Exhibit 10.3
INTERNATIONAL STEEL GROUP INC.
SECOND AMENDMENT AND
LIMITED WAIVER TO
CREDIT AND GUARANTY AGREEMENT
This SECOND AMENDMENT AND LIMITED WAIVER TO CREDIT AND
GUARANTY AGREEMENT, dated as of September 30, 2003 (this "AMENDMENT"), is
entered into by and among INTERNATIONAL STEEL GROUP INC., a Delaware corporation
(the "COMPANY"), ISG ACQUISITION INC., ISG CLEVELAND INC., ISG HENNEPIN INC.,
ISG INDIANA HARBOR INC., ISG XXXXXX INC., ISG RIVERDALE INC., ISG PLATE INC.,
ISG PIEDMONT INC., ISG XXXXX HARBOR INC., ISG SPARROWS POINT INC., ISG STEELTON
INC., and ISG LACKAWANNA INC. (each a "BORROWER" and collectively, the
"BORROWERS"), the CREDIT SUPPORT PARTIES listed on the signature pages hereto,
the Lenders listed on the signature pages hereto, UBS AG, STAMFORD BRANCH, as
Administrative Agent (together with its permitted successors in such capacity,
"ADMINISTRATIVE AGENT"), XXXXXXX XXXXX CREDIT PARTNERS L.P., as Syndication
Agent (in such capacity, "SYNDICATION AGENT"), THE CIT GROUP/BUSINESS CREDIT,
INC., as Collateral Agent (together with its permitted successor in such
capacity, "COLLATERAL AGENT"), FLEET CAPITAL CORPORATION, as Co-Documentation
Agent and LASALLE BANK NATIONAL ASSOCIATION, as Co-Documentation Agent, and is
made with reference to that certain Credit and Guaranty Agreement, dated as of
May 7, 2003 (as amended through the date hereof, the "CREDIT AGREEMENT").
Capitalized terms used herein not otherwise defined herein or otherwise amended
hereby shall have the meanings ascribed thereto in the Credit Agreement.
RECITALS:
WHEREAS, the Company and the Borrowers have requested that the
Lenders agree to (i) make amendments to certain provisions of the Credit
Agreement; and (ii) waive certain Events of Default with respect to Section 6.8
of the Credit Agreement;
WHEREAS, the Lenders have agreed to waive and amend certain
provisions of the Credit Agreement, in each case in the manner, and on the terms
and conditions, provided for herein.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION I. AMENDMENTS TO CREDIT AGREEMENT
Upon satisfaction of the conditions set forth in Section III herein,
the Credit Agreement shall be amended as follows in this Section I:
A. AMENDMENTS TO SECTION 1: DEFINITIONS
---------------------------------------
(a) The definition of "CONSOLIDATED CAPITAL EXPENDITURES" in
Section 1.1 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:
"'CONSOLIDATED CAPITAL EXPENDITURES' means, for any
period, the aggregate of all expenditures of the Company and its
Subsidiaries during such period determined on a consolidated basis
that, in accordance with GAAP, are or should be included in "purchase
of property and equipment" or similar items reflected in the
consolidated statement of cash flows of the Company and its
Subsidiaries; provided, that payments in respect of the lease between
ISG Xxxxx Harbor Inc., as lessee, and DTE Xxxxx Harbor, L.L.C., as
lessor, of the No. 1 coke battery located at ISG Xxxxx Harbor Inc.'s
steel-making plant in the town of Xxxxx Harbor, Indiana shall not be
deemed to be Consolidated Capital Expenditures hereunder."
(b) The definition of "ELIGIBLE INVENTORY" in Section 1.1 of
the Credit Agreement is hereby amended to delete subsection (d) of such
definition and replace it with the following:
"(d) is in transit, except for (i) Eligible L/C Inventory and
(ii) inventory that is in transit (A) between locations owned or leased
by one or more of the Credit Parties, (B) between a location owned or
leased by a Credit Party and a location not owned or leased by a Credit
Party (a "THIRD PARTY LOCATION") or (C) between Third Party Locations,
provided that with respect to any such Third Party Location, a bailee
acknowledgment letter (in form and substance satisfactory to the
Collateral Agent) has been executed in favor of the Collateral Agent
and delivered to the Collateral Agent;"
(c) The definition of "INELIGIBLE COMMINGLED INVENTORY" in
Section 1.1 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:
"'INELIGIBLE COMMINGLED INVENTORY' means (i) with
respect to any Commingled Inventory located at all locations (other
than any Commingled Inventory located at the Wisconsin Docks), any
Commingled Inventory in excess of the aggregate value (as determined at
the lower of cost or market), for all Commingled Inventory of all of
the Borrowers at such locations, of $18,000,000; and (ii) with respect
to any Commingled Inventory located at the Wisconsin Docks, any
Commingled Inventory that is in excess of 2,500,000 tons."
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(d) Section 1.1 of the Credit Agreement is hereby further
amended by adding the following definitions in proper alphabetical sequence:
"'SECOND AMENDMENT' means that certain Second
Amendment and Limited Waiver to Credit and Guaranty Agreement dated as
of September 30, 2003, among the Company, Borrowers, Administrative
Agent, Syndication Agent, Collateral Agent, Documentation Agent and the
financial institutions and the Credit Support Parties listed on the
signature pages thereto.
'SECOND AMENDMENT EFFECTIVE DATE' means the Second
Amendment Effective Date, as defined in the Second Amendment.
'WISCONSIN DOCKS' means the docks located in Allouez,
Wisconsin, owned by Burlington Northern Santa Fe Railroad (or its
successors and assigns)."
B. AMENDMENTS TO SECTION 2.8: INTEREST RATE.
--------------------------------------------
Section 2.8 of the Credit Agreement is hereby amended by
inserting the following paragraph at the conclusion of Section 2.8(a):
"Notwithstanding any of the foregoing to the contrary, the foregoing
interest rates shall be increased by (i) an additional 0.50% per annum
on the Second Amendment Effective Date; and (ii) an additional 0.50%
per annum if an IPO and/or other capital markets offerings by the
Company that provides at least $250,000,000 in aggregate gross proceeds
to the Company has not occurred on or before March 31, 2004; provided,
that the foregoing interest rates set forth above shall be reduced by
0.50% on the date that the Company achieves a Quarterly Leverage Ratio
of 3.00:1.00 or less."
C. AMENDMENTS TO SECTION 5: AFFIRMATIVE COVENANTS.
--------------------------------------------------
Section 5 of the Credit Agreement is hereby amended by
inserting a new Section 5.19 and 5.20 at the conclusion thereof as follows:
"5.19. COMMINGLED INVENTORY. Simultaneously with the delivery
of the Borrowing Base Certificate as set forth in Section 5.1(m), the
Company shall deliver to the Collateral Agent an officer's certificate
(in form and substance reasonably satisfactory to the Collateral Agent)
stating the tonnage of iron ore pellets owned by ISG Burns Harbor Inc.
located at the Wisconsin Docks.
5.20. SECOND AMENDMENT FEE. The Company agrees to pay to the
Administrative Agent on October 10, 2003, for distribution to all
Lenders who execute and deliver the Second Amendment on or before
October 10, 2003, an amendment fee equal to 0.25% of such Lenders'
outstanding Term Loans and Revolving Commitments on the Second
Amendment Effective Date."
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D. AMENDMENTS TO SECTION 6.8: FINANCIAL COVENANTS.
--------------------------------------------------
(a) Section 6.8(a) of the Credit Agreement is hereby amended
by deleting the table set forth in Section 6.8(a)(ii) and replacing it with the
following:
======================================================= ========================
FISCAL QUARTERLY
QUARTER FIXED CHARGE
COVERAGE RATIO
------------------------------------------------------- ------------------------
Closing Date to September 30, 2003 0.20:1.00
------------------------------------------------------- ------------------------
Closing Date to December 31, 2003 0.50:1.00
------------------------------------------------------- ------------------------
Closing Date to March 31, 2004 0.70:1.00
------------------------------------------------------- ------------------------
July 1, 2003 to June 30, 2004 0.70:1.00
------------------------------------------------------- ------------------------
October 1, 2003 to September 30, 2004 0.70:1.00
------------------------------------------------------- ------------------------
January 1, 2004 to December 31, 2004 0.70:1.00
------------------------------------------------------- ------------------------
January 1, 2005 to March 31, 2005 1.10:1.00
and each Fiscal Quarter Ending Thereafter
======================================================= ========================
(b) Section 6.8(b) of the Credit Agreement is hereby amended
by deleting the table set forth in Section 6.8(b) and replacing it with the
following:
===================================================== ==========================
FOUR-FISCAL QUARTER PERIOD ENDING: QUARTERLY
LEVERAGE
RATIO
----------------------------------------------------- --------------------------
March 31, 2004 6.00:1.00
----------------------------------------------------- --------------------------
June 30, 2004 4.00:1.00
----------------------------------------------------- --------------------------
September 30, 2004 3.00:1.00
----------------------------------------------------- --------------------------
December 31, 2004 3.00:1.00
----------------------------------------------------- --------------------------
March 31, 2005 and each four-Fiscal Quarter Period 2.00:1.00
Ending Thereafter
===================================================== ==========================
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(c) Section 6.8(c) of the Credit Agreement is hereby amended
by deleting the table set forth in Section 6.8(c) and replacing it with the
following:
====================================================== =========================
FISCAL MINIMUM
QUARTER CONSOLIDATED
ADJUSTED EBITDA
------------------------------------------------------ -------------------------
January 1, 2003 to September 30, 2003 $10,000,000
------------------------------------------------------ -------------------------
January 1, 2003 to December 31, 2003 $70,000,000
------------------------------------------------------ -------------------------
March 31, 2003 to March 31, 2004 $140,000,000
------------------------------------------------------ -------------------------
July 1, 2003 to June 30, 2004 $220,000,000
------------------------------------------------------ -------------------------
October 1, 2003 to September 30, 2004 $275,000,000
------------------------------------------------------ -------------------------
January 1, 2004 to December 31, 2004 $350,000,000
------------------------------------------------------ -------------------------
April 1, 2004 to March 31, 2005 $530,000,000
------------------------------------------------------ -------------------------
July 1, 2004 to June 30, 2005 $580,000,000
------------------------------------------------------ -------------------------
October 1, 2004 to September 30, 2005 $620,000,000
------------------------------------------------------ -------------------------
January 1, 2005 to December 31, 2005 $650,000,000
------------------------------------------------------ -------------------------
April 1, 2005 to March 31, 2006 $650,000,000
------------------------------------------------------ -------------------------
July 1, 2005 to June 30, 2006 $650,000,000
------------------------------------------------------ -------------------------
October 1, 2005 to September 30, 2006 $650,000,000
------------------------------------------------------ -------------------------
January 1, 2006 to December 31, 2006 $650,000,000
------------------------------------------------------ -------------------------
April 1, 2006 to March 31, 2007 $650,000,000
====================================================== =========================
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E. AMENDMENTS TO SECTION 8: EVENTS OF DEFAULT.
----------------------------------------------
Section 8 of the Credit Agreement is hereby amended to delete
subsection 8.1(c) and replace it with the following:
"(c) Breach of Certain Covenants. Failure of any Credit Party
to perform or comply with any term or condition contained in Section
2.6, Section 5.2, Section 5.20 or Section 6 (other than Section 6.6);
or"
SECTION II. LIMITED WAIVER
The Company has advised the Lenders that the Quarterly Fixed
Charge Coverage Ratio required pursuant to Section 6.8(a)(ii) of the Credit
Agreement (prior to giving effect to the amendments set forth herein) and the
minimum Consolidated Adjusted EBITDA required pursuant to Section 6.8(c) of the
Credit Agreement (prior to giving effect to the amendments set forth herein), in
each case as of September 30, 2003, are not expected to be achieved. At the
request of the Company, the Lenders party hereto hereby waive the requirements
that (i) the Quarterly Fixed Charge Coverage Ratio, as of September 30, 2003,
not be less than 0.70:1.00; and (ii) the minimum Consolidated Adjusted EBITDA,
as of September 30, 2003, not be less than $100,000,000.
The waiver set forth above shall be limited precisely as
written and relates solely to a waiver of the provisions of Sections 6.8(a)(ii)
and 6.8(c) of the Credit Agreement in the manner and to the extent described
above, and shall not be deemed to:
(a) constitute a waiver of compliance by any Credit
Party with respect to any other term, provision or condition of the
Credit Agreement and any other instrument or agreement referred to
therein; or
(b) prejudice any right or remedy that any Agent or
any Lender may now have (except to the extent such right or remedy was
based upon existing defaults that will not exist after giving effect to
the waiver granted above) or may have in the future under or in
connection with the Credit Agreement or any other instrument or
agreement referred to therein.
SECTION III. CONDITIONS PRECEDENT TO EFFECTIVENESS
The amendments set forth in Section I hereof and the limited
waiver set forth in Section II hereof shall be effective on and as of the date
hereof (the "SECOND AMENDMENT EFFECTIVE DATE") upon the satisfaction, or waiver
by the Requisite Lenders, on or after the date hereof, of the following
conditions:
(a) The Company, the Borrowers, the other Credit Parties and
the Requisite Lenders shall have indicated their consent by the execution and
delivery of the signature pages hereof to the Administrative Agent.
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(b) The Administrative Agent shall have received a certificate
from the Company, certifying that as of the Second Amendment Effective Date, the
representations and warranties contained in Section IV herein and in the other
Credit Documents are true and correct in all material respects on and as of the
Second Amendment Effective Date to the same extent as though made on and as of
the Second Amendment Effective Date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case such
representations and warranties are true and correct in all material respects on
and as of such earlier date.
(c) The Administrative Agent shall have received a certificate
from the Company, certifying that as of the Second Amendment Effective Date
(after giving effect to the amendments and waivers contained herein), no event
shall have occurred and be continuing that would constitute an Event of Default
or a Default.
(d) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Second Amendment Effective
Date, including, to the extent invoiced, reimbursement or other payment of all
out-of-pocket expenses required to be reimbursed or paid by the Company
hereunder or any other Credit Document.
(e) The Administrative Agent and Lenders shall have received
such other documents and information regarding Credit Parties and the Credit
Agreement as the Administrative Agent or Lenders may have reasonably requested
prior to the date hereof.
SECTION IV. REPRESENTATIONS AND WARRANTIES
A. CORPORATE POWER AND AUTHORITY. Each Credit Party has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, this Amendment.
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment has been duly authorized by all necessary corporate or partnership (as
applicable) action on the part of each Credit Party.
C. BINDING OBLIGATION. This Amendment has been duly executed and
delivered by each Credit Party and constitutes a legal, valid and binding
obligation of each Credit Party enforceable against each Credit Party in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting creditors' rights generally and except as enforceability may be
limited by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
D. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
DOCUMENTS. The representations and warranties contained in the Credit Documents
are and will be true and correct in all material respects on and as of the
Second Amendment Effective Date (after giving effect to the amendments and
waivers contained herein) to the same extent as though made on and as of that
date, except to the extent such representations and warranties specifically
relate to
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an earlier date, in which case they were true and correct in all
material respects on and as of such earlier date .
E. ABSENCE OF DEFAULT. No event has occurred and is continuing (after
giving effect to the amendments and waivers contained herein) or will result
from the consummation of the transactions contemplated by this Amendment that
would constitute an Event of Default or a Default.
SECTION V. ACKNOWLEDGMENT AND CONSENT
Each of the Company, each wholly-owned Domestic Subsidiary of
the Company (other than the Borrowers and the Specified Subsidiaries) and ISG
Real Estate Inc. has (i) guaranteed the Obligations and (ii) (other than ISG
Real Estate Inc.) created Liens in favor of Lenders on the Collateral to secure
the Obligations subject to the terms and provisions of the Credit Agreement.
Each of the Company, ISG Real Estate Inc., and each wholly-owned Domestic
Subsidiary of the Company who has guaranteed the Obligations are collectively
referred to herein as the "CREDIT SUPPORT PARTIES", and the Credit Agreement and
the Collateral Documents are collectively referred to herein as the "CREDIT
SUPPORT DOCUMENTS".
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment and
consents to the amendment of the Credit Agreement effected pursuant to this
Amendment. Each Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all Collateral encumbered
thereby will continue to guarantee or secure, as the case may be, to the fullest
extent possible in accordance with and subject to the Credit Support Documents
the payment and performance of all "Obligations" under each of the Credit
Support Documents, as the case may be (in each case as such terms are defined in
the applicable Credit Support Document), including without limitation the
payment and performance of all such "Obligations" under each of the Credit
Support Documents, as the case may be, in respect of the Obligations of the
Company now or hereafter existing under or in respect of the Credit Agreement
and hereby pledges and assigns to the Collateral Agent, and grants to the
Collateral Agent a continuing lien on and security interest in and to all
Collateral as collateral security for the prompt payment and performance in full
when due of the "Obligations" under each of, and in accordance with and subject
to, the Credit Support Documents to which it is a party (whether at stated
maturity, by acceleration or otherwise).
Each Credit Support Party acknowledges and agrees that all of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Credit Agreement, this Amendment and the Credit Support Documents to which it is
a party or otherwise bound are true and correct in all material respects on and
as of the Second Amendment Effective Date to the same extent as though made on
and as of the Second Amendment Effective Date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case they were true, correct and complete in all material respects on and as of
such earlier date.
8
Each Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Credit Support Party (other than the Company) is not required by the terms
of the Credit Agreement or any other Credit Document to consent to the
amendments to the Credit Agreement effected pursuant to this Amendment and (ii)
nothing in the Credit Agreement, this Amendment or any other Credit Document
shall be deemed to require the consent of such Credit Support Party (other than
the Company) to any future amendments to the Credit Agreement.
SECTION VI. MISCELLANEOUS
A. BINDING EFFECT. This Amendment shall be binding upon the parties
hereto and their respective successors and assigns and shall inure to the
benefit of the parties hereto and the successors and assigns of Lenders. No
Credit Party's rights or obligations hereunder or any interest therein may be
assigned or delegated by any Credit Party without the prior written consent of
all Lenders.
B. SEVERABILITY. In case any provision in or obligation hereunder shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
C. REFERENCE TO CREDIT AGREEMENT. On and after the Second Amendment
Effective Date, each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Credit Documents to the "Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Credit Agreement shall mean and be a reference to the Credit Agreement as
amended by this Amendment.
D. EFFECT ON CREDIT AGREEMENT. Except as specifically amended by this
Amendment, the Credit Agreement and the other Credit Documents shall remain in
full force and effect and are hereby ratified and confirmed.
E. EXECUTION. The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of any Agent
or Lender under, the Credit Agreement or any of the other Credit Documents.
F. HEADINGS. Section headings herein are included herein for
convenience of reference only and shall not constitute a part hereof for any
other purpose or be given any substantive effect.
G. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
9
H. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. As set forth herein, this Amendment shall become effective upon
the execution of a counterpart hereof by each of the parties hereto and receipt
by the Administrative Agent and the Syndication Agent of written or telephonic
notification of such execution and authorization of delivery thereof.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY INTERNATIONAL STEEL GROUP INC.
By: /s/ Xxxxxx Xxxx
-----------------------------------
Name: Xxxxxx Xxxx
Title: President
BORROWERS ISG ACQUISITION INC.
ISG CLEVELAND INC.
ISG HENNEPIN INC.
ISG INDIANA HARBOR INC.
ISG XXXXXX INC.
ISG RIVERDALE INC.
ISG PLATE INC.
ISG PIEDMONT INC.
ISG XXXXX HARBOR INC.
ISG SPARROWS POINT INC.
ISG STEELTON INC.
ISG LACKAWANNA INC.
By: /s/ Xxxxxx Xxxx
-----------------------------------
Name: Xxxxxx Xxxx
Title: President
CREDIT SUPPORT PARTIES
ISG RAILWAYS INC.
ISG/EGL HOLDING COMPANY
ISG CLEVELAND WORKS RAILWAY COMPANY
ISG SOUTH CHICAGO & INDIANA HARBOR RAILWAY
COMPANY
ISG VENTURE INC.
ISG SALES INC.
ISG CLEVELAND WEST INC.
ISG CLEVELAND WEST PROPERTIES INC.
ISG TECHNOLOGIES INC.
ISG REAL ESTATE INC.
ISG HIBBING INC.
HIBBING TACONITE HOLDING INC.
By: /s/ Xxxxxx Xxxx
-----------------------------------
Name: Xxxxxx Xxxx
Title: President
ADMINISTRATIVE AGENT AND
ISSUING BANK UBS AG, STAMFORD BRANCH
By: /s/ Xxxxxxx X'Xxxxx
-----------------------------------
Name: Xxxxxxx X'Xxxxx
Title: Director
LENDER AND SWING LINE LENDER UBS AG, CAYMAN ISLANDS BRANCH
By: /s/ Xxxxxxx X'Xxxxx
-----------------------------------
Name: Xxxxxxx X'Xxxxx
Title: Director
JOINT LEAD ARRANGER, JOINT
BOOKRUNNER, SYNDICATION AGENT XXXXXXX SACHS CREDIT PARTNERS
AND A LENDER L.P.
By: /s/ Xxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: Authorized Signatory
COLLATERAL AGENT THE CIT GROUP/BUSINESS CREDIT,
AND A LENDER INC.
By: /s/ Xxxxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Vice President
CO-DOCUMENTATION AGENT
AND A LENDER FLEET CAPITAL CORPORATION
By: /s/ Xxxxxxx Xxxxxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Vice President
CO-DOCUMENTATION AGENT LASALLE BANK NATIONAL
AND A LENDER ASSOCIATION
By: /s/ Xxxxx X. Cable
-----------------------------------
Name: Xxxxx X. Cable
Title: Assistant Vice President
