INTERCREDITOR AGREEMENT, dated March 12, 1999 by and among The CIT
Group/Business Credit, Inc., as agent for the Lenders ("herein, the Agent"),
Lone Star Technologies, Inc. (the "Senior Subordinated Lender"), and Lone Star
Steel Company, (herein"Company"). Capitalized terms herein which are otherwise
defined herein shall have the meaning applicable thereto in the CIT Financing
Agreement.
W I T N E S S E T H:
WHEREAS, the Company and certain of the Guarantors (as defined below) have
entered or is about to enter into a certain Financing Agreement and any and all
loan, guaranties and security agreements with the Agent and/or the Lenders party
thereto from time to time and as may be amended from time to time (the "CIT
Financing Agreement") pursuant to which the Agent and the Lenders have made, or
will make certain loans, advances and extensions of credit to or for the benefit
of the Company, upon the security of the Collateral (as defined therein and
herein) including without limitation the Company's and the Guarantors' Accounts,
Inventory, Equipment, Documents of Title, General Intangibles, and Subsidiary
Stock all as more fully set forth in said the CIT Financing Agreement; and
WHEREAS, Senior Subordinated Lender is the parent of the Company, and the
Company has entered into a certain promissory note and security agreement with
the Senior Subordinated Lender, each dated March 12, 1999 (collectively, the
"Senior Subordinated Lender Financing Agreement") pursuant to which Senior
Subordinated Lender has made certain loans, advances or extensions of credit to
the Company upon a junior security interest in the Collateral (as defined
herein) of the Company, all as more fully set forth in said Senior Subordinated
Lender Financing Agreement; and
WHEREAS, Senior Subordinated Lender wishes to subordinate its lien on all
Collateral to the Agent and the Lenders as herein provided.
NOW, THEREFORE, in consideration of each of the parties hereto entering
into the above referred to agreements and arrangements with the Companyand in
order to determine the relative priorities of the respective security interests
in the Collateral and the application of the proceeds thereof, it is hereby
agreed as follows:
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1. DEFINITIONS. As used in this Intercreditor Agreement, the following
terms shall have the following meanings, unless the context otherwise requires:
"ACCOUNTS" shall mean all present and future accounts, receivables,
instruments, documents, contract rights, chattel paper, general intangibles,
unpaid seller's rights, returned and repossessed goods, all rights to the goods
represented by the foregoing and all cash and non-cash Proceeds thereof.
"AGENT OBLIGATIONS" shall mean any and every Obligation of the Company to
the Agent and/or the Lenders (as defined in the CIT Financing Agreement) and any
and all, indebtedness and liabilities arising out of or in any way connected
with the CIT Financing Agreement or any post-petition financing, including
without limitation under section 364 of the Bankruptcy Code or any arrangement
for the use of cash collateral under section 363 of the Bankruptcy Code.
"COLLATERAL" shall mean all present and future Accounts, Inventory,
Equipment, Documents of Title, General Intangibles and Subsidiary Stock of the
Company and the Guarantors and all cash and non-cash Proceeds thereof.
"DOCUMENTS OF TITLE" shall mean all present and future warehouse receipts,
bills of lading, shipping documents, chattel paper, instruments and similar
documents, all whether negotiable or not and all goods and Inventory relating
thereto and all cash and non-cash Proceeds of the foregoing.
"EQUIPMENT" shall mean all present and hereafter acquired machinery,
equipment, furnishings and fixtures, and all additions, substitutions and
replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all cash and non-cash Proceeds thereof.
"GENERAL INTANGIBLES" shall have the meaning set forth in the Uniform
Commercial Code as in effect in the State of Texas and shall include, without
limitation, all present and future right, title and interest in and to all
tradenames, Trademarks (together with the good will associated therewith),
Patents, licenses, customer lists, distribution agreements, supply agreements
and tax refunds, together with all monies and claims for monies now or hereafter
due and payable in connection with any of the foregoing or otherwise, and all
cash and non-cash Proceeds thereof.
"GUARANTIES" shall mean the separate instruments of guaranty executed by
the Guarantors in favor of the Agent and/or Senior Subordinated Lender.
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"GUARANTORS" shall mean T & N Lone Star Warehouse Co., Lone Star Logistics,
Inc. and Texas & Northern Railway Company and the Company.
"INVENTORY" shall mean all present and hereafter acquired merchandise,
inventory and goods, and all additions, substitutions and replacements thereof,
wherever located, together with all goods and materials used or usable in
manufacturing, processing, packaging or shipping same; in all stages of
production - from raw materials through work-in-process to finished goods - and
all cash and non-cash Proceeds thereof.
"SENIOR SUBORDINATED LENDER OBLIGATIONS" shall mean any and every
obligation, indebtedness and liability of the Company and/or the Guarantors to
Senior Subordinated Lender arising under, and as set forth in, the Senior
Subordinated Lender Financing Agreement.
"OBLIGATIONS" shall mean the Agent Obligations and the Senior Subordinated
Lender Obligations.
"PATENTS" shall mean all present and hereafter acquired patents and/or
patents rights and all cash and non-cash Proceeds thereof.
"PROCEEDS" shall mean all proceeds as defined in the Uniform Commercial
Code of the State of Texas as well as all cash, securities, insurance proceeds,
condemnation awards and other property received in respect of any Collateral,
including any cash, securities or other property received from any liquidations
or adjustment of debt of the Company or any Guarantor, and any portion of the
Collateral or the proceeds thereof which may be distributed in kind.
"REAL ESTATE" shall mean all fee and/or leasehold interests in the real
property.
"SECURED PARTIES" shall mean the Agent,the Lenders and Senior Subordinated
Lender.
"SUBSIDIARY STOCK" shall mean all present and future stock issued by any
present or future subsidiary of the Company and/or the Guarantors and all cash
and non-cash Proceeds thereof.
"TRADEMARKS" shall mean all present and hereafter acquired trademarks
and/or trademark rights together with the good will associated therewith and all
cash and non-cash Proceeds thereof.
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2. PRIORITIES. Irrespective of any statement contained in any of the CIT
Financing Agreement or the Senior Subordinated Lender Financing Agreement or the
Guaranties to the contrary and irrespective of the time, order or method of
attachment or perfection of the security interests granted thereby or the time
or order of filing or recording of financing statements or other liens,
mortgages or security interests, and irrespective or anything contained in any
filing or agreement to which either the Agent or Senior Subordinated Lender may
now or hereafter be a party, any lien upon or security interest which Senior
Subordinated Lender may now or hereafter have in any Collateral, including
without limitation all Accounts, Inventory, Equipment, Documents of Title,
General Intangibles and/or Subsidiary Stock of the Company and/or the Guarantors
shall be, and hereby is subject and subordinate to the Agent's lien upon or
security interest in such Collateral.
3. EXERCISE OF RIGHTS AND REMEDIES. Irrespective of any other agreement or
arrangement, as to such Collateral of the Company, and/or the Guarantors and so
long as the CIT Financing Agreement remains in effect, the Agent and the Lenders
shall have the exclusive right to carry out the provisions of the CIT Financing
Agreement and to enforce and collect any loans, advances, or the Agent
Obligations secured thereby and to exercise and enforce all rights and
privileges accruing to the Agent by reason of said the CIT Financing Agreement
and any other agreements, security, guarantees or claims given to the Agent in
connection therewith, all in the Agent's sole discretion and in the exercise of
its sole business judgment. This includes more specifically, without
limitation, the rights: to make overadvances in its sole discretion, to effect
collection of all open Accounts and to settle and adjust the amounts due thereon
directly with the customers, to sell or otherwise dispose of Inventory, all in a
manner which the Agent deems to be necessary in its sole discretion, and to
incur expenses in relation to the foregoing; all as may be necessary in the
Agent's sole discretion, and all as more fully provided in the CIT Financing
Agreement and to exercise all the rights and remedies of a secured lender under
the Uniform Commercial Code of the State of Texas. In exercising its rights as
aforesaid, the Agent agrees that, except as the Agent and the Required Lenders
may otherwise agree from time to time in their sole discretion, it shall handle
all transactions relating to the Collateral in accordance with its usual
practices in the ordinary course of its business and shall adhere to the same
standards of conduct as would be the case if there were no subordinate liens.
Senior Subordinated Lender agrees that, so long as the Company, or any one of
them, and/or the Guarantors may be indebted or obligated to the Agent and/or the
Lenders in any manner whatsoever under the CIT Financing Agreement or otherwise,
Senior Subordinated Lender shall not seek to foreclose on its junior security
interest in or exercise any rights or assert any claims with respect to any
Collateral, including without limitation all Accounts, Inventory, Equipment,
Documents of Title, General Intangibles and/or Subsidiary Stock of the Company
and/or the Guarantors, nor shall Senior Subordinated Lender take any
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action, nor institute any proceedings with respect thereto or the Real
Estate, except as may be reasonably necessary to protect its junior lien
thereon in accordance with the terms hereof (for example - filing of a proof
of claim).
4. OTHER AGREEMENTS
(a) RELEASES. (i) If the Agent and/or the Lenders releases any of its or
their liens on any part of the Collateral in connection with the sale, lease,
exchange, transfer or other disposition thereof or in connection with any
refinancing or restructuring of the indebtedness of the Company, or any
Guarantor, the liens of the Senior Subordinated Lender shall be automatically,
unconditionally and simultaneously released, to the maximum extent permitted by
law, and Senior Subordinated Lender shall execute and deliver to the Agent or
the Company or the Guarantors such termination statements, releases and other
documents as the Agent or the Company or the Guarantor may request to
effectively confirm such release and to comply with the intent hereof.
Notwithstanding the foregoing, the lien granted to the Senior Subordinated
Lender shall, subject to all of the provisions of this Intercreditor Agreement,
continue in the proceeds of any sale, lease, exchange or other disposition of
the such Collateral if such proceeds are not applied to the Agent Obligations in
accordance with the CIT Financing Agreement or otherwise disbursed in accordance
with such the CIT Financing Agreement.
(ii) The Senior Subordinated Lender hereby waives any and all rights it may
have to object to the manner in which the Agent and/or the Lenders may seek to
enforce or collect the Agent Obligations or the liens granted in any of the
Collateral including waiving any right based on any duty to conduct any such
sale, lease, exchange, transfer or other disposition in a commercially
reasonable manner.
(iii) In furtherance of the foregoing, the Senior Subordinated Lender will
execute and deliver to the Agent undated UCC termination and/or release
statements in respect of all or any part of the Collateral in such number and
such jurisdictions as determined by the Agent. The Senior Subordinated Lender
hereby irrevocably appoints the Agent its attorney-in-fact and authorizes the
Agent solely to complete the UCC termination statements and file them in order
to carry out the purposes of this Intercreditor Agreement in the event that
Senior Subordinating Lender fails to provide any requested statements within ten
(10) business days of any written request therefor. This appointment and
authorization is coupled with an interest and is irrevocable.
(b) INSURANCE. Unless and until the Agent Obligations are paid in full
and the CIT Financing Agreement terminated, the Agent shall have the sole and
exclusive right, subject to the specific rights of the Company and Guarantors
under the CIT
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Financing Agreement to adjust settlement for any insurance policy covering
the Collateral in the event of any loss thereunder and to approve any award
granted in any condemnation or similar proceeding affecting the Collateral.
Unless and until the Agent Obligations are paid in full, all proceeds of any
such policy and any such award shall be paid to the Agent on behalf of the
Lenders and applied in accordance with the provisions of the CIT Financing
Agreement. In the event the Agent allows any portion of such insurance
proceeds or condemnation or similar award to be used by the Company or the
Guarantors to repair or replace the Collateral affected or for any other
purpose, the Senior Subordinated Lender hereby consents thereto.
(c) PROHIBITION ON CONTESTING LIENS AND THE AGENT OBLIGATIONS; NO NEW
LIENS. The Senior Subordinated Lender agrees that it shall not (and hereby
waives any right to) contest or support any other person in contesting, in any
action or proceeding or otherwise (including, without limitation, any federal or
state bankruptcy, insolvency or liquidation proceeding), the priority, the
validity or enforceability of the Agent Obligations or any lien held by the
Agent and/or the Lenders. Without the prior written consent of the Agent, the
Senior Subordinated Lender shall not request, obtain or hold any lien on any
assets of the Company or the Guarantors, other than liens granted pursuant to
the Senior Subordinated Lender Financing Agreement as in effect on the date
hereof in the Collateral or as otherwise may be agreed to from time to time in
writing by the Agent.
(d) FINANCING ISSUES. If the Company or any Guarantor shall be subject to
any federal or state bankruptcy, insolvency or liquidation proceeding and the
Agent shall desire to permit the use of cash Collateral or to permit any of the
Company or any Guarantor to obtain financing under section 363 or section 364 of
the Bankruptcy Code, then the Senior Subordinated Lender agrees that it will
raise no objection to such use or financing and will not request adequate
protection or any other relief in connection therewith and, to the extent
necessary, will subordinate its liens in the Collateral to any such financing.
(e) ADEQUATE PROTECTION. The Senior Subordinated Lender shall not seek or
request adequate protection (absent the prior written consent of the Agent), nor
shall it contest (or support any other person contesting) (i) any request by the
Agent for adequate protection or (ii) any objection by the Agent to any motion,
relief, action or proceeding based on the Agent claiming a lack of adequate
protection.
(f) AUTOMATIC STAY. The Senior Subordinated Lender shall not seek relief
from the automatic stay or any other stay in any federal or state bankruptcy,
insolvency or liquidation proceeding in respect of the Collateral (absent the
prior written consent of the Agent).
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5. FURTHER ASSURANCES. the Agent and Senior Subordinated Lender each agree
to execute any further documents or amendments as may be necessary to effect the
purpose of this Intercreditor Agreement on any applicable public records.
6. APPLICATION OF PROCEEDS .
(a) COLLATERAL. The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral, including without limitations all
Accounts, Inventory, Equipment, Documents of Title, General Intangibles and
Subsidiary Stock of the Company and/or the Guarantors shall be applied in the
following order of priorities:
FIRST, to the payment in full of the Agent's and the Lenders' expenses of
such sale, disposition or other realization, including all expenses, liabilities
and advances incurred or made by the Agent and/or the Lenders in connection
therewith, including attorneys' fees;
SECOND, to the payment in full in cash of any and all the Agent
Obligations;
THIRD, to the payment in full of Senior Subordinated Lender's expenses of
such sale, disposition or other realization, including all expenses, liabilities
and advances incurred or made by Senior Subordinated Lender in connection
therewith, including attorneys' fees;
FOURTH, to the payment in full in cash of all Senior Subordinated Lender
Obligations;
FINALLY, to pay to the Company, or the Guarantors, or their respective
representatives or as a court of competent jurisdiction may direct, any surplus
then remaining from such Proceeds.
(b) GUARANTIES. The Proceeds of the Guaranties including without
limitation those representing Proceeds of Collateral (whether received by the
Agent or the Senior Subordinated Lender) shall be applied first to the Agent
Obligations until paid in cash in full and then to the Senior Subordinated
Lender Obligations.
7. NOTICES. Each Secured Party agrees to use its best efforts to notify
the other Secured Party within a reasonable time in the event of any material
event of default or material breach by any of the Company resulting, or which
may result, in acceleration of any Obligation due to the Secured Party giving
notice and secured by any Collateral. Each Secured Party further agrees to use
its best efforts to furnish the other Secured Party with copies of any notices
of default, acceleration, demand or
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foreclosure as the Secured Party giving the notice may send to any of the
Company and/or the Guarantors, provided that failure to give any of the
foregoing notices shall not (i) affect the priorities of the liens upon the
Collateral set forth herein or (ii) result in any liability whatsoever to the
other party.
8. NO REPRESENTATIONS. The Secured Parties have not made to each other
nor do they hereby or otherwise make to each other any warranties, express or
implied, nor do they assume any liability to each other with respect to: (a)
obligors under any instruments of guarantees; (b) the enforceability, validity,
value or collectibility of: the loans made to the Company, the Accounts, the
Inventory, Equipment, Documents of Title, General Intangibles, Subsidiary Stock,
or any guarantee or security which may have been granted to any of them in
connection with any of their agreements; or (c) title or right to transfer any
Collateral or security. Senior Subordinated Lender expressly acknowledges that
the Agent may, in its sole discretion, make loans, advances and extensions of
credit to the Company or the Guarantors, or any one of them, in excess of the
amounts otherwise available to the them based upon the advance formulas set
forth in the CIT Financing Agreement. No party shall be liable to the other for
any action or failure to act or any error of judgment, negligence, or mistake,
or oversight whatsoever on the part of any party or any party's agents,
officers, employees or attorneys with respect to any transaction relating to the
agreements or security or guarantees therefor, provided said party has acted in
good faith and has not been guilty of willful misconduct.
9. WAIVERS. The Senior Subordinated Lender agrees not to assert and
hereby waives any rights to demand, request, plead or otherwise assert or
claim the benefit of, any marshalling or other similar right that may
otherwise be available under applicable law. In addition, notwithstanding
any interest which Senior Subordinating Lender may now or hereafter have in
any Real Estate which the Company or any Guarantor may occupy or on which
collateral may be placed or stored, Senior Subordinated Lender agrees that:
(a) it will not hinder or delay the Agent in enforcing its rights and
remedies with respect to the Inventory and Equipment of any of the Company
and/or the Guarantors; (b) such Inventory and Equipment may be repossessed or
removed by the Agent at any time and from time to time; (c) the Agent may go
on the Real Estate for such purposes at any time and from time to time and
Senior Subordinated Lender will provide access accordingly; and (d) said
Inventory and Equipment is, and will remain personal property at all times
hereafter notwithstanding any provision or language to the contrary in any
mortgage or security agreement between Senior Subordinated Lender and the
Company or the Guarantors.
10. MISCELLANEOUS Except as otherwise provided in this Intercreditor
Agreement, the rights and priorities of the parties shall be determined in
accordance with applicable law. This Intercreditor Agreement shall be governed
by the Laws of
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the State of New York and, except as otherwise defined in this Intercreditor
Agreement, all terms used herein which are defined in the Uniform Commercial
Code shall have the meanings therein stated. This Intercreditor Agreement is
solely for the benefit of the parties hereto and their respective successors
and assigns, and no other person, firm, entity or corporation shall have any
right, benefit, priority or, interest under, or because of the existence of,
this Intercreditor Agreement. The Company and the Guarantors although not
parties hereto have signed below to confirm their agreement to all of the
foregoing.
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IN WITNESS WHEREOF, the parties hereto have caused this Intercreditor
Agreement to be duly executed by their proper and duly authorized officers as of
the day and year first above written.
LONE STAR TECHNOLOGIES, INC.
(the "Senior Subordinated Lender")
By /s/ Rhys J. Best
-------------------------------
Title: President
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Agent
By /s/ Xxxx Xxxxx
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Title: Vice President
CONFIRMED:
LONE STAR STEEL COMPANY
(the "Company")
By /s/ X.X. Xxx
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Title: Treasurer
T & N LONE STAR WAREHOUSE CO.
By /s/ X.X. Xxx
-------------------------------
Title: Treasurer
LONE STAR LOGISTICS, INC.
By /s/ X.X. Xxx
-------------------------------
Title: Treasurer
TEXAS & NORTHERN RAILWAY COMPANY
By /s/ X.X. Xxx
-------------------------------
Title: Treasurer
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