FORBEARANCE AND COLLATERAL LIQUIDATION AGREEMENT
This Forbearance and Collateral Liquidation Agreement is entered into
as of the 15th day of March, 1996 by Technical Metals Company, a Michigan
corporation (the "Debtor"), The Provident Bank, an Ohio banking company (the
"Bank") and National Steel Corporation, a Delaware corporation ("NSC").
Recitals
A. As of January 12, 1996, (i) the Debtor was indebted to the Bank in
the approximate amount of $4.7 million, which debt was secured by liens on
substantially all of the Debtor's tangible and intangible personal property; and
(ii) the Debtor was indebted to NSC in the approximate amount of $3.3 million,
which debt was secured by liens on substantially all of the Debtor's tangible
and intangible personal property and by a mortgage on the Debtor's real
property.
B. On and after January 12, 1996, the Debtor was in default of its
repayment obligations to the Bank and to NSC.
C. After considering various options for the repayment of the debts due
the Bank and NSC, the Debtor determined that its property should be liquidated
in two stages: (i) its real property and its tangible personal property other
than inventory should be sold to The Mill Steel Co. ("Mill Steel") pursuant to
the Purchase Agreement between Mill Steel and the Debtor as of January 19, 1996
and as amended pursuant to the Addendum to Purchase Agreement dated March 15,
1996 (the "Mill Steel Purchase Agreement"); and (ii) its remaining personal
property should be reduced to money in an orderly fashion.
D. In consideration of the undertakings set forth below, the Bank and
NSC have agreed, subject to the conditions and limitations set forth below, to
forbear from exercising their respective
rights in and to the Debtor's property while and so long as the Debtor
diligently pursues the closing of the sale of its tangible personal property and
real property to Mill Steel pursuant to the Mill Steel Purchase Agreement (the
"Mill Steel Sale") and the orderly reduction of its other property to money
(together with the Mill Steel Sale, the "Liquidation") as provided herein.
Agreement
1. Incorporation of Recitals. The above recitals are incorporated as
part of this Agreement.
2. Forbearance. The Bank and NSC agree to forbear from exercising their
rights in and to the Debtor's property for so long as:
a. the Debtor closes the sale of tangible personal property to Mill
Steel on or before March 30, 1996 and the sale of real property
to Mill Steel on or before May 10, 1996;
b. the Debtor otherwise diligently pursues the Liquidation;
c. the Debtor is not in default of this Agreement, and
d. no bankruptcy petition is filed by or against the Debtor.
3. Liquidation Expenses. Anticipated Liquidation expenses for the
period commencing January 16, 1996 (the "Liquidation Expenses") are set forth
in the liquidation budget attached as Exhibit A (the "Liquidation Budget"). The
Debtor agrees to conduct the Liquidation within the Liquidation Budget.
Liquidation proceeds shall not be used to pay Liquidation Expenses except on an
expenditure-by-expenditure basis approved in advance by both the Bank and NSC in
their sole discretion.
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4. Disposition of Liquidation Proceeds. The Debtor shall cause all
Liquidation proceeds to be remitted to the Bank upon receipt. Upon receipt,
the Bank shall disburse:
a. to NSC the first $191,189.52 of proceeds of accounts receivable
resulting from the Debtor's sale of steel delivered to the
Debtor by NSC from December 20, 1995 to January 10, 1996 (the
"NSC Priority Receivables", each of which is circled and
initialed by the parties on the January 12, 1996 Accounts
Receivable Aged Trial Balance, the "Aging", attached as Exhibit
B) less a share of the costs, if any, of collecting the NSC
Priority Receivables beyond costs of the type anticipated in the
Liquidation Budget (the "Extraordinary Collection Costs"), such
share to bear the same proportion to the Extraordinary Collection
Costs as the amount otherwise payable to NSC under this
subparagraph 4(a) bears to the sum of the NSC Priority
Receivables.
b. the balance of the Liquidation proceeds, including the balance of
the NSC Priority Receivables, as follows notwithstanding any
other agreement to the contrary:
(i) first, in satisfaction of Liquidation Expenses approved by
the Bank and NSC;
(ii) second, to the Bank until it receives $2.6 million under
this subparagraph;
(iii) third, to NSC until it receives $1.4 million under this
subparagraph; and
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(iv) fourth, to the Bank and NSC in the ratio of two-thirds to
one-third, respectively.
For purposes of this subparagraph 4(b), proceeds of the Liquidation shall
include proceeds of (i) with the exception of that part of the NSC Priority
Receivables paid to NSC pursuant to the preceding subparagraph, all of the
Debtor's accounts receivable listed on the Aging and any other account
receivable of the Debtor outstanding as of January 12, 1996 (the "Accounts
Receivable"); (ii) all raw materials, work-in-process and finished goods listed
on the January 17, 1996 Stock Status Report attached as Exhibit C or otherwise
in the possession or under the control of the Debtor on January 12, 1996 (the
"Inventory") and all receivables resulting from sale of the Inventory (the
"Inventory Receivables"); and (iii) all other property not sold in the Mill
Steel Sale.
5. Collection of Accounts Receivable and Sale of Inventory. The Debtor
shall collect the Accounts Receivable, sell the Inventory and collect the
Inventory Receivables in an orderly manner. Accounts Receivable and Inventory
Receivables shall be collected according to the terms of the underlying invoices
and shall not be discounted or compromised without prior written approval from
the Bank and NSC. Upon execution of this Agreement and weekly thereafter, the
Debtor shall furnish the Bank and NSC with a tabular report showing (i) with
respect to Accounts Receivable, the dollar amount of each invoice outstanding as
of January 12, 1996 and the payment(s) received against the invoice since that
date; (ii) with respect to Inventory, the quantity and cost of each distinct
category of Inventory as of January 17, 1996 and the quantity removed from the
Debtor's premises within each category since that date; and (iii) with respect
to Inventory Receivables, the date and dollar amount of each invoice and the
payment received.
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6. Lien Terminations. At the closing of the sale of tangible personal
property to Mill Steel, (i) the Bank shall cause to be executed and delivered to
Mill Steel a UCC-3 termination statement terminating its lien(s) on all tangible
personal property acquired from the Debtor by Mill Steel; and (ii) NSC shall
execute and deliver to Mill Steel a UCC-3 termination statement terminating its
lien(s) on all tangible personal property acquired from the Debtor by Mill
Steel. At the closing of the real property sale to Mill Steel, NSC shall execute
and deliver to Mill Steel a discharge of mortgage discharging its mortgage on
all real property acquired from the Debtor by Mill Steel.
7. Releases. At the closing of the real property sale to Mill Steel,
NSC and the Debtor shall execute and exchange Mutual Releases in the form
attached as Exhibit D.
8. Notices. Any party giving a notice under this Agreement shall give
the notice to both of the other parties by telecopy and first class mail as
follows:
a. If to the Debtor: Technical Metals Company
Attn: President
18800 Meginnity Avenue
Melvindale, MI 48122
Telecopy no. (313) 388-1880
With a copy to: Austin Hirschhorn, Esq.
251 East Merrill Street
Birmingham, MI 48008-61S0
Telecopy no. (810) 647-8596
b. If to the Bank: The Provident Bank
Attn: Michael Giulioli
One Columbus
10 West Broad Street
Columbus, OH 43215
Telecopy no. (614) 221-0875
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With copy to: Robert G. Sanker, Esq.
Keating, Muething & Klekamp
1800 Provident Tower
Cincinnati, OH 45202
Telecopy no. (513) 579-6956
c. If to NSC: National Steel Corporation
Attn: Glenn G. Pulianas
4100 Edison Lakes Parkway
Mishawaka, IN 46545-3440
Telecopy no. (219) 273-7493
With a copy to: Peter A. Jackson, Esq.
Clark Hill, P.L.C.
1600 First Federal Building
Detroit, MI 48226-1962
Telecopy no. (313) 965-8548
9. Entire Agreement. This Agreement is the entire agreement between the
parties as to its subject matter and it supersedes all negotiations, preliminary
agreements and prior or contemporaneous statements and understandings. The
Debtor acknowledges that the Mill Steel Purchase Agreement's allocation of the
purchase price reflects considerations beyond value.
10. Amendments. No amendment of this Agreement shall be effective
unless made in writing and signed on behalf of all parties.
11. Waiver. No party shall be deemed to have waived any right under
this Agreement unless the waiver is in writing and signed by the party. Any such
waiver shall be effective only with respect to the specific matter and time to
which it refers.
12. Successors and Assigns. This Agreement is binding upon and inures
to the benefit of the parties, their successors and their assigns, but shall not
be assigned by any party without the prior
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written consent of both of the other parties.
13. Governing Law. This Agreement shall be construed according to the
laws of the State of Michigan.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties have executed this Forbearance and
Collateral Liquidation Agreement as of the date first written above.
NATIONAL STEEL CORPORATION
By: ___________________
Its:___________________
THE PROVIDENT BANK
By: ___________________
Its:___________________
TECHNICAL METALS COMPANY
By: ___________________
Its:___________________
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MUTUAL RELEASE AGREEMENT
THIS AGREEMENT is made between TECHNICAL METALS COMPANY, a Michigan
Corporation (TMC), QUALITY PRODUCTS, INC., a Delaware Corporation (QPI), and
NATIONAL STEEL CORPORATION, a Delaware Corporation (NSC), with respect to the
following facts:
A. TMC, NSC, and THE PROVIDENT BANK, an Ohio Banking Company, have
entered into a Forbearance and Collateral Liquidation Agreement as of MARCH 16,
1996, (the "Forbearance Agreement") which provides for the orderly liquidation
of the assets of TMC.
B. As part of the consideration for the Forbearance and Collateral
Liquidation Agreement, NSC and TMC have agreed to exchange mutual releases upon
the closing of the sale of the real property owned by TMC and located at 18800
Meginnity, Melvindale, Michigan 48122, to THE MILL STEEL CO.
C. QPI and NSC executed a Guaranty dated MARCH 30, 1994, under which
QPI guaranteed payment to NSC for credit extended to TMC.
IN CONSIDERATION OF the following mutually agreed upon covenants, the
parties agree that:
1. TMC and QPI fully release and discharge NSC, its shareholders,
directors, officers, agents, successors, and assigns, from all claims that TMC
or QPI
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has or may have against NSC, known or unknown, contingent or accrued.
2. NSC fully releases and discharges TMC, its shareholders, directors,
officers, agents, successors, assigns, and guarantors, including QPI, from all
claims that NSC has or may have against TMC, known or unknown, contingent or
accrued, including claims relating to the Guaranty dated MARCH 30, 1994;
provided, however, that if NSC disgorges any part of the funds received under
the Forbearance Agreement, then, to that extent, NSC'S claims against TMC and
QPI will be reinstated.
3. This Mutual Release Agreement is a compromise of disputed claims and
is made in good faith to settle the present dispute and avoid all future
disputes.
4. The agreement made by the parties is not to be construed as an
admission of any liability on the part of any of the parties released in this
Agreement.
5. Each of TMC, QPI and NSC stipulate that the officer executing this
Agreement on it behalf is properly and fully authorized to execute the
Agreement.
6. TMC, QPI and NSC have reviewed the terms of this Agreement with
their respective attorneys and understand and agree to the consequences of this
Agreement.
7. This Agreement contains the entire understanding of the parties and
there are no other promises or conditions other than those described in this
Agreement. This Agreement and all other documents to be signed in conjunction
with this Agreement shall be binding upon and shall benefit TMC, QPI and NSC,
and their respective shareholders, directors, officers, agents, successors and
assigns.
TECHNICAL METALS COMPANY, QUALITY PRODUCTS, INC.,
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and TECHNICAL STEEL CORPORATION have signed this Mutual Release
Agreement effective April 26, 1996.
SIGNED IN THE PRESENCE OF:
(Sig of Jeanette F. Skladanowski) TECHNICAL METALS COMPANY,
Jeannette F. Skladanowski a Michigan Corporation
By: (Sig of Bruce Weaver)
Bruce Weaver
Its: President
QUALITY PRODUCTS, INC., a
Delaware Corporation
(Sig of Jeanette F. Skladanowski) By: (Sig of Bruce Weaver)
Jeanette F. Skladanowski Bruce Weaver
Its: President
NATIONAL STEEL
CORPORATION, a Delaware
Corporation
(Sig of Edward P. Krupa)
Edward P. Krupa By: (Sig of Glenn G. Pulianas)
Glenn G. Pulianas
Its: Manager
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