EXHIBIT 99.3
EXECUTION
AMENDMENT NO. 1 TO
LOAN AND SECURITY AGREEMENT
AMENDMENT dated as of November 21, 2001 by and among Rouge Steel
Company, a Delaware corporation ("Borrower"), Rouge Industries, Inc., a Delaware
corporation ("RII"), QS Steel Inc., a Michigan corporation ("QS"), Eveleth
Taconite Company, a Minnesota corporation ("Eveleth", and together with RII and
QS, each individually a "Guarantor" and collectively, "Guarantors"), the
financial institutions from time to time parties hereto as lenders, whether by
execution of this Agreement or an Assignment and Acceptance (each individually,
a "Lender" and collectively, "Lenders") and Congress Financial Corporation, a
Delaware corporation, in its capacity as agent for Lenders (in such capacity,
"Agent").
W I T N E S S E T H
WHEREAS, Agent, Lenders, Borrower and Guarantors have entered into
financing arrangements pursuant to which Agent and Lenders have made and may
make loans and advances and provide other financial accommodations to Borrower
as set forth in the Loan and Security Agreement, dated March 13, 2001, by and
among Agent, Lenders, Borrower and Guarantors (as the same now exists and may
hereafter be further amended, modified, supplemented, extended, renewed,
restated or replaced, the "Loan Agreement") and the agreements, documents and
instruments at any time executed and/or delivered in connection therewith or
related thereto (collectively, together with the Loan Agreement, the "Financing
Agreements");
WHEREAS, Borrower and Guarantors have advised Agent and Lenders that
Borrower intends to enter into certain financing arrangements with Ford Motor
Company ("Ford" as hereinafter further defined) pursuant to which Ford may make
certain loans to Borrower secured by assets and properties of Borrower and
Guarantors; and
WHEREAS, Borrower and Guarantors have requested that Agent and Lenders
consent to certain financing agreements between Borrower and Ford and agree to
certain amendments to the Loan Agreement and Agent and Lenders are willing to
agree to such amendments, subject to the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements and covenants set forth herein, and for other good and valuable
consideration, the adequacy and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
Section 1. Definitions.
1.1 Additional Definitions. As used herein, the following terms shall
have the respective meanings given to them below and the Loan Agreement shall be
deemed and is hereby amended to include, in addition and not in limitation, each
of the following definitions:
(a) "Amendment No. 1" shall mean this Amendment No. 1 to the
Loan and Security Agreement by and among Borrower, Guarantors, Agent and
Lenders, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(b) "Consultant" shall mean the firm to be retained by
Borrower to provide financial and business consulting services to Borrower
pursuant to Section 3.5 below and any replacement or successors thereto.
(c) "Ford" shall mean Ford Motor Company, a Delaware
corporation, and its successors and assigns.
(d) "Ford Intercreditor Agreement" shall mean the
Intercreditor and Subordination Agreement, dated of even date herewith, by and
between Agent and Ford, as acknowledged by Borrower and Guarantors, as the same
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(e) "Ford Inventory Payable" shall mean the aggregate amount
of the accounts payable owed by Borrower or any Guarantor to Ford at any given
time pursuant to the sale or transfer to Borrower or a Guarantor of inventory
consisting of semi-finished goods or finished goods which are held by Borrower
or a Guarantor for sale and raw materials and work-in-process used in the making
of such semi-finished or finished goods (and in no event shall electricity or
similar items be deemed to constitute inventory of Borrower or a Guarantor).
(f) "Ford Loan Agreement" shall mean the Subordinated Loan and
Security Agreement by and among Borrower, Guarantors and Ford, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
(g) "Ford Loan Documents" shall mean (i) the Ford Loan
Agreement, (ii) the Note, dated as of November 19, 2001, issued by Borrower
payable to Ford in the original principal amount of up to $75,000,000 and (iii)
all agreements, documents and instruments at any time executed and/or delivered
by Borrower or any Guarantor or any other person to, with or in favor of Ford in
connection with or related to the Ford Loan Agreement, as all of the foregoing
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.2 Amendment to Definitions.
(a) The definition of "Eligible Accounts" set forth in Section
1.26 is hereby
amended to add a new sentence on to the end of such definition as follows:
"Notwithstanding anything to the contrary contained herein,
any Accounts owing by Ford or any of its affiliates shall not
be deemed to be Eligible Accounts."
(b) The definition of "Eligible Inventory" set forth in
Section 1.27 is hereby amended to add a new sentence on to the end of such
definition as follows:
"Notwithstanding anything to the contrary contained herein,
any Inventory purchased from or supplied by Ford or any of its
affiliates shall not be deemed to be Eligible Inventory."
(c) The definition of "Maximum Credit" set forth in Section
1.63 of the Loan Agreement is hereby amended to delete the reference to
"$250,000,000" in such definition and to replace with "$200,000,000".
1.3 Interpretation. For purposes of this Amendment, all terms used
herein, including but not limited to, those terms used and/or defined herein or
in the recitals hereto shall have the respective meanings assigned thereto in
the Loan Agreement as amended by this Amendment No. 1.
Section 2. Amendments to Loan Agreement.
2.1 Collateral Reporting. Section 7.1(a) of the Loan Agreement is
hereby deleted and replaced with the following new Section 7.1(a):
"(i) on a daily basis, a Borrowing Base
Certificate setting for the calculation of the Borrowing Base
as of the previous day with a schedule of sales made,
collections received and credit memos issued for such day,
duly completed and executed by the chief financial officer or
other appropriate financial officer of Borrower reasonably
acceptable to Agent,
(ii) as soon as possible after the end of
each week (but in any event within two (2) Business Days after
the end thereof), on a weekly basis, a Borrowing Base
Certificate setting forth the calculation of the Borrowing
Base as of the last Business Day of the immediately preceding
day as to the Accounts and as of the last day of the
immediately preceding week as to Inventory, including the
schedules required pursuant to the terms of the Borrowing Base
Certificate, a calculation of the aggregate amount of the Ford
Inventory Payable as of the immediately preceding week and a
calculation of the aggregate amount of Inventory
purchased from or supplied by Ford as of the immediately
preceding week, duly completed and executed by the chief
financial officer or other appropriate financial officer of
Borrower reasonably acceptable to Agent,
(iii) as soon as possible after the end of
each month (but in any event within ten (10) Business Days
after the end thereof), on a monthly basis or more frequently
as Agent may reasonably request, (A) a Borrowing Base
Certificate setting forth the calculation of the Borrowing
Base as of the last Business Day of the immediately preceding
month as to the Accounts and as of the last day of the
immediately preceding month as to Inventory, including the
schedules required pursuant to the terms of the Borrowing Base
Certificate for such month, including sales, collections
received and credit memos issued for each day of such month,
duly completed and executed by the chief financial officer or
other appropriate financial officer of Borrower reasonably
acceptable to Agent, (B) perpetual inventory reports, (C)
inventory reports by location and category (and including the
amounts of Inventory and the value thereof at premises of
Eveleth Mines L.L.C., any leased locations and at premises of
warehouses, processors or other third parties), (D) agings of
accounts receivable (together with a reconciliation to the
previous month's aging and general ledger) and (E) agings of
accounts payable (and including information indicating the
amounts owing to Eveleth Mines L.L.C., to owners and lessors
of leased premises, warehouses, processors and other third
parties from time to time in possession of any Collateral),
(iv) upon Agent's reasonable request, (A)
copies of customer statements and credit memos, remittance
advices and reports, and copies of deposit slips and bank
statements, (B) copies of shipping and delivery documents, and
(C) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrower, and
(v) such other reports as to the Collateral
as Agent shall reasonably request from time to time."
2.2 Encumbrances. Section 9.8 of the Loan Agreement is hereby amended
to add a new Section 9.8(k) on to the end thereof as follows:
"(k) the security interests and liens on the
Collateral in favor of Ford to secure the Indebtedness
permitted under Section
9.9(h) hereof; provided, that, such security interests and
liens are and at all times shall be junior and subordinate in
all respects to the security interests and liens of Agent
therein on terms and conditions acceptable to Agent."
2.3 Indebtedness. Section 9.9 of the Loan Agreement is hereby amended
to add a new Section 9.9(h) on to the end thereof as follows:
"(h) secured Indebtedness of Borrower to Ford
pursuant to the Ford Loan Documents (as each is in effect on
the date of Amendment No. 1); provided, that,
(i) the principal amount of such
Indebtedness shall not exceed $75,000,000 (less the aggregate
amount of all repayments in respect thereof) plus interest
thereon at the rate provided for in the Ford Loan Documents as
in effect on the date of Amendment No. 1,
(ii) Agent shall have received true, correct
and complete copies of the Ford Loan Documents,
(iii) such Indebtedness shall be subject to,
and subordinate in right of payment to, the right of Agent and
Lenders to receive the prior payment and satisfaction in full
of all of the Obligations in accordance with the terms of the
Ford Intercreditor Agreement,
(iv) Borrower and Guarantors shall not
request any loans under the Ford Loan Documents or deliver any
Borrowing Request (as such term is defined in the Ford Loan
Agreement as in effect on the date of Amendment No. 1) to Ford
at any time after March 29, 2002,
(v) Borrower and Guarantors shall not,
directly or indirectly, make any payments in respect of such
Indebtedness, except, that, unless and until Agent or any
Lender shall have given Ford written notice of the occurrence
of any Event of Default under the Financing Agreements,
Borrower and Guarantors may make regularly scheduled payments
of interest when due, on an unaccelerated basis, in respect of
such Indebtedness in accordance with the terms of the Ford
Loan Documents as in effect on the date of Amendment No. 1
(but not any prepayments, non-mandatory payments or any
payments pursuant to acceleration or claims of breach or to
acquire any such Indebtedness or otherwise),
(vi) Borrower and Guarantors shall not, (A)
directly or indirectly, amend, modify, alter or change any of
the terms of such Indebtedness or any of the Ford Loan
Documents, as in effect on the date of Amendment No. 1 or (B)
redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any
sums for such purpose, and
(vii) Borrower and Guarantors shall furnish
to Agent all notices or demands in connection with such
Indebtedness either received by Borrower or any Guarantor or
on its or their behalf promptly after the receipt thereof, or
sent by Borrower or any Guarantor or on its or their behalf
concurrently with the sending thereof, as the case may be,
including, without limitation, each Borrowing Request and each
statement of projected cash disbursements, expense reduction
report, any variance report and any other reports or
information delivered to Ford in connection therewith."
2.4 Loans, Investments, Guarantees, Etc. Section 9.10 of the Loan
Agreement is hereby amended to add a new Section 9.10(n) on to the end thereof
as follows:
"(n) secured guarantees by Guarantors in favor of
Ford with respect to the obligations of Borrower to Ford
pursuant to the Ford Loan Documents (as in effect on the date
of Amendment No. 1)."
2.5 Adjusted Net Worth. Pursuant to the letter agreement, dated March
13, 2001, by and among Agent, Borrower and Guarantors, notwithstanding the
requirement of five (5) days prior notice provided for in such letter agreement,
effective as of the date hereof, Section 9.18 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"9.18 Excess Availability. Borrower shall at all
times have Excess Availability of not less than $25,000,000."
2.6 Events of Default. Section 10.1 of the Loan Agreement is hereby
amended to add the following at the end thereof:
"(o) Borrower shall have failed by January 31, 2002
to retain the Consultant with a scope of engagement acceptable
to Agent;
(p) at any time subsequent to the initial employment
by Borrower of the Consultant, except as Agent may otherwise
agree, (i) Borrower terminates the employment of the
Consultant, or
limits or attempts to limit the scope of the engagement of the
Consultant, or (ii) Borrower, or any member of senior
management of Borrower, shall fail to cooperate in any
material respect with the Consultant in connection with its
services; and
(q) the occurrence of any event of default, or act,
condition or event which with notice or passage of time would
constitute an event of default, under the Ford Loan Documents
shall exist or have occurred and be continuing."
Section 3. Representations, Warranties and Covenants. In addition to
the continuing representations, warranties and covenants heretofore or hereafter
made by Borrower and Guarantors to Agent and Lenders pursuant to the other
Financing Agreements, Borrower and each Guarantor hereby represents, warrants
and covenants with and to Agent and Lenders as follows (which representations,
warranties and covenants are continuing and shall survive the execution and
delivery of Amendment No. 1 and shall be incorporated into and made a part of
the Financing Agreements):
3.1 Ford Loan Documents.
(a) The Ford Loan Documents and the transactions contemplated
under each have been duly executed, delivered and performed by Borrower in
accordance with their terms in all respects and the Ford Loan Documents are
effective.
(b) Neither the execution and delivery of the Ford Loan
Documents by Borrower or any of the instruments and documents to be delivered
pursuant thereto, nor the consummation by Borrower of the transactions
contemplated therein, nor compliance by Borrower with the provisions therein
contemplated, has violated or will violate any law or regulation or any order or
decree (in each case, applicable to Borrower) of any court or governmental
instrumentality that could reasonably be expected to have a Material Adverse
Effect or does or will conflict with or result in the breach of, or constitute a
default under, any indenture, mortgage, deed of trust, agreement or instrument
to which Borrower or any Guarantor is a party or may be bound that could
reasonably be expected to have a Material Adverse Effect, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the assets
and property of Borrower or any Guarantor (except as specifically contemplated
in the Ford Loan Documents) or violate any provision of the Certificate of
Incorporation or By-Laws of Borrower or any Guarantor.
(c) All actions and proceedings required by the Ford Loan
Documents, or any applicable law or regulation to be taken by Borrower have been
taken and the transactions contemplated thereunder have been duly and validly
consummated. Borrower and Guarantors have received all necessary consents and
approvals of third parties to the transactions contemplated by the Ford Loan
Documents.
(d) Borrower has delivered, or caused to be delivered, to
Agent true, correct and complete copies of the Ford Loan Documents.
3.2 No Default. No Event of Default or act, condition or event which
with notice or passage of time or both would constitute an Event of Default
shall exist or have occurred and be continuing on the date of this Amendment No.
1.
3.3 Corporate Power and Authority. This Amendment No. 1 has been duly
executed and delivered by Borrower and each Guarantor and is in full force and
effect as of the date of this Amendment No. 1 and the agreements and obligations
of Borrower and each Guarantor contained herein constitute legal, valid and
binding obligations of Borrower and such Guarantor enforceable against Borrower
and such Guarantor in accordance with their respective terms.
3.4 Consents. Borrower and Guarantors have received all necessary
consents and approvals of third parties to the transactions contemplated by this
Amendment No. 1.
3.5 Consultant. By no later than January 31, 2002, Borrower and
Guarantors shall enter into an agreement to retain a Consultant selected by
Borrower from a list provided by Agent to Borrower and attached hereto as
Exhibit A. The scope and nature of the engagement of the Consultant shall be
acceptable to Agent. Borrower and each Guarantor hereby irrevocably authorizes
and directs any such Consultant to share with Agent all budgets, records,
projections, financial information, reports and other information relating to
the Collateral, or the financial condition or operations of Borrower's and each
Guarantor's businesses. Borrower and each Guarantor agrees to provide the
Consultant with complete access to all of Borrower's and such Guarantor's books
and records, all of Borrower's and each Guarantor's premises and to Borrower's
and each Guarantor's management and to cooperate with such Consultant; provided,
that, such access shall be made upon Consultant's reasonable prior notice to
Borrower for access during normal business hours and any non-public information
provided by Borrower to Consultant shall be subject to the terms and conditions
of Section 13.5 of the Loan Agreement. So long as no Event of Default, or act,
condition or event which with notice or passage of time would constitute an
event of default shall exist or have occurred and be continuing, Borrower and
each Guarantor shall not be responsible for the fees and expenses of any
Consultant retained pursuant to this Section in excess of $50,000. At any time
that an Event of Default exists or has occurred and is continuing, Borrower and
each Guarantor shall pay all fees and expenses of each Consultant retained
pursuant to this Section regardless of the amount thereof.
3.6 Additional Items to be Delivered. In addition to all other terms,
conditions and provisions set forth in the other Financing Agreements, as soon
as possible, but in any event, by no later than December 15, 2001, Borrower
shall deliver or cause to be delivered to Agent, each in form and substance
reasonably satisfactory to Agent, (a) original Deposit Account Control
Agreements in favor of Agent with respect to Borrower's and each Guarantor's
deposit accounts listed on Exhibit B hereto, each duly authorized, executed and
delivered by Borrower or such Guarantor (as applicable), and the financial
institution which maintains such deposit account for Borrower or such Guarantor,
and (b) true, correct and complete copies of the Ford Loan Documents duly
authorized, executed and delivered by each Guarantor.
Section 4. Conditions Precedent. The effectiveness of the amendments
contained herein shall be subject to, Agent having received, in form and
substance reasonably satisfactory to Agent:
4.1 with respect to the Real Property of Borrower located in Dearborn,
Michigan, an original Modification to Mortgage, duly authorized, executed and
delivered by Borrower;
4.2 true, correct and complete copies of the Ford Loan Documents,
including the Initial Borrowing Request (as defined in the Ford Loan Documents),
duly authorized, executed and delivered by Ford and Borrower, as applicable, and
evidence that the Ford Loan Documents are in full force and effect;
4.3 the approval of the Required Lenders of this Amendment No. 1 and
the Ford Intercreditor Agreement including, the express authorization of such
Lenders to the execution, delivery and performance of this Amendment No. 1 and
the Ford Intercreditor Agreement, by Agent, on behalf of all Lenders, and
evidence that such approval is in full force and effect;
4.4 an original of the Ford Intercreditor Agreement, duly authorized,
executed and delivered by Ford and acknowledged by Borrower and each Guarantor
and evidence that such agreement is in full force and effect; and
4.5 an original of this Amendment No. 1, duly authorized, executed and
delivered by Borrower and each Guarantor.
Section 5. Provisions of General Application
5.1 Effect of this Amendment. Except as modified pursuant hereto, no
other changes or modifications to the Financing Agreements are intended or
implied and in all other respects the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof. To the extent of conflict between the terms of this
Amendment No. 1 and the other Financing Agreements, the terms of this Amendment
No. 1 shall control. The Loan Agreement and this Amendment No. 1 shall be read
and construed as one agreement.
5.2 Additional Events of Default. The parties hereto acknowledge,
confirm and agree that the failure of Borrower or Guarantors to comply with the
covenants, conditions and agreements contained herein shall constitute an Event
of Default under the Financing Agreements.
5.3 Further Assurances. The parties hereto shall execute and deliver
such additional documents and take such additional action as may be reasonably
necessary or desirable to effectuate the provisions and purposes of this
Amendment No. 1.
5.4 Governing Law. The rights and obligations hereunder of each of the
parties hereto
shall be governed by and interpreted and determined in accordance with the laws
of the State of New York, but excluding any principles of conflicts of law or
other rule of law that would result in the application of the law of any
jurisdiction other than the laws of the State of New York.
5.5 Binding Effect. This Amendment No. 1 shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
5.6 Survival of Representations and Warranties. All representations and
warranties made in this Amendment No. 1 or any other document furnished in
connection with this Amendment No. 1 shall survive the execution and delivery of
this Amendment No. 1 and the other documents, and no investigation by Agent or
any Lender or any closing shall affect the representations and warranties or the
right of Agent or any Lender to rely upon them.
5.7 Counterparts. This Amendment No. 1 may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be duly executed and delivered by their authorized officers as of the date
and year first above written.
ROUGE STEEL COMPANY
By: /s/ Xxxx X. Xxxxxxxxxxx
Title: Vice Chairman and CFO
ROUGE INDUSTRIES, INC.
By: /s/ Xxxx X. Xxxxxxxxxxx
Title: Vice Chairman and CFO
QS STEEL INC.
By: /s/ Xxxx X. Xxxxxxxxxxx
Title: President
EVELETH TACONITE COMPANY
By: /s/ Xxxx X. Xxxxxxxxxxx
Title: President
AGREED:
CONGRESS FINANCIAL CORPORATION,
as Agent
By: /s/ Xxxxxxx X. Xxxx
Title: Vice President
EXHIBIT A
TO
AMENDMENT NO. 1
List of Consultants
Xxxxxxx & Associates
Chicago, Illinois
BBK
Southfield, Michigan
FTI/Xxxxxxxx & Xxxxx
Saddlebrook, New Jersey
Glass & Associates
EXHIBIT B
TO
AMENDMENT NO. 1
List of Borrower/Guarantors Deposit Accounts
See Attached
