EXHIBIT 99.2
FORBEARANCE AGREEMENT AND AMENDMENT TO CREDIT AGREEMENT
This FORBEARANCE AGREEMENT AND AMENDMENT TO CREDIT AGREEMENT (this
"Forbearance Agreement") is entered into as of November 8, 2001 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 Forbearance Agreement shall have the meanings
ascribed to them in the Credit Agreement (as hereinafter defined).
W I T N E S S E T H:
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WHEREAS, the Borrower, the Agent, the Issuer and the Lenders are
party to a Credit Agreement dated as of January 3, 2001 (as amended,
supplemented, restated or otherwise modified from time to time, the "Credit
Agreement");
WHEREAS, the Borrower has 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 shutdown period;
WHEREAS, the Agent has determined that there has 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 has determined that such a shutdown of the
Borrower's and its Subsidiaries operations constitutes a Default and/or an Event
of Default under the Credit Agreement;
WHEREAS, the Borrower believes that the best method for the
preservation of the value of the assets of the Borrower and its Subsidiaries is
to continue to sell certain of their inventories and to collect their
receivables in conjunction with continued limited funding under the Credit
Agreement in accordance with a Budget (as defined below);
WHEREAS, in light of the foregoing, the Borrower has requested that
the Agent and the Lenders permanently reduce their commitments under the
Revolving Credit Agreement and forbear from exercising the remedies available to
them under the Credit Agreement until the close of business on December 21,
2001, and continue to make Revolving Loans, on the limited, discretionary basis
described below, while the Borrower and its Subsidiaries operate in accordance
with the Budget, and apply the proceeds of the Collateral to the Revolving
Credit Outstandings, including the cash collateralization of all outstanding
Letters of Credit;
WHEREAS, the Agent and Lenders are willing to agree to such
forbearance on the terms 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
FORBEARANCE
SECTION 1.01. FORBEARANCE.
(a) Standstill. From the Effective Date (as defined below) until the
close of business on December 21, 2001 (the "Standstill Period"), and subject to
the satisfaction of the conditions set forth herein, the Agent and the Lenders
agree to refrain from (i) accelerating the Obligations under the Credit
Agreement and (ii) exercising any other rights or remedies available to them
pursuant to the Credit Agreement.
(b) Termination of Standstill. Notwithstanding the foregoing, the
Standstill Period shall automatically and immediately terminate without
necessity or requirement of any notice or any other action and, upon such
termination, the Agent and each Lender may take any action granted or available
to it under law or contract (including, without limitation, acceleration of the
Obligations, foreclosure on the Collateral and exercise of set-off rights), upon
the occurrence of any of the following events:
(i) The occurrence of any Default or Event of Default under
Credit Agreement other than a Specified Default (as defined below).
(ii) The Borrower and its Subsidiaries shall not at any time
operate their businesses in accordance with the budget prepared by the Borrower
and attached hereto as Exhibit A (the "Budget").
(iii) The Borrower shall use any of the proceeds of the
Revolving Loans made after the Effective Date for any purpose other than the
purposes set forth in the Budget.
(iv) The Borrower shall at any time during any week permit
Excess Collateral (as defined below) to be less than, or Net Outstandings, to
exceed the amounts set forth for such week below:
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WEEK ENDING EXCESS COLLATERAL NET OUTSTANDINGS
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November 10, 2001 $24,750,000 $8,250,000
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November 17, 2001 $24,750,000 $8,250,000
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November 24, 2001 $24,000,000 $6,250,000
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December 1, 2001 $22,000,000 $4,750,000
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December 8, 2001 $22,000,000 $2,500,000
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December 15, 2001 $21,500,000 $1,750,000
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December 22, 2001 $21,000,000 $1,500,000
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Thereafter N/A $0
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(v) The Borrower shall fail to comply with the reporting
requirements set forth in Article III hereof.
(vi) The commencement by Borrower or any of its Subsidiaries,
or any creditor of the Borrower or any of its Subsidiaries, or any other Person
of any legal, judicial, administrative or arbitration proceeding in any court or
other tribunal to challenge any Lender's secured claims with respect to the
Obligations.
(vii) The commencement of any voluntary proceeding, or the
filing of any voluntary petition, by Borrower or any of its Subsidiaries under
the Bankruptcy Code or any similar law for the protection of creditors and
debtors.
(viii) The commencement of any involuntary proceeding, or the
filing of any involuntary petition, by any creditor of the Borrower or any of
its Subsidiaries, or any other Person, under the Bankruptcy Code or any similar
law for the protection of creditors and debtors, and such proceeding or petition
shall not be dismissed within 30 days of the commencement or filing thereof.
(c) Definition of Specified Default and Excess Collateral. For
purposes of this Forbearance Agreement, (i) "Specified Default" means any
Default under any of (A) clause (d) of Section 9.1 of the Credit Agreement to
the extent that such Default occurs as a result of non-compliance with Article
V, Section 7.3, clause (a) of Section 7.8, clause (a) of Section 8.4 or Section
8.7 of the Credit Agreement, (B) clauses (e) and (f) of Section 9.1 of the
Credit Agreement as a result of the non-payment of trade payables (but not any
other Indebtedness) by the Borrower after the Effective Date, or (C) clause (l)
of Section 9.1 of the Credit Agreement, in the case of each of (A), (B) and (C)
above, which occurs in connection with the shutdown of the majority of the
operations of the business of the Borrower and its Subsidiaries and as a result
of the sale of certain of their inventories and the collection of their
receivables in accordance with the Budget; and (ii) "Excess Collateral" means,
at any time, the Borrowing Base at such time, minus the sum of (A) the Net
Outstandings at such time and (B) any Availability Reserves in effect at such
time.
(d) Loans under the Credit Agreement During the Standstill Period.
During the Standstill Period, irrespective of the existence of any Specified
Default and the inability of the Borrower to make any the representations and
warranties set forth in Sections 4.5 and 4.13 of the Credit Agreement, the
Lenders at the sole discretion of the Agent may continue to make Revolving Loans
to the Borrower the proceeds of which shall be used by the Borrower solely to
fund reasonably necessary costs and expenses incurred by the Borrower and its
Subsidiaries solely in accordance with the Budget. Such Revolving Loans shall be
made at the sole discretion of the Agent. In no event shall the Agent approve
the making of any Revolving Loan that would for such week cause Excess
Collateral to be less than, or Net Outstandings to exceed, the amounts set forth
for such week in clause (b)(iv) of this Section above. No Revolving Loans will
be made after the earlier of (x) the termination of the Standstill Period and
(y) December 20, 2001. The making of Revolving Loan loans after the date hereof
shall not constitute or be deemed to constitute a waiver of any Default, Event
of Default, or term or provision of the Credit Agreement or any Loan Document.
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ARTICLE II
AMENDMENT TO THE CREDIT AGREEMENT
SECTION 2.01. AMENDMENTS TO THE CREDIT AGREEMENT. Subject to the
occurrence of the Effective Date, the Credit Agreement is hereby amended as
follows:
(a) Amendment to Section 2.4. Clause (iv) of Section 2.4 of
the Credit Agreement is hereby amended by deleting the figure "$25,000,000"
therefrom and inserting in place thereof the figure "$2,500,000."
(b) Amendment to Schedule I. The Revolving Credit
Commitments set forth on Schedule I of the Credit Agreement are hereby amended
and restated in their entirety as follows:
AMOUNT OF
LENDER COMMITMENT
Citicorp USA, Inc. $2,800,000
Heller Financial, Inc. $2,000,000
Foothill Capital Corporation $2,400,000
IBJ Whitehall Business Credit Corporation $800,000
GMAC Business Credit, LLC $2,000,000
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TOTAL $10,000,000
ARTICLE III
REPORTING COVENANTS
In addition to the covenants set forth in the Credit Agreement, as long
as any of the Obligations or any of the Revolving Credit Commitments remain
outstanding, unless the Requisite Lenders otherwise consent in writing, the
Borrower agrees with the Lenders and the Agent that:
SECTION 3.01. DAILY ACCOUNTS RECEIVABLE REPORTS. The Borrower
shall furnish the Agent with a daily report of the Accounts of the Borrower and
its Subsidiaries in form and substance satisfactory to the Agent.
SECTION 3.02. WEEKLY INVENTORY REPORTS. The Borrower shall
furnish the Agent with a weekly report of the Inventory of the Borrower and its
Subsidiaries in form and substance satisfactory to the Agent.
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ARTICLE IV
CONDITIONS PRECEDENT TO FORBEARANCE
The forbearance set forth in Article I hereof and the amendment set
forth in Article II hereof shall become effective on the date (the "Effective
Date") that each of the following conditions precedent are or shall be
contemporaneously satisfied:
SECTION 4.01. The Agent shall have received counterparts of this
Forbearance Agreement duly executed by the Agent, the Requisite Lenders and the
Borrower.
SECTION 4.02. 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
V hereof are correct on and as of the date of such certificate as though made on
and as of such date, and
(B) After giving effect to this Forbearance Agreement, no
event has occurred and is continuing which constitutes a Default or an Event of
Default, other than any Specified Default.
SECTION 4.03. 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 & Manges LLP.
SECTION 4.04. The Agent shall have received such other documents
from the Borrower as the Agent shall request in writing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents and warrants to the Agent and the Lenders that:
SECTION 5.01. AUTHORIZATION. The execution, delivery and
performance by the Borrower of this Forbearance Agreement have been authorized
by all necessary limited liability company action and the Forbearance Agreement
and the Credit Agreement as modified and amended by this Forbearance Agreement,
constitute legal, valid and binding obligations of the Borrower enforceable
against it in accordance with their 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 5.02. NO CONFLICT. Neither the execution, delivery and
performance of this Forbearance Agreement 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
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Subsidiaries is a party or by which the Borrower or any of its Subsidiaries or
any of their property is bound.
SECTION 5.03. REPRESENTATIONS AND WARRANTIES IN THE CREDIT
AGREEMENT. The representations and warranties set forth in Article IV of the
Credit Agreement (other than the representations and warranties set forth in
Sections 4.5 and 4.13 of the Credit 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 to an earlier date.
SECTION 5.04. NO DEFAULT. After giving effect to this
Forbearance Agreement, no Default or Event of Default other than any Specified
Default has occurred and is continuing under the Credit Agreement.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. REFERENCE TO AND EFFECT UPON THE CREDIT AGREEMENT;
NO WAIVER.
(a) Except as specifically modified above, the Credit
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
Forbearance Agreement 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 Credit Agreement or any Loan Document, or constitute a waiver of any
provision of the Credit Agreement or any Loan Document. Upon the effectiveness
of this Forbearance Agreement, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of similar import shall
mean and be a reference to the Credit Agreement as amended hereby.
SECTION 6.02. COSTS AND EXPENSES. As provided in Section 11.3 of
the Credit Agreement, the Borrower agrees to reimburse the Agent and the Lenders
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 Forbearance Agreement.
SECTION 6.03. RELEASE. In further consideration of the Lenders'
execution of this Forbearance Agreement, the Borrower hereby releases each of
the Agent, each Lender and the Issuer 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, 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
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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 6.04. GOVERNING LAW. THIS FORBEARANCE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6.05. SUBMISSION TO JURISDICTION; SERVICE OF PROCESS.
Any legal action or proceeding with respect to this Forbearance Agreement 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 Forbearance Agreement, 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.
SECTION 6.06. 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 FORBEARANCE AGREEMENT.
SECTION 6.07. HEADINGS. Section headings in this Forbearance
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Forbearance Agreement for any other purposes.
SECTION 6.08. COUNTERPARTS. This Forbearance Agreement 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 Forbearance
Agreement to be executed and delivered by their proper and duly authorized
officers as of the date set forth above.
BORROWER:
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GENEVA STEEL LLC
By: /s/ Steve Bunker
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Name: Steve Bunker
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Title: Vice President of Finance and Treasurer
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AGENT AND LENDER:
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CITICORP USA, INC.,
as Agent and a Lender
By: /s/ Keith R. Karako
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Name: Keith Karako
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Title: Managing Director
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LENDERS:
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FOOTHILL CAPITAL CORPORATION
as a Lender
By: /s/ Mike Baranowski
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Name: Mike Baranowski
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Title: Vice President
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IBJ WHITEHALL BUSINESS CREDIT CORPORATION
as a Lender
By: /s/ Craig Giordano
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Name: Craig Giordano
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Title:
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HELLER FINANCIAL, INC., as a Lender
By: /s/ Alfred J. Scoyni
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Name: Alfred J. Scoyni
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Title: Vice President
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[Signature Page to Forbearance Agreement]
GMAC BUSINESS CREDIT, LLC, as a Lender
By: /s/ Thomas Maiale
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Name: Thomas Maiale
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Title: Vice President
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[Signature Page to Forbearance Agreement]