L. Business 24
5M. Guarantors 24
5N. Intellectual Property Rights 24
5O. Benefit and Pension Plans 25
5P. Environmental Reporting 25
5Q. Incorporated Provisions 26
5R. Approved Financings 26
5S. Additional Restructuring Fee 27
5T. Inventory 27
5U. Accounts Receivable 27
5V. English Finance Structure Companies 27
5W. Material Contracts and Material Licenses 28
5X. Jurisdictions 28
5Y. Notices 29
5Z. Maintenance of Bank Accounts 30
5AA. Asset Monetization Program 31
5BB. Collateral Audit 31
5CC. Computer Systems 31
5DD. Biennial Collateral Opinion 31
5EE. Bi-Annual Auditor's Report 32
6. NEGATIVE COVENANTS 32
6A. Current Ratio 32
6B. Current Assets 33
6C. Ratio of Consolidated Total Net Debt to Normalized Consolidated EBITDA 33
6D. Ratio of Normalized Consolidated EBITDA Net of Capex to Consolidated Net Interest Expense 33
6E. ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇
▇▇. Cumulative Consolidated EBITDA 34
6G. Incurrence of Indebtedness 34
6H. Other Indebtedness and Agreements 35
6I. Payments to other Senior Lenders 35
6J. Negative Pledge 36
6K. Material Contracts and Material Licenses 36
6L. Sale of Assets 36
6M. Sale and Leaseback Transactions 37
6N. Acquisitions 37
6O. Loans, Investments, etc. 37
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6P. Dividends, etc. 38
6Q. No Reduction of Capital 38
6R. No Issue of Capital 38
6S. Capital Expenditures 38
6T. Accounting Changes 39
6U. Transactions with Affiliates 39
6V. Fundamental Changes 39
6W. Hedging Contracts 40
6X. Inconsistent Agreements 40
6Y. Announcements 40
6Z. Industrial Bonds 40
6AA. English Finance Structure Companies 40
6BB. Intentionally Deleted 41
6CC. Co-Steel C.S.M. Corp. 41
6DD. Financial Covenants on and after January 15, 2004 41
6EE. Investments 41
6FF. Payment of Intercompany Indebtedness 42
7. EVENTS OF DEFAULT 42
7A. Acceleration 42
7B. Rescission of Acceleration 48
7C. Notice of Acceleration or Rescission 49
7D. Other Remedies 49
8. REPRESENTATIONS, COVENANTS AND WARRANTIES 49
8A. Binding Obligation 49
8B. Reaffirmation 50
8C. No Default 50
8D. No Conflict, Breach, etc. 50
8E. No Violation of Law or Regulations 50
8F. Authorization, Consent, etc. 50
8G. Full Disclosure 51
8H. Organization and Ownership of Shares of Subsidiaries 51
8I. Litigation; Observance of Statutes and Orders 52
8J. Title to Property; Leases 52
8K. Existing Indebtedness 53
8L. Solvency 53
8M. Intent 54
8N. Environmental Matters 54
8O. Liens 54
8P. Ownership of Inventories Retained on Leased Properties 55
8Q. Ownership of Third Party Accounts Receivable 55
8R. Contracts Affected by Change of Control 55
8S. Material Contracts and Material Licenses 55
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8T. Restricted Subsidiaries 56
8U. Bank Accounts 56
8V. Intercompany Indebtedness 57
8W. Computer Systems 57
8X. Intellectual Property Rights 57
8Y. Licenses, Agency and Distribution Agreements 57
8Z. Insurance 58
8AA. Financial Statements 58
8BB. Special Purpose Financial Statements 58
8CC. Financial Forecast 59
8DD. Asset Monetization Program 59
8EE. Employment Disputes 59
8FF. Benefit and Pension Plans 59
8GG. Pension Plans 60
8HH. N.J.S.C. Investment Co., Inc. 60
8II. English Finance Structure Companies 60
8JJ. Hungarian Finance Structure Companies 60
8KK. Co-Steel C.S.M. Corp. 60
9. REPRESENTATIONS OF THE PURCHASERS 61
10. DEFINITIONS 61
10A. Yield-Maintenance Amount Terms 61
10B. Other Terms 63
10C. Accounting Principles, Terms and Determinations 88
11. MISCELLANEOUS 88
11A. Note Payments 88
11B. Expenses 88
11C. Consent to Amendments 89
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes 90
11E. Persons Deemed Owners; Participations 90
11F. Currency Equivalent 91
11G. Judgment 91
11H. Tax Indemnity 92
11I. Survival of Representations and Warranties; Entire Agreement 93
11J. Survival of Notes and Payment Obligations 93
11K. Successors and Assigns 93
11L. Disclosure to Other Persons 93
11M. Notices 94
11N. Payments Due on Non-Business Days 94
11O. Satisfaction Requirement 94
11P. Jurisdiction; Service of Process 95
11Q. Governing Law 95
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11R. Severability 96
11S. Descriptive Headings 96
11T. Counterparts 96
11U. Certain Conflicts 96
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SCHEDULES AND EXHIBITS
PURCHASER SCHEDULE
SCHEDULE 2L(d) -- Co-Steel Hungary
SCHEDULE 5V -- English Finance Structure Companies Transaction
SCHEDULE 5X -- Jurisdictions
SCHEDULE 6AA -- Business of English Finance Structure Companies
SCHEDULE 6DD -- Financial Covenants after January 15, 2004
SCHEDULE 8C -- Waived Defaults and Events of Default
SCHEDULE 8H -- Organization and Ownership of Shares of Subsidiaries
SCHEDULE 8I -- Certain Litigation
SCHEDULE 8J(a) -- Owned Properties (Including New Jersey and Ontario Properties)
SCHEDULE 8J(b) -- Significant U.S. Leased Properties
SCHEDULE 8N -- Environmental Matters
SCHEDULE 8S-1 -- Material Contracts
SCHEDULE 8S-2 -- Material Licenses
SCHEDULE 8U -- Bank Accounts
SCHEDULE 8V -- Intercompany Indebtedness
SCHEDULE 8X -- Intellectual Property
SCHEDULE 8Y -- Licenses, Agency and Distribution Agreements
SCHEDULE 8CC -- Financial Forecast
SCHEDULE 8GG -- Pension Plans
SCHEDULE 8II -- Assets and Liabilities of English Finance Structure Companies
SCHEDULE 8JJ -- Assets and Liabilities of Hungarian Finance Structure Companies
SCHEDULE 8KK -- Assets of Co-Steel C.S.M. Corp.
SCHEDULE 10B-2 -- Mortgages
EXHIBIT A-1 -- Form of Series A Senior Secured Note
EXHIBIT A-2 -- Form of Series B Senior Secured Note
EXHIBIT B -- Form of Intercreditor Agreement
EXHIBIT C -- Intentionally Deleted
EXHIBIT D -- Asset Monetization Program
EXHIBIT E -- Form of Guarantee
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CO-STEEL INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇
As of April 30, 2002
To the Purchasers Named in the
Purchaser Schedule Attached Hereto
Ladies and Gentlemen:
The undersigned, Co-Steel Inc., an Ontario, Canada corporation (herein
called the "COMPANY"), hereby agrees with the purchasers named in the Purchaser
Schedule attached hereto (herein called the "PURCHASERS") as follows:
1. PRELIMINARY STATEMENT
1A. PRIOR ISSUANCES.
(a) SERIES A NOTES. The Company has heretofore issued its 8.57% senior
promissory notes due January 15, 2004 (collectively, as in effect
immediately prior to the Restructuring Date, the "EXISTING SERIES A NOTES")
in the original aggregate principal amount of $100,000,000 pursuant to that
certain Note Agreement, dated as of January 10, 1994, as amended by the
Amended and Restated Note Agreement dated as of February 4, 2000 and as
further amended prior to the Restructuring Date (the "EXISTING 1994
AGREEMENT"), between the Company and The Prudential Insurance Company of
America (as the purchaser thereunder). The outstanding principal amount of
the Existing Series A Notes as of the date hereof is $45,000,000 (prior to
giving effect to any payments on the Restructuring Date).
(b) SERIES B NOTES. The Company has heretofore issued its 9.09% senior
promissory notes due July 15, 2006 (collectively, as in effect immediately
prior to the Restructuring Date, the "EXISTING SERIES B NOTES," and
together with the Existing Series A Notes, the "EXISTING NOTES") in the
original aggregate principal amount of $75,000,000 pursuant to that certain
Note Agreement, dated as of February 20, 1997, as amended by the Amended
and Restated Note Agreement dated as of February 4, 2000 and as further
amended prior to the Restructuring Date (the "EXISTING 1997 AGREEMENT," and
together with the Existing 1994 Agreement, the "EXISTING
AGREEMENTS"), among the Company and The Prudential Insurance Company of
America and U.S. Private Placement Fund (as the purchasers thereunder). The
entire original principal amount of the Series B Notes remains outstanding
as of the date hereof (prior to giving effect to any payments on the
Restructuring Date). As amended and restated hereby, the Existing
Agreements, together with this Second Amended and Restated Note Agreement,
are herein referred to, collectively, and as it may from time to time be
amended or supplemented, this "AGREEMENT." As amended and restated, the
Existing Series A Notes are herein referred to as the "SERIES A NOTES" and
the Existing Series B Notes are herein referred to as the "SERIES B NOTES."
The Series A Notes and the Series B Notes are referred to herein,
collectively, as the "NOTES."
1B FORM OF NOTES.
The Series A Notes and the Series B Notes shall be substantially in the
form set out in Exhibit A-1 and Exhibit A-2, respectively, with such changes
therefrom, if any, as may be approved by the Purchasers and the Company.
References to a "Schedule" or an "Exhibit" are, unless otherwise specified,
references to a Schedule or an Exhibit attached to this Agreement; references to
Sections or paragraphs are, unless otherwise specified, references to Sections
and paragraphs of this Agreement.
2. AMENDMENT AND RESTATEMENT OF EXISTING AGREEMENTS; CLOSING CONDITIONS;
POST-CLOSING DELIVERIES
The parties hereto hereby agree and consent to amend, restate and combine
the Existing Agreements in their entirety as provided herein, effective as of
April 30, 2002 (the "RESTRUCTURING DATE"), subject to the following conditions:
2A. THE EXCHANGE OF EXISTING NOTES.
Subject to the terms and conditions of this Agreement, the Company hereby
agrees to issue to the Purchasers and, subject to the terms and conditions
herein set forth, the Purchasers agree to accept from the Company in exchange
for the Existing Notes, one or more Series A Note(s) or Series B Note(s) in the
form attached hereto as Exhibit A-1 or Exhibit A-2, as the case may be, in the
principal amounts set forth on the Purchaser Schedule hereto. Such exchange
shall occur at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Toronto ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, at 10:00 a.m., local time, at a closing (the "CLOSING") on the
Restructuring Date. THE PARTIES AGREE AND CONFIRM THAT THE ISSUANCE OF THE
SERIES A NOTES AND THE SERIES B NOTES, THE EXCHANGE OF THE EXISTING NOTES FOR
SUCH NEW NOTES AND THE ENTERING INTO OF THIS AGREEMENT SHALL IN NO WAY EVIDENCE
A NEW DEBT
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ENTERED INTO BETWEEN THE PARTIES OR A NOVATION OF THE ORIGINAL DEBT BUT RATHER
THE DEBT CREATED PURSUANT TO THE EXISTING AGREEMENT IS CONTINUED IN FULL FORCE
AND EFFECT, AS AMENDED BY THIS AGREEMENT.
2B. ACCRUED INTEREST.
The Company shall pay to the Purchasers, on or prior to the Restructuring
Date, the amounts listed in Attachment 1 to the Purchaser Schedule, which
amounts represent additional accrued but unpaid interest on the Existing Notes
from the last scheduled interest payment date in respect thereof through April
29, 2002, payable as provided in Attachment 1 to the Purchaser Schedule.
2C. FEES.
The Company shall pay a fee to the Purchasers, on or prior to the
Restructuring Date, in the aggregate amount of $600,000, payable as provided in
Attachment 1 to the Purchaser Schedule.
2D. CERTAIN DOCUMENTS.
Each of the Purchasers shall have received the following, each dated the
Restructuring Date:
(a) the Series A Note(s) and the Series B Note(s) to be issued to the
purchasers as indicated in the Purchaser Schedule in exchange for the
Existing Notes held by such Purchasers;
(b) Collateral Documents duly executed by each party thereto and in
forms satisfactory to the Purchasers;
(c) Guarantee duly executed by the Initial Guarantors;
(d) Intercreditor Agreement duly executed by each party thereto and
substantially in the form attached hereto as Exhibit B;
(e) fully executed Bank Agreement in a form reasonably acceptable to
the Purchasers;
(f) fully executed PNC Credit Agreements in a form reasonably
acceptable to the Purchasers;
(g) a certificate of a senior officer of the Company certifying that
the conditions specified in paragraph 2.E. of this Agreement have been
fulfilled;
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(h) a certificate of the Secretary or an Assistant Secretary and one
other officer of the Company certifying the names and true signatures of
the officers of the Company authorized to sign this Agreement, the Series A
Notes, the Series B Notes, the Collateral Documents and the other documents
to be delivered by the Company hereunder;
(i) a certificate of the Secretary or an Assistant Secretary and one
other officer of each Initial Guarantor certifying the names and true
signatures of the officers of each Initial Guarantor authorized to sign the
Guarantee, each Pledge Agreement and the other documents to be delivered by
any Initial Guarantor hereunder;
(j) a favorable opinion of (i) Goodmans LLP, special Canadian counsel,
and (ii) Wilentz, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special U.S. counsel, for the Company
and the Initial Guarantors and such opinions shall be in form and substance
satisfactory to the Purchasers. The Company hereby directs each counsel to
deliver such opinions and understands and agrees that the Purchasers will
and are hereby authorized to rely on such opinions;
(k) a favorable opinion from ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, Purchasers' special
counsel in connection with such transactions covering matters incident to
such transactions as the Purchasers may reasonably request;
(l) a Business Plan in respect of fiscal years 2002 and 2003 (without
duplication for those items included in the Financial Forecast for fiscal
year 2002), which shall be in form and substance satisfactory to the
Purchasers in their sole and absolute discretion;
(m) an Asset Monetization Program as substantially set forth in the
form attached hereto as Exhibit D;
(n) a certified complete and correct copy of each Material Contract;
(o) a certified complete and correct copy of each Material Licenses;
(p) written evidence of the acceptance by Corporation Service Company,
located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, of its appointment by the
Company, the Initial Guarantors (other than U.S. Guarantors) as agent for
service of process in the State of New York;
(q) from each Initial Guarantor subject to any financial assistance
restriction, a certificate respecting solvency matters, in form and
substance satisfactory to the Purchasers;
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(r) monthly financial statements of the Company pursuant to paragraph
5A(d) for the month ended March 31, 2002; and
(s) additional documents, certificates or legal opinions with respect
to legal matters or corporate or other proceedings related to Documents and
the transactions contemplated hereby as may be reasonably requested by any
Purchaser, including copies of all documents, reports and certificates
delivered to the Banks or PNC.
2E. REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The representations and warranties contained in paragraph 8 shall be true
on and as of the Restructuring Date, except to the extent of changes caused by
the transactions herein contemplated; there shall exist on the Restructuring
Date no Event of Default or Default; and the Company shall each have delivered
to the Purchasers an Officer's Certificate, dated the Restructuring Date, to
both such effects.
2F. EXCHANGE PERMITTED BY APPLICABLE LAWS.
The exchange of the Existing Notes for the Series A Notes and the Series B
Notes, as applicable, by the Purchasers (including the use of the proceeds
originally received by the Company for the Existing Notes) shall not violate any
applicable law or governmental regulation (including, without limitation,
section 5 of the Securities Act or Regulation T, U or X of the Board of
Governors of the Federal Reserve System) and shall not subject such Purchaser to
any tax (other than any income taxes arising from such Purchaser's ownership of
any Notes), penalty, liability or other onerous condition under or pursuant to
any applicable law or governmental regulation, and Purchasers shall have
received such certificates or other evidence as it may request to establish
compliance with this condition.
2G. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of paragraph 11B, the Company shall have
paid on or before the Restructuring Date the fees, charges and disbursements of
your special counsel, ▇▇▇▇▇▇▇ ▇▇▇▇ LLP to the extent reflected in a statement of
such counsel rendered to the Company at least one Business Day prior to the
Restructuring Date.
2H. PAYMENT OF SIGNIFICANT SHARE OFFERING PROPORTION.
The Company shall pay to the Purchasers, on or prior to the Restructuring
Date, each such Purchaser's ratable portion of $7,412,192.22 (as provided in
Attachment 1 to the Purchaser Schedule) received by the Company in respect of
the March 2002 Significant Share Offering.
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2I. INSURANCE.
A Security Agent shall have received certificates of insurance or binders
with respect to all insurance policies of each Obligor, which policies shall:
(a) show a Security Agent on behalf of the Purchasers as loss payee as its
interests may appear; or (b) in the case of liability policies, show a Security
Agent on behalf of the Purchasers as additional insured; and (c) in the case of
any insurance maintained with respect to the Owned Property, shall be endorsed
with a standard mortgagee clause.
2J. CERTIFICATE OF STATUS/COMPLIANCE.
To the extent available, the Company shall have delivered to each Purchaser
a recently dated certificate of status with respect to itself and each Initial
Guarantor.
2K. COMPLIANCE WITH FINANCIAL COVENANTS.
Each Purchaser shall have received a Responsible Officer's certificate
demonstrating, and including calculations to evidence, compliance with each of
the covenants contained in paragraphs 6A through 6F at March 31, 2002.
2L. POST-CLOSING DELIVERIES.
(a) On or prior to 20 Business Days following the Restructuring Date,
the Company shall have delivered to the Purchasers the annual financial
statements of the Company required to be delivered pursuant to paragraph
5A(b) for the year ended December 31, 2001.
(b) On or prior to June 15, 2002, the Company shall have delivered to
the Purchasers a Business Plan in respect of fiscal years 2002 and 2003
(without duplication for those items included in the Financial Forecast for
fiscal year 2002), which shall be in form and substance satisfactory to the
Purchasers in their sole and absolute discretion; and
(c) On or prior to 10 Business Days of the general resumption of
public services in the Province of Ontario, the Company shall cause to be
delivered to the Purchasers and their counsel:
(i) all registrations necessary or advantageous to preserve the
priority of the Liens granted to the Purchasers pursuant to the
Collateral Documents;
(ii) search results showing personal property security
registrations, bulk sales and executions with respect to the Company
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and each Restricted Subsidiary which has tangible personal property or
place of business in the Province of Ontario as well as post-filing
searches to confirm a first perfected Lien in favor of the Purchasers;
(iii) a currently dated certificate of status for the Company and
each Guarantor incorporated under the laws of the Province of Ontario;
(iv) opinion of Ontario counsel respecting customary matters that
would have been included in the opinion of Ontario counsel delivered
on the Restructuring Date but for the public service employee strike
in the Province of Ontario, in form and substance satisfactory to the
Purchasers; and
(v) such other further agreements, instruments and other
documents as the Purchasers may reasonably require in respect of
customary closing matters not completed on or prior to the
Restructuring Date because of the public service employee strike in
the Province of Ontario.
(d) The Company shall cause to be delivered to the Purchasers, or
where indicated to a Security Agent, at the option of the Company, either
the documents specified in paragraph 2L(d)(i) (collectively, the "HUNGARIAN
GUARANTEE DOCUMENTS") or the documents specified in paragraph 2L(d)(ii)
(collectively, the "HUNGARIAN LOAN REORGANIZATION DOCUMENTS") in accordance
with the provisions of paragraph 2L(d)(iii):
(i) HUNGARIAN GUARANTEE DOCUMENTS. The Company, if it chooses
this option, shall deliver the following Hungarian Guarantee
Documents:
(1) a guarantee by Co-Steel Hungary of all of the
obligations of the Company to the Purchasers, in form and
substance reasonably satisfactory to the Required Holders which
Guarantee shall include, without limitation, a pledge of the
Hungarian Loan Notes in favor of the U.S. Security Agent (the
"HUNGARIAN GUARANTEE");
(2) certified copies of the articles of incorporation,
by-laws and resolutions (or in each case the Hungarian
equivalent) authorizing the actions taken under the Hungarian
Guarantee and the incumbency of the officers signing the
Hungarian Guarantee;
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(3) the original Hungarian Loan Notes delivered to the U.S.
Security Agent and duly endorsed in favor of the U.S. Security
Agent.
(4) evidence of registration of the Hungarian Guarantee in
all offices, if any, in which, in the opinion of the Required
Holders and their counsel, registration is necessary or of
advantage to preserve the priority of the Liens intended to be
created by the Hungarian Guarantee together with duplicate copies
of security instruments bearing or accompanied by appropriate
endorsements or certificates of registration with respect to the
Hungarian Guarantee;
(5) copies of all approvals and all consents of all
Governmental Authorities which are required to be obtained by the
Company or Co-Steel Hungary in order to complete the transactions
contemplated by the Hungarian Guarantee and perform its
obligations under the Hungarian Guarantee;
(6) a legal opinion of Hungarian counsel in form and
substance reasonably satisfactory to the Required Holders in
respect of the Hungarian Guarantee; and
(7) such further agreements, instruments and other documents
as the Required Holders may reasonably request in respect of the
foregoing.
(ii) HUNGARIAN LOAN REORGANIZATION DOCUMENTS. The Company may
deliver the following Hungarian Loan Reorganization Documents to the
U.S. Security Agent in respect of the transactions described in
Schedule 2L(d):
(1) certified copies of the articles of incorporation,
by-laws and resolutions of 1102590 Ontario Limited, Co-Steel
(U.S.) Ltd., New Holdco, Co-Steel C.S.M. Corp., Co-Steel USA
Holdings, Inc., Co-Steel Sayreville, Inc. and Co-Steel Hungary
authorizing the actions taken under Schedule 2L(d) and the
incumbency of the officers signing the documents contemplated in
Schedule 2L(d);
(2) the original New Subordinated Loan Notes delivered to a
Security Agent and duly endorsed in favor of such Security Agent;
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(3) evidence of registration of all the security described
in Schedule 2L(d) in all offices, if any, in which, in the
opinion of the Required Holders and its counsel, registration is
necessary or of advantage to preserve the priority of the Liens
intended to be created by the security described in Schedule
2L(d) together with duplicate copies of security instruments
bearing or accompanied by appropriate endorsements or
certificates of registration with respect to such security;
(4) copies of all approvals and all consents of all
Governmental Authorities which are required to be obtained by the
Company or any Subsidiary in order to complete the transactions
contemplated by Schedule 2L(d) and perform its obligations under
Schedule 2L(d);
(5) such opinions of counsel in form and substance
reasonably satisfactory to the Required Holders in respect of the
transactions described in Schedule 2L(d); and
(6) such further agreements, instruments, tax rulings and
other documents as the Required Holders may reasonably request in
respect of the foregoing.
(iii) If the Company fails to deliver either the Hungarian
Guarantee Documents or the Hungarian Loan Reorganization Documents
within 90 days following the Restructuring Date, the Applicable Rate
shall, in lieu of interest at the default rate stated in paragraph 3B,
be increased by 20 basis points and 120 days thereafter by a further
15 basis points, all until such time as the Company has caused to be
completed either the Hungarian Guarantee Documents or the Hungarian
Loan Reorganization Documents. For greater certainty, the transactions
contemplated by the Hungarian Guarantee Documents or the Hungarian
Loan Reorganization Documents may be completed notwithstanding any
restriction in paragraphs 5 or 6. In the event of a margin increase
under this paragraph 2L(d), the Applicable Rate shall revert to the
otherwise Applicable Rate upon the delivery of either the Hungarian
Guarantee Documents or the Hungarian Loan Reorganization Documents.
(e) If the Company has not sold the land and buildings located at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ by July 31, 2002, it shall on or before
August 15, 2002, provide to the Purchasers a policy of title insurance from
an insurer and with reinsurance reasonably satisfactory to and, together
with such endorsements as are reasonably required, by the Required
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Holders, and insuring, among such other matters that the Required Holders
may reasonably request, that Co-Steel Sayreville, Inc. has good and
marketable title to such property and the mortgage of the U.S. Security
Agent in respect of such property is a valid first lien.
(f) On or before June 1, 2002, the Required Holders shall receive:
(i) the Standstill Agreement duly executed by Co-Steel (UK)
Limited; and
(ii) an opinion of counsel in a form and substance reasonably
satisfactory to the Required Holders in respect of the Standstill
Agreement.
3. INTEREST RATE
3A. APPLICABLE RATES.
(a) SERIES A NOTES. From January 1, 1999 through and including January
17, 2000, the Company paid interest on the Series A Notes at a rate per
annum equal to the Initial Rate minus 50 basis points. From January 18,
2000 to (but excluding) the Restructuring Date, the Company shall pay
interest on the Series A Notes at a rate per annum equal to the Initial
Rate. From (and including) the Restructuring Date and thereafter, the
Company shall pay interest on the Series A Notes at a rate per annum equal
to the Applicable Rate.
(b) SERIES B NOTES. From January 1, 1999 through and including January
14, 2000, the Company paid interest on the Series B Notes at a rate per
annum equal to the Initial Rate minus 50 basis points. From January 15,
2000 to (but excluding) the Restructuring Date, the Company shall pay
interest on the Series B Notes at a rate per annum equal to the Initial
Rate. From (and including) the Restructuring Date and thereafter, the
Company shall pay interest on the Series B Notes at a rate per annum equal
to the Applicable Rate.
3B. DEFAULT RATE.
During the existence of an Event of Default, the outstanding principal
amount of the Notes, including any overdue Yield-Maintenance Amount, if any, or
any other amount due pursuant to this Agreement or the Notes shall bear
interest, payable on demand at a rate per annum equal to the greater of
(a) the Applicable Rate plus two percent (2%), or
10
(b) 2% over the rate of interest publicly announced by ▇▇▇▇▇▇ Guaranty
Trust Company of New York from time to time in New York City as its Prime
Rate.
3C. COMPUTATION OF INTEREST.
Interest payable on the Notes shall be computed on the basis of a 360 day
year of twelve 30 day months on the unpaid principal balance thereof and shall
be payable, in arrears, in cash on the 15th day of each month in each year,
until the principal amount thereof shall be due and payable for each respective
Series.
3D. INTEREST ACT (CANADA).
For purposes of any legislation respecting statement of interest rates
(including without limitation, the Interest Act (Canada)), the yearly rate that
can be stated to be equivalent to the rate calculated and payable as set out
above is that with interest accruing daily, such daily amount being determined
on the basis of a 365- or 366-day year, as the case may be, and the amount of
interest payable on an interest payment date determinable as follows:
(a) the interest accrued for each complete calendar monthly period
during the period for which an interest payment is being determined shall
be the rate per annum specified above:
(i) multiplied by the actual number of days in the year in which
such monthly period falls and divided by the actual number of days in
such complete monthly period, and
(ii) multiplied by 30 and divided by 360, and
(b) the interest accrued for each part of a calendar monthly period
during the period for which an interest payment is being determined shall
be the rate per annum specified above:
(i) multiplied by the actual number of days in the year in which
such partial period falls and divided by the actual number of days in
such partial period, and
(ii) multiplied by the actual number of days in the partial
period and divided by 360, and interest payable on the interest
payment date is calculable as the total of the determinations for each
such complete monthly period and the determinations for each such
partial period. The monthly period for calculation of the accrual of
such interest commences on the date hereof if no interest has been
paid hereon and otherwise on the last interest payment date to which
11
payment has been made. The rate of interest applicable in respect of
any part of a complete monthly period, expressed as an annual rate of
interest for the purposes of any legislation respecting statement of
interest rates, shall be the rate otherwise stated hereunder,
multiplied by 365 and divided by 360, unless the partial period falls
in a year having 366 days in which case the rate shall be multiplied
by 366 and divided by 360.
4. PREPAYMENTS
The Notes shall be subject to prepayment with respect to the required
prepayments specified in paragraphs 4A and 4B and the optional prepayments
permitted by paragraph 4C.
4A. SCHEDULED PREPAYMENTS.
(a) SERIES A NOTES. Until the Series A Notes shall be paid in full,
the Company shall apply to the prepayment of the Series A Notes, without
premium, the sum of $15,000,000 on January 15, in each of the years 2002
and 2003 (such payment due in 2003, together with the payment of
$15,000,000 due on January 15, 2002 pursuant to the Existing 1994 Note
Agreement (which was not paid when due), being hereby deemed to be deferred
until, and payable on, January 15, 2004, and being herein referred to as
the "DEFERRED SERIES A AMOUNTS"), and such principal amount of the Series A
Notes, together with interest thereon to the prepayment date, shall become
due on such prepayment date. The entire outstanding principal amount of the
Series A Notes (if not previously paid pursuant to paragraphs 4B, 4C or
7A), together with interest accrued thereon, shall become due and payable
on January 15, 2004.
(b) SERIES B NOTES. Until the Series B Notes shall be paid in full,
the Company shall apply to the prepayment of the Series B Notes, without
premium, the sum of $12,500,000 on July 15, in each of the years 2002 to
2005, inclusive (such payments due in 2002 and 2003, together with the
payment of $12,500,000 due on July 15, 2001 pursuant to the Existing 1997
Note Agreement (which was not paid when due), being hereby deemed to be
deferred until, and payable on, January 15, 2004, and being herein referred
to as the "DEFERRED SERIES B AMOUNTS"), and such principal amounts of the
Series B Notes, together with interest thereon to the prepayment dates,
shall become due on such prepayment dates. The entire outstanding principal
amount of the Series B Notes (if not previously paid pursuant to paragraphs
4B, 4C or 7A), together with interest accrued thereon, shall become due and
payable on July 15, 2006.
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4B. REQUIRED PREPAYMENTS.
(a) Prepayments from Asset Sales and other Activities.
(i) Asset Monetization Program. There shall be paid, in
--------------------------
accordance with Section 2 of the Intercreditor Agreement, in respect
of the principal amount of the Notes held by each holder, such
holder's ratable share of the Net Cash Proceeds received by any member
of the Restricted Group under the Asset Monetization Program.
(ii) Approved Asset Sales. There shall be paid, in accordance
--------------------
with Section 2 of the Intercreditor Agreement, in respect of the
principal amount of the Notes held by each holder, such holder's
ratable share of the Net Cash Proceeds received by any member of the
Restricted Group from Approved Asset Sales or the Disposal of other
assets where the Net Cash Proceeds are in excess of Cdn.$1,000,000 (or
its equivalent) in any one or more series of transactions or
Cdn.$5,000,000 (or its equivalent) in the aggregate for all such
Disposals completed in the same year.
(iii) Investment Capital; Share Offerings. There shall be paid,
-----------------------------------
in accordance with Section 2 of the Intercreditor Agreement, in
respect of the principal amount of the Notes held by each holder, such
holder's ratable share of the Net Cash Proceeds received by any member
of the Restricted Group from any Investment Capital or Share Offering;
provided, however, in respect of any Significant Share Offering, there
shall be paid in respect of the principal amount of the Notes held by
each holder, such holder's ratable portion of the Significant Share
Offering Proportion.
(iv) Gallatin Receipts. There shall be paid, in accordance with
-----------------
Section 2 of the Intercreditor Agreement, in respect of the principal
amount of the Notes held by each holder, such holder's ratable share
of 100% of the Company's share of cash or other property received from
the business operations of Gallatin.
(v) Settlement Amounts. There shall be paid, in accordance with
------------------
Section 2 of the Intercreditor Agreement, in respect of the principal
amount of the Notes held by each holder, such holder's ratable share
of 100% of all Settlement Amounts received by any member of the
Restricted Group.
(vi) Insurance Proceeds. There shall be paid, in accordance with
------------------
Section 2 of the Intercreditor Agreement, in respect of the principal
amount of the Notes held by each holder, such holder's
13
ratable share of the Net Cash Proceeds from all Insurance Proceeds
received by any Obligor which are required to be paid to a Security
Agent or received by a Security Agent directly from the insurer. All
Insurance Proceeds paid directly to a Security Agent by an insurer
that constitute a prepayment pursuant to the Intercreditor Agreement
shall be deemed a prepayment hereunder upon receipt by such Security
Agent.
For greater certainty, any transaction that is in accordance with
paragraph 2L(d) and 5V shall not be considered a prepayment obligation
under this paragraph 4B(a). All prepayments to be made by the Company under
this paragraph 4B shall be made to a Security Agent as provided in the
Intercreditor Agreement. Once so received by the Managing Security Agent
(as such term is defined in the Intercreditor Agreement), the Company shall
have discharged its obligations in respect thereof. The Company shall
deliver to the Managing Security Agent and the holders of Notes a Specified
Transaction Certificate together with each prepayment under this paragraph
4B. The Company shall specify, pursuant to the Specified Transaction
Certificate, the Notes of each Series against which to apply such
prepayment and shall specify the additional information required by
paragraph 4D. For greater certainty, the Company shall not deduct any cost
of converting from one currency to another from a prepayment hereunder and
any conversions from United States Dollars shall be made to the Equivalent
Amount of Canadian Dollars and any conversions from Canadian Dollars shall
be made to the Equivalent Amount of United States Dollars.
(b) EXCESS REVOLVER PAYDOWN. There shall be paid, in accordance with
Section 2 of the Intercreditor Agreement, in respect of the principal
amount of the Notes held by each holder, such holder's ratable share of the
Excess Revolver Paydown.
4C. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT.
The Notes shall be subject to prepayment, in whole at any time or from time
to time in part, pro rata among Notes of all Series in accordance with the
respective principal amounts thereof (in a minimum amount of $1,000,000 and
increments of $100,000), at the option of the Company, at 100% of the principal
amount so prepaid plus interest thereon to the prepayment date, together with
the Yield-Maintenance Amount, if any, with respect to each Note. Any such
payment shall be made ratably based on Series and shall be applied in accordance
with paragraph 4E.
14
4D. NOTICE OF PREPAYMENT.
The Company shall give the holder of each Note irrevocable written notice
by telecopier (receipt telephonically confirmed) of any prepayment pursuant to
paragraph 4B or 4C not less than 5 Business Days prior to the prepayment date,
specifying such prepayment date and the principal amount of the Notes of each
Series, and of the Notes held by such holder, to be prepaid on such date and
stating that such prepayment is to be made pursuant to paragraph 4B or 4C.
Notice of prepayment having been given as aforesaid, the principal amount of the
Notes specified in such notice, together with interest thereon to the prepayment
date and together with the Yield-Maintenance Amount, if any, with respect
thereto, shall become due and payable on such prepayment date. The Company
shall, on or before the day on which it gives written notice of any prepayment
pursuant to paragraph 4B or 4C, give telephonic notice of the principal amount
of the Notes of each Series to be prepaid and the prepayment date to each
Significant Holder which shall have designated a recipient of such notices in
the Purchaser Schedule attached hereto or by notice in writing to the Company.
4E. APPLICATION OF PREPAYMENTS.
Each payment made pursuant to paragraph 4B or 4C shall be applied to the
prepayment of the principal amount of the Notes, ratably based on Series, at
100% of the principal amount so prepaid plus interest thereon to the prepayment
date together with the Yield-Maintenance Amount, if any, due with respect to
each such Note. Any partial prepayment of the Notes pursuant to paragraph 4B or
4C shall be applied with respect to each Series first to the Deferred Principal
Amounts with respect to such Series in the chronological order of the original
due date of the payments of such Deferred Principal Amounts within each such
Series until all of the Deferred Principal Amounts with respect to such Series
shall have been fully repaid and second, in satisfaction of required payments of
principal with respect to such Series in inverse order of their scheduled due
dates. To the extent that any payment constitutes a payment of a Deferred
Principal Amount being paid prior to the date such payment would otherwise have
been due in the absence of the deferral of payments provided by paragraph 4A,
then to such extent a Yield-Maintenance Amount shall be calculated on such
payment and the original due date of such payment shall be used in such
calculation as the due date of such payment. To the extent that any payment
constitutes a payment of a Deferred Principal Amount being paid after the date
such payment would otherwise have been due in the absence of the deferral of
payments provided by paragraph 4A, then to such extent the Yield-Maintenance
Amount shall be deemed to be zero.
15
4F. APPLICATION OF PARTIAL PAYMENTS.
Upon any partial prepayment of the Notes of any Series pursuant to
paragraph 4A, 4B or 4C, the principal amount so prepaid shall be allocated to
all Notes of such Series, ratably in accordance with the respective principal
amounts thereof.
4G. RETIREMENT OF NOTES.
The Company shall not, and shall not permit any of its Subsidiaries or
Affiliates to, prepay or otherwise retire or acquire in whole or in part prior
to their stated final maturity (other than by prepayment pursuant to, paragraphs
4A, 4B or 4C or upon acceleration of such final maturity pursuant to paragraph
7A), or purchase, directly or indirectly, Notes held by any holder unless the
Company or such Subsidiary or Affiliate shall have offered to prepay or
otherwise acquire, retire or purchase, as the case may be, the same proportion
of the aggregate principal amount of Notes held by each other holder of Notes at
the time outstanding upon the same terms and conditions. Any Notes so prepaid or
otherwise acquired, retired or purchased by the Company or any of its
Subsidiaries or Affiliates shall not be deemed to be outstanding for any purpose
under this Agreement.
5. AFFIRMATIVE COVENANTS
5A. FINANCIAL STATEMENTS; BUSINESS PLANS.
The Company covenants that it will deliver to each Significant Holder in
quadruplicate:
(a) promptly upon availability and in any event within 45 days after
the end of each quarterly period (other than the last quarterly period) in
each fiscal year, its unaudited quarterly Special Purpose Financial
Statements and unaudited quarterly financial statements (including a
balance sheet and statements of profit and loss and cash flow) for such
quarterly fiscal period, prepared on a consolidated basis and separately
for the Company and each of its Lasco, Raritan, Sayreville, Recycling and
Corporate operating units, in each case in accordance with GAAP, setting
forth in comparative form the corresponding figures for the corresponding
period of the preceding fiscal period, and the corresponding figures for
the corresponding period set forth in the Financial Forecast all in
reasonable detail and accompanied by a management discussion and analysis
of variances between actual results and the Financial Forecast, and of
significant matters, including, without limitation of labor negotiations,
pending and current litigation and general market conditions, and market
positioning of the Company;
16
(b) promptly upon availability and in any event within 90 days after
the end of each fiscal year, its annual audited financial statements
(including a balance sheet and statements of profit and loss and cash flow
for such fiscal year) prepared on a consolidated basis and annual unaudited
financial statements prepared separately for the Company and each of its
Subsidiaries, in each case in accordance with GAAP, and setting forth in
comparative form the corresponding figures for the corresponding period of
the preceding fiscal period, all in reasonable detail, together with in the
case of the Company's audited financial statements, an Auditor's report to
directors, shareholders or lenders, as appropriate, thereon, which report
shall contain no qualifications;
(c) promptly upon availability and in any event within 90 days after
the end of its fiscal year, its annual audited Special Purpose Financial
Statements, setting forth in comparative form, if applicable, the
corresponding figures for the corresponding period of the preceding fiscal
period and the corresponding figures for the corresponding period set forth
in the Financial Forecast, all in reasonable detail, together with an
Auditor's report to directors or lenders, as appropriate, thereon, which
report shall be substantially in the form delivered to the Purchasers under
the Existing Agreements and shall otherwise contain no qualifications;
(d) promptly upon availability and in any event within 25 days after
the end of each month (other than December and within 45 days after the end
of each December), its (i) unaudited monthly financial statements
(including a balance sheet and statements of profit and loss and cash flow)
for such month for each of the Company's Lasco, Raritan, Sayreville and
Recycling operating units, in each case in accordance with GAAP, setting
forth in comparative form the corresponding figures for the corresponding
period of the preceding fiscal period, and the corresponding figures for
the corresponding period set forth in the Financial Forecast, all in
reasonable detail and accompanied by a management discussion and analysis
of variances between actual results and the Financial Forecast and of
significant matters, including, without limitation, labor negotiations,
pending and current litigation, pension and trade cases and general market
conditions and market positioning of the Company; (ii) an unaudited
consolidated earnings summary for the Company; (iii) a summary of cash
balances, accounts receivable, accounts payable, inventory and capital
expenditures for such month, in form and substance satisfactory to the
holders of Notes; and (iv) a summary of aged accounts receivable and
accounts payable (not aged) for the twenty largest customers/vendors with
detailed aged accounts receivable and accounts payable trial balances by
customer/vendor to be made available upon request of the Required Holders;
17
(e) promptly upon availability and in any event within 25 days after
the end of each month (other than December and within 45 days after the end
of each December), a roll-forward summary, satisfactory in form and content
to the holders of Notes, of the Company's monthly back-order log segregated
by individual operating unit, indicating year to date sales and commitments
by fiscal quarter in which sales occurred or commitments are to be
fulfilled and showing volume and average price by major product category;
(f) promptly upon availability and in any event within 25 days after
the end of each month (other than December and within 45 days after the end
of each December), an operating report for the Company, satisfactory in
form and content to the holders of Notes, providing details of, among other
matters, (i) tons produced, utilization at the melt shops and bar ▇▇▇▇▇,
major production downtimes, significant changes in component input costs
and supply contracts, (ii) significant events related to environmental and
safety matters, and (iii) progress made, to the date of such report, in
effecting the Asset Monetization Program, effecting approved capital
expenditures and in implementing the Strategic Plan;
(g) promptly upon availability (i) unaudited quarterly and audited
annual financial statements of Gallatin (including a balance sheet and
statements of profit and loss and cash flow), for such fiscal period,
prepared in accordance with GAAP, setting forth in comparative form the
corresponding figures for the corresponding period of the preceding fiscal
year; (ii) all reports, of any nature, delivered from time to time in
respect of Gallatin, that are not subject to a confidentiality obligation;
and (iii) a list of all other reports, of any nature, delivered from time
to time in respect of Gallatin respecting which the Company will use its
best efforts to obtain a release of any confidentiality obligation and
provide same to the holders of Notes if so requested by the Required
Holders;
(h) on or before September 30 in each year, its Business Plan for the
next two fiscal years together with quarterly updates which shall be
delivered with the financial statements described in clause (a) of this
paragraph 5A (the first such update to be delivered no later than June 15,
2002);
(i) promptly, and in any event within at least 24 hours after the
transmission thereof, all notices provided to any of the Banks or PNC,
other than notices requesting a draw down of funds under the Bank Agreement
or the PNC Credit Agreements;
(j) promptly upon transmission thereof, (i) copies of all such
financial statements, proxy statements, notices and reports as the Company
18
shall send to its public stockholders, (ii) copies of all registration
statements (without exhibits) and all reports, if any, which the Company
files with the Securities and Exchange Commission (or any governmental body
or agency succeeding to the functions of the Securities and Exchange
Commission), the Ontario Securities Commission (or any governmental body or
agency succeeding to the functions of the Ontario Securities Commission) or
any other provincial securities commission having jurisdiction over the
Company, and (iii) all press releases concerning material developments in
the business of the Company or any of its Subsidiaries;
(k) promptly upon receipt thereof, a copy of each management letter
submitted to the Board of Directors, (or any committee thereof) of the
Company by the independent public accountants of the Company in connection
with any annual, interim or special audit made by them of the books of the
Company or any of its Subsidiaries;
(l) on or before July 31, 2002 and on each anniversary of such date
thereafter, a five-year Strategic Plan for the Company and its Subsidiaries
including all reports from time to time received that will form a part of
the Strategic Plan as well as all drafts and interim versions of such
reports together with any notice of engagement of any consultant or
professional advisor engaged to give strategic advice to the Company and
copies of any agreements relating to any such engagement, and copies of all
work product produced by such consultants or professional advisors;
(m) with reasonable promptness, such other financial data as such
Significant Holder may reasonably request, including, without limitation,
notice of any report prepared by any third party for the benefit of the
Company or any of its Subsidiaries; and
(n) on or before 5 Business Days following the end of each of the
Company's fiscal quarters, the Company shall deliver a certificate of a
Responsible Officer setting forth a calculation of the amount of the Excess
Revolver Paydown, if any.
Together with each delivery of financial statements required by clauses (a)
through (c) above, the Company will deliver to each Significant Holder an
Officer's Certificate (i) demonstrating (with computations in reasonable detail)
compliance by the Company and its Subsidiaries with the provisions of paragraphs
▇▇, ▇▇, ▇▇, ▇▇, ▇▇ ▇▇▇ ▇▇, (▇▇) stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the nature
and period of existence thereof and what action the Company proposes to take
with respect thereto and (iii) if any of the Subsidiaries included in such
statements shall not be Restricted Subsidiaries, listing all Subsidiaries,
identifying each as an Unrestricted
19
Subsidiary, Restricted Subsidiary or Wholly-Owned Restricted Subsidiary and
specifying the adjustments which are necessary to permit the holders of the
Notes to confirm the foregoing calculations. Together with each delivery of
financial statements required by clauses (b) and (c) above, the Company will
deliver to each Significant Holder a certificate of such accountants stating
that, in making the audit necessary for their report on such financial
statements, they have obtained no knowledge of any Event of Default or Default
or, if they have obtained knowledge of any Event of Default or Default,
specifying the nature and period of existence thereof. Such accountants,
however, shall not be liable to anyone by reason of their failure to obtain
knowledge of any Event of Default or Default which would not be disclosed in the
course of an audit conducted in accordance with generally accepted auditing
standards. The Company also covenants that promptly after any Responsible
Officer obtains knowledge of an Event of Default or Default, it will deliver to
each Significant Holder an Officer's Certificate specifying the nature and
period of existence thereof and what action the Company proposes to take with
respect thereto.
5B. INFORMATION REQUIRED BY RULE 144A.
The Company covenants that it will, upon the request of the holder of any
Note, provide such holder, and any qualified institutional buyer designated by
such holder, the information required to be delivered pursuant to Rule 144(d)(4)
under the Securities Act in order to permit compliance with the information
requirements of Rule 144A under the Securities Act in connection with the resale
of Notes, except at such times as the Company is subject to the reporting
requirements of section 13 or 15(d) of the Exchange Act or exempt from reporting
pursuant to Rule 12g3-2(b) under the Exchange Act. For the purpose of this
paragraph 5B, the term "qualified institutional buyer" shall have the meaning
specified in Rule 144A under the Securities Act.
5C. INSPECTION OF PROPERTY.
The Company covenants that it will permit any Person designated by any
Significant Holder:
(a) if no Default or Event of Default then exists, at such Significant
Holder's expense, to visit and inspect any of the Properties of the Company
and its Restricted Subsidiaries, to examine the corporate books and
financial records of the Company and its Restricted Subsidiaries and make
copies thereof or extracts therefrom and to discuss the affairs, finances
and accounts of any of such corporations with the principal officers of the
Company and, with the consent of the Company (which consent will be not be
unreasonably withheld) its independent public accountants, all at such
reasonable times,
20
upon reasonable prior notice and as often as such Significant Holder may
reasonably request; and
(b) if a Default or Event of Default then exists, at the Company's
expense, to visit and inspect any of the Properties of the Company and its
Restricted Subsidiaries, to examine the corporate books and financial
records of the Company and its Restricted Subsidiaries and make copies
thereof or extracts therefrom and to discuss the affairs, finances and
accounts of any such corporation with the principal officers of the Company
and its independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts
of the Company and its subsidiaries), all at such times, and as often as
such Significant Holder may request.
5D. COVENANT TO SECURE NOTES EQUALLY.
The Company covenants that, if it or any of its Restricted Subsidiaries
shall create or assume any Lien upon any of its Property whether now owned or
hereafter acquired, other than Liens permitted by the provisions of paragraph 6J
(unless prior written consent to the creation or assumption thereof shall have
been obtained pursuant to paragraph 11C), it will make or cause to be made
effective provision whereby the Notes will be secured by such Lien equally and
ratably with any and all other Indebtedness thereby secured so long as any such
other Indebtedness shall be so secured.
5E. MAINTENANCE OF INSURANCE.
The Company covenants that it will maintain or cause to be maintained, with
financially sound and reputable insurers, insurance with respect to its
Properties and business and the Properties and business of its Restricted
Subsidiaries against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or similar business
and similarly situated, of such types, covering such Properties and in such
amounts as are customarily carried under similar circumstances by such other
corporations.
5F. COMPLIANCE WITH ENVIRONMENTAL LAWS.
The Company will, and will cause each of its Subsidiaries and each of its
Affiliates that are controlled by the Company or its Subsidiaries to, comply
with, or operate pursuant to valid waivers of, applicable Environmental Laws and
Environmental Permits, on time schedules required by such laws or permits or the
agencies administering them, including, without limitation, to the extent
required by applicable Environmental Laws or Environmental Permits, conducting,
on a timely basis, periodic tests and monitoring for contamination of ground
water, surface water, air and land and for biological toxicity and completing
proper,
21
thorough and effective clean-up, removal, remediation and/or restoration, in
each case, as required by or under the aforesaid laws and permits, except to the
extent that failure so to comply with any Environmental Law or Environmental
Permit does not have a Material Adverse Effect, and, in addition except that,
with respect to any testing, monitoring, clean-up, removal, remediation or other
such action required pursuant to such law or permits, neither the Company nor
any of its Subsidiaries shall be required to perform any such action if the
applicability or validity thereof is being contested in good faith by
appropriate proceedings and adequate reserves have been established in
accordance with GAAP.
5G. OTHER LAWS, REGULATIONS ETC.
The Company shall conduct its business and operations in material
compliance with its articles of incorporation and by-laws and all Applicable
Laws and, whether or not having the force of law, all applicable official
directives, rules, consents, approvals, authorizations, guidelines, orders and
policies of any Governmental Authorities or Persons having authority over it or
them, including health, safety, environmental protection, employment standards
and labor codes of all applicable Governmental Authorities and all applicable
stock exchange and securities commission rules and obtain and maintain in good
standing all material licenses, permits and approvals from any and all
Governmental Authorities and all applicable stock exchanges and securities
commissions required in respect of its and their operations and the listing of
its securities.
5H. ERISA NOTICES.
The Company covenants that it shall deliver to each Significant Holder,
promptly upon the Company or its Restricted Subsidiaries:
(a) giving or being required to give notice to the PBGC of any
"reportable event" (as defined in section 4043 of ERISA) with respect to
any Plan which might constitute grounds for a termination of such Plan
under Title IV of ERISA by the PBGC, or becoming aware that any plan
administrator of any Plan has given or is required to give notice of any
such "reportable event", a copy of the notice of such reportable event
given or which should have been given to the PBGC;
(b) receiving notice of the Company's or an ERISA Affiliate's complete
or partial withdrawal liability under Title IV of ERISA, or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice;
(c) receiving notice from the PBGC under Title IV of ERISA of an
intent to terminate, impose liability (other than for premiums under
section
22
4007 of ERISA) in respect of, or appoint a trustee to administer any Plan,
a copy of such notice;
(d) applying for a waiver of the minimum funding standard under
section 412 of the Code, a copy of such application;
(e) giving notice of intent to terminate any Plan under section 4041
(c) of ERISA, a copy of such notice and other information filed with the
PBGC;
(f) giving notice of withdrawal from any Plan pursuant to section 4063
of ERISA, a copy of such notice; or
(g) failing to make any required payment or required contribution to
any Plan or Multiemployer Plan or making any amendment to any Plan which
has resulted in the posting of a bond or other security, a certificate of
the chief financial officer or the chief accounting officer of the Company
setting forth details as to such occurrence and the action, if any, which
the Company is required to take.
5I. PAYMENT OF TAXES AND CLAIMS.
The Company covenants that it shall pay or discharge, or cause to be paid
or discharged, before the same shall become delinquent (a) all taxes,
assessments and governmental charges (including claims of the Internal Revenue
Service (U.S.), the PBGC and any other Canadian, British or United States
federal, state, provincial, regional or local agency or authority and claims
made at the insistence of the PBGC) levied or imposed upon it or any ERISA
Affiliate or any Code Affiliate or upon its or their income, profits or
Property, (b) all lawful claims for labor, materials and supplies, which, if
unpaid, might by law become a Lien upon its or its Subsidiaries' Properties, and
(c) all required installments under section 412(m) of the Code and all other
required payments under section 412 of the Code with respect to any Plan
maintained by the Company or any ERISA Affiliate; provided, however, that, in
the case of clause (a) and (b) above, the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim, the applicability or validity of which is being contested in good
faith by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP.
5J. MAINTENANCE OF PROPERTIES AND BOOKS.
The Company shall keep and maintain and cause each of its Restricted
Subsidiaries to keep and maintain proper and separate books and accounts all in
accordance with generally accepted accounting principles of the applicable
jurisdiction. Except where the failure to do so would not materially adversely
affect
23
the business, condition (financial or other), prospects or operations of
the Company and its Restricted Subsidiaries, taken as a whole, the Company will
cause all Properties of material value used or useful in the conduct of its
business or the business of any Restricted Subsidiary to be maintained and kept
in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
5K. CORPORATE EXISTENCE, ETC.
Except as otherwise provided in paragraph 6V, the Company will at all times
preserve and keep in full force and effect its corporate existence and that of
its Restricted Subsidiaries, if any, and rights and franchises material to its
business, and those of each of its Restricted Subsidiaries and will qualify, and
cause each of its Restricted Subsidiaries to qualify to do business in any
jurisdiction where the failure to do so would have a material adverse effect on
the business, condition (financial or other), Properties, prospects or
operations of the Company and its Restricted Subsidiaries, taken as a whole.
5L. BUSINESS.
The Company shall and shall cause each of its Subsidiaries to conduct and
operate a business substantially of the same nature as that engaged in by it or
any Subsidiary, as applicable, on the date of this Agreement.
5M. GUARANTORS.
The Company shall cause each Subsidiary having Net Tangible Assets in
excess of Cdn.$5,000,000, to execute and deliver a Guarantee to the holders of
Notes. The Company shall not permit the aggregate Net Tangible Assets of all of
its Subsidiaries which have not executed Guarantees (other than Co-Steel C.S.M.
Corp., 1062316 Ontario Limited and their Subsidiaries) to exceed Cdn.$10,000,000
at any time.
5N. INTELLECTUAL PROPERTY RIGHTS.
The Company shall:
(a) maintain all registrations and applications for registration for
any Intellectual Property Rights in good standing for so long as such
Intellectual Property Rights remain material to its business, including
without limitation paying all fees and making all such filings as may be
required from time to time;
24
(b) promptly notify the Purchasers if it knows, or has reason to know,
of any application or registration, relating to any patent or trademark
material to its business that may expire, become abandoned or dedicated to
the public domain, or of any material adverse determination or development
(including the institution of, or any such determination or development in,
any proceeding in the Canadian or U.S. Patent and Trademark Office or any
court or tribunal in any other country) regarding its ownership of any
material Intellectual Property Right or its right to register the same or
to keep and maintain the same; and
(c) report to the Purchasers any application for the registration of
any trademark material to its business with the Canadian or U.S. Patent and
Trademark Office and any application for any patent material to its
business with the Canadian or U.S. Patent and Trademark Office, in each
case within 30 days after the last day of the fiscal quarter in which any
application occurs (whether the application is made by itself or through
any agent, employee, licensee or designee).
5O. BENEFIT AND PENSION PLANS.
The Company shall comply with all Applicable Laws in respect of its
employees' benefit and pension plans, including, but not limited to, payment of
all contributions and premiums to be paid thereunder, and it shall ensure that
all premiums and payments relating to employee benefits and pensions are paid as
due.
5P. ENVIRONMENTAL REPORTING.
The Company shall immediately provide to the Purchasers written notice of
any of the following events of which it becomes aware if such event could
reasonably be expected to have a Material Adverse Effect:
(a) any proceeding or order of any Governmental Authority requiring it
or any Subsidiary to comply with or take action under any Environmental
Laws;
(b) the receipt of any written notice to the effect that it or any
Subsidiary is liable to any Person as a result of the Release or threatened
Release of any Contaminant into the Environment;
(c) receipt of any written notice that it or any Subsidiary is subject
to investigation by any Governmental Authority evaluating whether any
remedial action by it is needed to respond to the Release or threatened
Release of any Contaminant into the Environment;
25
(d) receipt of any written notice of, or its obtaining knowledge of, a
condition with respect to any property which it or any Subsidiary owns,
leases, occupies or has control of, or owned, leased, occupied or had
control of, which might reasonably be expected to result in a notice of
violation by it of any Environmental Law;
(e) receipt of any written notice of the commencement of any judicial
or administrative proceeding alleging a violation of any Environmental Law
with respect to any property which it or any Subsidiary owns, leases,
occupies or has control of, or owned, leased, occupied or had control of;
or
(f) the undertaking of any activities as a result of new or proposed
changes to any existing Environmental Law (whether or not having the force
of law) that could reasonably be expected to have a Material Adverse Effect
upon it or any of its Subsidiaries.
In addition, the Company shall notify the Purchasers upon receipt of any
report with respect to environmental audits conducted by or on behalf of, or
provided to, the Company or any Subsidiary, and upon request shall forthwith
provide copies of same to the Purchasers.
5Q. INCORPORATED PROVISIONS.
Neither the Company nor any Restricted Subsidiary will enter into, amend or
supplement any agreement of Indebtedness in any manner if the effect thereof
would be to increase interest rates or amend or add covenants or defaults, the
effect of which are not substantially provided for in this Agreement or, in the
case of covenants or defaults, are more restrictive on the Company and its
Subsidiaries than are the covenants and defaults contained herein (the
"ADDITIONAL PROVISIONS"), unless the Company shall execute and deliver to the
holders of the Notes an instrument in writing supplementing this Agreement and
extending the benefit of such Additional Provisions to the holders of the Notes.
Once incorporated in this Agreement, no waiver or consent under or amendment or
termination of the agreement of Indebtedness containing the Additional
Provisions shall have any effect on the Additional Provisions as incorporated
herein.
5R. APPROVED FINANCINGS.
The Company and its Subsidiaries shall have entered into Approved
Financings on or before January 15, 2004, and on such date there shall be no
Default or Event of Default in respect of any of the Replacement Covenants when
compliance therewith is calculated as if such covenants were in effect on
December 31, 2003.
26
5S. ADDITIONAL RESTRUCTURING FEE.
The Company shall pay a fee to the Purchasers, on or prior to August 30,
2002, in the aggregate amount of $300,000, payable as provided in Attachment 1
to the Purchaser Schedule.
5T. INVENTORY.
The Company shall maintain contractual relationships, in form and substance
satisfactory to the Required Holders, to ensure that the title to all Inventory
located on Leased Properties located in Canada is held in the name of Co-Steel
Distribution Canada Limited and that all Inventory located on Leased Properties
located in the United States is held in the name of Co-Steel USA Distribution,
Inc.
5U. ACCOUNTS RECEIVABLE.
The Company shall ensure that Co-Steel Distribution Canada Limited has
title to all Accounts Receivable in respect of the sale of Inventory payable by
arm's length Account Debtors of any member of the Restricted Group located in
Canada (other than Accounts Receivable relating to the Company's recycling
division), that the Company has title to all Accounts Receivable relating to the
Company's recycling division and that Co-Steel USA Distribution, Inc. has title
to all Accounts Receivable in respect of the sale of Inventory payable by arm's
length Account Debtors of any member of the Restricted Group located in the
United States.
5V. ENGLISH FINANCE STRUCTURE COMPANIES.
(a) On or prior to June 30, 2002, the Company shall document the
intercompany loan between Co-Steel (UK) Limited and the Company in a form
approved by the Required Holders.
(b) The Company shall use its commercially reasonable efforts to
complete the transaction described in Schedule 5V on or prior to December
31, 2002. For greater certainty the transactions described in Schedule 5V
may be completed notwithstanding any restriction in paragraph 5 or
paragraph 6 and no step in such transactions shall constitute an Event of
Default under paragraphs 7A (h), (i) or (j).
(c) On or prior to December 31, 2002, if there is any inter-company
Indebtedness from the Company or any Restricted Subsidiary to any English
Finance Structure Company or successor thereto, the Company shall either
(x) (1) continue or incorporate a Subsidiary pursuant to the Ontario
Business Corporations Act that will be the sole holder of any intercompany
Indebtedness formerly held by any of the English Finance Structure
27
Companies; (2) cause each such new Subsidiary to provide to the holders of
Notes a Guarantee and to provide the Canadian Security Agent a Security
Agreement; and (3) deliver to the Required Holders customary evidence of
perfection of the security interests granted by the foregoing Security
Agreement together with a customary opinion of counsel in respect of the
same in form and substance reasonably satisfactory to the Required Holders;
or (y) provide such other security, together with customary legal opinions
in respect of same, in form and substance reasonably requested by the
Required Holders in respect of the English Finance Structure Companies.
5W. MATERIAL CONTRACTS AND MATERIAL LICENSES.
The Company shall and shall cause each Guarantor to:
(a) perform all of its duties and obligations under, comply with all
the terms of, and enforce its rights under, the Material Contracts and
Material Licenses all in accordance with prudent business practice;
(b) deliver to the holders of Notes true and complete copies of each
Material Contract or Material License and each other contract which has
been requested by the Required Holders, and, if requested by the Required
Holders, execute and deliver to the holders of Notes a specific assignment
of each contract in favor of the holders of Notes and use reasonable
commercial efforts to obtain the consent to assignment of the other party
or parties to each Material Contract or Material License in a form
acceptable to the Required Holders;
(c) promptly upon request by the Required Holders, provide the holders
of Notes with all information regarding contractual relations of the
Company of a material nature which is requested by the Required Holders;
and
(d) use reasonable commercial efforts to obtain and deliver to the
holders of Notes the consent of any party that the Required Holders request
with respect to the Lien on any Material Contract or Material License in
favor of the holders of Notes, such consent to be in form and substance
acceptable to the Required Holders.
5X. JURISDICTIONS.
The Company shall advise the holders of Notes of any change in the location
at which the Company or any of its Restricted Subsidiaries' assets may be
located from the location disclosed on Schedule 5X and any additional
jurisdictions in which it is carrying on business of a material nature or any
change in the jurisdiction of incorporation of it or any of its Restricted
Subsidiaries (including, without
28
limitation, the Hungarian Finance Structure Companies and N.J.S.C. Investment
Co., Inc.).
5Y. NOTICES.
The Company shall deliver to each Significant Holder immediate written
notice of the commencement or occurrence of any of the following events of which
it becomes aware:
(a) the commencement of any proceeding for the condemnation,
expropriation or other taking of any of its or any Restricted Subsidiary's
property;
(b) the issuance by any Governmental Authority of any injunction,
order or decision involving it or any Restricted Subsidiary or any of its
or any Restricted Subsidiary's property in respect of any matter which
could reasonably be expected to have a Material Adverse Effect;
(c) the filing or commencement of any action, suit or proceeding
against or affecting it or a Restricted Subsidiary or any of its or any
Restricted Subsidiary's property, whether at law or equity or by or before
any court or any Governmental Authority or any arbitrator where the amount
claimed is in excess of Cdn.$5,000,000 (or its equivalent) or the aggregate
amount claimed under all such actions, suits or proceedings which are
unresolved is in excess of Cdn.$10,000,000 (or its equivalent) in the
aggregate, and any such notice shall specify the nature of such action,
suit or proceeding and its Restricted Subsidiary's proposed response and
shall from time to time provide all information requested by the Required
Holders respecting any action, suit or proceeding;
(d) the imposition of any Lien which is not a Permitted Lien against
any of its or any Restricted Subsidiary's property;
(e) any change in the amount and/or terms of any credit arrangement
made with other lenders or any action taken by another lender to recover
amounts outstanding with such other lender;
(f) any claim, demand or action impairing title to any of its or any
Restricted Subsidiary's property with a value in excess of Cdn.$5,000,000
(or its equivalent);
(g) any development in its or any of its Subsidiaries' business or
affairs which has had or which is likely to have a Material Adverse Effect
on its or any of its Subsidiaries' business, properties, operations or
condition, financial or otherwise;
29
(h) any Leased Property, other than the North York Property or the
Significant U.S. Leased Properties becoming material to the business of the
Company or any of its Restricted Subsidiaries;
(i) its entry into any contract or undertaking not in the ordinary
course of its business containing cumulative obligations of the Company or
any of its Subsidiaries in excess of Cdn.$5,000,000 (or its equivalent);
(j) its, or any Obligor's, acquisition of any property that is not
subject to the Collateral Documents, or any other event or condition that
may require additional action of any nature in order to preserve the
effectiveness and perfected status of the Liens of either Security Agent
with respect to the Collateral Documents;
(k) the preparation of any financial or strategic report by any third
party for the benefit of the Company or any Subsidiary other than Gallatin,
and with respect to Gallatin, any such financial or strategic report not
subject to a confidentiality obligation of the Company or Gallatin;
(l) any other adverse action by or notice from any Governmental
Authority with respect to it, any Restricted Subsidiary or any Hungarian
Finance Structure Company or any of its, any Restricted Subsidiary's or any
Hungarian Finance Structure Company's property which, if determined
adversely, would have a Material Adverse Effect; or
(m) any condition or event which constitutes an Event of Default or a
Default or a default under any other agreement for borrowed money with the
notice specifying the nature and occurrence of the Event of Default,
Default or other default and the action it has taken or proposes to take
with respect to the Event of Default, Default or other default.
5Z. MAINTENANCE OF BANK ACCOUNTS.
The Company shall and shall cause each Subsidiary to maintain each of its
bank accounts with either the administration agent under the Bank Agreement or
PNC or shall be subject to a Blocked Account Agreement; provided however that
(a) Acierco S.A. may maintain, up to the lesser of $1,000,000 and its then
contingent tax liability in the account with Banque de Luxembourg in Luxembourg,
identified in Schedule 8U, (b) Lake Ontario Steel Company Inc. may maintain up
to $500,000 in the account with Manufacturers and Traders Trust Company in
Buffalo, New York identified in Schedule 8U, and (c) Co-Steel C.S.M. Corp. and
any of its Subsidiaries may maintain any bank account from time to time. In
addition, with the consent of the Required Holders, the Company or any
Subsidiary may retain deposits in any bank account with respect to which a
Security Agent has been provided with a duly executed Blocked Account Agreement
from the bank
30
maintaining such account and may retain amounts individually less than
Cdn.$150,000 (or equivalent) and less than Cdn.$600,000 (or equivalent) in the
aggregate in bank accounts that do not meet any of the foregoing criteria.
Notwithstanding the foregoing, in connection with loans and advances permitted
pursuant to paragraph 6O, up to U.S. $10,200,000 may be transferred to and
retained for up to three Business Days in the bank account of Co-Steel Hungary
at HSBC London, England identified in Schedule 8U and the bank account of
Acierco S.A. at Banque de Luxembourg in Luxembourg and identified in Schedule
8U.
5AA. ASSET MONETIZATION PROGRAM.
The Company shall use its commercially reasonable efforts to implement and
adhere to the timetable set forth in the Asset Monetization Program, and shall,
if necessary, and as soon as practical, revise the Asset Monetization Program
based on the Strategic Plan and each Collateral Audit. Any revision to the Asset
Monetization Program shall be subject to the approval of the Required Holders
and shall be approved by the Company's Board of Directors.
5BB. COLLATERAL AUDIT.
The Company shall assist a consultant of the Required Holders' choice in
the preparation of a detailed collateral audit and/or appraisal of accounts
receivable, inventory, accounts payable, cash and related systems, machinery,
equipment and real estate of the Company and each Subsidiary (the "COLLATERAL
AUDIT"), and such report shall be dated as of August 31, 2003.
5CC. COMPUTER SYSTEMS.
The Company shall take commercially reasonable steps to ensure, so far as
reasonably possible, that all computer systems used in its business and material
to its business and owned or leased by it, including hardware and software,
remain free from viruses and disabling codes and devices and shall maintain in
place appropriate disaster recovery plans, procedures and facilities and to take
steps and implement all procedures necessary to safeguard and restrict
unauthorized access to its computer systems.
5DD. BIENNIAL COLLATERAL OPINION.
The Company shall have delivered, on a biennial basis, an opinion of
counsel in respect of the Collateral and the Collateral Documents as required by
Section 10 of the Intercreditor Agreement.
31
5EE. BI-ANNUAL AUDITOR'S REPORT.
(a) On or prior to June 15, 2002, the Company shall deliver the
Bi-Annual Auditor's Report in respect of year-end 2001, which shall be in
form and substance satisfactory to the Required Holders in their sole and
absolute discretion; and
(b) The Company shall twice annually, on or before 60 days following,
(i) March 31, and (ii) September 30, provide to each holder of Notes from
auditors acceptable to the Required Holders an audit report of the
Company's and its Subsidiaries' accounts receivable, inventory, accounts
payable, cash and related systems (the "BI-ANNUAL AUDITOR'S REPORT"). Such
report shall be satisfactory in form and content to the Required Holders.
6. NEGATIVE COVENANTS
The Company covenants that so long as any of the Notes are
outstanding:
6A. CURRENT RATIO.
The Company shall ensure that the ratio of Consolidated Current Assets to
Consolidated Current Liabilities, calculated at the end of each fiscal quarter
of the Company, commencing on December 31, 2001, is not less than:
(a) as at December 31, 2001, 1.8:1;
(b) as at March 31, 2002, 1.7:1;
(c) as at June 30, 2002, 1.6:1;
(d) as at September 30, 2002, 1.7:1;
(e) as at December 31, 2002, 1.6:1;
(f) as at March 31, 2003, 1.6:1;
(g) as at June 30, 2003, 1.7:1;
(h) as at September 30, 2003, 1.6:1; and
(i) as at December 31, 2003, 1.6:1.
32
6B. CURRENT ASSETS.
The Company shall ensure that Consolidated Current Assets, for any fiscal
period, are not less than 85% of the Consolidated Current Assets projected for
such fiscal period in the Financial Forecast, tested quarterly commencing on
December 31, 2001.
6C. RATIO OF CONSOLIDATED TOTAL NET DEBT TO NORMALIZED CONSOLIDATED
EBITDA.
The Company shall ensure that the ratio of Consolidated Total Net Debt to
Normalized Consolidated EBITDA at the end of each of the following fiscal
quarters of the Company does not exceed:
(a) as at December 31, 2001, 14.0:1;
(b) as at March 31, 2002, 14.3:1;
(c) as at June 30, 2002, 13.5:1;
(d) as at September 30, 2002, 12.2:1;
(e) as at December 31, 2002, 9.1:1;
(f) as at March 31, 2003, 7.3:1;
(g) as at June 30, 2003, 6.0:1;
(h) as at September 30, 2003, 5.0:1; and
(i) as at December 31, 2003, 4.5:1.
For the purposes of determining compliance with this covenant only, the
exchange rate for the calculation of Indebtedness in effect on the Restructuring
Date included in Consolidated Total Net Debt shall be Cdn.$1.55 = US$1.
6D. RATIO OF NORMALIZED CONSOLIDATED EBITDA NET OF CAPEX TO CONSOLIDATED
NET INTEREST EXPENSE.
The Company shall ensure that the ratio of Normalized Consolidated EBITDA
Net of Capex to Consolidated Net Interest Expense at the end of each of the
following fiscal quarters of the Company is not less than:
(a) as at December 31, 2001, 0.2:1;
(b) as at March 31, 2002, 0.1:1;
33
(c) as at June 30, 2002, 0.1:1;
(d) as at September 30, 2002, 0.3:1;
(e) as at December 31, 2002, 0.7:1;
(f) as at March 31, 2002, 0.9:1;
(g) as at June 30, 2003, 1.3:1;
(h) as at September 30, 2003, 1.5: 1; and
(i) as at December 31, 2003, 1.6:1.
6E. TANGIBLE NET WORTH.
The Company shall ensure that Tangible Net Worth: (a) exceeds Cdn.$390
million on September 30, 2002, minus the amount of write-downs of assets
resulting from Approved Asset Sales as of such date; and (b) exceeds Cdn.$380
million on December 31, 2002 and as at the end of each fiscal quarter of the
Company thereafter, minus the amount of write-downs of assets resulting from
Approved Asset Sales as of each such date.
6F. CUMULATIVE CONSOLIDATED EBITDA.
The Company shall ensure that Cumulative Consolidated EBITDA, tested at
each quarter end, is greater than or equal to:
($Cdn.000's)
-------------------------------------------------------------------------
Quarter Ending on the last day of 2001 2002 2003
-------------------------------------------------------------------------
March n/a 10,288 71,632
June n/a 24,725 98,473
September n/a 38,192 122,437
December 3,418 53,312 143,020
6G. INCURRENCE OF INDEBTEDNESS.
The Company shall not and shall not permit any Restricted Subsidiary or
Pledgor to create, incur, assume or permit to exist any Indebtedness except:
(a) Indebtedness in favor of the administration agent and the Banks
under the Bank Agreement;
(b) Indebtedness pursuant to the Notes;
34
(c) Indebtedness pursuant to the Convertible Unsecured Subordinated
Debentures;
(d) Indebtedness pursuant to the PNC Credit Agreements;
(e) Indebtedness pursuant to Permitted Intercompany Indebtedness;
(f) Indebtedness pursuant to Permitted Parent Guarantees;
(g) unsecured indemnities incurred in the ordinary course of
business;
(h) unsecured accounts payable and accrued liabilities owed to
Persons other than an Affiliate which are incurred in the normal course of
business or accrued pension liabilities;
(i) deferred revenue classified as a liability;
(j) deferred taxes;
(k) unsecured Indebtedness arising under one or more outstanding
judgments being appealed in good faith (except where their existence would
give rise to an Event of Default);
(l) Capitalized Lease Obligations and Indebtedness secured by
purchase money security interests in an aggregate amount outstanding at any
time not greater than Cdn.$5,000,000 (or its equivalent); and
(m) any unsecured Indebtedness as endorsee under negotiable
instruments received in payment of Accounts Receivable and endorsed for
deposit in the ordinary course of business.
6H. OTHER INDEBTEDNESS AND AGREEMENTS.
The Company shall not and shall not permit any Restricted Subsidiary or
Pledgor to make any amendment or modification to any indenture, note or other
agreement evidencing or governing any of its Indebtedness, or directly or
indirectly voluntarily prepay (other than as may be provided in the
Intercreditor Agreement), defease or in substance defease, purchase, redeem,
retire or otherwise acquire any other Indebtedness in advance of the Notes other
than as required by paragraph 5R.
6I. PAYMENTS TO OTHER SENIOR LENDERS.
Other than as permitted pursuant to the terms of the Intercreditor
Agreement or as required by paragraph 5R, no Obligor or Pledgor shall make any
35
payment of any kind to any Bank or PNC. Notwithstanding the foregoing, provided
no Default or Event of Default has then occurred, the Company may from time to
time pay interest as required pursuant to the terms of the Bank Agreement, and
each of Co-Steel Raritan, Inc. and Co-Steel Sayreville, Inc. may from time to
time pay interest as required pursuant to the terms of its respective PNC Credit
Agreement.
6J. NEGATIVE PLEDGE.
The Company shall not and shall not permit any Restricted Subsidiary to
create, assume or permit to exist over all or any part of its or their business
or assets, whether now owned or hereafter acquired, any Lien (whether prior or
junior to or pari passu with any Lien in favor of the Security Agents) other
than Permitted Liens.
6K. MATERIAL CONTRACTS AND MATERIAL LICENSES.
The Company shall not and shall not permit any Guarantor to:
(a) allow any circumstances to arise which would allow any Material
Contract or Material License to lapse or be terminated during its term;
provided that, for greater certainty, termination of a Material Contract at
the end of its term, in the ordinary course of business, is not prohibited
hereby;
(b) amend any Material Contract or Material License if such amendment
could reasonably be expected to have a Material Adverse Effect; or
(c) assign any Material Contract or Material License, except for
assignment to a Security Agent pursuant to the Collateral Documents.
6L. SALE OF ASSETS.
Other than Permitted Asset Sales or sales pursuant to the Asset
Monetization Program, the Company shall not and shall not permit any Subsidiary
to sell, lease, license, transfer, assign or otherwise dispose of any of its
business, assets, rights, revenues or property, real, personal or mixed,
tangible or intangible (including, without limitation, shares of stock and
indebtedness of Subsidiaries, receivables and leasehold interests), whether in
one or a series of transactions, except on terms and conditions approved by the
Required Holders (each such asset sale so approved, an "APPROVED ASSET SALE").
36
6M. SALE AND LEASEBACK TRANSACTIONS.
Other than as permitted by the Asset Monetization Program or in connection
with the incurrence of a Capitalized Lease Obligation permitted under paragraph
6G(l), the Company shall not and shall not permit any Restricted Subsidiary to
become or remain liable in any way, whether directly or by assignment or as a
guarantor or other contingent obligor, for the obligations of the lessee or user
under any lease or contract for the use of any Property if such Property is
owned on the date of this Agreement or thereafter acquired by the Company or any
of its Affiliates and has been or is to be sold or transferred to any other
Person and was, is or shall be used by the Company or any of its Affiliates for
substantially the same purpose as such Property was used by the Property or such
Affiliate prior to such sale or transfer.
6N. ACQUISITIONS.
The Company shall not and shall not permit any Restricted Subsidiary to (a)
acquire or incorporate any Subsidiary; or (b) acquire all or a substantial part
of, in one or a series of transactions (whether by way of amalgamation (other
than pursuant to paragraph 6V), merger, share purchase, asset purchase or
otherwise) the assets, shares or any other equity interests of any Person.
Provided that the foregoing shall not prevent the Company or any Restricted
Subsidiary from receiving equity of an arm's length Person as part of a
compromise of such arm's length Person's debt in connection with a bankruptcy or
similar proceeding affecting such Person or from acquiring Permitted
Investments.
6O. LOANS, INVESTMENTS, ETC.
Other than Key Employee Loans not to exceed Cdn.$5,000,000 at any time,
the Company shall not and shall not permit any Restricted Subsidiary to:
(a) directly or indirectly make any loan or advance to, or make any
investment in the debt obligations of, or guarantee, or otherwise undertake
to perform or warrant or ensure performance of any Indebtedness or
obligation of, or enter into any agreement that has the effect of assuming
the payment or performance of any Indebtedness or obligation of, any Person
(other than, in each case, to another member of the Restricted Group); or
(b) directly or indirectly subordinate or postpone any claim which it
has against any Person, except the extension of credit in the ordinary
course of business to trade debtors in accordance with customary trade
terms.
Notwithstanding the foregoing, (i) Co-Steel (U.S.) Ltd. shall be permitted
to make loans or advances to Co-Steel C.S.M. Corp., provided that the Equivalent
Amount (net of up to Cdn.$100,000 for operating expenses) of such loans or
37
advances is received by the Company, immediately prior thereto, or
contemporaneously therewith and further provided that each previous payment
under this subsection (i) has been duly received by the Company; (ii) provided
that at the time of, and immediately after giving effect to, such loan or
advance, no Default or Event of Default, or equivalent event under any Gallatin
credit facility, would exist, the Company may from time to time make loans or
advances to Gallatin totaling per annum up to the lesser of (x) Cdn.$3,000,000
and (y) the amount by which the Notes, the Indebtedness pursuant to the Bank
Agreement and the Indebtedness pursuant to the PNC Credit Agreements have been
prepaid pursuant to payments of the nature described in paragraph 4B(a)(iv), and
(iii) the Company or any Restricted Subsidiary may make investments from time to
time as permitted under paragraph 6EE.
6P. DIVIDENDS, ETC.
The Company shall not declare any dividends from, or set apart any sum for
the payment of any dividends on, or make any other distribution (by reduction of
capital or otherwise) in respect of, any of the Company's shares.
6Q. NO REDUCTION OF CAPITAL.
The Company shall not, and shall ensure that no Restricted Subsidiary shall
(as applicable), apply any of its assets to the purchase, redemption or other
acquisition or retirement of any shares in the Company's capital or otherwise
reduce the Company's issued or paid up capital in respect of any of its shares.
6R. NO ISSUE OF CAPITAL.
Other than pursuant to a Significant Share Offering, the Company shall not,
and shall not permit any other Obligor to, without the consent of the Required
Holders, issue any new capital by way of equity or subordinated debt offering or
otherwise, other than by issuance of common shares pursuant to stock options
granted to employees or former employees, or pursuant to a redemption or a
conversion of the Convertible Unsecured Subordinated Debentures in accordance
with their terms. Notwithstanding the foregoing, any Guarantor may issue new
capital by way of equity provided that such new equity is subject to the Lien of
a Stock Pledge Agreement, and the certificates representing such new capital are
forthwith delivered to a Security Agent.
6S. CAPITAL EXPENDITURES.
In each fiscal year the Restricted Group shall not make, or enter into any
agreement which would require them cumulatively to make any Capital Expenditures
(including by way of Capitalized Lease Obligations) in excess of those provided
for in the Financial Forecast; provided that the foregoing shall not restrict
38
the Restricted Group from making Capital Expenditures in any fiscal year in
amounts up to 20% of the amounts otherwise provided for in the Financial
Forecast but only if such Capital Expenditures are in respect of insurance
deductibles for insured losses, the Insurance Proceeds with respect to which are
payable to the Company.
6T. ACCOUNTING CHANGES.
The Company shall not make and shall not permit any Subsidiary to make any
changes in accounting treatment and reporting practices except as permitted by
GAAP and disclosed to the holders of Notes; and the Company shall not change its
financial year end.
6U. TRANSACTIONS WITH AFFILIATES.
Except as otherwise permitted in this paragraph 6, the Company shall not
and shall not permit any Restricted Subsidiary to:
(a) enter into any transaction with any Affiliate, including, without
limitation, any transaction for the purchase, sale or exchange of Property,
the rendering of any services, the making or obtaining of any loans or
advances, and the entering into of any contracts, except that it may enter
into a transaction or contract with an Affiliate which is in the ordinary
course of its business and which is upon fair and reasonable terms no less
favorable to it than it would obtain in a comparable arm's-length
transaction with a Person who is not an Affiliate; or
(b) pay any fees or expenses to, or reimburse or assume any obligation
for the reimbursement of any expenses incurred by any Affiliate, except
payments to reimburse Affiliates for reasonable out-of-pocket expenses
incurred in good faith in the conduct of its business.
▇▇. ▇▇▇▇▇▇▇▇▇▇▇ CHANGES.
The Company shall not and shall not permit any Restricted Subsidiary to
enter into any corporate transaction (or series of transactions), whether by way
of reconstruction, arrangement, reorganization, consolidation, amalgamation,
merger or otherwise, whereby all or substantially all of its or their
undertaking and assets would become the property of any other Person or in the
case of any amalgamation, the property of the continuing corporation resulting
from the amalgamation. Notwithstanding the foregoing, if at the time of and
immediately after giving effect to any amalgamation, no Default shall have
occurred:
(a) any Guarantor may amalgamate with any other Guarantor; or
39
(b) any Guarantor may sell, transfer, lease or otherwise dispose of
its assets to the Company or another Guarantor,
provided that such Guarantor provides the holders of Notes with prior
notice of any such transaction and upon any amalgamation, the resulting company
delivers to the applicable Security Agent the Collateral Documents to which each
predecessor entity was party and an assumption agreement pursuant to which the
amalgamated company confirms its assumption of all of the obligations of the
amalgamating companies under the Documents to which each predecessor entity was
party and such other security, certificates and opinions as may be required by
the Required Holders including, if applicable, a pledge of the amalgamated
company's shares.
6W. HEDGING CONTRACTS.
The Company shall not and shall not permit any of its Subsidiaries to
engage in currency trading, convert Notes from one currency into another or
enter into any currency or interest rate hedge for speculative reasons.
6X. INCONSISTENT AGREEMENTS.
The Company shall not and shall not permit any of its Subsidiaries to enter
into any agreement containing any provision which would be violated or breached
by this Agreement or any of the transactions contemplated by this Agreement by
its or their performance of the obligations in connection therewith.
6Y. ANNOUNCEMENTS.
Except as required by Applicable Law, neither the Company nor any
Restricted Subsidiary or any Pledgor shall make or permit any press release or
other public announcement to be made by or on its behalf which mentions any
Purchaser without each Purchaser's prior written approval of the press release
or public announcement.
6Z. INDUSTRIAL BONDS.
The Company shall not permit Co-Steel Dofasco LLC to sell the Gallatin
County Industrial Revenue Bonds except to another Affiliate or Subsidiary of the
Company.
6AA. ENGLISH FINANCE STRUCTURE COMPANIES.
Except as set forth in Schedule 6AA, the Company shall not (a) permit any
of the English Finance Structure Companies to carry on any business other than
the current business activities of providing financing to related companies, (b)
permit
40
and shall not permit any of its Subsidiaries to transfer any assets to
any of the English Finance Structure Companies, and (c) permit any of the
English Finance Structure Companies to incur additional liabilities.
6BB. INTENTIONALLY DELETED.
6CC. CO-STEEL C.S.M. CORP.
Other than its duties as a partner in Gallatin, the Company shall not
permit Co-Steel C.S.M. Corp. to carry on any business and the Company shall not
and shall not permit any of its Subsidiaries to transfer any assets to, or incur
any Indebtedness in respect of, Co-Steel C.S.M. Corp. Notwithstanding the
foregoing, the Company may and may permit its Subsidiaries to transfer funds to
Co-Steel C.S.M. Corp. (a) pursuant to its regular tax planning if (x) no Default
or Event of Default then exists or would occur because of such transfer, and (y)
an amount equivalent to the amount so transferred by the Company or such
Subsidiary is received by the Company or a Guarantor on the same Business Day as
such transfer or (b) if otherwise permitted pursuant to ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇. FINANCIAL COVENANTS ON AND AFTER JANUARY 15, 2004.
Commencing with January 15, 2004 and thereafter, this Agreement shall be
amended to delete the financial covenants contained in paragraphs 6A through 6F
hereof and there shall be substituted therefor the financial covenants contained
in paragraphs 6A through 6F as set forth in Schedule 6DD attached hereto (the
"REPLACEMENT COVENANTS").
6EE. INVESTMENTS.
Except as expressly permitted by paragraph 6O, the Company shall not at any
time purchase, acquire or own any stock, bonds, notes, or securities of, or any
partnership interest (whether general or limited) in, or any other interest in,
or make any capital contribution to, any other Person, or become a joint venture
partner in any joint venture, or agree, become or remain liable to do any of the
foregoing, except for the following "PERMITTED INVESTMENTS":
(a) debt securities having a maturity of not more than one year issued
or guaranteed by the United States or Canadian government or by an agency
or instrumentality thereof;
(b) certificates of deposit, bankers acceptances and time deposits,
which in each case mature within one year from the date of purchase thereof
and which are issued by a Qualified Bank;
41
(c) commercial paper maturing in 270 days or less from the date of issuance
which, at the time of acquisition by the Company either (A) is accorded the
highest rating by Standard and Poor's Rating Group, a division of McGraw Hill,
Inc. or ▇▇▇▇▇'▇ Investors Service, Inc. or (B) is issued by any Bank or an
affiliate of any Bank;
(d) direct obligations of the United States of America or Canada or any
agency or instrumentality of the United States of America, the payment or
guarantee of which constitutes a full faith and credit obligation of the United
States of America or Canada, in each case maturing in twelve (12) months or less
from the date of acquisition;
(e) ownership of the capital stock of Subsidiaries and ASW Holdings
existing on the Restructuring Date or as otherwise provided herein; and
(f) money market funds or income funds that invest solely in the
investments identified in clauses (a) to (d), inclusive, of this definition.
6FF. PAYMENT OF INTERCOMPANY INDEBTEDNESS.
The Company shall not permit any Restricted Subsidiary to make any payment
on account of principal or interest in respect of the Permitted Intercompany
Indebtedness described in Schedule 8V. Notwithstanding the foregoing, so long as
no Default or Event of Default exists or would occur because of such a payment
and provided that each previous payment pursuant to this sentence has been duly
received by a Restricted Subsidiary, it may twice annually permit payment by a
Restricted Subsidiary of up to U.S. $10,200,000 in respect of interest on
Permitted Intercompany Indebtedness described in Schedule 8V, if the amount of
such interest (net of up to Cdn.$100,000 for operating expenses) is received by
a Restricted Subsidiary within three Business Days of such payment.
7. EVENTS OF DEFAULT
7A. ACCELERATION.
If any of the following events shall occur and be continuing for any reason
whatsoever (and whether such occurrence shall be voluntary or involuntary or
come about or be effected by operation of law or otherwise):
(a) the Company defaults in the payment of any principal of or
Yield-Maintenance Amount payable with respect to any Note when the same
shall become due, either by the terms thereof or otherwise as herein
provided; or
42
(b) the Company defaults in the payment of any interest on any Note or
any fee or other amount not referred to in (a) above which is payable under
this Agreement for more than 3 Business Days after the date due; or
(c) the Company or any Subsidiary defaults (whether as primary obligor
or as guarantor or other surety) in any payment of principal of or interest
on any other obligation for money borrowed (or any Capitalized Lease
Obligation, any obligation under a conditional sale or other title
retention agreement, any obligation issued or assumed as full or partial
payment for Property whether or not secured by a purchase money mortgage or
any obligation under notes payable or drafts accepted representing
extensions of credit) beyond any period of grace provided with respect
thereto, or the Company or any Restricted Subsidiary fails to perform or
observe any other agreement, term or condition contained in any agreement
under which any such obligation is created (or if any other event
thereunder or under any such agreement shall occur and be continuing) and
the effect of such failure or other event is to cause, or to permit the
holder or holders of such obligation (or a trustee on behalf of such holder
or holders) to cause, such obligation to become due (or to be repurchased
by the Company or any Restricted Subsidiary) prior to any stated maturity,
provided, that, the aggregate amount of all obligations as to which such a
payment default shall occur and be continuing or such a failure or other
event causing or permitting acceleration (or resale to the Company on any
Subsidiary) shall occur and be continuing exceeds Cdn.$5,000,000 (or its
equivalent); or
(d) any representation or warranty made by any Obligor herein or in
any other Document or by any Obligor or any of its officers in any writing
furnished in connection with or pursuant to any Document shall be false in
any material respect on the date as of which made; or
(e) the Company fails to perform or observe any term, condition or
covenant contained in paragraph 6A, 6B, 6C, 6D, 6E or 6F of this Agreement
or the Company or any Guarantor fails to perform or observe the covenants
set forth in paragraphs 2L (other than 2L(d)), 6O and 6FF within the time
limits set forth therein; or
(f) the Company or any Guarantor fails to perform or observe any other
agreement, term or condition contained herein or in the other Documents and
such failure shall not be remedied within 15 days after the earlier of any
Responsible Officer obtaining actual knowledge or receiving written notice
from any holder of Notes of such failure; or
(g) the Company or any Subsidiary makes an assignment for the benefit
of creditors; or
43
(h) any decree or order for relief in respect of the Company or any
Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, composition, winding up,
dissolution or liquidation or similar law, whether now or hereafter in
effect (herein called the "BANKRUPTCY LAW"), of any jurisdiction; or
(i) the Company or any Subsidiary petitions or applies to any tribunal
for, or consents to, the appointment of, or taking possession by, a
trustee, receiver, custodian, liquidator or similar official of the Company
or any Subsidiary, of any substantial part of the assets of the Company or
any Subsidiary, or commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Subsidiary) relating to the
Company or any Subsidiary under the Bankruptcy Law of any other
jurisdiction or takes any corporate action to authorize any of the actions
described in this paragraph 7A(i); or
(j) any such petition or application is filed, or any such proceedings
are commenced, against the Company or any Subsidiary and the Company or
such Subsidiary by any act indicates its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or
(k) the Company ceases carrying on business permanently; or
(l) an encumbrancer takes possession of or a receiver manager is
appointed over all or substantially all of the assets or revenues of the
Company or any Subsidiary; or
(m) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or
(n) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary which requires the divestiture of assets representing a
substantial part, or the divestiture of the stock of a Subsidiary whose
assets represent a substantial part, of the consolidated assets of the
Company and its Subsidiaries (determined in accordance with GAAP) or which
requires the divestiture of assets, or stock of a Subsidiary, which shall
have contributed a substantial part of the consolidated net income of the
Company and its
44
Subsidiaries (determined in accordance with GAAP) for any of the three
fiscal years then most recently ended, and such order, judgment or decree
remains unstayed and in effect for more than 60 days; or
(o) a final judgment, exceeding, either singly or together with other
then outstanding final unstayed and undischarged judgments, in the
aggregate Cdn.$5,000,000 (or its equivalent), is rendered against the
Company or any Subsidiary and, within 30 days after entry thereof, such
judgment is not discharged or execution thereof stayed pending appeal, or
within 30 days after the expiration of any such stay, such judgment is not
discharged; or
(p) any "reportable event" as such term is defined in section 4043 of
ERISA occurs in connection with any Plan or trust created thereunder for
which the thirty day notice requirement has not been waived under
applicable regulations, or any event occurs requiring the Company or any
ERISA Affiliate to provide security to a Plan under section 401(a)(29) of
the Code; any "prohibited transaction" occurs, as such term is defined in
section 4975 of the Code or in section 406 of ERISA, in connection with any
Plan or any trust created thereunder; any notice of intent to terminate a
Plan or Plans is filed under Title IV of ERISA by the Company or any ERISA
Affiliate, any Plan administrator or any combination of the foregoing; any
proceedings are instituted by the PBGC to terminate or to cause a trustee
to be appointed to administer any Plan; any partial or complete withdrawal
is made by the Guarantor or an ERISA Affiliate from any Multiemployer Plan;
any proceedings are instituted by a fiduciary of any Plan against the
Company or any Code Affiliate to enforce section 515 of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; the
Company or a Code Affiliate fails to make a required installment under
section 412(m) of the Code or to pay any amount or amount which it shall
have become liable to pay to the PBGC or to a Plan under Title IV of ERISA
on or before the due date; any application is filed by the Company or a
Code Affiliate for a waiver of the minimum funding standard under section
412 of the Code or section 302 of ERISA; or any "reorganization" (as
defined in section 418 of the Code or Title IV ERISA) of any Plan which is
a Multiemployer Plan occurs; and each such instance individually, or any
two or more such instances in the aggregate, would result in liability of
the Company or any Code Affiliate or ERISA Affiliate to the Internal
Revenue Service, the PBGC or a Plan in an aggregate amount exceeding
$1,000,000 (or its equivalent); or
(q) one or more encumbrancers shall take possession of any Property or
assets valued in excess of Cdn.$5,000,000 (or its equivalent) of the
Company or any Subsidiary of the Company or a distress or execution or
45
any similar process is levied or enforced against any property or assets
valued in excess of Cdn.$5,000,000 (or its equivalent) of the Company or
any Subsidiary of the Company and remains unsatisfied for the shorter of a
period of 10 days or the period that would permit that property or those
assets to be sold in accordance with Applicable Law;
(r) any provision in this Agreement or any other Document shall
terminate or cease to be legally valid, binding and enforceable against the
Company, any Guarantor or any Pledgor, as applicable, or if the Company,
any Guarantor or any Pledgor, as applicable, contests in any manner, the
legality, validity, binding nature or enforceability of this Agreement or
any other Document;
(s) the Company shall fail to pay any amount owing by it under any
Hedging Contract and the failure to pay continues for the duration of the
grace period (if any) allowable under the Hedging Contract and an early
termination date under the Hedging Contract has occurred;
(t) other than as a result of the conversion or redemption of the
Convertible Unsecured Subordinated Debentures to common shares of the
Company in accordance with their terms, a change in Control of the Company
from that which existed on the Restructuring Date shall have occurred;
(u) any consent, license or authorization of any Governmental
Authority or any other Person which is required to make this Agreement, any
Material Contract, any Material License or any other Document legal, valid,
binding and enforceable or is required in order to enable the Company, any
Guarantor or any other party thereto to perform its obligations hereunder
or thereunder shall be withdrawn or ceases to be in full force and effect;
(v) the Company or any Subsidiary of the Company shall (i) change the
nature or scope of its business or (ii) (other than pursuant to an Approved
Asset Sale or as contemplated by paragraph 6AA, cease to carry on business;
(w) all or a material part of the assets of the Company or any
Subsidiary of the Company shall be lost or destroyed and the resulting
losses are not fully covered by insurance subject to applicable
deductibles;
(x) the institution of any steps by any US Guarantor, any member of
its Controlled Group or any other Person to terminate a Plan if, as a
result of such termination, such US Guarantor or any such member could be
required to make a contribution to such Plan, or could reasonably expect to
incur a liability or obligation to such Plan, in excess of Cdn.$1,000,000
(or its equivalent);
46
(y) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA;
(z) any Release of a Contaminant shall occur or is discovered or any
environmental complaint shall be filed by any Person that has, or is
reasonably likely to have, a Material Adverse Effect; or
(aa) in the sole, absolute and unfettered opinion of the Required
Holders there shall occur any Material Adverse Effect; or
(bb) the Company and its Subsidiaries shall have failed to enter into
Approved Financings as required by paragraph 5R or shall have refinanced
the Bank Agreement and/or the PNC Credit Agreements without the written
consent of the Required Holder(s); or
(cc) PNC exercise its rights or declare a default pursuant to Article
7 of the PNC Credit Agreements or Article 5 of the PNC Parent Guaranty; or
(dd) the Banks exercise their rights or declare a default pursuant to
section 11.01 of the Bank Agreement; or
(ee) the Banks or PNC shorten the maturity of the Indebtedness under
the Bank Agreement or the PNC Credit Agreements, as the case may be, so
that such Indebtedness matures sooner than January 15, 2004; or
(ff) in the sole judgment of the Required Holders, any Collateral
Document shall cease to be a valid and perfected first priority security
interest against third parties (other than in respect of Permitted Priority
Liens), and the Company is unable to rectify the problem to the
satisfaction of the Required Holders within 14 days after the Required
Holders or a Security Agent gives notice to the Company of the problem; or
(gg) any Obligor shall default in any material respect under any
Material Contract and the Obligor has not, within 30 days of the occurrence
of that default, taken steps to remedy, cure or otherwise respond to the
default in a manner satisfactory to the Required Holders; or
(hh) other than as permitted by paragraph 6V, if the Company or any
Restricted Subsidiary shall effect or pass an effective resolution
authorizing (i) its consolidation, merger or amalgamation with any Person,
or (ii) the sale, transfer or other disposition of all, or a material part
of, its assets to one or more Persons whether in one transaction or a
series of transactions, related or not; or
47
(ii) any consent, license or authorization of any Governmental
Authority or any other Person which is required to make any Material
Contract or any Material License legal, valid, binding and enforceable or
is required in order to enable the Company or any Guarantor or any other
party thereto to perform its obligations hereunder or thereunder shall be
withdrawn or ceases to be in full force and effect; or
(jj) any consent, license or authorization of any Governmental
Authority or any other Person which is required to make this Agreement or
any other Document legal, valid, binding and enforceable or is required in
order to enable the Company or any Guarantor to perform its obligations
hereunder or thereunder shall be withdrawn or ceases to be in full force
and effect,
then (i) if such event is an Event of Default specified in any of clauses
(g) to (l), inclusive, of this paragraph 7A, all of the Notes at the time
outstanding shall automatically become immediately due and payable; (ii) if such
event is an any Event of Default specified in clause (a) or clause (b) of this
paragraph 7A, any holder or holders of Notes at the time outstanding affected by
such Event of Default may at any time, at its or their option, by notice or
notices to the Company, declare all the Notes held by it or them to be
immediately due and payable, and (iii) if such event is an Event of Default
specified in any other clause of this paragraph 7A, the Required Holder(s) may,
at its or their option, by notice in writing to the Company, declare all of the
Notes to be, and all of the Notes shall thereupon be and become, immediately due
and payable. Upon any Notes becoming due and payable under this paragraph 7A,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Yield-Maintenance Amount determined in
respect of such principal amount (to the full extent permitted by applicable
law), shall all be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby waived.
The Company acknowledges, and the parties hereto agree, that each holder of a
Note has the right to maintain its investment in the Notes free from repayment
by the Company (except as herein specifically provided for) and that the
provision for payment of a Yield-Maintenance Amount by the Company in the event
that any Note is prepaid or accelerated as a result of an Event of Default, is
intended to provide compensation for the deprivation of such right under such
circumstances.
7B. RESCISSION OF ACCELERATION.
At any time after any or all of the Notes shall have been declared
immediately due and payable pursuant to paragraph 7A, the Required Holder(s)
may, by notice in writing to the Company, rescind and annul such declaration and
its consequences if (a) the Company shall have paid all overdue interest on the
48
Notes, the principal of and Yield-Maintenance Amount, if any, payable with
respect to any Notes which have become due otherwise than by reason of such
declaration, and interest on such overdue interest and overdue principal and
Yield-Maintenance Amount, (b) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (c) all Events of Default
and Defaults, other than non-payment of amounts which have become due solely by
reason of such declaration, shall have been cured or waived pursuant to
paragraph 11C, and (d) no judgment or decree shall have been entered for the
payment of any amounts due pursuant to the Notes or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION.
Whenever any Note shall be declared immediately due and payable pursuant to
paragraph 7A or any such declaration shall be rescinded and annulled pursuant to
paragraph 7B, the Company shall forthwith give written notice thereof to the
holder of each Note at the time outstanding.
7D. OTHER REMEDIES.
If any Event of Default or Default shall occur and be continuing, the
holder of any Note may proceed to protect and enforce its rights under this
Agreement and such Note by exercising such remedies as are available to such
holder in respect thereof under Applicable Law, either by suit in equity or by
action at law, or both, whether for specific performance of any covenant or
other agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. No remedy conferred in this Agreement upon the
holder of any Note is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or by
statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES
The Company represents, covenants and warrants, as of the Restructuring
Date, as follows:
8A. BINDING OBLIGATION.
This Agreement and each other Document that the Company is party to
constitutes the legal, valid, and binding obligation of the Company, enforceable
against the Company in accordance with its respective terms.
49
8B. REAFFIRMATION.
All representations and warranties made in the Existing Agreements by the
Company were true as of the dates of execution of the Existing Agreements.
8C. NO DEFAULT.
Except as disclosed on Schedule 8C with respect to the Existing Agreements
(it being agreed hereto that all such existing Defaults and Events of Default on
such Schedule 8C are hereby waived by the Purchasers as of the effectiveness of
this Agreement), immediately prior to the effectiveness of this Agreement, no
Default or Event of Default had occurred and was continuing under the Existing
Agreements, and immediately after the effectiveness of this Agreement, no
Default or Event of Default will have occurred and be continuing.
8D. NO CONFLICT, BREACH, ETC.
Neither the execution nor delivery of this Agreement, nor fulfillment of
nor compliance with the terms and provisions hereof and of the Notes will
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the Properties or assets of the Company or any
of its Subsidiaries pursuant to, the charter or by-laws of the Company or any of
its Subsidiaries, any award of any arbitrator or any agreement (including any
agreement with stockholders), any Material Contract, any Material License, the
leases for the North York Property or the Significant U.S. Leased Properties or
any order, judgment, decree, statute, law, rule or regulation to which the
Company or any of its Subsidiaries is subject.
8E. NO VIOLATION OF LAW OR REGULATIONS.
The amendment and restatement of the Existing Agreements and the execution
and delivery of this Agreement shall not violate any applicable law or
governmental regulation (including, without limitation, Regulations T, U and X
of the Board of Governors of the Federal Reserve System).
8F. AUTHORIZATION, CONSENT, ETC.
Neither the nature of the Company or of any Subsidiary, nor any of their
respective businesses or Properties, nor any relationship between the Company or
any Subsidiary and any other Person, nor any circumstance in connection with the
offering, issuance, sale or delivery of the Notes is such as to require any
authorization, consent, approval, exemption or other action by or notice to or
filing with any court or administrative or governmental body (other than routine
filings after the date of closing with the Securities and Exchange Commission
and/or state Blue Sky authorities) in connection with the execution and delivery
of this
50
agreement or fulfillment of or compliance with the terms and provisions hereof
or of the Notes.
8G. FULL DISCLOSURE.
None of the financial statements and other certificates previously provided
to the holders of Notes pursuant to the provisions of the Existing Agreements
nor the statements made in this Agreement nor any other written statements
furnished by or on behalf of the Company or any of its Subsidiaries, including,
without limitation, the Asset Monetization Program, the Financial Forecasts and
the Business Plans, and other written statements furnished to the Purchasers in
connection with the proposal and negotiation of this Agreement, the other
Documents and the waivers contained in paragraph 8C, taken as a whole, contain
any untrue statement of a material fact or omit a material fact necessary to
make the statements contained therein and herein not misleading. There is no
fact relating to any event or circumstance that has occurred or arisen since
December 31, 2001 that the Company has not disclosed to the Purchasers in
writing that has had or, so far as the Company can now reasonably foresee, could
reasonably be expected to have, a Material Adverse Effect.
8H. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES.
(a) Schedule 8H is (except as noted therein) a complete and correct
list of the Company's Subsidiaries, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 8H as being owned by the
Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and
clear of any Lien (except as otherwise disclosed in Schedule 8H).
(c) Each Subsidiary identified in Schedule 8H is a corporation or
other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified
as a foreign corporation or other legal entity and is in good standing in
each jurisdiction in which such qualification is required by law, other
than those jurisdictions as to which the failure to be so qualified or in
good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such Subsidiary has the
corporate or other power and authority to own or hold under lease the
properties it purports to own or hold
51
under lease and to transact the business it transacts and proposes to
transact.
8I. LITIGATION; OBSERVANCE OF STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 8I, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against
or affecting the Company or any Subsidiary or any property of the Company
or any Subsidiary in any court or before any arbitrator of any kind or
before or by any Governmental Authority that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance, rule or
regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
8J. TITLE TO PROPERTY; LEASES.
(a) OWNED PROPERTIES. The Company and its Subsidiaries have good and
sufficient title to their respective material Properties, including all
such Properties reflected in the most recent audited balance sheet
delivered to the Purchasers or purported to have been acquired by the
Company or any Subsidiary after said date (except as sold or otherwise
disposed of in the ordinary course of business), in each case free and
clear of Liens prohibited by this Agreement, except for those defects in
title and Liens that, individually or in the aggregate, would not have a
Material Adverse Effect. Neither the Company nor any Restricted Subsidiary
has any interest in any real property other than the Owned Properties and
there are no agreements, options, contracts or commitments to sell,
transfer or otherwise dispose of any Owned Property or which would restrict
the transfer of the Owned Properties other than those in connection with a
Permitted Asset Sale. The Ontario Properties and the New Jersey Properties
(all as described in Schedule 8J(a) comprise all of the Owned Properties
that in the reasonable good faith estimate of the Company have a value
individually in excess of Cdn.$5,000,000 (or its equivalent).
(b) LEASED PROPERTIES. The Company is not, nor is any of its
Restricted Subsidiaries, bound by any agreement to lease any real property
except the Leased Properties. The names of payees under the leases for the
Leased Properties, the description of the Leased Properties and the term,
rent and other amounts payable under the leases for the Leased Properties
52
are accurately described in Schedule 8J(b). All rent and other payments and
obligations required to be paid and performed pursuant to the leases for
the Leased Properties have been duly paid and performed. Neither the
Company nor any of its Restricted Subsidiaries, as applicable, is in
default of any of its obligations under the leases for any of the Leased
Properties. The North York Property and the Significant U.S. Leased
Properties are the only Leased Properties that are material to the business
of the Company or any of its Restricted Subsidiaries.
8K. EXISTING INDEBTEDNESS.
Since March 31, 2002, there has been no material change in the amounts,
interest rates, sinking funds, installment payments or maturities of the
Indebtedness of the Company or its Subsidiaries. After giving effect to this
Agreement, neither the Company nor any Subsidiary will be in default in the
payment of any principal or interest on any Indebtedness of the Company or such
Subsidiary and no event or condition shall exist with respect to any
Indebtedness of the Company or any Subsidiary that would permit (or that with
notice or the lapse of time, or both, would permit) one or more Persons to cause
such Indebtedness to become due and payable before its stated maturity or before
its regularly scheduled dates of payment.
8L. SOLVENCY.
(a) ASSETS GREATER THAN LIABILITIES. The fair value of the business
and assets of the Company, taken as a whole, exceeds, as of the
Restructuring Date, the liabilities of the Company, taken as a whole, as of
such time.
(b) MEETING LIABILITIES. After giving effect to this Agreement and the
other Documents, each of the Company and its Subsidiaries
(i) will not be engaged in any business or transaction, or about
to engage in any business or transaction, for which the Company or
such Subsidiary has unreasonably small assets or capital (within the
meaning of the Uniform Fraudulent Transfer Act, the Uniform Fraudulent
Conveyance Act and section 548 of the Federal Bankruptcy Code), and
(ii) will be able to pay its debts as they mature.
53
8M. INTENT.
The Company is entering into this Agreement and the other Documents to
which it is a party without any intent to hinder, delay, or defraud either
current creditors or future creditors of the Company.
8N. ENVIRONMENTAL MATTERS.
Except as otherwise disclosed in Schedule 8N, the Company has no knowledge
of any claim and has not received any notice of any claim, and no proceeding has
been instituted raising any claim against the Company, any of its Restricted
Subsidiaries or any of the English Finance Structure Companies or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Law, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect.
(a) the Company has no knowledge of any facts which would give rise to
any claim, public or private, of violation of Environmental Law or
damage to the Environment emanating from, occurring on or in any way
related to real properties now or formerly owned, leased or operated
by the Company, any of its Restricted Subsidiaries or any of the
English Finance Structure Companies or to other assets or their use,
except, in each case, such as could not reasonably be expected to
result in a Material Adverse Effect;
(b) neither the Company, any Restricted Subsidiary or any of the
English Finance Structure Companies has stored any Hazardous Materials
on real properties now or formerly owned, leased or operated by the
Company, any of its Restricted Subsidiaries or any of the English
Finance Structure Companies nor has disposed of any Hazardous
Materials in a manner contrary to any Environmental Law in each case
in any manner that could reasonably be expected to result in a
Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or operated
by the Company, any of its Restricted Subsidiaries or any of the
English Finance Structure Companies are in compliance with applicable
Environmental Laws, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect.
8O. LIENS.
The Collateral Documents create in favor of the Security Agents for and on
behalf of the holders of Notes valid, binding and perfected (when registered)
Liens
54
on all right, title and interest in all of the Collateral which is the subject
matter of the Collateral Documents and those Liens have first priority for all
purposes over any other Liens on the Collateral, except for Permitted Priority
Liens. The Collateral Documents to which it is a party, including their attached
schedules (if any), contain accurate descriptions of all of its material assets
and the Collateral Documents to which each Guarantor is a party, including their
attached schedules (if any).
8P. OWNERSHIP OF INVENTORIES RETAINED ON LEASED PROPERTIES.
The Company covenants that Co-Steel Distribution Canada Limited has good
and marketable title to all of the Inventory retained on Leased Properties
located in Canada and Co-Steel USA Distribution, Inc. has good and marketable
title to all of the Inventory retained on Leased Properties located in the
United States.
8Q. OWNERSHIP OF THIRD PARTY ACCOUNTS RECEIVABLE.
The Company covenants that Co-Steel Distribution Canada Limited has good
and marketable title to all of the Accounts Receivable payable by arm's length
Account Debtors of any member of the Restricted Group located in Canada, (other
than Accounts Receivable relating to the Company's recycling division which are
owned by the Company), and Co-Steel USA Distribution, Inc. has good and
marketable title to all of the Accounts Receivable payable by arm's length
Account Debtors of any member of the Restricted Group located in the United
States. Substantially all of the Accounts Receivable are assignable as security
for the Notes without the consent of the related Account Debtor or any other
Person.
8R. CONTRACTS AFFECTED BY CHANGE OF CONTROL.
The Company is not bound by any material contract or commitment which
requires prior approval of any transfer of the shares of any Person which are
pledged to a Security Agent for and on behalf of the holders of Notes pursuant
to the Stock Pledge Agreements.
8S. MATERIAL CONTRACTS AND MATERIAL LICENSES.
(a) Schedule 8S-1 accurately sets out all Material Contracts and
Schedule 8S-2 accurately sets out all Material Licenses.
(b) A true and complete certified copy of each Material Contract and
Material License has been delivered to the holders of Notes and each
Material Contract and Material License is in full force and effect,
unamended except as permitted under this Agreement.
55
(c) No event has occurred and is continuing caused by any member of
the Restricted Group or, to the best of the Company's knowledge, caused by
any other party to a Material Contract or Material License which would
constitute a material breach of or a default under any Material Contract or
Material License.
(d) Each Material Contract to which it is a party is binding upon it
and, to its knowledge, is a binding agreement of each other Person who is a
party to the Material Contract, in each case enforceable in accordance with
its terms, subject to any bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally.
(e) The Company has not made any prepayments to or received any
prepayments from third parties under any Material Contract out of the
ordinary course of its business.
(f) Except as set forth on Schedules 8S-1 and 8S-2, no Material
Contract or Material License is assignable without the consent of another
party to such Material Contract or the issuer or grantor of such Material
License.
8T. RESTRICTED SUBSIDIARIES.
Other than the Guarantors, no Subsidiary has Net Tangible Assets in excess
of Cdn.$5,000,000 (or its equivalent).
8U. BANK ACCOUNTS.
Schedule 8U accurately sets out each bank account maintained by the Company
and each of its Subsidiaries (other than Gallatin) and accurately sets forth the
institution and location where each such account is maintained. Other than as
permitted pursuant to paragraph 6FF, the bank account maintained by Acierco S.A.
with the Banque de Luxembourg will at no time hold deposits exceeding the lesser
of U.S.$1,000,000 and the then contingent tax liability of Acierco S.A. and the
bank account maintained by Lake Ontario Steel Company Inc. with Manufacturers
and Traders Trust Company in Buffalo, New York will at no time hold deposits
exceeding U.S.$500,000; and except as permitted by the foregoing provisions of
this sentence, each bank account of the Company or any Subsidiary (other than
Co-Steel C.S.M. Corp. and its Subsidiaries) shall be either maintained with the
administration agent under the Bank Agreement or PNC or shall be the subject of
a Blocked Account Agreement or if it does not meet any of the foregoing criteria
then it shall contain less than Cdn.$150,000 (or the Equivalent Amount in U.S.$)
and less than Cdn.$600,000 (or equivalent) in the aggregate for all such
accounts.
56
8V. INTERCOMPANY INDEBTEDNESS.
Schedule 8V accurately describes each inter-company loan ("INTERCOMPANY
Indebtedness") between the Company and any of its Subsidiaries or between any of
its Subsidiaries and another Subsidiary and in each case sets forth the
principal amount of each such inter-company loan together with the interest rate
it bears and the term of each such inter-company loan.
8W. COMPUTER SYSTEMS.
The Company makes commercially reasonable efforts to ensure that all
computer systems owned or leased by it or used in its businesses and material to
its business, including hardware and software, are, free from viruses and
disabling codes and devices, and it continues to take all steps and implement
all procedures necessary to ensure that those systems are free from viruses and
disabling codes and shall remain so. The Company has in place appropriate
disaster recovery plans, procedures and facilities and has taken all steps and
implemented all procedures necessary to safeguard and restrict unauthorized
access to its computer systems.
8X. INTELLECTUAL PROPERTY RIGHTS.
The Company is the registered (if registration is possible) and beneficial
owner or licensee of, with good and marketable title to, all Intellectual
Property Rights. All Intellectual Property Rights which are material to its
business are accurately described in Schedule 8X, as amended by written notice
by the Company to the Required Holders from time to time. The Company has the
right to use the Intellectual Property Rights, all applications and
registrations in Canada, the United States and elsewhere, and the Intellectual
Property Rights are current, and the conduct of its business does not to its
knowledge infringe the intellectual property rights of any other Person.
8Y. LICENSES, AGENCY AND DISTRIBUTION AGREEMENTS.
Schedule 8Y, as amended by written notice by the Company to the Required
Holders from time to time, accurately lists all material agreements to which it
is a party or by which it is bound under which the right to manufacture, use or
market any product, service, technology, information, data, computer hardware or
software or other Property has been granted, licensed or otherwise provided to
it or by it to any other Person, or under which it has been appointed or any
Person has been appointed by it as an agent, distributor, licensee or franchisee
for any of the foregoing. None of the agreements listed in Schedule 8Y grants to
any Person any authority to incur any liability or obligation to enter into any
agreement on behalf of the Company.
57
8Z. INSURANCE.
The Company maintains all risks property insurance in connection with its
assets and business and other types of insurance, including business
interruption insurance and liability insurance with respect to claims for
personal injury, death or property damage, with respect to the operation of its
business, all with responsible and reputable insurance companies in such amounts
and with such deductibles as are customary in the case of businesses of
established reputation engaged in the same or similar businesses.
8AA. FINANCIAL STATEMENTS.
The annual audited consolidated financial statements of the Company for the
fiscal year ended December 31, 2001, furnished to the Purchasers are the most
recent annual audited financial statements of the Company and its Subsidiaries.
The Company's financial statements have been prepared on a consolidated basis
(which consolidation includes all of its Subsidiaries) and in accordance with
GAAP, except as stated in the financial statements or in the notes thereto. The
Company's audited financial statements (a) present fairly in all material
respects the consolidated financial positions and the consolidated results of
operations at the dates thereof and for the periods covered therein, and (b)
disclose all liabilities of the Company and its Subsidiaries, including
contingent or unmatured liabilities as of the date thereof, which are required
to be disclosed thereon, in each case in accordance with GAAP.
8BB. SPECIAL PURPOSE FINANCIAL STATEMENTS.
The Special Purpose Financial Statements of the Company for the fiscal year
most recently ended, furnished to the Purchasers are the most recent Special
Purpose Financial Statements of the Company and its Subsidiaries (other than the
Unrestricted Subsidiaries). The Special Purpose Financial Statements have been
prepared on a consolidated basis (which consolidation includes all of its
Subsidiaries (other than the Unrestricted Subsidiaries)), and in accordance with
GAAP, except as stated in the Special Purpose Financial Statements or in the
notes thereto. The Special Purpose Financial Statements (a) present fairly in
all material respects the Company's and its Subsidiaries' (other than the
Unrestricted Subsidiaries) financial positions and their results of operations
at the dates thereof and for the periods covered therein, and (b) disclose all
liabilities of the Company and its Subsidiaries (other than the Unrestricted
Subsidiaries) including contingent or unmatured liabilities as of the date
thereof, which are required to be disclosed thereon, in each case in accordance
with GAAP.
58
8CC. FINANCIAL FORECAST.
The Company has prepared the Financial Forecast and is responsible for
developing the assumptions on which the Financial Forecast is based. The
Financial Forecast is based on reasonable assumptions as to all legal and
factual matters material to the estimates set forth therein. With respect to the
Financial Forecast, each Purchaser acknowledges (a) that there are uncertainties
inherent in attempting to make such projections and forecasts, (b) it is
familiar with such uncertainties, and (c) and agrees that the Financial Forecast
are projections and the actual results will likely differ. The Financial
Forecasts have been approved by the Company's Board of Directors.
8DD. ASSET MONETIZATION PROGRAM.
The Company has prepared the Asset Monetization Program and is responsible
for developing the assumptions on which the Asset Monetization Program is based.
The Asset Monetization Program is based on reasonable assumptions as to all
legal and factual matters material to the estimates set forth therein. With
respect to the Asset Monetization Program, each Purchaser acknowledges (a) that
there are uncertainties inherent in attempting to make such a program, (b) it is
familiar with such uncertainties, and (c) and agrees that the Asset Monetization
Program may not be achieved in the time frame or in amounts projected. The Asset
Monetization Program has been approved by the Company's Board of Directors.
8EE. EMPLOYMENT DISPUTES.
There are no disputes pending or, to the Company's best knowledge after due
inquiry by its Responsible Officers, threatened, between the Company and any of
its employees which could reasonably be expected to have a Material Adverse
Effect upon it.
8FF. BENEFIT AND PENSION PLANS.
The Company's benefit and pension plans are fully insured or otherwise
funded in accordance with Applicable Law and all premiums and other payments due
by the Company under its benefit and pension plans have been fully paid and all
benefits and pension payments due under its benefit and pension plans have been
paid. No Pension Plan that is subject to ERISA has incurred any "accumulated
funding deficiency" within the meaning of section 302 of ERISA or section 412 of
the Code and no Pension Plan that is subject to ERISA has applied for or
received a waiver of the minimum funding standards imposed by section 412 of the
Code. No Pension Plan that is subject to ERISA has been involved in any
transaction that (A) violates the fiduciary requirements of section 404 of ERISA
or
59
(B) is a "prohibited transaction" within the meaning of section 406(a) or
406(b) of ERISA or section 4975(c) of the Code.
8GG. PENSION PLANS.
Except as disclosed on Schedule 8GG during the twelve-consecutive-month
period prior to the Restructuring Date, no steps have been taken to terminate
any Pension Plan (other than a standard termination under section 4041(b) of
ERISA), and no contribution failure has occurred with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA. No
condition exists or event or transaction has occurred with respect to any
Pension Plan which might result in the incurrence by any US Guarantor or any
member of the Controlled Group of any material liability, fine or penalty.
8HH. N.J.S.C. INVESTMENT CO., INC.
N.J.S.C. Investment Co., Inc. is inactive and is currently in the process
of being dissolved.
8II. ENGLISH FINANCE STRUCTURE COMPANIES.
Each of the English Finance Structure Companies carries on the business of
providing financing to related corporations or owns the shares of other
companies that are English Finance Structure Companies and carries on no other
business. The assets and liabilities of each of the English Finance Structure
Companies are summarized on Schedule 8II.
▇▇▇. ▇▇▇▇▇▇▇▇▇ FINANCE STRUCTURE COMPANIES.
Each of the Hungarian Finance Structure Companies carries on the business
of providing financing to related corporations or owns the shares of other
companies that are Hungarian Finance Structure Companies and carries on no other
business. The assets and liabilities of each of the Hungarian Finance Structure
Companies are summarized on Schedule 8JJ.
8KK. CO-STEEL C.S.M. CORP.
Co-Steel C.S.M. Corp. carries on its business as a partner in Gallatin and
carries on no other business. Gallatin is an active business which operates a
minimill in Kentucky specializing in the production of flat rolled steel. The
assets and liabilities of Co-Steel C.S.M. Corp. are summarized on Schedule 8KK.
60
9. REPRESENTATIONS OF THE PURCHASERS
The representations made by each Purchaser in the Existing Agreements in
respect of the Existing Notes were true as of the date of execution of each
Existing Agreement.
10. DEFINITIONS
For the purpose of this Agreement, the terms not defined in paragraph 10B
but otherwise defined in the introductory sentence and in Sections 1 and 2 shall
have the respective meanings specified therein, and the following terms shall
have the meanings specified with respect thereto:
10A. YIELD-MAINTENANCE AMOUNT TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to paragraph 4B or 4C or is declared to
be immediately due and payable pursuant to paragraph 7A, as the context
requires.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal of
any Note, the yield to maturity implied by:
(a) the yields reported, as of 10:00 a.m. (New York City time) on the
Business Day next preceding the Settlement Date with respect to such Called
Principal, for actively traded U.S. Treasury securities having a maturity
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date, on the Treasury Yield Monitor page of Standard & Poor's
MMS-Treasury Market Insight (or, if Standard & Poor's shall cease to report
such yields in MMS-Treasury Market Insight or shall cease to be Prudential
Capital Group's customary source of information for calculating
yield-maintenance amounts on privately placed notes, then such source as is
then Prudential Capital Group's customary source of such information), or
(b) if such yields shall not be reported as of such time or the yields
reported as of such time shall not be ascertainable, the Treasury Constant
Maturity Series yields reported, for the latest day for which such yields
shall have been so reported as of the Business Day next preceding the
Settlement
61
Date with respect to such Called Principal, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for actively
traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date.
Such implied yield shall be determined, if necessary in the Required
Holders' sole discretion, by (i) converting U.S. Treasury ▇▇▇▇ quotations to
bond-equivalent yields in accordance with accepted financial practice and (ii)
interpolating linearly between yields reported for various maturities.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called Principal
of any Note, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing:
(a) such Called Principal into
(b) the sum of the products obtained by multiplying
(i) each Remaining Scheduled Payment of such Called Principal
(but not of interest thereon) by
(ii) the number of years (calculated to the nearest one-twelfth
year) which will elapse between the Settlement Date with respect to
such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon (calculated at the Initial Rate) that would be due on or after the
Settlement Date with respect to such Called Principal if no payment of such
Called Principal were made prior to its scheduled due date; provided that, if
such calculation is being made in connection with a payment in respect of a
True-Up Event (as defined in the Intercreditor Agreement), interest that would
be due for purposes of the calculation above shall be calculated at the
Applicable Rate.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or 4C or is declared to be immediately due and payable pursuant to
paragraph 7A , as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Called Principal of
such Note over the sum of:
(a) such Called Principal, plus
62
(b) interest accrued thereon as of (including interest due on) the
Settlement Date with respect to such Called Principal.
The Yield-Maintenance Amount shall in no event be less than zero.
10B. OTHER TERMS.
"ACCOUNT DEBTOR" shall mean any Person who is obligated to pay any Account
Receivable.
"ACCOUNTS RECEIVABLE" shall mean any right of a Person to payment for goods
sold, leased or services rendered in the ordinary course of business, classified
as an account receivable in accordance with GAAP.
"ADDITIONAL PROVISIONS" shall have the meaning specified in paragraph 5Q.
"ADJUSTED COST BASE" shall mean the dollar amount by which the Unrestricted
Subsidiaries would be carried as at December 31, 1998 in the accounts of the
Company, if the Unrestricted Subsidiaries were accounted for, from inception, by
the equity method of accounting. Furthermore: (a) the Adjusted Cost Base will
have no further adjustments subsequent to December 31, 1998 for net income or
loss of, or unrealized gains or losses on, the Unrestricted Subsidiaries; (b)
consistent with the equity method of accounting all inter-company transactions
and balances would be eliminated; and (c) the Adjusted Cost Base will be
increased or decreased, as the case may be, for any amounts contributed or
received in the form of subscription for equity, contribution of surplus, or
receipt of dividends. For greater certainty, realized gains or losses on
disposals of Unrestricted Subsidiaries will be reflected in the Special Purpose
Financial Statements. For purposes of this definition, the Hungarian Finance
Structure Companies and N.J.S.C. Investment Co., Inc. shall be deemed to be
Restricted Subsidiaries.
"AFFILIATE" shall mean:
(a) as such term is used in paragraphs 6G(h) and 6U, as to any Person,
any other Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. A Person shall
be deemed to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership
of voting securities or membership interests, by contract or otherwise);
without limiting the foregoing, any Person which is an officer, director or
a holder of 10% or more of the shares of any class of capital stock of the
Company or any Subsidiary, or a member of the immediate family of any such
officer, director or 10% or greater shareholder, shall be deemed to be an
Affiliate of the Company; and
63
(b) as used elsewhere in this Agreement, with respect to any Person,
any of (i) a director or executive officer of the Person or any other
Person described in clause (ii) below and (ii) any other Person which,
directly or indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with the Person and, with respect
to the Company, shall include each of its Subsidiaries.
"AGREEMENT" shall have the meaning specified in paragraph 1A(b).
"APPLICABLE LAW" shall mean, with respect to any Person, property,
transaction or event, all present or future applicable laws, statutes,
regulations, by-laws, treaties, judgments and decrees and all applicable
official directives if legally binding and all other legally binding
requirements of any Governmental Authority or Person having authority over such
Person, property, transaction or event.
"APPLICABLE RATE" shall mean, for any interest payment date in respect of
the Series A Notes and the Series B Notes, the Initial Rate for such Series plus
the applicable margin set forth below, based upon the ratio of Consolidated
Total Net Debt to Normalized Consolidated EBITDA as in effect on such date:
---------------------------------------------------------
Consolidated Total Net Debt to Applicable
Normalized Consolidated EBITDA Margin
---------------------------------------------------------
=<3:0 0%
---------------------------------------------------------
> 3:0, =<4:0 .50%
---------------------------------------------------------
> 4.0, =<5.0 1.25%
---------------------------------------------------------
> 5.0, <=7.5 1.75%
---------------------------------------------------------
>7.5 2.00%
---------------------------------------------------------
For purposes of the foregoing, the rate per annum shall be determined and
adjusted on the date (the "RATE ADJUSTMENT DATE") one Business Day after the
unaudited quarterly financial statements and the related Officer's Certificate
required pursuant to paragraph 5A are delivered to the Purchasers. If the
Company fails to deliver the unaudited quarterly financial statements and
related Officer's Certificate as required pursuant to paragraph 5A, on or before
any Rate Adjustment Date, the rate per annum shall be adjusted to an amount
equal to the Initial Rate plus 2.00% from such Rate Adjustment Date until such
time that the unaudited financial statements and related Officer's Certificate
are delivered to the Purchasers, whereupon the rate per annum shall be adjusted
as provided above, until the next Rate Adjustment Date.
64
"APPROVED ASSET SALE" shall have the meaning specified in paragraph 6L.
"APPROVED FINANCINGS" shall mean refinancings of, or replacement facilities
for, each of the Bank Agreement and the PNC Credit Agreements, all on terms and
conditions and with documentation reasonably satisfactory to the Required
Holder(s).
"ASSET MONETIZATION PROGRAM" shall mean the written plan and timetable for
divesting all non-core assets of the Company and its Subsidiaries, dated
February 25, 2002 and attached hereto as Exhibit D, as revised from time to time
pursuant to paragraph 5AA. The Asset Monetization Program shall be updated as
required by changes to the Strategic Plan, Collateral Audit and/or the Business
Plans and shall be approved by the Company's board of directors.
"ASW HOLDINGS" shall mean ASW Holdings plc, a corporation incorporated
under the laws of England.
"AUDITOR" shall mean (a) PricewaterhouseCoopers LLP, Chartered Accountants,
or (b) another nationally recognized firm of chartered accountants who at the
relevant time (i) are the duly appointed auditors of the Company and (ii) are in
fact independent of the Company.
"BA EQUIVALENT NOTE" shall mean a non-interest bearing note, issued by the
Company in the amount and for the same term as the Bankers' Acceptance the Banks
would otherwise have been required to discount under the Bank Agreement, at a
purchase price calculated on the same basis as Bankers' Acceptances are
discounted by the administration agent under the Bank Agreement.
"BANK AGREEMENT" shall mean that certain Credit Agreement, dated as of
April 30, 2002 (together with any amendment, modification, supplement thereto or
replacement thereof) by and among the Company, the various Guarantors party
thereto, The Toronto-Dominion Bank, as administration agent and the Banks.
"BANKER'S ACCEPTANCE" shall mean a depository ▇▇▇▇, as defined in the
Depository Bills and Notes Act (Canada) in Canadian dollars that is in the form
of a draft signed by the Company and accepted by a Bank or, for a Bank not
participating in clearing services as contemplated in that Act, a draft or other
▇▇▇▇ of exchange in Canadian dollars that is drawn by the Company and accepted
by a Bank.
"BANKRUPTCY LAW" shall have the meaning specified in clause (h) of
paragraph 7A.
"BANKS" shall mean the Toronto Dominion Bank, The Bank of Nova Scotia and
other lenders from time to time party to the Bank Agreement.
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"BI-ANNUAL AUDITOR'S REPORT" shall have the meaning specified in paragraph
5EE.
"BLOCKED ACCOUNT AGREEMENT" shall mean a blocked account agreement entered
into by a bank or other financial institution with which the Company or a
Subsidiary (other than Co-Steel C.S.M Corp and its Subsidiaries) maintains an
account, in form and substance acceptable to the Required Holders.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a day
on which commercial banks in ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, are required or
authorized to be closed.
"BUSINESS PLAN" shall mean, for each fiscal year, a detailed and
comprehensive 24-month business plan and forecast for the Company, which
includes a written management discussion, and shall be in form and substance
satisfactory to the Required Holder(s) and approved by the Company's board of
directors.
"CANADIAN DOLLARS", "CDN. DOLLARS", AND "CDN.$" shall mean lawful currency
of Canada.
"CANADIAN SECURITY AGENT" shall mean Computershare Trust Company of Canada
(and its permitted successors and assigns) in its capacity as Canadian security
agent for and on behalf of the administration agent and Banks under the Bank
Agreement, the holders of Notes and PNC pursuant to the Intercreditor Agreement.
"CAPITAL EXPENDITURE" shall mean any expenditure made by any Person for the
purchase, lease or acquisition of capital assets (other than Current Assets)
required to be capitalized in accordance with GAAP, including, without
limitation, Capitalized Lease Obligations.
"CAPITALIZED LEASE OBLIGATION" shall mean, with respect to any Person, at
any time, all liabilities of the Person as lessee in respect of all rentals
under any lease of (or other arrangement conveying the right to use) real or
personal property, which, in accordance with GAAP, have been or are required to
be capitalized on the books of such Person; the term "rentals" shall mean, all
payments which the lessee is required to make by the terms of any lease or other
arrangement.
"CLOSING" shall have the meaning specified in paragraph 2A.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
66
"CODE AFFILIATE" shall mean each Person which together with the Company or
any of its Subsidiaries is treated as a "single employer" under subsection (b),
(c), (m), (n) or (o) of section 414 of the Code.
"COLLATERAL" shall mean all Property, of whatever nature or kind, which is
the subject of any Lien created by any Collateral Document.
"COLLATERAL AUDIT" shall have the meaning specified in paragraph 5BB of
this Agreement.
"COLLATERAL DOCUMENTS" shall mean each Mortgage and Leasehold Mortgage (and
Landlord Consents as necessary), each Security Agreement, any Blocked Account
Agreement, each Stock Pledge Agreement (including delivery to the applicable
Security Agent of original share certificates representing the capital stock in
each Initial Guarantor, ASW Holdings and the other pledged entities together
with duly executed stock transfer powers), each UCC-1 Financing Statement (and
other registrations) required to be filed to perfect the Security Agents'
interests in assets of the Company and the Guarantors, the Insurance
Assignments, the Debentures and each Moveable Hypothec.
"COMPANY" shall have the meaning specified in the introductory paragraph of
this Agreement.
"CONSOLIDATED CURRENT ASSETS" shall mean, for any period, the trade
accounts receivable (net of any allowance for doubtful accounts and prepaid
expenses) and inventory (net of obsolescence or valuation reserves) of the
Company which, at the date of determination, are, in accordance with GAAP,
classified as current on the balance sheet contained in the most recent Special
Purpose Financial Statements, but excluding cash and cash equivalents.
"CONSOLIDATED CURRENT LIABILITIES" shall mean, for any period, the accounts
payable and accrued liabilities of the Company which, at the date of
determination, are, in accordance with GAAP, classified as current on the
balance sheet contained in the most recent Special Purpose Financial Statements,
but excluding bank indebtedness and the current portion of long-term
liabilities.
"CONSOLIDATED EBITDA" shall mean for any period (a) the Consolidated Net
Income in the period; plus (b) Consolidated Net Interest Expense in the period;
plus (c) income taxes, whether paid or deferred, which are deducted in
determining Consolidated Net Income in the period, if any; plus (d) depreciation
and amortization expense for the period; minus (e) to the extent added in
determining Consolidated Net Income, extraordinary gains; plus (f) to the extent
deducted in determining Consolidated Net Income, non-cash extraordinary losses
(which for greater certainty shall include the non-cash Cdn.$13 million pension
curtailment charge from the third fiscal quarter of 2001); plus (g) all cash
receipts from Gallatin
67
that have been used by the Company and its Subsidiaries to permanently repay
Indebtedness to the holders of the Notes, PNC and the Banks; (h) to the extent
deducted in determining Consolidated Net Income, unrealized foreign exchange
losses; minus (i) the amount of loans or advances to Gallatin made pursuant to
paragraph 6O; minus (j) to the extent added in determining Consolidated Net
Income, unrealized foreign exchange gains; all as set forth on the Special
Purpose Financial Statements for such period, all as determined in accordance
with GAAP.
"CONSOLIDATED NET INCOME" shall mean, with reference to any period, any net
earnings (or net loss) for such period as set forth on the Special Purpose
Financial Statements for such period.
"CONSOLIDATED NET INTEREST EXPENSE" shall mean, for any period, the
aggregate of interest charges, finance charges and debt service charges, fees or
discounts for borrowed money, paid, payable or accrued in respect of
interest-bearing Indebtedness (including without limitation Bankers'
Acceptances) net of all interest and dividend income and specifically excluding
all fees (but not interest charges) payable under or in connection with this
Agreement for such period, all as set forth on the Special Purpose Financial
Statements for such period, plus, for greater certainty, all interest,
calculated on an accrual basis, on the equity component of the Convertible
Unsecured Subordinated Debentures before income taxes.
"CONSOLIDATED TOTAL NET DEBT" shall mean, as of any date, the principal
amount of all outstanding interest bearing Indebtedness including, without
limitation, the principal amount of the Convertible Unsecured Subordinated
Debentures, the face amount of outstanding Bankers' Acceptances, Letters of
Credit, and the amount of Capitalized Lease Obligations (net of interest
component) but specifically excluding accounts payable and accrued liabilities,
and deducting cash and short term investments (rated R-1 (middle) or better by
Dominion Bond Rating Service), all as set forth on the Special Purpose Financial
Statements as of such date plus the face amount of all guarantees provided by
any Restricted Subsidiary for the benefit of any Unrestricted Subsidiary
(excluding, for greater certainty, the guarantee by the Company of the
obligations of Co-Steel (UK) Limited pursuant to the share purchase agreement
dated December 23, 1998 between Co-Steel (UK) Limited, ASW Holdings and the
Company).
"CONTAMINANT" shall mean any pollutant, dangerous substance, liquid waste,
industrial waste, hauled liquid waste, toxic substance, hazardous waste,
hazardous material, hazardous substance, nuclear material, contaminant or like
substance including any of the foregoing controlled, regulated or prohibited
under any Environmental Law or otherwise.
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"CONTROL" shall mean with respect to a body corporate deemed to be
controlled by another person or by two or more bodies corporate that (a) voting
securities of the first-mentioned body corporate carrying more than 50 percent
of the votes for the election of directors are held, other than by way of
security only, by or for the benefit of such other person or by or for the
benefit of such other bodies corporate; and (b) the votes carried by such
securities are sufficient, if exercised, to elect a majority of the board of
directors of the first-mentioned body corporate and "CONTROLLED" shall have a
corresponding meaning.
"CONTROLLED GROUP" shall mean all members of a controlled group of
corporations and all members of a controlled group of trades or business
(whether or not incorporated) under common control which, together with each US
Guarantor, are treated as a single employer under section 414 of the Code or
section 4001 of ERISA.
"CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES" shall mean the Company's
6.50% Convertible Unsecured Subordinated Debentures issued pursuant to a
prospectus dated April 14, 1997.
"CO-STEEL HUNGARY" means Co-Steel Liquidity Management Hungary Limited
Liability Company, a corporation incorporated pursuant to the laws of Hungary
and licensed as a Hungarian off-shore company.
"CUMULATIVE CONSOLIDATED EBITDA" shall mean Consolidated EBITDA calculated
for a period from October 1, 2001 to the date of calculation, which date shall
be the last calendar day of a month.
"CURRENT ASSETS" shall mean the consolidated current assets of any Person,
as defined and determined in accordance with GAAP.
"DEBENTURE" shall mean a Debenture from any Obligor in favor of the
Canadian Security Agent on behalf of the holders of Notes, PNC and the Banks
containing a first ranking fixed charge (subject to Permitted Liens) with
respect to the Company's leasehold interest in the North York Property, the
Company's freehold interest in each Ontario Property and other assets and a
floating charge over the remaining present and future assets of such Obligor
delivered or pledged to the Canadian Security Agent pursuant to a debenture
pledge agreement.
"DEFERRED PRINCIPAL AMOUNTS" shall mean, collectively, the Deferred Series
A Amounts and the Deferred Series B Amounts.
"DEFERRED SERIES A AMOUNTS" shall have the meaning specified in paragraph
4A(a).
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"DEFERRED SERIES B AMOUNTS" shall have the meaning specified in paragraph
4A(b).
"DISPOSAL" shall mean the sale, lease, transfer or other disposition of
Property of the Company or any of its Restricted Subsidiaries, whether by one
transaction or a series of transactions and whether at the same time or over a
period of time.
"DOCUMENTS" shall mean each of this Agreement, any Note, any Guarantee, any
Collateral Document, the Intercreditor Agreement, the Standstill Agreement and
all certificates and other documents delivered or to be delivered to the
Purchasers pursuant to this Agreement or any other Document.
"ENGLISH FINANCE STRUCTURE COMPANIES" shall mean each of Co-Steel Amsterdam
B.V., Co-Steel (UK) Limited and Cansteel Antilles N.V.
"ENVIRONMENT" shall mean soil, surface waters, ground waters, land stream
sediments, surface or subsurface strata, ambient air, and any environmental
medium.
"ENVIRONMENTAL LAW" shall mean any environmental or health and
safety-related law, regulation, rule or ordinance at the Canadian, United States
or British federal, state, provincial or local level, whether existing as of the
date hereof, whether or not previously enforced, and, for purposes of complying
in the future with such laws, regulations, rules or ordinances, those that are
subsequently enacted.
"ENVIRONMENTAL PERMITS" shall mean all permits, licenses and other
authorizations required under any applicable Environmental Law.
"EQUIVALENT AMOUNT" shall mean, on any date, the equivalent amount in
Canadian Dollars or United States Dollars, as the case may be, after giving
effect to a conversion of a specified amount of United States Dollars to
Canadian Dollars or of Canadian Dollars to United States Dollars, as the case
may be, at the official noon rate of exchange as quoted by the Bank of Canada on
page BOFC on Reuters service for the purchase of the applicable currency in the
wholesale market on the date in question at approximately noon (Toronto time)
for the purchase of United States Dollars with Canadian Dollars or at the rate
that is the reciprocal thereof for the purchase of Canadian Dollars with United
States Dollars, as the case may be.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of the same
controlled group of corporations as the Company within the meaning of
70
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph 7A,
provided that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event or act, and "DEFAULT" shall mean any of such events,
whether or not any such requirement has been satisfied.
"EXCESS REVOLVER PAYDOWN" shall have the meaning specified in the
Intercreditor Agreement.
"EXCHANGE ACT" shall mean the United States Securities Exchange Act of
1934, as amended.
"EXISTING AGREEMENTS" shall have the meaning specified in paragraph 1A(b).
"EXISTING 1994 AGREEMENT" shall have the meaning specified in paragraph
1A(a).
"EXISTING 1997 AGREEMENT" shall have the meaning specified in paragraph
1A(b).
"EXISTING NOTES" shall have the meaning specified in paragraph 1A(b).
"EXISTING SERIES A NOTES" shall have the meaning specified in paragraph
1A(a).
"EXISTING SERIES B NOTES" shall have the meaning specified in paragraph
1A(b).
"FAIR MARKET VALUE" shall mean, at any time with respect to any Property,
the sale value of such Property that would be realized in an arm's-length sale
at such time between an informed and willing buyer, and an informed and willing
seller, under no compulsion to buy or sell, respectively, as determined in good
faith by the Board of Directors of the Company.
"FINANCIAL FORECAST" shall mean the financial forecast for the Company and
its Subsidiaries dated October 1, 2001 for the fiscal years ending December 31,
2001, 2002 and 2003, which financial forecast is attached hereto as Schedule
8CC.
"FOREIGN PENSION PLAN" shall mean any plan, fund or other similar program
established or maintained by, or for the benefit of the employees of, any
Restricted Subsidiary or the Company which provides for retirement income for
71
such employees or results in a deferral of income for such employees in
contemplation of retirement and is not subject to ERISA.
"GAAP" shall mean, as of any time of determination, generally accepted
accounting principles applicable in Canada as recommended in the Handbook of the
Canadian Institute of Chartered Accountants as in effect at such time of
determination.
"GALLATIN" shall mean Gallatin Steel Company, a partnership created under
the laws of the Commonwealth of Kentucky.
"GALLATIN COUNTY INDUSTRIAL REVENUE BONDS" shall mean the industrial
revenue bonds issued by Gallatin to Gallatin County, Kentucky, U.S.A. pursuant
to an indenture dated as of March 1, 1994.
"GALLATIN PROJECT CONTRACTS" shall mean the Agreement between the Company
and Dofasco Inc. made April 30, 1993 and the related Partnership Agreement
between Co-Steel C.S.M. Corp. and Dofasco Gallatin Inc. made as of May 11, 1993,
as amended by the First Amending Agreement made June 24, 1993.
"GOVERNMENTAL AUTHORITY" shall mean the government of any nation or any
province, municipality, state or other political subdivision of any nation, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled (through stock or capital ownership or otherwise) by any of
the foregoing.
"GUARANTEE" shall mean a guarantee agreement from a Guarantor in favor of
the Purchasers, guaranteeing the payment and performance of all obligations to
the Purchasers, substantially in the form of Exhibit E hereto.
"GUARANTOR" shall mean each Initial Guarantor and each Subsidiary of the
Company which becomes a party hereto as a Guarantor from time to time pursuant
to paragraph 5M.
"HAZARDOUS MATERIAL" shall mean any pollutant, toxic substance, hazardous
waste, hazardous material, hazardous substance, or oil as defined in or pursuant
to the Resource Conservation and Recovery Act, as amended, the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, the Federal
Clean Water Act, or any other federal, state, provincial or local environmental
law, regulation, ordinance, rule, or by-law of the United States, Canada or the
United Kingdom, whether existing as of the date hereof, previously enforced, or
subsequently enacted.
72
"HEDGING CONTRACT" shall mean a contract entered into between the Company
and any Bank under the Bank Agreement with respect to any interest rate or
currency hedging product.
"HUNGARIAN FINANCE STRUCTURE COMPANIES" shall mean Goldmarsh Enterprises,
Acierco S. A. and Co-Steel Hungary.
"HUNGARIAN GUARANTEE" shall have the meaning set out in paragraph 2L(d).
"HUNGARIAN GUARANTEE DOCUMENTS" shall have the meaning set out in paragraph
2L(d).
"HUNGARIAN LOAN NOTES" shall mean:
(i) promissory note from Co-Steel C.S.M. Corp. for U.S.$25,000,000
maturing November 23, 2004 (Approximate Cdn.$39,730,000);
(ii) promissory note from Co-Steel C.S.M. Corp. for U.S.$25,000,000
maturing November 23, 2004 (Approximate Cdn.$39,730,000);
(iii) promissory note from Co-Steel C.S.M. Corp. for U.S.$28,650,000
maturing July 31, 2006 (Approximate Cdn.$45,530,000);
(iv) term loan to Co-Steel USA Holdings, Inc. for U.S.$100,000,000
maturing January 8, 2008 (Approximate Cdn.$158,920,000);
(v) term loan to Co-Steel Sayreville, Inc. for U.S.$13,000,000
maturing January 30, 2008 (Approximate Cdn.$20,659,600);
(vi) term loan to Co-Steel Sayreville, Inc. for U.S.$3,600,000
maturing June 30, 2008 (Approximate Cdn.$5,721,120);
(vii) term loan to Co-Steel Sayreville, Inc. for U.S.$5,683,330
maturing June 30, 2008 (Approximate Cdn.$9,031,948); and
(viii) promissory note from Co-Steel C.S.M. Corp. for U.S.$150,000
(Approximate Cdn.$238,000).
"HUNGARIAN LOAN REORGANIZATION DOCUMENTS" shall have the meaning set out in
paragraph 2L(d).
"INCHOATE LIEN" shall mean, with respect to any property or asset of any
Person, the following Liens:
73
(a) any Lien for taxes, local improvement charges, levies, rates,
assessments or utility charges not yet due or being contested in good faith
by appropriate proceedings and for which a provision has been taken in
accordance with GAAP, if applicable;
(b) any carriers, warehousemen, mechanics, or materialmen's lien in
respect of charges accruing in favor of any Person, so long as the charges
are not yet due or are being contested in good faith by appropriate
proceedings and for which a provision has been taken in accordance with
GAAP, if applicable; and
(c) undetermined or inchoate liens, privileges or charges incidental
to current operations which have not at such time been filed pursuant to
law against the Person's property or assets or which relate to obligations
not due or delinquent.
"INDEBTEDNESS" shall mean, with respect to any Person, at any time, the
aggregate, without duplication, of:
(a) all indebtedness, obligations and liabilities, (other than
accounts payable and accrued liabilities), of the Person which, in
accordance with GAAP, would be included in determining total liabilities as
shown in the liability section of the balance sheet of the Person,
including, without limitation, indebtedness, obligations and liabilities
for borrowed money (whether on account of principal, interest or otherwise)
or in respect of any bankers' or trade acceptance credit facility, but
excluding, for greater certainty, any inter-company debt that is eliminated
upon consolidation;
(b) all indebtedness, obligations and liabilities of the Person
secured by any Lien on any property or asset owned or held by the Person,
whether or not any other Person has assumed or is liable for the
indebtedness, obligations or liabilities so secured and whether or not the
rights and remedies of the secured party are limited to repossession or
sale of the property or assets covered, but, for greater certainty,
excluding operating leases;
(c) any Synthetic Lease or other transfer of property of assets which
has been made with recourse to the transferor or any obligation to
repurchase any property or assets or to purchase property or assets
regardless of the delivery or non-delivery thereof;
(d) any liability under any instrument of guarantee or indemnity or
arising under any guarantee, endorsement or undertaking which may be made
or issued to others for the account of the Person and at the request of
74
such Person, including any Advance made by way of Letter of Credit or
Banker's Acceptance or BA Equivalent Note;
(e) all indebtedness, obligations and liabilities of others which the
Person has directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), discounted with
recourse or other obligation to pay or under agreement (contingently or
otherwise) to purchase, repurchase or otherwise acquire or become liable
for, or in respect of which the Person has provided a comfort letter or
agreed to supply or advance funds (whether by way of loan, share purchase
or capital contribution, through a commitment to pay for property or
services regardless of the non-delivery of the property or the
non-furnishing of the services or otherwise) or in respect of which the
Person has otherwise become directly or indirectly liable; and the amount
of each such indebtedness, obligation or liability (each in this definition
a "GUARANTEE OF INDEBTEDNESS") shall be deemed to be the amount of the
Indebtedness in respect of which the Guarantee of Indebtedness relates,
unless the Guarantee of Indebtedness is limited to a determinable amount in
which case the amount of the Guarantee of Indebtedness shall be deemed to
be the lesser of the amount of the Indebtedness in respect of which the
Guarantee of Indebtedness relates and the determinable amount and for
greater certainty, a Guarantee of Indebtedness shall be deemed to be in the
same principal amount and bear the same rate of interest as the
Indebtedness which is the subject of such Guarantee of Indebtedness;
(f) all liabilities of the Person as a partner or venturer in any
partnership, joint venture or other enterprise;
(g) all items of indebtedness convertible into, or exchangeable for,
shares in the capital of the Person;
(h) all shares in the capital of, or partnership units in, the Person
which are redeemable or retractable at the option of any Person (other than
the Person in respect of whom a determination of Indebtedness is being
made); and
(i) any Capitalized Lease Obligation.
"INITIAL GUARANTOR" shall mean each of the Restricted Subsidiaries (other
than the Hungarian Finance Structure Companies) in existence as of the
Restructuring Date.
"INITIAL RATE" shall mean (a) 8.57% per annum in the case of the Series A
Notes, and (b) 9.09% per annum in the case of the Series B Notes.
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"INSURANCE ASSIGNMENT" shall mean any assignment in favor of the applicable
Security Agent by each Obligor of all insurance, including business
interruption, liability and property insurance, maintained by each Obligor in
respect of their respective businesses and assets, together with evidence of (a)
the applicable Security Agent being noted as loss payee as its interests may
appear; or (b) in the case of liability policies, the applicable Security Agent
being noted as additional insured; or (c) in the case of any insurance
maintained in respect of the Ontario Properties, that insurance being endorsed
with a standard mortgage clause (as approved by the Insurance Bureau of Canada,
from time to time); or (d) in the case of any insurance maintained in respect of
the New Jersey Properties, that insurance being endorsed with a standard
mortgage clause.
"INSURANCE PROCEEDS" shall mean all proceeds of any insurance policy
maintained by the Company or any Subsidiary and shall not include insurance
proceeds less than Cdn.$2,500,000 (or its equivalent) in respect of any one
instance or less than Cdn.$5,000,000 (or its equivalent) annually which may be
retained by the Company or applicable Subsidiary. For greater certainty if the
Company or any Subsidiary receives Insurance Proceeds consisting of property
insurance and business interruption insurance in respect of the same loss, the
amount of the business interruption insurance shall not be used in determining
such Cdn.$2,500,000 and Cdn.$5,000,000 thresholds.
"INTELLECTUAL PROPERTY RIGHTS" shall mean all patents, trademarks, trade
names, service marks, copyrights, industrial designs, inventions, technology and
other similar rights which are material to its business and owned by the
Company, all rights licensed by it to third parties and all rights by which it
has the use of any patents, trade-marks, trade names, service marks, copyrights,
industrial designs, inventions, technology or other similar rights owned by
others.
"INTERCOMPANY INDEBTEDNESS" shall have the meaning specified in paragraph
8V.
"INTERCREDITOR AGREEMENT" shall mean that certain Intercreditor Agreement,
dated as of the Restructuring Date, among the Banks, the Purchasers, PNC, the
Canadian Security Agent and the U.S. Security Agent, and acknowledged and agreed
to by the Company, for itself and on behalf of its Subsidiaries, as amended,
restated, supplemented or otherwise modified from time to time.
"INVENTORY" shall mean tangible personal property that is held by a Person
for sale or lease or that has been leased or that is to be furnished or has been
furnished under a contract of service, or that is raw materials, work in process
or materials used or consumed in a business or profession, which has been, or
properly may be, classified as inventory in accordance with GAAP.
76
"INVESTMENT CAPITAL" shall mean any cash or cash equivalents received in
respect of any investment made in the Company or any of its Subsidiaries by a
Person that is not the Company or any Subsidiary.
"KEY EMPLOYEE LOANS" shall mean loans to key employees of the Company for
the purpose of purchasing shares of the Company or for other employment
benefits.
"LANDLORD'S CONSENTS" shall mean collectively, such consents from the
landlords of the Leased Properties to the granting of a Lien in favor of a
Security Agent and such other matters in the form and substance satisfactory to
the Required Holders as the Required Holders may reasonably request.
"LEASED PROPERTIES" shall mean all lands and premises described in Schedule
8J(b) and any lands and premises which are subsequently leased by any Obligor.
"LEASEHOLD MORTGAGE" shall mean a leasehold mortgage with assignment of
subleases and rents, security agreement and fixture filing as a first ranking
encumbrance against all leasehold property, right, title and interest in the
premises identified thereon in favor of a Security Agent on behalf of the
holders of Notes, PNC and the Banks (subject in each case to Permitted Priority
Liens).
"LETTER OF CREDIT" shall mean a documentary or stand-by letter of credit or
letter of guarantee issued by a Bank at the request and for the account of the
Company under the Bank Agreement.
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien or Inchoate Lien (statutory or otherwise) or charge of any kind (including
any agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code
and/or the Personal Property Security Act of any jurisdiction) or any other type
of preferential arrangement for the purpose, or having the effect, of protecting
a creditor against loss or securing the payment or performance of an obligation.
"MARCH 2002 SIGNIFICANT SHARE OFFERING" shall mean the Company's offering
of 20,907,000 of its common shares which closed on March 12, 2002.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to the Company and the
Guarantors taken as a whole, (a) a material adverse effect upon the validity or
enforceability of this Agreement, the Collateral Documents, any Guarantee or the
Intercreditor Agreement, (b) a material adverse effect on the business,
properties, assets, financial condition, results of operations or prospect of
the Company and the Guarantors, taken as a whole, (c) an event, circumstance or
effect that impairs
77
materially the ability of the Company and the Guarantors, taken as a whole, to
duly and punctually pay or perform their obligations in respect of this
Agreement, the Notes and the other Documents, or (d) an event, circumstance or
effect that impairs materially the ability of the holders of the Notes, to the
extent permitted, to enforce their legal remedies pursuant to this Agreement,
the Notes and the other Documents.
"MATERIAL CONTRACTS" shall mean, collectively, those contracts listed in
Schedule 8S-1 and any contract or lease to which an Obligor is now or hereafter
becomes a party and which is at any time on or after the date of this Agreement,
material to the business of any Obligor in each case whether oral or written,
and in each case as the same may be amended, supplemented or otherwise modified
and in effect from time to time, but excluding (a) any collective agreements,
(b) any pension plan and benefits agreements, and (c) insurance policies.
"MATERIAL LICENSES" shall mean, collectively, those licenses, permits or
approvals listed on Schedule 8S-2 and any license, permit or approval issued by
any Governmental Authority, applicable stock exchange or securities commission,
to an Obligor, and which is at any time on or after the date of this Agreement,
necessary or material to the business and operations of an Obligor or to the
listing of its securities.
"MORTGAGE" shall mean a mortgage with assignment of leases and rents if
any, security agreement and fixture filing as a first ranking encumbrance
against all real property, right, title and interest in the properties
identified therein in favor of the U.S. Security Agent on behalf of the holders
of Notes, PNC and the Banks (subject in each case to Permitted Priority Liens)
and shall include each Mortgage listed on Schedule 10B-2 hereto.
"MOVEABLE HYPOTHEC" shall mean a deed of moveable hypothec entered into by
any Obligor in favor of the Canadian Security Agent on behalf of the holders of
Notes, PNC and the Banks creating a first ranking security interest in favor of
the Canadian Security Agent on all the present and future assets of such Obligor
located in the Province of Quebec (subject in each case to Permitted Priority
Liens).
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"NET CASH PROCEEDS" shall mean the cash proceeds (including any cash
payment received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only as and when received) of any sale of any Property or of any offering of
debt or equity securities, net of (without duplication): (a) reasonable and
documented legal, accounting and investment banking fees and/or commissions
actually paid to any
78
Person that is not an Affiliate of the Company, (b) in the case of an asset
disposition, amounts required to be applied to the repayment of Indebtedness
secured by a Lien expressly permitted under this Agreement (other than those
created pursuant to the Collateral Documents) on any asset which is the subject
of the asset disposition, (c) amounts agreed among the administration agent on
behalf of the Banks, the Required Holders and PNC pursuant to the Intercreditor
Agreement, and (d) in the case of an asset disposition, other customary fees
actually incurred in connection with the sale, all net of taxes paid or
reasonably estimated to be payable as a result of the asset disposition.
"NET TANGIBLE ASSETS" shall mean, with respect to any Subsidiary the
aggregate amount of assets of such Subsidiary after deducting therefrom (a) all
goodwill, trade names, trademarks, patents, organization expenses and other like
intangibles; (b) all equity held by it in another Subsidiary, and (c)
inter-company loans and advances to another Subsidiary of the Company, all as
set forth on the most recent balance sheet of such Subsidiary, computed in
accordance with GAAP (provided that such balance sheet shall be prepared on a
non-consolidated basis).
"NEW HOLDCO" shall have the meaning set out in Schedule 2L(d).
"NEW JERSEY PROPERTIES" shall mean the lands and premises described in
Schedule 8J(a) that are located in New Jersey and all plant, buildings,
structures, erections, improvements, appurtenances and fixtures (including fixed
machinery and fixed equipment) situate on those lands.
"NEW SUBORDINATED LOAN NOTES" shall have the meaning set out in Schedule
2L(d).
"NON-RESIDENT TAX" shall mean any and all present and future Tax, imposed,
assessed, levied or collected by or for the account of (a) Canada or any
political subdivision or taxing authority thereof or therein, or (b) such other
taxing jurisdiction (or any political subdivision or taxing authority thereof or
therein) in which the Company may now or hereafter reside or be treated (by such
taxing jurisdiction) as residing for tax purposes or with which the Company has
any relation or asserted relation forming the basis for the imposition,
assessment, levy or collection of any Tax but excluding Tax imposed upon the
overall net income of a holder of Notes by virtue of the residence, business
activities, organization or similar criterion of a holder in the jurisdiction
imposing such Tax and excluding Tax, if any, imposed pursuant to Part I of the
Income Tax Act (Canada) and Part II of the Corporations Tax Act (Ontario)
("HOLDER TAX").
"NORMALIZED CONSOLIDATED EBITDA" shall mean Consolidated EBITDA calculated
on a rolling twelve-month basis, except for the period ended December
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31, 2001 only, which shall be calculated using only the preceding 9 months
beginning April 1, 2001 and annualizing such number over 12 months.
"NORMALIZED CONSOLIDATED EBITDA NET OF CAPEX" shall mean, for any period,
Normalized Consolidated EBITDA minus (a) cash capital expenditures, (b) to the
extent not already deducted in the calculation of Normalized Consolidated
EBITDA, scheduled payments in respect of Capitalized Lease Obligations, and (c)
to the extent not otherwise already deducted in the calculation of Normalized
Consolidated EBITDA, mandatory funding requirements in respect of pension
obligations, in each case of any member of the Restricted Group during such
period.
"NORTH YORK PROPERTY" shall mean the leased premises of the Company located
at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇.
"NOTES" shall have the meaning specified in paragraph 1A.
"OBLIGOR" shall mean each of the Company and the Guarantors.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of the
Company by its President, one of its Vice Presidents or its Treasurer.
"ONTARIO PROPERTIES" shall mean the lands and premises described in
Schedule 8J(a) that are located in Ontario, Canada and all plant, buildings,
structures, erections, improvements, appurtenances and fixtures (including fixed
machinery and fixed equipment) situate on those lands.
"OWNED PROPERTY" shall mean the lands and premises described in Schedule
8J(a) and all plant, buildings, structures, erections, improvements,
appurtenances and fixtures (including fixed machinery and fixed equipment)
situated on these lands.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor corporation or governmental agency.
"PENSION PLAN" shall mean a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multi-employer plan as defined in section 4001(a)(3) of ERISA), and to which
each US Guarantor or any corporation, trade or business that is, along with such
US Guarantor, a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within the meaning of
section 4063 of ERISA at any time during the preceding five years, or by reason
of being deemed to be a contributing sponsor under section 4069 of ERISA.
"PERMITTED ASSET SALES" shall mean, in respect of the Company and its
Subsidiaries, (a) sales of inventory in the ordinary course of business upon
80
customary credit terms; (b) sales of assets between or among the Obligors; and
(c) sales of assets (excluding items set forth in (a) or (b)) valuing less than
Cdn.$2,500,000 (or its equivalent) individually and less than Cdn.$5,000,000 (or
its equivalent) in the aggregate per annum.
"PERMITTED INTERCOMPANY INDEBTEDNESS" shall mean (a) loans from an
Unrestricted Subsidiary to a Restricted Subsidiary, provided that no such loan
exceeds Cdn.$1,500,000 (or its equivalent) and that such loans in the aggregate
do not exceed Cdn.$3,000,000 (or its equivalent); (b) loans from a Restricted
Subsidiary to another Restricted Subsidiary; and (c) Intercompany Indebtedness
described in Schedule 8V.
"PERMITTED INVESTMENTS" shall have the meaning specified in paragraph 6EE.
"PERMITTED LIENS" shall mean, with respect to any property or asset of any
Person, the following Liens:
(a) any Inchoate Lien;
(b) Liens respecting Priority Payables;
(c) minor encumbrances, and those municipal agreements, easements, rights
of way, servitudes, rights in the nature of an easement, reservations,
restrictions and other similar rights in land granted to or reserved by other
Persons, rights of way for sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the use of
real properties which do not in the aggregate materially detract from the value
of the real properties or materially impair their use or operation;
(d) Liens arising out of judgments or awards against such Person with
respect to which enforcement has been stayed and such Person at the time shall
currently be prosecuting an appeal or proceeding for review in good faith by
appropriate proceedings diligently conducted and with respect to which such
Person has created adequate reserves or has adequate insurance protection;
provided, however, that at no time may the aggregate dollar amount of such liens
exceed Cdn.$5,000,000 (or its equivalent);
(e) Liens respecting Capitalized Lease Obligations provided such Liens
secure Indebtedness which is permitted under paragraph 6G;
(f) any right reserved to or vested in any Governmental Authority by the
terms of any lease, license, franchise, grant or permit acquired by such Person,
or by any statutory provision to terminate any such lease, license,
81
franchise, grant or permit, or to require annual or other periodic payments as a
condition of the continuance thereof;
(g) security by such Person to a utility or any Governmental Authority when
required by such utility or Governmental Authority in connection with the
operations of such Person and in the ordinary course of its business;
(h) reservations, limitations, provisos and conditions, if any, expressed
in any original grants from a Governmental Authority, as applicable;
(i) any Lien securing a purchase money obligation, provided that (i) no
such Lien affects any Property other than the Property acquired by the incurring
of such purchase money obligation; (ii) such Lien does not secure an amount in
excess of the original purchase price of such Property, less repayments made
from time to time; and (iii) such Liens secure Indebtedness which is permitted
under paragraph 6G.
(j) the Liens in favor of the Security Agents in their capacity as security
agents pursuant to the Intercreditor Agreement; and
(k) any Lien consented to in writing by the Required Holders.
Provided, however, that no Lien described in clauses (a) through (e) above shall
constitute a Permitted Lien if such Lien materially detracts from the value of
property of the Person or materially impairs its use in the operation of the
business of such Person.
"PERMITTED PARENT GUARANTEES" guarantees by the Company of the obligations
of a Restricted Subsidiary provided that the obligations guaranteed are
otherwise permitted pursuant to paragraph 6G and the guarantee by the Company of
the obligations of Co-Steel (UK) Limited pursuant to the share purchase
agreement dated December 23, 1998 among Co-Steel (UK) Limited, ASW Holdings and
the Company.
"PERMITTED PRIORITY LIENS" shall mean those encumbrances set forth in
subsections (a), (b), (c), (e), (f), (g), (h) and (i) of the definition of
Permitted Liens or any other Lien consented to in writing by the Required
Holders.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
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"PLAN" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
"PLEDGOR" shall mean each of the Company, 1102590 Ontario Limited, Co-Steel
(U.S.) Ltd., Co-Steel Finance Corp., Co-Steel Raritan, Inc., Co-Steel USA
Holdings, Inc., and Co-Steel Sayreville, Inc. and each other Person from time to
time party to any Stock Pledge Agreement.
"PNC" shall mean PNC Bank, National Association together with any other
party that becomes a lender under the PNC Credit Agreements.
"PNC CREDIT AGREEMENTS" shall mean each of (a) the second amended and
restated credit agreement dated as of the date hereof between PNC and Co-Steel
Sayreville, Inc. pursuant to which PNC is providing a revolving line of credit
to Co-Steel Sayreville, Inc., together with an accompanying promissory note, and
(b) the second amended and restated credit agreement dated as of the date hereof
between PNC and Co-Steel Raritan, Inc. pursuant to which PNC is providing a
revolving line of credit to Co-Steel Raritan Inc., together with an accompanying
promissory note.
"PNC PARENT GUARANTY" shall mean the Second Amended and Restated Guaranty
Agreement dated as of the date hereof entered into by the Company in favor of
PNC.
"PRIORITY PAYABLES" shall mean all statutory liens, deemed trusts and
preferred claims of any Person, including claims for employee wages, vacation
pay, termination or severance pay, employee withholdings, pension plan
contributions, workers' compensation assessments, municipal taxes and claims by
public utilities.
"PROPERTY" shall mean and include all interests in property and assets,
whether tangible or intangible, ▇▇▇▇▇▇ or inchoate and whether real, personal or
mixed.
"PURCHASERS" shall have the meaning specified at the commencement of this
Agreement.
"QUALIFIED BANK" shall mean a bank or trust company organized under the
laws of the United States of America or any state thereof, having either (a)
capital, surplus and undivided profits aggregating at least $250,000,000 or (b)
total assets in excess of $1,000,000,000 and whose long-term certificates of
deposit are rated "AA" or better by Standard and Poor's Rating Group, a division
of McGraw Hill, Inc. or "Aa" or better by ▇▇▇▇▇'▇ Investors Service, Inc.
83
"REFERENCE BANK" shall mean ▇▇▇▇▇▇ Guaranty Trust Company of New York or
such other commercial bank or trust company as shall be selected by the Required
Holders.
"RELEASE" shall mean discharge, spray, inject, inoculate, abandon, deposit,
spill, leak, seep, pour, emit, empty, throw, dump, place and exhaust, and when
used as a noun, has a similar meaning.
"REPLACEMENT COVENANTS" shall have the meaning specified in paragraph 6DD.
"REQUIRED HOLDER(s)" shall mean the holder or holders of at least 66 2/3%
of the aggregate principal amount of the Notes without regard to Series from
time to time outstanding.
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer, or chief accounting officer of the
Company, or any Person who, regardless of title, is performing the duties of any
of the aforesaid.
"RESTRICTED GROUP" shall mean the Company and the Restricted Subsidiaries
collectively.
"RESTRICTED SUBSIDIARY" shall mean each of 1300554 Ontario Limited, 1102590
Ontario Limited, Co-Steel Distribution Canada Limited, Co-Steel (U.S.) Ltd.,
Co-Steel Finance Corp., Co-Steel Raritan, Inc., Raritan River Urban Renewal
Corporation, Lake Ontario Steel Company Inc., Co-Steel USA Distribution, Inc.,
Co-Steel USA Holdings, Inc., Co-Steel Sayreville, Inc., and each other
Subsidiary of the Company that becomes a Guarantor pursuant to this Agreement or
as may be designated as a Restricted Subsidiary by the Company with the consent
of the Required Holders from time to time; provided, however that the Hungarian
Finance Structure Companies and N.J.S.C. Investment Co., Inc. shall be
considered Restricted Subsidiaries for calculation of the covenants set forth in
paragraphs 6A through 6F, inclusive, for purposes of the Special Purpose
Financial Statements and for the purpose of paragraph 5X.
"RESTRUCTURING DATE" shall have the meaning specified in paragraph 2.
"SECURITIES ACT" shall mean the Securities Act of 1933 of the United
States, as amended.
"SECURITY AGENTS" shall mean the Canadian Security Agent and the U.S.
Security Agent, collectively, and "SECURITY AGENT" shall mean either of them.
84
"SECURITY AGREEMENTS" shall mean each of (a) the Security Agreement dated
as of the Restructuring Date by and among the U.S. Security Agent, the Company,
and various Subsidiaries of the Company domiciled in the United States party
thereto and (b) the Security Agreement dated as of the Restructuring Date by and
among the Canadian Security Agent, the Company and various Subsidiaries of the
Company domiciled in Canada party thereto.
"SERIES" shall mean any series of Notes described in this Agreement.
"SERIES A NOTES" shall have the meaning specified in paragraph 1A(a).
"SERIES B NOTES" shall have the meaning specified in paragraph 1A(b).
"SETTLEMENT AMOUNTS" shall have a meaning equivalent to that provided in
clause (e) of the definition of "Specified Transaction" in the Intercreditor
Agreement.
"SHARE OFFERING" shall mean the sale of common shares by the Company to a
Person that is not the Company or any of its Subsidiaries.
"SHAREHOLDERS' EQUITY" shall mean, shareholders' equity as reflected on the
balance sheet in the most recent Special Purpose Financial Statements excluding
that portion of the Convertible Debentures classified as equity in accordance
with GAAP.
"SIGNIFICANT HOLDER" shall mean (a) each Purchaser, so long as such
Purchaser shall hold (or be committed under this Agreement to purchase) any
Note, or (b) any other holder of at least 5% of the aggregate principal amount
of the Notes (without regard to Series) from time to time outstanding.
"SIGNIFICANT SHARE OFFERING" shall mean any Share Offering (except the
March 2002 Significant Share Offering), the gross proceeds of which equal or
exceed Cdn.$ 50,000,000.
"SIGNIFICANT SHARE OFFERING PROPORTION" shall mean 662/3% of the Net Cash
Proceeds received in respect of any Significant Share Offering.
"SIGNIFICANT U.S. LEASED PROPERTIES" shall mean all lands and premises
described in Schedule 8J(b) that are located in the United States.
"SPECIAL PURPOSE FINANCIAL STATEMENTS" shall mean the consolidated
financial statements of the Company prepared under GAAP, except that the
Unrestricted Subsidiaries (excluding the Hungarian Finance Structure Companies
and N.J.S.C. Investment Co., Inc.) are not consolidated but are accounted for at
Adjusted Cost Base.
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"SPECIFIED TRANSACTION CERTIFICATE" shall have the meaning specified in the
Bank Agreement.
"STANDSTILL AGREEMENT" shall mean a standstill agreement from Co-Steel (UK)
Limited in favor of the Purchasers in a form and substance reasonably
satisfactory to the Required Holders.
"STOCK PLEDGE AGREEMENTS" shall mean each of the stock pledge agreements
and the share pledge agreements entered into by each of the Pledgors and any
other pledgors from time to time in favor of a Security Agent on behalf of the
Banks, PNC and the Purchasers including all holders of Notes from time to time.
"STRATEGIC PLAN" shall mean a written detailed plan which shall include,
without limitation: (a) an analysis of strategies and options to maximize value
for the Company and its Subsidiaries, including its Co-Steel Raritan, Inc.
operations and its interests in Gallatin; (b) a detailed written capital
expenditure plan for the Company and each of its Subsidiaries; (c) general cost
reduction and efficiency strategies for the Company and its Subsidiaries,
including a cost/benefit analysis of each such strategy; (d) an update of the
Asset Monetization Program, including any additional assets subject thereto; and
(e) a proposed timetable for implementing all of the foregoing. The Strategic
Plan shall be in a form reasonably satisfactory to the Required Holder(s) and
shall be updated annually to the extent acceptable to the Required Holders. The
Strategic Plan and each annual update thereof shall be approved by the Company's
board of directors.
"SUBSIDIARY" shall mean, with respect to any Person at any time: (a) any
other Person of which either (i) 50% or more of the shares in its capital or
other interests which entitle it to vote in the election of directors or
comparable Persons performing similar functions (excluding shares or other
interests entitled to vote only upon the failure to pay dividends thereon or
other contingencies) are owned by the former Person or (ii) it has a 50%
interest in the profits or capital of such other Person, at the time owned
directly (or indirectly through one or more Subsidiaries) by such Person, or (b)
any other Person whose net earnings, or any portion thereof, are consolidated
with the net earnings of such Person and are recorded on the books of such
Person for financial reporting purposes in accordance with GAAP, and includes
any entity in like relation to a Subsidiary.
"SYNTHETIC LEASE" shall mean any lease that, in accordance with GAAP, is
classified by the lessee as an operating lease for financial reporting purposes
but is treated as a secured financing for the purposes of income tax reporting.
"TANGIBLE NET WORTH" as of any date shall mean the amount equal to the
Shareholders' Equity (excluding foreign currency translation adjustments), less
all
86
goodwill, investments in and amounts due from ASW Holdings, trade names,
trademarks, patents, organization expenses, deferred financing expenses, amounts
due from employees and other like intangibles, all calculated based on the
Special Purpose Financial Statements prepared as of such date.
"TAX" shall mean any and all taxes, duties, levies, imposts, fees,
compulsory loans, charges and withholdings whatsoever as well as any interest or
penalties in respect of such amounts imposed, assessed, levied or collected in
respect of payments under the Notes or this Agreement.
"TRANSFEREE" shall mean any direct or indirect transferee of all or any
part of any Note purchased by any Purchaser under this Agreement.
"UNRESTRICTED SUBSIDIARY" shall mean each of 1062316 Ontario Limited,
Co-Steel Dofasco LLC, Co-Steel C.S.M. Corp., Gallatin, Gallatin Terminal Company
and Gallatin Transit Authority, Co-Steel Amsterdam B.V., Cansteel Antilles N.V.,
ASW Holdings, Co-Steel (UK) Limited, Co-Steel Benefit Plans, Inc., Co-Steel
Benefit Plans USA Inc., N.J.S.C. Investment Co., Inc., Goldmarsh Enterprises,
Acierco S.A., Co-Steel Hungary and such other Subsidiary of the Company as may
be designated as an Unrestricted Subsidiary by the Company with the consent of
the Required Holders from time to time and "Unrestricted Subsidiary" means any
of them, provided that N.J.S.C. Investment Co., Inc. and the Hungarian Finance
Structure Companies shall not be considered Unrestricted Subsidiaries for the
purposes of calculating the covenants set forth in paragraphs 6A through 6F,
inclusive, for the purposes of the Special Purpose Financial Statements and for
the purposes of paragraph 5X only.
"US GUARANTORS" shall mean Co-Steel (US) Ltd., Co-Steel Finance Corp.,
Co-Steel Raritan, Inc., Raritan River Urban Renewal Corporation, Lake Ontario
Steel Company Inc., Co-Steel USA Distribution, Inc., Co-Steel USA Holdings, Inc.
and Co-Steel Sayreville, Inc., and each Restricted Subsidiary carrying on
business in the United States that from time to time becomes a Guarantor
pursuant to the terms of this Agreement.
"U.S. SECURITY AGENT" shall mean State Street Bank and Trust Company in its
capacity as U.S. security agent for and on behalf of the administration agent
and the Banks, the holders of Notes and PNC pursuant to the Intercreditor
Agreement.
"VOTING STOCK" shall mean, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
87
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" shall mean any Wholly-Owned Subsidiary
that is a Restricted Subsidiary.
"WHOLLY-OWNED SUBSIDIARY" shall mean at any time, with respect to any
Person, any Subsidiary 100% of all of the equity securities (except directors'
qualifying shares) and Voting Stock of which are owned by one or more of such
Person and such Person's other Wholly-Owned Subsidiaries at such time.
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS.
Unless otherwise specified herein, all accounting terms used herein shall
be interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all unaudited financial statements and certificates and
reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the most
recent audited consolidated financial statements of the Company and its
Subsidiaries delivered pursuant to clause (ii) of paragraph 5A.
11. MISCELLANEOUS
11A. NOTE PAYMENTS.
The Company agrees that, so long as any Purchaser shall hold any Note, it
will make payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to such Note, which comply with the terms of this
Agreement, by wire transfer of immediately available funds for credit (not later
than 12:00 noon, New York City time, on the date due) to such Purchaser's
account or accounts as specified in the Purchaser Schedule attached hereto, or
such other account or accounts in the United States as such Purchaser may
designate in writing, notwithstanding any contrary provision herein or in any
Note with respect to the place of payment. Each Purchaser agrees that, before
disposing of any Note, such Purchaser will make a notation thereon (or on a
schedule attached thereto) of all principal payments previously made thereon and
of the date to which interest thereon has been paid. The Company agrees to
afford the benefits of this paragraph 11A to any Transferee which shall have
made the same agreement as each Purchaser has made in this paragraph 11A.
11B. EXPENSES.
The Company agrees, whether or not the transactions contemplated hereby
shall be consummated, to pay, and save each Purchaser and any Transferee
harmless against liability for the payment of, all out-of-pocket expenses
arising in connection with such transactions, including:
88
(a) all document production and duplication charges and the fees and
expenses of any special counsel engaged (X) by such Purchaser in connection
with this Agreement and the transactions contemplated hereby, and (Y) by
such Purchaser or any Transferee in connection with any subsequent proposed
modification of, or proposed consent under, this Agreement, whether or not
such proposed modification shall be effected or proposed consent granted,
and
(b) the costs and expenses, including the fees and expenses of
counsel, incurred by such Purchaser or such Transferee in enforcing (or
determining how to enforce) any rights under this Agreement or the Notes or
in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the
transactions contemplated hereby or by reason of such Purchaser's or such
Transferee's having acquired any Note, including without limitation costs
and expenses incurred in any bankruptcy case.
The obligations of the Company under this paragraph 11B shall survive the
transfer of any Note or portion thereof or interest therein by any
Purchaser or any Transferee and the payment of any Note.
11C. CONSENT TO AMENDMENTS.
This Agreement may be amended, and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it, if
the Company shall obtain the written consent to such amendment, action or
omission to act, of the Required Holder(s) except that, without the written
consent of the holder or holders of all Notes at the time outstanding, no
amendment to this Agreement shall change the maturity of any Note, or change the
principal of, or the rate or time of payment of interest on or any
Yield-Maintenance Amount payable with respect to any Note, or affect the time,
amount or allocation of any prepayments or repayments, or change the proportion
of the principal amount of the Notes required with respect to any consent,
amendment, waiver or declaration. Each holder of any Note at the time or
thereafter outstanding shall be bound by any consent authorized by this
paragraph 11C, whether or not such Note shall have been marked to indicate such
consent, but any Notes issued thereafter may bear a notation referring to any
such consent. No course of dealing between the Company and the holder of any
Note nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note.
89
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.
The Notes are issuable as registered notes without coupons in denominations
of at least $100,000, except as may be necessary to reflect any principal amount
not evenly divisible by $100,000. The Company shall keep at its principal office
a register in which the Company shall provide for the registration of Notes and
of transfers of Notes. Upon surrender for registration of transfer of any Note
at the principal office of the Company, the Company, shall, at its expense,
execute and deliver one or more new Notes of like tenor of the same Series and
of a like aggregate principal amount, registered in the name of such transferee
or transferees. At the option of the holder of any Note, such Note may be
exchanged for other Notes of like tenor of the same Series and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company. Whenever any Notes are
so surrendered for exchange, the Company, shall, at its expense, execute and
deliver the Notes which the holder making the exchange is entitled to receive.
Every Note surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue which were carried by
the Note so exchanged or transferred, so that neither gain nor loss of interest
shall result from any such transfer or exchange. Upon receipt of written notice
from the holder of any Note of the loss, theft, destruction or mutilation of
such Note and, in the case of any such loss, theft or destruction, upon receipt
of such holder's unsecured indemnity agreement, or in the case of any such
mutilation upon surrender and cancellation of such Note, the Company, will make
and deliver a new Note, of like tenor of the same Series in lieu of the lost,
stolen, destroyed or mutilated Note. Until such time as no longer required under
applicable requirements of the Securities Act or applicable state laws, the
Notes, and all Notes issued in exchange therefor or in substitution thereof,
shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND MAY BE REOFFERED AND SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM REGISTRATION IS AVAILABLE."
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS.
Prior to due presentment for registration of transfer, the Company may
treat the Person in whose name any Note is registered in the register of Notes
kept by the Company at its principal office as the owner and holder of such Note
for the purpose
90
of receiving payment of principal of, interest on and any Yield-Maintenance
Amount payable with respect to such Note and for all other purposes whatsoever,
whether or not such Note shall be overdue, and the Company shall not be affected
by notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in such Note to any Person on
such terms and conditions as may be determined by such holder in its sole and
absolute discretion.
11F. CURRENCY EQUIVALENT.
For purposes of the construction of this Agreement and the Notes, unless
explicitly indicated to the contrary all references to "Dollars" or "$" is to
United States Dollars and the equivalent in Dollars of an amount in any other
currency shall be determined at the rate of exchange quoted by the Reference
Bank in New York City, at 9:00 A.M. (New York City time) on the Business Day
immediately preceding the date of determination to prime banks in New York City
for the spot purchase in the New York City foreign exchange market of Dollars
with such other currency.
11G. JUDGMENT.
(a) If for the purpose of obtaining judgment in any court it is
necessary for any holder of any Note to convert a sum due hereunder or
under such Note in Dollars (the "Original Currency") into another currency
(the "Other Currency"), the Company agrees, to the fullest extent permitted
by Applicable Law, that the rate of exchange used shall be that at which in
accordance with normal banking procedures such Person could purchase the
Original Currency with the Other Currency on the Business Day preceding
that on which final judgment is given in the New York City foreign exchange
market.
(b) The obligation of the Company in respect of any sum due from it to
any holder of any Note hereunder shall, notwithstanding any judgment in
such Other Currency, be discharged only to the extent that on the Business
Day following receipt by such Person of any sum adjudged to be so due in
the Other Currency such Person may in accordance with normal banking
procedures in the New York City foreign exchange market purchase the
Original Currency with the Other Currency. If the amount of the Original
Currency so purchasable is less than the sum originally due to such Person
in the Original Currency, the Company agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such Person against such
loss, and if the amount of the Original Currency so purchasable exceeds the
sum originally due to such Person in the Original Currency, such Person
agrees to remit to the Company such excess.
91
11H. TAX INDEMNITY.
Any and all payments by the Company under this Agreement and pursuant to
the Notes shall be made free and clear of, and without deduction or withholding
for or on account of, Non-Resident Tax unless any deduction or withholding for
or on account of Non-Resident Tax is required by law. If the Company shall be
obligated by law to deduct or withhold for or on account of any Non-Resident
Tax, or, if any holder of a Note shall be obligated to pay any Non-Resident Tax
on or in respect of any payment under the Notes or under this Agreement, then
the Company will (a) within 10 days notify each holder of the Notes of such
event and provide documentation to verify such event and (b) promptly (i) pay
over to the government or taxing authority imposing such Non-Resident Tax the
full amount required to be deducted or withheld from or otherwise paid by the
Company (including the full amount required to be deducted or withheld from or
otherwise paid by it in respect to any Additional Amount paid pursuant to clause
(ii) hereof), and (iii) save as provided below, pay to such holder such
additional amount (the "ADDITIONAL AMOUNT") as is necessary in order that the
net amount received by such holder after any required deduction, withholding or
other payment of, or liability for, Non-Resident Tax on or in respect of such
payment and any required deduction, withholding or other payment of, or
liability for, Non-Resident Tax or United States Federal or State Tax on or with
respect to such Additional Amount (net of all applicable foreign tax credits)
shall equal the amount such holder would have received had no such deduction,
withholding or other payment of, or liability for, such Non-Resident Tax or
United States Federal or State Tax been paid or incurred, provided that no such
United States Federal or State Tax on or with respect to such Additional Amount
in respect of a payment shall be required to be paid by the Company to a holder
unless such Additional Amount is subject to such United States Federal or State
Tax in addition to the amount of such tax which would have been payable by the
holder on or in respect of the payment had no deduction, withholding or
Additional Amounts been required or paid, and (iii) furnish to such holder
within 30 days after it or they become available, the official receipt or
receipts from the relevant taxation or other authorities for the full amounts
deducted, withheld or paid. It is agreed that the Company shall have no right to
examine any of the books, records or tax returns of any holder, on or with
respect to such Additional Amount. The provisions of this paragraph 11H shall
apply to any successive holder of any Notes. Notwithstanding the foregoing, the
Company will not be liable for the payment of any Additional Amount to any
holder of Notes if and to the extent such holder is subject to Non-Resident Tax
in respect of the Notes solely by reason of such holder being considered to deal
with the Company not at arm's-length for purposes of the Income Tax Act
(Canada).
92
11I. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
(a) THIS AGREEMENT. All representations and warranties contained
herein or made in writing by or on behalf of the Company in connection
herewith shall survive the execution and delivery of this Agreement and
transfer by any Purchaser of any Note or portion thereof or interest
therein and the payment of any Note, and may be relied upon by any
Transferee, regardless of any investigation made at any time by or on
behalf of any Purchaser or any Transferee.
(b) EXISTING AGREEMENTS. Without limiting the foregoing, all
warranties, representations and certifications made by the Company in or
pursuant to the Existing Agreements or in any certificate or other
instrument delivered by it or on its behalf thereunder or pursuant thereto
shall be considered to have been relied upon by you, shall survive the
delivery to you of this Agreement and shall be incorporated herein by this
reference, regardless of any investigation made by you or on your behalf.
11J. SURVIVAL OF NOTES AND PAYMENT OBLIGATIONS.
Under the Existing Agreements and all payment obligations of the Company
this Agreement (including, without limitation, reimbursement obligations in
respect of costs, expenses, and fees of or incurred by the holders of the
Notes), including any obligation to pay the principal of and interest and
Yield-Maintenance Premium on the Notes, shall survive the amendment and
restatement of the Existing Agreements and this Agreement.
11K. SUCCESSORS AND ASSIGNS.
All covenants and other agreements in this Agreement contained by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including, without
limitation, any Transferee) whether so expressed or not.
11L. DISCLOSURE TO OTHER PERSONS.
The Company acknowledges that the holder of any Note may deliver copies of
any financial statements and other documents delivered to such holder, and
disclose any other information disclosed to such holder, by or on behalf of the
Company or any of its Restricted Subsidiaries in connection with or pursuant to
this Agreement to (a) such holder's directors, officers, employees, agents and
professional consultants, (b) any other holder of any Note, (c) any Person to
which such holder offers to sell such Note or any part thereof, (d) any Person
to which such holder sells or offers to sell a participation in all or any part
of such Note, (e) any Person from
93
which such holder offers to purchase any security of the Company, (f) any
federal or state regulatory authority having jurisdiction over such holder, (g)
the National Association of Insurance Commissioners or any similar organization
or (h) any other Person to which such delivery or disclosure may be necessary or
appropriate (i) in compliance with any law, rule, regulation or order applicable
to such holder, (ii) in response to any subpoena or other legal process or
informal investigative demand to which the Notes or the Note Agreement are
relevant or (iii) in connection with any litigation to which such holder is a
party and to which the Notes or the Note Agreement are relevant.
11M. NOTICES.
All written communications provided for hereunder shall be sent by first
class mail or nationwide overnight delivery service (with charges prepaid) and
(a) if to any Purchaser, addressed to such Purchaser at the address specified
for such communications in the Purchaser Schedule attached hereto, or at such
other address as such Purchaser shall have specified to the Company in writing,
(b) if to any other holder of any Note, addressed to such other holder at such
address as such other holder shall have specified to the Company in writing or,
if any such other holder shall not have so specified an address to the Company,
then addressed to such other holder in care of the last holder of such Note
which shall have so specified an address to the Company, and (c) if to the
Company, addressed to it at ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇,
▇▇▇▇▇▇, Attention: Chief Financial Officer (Facsimile No. 905-665-3720), or at
such other address as the Company shall have specified to the holder of each
Note in writing; provided, however, that any such communication to the Company
may also, at the option of the holder of any Note, be delivered by any other
means either to the Company at its address specified above or to any officer of
the Company.
11N. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary notwithstanding,
any payment of principal of or interest on any Note that is due on a date other
than a Business Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the interest payable
on such next succeeding Business Day.
11O. SATISFACTION REQUIREMENT.
If any agreement, certificate or other writing, or any action taken or to
be taken, is by the terms of this Agreement required to be satisfactory to any
Purchaser or to the Required Holder(s), the determination of such satisfaction
shall be made by such Purchaser or the Required Holder(s), as the case may be,
in the
94
sole and exclusive judgment (exercised in good faith) of the Person or Persons
making such determination.
11P. JURISDICTION; SERVICE OF PROCESS
The Company hereby irrevocably and unconditionally agrees that any suit,
action or proceeding with respect to this Agreement, any Note, or any other
Document to which the Company is a party, or any action or proceeding to execute
or otherwise enforce any judgment in respect of any breach hereof and thereof,
brought by any holder of a Note against the Company or any of its Property, may
be brought by such holder of a Note in the United States District Court for the
Southern District of New York or any New York state court sitting in New York
City as such holder of a Note may in its sole discretion elect, and, by the
execution and delivery of this Agreement, the Company irrevocably submits to the
non-exclusive jurisdiction of each such court; and agrees that process served
either personally or by registered mail shall, to the extent permitted by law,
constitute adequate service of process in any such suit. Without limiting the
foregoing, the Company hereby appoints, in the case of any such action or
proceeding brought in the courts of or in the state of New York, Corporation
Service Company with offices on the date hereof at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇, to receive, for it and on its behalf, service of process in the
state of New York with respect thereto, provided the Company may appoint any
other Person, reasonably acceptable to the Required Holders, with offices in the
state of New York to replace such agent for service of process upon delivery to
the holders of a reasonably acceptable agreement of such new agent agreeing so
to act. (The person making any such service of process shall also mail or
otherwise deliver a copy of such process to the Company, provided that the
failure of the Company to receive such copy shall not affect the validity of
such service on the Company.) In addition, the Company hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of venue in any suit, action or proceeding
arising out of or relating to this Agreement or any Note brought in the said
courts, and hereby irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Nothing herein shall in any way be deemed to limit the ability of any holder of
a Note to serve any such writs, process or summonses, in any manner permitted by
applicable law or to obtain jurisdiction over the Company, in such other
jurisdiction, and in such manner, as may be permitted by Applicable Law.
11Q. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such state that would require
the application of the laws of a jurisdiction other than such state.
95
11R. SEVERABILITY.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11S. DESCRIPTIVE HEADINGS.
The descriptive headings of the several paragraphs and Sections of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
11T. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one instrument.
11U. CERTAIN CONFLICTS.
The parties hereto agree that, if any provision of this Agreement is
inconsistent with or contrary to any provisions in any of the other Documents
(other than the Intercreditor Agreement), this Agreement shall control. The
parties hereto agree that, if any provision of this Agreement is inconsistent
with or contrary to any provisions in the Intercreditor Agreement, the
Intercreditor Agreement shall control.
[Rest of page intentionally left blank; next page is signature page.]
96
If you are in agreement with the foregoing, please sign the form of
acceptance below and return the same to the Company, whereupon this letter shall
become a binding agreement between the Company and the Purchasers.
Sincerely,
CO-STEEL INC.
By:______________________________
Name:
Title:
97
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: ___________________________________
Name:
Title:
U.S. PRIVATE PLACEMENT FUND
By: Prudential Private Placement
Investors, L.P., Investment Advisor
By: Prudential Private Placement
Investors, Inc., its General Partner
By: __________________________________
Name:
Title:
98
PURCHASER SCHEDULE
-----------------------------------------------------------------------------------------
PURCHASER NAME THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
-----------------------------------------------------------------------------------------
Name in which to register Notes THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
-----------------------------------------------------------------------------------------
Series A Note registration number; RA-1; $45,000,000
principal amount;
Series B Note registration number; RB-1; $70,000,000
principal amount
-----------------------------------------------------------------------------------------
Payment on account of Note
Method Federal Funds Wire Transfer
Account information Bank of New York
New York, NY
ABA No.: ▇▇▇-▇▇▇-▇▇▇
Account No. ▇▇▇-▇▇▇▇-▇▇▇
Re: (See "Accompanying information" below)
-----------------------------------------------------------------------------------------
Accompanying information Name of Issuer: Co-Steel Inc.
Description of
Security: Series A Senior Secured Notes due
January 15, 2004
PPN:
Description of
Security: Series B Senior Secured Notes due
July 15, 2006
PPN:
Due date and application (as among principal,
premium and interest) of the payment being made.
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
PURCHASER NAME THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
-----------------------------------------------------------------------------------------
Address / Fax # for notices related The Prudential Insurance Company of America
to payments c/o Investment Operations Group
Gateway Center Two, 10th Floor
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Manager, ▇▇▇▇▇▇▇▇ and Collections
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
The Prudential Insurance Company of America
▇/▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With receipt of telephonic prepayment notices to:
Manager, Trade Management Group
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------------------------------------------------------------
Address / Fax # for all other notices The Prudential Insurance Company of America
▇/▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------------------------------------------------------------
Instructions re Delivery of Notes The Prudential Insurance Company of America
c/o Prudential Capital Group
1114 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇, Esq.
-----------------------------------------------------------------------------------------
Tax identification number ▇▇-▇▇▇▇▇▇▇
-----------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
PURCHASER NAME U.S. PRIVATE PLACEMENT FUND
---------------------------------------------------------------------------------------------
Name in which to register Notes U.S. PRIVATE PLACEMENT FUND
---------------------------------------------------------------------------------------------
Series B Note registration number; RB-2; $5,000,000
principal amount
---------------------------------------------------------------------------------------------
Payment on account of Note
Method Federal Funds Wire Transfer
Account information Deutsche Bank New York
New York, NY
ABA #: ▇▇▇-▇▇▇-▇▇▇
Account #: 100457000006
FCC: U.S. Private Placement Fund Account # ▇▇-▇▇▇▇▇▇▇
Re: (See "Accompanying information" below)
---------------------------------------------------------------------------------------------
Accompanying information Name of Issuer: Co-Steel Inc.
Description of
Security: Series B Senior Secured Notes due
July 15, 2006
PPN:
Due date and application (as among principal, premium
and interest) of the payment being made.
---------------------------------------------------------------------------------------------
Address / Fax # for notices related Deutsche International (Ireland) Limited
to payments Valuations Department
George's Dock House
International Financial Services Centre
▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Phone: (▇▇▇-▇) ▇▇▇▇-▇▇▇
Fax: (▇▇▇-▇) ▇▇▇▇-▇▇▇
with a copy to:
Prudential Private Placement Investors, Inc.
Four ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Institutional Asset Management
---------------------------------------------------------------------------------------------
Address / Fax # for all other notices Prudential Private Placement Investors, Inc.
Four ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Institutional Asset Management
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
PURCHASER NAME U.S. PRIVATE PLACEMENT FUND
---------------------------------------------------------------------------------------------
Instructions re Delivery of Notes The Prudential Insurance Company of America
c/o Prudential Capital Group
1114 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇, Esq.
---------------------------------------------------------------------------------------------
Tax identification number N/A
---------------------------------------------------------------------------------------------
ATTACHMENT 1 TO PURCHASER SCHEDULE
I. FEES DUE ON RESTRUCTURING DATE
---------------------------------------------------------------------------------------------
PURCHASER NAME THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
---------------------------------------------------------------------------------------------
Restructuring Fee due at closing re: $225,000.00
Series A Notes
---------------------------------------------------------------------------------------------
Restructuring Fee due at closing re: $350,000.00
Series B Notes
---------------------------------------------------------------------------------------------
Interest Payable re: Series A Notes $1,124,812.50
---------------------------------------------------------------------------------------------
Interest Payable re: Series B Notes $265,125.00
---------------------------------------------------------------------------------------------
Significant Share Offering Amount $7,103,350.91
---------------------------------------------------------------------------------------------
II. FEES DUE POST CLOSING
---------------------------------------------------------------------------------------------
PURCHASER NAME THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
---------------------------------------------------------------------------------------------
Restructuring Fee due on or prior to $112,500.00
August 30, 2002 re: Series A Notes
---------------------------------------------------------------------------------------------
Restructuring Fee due on or prior to $175,000.00
August 30, 2002 re: Series B Notes
---------------------------------------------------------------------------------------------
I. FEES DUE ON RESTRUCTURING DATE
--------------------------------------------------------------------------------
PURCHASER NAME U.S. PRIVATE PLACEMENT FUND
--------------------------------------------------------------------------------
Restructuring Fee due at closing re: $25,000.00
Series B Notes
--------------------------------------------------------------------------------
Interest Payable re: Series B Notes $18,937.50
--------------------------------------------------------------------------------
Significant Share Offering Amount $308,841.31
--------------------------------------------------------------------------------
II. FEES DUE POST CLOSING
--------------------------------------------------------------------------------
PURCHASER NAME U.S. PRIVATE PLACEMENT FUND
--------------------------------------------------------------------------------
Restructuring Fee due prior to $12,500.00
August 30, 2002 re: Series B Notes
--------------------------------------------------------------------------------
SCHEDULE 2L(d)
Schedule 8C-1
SCHEDULE 5V
[UK HOLDINGS TRANSACTION]
Schedule 8C-1
SCHEDULE 5X
[JURISDICTIONS]
Schedule 8C-1
SCHEDULE 6AA
[BUSINESS OF ENGLISH FINANCE STRUCTURE COMPANIES]
Schedule 8C-1
SCHEDULE 6DD
FINANCIAL COVENANTS AFTER JANUARY 15, 2004
6A. MAINTENANCE OF INTEREST EXPENSE COVERAGE. Commencing with the fiscal
quarter ending December 31, 2003 and at each fiscal quarter end thereafter, the
Company covenants that it shall not permit the ratio of EBITDA to Interest
Expense to be less than 3.00X.
6B. RATIO OF CONSOLIDATED DEBT TO TOTAL CAPITALIZATION. The Company
covenants that it shall not permit Consolidated Debt to Total Capitalization to
exceed, at any time, 40%. In calculating Consolidated Debt for purposes of this
covenant only, the Company will be allowed to deduct from Consolidated Debt an
amount equal to the Company's cash and marketable securities on the date of
determination up to, and to the extent of, such Consolidated Debt as may be
prepaid by the Company at such time without penalty or premium provided,
--------
however, that if such Consolidated Debt were so prepaid, (a) such prepayment
would not conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or create any obligation under,
any instrument evidencing Debt of the Company or its Subsidiaries or any other
agreement of the Company or its Subsidiaries and (b) no Default or Event of
Default would exist or result therefrom.
6C. [Reserved].
6D. CONSOLIDATED TOTAL NET DEBT TO CONSOLIDATED EBITDA. Commencing with the
fiscal quarter ending December 31, 2003 and at each fiscal quarter end
thereafter, the Company covenants that it shall not permit Consolidated Total
Net Debt to Consolidated EBITDA (calculated on a rolling four quarter basis) to
exceed, as of the last day of each such quarterly fiscal period, 3.30X.
6E. MAINTENANCE OF TANGIBLE NET WORTH. The Company covenants that
(a) it shall not permit Tangible Net Worth of the Company and its
Restricted Subsidiaries, at any time, to be less than the sum of:
(i) Cdn.$450,000,000, PLUS
Schedule 8C-1
(ii) 75% of cumulative Consolidated Net Income Available For Tangible
Net Worth for the period from September 30, 2003 to and including
the last day of the fiscal quarter most recently ended prior to
the measurement date; and
(b) it shall not permit Tangible Net Worth of the Company and its
Restricted Subsidiaries, at any time, to be less than the sum of:
(i) Cdn.$450,000,000, PLUS
(ii) 75% of consolidated net earnings, as shown on the Special Purpose
Financial Statements for the period from September 30, 2003 to
and including the last day of the fiscal quarter most recently
ended prior to the measurement date.
6F. [Reserved]
The following defined terms used in this Schedule 6DD shall have the following
meanings (all other defined terms used herein shall have the definitions as set
forth in paragraph 10B of this Agreement):
"CASH PAID" shall mean any amounts contributed by any member of the
Restricted Group to any Unrestricted Subsidiary in the form of subscription for
equity, inter-company loan, contribution of surplus or otherwise, excluding
trade payable, tax equivalent payments for a tax liability of a member of the
Restricted Group or receivables in the ordinary course of business.
"CONSOLIDATED DEBT" at any time shall mean, without duplication, the
sum of all Funded Debt and Current Debt, in each case of the Company and its
Restricted Subsidiaries at such time, determined in accordance with GAAP on a
consolidated basis after eliminating all intercompany transactions.
"CONSOLIDATED EBITDA" shall mean for the Restricted Group (a) the
consolidated net earnings, as shown on the Special Purpose Financial Statements,
in the period; plus (b) Consolidated Net Interest Expense in the period; plus
(c) income taxes, whether paid or deferred, which are deducted in determining
consolidated net earnings, as shown on the Special Purpose Financial Statement,
in the period, if any; plus (d) depreciation and amortization expense for the
period; minus (e) to the extent added in determining consolidated net earnings,
as shown on the Special Purpose Financial Statements, extraordinary gains; plus
(f) to the extent deducted in determining consolidated net earnings, as shown on
the Special
Schedule 8C-2
Purpose Financial Statements, extraordinary losses; plus (g) to the extent
deducted in determining consolidated net earnings, as shown on the Special
Purpose Financial Statements, non-cash foreign exchanges losses; all as set
forth on the most recent Special Purpose Financial Statements plus (h) cash
received by the Company from an Unrestricted Subsidiary or any third party in
respect of interest, dividends, reductions in share capital and repayment of
inter-company loans; minus (i) Cash Paid by any member of the Restricted Group
to any Unrestricted Subsidiary.
"CONSOLIDATED FUNDED DEBT" at any time shall mean Funded Debt of the
Company and its Restricted Subsidiaries at such time, determined in accordance
with GAAP on a consolidated basis after eliminating all inter-company
transactions.
"CONSOLIDATED NET INCOME" shall mean, with reference to any period, any net
earnings (or net loss) of the Company and its Restricted Subsidiaries occurring
during such period, determined in accordance with GAAP on a consolidated basis,
excluding:
(i) extraordinary gains (net of any extraordinary losses up to the
amount of any extraordinary gains);
(ii) net income of any Person (other than a Restricted Subsidiary) in
which the Company or a Restricted Subsidiary has an ownership interest
unless those net earnings have actually been received in the form of cash
for distribution;
(iii) any portion of the net income of any Restricted Subsidiary which
for any reason is unavailable to pay dividends to the Company or any other
Restricted Subsidiary;
(iv) any aggregate net gain (in excess of any net losses) arising from
the sale, exchange or other disposition of capital assets (such term to
include all fixed assets, whether tangible or intangible, all inventory
sold in conjunction with the disposition of fixed assets, and all
securities);
(v) any write-up of any asset;
(vi) any gain arising from the acquisition of any securities of the
Company or its Restricted Subsidiaries;
Schedule 8C-3
(vii) net income or gain (but not any loss) resulting from a change in
accounting, discontinuing or disposing of operations, an extraordinary
event or prior period adjustments; and
(viii) the income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary.
"CONSOLIDATED NET INCOME AVAILABLE FOR TANGIBLE NET WORTH" shall mean, with
reference to any period, Consolidated Net Income for all quarterly fiscal
periods of the Company occurring during such period (taken as a cumulative
whole), without deducting or offsetting therefrom any deficit or net loss
occurring during any quarterly fiscal period of the Company occurring therein.
"CONSOLIDATED NET INTEREST EXPENSE" shall mean, for any period, the
aggregate of interest charges, finance charges and debt service charges, fees or
discounts for borrowed money, paid, payable or accrued in respect of
interest-bearing Indebtedness including without limitation Bankers' Acceptances
net of all interest and dividend income and specifically excluding all fees
payable under or in connection with this agreement for such period, all as set
forth on the most recent Special Purpose Financial Statements, plus interest,
calculated on an accrual basis, on the equity component of the Convertible
Unsecured Subordinated Debentures before income taxes.
"CONSOLIDATED TOTAL NET DEBT" shall mean for the Restricted Group, at any
time, the principal amount of all outstanding interest bearing Indebtedness
including, without limitation, the debt component but excluding the equity
component of the Convertible Unsecured Subordinated Debentures, the face amount
of outstanding Bankers' Acceptances, Letters of Credit, and the amount of
Capitalized Lease Obligations (net of interest component) but specifically
excluding trade payables, and deducting cash and short term investments (rated
R-1 (middle) or better by Dominion Bond Rating Service), all as set forth on the
most recent Special Purpose Financial Statements plus the face amount of all
guarantees provided by any Restricted Subsidiary for the benefit of any
Unrestricted Subsidiary.
"CURRENT DEBT" shall mean, with respect to any Person, (i) all Indebtedness
of such Person for borrowed money which by its terms or by the terms of any
instrument or agreement relating thereto matures on demand or within one year
from the date of the creation thereof and is not directly or indirectly
renewable or extendible at the option of the debtor to a date more than one year
from the date of the creation thereof, and (ii) any guarantee of an obligation
described in the preceding clause (i).
Schedule 8C-4
"CURRENT LIABILITIES" at any time shall mean the aggregate amount carried
as current liabilities on the books of the Company and its Restricted
Subsidiaries at such time, determined in accordance with GAAP on a consolidated
basis and after eliminating all intercompany items, in accordance with GAAP.
"DEBT" at any time shall mean, without duplication, the sum of Current Debt
and Funded Debt at such time.
"EBITDA" shall mean, at the time of determination thereof, Consolidated Net
Income for the then immediately preceding four full consecutive fiscal quarters,
plus all amounts deducted in calculating Consolidated Net Income for such period
in respect of
(a) gross interest accrued (including amortization of debt
discount and imputed interest on Capitalized Lease Obligations) on
Consolidated Debt,
(b) depreciation and amortization, and
(c) income taxes.
"FUNDED DEBT" shall mean, with respect to any Person, (i) all indebtedness,
Capitalized Lease Obligations, letters of credit (other than trade letters of
credit) and other obligations that are required to be listed as a liability on a
balance sheet under GAAP (other than deferred taxes) or are secured by a Lien,
in each case, having a final maturity of more than one year from the date of
origin thereof (or which is renewable or extendible for a period or periods more
than one year from the date of origin), including all payments in respect
thereof that are required to be made within one year from the date of any
determination of Funded Debt, whether or not included in Current Liabilities and
(ii) all guarantees of Funded Debt.
"INTEREST EXPENSE" shall mean, at the time of determination thereof, the
sum of (i) the gross interest accrued (including amortization of debt discount
and imputed interest on Capitalized Lease Obligations) during the then
immediately preceding four full consecutive fiscal quarters on Consolidated Debt
plus (ii) to the extent not included in (i), total cash interest expense paid on
the Convertible Unsecured Subordinated Debentures.
"TANGIBLE NET WORTH" at any time shall mean the aggregate amount of
shareholders equity determined on a consolidated basis in accordance with GAAP,
excluding (i) any intercompany transactions, (ii) the net book value of all
assets
Schedule 8C-5
which would be treated as intangible under GAAP and (iii) the cumulative amount
of any net write-up of asset values after the date of the audit immediately
preceding the date of closing.
"TOTAL CAPITALIZATION" at any time shall mean the sum of Tangible Net Worth
plus Consolidated Debt at such time.
Schedule 8C-6
SCHEDULE 8C
[WAIVED DEFAULTS AND EVENTS OF DEFAULT]
Schedule 8C-1
SCHEDULE 8H
[ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES]
Schedule 8H-1
SCHEDULE 8I
[CERTAIN LITIGATION]
Schedule 8I-1
SCHEDULE 8J(a)
[OWNED PROPERTIES]
Schedule 8M-1
SCHEDULE 8J(b)
[LEASED PROPERTIES]
Schedule 8M-1
SCHEDULE 8K
[EXISTING INDEBTEDNESS]
Schedule 8M-1
SCHEDULE 8N
[ENVIRONMENTAL MATTERS]
Schedule 8O-1
SCHEDULE 8S-1
[MATERIAL CONTRACTS]
Exhibit A-1 - 1
SCHEDULE 8S-2
[MATERIAL LICENSES]
Exhibit ▇-▇ - ▇
▇▇▇▇▇▇▇▇ ▇▇
[▇▇▇▇ ACCOUNTS]
Exhibit A-1 - 1
SCHEDULE 8V
[INTERCOMPANY INDEBTEDNESS]
Exhibit A-1 - 1
SCHEDULE 8X
[INTELLECTUAL PROPERTY]
Exhibit A-1 - 1
SCHEDULE 8Y
[LICENSES, AGENCY AND DISTRIBUTION AGREEMENTS]
Exhibit A-1 - 1
SCHEDULE 8CC
[FINANCIAL FORECAST]
Exhibit A-1 - 1
SCHEDULE 8GG
[PENSION PLANS]
Exhibit A-1 - 1
SCHEDULE 8II
[ASSETS AND LIABILITIES OF
ENGLISH FINANCE STRUCTURE COMPANIES]
Exhibit A-1 - 1
SCHEDULE 8JJ
[ASSETS AND LIABILITIES OF
HUNGARIAN FINANCE STRUCTURE COMPANIES]
Exhibit A-1 - 1
SCHEDULE 8KK
[ASSETS OF CO-STEEL C.S.M. CORP.]
Exhibit A-1 - 1
SCHEDULE 10B-2
[MORTGAGES]
Exhibit ▇-▇ - ▇
▇▇▇▇▇▇▇ ▇-▇
[FORM OF SERIES A SENIOR SECURED NOTE]
CO-STEEL INC.
SERIES A SENIOR SECURED NOTE DUE JANUARY 15, 2004
No. R- [DATE]
-------
$ PPN: 18975N B# 8
------------
FOR VALUE RECEIVED, CO-STEEL INC. (the "COMPANY"), a corporation organized
and existing under the laws of the Province of Ontario, Canada hereby promises
to pay to , or registered assigns, the principal
----------------------------
sum of DOLLARS ($ ) on January 15, 2004 or earlier
--------------------- ----------
as provided in the Agreement referred to below with interest (computed on the
basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day
months) (a) on the unpaid balance thereof at the Applicable Rate from the date
hereof, payable on the 15th day of each month in each year commencing with the
month next succeeding the date hereof, until the principal hereof shall have
become due and payable; and (b) during the existence of an Event of Default,
payable monthly as aforesaid (or, at the option of the registered holder hereof,
on demand), at a rate per annum from time to time equal to the greater of (i)
the Applicable Rate plus 2% per annum or (ii) 2% over the rate of interest
publicly announced by ▇▇▇▇▇▇ Guaranty Trust Company of New York from time to
time in New York City as its Prime Rate. Capitalized terms used herein and not
otherwise defined herein have the respective meanings ascribed thereto in the
Agreement referred to below.
Payments of principal of, and interest on, and any Yield-Maintenance Amount
payable with respect to, this Note are to be made at the main office of Bank of
New York in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of the senior promissory notes (herein called the "NOTES")
originally issued pursuant to the Note Agreement dated as of January 10, 1994
which was amended pursuant to the Amended and Restated Note Agreement dated as
of February 4, 2000 and further amended by the Second Amended and Restated
Exhibit A-1 - 1
Note Agreement, dated as of April 30, 2002 (herein called the "AGREEMENT"),
between the Company and The Prudential Insurance Company of America, and is
entitled to the benefits thereof. As provided in the Agreement, this Note is
subject to required prepayments as well as optional prepayment, in whole or from
time to time in part on the terms specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
This Note is intended to be performed in the State of New York and shall be
construed and enforced in accordance with the law of such State.
CO-STEEL INC.
By ________________________________
Name:
Title:
Exhibit ▇-▇ - ▇
▇▇▇▇▇▇▇ ▇-▇
[FORM OF SERIES B SENIOR SECURED NOTE]
CO-STEEL INC.
SERIES B SENIOR SECURED NOTE DUE JULY 15, 2006
No. R- [DATE]
-------
$ PPN: 18975N C* 1
------------
FOR VALUE RECEIVED, CO-STEEL INC. (the "COMPANY"), a corporation organized
and existing under the laws of the Province of Ontario, Canada hereby promises
to pay to or registered assigns, the principal
---------------------------------
sum of DOLLARS ($ ) on July 15, 2006
------------------------------- ------------
or earlier as provided in the Agreement referred to below with interest
(computed on the basis of a three hundred sixty (360) day year of twelve (12)
thirty (30) day months) (a) on the unpaid balance thereof at the Applicable Rate
from the date hereof, payable on the 15th day of each month in each year
commencing with the month next succeeding the date hereof, until the principal
hereof shall have become due and payable; and (b) during the existence of an
Event of Default, at a rate per annum from time to time equal to the greater of
(i) the Applicable Rate plus 2% per annum or (ii) 2% over the rate of interest
publicly announced by ▇▇▇▇▇▇ Guaranty Trust Company of New York from time to
time in New York City as its Prime Rate. Capitalized terms used herein and not
otherwise defined herein have the respective meanings ascribed thereto in the
Agreement referred to below.
Payments of principal of, and interest on, and any Yield-Maintenance Amount
payable with respect to, this Note are to be made at the main office of Bank of
New York in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of the senior promissory notes (herein called the "NOTES")
originally issued pursuant to the Note Agreement dated as of February 20, 1997
which was amended pursuant to the Amended and Restated Note Agreement dated as
of February 4, 2000 and further amended by the Second Amended and Restated Note
Agreement, dated as of April 30, 2002 (herein called the "AGREEMENT"), between
the Company and each of The Prudential Insurance Company of America
Exhibit A-2 - 1
and U.S. Private Placement Fund, and is entitled to the benefits thereof. As
provided in the Agreement, this Note is subject to required prepayments as well
as optional prepayment, in whole or from time to time in part on the terms
specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
This Note is intended to be performed in the State of New York and shall be
construed and enforced in accordance with the law of such State.
CO-STEEL INC.
By ________________________________
Name:
Title:
Exhibit A-2 - 2
EXHIBIT B
[FORM OF INTERCREDITOR AGREEMENT]
Exhibit B-1
EXHIBIT C
[INTENTIONALLY DELETED]
Exhibit C-1
EXHIBIT D
[ASSET MONETIZATION PROGRAM]
Exhibit D-1
EXHIBIT E
[FORM OF GUARANTEE]
Exhibit F-1
CO-STEEL INC.
(TO BE RENAMED GERDAU AMERISTEEL CORPORATION)
------------------------------------------
AMENDMENT NO. 1 AND WAIVER TO
SECOND AMENDED AND RESTATED NOTE AGREEMENT
------------------------------------------
DATED AS OF OCTOBER 23, 2002
SERIES A SENIOR SECURED NOTES DUE JANUARY 15, 2004
SERIES B SENIOR SECURED NOTES DUE JULY 15, 2006
As of October 23, 2002
To each of the Persons
Named in Annex 1 hereto
(the "CURRENT HOLDERS")
Ladies and Gentlemen:
CO-STEEL INC. (to be renamed GERDAU AMERISTEEL CORPORATION) an Ontario,
Canada corporation (together with any successors and assigns, the "COMPANY"),
hereby agrees with each of you as follows:
1. BACKGROUND
1.1. PRIOR ISSUANCE OF NOTES, ETC.
The Company issued and sold its (a) senior promissory notes due January 15,
2004 (the "SERIES A NOTES") in the original aggregate principal amount of
$100,000,000 pursuant to that certain Note Agreement, dated as of January 10,
1994, as amended by the Amended and Restated Note Agreement dated as of February
4, 2000, and as further amended by that certain Second Amended and Restated Note
Agreement, dated as of April 30, 2002 (the "EXISTING NOTE AGREEMENT") among the
Company, The Prudential Insurance Company of America ("PRUDENTIAL") and U.S.
Private Placement Fund (the "FUND"); and (b) senior promissory notes due July
15, 2006 (the "SERIES B NOTES" and together with the Series A Notes, the
"NOTES") in the original aggregate principal amount of $75,000,000 pursuant to
that certain Note Agreement, dated as of February 20, 1997 among the Company,
Prudential and the Fund, as amended by the Amended and Restated Note Agreement
dated as of February 4, 2000, and as further amended by the Existing Note
Agreement. The Existing Note Agreement, as may be amended pursuant to this
Amendment No. 1 and Waiver to Second Amended and Restated Note Agreement (this
"AMENDMENT") and as may be further amended, restated or otherwise modified from
time to time, is hereinafter referred to as the "NOTE AGREEMENT." As of the date
hereof, the outstanding principal amount of the Series A Notes is $41,058,376.04
and the outstanding principal amount of the Series B Notes is $68,430,626.74.
1.2. GERDAU TRANSACTION.
The Company proposes to enter into a series of transactions in which Gerdau
Steel Inc. ("GERDAU CANADA") will acquire common shares in the Company
representing approximately 74% (to be reduced to approximately 64.8%) of the
voting capital stock of the Company on a fully diluted basis after issuance
pursuant to certain proposed merger transactions (the "MERGER") outlined in more
detail in
the Management Information Memorandum of the Company dated August 26, 2002. The
Merger contemplates the following transfers:
(a) the transfer by Gerdau Canada of all of the existing share capital
(the "EXISTING GERDAU CANADA SUBGROUP SHARES") in each of Gerdau Courtice
Steel Inc. ("COURTICE"), Gerdau MRM Holdings Inc. ("MRM HOLDINGS") and
Gerdau USA Inc. ("GERDAU USA") to 4104315 Canada Limited;
(b) followed by a transfer of the Existing Gerdau Canada Subgroup
Shares to Gerdau Nova Scotia Holding Company ("GERDAU HOLDCO 2"); and
(c) followed by a transfer of all of the issued share capital in
Gerdau Holdco 2 to the Company.
2. REQUEST FOR CONSENT TO AMENDMENTS, WAIVERS AND DESIGNATION
The Company requests that each of the Current Holders enter into this
Amendment and consent to (a) the amendments to the Existing Note Agreement more
particularly set forth in Exhibit A of this Amendment (collectively, the
"AMENDMENTS"), (b) certain waivers as more particularly set forth in Exhibit B
of this Amendment (collectively, the "WAIVERS"), and (c) the designation of
certain entities as Unrestricted Subsidiaries as set forth in Section 4.3 of
this Amendment (the "DESIGNATION").
3. WARRANTIES AND REPRESENTATIONS
To induce the Current Holders to enter into this Amendment and to consent
to the Amendments and the Waivers, the Company warrants and represents as to
itself and its Subsidiaries (other than the Gerdau Subgroup except in respect of
Sections 3.9, 3.10, 3.11 and 3.12) as follows (it being agreed, however, that
nothing in this Section 3 shall affect any of the warranties and representations
previously made by the Company in or pursuant to the Existing Note Agreement,
and that all of such other warranties and representations, as well as the
warranties and representations in this Section 3, shall survive the
effectiveness of the Amendments and Waivers):
3.1. REAFFIRMATION.
All representations and warranties made in the Existing Note Agreement by
the Company continue to be true and correct in all material respects as of the
date hereof except for those representations and warranties which speak to a
prior specific date.
3.2. NO MATERIAL ADVERSE CHANGE.
2
Since April 30, 2002, there has been no change in the business operations,
profits, financial condition, Properties or business prospects of the Company
except changes that, in the aggregate, could not reasonably be expected to have
a Material Adverse Effect.
3.3. CORPORATE ORGANIZATION AND AUTHORITY.
The Company is duly organized, validly existing and in good standing under
the laws of Ontario, Canada and has the requisite corporate power and authority
to execute and deliver this Amendment and to perform its obligations under this
Amendment and the Note Agreement, as amended by this Amendment.
3.4. LEGAL AND AUTHORIZED; OBLIGATIONS ARE ENFORCEABLE.
(a) Neither the execution nor delivery of this Amendment, nor
fulfillment of nor compliance with the terms and provisions hereof will
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, or result in any violation of, or result
in the creation of any Lien upon any of the Properties or assets of the
Company or any of its Subsidiaries pursuant to, the charter or by-laws of
the Company or any of its Subsidiaries, any award of any arbitrator or any
agreement (including any agreement with stockholders), any Material
Contract, any Material License, the leases for the North York Property or
the Significant U.S. Leased Properties or any order, judgment, decree,
statute, law, rule or regulation to which the Company or any of its
Subsidiaries is subject.
(b) The execution and delivery of this Amendment has been duly
authorized by all necessary action on the part of the Company, and has been
executed and delivered on behalf of the Company by one or more duly
authorized officers of the Company, and this Amendment constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
3.5. FULL DISCLOSURE.
None of the financial statements and other certificates previously provided
to the Current Holders pursuant to the provisions of the Existing Note Agreement
nor the statements made in this Amendment nor any other written statements
furnished by or on behalf of the Company or any of its Subsidiaries, including,
without limitation, the Asset Monetization Program, the Financial Forecasts and
the Business Plans, and other written statements furnished to the Current
Holders in connection with the proposal and negotiation of the Merger, the
Existing Note Agreement and this Amendment, the other Documents and the Waivers
contained in Exhibit B hereto, taken as a whole, contain any untrue statement of
a material fact or omit a material fact necessary to make the statements
contained therein and herein not misleading. There is no fact relating to any
event or circumstance that
3
has occurred or arisen since April 30, 2002 that the Company has not disclosed
to the Current Holders in writing that has had or, so far as the Company can now
reasonably foresee, could reasonably be expected to have, a Material Adverse
Effect.
3.6. MERGER DOCUMENTS.
(a) Each of the representations and warranties made by the Company in
the Transaction Agreement among Gerdau Canada, ▇▇▇▇▇▇ ▇.▇. and the Company
dated as of August 12, 2002, as amended and restated on August 23, 2002
(together with all exhibits, schedules and other related documents,
collectively, the "TRANSACTION AGREEMENT") is true and correct in all
material respects, and such representations and warranties are hereby
incorporated herein by reference with the same effect as though made by the
Company and set forth herein in their entirety.
(b) The Company has delivered to each Current Holder a true and
correct copy of the Transaction Agreement.
3.7. INTENT.
The Company is entering into this Amendment and has entered into the
Transaction Agreement without any intent to hinder, delay, or defraud either
current creditors or future creditors of the Company.
3.8. NO DEFAULTS.
Except as disclosed on Exhibit B hereto, immediately prior to the
effectiveness of this Amendment, no Default or Event of Default had occurred and
was continuing under the Existing Note Agreement, and immediately after the
effectiveness of this Amendment, the Amendments and Waivers, no Default or Event
of Default under the Note Agreement will have occurred and be continuing.
3.9. GERDAU HOLDCO 2.
As of the Gerdau Transaction Effective Date (defined in Section 4.4),
Gerdau Holdco 2 (a) is an unlimited liability company duly organized and validly
existing under the laws of the Province of Nova Scotia and has all necessary
company power and authority to own its property and to carry on its business,
(b) carries on the business of being a holding body corporate of all of the
issued and outstanding shares of MRM and Courtice and, directly or indirectly,
all of the issued and outstanding shares of Gerdau USA and carries on no other
business, (c) has assets consisting solely of the aforementioned shareholdings,
and (d) has no Indebtedness or other liabilities. As of the Effective Date, all
of the issued and outstanding capital of Gerdau Holdco 2 will be beneficially
owned by the Company.
3.10. INTERMEDIATE HOLDING COMPANY.
4
As of the Effective Date, Intermediate Holding Company (a) is a corporation
duly incorporated and validly existing under the laws of the Province of Ontario
and has all necessary corporate power and authority to own its property and
carry on its business, (b) carries on no business (other than in respect of the
Status Quo Agreement), and (c) has no assets, Indebtedness or other liabilities.
As of the Effective Date, all of the issued and outstanding capital of
Intermediate Holding Company will be beneficially owned by the Company.
3.11. PRO FORMA FINANCIALS
The Company has delivered to the Current Holders its pro forma consolidated
balance sheet dated as of June 30, 2002, prepared giving effect to the Merger as
if the Merger had occurred on January 1, 2001, and statements of income for the
12-month period ended December 30, 2001, and for the six month period ended June
30, 2002, in each case prepared as if the Merger had occurred on January 1,
2001. Such pro forma consolidated financial statements were (a) prepared in good
faith and, in the Company's opinion, were reasonable when made and continue to
be reasonable as of the Effective Date, (b) based on the best information
reasonably available to the Company after due inquiry, (c) accurately reflect
all adjustments necessary to give effect to the Merger, and (d) present fairly
in accordance with GAAP, in all material respects, the pro forma financial
position of the Company and its Subsidiaries (including the Gerdau Subgroup) as
if the Merger had occurred on such date or at the beginning of such periods. The
Company does not have, as of the Effective Date, any material liabilities that
would be required to be included in financial statements prepared in accordance
with GAAP that are not reflected in such pro forma financial statements.
3.12. CAPITAL STRUCTURE.
After giving effect to the Gerdau Acquisition, the Parent Amalgamation and
the Ameristeel Amalgamation, Gerdau Canada will own 64.8% of the outstanding
common shares of the Company on a fully diluted basis.
4. AMENDMENTS; WAIVERS; DESIGNATION.
4.1. AMENDMENTS TO EXISTING NOTE AGREEMENT.
On the Effective Date, the Existing Note Agreement is hereby amended in the
manner specified in Exhibit A to this Amendment.
4.2. LIMITED WAIVERS UNDER EXISTING NOTE AGREEMENT.
On the Effective Date, each Current Holder hereby grants the Waivers set
forth in Exhibit B to this Amendment.
4.3. DESIGNATION AS UNRESTRICTED SUBSIDIARIES.
5
On the Effective Date, each Current Holder hereby consents to the
designation of each member of the Gerdau Subgroup as an Unrestricted Subsidiary
pursuant to the definition of "Unrestricted Subsidiary" in paragraph 10B of the
Existing Note Agreement.
4.4. EFFECTIVENESS OF AMENDMENTS, WAIVERS AND DESIGNATION.
The Amendments, the Waivers and the Designation shall become effective (the
"EFFECTIVE DATE") at such time as all of the Current Holders shall have
indicated their written consent to such Amendments, Waivers and Designation by
executing and delivering the applicable counterparts of this Amendment and
satisfaction in full of the following conditions precedent:
(a) delivery to each Current Holder of a copy of a fully executed
amendment to the Bank Agreement dated the date hereof substantially in the
form attached hereto as Exhibit C;
(b) delivery to each Current Holder of a copy of a fully executed
amendment to the PNC Credit Agreements dated the date hereof substantially
in the form attached hereto as Exhibit D;
(c) delivery to each Current Holder of a copy of a fully executed
Status Quo Agreement substantially in the form attached hereto as
Exhibit E;
(d) delivery to each Current Holder of certified copies of all
corporate action taken by the Company and each Guarantor to authorize the
execution and delivery of this Amendment;
(e) delivery to each Current Holder of certified copies of all
corporate action taken by each member of the Gerdau Subgroup party to the
Status Quo Agreement and Intermediate Holding Company to authorize the
execution and delivery of the Status Quo Agreement;
(f) if the Effective Date is not the date of execution of this
Agreement, delivery to each Current Holder of a certificate dated the
Effective Date and signed by a Responsible Officer of the Company,
certifying: (i) that the warranties and representations contained in
Section 3 of this Amendment are true on the Effective Date with the same
effect as though made on and as of that date; and (ii) that the Company has
performed and complied with all agreements and conditions contained herein
that are required to be performed or complied with by the Company on or
prior to the Effective Date, and that such performance and compliance
remains in effect on the Effective Date;
(g) delivery to each Current Holder of a certificate dated the
Effective Date and signed by the Secretary or the Assistant Secretary of
the Company
6
certifying as to (i) the incumbency of the Company, each Guarantor, the
Intermediate Holding Company and each member of the Gerdau Subgroup
party to the Status Quo Agreement; and (ii) the good standing or the
equivalent thereof for the Company, each Guarantor, Intermediate Holding
Company and each member of the Gerdau Subgroup party to the Status Quo
Agreement;
(h) delivery to each Current Holder from Goodmans LLP and Wilentz,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special counsel to the Company, of closing opinions,
dated as of the Effective Date, and in form and substance satisfactory to
the Current Holders. This Section 4.4(h) shall constitute direction by the
Company to such counsel to deliver such closing opinions to the Current
Holders;
(i) no Material Adverse Effect shall have occurred;
(j) the payment of the fee by the Company payable to the Current
Holders pursuant to Section 6 of this Amendment and the expenses to be paid
on behalf of the Current Holders pursuant to Section 7 of this Amendment
(to the extent a statement therefor has been presented to the Company on or
prior to the Effective Date);
(k) delivery to each Current Holder of any additional information,
certification or other document or instrument as such Current Holder may
request, including, without limitation, opinions of Nova Scotia counsel
delivered to the Company or Gerdau Canada dated as of the Effective Date;
(l) delivery to the relevant Security Agent or its nominee, of (i) an
acknowledgement in respect of the Stock Pledge Agreement concerning the
pledge of the membership interests in Gerdau Holdco 2 and (ii) all
certificates, instruments or other documents representing all of the issued
and outstanding membership interests of Gerdau Holdco 2 endorsed for
transfer or accompanied by a power of attorney, all as satisfactory to such
Security Agent;
(m) the Gerdau Acquisition shall have occurred in the manner
contemplated by the Transaction Agreement;
(n) delivery to each Current Holder of pro forma financial statements
incorporating the business of the Gerdau Subgroup;
(o) the representation contained in Section 3.8 shall be true and
correct as of the Effective Date;
(p) the maturity of the Gerdau Canada Credit Agreement revolver shall
have been renewed and extended until at least September 22, 2003;
7
(q) delivery of copies of all constating documents of Gerdau Holdco 2
and Intermediate Holding Company which shall be in form and substance
satisfactory to the Current Holders;
(r) execution and delivery of the amendment to the Intercreditor
Agreement dated the date hereof substantially in the form attached hereto
as Exhibit F; and
(s) delivery to the relevant Security Agent or its nominee of all
certificates, instruments or other documents representing all of the issued
and outstanding shares of Intermediate Holding Company endorsed for
transfer or accompanied by a power of attorney, all as satisfactory to such
Security Agent together with an acknowledgement by the Company that such
issued and outstanding shares are subject to the Lien of the Stock Pledge
Agreement.
4.5. NO OTHER AMENDMENTS OR WAIVERS; CONFIRMATION.
The parties agree and confirm that entering into this agreement shall in no
way evidence a new debt entered into between the parties or a novation of the
original debt but rather the debt created pursuant to the existing agreement is
continued in full force and effect, as amended by this Amendment. Except as
expressly provided herein, (a) no terms or provisions of the Note Agreement or
any other Document are modified or changed by this Amendment, (b) the terms of
this Amendment shall not operate as a waiver by any Current Holder of, or
otherwise prejudice any Current Holder's rights, remedies or powers under, the
Existing Note Agreement or any other Document or under any applicable law and
(c) the terms and provisions of the Existing Note Agreement and each other
Document shall continue in full force and effect.
5. DEFINED TERMS
Capitalized terms used herein and not otherwise defined have the meanings
ascribed to them in the Note Agreement.
6. FEE.
In consideration of the consent by the Current Holders to the Amendments
and the Waivers, the Company shall pay a combined fee to the Current Holders on
the Effective Date in an aggregate amount equal to one-tenth of one percent
(0.10%) of the outstanding principal amount of the Notes. Such combined fee
shall be paid to the Current Holders ratably in accordance with the respective
principal amounts of Notes held by them (as indicated in Annex 1) and in the
manner and to the accounts specified in the Existing Note Agreement for payments
of principal and interest on the Notes. The Company hereby represents that any
and all fees paid to the Banks and PNC, respectively, in consideration of
receiving amendments and
8
waivers similar to the Amendments and Waivers are (a) in respect of the Banks,
as a collective group, not more than one-tenth of one percent (0.10%) of the
aggregate outstanding principal amount of Indebtedness evidenced by the Bank
Agreement as of the Effective Date and (b) in respect of PNC, not more than
one-tenth of one percent (0.10%) of the aggregate outstanding principal amount
of Indebtedness evidenced by the PNC Credit Agreements as of the Effective Date.
7. EXPENSES
Whether or not any of the Amendments or Waivers becomes effective, the
Company will promptly (and in any event within thirty (30) days of receiving any
statement or invoice therefor) pay all fees, expenses and costs relating to this
Amendment, including, but not limited to, (a) the cost of reproducing this
Amendment and the other documents delivered in connection herewith and (b) the
reasonable fees and disbursements of the Current Holders' special counsel,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP, incurred in connection with the preparation, negotiation
and delivery of this Amendment. This Section 7 shall not be construed to limit
the Company's obligations under paragraph 11B of the Note Agreement.
8. MISCELLANEOUS
8.1. PART OF NOTE AGREEMENT, FUTURE REFERENCES, ETC.
This Amendment shall be construed in connection with and as a part of the
Note Agreement and, except as expressly amended by this Amendment, all terms,
conditions and covenants contained in the Note Agreement, the Notes and the
other Documents are hereby ratified and shall be and remain in full force and
effect. Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this Amendment may
refer to the Note Agreement without making specific reference to this Amendment,
but nevertheless all such references shall include this Amendment unless the
context otherwise requires.
8.2. GOVERNING LAW.
THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
8.3. DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART.
Two (2) or more duplicate originals hereof may be signed by the parties,
each of which shall be an original but all of which together shall constitute
one and the
9
same instrument. This Amendment may be executed in one or more counterparts and
shall become effective at the time provided in Section 4.4 hereof, and each set
of counterparts that, collectively, show execution by the Company and each
consenting Current Holder shall constitute one duplicate original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. NEXT PAGE IS SIGNATURE PAGE.]
10
If this Amendment is satisfactory to you, please so indicate by signing the
applicable acceptance on a counterpart hereof and returning such counterpart to
the Company, whereupon this Amendment shall become binding among the Company and
you in accordance with its terms.
Sincerely,
CO-STEEL INC.
By:
------------------------------
Name:
Title:
Accepted:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:
--------------------------------------
Name:
Title:
U.S. PRIVATE PLACEMENT FUND
By: Prudential Private Placement
Investors, L.P., Investment Advisor
By: Prudential Private Placement
Investors, Inc., its General Partner
By:
--------------------------------------
Name:
Title:
[Signature Page to Amendment No. 1 and Waiver]
Each undersigned Guarantor hereby
consents to the Amendments and confirms
its obligations as Guarantor under the
Amended and Restated Guarantee, dated
as of April 30, 2002:
CO-STEEL SAYREVILLE, INC.
By:
---------------------------------------
Name:
Title:
CO-STEEL RARITAN, INC.
By:
--------------------------------------
Name:
Title:
CO-STEEL USA DISTRIBUTION, INC.
By:
--------------------------------------
Name:
Title:
CO-STEEL (U.S.) LTD.
By:
--------------------------------------
Name:
Title:
CO-STEEL FINANCE CORP.
By:
--------------------------------------
Name:
Title:
[Signature Page to Amendment No. 1 and Waiver]
CO-STEEL USA HOLDINGS, INC.
By:
--------------------------------------
Name:
Title:
LAKE ONTARIO STEEL COMPANY INC.
By:
-------------------------------------
Name:
Title:
RARITAN RIVER URBAN RENEWAL CORPORATION
By:
-------------------------------------
Name:
Title:
CO-STEEL DISTRIBUTION CANADA LIMITED
By:
-------------------------------------
Name:
Title:
1300554 ONTARIO LIMITED
By:
-------------------------------------
Name:
Title:
[Signature Page to Amendment No. 1 and Waiver]
1102590 ONTARIO LIMITED
By:
-------------------------------------
Name:
Title:
[Signature Page to Amendment No. 1 and Waiver]
ANNEX 1
CURRENT HOLDERS AND PRINCIPAL AMOUNTS
==============================================================================================================
AGGREGATE PRINCIPAL AGGREGATE
AMOUNT OF SERIES A PRINCIPAL AMOUNT
SENIOR SECURED NOTES OF SERIES B SENIOR
NAME OF CURRENT HOLDER HELD SECURED NOTES HELD
==============================================================================================================
The Prudential Insurance Company of America $41,058,376.04 $63,868,584.94
--------------------------------------------------------------------------------------------------------------
U.S. Private Placement Fund N.A. $4,562,041.80
==============================================================================================================
Annex 1-1
EXHIBIT A
AMENDMENTS TO EXISTING NOTE AGREEMENT
1. Subsection (l) of paragraph 5A, paragraphs ▇▇, ▇▇, ▇▇, ▇▇, ▇▇, ▇▇, ▇▇, ▇▇,
▇▇▇, 5EE, 6L, 6T, 6W, 6X, 6Z, 6AA and Subsections (c), (g), (h), (i), (j),
(l), (n), (o), (q), (v), (w) and (bb) of paragraph 7A of the Existing Note
Agreement are hereby amended by deeming each reference therein to
"Subsidiary" and "Subsidiaries" as excluding each member of the Gerdau
Subgroup; and paragraph 6Z of the Existing Note Agreement is hereby amended
by deeming the reference therein to "Affiliate" as excluding each member of
Gerdau Canada.
2. The Existing Note Agreement is hereby amended by adding a new paragraph 5FF
to read as follows:
"5FF. GERDAU HOLDCO 2; INTERMEDIATE HOLDING COMPANY.
The Company shall do or cause to be done all things necessary to
ensure that each of Gerdau Holdco 2 and Intermediate Holding Company
remains a company duly created and validly subsisting under the laws of
its jurisdiction of formation and maintains all necessary company power
and authority to own its property and carry on its business as owned and
carried on by it on the Amendment No. 1 Effective Date, except as may
otherwise be permitted pursuant to paragraph 6HH."
3. The Existing Note Agreement is hereby amended by adding a new paragraph 5GG
to read as follows:
"5GG. FINANCING STATEMENTS.
The Company shall within 30 days following the Amendment No. 1
Effective Date, at its expense (a) register, file or record such
financing statements or financing change statements under applicable law
as are necessary to perfect or preserve the perfection of the security of
the Security Agents and the holders of the Notes in connection with the
change of name of the Company; and (b) cause to be delivered to the
Purchasers opinions of its Canadian and U.S. counsel in respect of such
registrations in a form and substance reasonably satisfactory to the
Purchasers.
4. Clause (e) in paragraph 6EE of the Existing Note Agreement is hereby
deleted and replaced in its entirety as follows:
"(e) ownership of the capital stock of ASW Holdings, the Gerdau
Subgroup and Subsidiaries existing on the Restructuring Date or as
otherwise provided herein; and"
Exhibit A-1
5. The Existing Note Agreement is hereby amended by adding a new paragraph 6GG
to read as follows:
"6GG. GERDAU HOLDCO 2; INTERMEDIATE HOLDING COMPANY.
The Company shall not:
(a) permit Gerdau Holdco 2 or Intermediate Holding Company to
create, incur, assume or permit to exist any Indebtedness;
(b) permit Gerdau Holdco 2 or Intermediate Holding Company to
guarantee, or give an indemnity in respect of, any Indebtedness,
obligation or liability (whether present or future, actual or
contingent) of any Person, or to create, assume or permit to exist
over all or any part of its business or assets, whether now owned or
hereafter acquired, any Lien (whether prior or subsequent to or pari
passu with any Lien in favor of the holders of the Notes) other than
the Liens in favor of The Toronto Dominion Bank as Administrative
Agent under the Gerdau Canada Credit Agreement existing on the Gerdau
Transaction Effective Date in the Gerdau Subgroup shares, equity
interests and assets;
(c) permit Gerdau Holdco 2 or Intermediate Holding Company to
sell, lease, license, transfer, assign, grant options or rights in or
over, or otherwise dispose of or deal with any of its business,
assets, rights, revenues or property, real, personal or mixed,
tangible or intangible (including, without limitation, shares of stock
and indebtedness of Subsidiaries, receivables and leasehold
interests), whether in one or a series of transactions other than the
Liens in favor of The Toronto Dominion Bank as Administrative Agent
under the Gerdau Canada Credit Agreement existing on the Gerdau
Transaction Effective Date in the Gerdau Subgroup shares, equity
interests and assets;
(d) permit Gerdau Holdco 2 to (i) acquire or incorporate any
Subsidiary; or (ii) acquire all or a substantial part of, in one or a
series of transactions (whether by way of amalgamation, merger, share
purchase, asset purchase or otherwise) the assets, shares or any other
equity interest of any Person;
(e) other than as permitted pursuant to paragraph 6HH, permit
Intermediate Holding Company to (i) acquire or incorporate any
Subsidiary; or (ii) acquire all or a substantial part of, in one or a
series of transactions (whether by way of amalgamation, merger, share
purchase,
Exhibit A-2
asset purchase or otherwise) the assets, shares or any other equity
interest of any Person;
(f) permit Gerdau Holdco 2 or Intermediate Holding Company to declare
any dividends from, or set apart any sum for the payment of any dividends
on, or make any other distribution (by reduction of capital or otherwise)
in respect of, any of Gerdau Holdco 2's membership interests or
Intermediate Holding Company's shares;
(g) permit Gerdau Holdco 2 or Intermediate Holding Company to apply
any of their respective assets to the purchase, redemption or other
acquisition or retirement of any shares or membership interests in their
capital or otherwise reduce issued or paid up capital in respect of any of
their shares;
(h) permit Gerdau Holdco 2 or Intermediate Holding Company to issue or
approve the transfer of any new capital by way of equity or subordinated
debt offering or otherwise other than as contemplated by paragraph 6HH;
(i) permit Gerdau Holdco 2 or Intermediate Holding Company to:
(i) enter into any transaction with any Affiliate, including,
without limitation, any transaction for the purchase, sale or exchange
of property, the rendering of any services, the making or obtaining of
any loans or advances, and the entering into of any contracts or
agreements other than the Status Quo Agreement, the Approved Transfer
Documents and as contemplated by paragraph 6HH; or;
(ii) pay any fees or expenses to, or reimburse or assume any
obligation for the reimbursement of any expenses incurred by any
Affiliate of it;
(j) permit Gerdau Holdco 2 or Intermediate Holding Company to enter
into any corporate transaction (or series of transactions), whether by way
of reconstruction, arrangement, reorganization, consolidation,
amalgamation, merger or otherwise, whereby all or substantially all of its
or their undertaking and assets would become the property of any other
Person or in the case of any amalgamation, the property of the continuing
corporation resulting from the amalgamation other than in respect of the
Intermediate Holding Company Transfer or the Gerdau Holdco 2 Conversion;
Exhibit A-3
(k) permit Gerdau Holdco 2 or Intermediate Holding Company to engage
in any business other than holding the common stock of the Gerdau
Subgroup and entering into and performing the terms of the Status Quo
Agreement and as otherwise contemplated herein;
(l) permit Gerdau Holdco 2 or Intermediate Holding Company to amend,
revise or supplement or take any action or omit to take any action
which would contravene any of their respective organizational
documents other than as required by the Gerdau Holdco 2 Conversion;
(m) permit Intermediate Holding Company to engage in any business
other than holding the membership interests of Gerdau Holdco 2 after
the occurrence of the Intermediate Holding Company Transfer or
entering into and performing the terms of the Status Quo Agreement and
the Approved Transfer Documents; and
(n) permit any of its Subsidiaries (other than the Gerdau Subgroup
(excluding Gerdau Holdco 2 and Intermediate Holding Company)) to
transfer, except in connection with the Intermediate Holding Company
Transfer, any assets to or incur any Indebtedness in respect of any
member of the Gerdau Subgroup."
6. The Existing Note Agreement is hereby amended by adding a new paragraph 6HH
to read as follows:
"6HH. INTERMEDIATE HOLDING COMPANY TRANSFER; GERDAU HOLDCO 2 CONVERSION.
(a) INTERMEDIATE HOLDING COMPANY TRANSFER. Upon the occurrence of any
of the following events:
(i) in the event that Cumulative Consolidated EBITDA tested on
March 31, 2003 does not exceed $105,000,00; or
(ii) in the event that the Adjusted Cost Base of the Gerdau
Subgroup as reflected in the Special Purpose Financial Statements at
any time is less than 99% of the Adjusted Cost Base of the Gerdau
Subgroup as reflected in the Special Purpose Financial Statements as
of December 31, 2002; or
(iii) in the event that the Required Lenders reasonably deem that
a Material Event exists;
Exhibit A-4
then the Company shall take all steps necessary to effect the
Intermediate Holding Company Transfer. The Intermediate Holding
Company Transfer shall take place within 30 days of an event specified
in clauses (i) or (ii) above and within 5 Business Days of the event
specified in clause (iii) above. The Intermediate Holding Company
Transfer will be effected to ensure that the securities of Gerdau
Holdco 2 so transferred remain subject to the Lien of the Stock Pledge
Agreement.
(b) GERDAU HOLDCO 2 CONVERSION.
(i) If at any time the Required Holders reasonably deem that a
Material Event exists, whether or not arising from the direct
ownership of Gerdau Holdco 2, then the Company will immediately
commence, and diligently proceed with, the Gerdau Holdco 2 Conversion
which shall in no event take longer than 5 Business Days.
(ii) If any relevant Governmental Authority makes a final
determination disapproving of the Ameristeel Amalgamation or the
Company has not completed a refinancing of its obligations hereunder
on or before December 15, 2003, then the Company will cause the Gerdau
Holdco 2 Conversion to occur within 5 Business Days.
(c) LIMITED WAIVER. Any provision contained herein or in Amendment
No. 1 to the contrary notwithstanding, the Company shall be permitted
to take any and all acts reasonably necessary to complete the
Intermediate Holding Company Transfer and/or the Gerdau Holdco
Conversion for the purposes outlined above."
7. The Existing Note Agreement is hereby amended by adding a new paragraph 6II
to read as follows:
"6II. GERDAU SUBGROUP INVESTMENT.
From and after January 1, 2003, the Adjusted Cost Base of the Gerdau
Subgroup as reflected in the Special Purpose Financial Statements
shall not at any time be less than 90% of the Adjusted Cost Base of
the Gerdau Subgroup as reflected in the Special Purpose Financial
Statements as of December 31, 2002."
8. The Existing Note Agreement is hereby amended by replacing "Restructuring
Date" in subsection (t) of paragraph 7A with "Amendment No. 1 Effective
Date".
Exhibit A-5
9. The Existing Note Agreement is hereby amended by deleting Schedule 8H and
substituting therefor the Schedule 8H attached hereto.
10. The Existing Note Agreement is hereby amended by deleting Schedule 8I and
substituting therefor the Schedule 8I attached hereto.
11. Paragraph 10B is hereby amended by adding the following definitions in the
appropriate alphabetical order:
""AMENDMENT NO. 1" shall mean that certain Amendment No. 1 and Waiver
to Second Amended and Restated Note Agreement, dated as of October 23,
2002, among the Company, the Guarantors and the Purchasers."
""AMENDMENT NO. 1 EFFECTIVE DATE" shall mean the effective date of the
Amendment No. 1.
""AMERISTEEL AMALGAMATION" shall mean the issuance by the Company of
its common shares pursuant to and in accordance with Section 3.5 of
the Transaction Agreement."
""APPROVED TRANSFER DOCUMENTS" shall mean those documents attached
hereto as Exhibit F."
""COURTICE" shall mean Gerdau Courtice Steel Inc., a corporation
incorporated under the laws of Canada."
""GERDAU ACQUISITION" shall mean the acquisition by the Company of all
of the issued and outstanding shares in the capital stock of Gerdau
Holdco 2 in consideration for the issuance by the Company of its
common shares in Gerdau Holdco 1 pursuant to and in accordance with
the Transaction Agreement."
""GERDAU CANADA" shall mean Gerdau Steel Inc., a corporation
incorporated under the laws of Canada."
""GERDAU CANADA CREDIT AGREEMENT" shall mean the Amended and Restated
Loan Agreement dated November 8, 1996, among Gerdau Canada, Courtice,
MRM, GUSAP Partners, Chase Securities Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.,
The Toronto-Dominion Bank, the financial institutions from time to
time parties thereto as lenders and The Toronto-Dominion Bank as
agent, as further amended or amended and restated from time to time."
""GERDAU HOLDCO 1" shall mean 4104315 Canada Limited, a corporation
incorporated under the laws of Canada."
Exhibit A-6
""GERDAU HOLDCO 2" shall mean Gerdau Nova Scotia Holding Company, a
company formed under the laws of Nova Scotia."
""GERDAU HOLDCO 2 CONVERSION" shall mean the conversion of Gerdau
Holdco 2 from a Nova Scotia unlimited liability company into a Nova
Scotia limited liability company pursuant to documentation reasonably
satisfactory to the Required Holders."
""GERDAU SUBGROUP" shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇ MRM Holdings
Inc., Gerdau Courtice Steel Inc., GUSAP Partners, 3038482 Nova Scotia
Company, PASUG LLC, Gerdau USA Inc. and Ameristeel Corporation, and
their respective direct and indirect subsidiaries and, if at any time
Intermediate Holding Company holds all of the issued and outstanding
membership interests of Gerdau Holdco 2, then shall also include
Intermediate Holding Company."
""GERDAU TRANSACTION EFFECTIVE DATE" shall mean the date on which the
Gerdau Acquisition is consummated."
""GERDAU USA" shall mean Gerdau USA Inc., a corporation incorporated
under the laws of the State of Delaware."
""INTERMEDIATE HOLDING COMPANY" shall mean 2017387 Ontario Limited, a
corporation incorporated under the laws of the province of Ontario."
""INTERMEDIATE HOLDING COMPANY TRANSFER" shall mean a transfer by the
Company to Intermediate Holding Company of all issued and outstanding
securities of Gerdau Holdco 2 pursuant to the Approved Transfer
Documents."
""MATERIAL EVENT" shall mean the occurrence of any of the following:
(a) a Material Adverse Effect, (b) Gerdau Holdco 2 asserts any
claim(s) against the Company in excess of $1,000,000 for any single
claim or the aggregate of all such claims exceeds $5,000,000, (c) any
Bankruptcy Event in respect of Gerdau Holdco 2, (d) any claim is
asserted against Gerdau Holdco 2 in excess of $250,000 for any single
claim or the aggregate of all such claims exceeds $1,000,000, (e) an
Event of Default occurs, or (f) an event of default occurs under the
Gerdau Canada Credit Agreement entitling the lenders thereunder, with
the passage of time or otherwise, to accelerate their rights
thereunder."
""MRM" shall mean Gerdau MRM Steel Inc., a corporation continued under
the laws of the Province of Saskatchewan."
Exhibit A-7
""PARENT AMALGAMATION" shall mean the amalgamation of Gerdau Canada
and Gerdau Holdco 1 on or before January 1, 2003 by way of a vertical
short form amalgamation under the Canada Business Corporations Act."
""STATUS QUO AGREEMENT" shall mean the status quo agreement dated as
of October 22, 2002 among Gerdau Canada, Courtice, MRM, Gerdau USA,
Gerdau Holdco 2, Intermediate Holding Company, the Company, the
Security Agents, PNC, the Purchasers and the Toronto-Dominion Bank, as
administration agent, in form and substance satisfactory to the
Required Holders."
""TRANSACTION AGREEMENT" shall mean the transaction agreement dated
August 12, 2002 between Gerdau Canada, ▇▇▇▇▇▇ ▇.▇. and the Company, as
amended, as amended and restated on August 23, 2002."
12. The definition of "ADJUSTED COST BASE" in paragraph 10B of the Existing
Note Agreement is hereby deleted and replaced in its entirety as follows:
""ADJUSTED COST BASE" shall mean (i) for each Unrestricted Subsidiary
(with the exception of the Gerdau Subgroup), the dollar amount by
which the Unrestricted Subsidiaries would be carried as at December
31, 1998 in the accounts of the Company if the Unrestricted
Subsidiaries were accounted for, from inception, by the equity method
of accounting and (ii) the Gerdau Subgroup will be carried at cost as
of the Amendment No. 1 Effective Date. Except that (a) the Adjusted
Cost Base will have no further adjustments for net income or loss of,
or unrealized gains or losses on, the Unrestricted Subsidiaries; (b)
consistent with GAAP, all inter-company transactions and balances
would be adjusted as appropriate to consolidate the Company's
Restricted Subsidiaries, and all transactions between or among the
Company and its Restricted Subsidiaries, on the one hand, and the
Unrestricted Subsidiaries (including, without limitation, the Gerdau
Subgroup), on the other hand, shall be treated as transactions between
or among unrelated third parties and accounted for and measured at the
exchange amount of consideration established and agreed to by the
parties; and (c) the Adjusted Cost Base will be increased or
decreased, as the case may be, for any amounts contributed or received
in the form of subscription for equity, contribution of surplus, or
receipt of dividends. For greater certainty, realized gains or losses
on dispositions of Unrestricted Subsidiaries will be reflected in the
Special Purpose Financial Statements. For the purposes of this
definition, the Hungarian Finance Structure Companies and NJSC
Investment Co., Inc. shall be deemed to be Restricted Subsidiaries,
provided, however, that as used in ▇▇▇▇▇▇▇▇▇ ▇▇▇, "Adjusted Cost Base"
shall be determined solely with
Exhibit A-8
respect to the Gerdau Subgroup and will reflect any permanent
impairment of value as determined in accordance with GAAP."
13. The definition of "PERMITTED INTERCOMPANY INDEBTEDNESS" in paragraph 10B of
the Existing Note Agreement is hereby deleted and replaced in its entirety
as follows:
""PERMITTED INTERCOMPANY INDEBTEDNESS" shall mean (a) loans from an
Unrestricted Subsidiary (other than a member of the Gerdau Subgroup)
to a Restricted Subsidiary, provided that no such loan exceeds
Cdn.$1,500,000 (or its equivalent) and that such loans in the
aggregate do not exceed Cdn.$3,000,000 (or its equivalent); (b) loans
from a Restricted Subsidiary to another Restricted Subsidiary; and (c)
Intercompany Indebtedness described in Schedule 8V."
14. The definition of "SPECIAL PURPOSE FINANCIAL STATEMENTS" in paragraph 10B
of the Existing Note Agreement is hereby deleted and replaced in its
entirety as follows:
"SPECIAL PURPOSE FINANCIAL STATEMENTS" shall mean the consolidated
financial statements of the Company prepared under GAAP, except that
the Unrestricted Subsidiaries (excluding the Hungarian Finance
Structure Companies and N.J.S.C. Investment Co., Inc.) are not
consolidated but are accounted for at Adjusted Cost Base. Purchase
accounting related to the Gerdau Acquisition including adjustments to
the assets and liabilities of the Company and the Restricted
Subsidiaries to reflect fair market values will be excluded. The
Gerdau Subgroup will be shown at cost."
15. The definition of "TANGIBLE NET WORTH" in paragraph 10B of the Existing
Note Agreement is hereby deleted and replaced in its entirety as follows:
""TANGIBLE NET WORTH" as of any date shall mean the amount equal to
the Shareholders' Equity (excluding foreign currency translation
adjustments), less all (i) goodwill, investments in and amounts due
from ASW Holdings, trade names, trademarks, patents, organization
expenses, deferred financing expenses, amounts due from employees and
other like intangibles, all calculated based on the Special Purpose
Financial Statements prepared as of such date plus (ii) an amount
equal to the greater of (A) the Adjusted Cost Base attributable to the
Gerdau Subgroup or (B) the aggregate investment of the Company in the
Gerdau Subgroup, determined as of the Gerdau Transaction Effective
Date, and any increase in such investment arising from the
distribution of any equity of the Company after such date to minority
shareholders in Ameristeel Corporation in exchange for their shares of
Ameristeel Corporation."
Exhibit A-9
16. The definitions of "Asset Monetization Program", "Blocked Account
Agreement", "Consolidated EBITDA", "Financial Forecast", "Insurance
Proceeds", "Intercreditor Agreement", "Net Tangible Assets", "Permitted
Asset Sales" and "Strategic Plan" in paragraph 10B of the Existing Note
Agreement are hereby amended by deeming each reference therein to
"Subsidiary" or "Subsidiaries" as excluding the Gerdau Subgroup.
Exhibit A-10
EXHIBIT B TO AMENDMENT
WAIVERS UNDER EXISTING NOTE AGREEMENT
1. The Current Holders hereby consent to the Gerdau Acquisition and the
formation of Intermediate Holding Company and hereby waive compliance by
the Company with paragraphs 6N, 6R and 6EE of the Existing Note Agreement
solely with respect to the Gerdau Acquisition and the formation of
Intermediate Holding Company, and with respect to paragraph 6R only, also
with respect to the Ameristeel Amalgamation.
2. The Current Holders hereby waive any Event of Default including, without
limitation, Events of Default pursuant to subsections (t) and (v) of
paragraph 7A that would arise solely as an immediate consequence of the
consummation of (a) the Gerdau Acquisition, (b) the Parent Amalgamation or
(c) the Ameristeel Amalgamation.
3. The Current Holders hereby waive compliance by the Company with subsection
(d) of paragraph 2L arising solely as a result of the Company's failure to
deliver the applicable documentation within the period set forth therein.
4. The Current Holders hereby waive compliance by the Company and its
Restricted Subsidiaries with paragraph 6H solely with respect to the
amendment and modification of the Bank Agreement and the PNC Credit
Agreements in connection with permitting the Gerdau Acquisition.
Exhibit B-1
EXHIBIT C TO AMENDMENT
[INSERT BANK AGREEMENT AMENDMENT]
Exhibit C-1
EXHIBIT D TO AMENDMENT
[INSERT PNC CREDIT AGREEMENTS AMENDMENT]
Exhibit D-1
EXHIBIT E TO AMENDMENT
[INSERT STATUS QUO AGREEMENT]
Exhibit E-1
EXHIBIT F TO AMENDMENT
[INSERT AMENDMENT TO INTERCREDITOR AGREEMENT]
Exhibit F-1
SCHEDULE 8H
ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES
Please see attached.
Schedule 8H-1
Schedule 8I
CERTAIN LITIGATION
CO-STEEL RARITAN, INC.
----------------------
▇▇▇▇▇ ▇▇▇▇▇▇. Co-Steel Raritan, Inc. has been listed as a third-party defendant
in a personal injury claim in the Superior Court, Middlesex County, N.J. by
▇▇▇▇▇ ▇▇▇▇▇▇, a former employee, against Consolidated Rail Corporation. The
discovery phase of this claim is substantially completed.
GALLATIN STEEL COMPANY
----------------------
▇▇▇▇▇ FAMILY. By letter dated December 29, 1998, three individuals that live in
close proximity to the Gallatin Steel Company's Ghent, Kentucky facility gave
notice of a complaint that the facility has released emissions of matter into
the air which violates the federal waste management regulations and a lawsuit
was filed on July 30, 1999 in the Federal District Court. The Gallatin Steel
Company believes the allegations are based upon erroneous interpretations of
permits and regulations and are inaccurate in fact. A second nearly identical
complaint was filed by the same plaintiffs on December 1, 1999. (▇▇▇▇▇▇ ▇▇▇▇▇,
et ▇▇ ▇. ▇▇▇▇▇▇▇▇ Steel Company, Civil Action No. 99-242). The Court dismissed
most of the first lawsuit on procedural grounds and consolidated the remaining
claims in the December 1, 1999 lawsuit. Most of the claims raised in the lawsuit
against the Company would be resolved under a Consent Decree which has been
negotiated between the United States and Gallatin Steel Company in Civil Action
99-30. Under the Consent Decree, the Gallatin Steel Company would be required to
pay a civil penalty in the amount of $925,000 and undertake certain pollution
control projects to reduce particulate emissions. The Consent Decree should
resolve the air emissions claims advanced in ▇▇▇▇▇▇ ▇▇▇▇▇, et ▇▇ ▇. ▇▇▇▇▇▇▇▇
Steel Company, Civil Action No. 99-242.
CO-STEEL INC.
-------------
EUROPEAN METALS RECYCLING. European Metals Recycling ("EMR") has made a claim
against Co-Steel Inc. in relation to EMR's purchase of ▇▇▇▇▇ ▇▇▇▇▇ Recycling
from Co-Steel Inc. in 2000. The claim has been initiated in the English High
Court of Justice in the amount of Pound Sterling 5,933,773. The total amount of
the claim is based upon a number of smaller claims arising from alleged breaches
of representations. The alleged breaches cover a number of items including
environmental as well as asset value. Co-Steel Inc. believes the claim is
substantially without merit and it has filed a statement of defence and made a
request for particulars of the claim.
SCHEDULE 8I-1
EXHIBIT F
[APPROVED TRANSFER DOCUMENTS]
Exhibit F-1