EXHIBIT 99.2
CONSENT TO RELEASE OF COLLATERAL
THIS CONSENT TO RELEASE OF COLLATERAL (this "Consent") is entered into
as of January 16, 2002 among GENEVA STEEL LLC, a Delaware limited liability
company ("Borrower"), each Lender signatory hereto (each, together with its
successors and permitted assigns, a "Lender"), and CITICORP USA, INC., acting as
agent for itself and the other Lenders (in such capacity, "Agent"). Unless
otherwise specified herein, all capitalized terms used in this Consent shall
have the meanings ascribed to them in the Loan Agreement (as hereinafter
defined).
W I T N E S S E T H:
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WHEREAS, the Borrower, the Agent and the Lenders are party to a Term
Loan Agreement dated as of January 3, 2001 (as amended, supplemented, restated
or otherwise modified from time to time, the "Loan Agreement");
WHEREAS, prior to November 15, 2001, the Borrower informed the Agent of
its intention to temporarily shut down the majority of its operations and the
operations of its Subsidiaries and to continue to sell certain of their
inventories and to collect their receivables in an orderly manner during such
temporary shut-down period;
WHEREAS, the Agent determined that there had occurred a material adverse
change in the value of the security interests or in the business, operations,
assets, liabilities (contingent or otherwise) or financial condition of the
Borrower since January 2, 2001;
WHEREAS, the Agent also determined that a shut-down of the Borrower's
and its Subsidiaries' operations constitutes a Default and/or an Event of
Default under the Loan Agreement;
WHEREAS, prior to November 15, 2001 the Borrower informed the Agent of
its belief that the best method for the preservation of the value of the assets
of the Borrower and its Subsidiaries was to continue to sell certain of their
inventories and to collect their receivables in conjunction with continued
limited funding in accordance with a budget made under the Credit Agreement,
dated as of January 3, 2001, as amended, among the Borrower, the lenders and
issuers party thereto and Citicorp, as agent for the lenders (as amended, the
"Credit Agreement");
WHEREAS, in light of the foregoing, prior to November 15, 2001 the
Borrower requested that the Agent and the Lenders forbear from exercising the
remedies available to them under the Loan Agreement until the close of business
on December 21, 2001 while the Borrower and its Subsidiaries operated in a
shut-down mode and applied the proceeds of the collateral securing the Credit
Agreement to the outstandings thereunder (including the cash collateralization
of letters of credit);
WHEREAS, on November 15, 2001 the Borrower, the Agent and the Lenders
entered into a Forbearance Agreement, which was consented to by the Government
Guarantor, pursuant to which the Agent and the Lenders agreed, with the
Government Guarantor's consent, to such forbearance on the terms set forth
therein (the "Original Forbearance Agreement");
WHEREAS, as of December 21, 2001 the Borrower had paid all of the
outstandings under the Credit Agreement and cash collateralized all letters of
credit issued thereunder, and the commitments under the Credit Agreement had
been terminated;
WHEREAS, prior to December 21, 2001 the Borrower informed the Agent that
the Borrower believed that the best method for the preservation of the value of
the assets of the Borrower and its Subsidiaries was, at least until January 11,
2002, to continue to investigate the possibility of additional financing and to
continue to sell certain of their inventories and to collect their receivables
and to deposit the proceeds of such inventory and receivables in a Blocked
Account or a Cash Collateral Account as directed by the Agent, which proceeds
the Agent would disburse to the Borrower (after receipt of a written request
from the Borrower) for application to the shut-down costs of the Borrower in
accordance with a budget;
WHEREAS, in light of the foregoing, prior to December 21, 2001 the
Borrower requested that the Agent and the Lenders amend and restate the Original
Forbearance Agreement to provide that the Agent and Lenders forbear from
exercising the remedies available to them under the Loan Agreement for an
extended period until the close of business on January 11, 2002 while the
Borrower and its Subsidiaries operate in accordance with a budget and deposit
the proceeds of such inventory and receivables into a Blocked Account or a Cash
Collateral Account as directed by the Agent, which proceeds the Agent would
disburse to the Borrower (after receipt of a written request from the Borrower)
for application to the shut-down costs of the Borrower in accordance with a
budget;
WHEREAS, on December 21, 2001 the Borrower, the Agent and the Lenders
entered into an Amended and Restated Forbearance Agreement, which was consented
to by the Government Guarantor, pursuant to which the Agent and the Lenders
agreed, with the Government Guarantor's consent, to such forbearance on the
terms set forth therein (the "Amended and Restated Forbearance Agreement");
WHEREAS, after the close of business on January 11, 2002 the forbearance
agreed to pursuant to the Amended and Restated Forbearance Agreement expired
pursuant to its terms without the Borrower having obtained any additional
financing;
WHEREAS, the Borrower has informed the Agent and the Government
Guarantor of the Borrower's belief that the best method for the preservation of
the value of the assets of the Borrower and its Subsidiaries is, until January
23, 2002, for the Borrower to investigate its strategic alternatives, including,
without limitation, (i) the retention of an investment bank to explore a sale of
the business of the Borrower and its Subsidiaries as a going concern or a sale
of the Collateral, (ii) the filing of a petition pursuant to Chapter 11 of title
11, United States Code (the "Bankruptcy Code"), (iii) seeking the agreement of
the Agent, the Lenders and the Government Guarantor to the entry of a
stipulation in connection with such petition pursuant to which the Agent and the
Lenders, with the consent of the Government Guarantor, would consent to the
Borrower's use of cash collateral in accordance with an agreed budget, and (iv)
continuing to investigate the possibility of additional financing;
WHEREAS, in connection with such investigation, the Borrower has
requested that the Agent and the Lenders and the Government Guarantor consent to
the use of the proceeds of collateral for an extended period until the close of
business on January 23, 2002 while the Borrower and its Subsidiaries operate in
accordance with the Budget (as defined below) and deposit the proceeds of such
inventory and receivables into a Blocked Account or a Cash Collateral Account as
directed by the Agent, which proceeds the Agent shall disburse to the Borrower
(after receipt of a written request from the Borrower) for application to the
shut-down costs of the Borrower in accordance with the Budget;
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WHEREAS, the Borrower has requested that the Agent release the proceeds
of the Collateral from the Liens held by the Agent to effect the purposes
hereof;
WHEREAS, the Agent and the Lenders are willing to agree, and the
Government Guarantor is willing to consent, to such extended forbearance on the
terms and conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
RELEASE OF COLLATERAL
SECTION 1.01. Release of Collateral. In order to permit the Borrower to
apply the proceeds of the inventory and receivables to the costs of the Borrower
in accordance with the budget prepared by the Borrower and attached hereto as
Exhibit A (the "Budget"), upon receipt of a written request from the Borrower
the Agent will, and is hereby authorized to, release (in accordance with the
daily cumulative amounts in the Budget not to exceed in the aggregate
$2,410,000) such Collateral from the Liens of the Agent only as such funds are
expended by the Borrower. The Agent shall have no obligation to disburse to the
Borrower, and the Borrower shall have no right to withdraw, any amount from any
Blocked Account or Cash Collateral Account except as provided for in the
aggregate in the Budget, subject to the limitations set forth in the immediately
preceding sentence. This Consent, and the obligation of the Agent to release
such Collateral to the Borrower, shall be terminated upon the earlier to occur
of (i) the expiration of 24 hours following written notice from the Agent to the
Borrower of such termination describing the circumstances causing such
termination and such circumstances shall not have been cured, (ii) the filing of
a voluntary petition by the Borrower pursuant to the Bankruptcy Code, and (iii)
the close of business on January 23, 2002.
ARTICLE II
CONDITIONS PRECEDENT TO CONSENT
The provisions relating to the release of Collateral set forth in
Article I hereof shall become effective on the date (the "Effective Date") that
each of the following conditions precedent are or shall be contemporaneously
satisfied:
SECTION 2.01. The Agent shall have received counterparts of this
Consent duly executed by the Agent, the Lenders, the Borrower and the Government
Guarantor.
SECTION 2.02. The Agent shall have received, dated the date of
receipt thereof by the Agent, in form and substance satisfactory to the Agent, a
certificate signed by a duly authorized officer of the Borrower stating that:
(a) The representations and warranties contained in Article III
hereof are correct on and as of the date of such certificate as though made on
and as of such date; and
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(b) After giving effect to this Consent, no event has occurred
and is continuing which constitutes a Default or an Event of Default, other than
the Specified Defaults (as defined in the Amended and Restated Forbearance
Agreement).
SECTION 2.03. After giving effect to this Consent, no event has
occurred and is continuing which constitutes a Default or an Event of Default,
other than the Specified Defaults (as defined in the Amended and Restated
Forbearance Agreement).
SECTION 2.04. The Borrower shall have paid and reimbursed the
Agent and the Lenders for all outstanding and unpaid fees, costs and expenses,
including fees and expenses of Weil, Gotshal & Xxxxxx LLP.
SECTION 2.05. Each of the Agent and the Government Guarantor
shall have received such documents from the Borrower as the Agent shall request
in writing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents and warrants to the Agent and the Lenders that:
SECTION 3.01. AUTHORIZATION. The execution, delivery and
performance by the Borrower of this Consent have been authorized by all
necessary limited liability company action, and this Consent constitutes the
legal, valid and binding obligation of the Borrower enforceable against it in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and the application
of general principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law).
SECTION 3.02. NO CONFLICT. Neither the execution, delivery and
performance of this Consent nor the consummation of the transactions
contemplated hereby does or shall contravene, result in a breach of, or violate
(a) any provision of the Borrower's certificate of formation or agreement of
limited liability company, (b) any law or regulation, or any order or decree of
any court or government agency or instrumentality, or (c) any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which the
Borrower or any of its Subsidiaries is a party or by which the Borrower or any
of its Subsidiaries or any of their property is bound.
SECTION 3.03. REPRESENTATIONS AND WARRANTIES IN THE LOAN
AGREEMENT. The representations and warranties set forth in Article IV of the
Loan Agreement (other than the representations and warranties set forth in
Section 4.5 of the Loan Agreement and clause (c) of Section 4.11 of the Loan
Agreement) and in each other Loan Document are true and correct in all material
respects on and as of the Effective Date with the same effect as though made on
and as of such date, except to the extent such representations and warranties
expressly relate only to an earlier date.
SECTION 3.04. NO DEFAULT. After giving effect to this Consent no
Default or Event of Default other than any Specified Default (as defined in the
Amended and Restated Forbearance Agreement) has occurred and is continuing under
the Loan Agreement.
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ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.01. REFERENCE TO AND EFFECT UPON THE LOAN AGREEMENT;
NO WAIVER.
(a) The Loan Agreement and the other Loan Documents shall remain
in full force and effect and are hereby ratified and confirmed.
(b) The execution, delivery and effectiveness of this Consent
shall not operate as a waiver of any Default or Event of Default or any right,
power, privilege or remedy of the Agent or any Lender under the Loan Agreement
or any Loan Document, or constitute a waiver of any provision of the Loan
Agreement or any Loan Document.
SECTION 4.02. COSTS AND EXPENSES. As provided in Section 10.3 of
the Loan Agreement, the Borrower agrees to reimburse the Agent and the Lenders
and the Government Guarantor for all reasonable fees, costs and expenses,
including the reasonable fees, costs and expenses of counsel or other advisors
for advice, assistance, or other representation in connection with this Consent.
SECTION 4.03. RELEASE. In further consideration of the Lenders'
execution of this Consent, the Borrower hereby releases each of the Agent, the
Government Guarantor and each Lender and each of their respective affiliates,
officers, employees, directors, agents and attorneys (collectively, the
"Releasees") from any and all claims, demands, liabilities, responsibilities,
disputes, causes of action (whether at law or equity) and obligations of every
kind or nature whatsoever, whether liquidated or unliquidated, known or unknown,
matured or unmatured, fixed or contingent that the Borrower may have against the
Releasees which arise from or in any way relate to the Obligations, any
Collateral, any Loan Document (including, without limitation, the Original
Forbearance Agreement, the Amended and Restated Forbearance Agreement and this
Consent), any documents, agreements, dealings or other matters in connection
with or relating to any of the Loan Documents, and any third parties liable in
whole or in part for the Obligations, in each case to the extent arising (x) on
or prior to the date hereof or (y) out of, or relating to, actions, dealings or
matters occurring on or prior to the date hereof (including, without limitation,
any actions or inactions which any of the Releasees may have taken or omitted to
take prior to the date hereof).
SECTION 4.04. GOVERNING LAW. THIS CONSENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 4.05. SUBMISSION TO JURISDICTION; SERVICE OF PROCESS.
Any legal action or proceeding with respect to this Consent or any other Loan
Document may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by execution and
delivery of this Consent, the Borrower hereby accepts for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. The parties hereto hereby irrevocably waive any objection,
including any objection to the laying of venue or based on the grounds of forum
non conveniens, which any of them may now or hereafter have to the bringing of
any such action or proceeding in such respective jurisdictions.
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SECTION 4.06. WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS AND
THE BORROWER IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH
RESPECT TO THIS CONSENT.
SECTION 4.07. HEADINGS. Section headings in this Consent are
included herein for convenience of reference only and shall not constitute a
part of this Consent for any other purposes.
SECTION 4.08. COUNTERPARTS. This Consent may be executed in any
number of counterparts and by facsimile, each of which counterparts when so
executed shall be deemed an original, but all such counterparts shall constitute
one and the same instrument.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Consent to be
executed and delivered by their proper and duly authorized officers as of the
date set forth above.
BORROWER:
GENEVA STEEL LLC
By: /s/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
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Title: Vice President of Finance and Treasurer
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AGENT AND LENDER:
CITICORP USA, INC.,
as Agent and Term A Lender
By: /s/ Xxxxx X. Xxxxxx
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Name: Managing Director
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Title: Managing Director
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LENDERS:
CITICORP NORTH AMERICA, INC.
as Term B Lender
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
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Title: Vice President
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CITICORP NORTH AMERICA, INC.
as Term C Lender
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
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Title: Vice President
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[Signature Page to Consent to Release of Collateral]
GOVERNMENT GUARANTOR:
Approved and consented to the foregoing Consent
as of this 16th of January, 2002
EMERGENCY STEEL LOAN GUARANTY BOARD,
as Government Guarantor
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx J, Rooney
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Title: Secretary to the Board
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[Government Guarantor Consent Page to Consent to Release of Collateral]
