ACCOUNT RECONCILIATION AGREEMENT
THIS ACCOUNT RECONCILIATION AGREEMENT (the "Agreement") is made and entered
into as of the 11th day of March, 2002, by and between KEYSTONE CONSOLIDATED
INDUSTRIES, INC. d/b/a KEYSTONE STEEL & WIRE COMPANY, a Delaware corporation
("Keystone"), and PSC METALS, INC., an Ohio corporation ("PSC").
W I T N E S S E T H:
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WHEREAS, pursuant to a Scrap Supply and Consignment Agreement dated as of
January 31, 2001 (the "Consignment Agreement"), PSC is a critical supplier of
scrap metal and pig iron ("Scrap") from which Keystone regularly purchases Scrap
for use in its business operations;
WHEREAS, Keystone is currently pursuing an out-of-court restructuring of
its obligations and capital structure (the "Restructuring");
WHEREAS, in connection with Keystone's efforts in furtherance of the
Restructuring, PSC previously agreed that Keystone could defer payment of
certain past due amounts owed by Keystone to PSC (collectively, the "Past Due
Amounts") for past purchases of Scrap until completion of the Restructuring and
that for current usage, Keystone would prepay PSC $1,000,000 on each Monday; as
outlined in an October 18, 2001 letter from Xxxxxxxxx X. Xxxxx, President, PSC
to Xxx Xxxxxx, President and CEO, Keystone;
WHEREAS, PSC and Keystone hereby expressly acknowledge and agree that PSC
owes Keystone $133,000 for mill scale sales and $256,000 related to scrap sales
by Keystone to PSC, for an aggregate amount owed to Keystone of $389,000 (the
"Receivable Balance");
WHEREAS, PSC and Keystone hereby expressly acknowledge and agree that the
Past Due Amounts as reduced by the Receivable Balance result in a net amount
owed by Keystone to PSC of $11,290,822.90 (the "Outstanding Balance"); and
WHEREAS, the parties desire to provide for the payment in full of the
Outstanding Balance and other amounts becoming due between them upon the terms
and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the parties hereto,
it is hereby agreed as follows:
Section 1. Payment for New Purchases. Consistent with Keystone's continuing
reliance on PSC as a critical supplier (see Section 7(g) of the Consignment
Agreement), and, and for so long as any portion of the Outstanding Balance
remains unpaid, Keystone will pay to PSC by wire transfer on the morning of each
and every Monday (or next business day thereafter in the event a particular
Monday is not a business day) from and after the date hereof an amount
determined based upon the estimated Scrap usage for the then current week
(currently estimated at $1,100,000 as of the date of this Agreement) as
prepayment for purchases of Scrap to be made by Keystone with respect to such
week. The foregoing prepayment amount as made each Monday (or subsequent
business day) shall be increased or decreased, as the case may be, to account
for the difference between the prepayment made with respect to the immediately
preceding week and the actual cost of Scrap acquired by Keystone from PSC in
such week.
Section 2. Imposition and Application of Surcharge. From and after the date
of the Agreement and for so long as any portion of the Outstanding Balance
remains unpaid, and in addition to the then current market price charged by PSC
for Scrap, PSC shall charge Keystone and Keystone shall pay PSC a surcharge (the
"Surcharge") equal to $3.00 per gross ton of Scrap purchased by Keystone from
PSC. PSC shall apply all amounts of the Surcharge provided in this Section 2 and
collected by it from Keystone to the payment of the Outstanding Balance, which
shall be reduced dollar-for-dollar by the amount of such Surcharge collections.
Section 3. Payment of the Outstanding Balance. In addition to any Surcharge
or other payment obligation imposed upon Keystone pursuant to this Agreement,
Keystone hereby promises to pay the Outstanding Balance to PSC as follows:
(a) in the event that the unpaid portion of the Outstanding Balance on
March 31, 2003 exceeds 80% of the Outstanding Balance as of the date
hereof, Keystone shall promptly pay such excess Outstanding Balance amount
in full;
(b) in the event that the unpaid portion of the Outstanding Balance on
March 31, 2004 exceeds 60% of the Outstanding Balance as of the date
hereof, Keystone shall promptly pay such excess Outstanding Balance amount
in full;
(c) in the event that the unpaid portion of the Outstanding Balance on
March 31, 2005 exceeds 40% of the Outstanding Balance as of the date
hereof, Keystone shall promptly pay such excess Outstanding Balance amount
in full;
(d) in the event that the unpaid portion of the Outstanding Balance on
March 31, 2006 exceeds 20% of the Outstanding Balance as of the date
hereof, Keystone shall promptly pay such excess Outstanding Balance amount
in full; and
(e) Keystone shall pay in full on March 31, 2007 any unpaid portion of
the Outstanding Balance as of such date.
The Outstanding Balance shall not bear interest and may be prepaid in whole
or in part at any time without penalty.
Section 4. Additional Required Payment. In the event that the EBITDA (as
hereinafter defined) of Keystone in any fiscal year shall exceed $20,000,000
(any such amount, the "Excess EBITDA"), Keystone shall pay to PSC on or before
April 15 of the following year an amount equal to the product of such Excess
EBITDA multiplied by 14.14%, limited to the extent of the unpaid Outstanding
Balance as of the date such payment is made. Notwithstanding the foregoing, in
the event that any such payment pursuant to this Section 4 would result in an
event of default under any of Keystone's various credit agreements, Keystone
shall be permitted to defer such payment until such time as payment is permitted
under all applicable covenants of such credit agreements. For purposes of this
Section 4, "EBITDA" for any fiscal year shall be the amount determined based
upon Income (loss) before income taxes, plus Depreciation and Amortization
expense, plus Interest Expense, less overfunded defined benefit pension credit
or plus defined benefit pension expense, as the case may be, all as reported in
Keystone's Annual Report on Form 10-K with respect to such year.
Section 5. Priority; No Further Obligations. To the extent the terms and
conditions of this Agreement alter or vary the terms and conditions of any
agreement between the parties hereto, the parties hereto agree that the terms
and conditions of this Agreement shall be deemed to have modified, amended and
superseded the terms and conditions of such agreement, notwithstanding any terms
or conditions therein to the contrary. Notwithstanding anything in this
Agreement to the contrary, the Consignment Agreement, as amended by the terms of
this Agreement, shall remain in full force and effect until terminated in
writing by the parties.
Section 6. Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid, or
by courier or overnight carrier to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall have been
deemed to have been delivered as of the date so delivered:
If to Keystone:
Keystone Consolidated Industries, Inc.
Three Lincoln Centre
0000 XXX Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attention: Chief Financial Officer
Fax: (000) 000-0000
If to PSC:
PSC Metals, Inc.
X.X. Xxx 000000X
Xxxxxxxxx, Xxxx 00000
Attention: Chief Financial Officer
Fax: 000-000-0000
Section 7. Further Assurances. The parties hereto shall execute and
deliver, and file and record, as the case may be, such further or additional
documents, agreements or instruments as the other party hereto shall reasonably
require to consummate the transactions contemplated herein.
Section 8. Binding Effect; Construction. The covenants contained herein
shall bind, and the benefits hereof shall inure to the benefit of, the
respective heirs, personal representatives, administrators, and successors and
permitted assigns, to the extent applicable, of the parties hereto.
Section 9. Entire Agreement; Severability. This Agreement and the
Consignment Agreement contain the entire agreement among the parties hereto
relating to the matters provided herein, and no representations, promises or
agreements, oral or otherwise, not expressly contained or incorporated by
reference herein or therein shall be binding on the parties hereto. The
provisions of this Agreement are severable and the invalidity of one or more of
the provisions herein shall not have any effect upon the validity or
enforceability of any other provision hereof.
Section 10. Governing Law. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Illinois applicable to
agreements made wholly within that State and without giving effect to any
principles of conflict of laws.
Section 11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and may be delivered via
facsimile or otherwise, and all of which together shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned as of the date first written above.
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
d/b/a KEYSTONE
STEEL & WIRE COMPANY
By:
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Name:
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Title:
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PSC METALS, INC.
By:
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Name:
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Title:
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