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EXHIBIT 10.3
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of April
21, 2000 (this "Amendment"), is among ROUGE INDUSTRIES, INC., a Delaware
corporation ("Holdings"), ROUGE STEEL COMPANY, a Delaware corporation (the
"Borrower"), the financial institutions party hereto (the "Banks") and BANK ONE,
MICHIGAN, a Michigan banking corporation, as agent for the Banks (in such
capacity, the "Agent").
RECITALS
A. Holdings, the Borrower, the Agent and the Banks are
parties to a Credit Agreement dated as of December 16, 1997, as amended by a
First Amendment to Credit Agreement dated as of July 23, 1999 (the "Credit
Agreement").
B. Holdings and the Borrower desire to amend the Credit
Agreement, and the Agent and the Banks are willing to do so strictly in
accordance with the terms hereof.
TERMS
In consideration of the premises and of the mutual agreements
herein contained, the parties agree as follows:
ARTICLE I.
AMENDMENTS
Upon fulfillment of the conditions set forth in Article III
hereof, the Credit Agreement shall be amended as follows:
1.1 The definition of "Applicable Margin" contained in
Section 1.1 is restated as follows:
"Applicable Margin" shall mean (i) with respect to
Base Rate Loans, 0% and (ii) with respect to LIBOR Loans, the Letter
of Credit fees payable under Section 2A.4(b) and the facility fees
payable under Section 2.16, the applicable margin set forth opposite
the Total Debt to EBITDA Ratio set forth below:
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-------------------------- ----------------- ----------------- ----------------- -----------------
XXXXX X XXXXX XX XXXXX XXX XXXXX XX
-------------------------- ----------------- ----------------- ----------------- -----------------
Total Debt to
EBITDA Ratio < 1.00 >1.00 BUT >1.50 BUT >2.25
- <1.50 <2.25
- -
-------------------------- ----------------- ----------------- ----------------- -----------------
Applicable Margin for 0.15% 0.20% 0.25% 0.30%
Facility Fees
-------------------------- ----------------- ----------------- ----------------- -----------------
Applicable Margin for 0.725% 0.80% 1.00% 1.20%
LIBOR Loans and Letter
of Credit Fees
-------------------------- ----------------- ----------------- ----------------- -----------------
For purposes of determining the Applicable Margin, the Total Debt to
EBITDA Ratio will be determined at the end of each fiscal quarter of
the Borrower (a "Margin Determination Date"), commencing with the
fiscal quarter ending December 31, 2000. Such Applicable Margin
determined on a Margin Determination Date will be effective (a
"Margin Adjustment Date") commencing on the fifth day after Agent's
receipt of the financial statements delivered pursuant to Section
5.1(a) or (b) and the compliance certificate executed and delivered
by an Authorized Officer pursuant to Section 5.1(e) certifying the
Total Debt to EBITDA Ratio for the previous fiscal quarter, and shall
be effective with respect to all LIBOR Loans made, continued or
converted on or after such Margin Adjustment Date and shall be
effective with respect to all Letter of Credit fees payable under
Section 2A.4(b) and facility fees payable under Section 2.16 on or
after such Margin Adjustment Date. Notwithstanding the foregoing, if
a lower Applicable Margin would be effective on any Margin Adjustment
Date and a Default or Event of Default exists on such date or
Holdings and/or the Borrower has failed to deliver the financial
statements and compliance certificate described in Section 5.1(a) or
(b) or 5.1(e), respectively, with respect to a fiscal quarter or
fiscal year in accordance with the provisions thereof, then such
Applicable Margin shall not be so reduced until such Default or Event
of Default shall be cured or waived or Holdings and/or the Borrower
shall have delivered such financial statements and compliance
certificate in accordance with the provisions of Section 5.1(a) or
(b) and 5.1(e), as the case may be.
Notwithstanding the above, (i) from and including the Second
Amendment Effective Date to and including September 30, 2000, the
Applicable Margin for LIBOR Loans and Letter of Credit fees shall be
1.40% and the Applicable Margin for facility fees shall be 0.35% and
(ii) from and including October 1, 2000 to and including the First
Margin Determination Date after December 31, 2000, the Applicable
Margin for LIBOR Loans and Letter of Credit fees shall be 1.20% and
the Applicable Margin for facility fees shall be 0.30%.
1.2 The definition of "Interest Coverage Ratio" is
restated as follows:
"Interest Coverage Ratio" shall mean:
(a) for the fiscal quarters ending June 30, 2000, September
30, 2000 and December 31, 2000 and March 31, 2001, the ratio of
EBITDA to Interest Expense, as calculated for the fiscal quarter then
ending in the case of the fiscal quarter ending June 30, 2000, as
calculated for the two consecutive fiscal quarters ending in the case
of the
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fiscal quarter ending September 30, 2000, as calculated for the three
consecutive fiscal quarters then ending in the case of the fiscal
quarter ending December 31, 2000 and as calculated for the four
consecutive fiscal quarters then ending in the case of the fiscal
quarter ending March 31, 2001; and
(b) for the fiscal quarter ending June 30, 2001 and any fiscal
quarter ending thereafter, the ratio of EBIT to Interest Expense, in
each case as calculated for the four consecutive fiscal quarters then
ending.
1.3 The following new definitions are hereby added to
Section 1.1 in appropriate alphabetical order:
"Second Amendment" shall mean the Second Amendment to
this Agreement dated April 21, 2000.
"Second Amendment Effective Date" shall mean the
effective date of the Second Amendment.
"Total Debt to EBITDA Ratio" shall mean, at any time,
the ratio of (i) Total Debt at such time to (ii) EBITDA, calculated
as of the end of the most recently ended fiscal quarter of Holdings
for the four consecutive fiscal quarters then ending, provided that
the amount calculated under this clause (ii) for (x) the fiscal
quarter ending June 30, 2000, shall be an amount equal to four times
the amount of EBITDA for the fiscal quarter then ending, (y) the
fiscal quarter ending September 30, 2000, shall be an amount equal to
two times the amount of EBITDA for the two consecutive fiscal
quarters then ending and (z) the fiscal quarter ending December 31,
2000, shall be an amount equal to four-thirds times the amount of
EBITDA for the three consecutive fiscal quarters then ending.
1.4 Section 2.16 is amended by deleting the last sentence
thereof (which sentence was added by the First Amendment).
1.5 A new Section 5.10 is added as follows:
5.10 Collateral. On or before May 15, 2000, Holdings,
the Borrower and each of their Subsidiaries will execute and deliver
to the Agent all security agreements, financing statements and other
agreements, documents and opinions requested by the Agent and in form
and substance acceptable to the Agent in order to provide a
perfectible and enforceable lien and security interest on all
accounts receivable, inventory and related assets of Holdings, the
Borrower and each of their Subsidiaries (all of the foregoing defined
herein as the "Collateral Documents"). Each of the Collateral
Documents shall be considered a Loan Document. Holdings and the
Borrower acknowledge and agree that the Collateral Documents shall be
effective and enforceable, provided that the Agent may not file any
of the financing statements unless required by the terms of the next
sentence. Notwithstanding anything in this Agreement to the contrary,
it is agreed by all parties that the Agent shall promptly file all
such financing statements upon the occurrence of any Event of Default
or if an Event of Default would have occurred but for any amendment
or modification of this Agreement or any waiver hereunder after the
Second Amendment Effective Date unless agreed to by all Banks.
Holdings and the Borrower agree to further execute and deliver, or
cause
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to be executed and delivered, such other agreements and documents
from time to time requested by the Agent in order to provide a
perfectible and enforceable lien and security interest on all
accounts receivable, inventory and related assets of Holdings, the
Borrower and their Subsidiaries.
1.6 Section 6.1(a) is restated as follows:
(a) Total Debt to EBITDA Ratio. Holdings shall not
permit or suffer the Total Debt to EBITDA Ratio to be greater than
(i) 3.0 to 1.0 at any time from and including June 30, 2000 to and
including December 30, 2000 or (ii) 2.5 to 1.0 at any time
thereafter.
1.7 Section 6.1(b) is restated as follows:
(b) Net Worth. Holdings shall not at any time permit
its Net Worth to be less than an amount equal to the sum of (i)
380,000,000 plus (ii) the aggregate of the Annual Increase for each
fiscal year of Holdings that shall have elapsed during the period
from January 1, 2000 through the date as at which compliance with
this Subsection (b) is being determined, such Annual Increase to be
added as of the end of each December 31, commencing December 31,
2000; provided, however, for purposes of determining Net Worth under
this Section 6.1(b), any reduction of Net Worth caused by purchases
by Holdings of its common stock in accordance with Section 6.5(vi)
shall be disregarded.
1.8 Section 6.1(c) is restated as follows:
(c) Interest Coverage Ratio. Holdings shall not
permit or suffer the Interest Coverage Ratio to be less than (i) 4.0
to 1.0 as of the end of any of the fiscal quarters ending June 30,
2000, September 30, 2000, December 31, 2000 or March 31, 2001 or (ii)
3.0 to 1.0 as of the end of any fiscal quarter thereafter.
1.9 Section 6.5 is amended by adding the following to the
end thereof: "and (vi) Holdings may make purchases of its common
stock in the open market at the then prevailing market prices at any
time prior to April 30, 2001 in an aggregate amount not to exceed
$10,000,000".
1.10 Annex 1 attached hereto is hereby substituted for
Annex 1 attached to the Credit Agreement.
ARTICLE II.
REPRESENTATIONS
Each of Holdings and the Borrower represents and warrants to
the Agent and the Banks that:
2.1 The execution, delivery and performance of this
Amendment are within its powers, have been duly authorized and are not in
contravention with any law, of the terms of its Articles of Incorporation or
By-Laws, or any undertaking to which it is a party or by which it is bound.
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2.2 This Amendment is the legal, valid and binding
obligation of it, enforceable against it in accordance with the terms hereof.
2.3 After giving effect to the amendments herein
contained, the representations and warranties contained in Section 4 of the
Credit Agreement and the representations and warranties contained in the other
Loan Documents are true on and as of the date hereof with the same force and
effect as if made on and as of the date hereof.
2.4 After giving effect to the waiver contained in
Section 4.1, no Event of Default or Default exists or has occurred and is
continuing on the date hereof.
ARTICLE III.
CONDITIONS OF EFFECTIVENESS
This Amendment shall become effective as of the date hereof
when each of the following has been satisfied.
3.1 This Amendment shall be signed by Holdings, the
Borrower and the Banks.
3.2 Holdings and the Borrower shall have delivered a
certified board resolution approving the execution, delivery and performance of
this Amendment.
3.3 The Borrower shall deliver such other agreements and
documents requested by the Agent.
ARTICLE IV.
MISCELLANEOUS.
4.1 Holdings and the Borrower have informed the Banks and
the Agent that an Event of Default has occurred due to a breach of Section
6.1(c) (the "Existing Default"), and Holdings and the Borrower have requested
that the Banks and the Agent waive the Existing Default subject to this
Amendment becoming effective pursuant to Article III hereof and the terms and
conditions set forth herein. Pursuant to such request, the Banks and the Agent
hereby waive the Existing Default for the period prior to the effectiveness of
this Amendment, but not at any time thereafter. The Borrower acknowledges and
agrees that the waiver contained herein is a limited waiver, limited to the
specific one time waiver described above. Such limited waiver (a) shall not
modify or waive any other term, covenant or agreement of the Loan Documents, and
(b) shall not be deemed to have prejudiced any present or future right or rights
which the Agent or the Banks now have or may have under the Loan documents.
4.2 Holdings and the Borrower jointly and severally agree
to pay each Bank which signs this Amendment on or before April 21, 2000 an
amendment fee equal to 0.15% on the amount of such Bank's Revolving Loan
Commitment after giving effect to this Amendment.
4.3 References in the Credit Agreement or in any other
Loan Document to the Credit Agreement shall be deemed to be references to the
Credit Agreement as amended hereby and as further amended from time to time.
4.4 The Borrower agrees to pay and to save the Agent
harmless for the payment of all costs and expenses arising in connection with
this Amendment, including the reasonable fees of counsel to the Agent in
connection with preparing this Amendment and the related documents.
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4.5 Except as expressly amended hereby, the Borrower
agrees that the Credit Agreement and all other Loan Documents are ratified and
confirmed and shall remain in full force and effect and that it has no set off,
counterclaim, defense or other claim or dispute with respect to any of the
foregoing. Terms used but not defined herein shall have the respective meanings
ascribed thereto in the Credit Agreement.
4.6 This Amendment may be signed upon any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have
caused this Amendment to be executed and delivered as of the day and year first
above written.
ROUGE INDUSTRIES, INC.
By: /s/ Xxxx X. Xxxxxxxxxxx
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Title: Vice Chairman and CFO
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ROUGE STEEL COMPANY
By: /s/ Xxxx X. Xxxxxxxxxxx
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Title: Vice Chairman and CFO
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BANK ONE, MICHIGAN, as Agent,
as Issuing Bank and as a Bank
By: /s/ Xxxxxxx X. Xxxxxx
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Title: First Vice President
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COMERICA BANK
By: /s/ Xxxxxx XxXxxxxxx
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Title: Asst Vice President
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NATIONAL CITY BANK
By: /s/ Xxxx X. XxXxxxxxxxx
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Title: Vice President
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ANNEX 1
REVOLVING LOAN COMMITMENTS
REVOLVING LOAN COMMITMENTS FOR THE PERIOD FROM AND INCLUDING THE FIRST AMENDMENT
EFFECTIVE DATE TO BUT EXCLUDING DECEMBER 31, 2000:
Name of Bank Amount of Revolving Loan Commitment
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NBD Bank $50,000,000
Comerica Bank $37,500,000
National City Bank $37,500,000
REVOLVING LOAN COMMITMENTS FOR THE PERIOD FROM AND INCLUDING DECEMBER 31, 2000
TO BUT EXCLUDING THE MATURITY DATE:
Name of Bank Amount of Revolving Loan Commitment
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NBD Bank $40,000,000
Comerica Bank $30,000,000
National City Bank $30,000,000
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