THIRD EXTENSION AND MODIFICATION TO POST-PETITION
LOAN AND SECURITY AGREEMENT
THIRD EXTENSION AND MODIFICATION TO POST-PETITION LOAN AND SECURITY
AGREEMENT (the "Modification") dated June 26, 1998, by and between CONSOLIDATED
STAINLESS, INC. (the "Borrower"), XXXXXX X. XXXXX and XXXXXX X. XXXXX
(collectively, the "Guarantors" and each, a "Guarantor"), and MELLON BANK, N.A.
(the "Bank"). Borrower and Guarantors are sometimes collectively referred to
herein as the "Obligors".
BACKGROUND
A. Pursuant to a certain Post-Petition Loan and Security Agreement dated
December 12, 1997 by and between Borrower and Bank as modified on February 24,
1998, on March 4, 1998, on March 9, 1998, April 13, 1998 and April 16, 1998, and
as extended and modified by the Extension and Modification to Post-Petition Loan
and Security Agreement dated May 29, 1998 and the Second Extension and
Modification to Post-Petition Loan and Security Agreement dated June 12, 1998
(collectively, the "Loan Agreement"), Bank agreed, subject to the terms and
conditions stated therein, to extend to Borrower a line of credit up to the
maximum amount as defined therein (the "Line").
B. By that certain Surety Agreement dated December 12, 1997, Guarantors
agreed to guarantee and become sureties for certain obligations of Borrower to
Bank, including those arising under the Loan Documents.
C. Borrower has requested that Bank consent to the extension of the term
and modification of certain provisions of the Loan Agreement, which Bank is
willing to do upon and subject to the terms and conditions of this Modification.
D. All capitalized terms not defined herein shall have the meanings set
forth therefor in the Loan Agreement.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. ACKNOWLEDGMENT OF DEFAULTS. Borrower hereby confirms and acknowledges that
it is in default of its respective obligations under the Loan Documents as
a result, inter alia, of (a) Borrower's prior failure to achieve projected
monthly sales as required in Article 13.1(c) of the Loan Agreement, (b)
Borrower exceeding the Inventory Sublimit, WIP Sublimit and Permitted
Out-of-Formula Advances as scheduled under the Loan Agreement, and (c) the
existence of Out-of-Formula Advances from time to time. Borrower further
acknowledges and agrees that the Bank has certain rights and remedies
available to it as a result of the occurrence of the defaults, including
the right to confess judgment against the Borrower and each Guarantor.
BORROWER AND GUARANTORS EXPRESSLY AGREE THAT NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO CONSTITUTE A WAIVER OR RELEASE OF ANY EXISTING EVENTS
OF DEFAULT OR OF ANY RIGHTS AND REMEDIES AVAILABLE TO BANK AS A RESULT
THEREOF.
2. MODIFICATIONS.
The Loan Agreement shall be modified, effective as of June 29, 1998, as
follows:
a. Schedule 1.57 shall be modified by substituting the following
Schedule 1.57:
PERMITTED OUT-OF-FORMULA ADVANCES
Time Period Permitted Out-of-Formula Advances
----------- ---------------------------------
From June 29, 1998 to and including $2,275,000.00 less the Additional
July 3, 1998 Reduction if any.
From July 4, 1998 to and including $2,175,000.00 less the Additional
if July 10, 1998 Reduction if any.
From July 11, 1998 to and including $2,150,000.00 less the Additional
July 17, 1998 Reduction if any.
From July 18, 1998 to and including $2,000,000.00 less the Additional
July 24, 1998 Reduction if any.
From July 25, 1998 to and including $1,950,000.00 less the Additional
July 31, 1998 Reduction if any.
From August 1, 1998 and at all times $1,925,000.00 less the Additional
thereafter Reduction if any.
"Additional Reduction" means the sum of (i) fifty percent (50%) of the proceeds
of Borrower's "Pre-Petition Delinquent Accounts" (defined as Borrower's
pre-petition date accounts receivable that are ninety days or more past invoice
date as of April 10, 1998), plus (ii) sixty-five percent (65%) of the amount by
which the Value of Borrower's ineligible inventory is less than $1,000,000.00.
Notwithstanding anything in the Loan Agreement, fifty percent (50%) of the
proceeds of the collection of Pre-Petition Delinquent Accounts shall be applied
to the reduction of the Permitted Out-of-Formula Advance at the Bank's
discretion. The Additional Reduction shall apply upon the occurrence of either:
(a) July 30, 1998, or (b) the aggregate collection by Borrower of Borrower's
Pre-Petition Delinquent Accounts in excess of $60,000.00 during the period June
29, 1998 through July 31, 1998. Any additional availability under the Line in
excess of that set forth in the Budget may not be used by the Borrower for any
cash disbursements other than the cash disbursements as set forth in the Budget,
until the Bank and Borrower have agreed to a further reduction in the Permitted
Out-of-Formula Advances beyond those set forth above.
b. Schedule 3.1(b) shall be modified by substituting the following
Schedule 3.1(b):
SUBLIMITS ON INVENTORY AND WIP ADVANCES
A. Inventory Sublimit
Time Period Inventory Sublimit
----------- ------------------
From June 29, 1998 to and including $7,100,000.00
July 3, 1998
From July 4, 1998 to and including $7,000,000.00
July 10, 1998
From July 11, 1998 to and including $6,800,000.00
July 17, 1998
From July 18, 1998 to and including $6,500,000.00
July 24, 1998
From July 25, 1998 to and including $6,300,000.00
July 31, 1998
From August 1, 1998 and at all times $6,000,000.00
thereafter
B. WIP Sublimit
Time Period WIP Sublimit
----------- ------------
From June 29, 1998 $175,000.00
to and including July 31, 1998
From August 1, 1998 and at all $150,000.00
times thereafter
c. Schedule 1.46 shall be modified by substituting the following
Schedule 1.46:
MAXIMUM AMOUNT
Time Period Maximum Amount
----------- --------------
From June 29, 1998 to and including $11,600,000.00
July 3, 1998
From July 4, 1998 to and including $11,500,000.00
July 10, 1998
From July 11, 1998 to and including $11,350,000.00
July 17, 1998
From July 18, 1998 to and including $11,250,000.00
July 24, 1998
From July 25, 1998 to and including $11,150,000.00
July 31, 1998
From August 1, 1998 and at all times $11,000,000.00
thereafter
d. Paragraph 3.1(a) shall be modified by substituting the following
Paragraph 3.1(a):
3.1(a) Establishment of Line. Bank will establish for Borrower for
and during the period from June 29, 1998 until July 31, 1998 (as
such period may be extended hereunder, the "Contract Period"),
subject to the terms and conditions hereof, a revolving line of
credit (the "Line") pursuant to which Bank will from time to time
make loans or other extensions of credit to Borrower in an aggregate
amount not exceeding at any time the lesser of: the (i) Borrowing
Base, or (ii) Adjusted Maximum Amount and only for cash
disbursements as set forth in the Budget. Within the limitations set
forth in this Section 3.1, Borrower may borrow, repay and reborrow
under the Line. The Line shall be subject to all terms and
conditions set forth in all of the Loan Documents which terms and
conditions are incorporated herein. Borrower's obligation to repay
the loans and extensions of credit under the Line shall be evidenced
by Borrower's promissory note (the "Line Note") in the maximum face
amount of Nineteen Million Dollars ($19,000,000.00), dated December
12, 1997.
e. Paragraph 3.1 (d) shall be modified by substituting the following
Paragraph 3.1(d):
3.1(d) Extension of Contract Period. Bank may extend the Contract
Period beyond July 31, 1998 on terms and conditions acceptable to
Bank and at Bank's sole discretion upon payment of an additional
Loan Fee and approval by the Court.
f. Paragraph 8.28 shall be modified by substituting the following
Paragraph 8.28:
8.28 Permanent Financing Order. Borrower will use its best efforts
to cause the Permanent Financing Order to be entered by the
Bankruptcy Court
on or before twenty (20) days after the date of entry of the Interim
Financing Order.
g. The following paragraph 8.37 shall be added to the Loan Agreement:
8.37 Financing of Manufacturing Facilities. As of July 15, 1998,
Bank shall have no obligation to advance any sums to Borrower for
any operational costs or other costs associated with the Lakeland
and Auburndale manufacturing facilities including, but not limited
to, payroll, payroll taxes and employee benefits, unless Bank agrees
otherwise in writing prior to July 15, 1998.
h. Paragraph 14.1 shall be modified by substituting the following
Paragraph 14.1:
14.1 Communications and Notices. All notices, requests and other
communications made or given in connection with the Loan Documents
shall be in writing and, unless receipt is stated herein to be
required, shall be deemed to have been validly given if delivered
personally to the individual or division or department to whose
attention notices to a party are to be addressed, or by private
carrier, or registered or certified mail, return receipt requested,
or by telecopy with the original forwarded by first-class mail, in
all cases, with charges prepaid, addressed as follows, until some
other address (or individual or division or department for
attention) shall have been designated by notice given by one party
to the other:
To Borrower: Consolidated Stainless, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, President
Telecopier No.: (000) 000-0000
with a copy to: Saul, Ewing, Xxxxxx & Xxxx LLP
Centre Square West
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esquire
Telecopier No.: (000) 000-0000
with a copy to: Greenberg, Traurig, Hoffman, Lipoff,
Xxxxx & Xxxxxxx
Citicorp Center
000 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Esquire
Telecopier No.: (000) 000-0000
To Bank: Mellon Bank, N.A.
0000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx, Vice President
Telecopier No.: (000) 000-0000
with a copy to: Klehr, Harrison, Xxxxxx, Branzburg
& Xxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
Telecopier No.: (000) 000-0000
with a copy to: Wolf, Block, Xxxxxx & Xxxxx-Xxxxx LLP
000 Xxxxx 00xx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx, Esquire
Telecopier No.: (000)000-0000
i. Paragraph 8.16 shall be modified by substituting the following
Paragraph 8.16:
8.16 Maintenance of Management. Borrower shall cause its business to
be continuously managed by its present management consisting of
Xxxxxx X. Xxxxx as President and Co-CEO and Xxxxxxx Xxxxxxxx of
Phoenix Management Services, Inc. as Co-CEO on terms and conditions
and with responsibilities acceptable to Bank.
j. Paragraph 1.14 shall be modified by substituting the following
Paragraph 1.14:
1.14 "Budget" means that certain Budget and Cash Flow Projections
dated June 26, 1998, prepared by Borrower for the period June 29,
1998 through July 31, 1998 and attached hereto as Exhibit "A", as
the same may be updated from time to time. The Budget includes,
without limitation, statements of receipts and disbursements and
availability reports prepared on a weekly cash basis for the
Contract Period, and balance sheets, profit and loss statements and
cash flow statements prepared on a monthly accrual basis for the
Contract Period.
k. Paragraph 13.1 shall be modified by adding the following
subparagraph 13.1(y):
(y) The failure by the Borrower to file a Chapter 11 Plan of
Reorganization on or before July 31, 1998 that is acceptable in all
respects to Bank in Bank's sole discretion.
l. The following paragraph 8.38 shall be added to the Loan Agreement:
8.38 Access to Investment Bankers. Borrower shall make available to
Bank, and Bank may contact directly, the investment bankers retained
by the Borrower. Such investment bankers shall discuss with and
disclose to Bank any and all information regarding the potential
sale of any of the Borrower's assets and any information requested
by Bank. Bank agrees to attempt to notify Borrower prior to
contacting the investment bankers, but Bank will notify Borrower
when Bank has had contact with the investment bankers.
m. The following paragraph 8.39 shall be added to the Loan Agreement:
8.39 Phoenix Management Services, Inc. Borrower shall retain Phoenix
Management Services, Inc. and Xxxxxxx Xxxxxxxx of Phoenix Management
Services, Inc. as Co-CEO of the Borrower on terms and conditions and
with responsibilities acceptable to Bank. At times convenient to
Bank and Borrower, Xxxxx Xxxxxxxx and Phoenix Management Services,
Inc. shall be available to Bank to apprise Bank of any issues and/or
status with respect to the Borrower's operations, financing, asset
disposition or reorganization. The compensation of Xxxxxxx Xxxxxxxx
and Phoenix Management Services, Inc. may be paid by Bank either
debiting Borrower's account or advancing funds under the Line
consistent with the Loan Agreement and this Modification.
n. The following paragraph 13.2 (d) shall be added to the Loan
Agreement:
13.2 (d) Borrower's Exclusivity Period. If Borrower fails to file a
Chapter 11 Plan of Reorganization on or before July 31, 1998 or if
any Plan of Reorganization that is filed by Borrower is not
acceptable to Bank, in Bank's sole discretion, then Borrower agrees
that any existing exclusive period in which to file or solicit
acceptances to Borrower's Plan of Reorganization shall be dissolved
as to Bank and Bank shall be permitted to file and solicit
acceptances to its own Chapter 11 Plan, should Bank so chose.
3. OTHER REFERENCES. All references in the Loan Agreement and all the Loan
Documents to the term "Loan Documents" shall mean the Loan Documents as
defined therein, and this
Modification, and any and all other documents executed and delivered by
Borrower pursuant to and in connection herewith.
4. FURTHER AGREEMENTS AND REPRESENTATIONS. Obligors hereby:
a. Ratify, confirm and acknowledge that the Loan Agreement, as amended
hereby, and the other Loan Documents continue to be valid, binding
and in full force and effect;
b. Covenant and agree to perform all of their respective obligations
under the Loan Agreement, as amended hereby, and the Loan Documents;
c. Acknowledge and agree that as of the date hereof, no Obligor has any
defense, set-off, counterclaim or challenge against the payment of
any sums constituting Bank Indebtedness or the enforcement of any of
the terms of the Loan Agreement, as amended hereby, or any of the
other Loan Documents;
d. Ratify and confirm that all representations and warranties of the
Obligors, contained in the Loan Agreement and/or the other Loan
Documents, are true and complete on and as of the date hereof, as if
made on and as of the date hereof;
e. Acknowledge and agree that nothing contained herein shall be deemed
to impair, reduce or release in any manner whatsoever any of the
Obligations of Guarantors under the Surety Agreement;
f. Represent and warrant that the execution and delivery of this
Amendment by Obligors and all documents and agreements to be
executed and delivered pursuant to the terms hereof;
i. have been duly authorized by all requisite corporate action by
Borrower;
ii. will not conflict with or result in the breach of or
constitute a default (upon the passage of time, delivery of
notice or both) under Borrower's Certificate of Incorporation
or By-Laws or any applicable statute, law, rule, regulation or
ordinance or any indenture, mortgage, loan or other document
or agreement to which any Obligor is a party or by which any
of them is bound or affected; and
iii. will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the
property or assets of any Obligor, except liens in favor of
the Bank or as permitted hereunder or under the Loan
Documents;
g. Represent and warrant that all of the information described in the
foregoing Background is accurate; and
h. Acknowledge and agree that Obligors' failure to comply with or
perform any of their respective covenants, agreements or obligations
contained in this Amendment or any other documents executed and
delivered by any of them in connection herewith will, subject to
applicable notice, grace and cure periods, constitute an Event of
Default under the Loan Agreement and each of the Loan Documents.
5. NO NOVATION. Nothing contained herein and no actions taken pursuant to the
terms hereof are intended to constitute a novation of the Loan Agreement
or any of the Loan Documents and shall not constitute a release,
termination or waiver of any of the liens, security interests, rights or
remedies granted to Bank in the Loan Documents.
6. NO FURTHER AMENDMENTS. Nothing contained herein constitutes an agreement
or obligation by Bank to grant any further amendments or modifications to
any of the Loan Documents.
7. INCONSISTENCIES. To the extent of any inconsistency between the terms and
conditions of this Modification and the terms and conditions of the Loan
Agreement or the Loan Documents as previously modified, the terms and
conditions of this Modification shall prevail. All terms and conditions of
the Loan Agreement and the Loan Documents as previously modified and not
inconsistent herewith shall remain in full force and effect, and are
hereby ratified and confirmed by Borrower and Guarantors.
8. CONSTRUCTION. All references to the Loan Agreement therein or in any of
the other Loan Documents shall be deemed to be a reference to the Loan
Agreement, as modified hereby.
9. BINDING EFFECT. This Modification shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
10. GOVERNING LAW. This Modification shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
11. HEADINGS. The headings of the sections of this Modification are inserted
for convenience only and shall not be deemed to constitute a part of this
Modification.
12. COUNTERPARTS. This Modification may be executed in any number of
counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Modification by
signing any such counterpart.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Modification to be
executed effective as of the day and year first above written.
CONSOLIDATED STAINLESS, INC.
By: /s/ Xxxxxx Xxxxx PRES.
-------------------------
Xxxxxx Xxxxx, President
{CORPORATE SEAL}
/s/ Xxxxxx Xxxxx (SEAL)
-----------------------------
XXXXXX X. XXXXX
Florida Driver License
X000-000-00-000-0
MELLON BANK, N.A.
By:
-------------------------
Name/Title:
-----------------
STATE OF FLORIDA :
: SS
COUNTY OF Orange :
On this, the 26th day of June, 1998, before me, a notary public,
personally appeared XXXXXX X. XXXXX, known to me (or satisfactorily proven) to
be the person whose name is subscribed to the within instrument, and
acknowledged that he executed the same for the purposes therein contained.
/s/ Xxxxxxxx X. Xxxxxxx
-----------------------
Notary Public
My Commission Expires:
------------------------------------------------
Xxxxxxxx X. Xxxxxxx
[SEAL] Notary Public, State of Florida
Commission No. CC 602158
My Commission Exp. 01/13/2001
Bonded Through Fla. Notary Service & Bonding Co.
------------------------------------------------
