FORBEARANCE
AGREEMENT
This Forbearance Agreement (the
“Agreement”) is made this 17 th day of August, 2009, by and among COPPERWELD
BIMETALLICS LLC, a Delaware limited liability company (the
“Company”), COPPERWELD BIMETALLICS UK LIMITED, a United
Kingdom private limited company (“CBUK”), and FUSHI
COPPERWELD, INC., a Nevada corporation formerly known as Fushi
International, Inc. (“Fushi” and together with CBUK,
collectively, the “Guarantors;” the Guarantors and the
Company, collectively, the “Obligors”) and WELLS FARGO
BANK, NATIONAL ASSOCIATION (the “Lender”), acting
through its Wells Fargo Business Credit operating division, as
assignee of The CIT Group/Commercial Services, Inc.
(“CIT”). Capitalized terms used herein and
not defined herein shall have the meanings provided in the
Financing Agreement (as hereinafter defined).
R E C I T A L S:
WHEREAS, the Company is obligated to the Lender
pursuant to a Financing Agreement dated April 5, 2007, as amended,
between the Company and CIT, as assigned to the Lender effective
July 31, 2008 (the “Financing Agreement”), and various
other notes and documents executed by the Company in favor of CIT,
as assigned to the Lender (any and all amounts owing by the Company
pursuant to the documents and agreements evidencing and/or securing
any debts, obligations and liabilities of the Company to the Lender
heretofore, now or hereafter made, incurred, or created, arising
out of credit previously granted, credit contemporaneously granted,
or granted in the future, whether for principal, interest, fees or
any other amount shall be hereinafter referred to as the
“Obligations”); and
WHEREAS, the Obligations are secured by the
personal property described in the Financing Agreement and other
pledge agreements, collateral assignments and security agreements
executed in connection therewith, and perfected by financing
statements and other filings, as well as the delivery to the Lender
of certain assets, as described on Exhibit A (the property
described in the Financing Agreement and such other pledge
agreements, collateral assignments and security agreements and the
financing statements and other filings is hereinafter referred to
as the “Collateral”); and
WHEREAS, CBUK has provided a certain Guaranty of
the Obligations dated April 5, 2007, and Fushi has provided a
certain Guaranty of the Obligations dated October 26, 2007, as
amended (each a “Guaranty”); and
WHEREAS, the Guarantors have provided security
agreements and pledge agreements as more fully described on
Exhibit B to secure the Obligations (the “Guarantor
Security Documents”); and
WHEREAS, by virtue of the occurrence of certain
Events of Default under the Financing Agreement as described in the
Lender’s letter to the Company dated May 5, 2009 (the
“Existing Defaults”), the Lender has no further
obligation to make additional Revolving Loans and is entitled to
demand immediate payment of the Obligations; and
WHEREAS, the Lender has advised the Obligors
that in light of such Existing Defaults as well as the
Company’s current financial condition and prospects, it is
unwilling to commit to continue to provide financing for the
Company on a long term basis; and
WHEREAS, the Obligors have requested that the
Lender forbear from taking action to collect the Obligations and
exercising any other rights and remedies against any of the
Obligors or the Collateral and that Lender provide further
Revolving Loans and other financial accommodations to the Company
notwithstanding such Existing Defaults to allow the Company time to
obtain replacement financing; and
WHEREAS, the Lender, subject to
the terms and conditions of
this Agreement , and in reliance on information given
by the Obligors to the Lender pursuant to and in their
negotiations, has agreed to forbear from seeking immediate payment
of the full amount of the Obligations and exercising any other
rights and remedies against any of the Obligors or the Collateral
for the period through and including October 31, 2009, or such
earlier date as a Forbearance Event of Default (as hereafter
defined) has occurred and the Lender has elected to terminate its
agreement to forbear hereunder (the “Forbearance
Period”).
NOW, THEREFORE, in consideration of the mutual
promises hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
A G R E E M E N T
1.
Definitions. All terms not otherwise defined in
this Agreement shall be defined as set forth in the Financing
Agreement.
2.
Statement of the Obligations . The Obligors
acknowledge and agree that the Obligations owed by the Company to
the Lender as of the date hereof are as follows: (i) the
principal amount as of August 11, 2009 of Four Million One Hundred
Fifty Five Thousand Eight Hundred Seven and 03/100 Dollars
($4,155,807.03) consisting of outstanding Revolving Loans under the
Financing Agreement, (ii) accrued and unpaid interest to the
date hereof; and (iii) all costs and expenses (including
attorneys’ fees) of the Lender required to be paid pursuant
to the Financing Agreement and this Agreement. The
Obligors acknowledge and agree that the Obligations have not been
released or forgiven, that they are a legal, valid and binding
obligations of the Company, that they are payable in accordance
with their terms, and are not subject to any defenses,
counterclaims or setoffs whatsoever. The Obligors agree
that nothing contained in this Agreement shall (i) nullify,
extinguish, satisfy, release, discharge, constitute a novation or
otherwise affect any of the Obligors’ obligations to the
Lender; (ii) constitute a waiver of any default; or (iii) except as
expressly provided herein, vary or waive any of the terms of the
Obligations.
3.
Security Interests of the Lender . Each of the
Obligors acknowledges and agrees that the Lender has a legal,
valid, binding and enforceable first priority security interest in
the Collateral, subject only to the Permitted Encumbrances, and a
legal, valid, binding and enforceable first priority security
interest in the assets of the Guarantors subject to the Guarantor
Security Documents.
4.
Guaranties . Each of the Guarantors acknowledges
and agrees that its Guaranty has not been revoked, released,
discharged or forgiven, and is a legal, valid, binding obligation
of such Guarantor party thereto enforceable against it in
accordance with its terms, and is not subject to any defenses,
counterclaims or setoffs whatsoever. Each such Guarantor
hereby acknowledges and consents to and agrees to the terms and
provisions of this Agreement. Nothing contained herein
shall revoke, release, discharge or forgive the obligations of the
applicable Guarantor pursuant to its Guaranty.
5.
Conditions Precedent . This Agreement shall
become effective upon the Lender’s receipt of an executed
original hereof, together with each of the following:
(a) From
each of the Company and each Guarantor, a Certificate of Authority
in form and content acceptable to the Lender.
(b) The
fee payable under Paragraph 6(d) hereof.
(c) Such
other matters as the Lender may require.
6.
Consideration for Forbearance . In consideration
of the Lender’s agreement to forbear from taking certain
actions during the Forbearance Period, the Obligors agree
that:
(a) During the
Forbearance Period:
(i) The
Obligors shall comply with the terms of this Agreement and the
Financing Agreement (as amended hereby) and provide to the Lender
such financial and other information required under or requested in
accordance with this Agreement or the Financing
Agreement.
(ii) The
Obligors shall pay (a) all amounts due employees for wages, salary,
and benefits together with state and federal taxes (including, but
not limited to, all sales, withholding and social security taxes),
(b) all premiums for insurance (including but not limited to, all
property and casualty, liability and worker’s compensation
insurance), and (c) real property and personal property tax
payments when due unless such taxes are being contested in good
faith by appropriate proceedings and for which adequate reserves
have been established in accordance with GAAP.
(b) During the
Forbearance Period, the Obligors shall furnish to the Lender on the
day any Obligor first obtains knowledge of the occurrence of any
Forbearance Event of Default (as hereinafter defined), a statement
of an authorized representative of the Company setting forth
details of such Forbearance Event of Default.
(c) During the
Forbearance Period, the Obligors shall continue to keep the Lender
informed of the status of potential refinancing of the
Obligations.
(d) The Company
shall pay to the Lender a fully earned, non-refundable fee in the
amount of Fifty Thousand Dollars ($50,000).
7.
Amendment of the Financing Agreement . As further
consideration for the Lender’s agreements herein and in
reliance on the information provided by the Obligors to the Lender
in connection herewith, the Lender and the Obligors agree that the
Financing Agreement shall be amended as follows:
(a)
Amendment of Section 1.1 . Section 1.1 of
the Financing Agreement is amended upon execution of this Agreement
by adding or amending the following definitions:
Availability Reserve shall mean an amount equal to the sum
of:
(a) any
reserve which the Lender may establish from time to time pursuant
to the express terms of this Financing Agreement, including such
reserves against Net Availability as the Lender deems necessary in
the exercise of its reasonable business judgment as a result of (i)
negative forecasts and/or trends in the Company’s business,
industry, prospects, profits, operations or financial condition or
(ii) other issues, circumstances or facts that could otherwise
negatively impact the Company or its business, prospect, profits,
operations, industry, financial condition or assets (which amount
as of August 11, 2009, and after giving effect to the elimination
of that portion of the Borrowing Base related to Eligible Off-Site
Inventory consisting of raw materials, work in process and
consignment Inventory, was equal to $347,200;
provided , however , that at such time, if any, as
the Lender is satisfied, in its sole discretion, that it has a
valid first priority security interest in the Company’s
Equipment, the foregoing portion of the Availability Reserve shall
be reduced by $347,200 (provided in no event shall
the elimination of such portion of the Availability Reserve
prohibit the Lender from thereafter establishing such additional
reserves as it deems necessary in the exercise of its reasonable
business judgment);
(b) a
reserve for obsolescence as established by the Lender from time to
time (which amount as of August 11, 2009, was $235,000);
plus
(c) the
Nexans Reserve (which amount as of August 11, 2009, was
$85,000).
Borrowing Base shall mean, at any time, the sum at such time
of:
(a) eighty-five
percent (85%) of the Company’s outstanding Eligible Accounts
Receivable; plus
(b) the
lesser of (i) $2,500,000 or (ii) ninety percent (90%) of the
Company’s outstanding Eligible Foreign Accounts Receivable;
plus
(c) the
least of (i) $2,000,000 or (ii) the sum of (1) fifty percent (50%)
of the aggregate value of the Eligible On-Site Inventory consisting
of raw materials and finished goods Inventory plus (2) the
lesser of (x) $750,000 or (y) thirty seven percent (37%) of the
aggregate value of the Eligible On-Site Inventory consisting of
work-in-process Inventory, in each case valued at the lower of cost
or market on a first in, first out basis, or (iii) eighty-five
percent (85%) of the Net Orderly Liquidation Value of the
Company’s Inventory, or (iv) the Accounts Receivable
Availability; plus
(d) the
lesser of (i) the Letter of Credit Collateral Loan Cap or (ii) one
hundred percent (100%) of the face amount of all Letter of Credit
Collateral; less
(e) the
amount of the Availability Reserve in effect at such
time.
Daily Three Month LIBOR
shall mean, for any day, the rate of
interest equal to LIBOR then in effect for delivery for a three (3)
month period. When interest is determined in relation to
Daily Three Month LIBOR, each change in the interest rate shall
become effective each Business Day that the Lender determines that
Daily Three Month LIBOR has changed.
LIBOR shall mean the rate per annum (rounded upward,
if necessary, to the nearest whole 1/8 th of
one percent (1%)) determined pursuant to the following
formula:
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100% - LIBOR Reserve
Percentage
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(a) “Base
LIBOR” means the rate per annum for United States dollar
deposits quoted by the Lender for the purpose of calculating Daily
Three Month LIBOR as the Inter-Bank Market Offered Rate in effect
from time to time for three (3) month delivery of funds in amounts
approximately equal to the principal amount of such
loans. The Company understands and agrees that the
Lender may base its quotation of the Inter-Bank Market Offered Rate
upon such offers or other market indicators of the Inter-Bank
Market as the Lender in its discretion deems appropriate, including
but not limited to the rate offered for U.S. dollar deposits on the
London Inter-Bank Market.
(b) “LIBOR
Reserve Percentage” means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any
successor) for “Eurocurrency Liabilities” (as defined
in Regulation D of the Federal Reserve Board, as amended), adjusted
by the Lender for expected changes in such reserve percentage
during the applicable Interest Period.
Revolving Line of Credit
shall mean the commitment of the
Lender to make Revolving Loans pursuant to Section 3 of this
Financing Agreement in an aggregate amount equal to Seven Million
Dollars ($7,000,000) of which no more than Two Million Five Hundred
Thousand Dollars ($2,5000,000) shall consist of Foreign Revolving
Loans.
(b)
Amendment of Section 3.1(a) . Section 3.1(a) of
the Financing Agreement shall be amended to read as
follows:
