NS GROUP, INC. EXHIBIT 10.1
AMENDMENT NO. 1 TO FINANCING AND SECURITY AGREEMENT
THIS AMENDMENT NO. 1 TO FINANCING AGREEMENT AND SECURITY AGREEMENT (this
"Amendment") is made and entered into as of the 19th day of May, 2003, by and
among THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation ("CIT"), CIT
as agent for the Lenders (the "Agent"), any other party which now or hereafter
becomes a lender hereunder (collectively the "Lenders"), NEWPORT STEEL
CORPORATION, a Kentucky corporation ("Newport" and individually, a "Company"),
and XXXXXX STEEL CORPORATION, a Pennsylvania corporation ("Xxxxxx", and
individually a "Company" and collectively Newport and Koppel, the "Companies").
RECITALS
A. The Companies are the borrowers under that certain Financing and
Security Agreement dated as of March 29, 2002 (the "Financing Agreement") among
the Lenders, the Agent, and the Companies.
B. The Companies have advised the Agent that the Companies desire to
repay the Senior Note Debt in full and amend the Financing Agreement to increase
Availability thereunder.
C. The Agent and Lenders have agreed to the Companies' request on the
terms and conditions set forth in the Amendment.
NOW, THEREFORE, in consideration of the foregoing Recitals, the
representations, warranties, covenants and agreements set forth in this
Amendment and other good and valuable consideration, the receipt and sufficiency
of which hereby are acknowledged, the Companies, the Agent and the Lenders
hereby agree as follows:
1. INCORPORATION BY REFERENCE.
(a) The foregoing Recitals are incorporated into this Amendment by
reference as if set forth in full in the body of this Amendment.
(b) Capitalized terms used in this Amendment and not expressly defined
herein shall have the meanings given to such terms in the Financing Agreement.
2. AMENDMENTS TO FINANCING AGREEMENT. Effective upon complete
satisfaction of the conditions set forth in Section 3 below:
2.1 The following definitions appearing in Subsection 1 of the
Financing Agreement are amended and restated in their entirety as follows:
"ACCOUNTS shall mean any and all of each Company's present and
future: (a) accounts (as defined in the UCC), and any and all other
receivables (whether or not specifically listed on schedules furnished
to the Agent), including, without limitation, all accounts created by,
or arising from, any of the Companies' sales, leases, rentals of goods
or renditions of services to their customers, including but not limited
to, those accounts arising under a trade name or style of any of the
Companies, or through any of the Companies' divisions; (b) instruments,
documents, chattel paper (including electronic chattel paper) (all as
defined in the UCC); (c) unpaid seller's or lessor's rights (including
rescission, replevin, reclamation, repossession and stoppage in
transit) relating to the foregoing or arising therefrom; (d) rights to
any goods represented by any of the foregoing, including rights to
returned, reclaimed or repossessed goods; (e) reserves and credit
balances arising in connection with or pursuant hereto; (f) guarantees,
supporting obligations, payment intangibles and letter of credit rights
(all as defined in the UCC); (g) insurance policies or rights relating
to any of the foregoing; (h) general intangibles pertaining to any and
all of the foregoing (including all rights to payment, including those
arising in connection with bank and non-bank credit cards), and
including books and records and any electronic media and software
thereto; (i) notes, deposits or property of account debtors securing
the obligations of any such account debtors of any of the Companies;
and (j) cash and non-cash Proceeds of any and all of the foregoing."
"COLLATERAL shall mean all present and future Accounts,
Equipment, Inventory and other Goods, Documents of Title, General
Intangibles (to the extent permitted under the documentation granting
such rights or applicable law), Investment Property and Real Estate,
and the Other Collateral; provided, however, that with respect to
Koppel, the Collateral shall not include the property of Koppel subject
to a security interest in favor of Beaver County Corporation for
Economic Development ("CED") as described in that certain UCC financing
statement showing Koppel as debtor and CED as secured party and filed
with Beaver County, Pennsylvania, file number MBV1418 PG 804."
"EARLY TERMINATION FEE" shall: (a) mean the fee the Agent on
behalf of the Lenders is entitled to charge the Companies in the event
the Companies or any one of them terminates the Revolving Line of
Credit or this Financing Agreement on or on a date prior to the fourth
Anniversary Date; and (b) be determined by multiplying the Revolving
Line of Credit by (x) one percent (1.0%) if the Early Termination Date
occurs on or before the second Anniversary Date, (y) one half percent
(0.5%) if the Early Termination Date occurs after the second
Anniversary Date but on or before the third Anniversary Date; and (z)
one quarter percent (0.25%) if the Early Termination Date occurs after
the third Anniversary Date but on or prior to the fourth Anniversary
Date."
"GENERAL INTANGIBLES" shall mean, as to each Company, all
present and hereafter acquired general intangibles (as defined in the
UCC), and shall include, without limitation, all present and future
right, title and interest in and to: (a) all Trademarks, tradenames,
corporate names, business names, logos and any other designs or sources
of business identities, (b) Patents, together with any improvements on
said Patents, utility models, industrial models, and designs, (c)
Copyrights, (d) trade secrets, (e) licenses, permits and franchises,
(f) all applications with respect to the foregoing, (g) all right,
title and interest in
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and to any and all extensions and renewals, (h) goodwill with respect
to any of the foregoing, (i) any other forms of similar intellectual
property, (j) commercial tort claims and (k) all customer lists,
distribution agreements, supply agreements, blueprints, indemnification
rights 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,
including, without limitation, the proceeds or royalties of any
licensing agreements between any of the Companies and any licensee of
any of the Companies' General Intangibles."
"GOODS shall mean present and hereafter acquired "Goods", as
defined in the UCC, together with all Proceeds thereof of whatever
sort."
"PERMITED INDEBTEDNESS" shall mean, with respect to the
Companies, the Guarantors and their respective subsidiaries, on a
consolidated basis: (a) current Indebtedness maturing in less than one
year and incurred in the ordinary course of business for raw materials,
supplies, Equipment, services, Taxes or labor; (b) the Indebtedness
secured by Purchase Money Liens; (c) Indebtedness arising under the
Letters of Credit and this Financing Agreement; (d) deferred Taxes and
other expenses incurred in the ordinary course of business; (e)
Indebtedness (including, without limitation, Indebtedness pursuant to
Capital Leases) incurred to finance permitted Capital Expenditures; (f)
Indebtedness issued pursuant to interest rate protection agreements;
(g) Indebtedness (including, without limitation, Indebtedness incurred
in connection with Acquisitions permitted pursuant to the provisions of
this Financing Agreement) in an aggregate principal amount not to
exceed $100,000,000 outstanding at any time that is either unsecured or
is secured by property of the Companies, the Guarantors or their
respective subsidiaries other than assets constituting Collateral,
provided that the holder of any such secured Indebtedness of $5,000,000
or more shall have executed and delivered to Agent an intercreditor
agreement acceptable to Agent in its commercially reasonable
discretion; (h) other Indebtedness existing on the date of execution of
this Financing Agreement and listed in the most recent financial
statement delivered to the Agent and the Lenders or otherwise disclosed
to the Agent and the Lenders in writing prior to the Closing Date; (i)
any extension, renewal or replacement of any of the Indebtedness set
forth in the foregoing clauses (g) and (h) so long as Indebtedness
incurred pursuant to clause (g) together with any extension, renewal or
replacement of such Indebtedness, in the aggregate, does not exceed
$100,000,000 outstanding at any time; and (j) such other Indebtedness
as Agent and Required Lenders may hereafter approve in writing."
"REAL ESTATE" shall mean real property described on Schedule
2.1 attached hereto and any other real property acquired by any of the
Companies and subjected to a Mortgage."
2.2 The definition of "Borrowing Base" set forth in
Section 1 is amended by deleting the reference to the monetary amount of
"$20,000,000" set forth in the last line and inserting in its place the monetary
amount of $5,000,000".
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2.3 The definition of "Documentation Fee" set forth in
Section 1 is amended by inserting the parenthetical "(and standard fees of CIT's
in house counsel)" immediately after the reference to "Agent's standard fees"
set forth in the first line.
2.4 The definition of "Eligible Accounts Receivable" set
forth in Section 1 is amended by inserting the words "from the sale of Inventory
or the rendition of services" in the second line immediately after the words
"Company's Accounts arising".
2.5 The definition of "Interest Rate Margin" set forth in
Section 1 is amended by deleting the table set forth therein and inserting in
its place the following table:
AVERAGE CREDIT EXPOSURE CHASE RATE MARGIN LIBOR MARGIN
----------------------------------------------------------------------
$0.00 to $15,000,000 1.00% 2.50%
------------------------------------------------------------------
$15,000,001 to $30,000,000 1.00% 2.50%
------------------------------------------------------------------
$30,000,001 to $40,000,000 1.25% 3.00%
------------------------------------------------------------------
$40,000,001 to $45,000,000 1.75% 3.25%
==================================================================
2.6 The definition of "Other Collateral" set forth in
Section 1 is amended by deleting the phrase "constituting Proceeds of
Collateral" in the fourth line immediately after the words "other monies and
property".
2.7 The definition of "Out-of-pocket Expenses" set forth
in Section 1 is amended by deleting the period at the end of the definition and
adding the following language:
", all fees and disbursements incurred as a result of a
workout, restructuring, reorganization, liquidation, insolvency
proceeding and in any appeals arising therefrom whether incurred
before, during or after the termination of this Financing Agreement or
the commencement of any case with respect to any of the Companies or
Guarantors under the United States Bankruptcy Code or any similar
statute; and title insurance premiums, real estate survey costs, note
taxes, intangible taxes and mortgage or recording taxes and fees."
2.8 The definition of "Permitted Encumbrances" set forth
in Section 1 is hereby amended by deleting clause (h) in its entirety and
renaming clauses (i), (j), (k) and (l) thereof as clauses "(h)", "(i)" "(j)",
and "(k)" respectively.
2.9 The definition of "Revolving Line of Credit" set
forth in Section 1 is amended by deleting the reference to the monetary amount
of $50,000,000 set forth in the last line, and inserting in its place the
monetary amount of "$45,000,000."
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2.10 The following new definitions shall be inserted into
Section 1 of the Financing Agreement at the appropriate alphabetical location:
"EBITDA shall mean, in any period, all earnings of the
Companies and Guarantors determined on a consolidated basis for said
period before all interest, tax obligations and depreciation and
amortization expense of the Companies and Guarantors determined on a
consolidated basis for said period, all determined in conformity with
GAAP on a basis consistent with the latest audited financial statements
of the Companies and the Guarantors determined on a consolidated basis,
but excluding the effect of extraordinary and/or nonrecurring gains or
losses for such period.
MORTGAGES shall mean all mortgages and deeds of trust executed
and delivered by the Companies in favor of the Agent for the benefit of
the Lenders covering the Real Estate."
2.11 Paragraph (c) of Section 3.6 of the Financing
Agreement is amended by deleting (i) the words "subordinated to the Senior Note
Debt to the extent expressly required under the Senior Note Indenture and
otherwise" set forth in clause (A) of Section 3.6(c), and (ii) the words "and
subordinated to the Senior Note Debt to the extent expressly required by the
Senior Note Indenture" set forth at the end of clause (B) of Section 3.6(c).
2.12 Section 5.1 of the Financing Agreement is amended by
deleting the words "subordinated to the Senior Note Debt to the extent expressly
required by the terms of the Senior Note Indenture, and otherwise" set forth in
the proviso at the end of Section 5.1.
2.13 Section 6.1 of the Financing Agreement is amended and
restated in its entirety to read as follows:
"6.1 GRANT OF SECURITY INTEREST. As security for the
prompt payment in full of all Obligations, each of the Companies hereby
pledges and grants to the Agent, for the benefit of the Lenders, a
continuing general lien upon and security interest in all of the
Collateral."
2.14 Paragraph (a) of Section 6.2 of the Financing
Agreement is amended by adding the following words at the end thereof:
", and if any Collateral is Equipment, whether any Company's
interest in such Equipment is as owner, lessee or conditional vendee".
2.15 Section 6.2 of the Financing Agreement is further
amended by adding thereto the following as a new paragraph (c) appearing
immediately after paragraph (b) of Section 6.2 as follows:
"(c) All Equipment whether the same constitutes personal
property or fixtures, including, but without limiting the generality of
the foregoing, all dies, jigs, tools, benches, tables, accretions,
component parts thereof and additions thereto, as well as all
accessories,
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motors, engines and auxiliary parts used in connection with or attached
to the Equipment, other than Equipment of Xxxxxx expressly excluded
from the definition of Collateral."
2.16 Section 6.4 of the Financing Agreement is amended and
restated in its entirety to read as follows:
"6.4. PERMITTED ACQUISITION. Neither Company shall nor
shall any Guarantor (collectively, the "Loan Parties" and individually
a "Loan Party") acquire another Person or substantially all of the
assets of another Person or make an Investment in another Person (any
of the foregoing, an "Acquisition") except in accordance with and
subject to the provisions of this subsection 6.4 and provided that such
Loan Party satisfy the following minimum requirements (unless waived or
otherwise permitted by Agent):
(a) The Agent shall receive not less than fifteen (15) Business
Days' prior written notice of such Acquisition, which notice
shall include a reasonably detailed description of the
proposed terms of such Acquisition and identify the
anticipated closing date thereof;
(b) No Event of Default shall exist prior to or after giving
effect to such Acquisition and the incurrence of any Revolving
Loans or other Indebtedness in connection therewith;
(c) Such Loan Party shall cause the Person acquired in any such
Acquisition (the "Target") to guarantee the Obligations by
executing and delivering a guaranty substantially in the form
and substance as the Guaranties delivered by the Guarantors on
the Closing Date;
(d) Such Target shall grant to Agent for the benefit of Lenders
(i) a first priority perfected security interest in its
accounts receivable and inventory, and (ii) unless otherwise
consented to by the Required Lenders (such consent not to be
unreasonably withheld) or unless there is a valid pre-existing
lien on such asset (i.e., a lien in effect prior to
consummation of the Acquisition), a first priority perfected
security interest in all other assets constituting Collateral,
subject to Permitted Encumbrances securing Permitted
Indebtedness; and
(e) The Companies or Guarantors shall obtain the Required Lenders'
prior written consent for the Acquisition in the event that:
(i) excess Availability hereunder is less than
$15,000,000 (taking into account the $5,000,000
reserve established in clause (c) of the definition
of Borrowing Base): (x) on average for the thirty day
period preceding any such Acquisition; (y) on the
date of such Acquisition after giving effect to any
such Acquisition; and (z) on average for the thirty
day period following any such Acquisition after
giving effect to any such Acquisition. Such excess
Availability requirement also requires that all of
the Companies' debts,
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obligations and payables are then current consistent
with past payment practices of the Companies;
(ii) the Target is acquired in a stock acquisition, or
(iii) the acquired assets include real estate;
provided however, that consent pursuant to clauses (ii) and
(iii) hereof will not be unreasonably withheld.
In the event that the Required Lenders decline to give consent
under either subsection (d)(ii) or subsections (e)(ii) or (e)(iii) of
this Section 6.4, the Agent and Lenders hereby agree that the Companies
shall have the right (but not the obligation) to terminate the
Financing Agreement without being required to pay the Early Termination
Fee.
For purposes of this Section 6.4, "Investment" means any
direct or indirect purchase or other acquisition by a Loan Party of any
beneficial interest in, including stock, partnership interest or other
equity securities of, or ownership interest in, any other Person such
that, after giving effect thereto, such Loan Party is able to control
the management or policies of a Person, whether through the ability to
exercise voting power, by contract or otherwise."
2.17 Section 6.8 of the Financing Agreement is amended and
restated in its entirety to read as follows:
"6.8 GENERAL INTANGIBLES. Each of the Companies agrees to
maintain its rights in, and the value of, all General Intangibles
necessary for such Company to operate its business, and shall make when
due all payments required with respect to any licensed rights. Each of
the Companies shall provide the Agent with adequate notice of the
acquisition of rights with respect to any additional Patents,
Trademarks and Copyrights so that the Agent may, to the extent
permitted under the documentation granting such rights or applicable
law, perfect the security interests of the Agent, for the benefit of
the Lenders, in such rights in a timely manner."
2.18 Section 6 of the Financing Agreement is amended by
adding thereto the following as new Sections appearing immediately after Section
6.8 as follows:
"6.9 EQUIPMENT. The Companies agree at their own cost and
expense to keep the Equipment in as good and substantial repair and
condition as the same is now or at the time the lien and security
interest granted herein shall attach thereto, reasonable wear and tear
excepted, making any and all repairs and replacements when and where
necessary. Except as otherwise permitted herein, the Companies also
agree to safeguard, protect and hold all Equipment for the account of
the Agent, on behalf of the Lenders, and make no sale, transfer, lease
or other disposition thereof unless the Companies first obtain the
prior written approval of the Agent. All proceeds of any such sale,
transfer, lease or other disposition shall not be commingled with any
of the Companies' other property, but shall be segregated, held by the
Companies in trust for the Agent, on behalf of the Lenders, as the
Lenders' exclusive
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property, and shall be delivered immediately by the Companies to the
Agent in the identical form received by the Companies by deposit to the
Depository Account, for application to the Obligations in such manner
as the Agent shall elect. The security interests of the Agent shall,
without break in continuity and without further formality or act,
continue in, and attach to, all proceeds, including any instruments for
the payment of money, accounts receivable, contract rights, documents
of title, shipping documents, chattel paper and all other cash and
non-cash proceeds of such sales, exchanges and dispositions. As to any
such sale, exchange or other disposition, the Agent shall have all of
the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation. Notwithstanding anything set
forth herein to the contrary, the Companies may sell, exchange or
otherwise dispose of: (i) the "Excluded Equipment" set forth in Exhibit
B, pages 74-81 of the NS Group, Inc. Machinery and Equipment Summary
and Appraisal dated April, 2003, provided that the proceeds of such
sales and dispositions net of all costs, fees, expenses and taxes
incurred with respect to such disposition are delivered to the Agent in
accordance with the foregoing provisions of this Section 6.9; and (ii)
other obsolete Equipment or Equipment no longer needed in the
Companies' operations, provided that the then book value of the
Equipment so disposed pursuant to clause (ii) herein does not exceed
$500,000 in the aggregate in any fiscal year; and the proceeds of such
sales and dispositions net of all costs, fees, expenses and taxes
incurred with respect to such disposition are delivered to the Agent in
accordance with the foregoing provisions of this Section 6.9, except
that the Companies may retain and use such proceeds to promptly
purchase replacement Equipment which the Companies determine in their
reasonable business judgment to have a collateral value at least equal
to the Equipment so disposed of or sold; and provided further that the
aforesaid rights set forth in clauses (i) and (ii) herein shall
automatically cease upon the occurrence of an Event of Default which is
not waived."
6.10 MORTGAGES. This Financing Agreement and the
obligation of the Companies to perform all of their covenants and
obligations hereunder are further secured by the Mortgages. Unless
otherwise consented to by the Required Lenders (such consent not to be
unreasonably withheld) or unless there is a valid pre-existing mortgage
or deed of trust on such real estate (i.e., a mortgage or deed of trust
in effect prior to consummation of an acquisition), each of the
Companies shall execute and deliver to the Agent, for the benefit of
the Lenders, from time to time, a mortgage or deed of trust (as
appropriate) in form and substance reasonably satisfactory to the Agent
on any real estate acquired by such Company after the date hereof,
subject only to Permitted Encumbrances securing Permitted Indebtedness
and those exceptions of title as set forth in a title insurance policy
for such real estate that are reasonably satisfactory to the Agent.
6.11 COMMERCIAL TORT CLAIMS. Each of the Companies
represents and warrants that it holds no interest in any commercial
tort claim, other than the claims described on Schedule 7.1. If any of
the Companies shall at any time hold or acquire a commercial tort
claim, such Company shall immediately notify the Agent in a writing
signed by the Company of the brief details thereof and grant to the
Agent in such writing a security interest therein and in the proceeds
thereof for the benefit of the Lenders, all upon the terms of this
Agreement, with such writing to be in form and substance satisfactory
to the Agent.
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6.12 LETTER OF CREDIT. If any of the Companies is or
becomes a beneficiary under a letter of credit now or hereafter issued
for the benefit of such Company, such Company shall promptly notify the
Agent. Upon request by the Agent, the Company shall, pursuant to an
agreement in form and substance satisfactory to the Agent, either (a)
cause the issuer of such letter of credit to consent to the assignment
of the proceeds of such letter of credit to the Agent or (b) cause the
issuer of such letter of credit to name the Agent as the transferee
beneficiary of such letter of credit."
2.19 Section 7.1 of the Financing Agreement is amended by
deleting clauses (vii) and (viii) in their entirety.
2.20 The second sentence of Paragraph (a) of Section 7.5
of the Financing Agreement is amended and restated in its entirety as follows:
"All policies covering Real Estate, Equipment and Inventory
are, subject to the rights of any holders of Permitted Encumbrances
holding claims senior to the Agent, to be made payable to the Agent on
behalf of the Lenders, in case of loss, under a standard
non-contributory "mortgagee", "lender", or "secured party" clause and
are to contain such other provisions as the Agent may require to fully
protect the Agent's interest in the Real Estate, Equipment and
Inventory and to any payments to be made under such policies."
2.21 The last sentence of Section 7.3 of the Financing
Agreement is amended and restated in its entirety as follows:
"In addition to the foregoing, Agent may require the Companies
to obtain and deliver to Agent (or Agent may obtain, at the Companies'
expense) Inventory and/or Equipment appraisal reports in form and
substance and from appraisers satisfactory to Agent; provided however,
that absent the occurrence and continuance of a Default or an Event of
Default (in which instances the limitations set forth herein shall not
apply), the Companies shall be responsible for the cost and expenses of
the Agent with respect to no more than two Inventory appraisals and two
Equipment appraisals during any calendar year."
2.22 Paragraph (b) of Section 7.5 of the Financing
Agreement is amended by adding the symbol "(i)" appearing immediately after the
"(b)" and before the words "In the event of any loss . . .", and adding the
following new paragraphs at the end of the existing paragraph as follows:
"(ii) In the event any part of any of the Companies' Real
Estate or Equipment is condemned or damaged by fire or other casualty
and the insurance or condemnation proceeds for such condemnation,
damage or other casualty (the "Casualty Proceeds") is less than or
equal to $2,000,000, the Agent shall promptly apply such Casualty
Proceeds to reduce the Revolving Loan.
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(iii) So long as no Event of Default shall have occurred and
remain outstanding, the Companies have sufficient business interruption
insurance to replace the lost profits with respect to any facility, and
the Casualty Proceeds are in excess of $2,000,000, the Companies may
elect (by delivering written notice to the Agent) to replace, repair or
restore such Real Estate or Equipment to substantially the equivalent
condition prior to such condemnation, fire or other casualty as set
forth herein. If the Companies do not, or cannot, elect to use the
Casualty Proceeds as set forth above, the Agent may, subject to the
rights of any holders of Permitted Encumbrances holding claims senior
to the Agent, apply the Casualty Proceeds to the payment of the
Obligations in such manner and in such order as the Agent reasonably
may elect.
(iv) If the Companies elect to use the Casualty Proceeds for
the repair, replacement or restoration of any Real Estate or Equipment,
x) proceeds of insurance on Equipment or Real Estate will be applied to
the reduction of the Revolving Loans and y) the Agent may set up a
reserve against Availability for an amount equal to the proceeds
referred to in clause x) hereof. The reserve will be reduced
dollar-for-dollar upon receipt of non-cancelable executed purchase
orders, delivery receipts or contracts for the replacement, repair or
restoration of Equipment or the Real Estate and disbursements in
connection therewith.
(v) The Companies agree to pay any reasonable costs, fees or
expenses which the Agent may reasonably incur in connection herewith."
2.23 The second sentence of Section 7.8 is amended by
deleting the phrase "President, Vice President, Controller, or Treasurer"
therein and inserting in its place the phrase "President, Vice President,
Controller, Treasurer, or Assistant Treasurer".
2.24 Paragraph (f) of Section 7.9 is amended and restated
in its entirety to read as follows:
"(f) Declare or pay any dividend or distribution of any kind
on, or purchase, acquire, redeem or retire, any of its equity interests
(of any class or type whatsoever), whether now or hereafter issued and
outstanding;"
2.25 Section 7.10 is amended by inserting the phrase
"Guarantors, and their respective subsidiaries," immediately after the word
"Companies," in the second line of the Section 7.10.
2.26 Section 7.17 is amended and restated in its entirety
to read as follows:
"7.17 INTENTIONALLY OMITTED."
2.27 Section 7 of the Financing Agreement is amended by
adding thereto the following as a new section appearing immediately after
Section 7.19 as follows:
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"7.20 MINIMUM EBITDA.
(a) The Companies shall not permit EBITDA to be less than
the amounts specified below for the months (taken as a single period)
specified below and shall cause to be prepared and furnished to Agent a
compliance certificate, in form and substance satisfactory to Agent,
executed by an authorized financial or accounting officer of the
Companies, demonstrating compliance with this covenant:
"PERIOD EBITDA
------- ------
Three months ending
June 30, 2003 $(6,000,000)
Three months ending
July 31, 2003 $(4,500,000)
Three months ending
August 31, 2003 $(2,800,000)
Three months ending
September 30, 2003 $(1,100,000)
Three months ending
October 31, 2003 $ 450,000
Three months ending
November 30, 2003 $ 1,700,000
Three months ending
December 31, 2003 and
for each three-month rolling
period ending at the end of each
month thereafter $ 2,500,000
(b) In the event that the Companies fail to meet the
minimum EBITDA set forth above for any period, such failure shall not
be deemed to be an Event of Default (i) so long as the Companies have
timely provided the month-end financial statements required by Section
7.8 of this Financing Statement, and (ii) excess Availability hereunder
is $12,500,000 or greater (taking into account the $5,000,000 reserve
established in clause (c) of the definition of Borrowing Base). Agent
shall have the right to increase the reserve against Availability
established in clause (c) of the definition of Borrowing Base from
$5,000,000 to $12,500,000 during any period in which the Companies and
Guarantors (x) fail to maintain the minimum EBITDA for such period, or
(y) fail to timely provide the compliance certificates required by this
covenant or the month-end financial statements required by Section 7.8
of this Financing Agreement.
2.28 Section 8.3 of the Financing Agreement is amended by
deleting the reference to the numerical amount of "one and three quarter percent
(1.75%)" set forth in the third line, and inserting in its place the numerical
amount of "two and one quarter percent (2.25%)."
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2.29 Paragraph (e) of Section 10.1 of the Financing
Agreement is amended by inserting the words "and 7.20" immediately after the
number "7.17" and immediately before the word "hereof" at the end of Section
10.1.
2.30 Paragraph (i) of Section 10.1 of the Financing
Agreement is amended by deleting the words "(x) Senior Note Debt or (y) any
other" in the second and third lines of Paragraph (i).
2.31 Schedule 2.1, Bailee Locations and Leased and Owned
Real Estate, and Schedule 7.1, Collateral and the Companies' Information, to the
Financing Agreement are deleted, and substituted in their place are new
Schedules 2.1 and 7.1, and new Schedule 1, Permitted Liens, is added in its
numerically proper place, all such Schedules in the forms attached hereto as
Schedules 1, 2.1 and 7.1 respectively.
3. CONDITIONS. The terms of Section 2 above shall become
effective only when each of the following conditions have been completely
satisfied as determined by Agent in its sole and absolute discretion (the date
of such satisfaction being hereinafter referred to as the "Effective Date").
3.1 DOCUMENTS. Agent shall have received each of the
agreements, instruments and other documents set forth on Exhibit A, attached
hereto and made a part hereof, properly executed (where necessary) in each case
in form and substance acceptable to Agent in its sole and absolute discretion.
3.2 REPRESENTATIONS AND WARRANTIES; NO DEFAULT. As of the
date of this Amendment and as of the Effective Date, the representations and
warranties contained herein and in the Financing Agreement shall be true and
complete in all material respects (both immediately before and after giving
effect to consummation of the transactions contemplated hereby), and no Default
or Event of Default thereunder shall exist.
3.3 PROCEEDINGS. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all agreements, instruments, certificates and other documents relating thereto
shall be in form and substance satisfactory to Agent, as determined in its sole
and absolute discretion.
3.4 SENIOR NOTE DEBT. The Senior Note Indenture shall be:
(i) terminated; (ii) all notes and obligations of the Companies, Parent, and/or
other Guarantors thereunder shall be paid or satisfied in full, including
through utilization of the proceeds of the Revolving Loans to be made under the
Financing Agreement pursuant to Section 4.4 of this Amendment; and (iii) all
mortgages, liens or security interests in favor of the Senior Note Indenture
Trustee and the note holders under the Senior Note Indenture on the Collateral
and otherwise in connection therewith shall be terminated and/or released upon
such payment.
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3.5 PROJECTIONS. The Agent shall have received, reviewed
and been satisfied with quarterly cash budget projections prepared by each of
the Companies for a 12-month period following the date hereof.
3.6 FEES. All fees and out of pocket expenses required to
be paid to the Agent and each Lender on or prior to the Effective Date shall
have been paid in full, including, without limitation: (i) the legal fees of
in-house counsel for the Agent incurred in connection with the documentation and
negotiation of this Amendment and the other agreements relating hereto, as well
as the consummation of the transactions contemplated by this Amendment and such
other agreements, (ii) all UCC search and filing fees, other filing fees,
recording taxes and similar fees, if any, incurred by the Agent in connection
with this Amendment, (iii) all title insurance premiums, mortgage or recording
taxes, and other costs incurred by the Agent in connection with the Mortgages,
and (iv) and all fees pursuant to the Fee Letter dated as of the date of this
Amendment between the Companies and Agent.
3.7 PAYOFF OF THE PROVIDENT BANK. The Agent will have
purchased The Provident Bank's share of the Loans pursuant to Section 14.11 of
the Financing Agreement.
3.8 UCC. All UCC financing statements and similar
documents required to be filed in order to create in favor of the Agent, for the
benefit of the Lenders a first priority perfected security interest in the
Collateral of the Companies (to the extent that such a security interest may be
perfected by a filing under the UCC or applicable law) subject only to the
Permitted Encumbrances, shall have been properly filed in each office in each
jurisdiction required. The Agent shall have received (i) acknowledgement copies
of all such filings (or, in lieu thereof, the Agent shall have received other
evidence satisfactory to the Agent that all such filings have been made), and
(ii) evidence that all necessary filing fees, taxes and other expenses related
to such filings have been paid in full.
3.9 AMENDED AND RESTATED SECURITY AGREEMENTS. Each
Guarantor shall have executed and delivered to the Agent Amended and Restated
Security Agreements that grant to Agent for the benefit of Lenders, security
interests in all of the personal property of such Guarantor of the same type and
kind as the Collateral, on which Agent does not currently hold a first priority
perfected security interest pursuant to the Financing Agreement (collectively,
the "Additional Guarantor Collateral"). Agent shall have filed all UCC financing
statements and similar documents required to be filed in order to create in
favor of the Agent a first priority perfected security interest in the
Additional Guarantor Collateral (to the extent that such a security interest may
be perfected by a filing under the UCC or applicable law), subject only to such
encumbrances as would create for Agent a security interest in the Additional
Guarantor Collateral with the same priority as that held by the Senior Note
Indenture Trustee as of the date hereof. The Agent shall have received (i)
acknowledgement copies of all such filings (or, in lieu thereof, the Agent shall
have received other evidence satisfactory to the Agent that all such filings
have been made), and (ii) evidence that all necessary filing fees, taxes and
other expenses related to such filings have been paid in full.
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4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE
COMPANIES AND THE AGENT.
4.1 In order to induce the Agent and the Lenders to enter
into this Amendment, the Companies (where appropriate) jointly and severally
represent and warrant to the Agents and the Lenders that: (a) each of the
Companies has full power, authority and legal right to execute, deliver and
perform this Amendment, and the execution, delivery and performance hereof and
thereof have been duly authorized by all necessary organizational action; (b)
this Amendment has been duly executed and delivered by each of the Companies and
constitutes the legal, valid and binding obligation of the each of the
Companies, enforceable in accordance with its terms; (c) the execution and
delivery of this Amendment by the Companies does not violate any term, provision
or condition of, or constitute a default under, any loan agreement, mortgage,
deed of trust, note, security agreement, pledge agreement, lease or indenture to
which any of the Companies is a party or by which any of the Companies' assets
are bound; and (d) each of the new Schedules 1, 2.1 and 7.1 attached hereto
correctly and completely set forth the subject matter of each such Schedule as
of the date of this Amendment.
4.2 In addition to the representations and warranties set
forth above, the Companies jointly and severally reaffirm and remake all
representations and warranties made by the Companies in the Financing Agreement,
effective as of the date of this Amendment, and the Companies hereby confirm
that, as of the date hereof, (i) they have no offsets, counterclaims or defenses
to the payment of the Obligations and (ii) the Lenders and the Agent have fully
performed their respective obligations under the Financing Agreement and the
other Loan Documents.
4.3 In addition to the Companies' obligations pursuant to
the provisions of Section 7.14 of the Financing Agreement, the Companies
acknowledge and agree that, if at any time prior to the completion of
syndication, CIT determines that it will be unable to sell down the Revolving
Line of Credit to CIT's desired hold position, CIT reserves the right, after
consultation with the Companies, to adjust, as CIT may deem appropriate in order
to effect a successful syndication to such desired hold position: (i) pricing,
and/or (ii) the advance rates, any such adjustment to advance rates to be
determined pursuant to the net orderly liquidation value of the Companies' gross
Inventory as set forth in the most recent periodic appraisal conducted by an
appraiser acceptable to CIT.
4.4 Notwithstanding any provision of the Financing
Agreement to the contrary, so long as no Event of Default then exists other than
a Default caused by failure to maintain the $20,000,000 reserve established in
clause (c) of the definition of Borrowing Base, the Companies may repay the
Senior Note Debt in full (provided that after giving effect to such payment, the
Companies shall have excess Availability under the Financing Agreement of not
less than $10,000,000.
4.5 Concurrent with the execution of this Amendment, the
Companies, Guarantors and CIT will execute and deliver a pre-filing
authorization substantially in the form attached to this Amendment as Exhibit B:
(i) authorizing CIT to file financing statements under the Uniform
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Commercial Code in any jurisdictions and offices deemed necessary or desirable
by CIT in connection with the anticipated perfection of any security interest or
lien to be granted to CIT in any of the documents, agreement, instruments and
other written matter entered into or prepared in connection with this Amendment;
(ii) acknowledging that all such additional liens granted pursuant to this
Amendment are not and shall not be effective until the Senior Notes are paid in
full; and (iii) providing that CIT will immediately terminate all such financing
statements filed in connection with this Amendment in the event that
satisfaction of the conditions set forth in Section 3 does not occur on or
before July 31, 2003.
4.6 Not later than three months following the Effective
Date, the Companies and the Guarantors, excluding NK Management, shall have
provided the Agent (or to an agent of the Agent or to an agent of the title
insurance company satisfactory to Agent) the Mortgages, in form and substance
satisfactory to Agent in its sole discretion. Failure to comply with this
requirement shall constitute an Event of Default under the Financing Agreement.
The Agent and the Lenders acknowledge and agree that they will not hold a
mortgage on the real estate owned by NK Management identified in Subsection B of
Schedule 1 to the Security Agreement dated as of March 29, 2002 by and among,
Agent, Erlanger and NK Management or the real estate owned by Xxxxxx and subject
to a mortgage in favor of CED.
4.7 Concurrent with the execution of this Amendment, the
Companies will execute and deliver the Fee Letter.
4.8 On or before five (5) business days after the parties
have executed this Amendment, the Agent will exercise its rights pursuant to
Section 14.11 of the Financing Agreement to purchase The Provident Bank's share
of the Loans.
5. REFERENCE TO AND EFFECT OF AMENDMENT; RESERVATION OF
THE AGENTS' AND THE LENDERS' RIGHTS.
5.1 Upon the effectiveness of this Amendment, (i) each
reference in the Financing Agreement to "this Financing Agreement," "hereunder,"
"hereof," "herein," "hereby" or words of like import, shall mean and be a
reference to the Financing Agreement as amended hereby, (ii) each reference to
the Financing Agreement in the Promissory Notes and in any other document,
instrument or agreement executed and/or delivered by the Companies in connection
with the Financing Agreement shall mean and be a reference to the Financing
Agreement, as amended hereby, and (iii) each reference to the Promissory Notes,
Guaranties, Security Agreements, and any other document, instrument or agreement
executed and/or delivered by the Companies or Guarantors in connection with this
Amendment shall mean and be a reference to such Promissory Notes, Guaranties,
Security Agreements or any such other document, instrument or agreement, as
amended in connection with this Amendment.
5.2 Except as expressly provided in this Amendment, the
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of the Agent or the Lenders under the
Financing Agreement, nor constitute a waiver of noncompliance with, or a
modification of, any term or provision contained therein.
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5.3 Except as expressly modified by this Amendment, all
of the terms and provisions of the Financing Agreement are and shall remain in
full force and effect, and shall apply with such force and effect to this
Amendment, and the Agent and the Lenders hereby expressly reserve all rights,
remedies, powers and privileges contained in the Financing Agreement and in any
other document executed and/or delivered by the Companies pursuant thereto.
6. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS AND DECISIONS OF THE
STATE OF ILLINOIS.
7. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
8. WAIVER OF SURETYSHIP DEFENSES. Each Company agrees
that the payment or performance of any of the Obligations by such Company shall
not in any way operate, or be construed or interpreted, as a waiver or release
of the joint and several liability of any other Company under the Financing
Agreement. In addition, each Company agrees that its liability to the Agents and
the Lenders under the Financing Agreement shall not be affected or reduced in
any way by (a) any defense, offset or counterclaim which may at any time be
available to or be asserted by any other Company against the Agents and/or the
Lenders, (b) any defense available to such Company based upon its status as a
secondary obligor for any of the Obligations (all of which defenses the
Companies hereby expressly waive), or (c) any other event or circumstance
whatsoever which may constitute an equitable or legal discharge of a surety or a
guarantor.
[SIGNATURE PAGE FOLLOWS]
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[SIGNATURE PAGE TO AMENDMENT NO. 1 FINANCING AND SECURITY AGREEMENT]
BORROWERS:
NEWPORT STEEL CORPORATION, a XXXXXX STEEL CORPORATION, a
Kentucky corporation Pennsylvania corporation
By: /s/ Xxxxxx X. Xxxxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxxx
-------------------------------- -----------------------------
Name: Xxxxxx X. Xxxxxxxxxx Name: Xxxxxx X. Xxxxxxxxxx
Title: Treasurer Title: Treasurer
NS GROUP, INC., a Kentucky corporation,
solely with respect to amendments to
subsections 6.4, 6.8 and 7.17 of the
Financing Agreement
By: /s/ Xxxxxx X. Xxxxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Vice President, Treasurer
AGENT AND LENDERS:
THE CIT GROUP/BUSINESS CREDIT,
INC., as Agent and a Lender
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
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EXHIBIT A
Conditions Precedent
The following is a list of the principal documents and deliveries to be received
by the Agent and the undertakings to be satisfied on or before the effectiveness
of this Amendment:
AMENDMENTS TO EXISTING LOAN DOCUMENTS
1. Amendment No. 1 to Financing and Security Agreement among the Agents, the
Lenders and the Companies, together with the following Exhibits and Schedules
duly executed and delivered by the Companies, Agent, and each Lender:
Exhibit A - Conditions Precedent
Schedule 1 - Permitted Liens
Schedule 2.1 - Bailee Locations, Owned and Leased Real Estate
Schedule 7.1 - Collateral and Company Information
2. Amended and Restated Revolving Credit Promissory Note, duly executed and
delivered by the Companies
3. UCC Fixture Filings on equipment (as appropriate) and UCC Financing Statement
Amendments filed against the Companies and the Guarantors, amending the
collateral descriptions:
(a) NS Group, Inc.: Kentucky, Secretary of State
(b) Newport Steel: Kentucky, Secretary of State
(c) Xxxxxx Steel: Pennsylvania, Department of State
(d) Erlanger: Oklahoma County, Oklahoma
(e) NK Management Kentucky, Secretary of State
ADDITIONAL SECURITY DOCUMENTS
4. Reaffirmation of Guaranty and Consent duly executed and delivered by Parent,
Erlanger and NK Management
5. Amended and Restated Security Agreement and Schedule 1, duly executed and
delivered by Parent and Agent
6. Pledge Agreement, together with stock certificates and blank stock powers,
duly executed and delivered by Parent, covering all capital stock owned by
Parent in the Companies and the other Guarantors
7. Intellectual Property Security Agreement(s) duly executed and delivered by
the Companies and Guarantors, as appropriate
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8. Amended and Restated Security Agreement and Schedule 1, duly executed and
delivered by Erlanger, NK Management and Agent
9. Updated UCC, tax, mechanics lien, judgment and pending litigation searches,
as follows:
(a) with respect to Parent, from the Secretary of State of Kentucky and
the Xxxxxxxx Co., KY recorder's office;
(b) with respect to Newport Steel, from the Secretary of State of
Kentucky and the Xxxxxxxx Co., KY recorder's office;
(c) with respect to Xxxxxx Steel, from the Department of State of
Pennsylvania, the Beaver Co., PA and Xxxxxxxx Co., TX recorder's office;
(d) with respect to Erlanger, the County Clerk-Central Filing Office,
Oklahoma and the Oklahoma Co., OK and the Xxxxxx Co., OK recorder's office
(e) with respect to NK Management, from the Secretary of State of
Kentucky, and the Xxxxx Co., KY recorder's office
REAL ESTATE DOCUMENTS/DELIVERIES
10. Title insurance policies and surveys for each parcel of Real Estate owned by
the Companies or the Guarantors excluding NK Management
11. Mortgages for each parcel of Real Estate referenced in item #10 above, duly
executed and delivered by the appropriate party
12. Fixture filings
CORPORATE DOCUMENTS/DELIVERIES
13 . Officer's Closing Certificate, executed by an authorized officer of each of
the Companies
14. Secretary's Certificate of Parent regarding resolutions of Parent's board of
directors and incumbency and signatures of Parent's officers
15. Secretary's Certificate of each of Erlanger and NK Management regarding
resolutions of each Guarantor's board of directors and incumbency and signatures
of each Guarantor's officers
16. Certificates of Good Standing as follows:
(a) Newport Steel - Kentucky and Texas Indiana Secretary of State,
(b) Xxxxxx Steel - Oklahoma, Pennsylvania and Texas,
(c) Parent - Kentucky,
(d) Erlanger - Oklahoma
(e) NK Management - Kentucky
(f) Any other jurisdiction in which a Borrower or Guarantor is
qualified to do business as a foreign corporation
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17. Legal Opinion from counsel to the Companies and the Guarantors regarding
Amendment No. 1 to Financing and Security Agreement and the other agreements
relating thereto
SENIOR NOTE DEBT DELIVERIES
18. Payoff letter and Authorization and Acknowledgment to File Termination
Statements
19. UCC terminations required by Agent
20. Release of all Mortgages/Deeds of Trust/fixture filings held pursuant to the
Senior Note Indenture
21. Release of all intellectual property security interests held pursuant to the
Senior Note Indenture
OTHER DELIVERIES
22. Borrowing Base Certificate
23. Certificate of property and casualty insurance with respect to the property
of the Companies with evidence of Agent having been name as loss payee thereon
with respect to the Collateral
24. Loss payee endorsement in favor of Agent with respect to the foregoing
property and casualty insurance policies
25. Certificate of the Companies' general liability insurance with evidence of
Agent having been named as additional insured thereon
26. The Fee Letter duly executed and delivered by the Companies
27. Additional Bailee Letters
28. Covenant Compliance Certificate
29. Pre-filing Authorization
30. Fee Letter
31. Such other documents as Agent may reasonably request in connection with this
Amendment in form and substance satisfactory to Agent and Lenders
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